can you transform your business from good to Great yes you can so why is it so hard to become great that's because often good is good enough it's just easy to accept things as they are instead of pursuing greatness this is exactly why great companies are so few and good enough ones are a plenty like in the case of Walgreens and eer eer and Walgreens were both already good companies yet Walgreens worked on itself internally in ways that carried it to new heights and their stock outperformed major companies like Coca-Cola by eight times and overall the companies listed in this 5-year Pursuit on average beat the market by 6. 9 times Jim Collins created a team to pursue the following question how to turn a good organization into an organization with sustained great results throughout their Pursuit they found strict criteria by funneling down companies until they found 11 to which followed the pathway to Greatness beating some of what would be thought to be the best companies of the time like General Electric and Intel they found that there was a slow buildup to breakthrough process focused on having disciplined people disciplined thought and disciplined action no defining moment lucky break or singular action was attributed to their success but rather continuous hard work liken to pushing a giant heavy flywheel in One Direction until it built momentum to break through and Beyond and it started with level five leadership level five leaders are ambitious but for their company first and themselves second a strong mix of personal humility and professional will they demonstrate that they are more of a Workhorse than a show horse they look outside towards their fellow workers to attribute success and look Inward and blame themselves when things go poorly known as the analogy of looking outside the window for success and atam mirror for failure Jim and his team reason that too often the board of directors looked for celebrity like leadership far from level five level five leaders are often attributed with being fanatically driven to produce sustained results they will do whatever it takes to make a company truly great an old paper company named Kimberly Clark gained a new CEO named Darwin E Smith who became a level five leader a key point that every good to great company had was level five leadership during their transition era their stock which values a company's worth had fallen behind the General market by over 30% over the last 20 years referring to Kimberly Clark but from 1971 to 199 1 things changed they beat the market by over four times bested their direct Rivals amongst them being Proctor and Gamble and became the leading paper based company in the world what about Darwin Smith revolutionized this feeble paper company now he wasn't someone at first glance whom you'd see as remarkable he was shy nerdy and a bit awkward he enjoyed vacation time on his farm and preferred the company of plumbers and electricians Darwin was a self-made man he grew up as a poor farmer boy and had a strong resolve and discipline while harvesting during the day and attending Indiana University at night he cut off part of his finger and The Story Goes he went to school that same night and went back to work the next day he kept working and earned his admission into Harvard Law School shortly after he became CEO he was reminded of his lack of qualifications for the job and also was diagnosed with nose and throat cancer at the time with a prediction to have only one year left to live to which he told the board he's not dead yet and doesn't plan on dying anytime soon he kept up with his busy work schedule and went to radiation treatments he ended up beating the cancer and lived another 25 years during his career he announced he would sell the Mills a decision that shocked the company based off an analysis that this method of business was mediocre and instead shifted their entire Focus to the consumer paper products Market likening this scenario to his experience with cancer if you have cancer in your own arm you must be willing to sacrifice the arm so too is he willing to sell the Mills to either succeed or die here this gutsy move to which analyst downgraded the company and said the move was quote unquote stupid ended up transforming the company now Darwin didn't flaunt himself but rather responded to the question of what led to his success by saying I never stopped working on becoming qualified for the position a level five leader is not someone who has an enormous ego but someone who is compellingly modest and prefers to not be in the spotlight to which the author believes potential level five leaders exist all around us if you know what to look for and that people can evolve to become level five leaders to the surprise of the team was the next step for they initially thought that it would be a new vision and direction it's actually first who then what to which can be summed up as the company itself being a bus and therefore getting the right people on the bus and the wrong people off the bus and then figuring out where to drive it three simple truths first if you begin with who rather than what you can more easily adapt to the changing World second if you have the right people on the bus the problem of how to motivate and manage people largely goes away and thirdly if you have the wrong people it doesn't matter where you are going because you still won't have a great company great companies focus on who first like a level five management team and then they're