Jim Collins: Good To Great

episode 150

SHOW TRANSCRIPT

And welcome to the moonshots podcast. It's episode 150. I'm your cohost Mike Parsons. And as always, I'm joined by the great man himself. Mr. Mark is in Freeland. Good morning, mark. Good morning, Mike. What a a book, a show, a powerhouse that we're digging into today is episode 150. This is a real powerhouse of business and strategy.

Isn't it? Not only that, but I think Mike, we are about to dive into one of our official top 10 all-time great books for the moonshot podcast. If you want to shoot for the moon, you're going to need this book. So with no further ado, Which book do we return to today? Today? Episode 150 is Jim Collins is good to great (buy on Amazon) , which Mike is actually celebrating a 20 year anniversary this week.

What a perfect time to be revisiting and reigniting. Our imaginations with Jim Collins [00:01:00] is pretty huge tome of research and business analysis. Yeah, it's it's a classic there's no other way to say it's absolute classic because at the heart of this book, Jim Collins studied with with a large team supporting him.

Don't forget that bit. And he studied the publicly available records of listed companies over a period of 20 years and said which books, which companies made this transition from goods. And they isolated a small, a couple of handfuls of companies that had made some fundamental transition from being a good companies to being great companies and great.

Isn't just like great for a day, a week, a month or a year, but sustained compelling multi-year decade long greatness. And he was like, okay. So he isolated a bunch of companies that [00:02:00] did it. And then he asked the big question, the question we love mark, how did they do it? And that is the heart of the book.

And that is what makes it so strong. So compelling. So timeless is they studied such a huge body of companies. They studied them for all the same factors. So there was no kind of unfair advantage and they didn't just pick the lucky ones. And isn't it amazing that we have a body of work here in the book.

Good to great by Jim Collins, which is it's the path. If you want to build a company. Good to great is an essential reading mark from listening to the show that I did way back in the day with Chad. When you listen to that, and when you look at the book, what stands out for you as some of the big, chunky moonshot ideas from an overview perspective, it's really a blueprint.

It is a [00:03:00] blueprint that analyzes based on the huge, and I'm in huge mountains of. I in fact, totaling 980 combined years of data. So that means across the 11 companies, nine more, nearly a thousand years worth of data for each of the, for all of those communities and together. And those are the only companies that made the criteria of sustained greatness.

 He studied thousands of counties, but he got to adjust to those ones. Isn't that crazy? It's absolutely enormous. And what he did was okay. How can I understand and unlock. How a company goes from good to becoming great. And this book, Mike is really a blueprint of how those companies were able to do it.

So as we reflect on what we're trying to do on the moonshot show from a personal perspective, as well as a business perspective, this is really one of the top 10, if not, maybe top five books that are valuable to all of us, because it's helping us unlock, what are the secrets [00:04:00] sauce? What are the practices and key characteristics that we can follow as we consider building companies in order to go out and become one day.

Great. How good is that? And for me, the standout idea was the very brutal. Analogy. He uses of getting people on the bus and the way he describes that idea, which is a clip we have coming up in the show first, who then what is so powerful because we, I think it's pretty easy to get a bit carried away with the idea.

Isn't it like? Oh, imagine it was such a good idea. Yeah, it's a dangerous, potentially dangerous situation because you're all sitting around a table saying, oh, Mike, this is a great idea where we are destined to success and you almost put it on a pedestal and you don't spend enough time building the let's call it the operations or the side all around the people.

And I think what good to great really calls out based on all this analysis, [00:05:00] this quantum, as well as call data that Jim and his team dig into. It's the fact that it all starts with having a solid foundation of people or all aligned or wanting to make a big success out of the company or the product. And without spending that time on the ground floor.

So to speak the baseline, you can't build a great company on top of it because like we we know you can't build a strong house without good foundation. True. True. True. Said, mark. I think we are primed and we are ready. So with no further ado, let's jump into the universe of making companies and not just good, but let's get them from good to great with the author, Jim Cole.

And we'll start off with a clip that gets into a little bit how Jim and his team of researchers approached this second, very large research project when they were trying to answer a leftover question after they've [00:06:00] completed the built to last study, which was okay. So we've identified what has made these companies be such an enduring and lasting company, but how did they become great in the first place?

Is there a dangerous to study success? So we don't study success. We study contrast, we study the contrast between success and failure. We study the contrast between endurance and collapse. We study the contrast between great and good. We study the contrast between those who thrive in chaos and those who do not.

And it brings me to a key point right up front from all of our work. See if we identify matched pairs of companies, match pairs of enterprises that were in the same spot, same time, same opportunities, same resources with the same potential. And yet one becomes [00:07:00] great. And the other does not one thrives in chaos.

The other does not one keeps climbing while the other falls, and yet their circumstances were identical or very similar at. You come to an inevitable conclusion, the answer, the cause of why one becomes great in another, not cannot be their circumstance. So if I were to take one giant lesson from all 25 years of research, I'd put it to you right?

Upfront greatness is not primarily a function of circumstance. It is first and foremost, a matter of conscious choice and of discipline. There's so many, he's just getting me started here. First of all, I love the fact that he points out that he really was almost forensic and finding out and [00:08:00] isolating what factors led to greatness.

And to me, that's where the value and the timelessness of his work lays is that they were able to do. That very thing. And don't you do anything, Chad, it's almost that sort of forensic approach is what creates the power of these next six ideas. We're going to lay out on the show. I think that is the source.

And I think it's such a powerful approach to isolate what is the thing that great companies do. Yeah. And he's not just sitting in his office in Boulder, Colorado thinking up these ideas, he and a team of dozens of researchers spent six years going through all of the data to figure out what the differentiating factors were of great companies versus good companies.

At first, they looked at the stock [00:09:00] price performance of similar companies in similar industries over time. And what they were looking for was a company that had a period of 10 to 15 years of expanded and continuous growth as compared to the quote unquote control company. And if you go to our show notes you'll find the full list of all the different companies, but the CA the outliers that they were looking for were the companies that had 10 to 15 years of breakthrough in terms of stock price performance.

