Good to GreatChapter 6 – Culture of Discipline

Team members:

Ravi Bavaria

Abhishek Pawar

The title “Culture of Discipline” gives the impression of a recipe for a company that is run

like a dictatorship with set schedules, procedures and protocols. One in which

creativity, fulfillment, and passion are unnecessary. We hope to explain the true

meaning of this chapter’s title.

What does the title “Culture of Discipline” bring to your mind?

Typical Progression of Businesses

Start-up

Number of Employees Increase as Business Grows

Business Crumbles as Entrepreneur Fails to Grow with Business

Business Restructures

Culture of Discipline

-Business grows and has potential of being “great”.

Dictatorship (Tyrannical Rule)

-Business eventually becomes stagnant

Culture of Discipline Companies

Amgen○ Few successful start-

ups become great companies

○ Avoid bureaucracy and hierarchy and instead create a culture of discipline

Abbott Laboratories○ Allow employee

creativity and freedom within designated perimeters.

Companies that don’t make the leap

– Lubbock Barber College• Found a blue ocean in

1955.• Over 49 years, the

college grew from 8 students to 50 students.

• Ownership then passed to another family member and business started to stagnate.

THE GOOD TO GREAT MATRIX OF CREATIVE DISCIPLINE

Hierarchical Organization

Great Organization

Bureaucratic Organization

Start – Up Organization

Ethics of Entrepreneurshi

p

Low

Low

High

High

Culture of Discipline

Culture of Discipline’s Primary Idea

“Build a culture full of people who take disciplined action within the three circles, fanatically consistent with the Hedgehog Concept.” (Collins, 124)

Four Key Points

1. Freedom and responsibility within a framework

2. Fill the company with self-disciplined people who are willing to go the extra mile and rinse their “Cottage Cheese”

3. Don’t confuse a Culture of Discipline with a tyrannical disciplinarian

4. Fanatical adherence to the hedgehog concept and start a “Stop-Doing” list

FREEDOM (AND RESPONSIBILITY) WITHIN A FRAMEWORK

A Culture of Discipline: People must stick to a consistent system Allows people freedom within the

framework of the system A highly developed system has both freedom

and responsibilityExample: Airline Pilot

FREEDOM (AND RESPONSIBILITY) WITHIN A FRAMEWORK

Disciplined People:Not trying to discipline the wrong people into the right

behaviors, but getting self-disciplined people on the bus in the first place

Disciplined Thought:You need to confront the brutal facts of reality, while

retaining resolute faith that you can and will create a path to greatness

Disciplined Action:Primary subject of this chapterThe comparison companies often tried to skip this

jump right to disciplined plan

FREEDOM (AND RESPONSIBILITY) WITHIN A FRAMEWORK

Good to Great Companies:Built a consistent system with clear constraints,

but they also gave people freedom and responsibility within the framework of that system. They hired self-disciplines people who didn’t need to be managed, and then managed the system, not the people

RINSING YOUR COTTAGE CHEESE

People in the Good to Great Companies became extreme in the fulfillment of their responsibilities

The cottage cheese analogy comes from Dave Scott: Ironman Tri-AthleteWould literally rinse his cottage cheese to get

the extra fat offRinsing the cottage cheese was one more small

step he believed would make him that much better, one more small step added to all the other steps to create a consistent program of “super-discipline”

RINSING YOUR COTTAGE CHEESE

Everyone would like to be the best, but most organizations lack the discipline to figure out with egoless clarity what they can be the best at

They will do whatever it takes to turn potential into reality

They lack their discipline to rinse their cottage cheeseExample: Wells Fargo v. Bank of America

A CULTURE, NOT A TYRANT

Good to Great companies had Level 5 leaders who built an enduring culture of discipline

Comparison companies had Level 4 leaders who personally disciplined the organization through sheer force

A CULTURE, NOT A TYRANT

Examples: Ray MacDonaldStanley Gault of RubbermaidLee Iacocca of Chrysler

Each example illustrate a pattern:○ A spectacular rise under a tyrannical disciplinarian,

followed by a decline with the disciplinarian stepped away

Disciplined action without disciplined understanding of the 3 circles cannot produce sustained great results.

