1. Great by Choice Jim Collins and Morten Hansen
Uncertainty, chaos and luck—Why some thrive despite them all!

2. South Pole
Victory awaits him who has everything in order—luck people call it. Defeat is certain from him who has neglected to take the necessary precautions in time; this is called bad luck.
-Roald Amundsen

3. Selection Criteria
Spectacular results for an era of 15+ years relative to the stock market and industry
Turbulent environment—uncontrollable, fast-moving, uncertain and potentially harmful
Began from a position of vulnerability, being young and/or small at the start of its 10X journey

4. 10X Study Companies 10X Case Comparison Dynastic Era of Study
Value of $10,000 Invested
Performance Relative to Market
Performance Relative to Industry
Amgen
Genentech
$4.5M
24 X Market
77.2 X its industry
Biomet
Kirschner
$3.4M
18.1 X Market
11.2 X its industry
Intel
AMD
$3.9M
20.7 X Market
46.3 X its industry
Microsoft
Apple
$10.6M
56 X Market
118.8 X its industry
Progressive Insurance
Safeco
$2.7M
14.6 X Market
11.3 X its industry
Southwest Airlines
PSA
$12.0M
63.4 X Market
550.4 X its industry
Stryker
US Surgical Corporation
$5.3M
28 X Market
10.9 X its industry

5. Myths
Successful leaders in a turbulent world 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

6. Behaviors in 10X Leadership
Fanatic
DISCIPLINE
Level 5
AMBITION
Empirical
CREATIVITY
Productive
PARANOIA

7. Fanatic Discipline Consistency of Action Consistency with:
Values
Long-term goals
Performance standards
Long-term aspirations
Self Discipline=inner will to do whatever it takes to create a great outcome, no matter how difficult

8. 20 Mile March Consistent performance no matter what
Lower bound and Upper bound
Discomfort
Unwavering commitment to high performance in difficult conditions
Discomfort of holding back in good conditions

9. 20 Mile March Which company would you invest in, A or B?
Both small companies
Fast growing industry
Spinning out disruptive technology
Thriving on rapidly growing customer demand
Company A: 25% average annual growth 19 years
Company B: 45% average annual growth 19 same years

10. 20 Mile March Additional information: Company A Company B
Standard Deviation=15 percentage points
Standard Deviation=116 percentage points
Maintain consistent growth staying below 30% but achieving 20% or more almost every year
Growth rate exceed 30% for13 of 19 years but ranged from +313% to
-200%

11. Stryker: 350 times
USSC: Fell below market
and disappeared

12. Stryker’s 20 Mile March Achieve 20% net income growth every year
Law—not an option
Snorkel Award for those that lagged
Behind for 2 years—CEO would “help” working around the clock
No excuses

13. Elements of a Good 20 Mile March
Performance markers—lower bound of acceptable achievement
Self-imposed constraint—upper bound in exceptionally good conditions
Tailored to enterprise
Lies largely within your control to achieve
Goldilocks time frame—not too short and not too long but just right
Designed and self-imposed by the enterprise
Must be achieved with great consistency. Good intentions don’t count

14. 20 Mile March
Accomplishing a 20 Mile March, consistently, in good times and bad, builds confidence. Tangible achievement in the face of adversity reinforces the 10X perspective: we are ultimately responsible for improving performance. We never blame circumstance; we never blame the environment.

15. 20 Mile March
Failure to 20 Mile March in an uncertain and unforgiving environment can set you up for catastrophe. Every comparison case had an episode in its history in which failing to 20 Mile March led to a devastating outcome. In contrast, only two 10X companies had episodes of failing to 20 Mile March, and neither of these episodes led to a catastrophe because the 10X companies self-corrected before a storm could rise up and kill them.

16. 20 Mile March
Like Amundsen and his team, the 10Xers and their companies use their 20 Mile Marches as a way to exert self-control, even when afraid or tempted by opportunity. Having a clear 20 Mile March focuses the mind; because everyone on the team knows the markers and their importance, they can stay on track.

17. Exercise
Determine a good 20 mile march for your organization

18. Empirical Creativity Is innovation a key to successful companies?
Don’t creative companies outperform other less creative companies?

