This is a review I posted on GoodReads earlier this summer.

Collins and Hansen contend that great companies aren’t great because of lucky breaks but rather by choice, particularly disciplined choices. Their research looked at 7 pairs of companies in environments of great change. In each pair, one performed at 10X the average return on the stock market while others simply tracked with the overall market. Here’s what they found distinguished the 10X performers:

1. They were committed to the 20 mile march in good times and bad. They didn’t overreach when things were going well, nor retreat when conditions were bad. They had consistent growth targets and consistently met them.

2. They “fired bullets, then cannonballs.” Generally companies in both groups innovated. What distinguished the 10X companies was that they first made low cost experiments with innovations (bullets) and used empirical data to discern which of these to invest heavily in (calibrated cannonballs). Less successful companies fired more “uncalibrated cannonballs”.

3. Good company leaders led “above the death line”. They took fewer decisions that involved “death line risk” (where adverse results could spell the end of the company) and also took fewer decisions involving asymmetric or uncontrollable risk. They maintained higher cash reserves and lower debt to equity ratios than comparable companies.

4. They had clearly articulated SMaC practices (Specific, Measureable, and Consistent) that they relentlessly implemented and changed less frequently.

5. In change situations they were better able to go fast when they had to while going slow when they could. Decisions were more deliberate and characterized by the ability to Zoom Out/Zoom In.

Most of all, the authors research looked at “luck events” good and bad, and found them equally distributed between 10X and mediocre companies. the 10X companies were generally not any luckier, rather, because of the above practices, they were better position to reap a good “return on luck.” While the above practices offer no quarantees, the authors argue that companies and their leaders do have significant choices they can make to influence their destinies–they are not helpless victims of forces bigger than them.

I thought this was a great read. The research is laced with stories from the companies as well as a really interesting comparison of the Amundsen and Scott expeditions to the south pole. Amundsen made it first and his whole team survived. Scott came in second and no one made it back. The differences are fascinating and illustrate many of the practices in the book.