From Good to Great: The fundamentals of transforming companies

Jim Collins’ Good to Great reads like both a college textbook and a practical guide. It takes a highly data-driven approach—something widely appreciated—and extensively utilizes case studies and analysis to substantiate its arguments.

The book explores how several companies, spanning multiple industries, evolved from being merely “good” to truly “great.” Some of these companies include Kimberly-Clark, Gillette, Fannie Mae, Nucor, Circuit City (which has since declined), Philip Morris, Walgreens, and Wells Fargo (which has faced its own challenges). While some might question Collins’ criteria for defining greatness—primarily stock and profit growth—it aligns with the fundamental goal of private enterprises. Throughout the book, he pinpoints the key factors and concepts that enabled these transformations.

Below, a few of these pivotal concepts are highlighted along with relevant observations.

Level five leadership

One of the most fascinating ideas Collins presents is the concept of Level Five Leaders, which challenges common perceptions of leadership. When people imagine a top CEO, they often picture a charismatic, high-energy figure who dominates the room. This kind of leader certainly exists across public and private sectors, but Collins’ research suggests that these individuals are not typically the ones who lead companies to sustained greatness.

Instead, the transformative leaders in Collins’ study exhibited a blend of deep humility and fierce professional resolve. Unlike those seeking personal glory, Level Five Leaders prioritize the success of their organization. They credit their teams for achievements but personally take responsibility for failures. Historical figures like Abraham Lincoln and modern investors like Warren Buffet exemplify this leadership style.

Public perception of leadership

Intrigued by the contrast between popular perceptions and Collins’ findings, a question was posed on social media: What are the most important qualities in an effective leader?

Here’s what people shared:

• “Awareness. Effective communication. Dependability.”
• “Integrity, compassion, and grit.”
• “The ability to listen, think strategically, show humility, and lead by example.”
• “Prioritizing group success over individual recognition.”
• “Teachability—being open to learning from others fosters humility and growth.”
• “Encouraging collaboration, taking accountability, and lifting others up.”

Surprisingly, the responses closely aligned with Collins’ Level Five Leadership framework. While this isn’t a scientific sample, it does highlight a disconnect between what people value in leaders and what corporate boards often prioritize when selecting executives.

The stockdale paradox

To illustrate Level Five Leadership, Collins shares the story of Admiral Jim Stockdale, a prisoner of war in the infamous “Hanoi Hilton” during the Vietnam War. Stockdale endured extreme torture and yet remained resolute, finding ways to pass secret intelligence through letters to his wife and devising covert communication methods among prisoners.

When asked how he survived, Stockdale said:
“I never lost faith in the end of the story… I never doubted that I would get out and turn this experience into a defining moment of my life.”

However, when Collins asked who didn’t survive, Stockdale’s response was unexpected:
“The optimists. They believed they’d be free by Christmas, then Easter, then Thanksgiving—and eventually, they lost hope.”

The Stockdale Paradox teaches an essential leadership lesson: Never lose faith in eventual success, but at the same time, confront harsh realities head-on.

First who, then what

Another key pattern in Good to Great companies was their approach to team building. Unlike traditional theories that prioritize setting a vision before assembling a team, these successful companies focused first on getting the right people onboard. Collins uses the metaphor of a bus—before mapping the journey, leaders ensured they had the right passengers and removed the wrong ones.

Once the right people were in place, they focused on assigning roles that maximized individual strengths. Only after that did they determine their vision and strategy.

The hedgehog concept

Collins argues that Good to Great companies succeed because they simplify their focus. Rather than trying to excel in multiple areas, they hone in on one defining strength.

This principle, called the Hedgehog Concept, originates from a fable where a fox constantly devises new ways to attack a hedgehog. Yet, each time, the hedgehog rolls into a spiky, impenetrable ball—using the same simple defense mechanism to thwart the fox. The lesson? Consistency and mastery over one core strength triumph over scattered efforts.

For businesses, the Hedgehog Concept is found at the intersection of three key questions:

1. What are you deeply passionate about?
2. What can you be the best in the world at?
3. What drives your economic engine (or resource engine for nonprofits)?

Great companies took years to pinpoint their answer—but once they did, their growth accelerated.

The flywheel effect

Collins also introduces the Flywheel Effect to explain how lasting success is built. Contrary to the myth of overnight success, true greatness is the result of persistent effort over time.

Imagine pushing a heavy flywheel. At first, the movement is slow and laborious, but with continuous effort, it starts to spin faster and eventually builds unstoppable momentum.

There are no singular “Aha!” moments. Instead, the companies that became great did so through steady, focused progress in alignment with their vision.

Conclusion

Even though Good to Great isn’t specifically targeted at any one industry, it provides valuable insights applicable across various fields. The book reinforces several important lessons:

• The most effective leaders prioritize humility and persistence over ego and charisma.
• Having the right people in an organization is crucial to success.
• Simplicity and focus lead to stronger performance than trying to do everything.
• Lasting success comes from sustained effort, not sudden breakthroughs.

Whether in business, public service, or a nonprofit, Collins’ research provides powerful strategies for building organizations that last.