Book notes on Jim Collin’s Great by Choice – from Jeff Springer.
Great By Choice. Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All
By Jim Collins & Morten Hansen / Key Ideas
1. Thriving in Uncertainty. We cannot predict the future. But we can create it.
p. 1 “We cannot predict the future. But we can create it. …We can be astonished, confounded, shocked, stunned, delighted, or terrified, but rarely prescient. None of us can predict with certainty the twists and turns our lives will take. Life is uncertain, the future unknown. This is neither good nor bad. It just is, like gravity. Yet the task remains: how to master our own fate, even so.”
p. 12 “As the influential management thinker Peter Drucker taught, the best—perhaps even the only—way to predict the future is to create it.”
Note: Peter Drucker, the well known management guru, was known for saying: “You can’t predict the future, but you can create it.” The following 3 quotes are from the book: A Class with Drucker, by William Cohen.
p. 124 “The future, Drucker said again, is unpredictable, but can be created. In his lecture, Peter emphasized that while planning, especially strategic planning, was difficult and risky, it was one of management’s primary responsibilities. ‘Strategic planning is not about making decisions in the future,’ he said, since decisions could only be made now, in the present. So what he was really talking about was making decisions now to create a desired future for our companies. This implied reaching the goals or objectives we set, regardless of the environmental conditions we might later encounter. However it was crucial to start with our objectives. What exactly did we want to do? Only then could we decide on the actions we needed to take now, in the present, to realize these goals.”
p. 127 “Peter made it very clear that the process of creating your future, anybody’s future, begins with your goals and objectives. These need to be crystal-clear. Then you need to determine the actions that must be taken today to achieve these objectives in the future. Drucker said there was danger in assuming that today’s trends, whatever they are, will continue into the future. …He was not saying that the planner should forget the past, but rather that one should not assume that the past or present would continue in the future. Peter wanted us to focus on future goals first. Then consider what we face today and take the necessary actions that will point us toward reaching those goals in the future. As we progress, the environment and conditions are going to change. We can’t predict these changes. In fact, if we hold to those initial actions and stay the course, we’re never going to reach the future we are intent on creating. However, we can and must take new actions to enable us to make progress toward and reach these future goals.”
p. 132 “As Peter often said, you can’t predict your future, but you can create it. Quit worrying about your future environment. No one can predict it. Especially don’t focus on why you can’t do something. Instead, decide what your objectives are, look at the resources you need, and do a situational analysis. Then go from there and take action. Others have created their futures, and so can you!”
2. The key question: Why do some companies thrive, in uncertainty, even chaos, and others do not?
p. 2 “…some companies and leaders navigate this type of world exceptionally well. They don’t merely react; they create. They don’t merely survive; they prevail. They don’t merely succeed; they thrive. They build great enterprises that can endure. We do not believe that chaos, uncertainty, and instability are good; companies, leaders, organizations, and societies do not thrive on chaos. But they can thrive in chaos.”
3. The answer to the key question of thriving in uncertainty is: 10X Leadership.
p. 13 – 18 A look at two leaders…
In 1911 there were two teams in a race to get to the South Pole first. Roald Anumdsen and his team were the winners and Robert Falcon Scott and his team were the losers. Anumdsen with all his planning started late in the race and still won and brought the whole team back. Scott started first, arrived second to the Pole and he and the whole team died on the way back. Anumdsen was the 10X leader. (Which are you?)
The parts of 10X Leadership…a humble but ambitious leader and three core behaviors…
Start with a “Level 5 Ambition” – this is a concept from the earlier book Good to Great. A “Level 5 Leader” is a leader who builds enduring greatness (into their organization) through a paradoxical blend of humility and professional will. Level 5 ambition is the strong well to make the organization better. Level 5 Ambition is a passion and an ambition for a cause or company larger than themselves. They have egos but their egos are channeled into their companies for their purposes and not for personal aggrandizement.
The leader develops the habit of “Fanatic Discipline.” For Anumdsen this was his commitment to the daily “20 Mile March.” Anumdsen moved forward to the Pole and back in daily segments of 20 miles. Even when they could move more than 20 miles in a day, they did not; Anumdsen did not want to get people over tired. Fanatic discipline is the issue of “consecutive performance.” The 20 Mile March for them was not an average. It was the purposed choice that this team will move 20 miles toward the Pole every day. “Fanatic discipline” 10Xers display extreme consistency of action-consistency with values, goals, performance standards and methods. They are utterly restless, monomaniacal, unbending in their focus on their quests.”
