Resumo do Livro "Feitas para Vencer" de Jim Collins (Good to Great) - Vale a pena!

O resumo deste livro é para quem tem desejo de tornar-se líder em qualquer organização ou comunidade. Aproveitem!!!!

GOOD TO GREAT – Jim Collins

Chapter 1 – Good is Enemy of Great:

What is in the Black Box
Good results
Great Results

- Larger-than-life celebrity leaders who ride in from the outside are negatively correlated with taking a company from good to great: CEOs better perform when they come from inside
- There is no systematic pattern linking specific forms of executive compensation to the process of going from good to great.
- Strategy per se did not separate the good to great companies from the comparison companies. Both sets of companies had a well defined set of strategies and there is no evidence that good to great companies spent more time on long range strategic planning than the comparison companies.
- The good to great companies did not focus principally in what to do to become great; they focused equally on what not to do and what stop doing.
- Technology and technology-driven change has virtually nothing to do with igniting a transformation from good to great. Technology can accelerate transformation but technology cannot cause a transformation.
- Mergers and acquisitions play virtually no role in igniting a transformation from good to great; two big mediocrities joined together never make one great company.
- The good to great companies paid scant attention to managing change, motivating people, or creating alignment. Under the right conditions, the problems of commitment, alignment, motivation and change largely melt away.
- The good to great companies had no name, tag line, launch event or program to signify their transformation. It was a continuous improvement process that created revolutionary results and not revolutionary process.
- Greatness is not a function of circumstance (being in the right place on the right time). Greatness is a matter of conscious choice.

Transformation is a process of buildup followed by breakthrough, broken into three broad stages: disciplined people, disciplined thought and disciplined action.
BUILDUP
Level 5
Leadership
First Who
Then What
Confront the brutal facts
Disciplined People
BREAK
THROUGH
Hedgehog Concept
Culture of Discipline
Technology Accelerators
Disciplined Thought
Disciplined Action
THE FLY WHEEL FROM GOOD TO GREAT
- Level 5 Leadership: Compared to the high-profile leaders with big personalities who make headlines and become celebrities, the good to great leaders seem to have come from Mars. Self-Effacing, quiet, reserved, even shy – these leaders are paradoxical blend of personal humility and professional will.
- First Who…Then What: It is expected that the good to great leaders would begin by setting a new vision and strategy. Instead, they first get the right people in the bus, the wrong of the bus and the right people on the right seats – and then they figure out where to drive it. People are not your most important asset. The right people are.
- Confront the Brutal Facts: (yet never lose faith) – a former prisoner of war has more to teach us about what it takes to find a path to greatness than most books on corporate strategy. Every good to great company embraced what is called the “Stockdale Paradox”: you must maintain unwavering faith that you can and you will prevail in the end, regardless the difficulties AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be.
- The Hedgehog Concept: (Simplicity within the three circles) – to go from good to great requires transcending the curse of competence. Just because something is your core business – just because you have been doing it for years or perhaps even decades – does not necessarily mean you can be the best in the world at it. And if you can not be the best in the world at your core business, then your core business cannot form the basis of a great company. It must be replaced with a simple concept that reflects deep understanding of the three intersecting circles.
- Culture of Discipline: All companies have culture, some have discipline but fen companies have a culture of discipline. When you have disciplined people, you don´t need hierarchy. When you have disciplined thought, you don´t need bureaucracy. When you have disciplined action, you don´t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the great performance.
- Technology Accelerators: Good to great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of careful selected technologies.
- The Fly Wheel and the Doom Loop: Those who launch revolutions, dramatic change programs, and wrenching restructuring will almost certainly fail to make the loop from good to great. The good to great transformations never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until the point of breakthrough and beyond.

These are the timeless principles from good to great. It is about how you take a good organization and turn it into one that produces sustained great results, using whatever definitions best applies to your organization. And keep in mind: The world is changing and will continue to do so. But timeless principles of organized human performance will endure.