heading whereas comparison companies focused on first what I e the genius and then who a th helpers to help with the plan the issue with the genius with a thousand helpers model is once the Genius Leaves the model fails and regarding people decisions be rigorous not ruthless being rigorous is having the same exacting standards at all times and in all levels especially in upper management like how if someone does X the consequence is y regardless of who they are so standards are upheld being ruthless on the other hand is like laying off tons of people especially in difficult times without careful consideration one such example is of Wells Fargo in 1986 who acquired Crocker bank and in order to cut cost looked inward on their people and found a long tradition where the executives would have a marble dining room with its own chef and over $500,000 worth of China whereas the Wells Fargo team ate food prepared by a college dorm food service Wells Fargo decided to cut a lot of the people who wanted to live higher than their fellow employees resulting in around 1,600 Crocker managers being let go despite the seeming ruthless it was in fact rigorous due to Wells Fargo deciding to keep some of the best Managers from Crocker and even let some of their own go similar to a professional sports team you must make the cut every year regardless of time at the company or position three disciplines for being rigorous in people decisions number one if you're not 100% sure or have some glimps of Doubt do not hire the person instead keep looking a company should grow based upon its own ability to attract enough of the right people number two if you know they are the wrong person and you need to make a change act verify though that they aren't just simply in the wrong position or seat number three put your absolute best people on the biggest opportunities instead of your biggest problems if you decide to get rid of your problems remember to not get rid of your best people remember the example of Darwin Smith who sold the Mills things weren't going to run like they used to and people questioned what their future would look like Darwin stated we need all the talented managers out there we can get and in turn moved all his best people to the consumer business their biggest opportunity facts are better than dreams similar companies A&P and Kroger who both sld groceries had some facts of their own to face Americans had changed and so needed they however &p liked the way they did things it was good enough they thought and decided to not make any changes but to just keep doing what they did which was sell cheap groceries both companies were older Kroger was 82 and& was 111 years old both companies had knowledge that the world was changing and only one ended up facing the brutal facts and the other decided to well put its head in the sand this later led to A&P doing price cutting which resulted in poor service and they dug themselves deeper into a hole they struggled from 1970 to 2015 and poor decisions sent this so-called time- tested company to its grave in 2015 where it closed its doors for good the exact opposite of the story was Kroger and they saw that there was no sustainable approach to the old grocery model confronting this brutal fact LED them to the knowledge that super stores were the way of the future they decided to make some big changes by replacing every single store that didn't fit with the new reality it later attained in 1999 the number one suit of grocery stores in America from this example there were many key points so how can you confront the brutal facts in your business first foster a culture where people can be heard that way people don't tell you what you want to hear be open to the possibility that you are also wrong this is probably the hardest for people because often these are well respected and even looked to for most of the answers also engage conversations with questions in dialogue and debate not coercion don't simply give answers let the answers come naturally and when investigating a problem do so without blame to see things as they are and finally build red flag mechanisms to show you that something is wrong and something needs to be done the Stockdale Paradox referring to Admiral Jim Stockdale the highest ranking US military officer in the Hanoi Hilton prisoner of war camp during the Vietnam war he survived by saying I never lost faith in the end of the story never doubted that he would get out but that he would Prevail and turn the experience into a defining moment in his life Jim Collins asked Stockdale who didn't make it out Stockdale replied oh that's easy the optimists to which Stockdale expounded and said they died of a broken heart one of their own making they'd Believe by Christmas they'd be out and then Christmas would come and go then they would believe it would be Easter which would go then Thanksgiving and then it was Christmas again a powerful truth that Jim learned is you must never confuse faith that you will prevail in the end which you can never afford to lose with the discipline to confront the most brutal facts of your current reality whatever they may be the story of a fox and a hedgehog based on a Greek Parable the fox knows many things and the Hedgehog knows one big thing day after day the fox tries to get the Hedgehog cutting as ever he makes numerous attempts however the Hedgehog just does one thing and that is roll up into a little ball of spikes and the fox is outwitted again and again the