President’s Viewpoint
Wanted Breakthrough to Greatness
(The following is a continuation of Victor Deyglio’s comments from the book Good to Great by Jim Collins et al.)
We plan strategies in terms of where, how and who: we first decide where we want to go (vision), design how to get there (process), and identify who’s driving the bus (people). To go from good to great, Level 5 leaders reverse the thinking: they first got the right people on the bus (and the wrong people off the bus), and then figured out where to drive it. In effect, L-5 leaders are strategic thinkers, not just strategic planners.
Order of Magnitude
There is a distinction between strategic thinking and strategic planning. All planning entails the “vision-process-people” template. Often, what distinguishes strategic planning from any other planning is the order of magnitude: the more far reaching the plan, the more strategic we call it.
All plans fall within horizons and all horizons are limits. Planning, de facto, limits our actions to the options determined by the vision looming on the horizon.
Difference in Kind
Strategic thinking, on the other hand, is opportunistic, and is based on three truths:
• Flexibility: if you begin with “who,” rather than “what,” you more easily adapt to a changing world. If people get on the bus because of where it is going, and you need to change directions along the way, you also need to change the people. If they get on the bus because of who is there, then direction doesn’t matter, and change becomes part of the dynamic.
• Self-motivation: with the right people on the bus, the problem of “motivating and managing” dissipates.
• Great people: the wrong people suck the life out of vision. They are not motivated in themselves, and they de-motivate other and sustain mediocrity.
L-5 leaders didn’t assemble the right team to realize the strategic plan; they didn’t do the strategic plan until they had the right people. Before vision, before strategy, before tactics, before organizational structure, before technology – assemble the right people.
The Right People
L-5 leaders rejected the leadership model characterized as “genius with a thousand helpers.” Instead, they created environments where hardworking people thrive and whose moral code required building excellence for its own sake.
In seeking the right people, good-to-great companies placed greater weight on character attributes than on specific educational background, practical skills, specialized knowledge or work experience.
Rigorous vs Ruthless.
Transformation from good-to-great is not easy, and great companies are tough places to work in. But they are not ruthless cultures; rather, they are rigorous cultures:
• To be ruthless means hacking and cutting, especially in difficult times.
• To be rigorous means consistently applying exacting standards at all times and all levels.
The ultimate throttle on growth for any company is not markets, technology, competition, or products. It is the ability to get and keep the right people.
Disciplines of Rigor
1. When in doubt, keep looking:
• No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth.
• If your growth rate in revenues consistently outpaces your growth rate in people, you simply will not – indeed cannot – build a great company.
2. When you know you need to make a people change, act:
• The moment you need to manage someone, you’ve made a hiring mistake. The best people don’t need to be managed. Guided, taught, led – yes. But not managed.
• Strong performers are intrinsically motivated by performance
• Waiting too long before acting is unfair to the people who need to get off the bus. For every minute you allow people to continue holding seats when you know they will not make it in the end, you’re stealing a portion of their life.
3. Put your best people on your biggest opportunities, not your biggest problems:
• Managing problems makes you good; building opportunities is the way to become great.
• When you decide to sell off your problems, don’t sell off your best people too.
• If you create a place where the best people always have a seat on the bus, they’re more likely to support changes in direction.
A Great Life
If we don’t spend the vast majority of our time with people we love and respect, we cannot possibly have a great life. But if we spend the vast majority of our time with people we love and respect – people we really enjoy being on the bus with and who will never disappoint us – then we will almost certainly have a great life, no matter where the bus goes.
Breakthrough
“Greatness” demands disciplined people, disciplined thought, and disciplined action.
Disciplined thought begins by confronting the brutal facts. We fail to succeed when we divert our energy looking for the silver bullet that leads to instant turn-around… “the big breakthrough.”
Yes, Virginia, there is such as thing as the “big breakthrough.” Breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another.
Disciplined Thinking
The origins of disciplined thinking are brutal, and the process is difficult,
but disciplined thinking should never brutalize. We begin by questioning everything, especially our assumptions.
We must leave our comfort zones to begin a journey along an unknown path with no clear destination. Frightening, but it’s the only path to a real breakthrough.
As leaders we need to create a climate where truth is heard. Some suggestions:
• Lead with questions, not answers. Search for the truth; don’t deposit it.
• Engage in dialogue and debate, not coercion. People shouldn’t just have their say; who cares what most people have to say. People need the opportunity to be heard in the search for the right answers to the right questions, no matter how raw the process.
• Conduct autopsies, without blame. Search for understanding, not a victim.
• Build “red flag” mechanisms. Turn information into “information that cannot be ignored.”
