Great by Choice

Another book by Professor Jim Collins after Built to last, Good to Great and How does the Mighty Fall, Great by Choice showing - Why do some companies thrive in uncertainty, even chaos, and others do not? The method is similar (comparative historical analysis) and the question of greatness is constant. But in this study, unlike any of the previous research,  Collins selected cases not just on performance or stature but also on the extremity of the environment i.e. PERFORMANCE + ENVIRONMENT

Starting from delving into what he learned about the individual people who led these companies, and in, how they led and built their companies differently from their less successful comparisons to studying luck. Collins defined luck, quantified luck, determined if the 10X cases were luckier (or not), and discovered what they do differently about luck.

At the end of the book, the detailed methods of research, quantitative and qualitative parameters based on each type of analysis (10x, 20 Mile March, Bullets-then-Cannonballs, Cash and Balance Sheet Risk, Speed, Luck, SMaC, Hockey hall of Fame) have been listed.

Chapter 1 Thriving in uncertainty

This chapter discusses about the entrenched myths and gives the contrary findings about the 10xers and comparison companies. The complete data set from all this research covers the evolution of 75 corporations, for a total of more than six thousand years of combined corporate history.

“Thriving in a chaotic world is not just a business challenge. In fact, all work is not fundamentally about business, but about the principles that distinguish great organizations from good ones.”

“Greatness is not just a business quest; it's a human quest.”

Chapter 2 – 10Xers

The chapter uses the reference of Amundsen and Scott, 2 men who started the expedition of South Pole together, one well prepared and disciplined, while other lacked contingency planning, one doing of the track practices while other had no prior experience to uncertainty, one ended up in victory while other in death. Using this idea Collins tries to establish a correlation between great and not so great firms who could succumb to uncertainty. lOXers shared a set of behavioral traits that distinguished them from the comparison leaders. lOXers then bring this idea to life by a triad of core behaviors: fanatic discipline(to keep them on track), empirical creativity(relying upon direct observation, conducting practical experiments, and/or engaging directly with evidence rather than relying upon opinion),  productive paranoia (turning hyper vigilance into preparation and productive action) and Level 5 ambition (defined themselves by impact and contribution and purpose). Each of the above mentioned qualities are described in detail using examples, data points and case studies.

"Discipline, in essence, is consistency of action."

Chapter 3 - 20 Mile March

The 20Mile March daily –no matter what the external situations are. Comparing the similar analogy with John Brown’s Stryker, Southwest Airlines and Progressive - fluctuating currency rate, bad markets, inflation – no matter what the idea is just to finish the 20Mile March.

Both parts of a 20 Mile March are equally important : a lower bound and a upper bound, a hurdle that you jump over and a ceiling that you will not rise above, the ambition to achieve and the self-control to hold back.

Collins using comparison contrast method compares Stryker vs. USSC, Southwest Airlines vs. PSA, Progressive Insurance vs. Safeco Insurance, Intel vs. AMD, Biomet vs. Kirschner, Genentech under Levinson and Pre Levinson.

Failing to 20 Mile March leaves an organization more exposed to turbulent events. Every comparison case had at least one episode of slamming into a difficult time without having the discipline of a 20 Mile March in place, which resulted in a major setback or catastrophe.

“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. A good 20 Mile March must be achieved with great consistency. Good intentions do not count.”

Chapter 4 – Fire bullets, then Cannonballs

To end the dilemma of “innovate or die”, Collins using case studies, book references comes up with the idea: fire bullets, then fire cannonballs.

This chapter place the comparison between an innovator and follow up companies – PSA (Drive Fly Sleep fiasco) and Southwest Airlines, AMD and Intel, Genentech(more patents but high costs) and Amgen, USSC and Stryker, how non pioneers outperformed pioneers over the long run. They made low cost, low risk, low distraction bullets then went on to make cannonballs.

A calibrated cannonball has confirmation based on actual experience—empirical validation—that a big bet will likely prove successful. Launching an uncalibrated cannonball means placing a big bet without empirical validation. For e.g. Progressive's three strategic decisions-trucking insurance (uncalibrated cannonball), standard auto insurance (calibrated cannonball), and homeowners insurance (bullets followed by the decision not to fire a cannonball)-all underscore one very big lesson. In the face of instability, uncertainty, and rapid change, relying upon pure analysis will likely not work, and just might get you killed. Analytic skills still matter, but empirical validation matters much more.