And then they conducted. Hundreds, if not thousands of hours of interviews with leaders and employees of those companies to figure out what made the difference between two companies that had the same circumstances they're in the same industry were building similar products, had access to the same talent pool, et cetera.

 But one company had 3, 4, 5, and even like over a [00:10:00] hundred X greater returns then their peer companies and you and I can be data geeks sometimes when it comes to our work. And so knowing that all of these principles are backed by so much data and academic rigor is just really exciting and it speaks to the timelessness of these ideas.

Yeah. And draw some parallels with the likes of county pore Bernay brown Drucker and so forth. But. Here's one thing for sure that we know it wasn't just good luck. It wasn't chance. There were some very deliberate things that happened. And the first of those was what he calls level five leadership.

And what is so good about what we're going to do right now is listen to Jim Collins in his very turbo charged, excited [00:11:00] enthusiasm is we're going to hear about what it really looks like, what it really feels because we hear about leadership so much. And what he found is almost contrarian to what culture has been expected about leaders.

So let's have a listen now to Jim Collins, talking about leadership. It's great leadership. What's the X factor of great leadership. In the book. Good to great. We studied people who transformed mediocre average companies into those that became exceptional, like taking a, an also Ram sports team and turning it into a 15 year dynasty.

And when we looked at those where they fundamentally changed the trajectory of an enterprise, we discovered this idea of the level five leader. And what we found is that it's really a hierarchy. You think of it as that there's level one level, two level three level [00:12:00] four level five level one is good individual skills.

You can do stuff. Level two, good team skills you play well with others. Level three, you learn to manage your good management skills. Level four is leadership who become an effective leader, but here's, what's interesting. When we looked at the good to great companies and we looked at their comparisons that didn't make.

And we asked a simple question, did the good degrades have leadership? And the others did not know. We actually found that both the good degrades and the comparison had leaders. What was different was that the good to great companies had what we call level five leaders and the comparison companies had level four leaders.

So if it took the level five leaders to create a good to great leap, then in the fives versus the fours is where you might find the X-Factor of great leadership. And what did we find [00:13:00] humility that the X factor of truly great leadership is humility, combined with a ferocious will for something bigger than yourself.

Humility in a very special way. I want to be very clear. These people are ambitious. They have tremendous energy. They are often exhausting. They never want to stop. They never they're utterly relentless. Okay. There's no, they have all that, but here's the difference C for a five versus a four. So four, four, all that energy and ambition and drive is about them.

It's about what they get. It's about how they look it's about what they make. It's about what a cruise to them. It's about whether they are the center. That's a form fives, all that same level of energy and drive and ambition. It's channeled outward [00:14:00] into a cause into a company, into a culture, into a quest, into something that is bigger and more enduring than they are level fives lead in a spirit of service and they subsumed themselves and sacrifice.

I can't help, but think Mike, if we subtracted a few years from Jim and gave him a slight south African accent, we might be hearing from another author we've profiled. I know. I know. It's so Sinek ask, but I think we can all say that at times we've been tempted by the allure of what he calls level four leadership or said differently.

Ego. Yeah. And what is so fascinating about his proposition is what he's really saying [00:15:00] is that if you want to be great, that is level five leadership, and that starts with making those around you. Great. And we've heard about humble leadership, servant leadership, but what he's saying, when he looks at the data and studies, those that truly have been great.

He says it is those that put others before themselves. And what he talked about in in, in his book, and this is how we might recognize it is these people are the last to speak in the meeting. These people are almost unaware of the role or at least the significance of their contribution because they are so focused on the contribution of others and how they might help them.

This is, this leadership is [00:16:00] not pandering. It's not a virtue signaling. It is a true dedication to others and he could only find. And it doesn't also companies, so it's not easy, but we know what it looks like. So I've got a question for you, Chad, when you think about moments where you have been in the company of great leaders in your career, what does it feel like?

What does it look like? What is this level five leadership look like when you've seen it? To me, it looks like a lot of focus on the purpose of the organization over the career trajectory and ego of that leader is able to succinctly state the true purpose of the organization and rally people around that purpose as opposed to rallying them around themselves and hoarding [00:17:00] that talent.

 All for all, for themselves into a crew, the value for their own careers. And I think the other thing that Jim might also say is there are also relentlessly focused on the big, hairy, audacious goal of the company. They're often driving what that goal is and are being held ultimately accountable to achieving that goal.

And again, that goes tied to the purpose of the organization and not to themselves. Yeah. Yeah. So there seems to be true service to those around them and those that are making up the organization. What's also interesting is he actually found that there was no correlation to being. Charming or a good salesman.

In fact, in his book, he often found that the best leaders were quite shy, even I think [00:18:00] is perhaps one way them.

But I find that really fascinating that it really does challenge what we have become trained to expect as a good leader, some bombastic larger than life charismatic. He's saying it's in fact it's quite the opposite. Yeah. And I think one of the most fascinating if we could get sidetracked on a whole discussion here, a fascinating leader to view through all of these lenses is Steve jobs, because I think he fits this mold and yet he also bucks some of these principles.

Which in my mind just makes him and the story of apple, even more of an outlier exceptional story. But again, it's really interesting there's a lot of apple fanboys and people often, and I'm doing it now put him up in apple up is this exemplary [00:19:00] example. But I would as we get through some of these principles, you'll see that Steve jobs embodies the principle, but also the antithesis to the principal as well, which again, just makes him that much more interesting to, to study.

So if we want to walk away with one habit around great leadership, what comes to your mind is if we could adopt to one little practice, Chad, to help us on our way to level five leadership, what would that be? I don't know. I think it would be something like the default question that leader asks of all of their people in every interaction is how can I help you?

