This is another case of my seeing a book discussed online and reaching out to the publisher for a copy, this time the good folks at HarperCollins. The concept behind Jim Collins and Morten T. Hansen's Great by Choice: Uncertainty, Chaos, and Luck--Why Some Thrive Despite Them All sounded sufficiently intriguing that I wanted to see what it was about – as I was aware that there were people and companies that had made their fortunes in very dark times, and I was hoping that I might find out some “secrets” of that sort of performance in the current economic abyss.Anyway, the main thrust of the book is based on a study that the authors did of companies that out-performed their competition by an order of magnitude, thus being the “10Xers” of the book's terminology. They started out with a list of 20,400 companies and narrowed that down, through 11 levels of filters, to a final group of seven … which had out-performed their industries anywhere from 11.2X all the way up to a whopping 550.4X (Southwest airlines, thriving in a time when their competitors where dropping left and right). The study looked at “dynastic eras” of the various companies, all ending in 2002, but starting as early as 1968 and as late as 1980, and each company is paired with a reference competitor. The list is about half well-known names (Microsoft, Intel, Progressive, Southwest), and half more obscure firms.
The “10Xers” are analyzed according to a formula graphed out on a triangle made out of four other triangles, each representing one typical behavior trait of these companies: “Fanatic Discipline”, “Empirical Creativity”, “Productive Paranoia”, and something called “Level 5 Ambition” (this was a concept arising from another study, and generally indicates leaders who are “incredibly ambitious, but their ambition is first and foremost for the cause, for the company, for the work, not themselves”). Great by Choice walks through these four traits, looking at the details of each.
In the “Fanatic Disciple” section, the authors introduce the concept of the “20 Mile March”, a regular and focused expenditure of effort to achieve specific goals over time, with the imagery tied into what is needed to successfully make a very long-distance trek.
What the researchers found surprising was that the 10X companies frequently “left money on the table”, not rushing after “low hanging fruit” like their competition did … they achieved their “20 mile” goals, and set up to reach the next 20 miles. This dedication enabled Progressive to achieve “underwriting profit” in 14 out of 16 years, and Southwest be profitable 30 out of 30 years.A good 20 Mile March has the following seven characteristics:
1. Clear performance markers.
2. Self-imposed constraints.
3. Appropriate to the specific enterprise.
4. Largely within the company's control to achieve.
5. A proper timeframe – long enough to manage, yet short enough to have teeth.
6. Imposed by the company upon itself.
7. Achieved with high consistency.
The concept used to illustrate the “Empirical Creativity” triangle is “Fire Bullets, Then Cannonballs” and deals with innovation. Oddly, the most successful companies turned out to not be the most innovative, but the ones whose major pushes were best targeted. The concept here of “bullets” are ventures that are low cost, low risk, and low distraction efforts that allow the companies to calibrate their approaches and only fire successful “cannonballs”. Everybody can come up with examples of “What were they thinking?” moments for major corporations, where some huge initiative went horribly wrong … those would be “misfired” cannonballs. Using small test cases to see what works avoids potentially disastrous expenditures on major projects. Again, the 10X companies were typically not the most innovative, but the ones who coupled creativity with discipline. Additionally, there appears to be a “threshold of innovation” in each industry, which a company needs to exceed to be successful, but, once past that line, additional innovation has little effect. Also, what sort of spending consists a “bullet” and what a “cannonball” is highly variable between industries … a publisher might put out a book in a new niche for a few thousand dollars, while an airline would be tying up millions in new aircraft.
Next comes “Productive Paranoia” and the concept of “Leading Above the Death Line” … this is illustrated by stories of successful Everest climbs, and deadly attempts made by as experienced climbers at the same time.
Most of these leaders focus heavily on worst-case scenarios and have plans in place for what they can do if these come to pass … like the expedition that was near the summit of Everest but opted to return to base-camp to avoid hazardous weather, because they could, having enough supplies and time to start over when the storm had passed.10xers remain productively paranoid in good times, recognizing that it's what they do before the storm comes that matters most. Since it's impossible to consistently predict specific disruptive events, they systematically build buffers and shock absorbers for dealing with unexpected events. …
10X companies took less risk than the comparison cases … {they} took risks, but … they bounded, managed, and avoided risks … shunned asymmetric risk, and steered away from uncontrollable risk. …
10X leaders remain obsessively focused on their objectives and hypervigilant about changes in their environment; they push for perfect execution and adjust to changing conditions...
Penultimately, there is “Level 5 Ambition”, with the illustrative idea of SMaC - “Specific, Methodical, and Consistent” … “A solid SMaC recipe is the operating code for turning strategic concepts into reality, a set of practices more enduring than mere tactics. Tactics change from situation to situation where SMaC practices can last for decades and apply across a wide range of circumstances.” Over the time-spans looked at in the study, the 10Xer companies changed their SMaC Recipes very little, ranging from 10-20% (over more than 30 years), while the comparison companies changed theirs anywhere from 55-70%. One's SMaC should only be amended when conditions truly demand it, and should be only done with the other three elements.
One last section does not appear on the triangle-of-triangles, this is “Return on Luck” which features a fascinating analysis of what role luck might play in the outcomes experienced by the 10X companies. The authors note:
It turns out that both the 10X and their comparison companies had roughly the same amount of “luck”, good and bad. Of course, not all luck is the same, a single instance of good luck is not likely to “make a company” in the long run, but a sufficiently disruptive bit of bad luck could destroy it. Generally speaking, the 10X companies were better prepared to weather bad luck events, and to not squander good luck when it came their way.We defined a luck event as one that meets three tests: (1) some significant aspect of the event occurs largely or entirely independent of the actions of the key actors in the enterprise, (2) the event has a potentially significant consequence (good or bad), and (3) the event has some element of unpredictability.
Great by Choice is a really remarkable book, which takes a look at the most successful businesses and digs down to the patterns that they have in common. How one might apply this in one's own life is another question, as much of the material here is based on large organizations (although many of the illustrative stories deal with explorers, etc. and how they exhibited similar traits to those outlined here) … but the often counter-intuitive results seen by the authors provide much food for thought. This has been out for about a year, but should certainly be at your local book vendor that carries business titles (although the online guys have it at around 1/3rd off). I don't usually recommend this sort of business book “to all and sundry”, but it's such an intriguing look at what is involved in the most successful ventures, that I think most people who are interested in cultural/societal studies would find this enticing as well.
