Monday, July 25, 2016

Monday Review: Great by Choice 2

Last week I started reviewing Jim Collins and Morten Hansen's new book, Great by Choice. Today is chapter 2: "10Xers."

1. The title of the chapter has to do with the companies that form the focus of this book's study, namely, companies that performed at least 10 times better than its industry index over the period from 1972-2002.

The study concluded that there were three key characteristics of the leadership of the companies in this category: 1) fanatic discipline, 2) empirical creativity, and 3) productive paranoia. I like the last two titles, not as happy with the first.

2. So they begin by contrasting Roald Amundsen and Robert Falcon Scott, who in 1911 raced to be the first to get to the south pole. Amundsen made it there and back in good time. Scott got bogged down and ended up freezing to death.

Collins and Hansen use Amundsen as an example of the kind of leader who is more likely to lead an organization through chaotic times. Amundsen prepared fanatically for the trip to the south pole. He experimented with various options to find the ones that seemed most likely to work. He expected everything to go wrong and had multiple failsafes. They basically summarize his philosophy as, "Don't wait until you're in a crisis to prepare for it."

By contrast, Scott had done little experimentation in preparation. He chose the wrong animals and the wrong equipment. He had barely enough provisions to make it if everything went right. He depended on being able to hit his return path without error. He made it to the pole, but died before he made it back to his starting camp.

3. So the first characteristic they identified of the companies that super-produced in tough times is "fanatic discipline." Frankly, I'm not sure that they found the right term because they seem to ball up several things in this category. For example, they include "consistency of action" here--clearsightedness in terms of goals. But surely the leaders of the other companies were tenacious in some way too.

I liked this line: These leaders were "utterly relentless, monomaniacal even, unbending in their focus on their quests. They don't overreact to events, succumb to the herd, or leap for alluring--but irrelevant--opportunities" (21). They were "non-conformists in the best sense" (23). They were "fanatics" (22).

It sounds like this category should have been titled, "disciplined fanatics" rather than "fanatical discipline." But I've detected in Collins a tendency to push against charisma. He's a data guy by personality, which suggests there could be some bias against the charismatic in his books.

So let's go ahead and put a hypothesis out there, namely, that what he is talking about here is an intense, focused, and idiosyncratic passion that often bordered on the weird. These guys didn't give a rip what other people thought about them.

4. The second characteristic of the leaders of these companies was a certain "empirical creativity." What they mean here is that these leaders were creative, but based on data. "At times of uncertainty, most people look to other people... They look primarily for empirical evidence" (28).

A key point Collins and Hansen make here is that they didn't "favor analysis over action." There is a certain kind of data person that just likes endlessly collecting data and never acts. That's not what they're saying here. These companies sometimes took big risks, but they were risks based on evidence.

5. Finally, these leaders had something called "productive paranoia." They were always expecting the bottom to fall out. Bill Gates was "Doctor Doom" at Microsoft, once prompting an 11% drop because of a memo he sent worried that the sky was going to fall at any minute. One of the company presidents had a portrait of General Custer on his wall. The leader of Southwest predicted 11 of the last 3 recessions. :-)

"By embracing the myriad of possible dangers, they put themselves in a superior position to overcome danger" (28). I particularly identified with this one. It's part of why I was willing to step back into a leadership role at IWU this year. I see the educational sky cracking all around us, and I fear my part of the university is doing squat.

6. Collins then connects these specific characteristics with what he called "Level 5 Ambition" from his Good to Great book. In that book, Level 5 Ambition was a combination of humility and professional will. Since many of the leaders of this book were flamboyant (seeming to contradict their earlier findings--again, one suspects there is some bias against charisma lurking here), they describe humility as a tendency to work for the greater good.

Now maybe that's what they should have said in Good to Great! These leaders weren't out for themselves but for the greater good of the company. Now that will preach. These "paranoid, neurotic freaks" (PNFs) were "passionately driven for a cause beyond themselves" (33).

The next few chapters begin to play out these concepts in greater detail.

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