Great by Choice: Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All

by Jim Collins

of the worst-case scenario? Do we have contingencies in place for the worst-case scenario? What’s the upside and what’s the downside of this decision? What’s the likelihood of the upside and the downside? What’s out of our control? How can we minimize ...

Taking the time available before the risk profile changes, whether short or long, to make a rigorous and deliberate decision produces a better outcome than rushing a decision.

how much time before the risk profile changes?

Putnam didn’t issue some bland, generic “Southwest Airlines will be a leading low-cost airline” vacuous statement. He specified two-hour segments. He specified 737s. He specified 10-minute turns. He specified no air freight or mail. He specified no food service. He specified no interlining. He specified no seat selection. He specified cash-register receipts.

Putnam laid out a clear, simple, and concrete framework for decisions and action.

Putnam’s 10 points reflect insight, based upon empirical validation about what works.

Good idea to write out exactly what the organizational infrastructure and logistics should be, what conditions make it work, and to test and validate these operational systems before adding, multiplying

consistency over time. In total, the elements on the Putnam list changed only about 20 percent in a quarter of a century.

If Southwest had become rigid, close-minded, uncurious, never amending Putnam’s points as needed, it would not have become a 10X case. Still, what most stands out is how much of the list Southwest kept intact.

A SMaC recipe is a set of durable operating practices that create a replicable and consistent success formula.

“SMaC” stands for Specific, Methodical, and Consistent.

A solid SMaC recipe is the operating code for turning strategic concepts into reality,

Tactics change from situation to situation, whereas SMaC practices can last for decades and apply across a wide range of circumstances.

it is possible to develop practices that are both specific and durable—SMaC practices.

A SMaC practice is not the same as a strategy, culture, core values, purpose, or tactics.

A SMaC recipe also includes practices “not to do.” Putnam’s list has clear not-to-do points—

Better defines what the company does not do... prioritizes what it does do

Do not grant stock options to the CEO but only to employees (Biomet).

In all the previous, the smac recipe is a tactic of sorts, which requires context to understand the reasoning behind the rule. For example, herb kelleher instead, as a tactic, to stick option and no pay raise to show solidarity and long term thinking (see HIBT w/ herb kelleher)

He went to a 50-degree-below-zero-F freezer in Toronto to develop specific protocols for handling the IMAX camera in extreme cold, assessing how the batteries would perform and practicing loading the 65mm film with bare hands. (Even on the top of Everest, he had to load the camera with bare hands to minimize any chance of malfunction.) He created an “Idiot Check” list for working and moving the camera in extreme conditions and unusual situations.

He systematically developed a supply list that eliminated any weight that didn’t directly contribute to the IMAX project or to safety. He then refined all his methods on a 160-mile, 28-day trek in Nepal the year before the Everest ascent.

So a smac is more a set of validated practices that guarantee success (minimize risk), especially in extreme circumstances

the existence of a recipe per se did not systematically distinguish the 10X companies from the comparison companies.

the principal finding is how the 10X companies adhered to their recipes with fanatic discipline to a far greater degree than the comparisons, and how they carefully amended their recipes with empirical creativity and productive paranoia.

but the comparisons changed their recipes to a much greater degree than the 10X cases over time.

think back on PSA. Recall from Chapter 4 how Southwest Airlines began as a copy of PSA, right down to the operating manuals.

both facing a disruptive environment, both with fabulous core markets, both with nearly identical recipes,

only Southwest...

PSA reacted to deregulation by deciding it needed to become more like…United Airlines.

Lack of clarity by PSA leadership to look at empirical evidence in their own model vs. other airline models? Could have looked at the success with Southwest airlines as further validation for their model. Instead, shifted based on what deciding factor?

PSA moving away from its proven recipe just as Southwest began to build momentum in Texas.

Kelleher understood why each ingredient in Putnam’s list worked, and he understood that the Southwest model would still apply in an increasingly competitive airline industry.

Far more difficult than implementing change is figuring out what works, understanding why it works, grasping when to change, and knowing when not to.

The fall and rise of Apple illustrates the danger of straying from a recipe and the value of restoring it.

Steve Jobs didn’t so much revolutionize the company as he returned it to the principles he’d used to launch the company from garage to greatness two decades earlier.

For example: allow no one else to clone our products; design our products so they work seamlessly together; make design friendly and elegant; obsess about secrecy and then do big launches to capture pent-up excitement; don’t enter any business where we don’t control the primary technology; design for and market to individuals, not businesses.

Apple fell behind during its dark days not because its original recipe no longer worked, but because it lacked the discipline to adhere to its original recipe.

ask, “Is our recipe no longer working because we’ve lost discipline? Or is it no longer working because our circumstances have fundamentally changed?”

Wooden translated his “Pyramid of Success” (a philosophy of life and competition) into a detailed recipe, right down to how players should tie their shoes.

After the lesson, you ask one of the All-American seniors what that was all about, and he says, “Get a blister in a big game, and you’re gonna suffer. Shoes come untied in a close game…well, that just never happens here.”

In this stormy world, we need to think anew. And that means rejecting the idea that the only path to continued prosperity lies in continuous corporate revolution.

the signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.

10Xers are truly obsessed, driven people. It’s just that they accomplish their huge goals by adhering with great discipline to what they know works while simultaneously worrying—for they always worry—about what might no longer work in a changing environment.

Most change is just noise and requires no fundamental change in ourselves.

Yet some change is not noise, demanding that we adjust and evolve,

A great company must evolve its recipe, revising selected elements when conditions merit, while keepi...

Both parts of the story are important: the big exit from memory chips and the fact that Intel did not change other elements of its SMaC recipe.

While none of these were bad ideas per se, in switching from one recipe to another, inflicting frequent wholesale change upon itself, AMD never gained long-term momentum.

So, how does a 10X company know when it’s time to amend its recipe, presuming it has a really good one?

it can explicitly consider the recipe’s ingredients in the context of changes in the environment. It can ...

firing bullets can give you a hedge against an uncertain future,

There are two healthy approaches to amending the SMaC recipe: (1) exercising empirical creativity, which is more internally driven, and (2) exercising productive paranoia, which is more externally focused.

Gates had a zoom-out mechanism already in place; he’d set aside an entire week each year to go away for intense reading and reflection, his “Think Week.”

In a great twist of irony, those who bring about the most significant change in the world, those who have the largest impact on the economy and society, are themselves enormously consistent in their approach.

A SMaC recipe is a set of durable operating practices that create a replicable and consistent success formula;