Why do some companies thrive in uncertainty, even chaos, and others do not?
“The only thing that is constant is change.” – Heraclitus
If 2020 could be characterized by a single word, it might be uncertainty.
It could also be unprecedented, chaotic, erratic or unpredictable.
We’ve heard it all. And yes, in a sense, these descriptors are all accurate. But Jim Collins, world-renowned researcher, author and speaker, has this caution to offer leaders: “We will always be in a ‘time of uncertainty.’ It’s not about IF a storm is coming, but WHEN.”
But why do some companies thrive in uncertainty, even chaos, and others do not? Collins addressed this key question yesterday in his Good to Great virtual event through The Growth Faculty. Collins spent nearly 3 hours dissecting concepts from his 30 years of researching over 20,400 companies to highlight the 10 questions a leader must answer with their team to build a Great Company. Now, more than ever, these questions are paramount to an organization’s success and survival.
Question #1: Do we have 90% of the key seats in the bus filled with the right people?
Collins prefaced this question by explaining, “The most important skill leaders must master is the ability to make great people decisions.” This concept of Level 5 Leadership is one Collins draws on throughout the 10 questions, as he highlights, “The essence of great leadership is not the personality. People focus so much on personality, but it has to do with personal humility, indomitable will and ambition for something bigger than yourself.”
Because the Level 5 Leaders in Good to Great shared these core traits, they were able to effectively embrace their individual approaches to managing, in this case, those “key seats.” And this is a crucial element of what made Good companies into Great companies. As Collins said, “If you can’t predict the WHAT, and you can’t, then what’s your ultimate hedge against uncertainty? It’s the WHO.”
“There are two different approaches to this question,” Collins continued, “Do you get there by developing people to get to the key seats, or by acting decisively to replace people in those key seats? They key is, you have to get to the 90%. Be RIGOROUS, but not RUTHLESS.”
Question #2: What are the brutal facts and how do you live both sides of the Stockdale Paradox?
In Good to Great, Collins developed the concept of the Stockdale Paradox after speaking with Admiral Jim Stockdale, a high ranking U.S. military officer who was captured and held prisoner in the Hanoi Hilton from 1968 to 1974. Despite the seven years of repeated torture, imprisonment and uncertainty, Stockdale shared that, “I never ever wavered in my absolute faith that not only would I prevail—get out of this—but I would also prevail by turning it into the defining event of my life that would make me a stronger and better person.”
In his conversation with Stockdale, Collins asked, “Who didn’t make it out?” Stockdale responded, “Oh it’s easy, I can tell you who didn’t make it out. It was the optimists… They were the ones who always said, ‘We’re going to be out by Christmas.’ Christmas would come and it would go. And there would be another Christmas. And they died of a broken heart.”
“You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
Collins advised leaders to take this concept of Brutal Facts and apply it to their business, particularly in times of uncertainty, saying, “Once we have the right people, we must confront the Brutal Facts. If we don’t confront the Brutal Facts, they will surely confront us. The Stockdale Paradox is the Genius of the AND. You must have unwavering faith AND confront the brutal facts.”
Question #3: How is your hedgehog changing and evolving in this time of uncertainty?
The Hedgehog concept is the intersection of 3 Circles: What are you deeply passionate about? What drives your economic engine? What can you be the best in the world at?
This concept, shared in an essay by Isaiah Berlin and based on an ancient Greek parable, explores the concept: “The fox knows many things but the hedgehog knows one big thing.”
Collins shared, “Those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature to drive toward what we came to call a Hedgehog Concept for their companies. Those who led the comparison companies tended to be foxes, never gaining the clarifying advantage of a Hedgehog Concept, being instead scattered, diffused and inconsistent.”
As you go through this time of change, what are you learning about how your hedgehog is changing in response?”
Question #4: How, if at all, should we change our flywheel?
The flywheel, outlined in both Good to Great and Turning the Flywheel, illustrates the idea of your business in motion. A series of actions, rotating forward in increasing momentum that compounds upon itself. Collins clarified, “There is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.”
So how should you adapt your flywheel to changing circumstances? First, Collins recommends assessing whether changes need to be made at all. “A flywheel is not,” he shared, “A set of action steps drawn as a circle. A flywheel has an inevitable, logical set of actions. Once you get the logical momentum of your flywheel you can compound and create changes as needed. Does the same flywheel apply in all circumstances? You can’t answer the question unless you first know what your flywheel is. Then you can understand how, if at all, you should change it.
When you do your flywheel right, there’s a right side and a left side of the flywheel. The 12-6 side of the flywheel is about what you do, how you contribute and how you serve people. The 6-12 side of the flywheel is all about how that process generates resources or economy that can feed back into the flywheel. The point of the flywheel is not about coming down one side and generating money to siphon off and make one person rich. It’s about taking those proceeds as fuel for the other side of the flywheel to increase momentum, and you have to stay with your flywheel long enough to generate that momentum.
You must both sustain momentum AND evolve or change your flywheel when the world around us changes.”
Question #5: What bullets and cannonballs should we fire?
Collins offers this metaphor for effective innovation: Fire Bullets, Then Cannonballs. Before expending resources, especially in a environment like the one we are in now, it’s important to calibrate your trajectory and ensure success, reducing risk for your company.
Collins shared this insight, “Those companies who don’t do well in chaos and uncertainty make the following mistakes:
- They don’t fire enough bullets.
- They fail to follow-through and fire the cannonball.
- They are scared or undisciplined and fire big, uncalibrated cannonballs.”
This is a time to be really disciplined about bullets and cannonballs.”
Read Part 2: 10 Questions You Must Answer to Thrive in Uncertainty with Jim Collins on Monday, July 27th. Subscribe Now.