Adhering to the Hedgehog Concept Pitney Bowes, attained 100% of the

metered mail market. By 1950, nearly half of all U.S. mail

passed through Pitney Bowes. There wasn’t any competition in this

market, and Pitney wasn’t really a great company as it was a wonderful monopoly

Adhering to the Hedgehog Concept The long slide for Pitney, began when

they were required to license its patents to competitors.

Within 6 years, they had 16 competitors and were in a freefall as they had to be rid of ill-fated acquisitions and joint ventures.

Company lost money for the first time in its tenure in 1973.

Adhering to the Hedgehog Concept Fred Allen stepped in and took the

company in the right direction. Thought of specializing in faxing and

special copiers. George Harvey was Allen’s successor

and they instituted a disciplined diversification model.

Adhering to the Hedgehog Concept Pitney then attained a 45% of the high-end

fax market. Also began the Paragon mail processor

that seals and sends letters. By the late 1980’s, these recent

technological advances by Pitney and their business model drove over half of its revenues.

Also linked these advances to the internet, which brought forth another opportunity.

Adhering to the Hedgehog Concept After falling 77% behind the market in

1973, they changed their course and rose to over 11 times the market by 1999.

Outperformed Coca Cola, 3M, Johnson & Johnson, Merck, Motorola and many other fortune 500 companies.

Adhering to the Hedgehog Concept The goal is to stay within the three circles

of the hedgehog concept.If it doesn’t fit, don’t do it.

RJ Reynolds, a tobacco company, was the best in the 1960’s.

When the Surgeon General’s Office traced tobacco to cancer, RJR diversified from the tobacco industry.

They took part in the shipping industry, which had nothing to do with what their company was founded on.

Adhering to the Hedgehog Concept Phillip Morris took a better path. They sought the not-so-healthy

consumables market. In November 1988, RJR they accepted

the $24.88 billion offered by Kohlberg Kravis Roberts & Co. (KKR).

Phillip Morris beat RJR by 4 times since the Surgeon General’s news.

Adhering to the Hedgehog Concept Nucor, built around the hedgehog concept,

produced steel. There weren’t any class distinctions in regards to

workers. Grew into a $3.5 billion fortune 500 company with

only four layers of management. The perks were for the workers, not the

executives, who did the work. All 7,000 employees appeared in the annual

report, and Nucor stuck by their concept through thick and thin.

Still trading On the NYSE

Bentley Motors “To build a good car, a fast car, the best in class”. W.O.

Bentley’s mission statement since the beginning.

Located in Crewe, England since 1946 and owned since 1998 by Volkswagen AG, Bentley Motors is dedicated to making responsive and powerful Grand Tourers with the stamina to cross continents at pace, and drive in refined comfort and style. 

They know their cars are expensive, but they stick to their hedgehog concept, of producing the best cars in style, comfort, and performance.

Which they only advertise to the people who are willing to pay for the cream of the crop. They haven’t changed their business model since 1946.

Nucor’s Opposite

Bethlehem Steel

Culture was built upon a class system○ executive “corner”

offices○ executive country club○ executive fleet of jets

Bethlehem survived the 1970’s and 1980’s due to the technological advances in the industry.

By the 1990’s, the corporate culture was so focused on the class system, that the business forgot about the clients.

$1 invested in Nucor was worth 200 times more than $1 in Bethlehem Steel

Nucor chose to fanatically follow their Hedgehog concept and made a leap from “Good to Great.”

“STOP DOING” LIST “To Do” List- Rarely Work Kimberly Clark

-Darwin Smith, CEO Company Titles

- Can you justify Budgeting? Understanding YOUR Hedgehog Concepts

Examples: Kroger- Superstores Walgreens- Best, Most Convenient

The Real Question?

Once you know the right thing, do you have the discipline to do the right thing and , equally important, to stop doing the wrong things?