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The 10 Commandments of Business from Jim Collins

Like losing those last ten pounds or shaving just a second from your best run time, going from good to great is a small move that makes a big difference
by Caitlin Schiller | Jun 21 2015

Anyone who’s set weight-loss goals or trained for a race, however, can tell you that attaining that last bit of excellence is the hardest part. Now, imagine the task of moving an entire business from all right to excellent—where would you start? Who might you ask for advice?

the-10-commandments-of-business-from-jim-collins

Easy—Jim Collins.

Jim-Collins

Jim Collins is a rockstar business consultant and author of bestsellers Good to Great, Built to Last, and How the Mighty Fall, which have sold more than ten million copies worldwide.

In each of these books, Collins exhaustively explores what makes great companies great, visionary companies visionary, and 10X companies so productive. And lest you believe he shuns the world and spends all of his time working on books, think again: Collins also heads a research laboratory that studies leadership, then teaches what he’s learned in the classroom.

If there’s anyone who knows a thing or two about greatness, it’s this guy. So, we scoured Collins’s books and put together a primer of his most useful concepts and best advice. These are the 10 Commandments for getting to greatness from a guy who knows.

1. Find your Hedgehog concept. — Good to Great

Imagine a fox hunting a hedgehog. The fox is crafty and invents a battery of complex tactics to get at the smaller creature, yet despite all of its cunning, the fox never wins. The hedgehog has a simple, foolproof parry to any attack: it curls up and becomes an unbreachable spiked ball.

According to Collins, good-to-great companies find their own Hedgehog concept—something simple, clear, and fail-proof—by asking themselves three key questions:

  • What can we be the best in the world at?
  • What can we be passionate about?
  • What is the key economic indicator we should concentrate on?

Collins found that after an average of 4 years’ iteration and debate, good-to-great companies discovered their own Hedgehog concept at the intersection of these questions. After that point, every decision in the company was made in line with it, and success followed.

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Take the example of drugstore chain, Walgreens. The Walgreens Hedgehog concept was to be the best, most convenient drugstore with a high customer profit per visit. By pursuing it relentlessly, Walgreens outperformed the general stock market by a factor of 7. By contrast, their competitor, Eckerd Pharmacy, lacked a simple Hedgehog concept and grew sporadically in several misguided directions, eventually ceasing to exist as an independent company.

2.Find your level 5 leaders. — Good to Great

In his research, one thing that Collins noticed was that good-to-great companies had “level 5” leadership to spur on their transition. If you’re wondering what a level 5 leader is, you’re not alone. Here’s a quick profile:

Level 5 leaders:

  • Are excellent team members and managers
  • Are single-mindedly ambitious on behalf of the company
  • Are personally modest yet fanatically driven toward results; they share credit for their company’s achievements, downplaying their own role, but are quick to take responsibility for shortcomings
  • Want their company to continue performing even after they leave

d_smithCollins offers the example of Darwin Smith, who transformed Kimberly-Clark into one of the leading paper consumer goods companies in the world. Smith refused to cultivate an image of himself as a hero or celebrity. He dressed like a farm boy, spent his holidays working on his Wisconsin farm and often found his favorite companions among plumbers and electricians.

3. Before anything, put the right people in the right place.— Good to Great

Level 5 leaders can make or break a company, but who you’ve got in the rest of the rocketship matters, too. In Good to Great, Collins suggests asking who you have to work with before focusing on what you’re working on.

Collins’s lab found that the transformation from good to great always began with getting the right people into the company and the wrong people out of it, even before defining a clear path forward. Great companies realize that the right people can always be trained and educated. Furthermore, great leaders know that having the right people around them gives the entire business the best shot at success.

For example, when Dick Cooley took over as the CEO of Wells Fargo, he realized he could never understand the major changes that would follow from the imminent deregulation of the banking industry. He reasoned that if he got the best and the brightest people into the company, somehow together they would find a way to prevail. He was right. The company prospered spectacularly and Warren Buffet subsequently called Wells Fargo’s executives, “The best management team in business.”

4. Maintain strong core values but never stop improving.  —Built to Last

In his research Collins found that at that the heart of a truly great company is a core ideology, but the manifestations of that core ideology are always open for change and progress.

For instance, Wal-Mart’s drive to “exceed customer expectations” is a stable element of its core ideology, but having greeters at the entrance to their stores is a practice that can change. This flexibility demonstrates how visionary companies shuck what Collins calls the Tyranny of the OR, whereby a company must choose between staying true to its core ideology or stimulating progress. Instead, visionary companies use the Genius of the AND—experimenting and developing—while still adhering to the core ideology.

But hang on—what keeps the core ideologies from becoming stultifying to a business? In a visionary company, the core values are tempered and evolved by a commitment to constantly improving products, business and organization. Consider the founder of the Marriott Corporation, J. Willard Marriot, who lived by the motto:

“Keep on being constructive, doing constructive things, until it’s time to die… make every day count, to the very end.”

5. Use BHAGS (big hairy audacious goals) to drive progress. — Built to Last

Moon-landing

To drive progress, visionary companies set themselves extremely bold objectives— so-called Big Hairy Audacious Goals (BHAGs)—to which they commit utterly and completely.

BHAGs are as formidable as they sound: often, they’re so ambitious that they seem unrealistic, especially to outsiders. Nevertheless, they’re also clear and tangible enough to energize and focus the organization.

A well-known example of a non-corporate BHAG is the one set by John F. Kennedy in 1961 when he proclaimed that the U.S. would take a man to the moon and back safely by the end of the decade. At the time, this was an almost ludicrously bold commitment, but it did get the U.S. moving vigorously forward.

