The following is a conversation between Jim Collins, Entrepreneurial Professor and author of Good to Great, Good to Great and the Social Sectors, and Turning the Flywheel, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer WNYM in New York City.
Jim Collins © www.toolshero.com
Denver: My next guest is the author or co-author of six best-selling books that have sold in total more than 10 million copies. Forbes Magazine selected him as one of “The 100 Greatest Living Business Minds.” And much to the good fortune of the social sector, he has spent considerable time researching and studying it. He is Jim Collins, an entrepreneurial professor, if you will, and the author of Good to Great, Good to Great and the Social Sectors, and his latest monograph, which is called Turning the Flywheel.
Good evening, Jim, and welcome to The Business of Giving!
Jim: It’s really a pleasure to be here with you, Denver, on the show.
Denver: Thank you. You operate a management lab in Boulder, Colorado and have carved out a really unique role in the world of business and social enterprise. Jim, how did you go from being a Stanford professor to this very distinctive calling?
Jim: It’s a kind of a circuitous journey. I was teaching entrepreneurship and small business at the Stanford Graduate School of Business, and I had had the great good fortune of mentors who had given me the opportunity to do that at a relatively young age. I was 30 when I began teaching there, and I had marvelous students. I have just always really been driven by curiosity and wanting to pursue really big questions, such as: What makes a great company or a great organization tick? What makes them built to last? And those kinds of questions would need to best be answered in really big, multi-year research projects.
And so I was getting started at Stanford. Jerry Porras, who was a great mentor, gave me this marvelous research method that we developed together, where we looked at kind of matched pairs of organizations – same situations, but different results – and asking what was different. Eventually, I came to the conclusion that I wanted to pursue a path that was not unlike a lot of the entrepreneurs that I’d studied. I always used to say to my students, “Hey, you don’t necessarily need to be at IBM to be in business. You could do your own.” And one day, my students were sort of saying, “Well, why do you need to be at a university to do really interesting research projects and to teach?” And I thought about that, and I thought, “You know, that’s a really interesting question. That’s a really good question.”
Denver: Touché to them.
Jim: Eventually, I decided to bet on my own research projects and step out and go from being a professor of entrepreneurship, if you will, to being an entrepreneurial professor on my own.
I think luck comes in many forms, but “Who Luck” is one of the best.
Denver: Let me pick up what you just said about Jerry Porras and the method because unlike many other business thinkers, Jim, your work has really endured. I talk to people, and they’ll speak about Good to Great as if it was published yesterday, and not nearly 20 years ago, and that’s probably because the principles therein are timeless. So, I’d be interested in learning a little bit more about that methodology and how you go about doing this work that leads to such enduring concepts.
Jim: Well, fabulous! Let me just take a quick moment on this because there is a method, and Jerry Porras, who was one of my great strokes of “Who Luck” – I think luck comes in many forms, but “Who Luck” is one of the best – was a senior professor when I was 30 years old and starting to teach at Stanford. We teamed up together to ask the question: What really separates those that go from start-ups to become enduring, great visionary companies? And the question was: How would you study that? And there were two elements of it.
The first was to realize that you can learn a lot from history, that you can find companies that became enduring, great companies. You can take, say, Walt Disney in his garage, and then go from his start-up all the way up to becoming the Disney that we have today. Or you could do that with a 3M; or you could do that with any number of kinds of companies, and they were all once start-ups. So you study them over the course of history, just like you’d study the history of the United States. And history is a great teacher because organizations evolve, right? There’s no single slice of time; you have to look at it step by step.
But then Jerry introduced this really important idea. So what we need to have is a control set. Now in science, you would do double-blind, randomized, placebo-controlled trials, but you can’t do that in management. But Jerry had the brilliant insight to say, “We could use the method where you go back and say, ‘At the birth of an industry, you essentially kind of have a randomized trial.’” You have pairs of companies that were in the same spot – same time, same opportunities, same resources, same moment in history – and then one became great, and the other did not, coming off of the same kind of circumstances, almost like twin studies. And Jerry said, “If we then not just look at what the successful ones share in common, but what they share in common that is different from the comparison set that didn’t become great, coming off the same circumstances, and you really focus on what was different, not just: What do the successful share in common? You will then see what the differentiating principles are that separate the enduring great from the others.”
And the key was – what Jerry really pushed us to do early on – was to say, “We’re not going to look for best practices of the moment. We are going to look for enduring principles that will always be true.” And it turns out they’re not even business principles. Because if you’re studying great companies to not-great companies, companies drop out. And what you’re really looking at is great versus not-great. So, when we talk about Level 5 Leadership, or we talk about Preserve the Core/Stimulate Progress, we talk about the Flywheel…those are not business ideas. Those are greatness ideas, which is why they migrated to the social sectors.
Denver: Fascinating! I guess the reason you did study companies is not because they were companies, it’s because there was data there that you were able to compare.
Jim: Exactly right. So my own self-perception is that while many in the world would see me as a business thinker or a business writer, I never saw myself that way. I saw myself as somebody who wanted to understand what would separate a truly great… and then potentially enduring enterprise of any type, business or non-business, and I needed a way to study it. And the beauty of business is by using that kind of matched pair method, it’s amazing amounts of data. You can get balance sheets, income statements, proxy reports going for 10-, 20-, 30-, 40-, 50 years, and it’s all normalized to certain types of reporting standards, so you have marvelous amounts of very good data from which to draw your conclusions.
Denver: Transcripts of conference calls with investors, everything in the world.
Jim: Exactly. And that’s why the work takes so long. People often ask, “Why does it take six years to do a research project?” And the reason is because you have to study everything from inception over the course of decades, and you read everything that’s ever been published by or about the company. And that just gives you–it’s massive. I mean, it can take three or four months just to process one case study. I’m working virtually full-time.
Denver: But that, of course, is one of the reasons your work is so enduring and so relevant, even as the world around us has apparently changed and evolved. Well, after you wrote Good to Great, you subsequently came out with a monograph titled Good to Great and the Social Sectors. Now, why did you believe that a separate monograph was needed for the social sector?
