Jim Collins: Building A Pocket of Greatness

A Tale of Two Leaders

Let me share a story that captures the essence of what we'll explore today.

The executive team fell silent as Sarah, the newly appointed CEO, took her seat at the head of the table. Inherited challenges were significant.

The problems were a shrinking market share, unmotivated workers, and a culture that accepted mediocrity. "We've always been a good company," one executive offered as consolation. "In this industry, that's something to be proud of."

Two floors down, Pete led his small product development team with a new philosophy. Despite operating within the same struggling organization, his team consistently delivered great results.

They weren't just good—they were great. While the executive team chased quick fixes, Pete built a "pocket of greatness." He created a team with the right people, clear goals, and a strong culture of discipline.

Three years later, the company went from being average to excellent. Sarah used Pete's approach throughout the organization. This led to numerous areas of success that transformed the entire company. She hadn't changed the outside factors.

The market remained competitive, and the industry remained tough. What changed were her strategic decisions.

This story unfolds in various types of organizations. This includes public corporations, small family businesses, manufacturing plants, and professional sports teams.

What separates a mediocre company from a great company isn't circumstances but choices.

I heard Jim Collins, author of "Good to Great," speak at Leadercast recently. Below are my notes on his talk.

Key Takeaways

• Greatness is a choice, not a circumstance.

• Collins' research indicates that our choices, rather than external factors, shape outcomes.

• Level 5 Leadership: A Level 5 leader combines personal humility with a strong professional will. This style mirrors the great leadership of General Eisenhower at West Point.

• First Who, Then What: Put the right people in the right roles. This step is key before making any strategic choices about where to go.

• Confront the Brutal Facts: Good-to-great companies practice the Stockdale Paradox—confronting reality while maintaining faith in ultimate success.

• The Flywheel Effect: The flywheel illustrates that lasting success stems from consistent effort in a single direction. It’s not about big bets or one defining action.

• Hedgehog Concept: Find the intersection of what you're passionate about, what you can be best at, and what drives your economic engine.

The Journey from Good to Great

One of the most profound, simple ideas Collins shared is that "Good is the enemy of great." This insight comes from his team's detailed case studies. It asks business leaders and owners:

How often have we settled for "good enough" instead of striving for greatness?

Collins' years of research show that great organizations aren't just lucky. There’s more to it than circumstances. His research team found that good-to-great companies differ greatly from similar firms.

When conditions stay the same but results vary, we can't blame outside factors. This idea is tough but freeing: great leaders aren't held back by tough times, bad economies, or big failures.

What sets a mediocre company apart from a great one is the choices it makes. This was clear during the dot-com bust. Some companies thrived, while others struggled.

The Five Stages of How the Mighty Fall

In his earlier work, after "Good to Great," Collins explained that organizations can decline like cancer.

• Hubris born of success - When arrogance replaces the humility seen in good-to-great leaders

• Undisciplined pursuit of more - Overreaching beyond your capacity to get the right people in key seats

• Denial of risk and peril - Ignoring warning signs and brutal facts

• Grasping for salvation - Looking for a charismatic leader or making big bets on quick fixes

• Capitulation to irrelevance or death - The final stage where recovery becomes nearly impossible

What struck me most was how these stages are self-inflicted. Unlike cancer, organizational decline is almost always a result of our own choices. Many companies, like Wells Fargo, showed warning signs long before their big falls.

Level 5 Leadership: The Antidote to Hubris

What characteristic defines leaders of the good-to-great companies?

Surprisingly, it's not charisma or force of personality—it's humility. The idea of level 5 leadership fundamentally challenges our cultural assumptions about what makes a good leader.

Collins emphasized that humility doesn't equal weakness. Rather, Level 5 leaders demonstrate a powerful blend of personal humility and professional will. They’re more "plow horse" than "show horse." They focus on building something bigger than themselves, not just on personal success or stock options.

Even Steve Jobs, known for his visionary products, showed Level 5 traits during his second time at Apple. He focused less on his fame and more on building a great company that would last.