19. Empirical Creativity
Only 9% of pioneers end up as the final winners in a market
64% of pioneers failed outright.
It seems that pioneering innovation is good for society but statistically lethal for the individual pioneer.

20. Empirical Creativity
The evidence from our research does not support the premise that 10X companies will necessarily be more innovative than their less successful comparisons. And in some surprise cases, such as Southwest Airlines versus PSA and Amgen versus Genentech, the 10X companies were less innovative than the comparisons.

21. Innovation
Each environment has a level of “threshold innovation” that you need to meet to be a contender in the game… Companies that fail even to meet the innovation threshold cannot win. But once you’re above the threshold, especially in a highly turbulent environment, being more innovative doesn’t seem to matter very much.

22. Discipline and Innovation
Intel versus Advance Memory Systems—1970
AMS produced first 1000 bit memory chip
Intel rushed to market its 1103 chip late 1970 but had problems
In spite of these problems, by 1973 Intel crushed AMS
Reason: “Intel Delivers”--Intel believed that innovation without discipline leads to disaster.

23. Discipline
The great task, rarely achieved, is to blend creative intensity with relentless discipline so as to amplify the creativity rather than destroy it. When you marry operating excellence with innovation, you multiply the value of your creativity. And that is what 10Xers do.

24. Fire Bullets then Cannonballs
Amgen was created to do great things but didn’t know what. So they tried many possible options until they had enough empirical evidence to put all of their efforts into one big project.

25. Empirical Creativity
Amgen’s early days illustrate a key pattern we observed: fire bullets, then fire cannonballs. First, you fire bullets to figure out what will work. Then once you have empirical confidence based on the bullets, you concentrate your resources and fire a cannonball. After the cannonball hits, you keep 20 Mile Marching to make the most of your big success.

26. What Makes a Bullet?
A bullet is an empirical test aimed at learning what works and that meets three criteria:
Low Cost
Low Risk
Low Distraction

27. Empirical Combination of Activities
Fire bullets
Assess: Did your bullets hit anything?
Consider: Do any of your successful bullets merit conversion to a big cannonball?
Convert: Concentrate resources and fire a cannonball once calibrated
Don’t fire uncalibrated cannonballs
Terminate bullets that show no evidence of eventual success

28. Empirical Validation
If an enterprise gets slammed by a series of shocks just as its uncalibrated cannonballs go crashing off into space, it’s more likely to have a catastrophic outcome (PSA).
In the face of instability, uncertainty, and rapid change, relying upon pure analysis will likely not work, and just might get you killed. Analytic skills still matter, but empirical validation matters much more (Progressive).
PSA took the entire travel experience as their domain. Bought hotels and rental car companies

29. Steps
A big, successful venture can look in retrospect like a single-step creative breakthrough when, in fact, it came about as a multistep iterative process based more upon empirical validation than visionary genius. The marriage of fanatic discipline and empirical creativity better explains Apple’s revival than breakthrough innovation per se.

30. Exercise
Determine two “bullets” that would apply to your business

31. Productive Paranoia
Build cash reserves and buffers to prepare for unexpected events and bad luck before they happen
Bound risk—Death Line risk, asymmetric risk, and uncontrollable risk—and manage time-based risk.
Zoom out, then zoom in, remaining hypervigilant to sense changing conditions and respond effectively

32. Leading Above the Death Line

33. Productive Paranoia 1
Extra Oxygen canisters—it’s what you do before the storm comes
Cash reserves—10X companies carried 3-10 times the ration of cash to assets (87,117 companies compared)
10Xers are “Paranoid, neurotic freaks”—even when they were small and starting out
Black Swan events—Hard to predict but high probability they will occur

34. Southwest 2001
On 9/11, SW had $1B in cash on hand and highest credit rating in the industry
Lowest cost-per-available-seat-mile
Crisis plan in place
No jobs cut
No flights cut
Turned a profit in 2001 including Q4
Turned a profit in 2002

35. Productive Paranoia 2—Bounding Risk
Death Line risk--Kill you or severely damage the enterprise
Asymmetric risk—Potential downside is much bigger than the potential upside
Uncontrollable risk—Expose the enterprise to forces and events that it has little ability to manage or control

36. Risks

37. Speed—Time Based Risk

38. Acting on Risk
Sometimes acting too fast increases risk. Sometimes acting too slow increases risk. The critical questions is, “How much time before your risk profile changes?” Do you have Seconds? Minutes? Hours? Days? Weeks? Months? Years? Decades? The primary difficulty lies not in answering the questions but in having the presence of mind to ask the question.