The leader develops the habit of “Empirical Creativity.” Anumdsen lived with Eskimos before his race to the Pole to learn from them about long journeys over the ice. The Eskimos had the empirical learning. They taught him that dog sleds were the answer. Scott tried motor cycles and horses and ended up having his team “man haul” the sleds. In honing in on a target, shoot a bullet to learn the distance and arc needed and then shoot your cannonballs. Target in on your target, before you give it the final big shot. Creativity must be joined with the reality of the empirical evidence. Empirical creativity: When faced with uncertainty, 10Xers do not look primarily to other people, conventional wisdom, authority figures, or peers for direction; they look primarily to empirical evidence. They rely on direct observation, practical experimentation, and direct engagement with tangible evidence. They make bold, creative moves for a sound empirical base.
The leader develops the habit of “Productive Paranoia.” They are conservative, and plan for the hard, down times. They provide reasonable reserves. Productive paranoia: 10Xers maintain hyper-vigilance, staying highly attuned to threats and changes in their environment, even when—especially when—all’s going well. They assume conditions will turn against them, at perhaps the worst possible moment. They channel their fear and worry into action, preparing, developing contingency plans, building buffers, and maintaining large margins of safety.
4. Fanatic Discipline.
p. 21 – 22 “10Xers are utterly relentless, monomaniacal even, unbending in their focus on their quests. They don’t overreact to events, succumb to the herd, or leap for alluring—but irrelevant—opportunities. They’re capable of immense perseverance, unyielding in their standards yet disciplined enough not to overreach. In our research-team discussions we struggled with how to best describe the discipline we found in the 10X leaders. Most business CEOs have some level of discipline, but the 10Xers operated on an entirely different level. The 10Xers, we concluded, weren’t just disciplined; they were fanatics.”
p. 23 “…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 fanatic discipline to adhere to them. If that required them to diverge from normal behavior, then so be it. They didn’t let external pressures, or even social norms, knock them off course, In an uncertain and unforgiving environment, following the madness of crowds is a good way to get killed.”
p. 39 – 69 The concept of the “20 Mile March” The concept of the 20 Mile March is a concept of steady progress toward a goal. It is the idea of a very disciplined approach to moving forward. The book shows many examples to include John Brown who walked across America at 20 miles a day; and Amundsen moving toward the South Pole. When conditions were hard, Amundsen pushed his men to make 20 miles, when conditions were better and they could do more than 20 miles, they still only went 20 miles to stay rested and stay on plan.
p. 45 “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.”
p. 48 – 49 Elements of a good 20 Mile March
• Uses performance markers that delineate a lower bound of acceptable achievement. These keep pushing you forward
• Has self-imposed constraints that create an upper bound for how far you’ll march when conditions are good
• Is tailored to the enterprise and its environment. The 20 Mile March will be different for each organization
• It lies largely within your control to achieve. You shouldn’t need luck to achieve your 20 Mile March
• It has a “Goldilocks time frame,” it is not too short or too long, but just right
• It is designed and imposed by the enterprise, not imposed from the outside or blindly copied from others
• It must be achieved with great consistency
p. 55 “Accomplishing the 20 Mile March, consistently, in good time and bad, builds confidence. Tangible achievement in the face of adversity reinforces the 10X perspective: we are ultimately responsible for improving performance. We never blame circumstance; we never blame the environment.”
p. 64 “We live in a modern culture that reveres the Next Big Thing. It’s exciting, fun to read about, fun to talk about, fun to write about, fun to learn about, and fun to join. Yet the pursuit of the Next Big Thing can be quite dangerous if it becomes an excuse for failing to 20 Mile March. If you always search for the New Big Thing, that’s largely what you’ll end up doing—always searching for the Next Big Thing.”
p. 65 “A 20 Mile March needn’t be financial. You can have a creative march, a learning march, a service-improvement march, or any other type of march, as long as it has the primary characteristics of a good 20 Mile March.”
