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D ire ct Comparison Selection Process



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Good-to-Great
D ire ct Comparison Selection Process
The purpose of the direct comparison analysis is to create as close to a "historical controlled experiment" as possible. The idea is simple By finding companies that were approximately the same ages and had similar opportunities, lines of business, and success profiles as each of the good-to-great companies at the time of transition, we were able to conduct direct comparative analysis in our research, looking for the distinguishing variables that account for the transition from good to great. Our objective was to find companies that could have done what the good-to-great companies did, but failed to do so, and then ask "What was different" We performed a systematic and methodical collection and scoring of all obvious comparison candidates for each good-to-great company, using the following six criteria. Business Fit At the time of transition, the comparison candidate had similar products and services as the good-to-great company. Size
Fit:
At the time of transition, the comparison candidate was the same basic size as the good-to-great company. We applied a consistent scoring matrix based upon the ratio of the comparison candidate revenues divided by the good-to-great company revenues at the time of transition. Age Fit The comparison candidate was founded in the same era as the good-to-great company. We applied a consistent scoring matrix based upon a calculated age ratio of the comparison candidate to the good-to-great company. Stock Chart Fit The cumulative stock returns to market chart of the comparison candidate roughly tracks the pattern of the good-to-great company until the point of transition, at which point the trajectories of the two companies separate, with the good-to-great company outperforming the comparison candidate from that point on. Conservative Test At the time of transition, the comparison candidate was more successful than the good-to-great company-larger and more profitable, with a stronger market position and better reputation. This is a critical test, stacking the deck against our good-to-great companies.

Appendix l . B
229 Face Validity This takes into account two factors (1) The comparison candidate is in a similar line of business at the time of selection into the study, and
(2) the comparison candidate is less successful than the good-to-great company at the time of into the study. Thus, face validity and conservative test work together Conservative test ensures that the comparison company was stronger than the good-to-great company at the year of the good-to-great company's transition, and weaker than the good-to-great company at the time of selection into the study. We scored each comparison candidate on each of the above six criteria on a scale of
1 to
4:
4
= The comparison candidate fits the criteria extremely well-there are no issues or qualifiers.
3
= The comparison candidate fits the criteria reasonably well-there are minor issues or qualifiers that keep it from getting a
4.
2
= The comparison candidate fits the criteria poorly-there are major issues and concerns.
1
= The comparison candidate fails the criteria. The following table shows the comparison candidates for each good-to- great company with their average score across the six criteria. The comparison candidate selected as the direct comparison appears at the top of each list. Pfizer
Warner-Lambert Upjohn
Richardson-Merrill GD.
Searle Co Sterling Drugs
Schering-Plough
Bristol-Meyers Norwich
Parke-Davis



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