Sunday 22 January 2017

Timeless principles for making leap to greatness

Good to Great

Drake Bennett

Published 08/09/2011 | 05:00

TEN years after it was first published, Jim Collins's 'Good to Great' is still lodged on the bestseller list at No 10.

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Collins, a former lecturer at Stanford Business School, is a high lama of business guru-dom. He even lives in the mountains, in Boulder, Colorado. 'Good to Great', a study of what it takes for a company to vault from the crowded ranks of perfectly good performance to the heights of greatness, has sold eight million copies worldwide.

Aside from sometimes mystical prose, Collins is a data man. His books are the products of years of study.

For 'Good to Great', Collins and the team at his "management research laboratory" picked out 11 Fortune 500 companies that, based on stock market performance, had made the leap from good to great.

The team then looked through newspaper and magazine stories, analyst reports, proxy statements and business school case studies. In all, the researchers read 6,000 articles and produced more than 2,000 pages of interview transcripts with executives, creating 384 million bytes of computer data.

"I like to think of our work as a search for timeless principles -- the enduring physics of great organisations -- that will remain true and relevant no matter how the world changes," Collins says.

The advice that Collins extracts from this research is reasonable enough and useful, if unsurprising. To become great, companies need exceptional and humble leaders and top talent.

They need to confront cold, hard truths and not lose faith. They need their Hedgehog Concept.

For all his thousands of pages and hundreds of megabytes, however, Collins's data leave big blind spots.

The news stories, case studies and analyst reports he draws on are all, in their way, fundamentally subjective, as are the interviews in which executives expound on their own success.

While these may be the best data Collins could find on the Fortune500 companies he wanted to look at, they're a long way from the building blocks of an "enduring physics of great organisations". They're mostly measures of perception, not fact. It's little surprise that, added together and carefully sifted for patterns, what they yield sounds a lot like conventional wisdom. 'Good to Great' is still flying off the shelves even after two of the companies it celebrates have imploded.

Circuit City is defunct, and Fannie Mae, having played a central role in the 2008 financial crisis, had to be rescued by the US government and placed in federal conservatorship at a cost thus far of almost $100bn (€71m).

Even great companies can, of course, lose their way or be overtaken by events. And with Fannie in particular, Collins's methods didn't just fail to predict disaster, they may have limited his understanding of its success.

As he sees it, Fannie's leap into world-beating stock market performance in the 1980s and 1990s happened because it became "the best capital markets player in the world at managing mortgage interest risk". It's now clear, though, that what Fannie really excelled at was managing politicians -- a skill its executives probably didn't emphasise in their interviews with Collins's researchers.

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