About the book
I just the love Mr. Jim Collins and his research team has conducted. No man on earth has made as much as Mr. Collins to help leaders to stay on track. The current business systems wouldn’t be the same without his insights, creative writings and evidence based analysis. We can easily promote Jim Collins to the same category as Peter Drucker.
“One should… be able to see that things are hopeless and yet be determined to make them otherwise.” —F. Scott Fitzgerald
What are the key learnings?
Key question… “What does it take to build a great company?”
This is the recipe…. “Bill Gates didn’t just get a lucky break and cash in his chips. He kept pushing, driving, working:
1) staying on a 20 Mile March;
2) firing first bullets, then big calibrated cannonballs;
3) exercising productive paranoia to avoid the Death Line;
4) developing and amending a SMaC recipe;
5) hiring great people;
6) building a culture of discipline; never deviating from his monomaniacal focus—and sustained his efforts for more than two decades.”
1 THRIVING IN UNCERTAINTY
Meaning of the book…. “All of this led us to a simple question: Why do some companies thrive in uncertainty, even chaos, and others do not? We began the nine-year research project behind this book in 2002, when America awoke from its false sense of stability, safety, and wealth entitlement.”
“We selected on performance plus environment for two reasons:
1) First, we believe the future will remain unpredictable and the world unstable for the rest of our lives, and we wanted to understand the factors that distinguish great organizations, those that prevail against extreme odds, in such environments.
2) Second, by looking at the best companies and their leaders in extreme environments, we gain insights that might otherwise remain hidden when studying leaders in more tranquil settings.”
FINDING THE 10X CASES
“We spent the first year of our efforts identifying the primary study set of 10X cases, searching for historical cases that met three basic tests:
1) The enterprise sustained truly spectacular results for an era of 15 + years relative to the general stock market and relative to its industry.
2) The enterprise achieved these results in a particularly turbulent environment, full of events that were uncontrollable, fast-moving, uncertain, and potentially harmful.
3) The enterprise began its rise to greatness from a position of vulnerability, being young and/ or small at the start of its 10X journey.
The crucial question is “What did the great companies share in common that distinguished them from their direct comparisons?”
Leaders…. Entrenched myth: Successful leaders in a turbulent world are bold, risk-seeking visionaries. Contrary finding: The best leaders we studied did not have a visionary ability to predict the future. They observed what worked, figured out why it worked, and built upon proven foundations.
They were not:
· more risk taking,
· bolder,
· more visionary, and
· more creative than the comparisons.
They were:
· more disciplined,
· more empirical, and
· more paranoid.
Innovation…. “Entrenched myth: Innovation distinguishes 10X companies in a fast-moving, uncertain, and chaotic world. Contrary finding: To our surprise, no. Yes, the 10X cases innovated, a lot. But the evidence does not support the premise that 10X companies will necessarily be more innovative than their less successful comparisons; and in some surprise cases, the 10X cases were less innovative. Innovation by itself turns out not to be the trump card we expected; more important is the ability to scale innovation, to blend creativity with discipline.”
Speed….. “Entrenched myth: A threat-filled world favors the speedy; you’re either the quick or the dead. Contrary finding: The idea that leading in a “fast world” always requires “fast decisions” and “fast action”—and that we should embrace an overall ethos of “Fast! Fast! Fast!”—is a good way to get killed. 10X leaders figure out when to go fast, and when not to.”
Change…. “Entrenched myth: Radical change on the outside requires radical change on the inside. Contrary finding: The 10X cases changed less in reaction to their changing world than the comparison cases. Just because your environment is rocked by dramatic change does not mean that you should inflict radical change upon yourself.”
Luck…. “Entrenched myth: Great enterprises with 10X success have a lot better luck. Contrary finding: The 10X companies did not generally have more luck than the comparisons. Both sets had luck—lots of luck, both good and bad—in comparable amounts. The critical question is not whether you’ll have luck, but what you do with the luck that you get.”
Peter Drucker taught, “the best—perhaps even the only—way to predict the future is to create it.
2 10XERS
“Victory awaits him who has everything in order—luck people call it. Defeat is certain for him who has neglected to take the necessary precautions in time; this is called bad luck.” —Roald Amundsen, The South Pole
“Amundsen’s philosophy: You prepare with intensity, all the time, so that when conditions turn against you, you can draw from a deep reservoir of strength. And equally, you prepare so that when conditions turn in your favor, you can strike hard.”