Chapter 2 - Level 5 Leadership:

- Level 5 leader is an individual who blends extreme personal humility with intense personal will. They channel their ego needs away from themselves and into the larger goal of building a great company. It is not that level 5 leaders have no ego or self interest. Indeed they are incredibly ambitious but their ambition is first and foremost fro the institution, not themselves.
- Level 5 leaders are a study in duality: modest and willful; humble and fearless.
- Level 5 leaders want to see the company even more successful in the next generation, comfortable with the idea that most people won´t even know the roots of that success trace back to their efforts. In contrast, conventional leaders concerned more with their own reputation for personal greatness, often failed to set the company up for the next generation. (in more than 75% of the comparison companies, executives set their successors up for failure or chose weak successors).
- In contrast to the very I-centric style of the comparison leaders, the good to great leaders did not talk about themselves. It was not just false modesty. Those who worked or wrote about the good to great leaders continuously used words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, and so forth. They never wanted to become larger than life heroes or become unreachable icons. They were seemingly ordinary people quietly producing extraordinary results.
- They are not just about humility and modest. They are equally ferocious to resolve and have a great determination to do whatever needs to be done to make the company great. They are fanatically driven, infected with an incurable need to produce results.
- Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (other people, external factors, good luck) and at the same time, they look at the mirror to apportion responsibility, never blaming bad luck, other people or environment, when things go wrong.
- There are two categories of people: those who do not have the seed of level 5 and those who do. The first category consists of people who could never in a million of years bring themselves to subjugate their egoistic needs to the greater ambition of building something larger and more lasting than themselves. For these people, work will always be first and foremost about what they get- fame, fortune, adulation, power – not what they build, create, contribute. The second category of people consists of those who have the potential to evolve to level 5; the capability resides within them, perhaps buried or ignored, but there nonetheless and under the right circumstances – self reflection, conscious personal development, a mentor, a great teacher, loving parents, a significant life experience, a level 5 boss, etc, they begin to develop.
- There is a symbiotic relationship between level 5 leaders and the other principles. On the one hand, level 5 traits enable you to implement the other findings; in the other hand, practicing the other findings help you to become a level 5 leader. This chapter is about what the level 5 leaders are; the rest describes what they do.

Chapter 3 – First Who…Then What:

- The good to great leaders began transformation by first getting the right people on the bus, the wrong ones off the bus and then figures out where to drive it.
- The key point of this chapter in not just the idea of getting the right people on the team. The key point is that “who” questions come before “what” questions – before vision, before strategy, before organization structure, before tactics. First who, then what – as a rigorous discipline, consistently applied so you can adapt to a changing world and they will be self motivated by the inner driver to produce the best results and to be part of creating something great.
- Dick Cooley (CEO Wells Fargo) said: “I do not know where we should take this company but I do know tat, if I start with the right people, ask them the right questions, and engage them in a vigorous debate, we will find a way to make this company great”.
- The comparison companies frequently followed the “genius with a thousand helpers” model – a genius leader who sets a vision and then enlists a crew of highly capable “helpers” to make the vision happen. This model fails when the genius departs.
- The good to great leaders were rigorous, not ruthless, in people decisions. They did not rely on layoffs and restructuring as primary strategy for improving performance. To be rigorous means consistently applying exacting standards at all times and at all levels, especially in upper management, To be rigorous means that the best people need not to worry about their positions and can concentrate fully on their work. “The only way to deliver to the people who are achieving is not to burden them with people who are not achieving”. The comparison companies used layoffs to a much greater extent.
- There are three practical disciplines for being rigorous in people decisions:
1- When in doubt, do not hire, keep looking (corollary: a company should limit its growth based on its ability to attract enough of the right people.); David Packard: “No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company. If your growth rate in revenue consistently outpaces your rate in people, you simply will not- indeed can not- build a great company.”
2- When you know you need to make a people change, act. (corollary: first be sure you do not simply have someone in the wrong seat.). When we have the wrong people in the bus and we know it, we normally wait, delay, try alternatives but worse, we spend time, energy and resources, taking it away from developing and working with all the right people. Letting the wrong people hang around is unfair to all the right people as they inevitably find themselves compensating for the inadequacies of the wrong people. Worse, it can drive away the right people. Strong performers are intrinsically motivated by performance and when they see their efforts impeded by carrying extra weight, they eventually become frustrated. And put the wrong ones off the bus, they can go for somewhere where they can blossom.
3- Put your best in your biggest opportunities, not your biggest problems (corollary: If you sell of your problems, do not sell off your best people.). The only way to become great is building in your opportunities and not managing your problems that can only make you good.
- Good to great management team consist of people who debate vigorously in the search of the best answers, yet who unify behind decisions, regardless of parochial interests.
- There is no systematic pattern linking executive compensation to the shift from good to great. The purpose of compensation is not to “motivate” the right behaviors from the right people, but to get and keep the right people in the first place. Not that executive compensation is irrelevant. You have to be basically rational and reasonable. But once you have structured something that makes basic sense, executive compensation falls away as distinguishing variable in moving an organization from good to great simply because the right people will do the right things and deliver the best results they are capable of, regardless of the incentive system. Their moral code requires building excellence for its own sake.
- The old adage “people are your most important asset” is wrong. People are not your most important asset. The right people are.
- Whether someone is the “right person” has more to do with character traits and innate capabilities than with specific knowledge, background or skills. Statement from Dave Nassef of Pitney Bowes: “We do not look at experience. We want to know: Who are they? Why are they? We find out who they are by asking them why they made decisions in their life. The answers to these questions give us insight into their core values.”

