Category: Books

Good to Great by Jim Collins

Good to Great by Jim Collins analyses commonalities between highly successful businesses and their differences to mediocre businesses.

Contrast to most other books in this category

The books I’ve read in this category have had at least one good take-away point but many of them are just that – a good take-away point wrapped in a lot of fluff so that something can actually be distributed and sold. Nobody would pay for a few bullet points on a postcard. I would put Lean Startup in this category – the only key message in the book can be summarised by the below image.

Spotify's MVP model

In contrast, Good to Great’s author is Jim Collins. He is an academic and the book draws on a the findings and the journey of a large research project that he headed at Stanford University.

Brief summary

The research team selected companies listed on the New York Stock Exchange that out-performed the average for their vertical for 12 (?) consecutive years by at least three times. This is important to rule out the tail wind of an industry-specific boom, the tenure of one individual and happy coincidences. Picking publicly listed companies means that financial data is easy to come by and as accurate as possible.

The author identifies twelve companies and for each, identifies a comparable company in the same vertical that performed roughly on average for the same vertical in the same period. The book explores a series of commonalities between the companies in the first category and the differences between them and the comparison companies. The focus is on the people within the company – their leadership skills, their worldview and so on.

What’s reassuring for me

I didn’t read this book for reassurance. However, the book devotes a chapter, that is preceded by a clear message that it is a particularly important chapter, to what I had come to believe is the most important skill for a small business owner.

Brutal honesty

Companies are full of numbers – profit, revenue, growth rate, customers acquired and lost, people acquired and lost, marketing ROI and so on. However, sometimes the numbers aren’t what we want to see. Perhaps a period was turbulent and the numbers for that period are embarrassing. Perhaps one project was particularly bad and distorted the average – and it feels easiest to move on and forget about it. Perhaps some people within the company generate much less value than others but fixing it could open new a can of worms.

What I have come to believe is the most important skill for a small business owner is the ability to be brutally honest. That is, to start with unbiased numbers, to do broad and unbiased analysis regularly, to draw unbiased conclusions and to act on them without bias. It’s often easier to gloss over a subject, to accept a situation as inevitable and to tell the message that you want to tell.

However, by conducting broad, regular and unbiased analysis, forming unbiased conclusions and acting on them systematically, you can start to work on making the changes you really need to make.