Great by Choice (Jim Collins and Morten T. Hansen): Chapter 04: Fire Bullets, Then Cannonballs

In this chapter, Jim and his co-authors remind us that it wasn't Southwest Airlines who invented the quirky, humorous airline model - it was Pacific Southwest Airlines. And yet, somehow Pacific Southwest doesn't exist as an Independent airline anymore. How does that happen?

They say that Southwest Airlines is a perfect replica of Pacific Southwest Airlines. How did this happen? Because at one stage, airlines were heavily regulated. PSA operated in California, while Southwest Airlines operated in Texas. There was no competition. And so PSA had no second thoughts about giving Southwest Airlines their exact playbook.

And Southwest Airlines was happy to copy every single detail. Little did they know that the regulation era was at its tail end.

And this helps the authors make their case that innovation is hardly a key factor in the success of the 10X companies. 

Southwest Airlines did not invent the model which made them so successful. 

They found a similar pattern in the pharma industry. Genentech was more innovative than Amgen, yet they are now out of business, while Amgen continues to thrive.

They quote John Brown, Stryker CEO, who said, "It's best to be one fad behind, never first to market, but never last"

Additionally, they quote a study by Gerard J. Tellis Peter N. Golder in their book, Will and Vision, who found that only 9% of pioneers end up as winners in a market. 

Bear in mind, they're not saying innovation is bad. They're not saying don't innovate at all. They're saying innovation is not the trump card we'd like to believe it is. Both the 10X companies and the comparison companies innovated. Yet, 10X companies, the winners, innovated less. 

Rather than innovation, you're better off relying on your ability to deliver constant quality. At least that was Intel's formula for success, after which they coined the slogan, Intel Delivers. Discipline. 20 Mile Marching in combination with creativity is the formula for a company's success. It's not this or that. It's this and that.

In the language of the authors, it's not innovate or die. Rather it's fire bullets, then fire cannonballs. 

What exactly does this mean? 

If you bet big on the wrong innovation, or if you failed to execute on the right innovation, you'll be exposed to calamity. On the other hand, if you just sit still and never do anything new, the world will pass you by and you'll die from that instead. 

Test. Iterate. When you find something that works, go hard on that. 

A direct quote from the book reads as follows: "First you fire bullets to figure out what'll work. Then once you have empirical evidence based on the bullets, you concentrate your resources and fire a cannonball. After the cannonball hits, you keep 20 Mile Marching to make the most of your big success." 

1. A bullet is low cost

2. A bullet is low risk - minimal consequences if it fails.

3. A bullet is low distraction. 

The trick is to only fire Cannonballs once you have a successful bullet. If the bullet fails to produce the desired result, move on to something else. The challenge is to balance creativity with discipline. Keep in mind that balance doesn't necessarily mean 50/50. Find what works and going to that direction. 

To illustrate this point, they tell the story of PSA, who pioneered a Fly-drive-sleep Cannonball which failed badly. They reasoned that people flying from out of town would need a rented car to drive, and hotel accommodation to sleep. And sonthey proceeded to buy rental car companies and hotels close together airport. This poor execution backfired. A better execution plan would have been to enter into partnership with rental car companies and hotels to determine if the idea had merit. Or maybe test out the concept in one city before rolling it out nationwide. But they didn’t. They went almost out. Spent money they didn't have. Borrowed tremendous loads of money. Failed to pay back their loans. And eventually went under. 

Keep your powder dry, as Jordan Belfort would say. Take calculated risks. Don't gamble it alm on one throw of the dice. Fire Bullets, Then Cannonballs. Test before you commit. 

Here's a plot twist for you. The authors warn that an untested big bet that just happens to succeed is more dangerous than an untested Cannonball that fails. Why? Because it reinforces bad processes.  

They say, "Good process doesn't guarantee good outcomes, and bad process doesn't guarantee bad outcomes. But good outcomes with bad process - firing uncalibrated cannonballs that just happen to succeed - reinforces bad process and can lead to firing more uncalibrated cannonballs. 

Don't just rely on your analytic capabilities. Back up your analytics with empirical validation. 

Better yet, "You don't need to be the one firing to fire all the bullets. You can learn from the empirical experience of others."

If you learn one thing from reading this article it's this, and this is a direct quote from the book, "More important than being first or the most creative is figuring out what works in practice, doing it better than anyone else, and then making the very most of it with a 20 Mile March."

You can never predict with absolute certainty. Always hedge your bets. Always ask what if? Always test. Never assume you know. 

The authors remind us that at some point we do have to fire cannonballs. If you only keep firing bullets, you'll never do anything great. "The idea is not to choose between bullets or cannonballs, but to fire bullets first, then cannonballs."  

Next, don't rush to create the next big thing. First make the most of the big thing you already have. 

The authors show us how Steve Jobs got Apple back on track by following this very same principle. 

"Greatness," the authors conclude, "requires having the reserves to endure staggering defeats, bad luck, calamity, chaos, and disruption."

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