Chapter 4 – Confront the Brutal Facts:

- All good to great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality.
- When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts.
- A primary task in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and ultimately, for the truth to be heard.
- Creating a climate where the truth is heard involves four basic practices:
1- Lead with questions, not answers. Use it to gain understanding, not as a form of manipulation or as a way to blame or put down others. Leading from good to great does not mean coming up with answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not understand enough to have the answers and then ask the questions tat will lead to the best possible insights.
2- Engage in dialogue and debate, not coercion. Play the role of Socratic moderator in a series of raging debates. Be a mediator. Argue and debate to emerge with a conclusion. All good to great companies had a taste for intense dialogue. They did not use the discussion as a sham (feign, imitation) process to let people “have their say” so that they could “buy in” to a predetermined decision. The process was more like a heated scientific debate with people engaged in a search for the best answers.
3- Conduct autopsies, without blame. Make a clinical analysis of the failures, talk about the mistake, its implications and its lessons without pointing fingers to single out blame. In this way, it will be created a climate where the truth is heard. If you have the right people on the bus, you should almost never need to assign blame but need only to search for understanding and learning.
4- Build red flag mechanisms that turn information into information that cannot be ignored.
- The good to great companies faced just as much adversity as the comparison companies but responded to that adversity differently. They hit the realities of their situation head-on, facing the hard truths and saying “We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail”. As a result, they emerged from adversity even stronger and more resilient.
- Good to great companies never have the goal to merely survive but to prevail in the end as a great company.
- A key psychology for leading from good to great is the Stockdale Paradox: Retain absolute faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time confront the most brutal facts of your current reality, whatever they might be. What separates people is not the presence or absence of difficulty, but how they deal with the inevitable difficulties of life. In wrestling with life’s challenges, the Stockdale Paradox has proved powerful for coming back from difficulties not weakened, but stronger.
- Charisma can be as much a liability as an asset, as the strength of your leadership personality can deter people from bringing you the brutal facts.
- Leadership does not begin just with vision. It begins with getting people to confront the brutal facts and to act on the implications.
- Spending time and energy trying to motivate people is waste of effort. The real question is not, ”how do we motivate our people?” If you have the right people, they will be self motivated. The key is not to de-motivate them. One of the primary ways to de-motivate people is to ignore the brutal facts of reality.

Chapter 5 – Hedgehog Concept:

