The encompass story past Jim Collins in the October 2001 effect of Fast Company is based on the vast research that went into the making of Skillful to Great: Why Some Companies Make the Leap … And Others Don't (HarperCollins, 2001). Collins's new book is destined to influence how leaders around the world recall about their companies, their strategies, and their approach to making change.

In an in-depth interview, we asked Collins nearly the implications of his enquiry and ideas for the economy, stock market, and the very nature of executive leadership.

The good-to-great companies that you wrote near all achieved remarkable stock-market results over a 15-year period. But today, the stock market is downwardly. Does that mean we won't run across any skillful-to-smashing companies today?

Showtime, I desire to correct a great misconception. The stock marketplace is non down. How does the stock market wait relative to 1985? The stock market is not downward. How does it look relative to 1990? The stock market is not downwards. The market place was irrationally out of whack — we didn't have a stock market; we had a speculative casino.

The tech bubble wasn't the new economy — there is a new economy that's been going for years at a deeper level. But the roughshod fact is that the companies that were at the tiptop of the tech bubble didn't have results. You tin't make goose egg profits and claim that you have results. In the example of companies that had great results earlier the bubble burst, they're in a down period now, but and then what? The bottom line on a visitor like Cisco is, we don't know the respond yet. Information technology could be that those companies are only in a very difficult half-dozen- to 12-month period.

Permit me use an analogy. Permit'south say that you have a bang-up basketball game dynasty like the UCLA Bruins under John Wooden. This is a team that is going to win 10 NCAA championships in 12 years. They're a team that went from good to neat. But in 1970, they lose 3 games. Does that mean that we're going to write them off and say they're not a great team? We have to look over a longer menstruation of time. The same is true of companies that got defenseless in the chimera. It was too brusque a time period. It'southward going to take more time to tell which companies that are in trouble at present are simply going through a momentary period and will have the resiliency to come up dorsum.

Merely to a lot of businesspeople, the current slowdown is a sign of the new economic system'due south demise.

This is ane of the almost wonderful times in history. Ii or iii years ago, what was the major complaint that we heard? "It's then difficult to go skillful people! Whine, whine, whine!" Today, we've got the greatest opportunity that we are going to have for decades to snag a boatload — not a busload, but a boatload — of great people. And great companies always start with who, not what. We tin can finally get to the right side of Packard's Law. Packard'due south Constabulary is similar a constabulary of physics for great companies. It says that no company can get or remain great if it allows its growth rate in revenues to exceed its growth in getting the right people in a sustainable fashion. Information technology's 1 of those timeless truths that transcend applied science and economics. Now, instead of trying to accumulate capital, we tin can accumulate people.

If I were running a company today, I would have one priority to a higher place all others: to learn every bit many of the best people every bit I could. I'd put off everything else if I could afford it — buildings, new projects, R&D — to fill my bus. Because things are going to come back. My flywheel is going to start to turn. And the single biggest constraint on growth and the success of my organization isn't markets, isn't engineering science, isn't opportunity, isn't the stock market. If yous desire to be a great company, the single biggest limitation on your ability to abound is the power to become and hang on to enough of the right people.

This is too a great time to force yourself to await back. When you were breaking Packard'due south Police, you lot probably let a lot of the incorrect people on the autobus. This is a skillful fourth dimension to get them off. In fact, it's a piffling easier to do that now. Nosotros can blame information technology on the circumstances.

What else would you lot exercise to capitalize on this flow of reevaluation?

This is also a corking time to ask yourself some really hard questions. In a time of irrational prosperity, where the market would requite you coin whether you delivered or not, a lot of companies hadn't answered any of the questions in the 3 circles (What can nosotros be the best in the globe at? What is the economic denominator that best drives our economic engine? And what are our core people deeply passionate about?). They had no concept of what they could exercise better than whatsoever other visitor in the world that was sustainable, they had no profit denominator, and the only thing they had passion for was flipping the company.