Either work towards our Beehag our big, hairy, audacious goal, or how can I help you find purpose in inside of this organization and contribute, or it's asking the questions and how the, and getting involved in that servant leadership style. But I like this idea of asking that [00:20:00] question. Yeah. I love it.

I love it. Yeah. Just okay. What's the biggest blocker you face to doing great work here and serving our mission. Tell me what the biggest blocker is and I'll try and smash it down for you. That's a really, it's a really good one to stop. How about you? I like the really simple mantra of being the last to speak in a meeting.

 How often is it that you know, the most so hard? Oh my gosh. Like it's so default, wherever I travel in the world. When the top dog walks in the room, it's like a machine gun and you're like, oh, Alrighty, here we go. And yeah, I just love the idea of, okay. I'll just listen.

And I can't remember who it was that we did on the show together, but someone we were decoding and researching was saying, Hey, surely that's the best way to do it because you just get to hear everyone [00:21:00] else's ideas and then you get to pick the best one. And to build off that Shirley is the best to speak last.

I can't remember who it is. Can you remember who that was? Am I hallucinating? I read so much and watch so much of this stuff now. I can't remember if I did, if you know the show or shoot us an email, hello image, too many shows. But we're not going to stop with people's stuff here. We're going to keep going on this leadership and people and culture track.

Yeah we had brought this concept and principle into the built to last show, but he expounds even further on the importance of people and getting the right people inside the organization. And you'll see how most, if not all of these concepts come back to this idea of the right people on the bus, which [00:22:00] I think is a great analogy.

And so here's Jim elaborating on why it's so important to get the right people inside of your organization. I've always loved the story. Silver blaze, which is the Sherlock Holmes story, where at the end of the case, the Constable ass homes, what was the key to the case? And home says it was the curious incident of the dog in the nighttime and the Constable says, but the dog didn't do anything in the nighttime.

Yes. That was the curious incident. The dog didn't. And so therefore I knew the criminal must have been somebody who knew the dark in our research. It is the dogs that do not bark that often give us some of the best clues and are the dogs that do not bark, helped us see the who principle. You would think that if you're leading a company from good to great, one of the things you would expect to see one of the dogs you would expect to bark, as he would find very motivating and [00:23:00] charismatic leaders who could infuse motivation into the troops so that they would go out and do good to great things.

 As our research unfolded, what we found is that most of the good to great leaders had a charisma bypass. They couldn't motivate anybody as just a pure motivational force. That's not how they lead, but then when we began asking them, how did you get alignment? How did you get people motivated behind what you were trying to do?

The dog just didn't bark. They didn't spend any time on that. That's not how they led. And we scratched our heads a little bit. How would you make sense of the fact that you're getting a whole company to go in a different direction? And yet the leaders who made this happen, didn't invest in figuring out how to motivate people, how to inspire people, how to get people behind the flywheel.

And this is what we learned something. See if you have the right people, they're already motivated, [00:24:00] the right people are self-motivated the right people are self-disciplined. And the challenge of management, the challenge of leadership is not to, how to figure out how to motivate the wrong people into the right people, as how to get the right people, and then not do all the stupid management things that tend to de-motivate the already motivated.

How powerful is the fact that we consume ourselves with trying to use all sorts of tricks and so forth to get people excited about bad ideas, but he's saying, no, your job is if you have the right people they're motivated, you just need to get out of their way and not make a mess. Yeah. Yeah. In the book, he goes even further into all of these failed restructuring and promotion plans and incentives and compensation and all of that has [00:25:00] no correlation to a good to great company.

And it also just reinforces this fact of how important that core purpose of the organization is. And yeah, and that ambition of the level five leader, because that's actually. Their biggest asset when it comes to recruiting people. And I feel like I'm talking like Simon Sinek now, too. It's just you get them behind the why and you don't have to spell work out the rest.

Yes, exactly. Yeah. Yeah. And the interesting thing that comes up a lot is often in both Sinec and especially Jim Collins touched on it is often then when people aren't performing, it's not because they're bad or that they even have a poor fit with the organization. It's that they're playing out of position.

Yeah. So he's really pushing us to not only recruit the right people, but to get people playing to their strengths where [00:26:00] they can be experiencing true mastery. And he's almost making the best case ever for don't micromanage. Yeah, but I think another great clip go back to the end of the previous episode 65, listen to the first who then what clip it just, he's speaking so passionately about the need to identify first, who you're bringing into the organization.

And only after you've brought the right person in to then figure out what it is that they're doing. This is as many of these principles, counter-intuitive or contradictory to typical ways of hiring and recruiting talent. You figure out all of the things you read, the job description, here's the 10 things that they're going to be held accountable to.

And then you go out and find that individual. And in some cases there's no you're not sharing the purpose or the mission of the organization at all. You're just giving them a list of 10 things that they [00:27:00] need to do. And. This principle of first to then what's really changing even my own perspective on who are the people that I want to have around me to be a main collaborators.

 It's not just the skills that they have, but it's who they are fundamentally as people. And are they aligned with the vision of what we're trying to accomplish together? Yeah the there's a, I'm really trying to think about practices that I see know, feel that support this. And I love this saying to hire slow and to fire fast.

And so I'm stealing a lot from his idea of getting the right people on the bus and off the bus. But I think as a default, we often get in quite a hurry to hire people. And maybe skip over some important details, some important [00:28:00] areas of alignment. And then all too often, we hold onto people that are not a good fit for the organization, but for some reason, we don't have the courage to just say, Hey, listen, we've got to help you find something else.

I think that's this hire slow fire fast is a really good practice to focus on not only people first, but like really making sure you get the right people on the bus. My question for you, Chad is if we play this out, what other people practices do you think helped support this idea of first? Who then what?

That's a tough one for me, because I'm really just now I feel like I'm just now coming into my full leadership capacities in my career. So I'm quite new at all of these hiring and recruitment collaborations, sorts of questions. But I think for me personally, it's understanding [00:29:00] more about the person outside of the context of what.

