by Jim Collins
(The principles in Stages 1 through 3 derive from the research for the book Good to Great by Jim Collins; the principles in Stage 4 derive from the book Built to Last by Jim Collins and Jerry I. Porras.)
STAGE 1: DISCIPLINED PEOPLE
LEVEL 5 LEADERSHIP: Level 5 leaders are ambitious first and foremost for the cause, the organization, the work—not themselves—and they have the fierce resolve to do whatever it takes to make good on that ambition. A Level 5 leader displays a paradoxical blend of personal humility and professional will.
FIRST WHO, THEN WHAT: Those who build great organizations make sure they have the right people on the bus, the wrong people off the bus, and the right people in the key seats before they figure out where to drive the bus. They always think first about “who” and then about what.
STAGE 2: DISCIPLINED THOUGHT
CONFRONT THE BRUTAL FACTS—THE STOCKDALE PARADOX: Retain unwavering faith that you can and will prevail in the end, regardless of 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: Greatness comes about by a series of good decisions consistent with a simple, coherent concept—a “hedgehog concept.” The hedgehog concept is an operating model that reflects understanding of three intersecting circles: what you can be the best in the world at, what you are deeply passionate about, and what best drives your economic or resource engine.
STAGE 3: DISCIPLINED ACTION
CULTURE OF DISCIPLINE: Disciplined people who engage in disciplined thought and who take disciplined action—operating with freedom within a framework of responsibilities: this is the cornerstone of a culture that creates greatness. People do not have jobs; they have responsibilities.
THE FLYWHEEL: There is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.
STAGE 4: BUILDING GREATNESS TO LAST
CLOCK BUILDING, NOT TIME TELLING: Truly great organizations prosper through multiple generations of leaders, the exact opposite of being built around a single great leader, great idea, or specific program. Leaders in great organizations build catalytic mechanisms to stimulate progress and do not depend upon having a charismatic personality to get things done; indeed, many have had a “charisma bypass.”
PRESERVE THE CORE/STIMULATE PROGRESS: Enduring great organizations are characterized by a fundamental duality. On the one hand, they have a set of timeless core values and core reason for being that remain constant over long periods of time. On the other hand, they have a relentless drive for change and progress—a creative compulsion that often manifests in BHAGs (Big Hairy Audacious Goals). Great organizations keep clear the difference between their core values (which never change) and operating strategies and cultural practices (which endlessly adapt to a changing world).
Notes
The pagination of this electronic edition does not match the edition from which it was created. To locate a specific passage, please use the search feature of your e-book reader.
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4. Joseph H. Harper, “Observations of the San Francisco Earthquake” The Virtual Museum of the City of San Francisco (delivered before the Montana Society of Engineers, January 11, 1908), http://www.sfmuseum.org/1906/harper.html; E. E. Schmitz, “Proclamation by the Mayor,” The Virtual Museum of the City of San Francisco (on April 18, 1906), http://www.sfmuseum.org/1906.2/killproc.html; Gary Hector, Breaking the Bank: The Decline of BankAmerica (Boston: Little, Brown & Company, 1988), 25, 36; A. W. Clausen, “Bank of America: The Largest Bank Was Once a Plank on the Waterfront,” Nation’s Business, January 1971, 54.
5. Gary Hector, Breaking the Bank: The Decline of BankAmerica (Boston: Little, Brown & Company, 1988), 32, 50, 62.
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10. Victor F. Zonana and Kathryn Christensen, “Budging the Giant,” Wall Street Journal, May 20, 1982; “BankAmerica Plans to Acquire Charles Schwab,” Wall Street Journal, November 25, 1981; Victor F. Zonana, “The Porches and Saabs at Schwab Aggravate Some at BankAmerica,” Wall Street Journal, January 20, 1983; “BankAmerica Corp.’s Takeover of Seafirst Took Effect Today,” Wall Street Journal, July 1, 1983, 2; Victor F. Zonana, “Seafirst Holders Clear BankAmerica Bid For Largest Interstate Banking Takeover,” Wall Street Journal, June 29, 1983; Gary Hector, “More than Mortgages Ails BankAmerica,” Fortune, April 1, 1985, 50; “BofA’s Brash Fight to Build Deposits,” BusinessWeek, January 17, 1983, 98.
