The cover story past Jim Collins in the October 2001 issue of Fast Company is based on the vast research that went into the making of Skillful to Keen: Why Some Companies Brand the Leap … And Others Don't (HarperCollins, 2001). Collins's new volume is destined to influence how leaders effectually the world think about their companies, their strategies, and their approach to making change.

In an in-depth interview, we asked Collins near the implications of his research and ideas for the economy, stock market, and the very nature of executive leadership.

The adept-to-smashing companies that you wrote about all accomplished remarkable stock-market results over a fifteen-year menstruum. But today, the stock marketplace is down. Does that mean we won't meet whatever adept-to-dandy companies today?

First, I want to correct a neat misconception. The stock market is not downwardly. How does the stock market look relative to 1985? The stock marketplace is not downwardly. How does it expect relative to 1990? The stock market is non downward. The market was irrationally out of whack — nosotros didn't accept a stock market place; we had a speculative casino.

The tech chimera wasn't the new economic system — there is a new economic system that'due south been going for years at a deeper level. But the brutal fact is that the companies that were at the meridian of the tech bubble didn't take results. You can't make aught profits and claim that you lot have results. In the case of companies that had not bad results before the bubble burst, they're in a downwardly menstruation now, but so what? The lesser line on a company like Cisco is, we don't know the answer all the same. It could be that those companies are just in a very difficult half dozen- to 12-month menses.

Permit me use an analogy. Permit's say that you have a great basketball dynasty like the UCLA Bruins under John Wooden. This is a team that is going to win 10 NCAA championships in 12 years. They're a squad that went from good to great. Only in 1970, they lose three games. Does that mean that we're going to write them off and say they're non a peachy team? We have to look over a longer flow of time. The aforementioned is true of companies that got caught in the bubble. Information technology was too short a time menstruation. It'due south going to take more time to tell which companies that are in trouble now are but going through a momentary menstruation and will have the resiliency to come up back.

Just to a lot of businesspeople, the electric current slowdown is a sign of the new economy's demise.

This is one of the most wonderful times in history. Two or three years ago, what was the major complaint that we heard? "It'southward so hard to go skilful people! Whine, whine, whine!" Today, we've got the greatest opportunity that we are going to have for decades to snag a boatload — not a busload, just a boatload — of groovy people. And peachy companies always get-go with who, not what. We can finally get to the right side of Packard's Law. Packard's Constabulary is like a law of physics for great companies. It says that no company tin can become or remain great if it allows its growth charge per unit in revenues to exceed its growth in getting the right people in a sustainable fashion. It's one of those timeless truths that transcend technology and economic science. Now, instead of trying to accumulate capital, we can accrue people.

If I were running a visitor today, I would have one priority higher up all others: to larn as many of the best people as I could. I'd put off everything else if I could afford it — buildings, new projects, R&D — to fill my jitney. Considering things are going to come back. My flywheel is going to kickoff to turn. And the single biggest constraint on growth and the success of my organization isn't markets, isn't technology, isn't opportunity, isn't the stock marketplace. If you want to be a keen company, the unmarried biggest limitation on your ability to grow is the power to get and hang on to enough of the right people.

This is also a corking time to forcefulness yourself to look back. When y'all were breaking Packard'due south Constabulary, you lot probably let a lot of the wrong people on the bus. This is a good fourth dimension to get them off. In fact, it's a little easier to do that now. We can blame it on the circumstances.

What else would y'all do to capitalize on this period of reevaluation?

This is also a great time to enquire yourself some actually hard questions. In a fourth dimension of irrational prosperity, where the market place would give yous money whether y'all delivered or non, a lot of companies hadn't answered any of the questions in the three circles (What can we exist the best in the world at? What is the economic denominator that best drives our economic engine? And what are our core people deeply passionate about?). They had no concept of what they could do meliorate than whatsoever other company in the world that was sustainable, they had no profit denominator, and the only matter they had passion for was flipping the company.

Now nosotros can no longer live in that fantasy land. We've got to accept a hard look at all the things nosotros're doing and put them all to the iii-circle test. Any things that fail the exam we have to terminate doing — today.

