Hello, this is my last newsletter before the summer break. The next newsletter will be in September, so I hope that you enjoy the rest of the summer and are able to find time to spend with your families and loved ones.
In the meantime I will be continuing to add to my blog Cross Wires - yand share strategy insights on Twitter at https://twitter.com/stuart_cross.
This month's article is.......
Good To Great To Cliché
There are no 'cookie cutter' solutions that deliver sustainable growth for businesses. Life is just not that simple, and each situation needs its own response. So when I hear executives tell me that they want to take their company from "good to great" I am immediately concerned.
As you probably know Good To Great is a management book written by Jim Collins and published in 2001. It is based on a study of 1,400 companies and identified factors that sorted the great from the merely good, which included:
- Leaders who mix personal humility with professional rigour;
- Getting the right people in the organisation before thinking about strategy;
- Facing into the company's biggest issues without emotion;
- Creating a highly focused organisation that does one thing well; and
- Being disciplined and persistent, and using technology to accelerate growth.
So, you may ask, what's wrong with that list? I have five issues with the book:
Sample Size. Of the 1,435 companies studied only 11 were deemed to have made the transition from good to great. That's 0.8% and hardly the basis for a statistically significant sample. What's more all the companies were major businesses in the US, and so there was little attention paid to cultural differences.
Leadership Model. The post-leadership leader eulogised by Collins may work in some situations, but is not right in others. Steve Jobs is not the most humble guy, but I can't think that any Apple shareholder would have wanted anyone but him to have led the company in the last 10 years or so.
Excessive Focus. Collins' mantra on focus, which he called his hedgehog concept, can limit thinking about expansion. Research shows that focus for companies is better than a diversification strategy, but focus with growth into adjacent markets delivers the strongest results. A perfect example has been Tesco's never-ending expansion into nearby categories which now includes banking - hardly focused for a grocer!
Nothing Fails Like Success. Success today is no guarantee of success tomorrow. You must continuously develop and evolve your business if it is to remain relevant to customers. Of the 11 'great' companies outlined Circuit City became bankrupt, Fannie Mae (the largest mortgage lender in the US) has lost over 90% of its value and its loans seem to be implicitly guaranteed by the government, and Walgreens has lost its dominant position in the US drugstore market to CVS, who have grown by expanding into other related markets (a further challenge to excessive focus).
One Best Way. Underpinning all my criticisms of the book is the idea that there is clearly a single best way. The argument is highly attractive to business leaders who are under pressure and looking for a way to develop their business. But there are many ways to create growth for a business, and CEOs and their teams must work hard to understand the best route for their business and then be constantly monitoring and managing its strategy and performance along the way. The task is Sisyphean.
The Bottom Line
The phrase 'good to great' has become an empty management cliché. Jim Collins' book may provide you with good ideas to stimulate thinking about your company's future growth, but it does not provide you with a clear-cut recipe for success. That, as you know, is your job.