Book SummaryGreat by Choice, by Jim Collins and Morten T. Hansen

1-Page Summary1-Page Book Summary of Great by Choice

In business, as in life, the only thing certain is uncertainty. How, then, can companies survive—even thrive—when the future is unpredictable? Using data from over 7,000 historical documents, Great by Choice authors Jim Collins and Morten T. Hansen shed some light on how some companies can weather great adversity better than others.

From an initial list of 20,400 companies, the research team identified seven case studies that they dubbed “10X” companies—those that performed better than the industry average by at least 10 times during periods of upheaval. To get a clearer idea of what these high-performing companies did differently, the research team also identified a comparison company for each 10X company. These comparison companies didn’t perform quite as well, despite being in the same industry, in the same era, with opportunities similar to those of the 10X companies.

The 10X companies (and their comparison companies in parentheses) are:

• Amgen (comparison company: Greentech)
• Biomet (Kirschner)
• Intel (Advanced Micro Devices, Inc. or AMD)
• Microsoft (Apple)
• Progressive (Safeco)
• Southwest Airlines (Pacific Southwest Airlines or PSA)
• Stryker (United States Surgical Corporation or USSC)

The research, which covered companies from their founding up until 2002, debunks a lot of entrenched myths when it comes to successful organizations and leaders.

Myth: Successful Leaders Are Big, Bold, Visionary Risk Takers

“10Xer”s (pronounced “ten-EX-ers”) are people who built companies that beat the industry index by at least 10 times. The research suggests that, instead of being big, bold, visionary risk-takers, 10Xers rely more on three core behaviors:

Behavior #1. Fanatic discipline—rather than strict adherence to rules and obedience to authority, the 10Xers’ brand of discipline is more about sticking consistently to their values, long-term goals, standards, and methods, no matter what.

One of the ways they exercise fanatic discipline is by going on the 20 Mile March. To 20 Mile March means to hit specified targets year after year with a long-term view in mind. The name comes from the concept of reaching a destination by hitting 20 miles a day, no more, no less, no matter what. The authors cite two South Pole expeditions in 1911 as an example: Team 1, led by Roald Amundsen, traveled no more than 20 miles a day, even when conditions were good. With their consistent pace, they finished the expedition right on schedule. Team 2, led by Robert Falcon Scott, pushed themselves to the brink of exhaustion on some days while sitting out all the gale-force winds they encountered. Team 2 reached the Pole 34 days later than Team 1 and died on their return journey.

A good 20 Mile March:

1. Specifies both upper and lower bounds. The minimum target (lower bound) should be realistic enough to be achieved even during hard times, while the maximum (upper bound) keeps you from overextending yourself and becoming too weak in the face of challenges. Example: Amundsen’s team targeted 15 to 20 miles a day, even on days when they could do 25.
2. Is customized to the enterprise. Performance makers should make sense for your company and your industry. These markers can be non-financial. Examples: For a church, it can be congregation size; for a school, it can be the students’ academic performance.
3. Is achievable through your own actions, not reliant on outside factors. Don’t sit around waiting for conditions to change in your favor. Take action, and control what you can control.
4. Falls within a reasonable time frame. A too-short 20 Mile March exposes you to greater risk, while a too-long one won’t make enough of an impact.
5. Is consistent. 10X companies rarely missed their target. When they did, they quickly self-corrected.

Behavior #2. Empirical creativity—10Xers aren’t more daring than their comparison leaders, but they act decisively based on extensive observation and experimentation.

• Example: Amundsen read through notes and journals from previous expeditions to help him decide on a stable base camp location—a place no one else had considered before.

Behavior #3. Productive paranoia—10Xers consider every kind of nightmare scenario so that they can remain vigilant and prepare for the worst.

• Example: Amundsen thought of disastrous scenarios and left nothing to chance. He stored three tons of supplies for his team and clearly marked the way to supply depots in case they went off course.

All three core behaviors are driven by Level 5 ambition, which is an incredible ambition and strength of will geared towards the organization. 10Xers aren’t on the quest for personal greatness; instead, they want to build a great company, make a difference in the world, and leave a legacy behind.

Myth: Successful Companies Are Innovators

The research revealed that some 10X companies didn’t innovate as much as their competitors. They did, however, innovate just enough and approached innovation in a way that increased their chances for success: They fired bullets before cannonballs. Firing “bullets” means testing and experimenting to see what they hit. Then, once they’d gathered convincing data, they concentrated their firepower into “cannonballs” calibrated for success, aiming in the direction that bullets had shown to have the greatest potential. They never launched uncalibrated cannonballs.

