Wednesday, June 06, 2012

Jim Collins - Great By Choice (3) - Things to Learn

The Four Behaviours

As mentioned above, Collins identifies four features of how “great” organisations are led which enables them to thrive in times of great uncertainty. They are:

  • fanatical discipline – “20 mile marching”.
  • empirical creativity – “fire bullets then cannonballs”.
  • productive paranoia - “leading above the death line”.
  • SMaC recipes – a well-defined set of specific, measurable and consistent practices.

A little explanation of each will help.

Fanatical discipline is the idea that companies should aim to achieve the same level of progress regardless of the outside environment. That both prevents them from overstretching themselves when times are good and from giving up or cutting core services when times are bad. The classic example he cites is that of Intel, whose corporate strategy was focused on upholding Moore's Law – doubling the complexity of components per integrated circuit every 18-24 months. This meant that they continued to invest in R&D, even through recessions. Perhaps the best example of this, though is from the Scott & Amundsen example. Scott's team would push hard on a day with good weather, but stay in their tents on a day with bad weather. Amundsen aimed to do 15-20 miles per day, regardless of the weather, refusing to do more even when the South Pole was within reach. As a result, they did not tire as much in good weather and stayed more motivated in bad, as well as having a higher average overall speed.

Empirical creativity was an idea that surprised Collins and Hansen. They expected that in an uncertain environment, it would be the more innovative companies that thrived. But instead they found that there seemed to be a minimum threshold for innovation – if companies did not innovate a certain amount, they declined and died. But above that limit, it was not the companies who innovated most who prospered, but the ones who tested their innovations before rolling them out on a large scale or even who just saw what was working elsewhere, and followed that. Hence the idea of firing bullets then cannonballs – one fires a large number of “bullets” to find out what works, and then follows the ones that work well up with a “cannonball”, which costs more and involves a greater commitment.

Productive Paranoia was another surprising idea. They had been expecting to find a sense of confidence, and quick decision making among the leaders of these “great” companies. Instead, they found that the leaders kept far larger cash reserves than in the comparison companies – 3 to 10x as much – that they kept a close watch out for things that could damage their position, and worked hard at finding solutions. Surprisingly, they also found that they took fewer risks than their competitors, especially “death line” risks, which could destroy the company, and “asymmetric risks”, where the potential loss was much greater than the potential profit. They also managed “time based risks” well – when a decision was urgent, they took as much of the time they had available as they could before the risk increased to make the best decision they could.

SMaC Recipes are a set of corporate practices which are specific, measurable and consistent. The “great” companies examined made sure theirs worked and were clear, concrete and replicable, and then held to them rigidly, only changing them rarely and when conditions needed it and only in accordance with productive paranoia or empirical creativity. That enables dramatic change and strong consistency at the same time. One example is Intel's policy, which Collins & Hansen list as 10 points. In 1985, Intel decided to change the entire focus of their business from memory chips to microprocessors because of strong and cheap mass-produced competition. But in doing so they only changed one point in their “SMaC recipe”, and they already had a thriving microprocessor arm as a side business. That enabled them to in some ways reinvent themselves without changing their corporate culture. What especially distinguished the “great” companies from their competitors was that the “great” companies stuck to their policies with greater discipline, and changed them less. They even found one example of two companies with nearidentical recipes, which were similarly successful until one decided to try to change to copy a bigger rival and went into decline. One example of a SMaC principle was Southwest Airways' decision only to fly Boeing 737s, because that meant that any pilot could fly any plane, any engineer could fix any plane and logistics for spares was much easier.

Theological Evaluation of the Four Behaviours

These behaviours, taken as advice for how to cope with turbulent situations, do not seem to suffer from the same kind of problems that Collins' ideas of “greatness” and “choice” do. This is possibly because they are based on research rather than worldly assumptions or hubristic misuse of data.

Indeed, some limited theological parallels could be drawn. For example, the idea of 20 mile marching could be compared to the business environment of Old Testament Israel, where due to the prohibition on interest, it was much harder for individuals to overextend their businesses in good times. The notion of empiricism also stems from a Christian worldview, specifically the doctrine of original sin and the way it has corrupted our understanding so that we do not always make accurate decisions about the world without testing it.

Of course, that does not make them Christian. There is nothing there about the importance of trusting God and finding him to be your Rock. There is nothing there about the need to go deeper into God to find your roots more securely in the work of Jesus on the cross. There is nothing there about prayer or the guidance of the Holy Spirit. They are clearly not sufficient as advice for Christian leaders. But it is possible to take them as potentially wise advice for leading a church through turbulent times.

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