Great by Choice

1. 10X companies thrive in chaos through disciplined leadership

10Xers display three core behaviors that, in combination, distinguish them from the leaders of the less successful comparison companies.

Fanatic discipline is the first core behavior of 10X leaders. They demonstrate unwavering consistency in their actions, adhering strictly to their values, goals, and performance standards. This discipline isn't about rigid obedience to rules, but rather an internal drive to maintain high standards regardless of external circumstances.

Empirical creativity is the second behavior. 10X leaders rely on direct observation, practical experimentation, and tangible evidence to make decisions. They don't simply follow conventional wisdom or authority figures. This approach allows them to make bold moves while managing risk effectively.

Productive paranoia is the third behavior. 10X leaders remain hypervigilant, always prepared for potential threats or changes in their environment. They assume conditions will turn against them and channel their fear into proactive preparation and contingency planning.

These behaviors are underpinned by a deep passion and ambition for a cause greater than themselves. 10X leaders are driven by the desire to build something truly exceptional, focusing on long-term impact rather than short-term personal gain.

2. The 20 Mile March: Consistent progress in any environment

Thriving in a chaotic world is not just a business challenge. In fact, all our work is not fundamentally about business, but about the principles that distinguish great organizations from good ones.

Consistent performance is key to long-term success. The 20 Mile March concept, inspired by Antarctic explorer Roald Amundsen, emphasizes the importance of setting and achieving consistent performance markers, regardless of external conditions.

This approach involves:

• Setting clear, concrete performance targets
• Maintaining discipline in both good and bad times
• Staying within upper and lower performance bounds
• Creating self-imposed constraints to prevent overreaching

Examples of successful 20 Mile Marches:

• Southwest Airlines: Achieving profitability every year for 30 consecutive years
• Progressive Insurance: Maintaining a 96% combined ratio
• Intel: Adhering to Moore's Law

The 20 Mile March builds confidence, reduces the impact of external factors, and provides a framework for consistent progress. It allows companies to thrive in uncertain environments by focusing on what they can control, rather than being at the mercy of external circumstances.

3. Fire bullets, then cannonballs: Empirical validation before big bets

You don't even need to be the one to fire all the bullets; you can learn from the empirical experience of others.

Test before investing. This principle advocates for making small, low-risk investments (bullets) to test ideas before committing significant resources (cannonballs). It's a method of empirical validation that helps companies innovate while managing risk.

Key components of the fire bullets, then cannonballs approach:

1. Fire bullets: Make small, low-cost, low-risk tests
2. Assess results: Determine which bullets hit the target
3. Concentrate resources: Invest heavily in successful bullets
4. Calibrate: Ensure the cannonball is based on empirical validation

Examples:

• Apple's development of the iPod and iTunes
• Intel's transition from memory chips to microprocessors

This approach allows companies to:

• Innovate without risking everything on unproven ideas
• Learn from small failures and build on small successes
• Adapt to changing markets while maintaining core strengths

The authors found that 10X companies were not necessarily more innovative than their competitors, but they were better at scaling successful innovations and avoiding uncalibrated big bets.

4. Leading above the Death Line: Prepare for the worst, expect the unexpected

By embracing the myriad of possible dangers, they put themselves in a superior position to overcome danger.

Productive paranoia is a key characteristic of 10X leaders. They constantly anticipate and prepare for potential threats, even during periods of success. This approach involves:

1. Building buffers and safety margins

• Maintaining conservative cash reserves
• Creating redundancies in critical systems

2. Bounding risk

• Avoiding "Death Line" risks that could destroy the company
• Minimizing exposure to uncontrollable external factors

3. Zoom out, then zoom in

• Regularly assessing the broader environment for potential threats
• Quickly focusing resources on addressing identified risks

Examples of productive paranoia:

• Intel's "only the paranoid survive" philosophy
• Southwest Airlines' fuel hedging strategy

10X leaders recognize that not all time is equal. They prepare extensively for pivotal moments when performance matters most, allowing them to capitalize on opportunities and weather crises more effectively than their competitors.

5. SMaC recipe: Specific, Methodical, and Consistent practices for success

The more unforgiving your world, the more SMaC you need to be.

Operational consistency is crucial for success in chaotic environments. A SMaC (Specific, Methodical, and Consistent) recipe is a set of durable operating practices that create a replicable success formula.

Characteristics of a good SMaC recipe:

• Clear and concrete guidelines
• Enduring over long periods (often decades)
• Tailored to the specific enterprise and environment
• Includes both what to do and what not to do

Examples:

• Southwest Airlines' 10-point operating model
• Intel's commitment to Moore's Law

The key to a SMaC recipe is not rigidity, but rather careful, empirically-validated evolution. 10X companies showed remarkable consistency in their core practices, changing only about 20% of their SMaC recipes over long periods, compared to 60% for comparison companies.

To develop a SMaC recipe:

1. Identify successful practices
2. Analyze what works and why
3. Formulate clear, actionable guidelines
4. Consistently apply the recipe
5. Periodically review and carefully amend based on empirical evidence

6. Return on Luck: Capitalizing on both good and bad fortune

The critical question is not "Are you lucky?" but "Do you get a high return on luck?"

Luck happens to everyone. The study found that both 10X companies and comparison companies experienced similar amounts of good and bad luck. The difference lies in how they capitalized on their luck.

Key findings on luck:

• 10X companies didn't have more good luck or less bad luck
• A single stroke of luck doesn't explain long-term success
• Both good and bad luck can be leveraged for growth

Strategies for high return on luck:

1. Recognize luck events when they occur
2. Quickly assess whether to alter plans based on luck events
3. Productively capitalize on good luck
4. Turn bad luck into learning and improvement opportunities

Examples:

• Southwest Airlines' response to 9/11
• Progressive Insurance's reaction to Proposition 103 in California

10X leaders demonstrate the ability to:

• Prepare for potential luck events before they happen
• Quickly recognize and respond to luck when it occurs
• Execute brilliantly to capitalize on good fortune
• Learn and grow from adversity

7. Level 5 Ambition: Fierce resolve combined with personal humility

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.

Selfless ambition characterizes 10X leaders. They possess a paradoxical blend of personal humility and professional will, directing their ego and intensity toward building something greater than themselves.

Key attributes of Level 5 leaders:

• Fierce resolve to achieve long-term goals
• Commitment to the company's success over personal gain
• Willingness to give others credit for successes
• Taking personal responsibility for failures

Examples:

• Herb Kelleher at Southwest Airlines
• Andy Grove at Intel

Level 5 leaders build enduring greatness through:

• Setting clear, ambitious goals for the organization
• Developing strong leadership teams
• Creating a culture of discipline and innovation
• Consistently applying the principles of 10X leadership

This combination of humility and determination allows 10X companies to outlast their competitors and achieve sustained excellence, even in the face of significant challenges and disruptions.

Last updated: August 19, 2024