Good to Great

Jim Collins identifies a specific set of 11 "great" companies that outperformed the general stock market by an average of seven times over fifteen years. These companies didn't achieve greatness through a single acquisition or a "eureka" moment. Instead, they followed a transition process that involved disciplined people, disciplined thought, and disciplined action.

To find these outliers, Collins and his team compared them against "comparator" companies—firms in the same industries with similar resources that stayed merely "good" or failed. This contrast highlights that greatness is a conscious choice and a matter of rigorous internal consistency rather than external circumstances or industry-wide trends.

Drawing on an essay by Isaiah Berlin, Collins categorizes leaders into "Foxes" and "Hedgehogs." While the fox knows many things and pursues many ends at once, the hedgehog simplifies a complex world into a single organizing idea. The book argues that companies making the leap to greatness find their "Hedgehog Concept"—the intersection of what they are deeply passionate about, what they can be the best in the world at, and what drives their economic engine.

This focus allows companies to ignore distractions and "shiny objects" that lead competitors astray. By doing one thing better than anyone else, these companies build an unstoppable momentum. However, critics argue this is a "luxury of focus"—only successful companies can afford to be so narrow, while struggling firms are often forced to diversify to survive.

One of the most significant criticisms of the book is that many of the companies Collins labeled "great" eventually stumbled or collapsed. Economists like Steven D. Levitt pointed out that investing in the book’s 11 "great" companies in 2001 would have resulted in underperforming the S&P 500. Specifically, companies like Circuit City went bankrupt, and Fannie Mae required a massive government bailout during the 2008 financial crisis.

This suggests that the "Good to Great" status might be a temporary state rather than a permanent trait. Collins later addressed this in How the Mighty Fall, suggesting that some of these companies succumbed to hubris or strayed from the very principles that originally made them successful.

Critics like Phil Rosenzweig argue that the book suffers from the "Halo Effect"—the tendency to look at a successful company and assume all its traits (like its culture or strategy) caused that success. Because the research was "backward-looking," it may have mistaken correlation for causation. Rosenzweig notes that much of the research relied on magazine articles, which are often written with the benefit of hindsight and are prone to exaggerating the brilliance of leaders.

Furthermore, critics argue that the book offers a "generic business recipe" that ignores the unique strategic challenges of different industries. By distilling success down into simple, common-sense steps, Collins may have overlooked the role of luck, timing, and the "Organizational Physics" that make it impossible to guarantee future results based on historical patterns.