Good to Great

Why Some Companies Make the Leap and Others Don't

By Jim Collins

"All Right, Royal. My Name's Andy."

The day I passed Commando training and earned the Green Beret, I went into the locker room and a man walked over to me and put his hand out.

For months he had been "yes, Sergeant" and "yes, Corporal". Rank, distance, and a very clear line between us.

He said: "All right, Royal. My name's Andy."

That was it. The line was gone. Not because anybody had relaxed the rules, and not because he had decided to be friendly. It was gone because I was in now, and being in works in both directions. The respect of rank was still there; in fact, it was more than ever.

I didn't have a word for that for years. Jim Collins gave me one.

I was on the bus.

What This Book Actually Is

Most business books start with a theory and go looking for examples. Collins did the opposite, and it's why this one has lasted.

He and his team spent five years on it. About ten and a half person-years of work. They started with 1,435 established companies and examined their performance across forty years.

To qualify, a company had to show roughly fifteen years of cumulative stock returns at or below the general market. Then an identifiable transition point. Then at least fifteen years at three times the market or better. The shift had to be specific to that company rather than an industry-wide lift. No startups, nothing younger than twenty-five years, and the transition had to be before 1985 so there was enough runway to judge it.

Eleven companies made it through. Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo.

Average return across the eleven was 6.9 times the general market.

Then the part most people skip. He built two comparison sets. Direct comparisons, meaning companies in the same industry with similar resources at the same moment who did not make the leap. And unsustained comparisons, meaning companies who made the leap and then lost it.

That second set is the clever one, because it answers the obvious objection. It isn't enough to know what the great ones did. You need to know what the ones who nearly made it didn't do.

In total, 980 years of combined financial data, 84 interviews, and the records of 56 CEOs.

That's the book. The findings came out of the data rather than the other way round, and Collins is open that several of them surprised and annoyed him.

Good Is The Enemy Of Great

The first line of the book is the whole argument.

Most organisations never become great, and it isn't because greatness is hard. It's because they're doing fine.

Fine is comfortable. Fine pays the wages. Fine gets through the board meeting. Nobody ever called an emergency meeting about fine.

I see this constantly in leadership work. The businesses in real trouble tend to know it and tend to move. The ones that never change are the ones having a reasonable year, every year, for a decade.

If you want a reason to read the rest of the book, that's it.

First Who, Then What

This is the one I talk about more than anything else in it, and people usually get the order wrong.

Collins' finding was that the good-to-great companies did not start with a vision and then recruit people to deliver it. They started with people.

Right people on the bus. Wrong people off the bus. Right people in the right seats.

And then work out where you're driving.

That sounds backwards until you sit with it. The logic is simple. If you have the wrong people, no vision will save you. If you have the right people, they are self-motivated, they don't need managing into effort, and they will adapt when the destination changes. Which it will.

Here's the distinction I'd add, because it's where most managers waste their effort.

Wrong seat is a fixable problem. Wrong bus is not.

Someone can be on the bus and simply in the wrong seat. Capable, aligned, bought in, and in a role that doesn't suit them. That's a good problem. You move them, and you often get a much better person back.

Someone can also be in exactly the right seat, technically excellent at the job, and have no business being on the bus at all. That one doesn't get fixed by a role change, a development plan or a conversation. And it's the one most leaders spend months pretending is a seat problem, because the alternative conversation is harder.

Most of the people I've seen managed out of businesses were never in the wrong seat. They were on the wrong bus, and everyone knew it for about a year before anyone said it.

How You Actually Know Who's On The Bus

Collins tells you to get the right people. He is notably light on how you'd tell.

Here's what we do.

Every person who joins us goes through our mission, vision, values and behaviours. Not as an induction slide. As a conversation, on the way in, where they tell me whether they're in.

That's the bus test. Not can they do the job. Do they buy into what this is for and how we do it.

And it does a second job that I value more. Because they agreed to it on the way in, it is available to me for as long as they're here.

