Good to Great

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Bad Business Models

November 4, 2009 in Business, Management and Operations | 1 comment

Bad Business Model
Bad Business Model

One of the main problems with a bad business model is offering too many services under one roof (i.e., one common corporate shell).  And even if you offer different services under separate corporate structures, then you are still stretching yourself beyond what you can be BEST at.

<—Mable Peabody is breaking one of the foundational rules of the Good To Great book: The Hedgehog Concept (see review here).  In his research, Jim Collins found that the companies which went from to Good to Great:
1.  Only did what they could be the best in the world at,
2.  Figured out what the single denominator, or profit per x, which drove their “economic engine”, and
3.  Only pursued what they were passionate about

So you need to rethink your model when it involves too many offerings.  There are other ways to make money, but they may not be the ways YOU should make money.  You can’t do everything well.
Make sure you are passionate about what you do, and that you can be your best at it.

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Good to Great Chapter 5 Review: The Hedgehog Concept (Simplicity within the Three Circles)

September 2, 2009 in Book Review | 3 comments

Good to Great bookThis chapter begins with a quaint story about the fox vs. the hedgehog.  The fox, always quickly bounding forward to attack the hedgehog, is consistently met with the hedgehog’s simple defense of rolling into a ball of spikes.  Hedgehogs are not exciting, just very consistent.

Jim Collins compares the Good to Great companies to that little hedgehog – always focused on their consistent method of success.  Out of this little story, Jim Collins developed what he calls The Hedgehog Concept.

During interviews with the executives of these extraordinary companies, they consistently found them to be deliberate in their simple, consistent policy of doing great business.  No surprises, no magic, no rocket science.  Just simple consistent excellence in following their researched methodologies – methodologies that work.

Here is Jim Collins’ explanation of the simplicity of The Hedgehog Concept and how it relates to three focused dimensions that should be considered when doing business (with excerpts from the book):

1.  What can you be the best in the world at (and what you cannot be the best in the world at).  You may have a core competence in something, but you may not be the best in the world at it.  Do only what you can be the best in the world at.

A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best.  It is an understanding of what you can be the best at.  The distinction is absolutely crucial.

2.  What drives your economic engine.  The good to great companies attained piercing insight into what generates robust cash flow and profitability.  These companies discovered their single denominator – profit per x – that had the greatest impact on their economics.

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.

3.  What are you deeply passionate about.  The good to great companies focused only on those activities that ignited their passions.

You can’t manufacture passion or “motivate” people to feel passionate.  You can only discover what ignites your passion and the passions of those around you.

These three core concepts coupled with a fanatical consistency (the Hedgehog Concept) drove the Good to Great companies to consistently create great results without circus fanfare.

But finding your Hedgehog Concept isn’t easy (on average, it took 4 years for the great companies to clarify their Hedgehog Concept).  Thus, Collins suggests implementing a team of counselors to help you clarify your passionate mission.  The Council, as Collins calls them, helps the owners/executives debate and struggle through the principles that make a great company… helping to discover what they are passionate about, what drives their economic engine and what they can be the best in the world at.

My Council is my wife, my business coach, and my staff.  They keep me on track to make sure our business is all about what we are passionate about, and what we love.

What are you the best in the world at?  What drives your economic engine?  What are you passionate about?

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Good To Great Ch. 4 Review: Confront the Brutal Facts (Yet Never Lose Faith)

August 5, 2009 in Book Review | No comments

Good to Great at AmazonThis chapter concerned the companies being studied in this book, and their counterpart examples, and whether they confronted the brutal solemn facts of their existence before their transition into great companies.  Some did, and some did not…

This chapter was also about how the great companies continually refined their definition and mission of greatness with the brutal facts of reality.  Look the facts squarely in the face and deal with what you see.

The greatest impact this chapter had on me was found in the discussion of Building a Climate Where the Truth is Heard:

1.  As the leader, you are to lead with questions, not answers. Just because you are the chief executive, or even if you own the business, doesn’t mean you have all of the answers.  Your employees already know that, now you just have to admit it.  Good to Great leaders start meetings with questions, creating a culture where people have tremendous opportunity to be heard and, ultimately, for the truth to be heard.  If you have the right people on the bus, leading with questions won’t be power-grabs by your subordinates to rise to the top, but great opportunities to hear feedback that will turn your good company into a great one.

2.  Engage in dialogue and debate, not coercion. Debate if you must, and do it with intensity, but don’t ever make your management meetings times to air your grievances with the results of the last quarter.  Enter into the intense research needed to change a company from good to great, but don’t make it a platform to coerce the results.

