Great By Choice by Jim Collins

Presented by: Susan R. Schilke

10XERS

  • $10,000 invested in 1972 – led to a value of $6 mil in 2002 – 23 times better than the general market.
  • Spectacular results for 15+ years – related to market and industry
  • Turbulent environment
  • Started small/young 
10X Case Era $10k inv val Rel to Mkt Rel to Ind Comparison
Amgen 1980-2002 $4.5 m 24 X 77.2 X Genentech
Biomet 1977-2002 $3.4 m 18.1 X 11.2 X Kirschner
Intel 1968-2002 $3.9 m 20.7 X 46.3 X AMD
Microsoft 1975-2002 $10.6 m 56 X 118.8 X Apple
Progressive 1965-2002 $2.7 m 14.6 X 11.3 X Safeco
Southwest 1967-2002 $12 m 63.4 X 550.4 X PSA
Stryker 1977-2002 $5.3 m 28 X 10.9 X USSC
  •  Not more creative or visionary
  • Not more charismatic or ambitious
  • Not luckier or more risk-taking
  • Not more heroic or prone to big, bold moves
  • Amundsen & Scott 1911 Expeditions
    • One achieved spectacular success… the other failure of equal magnitude
    • Amundsen – sailing via bicycle, dolphin meat, Eskimos
    • Scott – unproven technology, no redundancies, just enough supplies
    • One to four thermometers…
    • Same goals and exact same environment… different behaviors

Three Consistent Traits

  • Fanatic Discipline
    • Consistency of action – consistent with values, goals & performance standards
    • Didn’t succumb to herd mentality – or alluring opportunities
  • Empirical Creativity
    • Relying on evidence over opinion
    • Made unconventional choices
  • Productive Paranoia
    • Hyper-vigilance in good times as well as bad
    • What could go wrong? How do we prepare?

Plus – Level 5 Ambition

  • Driven to create something beyond themselves
  • Focus on enduring company success over personal achievements

20 Mile March

  • Distinguishing factor in 10X companies
  • Focused on hitting specific performance measures with consistency over time
  • Requires two types of discomfort
    • Delivering performance in difficult times
    • Holding back in good times

Elements of a 20 Mile March

  • Performance markers with minimum acceptable achievement
  • Self-imposed constraints – upper bounds
  • Tailored to the enterprise and industry
  • Within your control to achieve
  • Goldilocks time frame
  • Designed by the company and self-imposed
  • Achieved with great consistency

Examples of a 20 Mile March

  • Stryker – 20% net income growth each year
    • Snorkel Award for those below the watermark
    • Annual breakfast for those who hit the goal
    • Comparison – USSC – 248% growth in 3 yrs, then…
  • Southwest Airlines
    • Profitable every year
    • Slow consistent expansion
  • Progressive – profitable combined ratio of 96%
  • Intel – Moore’s law – double complexity every 18 months to two years
  • Amundsen – 15-20 miles per day regardless of conditions

20 Mile March

  • Provided an edge in most volatile markets
  • Inverse correlation between pursuit of maximum growth and 10X success
  • 20 Mile March philosophy in place at 10X companies before they were successful – helped them get there
  • WHAT IS YOUR 20 MILE MARCH? What can you commit to achieving with consistency for 15 to 30 years?

Fire Bullets, Then Cannonballs

  • 10X success not driven by innovaton
  • 10X companies innovated – but less than expected relative to their industries and comparison companies
  • Met the industry threshold for innovation
  • Then blended creative intensity with relentless discipline and operating excellence

Bullets, Then Cannonballs

  • Fire bullets – empirical tests that
    • Are low cost (size appropriate to industry)
    • Are low risk (not necessarily high probability of success, but minimal consequences if not)
    • Are low distraction (for the overall company)
  • Assess: Did they hit anything?
  • Consider: Do they merit conversion to cannonballs?
  • Convert: Concentrate resources and fire a cannonball
  • Don’t fire uncalibrated cannonballs
  • Terminate bullets that miss

Mediocrity

Cannonballs

  • Calibrated: 10X examples
    • Biogen – multiple research projects
    • Progressive – auto (hit/yes) & homeowners (miss/no)
    • Microsoft – DOS/Windows
    • Apple – iPod – for iMac, then iTunes, then…
  • Uncalibrated: Comparison Company Examples
    • Kirschner – high-risk acquisitions
    • PSA – Fly-Drive-Sleep; L1011s
    • 9% of pioneers end up as market winners

Fire Bullets, Then Cannonballs

  • 10X companies fired a lot of bullets that didn’t hit… and even some uncalibrated cannonballs
  • 10X companies learned from their mistakes
  • Comparison companies fired more uncalibrated (untested) cannonballs
  • 10Xers not more innovative or predictive – combined creativity and discipline to better scale the innovations than competitors

Key Question

  • Which of the following behaviors do you most need to increase?
    • Firing enough bullets
    • Resisting the temptation to fire uncalibrated cannonballs
    • Committing – converting bullets into cannonballs once you have validation

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