Good to Great Chapter 7: Technology Accelerators

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Good to Great Chapter 7Technology Accelerators

• Group 5
• Laura Moore
• Jeffri Vaughn
• Grant Gerhardt
• Patrick Kirkland
• Chet Visser

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Good to Great Chapter 7 Technology Accelerators
The Hedgehog

• In every good-to-great case it was never just
  technology, but The pioneering application of
  carefully selected technologies
• Technology-induced change is nothing new. The
  real question is not, what is the role of
  technology? Rather, the real question is, how do
  good-to-great organizations think differently
  about technology?

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Drugstore.com VS. Walgreens

• Drugstore.com opened an internet pharmacy for
  people to order their prescriptions online and
  have them mailed to them.
• Walgreens stock price dropped 40 when
  Drugstore.com challenged Walgreens.
• Walgreens was very quiet and simply said, Were
  a crawl, walk, run company.
• Drugstore.com did the opposite ran first, then
  walked, and crawled last as their value dropped
  and debt grew.
• Walgreens ended up prospering during the .com
  craze with their well planned strategy.

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Good VS. Great

• Great companies (Hedgehogs) find ways to use new
  technology for advancing their business before
  anybody else, and make sure it will work with
  extensive research.
• For Example Kroger used barcode scanners for
  speedier checkout and more efficient inventory.
  Later, Wal-Mart would use JIT Inventory to keep
  inventory costs low.
• Good companies (Foxes) implement new technologies
  after they have been successfully used by someone
  else.
• For Example Everybody else soon followed Kroger
  and their barcode scanners. Later, some followed
  Wal-Marts JIT inventory system, but many have
  not yet adopted this strategy.

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Technology Accelerators in the Good-to-Great
Companies

• Abbot
• Computer technology to increase economic
  denominator of profit per employee
• Circuit City
• Sophisticated point-of-sale and
  inventory-tracking technologies
• Able to operate a geographically dispersed system
  with great consistency
• Fannie Mae
• Sophisticated algorithms and computer analysis to
  more accurately assess mortgage risk, thereby
  increasing economic denominator of profit per
  risk level
• Increases access to home mortgages for
  lower-income groups, linking to passion for
  democratizing home ownership

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Technology Accelerators in the Good-to-Great
Companies

• Gillette
• Sophisticated manufacturing technology for making
  billions of high-tolerance products at low cost
  with fantastic consistency
• Kimberly-Clark
• Manufacturing-process technology, especially in
  nonwoven materials, to support their passionate
  pursuit of product superiority
• Sophisticated RD labs
• Kroger
• Computer and information technology to the
  continuous modernization of superstores
• First to seriously experiment with scanners,
  which it linked to the entire cash-flow cycle,
  thereby providing funds for the massive
  store-revamping process

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Technology Accelerators in the Good-to-Great
Companies

• Nucor
• Most advanced mini-mill steel manufacturing
  technology
• Willing to make huge bets (up to 50 of corporate
  net worth) on new technologies that other viewed
  as risky, such as continuous thin slab casting

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Technology Accelerators in the Good-to-Great
Companies

• Philip Morris
• Both packaging and manufacturing technologies
• Bet on technology to make flip-top boxes the
  fist packaging innovation in 20 years in the
  industry
• First to use computer-based manufacturing
• Huge investment in manufacturing center to
  experiment with, test, and refine advanced
  manufacturing and quality techniques

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Technology Accelerators in the Good-to-Great
Companies

• Pitney Bowes
• Advanced technology to the mailroom
• Mechanical postage meters
• Invested heavily in electrical, software,
  communications, and Internet engineering for the
  most sophisticated back-office machines
• Huge RD investment to reinvent basic postage
  meter technology in the 1980s

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Technology Accelerators in the Good-to-Great
Companies

• Walgreens
• Satellite communications and computer network
  technology, linked to its concept of convenient
  corner drugstores, tailored to the unique needs
  of specific demographics and locations
• Big investment on a satellite system that links
  all stores together, like one giant web of a
  single corner pharmacy
• Led the rest of the industry by at least a decade

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Technology Accelerators in the Good-to-Great
Companies

• Wells Fargo
• Technologies that would increase economic
  denominator of profit per employee
• Early leader in 24-hour banking by phone, early
  adopter of ATMs, first to allow people to buy and
  sell mutual funds at an ATM, pioneer in Internet
  and electronic banking
• Pioneered sophisticated mathematics to conduct
  better risk assessment in lending

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Technology as an Accelerator, Not a Creator, of
MomentumFannie Mae