Jim: So, Denver, this was a kind of a surprise how it came about. It was a surprise to me. So, After Good to Great, which came after Built to Last – so there was Built to Last and then there was Good to Great, and we had these two pieces of work out there, and they had powerful principles within them – we noticed something fascinating at our research lab in Boulder. Our incoming correspondence increasingly was coming from non-business. We were getting emails and questions coming from symphony orchestras and K-12 schools and museums and healthcare systems and people in philanthropy.
And they came first by saying that they’d read the material and found it powerful, and I concluded that somewhere between 30% and 50% of the readership of Good to Great came from non-business. So that was point one. But then the second was they kept asking questions. They believed in the principles – Level 5, First Who, some of the things we’ll talk about – but they said, “We really want to know, Jim, what you think as to how those principles might apply in a different way when you step into the different dynamics of the social sectors?”
So I thought I’m going to take that on. I’ll just share with you something interesting. When I first went in to do it, I wrote an entire monograph on Good to Great and the Social Sectors, spent an entire year on it, sent it out to critical readers, many of whom were in the social sectors. And the feedback that came back – so I listened very closely to people – was I needed to throw it out and start over. And I literally threw out the entire thing and started over.
Running a major company is an order of magnitude easier and less complex than building a great social sector enterprise.
Denver: Why did they say that?
Jim: Because I made a mistake in the first version, and the later version really, really came from a different view. I came at it with thinking too much like a business person. One of the things I learned early on was if your primary grounding originally was in the world of teaching at a business school, working with companies and so forth, you need to come to the social sectors not with a sense of that you know; you need to come with a tremendous sense of humility– that you don’t know.
And then there was another thing that I learned from them, which is business is the easy case. Business is the easy case. Running a major company is an order of magnitude easier and less complex than building a great social sector enterprise.
Denver: Why is that?
Jim: And I didn’t understand that. And then once they taught me is that I need to go back and really think: How is it different? How is it harder?
Money in the business sector is both an input and an output. It’s both a means to success and a measure of success, and a fuel for success. But in the social sectors, money is not a definition of success and it shouldn’t be. Money is an input, but not an output.
Denver: How is it harder?
Jim: There’s multiple ways that it’s harder, so let’s hit a couple of them. One is, think about this: in business, you have these predefined definitions of success – return on invested capital, return on equity, return on assets, cash flow metrics. They’re widely accepted and they’re easily measurable. And also, money in the business sector is both an input and an output. It’s both a means to success and a measure of success, and a fuel for success. But in the social sectors, money is not a definition of success, and it shouldn’t be. Money is an input, but not an output.
So then, if you’re running a symphony orchestra, as my friend Tom Morris was teaching me about the Cleveland Symphony Orchestra when he was there, you have to be very rigorous in thinking: What does it mean for us to know that we are doing better? And if we just measure that in ticket sales, we’re missing the point. Are we playing a more beautiful Mahler Symphony? How would we know? Are we are able to take on a wider range of the repertoire? Are we able to bring people in to not just hear a great Beethoven Symphony 3, which, of course, still will give you goosebumps? Will people also take on difficult, dissonant 20th century music? Will they sit for a twelve-tone? And will they do it in a way where they walk away saying, “Thank you so much for exposing me to a musical experience that’s challenging.”
You have to think those are definitions of progress and success and results, and you have to think very hard about what that is. That’s a different level of thinking than, “Do we simply have a higher return on invested capital?”
The real question is not business versus social; that’s an unfortunate frame. Rather, the key difference is great versus good, great versus not great, great versus mediocre.
So, when you talk about the principle of Level 5 Leadership or the principle of a Culture of Discipline, a culture of discipline is not a principle of business; it is a principle of greatness…And you will find a culture of discipline in any great kind of organization, business or non-business, and you won’t find it in a mediocre one, business or non-business.
Denver: Your subhead to that monograph was “Why Business Thinking is Not the Answer,” which has to make it my favorite subtitle of any book that I’ve ever encountered because I hear that all the time – you need to run these organizations more like a business. And I think we found out a little bit that it’s just not that easy, and perhaps we have some evidence of that from some of the Silicon Valley guys who were going to fix education and try to intervene in a way which was much more like a business and really hit some walls, and recognize: it’s just not that simple. It’s a little bit more complex.
Jim: The reason I put that subtitle on there about “Why Business Thinking is Not the Answer” is that, first of all, that was a lesson I had to really learn, and why it took me a whole second year to rewrite the monograph through the lens of why business thinking is not the answer. And I want to thank my critical readers for really basically making me really embrace that and see it.
But what I also came to see is this: think about it this way. Most businesses are average by definition. Most businesses are average businesses. They’re not great. And so, if you just took the practices of average businesses and ported them to the social sectors, all you’re doing is exporting the practices of averageness. Why would you want to do that? The real question is not business versus social; that’s an unfortunate frame. Rather, the key difference is great versus good, great versus not great, great versus mediocre.
So, when you talk about the principle of Level 5 Leadership or the principle of a Culture of Discipline, a culture of discipline is not a principle of business; it is a principle of greatness. A great company will have a culture of discipline, but so will a great hospital really getting disciplined about: How do we know at lowering costs and increasing patient outcomes, we’re doing that in an increasingly different disciplined way? And you will find a culture of discipline in any great kind of organization, business or non-business, and you won’t find it in a mediocre one, business or non-business.
A Level 5 Leader is a leader who is first ambitious for and in leading in service to a cause that is bigger than they are.
Denver: That is a wonderful distinction. You’ve mentioned a couple times now Level 5 Leaders, and a social sector leader that you have great admiration for and probably you would consider to be Level 5 is Wendy Kopp. Tell our listeners what a Level 5 Leader is. And then, who is, and what makes her so exceptional?
Jim: Exactly. There are two things we can do with Level 5, but first, let’s teach it through the lens of Wendy Kopp who, full disclosure, is a friend. I admire her tremendously. I’ve known her for years.
So first, what is the essence of a Level 5 Leader? What we found in our research when we did Good to Great was we were looking at the good to great companies versus the comparisons and asking what’s different. And what we found is that both of the companies had leaders, but that the good to great companies, when they made that inflection leap, had these Level 5 Leaders, and the comparison companies had more egocentric leaders.