Now we can no longer live in that fantasy land. We've got to take a hard wait at all the things we're doing and put them all to the three-circle test. Any things that fail the exam we have to terminate doing — today.

I run into lots of companies that found themselves with lots of capital. So they wandered into all kinds of acquisitions or new ventures or new directions, simply because they could. But they didn't necessarily fit within the three circles. Today, the chore is for them to prune away. Those who clarify their iii circles volition come up out of this just fine. Those that don't deserve to die.

CEOs today find themselves with piffling fourth dimension to prove their worth. What communication would you give to a CEO on the hot seat?

If I were a CEO on the hot seat taking over a company that I wanted to move from good to great, here's what I'd do. I'd take that good-to-great stock chart, and I'd put it in front of my directors. I'd say, "Nosotros're on the left side of this curve. We want to be on the right side of the curve. Right? If that's what nosotros all want, we know what information technology'southward going to accept to get it. You can't keep lurching from CEO to CEO. If yous practice that, you'll observe yourself in the Doom Loop — and then we'll terminate up every bit i of the comparison companies, not 1 of the corking companies."

I don't think all directors are stupid. Well-nigh of them are intelligent, but they're operating out of ignorance rather than a lack of good intent. We need to striking them over the head with the empirical results. Our job is to beat out the market in a sustainable way over time. We need to think virtually the stock cost over a five-year catamenia. And nosotros demand to begin to do all the things it will take to get that flywheel turning.

Finally, if I'm the CEO, I want the board to give me the post-obit assurance: However long or short my tenure every bit CEO may be, whoever you pick as my successor needs to pick up that flywheel in midturn and to go along pushing in a consistent direction. I may only go the flywheel turning at xvi RPMs. Merely my successor has to take it to 100 RPMs. His successor has to accept information technology to 500 RPMs, and his successor to 1,000 RPMs. Information technology'south not well-nigh me equally CEO — it's about a commitment to a consistent plan. Nosotros're not going to exercise a Doom Loop.

The CEOs who took their companies from expert to great were largely anonymous — a far cry from the glory CEOs we read about. Is that an accident? Or is it cause and effect?

I believe it's more a matter of crusade and event than an accident. There is something directly related betwixt the absence of celebrity and the presence of good-to-neat results. Why? First, when you lot accept a celebrity, the company turns into "the one genius with 1,000 helpers." It creates a sense that the whole thing is actually about the CEO. And that leads to all sorts of problems — if the person goes abroad or if the person turns out not to be a genius after all.

At a deeper level, we institute that for leaders to make something keen, their appetite has to be for the greatness of the work and the company rather than for themselves. That doesn't mean that they don't have an ego. It doesn't mean that they don't have any self-needs. It means that at conclusion bespeak later conclusion signal — at the critical junctures when Choice A would favor their ego and Choice B would favor the visitor and its work — fourth dimension and again those leaders option Choice B. Celebrity CEOs, at those same decision points, are more likely to favor self and ego over visitor and work.

Similar the anonymous CEOs, almost of the companies that made the transformation from practiced to great are unheralded. What does that tell us?

The truth is, virtually people are not working in the almost glamorous things in the globe. They are doing real work — which means that most of the fourth dimension they're doing a heck of a lot of drudgery with only few points of excitement. Some people are putting out baked bread. Some are building retail stores. The real work of the economy gets done by people who make cars, who sell existent manor, who run grocery stores and banks. So 1 of the great findings of this study is that yous can be in a great company and be doing it in steel, in drugstores, in grocery stores. It's merely not the example that if you're not in Silicon Valley, you lot're non cool. It doesn't matter where you are. So no one has the right to whine about their company, their industry, or the kind of business organisation they're in — ever again.

Were the 11 companies that fabricated the transformation benefited past their anonymity?

One of the great advantages that these companies had was, nobody cared! Kroger started its transition; Nucor started its transition; nobody was expecting much. They could underpromise and overdeliver. In fact, if I were taking over a visitor and trying to make information technology go from skillful to cracking, I would tell my vice president of communications that his job was to make the whole globe recollect that we constantly were on the edge of doom.

