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1-Page Summary of The Leap

Introduction

Jim Collins and his team reviewed decades of data, articles, and financial papers on more than 1,000 companies in the Fortune 500. They were looking for companies that had gone from an extended period of goodness to one of greatness. They defined this as beating the market by three times for more than 15 years. After identifying 11 such companies, they worked backward to discover certain principles that held true across all 11 good-to-great corporations.

The researchers were surprised by what they didn’t find in the data. For example, genius CEOs who swoop into a company and turn it around do not lead to sustained greatness over time. In addition, CEO pay and incentive structure did not correlate with company performance.

The author presents a list of traits and philosophies that companies must have in order to go from good to great. The first trait is level five leadership; if you want your company to become great, then it needs leaders who are humble and hardworking. Next is the concept of “first who…then what.” In other words, before you decide on your strategy or goals, get the right people into the organization. The third trait is confronting brutal facts but never losing faith. No matter how bad things may seem, don’t give up hope because there’s always a way out. Fourthly comes the hedgehog concept which ties together all of your company’s values with its economic engine and one thing it can be best at doing (i.e., Apple’s iPod). Fifthly comes discipline which consists of disciplined people, disciplined thought and disciplined action—in other words having employees work as a team towards achieving their common goal for success (i.e., General Electric). Sixthly comes technology accelerators where good-to-great companies implement technology based on testing instead of just rushing into using it blindly (i.e., Cisco Systems). Seventhly we have flywheels where companies build momentum slowly at first but once they gain more speed they’re able to break through barriers like those that held them back from becoming truly successful businesses (i.e., Walgreens Boots Alliance Inc.).

Level-Five Leadership

There are five levels of leadership. Level one is when someone demonstrates individual competence. Level two is when a person contributes to the team by demonstrating his or her competence within it. A level three leader is a competent manager who also guides and mentors others, whereas an effective leader at level four leads an organization effectively but with humility. The ultimate goal for leaders at level five is to be humble and diligent as well as effective in their work while taking blame for failures and giving credit where due for successes.

Collins found that Darwin Smith of Kimberly-Clarke was a level five leader. He helped his company beat the market by four times during his 20 years as CEO. Smith was humble and quiet in his personal life, but he was daring, intuitive, and dogged at work.

Smith’s first notable action as CEO was to sell off the company’s entire coated-paper business. By getting rid of all the materials and mills used in this core business, he had the money to reinvest in a different but more competitive industry—consumer paper products. The reason for such drastic measures was that his company wanted to compete with Proctor & Gamble, which is a well-established competitor in consumer goods. Smith figured that if his company could beat P&G at its own game, it would have no choice but to produce an excellent product. And if you look back at history, it turned out just like Smith predicted: His company became incredibly successful because of this strategy