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Great by Choice: Uncertainty, Chaos, and Luck--Why Some Thrive Despite Them All (Good to Great) Hardcover – Illustrated, October 11, 2011
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Jim Collins on the Writing Process
When I first embarked on a career that required writing, I devoured dozens of books about the process of writing. I soon realized that each writer has weird tricks and idiosyncratic methods. Some wrote late at night, in the tranquil bubble of solitude created by a sleeping world, while others preferred first morning light. Some cranked out three pages a day, workmanlike, whereas others worked in extended bursts followed by catatonic exhaustion. Some preferred the monastic discipline of facing cinder-block walls, while others preferred soaring views.
I quickly learned that I had to discover my own methods. Most useful, I realized that I have different brains at different times of day. In the morning, I have a creative brain; in the evening, I have a critical brain. If I try to edit in the morning, I’m too creative, and if I try to create in the evening, I’m too critical. So, I go at writing like a two piston machine: create in the morning, edit in the evening, create in the morning, edit in the evening…
Yet all writers seem to agree on one point: writing well is desperately difficult, and it never gets easier. It’s like running: if you push your limits, you can become a faster runner, but you will always suffer. In nonfiction, writing is thinking; if I can’t make the words work, that means I don’t know yet what I think. Sometimes after toiling in a quagmire for dozens (or hundreds) of hours I throw the whole effort into the wastebasket and start with a blank page. When I sheepishly shared this wastebasket strategy with the great management writer Peter Drucker, he made me feel much better when he exclaimed, “Ah, that is immense progress!”
The final months of completing Great by Choice required seven days a week effort, with numerous all-nighters. I had naively hoped after writing Good to Great that perhaps I had learned enough about writing that this work might not require descending deep into the dark cave of despair. Alas, the cave of darkness is the only path to producing the best work; there is no easy path, no shorter path, no path of less suffering. Winston Churchill once said that writing a book goes through five phases. In phase one, it is a novelty or a toy; by phase five, it is a tyrant ruling your life, and just as you are about to be reconciled to your servitude, you kill the monster and fling him to the public. And so, exiting the caving blinking in the sunlight, we’ve killed the monster and hereby fling. We love this book, and have great passion about sharing it with the world—making all the suffering worthwhile.
A Q&A with Morten T. Hansen
Q: How did you and Jim develop ideas together during the research?
Hansen: During our hundreds of research meetings—what we called “chimposiums” (as when two curious chimps get together), Jim and I probed the data, exchanged views, and debated vigorously. We didn't always agree, in which case we did some more analysis to get to the main findings we report in Great by Choice.
Q: Why did Great by Choice take nine years of effort?
Hansen: When Jim and I started out some nine years ago, we did not anticipate that it would take us this long, nor did we know what the results would be. We followed a simple principle—carry out the absolutely best research we could possibly do, no matter how long.
Q: Did you find what you expected, or surprises?
Hansen: The way we did the research was to explore why some companies attained great performance over the long-run while others did not. We did not start with any preconceived ideas and hypotheses about what made the difference. We let the data speak. What we found, and what we report in the book, surprised us a great deal. A few times we scratched our heads because we were so surprised, but that's what the data revealed.
Q: Did you have fun?
Hansen: Analyzing the data, debating, and arriving at some really interesting insights was a great deal of fun. It created joy in my life. It may not be everyone's idea of having a good time, but Jim and I always looked forward to our chimposiums. I hope you will enjoy Great by Choice as much as Jim and I enjoyed the research process!
“Collins and Hansen draw some interesting and counterintuitive conclusions from their research….far from a dry work of social science. Mr. Collins has a way with words, not least with metaphor.” (Wall Street Journal)
Entrepreneurs and business leaders may find the concepts in this book useful for making choices to increase their odds of building a great company. (Booklist)
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I realized that I never reviewed Great by Choice for my website, so I picked it up and, just like the last time, found myself still reading a couple of hours later. I think Great by Choice is, Jim Collins’ best book. The partnership with Morten Hansen makes the reasoning tighter and the research a bit broader than in Collins’ other books. Here’s the authors’ statement of what they want the book to achieve.
“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. 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.”
The opening chapter, Thriving in Uncertainty, is an introduction to the book. The research is typical Jim Collins. He went looking for enterprises that had great performance over many years in a particularly turbulent environment and that started from a position of vulnerability.
In this chapter, the authors share their findings about five what they call “entrenched myths” that were disproved by their research. Here are the myths.
1. Successful leaders in a turbulent world are bold, risk-seeking visionaries.
2. Innovation distinguishes those companies that succeed in a fast-moving, uncertain and chaotic world.
3. A threat-filled world favors the speedy.
4. Radical change on the outside requires radical change on the inside.
5. Great enterprises have a lot better luck than other enterprises.
All of those, are false. So, what is this book about? It’s simple, Great by Choice will prepare you to succeed in a world that you cannot predict.
