Book Summary
The book is the findings of the author and his research team on why some good companies are able to break out of their peers and become great companies. Out of the S&P500 companies, they were only able to find 11 companies that performed as good companies for at least 15 years and then they outdid the market by 5x for atleast 15 years. The book is a good read for anyone who is starting out a new company or running an established company and wants to take it to the next level. The 11 companies are Abbott Laboratories, Circuit City, Fannie Mae, Gillette Co., Kimberly-Clark Corp., the Kroger Co., Nucor Corp., Philip Morris Cos. Inc., Pitney Bowes Inc., Walgreens, and Wells Fargo. Let us see one by one what these companies had going for them, that they were able to become great companies.Â
Level 5 Leaders
When we hear the word leader, the names that come to our mind are often the headline worthy CEOs who have created a mark in the market. However, most often we find that as soon as these leaders step down or lose their focus, their company starts to crumble. The author of the book calls such leaders level 4 leaders – leaders who are able to inspire a commitment and pursuit of a vision, capable of extracting better performances from others.
However, the author argues that for a company to grow from good to great (a great company has beaten the market by 5 times for at least 15 years), the leader is able to create an ecosystem where the company still grows even if they are replaced. They are able to inspire others to grow into leaders and create a culture within the company of debate and transparency. A common trait seen in these level 5 leaders is humility. They will give all the credit to their team, but if something goes wrong, they will step up and own the responsibility.
Right people in the right places
All level 5 leaders understand that they need a good team. So, one of the first things they do is assemble their team.
And it is not just enough to get the right people, but they need to be in the right seats also. Someone could not do justice to the role of marketing, but could be the best fit for economics. They should be comfortable in expressing their ideas and views and all discussion should be for the betterment of the company and not for personal validation. Such a team can present the best way forward for the company, much better than a brilliant CEO.Â
Confront the brutal facts
Once you have the team in place, it is time to understand where your company stands. Quite often, people shut themselves out from negative outcomes, hoping somehow the problems will be solved in due course of time. However, someone who deliberately closes their eyes and walks is eventually going to hit a tree. It is very crucial to know where the company lags, what is stopping it from growing and what it needs to stop doing. Before looking at competitors, look at yourself to learn your strengths, know your weaknesses and discover opportunities.Â

A few things to keep in mind are that things go wrong and you do not blame, but understand it is part of the game. Learn from your mistakes and never repeat them. Lead with questions rather than preconceived truths. Let data and facts speak openly. And most importantly, engage and engage with your team.
Hedgehog strategy
Once you know where you are, it is time to discover where your company needs to go. In the book, it is defined as the Hedgehog Principle. It is called so because, unlike a fox, which comes up with multiple creative solutions to catch a hedgehog, the hedgehog has a very simple but effective solution to save itself – curling into a pricky ball. The author argues that to become a great company, a company needs to identify its core competence, and follow it with great discipline. This core competence lies in the intersection of three questions.
1) What are you passionate about ?
2) What can you do best in the world?
3) Where can you make money ?Â

Discipline
Consistent action in any field yields extraordinary results due to compounding effects. Be it going to gym to workout or eating healthy food or investing your money. Similarly, to become a great company, you need to consistently act within your hedgehog principle. You would have to say NO to great opportunities if it does not fit your hedgehog principle, stop doing certain activities if it does not fit your hedgehog principle and, most importantly, not change your hedgehog principle every week, because it is boring to follow something in a disciplined way.
You need to be consistent with it so that you can set the flywheel in motion. Once you have got it going at great speed, then the flywheel can keep moving on its own. The initial resistance is replaced with momentum on your side.

A drop of water over many years can erode even the hardest rocks.
Technology Accelerators
Technology is a great thing because it accelerates everything. If you go in the right direction, it can help you reach there faster. However, it is a double edged sword. If you are going in the wrong direction, it can be too late before you realise your folly. Hence, make sure you have a hedgehog principle in place before incorporating technology into a company that fits the principle. Do not do something because it is the talk of the town, but rather because it fits perfectly into your core competence.Â

Conclusion
The author argues that the most important step in this process is that a level 5 leader is at the helm of things. This is so because they naturally follow the remaining steps. Conversely, if you follow the remaining steps with humility, you will eventually become a level 5 leader. They are both interwined.Â
Once you have the right driver and right passengers in the appropriate seats, decide on the route you want to take. After that, stick to it religiously. Use technology as boosters to reach your destination faster. All the best for the ride that you will remember for the rest of your life.Â