In the class of our study, nosotros really printed out the transcripts of the CEO presentations to analysts by the skilful-to-slap-up companies and the comparing companies. Nosotros read all of those. And it's hit. The good-to-great people always talk about the challenges they're facing, the programs they're building, the things they're worried most. Yous go to the comparison companies, they're constantly hyping themselves, they're selling the future — but they're never delivering results.

If I'grand not a CEO, how practice the good-to-great lessons apply to me?

The skilful-to-great concepts are applicative to any situation — equally long equally you can pick the people effectually you. That'southward the crucial thing. Simply fundamentally, we really do — we have a lot of discretion over the people in our lives, the people we decide to let on our passenger vehicle, whether information technology's in our department at work or in our personal lives. But the basic message is this: Build your own flywheel. Yous tin do it. Y'all can first to build momentum in something for which you lot've got responsibility. You lot can build a great section. You can build a great church building community. Y'all can accept every one of the skillful-to-neat ideas and apply them to your ain piece of work or your ain life.

What did your report teach you almost alter in business in general? Is it essentially a message to go dorsum to basics?

Very rarely exercise significant changes ever lead to results in a sustainable way. That'south ane of the really important findings of the book. We started with 1,435 companies. And 11 companies did it. Let's just look at that fact for a moment. The fact is, it doesn't happen very often. Why not? Considering we don't know what the heck we're doing! And because we don't know what we're doing, we launch into all sorts of things that don't produce results. We finish up like a bunch of primitives dancing effectually the campfire chanting at the moon.

What I feel strongly is that we need some science to empathise what information technology really takes to modify things. Is it dorsum to nuts? No, it'southward frontward to agreement. Why is it back to nuts to say that CEOs need to be ambitious for their companies and non for themselves? Why is it back to nuts to do the who and the people question start and the what and where question second? Since when is it back to basics for a visitor to begin with a question like, Why have we sucked for 100 years, and what are the cruel facts that we take to confront? Why is it back to basics to say that terminate-doing lists are more important than to-practise lists? And since when has it been dorsum to basics to say that technology is merely an accelerator and not a creator of anything? I don't remember those concepts are back to basics. Because if they are, we should be able to go back in time and find that people used those ideas. People didn't — which is why there are only 11 out of 1,435. And then, no, it's not back to basics. It'due south forrard to understanding.

What's your assessment of the new economy? We've seen a lot of change, and we've seen a lot of backlash against the change. How practise you brand sense out of it all?

The tremendous changes that are taking place around united states of america make information technology the most exciting time in history to be alive. It's really fun. All these changes — changes in technology, globalization — they're brutal facts that must exist integrated into whatever decisions we make. The people at Walgreens didn't ignore the Internet because they were focused only on basics. They confronted the savage fact of the Net and then asked, How does information technology fit into our three circles, and how can we use it to spin our flywheel faster?

You lot never ignore changes — yous striking them head-on as brutal facts, or you come to them with a great sense of glee and excitement. This alter, this new technology opens up a way for you lot to prevail, to be even better as a company. All of the expert-to-great companies took changes and used them to their advantage, often with not bad glee.

When new pianos came along, Mozart didn't hang upwards his music. He didn't say, "There are these new pianos! The harpsichord is out of the way, and then I'k done up as a composer!" He thought, This is so cool! I can do it loud with piano forte! This is really dandy! He kept the discipline of writing peachy music and, at the same fourth dimension, embraced with great glee and excitement the invention of pianos.

With all the change around us, we need to be just like Mozart. We maintain a cracking discipline most our music, but at the same fourth dimension, we embrace things that can allow united states of america to make even greater music.

Alan M. Webber (awebber@fastcompany.com) is a Fast Company founding editor. Jim Collins (jimcollins@aol.com) wrote the essay Congenital to Flip in the March 2000 result of Fast Company. His new book, Good to Groovy: Why Some Companies Brand the Bound … And Others Don't, volition be bachelor in October.

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