Note: This is the second article in a two-part series. In the first article, "With Creative and Paranoid Leaders, Great Companies Thrive in Chaotic Times," Collins notes that leaders of great companies exhibit fanatic discipline, productive paranoia and empirical creativity. In his new book, "Great by Choice," co-written with Morten Hansen, Jim Collins finds that chaos and uncertainty may be nerve-wracking but they don't spell doom for companies. In fact, he says, some companies achieve extraordinary results in such conditions.
To show how, Collins and Hansen contrasted the performance of seven 10X companies (those exceeding the financial performance of their peers by a factor of 10 for 15 years) with seven competitors that did not do as well. They picked companies that were young or small and rose to have great results despite operating in environments subject to rapid shifts that were potentially harmful.
The 10X companies profiled in the book are Stryker, Southwest Airlines, Progressive Insurance, Intel, Microsoft, Amgen and Biomet.
IW:
Innovation is a topic at every corporate meeting. You found that great companies are innovative but not the most innovative. Can you explain?
Collins: They do innovate. It is very important to underscore that innovation is important. I wouldn't want our work to be misinterpreted as it isn't. It is.
However, what we found is that innovation alone or above a certain threshold will not (a) guarantee you become a great company or (b) necessarily keep you alive. Any given industry has a threshold level of innovation. You need to be at the threshold of your industry, be innovative enough to be a contender.
Innovative enough is very different from the most innovative. In the case of airlines, that is a relatively low threshold. In the case of biotechnology, it is a very high innovation threshold. To be innovative enough to be a biotech company means a very high level of innovation. However, the most innovative biotech company isn't necessarily the 10X company. In our case, the comparison company [Genentech] was more innovative than the 10X winner [Amgen].
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