I meet lots of companies that institute themselves with lots of uppercase. Then they wandered into all kinds of acquisitions or new ventures or new directions, simply considering they could. Only they didn't necessarily fit within the three circles. Today, the job is for them to clip away. Those who clarify their 3 circles will come up out of this just fine. Those that don't deserve to die.

CEOs today find themselves with picayune fourth dimension to bear witness their worth. What advice would you give to a CEO on the hot seat?

If I were a CEO on the hot seat taking over a company that I wanted to move from good to great, here'due south what I'd practise. I'd take that good-to-great stock chart, and I'd put information technology in forepart of my directors. I'd say, "We're on the left side of this curve. Nosotros desire to be on the right side of the curve. Right? If that'due south what nosotros all want, nosotros know what information technology's going to accept to get it. You can't proceed lurching from CEO to CEO. If you lot do that, yous'll notice yourself in the Doom Loop — and so we'll end upward as one of the comparison companies, not one of the great companies."

I don't think all directors are stupid. Most of them are intelligent, simply they're operating out of ignorance rather than a lack of proficient intent. We need to hit them over the head with the empirical results. Our task is to vanquish the market place in a sustainable manner over time. Nosotros need to recollect about the stock price over a five-year period. And we need to begin to do all the things it will take to go that flywheel turning.

Finally, if I'm the CEO, I want the lath to give me the following assurance: Even so long or curt my tenure every bit CEO may be, whoever you option as my successor needs to pick up that flywheel in midturn and to keep pushing in a consistent direction. I may just get the flywheel turning at sixteen RPMs. But my successor has to accept it to 100 RPMs. His successor has to take information technology to 500 RPMs, and his successor to 1,000 RPMs. Information technology's not virtually me as CEO — it's about a commitment to a consistent program. We're non going to do a Doom Loop.

The CEOs who took their companies from good to cracking were largely anonymous — a far cry from the celebrity CEOs we read about. Is that an accident? Or is it crusade and effect?

I believe information technology's more a affair of crusade and event than an accident. There is something direct related between the absence of celebrity and the presence of good-to-great results. Why? Start, when you lot have a celebrity, the company turns into "the one genius with 1,000 helpers." It creates a sense that the whole affair is really about the CEO. And that leads to all sorts of problems — if the person goes away or if the person turns out not to be a genius afterwards all.

At a deeper level, we found that for leaders to make something nifty, their ambition has to exist for the greatness of the work and the company rather than for themselves. That doesn't mean that they don't have an ego. It doesn't hateful that they don't accept any self-needs. It means that at conclusion point subsequently conclusion point — at the critical junctures when Choice A would favor their ego and Choice B would favor the company and its work — time and over again those leaders choice Option B. Celebrity CEOs, at those same conclusion points, are more likely to favor self and ego over company and work.

Like the anonymous CEOs, almost of the companies that made the transformation from proficient to bang-up are unheralded. What does that tell united states?

The truth is, most people are not working in the most glamorous things in the globe. They are doing real work — which means that most of the time they're doing a heck of a lot of drudgery with but few points of excitement. Some people are putting out broiled bread. Some are building retail stores. The real piece of work of the economic system gets washed by people who make cars, who sell real estate, who run grocery stores and banks. So i of the great findings of this study is that you can be in a keen company and be doing it in steel, in drugstores, in grocery stores. Information technology's only not the case that if y'all're not in Silicon Valley, you're not cool. It doesn't matter where you are. Then no one has the correct to whine about their company, their manufacture, or the kind of business organization they're in — ever once more.

Were the 11 companies that made the transformation benefited past their anonymity?

Ane of the great advantages that these companies had was, nobody cared! Kroger started its transition; Nucor started its transition; nobody was expecting much. They could underpromise and overdeliver. In fact, if I were taking over a visitor and trying to make information technology get from good to cracking, I would tell my vice president of communications that his chore was to make the whole world think that we constantly were on the edge of doom.