And what a Level 5 Leader is a leader who is first ambitious for and in leading in service to a cause that is bigger than they are, that’s number one. Then, they have this blend of kind of approach, which is of a personal humility combined with an indomitable will. And it’s this marvelous combination of they are humble enough to always learn, the humility to put themselves in service to cause, the humility to basically say, “I need to always be getting better. I don’t necessarily have all the answers. I am not the center of the universe. This is not about me. It’s not about how I look. It’s not about what I get or how famous I am.” That’s the personal humility. But the indomitable will is: “I will do anything, whatever it takes, for the cause that we are serving. That’s the 5.
Now, let’s look at Wendy Kopp. She’s coming out of Princeton. She writes her senior thesis on education; passionate, deep belief that every kid – first starting in this country, and now she’s worried about the whole world – every kid deserves to get to age 18 with a solid K-12 education, independent of the neighborhood in which you live or the family to which you are born, period. Full stop. No exception.
She takes that, and then she comes up with this idea to get people to want to give up at least two years of their lives in service, almost like being deployed, to teach in our most underserved schools in this country, from Harlem in the Bronx, to the Mississippi Delta, and the poorest parts of this country. She gets kids who have lots of opportunities in life to sign up to do this and then to have education part of their passion for life. The beauty of it is she does it with no power. See, this is what a Level 5 is able to do. James McGregor Burns said that wonderful thing, which is that “Leadership only exists if people follow when they have the freedom otherwise to not follow.”
And so, in a sense, you have to be like a Legislative Level 5, where you’re one of many who have pieces of power. No one has enough power by themselves to just make something happen, but a lot of people have enough negative power to stop things. So, what that means is you have to be almost like a great senator rather than a great president.
Denver: I had Aaron Hurst on the show, and he had a great line, Jim. He said that “You’ve never managed, really managed, until you’ve managed volunteers.”
Jim: Exactly. So here you have somebody who doesn’t have power to tell all these young people to sign up and to go into the schools, but what she has is the cause that draws them in to really dedicate themselves for that time. So, Wendy is a classic example of a Level 5.
And now there are many Level 5s, and one of the things you mentioned earlier about what’s more difficult about the social sectors versus the business sector, I came to see something interesting, which is there’s two types of 5s. There’s the Executive Level 5 and the Legislative Level 5.
The Executive Level 5 is the one who has enough power to just simply make things happen. If you’re Sam Walton at Walmart in 1986, and you decide that you want to move the company to be able to go into California, you can do so because you’re Sam, it’s your company; you have the concentrated executive power. That’s pretty easy.
But in the social sectors, as one of my friends who ran a major university put it, he said, “In my environment, I’m managing and leading a thousand points of no,” and so you think about the power is diffuse. And so, in a sense, you have to be like a Legislative Level 5, where you’re one of many who have pieces of power. No one has enough power by themselves to just make something happen, but a lot of people have enough negative power to stop things. So, what that means is you have to be almost like a great senator rather than a great president.
The leaders in the social sectors have more to teach business leaders about what true leadership is than the other way around.
Denver: I think that’s one of the reasons that a lot of business leaders who go into government have such a difficult time because they’re just not used to that pushback, or having to build that kind of a consensus.
It was funny. I had Tony Marx from the New York Public Library on the show recently, and he wanted to do something. He saw this kid up in the Bronx who was sitting outside a library, and he asked him why he was there after hours; and he said it was the only place he was able to get the internet because he didn’t have it in his house. He said he went back to the New York Public Library down at 42nd Street and was thinking on the way there, “What committees do I have to take this… run this by?” and had this delightful moment where he said, “No committees! I can actually do this!” So he surprised himself. So, it’s funny in terms of that’s what you need to do very often in the nonprofit sector. It’s a really difficult adjustment for guys and gals who have been running companies to go into this sector and realize that it’s more complicated to get things done than just by edict.
Jim: This question of if you don’t have enough, let’s say, there’s a hundred points of power that you could put on a power map, if you’re the CEO of a company, you may well have enough points of power to just simply – you don’t have to worry about that. But if you don’t have that, you have to somehow, instead of making the decision, you have to architect the conditions for the decision to happen. And that is a fundamentally very difficult task, which is why, in my view, and Peter Drucker said this many years ago but I came to the same conclusion looking at it, that the leaders in the social sectors have more to teach business leaders about what true leadership is than the other way around.
And the cost of capitulating to letting the wrong person sit in a seat for the sake of expediency so far exceeds letting the seat go unfilled until you find the right person. So, you should always exercise the discipline to leave a seat unfilled than to act too quickly and put the wrong person in it.
Denver: So interesting. You talked a moment ago about the First Who, Then What principle. And in speaking to a lot of leaders in the sector, boy, they’ll put as one of their top two or three challenges: recruiting and retaining talent. And we know it’s important to get the right people on the bus, but we’re in a competitive market right now. There are now purpose-driven businesses that are competing for people who really want to have meaning in their life, and they just can’t compete sometimes on salaries or benefits. What do they need to do to succeed in getting those right people in their organization?
Jim: Let’s talk very briefly about what the First Who principle is all about. The key word is the word “first.” The thing we found in our research is not that people just focused on making sure that they had the right talent. That wasn’t the finding. The finding was that they first and always focused on getting the right people – what we call the right people on the bus – before they even knew where the bus was going to go. And that everything in life is a question of: Are you going to come at a situation as a what question or as a who question?
So, First Who means if we do not have the discipline to take however long it takes to get the right person, and if we have to leave a seat unfilled, we will do so. That’s a discipline. The discipline of First Who is always to say, “It is always first about: get the right people, then figure everything else out.”
And so it’s interesting. Let me just share a personal version of how the shift from “First What” to “First Who” can happen.
Denver: Please do.
Jim: My wife, now we’ve been married 39 years, a number of years ago had a cancer incident. And being a data type person who tends to respond to the world by trying to understand it, I responded first by reading everything I could get my hands on about how cancer works. I’m reading about the molecular biology and DNA and RNA and different kinds of treatments and how cells mutate and all this kind of stuff as if that was going to be helpful.
And finally Joanne said to me, “Why don’t you read your own book?” And what she said was, “You’re spending too much time on the what. Don’t spend any time on the what. Don’t spend any time on what’s the treatment, what’s the schedule, what/how does the disease work. Why don’t, Jim, you focus on helping me get the right who. If we get the right oncologist, if we get the right surgeon, if we get the right radiology consultants, if we get the right people, we’re going to get the best answers. Why don’t you change where you put your time? Help me build the bus.”
