High-Level Thoughts

Primarily about what makes a business great, but also a useful tool for making your own life great. Where do you want to be great, not just have success?

Summary Notes

“Indeed, the real question is not, “Why greatness?” but “What work makes you feel compelled to try to create greatness?” If you have to ask the question, “Why should we try to make it great? Isn’t success enough?” then you’re probably engaged in the wrong line of work.”

Level 5 Leadership:

  • “Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious— but their ambition is first and foremost for the institution, not themselves.”
  • “It is very important to grasp that Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great.”
  • “Ten out of eleven good-to-great CEOs came from inside the company, three of them by family inheritance. The comparison companies turned to outsiders with six times greater frequency— yet they failed to produce sustained great results.”
  • “Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck). At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly.

First Who, then What:

  • “I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.”
  • “We found no systematic pattern linking executive compensation to the process of going from good to great. The evidence simply does not support the idea that the specific structure of executive compensation acts as a key lever in taking a company from good to great.”
  • “To be ruthless means hacking and cutting, especially in difficult times, or wantonly firing people without any thoughtful consideration. To be rigorous means consistently applying exacting standards at all times and at all levels, especially in upper management. To be rigorous, not ruthless, means that the best people need not worry about their positions and can concentrate fully on their work.”
  • How to be rigorous:
  • When in doubt, don’t hire, keep looking
  • When you know you need to make a people change, act: ” The good-to-great companies showed the following bipolar pattern at the top management level: People either stayed on the bus for a long time or got off the bus in a hurry. In other words, the good-to-great companies did not churn more, they churned better.”
  • Put your best people on your biggest opportunities, not your biggest problems

Confront the Brutal Facts but Never Lose Faith:

  • “The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse. This is one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts.”
  • How to encourage a climate of truth:
  • Lead with questions, not answers. Don’t assume you know what’s best.
  • Engage in dialogue and debate, no coercion.
  • Conduct autopsies and without blame
  • Build “red flag” mechanisms: “If you raise your hand with your red flag, the classroom will stop for you. There are no restrictions on when and how to use your red flag; the decision rests entirely in your hands… Your red flag can be used only once during the quarter.”
  • “This is a very important lesson. 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, whatever they might be.”
  • “Spending time and energy trying to “motivate” people is a waste of effort. The real question is not, “How do we motivate our people?” If you have the right people, they will be self-motivated. The key is to not de-motivate them. One of the primary ways to de-motivate people is to ignore the brutal facts of reality.”

The Hedgehog Concept (simplicity within three circles)

  • ““The fox knows many things, but the hedgehog knows one big thing.””
  • More precisely, a Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:
  • What you can be the best in the world at (and, equally important, what you cannot be the best in the world at).
  • What drives your economic engine. The single denominator— profit per x— that had the greatest impact on their economics. (It would be cash flow per x in the social sector.)
  • What you are deeply passionate about.

A Culture of Discipline

  • “Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept.”
  • “The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired self-disciplined people who didn’t need to be managed, and then managed the system, not the people.”
  • “When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance.”

Technology Accelerators

  • “This brings us to the central point of the chapter. When used right, technology becomes an accelerator of momentum, not a creator of it.”

The Flywheel and the Doom Loop

  • “Sustainable transformations follow a predictable pattern of buildup and breakthrough. Like pushing on a giant, heavy flywheel, it takes a lot of effort to get the thing moving at all, but with persistent pushing in a consistent direction over a long period of time, the flywheel builds momentum, eventually hitting a point of breakthrough.”

From Good to Great to Built to Last

  • “Bad BHAGs, it turns out, are set with bravado; good BHAGs are set with understanding. Indeed, when you combine quiet understanding of the three circles with the audacity of a BHAG, you get a powerful, almost magical mix.”
  • “Indeed, the point of this entire book is not that we should “add” these findings to what we are already doing and make ourselves even more overworked. No, the point is to realize that much of what we’re doing is at best a waste of energy. If we organized the majority of our work time around applying these principles, and pretty much ignored or stopped doing everything else, our lives would be simpler and our results vastly improved.”

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