Jim Collins is the author or co-author of six books on business which have sold more than 10 million copies. According to the forewood for this new one, the idea was to look at companies which have been spectacularly successful not only against their competitors, but during particularly challenging times.
Taking an initial sample size of 20,400 companies the authors wanted to find ones which had achieved spectacular results for an era of 15 plus years relative both to the general stock market and its own industry. Secondly the results were achieved in a particularly turbulent environment and thirdly the company rose from a position of vulnerability “being young and/or small at the start of its journey.”
These high performing companies are named “10X” by the authors, which means they beat their industry index by at least 10 times. The first example cited is Southwest Airlines, which between 1972 and 2002 offered a return on a $10,000 investment 63 times better than the general stock market. As the authors say, “These are impressive results by any measure, but they’re astonishing when you take into account the roiling storms, destabilizing shocks and chronic uncertainty of Southwest’s environment.”
It comes down to a matter of leadership, and the authors make the point that it’s in times of great uncertainty and stress that great leaders show their true value. Their aim is to answer the crucial question “What did the great companies share in common that distinguished them from their direct comparisons?”
It’s interesting that one of the case studies is Microsoft to Apple, but focussed on the 1980s and 1990s “…when Microsoft won big and Apple nearly killed itself. If you’d bought Apple stock at the end of December 1980, the month of its initial public offering (IPO), and held it to the end of our era of analysis in 2002, your investment would’ve ended up more than 80 percent behind the general stock market.”
The book is incredibly thorough, and overthrows a number of what it calls "”entrenched myths” such as “Successful leaders in a turbulent world are bold, risk-seeking visionaries” In fact, they say the best ones are more disciplined, more empirical and more paranoid” and they back this up by comparing the race for the North Pole and the characters and preparation of Roald Amundsen and Robert Falcon Scott. It’s hard to disagree with their analysis.
The case studies and stories are well told and have all the relevant facts, and the authors draw compelling conclusions from the evidence. Southwest Airlines is seen as an example of an airline which had the discipline to hold back on growth in the good times in order to preserve profitability and the “Southwest culture”.
“In 1996, more than a hundred cities clamoured for Southwest service. And how many cities did Southwest open that year? Four…. Anyone who said they’d be profitable every year for nearly three decades in the airline business – the airline business! – would be laughed at. No one does that. But Southwest did. Here we have a publicly traded company willing to leave growth on the table.”
The authors call this steady and profitable approach a “20 mile march” by which they mean a company which uses performance markers, self-imposed constraints, with an aim within the companies’ control, designed and self-imposed by the enterprise.
It’s the opposite of a sexy story. It involves consistency, although this doesn’t have to focus on profitability. In the case of Amgen, another of the 10X companies, it was a focus on ”… innovation based on incremental product innovation and product-development milestones, continuously developed existing drugs for new indications. Resulted in strong revenue growth.”
Why is this steady focus so important?
“By sticking with your 20 Mile March, you reduce the chances of getting crippled by a big, unexpected shock. Every 10X winner pulled further ahead of its less successful comparison companies during turbulent times.”
Subsequent chapters deal with “Return on luck”, once again taking as their example a climbing trip that went wrong in 1999 in Alaska, but drawing a lesson from the survival of the experienced but badly injured climber (he was very determined, very prepared and trusted his climbing partner). They then define what they think luck is, and then analyse their 10X companies, and the comparison company, to see how luck played a part.
It’s at this point that you realise the amount of research that must have gone into this book, but for all of that it adds up to the adage – Don’t confuse luck with return on luck – in other words, you have to make the most of whatever is flung your way, and if the luck is bad, you make sure through preparations and working hard it doesn’t destroy you.
The book even has a few words on the famous Steve Jobs comeback story, making the point that the first thing he did was increase discipline and brought in Tim Cook (now CEO) a world-class supply-chain expert.
“Together Jobs and Cook formed a perfect yin-yang team of creativity and discipline. They cut perks, stopped funding the corporate sabbatical program, improved operating efficiency, lowered overall cost structure, and got people focussed on the intense “work all day and all of the night” ethos that’s characterized Apple in its early years.”
The authors make the point that Jobs then concentrated on computers for four years, and only then turned to the iPod and iTunes.
I could quote from this book all day – it’s a worthy successor to Good to Great and worth reading for all the same reasons.