• Jim Johnson became CEO of Fannie Mae and hired a
  consulting firm to conduct technology audit
• Lead consultant, Bill Kelvie, used a four-level
  ranking
• Four is cutting edge
• One is stone age
• Fannie Mae ranked two

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Technology as an Accelerator, Not a Creator, of
MomentumFannie Mae

• Kelvie was hired to move the company ahead
• When Kelvie came to Fannie Mae in 1990, the
  company lagged about 10 years behind Wall Street
  in the use of technology
• Over the next five years, Kelvie took Fannie Mae
  from a two to a 3.8 on the four-point ranking
• Created over 300 computer applications
• Sophisticated analytical programs to control the
  600 billion mortgage portfolio
• Online data warehouses covering 60 million
  properties and streamlined workflows
• Reduced paper and clerical effort

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Technology as an Accelerator, Not a Creator, of
MomentumFannie Mae

• We moved technology out of the back office and
  harnessed it to transform every part of the
  business. We created an expert system that lowers
  the cost of becoming a home owner. Lenders using
  our technology reduced the loan-approval time
  from 30 days to 30 minutes and lowered the
  associated costs by over 1,000 per loan.
  Kelvie
• The system has saved home buyers nearly 4 billion

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Technology as an Accelerator, Not a Creator, of
MomentumFannie Mae

• Fannie Mae transition began in 1981, yet the
  company lagged behind in the application of
  technology until the early 1990s
• Technology became of prime importance to Fannie
  Mae AFTER it discovered its Hedgehog Concept and
  AFTER it reached breakthrough
• Technology was a key part of what Fannie Mae
  leaders called the second wind of the
  transformation and acted as an accelerating
  factor
• Same pattern holds for Kroger, Gillette,
  Walgreens, and all the good-to-great companies
• Pioneering application of technology usually came
  late in the transition and never at the start

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Technology as an Accelerator, Not a Creator, of
Momentum

• When used right, technology becomes an
  ACCELERATOR of momentum, not a creator of it
• The good-to-great companies never began their
  transitions with pioneering technology, for the
  simple reason that you cannot make use of
  technology until you know which technologies are
  relevant
• Relevant technologies are those that link
  directly to the three intersecting circles of the
  Hedgehog Concept

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Technology as an Accelerator, Not a Creator, of
Momentum

• To make technology productive in a transformation
  from good to great, ask the following questions
• Does the technology fit directly with your
  Hedgehog Concept?
• Yes You need to become a pioneer in the
  application of that technology
• No Ask another question
• Do you need this technology at all?
• Yes All you need is parity, dont need the most
  advanced technology to be a great company
• No The technology is irrelevant and can be
  ignored

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Technology as an Accelerator, Not a Creator, of
MomentumGood-to-Great Companies

• Good-to-great companies remained disciplined
  within the frame of their Hedgehog Concept
• Their relationship to technology is no different
  from their relationship to any other category of
  decisions
• Disciplined people, who engage in disciplined
  thought, and who then take disciplined action
• If a technology doesnt fit squarely within their
  three circles, they ignore it
• Once they understand which technologies are
  relevant, they become fanatical and creative in
  the application of those technologies

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Technology as an Accelerator, Not a Creator, of
MomentumComparison Companies

• In comparison companies, only three cases of
  pioneering in the application of technology
• Chrysler Computer-aided design
• Harris Electronics applied to printing
• Rubbermaid Advanced manufacturing

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Technology as an Accelerator, Not a Creator, of
MomentumComparison Companies

• Demonstrates that technology alone cannot create
  sustained great results
• Chrysler made superb use of advanced
  computer-aided and other design technologies but
  failed to link those technologies to a consistent
  Hedgehog Concept
• No advanced technology by itself could save the
  company from massive downturn

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Technology as an Accelerator, Not a Creator, of
Momentum

• Technology without a clear Hedgehog Concept, and
  without the discipline to stay within the three
  circles, cannot make a company great

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Technology Trap

• The 20th Centurys theme Technology
• In the 20th Century we saw some of the most
  earthshaking advances in technology
• Ex. Aviation, Cars, Electricity, Computers,
  Nuclear Energy
• This theme is proven by Times Choice of Albert
  Einstein as Man of the Century and Jeff Bezos of
  Amazon.com as the 1999 Man of the Year

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• Masters Forum Seminars
• For 15 years had one constant theme Technology,
  Change, and the connection between the two
• The reason is that people do not always know
  what they do not know. They are always afraid of
  some previously unknown technology cropping up
  and hurting them.
• What do good-to-great executives think of
  technology?
• It is a tool that accelerates success, not one
  that produces success
• It is neither a main factor in your success nor
  your decline

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• 80 of the good-to-great executives interviewed
  by the author did not even mention technology as
  one of the top five factors in the transition.
• When technology was mentioned, it only had a
  medium ranking.
• You cannot rely on technology to transition your
  company from good to great. But, it certainly can
  help you.

