great by choice review and application
DESCRIPTION
Jim Collins' best selling book, Great by Choice provides deep insights into company success and failures and offers a valid approach to business strategy that continues to provide value today.TRANSCRIPT
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Great By Choice
Insights and Learning's from Great By Choice
Presented byDoug O’KeefeDirector of Delivery [email protected]
SourceGreat by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them AllJim Collins, Morten T. Hansen
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• Other books– Good to Great– Built to Last– How the Mighty Fall– Great By Choice– Beyond Entrepreneurship
• Operates a management laboratory in Boulder CO
• Consults with leaders and executives from around the world
Great By ChoiceThe Author
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AgendaGreat By Choice
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And Others Do Not?
Why Do Some Companies Thrive In Uncertainty?
Even Chaos …
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They don’t merely react
They don’t merely survive
They don’t merely succeed
They CREATE
They PREVAIL
They THRIVE
Why Do Some Companies Thrive in Uncertainty?Great By Choice
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They don’t merely react
They don’t merely survive
They don’t merely succeed
They CREATE
They PREVAIL
They THRIVE
Why Do Some Companies Thrive in Uncertainty?Great By Choice
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They don’t merely react
They don’t merely survive
They don’t merely succeed
They CREATE
They PREVAIL
They THRIVE
Why Do Some Companies Thrive in Uncertainty?Great By Choice
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They don’t merely react
They don’t merely survive
They don’t merely succeed
They CREATE
They PREVAIL
They THRIVE
Why Do Some Companies Thrive in Uncertainty?Great By Choice
They build GREAT enterprises that can ENDURE
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Myths About SuccessWhat Makes The Good, Good?
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Myths to Break DownSuccessful leaders in a turbulent market are bold, risk-seeking visionaries
Innovation distinguishes 10X companies in a fast-moving, uncertain, and chaotic world
A threat-filled world favors the speedy, you’re either the quick or the dead
Radical change on the outside requires radical change on the inside
Great enterprises with 10X success have a lot more good luck
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The Race To The South PoleOctober 1911
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2 Teams – One GoalTeam 1:Roald Amundsen (Leader)
Team 2:Robert Falcon Scott (Leader)
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• Amundsen• Preparation is a MUST• Don’t wait until you are there to figure out what to do• Prepare for everything with intensity
Amundsen versus ScottPhilosophy
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• Amundsen• Preparation is a MUST• Don’t wait until you are there to figure out what to do• Prepare for everything with intensity
• Scott• A good plan but not a systematic plan• Had a goal (the South Pole) and a plan to get there• Ran everything dangerously close to his calculations
Amundsen versus ScottPhilosophy
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Is It Luck?Great By Choice
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1st 34 days – same ratio of good days to bad days
Same environmentSame yearDifferent results
I’d rather be lucky than good
Scott v Amundson
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Different BehaviorsGreat By Choice
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Different BEHAVIORS
Luck had nothing to do with it
Different outcomes
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10XersGreat By Choice
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They’re not
More creative
More visionary
More charismatic
More ambitious
More lucky
More risk-seeking
More heroic
More prone to making big, bold moves
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10XersGreat By Choice
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They
Have Fanatic
Discipline
Show Empirical Creativity
Live In Productive Paranoia
Fanatic Discipline
Productive Paranoia
Empirical Creativity
Level 5 Ambition
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10X CompaniesCompanies That Outperform Their Industry Index By 10X
20,400 companies11 criteria layersLeft with 7
Outperform comparison companies 30:1
10XCase
Value of 10K Invested
Market Industry Comparison Company
Amgen $4.5MM 24X 77X Genentech
Biomet $3.4MM 18X 11X Kirschner
Intel $3.9MM 21X 46X AMD
Microsoft $10.6MM 56X 119X Apple
Progressive $2.7MM 15X 11X Safeco
Southwest $12.0MM 63X 550X PSA
Stryker $5.3MM 28X 11X USSC
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• October 16, 1998 – Progressive stock jumps 18%• January 26, 1999 – Progressive stock plummets 19%
WHY?