3.  Conduct autopsies, without blame. Search for the reasons behind bad decisions, and faulty reasoning, but don’t do it with the goal of placing blame.  And if you are the executive, you should probably step up and assume the blame for the poor results in your company anyway, since you were the one most likely to be able to make the change toward success.  At least, that’s Jim Collins point and conclusion.

4.  The Collins team noted that the studied companies and the comparison companies both had access to extreme amounts of information… but the great companies turned that information into information that cannot be ignored. They did this by building “red flag” mechanisms.  These are mechanisms where you receive real-time customer/client feedback (instead of waiting for the year-end surveys that you explain away anyway).  Some companies gave the client full discretion to deduct invoice lines from the invoices they disputed.  The client didn’t ask for permission, they just deducted the amount and paid the balance.  This alerted the company to real-time dissatisfaction, and they immediately handled the problem.  Likewise, in one of Collins’ university classes he was teaching, he gave a red sheet of paper to every student and allowed them to “throw the flag” once during the semester.  They could challenge the professor, another student, make any observation whatsoever to improve the direction of the class.  This red flag could only be used once, and was not transferable to another student, but it offered immediate correction to the class if it was headed in the wrong direction.  You could build any type of red flag mechanism into your company maybe allowing your employees to confront you without retribution in a monthly meeting, or offer clients a one time reprieve form invoicing if they disagreed with how you were serving them.  Either way, allowing a real-time “red flag” input system will get your immediate attention and halt the continued dysfunction of your poor service through the end of the year.

One thing about books like this is that they challenge us as business owners to be bold in our methods of service, improving ourselves and leading our staff onto the limbs of crazy customer service.  I repeat our motto at work often, and now the staff repeats it too: “We ain’t scared.”  You must take courage when improving yourself or your business.  You won’t always succeed, but you’ll better yourself just for trying.

The journey along the way is often the benefit we receive from trying… not the ultimate goal of profit for profit’s sake at the end of a task.  I hope you enjoyed this post.  Do you want to throw a red flag?  Did I miss an important point?  Let me have in the comments, dang it!  I ain’t scared!

Thanks, Jason M. Blumer

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Good To Great Ch. 3 Review: “First Who… Then What”

July 15, 2009 in Book Review | 6 comments

Good to Great at AmazonThis chapter made the most impact on me, and on my business. I’ve seen the truths of this chapter played out before my eyes as our firm has gone through a number of people over the years… some great (and they’re still with us), and some that are gone (because they stunk!).

The executives that Jim Collins studied in the Good to Great companies would NOT “set a new direction, a new vision and strategy for the company, and then get people committed and aligned behind that new direction.”  They began with the who, and then figured out the what.  That is, sometimes the executives didn’t know the direction that should be taken for the company or what the ultimate outcome of their visioning should be.  They focused on getting the right people “on the bus” and the wrong people “off the bus” and then they decided where to drive the bus.

And this is amazing = the task of motivating people and managing their work largely melts away when you have the right people on the bus.  What does that say to you and I as business owners?  Answer: when you’ve determined that you have the wrong people on the bus, the quicker you can get them off your “bus”, the quicker you can take your company in the proper direction.  Each day you delay is another lost day towards greatness.  Don’t let the wrong people hold your company back.  I see it happen a lot!  We give chance after chance when the person is entirely the wrong person for the company.  No matter how much you train, or how many bonuses you offer, the wrong people will always be the wrong people… today and tomorrow.

Ultimately, the research team working on the Good to Great book found that building the right team outlived the humble leader that had the wisdom to build the right team in the first place.  Whereas, the comparison companies never did well after the fearless arrogant leader left the leadership of the company.  A team will outlive you and make your company live on whether you are present or not.  That is the definition of a Great company, one that outlives it’s creato7

Finally, in regards to getting the right people on the bus, Jim Collins discovered three important disciplines in the Good to Great companies:

1.  When in doubt, don’t hire – keep looking.  A company should actually limit its growth based on its ability to attract and hire the right people.

2.  When you know you need to make a people change, act.  But first, be sure you don’t have someone in the wrong seat.

3.  Put your best people on your biggest opportunities, not your biggest problems.  If you sell off your problems, don’t sell off your best people.

The truths from this book of attracting and hiring the right people will stick with me for a long time.  I hope they help you, too.

Thanks, Jason M. Blumer

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Good To Great Ch. 2 Review: Level 5 Leadership

July 1, 2009 in Book Review, Business | 1 comment

Good to Great at AmazonChapter 2 of Good to Great begins with the explanation of the six specific aspects of the companies that made the jump from good to great.  Again, they are:

-Level 5 Leadership

-First Who… Then What

-Confront the Brutal Facts

-Hedgehog Concept

-Culture of Discipline, and

-Technology Accelerators

This week’s review is related to the first of the specific aspects found in the good to great companies: Level 5 Leadership.  After 84 interviews with the executive CEOs of the good to great companies, and reading through 5,979 articles of the target companies in the research project, Jim Collins and his research team found unlikely leaders at the helms of these great companies.  After many intriguing company examples in the book, Collins describes the leaders as Level 5 Leaders, at the very top of five levels of leaders found in companies throughout the world.

