Myth of visionary

Entrenched myth: Successful leaders in a turbulent world are bold, risk-seeking visionaries. Contrary finding: The best leaders we studied did not have a visionary ability to predict the future. They observed what worked, figured out why it worked, and built upon proven foundations. They were not more risk taking, more bold, more visionary, and more creative than the comparisons. They were more disciplined, more empirical, and more paranoid.

Discipline + Scaling » Innovation

Innovation by itself turns out not to be the trump card we expected; more important is the ability to scale innovation, to blend creativity with discipline.

Not always fast

10X leaders figure out when to go fast, and when not to.

Changed less in reaction

The 10X cases changed less in reaction to their changing world than the comparison cases. Just because your environment is rocked by dramatic change does not mean that you should inflict radical change upon yourself.

Action > Luck

The critical question is not whether you’ll have luck, but what you do with the luck that you get.

An explorer’s philosophy of success

Amundsen’s philosophy: You don’t wait until you’re in an unexpected storm to discover that you need more strength and endurance. You don’t wait until you’re shipwrecked to determine if you can eat raw dolphin. You don’t wait until you’re on the Antarctic journey to become a superb skier and dog handler. You prepare with intensity, all the time, so that when conditions turn against you, you can draw from a deep reservoir of strength. And equally, you prepare so that when conditions turn in your favor, you can strike hard.

Behaviors > Environment

they faced the same environment in the same year with the same goal, the causes of their respective success and failure simply cannot be the environment. They had divergent outcomes principally because they displayed very different behaviors.

3 core needs

10Xers then bring this idea to life by a triad of core behaviors: fanatic discipline, empirical creativity, and productive paranoia… Fanatic discipline keeps 10X enterprises on track, empirical creativity keeps them vibrant, productive paranoia keeps them alive, and Level 5 ambition provides inspired motivation.

What is discipline?

Discipline is not the same as regimentation. Discipline is not the same as measurement. Discipline is not the same as hierarchical obedience or adherence to bureaucratic rules. True discipline requires the independence of mind to reject pressures to conform in ways incompatible with values, performance standards, and long-term aspirations.

How to deal with uncertainty

Social psychology research indicates that at times of uncertainty, most people look to other people authority figures, peers, group norms for their primary cues about how to proceed. 10Xers, in contrast, do not look to conventional wisdom to set their course during times of uncertainty, nor do they primarily look to what other people do, or to what pundits and experts say they should do. They look primarily to empirical evidence.

Complacency

The same USA Today article quoted Sculley, “I’ve got the team in place here. Things are booming. So I’m going fishing.” The very next year, Apple’s return on equity began to fall, from nearly 40 percent in 1988 to 13 percent in 1994

Productive paranoia in both good and bad times

our point is to draw a contrast with the productive paranoia Gates demonstrated all the time, no matter how successful Microsoft became.

Always on the lookout

Written by Gates himself, the memo listed a series of worries and threats about competitors, technology, intellectual property, legal cases, and Microsoft’s customer-support shortcomings and proclaimed that “our nightmare…is a reality.” Keep in mind that at the time of the memo, Microsoft was rapidly becoming the most powerful player in its industry, with Windows on the verge of becoming one of the most dominant software products ever.

Preparation all the time

Even in calm, clear, positive conditions, 10Xers constantly consider the possibility that events could turn against them at any moment. Indeed, they believe that conditions will absolutely, with 100 percent certainty turn against them without warning, at some unpredictable point in time, at some highly inconvenient moment. And they’d better be prepared.

Paranoia –> Action

By embracing the myriad of possible dangers, they put themselves in a superior position to overcome danger. 10Xers distinguish themselves not by paranoia per se, but by how they take effective action as a result. Paranoid behavior is enormously functional if fear is channeled into extensive preparation and calm, clearheaded action, hence our term “productive paranoia.”

Always in step

Gates didn’t just sit around writing up nightmare memos; he channeled fear into action by keeping workspace inexpensive; hiring better people; building cash reserves; and working on the next software release to stay a step ahead, then the next one, and the next one after that.

Larger than themselves

If they were nothing but weird, selfish, antisocial, paranoid freaks of nature, they likely could not have built truly great organizations. So, why did people follow them? Because of a deeply attractive form of ambition: 10Xers channel their ego and intensity into something larger and more enduring than themselves. They’re ambitious, to be sure, but for a purpose beyond themselves, be it building a great company, changing the world, or achieving some great object that’s ultimately not about them.

