Have
you read Great by Choice, by Jim
Collins and Morten T. Hansen? The
book describes nine years of research done to try and identify why some
companies thrive in uncertainty and others do not. As
I read the book, I realized that with the fast pace of change in technology,
the question is relevant not just to companies, but to their IT projects as
well.
The study
The
authors studied the stock market for the period 1972 to 2002, and selected several
companies who met three criteria: (a) stock price beat their industry index by
ten times (10X); (b) the environment in which the company operated over that
period was turbulent; and (c) the company was fairly small (and therefore
vulnerable) at the beginning of the period.
These companies and their leaders were called 10Xers.
Then
for each 10X company, they selected a comparison company in the same industry.
The majority of the work was to research what was different between the 10X
companies and the comparison companies to find out what could have been the
cause of the 10Xer’s success.
The
results of their research surprised them. Great creativity and risk taking
turned out not to be key factors to success in the long run. Instead, the 10X
companies and their leaders managed risk very well, and had three key behaviors:
(a) Fanatic discipline; (b) empirical creativity; and (c) productive paranoia
Antarctica
The
authors use the race for the South Pole in 1911 by Roald Amundsen and Robert
Falcon Scott to illustrate some of the book’s findings. They liken the approach
of Amundson’s successful expedition to the10X company leaders, while the
comparison company leaders lean more toward the habits of Scott, whose team perished
before completing the trek.
It’s
an interesting step back in time and also illustrates very well not only the
concepts of the study but also the relationship between risk management,
success, and failure.
Fanatic discipline
In
turbulent times, the companies that outperformed their industries had
consistent goals and performance. Instead of pursuing massive high-growth
strategies, they pushed for consistent returns every year, no matter how
difficult it was to achieve. In addition, even during boom times in their
industry, they held back from wild growth strategies despite pressure to do so.
Achieving
consistent performance no matter what is happening in the marketplace requires
concrete, clear, intelligent, and rigorously pursued performance mechanisms to
keep on track. Fanatic
discipline is not about bureaucracy, but about the ability to remain clear
about goals and find ways to deliver consistent performance. It also requires
the ability to be a non-conformist and avoid the herd instinct of the
marketplace.
Empirical creativity
The
most successful companies tested new concepts on a small scale and determined
what worked and what didn’t work before launching significant new lines of
business, markets and technologies.
These
trials allowed the 10X companies to spend a lot of time and money on big
launches only once they had tried the concept on a smaller scale and determined
how to be successful. Alternatively, they sometimes learned that the concept
didn’t work for them and avoided spending a great deal of money and resources
to learn that.
Although
innovation is necessary, the authors were surprised to find that the most
innovative were not the most successful companies. Instead, a threshold level
of innovation is required to compete in the industry, and beyond that the
amount of innovation doesn’t matter very much. Instead,
it matters more that innovation is paired with the ability to scale the
innovation and deliver on commitments to customers.
Productive paranoia
Leaders
of 10X companies prepared for the unknown and managed risks well. They concerned themselves with what could go wrong
and created buffers to deal with those known and also with unknown risks.
The
leaders of the 10X companies avoided taking actions that had huge downside
potential. In addition, they had the ability to look beyond daily operations to
see the big picture and identify the biggest risks to their companies.
IT project risk
This
book is based on research into US corporations and makes interesting references
to the South Pole expeditions of 1911.
However, as I read it, I thought very often of IT projects I’ve been on,
and how the lessons could be applied. Many
projects fail to achieve their objectives (or even fail to complete) due to
lack of discipline, trying to deliver untested concepts, or poor risk
management. Examples
include projects without clear objectives, sponsorship, scope, or requirements
(lack of discipline). Also, there are projects attempting to launch big
technological or business changes without pilots (lack of empirical
information). Probably anyone reading
this can think of cases where big risks (new software, new hardware, new
vendor) were taken, but the risks were either unrecognized or unmanaged (lack
of productive paranoia).
Summary
The
authors of the book Great by Choice
have based their book on research into US companies that outperformed their
industry competitors over a thirty-year span by at least ten times. They
identify three key characteristics of 10X companies and leaders that have been
key to their success: (a) fanatic discipline; (b) empirical creativity; and (c)
productive paranoia.
They
make no claim at all of the book’s relevance to IT projects. However, as I read
the book, I thought the parallels were easy to see and recommend the book to
those who are interested in managing the risk of IT projects.
Copyright
2015 Debbie Gallagher