5. Empirical Creativity.
p. 25 “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 contract, 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.”
p. 25 – 26”The point here is not to be contrary and independent just for the sake of being contrary and independent. The point is to be more empirical to buttress your mental independence and validate your creative instincts. By ‘empirical,’ we mean relying upon direct observation, conducting practical experiments, and/or engaging directly with evidence rather than relying upon opinion, whim, conventional wisdom, authority, or untested ideas. Having an empirical foundation enables 10Xers to make bold, creative moves and bound their risk.”
p. 26 “The 10Xers did not generally make bolder moves than their less successful comparisons; both groups made big bets and, when needed, took dramatic action. Nor did the 10Xers exude more raw confidence than the comparison leaders…But the 10Xers had a much deeper empirical foundation for their decisions and actions, which gave them well-founded confidence and bounded their risk.”
p. 69 – 98 Fire Bullets, Then Cannonballs. The way to be innovative is to fire bullets first, get on target and then fire a cannonball at the target.
p. 73 – 75 “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… the 10X companies were less innovative. …We concluded that each environment has a level of ‘threshold innovation’ that you need to meet to be a contender in the game; some industries, such as biotechnology, command a high threshold. Companies that fail even to meet the innovation threshold cannot win. But—and this surprised us—once you’re above the threshold, especially in a highly turbulent environment, being more innovative doesn’t seem to matter very much.”
p. 80 “…a key pattern we observed in this study: 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.”
p. 81 What makes a good bullet? A bullet is low cost / A bullet is low risk / A bullet is low distraction
p. 83 Ready, aim, fire! Not: Ready, fire, aim.
• Fire bullets
• Assess: Did your bullets hit anything?
• Consider: Do any of your successful bullets merit conversion to a big cannonball (a big risk)?
• Convert: Concentrate resources and fire a cannonball once calibrated
• Don’t fire uncalibrated cannonballs
• Terminate bullets that show no evidence of eventual success
p. 96 “There are two types of cannonballs, calibrated and uncalibrated. 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.”
A modern day story of fire bullets first and then cannonballs is the now amazingly successful Apple stores. Steve Jobs and his team built a full sized store at their headquarters before rolling out their retail stores. They worked and reworked every detail of the stores in the model, they worked until they were satisfied with every detail, several times rolling back deadlines because it still was not right. Then, when it was exactly what they wanted, they rolled out the stores to their amazing success.
6. Productive Paranoia.
p. 27 “…despite their empirical confidence, 10Xers never feel safe or comfortable; indeed, they remain afraid—terrified, even—of what the world can throw at them. So, they prepare to meet head-on what they most fear…”
p. 29 “10Xers differ from their less successful comparisons in how they maintain hypervigilance in good times as well as bad. Even in calm, clear, positive conditions, 10Xers constantly consider the possibility that events could turn against them at any moment. Indeed, they believe that conditions will—absolutely, with 100 percent certainty—turn against them without warning, at some unpredictable point in time, at some highly inconvenient moment. And they’d better be prepared.”
p. 30 “Productive paranoia isn’t just about avoiding danger, trying to find the safest and most enjoyable path through life; 10Xers seek to accomplish a great objective, be it a goal, a company, a noble ambition to change the world, or a desire to be useful in the extreme. Indeed, as an overall life approach, they worry not about protecting what they have, but creating and building something truly great, bigger than themselves…”
p. 99 – 124 Leading above the “Death Line”
p. 103 “Hitting the ‘Death Line’ means that the enterprise dies outright or becomes so damaged that it can no longer continue with the quest to become an enduring great company.”
p. 103 The three core practices of “Productive Paranoia,” of “Leading above the ‘Death Line’ (staying alive and viable)
• Productive Paranoia 1: Build cash reserves and buffers, 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. Don’t take these kinds of risks.
• Productive Paranoia 3: Zoom out, then zoom in, remaining hypervigilant to sense changing conditions and respond effectively.
p. 107 “Death Line risks are those that could kill or severely damage the enterprise. Asymmetric risks are those for which the potential downside is much bigger than the potential upside. Uncontrollable risks are those that expose the enterprise to forces and events that it has little ability to manage or control.”
p. 105 “10Xers remain productively paranoid in good times, recognizing that it’s impossible to consistently predict specific disruptive events, they systematically build buffers and shock absorbers for dealing with unexpected events. They put in
place their extra oxygen canisters long before they’re hit with a storm.”
p. 109 “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.”
p. 111 “Sometimes acting too fast increases risk. Sometimes acting too slow increases risk. The critical question is, ‘How much time before your risk profile changes?’ Do you have seconds? Minutes? Hours? Days? Weeks? Months? Years? The primary difficulty lies not in answering the question but in having the presence of mind to ask the question.”
p. 114 “We adopted the terms zoom out and zoom in to capture an essential manifestation of productive paranoia, a dual-lens capability. 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…In practice, it works like this:
(First, get the big picture of the coming change)
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?
