Summary of Great By Choice

"Jim" Collins (January 25, 1958 Colorado, United States ) is an American
researcher, author, speaker and consultant focused on the subject of business
management and company sustainability and growth.
2011: Great By Choice by James C. Collins and Morten T. Hansen
2005: Good to Great and the Social Sectors by James C. Collins
UNCERTAINITY, CHAOS,AND LUCK-
WHY SOME THRIVE DESPITE THEM ALL
JIM-COLLINS

Morten T. Hansen is a Norwegian-American professor, management
theorist, motivational speaker and author.
BORN = 1963 (age 57–58) Norway

Great By Choice analyzes what makes the world’s best companies thrive in
even the most uncertain and chaotic times, by distilling nine years of research and great
stories into three actionable principles.
The 3 biggest lessons from this book:
1. Great companies have incredible discipline.
2. You should innovate only when the evidence supports it.
3. Never rely on luck or chance to take care of things,
maximize them by working hard instead.
Uncertainty is unavoidable in business. Every company has to face external forces that it
cannot predict nor control. The question is, why do some companies thrive in uncertainty
or chaos, while others do not? “Great by Choice” addresses this question and breaks
down the myths and reality of what it takes to create lasting success in a fast-changing
world

THRIVING IN UNCERTAINITY
Collins and Hansen enumerate the problems that have arisen for all businesses in the
21st-century, and the years leading up to then. Despite these problems, some
companies have overachieved. He gives them the moniker 10X, which means that the
company beat its industry index by a minimum of 10 times. They and their research
team poured over the records of more than 20,000 companies to reach the book’s
conclusions.
Life is uncertain, the future unknown. Neither good or bad.
The study began in 2002 and covers the decades before then, depending on the
company.
As an example, Microsoft is compared with Apple. During the 80s and 90s, Microsoft
won hands-down against Apple, however since then Apple, under inspired leadership,
has gone from strength to strength, while to some, Microsoft seems to be floundering
Among these were Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest
Airlines and Stryker. The study began in 2002 and covers the decades before then,
depending on the company.

Two pairs of 7 companies were studied by Jim Collins and Morten Hansen
during a 7 year period of extreme events (eg. recessions, war, 9/11).
Despite patches of terrible business conditions, the 10X companies
were so successful, you'd have banked up to $US12 million if you'd
invested $US10,000 in any one of them over the study period (1972 to
2002).
The pairs studied were:
 Amgen vs Genetech;
 Biomet vs Kirschner;
 Intel vs AMD;
 Microsoft vs Apple (focusing on the 80s and 90s);
 Progressive vs Safeco;
 Southwest Airlines to PSA;
 Stryker vs United States Surgical Corporation (USSC).

 Five entrenched myths are examined and found to be inaccurate. One of
these myths is that radical change on the outside requires radical change
on the inside
10X companies changed less intentionally than the comparisons
1. Successful leaders are bold, risk seeking visionaries
2. Innovation distinguishes 10X companies
3. A fast world required fast decisions and fast action
4. A radical change in the world requires radical change in your business
5. Great enterprises have more good luck
Every 10X case beat its industry index by at least 10 times. If you invested
$10,000 in a portfolio of the 10X companies at the end of 1972

Finding the 10X Cases
First year- searched for historical cases meeting three basic
tests:
1. Enterprise sustained spectacular results for15+ years.
2. Enterprise achieved results in turbulent environment.
3. Enterprise began its rise to greatness from a position of
vulnerability. (young or small)

10X Leadership
10X Leaders have purpose, long-term goals, severe performance
standards and... the Fanatic Discipline to adhere to them

 This chapter is entitled the 20-mile march and
deals with the importance of consistency, rather
than a mixture of great jumps upward and steep
falls downward, in performing well over a long
time period.
 Research about the 20-mile march indicates
that it is a distinguishing factor, to an
overwhelming degree, between 10X companies
and comparison companies.

 In order to march 20 miles successfully, you need to hit specified markers
with great consistency over a very long period of time.
 In a good 20-mile march, good performances are achieved during times
that are difficult and there is sensible non-overly ambitious advance when
times are good.
The 20 Mile March discipline requires dealing with two distinct types of
discomfort:
 Delivering high performance in difficult times
 Holding back in good times.

FEATURES OF 20-MILE MARCH
A good 20-mile march has the following seven features:
1. Clear performance markers
2. Self-imposed constraints
3. A 20-mile march that is applicable to the specific enterprise
4. The 20-mile march must be within the company's ability to reach
5. A proper timeframe that is long enough to manage, yet enough to
have teeth
6. Imposed by the company upon its self
7. Achieved with high consistency

 A 20-mile march may not have to be financial.
20-mile marches are very useful in every
sphere of human endeavor.
 It is possible to have creative marches,
learning matches, service improvement
marches or any other type of activity, as long
as it has the characteristics of a good 20-mile
march.

Explains the success of 10X companies than big-leap
innovations and predictive genius
› Pacific Southwest Airlines (innovator)
› Southwest Airlines (10X company)
“Anticipated that innovations might be a primary
distinguishing factor for 10X success in unstable
environments characterized by rapid change.”

