Great By Choice

Key Concepts

The core behaviors of 10X companies

“10Xers display three core behaviors that, in combination, distinguish them from the leader of the less success comparison companies:

• Fanatic discipline: 10Xers display extreme consistency of action—consistency with values, goals, performance standards, and methods. They are utterly relentless, monomaniacal, unbending in their focus on their quests. (p. 36)

• Empirical creativity: When faced with uncertainty, 10Xers do not look primarily to other people, conventional wisdom, authority figures, or peers for direction; they look primarily to empirical evidence. They rely upon direct observation, practical experimentation, and direct engagement with tangible evidence. They make their bold, creative moves from a sound empirical base. (pp. 36-7) 

• Productive paranoia: 10Xers maintain hypervigilance, staying highly attuned to threats and dangers in their environments, evening—especially when—all’s going well. They assume conditions will turn against them, at perhaps the worst possible moment. They channel their fear and worry into action, preparing, developing contingency plans, building buffers, and maintaining large margins of safety.” (p. 37) 

10X companies are laser focused on achieving consistent results no matter what (a 20 Mile March)

“The 10X companies didn't have a perfect record, only a near-perfect record,  but they never saw missing a March as “OK.”  If they missed it even once, they obsessed over what they needed to do to get back on track: There’s no excuse, and it’s up to us to correct for our failures, period.” (p. 50)

“To 20 Mile March requires hitting specified performance markers with great consistency over a long period of time. It requires two distinct types of discomfort, delivering high performance in difficult times and holding back in good times.” (p. 65)

“The 20 Mile March builds confidence. By adhering to a 20 Mile March no matter what challenges and unexpected shocks you encounter, you prove to yourself and your enterprise that performance is not determined by your conditions but largely by your own actions.” (p. 66)

10X companies do a lot of experimentation (fire bullets) before making their big bet (cannonballs)

A “fire bullets, then cannonballs" approach better explains the success of 10X companies than big-leap Innovations and predictive genius. (p. 96)

A bullet is a low-cost,  low risk, and low distraction test or experiment. 10Xers use bullets to empirically validate what will actually work. Based on that empirical validation, they then concentrate their resources to fire a cannonball, enabling large returns from concentrated debts. (p. 96)

Failure to fire cannonballs, once calibrated, leads to mediocre results. The idea is not to choose between bullets or cannonballs but to fire bullets first, then fire cannonballs. (p. 97)

10X companies prepare for risk more effectively than others

“10Xers understand that they cannot reliably and consistently predict the future events, so they prepare obsessively—ahead of time, all the time—for what they cannot possibly predict. They assume that a series of bad events can wallop them in quick succession, unexpectedly and at any time.” (p. 121)

“10Xers build buffers and shock absorbers far beyond  the norm of what others do. The 10X companies we studied carried 3 to 10 times the ratio of cash to assets relative to the median of what most companies carry and maintained more conservative balance sheets then the comparison companies throughout their histories, even when they were small enterprises.” (pp. 121-2)

10X companies have Specific, Methodical, and Consistent “recipes”—or SMaC

“If you really want to become mediocre forget yourself killed in a turbulent environment, you want to be changing, morphing, leaping, and transforming yourself all the time and in reaction to everything that hits you. We've found in all our research studies that the signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.” (p. 138)

“A SMaC recipe is a set of durable operating practices that create a replicable and consistent success formula; it is clear and concrete, enabling the entire enterprise to unify and organize its efforts, giving clear guidance regarding what to do and what not to do. A SMaC recipe reflects empirical validation and insight about what actually works and why.” (p. 147)

10X companies are no more lucky than others, but they get higher Return on Luck

“Luck happens, a lot, both good luck and bad luck. Every company in our research experienced significant events in our era of analysis. Yet the 10X cases were not generally luckier than the comparison cases.” (p. 177)

“The critical question is not ‘Are you lucky?’ but ‘Do you get a high return on luck?’”  (p. 177)

