By Samuel Kniseley Ballesteros on April 20, 2020
Jim Collins, author of the business classic Good to Great, and UC Berkeley Professor Morten Hansen set out, in their book, Great by Choice, to answer that question.
Specifically, they asked,
“Why do some companies thrive in uncertainty, even chaos, and others do not? When buffeted by tumultuous events, when hit by big, fast-moving forces that we can neither predict nor control, what distinguishes those who perform exceptionally well from those who underperform or worse?”
Collins and Hansen narrowed their list of test companies down from 20,400 to 7 matched pairs, each of which was in the same industry, had the same financial resources and encountered similar challenges, both internal and external.
Between each pair of companies, one outperformed the industry benchmark significantly, while the other struggled or failed! Collins and Hansen identified seven “10x companies” including Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines and Stryker who consistently beat their industry index, and accomplished this tremendous growth during chaotic times.
What made the difference between them and their counterparts who under-performed? Collins and Hansen’s substantial analysis identified 3 core behaviors that gave the 10x companies an edge over their counterparts. They were FANATIC DISCIPLINE, EMPIRICAL CREATIVITY and PRODUCTIVE PARANOIA.
What is Fanatic Discipline?
The first behavior, Fanatic Discipline, is the resolve to stay focused on the vital disciplines that give you what you want from the business. The authors of Great by Choice say, “For a 10xer, the only legitimate form of discipline is self-discipline, having the inner will to do whatever it takes to create a great outcome, no matter how difficult” (Great By Choice, p. 23). So, discipline is defined here as “consistency of action” (Great By Choice, p. 23).
They compare this “consistency of action” to a 20 Mile March, and they illustrate it by contrasting the dramatic stories of 20th Century explorers, Roald Amundsen and Robert Falcon Scott.
“In October 1911, two teams of adventurers made their final preparations in their quest to be the first people in modern history to reach the South Pole. For one team, it would be a race to victory and a safe return home. For the second team, it would be a devastating defeat, reaching the Pole only to find the wind-whipped flags of their rivals planted 34 days earlier, followed by a race for their lives -- a race that they lost in the end, as the advancing winter swallowed them up. All five members of the second Pole team perished, staggering from exhaustion, suffering the dead-black pain of frostbite, and then freezing to death as some wrote their final journal entries and notes to loved ones back home.”
“It's a near-perfect matched pair. Here we have two expedition leaders -- Roald Amundsen, the winner, and Robert Falcon Scott, the loser -- of similar ages (39 and 43) and with comparable experience. Amundsen and Scott started their respective journeys for the Pole within days of each other, both facing a roundtrip of more than 1,400 miles into an uncertain and unforgiving environment, where temperatures could easily reach 20˚ below zero even during the summer, made worse by gale-force winds. And keep in mind, this was 1911. They had no means of modern communication to call back to base camp -- no radio, no cellphones, no satellite links -- and a rescue would have been highly improbable at the South Pole if they screwed up. One leader led his team to victory and safety. The other led his team to defeat and death.”
“What separated these two men? Why did one achieve spectacular success in such an extreme set of conditions, while the other failed even to survive?” How to Manage Through Chaos by Jim Collins and Morten T. Hansen
What made Amundsen and the 10x companies in Collins and Hansen’s research different?
Were they luckier? Were they smarter? Were they more visionary, innovative or creative? Were they more willing to take risks? What Collins and Hansen discovered in their 9-year study is that none of those traits made them successful. What did make a difference was their behavior!
The first difference was that they were more fanatically disciplined. We can see this by contrasting Amundsen’s and Scott’s approach.
Scott thought that his best chance at reaching the South Pole was to cover as much distance as possible when conditions were favorable. Therefore, he would push his team as far as they could go on good days. Then, exhausted, they still had to set up camp for the night. If the next day presented harsh conditions, they would hunker down in their tents and lament their bad luck that day.
The 20-Mile March
In contrast, Amundsen began with the end in mind, calculating the number of days it would take to reach the South Pole by the team’s target date. Giving himself some buffer time, he figured that the team could reach their destination by marching 15 to 20 miles every day. On good days, the team would exercise self-control, and stop to rest and re-energize after a maximum of 20 miles. When they encountered bad weather or terrain, they would push past it to complete their 20-Mile March.
Collins and Hansen write, “The 20 Mile March creates two types of self-imposed discomfort: (1) the discomfort of unwavering commitment to high performance in difficult conditions, and (2) the discomfort of holding back in good conditions” (Great By Choice, p. 45).
An example is that, in spite of all the chaos and economic troubles experienced by the airline industry between 1990 and 2003, Southwest Airlines produced a solid profit for 30 consecutive years. However, the airline known for “Low Fares, Lots of Flights and Lots of Fun,” was also known to “hold back in good times so as not to extend beyond its ability to preserve profitability and the Southwest culture” (Great By Choice, p. 45).
When we begin implementing the Entrepreneurial Operating System® (EOS®) with leadership teams, we embark on a journey to strengthen the Six Key Components™ of their business.
The Traction® component is all about “consistency of action” or, as we call it, execution. The 2 tools or disciplines that we use to strengthen the Traction® component are Rocks and Meeting Pulse™, which create a 20-Mile March discipline for the team.
Rocks are the most important priorities we must work on in the next 90 days. This is part of our 20-Mile March. Rocks just help us focus. By focusing on our Rocks, we learn to live within the 90-Day World® that looks like this. We consistently act on the vision by focusing on the most important priorities for 90 days. Then we stop, pick our head up out of working in the business and meet for a Quarterly Session to review whether we’ve completed our Rocks and learn how to get better, faster and stronger. Then we review our vision to make sure we all have one vision, one page, one plan. From there, we set new Rocks for the next 90 days, and we jump back into the business to consistently act on those priorities for the next 90 days.
Within the 90-Day World®, we implement a weekly Meeting Pulse™ with a very specific agenda called the Level 10 Meeting™ (or L10) Agenda. This is another part of our 20-Mile March in that the leadership team meets every week for 90 minutes, on the same day, at the same time, using the same agenda, starting on time and ending on time. During the 90 minutes, the team is checking on their Scorecard, their Rocks, their customers & employees, and on their weekly To-Do’s (7-Day Action Items). Any of these items that are off-track drop down to the Issue Solving section of the meeting. Then, 60 of the 90 minutes is spent identifying the true root cause of any off-track Scorecard numbers, Rocks and To-dos. This is what makes for effective meetings where you are solving your problems as they arise, especially anything that is keeping you from focusing on and completing your Rocks (90-day priorities) or your To-dos.
Fanatical focus on these disciplines can help you survive and thrive, even in the midst of economic turbulence. That behavior, of FANATIC DISCIPLINE, is the first that Collins and Hansen’s research found characteristic of 10x companies. In my next article, we’ll explore the next behavior that propels 10x companies, EMPIRICAL CREATIVITY.