Rating Your Firm on Jim Collins 7 Good to Great Principles & The Peanut Butter Manifesto
7 May 2023 Newsletter
“You do not rise to the level of your goals, you fall to the level of your systems.”
Hope you’re Thriving!
It’s been a productive week, with several podcast recordings, strategy workshops and a King’s coronation.
In this week’s podcast, we discuss taking a new perspective on a mature set of tools. We’re reviewing how to rate your firm on Jim Collin’s 7 Good to Great principles.
These principles are:
- Level 5 Executive Leadership
- First Who, Then What
- Confront the Brutal Facts
- The Hedgehog Concept
- A Culture of Discipline
- Technology Accelerators
- The Flywheel and the Doom Loop
So, rather than consider these as simply tools or jobs to be done, we’re asking how you rate your firm’s performance on each of these. More on that below.
Shift Capital to Grow Margins
This week, I came across an HBR article stating that when capital costs rise (from 6% to 10%), you need to switch from using capital investment to grow revenue to using capital to grow margin.
From the article:
“When the cost of capital is low, strategies that accelerate growth create far more value than those tied to boosting margins. But as capital costs approach 9% or so (the current average for the S&P 500), the value of growth diminishes and strategies that increase profitability create more value.”
This is why we’re seeing tech stocks, which were focused on growth, collapse over the past year.
The article recommends that readers re-evaluate investments in growth, invest in productivity, and change capital spending from yearly to half-yearly or quarterly.
The Peanut Butter Manifesto
In 2006 Brad Garlinghouse was an SVP at Yahoo, and Yahoo was dominant in a way that’s hard to fathom now. Garlinghouse wrote an internal memo urging change and pointing out Yahoo’s lack of focused, cohesive vision, using peanut butter as a metaphor for spreading its resources too thinly.
The issues he raised include:
• We repeatedly hire leaders from outside the company, resulting in disparate visions of what winning looks like — rather than a leadership team rallying around a single cohesive strategy.
• We lack clarity of ownership and accountability… at what point in the organization does someone really OWN the success of their product or service or feature? Product, marketing, engineering, corporate strategy, financial operations… there are so many people in charge (or believe that they are in charge) that it’s not clear if anyone is in charge. This forces decisions to be pushed up – rather than down.
• We lack decisiveness. Combine a lack of focus with unclear ownership, and the result is that decisions are either not made or are made when it is already too late. Without a clear and focused vision, and without complete clarity of ownership, we lack a macro perspective to guide our decisions and visibility into who should make those decisions.
• We have lost our passion to win. Far too many employees are “phoning” it in, lacking the passion and commitment to be a part of the solution. Weak performers that have been around for years are rewarded. And many of our top performers aren’t adequately recognized for their efforts.
And this is systematic of the doom loop articulated in Good to Great by Jim Collins.
Equally, this is what we work on with leadership teams to overcome every day.
Employee of the Month
This Week on The Growth Whisperers Podcast
Jim Collins book Good to Great is one of the all-time business classics due to the size and quality of the research that underpins the principles that he identified in the research about companies that endured and achieved great performance, relative to their peer companies who only achieved good performance.
In Good to Great, Jim Collins identified seven core principles that great companies excelled at.
In this part one of two episodes, we dig into the seven principles from Good to Great and ask you to rate your firm’s performance on each of these.
Listen to The Growth Whisperers
Or watch it on YouTube
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