 66 wide-ranging markets, from chewing gum to the
Internet
 Only 9% of pioneers end up as the final winners in the
market
 64% of Pioneers failed outright
 Pioneering Innovation:
› Good for society
› Statistically lethal for the individual pioneer

 Advanced Memory System created the 1000-bit-
memory-chip barrier a few months before Intel
 By 1973 had taken over the market place
 The motto “Intel Delivers” is what set them apart from
their competitors
 With their ability to deliver on their innovations is why
they are a 10x company

 Embracing the “fire bullets, then cannonballs”
principle requires
› Fire bullets
› Assess: Did your bullets hit anything?
› Consider: Successful bullets to cannonballs?
› Don’t fire uncalibrated cannonballs
› Terminate bullets that show no evidence of eventual
success

 Cannonball: “Fly-Drive-Sleep”
› Fail
› Generated losses every year
› Then fired another to by big jets
› Bought big jets and then plane fuel went up
› Fail again
› Economy fell into recession
 Calibrated Cannonballs
› Higher rate of success
 Uncalibrated Cannonballs
› Can be successful, but that can be more dangerous
 Ex: Tell your friend to go gamble and they win

 Initial product success came with a revamp of Apple’s
first success; Macintosh Computer
› Made the most of what Apple already had
 I Pod
› MP3 players already existed, but not with large data
storage capabilities
› All the parts necessary existed, just needed to be
pieced together
› Small leap forward; Extension of MP3 player

 A "fire bullets, then cannonballs" approach better explains
the success of 10X companies as opposed to big-leap
innovations and predictive genius
 A bullet is a low-cost, low-risk, and low-distraction test or
experiment
 10X cases fired a significant number of bullets that never hit
anything
 Two types of cannonballs, calibrated and uncalibrated
› Calibrated cannonballs have confirmation based on actual
experience
› uncalibrated cannonballs place big bets without empirical
validation

 SMaC stands for
 Specific
 Methodical
 Consistent.
 The more uncertain, fast-changing, and
unforgiving your environment, the more SMaC
you need to be

 Clear and concrete, allows enterprise to
unify and organize its efforts
 Unchanging from situation to situation
 Reflects empirical validation and insight
 Contains practices “to do” and “not to do”

 In 1979, Howard Putnam, then CEO of Southwest
Airlines, developed a recipe that would transform a
company into a 10X organization in a time that is
infamous for deregulations in the aviation industry.
 The laws would unleash fierce competition and each
company would have to fight to retain its market share.
 Putnam reinforced the position of his airline by creating
a strategy for Southwest Airlines containing 10 simple
action points

1. Remain an airline for short distances
2. Use the Boeing 737 as primary plane for 10-12 years
3. Ensure higher occupation of the plane and take fast turns. In most
cases within 10 minutes
4. The passenger is our number 1 product. Do not take on airfreight
or mail, only small packages with a high profitability and low
handling costs
5. Continue to ask low rates and offer high service
6. No catering
7. No reselling of tickets
8. Keep Texas as the first priority
9. Retain the family feeling in the services and create a fun
atmosphere. We are proud of our employees
10. Keep it simple

 These ten points formed the SMaC concept.
 The points are specific, methodical and consistent.
 From the list, we can see that not all items demand
action. The points that indicate not to take action are
just as important.
 When used correctly, a solid SMaC recipe is an
operational code for converting strategic concepts into
practice

Southwest
• Began as a copy of PSA
• Builds momentum in Texas
• Analysts said they needed
to change their formula
• CEO kept most of the
recipe intact
• Became one of the most
admired companies in the
world
• Only one that endured as
great company
PSA
• Reacted to deregulation by
becoming more like United
Airlines
• Moved away from recipe
• Sold out to US Air
• Became irrelevant, then
forgotten
Both facing deregulation, disruptive environment, identical recipes,
fabulous core markets

 Change is not the most difficult part
 10Xers ask why their recipe isn’t working anymore
before assuming obsolete methods
 The signature of mediocrity is not an unwillingness to
change; the signature of mediocrity is chronic
inconsistency”
 Signature of mediocrity = chronic inconsistency
 10Xers accomplish goals by adhering to what they know
works
 10X companies kept ingredients for more than 20 years

Malcolm Daly and Jim Donini
 In May 1999 they climbed an unclimbed face
of Thunder Mountain in Alaska. Before
reaching the summit, Daly lost his stance
and fell down the side of the mountain.

Bad Luck:
 Daly's stance giving way
 Good Luck:
 Slice rope wasn't cut all the
way
 Daly didn't die in the fall
 Daly didn't kill Donini on the
way down
 Donini reached the base
camp just as the airplane
happened to
 fly by
 Had everything taken just five
hours longer, Daly wouldn't
have survived
Skill
 Most significant element: he
had developed relationships
with people who loved him
and who would risk their lives
for him
 Rescue leader Billy Shot
should've aborted but he
didn't Luck clearly played a
role in Daly's survival

 Just what is the role of luck? And how, if at all,
should luck factor into developing our strategies
for survival and success?
 Defined a luck event as one that meets 3 tests:
• Some significant aspect of the event occurs
largely or entirely independent of the actions of
the key actors
• The event has a potentially significant
consequence (good or bad)
• The event has some element of unpredictability

 Hockey
• Players born in second half of the year had fewer
successes than those born in the first half of the
year
 NHL
• birth rate distribution
• NHL "Hall of Fame"
 Ray Bourque
• "Goals live on the other side of obstacles and
challenges."

 "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, r an extended
sequence of bad-luck events that creates a
catastrophic outcome can terminate the
quest."

Summary of Great By Choice

More Related Content

What's hot (20)

Similar to Summary of Great By Choice (20)

Recently uploaded (20)

Summary of Great By Choice

Editor's Notes