Good to Great

(10 minute read)

How to turn your “good” business into a “great” business.  

The principles below have been created from a study of every company on the S&P 500  over 30 year time period.  

There are three main broad categories: 

1. Disciplined People
   
2. Disciplined Thought 
   
3. Disciplined Action  
   

These will be broken down into the following.  

Disciplined People

• Level 5 Leadership  
  
• First Who, Then what
  

Disciplined Thought

• Confront the brutal facts
  
• Hedgehog Concept 
  

Disciplined Action 

• Culture of discipline
  
• Technology Accelerators

Level 5 Leadership 

Personal Humility + Professional Will = Level 5

Unwavering resolve…do what MUST be done.  

Ensure successors are well set up for the future

Questions to ask:

1. What cause do you serve with level 5 ambition?
   
2. Will you settle for being a good leader or will you grow to become a great leader?
   
3. How can you reframe failure as growth, in pursuit of a BHAG?  
   
4. How can you succeed by helping others succeed?
   
5. Have you found your hedgehog?  Your personal hedgehog?  
   
6. Will you build your unit, your minibus, into a pocket of greatness?
   
7. How will you change the lives of others?
   

Not a “genius with a thousand helpers”

Rigorous, not ruthless.

1. When in doubt, don’t hire – keep looking
   
2. When you know you need to make a people change, act.
   
3. Put your best people on your biggest opportunities, not your biggest problems.
   

This ties in with our organisational strength assessment.  The great companies first ensured that they hired the best people, then determined the strategy to utilise their human capital.  As opposed to determining the direction  and then filling the seats.  

Employee compensation should be aimed at getting the right people on the bus from the get go and keeping them there rather than to get the right behaviours from the wrong people. 

Management teams would debate vigorously, but unify behind the decision.  

Confronting the brutal facts. (yet never lose faith)  

Unwavering faith amid the brutal facts – Stockdale Paradox 

Retain faith that you 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 may be.  

“You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality.“

Facts are better than dreams

The great companies always dealt with the brutal facts of the situation yet had rational optimism that the company would be able to endure the tough times to prosper in the future.  The opposite of this is irrational optimism where people believe that “it’ll all be ok” without considering the current circumstances.  Good to great companies continually refined the path to greatness with the brutal facts of reality.  

How do you create a culture where the truth is heard?  

• Ensuring staff members feel safe to speak the truth
  
• Lead with questions, not answers
  
• Engage in dialogue and debate, not coercion.  (thoughtful disagreement: finding the most intelligent people who disagree with you to try and understand their reasoning)  
  
• Conduct autopsies, without blame. Determining root cause of mistakes to be able to learn.  
  
• Build “red flag” mechanisms – people can speak up about anything they would like at any point in time.  
  

The Hedgehog Concept (Simplicity within the three circles) 

If you remember one thing, let this be it.  The hedgehog concept is based on:  

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

The intersection of these points is what your business should be specialising in.  An example of this may be an accounting firm that specialises in R&D Tax Incentives (RDTI) for startup companies.  The WHY of the organisation was due to the founder wanting to assist other startups after having successfully built her own business.  (PASSION)  This business had extensive knowledge and experience in this industry and was considered a market leader (BEST IN THE WORLD)  Due to the value of their professional services, they were able to charge above market rates for their highly regarded services. (ECONOMIC ENGINE)  

Now consider an example where a RDTI client has asked this company for advice regarding Capital Gains Tax on their cryptocurrency investment.  Although, the accountants would have been able to complete this task they chose not to and to refer it onto a business associate that specialises in this area.  This is because the task did not fall into their hedgehog concept.  As a result, they did not waste unnecessary time completing a task that they are not good at (and may require additional research).  This also aligns with the theory of economic efficiency which states that “everyone should do that which they are best at”.  This results in a more prosperous future for all.  

Understanding what you can (and cannot) be the best at – not a goal, strategy or intention.  REALITY!

If we cannot be the best at it, why are we doing it at all?  

Insight into your economic engine, what is your denominator?

If you could have pick one and only one ratio – (profit per x, sales per x, cashflow per x) to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?    

Understanding your passion

We should only do things that we can get passionate about!  If it’s not a hell yeah, it’s a no!

Culture of discipline

• Build a culture full of self disciplined people who take disciplined action, fanatically consistent with the three circles.
  
• If you have the right (self disciplined) people on the bus, then stifling bureaucracy should not be required.  
  
• A balance of discipline and entrepreneurial spirit e.g. the pilot who acts within strict guidelines to land a plane safely but has to make the quick decision to abort a landing due to dangerous conditions.  
  

How to build the culture

1. Build a culture around the idea of freedom and responsibility, within a framework eg. Pilot landing.
   
2. Fill that culture with self disciplined people who are willing to go to extreme lengths to fulfill their responsibilities.  They will “rinse their cottage cheese”. (go to extreme lengths to be the best)
3. Do not confuse a culture of discipline with a tyrannical disciplinarian.  
   
4. Adhere to the hedgehog concept and create a “stop doing list” to keep it simple.  
   

Technology Accelerators

• Technology accelerations “accelerate” momentum, they do not build it.  This technology needs to enhance the aspects of the hedgehog concept.  
  
• Avoid tech fads and bandwagons.  Then become pioneer in your carefully selected technology (Currently AI, what will be next?)
• “Crawl, walk, run” can be a very effective approach, even during times of rapid tech change.  

Jim Collins' Good to Great is on my book list to recommend to all business owners who aspire to have great businesses!  

If you’re ready to take your business to the next level and get out of reactive mode, let’s chat. Reach out to us at hello@accountica.com.au with the subject line “Private,” and we’ll help you build the business of your dreams.

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The information on this website is general in nature and does not consider your personal situation. You should consider whether the information is appropriate to your needs and, where appropriate, seek professional advice.

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