Chapter two is “10Xers.” That’s what the authors call the super successful and adaptable companies that they studied. The core of the chapter is the story of Roald Amundsen and his race to the South Pole. Next, they define 10X leadership as three important things: fanatic discipline; productive paranoia; empirical creativity.
Every chapter ends the same way. There’s a summary of key findings, of course, but also unexpected findings and another part called “One Key Question,” which they suggest you answer.
The authors call chapter three “The 20-Mile March” and it’s about having concrete, clear, and rigorous performance mechanisms that keep you on track. They phrase this philosophy as a commitment to high performance in difficult conditions and (this is important) “the discomfort of holding back in good conditions.”
This all made sense to me. I’m a proponent of getting a little better, pushing forward, and making a little progress every day. The finding that I found surprising and helpful was that the idea of the 20-mile march also includes not pressing too hard ahead when conditions are good. It’s a continued steadiness. When times are good, stick to your discipline. Don’t try to go explosive.
Chapter four is titled “Fire Bullets, Then Cannonballs.” For the authors, a bullet is a test that you make to determine what works. A bullet is a low-cost, low-risk, low-distraction trial. It’s what puts the “empirical” in “empirical creativity.”
This is what I learned in my early direct-response career. You test things. When those things work, you expand a little bit, but you also understand that many of the things you test won’t work.
Chapter five is “Leading above the Death Line.” The chapter is about risk in two areas. First, it is about the things you can do to minimize the risk of unforeseen and uncontrollable events. Then, the authors talk about three kinds of risk. Death line risk is where there’s a risk of destroying or severely damaging the enterprise. Asymmetric risk is where the downside is much larger than the upside. Uncontrollable risk is what it sounds like, something that can’t be either controlled or managed. The big takeaway for me is in the “One Key Question” that the authors suggested you ask about yourself and your enterprise: “How much time before the risk profile changes?”
Chapter six is about “SMaC.” SMaC stands for Specific, Methodical, and Consistent. The lessons in this chapter were a lot like the ones in “20-Mile March” chapter. The key point is that in an uncertain, fast-changing environment, you need to be specific, methodical, and consistent.
The final chapter is about “Return on Luck.” As you might expect, the basic thing to learn is you’re going to have good luck and you’re going to have bad luck, and what’s going to matter is what you do with it. That’s a lot like the message of a bevy of motivational speakers, but it’s still important. My mother had a question she asked in all kinds of situations: “What good can we make of this?” You improve your return on luck by asking questions like that
As with every book with Jim Collins’ name on the cover, this one is superbly written with dozens of well-told stories, liberally seasoned with facts. What makes this book special is the tightness of the reasoning and the phrasing of the research. The big plus of this book, for me, was that this is not only about organizations. You can apply the things you find here to a career or a project or just about any part of life. You’re going to have luck. It’s what you do with it that matters. To find out how to do the best possible job dealing with the luck you get, read Great by Choice.
I always wish Amazon would show an easy-to-find Table of Contents for books, so I've created one for you here, complete with a summary of each chapter/section.
1 - THRIVING IN UNCERTAINTY
Collins and Hansen explain what the method for their book (what I described above), including the definition of a 10Xer, which is a company that beat their industry by 10 fold. Just 7 companies were selected as a 10X case out of 20,400 companies. The seven are Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker. They don't include Apple because their research lens of Apple vs. Microsoft focused primarily on the 1980s and 1990s (remember they stopped collecting data in 2002), which makes no sense to me. The present environment (the one in which Apple has exploded) is a far more difficult climate than the 80s-90s.
2 - 10Xers
Example of a 10xer is Southwest airlines, whose growth since 1972 is greater than that of Walmart, despite this period being a particularly harsh one for the airline industry. Anecdotes describe historic examples of 10xers and explains they aren't more creative, more visionary, more charismatic, or more ambitious, more blessed by luck, more risk seeking, more heroic, or more bold. The glaring fact that Apple is missing goes against this model, as Jobs and company were many of these things.
3 - 20 MILE MARCH
Here they introduce discipline as the key that sets 10Xers apart (hence the 20 mile march). 10Xers are focused on data with GREAT discipline and stick to their plan, like a 20 Mile March.
4 - FIRE BULLETS, THEN CANNONBALLS
10Xers were not more innovative than the control companies; indeed, they were considered less innovative in some comparisons. 10Xers scale innovation (firing bullets) and then the fire cannonballs once they know what's on target.
5 - LEADING ABOVE THE DEATH LINE
Explains "productive paranoia," the idea that you need to build cash reserves and buffers, bound your risk, and show flexibility in looking at macro and micro factors at play in your business and industry.
6 - SMaC
SMaC stands for Specific, Methodological, and Consistent. The more uncertain your environment, the more SMaC you need to be. A SMaC recipe is a set of durable operating principles and practices that create a replicable and consistent success formula.
