Great By Choice

7 November 2011 | By Robert Thickett

Good To Great was the result of a study of firms that experienced market-beating and sustained growth over a 15-year period. It looked at how these firms had achieved impressive figures and sought to draw comparisons between the types of men in charge of these high-performing firms.

Written in 2001, it threw up some troubling comparisons for a modern audience, including Collins’ lauding of firms such as Fannie Mae, which was nationalised in 2008 and all its chief executives sacked.

Great By Choice addresses this specific conundrum - firms that might perform well in the past and then see their performance tank or go under - early on in the book.

“Think of our research as comparable to studying a sports dynasty during its best years,” Collins writes.

“A great company can cease to be great, yet this does not erase its dynastic era from the record books, and it’s on that historical dynastic era that we focussed our research lens.”

Even though Great By Choice has only just been published it already has one of these of anomalies.

Collins takes a company that’s performed well over a certain period and compares it with a firm in the same industry that has not performed well.

One such comparison is between Apple and Microsoft - except Apple is the low-performing firm with Microsoft the high-performing test case. That said, Collins stresses the comparison is prior to the return of Steve Jobs, Apple’s recently deceased chief executive.

But the author is more interested in how individuals made their firms great. He introduces us to the term 10X, with every 10X firm beating its industry index by at least 10 times.

The most enduring comparison he makes is between 39 year old Norwegian Roald Amundsen and 43 year old Englishman Robert Falcon Scott.

In 1911 both led separate teams to try to be the first to reach the South Pole. Amundsen arrived first and got back to his boat before the harsh winter struck. Scott made it to the South Pole more than a month after Amundsen, but on the way back froze to death in his tent.

Collins applies the answer of how two individuals starting at roughly the same time resulted in such contrasting outcomes to not just firms and businesses, but schools as well.

Preparation and constructive paranoia are the first - Amundsen had lived with Eskimos, experimented with eating dolphin meat and learnt to use dogs to pull sleds. He also constantly planned for the worst. By contrast Scott brought ponies that died and untested motor sledges that broke, which meant they then had to travel on foot.

Collins also refers to the 20-mile march, which is essentially about setting a 20% growth target that a firm always strives to hit but never exceeds. Slow and steady growth is better than peaking too soon. It’s this internal discipline that Collins argues great firms have.

In Amundsen’s case he ensured that his team only travelled between 15 and 20 miles each day even when they felt they could do more. By contrast Scott would drive his team to exhaustion.

The moral, as with the story of the hare and the tortoise, is that slow and steady wins the race.

By Robert Thicket

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