How to free your organization from “the ideology of comfort and the tyranny of custom”
The quotation in the title of this review is from Leading Change in which James O’Toole brilliantly explains why most of the resistance to change initiatives is cultural in nature. Over the years, Geoffrey Moore has written several books in which he explains how business leaders need to cross the chasm created by disruptive technologies, to survive inside a tornado of constant change, and to deal with a process of natural selection that eliminates many (most?) companies that defend the status quo (or at least their status quo) rather than escaping from its appealing but lethal limitations and insufficiencies. In his latest book, Moore suggests that there is some “hidden force” that is working against most companies’ efforts: “the pull of the past, most concretely embodied in [a company's] prior year’s operating plan.”
One especially significant result of that organizational vulnerability is that it precludes exposure to what Moore characterizes as “secular market change.” That is, a “not to be repeated” expansion of the market that occurs whenever a new category or a new class of customers is brought on board. That expansion “stands in contrast to cyclical growth, which refers to the ongoing returns from an established market, one in which the customers and the category remain the same and power shuttles here and there among various vendors and their latest offers. The key point here is, you can make a mistake with cyclical growth and still have plenty of chances to get yourself back in the game. That is not the case, however, with secular change.” Missing out on the opportunities it offers “is a disaster.”
Those who have read one or more of Moore’s previous books already know that he is a visionary pragmatist with exceptional analytical and writing skills. I think that Escape Velocity will prove to be his most important book thus far, given the timing of its appearance during an extended period of economic turbulence and organizational disruption. I agree with him that leaders must ask the right questions (please see Pages 10-11) and then obtain the correct answers to them. In order to free themselves and their organization from – and then remain free of — the “pull of the past,” they must formulate and then execute an escape-velocity strategy. How? Focus on three separate but interdependent initiatives:
1. Innovate sufficiently to achieve competitive separation in the domain of invention.
2. Institutionalize what achieves the separation so it can be scaled and sustain in the domain of deployment.
3. Drive the transition from invention to deployment to a tipping point “such that the world will go forward as newly aligned and not fall back into its old ways.”
Throughout his lively and eloquent narrative, Moore explains how to create, apply, and sustain four types of power and devotes a separate chapter to each: Category (i.e. reengineering portfolio management), Company (i.e. making asymmetrical bets), Market (i.e. capitalizing on markets in transition), Offer (i.e. breaking the ties that bind), and Execution (i.e. engineering the escape). It should be noted that, in the Introduction, Moore duly notes that under certain conditions, an established player’s standard operating procedure (e.g. operational gains from mature markets), “does not result, in and of itself, in bad economic results.” However, a key point, the “players” (be they new or established) do not sink “into a fixed legacy position.” Each adopted one or more of the 13 different models or frameworks that, Moore points out, are “nestled inside one or another level in the Hierarchy of Powers” he thoroughly examines in Chapters 2-6 and then reviews in the final chapter.
In my opinion, this is one of the most important business books published in recent years and its relevance will increase exponentially for years to come. Bravo!
Additional and even more valuable revelations about “the principles that distinguish great organizations from good ones”
For as long as I can remember, Jim Collins has been a research-driven business thinker. In each of his prior books, he and his associates (usually Morten Hansen among them) share what was revealed during many years of research to learn the answer to an especially important question. For Built to Last, it was “Why are some companies able to achieve and sustain success through multiple generations of leaders, across decades and even centuries?”; in Good to Great, “Why do some companies make the leap from good to great… and others don’t?”; then in How the Mighty Fall, “How and why do some once great companies fall and other companies never give in to the same challenges, problems, and setbacks?”; and now in Great by Choice, “Why do some companies thrive in uncertainty, even chaos, and others do not?”
Collins, Hansen, and their colleagues conducted a nine-year study (2002-2011) and share what they learned. Here are the findings that caught my eye:
1. For reasons best revealed within the book’s narrative, in context, some companies and leaders thrive in chaos. Those on whom the book focuses have out-performed their industry’s index by at least 10 times and (key point) under the same extreme conditions with which others in the same industry must also contend.
2. Characterized as “10X” companies, those selected were paired in a “near-perfect match” — for purposes of both comparison and contrast – with companies during “eras of dynastic performance that ended in 2002, not the companies as they are today. It’s entirely possible that by the time you read these words, one or two of the companies on the list [i.e. Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker] has stumbled, falling from greatness.”
3. The research invalidates well-entrenched myths (see Pages 9-10) with regard to the 10X companies and their leaders. For example, “the evidence does not support the premise that 10X companies will necessarily be more innovative than their less successful comparisons [during the same timeframe]; and in some cases, the 10X cases were less innovative.”
4. Leaders of 10X companies display three core behaviors that, in combination, distinguish them from the leaders of less successful comparison companies. They also call to mind the behaviors of Level 5 leadership, examined in detail in Good to Great. Specifically, 10Xers exemplify fanatic discipline (“utterly relentless, monomaniacal, unbending in their focus on their quests”), empirical creativity (reliance on “direct observation, practical experimentation, and direct engagement with tangible evidence”), and productive paranoia (channeling their fear and worry into action, preparing, developing contingency plans, building buffers, and maintaining large margins of safety”).
5. In the Epilogue, Collins and his associates acknowledge their sense that “a dangerous disease” is infecting today’s culture, one that incorrectly suggests that greatness “owes more to circumstance, even luck, than to action and discipline.” Yes, they agree, good or bad luck plays a role for everyone, including 10Xers and Level Fivers. However, they offer an eloquent reassurance that many of us need to hear: “The greatest leaders we’ve studied throughout all our research cared as much about values as victory, as much about purpose as profit. As much about being useful as being successful. Their drive and stamina are ultimately internal, rising from where deep inside.”
Organizations do not make choices, their leaders do, and the fate of each of those organizations depends on the quality of the choices its leaders make, especially amidst uncertainty, chaos, and luck…three realities that even the best leaders can only manage rather than control. That is the challenge but also the opportunity to which the book’s title refers. The single most important difference between the 10X companies that Collins and Hansen discuss and those with which they are compared/contrasted is that those who lead them make better choices as they build and then sustain a culture within which everyone else does.