I had been putting off reading Good To Great for some time, but finally bit the bullet. It is one of the most popular business books of all time, but I would also say it is one of the most useless. I can kind of understand why it's so popular; everything written in it makes complete sense! You can nod your way through the entire thing, without realizing by the end that you haven't actually learned anything useful.
The first problem is that the companies that became great all suffer from a halo effect. The companies chosen as "great" were those that had outstanding stock market returns; so already, there is a prevailing belief surrounding these companies that they have a great leader, great people, discipline, focus etc. But can you tell you have a leader who has "an almost stoic determination to do whatever needs to be done to make the company great" or who "confronts brutal facts" or who institutes a "culture of discipline" without knowing the results beforehand? I suspect it's not so easy, or Jim Collins would be richer than Warren Buffett. On the other hand, it is really easy to say that a company had a great *whatever* after the fact!
Another problem is survivorship bias. Collins' advice is for companies to be hedgehogs, focused firms that stay within their realms of expertise. But aren't these also the riskiest firms? What about the thousands of focused firms that go out of business because some new technology has rendered these one-trick ponies obsolete?
With this kind of subjective study, confirmation bias also likely plays a huge role. Once the author identifies traits (either because of a halo effect or because they've truly found something different about a great company, whether it contributed to its success or not), there will be a tendency to view other "great" companies as having employed the same trait.
It should come as no surprise, therefore, that the 11 companies Collins called "great" have under-performed since the publication date. Two of the eleven companies effectively went bankrupt just a few years after publication! One of my favourite lines in the book is about how Fannie Mae, one of the "greats", employed technology which "reduced the loan-approval time from thirty days to thirty minutes and lowered the associated costs by over $1,000 per loan." How did that work out? Can't foresee any problems there!
Moreover, there is little discussion of the strategies that allowed these eleven companies to succeed for the period under study. Collins emphasizes getting a great leader, getting the right people on board, employing discipline, and focusing on areas where you are successful. But how on earth do you do that? Is there a manager who doesn't feel these factors are important? Unfortunately, there is no discussion about what strategies are likely to succeed under what circumstances. Give me a strategy book by Greenwald or Christensen over a book like Good to Great anytime.