The critical question for any leader, especially young leaders:

What are you in it for?

First Who, Then What

Collins says we need to do three things first: get the right people on the bus, remove the wrong people, and place the right people in the right seats. This principle resonated deeply with my own experiences leading portfolio companies through transformation.

Think about it this way: If you were facing a serious medical diagnosis, what would you do first?

Find the right doctors. The solution follows from having the right people.

This principle works for leading a Fortune 500 company, a startup, or a social sector organization. Wrong people in key seats will limit how far you can go. No incentive systems can compensate for having the wrong people make crucial decisions.

The Hedgehog Concept

The hedgehog concept comes from Isaiah Berlin's essay. He compares foxes, who know many things, to hedgehogs, who know one big thing. This idea is key to Collins' framework. Every great company discovers the intersection of:

• What can you be the best in the world at

• What drives your economic engine

• What you're deeply passionate about

Finding this intersection is neither quick nor easy. It needs what Collins' team calls a "culture of discipline." You must be ready to say no to chances that don’t match your hedgehog concept.

This method has helped groups in many areas. It works for private companies, military organizations, and schools. They can now direct their efforts to achieve the greatest impact.

Confronting the Brutal Facts

One reason organizations falter is their inability to confront reality. Many companies seem successful, but they often hide serious problems. This issue is well documented by the Harvard Business Review.

The Stockdale Paradox (named after Admiral James Stockdale, a prisoner of war in Vietnam) embodies this principle: Maintain unwavering faith that you will prevail regardless of difficulties, while simultaneously confronting the most brutal facts of your current reality.

It's not enough to have faith or optimism. We need the discipline to face hard truths about our organizations, our teams, and ourselves. Their readiness to face reality became a strength for all the good-to-great companies in Collins' research.

The Danger of "Savior Syndrome"

When organizations face challenges, they often seek help. They might look for a charismatic leader, new technology, or innovative programs. These silver bullets may provide a temporary boost but rarely address core issues.

As Collins found in his case studies, most good-to-great companies were led by CEOs promoted from within. They grasped the organization's core and focused on its strengths.

They avoided external solutions that didn't fit. This is very different from many struggling companies. They hire celebrity CEOs as saviors but often end up in worse shape after they leave.

The Flywheel Effect: Success Is Cumulative

Perhaps my favorite concept from Collins is the flywheel effect. The flywheel's power is in its simplicity. Greatness doesn’t come from just one action, person, product, or technology. Instead, it results from consistent, persistent effort in one direction over time.

Think about these examples:

• Sam Walton didn't open his second store until seven years after his first

• Starbucks had only five stores, thirteen years into its existence

The flywheel principles teach us that most "overnight successes" actually take 20+ years. Each push of the heavy flywheel builds momentum. Over time, this creates an unstoppable force. The flywheel start is always difficult, requiring great effort with little visible result.

This is the opposite of what Collins calls the "doom loop." In this loop, teams constantly change direction. They chase new ideas and abandon efforts before they can gain momentum. To build a top flywheel, focus on the right things consistently. Avoid constant reinvention.

Purpose Beyond Profit

All 18 companies studied in "Built to Last" (Collins' first book with Jerry Porras) sought more than just financial success. They existed for a reason beyond making money, which helped them navigate turbulent times.

Ask yourself:

• What would be lost if your organization disappeared?

• Would it matter?

Great businesses are built on core values that sustain them through inevitable ups and downs. As Collins put it, "If we lose our values, we lose our soul. If we lose our soul, we lose it all."

This principle has proven equally valid in the social sectors, where purpose naturally extends beyond profit. The management lab Collins established found that organizations with clearly articulated core values—whether in business or non-profit sectors—consistently outperformed those focused solely on financial metrics.

