If you haven’t done so already, I would encourage you to get and read Jim Collins’ latest book, Great by Choice, right away. Following on in the tradition of his earlier books, Good to Great, Built to Last, and How the Might Fall, Collins and his colleague Morten Hansen focus this book on exploring the key attributes that distinguish companies that perform exceptionally well in turbulent times from those that underperform or worse.
Referring to these high performing companies as “10X cases”, Collins and Hansen selected 7 companies (Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker) that demonstrated three specific criteria:
1. They sustained spectacular results over a period of 15+ years (ending in 2002) relative to the general stock market and relative to its industry;
2. They achieved these results in a tumultuous environment earmarked by events that were uncontrollable, fast-moving, uncertain, and potentially harmful; and
3. They began their rise to greatness from a position of vulnerability, being young and/or small at the start of the journey in question.
In his usual style, Collins also selected comparison peer companies for each of his 10X cases and used these comparisons as the foundation for his analysis. These companies include Genentech (for Amgen), Kirschner (for Biomet), AMD (for Intel), Apple (for Microsoft), Safeco (for Progressive Insurance), PSA (for Southwest Airlines), and United States Surgical Corp (for Stryker).
What the authors found was that, relative to their less successful peer companies, the 10X cases were not: more creative; more visionary; more charismatic; more ambitious; luckier; more risk seeking; more heroic; or more prone to making big, bold moves. That is, both groups showed similar levels on all these attributes.
What DID distinguish the 10X cases from their peers was what Collins and Hansen call:
Fanatic Discipline – They demonstrated a relentless, unbending focus on their quest - maintaining constancy of purpose and adherence to a disciplined plan of execution, regardless of changing conditions
Empirical Creativity – They relied on direct observation, conducting practical experiments, and/or engaging directly with evidence rather than opinion, conventional wisdom, authority, and/or untested ideas to generate and make bold, creative moves AND manage risk at the same time.
Productive Paranoia – They maintained hyper-vigilance in good times and in bad, considering the possibility that events could turn against them at any inconvenient moment and they prepared for such an occurrence because they believe with 100% certainty that it will happen.
Level 5 Ambition/Leadership – 10X leaders channeled their intensity into something larger and more enduring that themselves and their ambition was on a purpose such as building a great company, changing the world, or achieving a great objective that’s not about them.
In addition to identifying the attributes of 10X cases, the authors also take the time in this book to discuss, in detail, some of the key supporting tools, activities, and actions that all 10X cases used and/or executed to achieve success. I was particularly interested in one tool called SMaC – a set of durable operating practices/principles that create a replicable and consistent success formula (SMaC stands for specific, methodical, and consistent).
The great thing about the SMac is that it provides an operating code and decision-making tool that helps turn high level strategic concepts into reality. A SMaC acts as a set of principles that are more enduring than tactics, which can change from situation to situation. The exciting thing that Collins and Hansen uncovered about the practices outlined in a SMaC is that they usually stand up over time (in several cases for decades!) and apply across a wide range of circumstances.
A good SMaC is short and precise (often 10 tenets or less), is based on insights about what works that have been generated through the empirical validation, and outlines both what to do and what NOT to do. The clarity that the SMaC provides helps people remain steadfast and focused on the business fundamentals that have been proven to produce results, in good times and in bad.
Collins provides examples of the SMaC’s of several 10X companies in his book - you can read them for yourself when you pick up the book. However, just to give you an idea of what a SMac looks like, here are a few example SMaC tenets:
Remain a short-hail carrier, under two hour segments; Stay out of food services; Retain Texas as our #1 priority (Southwest Airlines)
Concentrate on non-standard auto insurance, insuring high-risk drivers whom major insurance companies would likely turn away; Exit any state where regulation makes profitable pricing with superb claims service impossible; Never use loss reserves to manage earnings (Progressive Insurance)
You get the idea.
10X cases adhere to their SMac with fanatical discipline but that’s not to say that they aren’t open to modifying it when required. Typically, they use empirical creativity and productive paranoia as key considerations when making the decision to amend their SMaC. However, while 10X cases did make changes to their SMaC, the authors’ research showed that the comparison peer companies changed their recipe for success, on average, four times more frequently than the 10X cases did.
When I read about the SMaC concept, I got very excited about the possibilities. As we all know, a key barrier to strategy execution is the understanding of what the strategy really looks like in action. While this is seen as a critical problem at the frontlines of an organization, I know that this can also be a critical problem at the executive level and in the boardroom. I believe that, when partnered with an organization’s change agenda and strategy map, a SMaC can effectively make a company’s business strategy more actionable and facilitate consistent and aligned decision making at all levels of the organization.
I am so convinced of the value of the SMaC that I took the opportunity to introduce it a few weeks ago into my strategic planning work with a client. I think that the timing of the SMaC discussion is critical and needs enough fact-based dialogue behind it before the effort is made to create the list. As a result, I placed the SMaC discussion after: a stakeholder needs and SWOT review, the definition of the primary stakeholder value proposition, and a discussion of the organization’s purpose. In fact, I used the development of my client’s SMaC as a platform for further detailing the organization’s purpose. Once the SMaC was created, we were able to test out its robustness by running a few scenarios through the principles and using them to determine whether a go-no go decision, based on the criteria, felt “right”. With the SMaC in hand, it then became very easy for my client to define their change agenda, their 3 year vision statement, their strategy map, and gap closing projects. I found that the SMaC provided my client with a very useful tool for guiding the alignment of those subsequent elements with the overall purpose of the organization.
While I won’t be able to see how having a SMaC in place affects my client and their strategy execution and business decision-making until some time in the future, the general consensus of the group doing the work was that the SMaC will be a very useful tool moving forward, particularly as leadership faces expected external pressures and difficult strategic and operational decisions.
The SMaC concept presented by Collins and Hansen has been road tested in successful organizations. It provides business leaders with an important tool that will help them put their strategy into action AND guide them in evaluating opportunities as they arise and in making strategic business decisions, in good times and in bad, that are consistent with the purpose and vision for their company. The key to success in developing and using a SMaC is to (1) leverage evidenced based insights to create a focused set of ten or less operating principles, (2) follow them with strict discipline, and (3) remain open to making adjustments when, and only when, it is required.
Have you SMaC–ed your company yet? If not, I encourage you to pick up Great by Choice and get SMaC-ed today!
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