To understand what some of their drivers and motivations are and see if and or how they connect to what we're trying to do or what this organization is trying to accomplish and what their purpose is. So you may find that if the whole purpose of the organization is really delivering services to as many people in a certain population, or what other ways is that person interested in or connected to your end customers?

 Th that that they could really get behind. There's some specific interview questions or conversational questions that you can ask to begin to elicit some of this, but I think for me, it's weighting the non-technical and skill-based sorts of questions and screenings when it comes to finding collaborators and talent and focusing on their passions, what they feel like they're born to do what some of their [00:30:00] other interests and motivations are.

 Yeah. I also liked the exercise. If you want to be focused on the interview moment. I like to understand the stories. They can tell me of moments when they were really collaborative. When they took a high degree of ownership, where they were learning, where they were committed to getting the job done and serving others.

I'm like, oh, so you like you really? You really think you're a good communicator. Tell me about a time where communication that you've done is really made a difference. And for me, I want to hear stories in detail so they can truly relate behavior. They talk about to my expectations of how they'll behave in the organization and if they can't, if they can't talk about it in any specificity, I'm like how conscious are you of this behavior?

If you're really struggling to tell me in some detail, [00:31:00] it's actually a technique I learned from Elon Musk when he's oh, you worked on a product. Tell me how you guys approached it. And he said, he can tell almost instantly if someone really worked on the product, because if they're unable to really tell you in any detail about some of the challenges they face and how they solve them, then you know that they were like, they're a passenger on it.

They weren't really. And they're going well. You know that, yeah. Another example that came to mind and you and I love working in, it's almost a requirement for us to work in highly collaborative environments. You can ask someone think of a time in which you feel like you were really accomplishing something great, who helped you accomplish that?

And so you can really understand if that person was able to work with the team, to get something accomplished and step outside of themselves and figure out how they worked with that team. And as you said, really focused on those stories to get[00:32:00] those interesting anecdotes and hard data points on, on, on how they were able to do it.

That's a good one. That's a good one. So we know it's about level five leadership and being humble and serving others. We know it's like obsess about. First who then what? And if you need any inspiration about that, go over to our previous show where I'm going to try and do my best Jim Collins. And he goes first, who first who now let me say it again.

First, who then what? It's an impassioned plea to Hey, HP didn't even know what products they were going to make when they founded the company. It's okay. Just get a good cohort of people around you. Yeah. Yeah. This is just like two of the principles. We've got four more principles coming your way. Oh my gosh.

Oh my gosh. [00:33:00] Now, just as a quick heads up to all our listeners, remember go to moonshots dot. I if you want to pick up on the show notes for this episode or any other, or you want to delve into any of the other 65 shows where you've got Elon Musk we've got now talking about Elon Musk, just for a second.

Chad Owen, I'm feeling we might need to cut our third show on Ilan. This guy is talk about getting a lot done in the last six months. How are you feeling like Ilan is back? Do we need to revisit the lawn yet? We may just have to have a standing annual show on him. The stock price speaks for itself at this point.

 It's I think it's definitely are performed expectations of most analysts from last year. There were lots of woes. The fact that he's got his production problems taken care of and they're turning out a thousand cars a day. I think [00:34:00] it's pretty incredible. Yeah indeed. So if you want to dig into any of that or find you bring a brown, who else let me throw some names at you.

Chat on who's in our archive. I tell you who else we could do another show on Fred Smith, because I think you, I think. FedEx might be in quite some trouble. You, yeah, it's w it's one of those Amazon can eat the world sorts of stories where most of Amazon's deliveries are. I saw some crazy statistic, but they've essentially cut out the middle people of the ups and FedEx in a big way.

 I think they're a potential acquisition target, not for Amazon or another e-commerce retailer, but probably for a brick and mortar that wants to get into prime style shipping. And I don't know if that's a target or Walmart or something like [00:35:00] that, but yeah. We could do 65 shows the same individuals and come up with a, so what you don't know, listeners is we have our producing stack.

Is this about 20 clips or more for each of these shows? And we can only bring you the top six to eight sometimes. Or we break all the rules and we'll bring you like 12 or 14 for someone really special. But yeah, there's so much stuff that hits the cutting room floor. Yeah, just quickly, just for some inspiration on our archive on moonshots.io someone we should revisit is Ben Horowitz, the partner of mark Andreessen from one of the most esteemed Andreessen Horowitz venture capital firm, Ben Horowitz has has a new book out.

 What you do is who you are, which is a really interesting really interesting title, just flicking through here. Paige and Brynn have stepped down from Google. It would be interesting to revisit them.[00:36:00] It's just fascinating. Tim cook to seems to do Jeff Bezos got to do another one on him too.

Yeah. He's busy in India at the moment Tim cook continues to be just. Quite massive for quite level five leadership. Hey, quite level five. I think Jim Collins would approve indeed. All right. We should get back to the show, but for any of those archive shows that we're mentioning, just drop over to moonshots.io.

We have been in a world of leadership and getting the people right. But Chad, something happens. Something changes in a company when you've got the right people around the table, because there's a sense of safety. There's a sense of trust amongst each other. And that opens things up a little bit. And that means that the right conversations about the right topics can happen.

So do you want to set the scene for this turn that we're going to [00:37:00] make now? And now that we've got the right people, what's this next idea? And what's the next clip we've got coming in this journey into good to great Jim Collins. I'm trying to. Because built to last and good to great kind of bleed together.

I'm just triple checking that I've got the right companies here in, in my head, but there's this principle of confronting the brutal facts. And I think of this as a mental model where you have to be, so you talked about getting the right people in the room to have the right conversations often where people mess that up is they create a reality distortion field around themselves where the only reality that exists in those four walls of that conference room.

And they're not looking out into the world and getting the right inputs to understand really what's going on. And an example he's from the book is the paper. Kimberly Clark, that is in competition with [00:38:00] others like Scott paper, P and G. And in many other companies, they decided to sell their paper mills and go all in, oh my gosh, on consumer products, because they saw the commoditization of the mill business and the decline of it and did a 180 pivot to a product company.