Now, that’s a simple, personal example. But in everything – if you’re a leader of a nonprofit, if you’re a leader in government, if you’re a leader in a business, if you’re a leader in any walk of life – every chance you face a fork in the road, ask yourself: How can I change what seems to be a what question into a who question?
The second is our friend Tom Tierney. You and I both talked, we admire Tom tremendously.
Denver: of Bridgespan.
Jim: Bridgespan, and he also created this thing called Bridgestar, which is about people. Tom believes, having spent so much time in the sector, that, yes, it is always hard to lever where you are to get enough of the right people, but that doesn’t change the fact that people don’t spend enough time on focusing on getting the right people. And the cost of capitulating to letting the wrong person sit in a seat for the sake of expediency so far exceeds letting the seat go unfilled until you find the right person. So, you should always exercise the discipline to leave a seat unfilled than to act too quickly and put the wrong person in it.
Denver: A great practitioner of that would be Gail McGovern, who’s the CEO of the American Red Cross. She said she will limp along with a vacancy for however long it takes to get the right person in the seat, and she is really aware of the price you pay when you just try to fill it. And you get that pressure sometimes. It’s been open…she doesn’t care, “I’m going to get the right person there,” and it’s really worked out well.
Jim: I think that the critical thing for any leader building an enterprise is to, first of all, embrace that and second, to really exercise the discipline wherever you can.
We write in the monograph about Roger Briggs, who ran a science department at a public school here in Colorado. He really felt that the decision about whether a teacher gets tenure should shift from the default is no until the teacher proves they can be a great teacher, rather than the default is yes unless something terrible happens. And he, in building his science department, applied that. What happened is sometimes it would take a while for finally the right tenured seat to be filled, but once it was, then they were there. He would perpetuate those good decisions for a long time, and he built this marvelous little mini bus of a spectacular science department by exercising that discipline.
Denver: Let me ask you about Built to Last in the context of legacy organizations in the social sector. I’ve had an opportunity to speak to some of the CEOs of organizations that are 75- and 100- and 150 years old and even have gone to visit their offices. And I see some that are really embracing change and are moving along quite nicely as the environment and the world around them changes, and others that just seem to be stuck. They just won’t make the changes that they need, or they can’t. What is the difference between an organization that can do that and one that is just paralyzed?
Jim: So, first, just for folks who like to go back and find some of your shows, I think two really great examples of that in your show that this very conversation came up of folks who are doing as well were I believe, it’s Dan Weiss of the Metropolitan Museum and Simon Woods of Los Angeles Phil. In both of those cases, they were talking about one of the key principles that they were using their own words, but essentially, what we found in Built to Last.
So Built to Last asks the question “What separates a truly visionary organization?” …a truly great organization, not just over the course of one leadership cycle or a single decade, but multiple decades, through multiple generations of leaders and multiple generations of societal change, technological change, and so forth. And after six years of research, we essentially distilled it down to a couple of key principles.
The core key principle is this idea called Preserve the Core/Stimulate Progress. And as I was listening to both of those shows, I was really struck by they are really talking about Preserve the Core/Stimulate Progress, and you have to do both.
So one side is: you have a core set of values and a core reason for being. We’re going to put music in people’s ears that’s going to transform their emotions in their brain. We’re going to allow everybody to have an experience of some of the most extraordinary art in the world that could transform their view of everything. You have that sort of core sense and the principles that you live by that you will never change. That’s Preserves the Core.
But over the course of decades to centuries, the world changes and that brings us to the other side, which is all about Stimulate Progress. It’s a big Genius of the AND – Preserve the Core on one side. Stimulate Progress means “Well, we need to be thinking about –” I remember Simon talking about: we need to think about what kinds of people do we have in the orchestra, what kind of music do we play, how do we connect in with current types of technology, all these types of things– that’s all about stimulating progress. And the ones that do it well over time are living constantly in the Genius of the AND of Preserve the Core and Stimulate Progress.
Here’s the big point: people confuse core values and core purpose with operating practices, and what you have to do is to separate those. So let’s take the world of academia. There’s a core value of intellectual freedom of inquiry. That should never change. That’s Preserve the Core. But there’s the practice of academic tenure, which is you can’t get fired for what you think. Well, that’s a practice. Now, if some day, it turned out that the practice was no longer helpful, you have to be able to say, “No. We’re going to change the practice, and we’re going to keep the core value.”
So as these storied organizations – great museums, great orchestras, great universities, great foundations – evolve, they need to always be able to say, “We need to be very clear what are the values and what are merely the practices.” And they may look like sacred practices, but they are still practices, and therefore they can change.
Denver: And that is the Genius of the AND because I think so many folks live with Preserve the Core OR Stimulate Progress.
Jim: Exactly right. And the whole key to the concept is Preserve the Core ferociously, intensely, passionately, and at the same time, all the time relentlessly, passionately, energetically Stimulate Progress, both every day, all the time.
Denver: So well said. Another recent focus in the sector has been making big bets for social change. I think folks don’t want to mitigate a problem anymore, but they want to really solve it. This has been promoted by the likes of Bridgespan and the MacArthur Foundation. How should a social sector organization, and so importantly, a donor go about making an intelligent, big bet?
Jim: One of the things that we’ve learned in our research, and this is something that my colleague Morten Hansen and I found in what became the book Great By Choice where we were looking at who does well in really turbulent and disruptive environments, one of the things that that we found is this thing we call Bullets, then Cannonballs.
The idea that you fire bullets, which are small calibrated shots… like if you had a ship bearing down on you, you take a shot at the ship with a bullet and it misses, but you reset again and you fire another bullet, and it misses. And then you recalibrate and then “ping!” you hear the side of the ship. And then you take your gunpowder, and you put it in a big cannonball, and you fire the cannonball on the calibrated line of sight.