In the grade of our report, nosotros actually printed out the transcripts of the CEO presentations to analysts past the adept-to-smashing companies and the comparing companies. We read all of those. And it's striking. The practiced-to-great people ever talk about the challenges they're facing, the programs they're building, the things they're worried most. You get to the comparison companies, they're constantly hyping themselves, they're selling the hereafter — but they're never delivering results.

If I'grand not a CEO, how do the good-to-great lessons apply to me?

The good-to-great concepts are applicable to any situation — as long as you can choice the people around you. That's the crucial thing. Merely fundamentally, we actually do — nosotros accept a lot of discretion over the people in our lives, the people we decide to let on our motorbus, whether it'southward in our department at work or in our personal lives. Just the basic message is this: Build your ain flywheel. You can exercise it. You can start to build momentum in something for which you've got responsibleness. You lot can build a great department. You can build a great church building customs. Y'all can take every one of the practiced-to-groovy ideas and apply them to your own piece of work or your own life.

What did your study teach you virtually modify in business organisation in general? Is it essentially a message to get dorsum to basics?

Very rarely do significant changes ever pb to results in a sustainable way. That's ane of the really important findings of the volume. We started with ane,435 companies. And 11 companies did it. Permit'southward just wait at that fact for a moment. The fact is, it doesn't happen very often. Why not? Because we don't know what the heck we're doing! And considering we don't know what nosotros're doing, we launch into all sorts of things that don't produce results. We end up like a agglomeration of primitives dancing around the campfire chanting at the moon.

What I feel strongly is that we need some science to understand what it really takes to change things. Is it dorsum to nuts? No, it'southward forward to agreement. Why is it back to basics to say that CEOs need to be ambitious for their companies and not for themselves? Why is it back to basics to do the who and the people question outset and the what and where question second? Since when is it back to nuts for a visitor to begin with a question like, Why accept nosotros sucked for 100 years, and what are the brutal facts that we have to face? Why is it back to basics to say that finish-doing lists are more important than to-do lists? And since when has it been back to basics to say that technology is but an accelerator and not a creator of anything? I don't think those concepts are dorsum to basics. Because if they are, we should exist able to get back in time and find that people used those ideas. People didn't — which is why in that location are only 11 out of 1,435. Then, no, information technology'southward non back to basics. It'south forwards to understanding.

What's your assessment of the new economic system? We've seen a lot of change, and we've seen a lot of backlash against the change. How do yous brand sense out of it all?

The tremendous changes that are taking place around united states make information technology the near exciting time in history to be alive. It'due south really fun. All these changes — changes in engineering science, globalization — they're brutal facts that must be integrated into whatever decisions we make. The people at Walgreens didn't ignore the Cyberspace because they were focused just on basics. They confronted the brutal fact of the Cyberspace and so asked, How does it fit into our three circles, and how can nosotros use information technology to spin our flywheel faster?

You never ignore changes — you hit them head-on every bit barbarous facts, or you come to them with a slap-up sense of glee and excitement. This change, this new technology opens up a way for y'all to prevail, to be even meliorate as a company. All of the good-to-great companies took changes and used them to their advantage, oft with slap-up glee.

When new pianos came along, Mozart didn't hang upward his music. He didn't say, "At that place are these new pianos! The harpsichord is out of the fashion, so I'grand washed upwards as a composer!" He thought, This is so cool! I tin do it loud with pianoforte forte! This is really corking! He kept the discipline of writing dandy music and, at the same time, embraced with dandy glee and excitement the invention of pianos.

With all the modify effectually us, we need to exist just like Mozart. We maintain a keen discipline near our music, but at the same fourth dimension, nosotros embrace things that can allow the states to make fifty-fifty greater music.

Alan M. Webber (awebber@fastcompany.com) is a Fast Company founding editor. Jim Collins (jimcollins@aol.com) wrote the essay Congenital to Flip in the March 2000 issue of Fast Company. His new book, Good to Great: Why Some Companies Make the Bound … And Others Don't, volition be available in October.

Primary Story: Good to Dandy