Every piece of difficult feedback I've ever had to give has been easier because of that conversation. I'm not arriving with my opinion of their behaviour. I'm returning to something they signed up to. It's almost an unofficial contract, and it takes the personal out of it entirely. We agreed this. Here's where we are against it. What do you need from me?

That one change turns feedback from an accusation into a comparison.

Collins has a story that's the same test with the volume turned all the way up. David Maxwell took over Fannie Mae when it was losing a million dollars a day. He sat down with his twenty-six executives and told them plainly how demanding the road ahead was going to be, and he asked them to commit or get off.

Fourteen of them left.

He replaced them with better people, and the company went from losing a million dollars a day to making four million a day.

Fourteen out of twenty-six. That's more than half a leadership team, and it was the right call.

How You Test The Seat

Collins names both problems and gives you a test for neither. Right people, right seats, and no method for working out which is which.

Our MVVB conversation answers the bus. For the seat, the cleanest test I know is Gino Wickman's, from Traction. GWC. Does the person get it, do they want it, and do they have the capacity to do it.

Three questions, and they fail in different directions.

Someone who doesn't get it will never prioritise correctly, however hard they work. Someone who doesn't want it will do the job adequately and quietly resent it. Someone without the capacity can be developed, if the first two are there.

That last point is the one worth sitting with. Capacity is the one most people recruit for, and it's the only one of the three that training actually fixes. The other two decide whether it's worth fixing.

Level 5 Leadership

Collins built a five-level hierarchy, and the top level sits on all the others rather than replacing them.

Level 1, Highly Capable Individual. Talent, knowledge, skill, work habits.

Level 2, Contributing Team Member. Contributes to the group's objectives and works well with others.

Level 3, Competent Manager. Organises people and resources effectively toward objectives.

Level 4, Effective Leader. Builds commitment to a clear and compelling vision, and drives higher performance standards.

Level 5, Executive. Builds enduring greatness through a paradoxical blend of personal humility and professional will.

Every one of the eleven was led through its transition by a Level 5 leader. And almost none of them were famous.

That was the finding that irritated Collins, because it cut against everything the business press was saying at the time. The celebrated, charismatic, magazine-cover CEO is a Level 4. Level 5 is quieter, and it's the one that lasts, partly because Level 5 leaders set up successors to outperform them while Level 4 leaders tend to set up successors who make them look good in hindsight.

The clearest marker is what Collins called the window and the mirror.

Level 5 leaders look out of the window to explain success. The team, the conditions, the timing, a bit of luck. Then they look in the mirror to explain failure, and take it personally.

The comparison CEOs did the exact reverse.

Darwin Smith is his best example. Smith ran Kimberly-Clark, and he sold the paper mills. Including the one in the town the company was named after. Analysts said it was idiotic. He put every penny into consumer products, went straight at Procter and Gamble, and Kimberly-Clark became the world's leading paper-based consumer products company. Asked about it later, he said he had never stopped trying to qualify for the job.

There's a reason this section stopped me the first time I read it.

One of our five values is Humble Excellence. We wrote that down long before I read this book, and when I got to Level 5 Leadership I realised we'd arrived at the same paradox from the other direction. Humility and will, held at the same time, neither one softening the other.

Warm with people. Tough on standards.

It's good to have twenty years of data behind a value you already hold.

The Stockdale Paradox

This is the chapter I think about most, and it has very little to do with business.

Admiral Jim Stockdale was the most senior American officer held in the Hanoi Hilton.

Seven years. Tortured repeatedly. No release date, no certainty he'd ever go home.

Collins asked him how he coped with not knowing.

Stockdale said he never doubted, not for a second, that he would get out and that it would come to define his life for the better.

Then Collins asked a harder question. Who didn't make it out?

Stockdale's answer was immediate. The optimists.

The ones who said we'll be out by Christmas. Then Christmas came and went, and they said Easter. Then Easter came and went, and they said Christmas again. And they died, Stockdale said, of a broken heart.

His conclusion is the paradox. You must retain absolute faith that you will prevail in the end, and you must confront the most brutal facts of your current reality. Not one or the other. Both, at once, permanently.