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• Ken Iverson of Nucor was asked where he would
  rate Technology among the five factors that
  helped him transit from good to great
• His answer Not in the top five
• Real reason for success The companys
  consistency, and their ability to project their
  philosophies throughout the whole organization,
  enabled by their lack of layers and bureaucracy
• Only 20 of Nucors success was based on
  technology

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Early Technology

• Throughout business and history, there are
  countless examples of those who were first with a
  technology or completely relied on technology and
  fell behind or perished.

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Examples

• Boeing and Dehavilland
• Dehavilland was the company that actually built
  the first jetliner, the Comet, some 4 to 5 years
  prior to the first flight of the 707
• Dehavilland lost out in the end because of some
  teething problems that resulted in 3 in-flight
  breakups of their Comet jetliner
• USAF and USN During Vietnam
• Early 1960 Air combat doctrine stated guided
  missiles made dogfighting obsolete
• All dogfight teaching was stopped and it was even
  forbidden to be practiced
• Resulted in a nearly 1 to 1 kill ratio in aerial
  combat
• USN started Top Gun and USAF initiated a similar
  program, Red Flag, to rectify this problem. Kill
  ratio improved to 5 to 1.

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• Titanic
• Believed that new technology of watertight
  compartments made the ship unsinkable, and new
  wireless would keep them appraised of ice
  situation
• Took on fewer than necessary life boats
• Barreled into the dark at nearly full speed in
  poor ice spotting conditions
• Resulted in massive loss of life due to reliance
  and over confidence on new and untried
  technologies

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Takeaways

• Never blindly rely on technology
• When technology is used correctly and linked to
  simple, clear, and coherent concepts rooted in
  deep understanding, technology will drive you
  towards success
• When technology is not used correctly, it will
  accelerate your demise
• Technology is never the primary cause of a
  companys demise. This responsibility usually
  belongs to the executives and their management
  techniques

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Technology and the Fear of Being Left Behind

• Technology is important, but as a subset of
  discipline or perhaps the flywheel.
• Why did the good-to-great companies maintain
  such a balanced perspective on technology, when
  most companies become reactionary, lurching and
  running about like Chicken Little, as were
  seeing with the internet?
• Chris Jones, Good to Great researcher

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Strategy

• If you had the opportunity to sit down and read
  all 2000 pages of transcripts from the
  good-to-great interviews, youd be struck by the
  utter absence of talk about competitive
  strategy.
• They never talked in reactionary terms and never
  defined their strategies principally in response
  to what others were doing.

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Strategy

• The good-to-great companies talked in terms of
  what they were trying to create and how they were
  trying to improve relative to an absolute
  standard of excellence.
• Were just never satisfied. We can be delighted,
  but never satisfied.
• Wayne Sanders, Kimberly-Clark

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No Fear

• Those who built good-to-great companies werent
  motivated by fear.
• Fear of what they didnt understand.
• Fear of looking like a chump.
• Fear of watching others hit it big while they
  didnt.
• Fear of being hammered by the competition.

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Technology Bubble

• Took place right smack in the middle of the
  research on good to great.
• It served as a perfect stage to watch the
  difference between great and good play itself
  out, as the great ones responded like Walgreens.
• Walgreens became great with calm equanimity and
  quiet, deliberate steps forwardwhile the
  mediocre ones lurched about in fearful, frantic
  reaction.

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The Big Point

• The big point of this chapter is not about
  technology per se.
• No technology, no matter how amazingnot
  computers, not telecommunications, not the
  internetcan itself ignite a shift from good to
  great.
• No technology can make you Level 5.
• No technology can turn the wrong people into the
  right people.

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The Big Point

• No technology can instill the discipline to
  confront brutal facts of reality, nor can it
  instill unwavering faith.
• No technology can supplant the need for deep
  understanding of the three circles and the
  translation of that understanding into a simple
  Hedgehog Concept.
• No technology can create a culture of discipline.
• No technology can instill the simple inner belief
  that leaving unrealized potential on the
  tableletting something remain good when it can
  become greatis a secular sin.

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Conclusion

• Those that stay true to these fundamentals and
  maintain their balance, even in times of great
  change and disruption, will accumulate the
  momentum that creates breakthrough momentum.
• Those that do not, those that fall into
  reactionary lurching about, will spiral downward
  or remain mediocre.
• This is the big-picture difference between great
  and good, the gist of the whole study captured in
  the metaphor of the flywheel versus the doom loop.