Great by Choice: Uncertainty, Chaos and Luck – Why Some Thrive Despite Them All


Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All
Published: 10/13/2011
Ten years after the worldwide bestseller Good to Great, Jim Collins returns with another groundbreaking work, this time to ask: Why do some companies thrive in uncertainty, even chaos, and others do not? Based on nine years of research, buttressed by rigorous analysis and infused with engaging stories, Collins and his colleague, Morten Hansen, enumerate the principles for building a truly great enterprise in unpredictable, tumultuous, and fast-moving times.

Book Summary - Great by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them All by Jim Collins and Morten T. Hansen

Key Insights

It is no secret that the constantly changing world often puts many companies out of business because they just can’t keep up with the chaos. In Great by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them All, Jim Collins and Morten T. Hansen explain how some businesses don’t just get through these tough times -- they actually grow and flourish because of them.

The success of a company is not based on innovation or risk-taking or boldness. It is based on discipline, learning through thorough research and evidence, and a near-paranoia about the possibility of failure. Luck has no place in a successful business plan. Everything must be done with intention if one wants to succeed even in the midst of all the uncertainty in the world.

Key Points

Be Prepared

To illustrate the importance of being prepared is not just the business world, but the world in general, the authors use the example of two teams of explorers who were in competition to see who would be the first to reach the South Pole.

Roald Amundsen and his team from Norway beat Robert Falcon Scott and his British team by 34 days. But Scott’s misfortune didn’t stop there. Not only did he and his team lose the race to the Pole, they then froze to death in the icy tundra. So why did Amundsen and his team make it to the South Pole first and make it back home safe and sound when their competitors didn’t?

The answer is preparation.

Amundsen prepared for years before the trek. He went around the world gathering knowledge, especially from the Eskimos, about how to survive the deadly conditions of the Arctic. He tested every possible food source he could possibly come across on his journey, even trying things like dolphin meat. He made sure his team had more supplies than they needed and that they marked their trail with black flags to make it stand out against the white, snowy landscape.

Scott’s team, on the other hand, didn’t have nearly as many supplies, and they counted on new, unproven technology like motor sleds to travel (unlike Amundsen, who used tried-and-trusted Eskimo dog sleds) without knowing beforehand if they would even work. These sleds failed, their food ran out, and they ultimately perished, all because they weren’t adequately prepared.

Neither team could possibly know exactly what the trek had in store for them, but Amundsen was prepared for any possible trouble he could run into, which is why, in the end, his team was successful.

This same idea can be applied to business as well: even if the future can’t be predicted, the key is to be prepared for anything the world might throw your way.

What We Can Learn from 10Xers

10Xers are businesses that have outperformed their competitors by a factor of at least ten in a given time frame. The book uses these companies as an example of what to do better, and how to thrive in unpredictable conditions that can easily sink other companies.

There are three keys to 10Xers’ success. The first is discipline. This discipline involves setting a course and staying that course no matter what. Just like Amundsen charted his route to the South Pole and stuck to it, businesses must do the same, never getting distracted and never losing sight of their goal.

The second key to success is using personally tested empirical evidence to inform your decisions. Don’t just listen to what experts or other companies advise, go out there and do the research yourself. Test your hypotheses, gather evidence, then decide where, when, and how you should innovate.

The final key is referred to as “Productive Paranoia.” While paranoia doesn’t sound like something one should strive for, a certain amount of hypervigilance and nervousness is necessary to keep leaders on their toes and keep their businesses running smoothly. You can never just assume that everything is fine and will continue to go well. Like Amundsen, you must always prepare for the worst, so that if it happens, you will be ready to face it and overcome it.

Twenty-Mile Marching

Borrowing more inspiration from Amundsen and his team, successful companies use a strategy known as Twenty-Mile Marching to find and reach their goals.

Amundsen and his team marched around 15.5 miles every single day of their trek: never more, never less. Companies who perform well even in chaotic times do the same thing: they set a goal for themselves (such as a certain annual growth percentage or a predetermined amount of innovation per quarter) and push themselves to achieve this goal even if conditions aren’t favorable.

A crucial part of this strategy, though, is not to overdo it. Even if the weather was great and the going was good, Amundsen didn’t have his team push on past 15.5 miles per day. Instead, they went the 15.5 miles, stopped, and rested up, so that if the next day brought bad conditions, they would be strong enough to handle them.

You wouldn’t think that this would apply to businesses, but the book gives the example of an electronics company called Advanced Micro Devices (AMD). AMD practically put itself out of business because it tried to grow too much too fast. It borrowed too much money so that it could gain a 60 percent growth rate in one year, and then its market fell and it didn’t have the resources to bail itself out. Intel, on the other hand, followed a more steady, sustainable course, which is one of the reasons it became a 10X company while AMD fell far behind.

It is important to set a goal and do everything you can to reach it, but you must make sure that you aren’t overreaching or trying to get ahead of yourself. In some cases, this can be just as bad as not reaching your goal at all.

Be Bold -- But Only if the Evidence Supports It

A company can’t get anywhere if it isn’t innovative. That being said, creating new products just for the sake of being innovative is a huge mistake. You should be bold and innovative, but only if you have first studied the marketplace and come up with empirical evidence that proves your idea is a good one.

