Great by Choice Γçô Thriving in Uncertainty.Pdf
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UNCERTAINTY, CHAOS, AND LUCK- WHY SOME THRIVE DESPITE THEM ALL AUTHOR OF GOOD TO GREAT JL^U^O i>vJ J USA $29.99 THE NEW QUESTION Ten years after the worldwide bestseller 6000* to Great, Jim Collins returns with another groundbreaking work, this timeto ask: Why do some companiesthrive in uncertainty, even chaos, and others do not? Based on nine years of research, buttressed by rigorous analysis and infused with engaging stories, Collinsand his colleague, Morten Hansen, enumerate the principles for building a truly great enterprise in unpredictable, tumultuous, and fast-moving times. THE NEW STUDY Great by Choice distinguishes itself from Collins's prior work by its focus not just on performance, but also on the type of unstable environments faced by leaders today. With a team of more than twenty researchers, Collins and Hansen studied companies that rose to greatness- beating their industry indexes by a minimum of ten times over fifteen years-in environments characterized by big forces and rapid shifts that leaders could not predict or control. The research team then contrasted these "10X companies" to a carefullyselected set of comparison com panies that failed to achieve greatness insimilarly extreme environments. THE NEW FINDINGS The study results were full of provocative surprises. Such as: • The best leaders were not more risktaking, more visionary, and more creative than the comparisons; they were more disciplined, more empirical, and more paranoid. • Innovation by itself turns out not to be the trump card in a cha otic and uncertain world; more important is the ability to scale innovation, to blend creativity with discipline. • Following the beliefthat leading ina "fast world"always requires "fast decisions" and "fast action" is a good way to get killed. • The great companies changed less in reaction to a radically changing world than the comparison companies. Theauthorschallengeconventional wisdomwith thought- provoking, sticky, and supremely practical concepts. They include: 10Xers; the 20 Mile March; Fire Bullets, Then Cannonballs; Leading above the Death Line; Zoom Out, Then Zoom In; and the SMaC Recipe. (CONTINUED ON BACK FLAP) 1011 GREAT BY CHOICE ALSO BY JIM COLLINS Beyond Entrepreneurship (with William C. Lazier) Managing the Small to Mid-Sized Company (with WilliamC. Lazier) Built toLast(with JerryI. Porras) Good to Great Good to Great and the Social Sectors How the Mighty Fall ALSO BY MORTEN T. HANSEN Collaboration GREAT BY UNCERTAINTY, CHAOS, AND LUCK- WHY SOME THRIVE DESPITE THEM ALL Jim Collins --\ i/\j ^ Morten T. Hansen HARPER BUSINESS An ImprintofHarperCoWmsPublishers www.harpercollins.com greatbychoice. Copyright© 2011 byJim Collins and Morten T. Hansen. All rights reserved. Printed in the United StatesofAmerica. No part ofthis book may be used or reproduced in any manner whatsoeverwithout written permission except in the case of brief quotations embodied in critical articles and reviews. For information, address HarperCollins Publishers, 10East 53rdStreet, NewYork, NY 10022. HarperCollins books may be purchased for educational, business, or sales promo tional use. For information, please write: Special Markets Department, Harper Collins Publishers, 10 East 53rd Street, New York, NY 10022. FIRST EDITION Libraryof Congress Cataloging-in-Publication Data has been applied for. ISBN 978-0-06-212099-1 11 12 13 14 15 dix/rrd 10 9 8 7 6 5 4 3 2 1 FROMJ To my grandmother Delores, who at age 97still had big dreams and audacious goals. FROM IOOEN: To my daughters, Alexandra and Julia, whose generation will create the future. JUUHEIHSl Acknowledgments ix 1 Thriving in Uncertainty 1 2 lOXers 13 3 20 Mile March 39 4 Fire Bullets, Then Cannonballs 69 5 Leading above the Death Line 99 6 SMaC 125 7 Return on Luck 149 Epilogue: Great by Choice 181 FrequentlyAsked Questions 184 Research Foundations 199 Notes 255 Index 295 vii ACKNOWLEDGMENTS fe could not have completed this project without the small army of people who made significant contributions oftimeand intellect. We had a wonderful team of research assistants. They are smart, curious, irreverent, fanatically disciplined people who are a joy to work with. We would like to thank the following members of the Chimp- Works research team: Robyn Bitner for multiplie years of marching on a range of analyses, Kyle Blackmer for turbulence insights, Brad Caldwell for Biomet and Southwest analyses, Adam Cederberg for company selection and IPO analyses, Lauren Cuje for lOX-company updates and title analysis, Terrence Cummings (a.k.a. Grande) for thousands of hours invested in dozens of pieces of the project, Daniel DeWispelare for Amgen analysis, Todd Driver for lOX-leader analyses and lOX-company updates, Michael