- All good to great companies attained a very simple concept that they used as a frame of reference for all their decisions, and this understanding coincided with breakthrough results. Meanwhile, the comparison companies came across with their snazzy (smart) strategies for growth.
- To go from good to great requires a deep understanding of three intersecting circles translated into a simple, crystalline concept (the hedgehog concept):
3. What you are deeply passionate about
1. What you can be best in the world at
2. What drives your economic engine
- To quickly grasp the three circles, consider the following personal analogy. Suppose you were able to construct a work life that meets the following three tests. First you are doing work for which you have a genetic or God given talent, and perhaps you could become one of the best in the world in applying that talent. (“I feel that I was just born to be doing this”). Second, you are well paid for what you do. (“I get paid to do this? Am I dreaming?”) Third, you are doing work you are passionate about and absolutely love to do, enjoying the actual process for its own sake. (“I look forward to getting up and throwing myself into a daily work and I really believe in what I am doing.”). If you could drive toward the intersection of these three circles and translate it into a simple, crystalline concept that guided your life choices, then you would have a hedgehog concept for yourself.
1. The key is to understand what your organization can be best in the world at, and equally important what cannot be the best at – not what it “wants” to be the best at. The hedgehog concept is not a goal, strategy or intention; it is an understanding.
- If you can not be the best in the world at your core business, then your core business cannot form the basis of your hedgehog concept.
- The “best of the world” understanding is a much more severe standard than a core competence. It is not just about building on strength and competence but about understanding what your organization truly has the potential to be the very best at and sticking to it. You might have a competence but not necessarily have the capacity to be truly the best in the world at that competence. Conversely, there may be activities at which you could become the best in the world, but at which you have no current competence.
2. To get insight into the drivers of your economic engine, search for the one denominator (profit per X or, in the social sector, cash flow per x) that has the single greatest impact. To attain it, you have to get profound insights about your economics. Get deep understanding of key drivers in its economic engine and build its system in accordance to this understanding
- Think about the economic denominator in terms of the following question: If you could pick one and only one ratio to systematically increase over time, what “x” would have the greatest and most suitable impact on your economic engine? The denominator can be quite subtle sometimes even unobvious. The key is to use the question of the denominator to gain understanding and insight into your economic model.
- Do you need to have a single denominator? No, but pushing for a single denominator tends to produce better insight than letting yourself the hook off with three or four denominators. The denominator question serve as a mechanism to force deeper understanding of the key drivers in your economic engine.
3. It may seem odd to talk about something as soft and fuzzy as “passion” as integral part of a strategic framework. But throughout the good to great companies, passion became a key part of the hedgehog concept. You can not manufacture passion or motivate people to feel passionate. You can only discover what ignites your passion and the passions of those around you. The passion circle can be focused equally on what the company stands for.
- Good to great companies set their goals and strategies based on understanding; comparison companies set their goals and strategies based on bravado.
- A hedgehog concept simplifies a complex world and makes decisions much easier. But while it has crystalline clarity and elegant simplicity once you have it, getting the concept can be devilishly difficult and takes time. It is an inherently iterative process whose essence is to get the right people engaged in vigorous dialogue and debate, infused with brutal facts and guided by questions formed by the three circles.
- Getting the hedgehog concept is an iterative process. The council can be a useful device (1- it exists as a device to gain understanding about important issues facing the organization; 2- is assembled and used by the leading executive and usually consists of 5 to 12 people; 3- each member has the ability to argue and debate in search of understanding, not from the egoistic need to win a point or a protect a parochial interest; 4- each member retains the respect of every other member without exception; 5- members come from a range of perspectives, but each member has a deep knowledge about some aspect of the organization and/or the environment in which it operates; 6- includes key members of the management team but is not limited to members of the management team, nor is every executive automatically a member; 7- is a standing body, not an ad hoc committee assembled for a specific project; 8- meets periodically, as much as once a week or as infrequently as once per quarter; 9- does not seek consensus, recognizing that consensus decisions are often at odds with intelligent decisions. The responsibility for the final decision remains with the leading executive; 10- is an informal body, not listed on any formal organization chart or in any formal documents; 11- can have a range of possible names. In the good to great companies, they had benign names like Long Range Profit Improvement Committee, Strategic Thinking Group, Executive Council and Corporate Products Committee)
- The good to great companies are more like hedgehogs – simple, dowdy (sem graca) creatures that know “one big thing” and stick to it. They simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It does not matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple (indeed almost simplistic) ideas. They understand that the essence of profound insight is simplicity. They see what is essential and ignore the rest. The comparison companies are more like foxes – crafty, cunning creatures that know many things yet lack consistency. They pursue many ends at the same time and see the world in all its complexity. They are scattered or diffused, moving on many levels, never integrating their thinking into one overall concept or unifying vision.
- It took four years on average for the good to great companies to get a hedgehog concept.
- Strategy per se did not separate the good to great companies from the comparison companies. Both sets had strategies, and there is no evidence that the good to great companies spent more time on the strategic planning than the comparison companies.
- You absolutely do not need to be in a great industry to produce sustained great results. No matter how bad the industry, every good to great company figured out how to produce truly superior returns.