“Unlike Scott, Amundsen systematically built enormous buffers for unforeseen events.”
“A single detail aptly highlights the difference in their approaches: Scott brought one thermometer for a key altitude-measurement device, and he exploded in “an outburst of wrath and consequence” when it broke; Amundsen brought four such thermometers to cover for accidents.”
DIFFERENT BEHAVIORS, NOT DIFFERENT CIRCUMSTANCES
“We’re not saying that 10Xers lacked creative intensity, ferocious ambition, or the courage to bet big. They displayed all these traits, but so did their less successful comparisons. So then, how did the 10Xers distinguish themselves?
1) Control: First, 10Xers embrace a paradox of control and non-control. On the one hand, 10Xers understand that they face continuous uncertainty and that they cannot control, and cannot accurately predict, significant aspects of the world around them.
2) Fate: On the other hand, 10Xers reject the idea that forces outside their control or chance events will determine their results; they accept full responsibility for their own fate.
10Xers then bring this idea to life by a triad of core behaviours:
· Fanatic discipline,
· Empirical creativity, and
· Productive paranoia.
FANATIC DISCIPLINE
“Both Kelleher and Lewis, like all the 10Xers we studied, were nonconformists in the best sense. They started with values, purpose, long-term goals, and severe performance standards; and they had the fanatic discipline to adhere to them.”
(if you’re a hammer, everything you see looks like a nail).
EMPIRICAL CREATIVITY
Like scientists….. “CEOs of the 10Xers were like scientists. Working based on the data and evidence.”
“Social psychology research indicates that at times of uncertainty, most people look to other people—authority figures, peers, group norms—for their primary cues about how to proceed.
10Xers, in contrast, do not look to conventional wisdom to set their course during times of uncertainty, nor do they primarily look to what other people do, or to what pundits and experts say they should do. They look primarily to empirical evidence.”
“But the 10Xers had a much deeper empirical foundation for their decisions and actions, which gave them well-founded confidence and bounded their risk. The 10Xers don’t favor analysis over action; they favor empiricism as the foundation for decisive action.”
PRODUCTIVE PARANOIA
“Like Amundsen with his huge supply buffers, 10Xers maintain a conservative financial position, squirreling away cash to protect against unforeseen disruptions.”
“In short, we found no consistent pattern in the backgrounds of 10Xers relative to the comparison leaders.”
3 20 MILE MARCH
“The 20 Mile March is more than a philosophy. It’s about having concrete, clear, intelligent, and rigorously pursued performance mechanisms that keep you on track.”
“The 20 Mile March creates two types of self-imposed discomfort:
(1) the discomfort of unwavering commitment to high performance in difficult conditions, and
(2) the discomfort of holding back in good conditions.”
Important…. “We found that every 10X company exemplified the 20 Mile March principle during the era we studied.”
WHY 20 MILE MARCHERS WIN?
“20 Mile Marching helps turn the odds in your favor for three reasons:
1. Confidence: It builds confidence in your ability to perform well in adverse circumstances.
2. Prevent: It reduces the likelihood of catastrophe when you’re hit by turbulent disruption.
3. Self-control: It helps you exert self-control in an out-of-control environment.”
“Having a clear 20 Mile March focuses the mind; because everyone on the team knows the markers and their importance, they can stay on track.”
ARTHUR LEVINSON: TEACHING A COMPANY TO MARCH
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.
“Key question? What is your 20 Mile March, something that you commit to achieving for 15 to 30 year?”
4 FIRE BULLETS, THEN CANNONBALLS
A BIG SURPRISE
About innovation…. “The evidence from our research does not support the premise that 10X companies will necessarily be more innovative than their less successful comparisons. And in some surprise cases, such as Southwest Airlines versus PSA and Amgen versus Genentech, the 10X companies were less innovative than the comparisons.”
About pioneering…. “Tellis and Golder also found that 64 percent of pioneers failed outright.
Good for society, bad for pioneers…. “It seems that pioneering innovation is good for society but statistically lethal for the individual pioneer!”
The level of innovation…. “We’re not saying that innovation is unimportant. Every company in this study innovated. It’s just that the 10X winners innovated less than we would have expected relative to their industries and relative to their comparison cases; they were innovative enough to be successful but generally not the most innovative.”
CREATIVITY AND DISCIPLINE
“Of course, it is not discipline alone that makes greatness, but the combination of discipline and creativity.”