Graham for comparison selec tion and comparative analyses, Eric Hagen for the IPO-list SMaC check and his big-brain contributions, Ryan Hall for a range of quanti tative analyses, Beth Hartman for turbulence analyses and companyse lections, Deborah Knox for industry-turbulence analyses and extensive IPO analysis, Betina Koski for industry-turbulence analyses, Michael Lane for comparison selection and comparative analyses, Lorilee Lin- field for company updates and multiple years of SMaC work, Nicholas M. Osgood for industry-turbulence analyses, Catherine Patterson for comparison selections and comparative analyses, Matthew Unangst for backup analyses and Moore's Law research, and Nathaniel (Natty) Zola forbecoming the guru ofSouthwest Airlines versus Pacific South west Airlines (PSA). From Mortens research assistants, we thank Chris IX x ACKNOWLEDGMENTS Allen for data analyses, Muhammad Rashid Ansari for industry analy ses, Jayne Brocklehurst for research support, Attrace Yuiying Chang for fact checking, Hendrika Escoffier for research support, Roisin Kelly for research support, Chittima Silberzahn for financial data and anal yses, Philippe Silberzahn for Microsoft and Apple analyses, William Simpson for data analyses, Gina Carioggia Szigety for data analyses in company selections, Nana von Bernuth for years ofamazing effort and commitment in conducting a wide range of indispensable analyses, and James Zeitler for data analyses. We are indebted to our critical readers who invested hours inreading drafts ofthemanuscript, criticizing the work, offering suggestions, and pushing atevery turn to make the work better. For their candor, insight, and perspective, we would like to thank Ron Adner, Joel T. Allison, FACHE, Chris Barbary, Gerald (Jerry) Belle, Darrell Billington, Kyle Blackmer, John M. Bremen,William P. Buchanan, Scott Calder, Robin Capehart, ScottCederberg, Brian Cornell, Lauren Cuje,JeffDonnelly, Todd Driver, David R. Duncan, Joanne Ernst, Mike Faith, Andrew Feiler, Claudio Fernandez-Araoz, Andrew Fimiano, Christopher For- man, John Foster, Dick Frost, Itzik Goldberger, Michael Graham, Ed Greenberg, Eric Hagen, Becky Hall, Ryan Hall, Beth Hartman, Liz Heron, JohnB. Hess, John G. Hill, Kim Hollingsworth Taylor, Thomas F. Hornbein, MD, Lane Hornung, Zane Huffman, Christine Jones, ScottJones, DavidD. Kennedy, Alan Khazei, Betina Koski, EvaM. H. Kristensen, BrianC. Larsen, Kyle Lefkoff, JimLinfield (father ofchimp Lorilee), Ed Ludwig, WistarH. MacLaren, DavidMaxwell, Kevin Mc- Garvey, MD, MBA, Bill McNabb, Anne-Worley Moelter (SFVG), Mi chael James Moelter, Clarence Otis Jr., Larry Pensack, Jerry Peterson, Amy Pressman, Sam Presti, Michael Prouting, David P. Rea,Jim Reid, Neville Richardson, Sara Richardson, Kevin Rumon, David G. Sal- yers, Kim Sanchez Rael, Vijay Sathe, Keegan Scanlon, Dirk Schlimm, William F Shuster, Anabel Shyers, Alyson Sinclair, Tim Tassopoulos, Kevin Taweel, Jean Taylor, Tom Tierney, Nicole Toomey Davis, Mat thewUnangst, NanavonBernuth, H. Lawrence Webb, David Weekley, Chuck Wexler, Dave Witherow, and Nathaniel (Natty) Zola. We also ACKNOWLEDGMENTS xi thank Constance Hale, Jeffrey Martin, and Filipe Simoes dos Santos for their special attention tothe research-methods section. In addition, we would like to thank Salvatore D. Fazzolari, Denis Godcharles, Ben R. Leedle Jr., Evan Shapiro, Roy M. Spence Jr., and Jim Weddle for helpful dialogue and feedback. We would also like to thank the Transportation Library at North western University for access to PSAs annual reports; Betty Grebe and Carol Krismann at the University ofColorado William M. White Business Library; the Center for Research in Security Pricing (CRSP), Booth School of Business at the University of Chicago for its quality data and excellent service; Jasjit Singh for patent data and insights; Dennis Bale and Laurie Drawbaugh for the roving office; Leigh Wil- banks for joining ourearly concept debates; Alex Toll for proofing; Alan Webber for great moments ofconversation that sparked key ideas; Jim Logan for enduring the seemingly endless journey; Tommy Caldwell for testing lOXer ideas on sheer cliff walls; and all of Jim s Personal Band of Brothers. Morten is especially thankful to Harvard Business School, INSEAD, and University of California-Berkeley, where he held academic positions during the time of this research. We thank Deborah Knox for editing the final text, pushing us for consistency and clarity, continually challenging our ideas, and zoom ing out on the big ideas while also zooming in on the details. We thank James J. Robb for hisgraphics expertise, unbounded creativity, and en during friendship. We thank Janet Brockett for her creative spark and design genius. We thank Caryn Marooney for being a farseeing guide through treacherous territory. Wethank PeterM. Moldave