(Second, create and execute the plan that the big picture dictates)
Focus on supreme execution of plans and objectives
p. 122 – 123 “Contrary to the image of brazen, self-confident, risk-taking entrepreneurs who see only upside potential, 10X leaders exercise productive paranoia, obsessing about what can go wrong. They ask questions like: What is the worst case scenario? What are the consequences of the worst-case scenario? Do we have contingencies in place for the worst case scenario? What is the upside and what’s the downside of this decision? What’s the likelihood of the upside and the downside? What’s out of our control? How can we minimize our exposure to forces we can’t control? What if? What if? What if?”
7. Level 5 Ambition. The high value of consistency.
p. 31 “…10Xers channel their ego and intensity into something larger and more enduring than themselves. They’re ambitious, to be sure, but for a purpose beyond themselves, be it building a great company, changing the world, or achieving some great object that’s ultimately not about them.”
p. 33 “The central question is, ‘What are you in it for?’ 10X leaders can be bland, or colorful, uncharismatic or magnetic, understated or flamboyant, normal to the point of dull or just flat-out weird—none of this really matters, as long as they’re passionately driven for a cause beyond themselves. …every 10Xer we studied aimed for much more than just ‘becoming successful.’ They didn’t define themselves by money. They didn’t define themselves by fame. They didn’t define themselves by power. They defined themselves by impact and contribution and purpose. ”
p. 125 – 148 “SMaC” Recipes. SMaC = Specific. Methodical. Consistent. / Keeping the recipe for our “secret sauce” consistent in the face of change.
p. 128 “We on the research team used to believe in an inevitable tradeoff between specificity and durability: if you want to have durable precepts to live by, they need to be more general, like core values or high-level strategy; but if you want specific practices, they need to change frequently as conditions change, like tactics. Yet it is possible to develop practices that are both specific and durable—SMaC practices.”
p. 129 “The clarity and specificity of a SMaC recipe helps people keep their bearings and sustain high performance when in extreme conditions.”
p. 134 The problem is not change, but dumb change. “Conventional wisdom says that change is hard. But if change is so difficult, why do we see more evidence of radical change in the less successful comparison cases? Because change is not the most difficult part. Far more difficult than implementing change is figuring out what works, understanding why it works, grasping when to change, and knowing when not to.”
p. 136 “When faced with declining results, 10Xers do not first assume that their principles and methods have become obsolete. Rather, they first consider whether the enterprise has perhaps strayed from its recipe, or has forgone discipline and rigor in adhering to the recipe. If so, they see the remedy in reconnecting with the underlying insights behind the recipe and reigniting passion for adhering to it. They ask, ‘Is our recipe no longer working because we’ve lost discipline? Or is it no longer working because our circumstances have fundamentally changed?’”
p. 138 “We’ve found in all our research studies that the signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.”
p. 139 Change. “The amount of change swirling about is both gigantic and, for most people, accelerating. If we tried to react to every single external change, we’d quickly find ourselves incapacitated. Most change is just noise and requires no fundamental change in ourselves.
“Yet some change is not noise, demanding that we adjust and evolve, else we face demise, catastrophe, or missed opportunities. A great company must evolve its recipe, revising selected elements when conditions merit, while keeping most of its recipe intact.”
p. 141”The Intel case illustrates a powerful ‘Genus of the AND.’ On the one hand; a great company changes only a small fraction of the SMaC recipe at any given time, keeping the rest of it intact. On the other hand, this isn’t ‘incremental’ change; a SMaC recipe change is, almost by definition, a hugely significant change. By grasping this point, a 10X enterprise can achieve significant change and extraordinary continuity, both at the same time.”
p. 190 – 191 Examples of the “Genius of the AND:” Disciplined And Creative / Empirical validation And Bold moves / Prudence And BHAGs (Big Hairy Audacious Goals) / Paranoid And Courageous / Threshold innovation And One fad behind / Cannot predict the future And Prepared for what they cannot predict / Zoom Out And Zoom In / Consistency And Change
p. 146 “ Changes to a solid and proven SMaC recipe are like amendments to the Constitution; if you get the recipe right, based on practical insight and empirical validation it should serve you well for a very long time; equally important, fundamental changes must be possible. Continually question and challenge your recipe, but change it rarely.”
