1. Greatby ChoiceSummary Group 3 Section 95

2. overview • Thriving in Uncertainty • 10 Xers • 20 mile march • Fire Bullets, Then Cannonballs • Leading above the Death Line • SMaC • Return on Luck • Comparison to Target

3. Thriving in uncertainty • Why do some companies thrive in uncertainty, even chaos, and others do not? • Found 10X cases. These cases had the following characteristics: • 1. The enterprise sustained truly spectacular results for an era of 15+ years relative to the general stock market and relative to its industry. • 2. The enterprise achieved these results in a particularly turbulent environment, full of events that were uncontrollable, fast-moving, uncertain, and potentially harmful. • 3. The enterprise began its rise to greatness from a position of vulnerability, being young and/or small at the start of its 10X journey

4. 10x leadership

5. 10 Xers • 10Xer’s have three core behaviors that distinguish them from the rest: • Fanatic Discipline- 10 Xers display extreme consistency of action– consistency with values, goals, performance standards, and methods. They are utterly relentless, monomaniacal, unbending in their focus on their quests. • Empirical Creativity- When faced with uncertainty, 10Xers do not look primarily to other people, conventional wisdom, authority figures, or peers for direction; they look primarily to empirical evidence. They rely upon direct observation, practical experimentation, and direct engagement with tangible evidence. They make their bold, creative moves from a sound empirical base. • Productive Paranoia- 10Xers maintain hyper vigilance, staying highly attuned to threats and changes in their environment, even when– all’s going well. They assumer conditions will turn against them. They channel their fear and worry into action, preparing, developing contingency plans, building buffers and maintaining large margins of safety.

6. Are you an Amundsen or are you a scott? • In October 1911, two teams set forth for their quest to the South Pole. • Admundsen and Scott achieved two completely different outcomes but in the same circumstances. • The reason for the difference, Admundsen’s outlook… “You don’t wait until you’re in an unexpected storm to discover that you need more strength and endurance” • Admunsen was over prepared for the hardships and therefore when they came along he was able to handle them with grace and productivity.

7. 20 mile march • Criteria for a successful 20 mile march! • Performance Markers • Self-Imposed constraint • Appropriate to the enterprise • Largely within its own control • Achieved with high consistency

8. Southwest airlines • Goal was a profit every year • Remained profitable while airline industry was suffering • Generated profit 30 consecutive years • Slowly Expanded • 8 years: New Orleans • Oklahoma City, Tulsa, Albuquerque, etc. • Quarter Century: Eastern Seaboard

9. Fire bullets, then cannonballs • Bullet- An empirical test aimed at learning what works and that meets three criteria • A bullet is low cost (the size and cost of the bullet grows as the organization grows) • A bullet is low risk (there are minimal consequences if the bullet goes awry) • A bullet is low distraction (it will not pull the organization as a whole off focus)

10. Experience leads to cannonballs • Companies must be innovative and creative • First they must gain the experience and knowledge to know where they should aim • Calibrated cannonballs • Then overnight you are a success because of quite a bit of planning and discipline

11. Leading above the death line • Productive Paranoia is important to leading above the death line • Build Cash reserves and buffers • Bound Risk- Manage time based risks • Zoom out and then zoom in • Preparation is key to 10X companies • You must be prepared before the storm hits • By being prepared 10X companies do not have to abandon their plans of action whenever unexpected rapid change occurs

12. smac • Specified, Methodical, and Consistent model • Recipe for successful operating practices • Also includes practices of what not to do • The more uncertain the market, the stronger your SMaC recipe should be • Good SMaC recipes are in direct correlation with 10X companies being successful • 10X companies must show: • Empirical creativity- to develop and evolve recipe • Fanatic discipline- for adhering to it • Productive Paranoia- for sensing when changes are needed • A minor amendment can be made to the recipe without changing the whole thing • Two ways of changing SMaC recipe • Empirical creativity- fire bullets then cannonballs • Productive Paranoia- zoom out, then zoom in • Knowing when to change is one of the greatest challenges for firms to face

13. Return on luck • Luck itself is not actually a strategy that should be used by companies • However, getting a positive return on good luck is • 3 aspects to a “luck event” for a company • A significant aspect of the event occurs largely independent of the actions of the key actors in the firm, somewhat randomly • The event has the potential to have a strong affect on the firm, in either a good or bad fashion • The event is for the most part, unpredictable and mostly uncontrollable

14. Return on luck • 4 combinations of luck and behavior • Good luck with good behavior • Good luck with bad behavior • Bad luck with good behavior • Bad luck with bad behavior • Example of good luck with good behavior is Bill Gates • Born into a well-off family and during the electronic boom. Used his position and worked hard to eventually create and run Microsoft. • This is High Return on Luck • Luck is not a strategy, but using good luck to get good results and preparing for bad luck is a strategy.

15. epilogue • Focus on what you do and what you’re good at • Keep discipline • Don’t have hopeless resignation that outcome is just about luck • Greatness is a matter of choice, not circumstance

16. Smac recipe & Hedgehog Concept • Q: “Is there a relationship between the SMaC recipe and the Hedgehog Concept from Good to Great?” • Hedgehog Concept: • What are you passionate about • What you can be the best in the world at • What drives your resource or economic engine Hedgehog Concept SMaC Recipe Flywheel Effect

17. Target and the 10Xer’s