Good to Great

When it comes to getting started, good-to-great leaders understand three simple truths. First, if you begin with "who," you can more easily adapt to a fast-changing world. If people get on your bus because of where they think it's going, you'll be in trouble when you get 10 miles down the road and discover that you need to change direction because the world has changed. But if people board the bus principally because of all the other great people on the bus, you'll be much faster and smarter in responding to changing conditions. Second, if you have the right people on your bus, you don't need to worry about motivating them. The right people are self-motivated: Nothing beats being a part of a team that is expected to produce great results. And third, if you have the wrong people on the bus, nothing else matters. You may be headed in the right direction, but you still won't achieve greatness. Great vision with mediocre people still produces mediocre results.

Disciplined Thought: Fox or Hedgehog?

Picture two animals: a fox and a hedgehog. Which are you? An ancient Greek parable distinguishes between foxes, which know many small things, and hedgehogs, which know one big thing. All good-to-great leaders, it turns out, are hedgehogs. They know how to simplify a complex world into a single, organizing idea -- the kind of basic principle that unifies, organizes, and guides all decisions. That's not to say hedgehogs are simplistic. Like great thinkers, who take complexities and boil them down into simple, yet profound, ideas (Adam Smith and the invisible hand, Darwin and evolution), leaders of good-to-great companies develop a Hedgehog Concept that is simple but that reflects penetrating insight and deep understanding.

What does it take to come up with a Hedgehog Concept for your company? Start by confronting the brutal facts. One good-to-great CEO began by asking, "Why have we sucked for 100 years?" That's brutal -- and it's precisely the type of disciplined question necessary to ignite a transformation. The management climate during a leap from good to great is like a searing scientific debate -- with smart, tough-minded people examining hard facts and debating what those facts mean. The point isn't to win the debate, but rather to come up with the best answers -- and, ultimately, to lock onto a Hedgehog Concept that works.

You'll know that you're getting closer to your Hedgehog Concept when you align three intersecting circles that represent three pivotal questions: What can we be the best in the world at? (And equally important -- what can we not be the best at?) What is the economic denominator that best drives our economic engine (profit or cash flow per "x")? And what are our core people deeply passionate about? Answer those three questions honestly, facing the brutal facts without blinking, and you'll begin to see your Hedgehog Concept emerge.

For example, before Wells Fargo understood its Hedgehog Concept, its leaders had tried to make it a global bank: It operated like a mini-Citicorp -- and a mediocre one at that.

Then the Wells Fargo team asked itself, "What can we potentially do better than any other company?" The brutal fact was that Wells Fargo would never be the best global bank in the world -- and so the leadership team pulled the plug on the vast majority of the bank's international operations. When the team asked that question about the bank's economic engine, Wells Fargo's leaders confronted a second brutal fact: In a deregulated world, commercial banking would be a commodity. The essential economic driver would no longer be profit per loan, but profit per employee. The bank switched its operations to become a pioneering leader in electronic banking and to open utilitarian branches run by small crews of superb people. Profit per employee skyrocketed. Finally, when it came to passion, members of the Wells Fargo team all agreed: The mindless waste and self-awarded perks of traditional banking culture were revolting. They proudly saw themselves as stoic Spartans in an industry that had been dominated by the wasteful, elitist culture of banking. The Wells Fargo team eventually translated the three circles into a simple, crystalline Hedgehog Concept: Run a bank like a business, with a focus on the western United States, and consistently increase profit per employee. "Run it like a business" and "run it like you own it" became mantras; simplicity and focus made all the difference. With fanatical adherence to that simple idea, Wells Fargo made the leap from good results to superior results.

In the journey from good to great, defining your Hedgehog Concept is an essential element. But insight and understanding don't happen overnight -- or after one off-site. On average, it took four years for the good-to-great companies to crystallize their Hedgehog Concepts. It was an inherently iterative process -- consisting of piercing questions, vigorous debate, resolute action, and autopsies without blame -- a cycle repeated over and over by the right people, infused with the brutal facts, and guided by the three circles. This is the chicken inside the egg.