BHAGs, Collins notes, often take on a life of their own. Just as the space program continued after Kennedy’s death, the visionary companies he studied pursued their BHAGs even as new CEOs and directors came and went. Once a BHAG was achieved, new ones were set, right in line with the company’s core ideology.

6. Skip the inspirational talk and take action on company values. —Built to Last

You’ve seen it before: so many companies claim they value high ideals, experimentation, and a culture of constant progress. And yet, for how many of them is that actually the case?

When Collins studied visionary companies, one thing he found that they all had in common was that they did more than make empty claims: they managed to translate their values into reality through concrete mechanisms that affected employees’ work reality, whether that meant creating new technologies, training and developing their staff, or supporting research and development.

An instance of walking the talk is company 3M. It didn’t just say, “We want our employees to be more innovative.” Instead, it implemented several mechanisms to encourage this idea. It encouraged employees to use 15% of their time on pet projects and dictated that 30% of each division’s annual sales must come from products less than four years old.

In a similar vein, great companies don’t just talk the talk—they get out there and take concrete steps. Wal-Mart, for example, spurred constant growth with so-called “Beat Yesterday” ledgers, which were used to compare each day’s sales to those of the year prior.

7. Chase innovation—but be prudent. —How the Mighty Fall

Collins is adamant that pushing for innovation is critical to greatness—but be careful not to push too hard. Collins found that most promising companies fail not because they’re lazy, but because they attempt to advance too quickly and do not maintain good business practices.

In How the Mighty Fall, Collins offers the example of household item manufacturer, Rubbermaid.  The company took its much-admired levels of innovation to an extreme, aiming to introduce one new product to their range per day: a strategy that led it to create nearly 1,000 new products in just three years.

But this innovation came at a cost: in pushing so hard for new products, Rubbermaid lost control of its costs and failed to meet orders. The lack of discipline undermined the innovations, and the company suffered a rapid decline until it was eventually taken over by a rival.

8. In the face of catastrophe, don’t try these things. —How the Mighty Fall

If you’ve ever been on a sinking boat, you know that the natural response to crisis is panic. It’s also the response most business leaders have when decline sets in. Which, in turn, can lead them to make rushed decisions that only deepen the crisis. Collins identifies two tactics companies use to combat calamity that ultimately lead to failure.

Response 1: The Silver Bullet

What: A sweeping solution that will solve all problems, like implementing an unproven technology, changing business culture entirely, or looking for a new market.
Result: At best, a short-lived boost, at worst—deeper failure.
Example: Hewlett Packard (HP) in the 1990s. Faced with low growth, HP made sweeping changes to its business culture: it ousted its old CEO for Carly Fiorina, a flashy, media-savvy figure who sought to fix HP’s problems by completely changing its image. This gargantuan change in company culture proved too much: HP’s progress continued to falter and Fiorina was dismissed.

Response 2: Throwing in the Towel

What: A more drastic approach than the Silver Bullet in which a company simply gives up.
Result: The company gets shut down or sold off
Example: The once-proud Scott Paper. After trying in vain to stop the rot, they ended up giving in. A new CEO was brought in to cut the company’s losses, which cost it 11,000 jobs, and what was left of it was sold to their archrival.

9. Tap into Productive Paranoia. —How the Mighty Fall

Business moves fast these days. No one can accurately predict what will happen in the coming months let alone years or decades. Yet, in these uncertain environments some companies not only survive, but thrive. What’s the common trait of the successful businesses? A healthy a dram of paranoia: it tends to breed discipline, evidence-based innovation, and preparedness.

To understand why paranoia is  so useful, Collins analyzed the practices of 10X companies (those that outperform their industry average by at least a factor of ten).

What he found was that 10Xers ensure they are prepared for any event or conditions by building up their knowledge and provisions, a practice which is reflected in three core behaviors:

First, fanatical discipline. Discipline in this context does not mean everybody in the organization obeys orders, but rather consistency in action. Collins found that 10X leaders identify their goals and preferred methods, then they stick to them doggedly.
Second, empirical creativity when making decisions. They aren’t interested in others’ opinions or following the established consensus, but in finding out what really works through analyzing results. They perform experiments, collect evidence, and only then move forward with innovation.
Third, Productive Paranoia helps 10Xers survive changes in their competitive environment. Rather than getting comfortable, 10X leaders are always wary of what might go wrong and channel their fears into creating policies that prepare their companies for difficult times.

10. Forget luck and chance. It’s hard work and ambition that assure greatness. —How the Mighty Fall

Popular_Electronics_Cover_Jan_1975In How the Mighty Fall, Collins asserts that for great companies and leaders alike, what separates them from the crowd is making the most of an opportunity presented through hard work and ambition. Example par excelence? Bill Gates.

Certainly, the Microsoft founder had much good fortune—he was privately educated, had access to computers at college, and was lucky enough to happen upon the issue of Popular Electronics magazine that featured the article that inspired him to launch his first product. None of this, however, is what made Bill Gates great. Instead, Collins contends, Gates’s success came from his own sweat and drive.

After reading the aforementioned article, Gates changed his life plans. He dropped out of college and moved to a state where he could pursue his goal of developing a groundbreaking software product. He worked all hours, often skipping food and sleep. He knew he could be successful, and he wasn’t prepared to stop until he achieved greatness. In short, through hard work and ambition, he turned the luck with which he started to his great advantage.

Learn what other markers of success Collins has found in his books Good to Great, Built to Last, and How the Mighty Fall—or read 10 minute summaries of all of them on Blinkist. Free!

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