Jim Collins on Creative Discipline, Paranoia and Other Marks of a Great Leader
Why do some businesses thrive during times of adversity while others die? According to renowned management thinker Jim Collins, the factors of a company's success can be distilled down to the three core traits of a great leader.
In his book, Great by Choice (HarperBusiness, 2011) Collins and co-author Morten T. Hansen studied four companies that rose to greatness in difficult environments against a carefully selected set of comparison companies that failed in similarly extreme environments.
Collins shared those findings, and the result of the nine years of research on how to build a successful business in uncertain times with an audience of over a thousand business leaders at New York's World Business Forum on Tuesday.
The key differentiator has nothing to do with a leader's personality. "The x-factor of great leadership is not personality, it's humility," Collins said. When humility is combined with ambition, he said, it can be channeled into a cause that is bigger and more important than the individual.
Here are the three core behaviors that Collins observed in leaders of the companies the successfully weathered difficult times.
1. Fanatic discipline. Successful leaders continue on at the same pace no matter what the conditions. They set a goal in any area (sales, innovation, growth), and meet that goal every year for at least 25 years without exception. This is a method that Collins referred to as the 20-mile mark, referencing a story of an early Arctic explorer who traveled 20-miles every day no matter how harsh the weather conditions.
Related: Inside the Successful Leader's Mindset
In other words, don't wait for conditions to improve and plan to make up the loss later. Commit to achieving the same consistent results no matter what. "We see tremendous consistency in any truly great enterprise and the signature of mediocrity is chronic inconsistency," Collins said.
2. Empirical creativity. Discipline alone is not enough to be successful, but neither is creativity. Collins argued that creativity is natural -- we are all creative thinkers as children -- but discipline must be learned and practiced. Empirical creativity is a blend of creativity and discipline. It wasn't that the successful companies that he studied were more innovative, their success was largely due to the way that they were innovative.
For example, in the biotech companies that he studied, the more successful company beat the comparison company by 30 to 1 in financial returns despite being less innovative (as judged by the number of patents issued). He asserted that pioneer innovation is great for society, but not always great for business. The goal, he said, isn't to stop innovating, it's to do it in a more disciplined manner and to test your innovations, or as he quoted the billionaire owner of medical-supply company Stryker Corp., John Stryker: "We strive to be one fad behind."
3. Productive paranoia. Collins categorized successful leaders as "paranoid, neurotic freaks." They are always preparing for when, not if, the next big disruption is going to happen. They may be preparing for the worst -- one company he studied prided itself on predicting the majority the recessions in the past several decades -- but their pessimism pays off.
The successful companies he studied held three to 10 times more cash assets than average, and they did so from the time they started. In other words, Collins said, "how you perform in bad times depends on how you prepare in good times."
Related: How to Become a Better Leader
Kathleen Davis is the former associate editor at Entrepreneur.com.