And yet they sell billions of Huggies every year now and again, they became the good to K kind of company. And I think that's one of my favorite examples around this mindset of. Of confronting the brutal facts. Yeah. I have to say for the younger members of our audience, what they wouldn't realize is Kimberly Clark used to be a paper company, which seems ridiculous right now in Kimberly Wisconsin, like their namesake.

They sold those paper mills to go all [00:39:00] in as a consumer product company. And at the time everyone, except the management team were like, this is the craziest thing ever. And it was the classic move of good to great. Now, Chad. Jim Collins actually has a whole frame and sort of name for this process.

Do you want to just walk us through and set up this clip for us? Oh, sure. I think the mindset's kind of summarize best in this clip that we have for you where he's talking about the stock Dale paradox from military history. I would like to give you a way of thinking that has been enormously helpful to me, that came from the good to great research for dealing with great difficulty.

And it was what we came to call the Stockdale paradox. The Stockdale paradox was taught to us by when we were doing the good to great researcher, trying to make sense of the CEO's. [00:40:00] When, and in doing that, I just, by chance happened to get to know Admiral Jim Stockdale, who was the highest ranking military officer in the Hanoi Hilton shut down in 1967 was there until 1974.

They could pull them out at any time and torture him. And they did tortured over 20 times. And I had the privilege to get to know. Stockdale. And we were going to the faculty club one day and I had read his book in love and war, which was written in alternating chapters by himself and his wife about their years when he was in the camp.

And I got depressed reading the book because it seems so bleak. It seems so different. It seemed it's like we can all endure anything. If we know it's going to come to an end and we know when, but what if you don't know if it's ever going to come to an end and you certainly don't know when, so I asked Admiral Stockdale how he dealt with that.

And he said, you have to realize I never got depressed because I never ever wavered [00:41:00] in my faith that not only I would get out, but I would turn being in the camp into the defining event of my life. That in retrospect, I would not trade later when we were up the hill, I asked him, I said, Admiral Stockdale, who didn't make it out as strong as you.

And he said easy. It was the optimist. I said, the optimist, you sounded optimistic. He said, no, I was not. I never wavered in my faith that I would prevail in the end, but I was not optimistic. I said, what's the difference? The optimist always thought we'd be out by Christmas.

Of course, Christmas would come and it would go.

And then we were going to be out by Easter and Thanksgiving and then Christmas would come again and they died of a broken heart. And that's when Admiral Stockdale grabbed me by the shoulders and said, this is what I learned when you're facing. And you're imprisoned by great calamity by great [00:42:00] difficulty by great uncertainty.

You have to, on the one hand, never confuse the need for unwavering faith that you will find a way to prevail in the end with on the other hand, the discipline to confront the most brutal facts we actually face. And we're not getting out of here by Christmas. Confronting the brutal facts, those honest Frank conversations, how rarely do they actually happen and how ironic that you can only really solve the problem if you can front the brutal facts.

And yet, so often we run away from the honest Frank truth, because it might make us look bad. It might make the company look bad. We might have a bad meeting in brackets. But I think like any good friendship, [00:43:00] the capability to be direct and to do so without judgment so that you can present the brutal facts.

Cause surely once you've presented the brutal facts, If people take it in the right way, you can build a constructive conversation and start heading towards a solution. But, oh my gosh, it's just too rare. The conversations of getting into those brutal facts are just too damn, right? Yeah. I first came across this story about Admiral Jim stocks and in a different book, a book called the obstacle is the way by Ryan holiday.

Here's my chance to plug my, my love of stoicism. And it's an extreme story. I can't even imagine what it would have been like to been, to have been in a prison prisoner of war camp for over seven years and coming out of that experience as a survivor. But the [00:44:00] two interesting things that I'm taking away as a learning from that story and how it applies to this principle is you never know.

Lose faith that in the end you will overcome your time. Horizon may have to go from this quarter to maybe five or even 10 years. So in some ways you have to be willing to stretch out that time horizon, but never give up. And at the same time, you have to confront the brutal reality. That's right in front of you not being fed properly, potentially being tortured in so that's not easy, but in the realm of business, it's, there's going to be short-term pressures or actions think of the eighties and in all of the hostile takeovers many companies were existentially threatened by these hostile takeovers.

And yet they still had to prove longterm viability to their shareholders. And if they weren't [00:45:00] confronting the facts that they could potentially be acquired by. One of these hostile takeovers, they would eat their lunch and they would never be able to deliver on their long-term promise of the company over time.

And I think this is as you're saying an often overlooked reality when it comes to leadership of a company. And importantly, what I would point out is I don't think you can confront the brutal facts if you don't have the right people. And if you don't have humble characteristics, because I think when a humble person puts to you, Hey, I think we've got a big problem here.

And I think it's because of this, it's much easier just to say, oh geez, maybe we do. If someone is perceived maybe as a little egotistical and someone like we've got a problem here, the feeling is instantly for those around that person is that there's blame being assigned. [00:46:00] And I think if we can create emotional safety through being humble and having the right people around the table, then I think we're able to say, you know what, we're in a bad place.

And. I think it's only once you acknowledge that you can actually save it. It's almost if I was to draw a parallel with our kind of consumer lives, I think it's when people go through a trans transformative health and diet revolution, where they lose a lot of weight and get themselves in shape, often they have to confront the brutal facts.

And I believe that AA, one of the, one of the principles for quitting alcohol is that you need to acknowledge or admit like that's like step one, right? Admitting that you're actually that you hooked. What we do is we see this [00:47:00] theme everywhere that until you confront the brutal facts, whether it's in your personal life at work, until you're ready to acknowledge where you're at, where you are, then what the Stockdale concept points out is.

