Jim Collins is one of my all-time favorite authors. He wrote (with the help of a research team) the bestselling books Good to Great, Great by Choice, Built to Last, and How the Mighty Fall. He constructs his books in an easy-to-understand way and makes the topic of business incredibly interesting. For today’s Resource Friday, let’s look at Great by Choice: Uncertainty, Chaos andLuck — Why Some Thrive Despite Them All.
Let’s jump in!
Collins starts by defining the kind of leader that is at the head of the successful companies researched — The 10X Leader.
The 10x leader: core behaviors
- Fantastic discipline: 10x leaders have an extreme focus on their goals and the consistent actions necessary to accomplish them.
- Empirical creativity: When faced with challenges, 10x leaders react using creative solutions based on observation, not theory.
- Productive paranoia: 10x leaders maintain a healthy level of pessimism. They are extremely aware of problems that may arise and how to combat them.
Each of these behaviors is carried into the company cultures of the successful companies researched. Let’s look!
Fantastic Discipline: The 20 Mile March
Collins uses the analogy of a long, seemingly monotonous march of 20 miles to communicate how these successful companies accomplished greatness. 10x companies don’t make rash decisions in order to gain a quick profit.
Through their research, Collins’ team regularly found that the companies being researched had long periods of consistency. They had clear performance goals and accomplished those goals with extreme regularity.
“A 20 Mile March needn’t be financial. You can have a creative march, a learning march, a service-improvement march, or any other type of march, as long as it has the primary characteristics of a good 20 Mile March” – Jim Collins, Great by Choice (p. 65)
Southwest Airlines was one example of this fantastic discipline. They remained profitable for 30 years straight, even through 9/11 and the uncertainty that followed. No other major airline has done this!
Empirical Creativity: Start with Bullets, End with Cannonballs
Collins uses the analogy of shooting bullets to communicate the idea of hitting a target before shooting cannonballs. The bullet is a test; the cannonball is a business venture.
According to Collins, here are characteristics of a bullet in business: Bullets are low cost, low risk, and low distraction. (p. 81)
Low cost: The bullet doesn’t take a lot of capital resources.
Low risk: There aren’t any significant consequences if the bullet doesn’t hit the target.
Low distraction: The bullet doesn’t take too much attention away from the main business needs.
Productive Paranoia: Prepare for the Worst
10x companies prepare for the worst in order to avoid risk. According to Collins, 10x companies keep about 3-10 times the amount of cash on hand as comparable companies.
Collins gives an example of Intel, one of their successful companies researched:
“By the late 1990s, Intel’s cash position had soared to more than $10 billion, reaching 40 percent of annual revenues (whereas AMD’s cash-to-revenue ratio hovered at less than 25 percent).” – Jim Collins, Great by Choice (p. 104)
Great Read for All Business Lovers
I loved this book because it got into the nitty gritty of business. I’m an engineer so I like numbers and quantifiable things. This book isn’t based on theory like a lot of business books. Collins uses research and numbers to back up his claims.
If you love learning about business, I’d highly recommend it!
What’s your favorite business book?
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