The Breakthrough Company: How Everyday Companies Become Extraordinary Performers [Paperback]

The best of recently published business books began when their authors or co-authors were intrigued by a question and conducted rigorous and extensive research to locate the answer to it. Jim Collins offers an excellent case in point. He and Jerry Porras wondered why certain companies were able to sustain their success over a period of 20+ years. What they learned is provided in Built to Last. Later, the managing director of the McKinsey office in San Francisco, Bill Meehan, congratulated Collins on the research and writing in the book, then added, "Unfortunately, it's useless." Why? Because great companies were always great. "Can a good company become a great company and, if so, how? Or is the disease of `just being good' incurable?" Collins provides the answers in Good to Great.

Small world. Years later during a casual conversation with Collins, Keith McFarland wondered aloud what could be learned about great companies closer to the time of their entrepreneurial breakthrough. "What a great research question," Collins replied. Actually, McFarland then formulated three questions that would guide and inform research for The Breakthrough Company:

1. Why do most companies start small and stay that way?

2. What is special about the handful of companies that successfully "break through" the entrepreneurial stage of development?

3. What can a leader do to ensure that his or her company maximizes its chances for a breakthrough?

McFarland and his associates created and analyzed of more than 7,000 of America's fastest growing private and p8blic companies. They spoke with more than 1,500 key executives. They reviewed and cataloged more than 5,600 articles. Moreover, they conducted intensive 90-day studies with 52 firms ranging in size from $9-million to $-billion in annual sales.

This book shares what they learned. More specifically, what proved to be the characteristics that separate those middle-sized entrepreneurial companies that break through to become "significant, lasting, and difference-making organizations" from those that don't. The book also suggests what leaders can do to help their organizations maximize their potential for breakthrough. "We began to see the story of the breakthrough company not as a journey from an entrepreneurial firm to a professionally managed firm, but from a small or mid-sized entrepreneurial firm to [begin italics] entrepreneurial enterprise [end italics]."As with any other journey, this one has a starting point and an ultimate destination as well as several checkpoints in between. As I re-read this book, I realized that rather than a single "journey," this process of transformation (i.e. from small to mid-size firm to entrepreneurial enterprise) consists of six separate but related transitions, each of which proceeds at its own pace. That is certainly true of the nine exemplary companies on which McFarland focuses in this book: ADTRAN, Chicos FAS, Express Personnel, Fastenal, Intuit, Paychex, Polaris, SAS Institute, and The Staubach Company." McFarland devotes a separate chapter to each of these transitions, citing real people and real situations in one or more of the nine companies to illustrate the given point.

In Chapter 3, for example, he explains what it means to "crown the company" during a firm's transition from one in which the leader is sovereign to one in which the firm itself is sovereign. I know from personal experience that Roger Staubach leveraged his visibility and credibility when establishing his own commercial real estate firm but that he "crowned it" as soon as possible. Over time, he has become much less involved in day-to-day operations because the firm may bear his name (and it does so with great pride) but it really is an entrepreneurial enterprise that is greater than the sum of its parts, or any one part such as its high-visibility founder. Who was convinced of that from the firm's first day? Roger Staubach.

I especially appreciate McFarland's brilliant use of various reader-friendly devices such as "The Key Ideas" section in most chapters, accompanied by "Squirts from the Grapefruit" (i.e. surprising revelations), "Breakthrough in Practice Tips," and boxed key ideas. This is the first business book I have read in which Charlie Chan is cited as a source. In one of his films, the star detective observes that surprising findings are "like squirt from grapefruit juice." McFarland acknowledges general "squirts" as well as a few that are relevant to each transition. For example, in Chapter 5 ("Building Company Character"): "Some breakthrough companies had formal values statements and some didn't. The creation of a formal statement of values did not seem to be in any way related to the development of strong company character." McFarland also includes seven mini-case studies of companies in which their real-world situations also illustrate his key points.

I wholly agree with him that "breakthrough is a journey, not a destination. "That there are no permanent breakthrough companies - only companies that engage in practices leading to long-term success. And just as it's possible for an everyday company to achieve breakthrough performance, it's equally possible for a breakthrough company to, without realizing it, fall back into life as an everyday firm." No company can afford to "crown" any of its individuals rather than the entire enterprise, rest on its laurels, play it safe, and allow its character to become a set of platitudes "that no one believes in." Instead, a company must continually find new and better ways to meet customer needs, to reduce costs, and to increase the speed of effective execution. If those involved in any breakthrough company believe, as Marshall Goldsmith so aptly describes it, that "what got them here will get them there" and relent in their commitment to the fundamentals of breakthrough that Keith McFarland explains so brilliantly in this book, that company's performance is certain to become mediocre and its survival problematic, at best.

I also appreciate the provision of seven mini-case studies that offer additional real-world examples of McFarland's most important points. They appear in this order: The Olson Company (Page 26), Shamrock Foods (Pages 109-110), Western Wats (Pages 138-139), Simms Fishing (Pages 148-149), Eagle Global Logistics (Page 158), o2 Ideas (Pages 1869-170), and House of Blues (Page 218). After explaining how to build breakthrough capabilities in the final chapter, McFarland offers a number of suggestions about how to avoid breakdown after breakthrough. It remains to be seen which (if any) of the nine exemplar companies avoid breakdown but of this we can be certain: the potential for a breakdown is inherent in each breakthrough. Keith McFarland agrees with Pogo: "We have met the enemy and he is us."

The Breakthrough Company does for smaller businesses that want to improve growth and profitability what Good to Great did for larger businesses. Keith R. McFarland has mostly duplicated the Good to Great research methodology except to look at those companies which have broken-out among smaller firms.

Like Good to Great, The Breakthrough Company focuses on leadership style and company culture. A number of the findings seemed no different from Good to Great, but different titles were used in this book.

The book suggests six fundamental transitions:

1. From having the leader be sovereign to putting the company's development ahead of the leader's interests.

2. Rather than making incremental improvements in response to market changes, make a few large bets that offer huge potential rewards.

3. Instead of having the company's culture be determined by whoever is there, build a company around an integrity-filled commitment to doing a good job.

4. Go from succeeding by being small and agile to succeeding because of proprietary advantages you develop.

5. Stop relying solely on internal ideas by getting help from wherever you can.

6. Encourage people internally to challenge assumptions in constructive ways rather than blindly following a narrow vision.

If you like your information compact, each chapter is summarized in detail at the end. You could get an overview of the book that way in about 30 minutes and decide if you want to read more.

So what is he really describing? To me, it all sounded like continuing business model innovation . . . an area I've studied and written about for 30 years. Yet, the book doesn't describe the business model innovation literature. That's the biggest surprise and missing element.

I thought that the cases were mostly pretty interesting, but some are presented in such a fragmentary way that I didn't really get a sense out of what made their performance special in the market place. The ones that I didn't get enough of a feeling for included Chico's FAS, Express Personnel, and The Staubach Company. Intuit, Polaris, and Paychex are the best described cases.

I also would have liked to have seen a comparison between these companies and the Good to Great Companies. That would have made it more obvious how the smaller companies face different issues and challenges than the larger ones.

If you like case studies of top performers, you'll like this book. Take a look.