Great By Choice Review and Application

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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.

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Great By Choice Review and Application

  1. 1. 2012 Crown Partners. All Rights ReservedGreat By ChoiceInsights and Learnings from Great By ChoicePresented byDoug O’KeefeDirector of Delivery Excellencedokeefe@crownpartners.com615.516.9955SourceGreat by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them AllJim Collins, Morten T. Hansen 1
  2. 2. 2012 Crown Partners. All Rights ReservedGreat By ChoiceThe Author• 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 2
  3. 3. 2012 Crown Partners. All Rights ReservedAgendaGreat By ChoiceWhy Do Some CompaniesThrive In Uncertainty?Even Chaos … And Others Do Not? 3
  4. 4. 2012 Crown Partners. All Rights ReservedWhy Do Some Companies Thrive in Uncertainty?Great By ChoiceThey don’t merely They CREATE reactThey don’t merely They PREVAIL surviveThey don’t merely They THRIVE succeed 4
  5. 5. 2012 Crown Partners. All Rights ReservedWhy Do Some Companies Thrive in Uncertainty?Great By ChoiceThey don’t merely They CREATE reactThey don’t merely They PREVAIL surviveThey don’t merely They THRIVE succeed 5
  6. 6. 2012 Crown Partners. All Rights ReservedWhy Do Some Companies Thrive in Uncertainty?Great By ChoiceThey don’t merely They CREATE reactThey don’t merely They PREVAIL surviveThey don’t merely They THRIVE succeed 6
  7. 7. 2012 Crown Partners. All Rights ReservedWhy Do Some Companies Thrive in Uncertainty?Great By ChoiceThey don’t merely They CREATE reactThey don’t merely They PREVAIL surviveThey don’t merely They THRIVE succeed They build GREAT enterprises that can ENDURE 7
  8. 8. 2012 Crown Partners. All Rights ReservedMyths About SuccessWhat Makes The Good, Good?Myths to Break DownSuccessful leaders in a turbulent market are bold, risk-seekingvisionariesInnovation distinguishes 10X companies in a fast-moving, uncertain, andchaotic worldA threat-filled world favors the speedy, you’re either the quick or the deadRadical change on the outside requires radical change on the insideGreat enterprises with 10X success have a lot more good luck 8
  9. 9. 2012 Crown Partners. All Rights ReservedThe Race To The South PoleOctober 19112 Teams – One GoalTeam 1:Roald Amundsen (Leader)Team 2:Robert Falcon Scott (Leader) 9
  10. 10. 2012 Crown Partners. All Rights ReservedAmundsen versus ScottPhilosophy• Amundsen • Preparation is a MUST • Don’t wait until you are there to figure out what to do • Prepare for everything with intensity 10
  11. 11. 2012 Crown Partners. All Rights ReservedAmundsen versus ScottPhilosophy• 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 11
  12. 12. 2012 Crown Partners. All Rights ReservedIs It Luck?Great By ChoiceI’d rather be lucky thangood 1st 34 days – same ratio of good days to bad daysScott v Amundson Same environment Same year Different results 12
  13. 13. 2012 Crown Partners. All Rights ReservedDifferent BehaviorsGreat By ChoiceLuck had nothing to dowith itDifferent outcomes Different BEHAVIORS 13
  14. 14. 2012 Crown Partners. All Rights Reserved10XersGreat By ChoiceThey’re notMore creative More risk-seekingMore visionary More heroicMore charismatic More prone toMore ambitious making big, boldMore lucky moves 14
  15. 15. 2012 Crown Partners. All Rights Reserved10XersGreat By ChoiceTheyHave Fanatic Fanatic DisciplineDisciplineShow Empirical Level 5Creativity AmbitionLive In Productive Productive Empirical Paranoia CreativityParanoia 15
  16. 16. 2012 Crown Partners. All Rights Reserved10X CompaniesCompanies That Outperform Their Industry Index By 10X 10X Value of 10K Market Industry Comparison Case Invested Company Amgen $4.5MM 24X 77X Genentech20,400 companies Biomet $3.4MM 18X 11X Kirschner11 criteria layers Intel $3.9MM 21X 46X AMDLeft with 7 Microsoft $10.6MM 56X 119X AppleOutperform Progressive $2.7MM 15X 11X Safecocomparison Southwest $12.0MM 63X 550X PSAcompanies Stryker $5.3MM 28X 11X USSC30:1 16
  17. 17. 2012 Crown Partners. All Rights ReservedFanatic DisciplineProgressive Insurance• 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 17
  18. 18. 2012 Crown Partners. All Rights ReservedFanatic DisciplineProgressive InsuranceFANATIC 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 18
  19. 19. 2012 Crown Partners. All Rights ReservedEmpirical CreativityIntel• 1994 – Intel CEO Andy Grove has a PSA test with abnormally high numbers• He didn’t elect to enter the treatment plan right awayWHY?• 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 19
  20. 20. 2012 Crown Partners. All Rights ReservedEmpirical CreativityIntelEMPIRICAL 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. 20
  21. 21. 2012 Crown Partners. All Rights ReservedProductive ParanoiaMicrosoft• 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 shortcomingsWHY?• Gates lives in fear• Gates always feels vulnerable• Gates lives in a productive paranoia regardless of how good or how bad Microsoft is doing 21
  22. 22. 2012 Crown Partners. All Rights ReservedProductive ParanoiaMicrosoftPRODUCTIVE 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 22
  23. 23. 2012 Crown Partners. All Rights ReservedLevel 5 AmbitionBiomet• 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 BiometWHY?• 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.” 23