What we found was a lot of companies that struggled and failed is they fired uncalibrated cannonballs and they just splash in the water, and then they were out of gunpowder and they were in trouble, or they didn’t fire enough bullets to find new things that would work that would allow them to fire the cannonball. What we found, a real punch line in our work – and this is going to sound like heresy, I don’t mean it to – but we did not find that just being innovative, more innovated, separated the great companies from the others. That, we did not find. Everybody innovated. What we found was it was the ability to scale empirically-proven innovations, the ability to calibrate with a bullet, and then to scale it into a cannonball is what better separated the great winners than just the pure amount of innovation.
So now let’s take that over to the social sectors. If you think of all the experiments that are happening out there, say, what’s happening when somebody does something really great in a school, somebody does something really great in a small museum, somebody does something really interesting like the Ojai Music Festival, then the question is: How do you take that successful bullet and then scale it into a national cannonball?
That I think is the challenge that the social sectors in my view, and maybe many others have not yet done as well as you can, say, do inside a given organization. Inside a company, inside an organization, it’s easy to do. When you step outside into an entire sector, it becomes much more difficult.
I’d like to maybe even also suggest that there’s a really critical step. We just have the Turning the Flywheel monograph. You build a flywheel inside your own organization. And we can talk about that for a minute, but as my friend Kim Smith from NewSchools Venture Fund put it, but in the social sector, there’s also this thing called the Uber Flywheel, which is the flywheel of an entire movement, the flywheel of an entire sector, and somehow have you go from a flywheel that works well with a single organization, into building the Uber flywheel of, say, all of education or all of the arts, or all of homeless questions. That transition is enormously difficult and is still, I think, one of the opportunities for people to solve that problem. I don’t think it’s been solved all that well yet.
Denver: Yes. And I think that’s one of the great distinctions you make between the business sector and the social sector. In the business, you’re supposed to compete and try to beat the other guys; whereas in the social sector, you’re trying to solve a problem that affects thousands, if not millions of people. Well, let’s turn to that new monograph Turning the Flywheel. What a great image, Jim. Describe it for us.
Jim: The Flywheel principle came from Good To Great, and the idea is this: it is that if you really study how a good to great transition happens, looking in from the outside, it can look like it was this instantaneous breakthrough and something leapt from good to great and there it was. Wow! Aha!
But if you really study how it actually happens, it’s like turning a giant heavy flywheel. You start pushing in an intelligent and consistent direction, and after a lot of effort, you get one giant, slow, creaky turn. And then you stay in that direction, and you eventually get 2 turns. And you keep pushing and you get 4 turns, and you keep pushing and you get 8 and 16 and 32 and 100 and 1,000 and 10,000 and then a million. And that flywheel’s got all this cumulative momentum, whoosh, around it goes and boom! There’s this breakthrough.
And if you would look at it and say, “Well, wait a minute. What was the one big push that made it go?” It’s kind of a nonsense question because it’s been push upon push, creating cumulative effect over time. That’s the basic flywheel principle: you need to come at it as a flywheel, not an event.
And if you think about what Amazon has done over the last two decades, it is in many ways building that flywheel. And notice it’s not a single event, it’s not a single moment, it’s not a single “Aha!” It is a massive, cumulative momentum machine.
Denver: Well, we’re going to talk about a couple of examples in the social sector, but I think a wonderful way to describe it, and something that all listeners can relate to, and a company that you’ve worked with, is Amazon. Why don’t you just describe to us the design of their flywheel?
Jim: After Good to Great was published, just right after it was published, I was asked to go up to Amazon in Seattle in 2001. It was the middle of the wake of the dotcom bust. And I met with the board and the executive team and so forth, and all I did was teach the ideas. I can’t really take credit for in any way for their great flywheel. Because what they did was, they took that flywheel principle that came from Good to Great and they said, “We’re going to make the flywheel our own.” That’s the wonderful thing about great students, is they can take what you teach and make it even better, and Amazon did.
And so, this is where the Turning the Flywheel monograph kind of got its start. It was how Amazon took the principle and really extended it. So what they did was they said, “You need to know how your flywheel turns. Think about it this way. Here you go. It starts – think of it as a circle, goes around and each component drives the next component.”
So top of the flywheel, lower prices on more offerings. And if you do that, that’s going to increase customer visits to the Amazon site. And if you do that, then that’s going to attract third-party sellers. And then if you do that, that’s going to allow you to extend the store and expand distribution. And if you do that, you’re going to grow revenues per fixed costs. And if you do that, that’s going to allow you to lower prices on more stuff, which allows you to increase customer visits, attract third-party sellers, expand the storage and distribution, grow revenues per fixed cost, and around yet again.
And if you think about what Amazon has done over the last two decades, it is in many ways building that flywheel. And notice it’s not a single event, it’s not a single moment, it’s not a single “Aha!” It is a massive, cumulative momentum machine.
Essentially, a flywheel is not a list of aspirations drawn as a circle, or a list of action steps drawn as a circle. It’s capturing the underlying logic of momentum, that if we do A, then that’s going to inevitably lead to B, and if we do B really well, it will inevitably lead to C, and around back to the top.
Denver: What I did notice, too, is that there is an incredible underlying logic to it all because every one of those things you said made the next step almost inevitable.
Jim: Exactly. That’s the key. A flywheel is not – this is what something people really need to grasp and part of why I wrote this new monograph because I found people working with a flywheel but not getting it right. I wanted to help them get it right. Essentially, a flywheel is not a list of aspirations drawn as a circle, or a list of action steps drawn as a circle. It’s capturing the underlying logic of momentum, that if we do A, then that’s going to inevitably lead to B, and if we do B really well, it will inevitably lead to C and around back to the top. And if you have somewhere between four and six components to reinforce like that, and you do them really well and you understand that architecture, it can create tremendous momentum.
Denver: For sure. Well, let’s turn to the social sector. One of the most admired healthcare institutions in the world is the Cleveland Clinic. You include that in your book. Walk us through their flywheel.
Jim: The Cleveland Clinic is a marvelous example of a flywheel. It goes all the way back to the early part of the 20th century when some physicians went off to World War I, and what they were struck by is the collaborative nature of dealing with casualties on the battlefield. When people come in off the battlefield, you don’t say, “Oh, that’s not my specialty” or “What’s my bonus going to be on this?” or “What’s my reimbursement rate like?” You want to save lives, and you want to get people back to the people that they love. Everybody would unify together to get the job done.
