Core guiding principles you cannot afford to miss if your goal is ultimate success

My current book is Great by Choice by Jim Collins and Morten Hansen. I am consistently impressed by their data driven and empirically sound findings on why particular companies succeed, excel and why some simply perish.

The book is based on rigorous research of 10X companies and their counterparts.

10X companies are companies that have excelled over time, not necessarily consistently but they have maintained a large market share and leadership when compared to other companies.

This of course is what keeps every CEO wake up at night: what are we doing right, and how can we keep ahead of the game in a way that enables long-term success.

Some of Collins’ and Hansen’s findings (and their large research team behind all the data crunching) are actually quite surprising and not what you’d think.

3 core 10Xer behaviours for success

All of the 10Xer companies that have had massive success and keep leading in their category display 3 key behaviours consistently:

  1. Fanatic Discipline.

Fanatic discipline is about consistency: keeping consistency in goals, values, strategies, and being pretty much just fanatic about it.

Collins and Hansen coined the term “20 Mile March” as a perfect example of this: the 10Xer companies over time have just kept on progressing, not necessarily by big leaps but by being consistent in their product development, consistent in how company values keep guiding their strategies.

In today’s market place, there is a big push about being all the time “ahead” of the game and being able to quickly act on opportunities.

Yet, the most successful companies keep consistency at their core. They could do large acquisitions, change products quickly, branch suddenly to new markets.

But most of them are fanatic about consistency.

Collins and Hansen use examples from polar expeditions and company progress where the most successful ones only go 20 miles each day.

They could go much faster when the conditions are good and stop or slow down when external conditions are not favourable.

But they don’t go faster or slower.

Companies like Apple, Genetech, and Southwest Airlines go the same number of miles each day, they focus on consistent progress regardless of external conditions.

Having consistency helps you and your team to stay on track, you know the milestones which you are supposed to hit, and you also gain confidence when you do so.

 

  1. Empirical Creativity.

One of the main assumptions about successful companies is their capacity to innovate.

While this may be so, Collins and Hansen stumbled upon a finding they did not expect at all: the 10Xer companies were actually less innovative then their counterparts, yet they killed at the market place.

Successful companies like Intel, Apple (after Jobs took over), and Southwest Airlines, adhered to a simple yet a paradoxical strategy: they innovated but only to a threshold where they could remain successful.

As Collins and Hansen (2011, p. 77) note: “it is not discipline alone that makes greatness, but the combinationof discipline and creativity”.

These companies all exhibited a strategy Collins and Hansen call “fire bullets, then cannonballs”.

This is the essence of empirical creativity where you start testing new ideas and potential products by firing one bullet at a time and then empirically understanding whether that bullet is hitting its target or not.

This is not about going all in but rather an empirical learning journey about what works and what does not.

Once a company has a good understanding where these bullets are going, how they can hit their target, it is only then that they fire a cannonball.

3 key principles define a bullet: it is low cost, it is also low risk, and it is a low distraction.

Firing bullets does not take over the company’s everyday processes and progress but forms a part of testing ground as to what directions the company could take in the future.

The comparison companies were the opposite where they made drastic decisions to for example acquire other companies, leading to significant debt, and then not being able to reverse the decision when it turned out not to be a favourable one.

 

  1. Productive Paranoia.

Another myth about successful companies is that the best companies take large and grave risks.

Yet, the 10Xers in this study took actually less risksand succeeded.

Productive paranoia rests on asking “what if” questions and thinking about different scenarios, and then making practical decisions to prepare for the unforeseen events and circumstances.

Essentially this means excellence in 3 key areas:

  1. Build cash reserves and buffers: make sure that you have enough room to always move.

If you are hiking up the Everest, make sure you have enough oxygen canisters for several attempts to mount the summit, not just for one attempt.

The 10Xer companies Collins and Hansen studied, “carried 3 to 10 times the ratio of cash to assets relative to the median of what most companies carry” (2011, p. 121).

In essence, always make sure you have enough resources to get you through unexpected conditions.

  1. Bound your riskunderstand where your risk is coming from, and the kind of risk it is. In essence 3 categories of risk need to be understood:

Death Line risk(risk that severely damage or kill the company), Asymmetric risk (where outcomes are more negative than potential positive ones), and Uncontrollable risk (risks that are outside of the company’s control and simply cannot be managed).

The 10Xers actually took less of these risks than other companies.

An additional category of risk was also the time bound nature of these risks.

The companies constantly asked “how much time before our risk profile changes?”.

During times when their risk profile was changing slowly, they waited to see how the changes would unfold. When risk profiles were changing fast, they acted quickly.

This key question became more important than understanding whether to react fast or slow, but rather in understanding the time bound nature of those risks.

This aided more robust decision-making on how to react and which strategies to pursue.

  1. Zoom out, then zoom in.

What these companies then did was that they used a strategy of zoom out-zoom in: they looked at the big picture, the larger trends and risks, (what is changing, how fast are particular trends and threats approaching) and then they zoomed in to their own strategies and practices, and focused on executing their objectives.

But they did not change their operations just because of a looming threat:

“Rapid change does not call for abandoning disciplined thought and disciplined action. Rather, it calls for upping the intensity to zoom out for fast yet rigorous decision making and zoom in for fast yet superb execution”. (2011, p. 122).

Zooming out means understanding the risk profiles and making informed decisions as to what that means for the company.

 

But you also have to have SMaC

So here we have the three key components in hugely successful companies. But it doesn’t end here.

Collins and Hansen also found that most companies actually used SMaC as their key strategy in combining all of these behaviours.

SMaC stands for Smart, Methodical and Consistent.

This means adhering to your key principles and is “a set of durable operating practices that create a replicable and consistent success formula” (2011, p. 147).

Each of the 10Xers had created a set of principles which they adhered to through the test of time, and kept as their main operational and strategic formula.

The question Collins and Hansen pose then for their readers is what is your SMaC?

Which operational or strategic choices and practices have you made or feel you should make to make your company or career a success?

For me, as a scientist, this has also direct connections to disciplinary development and the need for the consolidation of the field as I’ve written about before (here).

In order for a scientific field to grow and become robust, we need to find our SMaC, and also use the strategies above to really understand which of our methods, practices and strategies are relevant and robust guides to enable more successful climate change adaptation.

Luckily there’s much happening in this space and it keeps me hopeful that the field will continue some level of deeper soul searching as to how we could amend some of these principles to scientific development as well.

 

 

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