Hedgehog always wins likening this to ourselves foxes Seek many different ends and are often scattered and think on different levels hedgehogs can simplify complex things into a single organized idea they reduce challenges so that they are able to comprehend and overcome them many of the Great companies utiliz something the team called the Hedgehog concept compared to Fox companies who were always scattered and inconsistent an example of the Hedgehog concept is from Walgreens to be the best most convenient drugstore with high profit per customer visit and that was enough a simple idea and the driving force that the company continued towards always Walgreens did this by closing good stores to open great ones even if the location was right around the corner they engineered drivein pharmacies to fit being more convenient as well as photo developing which increased its profit per customer visit this concept continued to allow Walgreens to grow simply by more customers visiting which multiplied exponentially with incre increasing profit per customer visit they then threw the cash back into the system to build more convenient stores simple yet profoundly effective creating your own Hedgehog concept the three circles Vin diagram number one what you can be the best in the world at as well as what you're not the best at number two what drives your economic engine and how to generate robust and sustained cash flow as well as profitability and number three what are you deeply passionate about focus on what lights your fire and find what makes you passionate the secret to sustain great results is based upon a company culture of discipline often this is misconstrued as a tyrant who disciplines and this is largely wrong due to it destroying the Innovative minds and things no longer becoming as fun as they used to be people start to no longer enjoy what they do and are filled with numerous meetings that feel pointless and this continues then you start losing great people a culture of discipline revolves around people who follow a consistent system and still gives people freedom and responsibility within that system the discipline to follow their Hedgehog concept and stay away from whatever isn't inside that concept simply said but harder to do don't chase the once in a-lifetime Opportunities unless it fits within your three circles a good to great company exemplified this by showing they had disciplined people who had disciplined thoughts which led to disciplined action ACC quote from the book everyone would like to be the best but most organizations lack the discipline to figure out with eess Clarity what they can be the best at and the will to do whatever it takes to turn that potential into a reality they lack the discipline to rinse the cottage chees an analogy the group took from World Class athlete Dave Scott who biked 75 miles swam 20,000 M and would run 17 miles on average every day Dave believed that a low-fat high carb diet would give him the edge so he would literally rinse his cottage cheese to get rid of the ex's fat no evidence of that he absolutely needed to do however the point is he took one extra small step to create a consistent program of self-discipline Carl reichart has an unwavering belief in Wells Fargo emerging as a stronger company from Bank deregulation he chose to cut wasteful spending with the idea of we will not ask everyone else to suffer while we on high he froze executive salaries for over 2 years he shut down the fancy executive dining room and preferred a college dorm Food Service caterer he even removed free coffee from executive suites sold corporate Jets and cut Christmas trees for management on the contrary Bank of America chose to keep its alism for their Executives and ended up losing over 1. 8 billion across 3 years in the mid 1980s while Wells Fargo was prospering learning how to use technology to accelerate their business was a big difference in good to Great companies Walgreens for example is faced with what will they do amidst the new and upcoming internet the new and cool.
com companies were everywhere and apparently a lot of investors had more faith in a company trading at 398 times their revenue like drugstore. com versus Walgreens who is trading at 1. 4 times Revenue analysts even decided to downgrade Walgreens which resulted in a $15 billion loss in market value despite the pressure the response to Forbes from Dan Jor was where are a crawl walk run company to describe their more methodical approach to the new flashy internet a remarkable thing they did was ask questions that would fit with their business model or Hedgehog concept how will the internet help us connect to our convenience concept how can we ensure it's tied to increasing cash flow per customer visit and how can we use the web to enhance our business in a way we are passionate about with the world remember the Stockdale Paradox Walgreens executive stated we have complete faith that we can Prevail in an internet world as a great company yet we must almost so confront the brutal facts and reality of the internet they quietly learned and worked on making their own internet web page for Walgreens one that was largely wrapped around their Hedgehog concept calm deliberate steps forward like filling out your prescription on online and swinging by to grab it in our drive-thru or even having it shipped to you to add convenience their web page walgreens.
com rivaled the usability and interface of amazon. com back in 2000 what about drugstore.