Optimism on its own kills you. So does realism on its own. It's the combination that gets you through.

In the hardest things I've done, Commando training, maritime security work in places that genuinely were dangerous, racing Ironman distance in the mountains, the pattern has always been the same. Look straight at what is actually in front of you. Don't dress it up, don't tell yourself it isn't there, and don't pretend it's smaller than it is. And at the same time, hold on to the absolute certainty that you will come through it.

The Commando Spirit has a phrase for the second half of that: cheerfulness in the face of adversity. Which sounds like a morale slogan until you notice it's the Stockdale Paradox in five words.

The everyday version I use, and I use it a lot, is cold water.

You get in. It's horrible. There's no version where it isn't horrible. And the honest brutal fact is that it's going to get worse before it gets better, because when you climb out the wind hits you and that's the bit people aren't ready for.

And you know, with complete certainty, that twenty minutes later you'll be warm and dry and feeling better than you did all day.

That's the whole paradox in one swim. It's horrible, it's going to get worse first, and you are going to be fine. All three are true simultaneously.

The line I come back to, for myself and for the people I coach, is this too shall pass.

Abraham Lincoln told it at the Wisconsin State Fair in 1859, and he was careful to say it wasn't his. He called it an old Persian saying, given to an Eastern monarch by his sages when he asked for a sentence that would be true in every circumstance. Lincoln's own words on it were that it is "chastening in the hour of pride" and "consoling in the depths of affliction."

And then he added something very Stockdale: "And yet let us hope it is not quite true."

The Hedgehog Concept

The name comes from an Isaiah Berlin essay about an old parable. The fox knows many things. The hedgehog knows one big thing.

Foxes are cleverer, faster and more creative. The hedgehog wins because it does one thing and does it absolutely.

Collins' version is three circles, and your Hedgehog Concept is the intersection of all three.

What you can be the best in the world at. Not what you want to be best at. What you actually can be.

What drives your economic engine. And he's specific here in a way most people forget. One denominator. Profit per what?

What you are deeply passionate about. What you'd still care about if it paid less.

Walgreens is his cleanest example. They changed their denominator from profit per store to profit per customer visit. That one change reorganised everything. It justified putting shops close enough together to look like they were cannibalising each other, which they weren't, and it made convenience the entire strategy rather than a feature of it.

One number, and it decided a decade of decisions.

So let me do the exercise honestly rather than tidily.

Best in the world at. Developing people from the foundation up. Building people who are stronger and more resilient than when they arrived, whether that comes through fitness, leadership or team dynamics. That's the thread through everything we do and I've no doubt about it.

Deeply passionate about. Same answer, and I don't have to think about it.

Economic engine. This is the one I haven't closed.

Profit per event is probably the closest I've got, and I'm not confident it's right. We run four brands with genuinely different economics. Outdoor fitness is high volume and low ticket. Leadership development is low volume and high ticket. A single denominator across all of that is either going to be wrong or it's going to be so abstract it doesn't decide anything.

Which is uncomfortable, because Collins' point is that if you can't name the denominator you haven't got a Hedgehog Concept. You've got a purpose statement and two thirds of an answer.

I'd rather say that in print than pretend otherwise. Two circles are clear and the third one is live work. If you've read the book and nodded along at the Hedgehog chapter, I'd ask yourself whether you've actually named your denominator or just admired the diagram.

The Flywheel And The Doom Loop

There is no miracle moment. That's the finding, and Collins went looking for one.

None of the eleven could point to a single turning point. No launch, no reorganisation, no inspirational away day. They described it as a steady accumulation of pushes in the same direction, and he compares it to a chick developing inside an egg. From the outside it looks like nothing is happening, then one day something breaks out and everyone calls it a breakthrough.

The flywheel is heavy. The first turns take everything you've got and show almost nothing. Then at some point momentum does the work for you.

The Doom Loop is the comparison companies, and every reader will recognise it. New programme. Disappointing results. New direction. New leader. Restructure. Big push. Disappointing results. New programme.

Each individual decision looks defensible. The pattern is fatal, because the flywheel never gets past the first few turns.

