Busting Leadership Myths
And the role of luck in long-term success
By Charles Waldo
I was roaming the stacks of my local library, looking for HCBM article ideas. A name on the covers of a couple of books on display got my attention….Jim Collins. I’ll bet you’ve at least heard of him.
A prolific leadership and management researcher, author, consultant, and teacher, Collins has written seven books over the span of twenty years, each trying to shed more light on the leadership principles that have brought organizations above average success. GOOD TO GREAT sold over six million copies. I had enjoyed reading several of his books but had not read one that caught my eye: GREAT BY CHOICE: UNCERTAINTY, CHAOS, AND LUCK. WHY SOME THRIVE DESPITE THEM ALL. I was especially drawn by the word “Luck” in the title. I skimmed the book, liked it, checked it out, and spent many hours going through it, with this article the result. I hope it will give you some useful ideas for handling Luck (good and bad) when they arrive at your business or job.
It took Collins and his research team over nine years to dig out the data, analyze them, draw conclusions, make recommendations for action, and write the book. Here is how they did it and what they found, with special emphasis (mine) on the “Luck Factor.”
Teasing out the 10Xrs
The research team analyzed the 1972 - 2002 financial data for thousands of large and mid-cap U.S. corporations, looking for those relatively few they labeled “10Xrs”: firms that had consistently surpassed the financial performances of their key rivals during the 30 year study period and did so consistently by at least a factor of ten. In fact, the study found that, at the end of the study period, 10Xrs, on average, beat their competitors by a factor of 35X!
After combing through the financials the research team eventually found seven firms which met the study criteria AND had several direct competitors during the study period from which to make comparisons. The seven 10X firms investigated were: Intel, Amgen, Microsoft, Biomet (now part of Zimmer Holdings), Stryker, Southwest Airlines, and Progressive Insurance. Each is still very much in business.
The research methodology was extensive and rigorous but too complex for a short piece like this. It is fully explained in the book.
Some myths exploded
As they sifted through the data and tried to determine what separated the 10Xrs from their less successful competitors, they found to their surprise many “myths” of leadership and strategy that simply were not valid. Here are a few samples.
Myth 1 – Successful leaders in a turbulent world are bold, risk-taking visionaries.
Contrary finding --The best leaders studied did not have a visionary ability to predict the future. The observed what actually worked, figured out why it worked, and built upon proven foundations. They were not more risk-taking but were more disciplined, more empirical, and more “paranoid.”
Myth 2 – Innovation distinguishes 10X companies in a fast moving, uncertain and chaotic world.
Contrary finding -- Yes, the 10X companies innovated…a lot. But they were NOT any more innovative than their less successful competitors. In some cases they were less innovative. Innovation by itself is not the key; more important is the ability to scale innovation, to blend creativity with discipline.
Myth 3--- Radical change on the outside requires radical change on the inside.
Contrary finding – The 10Xrs changed less in reaction to their changing world than their competitors.
Myth 4 – Great companies with 10X success have a lot more luck.
Contrary finding – Not true. Both types of companies had similar amounts of luck – both good and bad. It was how the 10Xrs handled their luck – good or bad – that made the difference.
Summary -- Compared to their competitors, 10Xrs are not more creative; are not more visionary; their leaders are not more charismatic; they are not more ambitious; they are not blessed with more good luck or less bad luck; they are not more risk taking; and are not more prone to take big, bold moves. Get the book to get “inside” the 10Xrs.
“Luck” and the 10Xrs
Collins defined a “luck event” as one that (1) some significant aspect of the event occurs largely or entirely independent of the actions of the key actors in the enterprise, (2) the event has a potentially significant consequence (good or bad), and (3) the event has some element of unpredictability.
- A) All organizations have Bad Luck from time to time. Both the 10Xrs and their competitors had about the same number and magnitude of significant good and bad luck events. 10Xrs were NOT luckier than their competitors.
- B) A good luck event, even a major one, does not assure success over the long run.
- C) One bad luck event usually did not sink a company, if handled correctly.
- D) But a significant bad luck event coupled with very bad handling, could severely cripple or sink the company.
- E) Resilience is the key to handling a bad luck event and gratitude should be extended for good luck events. They NEVER take good luck for granted or assume it will be repeated.
- F) 10Xrs never relax, even when Good Luck lights on their shoulders. The pressure to take advantage of Good Fortune is always there.
- G) In the end, it’s great leaders and great people – or lack thereof – who make the difference in how Luck is handled. Good Luck seems to more often visit people who are fanatics about what they do and how they do it. People who are creative and are willing to take calculated risks. People who are energetic and purposeful, with high performance drive. People who you would go into battle with.