Good To Great: Why Some Companies Make the Leap...And Others Don't [Hardcover]

Those who flip heads "win," those who flip tails are eliminated.

Now let's assume that the coin-flipping adheres to the norm--that is, a flip yields heads half the time, and tails half the time. And let's do the flip-and-elimination exercise 10 times.

At the end, out of 1024 competitors, you should have one winner who's flipped 10 consecutive heads.

Is the winner great at flipping heads? No. Is the winner lucky? No. Is the winner inevitable? YES.

And that's the problem with Jim Collins' dunderheaded exercise--he's wowed by the winning coin flipper's success. He can't wait to interview the flipping champion, pore over the data to recreate the sheer drama/moments of truth surrounding each individual flip, find the subtle nuances beneath the flipper's consistent performance, and draw universally applicable lessons from the coin flipper's astounding success. I mean, how can anyone argue with TEN CONSECUTIVE flips of heads, right?

Um, actually everyone should argue with it, Jimmy.

Just like Tom Peters did fifteen years before with In Search of Excellence, Collins sanctifies his business winners, completely overlooking the fact that 1) plenty of business losers followed IDENTICAL strategies and still lost and 2) if you have any criteria for excellence that generates more than zero companies pulled from a universe of more than zero companies, then one or more companies MUST, by definition, make the cut, which leads us to 3) so what?--without a statistically rigorous analysis, there's a fairly serious possibility that a number of companies are making the cut RANDOMLY. Collins really stumbles on this last one--without statistical proof, not only can't he distinguish between Good and Great, he can't even make the call between Good and Kind of Random, Dude.

Like Collins' masquerade, Peters' book was a big hit, but followers of Peters soon ran into the Law of George Bernard Shaw--Time Wounds All Heels; most of the companies Peters championed in his book quickly floundered. Some of Collins' sainted companies are already floundering as well...

Books like Good to Great prey on the fact that you napped through statistics--if you'd been caffeined up during those dull lectures, you'd have remembered the fallacy of composition (the coin flipper's exercise), the distinction between random outcomes and relevant ones, and the enormous difference between what's causal and what's coincidental.

Look, there's nothing new in business: there are only a few basic strategies, and only a few macro and microeconomic truths. Ever notice how fads like supply side economics, the Japanization of America, the endless bull market, the end of history, The New Economy and the Macarena all seemed to collapse under the weight of basic market concepts you already knew?

So SNAP OUT OF IT, gulp down that double espresso, go back to your old and boring (but still accurate and useful) Michael Porter, Adam Smith, Karl Marx, Benjamim Graham, and Burton Malkiel, and stop chasing misallocated or downright blockheaded metaphors from Who Moved My Cheese, The Art of War and poor, misunderstood Charles Darwin, and for God's sake, please take a pass on this Three Card Monte of a book.

Collins says great companies are like hedgehogs in that they stick to what they know and can do well. Collins says when a fox attacks a hedgehog the hedgehog curls into a prickly ball and the attacking fox must leave it alone. Then, the fox runs around and tries another point of attack and never learns. The hedgehogs only needs to do one thing that works well and consistently.

In short, after much research and writing, Collins finds the key to business success is functioning within the intersection of three circles.

The first circle represents an endeavor at which your company has the potential to be the best in the world. The second circle represents what your company can feel passionate about. The third circle represents a measure of profitability that can drive your economic success. You must choose to do something that's profitable and know how to focus upon that profitability.

To find the circles, Collins makes the excellent point that you must begin with the right people. Collins emphasizes that the people must come before you decide exactly how your company will achieve success.

We learn that in great companies there is often heated debate about what's best for the company. The culture of great companies is open in the sense that the truth will be heard. That's very different from debating for the sake of protecting private turf and self-aggrandizement.

Collins' research says the CEO's at the time companies become great aren't egotistical business leaders. Rather, they tend to be reserved people who channel their ego into building their companies. Collins is a little vague on exactly how you get other employees and key players to channel their egos into building the company. The hope is that, if you select the right people, they'll do what's best for the company rather than for themselves. I'm not so sure that's always true.

Finding something you can be passionate about is the other key. And, all employees must be passionate about the endeavor. Because most employees won't get jazzed about making the CEO and shareholders wealthy, a company should have a purpose beyond just making money. Collins says a company should have 'core values.'

Collins says it doesn't matter what these 'core values' are, just that they exist. He says Philip Morris is happy to provide the strongest brand recognition of 'sinful' products. Maybe, they're rebelling against political correctness, or health, or whatever. If it works for them, it's cool. Fannie Mae, on the other hand, prides itself on providing mortgages to new, less-affluent homeowners and helping people buy homes. That sounds good, and is probably true, but it reads a little bit like a publicity statement.

Incidentally, the Great companies chosen were: Abbot Labs, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo.

While many of Collins' observations have insight and are well worth reading, I can't help but feel that certain points are forced to conform to Collins' ideas. For example, Nucor realized it could be the world's best steel manufacturer. Why? Had Nucor failed, I could imagine reading that Nucor tried to run around like a fox. Possibly, this is only the result of needing to fit all Collins' research into a short book, and Nucor had a truly viable reason to believe it could be the world's best steel maker.

As another example, Collins tells us Walgreens spent $100 million to create its own satellite system in an attempt to enhance profit per customer visit. Collins admires this because they used technology to stay focused upon their key ratio of profitability. Of course, the Internet came along and offered easier communication between the stores, so that you can pick up your prescription at any store, even when away on vacation. But, should a drugstore rodent really be messing with satellites? Is that within his inner rodent?

My feeling is that if this had all bombed and Walgreens had not been bailed out by the Internet, Collins would be using Walgreens as a good example of going too far outside what your company can be the best at! I see a hedgehog on the information freeway following the shinny bright lines.

In short:

--Get the right people on the bus. Get the wrong people off the bus. Be sure everyone is in a seat that suits them. Collins says that the right people are your best asset. Let them choose their own song. 99 Bottles Of Beer On The Wall, or whatever...

--Let the right people discover something your company can be great at. (This won't always work for ultra-small companies-- by the time you have the right people and are paying them, you'll be out of money before anyone figures out what you should be doing!)

--Choose something that the company can be passionate about. Passion isn't dictated, it's discovered.

--Find your best single measure of profitability. Collins asks: If you could maximize profitability per x, what x would have the biggest long-term impact on your company's success? Then, stay focused on improving that one key ratio.

--Stop making 'to do' lists. Start making "stop doing" lists. Stop doing anything that doesn't fit within your inner rodent.

--Know that you will succeed in the end. Have faith in your company's destiny. But, realize it might take many years that really suck to get there. Collins says you must confront the brutal facts of your company's reality.

Peter Hupalo, Author of "Thinking Like An Entrepreneur"

This is deep, deep quackery, a Who Moved My Cheese for people who spend all day in meetings trading consultantspeak, thinking they're working ("adding value"). For all its self-congratulation, Good to Great never moves beyond that old marketing joke--if it worked, then in retrospect, it was a good idea.

In a few years, Jim Collins will be every bit the joke that Tom Peters is today. Run, don't walk from this book.