A bullet can...

Great by Choice Summary Chapter 1: Introduction

In business, as in life, the only thing certain is uncertainty. How, then, can companies survive—even thrive—when the future is unpredictable? Great by Choice, written by bestselling author Jim Collins and management professor Morten T. Hansen, gives some insight into that question through nine years of research, which started in 2002. Around that time, there were many extreme events that rocked the business landscape: The bull market crashed, the government’s financial position deteriorated, the terrorist attacks of 9/11 happened. And yet, some companies successfully navigated through the chaos.

Seeking to understand how some can weather great adversity better than others, the authors analyzed the performance of thousands of organizations during extreme situations. From an initial list of 20,400 companies, Collins and Hansen identified seven case studies that they dubbed “10X” companies—those that performed better than the industry average by at least 10 times during periods of upheaval. To get a clearer idea of what these high-performing companies did differently, the authors also identified a comparison company for each 10X company. These comparison companies didn’t...

Great by Choice Summary Chapter 2: What Makes a 10Xer?

“10Xers” (pronounced “ten-EX-ers”) are people who built companies that beat the industry index by at least 10 times. They’re not all cut from the same cloth: They come from different backgrounds—with some growing up privileged, others poor—and have different personalities—some are flamboyant, others reserved. Dispelling an entrenched myth, the research suggests that they’re not more creative, more ambitious, or more visionary than their comparison leaders. What sets them apart? These three core behaviors that they have in common:

• Fanatic discipline
• Empirical creativity
• Productive paranoia

Fanatic Discipline

While people normally associate discipline with compliance with rules and obedience to authority, the 10Xers’ brand of discipline is more about sticking to their guns, no matter what. They adhere consistently to their values, long-term goals, standards, and methods, even if it means being nonconformist and going against what society expects.

• Example: In the late 1990s, Peter Lewis, CEO of Progressive Insurance, faced a dilemma. Progressive was experiencing wild fluctuations in its stock because Lewis refused to let analysts in on the company’s...

Shortform Exercise: Behave Like a 10Xer

Prepare your company for challenging times by adopting 10Xers’ core behaviors.

10Xers are hyper-disciplined, adhering to their values no matter what. But you can’t be consistent with your values if you don’t know what they are. Reflect on your values: What’s important to you? What are your most important goals?

Great by Choice Summary Chapter 3: How 10Xers Hit Targets

Comparison companies were relentless in their pursuit of growth in good times, which left them vulnerable in bad times. In contrast, 10Xers went on the 20 Mile March—they opted for consistent performance, in good times and bad. This chapter spotlights how this fanatic discipline served the 10X cases.

To 20 Mile March means to hit specified targets year after year with a long-term view in mind. The name comes from the concept of reaching a destination by hitting 20 miles a day, no more, no less—no matter what. For example, if you were to walk 3,000 miles from California to Maine, you would walk 20 miles daily, whether it was sunny or stormy, whether you were in excellent form or feeling spent. Your steady pace would ensure that you had enough reserves to keep going, day after day, no matter what the conditions. If another traveler were to walk the same distance with a different tactic, pushing himself to go 40 miles on days when the weather was great, he would be too exhausted to keep going by the time the harsh winter arrives. He would end up sitting out the whole winter before recommencing in the spring, already having lost a lot of ground. By the time you reach Maine, he...

Shortform Exercise: Determine Your 20 Mile March

Build an enterprise that lasts by beginning your 20 Mile March.

What is your goal for the next 15 to 30 years?

Great by Choice Summary Chapter 4: How 10Xers Innovate

While the 20 Mile March is reliable, bringing order to a chaotic world, it seems to leave little room for innovation. This chapter explores how to balance the need for unbending consistency with the need to adapt to a changing world using empirical creativity.

One of the surprising findings of the research was that the most innovative companies weren’t necessarily the most successful. In fact, only three out of the seven 10X companies could be considered more innovative than their comparison companies. This is not to say that 10X companies didn’t innovate; they did, but they innovated just enough and they did so methodically.