We can learn many lessons to run our companies better from the leadership lessons the Collins research team discovered in their research.  Here are the levels of the leaders they consistently found:

Level 1 Leaders are highly capable individuals who simply make productive contributions to their companies.

Level 2 Leaders are capable team members in an organization that make significant contributions to achieve group objectives in group settings.

Level 3 Leaders are competent managers who organize people and resources toward predetermined objectives.

Level 4 Leaders are considered effective leaders who catalyze commitment toward the vigorous pursuit of a clear and compelling vision.

Level 5 Leaders are the highest level type of leaders who “build enduring greatness through a paradoxical blend of personal humility and professional will.”

The last one is what we desire to become.  The humility plus professional will were Jim Collins’ main points in this chapter.  They originally envisioned big, bold (and loud) leaders entering the company on a white horse to save the struggling enterprise.  But they found quite the opposite – low key leaders with a great amount of humility and an almost fanatical will to succeed. No matter what it took, these leaders didn’t toot their own horn, and constantly made huge sacrifices both personally and professionally to make their organizations succeed.

His Window and Mirror analogy impacted me greatly.  These Level 5 Leaders would look out the window of their organizations and typically give credit for success to others, while looking in the mirror and taking all the blame for the times when the organization was misguided and made mistakes.  And these traits were consistent among all of the CEOs they studied!  That says a lot to how we need to operate in our businesses.

Thankfully, Jim Collins believes we can be taught these Level 5 Leader qualities.  That’s good news – let’s get busy.

Thanks, Jason M. Blumer

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Good To Great Ch. 1 Review: Good Is The Enemy of Great

June 16, 2009 in Book Review, Business | 1 comment

Good to Great at AmazonI love books based upon heavy research.  It’s not based upon someone’s thoughts or beliefs, or even experience.  It’s based upon tons of research, discussions, interviews, research team arguments and market analysis.  I feel I can learn a lot from these types of books.

Good To Great written by Jim Collins is one of those books developed after 5 years of research.  And I’m loving it so far.  I haven’t finished the book yet but I’m half way through.  I wanted to review the book on my blog for the sake of all readers… I highly suggest you read the book when you can.

Ch. 1: Good is the Enemy of Great

Jim Collins states that many schools, churches and schools are good… and that is precisely why they are not great.  Good is okay with most companies and individuals, so they often fail to make the leap to greatness (because they see no need to change).  Jim Collins says he has discovered the underlying variables that make greatness happen.  He and his team analyzed eleven great companies and eleven comparison companies which achieved certain cumulative stock returns that outperformed their competitors for 15 years following their transition point from good to great.

The Collins team analyzed what happened to these great companies at the point they made the transition from good to great.  He called this point of transition the “Black Box”, and sought to analyze what happened inside this Black Box.

Here are some initial findings to their research (which we can all learn from):

1.  Larger-than-life celebrity CEOs had nothing to do with greatness.  Most great CEOs came from inside the organization.

2.  Executive compensation had nothing to do with taking a company from good to great.  Their data does not support compensation being a main driver to executives taking their companies to greatness.

3.  Good to great companies did not primarily focus on what to do to become great, but what not to do and what to stop doing.

4.  Technology had virtually nothing to do with the transition from good to great.

5.  The good to great companies paid little attention to managing people or motivating people – people problems melt away in the good to great companies.

6.  Greatness is not a function of circumstance (e.g., being in the right industry at the right time), but is largely a matter of conscious choice.

To sum up the Collins research, evolving from goodness to greatness involved three broad stages, and two subset stages within each of the three broad categories:

1.  Disciplined People, which includes (1) Level 5 Leaders and (2) “First Who… Then What”

2.  Disciplined Thought, which includes (1) confronting the brutal facts and (2) the Hedgehog Concept, and

3.  Disciplined Action, which includes (1) a Culture of Discipline and (2) Technology Accelerators

It’s exciting to be reading a book where they say they’ve discovered the variables to greatness.  I’m reading with intensity to see what I can change in my company to become the next great company.

The remaining reviews of Good to Great will cover the subsets of each of the three identified broad stages above and I hope you enjoy the upcoming reviews.

Thanks, Jason M. Blumer

(Go to Chapter 2 review here)

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Monday Morning Message

June 8, 2009 in Monday Morning Message | No comments

“People are not your most important asset.  The right people are.”

Jim Collins

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