8. Return on Luck (ROL). What role does luck play in all of this? Answer: Very little.
p. 149 – 180 The research team looked at the issue of luck. They wondered if luck played any part in the success of the 10X companies. They set out to answer 3 questions:
• Is luck a common or rare element in the histories of the 10X and comparison cases?
• What role, if any, does luck play in explaining the divergent trajectories of the 10X and comparison cases?
• What can leaders do about luck to help them build great companies on a 10X journey?
p. 154 “We define 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.”
p. 158 “All the companies had good luck and bad luck—luck happens, a lot—but does luck play a differentiating role, an explanatory role, a definitive role in creating 10X success?” (No)
p. 160 “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?’”
p. 161 “We tend to think of luck as a ‘what’ variable—the plane flies by at the right moment, your IPO becomes much more successful than expected, etc. but one of the most significant forms of luck comes not as ‘what’ but in the form of who. In a family business, for example, there’s a significant amount of luck in whether a son or daughter has the right stuff to lead a company to greatness…
“This research project began with the premise that we live in an environment of chaos and uncertainty. But the environment doesn’t determine why some companies thrive in chaos and why others don’t. People do. People are disciplined fanatics. People are empirical. People are creative. People are productively paranoid. People lead. People build teams. People build organizations. People build cultures. People exemplify values, pursue purpose, and achieve big hairy audacious goals. Of all the luck we can get, people luck—the luck of finding the right mentor, partner, teammate, leader, and friend—is one of the most important.”
The moral of the story: Get the right people on the bus.
p. 163 “The difference between Bill Gates and similarly advantaged people is not luck. Yes, Gates was lucky to be born at the right time, but many others had this luck. And yes, Gates was lucky to have the chance to learn programming by 1975, but many others had this same 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. …Thousands of people could have done the exact same thing as Gates, at the exact time, but they didn’t.”
p. 165 – 166 “Neither extreme—it’s all luck or luck plays no role—has the evidence on its side. A far better fit with the data is a synthesizing concept, return on luck.
“Getting a high return on luck requires throwing yourself at the luck event with ferocious intensity, disrupting your life, and not letting up. Bill Gates didn’t just get a lucky break and cash in his chips. He kept pushing, driving, working—staying on a 20 Mile March; firing bullets, then big calibrated cannonballs; exercising productive paranoia to avoid the Death Line; developing and amending a SMaC recipe; hiring great people; building a culture of discipline; never deviating from this monomaniacal focus—and sustained he efforts for more than two decades. That’s not luck; that’s return on luck.”
p. 167 “The AMD story illustrates a common pattern we observed in the comparison companies during their respective eras of analysis, the squandering of good luck. When the time came to execute on their good fortune, they stumbled. They didn’t fail for lack of good luck; they failed for lack of superb execution.”
p. 169 “…10Xers shine when clobbered by setbacks and misfortune, turning bad luck into good results. 10Xers use difficulty as a catalyst to deepen purpose, recommit to values, increase discipline, respond with creativity, and heighten productive paranoia. Resilience, not luck, is the signature of greatness.”
p. 172 “There’s an interesting asymmetry between good luck and bad luck. A single stroke of good luck, no matter how big the break, cannot by itself make a great company. But a single stroke of extremely bad luck that slams you on the Death Line, or an extended sequence of bad-luck events that creates a catastrophic outcome, can terminate the quest.”
p. 173 “…10Xers exercise productive paranoia, combined with empirical creativity and fanatic discipline, to create huge margins of safety. If you stay in the game long enough, good luck tends to return, but if you get knocked out, you’ll never have the chance to be lucky again. Luck favors the persistent, but you can persist only if you survive.”
p. 174 “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 the good luck and bad—when it comes. Luck is not a strategy, but getting a positive return on luck is.”
p. 183 “We are not imprisoned by our circumstances. We are not imprisoned by the luck we get or the inherent unfairness of life. We are not imprisoned by crushing setbacks, self-inflicted mistakes or our past success. We are not imprisoned by the times in which we live, by the number of hours in a day or even the number of hours we’re granted in our very short lives. In the end, we can control only a tiny sliver of what happens to us. But even so, we are free to choose, free to become great by choice.”