And they came back and they said, “We want to create a healthcare organization,”– and they were from Cleveland– that captures that same spirit. And so they built this thing where they said, “We need physicians who are going to be ones who can work collaboratively, who aren’t going to be worried about what their reimbursement rate is or any of that. They want to join the cause of ‘We’re going to do great medical work together collaboratively to get stuff done.”
So their flywheel starts with: Get the right medical professionals. It’s: Get people who can do that. And if we get the right professionals, then that’s going to allow us to create a culture of collaboration for patient-centered care, that medical professionals who want to work together for the benefit of the patient will create that culture. And if we create that culture, then we can’t help but work across specialties for the best health outcomes because that’s how they happen. And if we do that well, then we can’t help but attract patients who want to come here because we do that so well and we’re going to get them from all over the world. And if we do that, that’s going to fuel our resource engine. We’re going to be able to fund this machine to do better work. And if we do that, then we can invest in the best facilities and research and getting more of the right people, which then brings us right back to the top of the flywheel: fill the system with the right medical professionals and drive that flywheel around. That flywheel, in some form or another, has been turning for a hundred years.
Denver: So when I first heard about the flywheel, I initially thought : This is for CEOs and those at the top of the organization, but that actually is not the case. And you give a wonderful example from a public school principal in Kansas. Now, share that with us.
Jim: Denver, this is one of the most exciting things for me. So I’ve been doing this research on K-12 education because I share with Wendy Kopp this just deep belief that as a kid in this country, the quality of your education- by the time you’re age 18- should have nothing to do with where you were born, and so I really wanted to study how leaders created great schools in difficult settings.
And so I was doing this research, and I came across that a lot of them built flywheels inside their schools. One of them that I put in the monograph is Ware Elementary School, a public elementary school in rural Kansas on a military base. What this school principal did, Deb Gustafson, she’s been turning this flywheel for now almost two decades.
When she came in, the kids were not reading at the levels that they needed to, and she just felt this sense of moral responsibility. You and I both admire Michael J. Fox, and how he took on the Parkinson’s challenge of like “I have a moral responsibility to do something, not just to deal with it myself, but to help others.” And she felt this moral sense of responsibility that, “No, the kids have got to get their reading by Grade three. Otherwise, we have failed them. The kids haven’t failed; we will have failed.” But then she said, “How am I going to do this in this rural military base area where I’ve got a lot of turnover; I don’t have access to lots of talent.” And so, she said, “My flywheel is going to key off of one thing. I can’t get enough experienced teachers, but I can find passionate young teachers.”
So she says, “Start on my flywheel. I want to select teachers who are infused with passion. And if they’re infused with passion, they’re going to want to learn from others in the building who already know how to teach. So that’s going to allow us to build these collaborative improvement teams. And if you’ve got those collaborative improvement teams working really well, then that’s going to drive them to say ‘How are we doing?’ and we’re going to assess our student progress early and often. And if we do that, and we really do it student by student, we’re eventually going to turn that into achieving learning in every single kid. And then if we do that, that’s going to enhance our reputation as a school and as a great place to teach. And if we enhance our reputation as a great place to teach, that’s going to allow more people coming from places like Kansas State University who are going to want to start their teaching career to say, ‘I want to go there because that’s got a great reputation as a great place to teach.’ We will replenish the passionate teacher pipeline and then select more of those teachers, and around the flywheel will go.”
And here’s the beauty: she didn’t sit around and wait for, “Gosh. I’m going to wait for education reform to fix education.” She just said, “I have a responsibility for my kids and my school, and I am going to do something about it.” And she built a flywheel.
Denver: And she’s got incredible results.
Jim: She absolutely did. She got those reading rates up from something in the 30% to pretty close to 100%, and she stayed there. She’s been on this flywheel now for coming up on two decades.
The flywheel should be an empirical exercise, not a theoretical exercise.
Denver: So, let’s say I’m with a nonprofit organization, and I’m listening to you, and I’m really interested. The question I would have is: Where do I start the flywheel? How do I determine the starting point? How do you do that?
Jim: It sort of depends on where you are in the journey. But basically, the flywheel should be an empirical exercise, not a theoretical exercise. What I always like to suggest people do is if they’re not a startup – startup, then you may still, maybe want to learn, just almost copy the best of a flywheel from someone else – but if you’ve got some experience with your folks, with your people, make a list of your significant successes of things that have been working and then that could be repeated. And then also make a list of disappointments, like “What has not worked?” So you have your own sort of set of empirical experiences.
And then if you say, “Well, okay. If we really look at this, what flywheel could best explain what actually works and what doesn’t work?” So you essentially build up from your successes and failures to then impute what the flywheel at its best actually is.
But one of the really critical questions you always have to ask is “Where does the flywheel start, even though it repeats?” Remember, Amazon started with lower prices, that’s an economic flywheel. Cleveland Clinic and Ware Elementary started with getting the right people. Intel starts with making the right chips. It’s an innovation flywheel.
And so the key is then to say, “What’s really the essence of our flywheel? Is it going to be data? Is it going to be maybe a knowledge about disease? Is it going to be a certain type of person?” And one of the big debates to have with your team is: What should be the starting point of our flywheel because it’s both signaling and conceptual clarity both.
Denver: Can you extend a flywheel?
Jim: Well, that’s one of the wonderful things about flywheels, is that a flywheel is not just kind of a specific arena. It can be something that allows you to extend into new areas. So let’s just go back to the Cleveland Clinic, when I spoke about earlier.
Cleveland Clinic started out – it really became known for what it did in heart and vascular. But as it began to expand and gain more capabilities, it began to move into other arenas of health delivery and health improvement, and wellness and being and so forth as it began to extend. And here’s the key: the underlying architecture of the flywheel – get the right people in there, work in a collaborative environment, work across specialties, solve the patient problems, do it in a way that brings in the resource engine, etcetera – all that’s still the same, but they’ve been able to extend, and they’ve even been able to extend outside of Cleveland to places like Abu Dhabi and other places, because the flywheel remains intact; but you were able to expand based upon that flywheel architecture
Denver: One last question about the flywheel. Can you have a personal flywheel, and if you can, what would yours be?
Jim: Yes. It’s very interesting. I thought about this because people started to ask me what’s my own flywheel, but I have had one for a very long time. It goes all the way back to when I was 30. I’m 61 so I’ve been on the flywheel for about 31 years. My flywheel begins with curiosity. That’s what really motivates me. I’m just a really curious person.
