Good to Great
This month marks the 15th anniversary of Jim Collins’ seminal business book, Good to Great. I am sure if you are in business that this book is either on your shelf or it has been recommended to you. I have it, have read it and as a result, ended up finding Collins’ first best-seller, Built to Last, and read that too. Both books were incredibly popular, but Good to Great has sold many millions of copies making it one of the best selling business books of all time.
The whole premise of Good to Great was to identify the traits of good companies that eventually allowed them to transition to great companies where “greatness” was defined as having cumulative stock returns many times better than a composite index of large, established companies. Collins and his team of researchers collected many thousands of pages of articles and interview transcripts over a 5 year period and eventually found eleven examples of “great” companies out of one thousand four hundred reviewed.
Fifteen years later, it’s interesting to see where some of these eleven great companies are now.
Circuit City’s path towards bankruptcy was like watching a train wreck in slow motion.
Fannie Mae took center stage during the most recent financial crisis, went into conservatorship of the Federal Housing Finance Agency and eventually had its shares delisted from the New York Stock Exchange. Ironic that an entity created to aid the housing market was a catalyst in destroying it.
Pitney Bowes went through a rebranding recently, but even before that, it was forced to sell its world headquarters building and Management Services division. Evidently, the 80+ acquisitions in 15 years did not have the affect on revenue as was hoped.
Gillette was acquired by Proctor & Gamble. A company not included in his list of “great” organizations.
My point is not to criticize Collins, his research, or even the businesses referenced. Even with the best intentions and research, things change. After all, the companies mentioned above were 4 of the 11 “great” companies referenced in one of the most popular business books ever written. It takes effort to stay on top in an ever evolving environment.
The same holds true for us as individuals. Things change and to remain “great” we need to be aware of opportunities to improve our financial lives. For example, Medicare enrollment begins this month and recent studies estimate that 95% of Medicare beneficiaries overspend on Medicare premiums due to a focus on premium and not on benefits. In this instance, a few minutes of research could save thousands of dollars. Alternatively, for those years away from Medicare and in the throes of college funding, as of October 1 you may now file the FAFSA (Free Application for Federal Student Aide) which is three months earlier than previously allowed. You now have extra time to plan how to pay for college even before school applications and outside scholarship deadlines have passed.
Businesses can go from great to average if they aren’t in tune with the marketplace and don’t adapt to change. As an investor, learn from the mistakes of these companies and make adjustments that will allow you to continue moving your life from good to great.