Great by ChoiceChapter 1 ~ Thriving in Uncertainty

Group 2 Members:

Michael Johnson,James Stariha,Mike Mullin,Elizabeth Allen,and Joshua Zamarron

“We simply do not know what the future holds”-Peter L. Bernstein

Cannot predict future, but can create it

Destabilization in last 15 yearsUncertainty neither good nor bad

(gravity) Task remains: how to master our

own fate, even so.

Research Behind Book

9 year research project, began in 2002

When America awoke from false sense of stability

Long-running bull market crashedBudget surplus flipped back to

deficit9/11: America went to war while

global competition did not

Why do some companies thrive in uncertainty, even chaos, and others do not ?

Started from position of vulnerability, rose to be great companies, performance

in unstable environment, big forces cannot control

Control group of companies that failed in the same extreme environment

Contrast to uncover distinguishing factors

Blue Ocean StrategyCirque du Soleil (1984)Strategic analysis pointed to limited

growth in a declining industryTook less than 20 years to achieve

revenues of top circuses (100 years to achieve)

Created uncontested new market space, made the competition irrelevant (created blue ocean) but still became great in instability

What is a 10X company(High Performing Study Cases)

10X companies (Industry Index)$10,000 at end of 1972, worth $6 million

at end of 2002 (32 times better performance)

Southwest Airlines: #1 Money Magazine 63 times better performance Wal-mart, J&J, GEContrasted to PSA is the single contrast

that captures the essence of the research question.

How is this book different? Method similar: comparative

historical analysis Question of greatness is constant Selected not just on performance or

stature, but also on the extremity of the environment (performance plus environment)

Why: 1.future remains unpredictable. 2.insight on companies and leaders in instability (Guide)

Question and Key PointWhy is it important to study

companies and leaders in an extreme unstable environment versus a tranquil environment?

Answer: Because you get a much more clear view of what makes them different and great (story of Guide)

Finding the 10X Cases1. First year- searched for historical cases

meeting three basic tests:

a) Enterprise sustained spectacular results for15+ years.

b) Enterprise achieved results in turbulent environment.

c) Enterprise began its rise to greatness from a position of vulnerability. (young or small)

Company Cuts and Exclusions

Initial list of 20,400 companies

a) 11 layers of cuts that met all tests

b) Want to study performance in extreme environments led to the use of extreme standards.

Final set of 10X Cases10X Case Dynastic Era

of StudyValue of $10,000 Invested

Performance Relative to

Market

Performance Relative to Industry

Amgen 1980-2002 $4.5 million 24.0X the market

77.2X its industry

Biomet 1977-2002 $3.4 million 18.1X the market

11.2X its industry

Intel 1968-2002 $3.9 million 20.7X the market

46.3X its industry

Microsoft 1975-2002 $10.6 million

56.0X the market

118.8X its industry

Progressive

Insurance

1965-2002 $2.7 million 14.6X the market

11.3X its industry

Southwest Airlines

1967-2002 $12.0 million

63.4X the market

550.4X its industry

Stryker 1977-2002 $5.3 million 28.0X the market

10.9X its industry

Our Company: MD AndersonMD Anderson has operated and

has had continued success throughout the same turbulent years as these 10X cases.

For the past 9 out of 11 years, MD Anderson has ranked No. 1 in cancer care in the “Best Hospitals” survey published in U.S. News and World Report.

Key Point!The data studied is historical data

that ended in 2002.

a) One of the companies on the list may have fallen from its place of power

b) However, a great company ceasing to be great does not erase the

historical dynastic era we focus on.

Question and Key Point10X companies experience good

results in what type of environment?

Answer: Turbulent

The Power of Contrast Comparison Set

◦ “What did the great companies share in common?”

◦ “What did the great companies share in common that distinguished them from their direct comparisons?”

Comparisons? 10X Companies outperformed 30 to 1.

Final Study Set of 10X Cases and their ComparisonsAmgen to GenentechBiomet to KirschnerIntel to AMDMicrosoft to Apple (1980’s and

1990’s)Progressive to SafecoSouthwest Airlines to PSA (Pacific

Southwest)Stryker to United States Surgical

Corporation

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Great By Choice vs. FOS/Blue OceanBlue Ocean

◦Blue or Red Ocean?◦Known or Unknown Marketplace?

FOS◦Strategy?◦Objectives?◦Position of Advantage?◦Elements of Success?

Surprised by the DataPerformed a deep historical

analysis of each pair of companies

Goal: construct a clear understanding of how each company evolved from founding through 2002

Systematically analyzed categories of data for each company

Development of ConceptsDid not begin with a theory or

test to proveBuilt a framework from the

ground upPlaced the greatest weight on

evidence from the actual time of the events.

The core of the analysis rested on, “What was different?”

Developed insights and shattered entrenched myths

Sampling of MythsEntrenched Myth: Successful

leaders in a turbulent world are bold, risk seeking visionaries.

Contrary Finding: Leaders observed what worked, figured out why it worked, and built upon proven foundations. They were more disciplined, empirical, and more paranoid.

Sampling of Myths ContinuedEntrenched Myth: Innovation

distinguishes 10X companies in a fast moving, uncertain, and chaotic world.

Contrary Finding: In some cases, 10X companies were less innovative than their comparisons. 10X companies have the ability to scale innovation, to blend creativity with discipline.

Sampling of Myths ContinuedEntrenched Myth: A threat-filled

world favors the speedy; you’re either the quick or the dead.

Contrary Finding: “Fast Decisions” and “Fast Actions” is a good way to get killed. 10X leaders figure out when to go fast, and when not to.

Sampling of Myths ContinuedEntrenched Myth: Radical change

on the outside requires radical change on the inside.

Contrary Finding: 10X cases changed less in reaction to their changing world than the comparison cases.

Sampling of Myths ContinuedEntrenched Myth: Great

enterprises with 10X success have a lot more good luck.

Contrary Finding: 10X cases and their comparisons had generally about the same amount of luck, good and bad. ◦What will you do with the luck that

you get?

Question and Key PointHow were the concepts

supported by this book developed?

Answer: From the ground up. They founded the concepts from the evidence. Not vice versa.

Addition of Previous WorkBuilt to Last

Good to Great

How the Mighty Fall

A New Lens, An Enduring QuestWhat does it take to build a great

company?

Black Box

M.D. Anderson

Going Forward

Question and Key PointWhat is the one question that is

being explored in the text?

Answer: What does it take to build a great company?

Does anyonehave any

questions?