11. Victor F. Zonana, “Budging the Giant,” Wall Street Journal, May 20, 1982, 1; Victor F. Zonana, “Stirring Giant: BankAmerica Corp., Seeking a Turnaround, Seems to Gain Ground,” Wall Street Journal, January 27, 1984.
12. Victor F. Zonana, “The Porches and Saabs at Schwab Aggravate Some at BankAmerica,” Wall Street Journal, January 20, 1983.
13. “BofA’s Brash Fight to Build Deposits,” BusinessWeek, January 17, 1983, 98; G. Christian Hill and Mike Tharp, “Stumbling Giant: Big Quarterly Deficit Stuns BankAmerica, Adds Pressure on Chief,” Wall Street Journal, July 18, 1985; Gary Hector, “More than Mortgages Ails BankAmerica,” Fortune, April 1, 1985, 50.
14. G. Christian Hill and Mike Tharp, “Stumbling Giant: Big Quarterly Deficit Stuns BankAmerica, Adds Pressure on Chief,” Wall Street Journal, July 18, 1985.
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21. Source: ©200601 CRSP®, Center for Research in Security Prices. Graduate School of Business, The University of Chicago. Used with permission. All rights reserved. www.crsp.chicagobooth.edu.
22. Howard Rudnitsky, “Would You Buy A Used Car From This Man?” Forbes, October 23, 1995, 52; Tim W. Ferguson, “Sofa With Your Stereo, Sir?” Forbes, July 7, 1997, 46.
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29. Calculation based on 1997 and 2006 revenues of Best Buy and Circuit City, taking half of the increase in revenues Best Buy achieved from 1997 to 2006 and adding that amount to Circuit City’s 2006 revenues.
30. Balaji Chakravarthy and V. Kasturi Rangan, “Best Buy,” Harvard Business School, case study #9-598-016 (Boston: Harvard Business School Publishing, 1997); Source: ©200601 CRSP®, Center for Research in Security Prices. Graduate School of Business, The University of Chicago. Used with permission. All rights reserved. www.crsp.chicagobooth.edu.
31. “Pinching 500 Billion Pennies,” Fortune, March 1963, 105.
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34. Peter Z. Grossman, “A&P: Should You Invest Along with the Germans?” Financial World, February 15, 1979, 16.
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38. Source: ©200601 CRSP®, Center for Research in Security Prices. Graduate School of Business, The University of Chicago. Used with permission. All rights reserved. www.crsp.chicagobooth.edu.
39. Elizabeth Rourke (updated by David E. Salamie), “Ames Department Stores, Inc.,” International Directory of Company Histories 30 (New York: St. James Press, 2000), 54; Wal-Mart Stores, Inc., “History Timeline,” Wal-Mart: History, http://walmartstores.com/AboutUs/297.aspx.
40. Source: ©200601 CRSP®, Center for Research in Security Prices. Graduate School of Business, The University of Chicago. Used with permission. All rights reserved. www.crsp.chicagobooth.edu.
41. Personal conversation with author.
42. Steven Jacober, “Ames Redefines Itself at $2 Billion,” Discount Merchandiser, August 1988, 22; Peter Hisey, “Herb Gilman: ‘The Concept Is So Simple,’” Discount Store News 27, no. 11 (May 23, 1988): 49.
43. Ames Department Stores, Inc., “Letter to Shareholders,” 1988 Annual Report to Stockholders (Rocky Hill, CT: Ames Department Stores, Inc., 1989); Eric N. Berg, “Ames’s Rocky Retailing Marriage,” New York Times, April 11, 1990.
44. Source: ©200601 CRSP®, Center for Research in Security Prices. Graduate School of Business, The University of Chicago. Used with permission. All rights reserved. www.crsp.chicagobooth.edu.
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46. Ames Department Stores, Inc., “Letter to Shareholders,” 1988 Annual Report to Stockholders (Rocky Hill, CT: Ames Department Stores, Inc., 1989); Joseph Pereira, “Digesting Zayre Gives Ames Heartburn,” Wall Street Journal, December 28, 1989; Eric N. Berg, “Ames’s Rocky Retailing Marriage,” New York Times, April 11, 1990; Pete Hisey, “What Went Wrong at Ames?” Discount Store News 29, no. 9 (May 7, 1990): 1.
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