• Progressive’s CEO Peter Lewis refused to play the games that Wall Street wanted by smoothing results to meet expectations
• He didn’t want to sacrifice company direction to satisfy Wall Street expectations
• Instead, Progressive became the 1st SEC-listed company to start reporting results MONTHLY
Fanatic DisciplineProgressive Insurance
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FANATIC DISCIPLINE
• Consistency of action• With values• With long-term goals• With performance standards• Over time
• True discipline requires the independence of mind to reject pressures to conform in ways incompatible with values, performance standards, and long term aspirations
• 10Xers – having the inner will to do WHATEVER it takes to create a GREAT outcome, no matter HOW DIFFICULT
Fanatic DisciplineProgressive Insurance
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• 1994 – Intel CEO Andy Grove has a PSA test withabnormally high numbers
• He didn’t elect to enter the treatment plan right away
WHY?
• Instead he did research at night • He “tested the tests”• He used his connections to interview other doctors
• He chose a combination radiation therapy over traditional surgery
Empirical CreativityIntel
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EMPIRICAL CREATIVITY
• Relying on direct observation• Conducting personal experiments• Engaging directly with evidence
• Having empirical creativity in the foundation allows making BOLD, CREATIVE moves and BOUNDS risks around those moves
• 10Xers – don’t look to conventional wisdom or what other people would do. They look to empirical evidence.
Empirical CreativityIntel
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• June 27-30, 1991• Bill Gates loses $300MM as Microsoft stock drops 11%• A memo, written by Gates, was leaked to the media detailing a
series of threats and worries about competition, technology, intellectual property, legal cases, and Microsoft’s own shortcomings
WHY?
• Gates lives in fear• Gates always feels vulnerable
• Gates lives in a productive paranoia regardless of how good or how bad Microsoft is doing
Productive ParanoiaMicrosoft
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PRODUCTIVE PARANOIA
• Hyper-vigilance in good times and in bad• Like a boy scout – always prepared• Consistent state of preparedness for what might come next
• Paranoid behavior is enormously functional IF fear is channeled into extensive preparation and CALM, CLEARHEADED action
• 10Xers – Constantly consider that conditions will – ABSOLUTELY 100% - turn against them without warning
Productive ParanoiaMicrosoft
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• In the 1990s, Biomet CEO Dane Miller was consistently ranked by Business Week as delivering more value per dollar of his own compensation than any other CEO
• In the 1990s, stock options for CEOs were at their peak• Dane Miller owned ZERO stock options in Biomet
WHY?
• He owned his own equity so his personal fortune linked directly to the company’s – upside AND downside
• Miller: “What incremental value does 100,000 shares have? At some point, you’re just satisfying an uncontrollable greed complex.”
Level 5 AmbitionBiomet
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LEVEL 5 AMBITION
• Deflects attention from themselves• Personal humility and professional will• Builds the company to be great WITHOUT them
• 10Xers – incredibly ambitious FOR THE CAUSE, for the company, and not for themselves
Level 5 AmbitionBiomet
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10XersGreat By Choice
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They
Have Fanatic
Discipline
Show Empirical Creativity
Live In Productive Paranoia
Fanatic Discipline
Productive Paranoia
Empirical Creativity
Level 5 Ambition
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20 Mile MarchGreat By Choice
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20 miles a day
regardless
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20 Mile MarchGreat By Choice
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Stryker – 20 Mile March Company20% net income growth per year
Every year
The LAW
Versus USSC• Stryker grew more
slowly more than half the time
• Then a series of “storms”
• By 1998, USSC was acquired by Tyco
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20 Mile MarchGreat By Choice
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Southwest Airlines – 20 Mile March CompanyDemanded a profit EVERY year
Maintain the culture
Don’t expand TOO much in any year
1996 – 100 cities want SWA
They expanded to 4
Enjoyed a profit EVERY year for 30 years
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20 Mile MarchGreat By Choice
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Crown – 20 Mile March Company?25% organic growth per year
Top line revenue focus
2012 – 25% growth over 20112013 – 25% growth over 2012
Eliminate business not focused on Top Line Revenue
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20 Mile MarchGreat By Choice
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Elements of a Good 20 Mile March CompanyPerformance markers
Self-imposed constraints
Tailored to the enterprise
Lies largely within our control
Goldilocks timeframe
Designed and self-imposed
Achieved with great consistency
Why it works1. Builds confidence in
ability to perform well in adversity
2. Reduces the impact of catastrophe
3. Helps exert self-control in an out of control environment
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20 Mile MarchGreat By Choice
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Back to the South Pole
Amundsen – 15-20 miles per day
Scott – exhaustion on good days; rest on bad days
Amundsen – 15 days of gale force winds; traveled on 8
Scott – 6 days; traveled on none
You know how the story ends
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Fire Bullets … Then CannonballsGreat By Choice
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Fire Bullets … Then CannonballsGreat By Choice
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What Makes A Bullet?
