Jim Collins seeks to answer the question: “in a world that is increasingly in financial turmoil and constant change, how do you succeed?”. Colins found that some companies are able to outperform others by nearly 10 times. He calls these companies 10x companies. Additionally, within these 10x companies, they all contained 4 main attributes: fanatical discipline, empirical creativity, productive paranoia, and Level 5 ambition.
Attribute #1—Fanatical Discipline
The first attribute of a 10x company is that they have fanatical discipline. Collins has us think about fanatical discipline like this: when on a cross-country journey, you’ll be much better off walking 20 miles per day consistently than walking much more on the good days and much less on the bad days.
10x companies know this as well. You should do whatever you need to do in order to get results in the down years and resist the urge to grow too wildly in the up years.
Attribute #2: Fire Bullets, Then Cannonballs
This metaphor goes as follows, if you were down to your last bit of gunpowder, and had an enemy ship bearing down on you, you’d need to be careful with your supplies. Take it all and fire the cannonballs, the chances are that you are going to miss and perish. Instead, fire the bullets first. Sooner or later you are going to find the right trajectory for your shots. Then you should fire your cannonballs.
Now, here are the steps to the process. First, fire a bullet and make a hypothesis about what your goal is. Second, figure out if that hypothesis is correct. Third, consider if it’s worth it to turn this bullet into a cannonball. If you have the additional resources and money that can lead to a big win, then it might be worth it. Finally, Convert it into a cannonball once you are convinced that you have calibrated the bullet correctly.
Attribute #3—Productive Paranoia
All of the 10x companies seem to be paranoid about something. However, instead of being on the lookout for the next government conspiracy, they always have one eye out for the risks that could bring their companies down. One of the things that each of the leaders of the 10x companies know at all times is where their “death line” was, and they devise strategies for making sure they never get close to it. They know that their company, like all companies, would run into a rough patch or ten along the way.
There were 3 specific things that each of these companies did:
They had enough cash on hand to make sure they were prepared for any unforeseen events or bad luck before it happened.
They bound the risk they are willing to take on. Specifically, they pay attention to 3 kinds of risk – deathlike risk, asymmetric risk (where the downside is much, much greater than the upside), and uncontrollable risk. Only when they were comfortable with the risk they were taking on, would they move forward with a plan.
They zoom in and zoom out. In zooming out, they would sense a change in the marketplace, determine how long they had in order to respond to the change, and then take the appropriate action. By zooming in, they would focus on the extreme execution of plans and objectives.
Attribute #4: Level 5 Ambition
Level 5 leadership is humility paired with a professional will. They want to see their companies succeed even beyond their tenure. The way they did this is through something that Collins calls SMaC. These are Specific, Methodical, and Consistent operating principles.
These are different from core values or mission statements because these are specific criteria for how they will run their company. By having a business strategy that was articulated and that could stand the test of time, they were able to focus their attention on the execution of these plans. Of course, even when the companies did amend their SMaCs, they did it with either empirical creativity or productive paranoia, only changing direction when they absolutely needed to, or when they could prove that it would be a home-run.
Here should be everything you need to know to get started building a 10x company ready for the future of business.