W h y s o m e c o m p a n I e s m a k e t h e
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| S TART AS TOP DOING" D o you have a "to list Do you also have a "stop doing" list Most of us lead busy but undisciplined lives. We have ever-expanding "to lists, trying to build momentum by doing, doing, doing-and doing more. And it rarely works. Those who built the good-to-great companies, however, made as much use of "stop doing" lists as "to do" lists. They displayed a remarkable discipline to unplug all sorts of extraneous junk. When Darwin Smith became CEO of Kimberly-Clark, he made great use of "stop doing" lists. He saw that playi g the annual forecast game with Wall Street focused people too muc on the short term, so he just stopped doing it. "On balance, I see non t advantage to our stockholders when we annually forecast future earni gs" said Smith. "We will not do He saw "title creep" as a sign of class-consciousness and bureaucratic layering, so he simply unplugged titles. No one at the company would have a title, unless it was fora position where the outside world demanded a title. He saw increasing layers as the natural result of empire building. 140 Collins So he simply unplugged a huge stack of layers with a simple elegant mechanism If you couldn't justify to your peers the need for at least fifteen people reporting to you to fulfill your responsibilities, then you would have zero people reporting to Keep in mind that he did this in the long before it became fashionable) To reinforce the idea that Kimberly -Clark should begin thinking of itself as a consumer company, not a paper company, he unplugged Kimberly from all paper industry trade The good-to-great companies institutionalized the discipline of "stop doing through the use of a unique budget mechanism. Stop and think fora moment What is the purpose of budgeting Most answer that budgeting exists to decide how much to apportion to each activity, or to manage costs, or both. From a good-to-great perspective, both of these answers are wrong. Kimberly -Clark didn't just reallocate resources from the paper business to the consumer business. It completely eliminated the paper business, sold the mills, and invested all the money into the emerging consumer business. I had an interesting conversation with some executives from a company in the paper business. It's a good company, not yet a great one, and they had competed directly with Kimberly-Clark before Kimberly transformed itself into a consumer company. Out of curiosity, I asked them what they thought of Kimberly-Clark. "What Kimber did is not fair" they said. Not fair" I looked quizzical. Oh, sure, they've become a muc ore successful company. But, you know, if we'd sold our paper bus' ess and become a powerful consumer company, we could have been great, too. But we just have too much invested in it, and we couldn't have brought ourselves to do it" If you look back on the good-to-great companies, they displayed remarkable courage to channel their resources into only one or a few are- Good to Great nas. Once they understood their three circles, they rarely hedged their bets. Recall Kroger's commitment to overturn its entire system to create superstores, while clung to the "safety" of its older stores. Recall Abbott's commitment to put the bulk of its resources into becoming number one in diagnostics and hospital nutritionals, while clung to its core pharmaceutical business (where it could never be the best in the world. Recall how Walgreens exited the profitable food-service business and focused all its might into one idea the best, most convenient drugstores. Recall Gillette and Sensor, Nucor and the mini-mills, Clark and selling the mills to channel all its resources into the consumer business. They all had the guts to make huge investments, once they understood their Hedgehog Concept. The most effective investment strategy is a highly undiversified portfolio when you are right. As facetious as that sounds, that's essentially the approach the good-to-great companies took. "Being right" means getting the Hedgehog Concept "highly undiversified 7 ' means investing fully in those things that fit squarely within the three circles and getting rid of everything else. Of course, the key here is the little caveat, "When you are right" But how do you know when you're right In studying the companies, we learned that "being right" just isn't that hard if you have all the pieces in place. If you have Level 5 leaders who get the right people on the bus, if you confront the brutal facts of reality, if you create a climate where the truth is heard, if you have a Council and work within the three circles, if you frame all decisions in the context of a crystalline Hedgehog Concept, if you act from understanding, not bravado-if you do all these things, then you are likely to be right on the big decisions. The real question is, once you know the right thing, do you have the discipline to do the right thing and, equally important, to stop doing the wrong things |