Tom Otley Jim Collins is the author or co-author of six books on business which have sold more than 10 million copies. According to the forewood for this new one, the idea was to look at companies which have been spectacularly successful not only against their competitors, but during particularly challenging times.
Taking an initial sample size of 20,400 companies the authors wanted to find ones which had achieved spectacular results for an era of 15 plus years relative both to the general stock market and its own industry. Secondly the results were achieved in a particularly turbulent environment and thirdly the company rose from a position of vulnerability “being young and/or small at the start of its journey.”
These high performing companies are named “10X” by the authors, which means they beat their industry index by at least 10 times. The first example cited is Southwest Airlines, which between 1972 and 2002 offered a return on a $10,000 investment 63 times better than the general stock market. As the authors say, “These are impressive results by any measure, but they’re astonishing when you take into account the roiling storms, destabilizing shocks and chronic uncertainty of Southwest’s environment.”
It comes down to a matter of leadership, and the authors make the point that it’s in times of great uncertainty and stress that great leaders show their true value. Their aim is to answer the crucial question “What did the great companies share in common that distinguished them from their direct comparisons?”
It’s interesting that one of the case studies is Microsoft to Apple, but focussed on the 1980s and 1990s “…when Microsoft won big and Apple nearly killed itself. If you’d bought Apple stock at the end of December 1980, the month of its initial public offering (IPO), and held it to the end of our era of analysis in 2002, your investment would’ve ended up more than 80 percent behind the general stock market.”
The book is incredibly thorough, and overthrows a number of what it calls "”entrenched myths” such as “Successful leaders in a turbulent world are bold, risk-seeking visionaries” In fact, they say the best ones are more disciplined, more empirical and more paranoid” and they back this up by comparing the race for the North Pole and the characters and preparation of Roald Amundsen and Robert Falcon Scott. It’s hard to disagree with their analysis.
The case studies and stories are well told and have all the relevant facts, and the authors draw compelling conclusions from the evidence. Southwest Airlines is seen as an example of an airline which had the discipline to hold back on growth in the good times in order to preserve profitability and the “Southwest culture”.
“In 1996, more than a hundred cities clamoured for Southwest service. And how many cities did Southwest open that year? Four…. Anyone who said they’d be profitable every year for nearly three decades in the airline business – the airline business! – would be laughed at. No one does that. But Southwest did. Here we have a publicly traded company willing to leave growth on the table.”
The authors call this steady and profitable approach a “20 mile march” by which they mean a company which uses performance markers, self-imposed constraints, with an aim within the companies’ control, designed and self-imposed by the enterprise.
It’s the opposite of a sexy story. It involves consistency, although this doesn’t have to focus on profitability. In the case of Amgen, another of the 10X companies, it was a focus on ”… innovation based on incremental product innovation and product-development milestones, continuously developed existing drugs for new indications. Resulted in strong revenue growth.”
Why is this steady focus so important?
“By sticking with your 20 Mile March, you reduce the chances of getting crippled by a big, unexpected shock. Every 10X winner pulled further ahead of its less successful comparison companies during turbulent times.”
Subsequent chapters deal with “Return on luck”, once again taking as their example a climbing trip that went wrong in 1999 in Alaska, but drawing a lesson from the survival of the experienced but badly injured climber (he was very determined, very prepared and trusted his climbing partner). They then define what they think luck is, and then analyse their 10X companies, and the comparison company, to see how luck played a part.
It’s at this point that you realise the amount of research that must have gone into this book, but for all of that it adds up to the adage – Don’t confuse luck with return on luck – in other words, you have to make the most of whatever is flung your way, and if the luck is bad, you make sure through preparations and working hard it doesn’t destroy you.
The book even has a few words on the famous Steve Jobs comeback story, making the point that the first thing he did was increase discipline and brought in Tim Cook (now CEO) a world-class supply-chain expert.
“Together Jobs and Cook formed a perfect yin-yang team of creativity and discipline. They cut perks, stopped funding the corporate sabbatical program, improved operating efficiency, lowered overall cost structure, and got people focussed on the intense “work all day and all of the night” ethos that’s characterized Apple in its early years.”
The authors make the point that Jobs then concentrated on computers for four years, and only then turned to the iPod and iTunes.
I could quote from this book all day – it’s a worthy successor to Good to Great and worth reading for all the same reasons.
Tom Otley 
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