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University of Massachusetts Amherst

Family Business Center

Robinson: Take Your Company from Good to Great

by Shel Horowitz

Why did Winston Churchill, at the peak of his power in World War II, set up the Statistical Research Office?

To tell him the truth when no one else was willing!

The always-enlightening Alan Robinson, UMass professor of management, returned to the Family Business Center (along with Mike Guarrera, an MBA student, who presented the cases) for its December meeting to talk about how to turn a good company into a great company. And it's not as easy as it sounds; the first sentence in the book, Good to Great, by Jim Collins - the basis for Robinson and Guarrera's December 12 presentation - is "Good is the enemy of great."

Good, Robinson says, can lead to mediocrity; the path to excellence may not start with "good." But there are some that make this exhilarating walk. To measure the transition to excellence, the Collins researchers looked for companies whose 15-year cumulative stock returns were no better than the market as a whole - but then, after some pivotal point, started outperforming the market by at least a factor of three, and sustained that performance for at least three years.

Among all publicly held companies, Collins and his team identified just 11 (including a few surprises). The research team paired each company with a competitor that hadn't made the transition. The 11 are listed here alphabetically, with their comparison company in parentheses: Abbott (Upjohn), Circuit City (Silo), Fannie Mae (Great Western), Gillette (Warner-Lambert), Kimberly-Clark (Scott Paper), Kroger (A&P), Nucor (Bethlehem Steel), Philip Morris (R.J. Reynolds), Pitney Bowes (Addressograph), Walgreens (Eckerd), and Wells Fargo (Bank of America).

And then the team looked for characteristics that these 11 top performers had in common, but that their competitors did not share:

  • A "Level 5 Leader" who understands the human factors in leadership, is willing to keep looking until the right person can take the job, and who is more concerned about making the company succeed than about personal ego or CEO perks.
  • Willingness to "confront the brutal facts" that could kill your business - leading with questions rather than answers, dialogue instead of coercion, autopsies without blame.
  • An integrated understanding of where the company could be the best in the world at its core business, where its passion lies, and what drives the company's economic engine - even if that analysis means shifting to a different core business (as Kimberly-Clark did when it divested its old coated paper mills). From these three interlocking circles, you can develop an articulation of the unique and powerful motivators for your company.

Collins calls this the "hedgehog concept. As an example, Walgreens developed this platform: Be the best, most convenient drugstores, with high profit per customer visit. To achieve this, they opened more convenient locations, pioneered the drive-through pharmacy concept, clustered stores in urban areas so no one would have to walk very far, and added new services such as 1-hour photo processing - and from 1975 through 2000, Walgreens outperformed the market by 15 times!

Why did Walgreens succeed so much more dramatically than Eckerd? Cork Walgreen focused on hiring and developing the right people, and in a corporate strategy based on insights from the whole team; Jack Eckerd bought the right stores, but failed to create an executive team or any real successor, and kept the corporate structure inside his own head. And how can your company embody the principles of Good to Great, or Collins' other book, Built to Last?

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