Chapter 6 – A Culture of Discipline:

- Sustained great results depend upon building a culture full of self disciplined people who take disciplined action, fanatically consistent with the three circles.
- Bureaucratic cultures arise to compensate for incompetence and lack of discipline, which arise from having the wrong people on the bus in the first place. If you get the right people in the bus and the wrong off, you do not need stultifying bureaucracy. Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people, which then increases the percentage of wrong people, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away and so forth.
- Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together – a culture of discipline with an ethic of entrepreneurship – you get a magical alchemy of superior performance and sustained results.
- A culture of discipline involves a duality. On the one hand, it requires people who adhere to a consistent system; yet, on the other hand, it gives people freedom and responsibility within the frame work of that system.
- The good to great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self disciplined people who did not need to be managed, and then managed the system, not the people.
- A culture of discipline is not just about action. It is about and starts with getting disciplined people who engage in disciplined thought (you need the discipline to confront the brutal facts of reality, while retaining resolute faith that you can and will create a path to greatness. Most importantly, you need the discipline to persist in the search for understanding until you get your hedgehog concept) and who then take disciplined action. And this order is important. The point is to first get self disciplined people who engage in very rigorous thinking, who then take disciplined action within the framework of a consistent system designed around the hedgehog concept.
- The good to great companies appear boring and pedestrian looking in from outside, but upon closer inspection, they are full of people who display extreme diligence and a stunning intensity, are self-disciplined and are willing to go to extreme lengths to fulfill their responsibilities (they “rinse the cottage cheese”). They do whatever it takes to become the best within carefully selected arenas and then to seek continual improvement from there.
- Do not confuse a culture of discipline with a tyrant who disciplines – they are very different concepts, one highly functional, the other highly dysfunctional. Savior CEOs who personally discipline through sheer force of personality usually fail to produce sustained results.
- The single most important form of discipline for sustained results is fanatical adherence to the hedgehog concept and the willingness to shun opportunities that fall outside the three circles. Even actions towards diversification and innovation have to stay within the three circles.
- The good to great companies at their best followed a simple mantra: “Anything that does not fit with our hedgehog concept, we will not do. We will not launch unrelated businesses. We will not make unrelated joint ventures. If it does not fit, we do not do it.” Every comparison company either lacked the discipline to understand its three circles or lacked the discipline to stay within the three circles.
- The more an organization has the discipline to stay within its three circles, with almost religious consistency, the more it will have opportunities for growth. The challenge becomes not opportunity creation, but opportunity selection.
- The fact that something is a “once in a lifetime opportunity” is irrelevant, unless it fits within the three circles. A great company will have many once in a lifetime opportunities.
- The purpose of budgeting in a good to great company is not to decide how much each activity gets, but to decided which arenas best fit with the hedgehog concept and should be fully funded and which should not be funded at all, that means, which activities best support the hedgehog concept to be fully strengthened and which should be eliminated entirely.
- “Stop Doing” lists are more important than “to do” lists.
- If you have level 5 leaders who get the right people on the bus, if you confront the brutal facts of reality, if you create a climate where the truth is heard, if you have a council and work within three circles, if you frame all decisions in the context of a crystalline hedgehog concept, if you act from understanding, not bravado – if you do all these things, once you know the right thing, do you have the discipline to do the right thing and, equally important, to stop doing the wrong things?

Chapter 7 – Technology Accelerators:

