Last week, Jim Collins, an author who has sold more than 10 million book copies worldwide, was a featured guest on the radio show “Performance Excellence USA." Co-hosts Julia Gabaldon, president/CEO of Quality New Mexico, and Steve Keene, partner in charge, Moss Adams LLC, and chair-elect for Quality New Mexico, asked Collins how his findings have changed over time, about the importance of discipline and agility, and how great leaders make decisions in chaotic times. They also explored Collins's take on how the Baldrige Excellence Framework is a "SMAC" recipe: a specific, methodical, and consistent leadership approach.
Following are highlights of the conversation:
Going back to your book Good to Great, what would be different today about your findings and conclusions?
Twenty-five years ago, I asked what separates a great enterprise from a mediocre one, and the principles then have not changed much today. What makes a great enterprise tick are the enduring principles of the hedgehog concept, level-5 leadership, first getting the right people on the bus, a culture of discipline, confrontation of the brutal facts, and the building of momentum. What I feel really, deeply passionate about is the idea that in a world of tremendous change, we really need some principles that we can build upon.
Discipline is a common theme in your research. You have been quoted as saying, “I see the Baldrige process as a powerful set of mechanisms for disciplined people engaged in disciplined thought and taking disciplined action to create great organizations that produce exceptional results.” Can you elaborate on that?
The blend of being able to put creativity and discipline together really distinguishes any kind of outstanding enterprise. Think of it as you have disciplined people who engage in disciplined thought and take disciplined action. When you stand back and examine how somebody really begins to build momentum, that’s what they’re doing. The interesting thing about building a culture of discipline is the idea that in the end almost fanatic levels of discipline—but not rigidity—doing the things that produce the best results with great rigor—separate excellent-from-mediocre enterprises.
If I do something a little bit better consistently over a very long period of time, it compounds to a gigantic result, like pushing a fly wheel. You start pushing in an intelligent and consistent direction, and after a lot of effort, you finally get a big, giant, creaky turn, but the discipline then comes. You build more and more momentum, and then you get this great, powerful, cumulative effect of the fly wheel, but to say, "Oh that’s too hard, we need a new fly wheel," that’s a lack of discipline. The real discipline comes in the compounding effect.
One of the things that always struck me about the Baldrige process is it’s a way of institutionalizing a culture of discipline. It’s entirely the antithesis of what’s dysfunctional with disciplinarians: geniuses with a thousand helpers who personally discipline people. We’re talking about making an entire cultural ethos where everyone is engaged in a systematic, methodical, consistent approach to making things work better day upon day, week upon week, year upon year, over a long period of time.
You have written, “Scale innovation to blend creativity with discipline.” Tell us more.
We wanted to research the role that innovation plays in helping enterprises and companies become big winners in environments that are full of chaos and change. Innovation is definitely important, but it’s kind of a threshold item. What we really found that is more important is the ability to scale innovation based upon an empirical assessment of what works, or what we call fire bullets and fire cannon balls. Essentially think of it as you have a ship bearing down on you. One approach would be to take all of your gun powder, put it in a big cannon ball, and fire it at the attacking ship, hoping it hits, but then it misses. You're out of gun powder and in trouble. But you could take a different approach, which is to put a little bit of gun powder into a bullet, and fire it at that ship. It misses, but it takes the right direction, so you take another little bit of gun powder and fire closer. Now you hit the side of the ship. You know that if you put all of your resources into the next cannon ball, it’s going to hit because you calibrated it; you have empirical validation. What we found is that the companies that don’t do well either don’t fire enough bullets to discover what will work to hedge against uncertainty, fire big uncalibrated cannon balls that splash in the ocean and leave them exposed, or fail to convert an empirically validated bullet into a big giant cannon ball. When you take a small innovation that worked and scale it into something really big, that is what distinguishes the really great success stories.
In chaotic times, what turns the odds in a leader's favor?
A triad of behaviors are used by great business leaders: fanatic discipline, empirical creativity, and productive paranoia.
Fanatic discipline is the notion of a leader taking a 20-mile march, whether conditions are good or bad, as long as progress is being made. This leader exhibits self-control in a world that is out of control, and therefore he/she will be the master of his/her own results. The great irony is the more the world is out of control, the more you need to be within self-control.
Empirical creativity is betting on something innovative but making sure that it is empirically validated so you don’t leave yourself exposed if it doesn’t work.
Productive paranoia is about learning from mistakes but understanding that the only mistakes you can learn from are the ones you survive. What we found is that as the world becomes more chaotic and uncertain, you can find yourself exposed. The leaders who do very well in these environments, particularly entrepreneurial leaders, have what we call productive paranoia. If you’re a productive paranoid, you say I feel very fortunate that my glass is full—not half full—but I’m aware that it could change at any moment, so I better be prepared. These leaders carry three-to-ten times the normal amount of cash to assets—just in case things go bad. This means always staying away from the risks that could kill you when you're going to go do great, big, dangerous, creative, adventurous things; you're going to do those things but in a way that you are guaranteed to survive the bad luck events along the way that could knock you out of the game.
When you put these three habits together, you get the kind of leadership behaviors that distinguish people that do exceptionally well in chaotic environments.
What is your advice on handling large amounts of change and the speed of that change?
Leaders should get a recipe that works, and once you have a recipe that works, you don’t want to throw that recipe out every two years; you want to evolve that recipe. This is analogous to the U.S. Constitution. You wouldn’t have wanted the founders to have written a constitution that needs to be thrown out and rewritten every 10 years. The whole idea is that you need to have very disciplined evolution of your constitution, and that’s where the founders came up with the amendment mechanism. We have found that the great company builders thought the same way: I'm going to build a culture on a set of values that work, but I have to allow them to evolve, and I’m going to do that through a disciplined evolution rather than just a reaction to the current fads.
A "SMAC" recipe is specific, methodical, and consistent just like the Baldrige process.
Regarding the speed of decision making, we asked whether the people who decide faster and act faster always win, and the answer is no. There is that old saying that you are either the quick or the dead, but sometimes, the quick are the dead. The question is not fast or slow. The question is how much time do you have before your risk profile changes. If I’m sitting on the side of a hill and there is a forest fire, I better move fast because my risk profile is changing by the minute. Or let’s suppose you have a slow-developing disease where there may be a lot of different kinds of treatments to consider. First thing you might ask is, "How much time do I have until my risk profile changes?" Take that time to go through a very disciplined analysis to determine what would be the best course of treatment.
Approaches, like the Baldrige framework, help organizations get better, and the concept of agility is paramount. Can you elaborate on the importance of agility?
One thing that we know for certain is that the signature of mediocrity is not an unwillingness to change. Now if you don’t change, don’t have an ability to have an agile response to the changes in your world, you will become irrelevant. But the true signature of mediocrity is chronic inconsistency. It’s when you have no sense of a recipe, no sense of a disciplined adherence to an approach that you then apply with great imagination.
There are two sides of a coin: on the one side is the fanatic discipline to really, really follow a recipe. A successful coach may evolve a winning program by improving based on the people involved and being very agile. The flip side of the coin involves luck. What we found through research is that luck doesn’t make great winners by itself, but what does contribute mightily is getting a high return on luck. When an unexpected luck event happens, your ability to recognize it, zoom out, make an adjustment, and then zoom back in and aggressively implement it, is how you get a higher return on luck. The question isn’t whether we’re going to get luck in life, it’s what you do with the luck. That incredible attention to a SMAC recipe with an ability to adjust and get a high return on unexpected luck; that combination is what separates those who end up being ten times better than others.
Listen to the entire 40-minute conversation with Collins from the radio show Performance Excellence USA: