Jim Collins' new book Great by Choice (which he co-authors with Morten Hansen) made for a fun Thanksgiving break read. Susan had family in town last week and so I asked if I could review the book for her. If you enjoyed the book Good to Great then you will like this follow up. I enjoyed it more than his most recent book How the Mighty Fall...And Why Some Companies Never Give In, which we reviewed a few years ago.
The most poignant quote is in the Epilogue and the entire book disproves this idea:
"We sense a dangerous disease infecting our modern culture and eroding hope: an increasingly prevalent view that greatness owes more to circumstance, even luck, than to action and discipline - that what happens to us matters more than what we do."
One thing I've noticed about Collins' books is that his examples of great companies sound so simple. Duh, you should be disciplined. Duh, you shouldn't put all your eggs in one basket. Duh, you should hire the right people. But every example is backed up by extensive years of research and analysis. It makes me wonder - could it be that simple to be great?
Companies called "10Xers" (pronounced "ten-EX-ers") are identified. These are companies who outperformed their industry index by at least 10 times during the specified 20 year period. Here are surprises about 10Xers:
They're not more creative.
They're not more visionary.
They're not more charismatic.
They're not more ambitious.
They're not more blessed with luck.
They're not more risk seeking.
They're not more heroic.
They're not more prone to making big, bold moves.
But all 10Xers share these 3 core behaviors:
1. Fanatic Discipline
Weaving in a great example of Fanatic Discipline is the story of 2 teams of adventurers who, in 1911, set out to be the first people in modern history to reach the South Pole. One explorer used the "20 Mile March" where he over prepared, trained in multiple ways for years, carried additional supplies even though they weighed more and paced his team by stopping at a certain time even on good weather days so the team could rest. One explorer wasn't as successful because he used new and untested equipment, carried just enough supplies and pushed his team to exhaustion on good weather days.
The premise of the 20 Mile March is to create 2 kinds of discomfort:
1. The discomfort of unwavering commitment to high performance in difficult conditions.
2. The discomfort of holding back in good conditions. Good intentions do not count.
Companies such as Southwest Airlines, Stryker, Intel and Progressive Insurance are examples of how the 20 Mile March creates consistency within companies even in turbulent times.
2. Empirical Creativity
On the flip side of discipline is creativity. The 10X companies validate their creative ideas with empirical evidence. Collins and Hansen say to, "Fire bullets, then cannonballs." A bullet is a low cost, low risk test of the market. Once a bullet has hit the target then you fire calibrated cannonballs to take the market by storm.
A good example is Apple's iTunes and iPod for non-Mac computers. Neither were new market categories. Apple developed the iPod first as a better MP3 device than already existed. The next bullet was iTunes for the Mac. The next bullet was Apple's online music store. With cumulative proven success they were able to fire the calibrated cannonball: iTunes and iPod for non-Mac computers.
A bad example is Southwest Airline's comparison company, PSA. In 1968 PSA launched the cannonball called "Fly-Drive-Sleep." It seemed to make sense. People who use airlines will also need rental cars and hotel rooms. PSA moved into both the hotel and rental car market by signing 25-year leases on California hotels and buying a rental car company and expanding it to 20 locations with 2,000 cars. Instead of firing bullets and buying just one hotel or partnering with a rental car company to test out markets, PSA went big. "Fly-Drive-Sleep" lost money every year and was the beginning of many uncalibrated cannonballs that led to PSA's eventual demise.
3. Productive Paranoia
"As soon as there is life there is danger," is what Ralph Waldo Emerson once wrote. 10X companies know they cannot predict the future and so they prepare ahead of time, obsessively. Planning for the worst case scenario, contingency plans, determining what is out of their control and how to minimize exposure to such forces gave the 10Xers their advantage. Unexpectedly, 10X companies took fewer risks than their comparison companies yet produced superior results.
My favorite chapter:
The final chapter in the book was the most interesting. It takes an in depth look at luck and "Return on Luck (ROL)." Both the 10X companies and their comparison companies experienced good and bad luck. A single stroke of good luck cannot make a great company. But a single stroke of bad luck can create a catastrophic outcome. 10X companies had just as much bad luck as their comparison companies. But the fact that they had fanatic discipline, fired bullets and then cannonballs and planned for worst case scenarios helped them emerge from unlucky situations even stronger.
In the end, Collins and Hansen concur that it may not be simple to become great - but we are all free to become great by choice.