Great by Choice

You can find our next post in the Great by Choice series here: Empirical Creativity (Fire Bullets, Then Cannonballs)

One of the first books our employees are given on their first day at SLS is “Great by Choice” by Jim Collins and Morten T. Hansen, which looks at why some companies thrive in uncertainty and chaos, and why others don’t. What draws us to this particular book is its focus on quantifiable data to lead you to the conclusions of what made these companies excel in their industries. There are three main points that we will cover in three blog posts, so that we can hopefully give you some insights that will help you become the great company you’re meant to be. Let us know if we can help you become Great by Choice! We’re more than a commercial lender. We’re your partner in business. Call us at 816.423.8021

For some backstory, the research for this book began in 2002, and continued for nine years. The subjects of the study were seven companies that are referred to as “10xers”, or companies that beat their industry index by at least 10 times, but that is just the baseline. Some companies went above and beyond that benchmark, like Southwest Airlines who performed 63.4 times better than the market as a whole, and 550.4 times better than its own industry! These companies include:

• Amgen (1980-2002)
• Biomet (1977-2002)
• Intel (1968-2002)
• Microsoft (1975-2002)
• Progressive Insurance (1965-2002)
• Southwest Airlines (1967-2002)
• Stryker (1977-2002)

As mentioned previously, there are three main points that cover the three main characteristics these 10xers have including Fanatic Discipline, Empirical Creativity, and Productive Paranoia. Today we will be taking a look at Fanatic Discipline.

Fanatic Discipline

According to “Great by Choice” this is not the same as regimentation, measurement, obedience to authority, adherence to social structure, or compliance with bureaucratic rules. It requires mental independence, and an ability to remain consistent in the face of herd instinct and social pressures. Fanatic discipline often means being a nonconformist. This doesn’t mean going off the rails and implementing a no shoes policy around the office or work site. It just means thinking outside the box, and being consistent about it.

When Progressive Insurance started dealing with large upward and downward swings in their stock price during the late 1990s even though there were no major changes in the company to spur these swings on, Peter Lewis, their CEO, knew he needed to do something about it. The trend was to release quarterly reports and participate in backroom talks with market analysts to shape the conversation around these reports, smoothing out any issues that could look bad on your company.  Peter Lewis chose not to play this game. He began to implement monthly reports so that the market could more accurately represent how the company was doing, good or bad. He kept behavior consistent, and solved a problem.

One of the terms used for the implementation of Fanatic Discipline was the 20 Mile March. When studying the 10xers, it came up time and time again that the recipe for success was patient, steady, clear goals to keep you on track. Erratic, aggressive growth ended up being less successful than steady growth found in companies that kept their goals and growth consistent year-after-year. For example, Southwest Airlines had many opportunities to expand earlier on in its history, but they kept steady growth, and didn’t expand outside their means. People thought they were crazy for continuing to be a regional airline when people were clamoring for them to come to their city. But let’s look at how their ability to stick to a steady growth plan, or 20 Mile March, worked out in the end. The airline industry lost billions of dollars in the early 90s. From 1990 to 2003, the U.S. airline industry only turned a profit in six of those fourteen years. Multiple big-name airlines went bankrupt during Southwest’s march. The kicker? Southwest turned a profit every year for 30 consecutive years. Imagine that.

—

You can find our next post in the Great by Choice series here: Empirical Creativity (Fire Bullets, Then Cannonballs)

To be a great business, you need a plan. Consistency may not have flash, but chasing after quick growth doesn’t land you in the 10x club. We’ve been working with businesses for over 30 years to help them continue to grow. We may be a commercial lender, but we’ve always been about fostering business relationships. Like we said, we’re more than a commercial lender. We’re a business partner. We will continue to look at the three main points found in “Great by Choice” in the future, so stay tuned, but we’re always open to talk about how we can help you achieve your goals. Give us a call!

Brian Soetaert

bsoetaert@slsfinancial.com

816.587.7375