by Chris Banescu –
In the book Great by Choice, authors Jim Collins and Morten T. Hansen set out to discover why some companies thrive in uncertain and chaotic times while others do not. Their extensive research identified what they named “10Xers“, businesses that didn’t just get by or became successful, but “truly thrived” beating other companies in their industry by “at least 10 times.”
Collins and Hansen set out to find enterprises that (1) sustained spectacular results for 15+ years relative to their industries and the market, (2) achieved results in turbulent and uncertain times, and (3) began their rise to greatness while being in a position of vulnerability.
Out of the 20,400 companies they initially began reviewing, they discovered just seven 10Xers (10X businesses) who fit their stringent performance characteristics.
The authors’ found that all 10Xers displayed the following behaviors: fanatic discipline, empirical creativity, and productive paranoia, all animated by “Level 5 ambition.”
Collins and Hansen refer to the disciplined pursuit of creativity and reliance on direct observation, experimentation, testing, and gathering of empirical data, as empirical creativity.
Employing the metaphor of “fire bullets, then cannonballs”, they explain that it’s often better to take smaller and more calculated risks (fire bullets) when dealing with new products, technologies, services, and processes in order to test them and gauge what works best for the organization. Only after new ideas are tested and confirmed, should an enterprise commit more resources, money, and manpower (fire cannonballs) into supporting them.
A “bullet” is described in the book as “an empirical test aimed at learning what works and that meets three criteria: a bullet must be low cost, low risk, and low distraction.” And 10Xers where shown to use them often to validate good ideas and target effective innovation. Then, based “on those empirical validations,” the 10X organizations concentrated “their resources to fire a cannonball, enabling large returns from concentrated bets,” write the authors.
The book further differentiates cannonballs as either “calibrated” (fired after empirical validation was achieved) or “uncalibrated” (fired before gaining empirical validation). It points out that 10X companies were “much more likely to fire calibrated cannonballs,” while the comparison organizations had “uncalibrated cannonballs flying all over the place.”
So why is this important and relevant for the long-term success of a company?
Because, as Collins and Hansen explain, calibrated cannonballs are four times more likely to achieve success than uncalibrated ones. That’s a 400% performance improvement over one’s competitors, which paid significant dividends for all 10Xers that employed the empirical creativity approach.
Now that’s something to consider!