My flywheel, the curiosity, then inevitably leads me to want to ask big questions. And if I ask big questions, then I have to want to answer them with rigorous research. I don’t want to just have an opinion; I want to have research. And if I do rigorous research, that’s going to lead to insights like Preserve the Core/ Stimulate Progress, and Level 5 Leaders and so forth, and be able to put those in a conceptual wrapping paper that people will grab them. And then if I do that, then I can’t help but want to share them, to teach them, to disseminate them, like our conversation right now. I love sharing the ideas; I’m a teacher at heart, I want to share them. And if I share them, well then, that has impact on the world. And that impact on the world translates into ultimately being able to fund because people will support the work because they bought a lot of books. But I never did this to sell books; I did this to answer questions. But the books then feed the next questions and the next piece of research, which then I channel right back in to doing the next set of good questions, so that I can continue the flywheel of curiosity. Mine is all about questions, insights, and teaching.
…be interested, and interesting things will happen.
I think the art of a good question, first, is you’re really present. You’re really listening. You’re there with the other person or the other people. Then, the second is: A really good question is one where you don’t know the answer when you ask it. I mean, for me, if there isn’t any real curiosity in the question, then it’s not really something where there’s a real conversation.
Denver: Well, let me pick up on that because I love the curiosity, and I love the questions. And it’s no surprise that when you advise someone, you don’t provide them with answers, but you’re going to pepper them with questions, more like an executive coach, I think, than a consultant. And I believe that asking the right question has to be one of the more underappreciated skills in the world. Now, this certainly may not be one, but what makes for a good question?
Jim: Ooh, boy. First of all, I agree with you completely about questions, and maybe just even zoom, step out on this, about how profound it is to change from an answer orientation to a question orientation.
I share this story at the beginning of the Social Sectors monograph, but a profound moment in my life was when the great thinker and wise man John Gardner, who’d been Secretary of Health, Education, and Welfare in the Johnson administration and founder of Common Cause. He was a senior emeritus professor down the hall from me at Stanford when I was 30. One day, I was in his office and he looked at me and he said, “Jim, it occurs to me you spend way too much time trying to be interesting. Why don’t you invest more time in being interested?” It’s one of those things where a great teacher changes your life in 30 seconds. And I walked away from that thinking “Wow. I’m going to try to change that.”
And so, I think that was a place that activated the desire for questions, like be interested, and interesting things will happen. Then over time, I learned I constantly refined the pursuit of questions, asking the right questions. And I think the essence of a really good question begins first with listening. Because you want to be really listening, and then you also want to be able to say – and by the way, it’s more tiring. Here’s an interesting little factoid: I’ve noticed that when I’m tired, if I’m sleep-deprived, for example, or exhausted or something, I will ask fewer questions and I will say more things. Why is that? Well because actually listening and asking questions is much harder than saying something.
And so, I think the art of a good question, first, is you’re really present. You’re really listening. You’re there with the other person or the other people. Then, the second is: A really good question is one where you don’t know the answer when you ask it. I mean, for me, if there isn’t any real curiosity in the question, then it’s not really something where there’s a real conversation. Now, some questions you ask to lead someone somewhere because you really want to get them to understand something, but sometimes you really want to say like, “Can you help me understand that?” or “Tell me about this person.” Or “I’m really curious what you learned from so-and-so.” Those are questions that open conversations.
And when I meet someone, I always like to start with something to be interested about them. What I found with that is: conversation is always at its best if you’re interested in them first, and then an interesting conversation will happen.
What I have found is that if you ask people really good questions, it accelerates a conversation and accelerates their insight.
Denver: I agree. Active listening really means you’re not thinking about what you’re going to say next exactly, and it’s also trusting that whatever question may come next, it will take care of itself through the act of listening instead of having to be prepared for “After he says this, I’m going here.”
Jim: Exactly. And sometimes when I prepare for what I call a “lab session,” I don’t do consulting in any traditional sense, but people will bring like an executive group or maybe gatherings of CEOs or whatever to Boulder, and we call them “dialogue sessions” because I basically ask questions. What I have found is that if you ask people really good questions, it accelerates a conversation and accelerates their insight. And sometimes you ask a question, and then you don’t say anything for 30 minutes.
Denver: Right. Well, let me tell you something I’m interested in, and that’s how you communicate your ideas and concepts with such vivid imagery. I mean, we have the Hedgehog concept, the 20-Mile March, time tellers verse clock builders, the Flywheel effect, for goodness sake, and others. It’s a really a great way to teach and provide stickiness to these ideas. How did this get started with you, Jim? And where do you come up with these ideas?
Jim: The idea is, first, just to be very clear, I never confuse the communication of an idea with the discovery of an idea. So the first thing is you’ve got to do your research or do your work so that the ideas that you’re communicating are really grounded in something where you have confidence, that what you’re teaching, like Preserve the Core/Stimulate Progress, or the Flywheel effect, or be a clock builder, Do More Clock Building, Less Time Telling – that they have years of research behind them.
But then you have this interesting question, which is “How do you get somebody to really engage with an idea?” And this was something that Joanne taught me. She had done some work on the question of which ideas tend to have impact more than others And so you have to have the ideas from the research, but she taught me about this thing about wrapping and unwrapping ideas, where she said, “Look. If I say to you ‘Do you have leaders?’ Well, you’ll say, ‘Well, we have leaders’ but we don’t even know if we’re talking about the same thing. If I say to you, ‘Do you have Level 5 Leaders?’ Now, you have to stop. Now, I’ve given you a package and that package is wrapped. Its wrapping paper is Level 5 Leadership. And you have to now unwrap this and say, ‘Well, what is Level 5?’ And ‘How’s 5 different than a 4?’ and ‘What does that mean? What’s the concept behind it?’ And then you unwrap it like unwrapping a gift, and then you rewrap it. And now you have the idea.” And that I learned from Joanne. She really taught me how to do that.
