A century ago, two heroic men led daring expeditions to the South Pole, a journey of 1,400 miles in subzero temperatures. It was autumn, 1911, before the advent of mass communication. They left days apart. Roald Amundsen arrived December 14, planting a Norwegian flag and leaving a polite letter for Englishman Robert Falcon Scott, whose group at the time was 360 miles behind. Scott’s group of five men reached the Pole five weeks later, but never made it back. Three frozen bodies were recovered later by a British search party just 10 miles from their supply depot.
Famed researcher Jim Collins recounts this (forgive me) chilling story to illustrate what separates the stellar from the rest. After probing similar questions in bestsellers such as Good to Great, Built to Last and most recently, Great by Choice, he teams with U.C. Berkeley management professor Morten T. Hansen to explain how “vulnerable” companies achieve “spectacular results” in uncertain or chaotic industries. The companies highlighted are termed “10X companies.”
Great by Choice is about more than recessions, write its authors: “Instability is chronic, uncertainty is permanent, change is accelerating, disruption is common, and we can neither predict nor govern events. We believe there will be no ‘new normal.’ There will only be a continuous series of ‘not normal’ times.”
What makes a company great under stress? Collins and Hansen’s research showed:
- Being outstanding or “10X” requires being more disciplined, more empirical, and having “productive paranoia.” Exceptional leaders are risk taking, visionary and creative, but all good leaders have these qualities. What makes the difference is the first three. “10xers” are similar to the Level 5 leaders that Collins chronicled in Good to Great, but had more “paranoia” because their environments were so much trickier.
- Being “lucky” is not that important. People often squander luck, and 10X companies didn’t get any more lucky breaks than anyone else, but when they did get a break, they took specific action to achieve a “high return on luck.” Bill Gates was one of several Americans who enjoyed the same privileges and access to mainframe computers at a pivotal moment, but he chose to drop out of Harvard and start Microsoft with Paul Allen in the 70s, and the others did not.
- Winning companies have a specific recipe for success. If there’s trouble they do not question the recipe itself, but whether it’s being adhered to. They change the recipe only cautiously. When Apple was stumbling under John Sculley, Steve Jobs first returned to its founding principles of consistency and discipline, then revived its original recipe, eg user-friendly, elegant design, and turned it around.
- “Productive paranoia” protects you from the inevitable storms. No one can foresee events such as 9/11 or the rise of e-commerce. One assumes storms will occur, although one cannot predict what they will be or when they’ll hit.
- Fire bullets, then cannonballs. This is the empirical creativity part. You take some small risks, and when you know enough, you fire a big cannonball. Progressive Insurance company established itself serving high-risk drivers, then when it wanted to move into the mass market, it creeped into states it knew well, Texas and Florida, gradually increasing its territory until it covered every state it operated in already. By 2002, it was the number four auto-insurer in the country.
- Enforce a consistent 20 Mile March. Remember Aesop’s tortoise and the hare? The tortoise, slow and steady, wins the race. This is where the Norwegian South Pole conqueror Amundsen had a real edge. On days when the conditions were good, he didn’t push his men to move faster than 20 miles, but when conditions deteriorated, he still demanded a minimum of 15 miles. This “fanatic discipline” kept the 10Xers from overreaching in good times and coasting in bad times. Amundsen prepared by testing raw meat on himself and apprenticing with Eskimos and dogsleds. He was prepared for anything, and when crises came, he had extra supplies and contingency plans. We know from Scott’s diary that his group had inadequate supplies, was caught flat footed by the weather and didn’t attempt any progress in bad conditions, and had to “man-haul” their sleds because their ponies were unsuited to the icy conditions. Scott was no slacker–he was already celebrated for his prior expedition with Ernest Shackleton that came only 520 miles from the pole. If anything, he was overconfident in his prodigious abilities.
In a nutshell, Great by Choice teaches us, as business owners, to prepare for uncertain times by being disciplined, cautious–even paranoid, and empirical in our approach.