Is Jim Collins’s Great by Choice worth reading? What are the key qualities that help 10X companies survive crises, according to its authors Jim Collins and Morten T. Hansen?
In Great by Choice, bestselling author Jim Collins and management professor Morten T. Hansen shed light on what it is that sets apart companies that stay afloat during crises when their not-so-successful counterparts go bust.
Here is a brief overview of Great by Choice by Jim Collins and Morten T. Hansen.
Great by Choice by Jim Collins and M.T. Hansen
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 perform quite as well, despite being in the same industry, in the same era, with similar opportunities as the 10X companies.
(Shortform note: Collins employs a similar method of comparative historical analysis in a previous book. Read our summary of Good to Great.)
Narrowing Down the 10X Companies
To be considered a 10X case, an enterprise had to meet three basic criteria:
- It must have demonstrated consistently impressive results in both its industry and in the stock market over 15+ years.
- It must have achieved these results during tumultuous times marked by unforeseen events.
- It must have been a young organization and/or started small before its spectacular rise.
Given these parameters, the authors narrowed down the 10X cases—and their comparison companies (in parentheses)—to the following:
- Amgen (comparison company: Genentech)
- 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)
(Shortform note: To learn more about the authors’ research methodologies, refer to the appendix section “Research Foundations” in Great by Choice.)
While the findings common among the 10X companies are no guarantee that an enterprise will be able to weather any storm, following their principles will likely give you a better chance of success than if you followed the comparisons’.
Note that the research tracked only up until 2002, so it’s entirely possible that the 10X companies no longer boast the same performance they once did. (On the flip side, comparison companies might have also made the jump from good to great, as in the case of Apple under Steve Jobs.) The authors examined these companies during their dynastic eras, or the 15+ years largely before the 2000s, so the research gives a snapshot of a period of stellar performance. Think of it as looking at a sports team’s dynasty—analyzing a company’s sustained performance over an era can still give useful insights, even if that era has already passed.
The research, which consisted of 7,000 historical documents that painted a picture of a company’s evolution from founding to 2002, dispels a lot of myths when it comes to successful organizations and leaders:
- Myth 1: Successful leaders are big, bold, visionary risk-takers. The evidence suggests that successful leaders rely more on empirical data than vision, and more on discipline and obsessive preparation than big risks.
- Myth 2: Successful companies are innovators. Some 10X companies didn’t innovate as much as their comparisons. They did, however, approach innovation in a way that increased their chances for success, combining it with creativity and discipline and having the ability to scale it.
- Myth 3: Successful leaders have to move fast, all the time. Instead of focusing on speed, 10X leaders focus more on timing.
- Myth 4: Successful companies keep up with a drastically changing environment by making their own drastic changes. The evidence shows that 10X companies changed less than their counterparts, even when the world around them was changing wildly.
- Myth 5: Successful companies are just luckier than others. The companies had a fairly even number of lucky breaks and misfortunes. The difference: 10X companies knew how to deal with the hand they were dealt.
What Sets 10Xers Apart
The findings have led to the following insights.
10Xers are 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
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 expected earnings—a widespread practice that enabled analysts to “predict” and “manage” earnings every quarter, thereby keeping markets steady. Lewis thought the practice was a dishonest and lazy shortcut that circumvented deep analysis and research. Giving into it would go against his principles, but not giving into it would leave his company vulnerable. He thus decided to do something no other SEC-listed company had done before: Progressive would publish monthly financial statements so that analysts could more accurately predict the company’s earnings using real data. Lewis refused to accept what seemed like the only options and found a way to keep Progressive secure without compromising his values.
People tend to think that leaders of successful companies make especially bold moves, yet the research revealed that 10Xers generally weren’t more daring than their comparison leaders. The difference lies in the process leading to those bold moves.
While most leaders rely on conventional wisdom, expert opinions, or even untested ideas, 10Xers rely on their own creative instincts backed by empirical data. Their decisive actions are evidence-based, coming only after extensive observation and experimentation. This allows them to make bold, creative moves while also managing their risks.
- Example: After a routine checkup, Intel chief executive Andy Grove learned that he might have prostate cancer. He didn’t leave his treatment plan up to the doctors and instead spent all his free time on research. He read everything he could find that was related to the subject, dove deep into all the studies, and found that there were conflicting opinions in the medical world regarding treatment. After considering all the data, he decided on his own treatment plan. Because the medical world itself hadn’t come to a consensus regarding the best course of action, Grove had to learn everything he could about it before coming to his own evidence-based decision.
10Xers have one constant thought: “What if?” They consider every kind of nightmare scenario so that they can remain vigilant and prepare for the worst. Even when the skies are clear and conditions are perfect, they are always preparing for a storm.
- Example: Bill Gates has always been guided by fear, whether Microsoft was just starting out or already a solid player in the industry. In the beginning, he wanted to make sure that Microsoft had enough cash to last an entire year without revenue. This kind of worst-case-scenario thinking would continue as Microsoft grew; in 1991, his “nightmare memo” was leaked to the press, listing all sorts of threats, even though the company was fast becoming a major player. Such memos were his way of outlining potential threats so that he could prepare for them. A year after the memo was leaked, Gates said, “If I really believed this stuff about our invincibility, I suppose I would take more vacations.” In contrast, his counterpart over at Apple, John Sculley, went on a nine-week sabbatical after Apple had one really good year. While Sculley may have also had a great work ethic, Gates was always on, always thinking about keeping the company secure, no matter how many good years Microsoft had.
Level 5 Ambition
10Xers are unyielding and ultra-disciplined, obsessive about evidence, and incredibly paranoid. It all seems like a lot to handle and yet 10Xers constantly attract talented people who want to work with them. That’s because 10Xers aren’t on a quest for personal greatness. Their core behaviors are driven by something greater than themselves, a relentless passion with a purpose: the ambition to build a great company, make a difference in the world, and leave a legacy behind.
- Example: Peter Lewis of Progressive Insurance had one goal: to make Progressive great. He accomplished this and did it so well that the company continued to prosper even after he handed over the reins to his successor.
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Here's what you'll find in our full Great by Choice summary:
- How you can make the choice to be great, no luck needed
- Why certain assumptions about great leaders are actually myths
- How some companies are 10X more successful than their competitors