THE BOOK• WHAT IS THIS ABOUT?

– HAVE YOU EVER THOUGHT WHAT MAKES THE DIFFERENCE BETWEEN A GOOD COMPANY AND A GREAT ONE?

– HOW DO COMPANIES BECOME MAGNIFICENT?

– WORKING IN A PROFITABLE FIELD? SPECIFIC TYPE OF BUSINESS? PRESSURED WORKERS? CRUSHING THEIR RIVALS?

– JIM COLLINS AND THEIR COLLEAGUES LOOKED FOR COMMON PATTERNS IN COMPANIES THAT MADE A TRANSITION BETWEEN BEING AVERAGE COMPANIES AND GREAT COMPANIES

STUDYING THE MARKET• WHAT DID THEY LOOK FOR?– Companies that appeared in Fortune List (1965-1995):• Biggest American companies• Belonging to the stock market: public and accessible

data– Average companies: financial performance not higher than

1.5 times the average market during 15 years– Great companies: financial performance 3 times better

than the average market for the next 15 years since a transition

STUDYING THE MARKET• COMPANIES THAT HAD A TRANSITION!

• WHY NO HIGH-TECH COMPANIES?:– Many of them too young (Google)– Some of them have always been great (Intel)

TRANSITION

STUDYING THE MARKET• SELECTED COMPANIES:

• HOW MANY OF THEN ARE WELL KNOWN??

Abbot Laboratories Circuit City

Fannie Mae Gillette

Kimberly-Clark Kroger

Nucor Philip Morris

Pitney Bowes Walgreens

Wells Fargo

WHY DID THEY SUCCEED AND THEIR RIVALS (COMPARISON COMPANIES) DID NOT?

COMMON PATTERNS• SET OF COMMON PATTERNS SHARED AMONG THE

GREAT COMPANIES, NOT PRESENT IN COMPARISON COMPANIES

• Great leader (special)• People: First Who, then What• They way of confronting reality (good desitions)• Finding your concept (main idea)• Establishing a culture of discipline• Sensible use technology (not only for its newness)

– CHAPTERS OF THE BOOK BASED ON THESE POINTS

COMMON PATTERNS• LEVEL 5 LEADER– Surprisingly found in every company! Comparison

companies had other type, called level 4.

10 OUT OF 11 GREAT LEADERS CAME FROM INSIDE THE COMPANY

COMPARISON COMPANIES TRIED WITH EXTERNAL

MANAGERS THAT BEHAVE LIKE ‘ROCK STARS’

LEVEL 4 LEADER•Egocentrics.•Whatever is needed for personal success.•Blame external factors when failing, take the credit for succeeding to themselves.

LEVEL 5 LEADER•Mixture: humility and professional willing.•Whatever is needed for the company’s sake.•Blame themselves when failing, take the credit for succeeding to the workers.

COMMON PATTERNS• LEVEL 5 LEADER

COULD YOU BECOME A LEVEL 5 LEADER?ARE THEY SO DIFFICULT TO FIND?

COULD YOU BE STRONG ENOUGH TO MAKE THE RIGHT DECISIONS?

COMMON PATTERNS• FIRST WHO, THEN WHAT

– Key Concept: finding the right people!– Get this right people and then give them something to do! (madness?)

– Right people has to do more with innate capabilities than with knowledge or specific abilities.

GET THE RIGHT PEOPLE IN THE BUS

GET THE WRONG PEOPLE OUT OF THE BUS

AFTER FILLING THE BUS WITH GREAT PEOPLE, DECIDE WHERE

TO GO

COMMON PATTERNS• FIRST WHO, THEN WHAT

HOW TO KNOW IF WE SELECTED THE RIGHT PEOPLE?

WHAT IF WE DISCOVER IN THE MIDDLE OF THE TRIP THAT WE WERE WRONG?

COMMON PATTERNS• CONFRONT THE FACTS

– Being too much charismatic might discourage your people (they will not show you the cruel truth)

– Leading with Questions and not with Answers

– Very important to talk, debate, discuss to make a final decision. In great companies, long and heated debates are very usual! (mentioned by all the leaders)

ALWAYS KEEPING THE FAITH NO MATTER THE

DIFFICULTIES

CONFRONTING THE ADVERSITIES IN AN

HONEST WAY

BUT

COMMON PATTERNS• THE HEDGEHOG CONCEPT

– The main concept that will move your company.

– Take into account, some years could pass before finding the MAIN CONCEPT.

GOOD COMPANIES: FOX. CLEVER, INGENIOUS, KNOW MANY THINGS

GREAT COMPANIES: HEDGEHOG. SIMPLE, KNOW ONLY ONE IMPORTANT THING

THREE CIRCLES INTERSECTION IS THE

KEY

COMMON PATTERNS• THE HEDGEHOG CONCEPT

WILL WE BE PATIENT ENOUGH FOR FINDING THE MAIN CONCEPT?

CAN A COMPANY AFFORD AND SURVIVE FOR SEVERAL YEARS BEFORE FINDING THIS CONCEPT?

COMMON PATTERNS• CULTURE OF DISCIPLINE– Culture full of disciplined people which make disciplined

decisions inside the three circles

– Many times, it is more important to make a list of things that you must NOT do, than things that you must do

DO NOT CONFUSE DISCIPLINE WITH

TYRANNY!

BUROCRATIC CULTURE EXISTS BECAUSE A LACK OF RIGHT PEOPLE IN THE BUS

WITH DISCIPLINED AND RIGHT PEOPLE, HIERARCHY IS NOT A PROBLEM (YOU CAN MANAGE YOUR

COMPANY WITH MUCH LESS LEVELS OF HIERARCHY)

COMMON PATTERNS• CULTURE OF DISCIPLINE

HOW LONG CAN A PERSON BE DISCIPLINED IN HIS WORK?

HOW TO KEEP THIS DISCIPLINED CULTURE?

COMMON PATTERNS• TECHNOLOGY ACCELERATORS– WHAT GREAT LEADERS THINK ABOUT IT?

– Comparison companies simply use technology because of the fear of falling behind, because of its newness

THEY ARE PIONEER IN APPLYING SELECTED

TECHNOLOGIES CAREFULLY

IT IS SEEN AS AN ACCELERATOR OF THE

SUCCESS, NOT A CREATOR OF SUCCES

BUT

80% OF GREAT COMPANIES LEADERS DO NOT INCLUDE TECHNOLOGY AMONG 5 MAIN

REASON OF THEIR SUCCESS!!

QUESTIONS TO THINK ABOUT• PEOPLE INSIDE A COMPANY IS NOT CONSCIOUS ABOUT THE TRANSITION. THERE IS

NO NAME, NO KEY EVENT THAT SUDDENLY CHANGES THE COURSE OF A COMPANY. HOW TO KNOW IF WE ARE IN THE RIGHT PATH?

• VERY COMMENTED IN THE BOOK. PEOPLE IS NOT THE MOST VALUABLE ACTIVE. RIGHT PEOPLE IS.

• COULD YOU BECOME A LEVEL 5 LEADER? COULD YOU BE STRONG ENOUGH TO MAKE THE RIGHT DECISIONS?

• WHERE DO I START FROM? WHAT IF A HAVE A VERY SMALL COMPANY? CAN I APPLY THIS IDEAS?

• CAN I APPLY THIS IDEAS TO ANOTHER FIELD? DO I NEED TO BE A BUSSINESS MAN TO READ THIS BOOK?

THANK YOU FOR YOUR ATTENTION