“Fire bullets, then fire cannonballs. First, you fire bullets to figure out what’ll work. Then once you have empirical confidence based on the bullets, you concentrate your resources and fire a cannonball. After the cannonball hits, you keep 20 Mile Marching to make the most of your big success.”
<= Just like in the “Lean Startup Way”
Bullets… “Acquisitions would be made with little or no debt, and only when the balance sheet would remain strong after the purchase, thereby ensuring that acquisitions would remain low risk, low cost, and relatively low distraction.”
Calibrated cannonballs… “The 10Xers were much more likely to fire calibrated cannonballs, while the comparison cases had uncalibrated cannonballs flying all over the place.”
“And that’s the underlying principle: empirical validation. Be creative, but validate your creative ideas with empirical experience. You don’t even need to be the one to fire all the bullets; you can learn from the empirical experience of others.”
EMPIRICAL VALIDATION, NOT PREDICTIVE GENIUS
APPLE’S REBIRTH: BULLETS, CANNONBALLS, AND DISCIPLINED CREATIVITY
KEY POINTS ► A “fire bullets, then cannonballs” approach better explains the success of 10X companies than big-leap innovations and predictive genius.
5 LEADING ABOVE THE DEATH LINE
“As soon as there is life there is danger.” —Ralph Waldo Emerson
“In this chapter, we explore three core sets of practices, rooted in the research, for leading and building a great enterprise with productive paranoia: ► Productive Paranoia 1: Build cash reserves and buffers—oxygen canisters—to prepare for unexpected events and bad luck before they happen. ► Productive Paranoia 2: Bound risk—Death Line risk, asymmetric risk, and uncontrollable risk—and manage time-based risk. ► Productive Paranoia 3: Zoom out, then zoom in, remaining hypervigilant to sense changing conditions and respond effectively.”
PRODUCTIVE PARANOIA 1: EXTRA OXYGEN CANISTERS-IT’S WHAT YOU DO BEFORE THE STORM COMES
“A Black Swan is a low-probability disruption, an event that almost no one can foresee, a concept popularized by the writer and financier Nassim Nicholas Taleb. Almost no one can predict a particular Black Swan before it hits, not even our 10Xers. But it is possible to predict that there will be some Black Swan, as yet unspecified.”
“When a calamitous event clobbers an industry or the overall economy, companies fall into one of three categories: those that pull ahead, those that fall behind, and those that die. The disruption itself does not determine your category. You do.”
PRODUCTIVE PARANOIA 2: BOUNDING RISK
“To explore this question, we first identified three primary categories of risk relevant to leading an enterprise: (1) Death Line risk, (2) asymmetric risk, and (3) uncontrollable risk. (See Research Foundations: Risk-Category Analysis.)”
“In short, we found that the 10X companies took less risk than the comparison cases. Certainly, the 10X leaders took risks, but relative to the comparisons in the same environments, they bounded, managed, and avoided risks. The 10X leaders abhorred Death Line risk, shunned asymmetric risk, and steered away from uncontrollable risk.”
PRODUCTIVE PARANOIA 3: ZOOM OUT, THEN ZOOM IN
Zoom Out…. “Sense a change in conditions Assess the time frame: How much time before the risk profile changes? Assess with rigor: Do the new conditions call for disrupting plans? If so, how?”
Zoom In…. “Focus on supreme execution of plans and objectives”
LEADING ABOVE THE DEATH LINE KEY POINTS ► This chapter explores three key dimensions of productive paranoia: 1. Build cash reserves and buffers—oxygen canisters—to prepare for unexpected events and bad luck before they happen. 2. Bound risk—Death Line risk, asymmetric risk, and uncontrollable risk—and manage time-based risk. 3. Zoom out, then zoom in, remaining hypervigilant to sense changing conditions and respond effectively.
6 SMaC
“Most men die of their remedies, and not of their illnesses.” —Molière
The “SMaC” is a formula and the word stands for
– Specific,
– Methodical, and
– Consistent.”
“You can use the term “SMaC” as a descriptor in any number of ways: as an adjective (“ Let’s build a SMaC system”), as a noun (“ SMaC lowers risk”), and as a verb (“ Let’s SMaC this project”).”