Low cost
Low Risk
Low Distraction
Empirical tests
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Fire Bullets … Then CannonballsGreat By Choice
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Firing Bullets
Fire bullets
Assess: Did they hit anything?
Consider: Do any bullets merit a cannonball?
Convert: Calibrate and fire a cannonball
Don’t fire uncalibrated cannonballs
Terminate bullets that show no evidence of eventual success
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Apple “Rebirth”• Bullet: going back to what they did best – personal computers• Bullet -> Cannonball: the Apple Store (rolled out slowly)• Bullet: Hire Tim Cook (supply chain expert) to put discipline
into manufacturing• Bullet: iPods that connected to the Mac (iTunes)
• Cannonball: iTunes and iPod for non-Mac computurs• Cannonball: iTunes store with $0.99 songs• Cannonballs: iPod mini, iPod Clickwheel, iPod Photo, iPod
Shuffle, iPod 30GB, iPod 80GB, iPod Nano, iPhone, iPad, iPad mini
Fire Bullets … Then CannonballsApple
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SMaCGreat By Choice
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SMaC
Specific
Methodical
and
Consistent
A set of durable operating practices that create a replicable and consistent success formula
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1. Remain a short-haul carrier, under two-hour segments.2. Utilize the 737 as our primary aircraft for ten to twelve
years. 3. Continued high aircraft utilization and quick turns, ten
minutes in most cases.4. The passenger is our #1 product. Do not carry air freight or
mail, only small packages which have high profitability and low handling costs.
5. Continued low fares and high frequency of service. 6. Stay out of food services.7. No interlining…costs in ticketing, tariffs and computers and
our unique airports do not lend themselves to interlining.8. Retain Texas as our #1 priority and only go interstate if
high-density short-haul markets are available to us. 9. Keep the family and people feeling in our service and a fun
atmosphere aloft. We’re proud of our employees.10.Keep it simple.
SMaCSouthwest Airlines
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Specific2 hour segments737s10 minute turnsNo air freight or mailNo food serviceNo seat selection
MethodicalBased on empirical evidence on what works
ConsistentThis list changed only 20% in 25 years!
SMaCSouthwest Airlines
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SMaCGreat By Choice
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SMaCSMaC isn’t a strategy, culture, set of core values, purposes, or tactics
Include WHAT NOT to do
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John Wooden – UCLA Basketball10 NCAA championships7 NCAA championships in a rowNational coach of the year 6 times
“There was a way to do everything. You could have taken UCLA people who played in ’55, ’65, ’70, and ’75; put them on the same team; and they would have been able to play with each other, instantly.”
SMaCGreat By Choice
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1980s & 1990s: PSA and Southwest• Both faced spiked jet fuel costs• Both experienced an air traffic control strike• Both faced recession and inflation• Both faced high interest rates that increased jet leasing costs• Both faced a change in CEOs
• PSA basically went out of business; Southwest THRIVED
WHY?
• SMaC• Productive paranoia• Empirical creativity
ROL: Return on LuckGreat By Choice
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Bill Gates• Upper middle class family that sent him to private school• Born at the right time – electronics advancements being made• Teamed with Paul Allen to develop BASIC into a product for a
PC• Went to Harvard where they had a PDP-10 he could work on
LUCKY GUY, HUH?
ROL: Return on LuckGreat By Choice
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Bill Gates• Was he the only person that grew up in an upper middle class
family?• Was he the only person born in the 1950s that went to a
private school with computing access?• Was he the only person who went to a college (or to Harvard)
with computing resources?• Was he the only person that knew how to program in BASIC?
NoNoNoNo
ROL: Return on LuckGreat By Choice
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Bill Gates• The difference IS NOT LUCK
• Gates did MORE with his luck
• He created a high RETURN ON LUCK
ROL: Return on LuckGreat By Choice
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ROL: Return on LuckGreat By Choice
Defining Moments in 10X Journey
Essential Skill for 10X Results
Can Lead to Hitting the Death Line
A Sure Path To Mediocrity
Don’t Confuse Luck with RETURN ON LUCK (ROL)
Great
Poor
Bad Good------------------- LUCK ------------------
Retu
rn o
n L
UC
K (
RO
L)
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ConclusionGreat By Choice
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And Others Do Not?
Why Do Some Companies Thrive In Uncertainty?
Even Chaos …
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Thank You
And purchase Jim Collins’ Book
Presented byDoug O’[email protected]