10 Practical Steps for Growth-Minded Leaders

• Build a pocket of greatness - Start with whatever you have responsibility for, even if it's just one department or project

• Do your diagnostics - Honestly assess where you stand compared to the principles in Jim Collins' famous book

• Focus on people - Identify your key seats and ensure they're filled with the right people

• Build a personal board of directors - Surround yourself with truth-tellers who can help you confront brutal facts

• Create white space - Turn off electronics, zoom out, and make time to think—a habit shared by many good-to-great leaders

• Double your question-to-statement ratio - Spend less time trying to be interesting and more time being interested

• Start a "stop doing" list - Practice disciplined elimination of activities that don't support your hedgehog concept

• Experiment with removing titles - Help great people focus on responsibilities, not positions

• Clarify core values - These will sustain your great team during turbulent times

• Create your own flywheel - Map out the key components of your flywheel effect and how each push can help build momentum.

Your Turn: From Inspiration to Action

As I reflect on these insights, I'm reminded that knowledge without action is merely information. The good-to-great transformation isn't about knowing—it's about doing.

So I ask you:

What's your next step?

Where will you build your pocket of greatness?

Which brutal facts do you need to confront? Who are the right people you need on your great team?

Remember, greatness is not determined by circumstances, but by the choices we make. And those choices begin today.

What one action will you take this week to move your own flywheel in the right direction?

It might not result in a great first hit immediately, but it's a fantastic way to begin your journey from good to great.

Frequently Asked Questions

Q: How do I apply these principles in a small family business?

A: The size of your organization doesn't matter when it comes to building pockets of greatness. Start by defining your hedgehog concept—the intersection of what you're passionate about, what you can be best in the world at, and what drives your economic engine.

Then focus relentlessly on getting the right people in the right seats before making strategic decisions. Some of the most powerful case studies in Collins' research came from smaller organizations that outperformed much larger comparison companies.

Q: What if I don't have control over who's on my team?

A: Even without hiring authority, you can begin applying the flywheel principles by clarifying responsibilities, confronting brutal facts, and creating a culture of discipline within your sphere of influence.

The second thing to remember is that many good-to-great transformations began in small departments before expanding company-wide. Focus on your immediate area of responsibility and demonstrate what excellence looks like. This is the essential step toward broader change.

Q: How long does it typically take to see results from applying these principles?

A: Collins' research team found that the flywheel effect isn't about big bets or a single defining action. The best flywheels build momentum gradually.

Most companies studied took four or more years before achieving their first significant breakthrough in performance.

During the flywheel start, progress may seem slow, like attempting to turn a heavy flywheel. Be patient and trust the process, knowing that each consistent push creates a cumulative effect over time.

Q: Can these principles be applied beyond business to social sectors, such as education or healthcare?

A: Absolutely. Collins extended his research to include social sectors, finding that while the metrics differ, the fundamental principles remain the same. Whether leading school systems, military organizations, or public corporations, greatness comes from disciplined people, thought, and action.

The hedgehog concept for organizations in social sectors often centers on making a distinctive impact and achieving superior performance per dollar of input rather than profit margins.

Q: What's the most common mistake leaders make when trying to implement Collins' ideas?

A: Many leaders embrace the concepts intellectually but fail to confront the brutal facts about their current reality. Others try to skip straight to results without doing the essential foundational work of getting the right people in the right seats.

Still others misinterpret Level 5 leadership as weakness rather than disciplined will paired with humility. The most successful implementations come when leaders truly embrace the culture of discipline that underlies all aspects of the good-to-great transformation.

Q: How do these principles apply during times of rapid technological change?

A: The interesting thing about Collins' case studies is that they span periods of significant disruption. What he found was that good-to-great companies used technology as an accelerator of momentum, not as a creator of it.

The fundamental principles—getting the right people, defining your hedgehog concept, building your own flywheel—remain constant even as specific technologies evolve. This approach helped companies weather the dot-com bust and subsequent disruptions with remarkable resilience.

Books by Jim Collins:

1. Good To Great

2. Built To Last

3. How The Mighty Fall

4. Great By Choice