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Book Review Good To Great Companies – Chapter 5 Summary

9 April 2010 No Comment

good2greatCollins begins this chapter by talk about an essay from Isaiah Berlin called “The Hedgehog and the Fox”, in this essay Berlin says the world is divided up into two groups, foxes and hedgehogs. With the fox, they are able to deal many complex situations and strategies, while the hedgehog only deals with one or rather “Foxes pursue many ends, at the same time and see the complexity…simplify a complex world into a single organizing idea, a basic principle-or concept that unifies and guess everything.” In other words, you need to take something as complex as management and try to simplefy it as much as possible.

One of the problem Collins and his team debated about was if these good-to-great companies had simple ideas, Hedgehog Concept, that what about the companies who had simple ideas and yet they still failed. Well the team would spend months on this and concluded that there are three parts to this concept or rather three circles that interchange with each other.

They are, “What You Can Be The Best In The World At”, “What Drives Your Economic Engine”, and “What You are Deeply Passionate About”. The first circle that is mention comes with a double standard, meaning you could be good at one thing and yet still be bad at it, however, there could be something that you good at and yet not know it. The next one more or less talks about how to sustain profitability or rather that one thing that helps sustain the profitability. As for the final circle, it talks the passion a person would develop that in a way helps them use the other two circles in order for the Hedgehog Concept to be possible. Or to simplify it a bit more: you have a talent your good at, you do it well enough to get paid for it, and if you’re passionate about this talent it pretty much keeps the other two going. However, for this to work with good-to-great companies, you need all three, not just pick one of them, and think your business will be a success.

He then goes on to break the three circles down a bit more with his first point being that regardless of your strength or competence, you need to have the knowledge of the business your running and have in Collin’s words “a sever standard of excellence.” For his the point one the second circle, the goal is to the find a single denominator and not for the sake of finding one, but rather to find one that sustains your economic drive to earning profit. As for his final point, passion is the key to the Hedgehog Concept, however, it has to be found and not made, you can’t motive those to feel passion, they have to find it on their own when working in a business you want to see succeed.

In the last part of the chapter, the driving point of the hedgehog concept is that you cannot jump the gun, but rather plan it all out and go into a slow transition that encompasses all three circles at once. Granted you could jump into a Hedgehog Concept but the odds are great that you would fail because of the lack of planning. In the comparison, it took on average, four years for the good-to-great companies to clarify the Hedgehog Concept before implementing it. On top of that for this process to begin, you first need the right people, need to understand the brutal realities and then you can begin the development stage of the Hedgehog Concept.

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