Title: Good to Great Chapter 7: Technology Accelerators
1Good to Great Chapter 7Technology Accelerators
- Group 5
- Laura Moore
- Jeffri Vaughn
- Grant Gerhardt
- Patrick Kirkland
- Chet Visser
2Good 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?
3Drugstore.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.
4Good 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.
5Technology 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
6Technology 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
7Technology 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
8Technology 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
9Technology 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
10Technology 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
11Technology 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
12Technology 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
13Technology 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
14Technology 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
15Technology 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
16Technology 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
17Technology 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
18Technology 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
19Technology 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
20Technology 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
21Technology 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
22Technology 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
23- 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
24- 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.
25- 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
26Early 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.
27Examples
- 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.
28- 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
29Takeaways
- 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
30Technology 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
31Strategy
- 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.
32Strategy
- 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
33No 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.
34Technology 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.
35The 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.
36The 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.
37Conclusion
- 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.