And then the second thing is this: I always think about what’s the right conceptual vehicle for a concept. So sometimes, a vehicle is like a stage process. When I studied how companies fall Five Stages of Decline, it’s a stage concept. But like Preserve the Core/Stimulate Progress, Jerry and I talked a long time about what kind of concept. It’s a dialectic-like thesis, antithesis, synthesis. It’s a dialectic concept. Level 5 is like Maslow’s hierarchy: Level 1, level 2, level 3, level 4, level 5, and you move to the progression.
So what I’ve learned is that you really have to always ask: What’s the right conceptual vessel, equation, analogy, dialectic, stage, hierarchy, Venn diagram… could be a mathematical equation. What’s the conceptual vehicle that best captures this concept, and then what’s the wrapping paper that will help people engage with it?
Denver: And that takes creativity. So, what stimulates your creativity? What kind of inputs?
Jim: It’s funny. So part of it is I’m just kind of fanatic about creative hours, and as people who know, we have this concept called the 20-Mile March, which is you set out like you’re walking across the United States, and you have to do at least 20 miles a day, every day, and they eventually get to the other side of the country. It’s a principle that came out of the Great By Choice research with Morten. But I’ve always had a 20-Mile March, which is I measure my creative hours every day. I basically ask how many creative hours did I get? To me, a creative hour is anything that contributes directly to something that might be a new idea or a new creation that could be replicable.
And so, at the end of every day, I put in a spreadsheet how many creative hours I got that day. It can be zero, it could be eight; It’s usually somewhere in between. But every 365-day cycle such as today to 365 days ago, has to be above a thousand hours. I actually rigorously hold myself to account that I have to get a thousand creative hours every 365-day cycle for 50 years without missing. I manage my life and my time that way, so therefore I manage my commitments very carefully to leave lots of vessel time for creative time.
The second is that I find it’s always a combination of research. I love to read way outside my field. I just finished taking a course on the History of the Black Death and the 1300s. I mean, I don’t know what that has to do with anything I’m studying except it stimulates ideas. I love to read voraciously. I love conversation. You and I had a conversation before we began today about some people that we both admire and what we learn from that. And then the research itself.
And a lot of it is: you’re always listening for something, you’re processing, you’re processing you’re processing. And then something pops out of your mouth, and you go, “Wow. That’s an interesting idea.” And it’s like you grab it before it disappears, and you write it down. I keep on my iPad, I have a little thing called creative insights, and anytime something occurs to me –I’ll share with you one. I was doing a dialogue session with a group of folks from outside this country. I challenged them to work on their flywheel, and then we moved to challenging them to think about their own 20-Mile March, and I had this insight that I hadn’t had before. The best 20-Mile Marches connect to the very top component of the flywheel. I didn’t know that, and I mean, even though I developed the concepts, in that session, there was this flash of “aha!” and now forever, I have that understanding.
Denver: Well, I hope you don’t mind me saying this, Jim, but you are a bit of a freak. You realize that?
Jim: I am, actually. I’m so curious that I kind of can’t help but be. And I so love sharing and teaching the ideas that I can’t help but be. I’m really a very fortunate person because I stumbled on these questions of what makes a great organization, a great company, a great enterprise tick, and they occupied me for 30 years.
I’m moving on to new questions now, but for my next 30 years, if I’m lucky enough health-wise to be granted another 30 years; my role model in many ways was Peter Drucker and people like John Gardner, and they had a really long run. And I hope to be just as freaky for the next 30, with also integrating in some other interesting artistic adventures and so forth. But I get up, and I just love the journey.
Denver: A great story you have about Peter Drucker is that in his mid-60s, he had written a bunch of books, and you would think that was about it, but he wasn’t even close to being done, correct?
Jim: I was really lucky because Peter was almost exactly 50 years older than me. I was born in 1958, he was born in 1909. I went down and visited him when I was 36, just at the time I was leaving to go off on my own to set up my own research path and to be an entrepreneurial professor. I asked Peter on that day – he was 86 – I said, “Which of your 26 books are you most proud of?” And he said, “The next one.” He wrote 10 more.
And I have—I’m literally looking at it right now—I have a picture of all of Peter’s books based on the year that he laid out sequentially, on the year that he wrote them. It starts with the End of Economic Man and goes all the way to the end. When I was asked to give the keynote for Drucker’s centennial… He had died a few years earlier, but at Claremont, at the Drucker Foundation, I looked at the bookshelf and I asked “Where was he at age 65 on this shelf?” The answer was he was one-third of the way across the shelf at age 65. He had two-thirds of his life’s writings left to go when he was 65 years old, and I have that picture. I’m 61, and so I keep a little note to myself that’s kind of around 25%, that is: You are here.
Denver: Well, what an inspirational note to close on. Other than this, what are you going to do for the next 30 years? What’s got you curious now? What are you currently working on?
Jim: I’m turning my attention to larger questions. I feel that the 30 years of work on what makes great companies tick, I will always teach those ideas. What makes great enterprises and the social sector tick through that… I will always teach those ideas. But I think my core research on that is coming to a close. I’m now turning to the question of I did a project on K-12… not sure what I’m going to do exactly with that yet, but the big one is the question of self-renewal inspired by John Gardner. I’m looking at that question about why some people do that really well over the long course of time. People like Peter, people like John, and others.
But in the end, before I’m done, if I’m granted health-wise, I think I understand organizational renewal really well. What I really, in the end, love to have is a three-layered cake of a contribution: individual self-renewal, organizational self-renewal, and societal renewal. And if I could before I’m done contribute insight on all three layers and how they interrelate – individual renewal, organizational renewal and societal renewal – I feel that I will have done perhaps something useful.
Denver: Well, listening to you, you certainly know you have that fire in the belly. Well, Jim Collins, entrepreneurial professor and author of Good to Great and the Social Sectors as well as Turning the Flywheel, among other books, I want to thank you so much for being here this evening. If people are interested in learning more about some of these concepts, tell us about your website and what visitors are going to find there.
Jim: It’s jimcollins.com. Everything there is freely available for everyone. It’s all built around the concepts. I think of it as kind of cyber office hours where you can come and hang out with the entrepreneurial professor and learn.
Denver: Well, Jim, thanks for being here. It was a real pleasure and privilege to have you on the program.
Jim: Thank you! I’ve really enjoyed it.
Denver: I’ll be back with more of The Business of Giving right after this.
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at www.facebook.com/businessofgiving.