Nine years after its publication in 2001, Jim Collins’ book, From Good to Great, continues to be a best-seller. Millions of executives have pored over its pages in the search to turn their firms into great organizations. The fact that a good proportion of the so-called “great companies” have gone bankrupt or been taken over or otherwise fallen on hard times (e.g. Fannie Mae, Circuit City, Gillette, Pitney Bowes) has hardly detracted from its sales.
Who wouldn’t want to become great? The idea that there is a simple set of principles that can turn your firm from merely good to truly great is so attractive and seductive that facts barely enter the picture. “Confronting the brutal truth” is supposed to be one of the very principles of greatness. But the principle is rarely applied by book buyers to the ideas in Collins book itself.
Nor do book buyers seem bothered by the fact that the methodology behind the book—choosing pairs of companies, one good and one bad, and then noting the differences—has been shown to be intellectually bankrupt: see The Halo Effect, a book by Phil Rosenzweig (NY: Free Press, 2007).
From Good to Great was published at the beginning of the 21st Century, but it is largely a book about the 20th Century, a world that hardly exists any more. It is a book about world of big bureaucracies, led from the top, by wise and disciplined leaders who “relentlessly push a giant flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond” (p.14). The great companies are “like hedgehogs: they know one big thing and stick to it” (p.119).
The book assumes a fairly static world, in which it is possible to “get it right”, by finding a “sustainable competitive advantage” then go on milking it indefinitely, as the flywheel grinds forward. Collins didn’t seem to notice that, even in 2001, the business world was in a state of flux. He didn’t notice that accelerating economic and social change in the global economy, the consequent imperative for ever faster innovation, the emergence of global networks of partners, the increasing ownership of the means of production by knowledge workers, the escalating power of customers in the marketplace, the multiplication of media channels, and burgeoning diversity in both the workplace and marketplace: all of these forces had caused traditional management to become dysfunctional.
Eight years later, in 2009, the impact of those trends had been documented and quantified in a study by the Deloitte Center for the Edge.[i] The return on assets of U.S. companies continued its steep decline. With economies of scale evaporating, resort to downsizing and outsourcing weakened firms’ future ability to compete. Meanwhile, as barriers to entry eroded and competition intensified, modest gains in labor productivity were mainly captured by customers and creative talent. “Winning” companies barely held on to their success, and market “losers” destroyed value more rapidly than ever before. Customers were increasingly disloyal to brands. Executive turnover accelerated. In the last 25 years, startups created 40 million jobs in the US, while established firms created almost none.
From Good to Great makes occasional nods to “entrepreneurship”, but there is no guidance as to how entrepreneurship is going to flourish in these top-down bureaucracies being relentlessly driven by a giant flywheel. Collins didn’t realize that economically those kinds of organizations were rotting from within. They were 20th Century dinosaurs in their death throes, even if their death has proven to be an agonizingly drawn-out affair, as they use their wealth and political clout to manipulate the marketplace and so cling to a troubled existence. The firms who pursue the model described in From Good to Great are heading not for greatness but the grave.
The writing is on the wall. This way of running companies was already defunct in 2001. In 2010, it is now fairly obvious that it needs to be replaced with a radically different way of organizing and managing.
What does the different way look like? The principles are simple to understand and very different from big bureaucracy. People do best what they do for themselves in the service of delighting others. When they are in charge of their own behavior, they take responsibility for it. When they are able to work on something worthwhile with others who enjoy doing the same thing, the group tends to get better. By working in short cycles, everyone can see the impact of what is being done. When people are open about what is going on, problems get solved. Innovation occurs. Clients are surprised to find that even their unexpressed desires are being met. Work becomes more fun than fun.
Instead of the bureaucracy relentlessly grinding forward with a giant flywheel, the organization of the 21st Century is light, agile, adaptive, innovative, insightful and responsive. It’s a place where people want to work. It’s a place where clients love to do business because the firm is focused on delighting them. The fact that it’s also much more productive, even in traditional economic terms, makes its emergence inevitable.
To find out more, go here:
http://www.stevedenning.com/Books/radical-management.aspx
[i] Deloitte Center for the Edge. Measuring the Forces of Long-Term Change: The 2009 Shift Index. 2009. http://www.edgeperspectives.com/shiftindex.pdf. Friedman, T. “Start-Ups, Not Bailouts” New York Times, April 3, 2010 http://www.nytimes.com/2010/04/04/opinion/04friedman.html?hp
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Posted by: Health News | March 16, 2011 at 03:08 AM