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 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
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.
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.
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.
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).
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.