39. Productive Paranoia 3: Zoom Out, then Zoom In
Gorilla in the room
Zoom Out
Sense a change in conditions
Assess the time frame: How much time before the risk profile changes?
Assess with rigor: Do the new conditions call for disrupting plans? If so, how?
Zoom In
Focus on supreme execution of plans and objectives

40. Intel’s Zoom Out then Zoom In
Intel identified that Intel’s 8086 processor was falling behind Motorola’s chip—Intel becoming obsolete
Dec 4, Special Task Force formed
Analyzed the threat—Why is Motorola winning? How important is it? How can we counter
Counterattack—Zoom In—2000 design wins within a year

41. Action
When facing fast-moving threats, 10X teams neither freeze up nor immediately react; they think first, even when they need to think fast.
Remember, not all time is equal. Live serves up moments that count much more than other moments.
In 1910, Amundsen was planning to go to the North Pole. When he learned that Cook and Peary had already reached 90 degrees North he secretly changed plans to head South but didn’t tell his crew until they had set sail from Madeira, Portugal.

42. Level 5 Leadership Don’t define themselves by money, fame or power
They define themselves by impact and contribution and purpose
The central question is, “What are you in it for?” 10X leaders can be bland or colorful, uncharismatic or magnetic, understated or flamboyant, normal to the point of dull or just flat-out weird—none of this really matters, as long as they’re passionately driven for a cause beyond themselves.

43. SMaC Recipe Specific, Methodical and, Consistent
Set of durable operating practices that create a replicable and consistent success formula—include things not to do
Not strategy, culture, core values, purpose, or tactics

44. SMaC Advantages
Keep bearings and sustain high performance in extreme conditions
Creates confidence that the team can perform following the SMaC
Establishes control in areas that you have control
The more unforgiving your world, the more SMaC you need to be

45. SMaC Durable—lasts over time
Comparison companies changed recipes 4X as much as the 10Xers
Requires fanatic discipline—stay the course
The signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.

46. Exercise Create your SMaC
Identify at least three durable operating practices for your company
One must be a “do not”

47. Luck Definition—Must meet all three tests
Some significant aspect of the event occurs largely or entirely independent of the actions of the key actors in the enterprise
The event has a potentially significant consequence (good or bad) and
The event has some element of unpredictability

48. Luck Did 10Xers have more good luck than comparison companies? No!
Did comparison companies have more bad luck than the 10Xers? No!
Did the 10Xers have a big “luck spike” that gave them a huge advantage? Only 1 (with reservations)
Did the 10Xers get more luck early? No!

49. Luck
Adding up all the evidence, we found that the 10X cases were not generally luckier than the comparison cases. The 10X cases and the comparisons both got luck, good and bad, in comparable amounts. The evidence leads us to conclude that luck does not cause 10X success. People do. The critical question is not “Are you lucky” but “Do you get a high return on luck?”

50. Defining Moments in 10X Journey Essential skill for 10X results
Luck
Don’t Confuse Luck with
Return on Luck (ROL)
Bad Luck Good
Defining Moments in 10X Journey
Essential skill for 10X results
Can lead to hitting the Death Line
A sure path to mediocrity
Great
Return on Luck
Poor

51. Luck
10Xers exercise productive paranoia, combined with empirical creativity and fanatic discipline, to create huge margins of safety. If you stay in the game long enough, good luck tends to return, but if you get knocked out, you’ll never have the chance to be lucky again. Luck favors the persistent, but you can persist only if you survive.

52. Summary Fanatic DISCIPLINE Empirical Productive CREATIVITY PARANOIA
Level 5
AMBITION
Empirical
CREATIVITY
Productive
PARANOIA

53. Questions? Leon Spackman Dir, Vendor Relations Lovelace Health Plan