Not So “Good to Great” Companies and a Heuristic Thinking Strategy

DSC_0047The other day I re-read the famous book Good to Great by Jim Collins. I know that many positive and negative things have been said about this book and knowing that, I’d like to add an additional point and linked with the engineering world.

First, let me rephrase some of book conclusions. Jim Collins found that it is possible to transform a good company to a great company, and companies that do that share some “special” characteristics such as:

  1. Humble leaders
  2. Right people on the bus
  3. Confront facts
  4. Focus: money, ability, fire
  5. Rinsing your cottage cheese
  6. Technology
  7. Superadditivity

He also mentioned 11 companies in different industries that were able to take these important steps in 2001:

  1. Abbott Laboratories
  2. Circuit City
  3. Fannie Mae
  4. Gillette
  5. Kimberly-Clark
  6. Kroger
  7. Nucor
  8. Philip Morris
  9. Pitney Bowes
  10. Walgreens
  11. Wells Fargo

However, if we see the performance of these 11 companies 10 years after (2010) we can see this:

  1. Abbott Laboratories → Stock up 0%
  2. Circuit City → Bankrupt
  3. Fannie Mae → Placed in conservatorship
  4. Gillette → Bought by P&G
  5. Kimberly-Clark → Stock up 1%
  6. Kroger → Stock up 0%
  7. Nucor → Stock up 4-fold
  8. Philip Morris → Stock down 20%
  9. Pitney Bowes → Stock down 20%
  10. Walgreens → Stock up 0%
  11. Wells Fargo → Stock up 0%

What happened with these companies? Did they forget the “Good to Great” lessons? I don’t think so . . . I think that the scenario changed, so old “great” ways to work are not so great forever.

I don’t want to say that Jim Collins made a mistake but that Jim Collins never mentioned that these 7 “special” characteristics were maybe just good heuristics for 2001, and might not be valid 10 years later. This is a critical point: to think in a heuristic strategic thinking way.

But what is a heuristic? Well, heuristic is a technique, a tool, it’s a way in which you look for a new solution. Heuristics have to be defined relative to the problem you are trying to solve. There are many examples about different famous heuristics in different problems like “Do the opposite,” “Big rocks first,” or “The nearest neighbor.” But let me put these heuristics in context.

For example “Do the opposite” could perfectly explain why Apple opened “Apple stores” in the most expensive places in big cities when the rest of the players tried to decreased cost, or why the same company used the razor-and-blade “reverse” selling music at 99 cents (with no profit) and ipod/iphones with a huge margin. Depending of the context, this could be a great strategy but that doesn’t mean it will always be successful.

In business world we find complex and dynamic systems. Things that worked a few years (or months) ago don’t necessarily work forever. This is where engineers, as model thinkers, have a tremendous advantage over other professionals. We have a better chance to bring together and integrate different techniques, methodologies, and backgrounds than traditional business people. Even in the DNA engineers seem to feel the need to connect the dots and link things that don’t look similar. Just think of the entire world of new possibilities in the business world if we can combine managerial problems with more technical techniques. Tremendous new and innovative opportunities can arise, and who knows maybe one valuable enough to write a best seller book.

Felipe Saavedra is a Chilean scholarship recipient and current MEM student.

3 Comments

  1. A very interesting perspective. As you said, engineers think a little different than other folks, so one thing that hit me about your list, was that for those companies that did not go bankrupt or got purchased, how did they perform relative to their peers? ie stating the absolute performance, may or may not reflect the strength of the companies. That being said, there is no doubt, a company, and people, must always be willing to examine themselves objectively, looking for ways to play to their strengths, and bolster their weaknesses.

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