- Through all the constant changes in the world, good to great companies have adapted and endured because good to great companies think differently about technology and technological change than mediocre ones.
- Good to great companies avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.
- The key question about any technology is, Does the technology fit direct with the hedgehog concept? If yes, then you need to become a pioneer in the application of that technology. If no, then you can just settle for parity or ignore it entirely. The hedgehog concept will drive the use of technology, not the other way around.
- The good to great companies used technology as an accelerator of momentum, not a creator of it. None of the good to great companies began their transformations with pioneering technology, yet they all became pioneers in the application of technology once they grasped how it fit with their three circles and after they hit the breakthrough. The pioneering application of technology usually came late in the transition and never at the start.
- It is possible to see the application of technology as just one more way in which the good to great companies remained disciplined within the frame of their hedgehog concept. Conceptually, their relationship to technology is no different from their relationship to any other category of decisions: disciplined people, who engage in disciplined thought, and who takes disciplined action. If a technology does not fit squarely within their three circles, they ignore alt the hype and fear and just go about their business with a remarkable degree of equanimity. However, once they understand which technologies are relevant, they become fanatical and creative in the application of those technologies.
- You could have taken the exact same leading edge technologies pioneered at the good to great companies and handed them to their direct comparisons for free, and the comparisons still would have failed to produce anywhere near the same results.
- Thoughtless reliance on technology is a liability, not an asset. When used right- when linked to a simple, clear, and coherent concept rooted in deep understanding- technology is an essential driver in accelerating forward momentum. But when used wrong- when grasped as an easy solution, without deep understanding of how it links to a clear and coherent concept- technology simply accelerates your own self created demise.
- How a company reacts to technological change is a good indicator if its inner drive for greatness versus mediocrity. Great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results; mediocre companies react and lurch about, motivated by fear of being left behind.
- The idea that technological change is the principal cause in the decline of once great companies (pr perceptual mediocrity of others) is not supported by the evidence. Certainly, a company can not remain a laggard and hope to be great, but technology by itself is never a primary root of either greatness or decline.
- Across 84 interviews with good to great executive, fully 80% did not even mention technology as one of the top five facts in the transformation. This is true even in companies famous for their pioneering application of technology such as Nucor.
- “Crawl, walk, run” can be a very effective approach, even during times of rapid and radical technological change. E.g. Walgreens: slow at first (crawl), it began experimenting with a Web site while engaging within the context of its own peculiar hedgehog concept. “How will the internet connect to our convenience concept? How can we tie it to our economic denominator of cash flow per customer visit? How can use the web to enhance what we do better than any other company in the world and in a way we are passionate about?” Throughout, Walgreens executives embraced the Stockdale Paradox: “We have the complete faith that we can prevail in an internet world as a great company; yet, we must also confront the brutal facts of reality about the internet.” Then, a little faster (walk), Walgreens began to find ways to tie the internet directly to its sophisticated inventory and distribution model and- ultimately- its convenience concept. Fill your prescription on-line, pop into your car and go to your local Walgreens drive-through, zoom past the window and pick up your order. Or have it shipped to you, if that is more convenient. And finally run, going deep into the usage of internet on its activities.
- No technology, no matter how amazing, can by itself ignite a shift from good to great. No technology can make you level 5 leader, turn the wrong people into the right one, nor can it instill the discipline to confront the brutal facts of reality and nor can it instill unwavering faith. No technology can supplant the need for deep understanding of the three circles and the translation of that understanding into a simple hedgehog concept. No technology can create a culture of discipline nor instill the simple inner belief that leaving unrealized potential on the table- letting something remain good when it can become great- is a secular sin. Those that stay true to these fundamentals and maintain their balance, even in times of great changes and disruption, will accumulate the momentum that creates breakthrough momentum. Those that do not, those that fall into reactionary lurching about, will spiral downward or remain mediocre.

Chapter 8 – The Flywheel and the Doom Loop:

