Good To Great

The book is more of a research report than just a business bestseller despite of its narrative/descriptive writing style. By narrowing thousands of companies down to around a dozen that experienced difficult times but managed to transition and beat the market, the author(s) ruled out superficial ones and identified actual causes for good-to-great transitions, which can be summarized as "right people make fact-based decisions consistently".

Business decisions are not as simple/straightforward as arithmetic. Uncertainty keeps haunting and logic defects may torpedo decisions. Thus, the conclusions may just be descriptive rather than definitive. Companies that adopted such methodology but failed in transition might be simply eliminated from the watch list of this study.

The scope & quality of the research is quite limited.

First, it didn't cover those always-great companies. Those companies may not always be blessed with Level 5 leaders because consecutive Level 4 leaders may also lead to enduring success.

Second, The research didn't cover tech companies such as Apple, Microsoft, Amazon, etc. With the second surge of Microsoft stock price after decade-long stagnation, is it appropriate to say Satya Nadella is better than Steve Ballmer in terms of leadership? Or is it simply because of the emerging of cloud service? There're probably more non-Level-5 leaders in tech industry, like Steve Jobs and Elon Musk. The products, instead of leaders, are more likely to define a tech company.

Third, in the Q&A session, the author rationalized the Hedgehog Concept in the case of the highly diverse company GE by saying "GE has a very unusual and subtle Hedgehog Concept" which is the development of "first-rate general managers". Hedgehog concept should be simple, and development of "first-rate general managers" is by no means simple. Similarly, you cannot say a company is great because it has a Hedgehog Concept of "development of great company". Ironically, GE suffered long-term decline after Jack Welch's retirement, or roughly after the publication of this book. The authors successfully identified diversification as an enemy of great, but instead of standing by the short side, they tried to align sophistically* and vainly the success of GE with the principles they developed.

In the end, I found the reason for the elimination of Boeing Co. in the 126-to-19 company selection is plausible. The authors claimed Boeing Co. "displays a continual upward trend relative to the market over the entire time covered by CRSP data". However, the stock matched the performance of S&P 500 index during 1968 to 1978, well within the study focus, and after 1978 Boeing started to beat the market substantially. This is actually a pretty good example for good-to-great transition.

*sophistical: fallacious, misleading or incorrect in logic or reasoning, especially intentionally.

Dec 17, 2018