Collins inferred that companies that fail even to meet the innovation threshold did not win. But once they were above the threshold, especially in a highly turbulent environment, being more innovative doesn't seem to matter very much.

“The difficult task is to marry relentless discipline with creativity, neither letting discipline inhibit creativity nor letting creativity erode discipline.”

“When you marry operating excellence with innovation, you multiply the value of your creativity. And that's what lOXers do.”

Chapter 5 – Leading above the Death Line

David Breashears’s story of filming a movie at 24500ft and safe return with the crew compared to Rob Hall’s catastrophe. From this comparison, Collins draws down similar curve for 10Xers.

After fanatic discipline and empirical creativity, Collins lays down the idea of productive paranoia and compares it with the David Breashears’s process of filming. Obsessing on what can go wrong or what can be the worst case scenario. To avoid failing in such catastrophe, Collins gave a few practices he observed in 10Xers.

Build cash reserves and buffers to prepare for unexpected events and bad luck before they happen.

Bound risk—Death Line risk (which can kill or severely damage the enterprise), asymmetric risk (in which the downside dwarfs the upside), and uncontrollable risk (which cannot be controlled or managed) —and manage time-based risk.

Zoom out, then zoom in, remaining hypervigilant to sense changing conditions and respond effectively. Zoom in, obsessively focusing on superb execution in the defining moment, never compromising excellence for speed.

Each of the above mentioned point is worked out in detail and explained well using companies like Stryker, Intel, Motorola etc.

“Rapid change does not call for abandoning disciplined thought and disciplined action. Rather, it calls for upping the intensity to zoom out for fast yet rigorous decision making and zoom in for fast yet superb execution.”

“The only mistakes you can learn from are the ones you survive.”

Chapter 6 – SMaC

The chapter starts with the quote of Moliere "Most men die of their remedies, and not of their illnesses.” This quote gets justified as we move further in the chapter and compare 10Xers with ordinary firms.

The word "SMaC" stands for Specific, Methodical, and Consistent. In this chapter, Collins narrates how Southwest Airlines, David Breashears, Progressive Insurance and other 10Xers made their own SMaC recipes and followed it with fanatic discipline and empirical creativity and exercise productive paranoia.

E.g. Putnam’s 10 point model for what to do and what not to do for Southwest Airlines after change in regulations and maintained them overtime with not more than 20% change. Be it any external condition - from fuel shocks to air-traffic-control strikes, massive industry mergers, the rise of the hub-and-spoke model, recessions, interest rate spikes, the Internet, and 9/11.

“The signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.” On comparing 10Xers SMaC with comparison firms, frequent changes in inconsistency is observed by Collins which leads to their average performance.

MOATS -SMaCs

Intel – firing bullets – memory chips to micro processors

Microsoft –software hardware both important

Progressive – high risk insurance, profits from underwriting not investments

SWA – less than 2 hour, high asset turn low cost flights, no air freight and food

Chapter 7 Return on Luck

Chapter starts with the story of Malcolm Daly and Jim Donini, two mountaineers who met with an accident. What did they do right and what role luck played in their situation. This analogy is used in the entire chapter to compare how luck counts and its role in uncertain and instable world. How 10Xers and comparison firms saw luck unfold.

Collins defines 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.

The real difference between the 10X and comparison cases wasn't luck per se but what they did with the luck they got. Microsoft’s OS to Progressive’s redemption after crash, Southwest Airlines glory post blackswans to Biomet’s survival, this chapter analysis the role of luck, what companies did with when they got lucky.

The leadership concepts in this book—fanatic discipline; empirical creativity, productive paranoia-, Level 5 ambition; 20 Mile March; fire bullets, then cannonballs; leading above the Death Line; and SMaC—all contribute directly to earning a great ROL.

“Luck is not a strategy, but getting a positive return on luck is.”

Collins concludes you can control only a tiny sliver of what happens to you. But even so, you are free to choose, free to become great by choice. This book and the three that precedes it (Built to Last, Good to Great, and How the Mighty Fall) looks into the question of what it takes to build an enduring great organization.

Jim Collins provides his research framework and methodology, case studies and analogies, not just numbers and facts. It is must read book along with its predecessors ( Good to Great and How does the Mighty Fall).