- Good to great transformations often look like dramatic, revolutionary events to those observing from outside, but they feel like organic, cumulative processes to people on the inside. The confusion of end outcomes (dramatic results) with processes (organic and cumulative) skews our perception of what really works over the long haul.
- No matter how dramatic the end results, the good to great transformations never happened in one fell swoop. There was no single defining action, no grand program, no key event, no one killer innovation, no solitary lucky break, no miracle moment. It was a whole bunch of interlocking pieces that built one upon another. It was a quiet, deliberate process of figuring out what needed to be done to create the best future results and then simply taking these steps, one after the other, turn by turn of the flywheel. After pushing on that flywheel in a consistent direction over an extended period of time, they’d inevitably hit a point of breakthrough.
- Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough by a cumulative process – step by step, action by action, decision by decision, turn by turn – that adds up to sustained and spectacular results.
- The comparison companies frequently tried to create a breakthrough with large, misguided acquisitions. The good to great companies, in contrast, principally used large acquisitions after breakthrough, to accelerate momentum in an already fast spinning flywheel.
- Those inside good to great companies were often unaware of the magnitude of their transformation at the time; only later, in retrospect, did it become clear. They had no name, tag line, launch event or program to signify what they were doing at the time.
- The good to great leaders spent essentially no energy trying to “create alignment”, “motivate the troops” or “manage change”. Under the right conditions, the problems of commitment, alignment, motivation, and change largely take care of themselves. Alignment principally follows from results and momentum, not the other way around.
- The short term pressures from Wall Street were not inconsistent with following this model. The flywheel effect is not in conflict with these pressures. Indeed, it is the key to managing them. The good to great companies had patience and discipline to follow the buildup-breakthrough flywheel model despite these pressures. And in the end, they attained extraordinary results by Wall Street’s own measure of success. Ex. Abbott pg 173. ( report external growth rate lower than the internally established goal).
- All good to great companies effectively managed Wall Street during their buildup-breakthrough years, and they saw no contradiction between. They simply focused on accumulating results, often practicing the time-honored discipline of under-promising and over-delivering. And as the results began to accumulate- as the flywheel built momentum- the investing community came along with great enthusiasm.
- The flywheel effect: The good to great companies understand a simple truth: Tremendous power exists in the fact of continued improvement and the delivery of results. Point to tangible accomplishments- however incremental at first- and show how these steps fit into the context of an overall concept that will work. When you do this in such a way that people see and feel the buildup of momentum, they will line up with enthusiasm. This applies not only to outside investors but also to internal constituent groups.

THE FLYWHEEL EFFECT:
Accumulation of Visible Results
People Line Up, Energized By Results
Flywheel Builds Momentum
Steps Forward, Consistent with Hedgehog Concept

- The comparison companies followed a different pattern, the doom loop. Rather than accumulating momentum – turn by turn of the flywheel – they tried to skip buildup and jump immediately to breakthrough. Then, with disappointing results, they’d lurch back and forth, failing to maintain a consistent direction. They would push the flywheel in one direction, then stop, change course, and throw it in a new direction, failing to build sustained momentum and fell instead into what was come to call the doom loop.

THE DOOM LOOP:
New Direction, Program, Leader, Event, Fad or Acquisition
No Buildup; No Accumulated Momentum
Reaction, Without Understanding
Disappointing Results
- Besides the acquisition matter, the other frequently observed doom loop pattern is that of new leaders who stepped in, stopped an already spinning flywheel, and threw it in an entirely new direction.
- When we look over the good to great transformations, two that come to mind are consistency and coherence. Each piece of the system reinforces the other parts of the system to form an integrated whole that is much more powerful than the sum of the parts. It is only through consistency over time, through multiple generations, that you can get maximum results.
- HOW TO TELL IF YOU ARE ON THE FLYWHEEL OR IN THE DOOM LOOP:

Signs of Flywheel
Signs of Doom Loop
Follow a pattern of buildup leading to breakthrough. Reach breakthrough by an accumulation of steps, one after the other, turn by turn of the flywheel; feels like an organic evolutionary process.
Skip buildup and jump right to breakthrough. Implement big programs, radical changes, dramatic revolutions; chronic restructuring – always looking for a miracle moment or new savior.
Confront the brutal facts to see clearly what steps must be taken to build momentum.
Embrace fads and engage in management hoopla, rather than confront the brutal facts.
Attain consistency with a clear Hedgehog Concept, resolutely staying within the three circles.
Demonstrate chronic inconsistency- lurching back and forth and straying far outside the three circles.
Follow the pattern of disciplined people (“first who”), disciplined thought, disciplined action.
Jump right to action, without disciplined thought and without first getting the right people on the bus.
Harness appropriate technology to your hedgehog concept, to accelerate momentum.
Run about like chicken little in reaction to technology change, fearful of being left behind.
Make major acquisitions after breakthrough (if at all) to accelerate momentum.
Make major acquisitions before breakthrough, in a doomed attempt to create momentum.
Spend little energy trying to motivate or align people; the momentum of the flywheel is infectious.
Spend a lot of energy trying to align and motivate people, rallying them around new visions.
Let results do most of the talking
Sell the future, to compensate for lack of results.
Maintain consistency over time; each generation builds on the work of previous generations; the flywheel continues to build momentum.
Demonstrate inconsistency over time; each new leader brings a radical new path; the flywheel grinds to a halt, and the doom loop begins anew.