The 'Good is the Enemy of Great' Problem and the Core Research Question

Key Insight

The primary obstacle to achieving greatness is not badness, but goodness itself. Organizations, institutions, and individuals often fail to reach great heights because they settle for being merely good. For instance, good schools prevent the emergence of great schools, good government hinders great government, and many companies remain good, never becoming great, precisely because their current state is 'quite good'. This challenge was starkly highlighted by an observation that most truly great companies have 'always been great', implying that good companies rarely make the leap to greatness, which planted the seed for the study's central inquiry.

This observation led to the central research question: 'Can a good company become a great company, and if so, how?' After a five-year research effort, it was unequivocally confirmed that such transformations from good to great indeed occur. The study identified companies that transitioned from average results to sustained great results for at least fifteen years, with an average cumulative stock return 6.9 times the general market, far surpassing General Electric's 2.8 times market outperformance during 1985 to 2000. A hypothetical $1 investment in these good-to-great companies in 1965 would have multiplied 471 times by 2000, compared to a 56-fold increase in the market.

One striking example is Walgreens, which for over forty years was an average company. However, from December 31, 1975, to January 1, 2000, a $1 investment in Walgreens outperformed technology giant Intel by nearly two times, General Electric by nearly five times, Coca-Cola by nearly eight times, and the overall stock market by over fifteen times. This transformation from 'nothing special' to world-class performance, while industry peers like Eckerd did not, embodies the quest's essence. The principles discovered are considered 'timeless physics' of great organizations, applicable universally beyond business to any entity—schools, government, or non-profits—even amidst significant change, as demonstrated by Wells Fargo during the banking deregulation of the 1980s.