SEAP Book Club Report: “Good to Great”

Live Blogging, ,

This is a liveblog of the SEAP Book Club Meeting on 7th July, where Gaurav Mehra, co-founder and MD of Saba Software, talked about the book Good to Great by Jim Collins. The SEAP Book Club meets on the first Saturday of every month at 10:30am in Sungard, Aundh.

This book is the second in a series of books. The first was Built to Last which talked about why some companies survive for more than 100 years – while others die. Good to Great talks about what makes some companies special enough to jump far higher over other successful companies. The 3rd book was How the Mighty Fall – This talked about why some companies, which seem to be doing great, fail. And finally, Great by Choice, their latest book, pulls all these threads together.

Interesting points made during the talk:

  • Good is the enemy of the great. If you’re good enough you will not strive for greatness. Need to be constantly wary of falling into this trap.
  • What you need is disciplined people, followed by disciplined thought, and finally disciplined action which will result in breakthrough greatness
  • This book is based on a study over 30 years of some great companies, deliberately compared against very similar companies which were successful but fell short of greatness. The suggestions on the book are based on what they found empirically.
  • Level 5 Leadership:
    • Personal Humility combined with Professional Will
    • Darwin Smith of Kimberly Clark: “I never stopped trying to become qualified for the job”
    • It’s always we not _I_
    • Usually not media heroes – not many articles will be written about them
    • Have ambition for company, not for self
    • 90% of such leaders come from within the company
  • Larger than Life leaders (Jack Welch, Lee Iacocca) are not good for a company at this stage. Characteristics of such leaders:
    • Took existing large/great companies – did not create the greatness
    • Set up successors for failure
    • Personal ambition trumps what’s best for companies
    • Large acquisitions, which might not make sense for the company
    • Note: the names mentioned above are not bad leaders. But they’re not the leaders who can take a good company to greatness.
    • Data shows that bringing a larger than life outsider into a company is negatively correlated with performance
  • Set up successors for success
    • Humble leaders with ambition for company, not self, do this very well
    • Larger than life leaders usually fail at this
    • Henry Singleton, co-founder of Teledyne was a good leader, built and ran Teledyne for a very long time, but the company did not do well after his retirement because he wasn’t able to groom a good successor
  • Get the right people on the bus and the wrong people off the bus
    • The great leaders did not focus on what to do. They focused on who should be in charge, and great things happened automatically
    • Having a genius at the top, with a thousand helpers (e.g. Singleton at Teledyne) is a bad idea. When the genius leaves, the helpers don’t know what to do.
    • It’s about whom you pay, not how or how much. The people should be there because they are passionate about what you’re doing, not focused on the salary. “Hire five, work them like ten, and pay them like eight.” This will lead to a lot of turn over, especially in the early stages, but in the long term, this will work best.
  • When in doubt, dont hire
    • Hire only A+ people. As Steve Jobs pointed out, if you hire B people, they will in turn hire C people and your company will go to the dogs.
  • Give your best people where the opportunities are – not where the problems are
    • The CEO of RJR Nabisco put his best person in charge of the international business, which accounted for 1% of the business – because that’s where the growth was. He went from controlling 99% of the company to 1% of the company. The result – RJR Nabisco became a world leader before becoming the leader in USA.
  • Confront the brutal facts

The Hedgehog Concept

The Hedgehog Concept idea is one of the most interesting parts of the book.

The fox knows many things, but the hedgehog knows only one thing. Focus on just that one big thing.

What you do, should be an intersection of these:

  • What you are deeply passionate about
  • What you are the best in the world about
  • What drives your economic engine

In other words, something is worth doing only if you can do it, you will enjoy doing it, and someone is willing to pay for it. If one of these is missing, dont do it.

Learn to say “No.” Stay with your Hedgehog principle and do not run after the new hotness. Like you have a ToDo list, you should also have a “Stop Doing” list. Your best returns come from having an undiversified portfolio (when you’re right).

Summary

  • Disciplined People
    • Level 5 Leadership
    • First Who then What
  • Disciplined Thought
    • Confront the Brutal Facts
    • Hedgehog Concept
  • Disciplined Action
    • Culture of Discipline
    • Technology Accelerations