Humbleness

“Coming from a modest background makes you focus on the essentials,” he later reflected. “I do know what life is like in a ditch [so] I don’t get caught up in the fanfare of whether fame and fortune will come.”

No pattern in background

In short, we found no consistent pattern in the backgrounds of 10Xers relative to the comparison leaders. 10Xers can come from tough upbringings or they can come from privileged lives or something in the middle. Nor did we find that they necessarily started as 10Xers; some of the 10Xers evolved, developing their leadership capabilities over time.

Keeping a consistent growth rate

In fact, Stryker grew more slowly than USSC more than half the time. According to the Wall Street Transcript, some observers criticized Brown for not being more aggressive. Brown, however, consciously chose to maintain the 20 Mile March, regardless of criticism urging him to grow Stryker at a faster pace in boom years.

Lower and upper bound of progress rate

John Brown understood that if you want to achieve consistent performance, you need both parts of a 20 Mile March: a lower bound and an upper bound, a hurdle that you jump over and a ceiling that you will not rise above, the ambition to achieve and the self-control to hold back.

Discomforts in both good and bad times

The 20 Mile March creates two types of self-imposed discomfort: (1) the discomfort of unwavering commitment to high performance in difficult conditions, and (2) the discomfort of holding back in good conditions.

Holding back, especially in good time

Equally important, Southwest had the discipline to hold back in good times so as not to extend beyond its ability to preserve profitability and the Southwest culture.

Consistent marching / progress

A good 20 Mile March has a Goldilocks time frame, not too short and not too long but just right. Make the timeline of the march too short, and you’ll be more exposed to uncontrollable variability; make the timeline too long, and it loses power.

Consistent growth instead of erratic growth

It means we say that we’d rather be consistently growing…than be hot for one year and then gone the next.”

Intel example on 20 Mile consistent march

Intel, for instance, built its 20 Mile March around the idea of “Moore’s Law” (double the complexity of components per integrated circuit at an affordable cost every 18 months to two years). Intel sustained its commitment to achieving Moore’s Law whether in boom times or industry depression, retaining its best engineers, always moving to the next-generation chip, investing consistently in its creative march, year in and year out, no matter what, for more than thirty years.

No blaming

Tangible achievement in the face of adversity reinforces the 10X perspective: we are ultimately responsible for improving performance. We never blame circumstance; we never blame the environment.

Tiny steps of achievement

They gained confidence by the very fact of increasing achievement. If you beat the odds, you then gain confidence that you can beat the odds again, which then builds confidence that you can beat the odds again, and again, and again.

Own action > conditions

The 20 Mile March builds confidence. By adhering to a 20 Mile March no matter what challenges and unexpected shocks you encounter, you prove to yourself and your enterprise that performance is not determined by your conditions but largely by your own actions.

Calamity in unexpected downturn

► There’s an inverse correlation between pursuit of maximum growth and 10X success. Comparison-company leaders often pressed for maximum growth in robust times, thereby exposing their enterprises to calamity in an unexpected downturn.

Accidental discoveries

“You may not find what you were looking for, but you find something else equally important.” Robert Noyce

Pioneers don’t always win

They found that only 9 percent of pioneers end up as the final winners in a market. Gillette didn’t pioneer the safety razor; Star did. Polaroid didn’t pioneer the instant camera; Dubroni did. Microsoft didn’t pioneer the personal computer spreadsheet; VisiCorp did. Amazon didn’t pioneer online bookselling and AOL didn’t pioneer online Internet service.

Clear mission statement

Indeed, the original statement of Moore’s Law, written by Moore in 1965, focused not just on doubling the complexity of integrated circuits per year (the innovation element) but also doing so at minimum cost.

Creative bullets:

  1. A bullet is low cost.
    • A bullet is low risk.
    • A bullet is low distraction.

10X companies used a combination of creative bullets (such as new products, technologies, services, and processes) and acquisitions.

Serendipity

Even the great software genius Bill Gates had no special predictive ability. He didn’t plan from the outset for Microsoft to be first to the market with an operating system for the IBM PC; he was off focusing on computer languages when IBM unexpectedly asked if Microsoft could provide an operating system.