You might be running the risk of being a little bit too optimistic, and it's just a disappointment all away. If you haven't started from the brutal facts. Yeah. I'd like to take us out of this little valley of darkness here because it is a very harrowing story. And if you've not read the book in love and war, it's also a really good book.

I read it after I had come across the story. But we have three more principles from good to great that we want it to be sure that we deliver to you. And this next one, they're all my favorite, but this one is really interesting. I think because of it, it's a novelty and it's quite easy to remember because of its name and it's called the hedgehog.

Concept in that thinking is that [00:48:00] there's two types of thinkers. There's there's foxes and there's hedgehogs. And we have a clip from Jim who's elaborating on why hedgehog thinkers are most important when it comes to identifying the right people, the right leaders, the level five leaders for companies that want to go from good to great.

And we took all our companies. We began to ask the question is there any pattern to the one big thing that they all followed? Is it, is there any sort of systematic framework that would explain it from when we laid out all the information? What we found and saw in the mess of data was an underlying framework of three intersecting.

And that what a really good hedgehog concept reflects as deep understanding of each of these three circles circle, number one, what you are deeply passionate about and nothing [00:49:00] great can happen without beginning first with passion. And if you're not passionate, you can't possibly make it. Great circle.

Number two is the lower left circle, and this is about understanding what you can be the best in the world at and equally what you cannot be the best in the world at not what you hope to be the best at, not what you aim to be the best at, but what you actually can be the best at. And then the third circle bottom is what drives your economic engine.

And we found in our research for corporations that they all got a simple penetrating underlying. A single ratio. If you could increase one ratio above all other ratios, profit per X, what one X would give you the highest rate of overtime [00:50:00] and it varies from company to company. So standing back then a hedgehog concept is when you find the intersection of what you are passionate about, what you can be the best in the world at, and what best drives your economic engine, preferably consistent with a single ratio of profit per X.

 Now there's an interesting take on this chatter because what we're really talking about is something that can be applied at a company level or at a personal level. So you can actually play this two ways. I think for simplicity sake, I think we should play this one more on the personal side of things and to kick things off.

 I'll challenge you on the company side. Okay. Okay. Go for it. Because I, now that I'm hearing this clip again, I actually think that this is probably the best, most succinct piece of advice in the entire book. Yes. That if you [00:51:00] only take one thing away from this book and this episode of moonshots answer those three questions and you will be so far, and as a company, you'll be so far away and ahead of everyone else.

What are you as the organization most passionate about? What are you fundamentally? I think he says like in coded, like almost at the DNA level, what are you? And what's your encoded expertise where you can be the best, not can be where you are. Able to be the best in the world. And then this idea of the economic engine, what is going to be the one true metric to rule them all.

And he uses, simplifies it to profit per X, but it could be anything profit per employee, profit per item shipped profit per website visit. There's so many ways in which you can measure that. If you just answer those three questions as an organization, I think you're doing really well.

Yeah. And [00:52:00] I actually think to go deeper into this, that what are you encoded to be the best in the world at if you can isolate one service, one product, one feature, or if on a personal life. At what is the one skill activity that you can be the best at the world at? I have found this very powerful, more powerful than what you deeply passionate about.

And particularly if you consider count Newport's craftsmen mindset and what drives your economic engine, I think when a company or an individual raises the question, what can you be the best of the world out? Like when all said and done, what is the thing you are built to do? And when you do it as a company it just happens as a sports team.

When you play the [00:53:00] running game, when you play Showtime basketball, like the LA Lakers did whatever it is. If you can isolate that, then the activity simply becomes, let's go find an economic engine. Let's find our passion in that. But also if you know that you can be the best of the world at one thing, then you just go and find things that help you achieve that status of being the best in the world.

And actually, I think a lot of companies lack that clarity. So many companies try to be all things to everyone. Don't they? Yeah. Who's your customer. Oh everyone. I can sell this to anybody. Oh, we've got a service for this and a product for that. And we've got another service and another service, like one of the most amazing things is every new CEO that's brought in to clean out a company.

The first thing they do for the larger publicly listed companies, [00:54:00] what are they often doing? Oh, hang on us. We're in way too many businesses we're selling off this and this let's focus on just a few, if not just one thing. What I think the big concept what's so great about it is that you can apply it.

And here's a similarity to join a cynic again, Sinek's start with why. Oh, he's a golden circle framework can be applied to the individual or the product or the company as can the hedgehog concept too. Isn't that interesting? Yeah. I also, I agree with you in that it's the what's I call it unique ability.

What's what are you designed to for as an organization or as a person in what do you do better than nearly everyone else? I think it's mostly. To identify that first. Why? I think it's also important to include passion is [00:55:00] that's where, that's how you answer that question of motivation that we were talking about at the beginning of the show, in, in order to have those people that are innately motivated there has you have to identify and see a level of passion for that single thing in order to keep the people motivated.

Otherwise you'll be rolling the Boulder up the hill, and then again, you and I love the data. So it was just like how do we know we're on the right track? That's where that key metric or the economic engine comes into play, where that's, how you're measuring your success. So coming back to FedEx, if you go back and listen to our episode on Fred Wilson you'll know that I don't think he stated it as the hedgehog concept, but he was measuring the success of his company in profit per employee.

And that told you exactly all you needed to know about his focus. It was really about. A magical enabling employee experience that he knew a trickled down to the customer experience. And we've [00:56:00] seen the success of that. Yes. So the hedgehog concept, just Google it we'll throw in a few links in the show notes so that you can dig into the hedgehog concept is really it's a very powerful little tool to use.

And I think you'll find it useful on many layers, but what's interesting is this next clip is really a bit of a nod to the book that we're going to cover in our next show. Great. By choice, we're going to open up now. Our thinking and it follows the journey. So you've got servant humble leadership where you get the right people on the bus, you have the right conversations and those conversations are around those questions in their head, how hedgehog concept.

