Monday Review: Great by Choice 4

This is the fourth post reading through Jim Collins and Morten Hansen's book, Great by Choice.

1. So the previous chapter presented Collins and Hansen's conclusion that companies that thrived in difficult times had "fanatic discipline." Mostly what they mean is that these 10X companies set difficult but attainable goals that they stuck to in good times and bad.

This fourth chapter is called, "Fire Bullets, Then Cannonballs." The idea is that the most successful companies did low-cost, low-risk innovations first and only then fired "calibrated cannonballs" in the directions of what worked.

2. So the first section points out that it was not the most innovative companies that had the phenomenal growth. Usually it was a company that came just a little behind the initial innovators. They were innovative, to be sure. Unless they met some minimum innovation threshhold for their market, they didn't go anywhere. But beyond that threshhold, being more innovative didn't make much of a difference.

3. The next section gives examples of the bullets then cannonballs idea. Amgen tried its recombinant DNA innovation on about a dozen possible uses (bullets) before it shot a cannonball at an applicant relating to anemia. A bullet is a) low cost, b) low risk, and c) low distraction.

Then they give examples of groups that shot cannonballs first, risky cannonballs that ended up sinking the companies. PSA was the model for Southwest, but it shot risky cannonball after cannonball and ended up sinking.

4. So even the 10Xers didn't get it all right all the time. Progressive made a rather big gamble, a uncalibrated cannonball that failed. So from then on they shot bullets first. From then on they used "empirical validation," test bullets, before firing any more cannonballs. From now on they were calibrated cannonballs.

Bill Gates was not able to predict whether IBMs new OS/2 would take over the market. At Microsoft, he kept some of his people still working on Windows. Surprisingly, Windows won out. If Bill Gates didn't succeed by predictive genius, then what hope do the rest of us have.

The chapter ends with Steve Jobs coming back to Apple. He has the idea of setting up local stores. But they don't make a huge investment. They make some bullet trials. They recalibrate. They fire again. He goes back to the old MacIntosh and improves it. The iPod starts as a branch of their computer business. It expands inch by inch.

Thus, "empirical creativity" is Collins second key, after fanatic discipline. It is innovation implemented in dialog with evidence gathered.