7 - ROL (RETURN ON LUCK)
10Xers weren't more lucky or unlucky than comparisons. They had better ROL because they took full advantage of good luck and minimized the effects of bad luck. If you think about it, that's the real key to luck. Knowing when you got lucky and how to take advantage of it, rather than blindly thinking you walk on water (like so many businesses do).
Like Jim's other books, the how to is what's missing. An outstanding book for that (increasing your leadership skill set) is Leadership 2.0
Top international reviews
Backed up by rigorous analysis the book identifies a handful of successful companies and then sets out to explain, with empirical evidence, why these companies performed so well in these uncertain times.
The book is structured around 6 main concepts (see below)
I find the writing of Jim Collins very succinct with a perfect blend of anecdote, theory and empirical evidence to make his points.
Please see below for the points I took away from this book:
• Great companies (10xers) accept uncertainty but refuse to accept that forces beyond their control will determine their destiny. Instead they work very hard at a clearly defined goal to build up a reservoir of strength (e.g. through cash on balance sheet or reputation in the market)
• 10xers consistently exhibit three core behaviours to build a reservoir of strength:
1. Fanatic discipline: Consistency of action around clearly defined strategy
2. Empirical creativity: decisions are made from a sound empirical base
3. Productive paranoia: constantly operating with a heightened state of awareness against potential threats
20 Mile March
• 10xers' growth trajectories often exhibit a steady trajectory much like the arctic explorer Anderson’s concept of marching 20 miles every day to the South Pole to be Cpt Scott , regardless of whether the weather was good or bad
• Adopting such a ‘20 Mile March’ will require pushing hard in adversity and reign it in during good times
• Such a philosophy will increase confidence because the organisation will be able to achieve results regardless of conditions
• Conversely, it is not about growing as quickly as possible all the time. Indeed, the study found that there is an inverse relationship between pursuit of maximum growth and 10x success. Growing too quickly can often lead to companies over extending themselves.
Fire Bullets, Then Cannonballs
• 10xers use low-risk empirical tests (‘firing bullets’) to validate what ideas work.
• Only once a company has successfully tested an idea with bullets should they fire the ‘cannonball’
• 10xers are therefore not visionary geniuses but empiricists.
• Acquisitions can qualify as bullets if they’re low-cost, low-risk and low-distraction
Leading above the Death Line
• 10xers effectively identify and manage risk
• When risks are identified these companies spend significant time and energy on understanding the likely impact through empirical analysis and then working very hard to execute their risk mitigation plan
• 10xers have a Specific, Methodical and Consistent (“SMaC”) recipe that they adhered to
• SmaC recipes endured for the long term and were changed by an average of 15% over the era of analysis
• See South Western airline’s SMaC in the book as a good example
Return on Luck
• All companies have good and bad luck. 10xers had their fair share of both
• The rest of the concepts above must be enthusiastically executed well to get a good return on luck
It specifically looks at businesses that have out-performed their industries and the Dow/Nasdaq indexes by more than 10 times - in other words 1000%. In fact these 7 businesses exceeded the industry and share averages by 36 times over the 30 years. They include companies like Intel & Microsoft.
The book is around 300 pages long, and is an easy read, but only 200 pages are the story - the last 100 pages are the methodology employed and the very long bibliography.
Overall the view is that these super-companies have at their core, 4 behaviours that excel at over time - 3 of these are covered in full detail within the book.
Disappointingly, the fourth (Level 5 Ambition) is hardly mentioned, as readers are presumed to have read the earlier book "Good to Great". For that reason I can't give this a top score. Given that there are nearly 100 pages of notes, it would have been sensible to have a chapter on "Level 5 Ambition" to make the book a stand-alone read.
Most of these businesses were small in 1971, in many ways the equivalent of UK AIM companies - so it is interesting to see how and why they were able to become the huge global successes they did, and why other companies in their sectors failed at the same time.
However, this recipe suffers the same problem as many others: the narrative fallacy (D. Kahnemann). It is quite easy to reconstruct the cases as to support the theory one wishes to promote. The points claimed by the author are surely important for success, but are not the only ones. This leads to the other two problems: the over-simplification and the role of randomness.
The parameters that may affect success (or failure) are just too many and inter-correlated in a complex cause-and-effect structure, as to support a simple 4-points theory. Indeed the author dedicates a chapter to the study of luck, but the role of randomness is not deeply analyzed and, to my opinion, generally underestimated.
As usual Jim condenses years of his teams research into something that our mortal minds can understand, using his unique mix of framework thinking and empirical research to build a case thats easy to follow and apply in your business (or see in other businesses).
Perhaps not as great as Built to Last or Good to Great (and perhaps a lot shorter - but in some ways that makes it a lot easier to get through!)