Tony Robbins has a line I use constantly. Motion brings emotion. You don't wait to feel ready and then act. You act, and the feeling follows.

That's the flywheel at individual scale. The first few pushes feel pointless. Do them anyway, in the same direction, and don't change direction because the early turns were hard.

The Stop Doing List

A short one, and the most immediately useful thing in the book.

Collins found the good-to-great leaders were defined as much by what they killed as by what they started. Stop doing lists, not just to-do lists.

That sits alongside Greg McKeown's Essentialism, and it's the thinking behind the Eisenhower Matrix. The question isn't how do I get through all of this. It's which of these should not exist.

Most leaders I work with don't have a prioritisation problem. They have an elimination problem. The list is accurate and it's too long, and nothing on it is going to fall off by itself.

Circuit City, And Whether The Book Still Stands

Now the part any honest review has to deal with.

Circuit City filed for bankruptcy in 2008. Fannie Mae was taken into government conservatorship the same year. Wells Fargo has had a decade of conduct scandals. Steven Levitt ran the numbers and found that if you'd invested in the eleven when the book came out in 2001, you'd have underperformed the S&P 500. Nucor is the only one that went on to dramatically beat the market.

And Philip Morris is on the list, which some readers never get past.

The methodological criticisms are fair too. Phil Rosenzweig's The Halo Effect makes the strongest version: if you select companies because they succeeded, then read the business press about them and interview their executives about why, you will mostly capture the glow of the success rather than its causes. Correlation presented as causation. Others have pointed out that picking eleven winners out of 1,435 and finding shared traits is exactly what you'd expect to be able to do with any eleven.

No book is perfect, and I'd rather state my position than wave the criticism away.

Here's mine.

A principle that produced fifteen years of exceptional performance and was then abandoned hasn't been disproved. It's been stopped.

Look at what actually happened to Circuit City. They cut their experienced, higher-paid sales staff to protect margin. They lost their best managers to a spin-off and then to Best Buy. They turned down a takeover at seventeen dollars a share because management believed they could turn it round.

Read that list again against the book. They took the right people off the bus on purpose. They stopped confronting the brutal facts. They let a Level 4 argument win.

The flywheel turns both ways. That's the part people forget when they use Circuit City as a stick to beat the book with. The Doom Loop is in here too, and Circuit City is now the best case study for it that exists.

What the book cannot do is make greatness permanent, and Collins has never claimed otherwise. His own defence is that these companies were great, not that they always would be. Which is a bit convenient, and it's also true.

Read it as a description of what greatness required of those eleven, for those fifteen years. Not as a guarantee.

Why This Matters For Every Leader

Who on your team is in the wrong seat, and who is on the wrong bus? And how long have you been treating the second one as the first?

What do people actually agree to when they join you, and could you point to it in a feedback conversation tomorrow?

When something went well last quarter, where did you look? And when something went badly?

What's your denominator? Profit per what?

Which of your current initiatives is the first push of a flywheel, and which is just the next thing in a Doom Loop?

And the hardest one. Is your organisation stuck because it's struggling, or because it's doing fine?

Who This Book Is For

Anyone who runs a business, a team or a department and has a nagging sense that they're doing well enough.

Anyone who keeps launching initiatives that work for a quarter.

Anyone who has a person they know, privately, shouldn't be there, and has spent six months framing it as a development issue.

And anyone who thinks leadership requires a personality. Collins' eleven suggest otherwise, and that should be a relief.

Final Thought

Back to that locker room.

In the Royal Marines you wear your Commando flashes on your shoulders. And for the rest of your career, someone will occasionally say three words to you in passing.

Check your flashes.

It isn't a reprimand and it isn't a joke. It means: you're wearing those, so act like it.

That's the half of the bus metaphor Collins doesn't quite get to. Getting on is not the end of the test. It's the start of a standard you'll be held to permanently, by people who are on the bus with you, and who have every right to call it out.

Being on the bus is the privilege. Check your flashes is the price.

And in my experience, the people worth having on your bus are precisely the ones who'll say it to you.