Strategy & Business Development

4 concepts that allow you to turn a good company into a great one

You are the CEO of a company and things are actually going well. But you know that it could be a lot better, you just don’t know where to start. Perhaps it is time for a new strategy, a big “launch” event or a burning platform? Maybe you can buy your way to growth or even count on reaching your breakthrough through new technology?

According to Jim Collins, author of ‘Good to Great’, 2011, all these options are wrong. If you want to turn a good business into what Collins calls a great one you have to focus on something else.

In relation to the book, Collins examined 1.435 good companies, isolated the best 11 and investigated how they have gone from good to great companies.

This has produced four interesting concepts that we all, both big and small companies and, according to Collins, in fact also us as people, can learn from if we want to develop.

 

The Flywheel Effect

He calls the first concept “The Flywheel Effect”. Imagine a big, heavy, horizontal wheel.

“It’s a massive, metal disc mounted horizontally on an axle. It’s about 100 feet in diameter, 10 feet thick, and it weighs about 25 tons.”

That flywheel is your company.

As you can imagine, it requires a huge effort to get this wheel moving. In the beginning it takes a gigantic effort to merely move the wheel a few centimeters. And after three days of lasting efforts, you have successfully moved the wheel all the way around. If you keep pushing, the flywheel will begin to move a bit faster, it still requires a big effort, but the wheel slowly starts moving faster and faster. And then – it’s impossible to say when exactly – comes the breakthrough. Momentum takes over and the wheel moves faster and faster, its own weight is now the propulsion force. You are not pushing harder, but the flywheel is still accelerating.

This is the Flywheel Effect and it’s the same effect Jim Collins discovered in the companies that went from good to great.

It is, contrary to many beliefs, not one single big effort that creates a ‘great’ company, but instead the long tough haul that without notice generates momentum. If we ask CEO’s in these companies they too are not able to say when exactly the change occurred.

Why does the Flywheel Effect work? According to Collins it’s about how people have an inherent wish to be part of a winning team.

“They want to feel the excitement and the satisfaction of being part of something that just flat-out works” says Collins in an article on FastCompany.

When we begin to feel the magic momentum and see the tangible results, we lean our shoulder against the flywheel and begin to push. That is how change really happen.

 

The Hedgehog Principle

Another one of Collins’ concepts is the Hedgehog Principle. The reason that Collins uses a hedgehog to define this principle is an old Greek fable of a fox and a hedgehog. While the fox is good at many small things, the hedgehog is good at one big thing.

This focus and onesidedness is what defines the great companies. For a company it’s about simplifying a complex world into a simple organizing idea. A kind of basic principle that unites, organizes and guides all decisions.

“Leaders in good-to-great companies develop a Hedgehog Concept that is simple but reflects penetrating insight and deep understanding”, Collins writes in the same article.

This is not something we “just do” on a leadership retreat. On average, it took the companies in Collins’ book four years to develop a good Hedgehog Principle. It’s an iterative process where we have to answer difficult questions and debate again and again.

 

The stop doing-list

A natural consequence of having a Hedgehog Principle is that there will be things that we will have to stop doing. Including difficult things such as selling parts of a business that makes a profit in order to focus on something else.

Only things that fit their Hedgehog Principle gets to be on the to do-list of great companies.

 

Surround yourself with the right people

The last component to becoming “great” is to ensure that we get the right people onboard. Or, actually it’s the first.

A lot of people’s instincts tell them to focus on the end goal, the strategy and on where the company should go as the first thing. But Collins’ work shows that great company don’t. For them, it’s much more important to get the right people “on the bus”, as Collins describes it. And especially to get the wrong ones of.

Good-to-great leaders understand three simple rules:

  1. If you begin with “who” you can quickly adapt to an ever changing world.
  2. The right people are self-motivated. There is nothing better than being part of a team that is expected to deliver fantastic results.
  3. A fantastic vision, with the wrong people behind it, still produces poor results.