But the key thing is you then have to apply this. You have to get to work, you have to roll up the sleeves. And what we've got coming now is Jim Collins talking [00:57:00] about the next key fundamental step in this journey from good to great. And it's all about a culture of discipline. So let's have a look at Jim Collins talking about pockets of greatness.

 You build your unit, your mini bus into a pocket of greatness. One thing I gained greater appreciation for at west point is that great leadership at the top doesn't amount to very much without exceptional leadership at the unit. This is the cellular structure. This is where great things get done.

And when I look at how the good degrades CEOs became CEO, they did it by not focusing on their career. They focused on their unit of responsibility and at every stage of their career, whatever they were running, whether it be in a little accounting department or whether it be a manufacturing facility, controllership, they built their unit into [00:58:00] a pocket of greatness.

And that is why they were tapped. Focus on your unit, not on your career, every responsibility you get, make it a pocket of greatness. And if you do that, you are more likely to die of indigestion for too much of too much responsibility, then starvation for too little and focusing on your unit means above all being a first.

Rather than a first what leader and that the number one executive skill for building a pocket of greatness of any size is figuring out who should be in the key seat on the bus to be rigorous about your people decisions. And we've spoken about this before, but it also means being not ruthless, be rigorous, not ruthless.

And that means taking care of your people [00:59:00] for in the end life is people. I love how this ties back to one of the core principles of built to last, which is this concept of promoting from within instead of, without I think. All but one of the companies in built to last had leaders promoted from within instead of being recruited from outside.

And this idea of starting with the people that are right around you in the organization, you don't have to be the CEO to create a culture of discipline. He says, just start with the people that are right around you and create the pocket of greatness, and that is going to spread this culture of discipline.

 And isn't it nice that he gives us a helpful, super practical, very common sense reminder. Don't focus on yourself, focus on that small cohort around you and [01:00:00] get the right people in the right seats. Get people playing in the right position. That's where that, that pocket of greatness is and be disciplined in focusing.

 The culture amongst those people. One of the things that he brings up in the book that sets the good to great companies apart from the control companies is often both companies would pop and break out in terms of market performance at the same time, but there would be a sharp decline that's right in the control company.

And when they looked at why that happened, they saw that in the control company, there was almost a tyrannical leader that was forcing the discipline in the company and being a bit of a task master. And that kind of culture was unsustainable in the long run. And then if you just go back and listen to the clip, we just listened to.

Instead [01:01:00] those kinds of leaders that were concerned, not about themselves, but their unit around them. Those were the leaders they were able to do. The company's from good to great. And so this idea of forcing a culture of discipline, it's not really the way to go. It has to be more emergent and grassroots.

Yeah. And I think the the crazy reminder that we get from both cynic and Jim Collins is that we vastly underestimate culture and people. And we're often we often have a sort of preoccupation with the idea or the shiny logo and how really the behaviors and the culture within our organization have such an influence on the outcome.

And to your point about leadership, what was also really crazy is that in good to great [01:02:00] companies, what he found was that when the primary CEO and leader left. The company continued to be great. And yet in the control companies, as soon as the dictator left, it would. Yeah. And that's because they created that cult of personality around them.

 They hoarded information and resources. Yeah. It created an unsustainable path forward for the company. And the worst part is those executives often took multi, tens of millions dollars in golden parachutes on the way out with them. Totally. Because it was about them and that it wasn't about the company existed.

It was about their status. Not the legacy of the company. Yeah. I don't want to name names here, but I'm looking at you, Adam Newman from, oh my gosh. Kaboom. [01:03:00] Moving to. The last and final clip and the last big idea that is inside of Jim Collins' book. Good to great. We have one more idea, but I would remind you that if any of these topics have piqued your interest, jump across to that.

I if you are enjoying the show, jump into your podcast app just while you're listening, give us a review or writing, share this with others. We would deeply appreciate that. And let's turn our listening is now to the last and final concept. Now the flywheel concept is it's something that Jim Collins has brought to life.

And we've talked a lot about flywheel effects in relationship to Amazon. So I think we should now lend areas to Jim Collins. One final time to hear about the turning of the flight. [01:04:00] And I'm excited to share my latest publication. It's called turning the flywheel. It's a monograph to accompany. Good to great.

And the monograph begins with the story of Amazon, amazon.com. Grabbing the flywheel concept, coming out of the.com bust in 2001, after being taught the idea. But then taking it to another level and saying we need to do is to capture the drivers in our flywheel, crystallize the components of our flywheel, and then turn that flywheel to build relentless momentum, unstoppable momentum.

The Amazon case is an archetype of a spectacularly powerful flywheel, and it's the starting point of this conversation. But what it really leads to is the idea that [01:05:00] to get full power out of the flywheel principle, it's very helpful to rigorously ask the question. How does our flywheel turn? What are the components in our flywheel?

What's the sequence in the flywheel? How can we do for ourselves? What Amazon did for itself now, your flywheel will almost certainly be different than Amazon's, but as we point out in the monograph, it's logic should be equally sound equally compelling. The monograph moves on to share flywheels from a range of types of organizations.

We're looking at small companies, healthcare organizations, nonprofits, arts organizations, and there's even a delightful discovery of a rural elementary school articulating and turning a flywheel so that children learn. [01:06:00] So I know I said the hedgehog concept was the most important, but are you cheating, Chad?

I think he might be cheating. I'm not finding your hedgehog concept. Is your homework for tomorrow, understanding, uncovering, creating, and investing in your flywheel. That's the key to your long-term success and oh, that's just, yeah. That's momentum, right? Yeah. And I see the flywheel effect much more as a framework and a system, as opposed to the simplicity of the three circles of the hedgehog concept.

But you heard him talk about this new monograph book. One of the final chapters in good to great is called turning the flywheel. He has since turned that into a little mini sized business book. That's also worth checking out if you're interested in learning more about this concept of the flywheel and getting some really interesting examples, Amazon.