“We observed an asymmetry between good luck and bad. A single stroke of good fortune, no matter how big, cannot by itself make a great company. But a single stroke of extremely bad luck, or an extended sequence of bad-luck events that create a catastrophic outcome, can terminate the quest.” (p. 178)

Quotables

“We do not believe that chaos, uncertainty, and instability are good; companies, leaders, organizations, and societies do not thrive on chaos. But they can thrive in chaos. (p .2)

“Amundsen’s philosophy: You don't wait until you're in an unexpected storm to discover that you need more strength and endurance. You don't wait until you're shipwrecked to determine if you can eat raw dolphin. You don't wait until you're on the Antarctic journey to become a superb skier and dog handler.  You prepare with intensity, all the time, so that when conditions turn against you, you can draw from a deep reservoir of strength. And equally, you prepare so that when conditions turn in your favor, you can strike hard.” (p. 15)

“Discipline, in essence, is consistency of action—consistency with values, consistency with long-term goals, consistency with performance standards, consistency of method, consistency over time. Discipline is not the same as regimentation. Discipline is not the same as measurement. Discipline is not the same as hierarchical obedience or adherence to bureaucratic rules. True discipline requires the independence of mind to reject pressures to conform in ways incompatible with values, performance standards, and long-term aspirations. For a 10Xer, the only legitimate form of discipline is self-discipline, having the inner will to do whatever it takes to create a good outcome, no matter how difficult.” (p. 21)

“10Xers distinguished themselves not by paranoia per se, but by how they take effective action as a result. Paranoid behavior is enormously functional if fear is channeled into extensive preparation and calm, clear-headed action, hence our term ‘productive paranoia.’” (p. 30)

“Underlying the three core 10Xer behaviors is a motivating force: passion and ambition for a cause or company larger than themselves. They have egos, but their egos are channeled into their purposes, not personal aggrandizement.” (p. 37)

“When John Brown became CEO of Stryker in 1977, he deliberately set a performance benchmark to drive consistent progress: Stryker would achieve 20 percent net income growth every year. This was more than a mere target, or a wish, or a hope, or a dream, or a vision. It was, to use Brown's own words, “‘the law.’” (p. 42)

“Financial markets are out of your control. Customers are out of your control. Earthquakes are out of your control. Global competition is out of your control. Technological change is out of your control. Most everything is ultimately out of your control. But when you 20 Mile March, you have a  tangible point of focus that keeps you and your team moving forward, despite confusion, uncertainty, and even chaos.” (p. 62)

“They [in the book Will and Vision] found that only 9 percent of pioneers end up as the final winners in a market.” (p. 74)

“You don’t even need to be the one to fire all of the bullets; you can learn from the empirical experience of others.” (p. 88)

“In 1991, Herb Kelleher explained why Southwest Airlines maintained and extremely conservative balance sheet: ‘As  long as we never forget the strengths that enable us to endure and grow in the midst of economic catastrophe; as long as we remember that such economic catastrophes occur with regularity; and as long as we never foolishly dissipate our basic strengths through shortsightedness, selfishness, or pettiness, we will continue to ensure; we will continue to grow; and we will continue to prosper.’” (p. 106)

“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.” (p. 122)

“Getting a high return on luck requires throwing yourself at the luck event with ferocious intensity, disrupting your life, and not letting up.” (p. 165)

“Luck is not a strategy, but getting a positive return on luck is.” (p. 174)

“There's only one truly definitive form of luck, and that's the luck that ends the game.” (p. 178)

“Indeed, if there’s one overarching message arising from more than six thousands years of corporate history across all of our research—studies that employ comparisons of great versus good in similar circumstances—it would be this: greatness is not primarily a matter of circumstance; greatness is first and foremost a matter of conscious choice and discipline. The factors that determine whether or not a company becomes truly great, even in a chaotic and uncertain world, lie largely within the hands of its people. It is not mainly a matter of what happens to them but a matter of what they create, what they do, and how well they do it.” (p. 182)