But what is “enough” when it comes to innovation? That varies from industry to industry:

• High innovation threshold: semiconductors, biotechnology, computers, software—companies need to constantly introduce new devices, products, and features or risk becoming obsolete.
• Medium innovation threshold: medical devices—technological advancement isn’t as fast-paced as it is in the high-threshold category.
• Low innovation threshold: airlines, insurance—airline ticketing, flying, and other services don’t need to be updated every...

Shortform Exercise: Innovate Like a 10Xer

10Xers increase their chances for success by using empirical data to back innovation.

Think about cannonballs that you’ve fired. Which ones were calibrated, and which ones were uncalibrated?

Great by Choice Summary Chapter 5: How 10Xers Prepare for the Unexpected

The 20 Mile March (fanatic discipline) and firing bullets before cannonballs (empirical creativity) might be enough to achieve success when conditions are stable. But the world is plagued by instability; you never know what’s going to happen next, so you need more than just discipline and creativity. This is where productive paranoia comes in.

When disaster strikes, there are only three outcomes for an enterprise: They pull ahead, they lag behind, or they hit what the authors call the “Death Line” (game over for the enterprise). 10X companies pulled ahead by going by a credo: If you stay ready, you don’t have to get ready. They knew that calamities were impossible to predict but that they could and would happen, so it was best to be prepared for every eventuality. Driven by productive paranoia, they constantly asked “What if?” and found ways to mitigate nightmare scenarios.

Putting Productive Paranoia into Practice

10X companies used productive paranoia to:

1. Set up buffers. An unforeseen event can drain an enterprise’s resources, crippling or killing the company. The 10X cases protected themselves by building cash reserves, having three to 10 times the...

Shortform Exercise: Prepare Like a 10Xer

There’s no telling what kind of unfortunate event is going to happen, but given an unstable, constantly changing world, disruptions are inevitable. Shield yourself against these threats by putting paranoia to good use.

Go back to your nightmare memo. How much time do you have to respond to each of the threats on your list?

Great by Choice Summary Chapter 6: How 10Xers Stay the Course

When so many things are rapidly changing, your first instinct might be to also rapidly change to keep up with the times. But 10X companies recognized that the only thing that they had control over was themselves, and they used this control to stay steadfast amid the chaos surrounding them. They employed fanatic discipline, empirical creativity, and productive paranoia, and they stuck to their SMaC recipe throughout any disruption.

What Is SMaC?

SMaC stands for Specific, Methodical, and Consistent. You can use it as a noun (as in “SMaC prepares a company for bad times”), an adjective (“We need some SMaC procedures”), or a verb (“Can you SMaC the new directives?”). A SMaC recipe is a set of operating practices that strikes the balance between being:

• Durable—it remains largely unchanged through decades and can apply to a wide range of situations; and
• Specific—it clearly outlines what a company should and should not do. All of the 10X companies had “don’t do” points in their SMaC recipes.
  • Example: Don’t wait for perfection to launch a product; aim for good enough, then improve (Microsoft); don’t be the first but also don’t be the last when...

Shortform Exercise: Formulate Your Own SMaC Recipe

Increase your chances of surviving and thriving in a world of chronic instability. Create a formula that’s specific, methodical, and consistent.

Does your enterprise currently have a SMaC recipe? If yes, is there anything that you need to change?

Great by Choice Summary Chapter 7: How 10Xers Treat Luck

Just how lucky were the 10X companies in the study? Did they get more good luck and less bad luck than their comparisons? Could their good fortune (and their comparisons’ bad fortune) perhaps explain their massive success?

While “luck” seems like an intangible concept, the authors came up with a methodology to measure it and determine what kind of role it played in a company’s success.

Methodology and Findings

To quantify luck, the research team followed this methodology:

1. They defined luck. A “luck event” is something that happened outside of a company’s actions, that could seriously impact the company in either a good or bad way, and that was somewhat unpredictable.
2. They pinpointed luck events and analyzed their importance in the histories of both the 10X companies and comparison companies. Example: Finding the EPO gene and getting FDA approval was considered a good luck event of high importance for Amgen; a competitor finding their way around proprietary technology and getting their own patent for EPO was considered a bad luck event of high importance for Amgen.
3. They determined if 10X cases had more good-luck events than their comparisons....

Shortform Exercise: Make the Most of Your Luck

It’s not what happens to you that matters—it’s what you do with it that counts.

List all significant luck events that you’ve had in the past five years. Assess whether each one was a good-luck event or a bad-luck event, and if it was of medium or high importance.