Phases of iteration in small tiny steps

And indeed, the first iteration just didn’t work: “We were like, ‘Oh God, we’re screwed,’” said Jobs. So, Jobs and his retail leader, Ron Johnson, redesigned, tested, and redesigned until they got it right. They launched their first two stores in Virginia and Los Angeles, and once those proved successful, they rolled them out with great consistency. Bullet, calibrate, bullet, recalibrate, cannonball.

Discipline –> Creativity

First, he increased discipline. That’s right, discipline, for without discipline there’d be no chance to do creative work. He brought in Tim Cook, a world-class supply-chain expert, and together Jobs and Cook formed a perfect yin-yang team of creativity and discipline. They cut perks, stopped funding the corporate sabbatical program, improved operating efficiency, lowered overall cost structure, and got people focused on the intense “work all day and all of the night” ethos that’d characterized Apple in its early years. Overhead costs fell.

Continuous learning

Jobs never stopped developing, growing, learning, pushing himself. He could have taken his fortune, and retired to a life of ease and comfortable irrelevance. Instead, he launched a new company called NeXT, worked on a new operating system, and became engaged with animated films at Pixar. In the 12 years away from Apple, Jobs had turned himself from a creative entrepreneur into a disciplined, creative company builder. Jobs always knew how to build insanely great products, but he had to learn how to build an insanely great company.

Learning in good times

The 10X winners in our research always assumed that conditions can and often do unexpectedly change, violently and fast. They were hypersensitive to changing conditions, continually asking, “What if?” By preparing ahead of time, building reserves, maintaining “irrationally” large margins of safety, bounding their risk, and honing their disciplines in good times and bad, they handled disruptions from a position of strength and flexibility. They understood, deeply: the only mistakes you can learn from are the ones you survive.

Large cash reserves

Think also of cash reserves and a conservative balance sheet as oxygen canisters and other supplies. By the late 1990s, Intel’s cash position had soared to more than $10 billion, reaching 40 percent of annual revenues

Intel and cash reserves

such a high level of cash might be irrational and inefficient 95 percent of the time, but Intel leadership worried about the 5 percent of the time when catastrophe might devastate the industry or when some other unexpected shock might batter the company. … found strong evidence that the 10X cases carried lots of extra oxygen canisters.

Accounting

80 percent of the time, the 10X cases carried a higher cash-to-assets ratio and a higher cash-to-liabilities ratio than their comparisons.

Embedded in the culture

Intel’s conservative cash position in the late 1990s was a continuation of the productive paranoia that its leaders, and their 10X counterparts, adopted in their early years.

Small steps –> Big steps

we noticed that the 10Xers appeared to lead their companies with a more conservative, risk-averse approach. They constrained growth in the 20 Mile March. They fired bullets before firing cannonballs. They displayed financial prudence, building a cache of extra oxygen canisters. Struck by the accumulating evidence, we undertook a more systematic analysis to ask, “Did the 10X cases take more risk or less risk than the comparison cases?”

Taking risk?

In short, we found that the 10X companies took less risk than the comparison cases. Certainly, the 10X leaders took risks, but relative to the comparisons in the same environments, they bounded, managed, and avoided risks.

Recognizing threats

We concluded that recognizing a change or threat early, and then taking the time available whether that be short or long to make a rigorous and deliberate decision yields better outcomes than just making a bunch of quick decisions.

Mediocrity == inconsistency

If you really want to become mediocre or get yourself killed in a turbulent environment, you want to be changing, morphing, leaping, and transforming yourself all the time and in reaction to everything that hits you. We’ve found in all our research studies that the signature of mediocrity is not an unwillingness to change; the signature of mediocrity is chronic inconsistency.

High return on luck

True, luck happens, good and bad, to everyone, whether we like it or not. But when we look at the 10Xers, we see people like Gates who recognize luck and seize it, leaders who grab luck events and make more of them than others do. It’s the 10X ability to get a high return on luck at pivotal moments that distinguishes them and this has a huge multiplicative effect.

Discipline > Luck

We sense a dangerous disease infecting our modern culture and eroding hope: an increasingly prevalent view that greatness owes more to circumstance, even luck, than to action and discipline that what happens to us matters more than what we do.