The authors use the analogy of bullets and cannonballs. First, a 10X company tests its market with a few small, low-cost, low-risk new products or services, just to see what the reception is. This is like firing bullets in different directions to see what target they hit. Once they hit something good, they hone in on that target and shoot it with cannonballs instead. The cannonballs are bigger, higher-risk products and services that ultimately become a large revenue stream for the company.

The book gives the example of Apple, a company known for its near-constant innovation. In 2001, it launched the iPod, a small MP3 player that only worked with Mac computers (the company’s flagship product). The product showed promise, so they tried a second bullet: iTunes, which was also compatible only with Mac. Once the company saw that there was a passionate interest in these things, they fired their cannonballs: iPods and iTunes for all computers, not just Macs. This led to them becoming one of the most successful companies of all time.

A Balanced Business is a Successful One

Every industry has different standards for innovation. If your company does not meet the threshold for innovation (coming up with new ideas, products, etc.), then it will be left behind by the other companies in the industry. Every industry has its own standards -- more technological industries require more innovation since tech is always changing, whereas industries like the airline industry don’t require as much innovation, as you can’t exactly reinvent the airplane every few months. So in most cases, in order to stay current, your company must keep innovating.

At the same time, though, you can’t only focus on innovation. This leads to an unbalanced company. You must focus equally on other aspects of the business as well, such as marketing, accounting, and manufacturing, in order to ensure that you don’t use all of your resources on just one part of the business.

The authors give the example of Intel versus another of their rivals, Advanced Memory Systems (AMS). AMS was more innovative, but Intel won out over this competitor in the end because it retained its focus on things like costs, delivery times, manufacturing and distribution, and customer experience. The better-balanced business was the one who ultimately succeeded, even if it wasn’t the most innovative at the time.

Productive Paranoia

It is normal to feel paranoid about the possibility of failure when you are running a business. Even when things are going well, you ask yourself what would happen if a new competitor came on the scene or if something in the industry changed. Would you be ready?

This type of paranoia (while stressful) can actually be beneficial. It can help you to prepare for problems that may arise in the future. One of the best ways that 10X companies prepare for the inevitable disaster is to stockpile as many funds as they can. The more financial assets you have the better prepared you will be if something happens. This strategy helped Southwest Airlines to survive the downturn of the airline industry after the tragic events of September 11, 2001, when almost all of their competitors went out of business.

Other things like watching the field for emerging competitors and keeping an eye on changing laws in your industry can also help you be ready for anything. You can’t control when a crisis may occur, but you can foresee possible problems and have a strategy to face them.

SMaC

Another key to success is “SMaC.” This stands for “specific, methodical, and consistent,” and applies to procedures used by a company to keep themselves on track. Companies must lay out their plans in such a way that they can last for years or even decades with only the need for minor tweaks here and there. Taking the time to get your operating procedures just right is the best way to keep your company on track and growing.

Southwest Airlines is a great example of this as well. When the airline industry in the U.S. was deregulated in 1979, many new airlines rose up and created competition for Southwest. Instead of being intimidated, Southwest set out and came up with a list of ten SMaC operating procedures that it would follow no matter what. These rules applied to things like which aircraft they would use and about how to handle food services, and they were such good rules that the company was still following 80 percent of them 25 years later.

Business owners should come up with a list of commandments like this for their own company and stick with them, as they add consistency, clarity, and guidance as you head into the future.

It’s Not About Luck

Many people in this day in age think that success depends largely on catching the right break or knowing the right person or being in the right place at the right time. In short, you need luck.

The authors of this book, though, say that no great industry leader has ever relied on luck. Luck is fleeting, and it always runs out at some point. Sure, some innovators like Bill Gates did come from a background that gave them certain advantages like private schooling and computer access, but that kind of luck isn’t enough. It wasn’t luck or privilege that made Microsoft take off: it was Bill Gates’ dropping out of school, moving across the country, and spending every waking moment (and plenty of moments he should have been sleeping) working on his software until it was perfect.

Hard work, ambition, and sticktoitiveness are the keys to success. Luck has nothing to do with it.

The Main Take-away

Successful businessmen and women should never rely on luck or chance to determine the future of their company. They should work hard, stay focused on their goals, and use evidence-based proof for how to proceed. They should be prepared for anything because the world is a chaotic place and could change at any moment.

Every company has some amount of luck, but preparation is the thing that will see your company through both good and bad times, not good fortune.

About the Authors

James “Jim” Collins was born in Aurora, Colorado in 1958. He is an author, speaker, researcher, and business consultant. He travels the country speaking about business management, growth, and sustainability. Since 1995, he has been running his own management laboratory in Boulder, Colorado, where he teaches corporate leaders better ways to run their businesses and conducts his own research into the topic.

Morten T. Hansen is a Norwegian-American author, professor, motivational speaker, and management theorist. He has degrees from the University of Oslo, the Middlebury Institute of International Studies at Monterey, the London School of Economics, and Stanford University, where he was also a Fulbright Scholar and received an award for his academic performance. He is now a tenured professor at the University of California, Berkeley, as well as a member of the faculty at Apple University.

LEAVE A REPLY

Leave a Reply

Your email address will not be published. Required fields are marked *