Great By Choice Review and Application

2012 Crown Partners. All Rights Reserved

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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

mailto:[email protected]

http://www.google.com/search?tbo=p&tbm=bks&q=inauthor:%22Jim+Collins%22

http://www.google.com/search?tbo=p&tbm=bks&q=inauthor:%22Morten+T.+Hansen%22

http://www.google.com/search?tbo=p&tbm=bks&q=inauthor:%22Morten+T.+Hansen%22


• 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 CREATE

They PREVAIL

They THRIVE



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They CREATE

They PREVAIL

They THRIVE



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They CREATE

They PREVAIL

They THRIVE


They build GREAT enterprises that can ENDURE


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


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


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


Different BehaviorsGreat By Choice

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Different BEHAVIORS

Luck had nothing to do with it

Different outcomes


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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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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They

Have Fanatic

Discipline

Show Empirical Creativity

Live In Productive Paranoia

Fanatic Discipline

Productive Paranoia

Empirical Creativity

Level 5 Ambition


20 Mile MarchGreat By Choice

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20 miles a day

regardless



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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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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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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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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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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


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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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


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


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?



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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



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Bill Gates• The difference IS NOT LUCK

• Gates did MORE with his luck

• He created a high RETURN ON LUCK



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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)


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]

mailto:[email protected]