Finally, apply the Stockdale Paradox (named after Admiral Jim Stockdale, Vietnam POW):
• Retain faith that you will prevail in the end, regardless of the difficulties, and
• Confront the most brutal facts of your current reality, whatever they might be.
Insight
L-5 leaders cultivate insight that allows them to see through complexity and discern underlying patterns. They see what is essential, and ignore the rest.
In a direct reference to Chapter Five of Good to Great, I was once described as a hedgehog. When I first read the description of the hedgehog, I was a bit taken-aback:
The hedgehog is a dowdy creature, looking like a genetic mix-up between a porcupine and a small armadillo. He waddles along, going about his simple way, searching for lunch and taking care of his home.
It did not comfort my ego to contrast this description to that of the fox: a cunning creature, fast, sleek, beautiful, fleet of foot, and crafty. And the gales of laughter from Institute staff about waddling and searching for lunch provided no balm. A quick look in the mirror, however, gave rise to a chuckle of recognition.
Physical attributes aside, the ancient Greek fable of the Fox and Hedgehog is about the power of insight that derives from disciplined thought. The fable is about winning and losing, and losing is about becoming lunch:
The fox is a cunning creature, able to devise a myriad of complex strategies for sneak attacks upon the hedgehog. Day in and day out, the fox circles around the hedgehog’s den, waiting for the perfect moment to pounce.
The hedgehog, minding his own business, wanders right into the path of the fox. The fox leaps out, bounding across the ground, lightning fast. Rolling into a perfect little ball, the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions.
The fox sees the hedgehog defense and calls off the attack. Retreating back to the forest, the fox begins to calculate a new line of attack. Each day, some version of this battle between the hedgehog and the fox takes place, and despite the greater cunning of the fox, the hedgehog always wins.
The essayist Isaiah Berlin divided the world into foxes and hedgehogs: Foxes pursue many ends at the same time and see the world in all its complexity. They are scattered or diffused, moving on many levels, never integrating their thinking into one overall concept or unifying vision.
Hedgehogs simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how complex the world, the hedgehog reduces all challenges and dilemmas to simple “hedgehog ideas.” For the hedgehog, anything that does not somehow relate to the “hedgehog idea” holds no relevance.
Great hedgehogs from history: Freud and the unconscious, Darwin and natural selection, Marx and class struggle, Einstein and relativity… the essence of profound thinking is simplicity.
Hedgehog Concept
All good-to-great companies attained a very simple concept that they used as a frame of reference for all their decisions, and this understanding coincided with breakthrough results. It isn’t simply about strategy; it’s about discovering the foundation of strategic thinking that flows from deep understanding about the following 3 things:
1. What can you be best in the world at?
2. What drives your economic engine?
3. What are you deeply passionate about?
Best in the world is not simply about core competence: Just because you possess a core competence doesn’t mean you can be the best in the world at it. Even worse, if you cannot be best in the world at your core business, then your core business cannot form the basis of going from good to great. If you can’t be best in the world at it, then why are you doing it?
Defining “best in the world” requires piercing insight and egoless clarity. The hedgehog’s “best in the world” is not about a goal or strategy or intention or plan to become the best. It’s an understanding of what you can be the best at.
We suffer from the curse of competence, but we never attain complete mastery and fulfillment. Consider the Gretzsky Phenomenon: if I can’t play my best, then I cannot play at all, because the game is no longer fun.
Doing what you are good at will only make you good. Focusing solely on what you can potentially do better than any other organization is the only path to greatness.
Economic Engine
It’s not about the micro-economics of your sector or even your company. It’s about the economic indicator that will drive your company from good to great. Remember: the hedgehog objective is about insight and understanding, not about plans and strategies.
If you could pick one and only one ratio – profit per x (or, in the social sector, cash flow per x) – to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?
The denominator question serves as a mechanism to force deeper understanding of the key drivers in your economic engine. The discipline of one denominator forces us to clarify our thinking. Some examples are:
• Abbott: shift from profit per product line to profit per employee fit with the idea of contributing to cost-effective health care
• Gillette: shift from profit per division to profit per
customer reflected the economic power of repeatable purchases (razor cartridges) times high profit per purchase (non disposable razors)
• Kimberly-Clark: shift from profit per fixed asset (the mills) to profit per consumer brand would be less cyclical and more profitable in both good and bad times.
• Kroger: shift from profit per store to profit per local population reflected the insight that local market share drove grocery economics (if you cannot attain number one or number two in local share, you should not play).
Passion. We should only do those things we are passionate about. You can’t manufacture passion or motivate people to feel passionate.
Ultimately, it’s about value. Kimberly-Clark executives made the shift to paper-based consumer products in large part because they could get more passionate about them. As one executive put it, the traditional paper products are okay, but “they just don’t have the charisma of a diaper.”