“A SMaC recipe is a set of durable operating practices that create a replicable and consistent success formula; it is clear and concrete, enabling the entire enterprise to unify and organize its efforts, giving clear guidance regarding what to do and what not to do. A SMaC recipe reflects empirical validation and insight about what actually works and why. Howard Putnam’s 10 points at Southwest Airlines perfectly illustrates the idea.”
7 RETURN ON LUCK
“The real difference between the 10X and comparison cases wasn’t luck per se but what they did with the luck they got. Adding up all the evidence, we found that the 10X cases were not generally luckier than the comparison cases. The 10X cases and the comparisons both got luck, good and bad, in comparable amounts. The evidence leads us to conclude that luck does not cause 10X success. People do. The critical question is not “Are you lucky?” but “Do you get a high return on luck?”
This is just like straight from Malcolm Gladwell’s “Outliers” …. “His friend Paul Allen just happened to see a cover story in the January 1975 issue of Popular Electronics titled “World’s First Microcomputer Kit to Rival Commercial Models.”
Important about the luck…. “Gates did more with his luck, taking a confluence of lucky circumstances and creating a huge return on his luck. And this is the important difference.”
Return on Luck (ROL)….. “Everyone gets luck, good and bad, but 10X winners make more of the luck they get. The Bill Gates story illustrates the upper-right quadrant, getting a great return on good luck.”
10XERS SHINE: GREAT RETURN ON BAD LUCK
“Canadian NHL players with the “bad luck” of being born in the second half of the year have a higher likelihood of making it into the Hall of Fame than those with the “good luck” of being born in the first half of the year!”
About bad luck…. “Nietzsche famously wrote, “What does not kill me, makes me stronger.” We all get bad luck. The question is how to use that bad luck to make us stronger, to turn it into “one of the best things that ever happened,” to not let it become a psychological prison. And that’s precisely what 10Xers do.”
BAD LUCK, POOR RETURN: THE ONE PLACE YOU REALLY DON’T WANT TO BE
LUCK IS NOT A STRATEGY…. “Life offers no guarantees. But it does offer strategies for managing the odds, indeed, even managing luck. The essence of “managing luck” involves four things: (1) cultivating the ability to zoom out to recognize luck when it happens, (2) developing the wisdom to see when, and when not, to let luck disrupt your plans, (3) being sufficiently well-prepared to endure an inevitable spate of bad luck, and (4) creating a positive return on luck—both good luck and bad—when it comes. Luck is not a strategy, but getting a positive return on luck is.”
“The best leaders we’ve studied maintain a paradoxical relationship to luck. On the one hand, they credit good luck in retrospect for having played a role in their achievements, despite the undeniable fact that others were just as lucky. On the other hand, they don’t blame bad luck for failures, and they hold only themselves responsible if they fail to turn their luck into great results. 10Xers grasp that if they blame bad luck for failure, they capitulate to fate. Equally, they grasp that if they fail to perceive when good luck helped, they might overestimate their own skill and leave themselves exposed when good luck runs dry. There might be more good luck down the road, but 10Xers never count on it.”
EPILOGUE GREAT BY CHOICE
Disease…. “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.”
Responsibility…. “Do we want to build a society and culture that encourage us to believe that we aren’t responsible for our choices and accountable for our performance? Our research evidence stands firmly against this view.”
People….“The factors that determine whether or not a company becomes truly great, even in a chaotic and uncertain world, lie largely within the hands of its people.”
Moment of truth…. “When the moment comes—when we’re afraid, exhausted, or tempted—what choice do we make? Do we abandon our values? Do we give in? Do we accept average performance because that’s what most everyone else accepts?”
Deep within…. “The greatest leaders we’ve studied throughout all our research cared as much about values as victory, as much about purpose as profit, as much about being useful as being successful. Their drive and standards are ultimately internal, rising from somewhere deep inside.
How should we change according to the book?
Start the 20 Mile March:
1. Clear performance markers (tavoitteet).
2. Self-imposed constraints.
3. Appropriate to the specific enterprise.
4. Largely within the company’s control to achieve (saavutettavissa).
5. A proper timeframe—long enough to manage, yet short enough to have teeth (aikaikkuna).
6. Imposed by the company upon itself.
7. Achieved with high consistency (osumatarkkuus).
What should I personally do?
“Companies, leaders, organizations, and societies do not thrive on chaos. But they can thrive in chaos.”
Summary
The book in six words – ”When the going gets weird, the weird become CEO.” (Hunter S. Thompson quote with a slight twist)
