How Great Leaders Make Their Own Luck
Jim Collins On Great By Choice
by Dan Schawbel on Forbes Magazine
Dan Schawbel, recognized as a “personal branding guru” by The New York Times, is the Managing Partner of Millennial Branding, LLC, a full-service personal branding agency. Dan is the author of Me 2.0: 4 Steps to Building Your Future, the founder of the Personal Branding Blog, and publisher of Personal Branding Magazine. He has worked with companies such as Google, Time Warner, Symantec, IBM, EMC, and CitiGroup.
What types of unstable environments do leaders face today that they didn’t have to worry about years ago?
My coauthor Morten Hansen and I believe that uncertainty, punctuated by episodes of chaos, characterize most of human history; it is a very normal state. Today, the relentless march of technological disruption, the increasingly global nature of competition, and the instantaneous flow of information all contribute to instability. But the forms of turbulence are less important than the fact that we will likely live with uncertainty and chaos for the rest of our lives. This is neither good nor bad; it just is. In fact, it comes with substantial opportunity—environments characterized by turbulent disruption can go hand-in-hand with extraordinary growth, as we saw in the rise of the technology sector. There will be some very big winners (and lots of carnage) along the way.
Can you name two companies that have flourished during these uncertain times?
Our research lens is to examine historical eras of great corporate performance, not to pick current company success stories. Two fascinating cases from the research study are Southwest Airlines and Stryker. Southwest beat the general stock market by 63 times from 1972 to 2002, and Stryker beat the general market by 28 times from 1977 to 2002. We cannot predict with certainty which companies will deliver similarly astounding results in the coming decades; but we can learn from the historical development of these and other companies in our research, so that leaders can increase the chances that their own companies will thrive in the coming chaos and uncertainty.
After years of research for your book, what result surprised you the most?
The mixture of creativity, discipline and paranoia needed to thrive. The 10X winners (those who beat their industry indexes by ten times or more) didn’t generally out-innovate everyone else; they combined creativity with discipline so that the discipline amplified the creativity rather than destroying it, all the while remaining productively paranoid so as to stay alive in the face of big, unexpected shocks. Hand in hand with this is that the leaders who led successfully in the face of turbulent disruption and rapid change were not generally more visionary, more risk-taking, or more blessed by luck than their direct comparisons.
Should smart companies take bigger risks during economic uncertainty/turmoil or make safe bets? Why or why not?
Neither . . . or both, depending on how you look at it. The whole idea is to place concentrated bets, but only after gaining empirical validation that the bet will likely succeed. Those who place big bets without empirical validation—what we call firing an uncalibrated cannonball before firing bullets to validate a concept—are taking excess and unnecessary risks. It’s about first firing bullets to gain empirical validation, then firing a cannonball. This allows you to get the exponential results of concentrated bets, while also bounding your risk. When you engage in inherently risk-oriented activities, such as entrepreneurship, the key is to bound and manage the risks, to achieve BHAGs (Big Hairy Audacious Goals) and to stay above the Death Line. Never forget, the only mistakes you can learn from are the ones you survive.
You and Morten found that a rapidly changing world full of big fast-moving forces does not necessarily call for speed of action and reaction, can you explain?
We found that 10Xers recognize changes and threats early (due largely to their productive paranoia), but then take the time available—whether that be short or long—to make rigorous decisions and take disciplined action. The key question is not “should we go fast or slow?” but “How much time do we have before the risk profile changes?” They go slow when they can, fast when they must. If they have time, they’re comfortable letting events unfold, while preparing to act decisively when the time comes. One of the most dangerous false beliefs is that you are either the quick or the dead. Sometimes the quick are the dead.
During the 1960s and 1970s, the Japanese achieved major advances in manufacturing management, which led to their rise as an economic power. The Japanese economic miracle and the country’s new manufacturing skills and methods surprised western firms; but the Japanese had done this by studying, adopting, and eventually perfecting the best practices of the West itself.