In this podcast, I discuss the major points in Jim Collins best-selling book Good to Great and how the elements of great companies relate to innovation. Looked at in one way, this book is about best practices needed to make a company great. What I’m doing in this podcast is directly addressing innovation best practices as they relate to the overall best practices.
As you know, this podcast series is completely based upon innovation best practices. When it comes to taking a good company to a great company, the insights from Jim Collins definitely fall into the category of best practices.
In the part one podcast, I addressed level 5 leadership, first who then what, and confront the brutal facts – yet never lose faith. In this part two podcast, I address what Collins calls the hedgehog concept, technology accelerators, and the flywheel and the doom loop associated with making a company go from good to great.
As background, Collins addresses the transformation process of a company going from good to great as a “build up followed by breakthrough.” He identified three broad stages that he calls disciplined people, disciplined thought, and disciplined action. The breakthrough stage includes the three elements being covered in this podcast.
Let’s start with the hedgehog concept. Here is Jim Collins introduction to the concept – “to go from good to great requires transcending the curse of confidence. Just because something is your core business – just because you’ve been doing it for years or perhaps even decades – does not necessarily mean you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company.”
This is about creating simplicity of focus or as Collins says, “a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles.” First is to identify what you can be best in the world at. Second, what drives your economic engine? Third, what are you deeply passionate about? It is at the intersection of these three circles where the simple focal point for turning a good company into a great company exists.
Collins shares some examples. For Walgreens, it was how they could become the best at convenient drugstores. For Gillette, it was how they could become the best at building premier global brands of daily necessities that require sophisticated manufacturing technology. For Wells Fargo, it is about how they could become best at running a bank like a business, with a focus on the Western United States.
All of this is 100% consistent with what Merwyn Technology taught us about what it takes to increase your chances for long-term success. Recall that of the three factors – benefit, reason to believe and dramatic difference – the dramatic difference is the most powerful of the three. In this case, dramatic difference is identifying how you can be the very best – better than all of your direct and indirect competition – in a specific business by meeting specific and important customer needs.
When you are the very best at delivering important customer benefits then your chances for success are high. Thus, in your innovation efforts you want to set the bar at this very high level. Specifically, you want your quantum idea generating session to have the goal of developing the quantity and quality of ideas that can accomplish this objective. It rules out most evolutionary innovation ideas – including line extensions and product improvements. It can require a disruptive innovation – an entirely new portfolio of customer benefits for example. It can also require a bold and dramatic leap forward in the benefits your customers value for most.
Let’s take a look at the second element in this podcast – technology accelerators. Collins says about this, “good to great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of carefully selected technologies.” He goes on to add, “when used right, technology becomes an accelerator of momentum, not a creator of it.”
As I’ve talked about in some previous podcasts, many people get enamored with technology, often for technology’s sake. The focus becomes the technology when the focus should be on the delivery of customer benefits.
Not surprisingly, I think one of the best examples of this is Apple with their iPhones and iPads. There is a ton of technology behind the swiping from page to page in these devices, but 100% of their focus is demonstrating ease-of-use and convenience. This is a good example of when technology enables the delivery of great customer benefits.
The other trap that companies often fall into with technology is believing that the more powerful the technology, the better the customer will like it. This is not necessarily so. Powerful technology can often be complex to use and subject to bugs and crashes. Technology, in my opinion, is most powerful when it simply and easily delivers major customer benefits. There’s no need for a 112 page operator manual. You learn easily. It works every time. You love it.
The third of the three elements in this podcast is the flywheel and the doom loop. About this Collins says, “no matter how dramatic the end result, the good to great transformations never happened in one fell swoop. There was no single defining action, no giant program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond.”
Collins shares of the example of UCLA basketball under John Wooden. Most of us remember John is the winner of ten NCAA basketball championships in twelve years, which included one season with a sixty-one game winning streak. What we fail to recognize is that from 1948 to 1963 – fifteen years – he was a relatively unknown, somewhat successful basketball coach at UCLA before winning his first national championship in 1964.
When you bring your customers something that is dramatically better than what exists in the market prior to your product, the world does not immediately beat a path to your door – at least in most cases. There are very few exceptions to this – I believe the iPhone and iPad are a couple of those exceptions.
You have serious marketing challenges when you make dramatic improvements to be better than all of your competition. First, you need to create awareness and there are many, many hurdles to creating this awareness. People are very busy. For the most part they are reasonably happy with the products they currently have. As a result, they pay little attention to advertising. Having spent decades in the consumer products business with significant advertising budgets, I can testify that it takes time to get momentum with a new and dramatically better product. Second, dramatically better products often require customers to change what those of us in marketing call habits and practices. Put simply, to realize the benefits of our now dramatically better product, customers need to change the way they are currently performing a task. Learning new ways for many people is not an easy task. I remember the in trepidation my wife had in moving from a flip phone to a smart phone – the process took a few months with associated anxiety of missing calls and losing messages with the fancy new phone.
When you have your hedgehog concept, you need to be ready for a long, long journey to success. Often the rewards go to those who can have a continuous learning process that produces quick improvements in marketing, product performance, or any other area needing improvement to accelerate your path to the goal. When you do this there is a clear sense of momentum – the rate of increase in year-over-year business continually becomes greater. At some point you realize you’ve optimized the idea and you have at least a temporary template for success. You invest even more and you invest as a long-term undertaking.
Inherent in this element is that it takes time to succeed. While you are pushing hard to succeed, competitors are noting your success. Along the path, competitors will try to mimic you while other competitors will try to outdo you. Innovation requires boldness, courage, and persistence. It also requires continuous innovative improvements, primarily by listening to your customers and how they react to your products and the products of competitors.
Sometimes you build momentum only to be derailed by a whole host of potential factors ranging from macro ones like an economic recession to or micro ones like an entirely new, powerful competitor entering your market space.
No one ever promised you that innovation would be easy. Having said that, you need to enter into the process with your eyes open and your ears alert.
All three of the good to great elements in this podcast are relevant for just about any business owner and leader listening to this podcast. These two podcasts present the broadest time perspective I’ve shared with you so far on the topic of innovation. This is perspective that is proven, practical help that when used wisely does help you to sell more and make more.