Included Mike and I have talked about it on the [01:07:00] shows in which we talk about Jeff Bezos, episode number three, as well as the Elan versus Jeff episode. But I don't see many companies understanding what their flywheel is, let alone knowing what a flywheel is. My ex I'm curious for you. How can we begin to understand and uncover what our flywheels are?

So I think a simple practice would be to ask yourself what seemed to be the causes and the things that correlate with our success as a company. If we have X, Y, and Z, we tend to do really well. And I would look at both direct and indirect things. I would look at things that you control and things you don't control, but most importantly, obviously focused on the things you control.

Jeff Bezos says, if he has more videos on Amazon prime, he [01:08:00] will sell more shoes on the Amazon store. He knows that there is a flywheel effect that if people come for great content, they leave with a new pair of shoes. So that's why he has Amazon prime. That's why he has a free video component to that offering.

That's his flywheel effect. And so I challenge all of our listeners to ask themselves when certain conditions are around you succeed. And perhaps when you want to look at cause and causation and correlation, perhaps you also want to say Hey, I did the same thing, but had two very different outcomes.

What were the things that were different much like in how Jim Collins approach this whole book, what are the things that were different? Because you might've isolate not only the things that create your flywheel effect, but those that hamper the flywheel effect. Now, upon hearing that Chad, does that [01:09:00] give you any inspiration to think about what we do or about what other brands do on how they might find their flywheel?

 Be warned. I might be sending you a calendar invite for us to have a collaboration session to figure out what our firewall is. My light bulb moment was we often think about business processes. In a linear fashion. We think about the customer journey or service delivery processes.

The important thing about the flywheel is it's circular and self-reinforcing so, as you're saying it's those most important interactions within or outside of the company with your customers that is providing value into the next stage, which is providing value into the next stage, which then comes back to the beginning to make the next turn of that flywheel easier.

So as you were saying with Amazon [01:10:00] Bezos knows that it, they can go super wide in their product offerings because he knows that for every customer touch point, he can get X additional in revenue. So yes, I may only be interested in buying sneakers on Amazon, but Hey, I see this cool show on prime.

Now I'm hooked into I'm in the system and Amazon prime at the middle of it. Being able to give me those shoes. In just one day, that's how they can continue to turn that Feiwell. And as we've seen, Amazon is pretty much unstoppable at this point in whatever business they're going into.

And it's because they have that perpetual momentum from the flywheel that started turning all the way back in, what was it? 95 when Amazon was started. It's been it's been quite some time now. Yes. And what's really fascinating if you dig into the book, it's not just Amazon, but Jim was even able to see this [01:11:00] pattern playing out in elementary schools, which is.

So that's that's really exciting that Jim Collins could even find the flywheel effect taking place in an elementary school. And it's speaking a little bit to the timeless timely, the timeless nature of his work and how it can endure to remind us and to continually tap us on the shoulder and say, Hey, level five leadership.

Hey, first, who then what? And it is for me, some very memorable, very clear recommendations that Jim has for us. And I th I think he could almost spend a career just trying to get some of these rides. There's a lot of work in this. Let's not sugar coat it, but you can start with the hedgehog concept and then take on the big challenge that is uncovering and investing in your [01:12:00] flywheel.

That's true. Mangle. We've still got yet another book, and then we're going to be profiling on the show. Yeah. Great by choice. Great by choice and what are not a nice companion to some of the concepts, not in good to great. But what we learned in the previous show when we were digging into, to built to last, and I think you want, you can expect in great by choice is once again, this theme, the greatness is not down to luck or to chance.

There's a lot of hard work that goes into it. And the great news is in our next show, we're going to dig into this and we're going to try and uncover it. We're going to try and decode it and share it with you, our listeners. And I think this is the moment where we need to remind our listeners how much we enjoy their feedback.

What's your favorite way. Chad, come on. It's time to remind them. How do you like to hear from our millions of [01:13:00] listeners? I love. Getting it emails in my inbox@helloatmoonshots.io always puts a smile on my face, getting an email from someone in a far-flung locale. I want to take this time to give a shout out to Maria and Tunisia and all of our other listeners, not just here in the states or in Romania or in England or Australia, but everywhere else we've been rocketing up the charts.

 Granted where number 100 and business podcasts, but Hey, I'll take it countries like Saudi Arabia, Iceland, Nigeria. So it's fun to know that we have listeners in all of those different locales. Yeah. Yeah. And w we keep getting more and more outreach trail as soon as we got to know just before the show, actually 29 minutes before we started recording from Denise.

Hello, Denise. Thanks for sending us a note. We really appreciate.[01:14:00] The thoughts that you sent through to us, and we encourage all of you to go to moonshots.io, to jump in and be part of the conversation about how we get to good to great, or how we be great by choice. Chad, what a journey we have come to the end of another show.

What did you enjoy the most in revisiting? One of our classics is sounds like you may have traded your allegiance from the hedgehog concept to the flywheel. I need to know where you stand on. What is your favorite? Good to great. I love the hedgehog concept if for no other reason that when high was a kid, I had a buzz cut where I spiked my hair and had a nickname of the hedgehogs.

So I'll take your hedgehog concept, but I, to me, that's a really fun exercise that you can do on your own. Maybe go into monk mode for a few hours somewhere, [01:15:00] turn off all your notifications, bring a notebook with you and write out your answers to what am I uniquely capable of that I can be the best at?

What am I passionate about? And what's the economic engine behind it? It's a pretty. I think it's a pretty you could get a lot out of going through that exercise. Absolutely. Absolutely. So there we have it where we're now past the halfway mark in our Jim Collins series, we will be jumping into great by choice.

In the next episode, we're going to have to put our thinking caps on Chad as to where we go next life after Jim Collins is it's pretty hard to think about, but it's true. It's been just so good to go back to this classic. So thank you to you. I thank you to all of our listeners and we hope that you join us for the next show, where we jump into the world of Jim Collins and great by choice.

But for now we're finished our journey into [01:16:00] good to great. That's the end of another moonshots. That's a wrap.