  24. 24. 2012 Crown Partners. All Rights ReservedLevel 5 AmbitionBiometLEVEL 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 24
  25. 25. 2012 Crown Partners. All Rights Reserved10XersGreat By ChoiceTheyHave Fanatic Fanatic DisciplineDisciplineShow Empirical Level 5Creativity AmbitionLive In Productive Productive Empirical Paranoia CreativityParanoia 25
  26. 26. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By Choice20 miles a dayregardless 26
  27. 27. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By ChoiceStryker – 20 Mile MarchCompany20% net income Versus USSCgrowth per year • Stryker grew more slowly more than half the timeEvery year • Then a series of “storms”The LAW • By 1998, USSC was acquired by Tyco 27
  28. 28. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By ChoiceSouthwest Airlines – 20Mile March CompanyDemanded a profit 1996 – 100 cities want SWAEVERY year They expanded to 4Maintain the culture Enjoyed a profit EVERY yearDon’t expand TOO for 30 yearsmuch in any year 28
  29. 29. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By ChoiceCrown – 20 Mile MarchCompany?25% organic growth 2012 – 25% growth over 2011per year 2013 – 25% growth over 2012Top line revenue Eliminate business notfocus focused on Top Line Revenue 29
  30. 30. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By ChoiceElements of a Good 20Mile March CompanyPerformance markersSelf-imposed constraints Why it works 1. Builds confidence in ability toTailored to the enterprise perform well in adversityLies largely within our control 2. Reduces the impact ofGoldilocks timeframe catastropheDesigned and self-imposed 3. Helps exert self-control in anAchieved with great consistency out of control environment 30
  31. 31. 2012 Crown Partners. All Rights Reserved20 Mile MarchGreat By ChoiceBack to the South PoleAmundsen – 15-20 miles per dayScott – exhaustion on good days;rest on bad days You know how the story endsAmundsen – 15 days of gale forcewinds; traveled on 8Scott – 6 days; traveled on none 31
  32. 32. 2012 Crown Partners. All Rights ReservedFire Bullets … Then CannonballsGreat By Choice 32
  33. 33. 2012 Crown Partners. All Rights ReservedFire Bullets … Then CannonballsGreat By ChoiceWhat Makes A Bullet?Low costLow Risk Empirical testsLow Distraction 33
  34. 34. 2012 Crown Partners. All Rights ReservedFire Bullets … Then CannonballsGreat By ChoiceFiring BulletsFire bulletsAssess: Did they hit anything? Don’t fire uncalibratedConsider: Do any bullets merit a cannonballscannonball?Convert: Calibrate and fire a Terminate bullets that showcannonball no evidence of eventual success 34
  35. 35. 2012 Crown Partners. All Rights ReservedFire Bullets … Then CannonballsAppleApple “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 35
  36. 36. 2012 Crown Partners. All Rights ReservedSMaCGreat By ChoiceSMaCSpecificMethodical A set of durable operatingand practices that create a replicable and consistentConsistent success formula 36
  37. 37. 2012 Crown Partners. All Rights ReservedSMaCSouthwest Airlines1. 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. 37
  38. 38. 2012 Crown Partners. All Rights ReservedSMaCSouthwest AirlinesSpecific 2 hour segments 737s 10 minute turns No air freight or mail No food service No seat selectionMethodical Based on empirical evidence on what worksConsistent This list changed only 20% in 25 years! 38
  39. 39. 2012 Crown Partners. All Rights ReservedSMaCGreat By ChoiceSMaCSMaC isn’t a strategy, culture,set of core values, purposes, ortactics Include WHAT NOT to do 39
  40. 40. 2012 Crown Partners. All Rights ReservedSMaCGreat By ChoiceJohn 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 havetaken UCLA people who played in ’55, ’65, ’70, and’75; put them on the same team; and they wouldhave been able to play with each other, instantly.” 40
  41. 41. 2012 Crown Partners. All Rights ReservedROL: Return on LuckGreat By Choice1980s & 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 THRIVEDWHY?• SMaC• Productive paranoia• Empirical creativity 41
  42. 42. 2012 Crown Partners. All Rights ReservedROL: Return on LuckGreat By ChoiceBill 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 onLUCKY GUY, HUH? 42
  43. 43. 2012 Crown Partners. All Rights ReservedROL: Return on LuckGreat By ChoiceBill 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 43
  44. 44. 2012 Crown Partners. All Rights ReservedROL: Return on LuckGreat By ChoiceBill Gates• The difference IS NOT LUCK• Gates did MORE with his luck• He created a high RETURN ON LUCK 44
  45. 45. 2012 Crown Partners. All Rights ReservedROL: Return on LuckGreat By ChoiceDon’t Confuse Luck with RETURN ON LUCK (ROL) Great Defining Moments in Essential Skill for Return on LUCK (ROL) 10X Journey 10X Results Can Lead to Hitting A Sure Path To the Death Line Mediocrity Poor Bad ------------------- LUCK ------------------ Good 45
  46. 46. 2012 Crown Partners. All Rights ReservedConclusionGreat By ChoiceWhy Do Some CompaniesThrive In Uncertainty?Even Chaos … And Others Do Not? 46
  47. 47. 2012 Crown Partners. All Rights ReservedThank YouAnd purchase Jim Collins’ BookPresented byDoug O’Keefefdokeefe@crownpartners.com615.516.9955 47

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