Great by Choice

Great by Choice Plot Summary

Introduction

Imagine standing at the edge of a vast, uncharted wilderness with nothing but a compass and your wits to guide you. This is the perfect metaphor for how successful organizations navigate through turbulent times. In a world of constant disruption and uncertainty, some companies not only survive but thrive, outperforming their competitors by factors of 10 or more. What separates these exceptional performers from the rest isn't what most people assume - it's not about being the most innovative, risk-taking, or visionary. Instead, it's about a paradoxical blend of discipline and creativity, consistency and adaptation. This book challenges conventional wisdom about success in chaotic environments by examining companies that achieved extraordinary results during the most turbulent periods. Through meticulous research spanning decades, we discover that greatness comes not from predicting the future or reacting to change, but from building organizations capable of thriving amid uncertainty. The insights apply far beyond business - they offer valuable lessons for anyone facing unpredictable challenges, from educators and healthcare professionals to government leaders and entrepreneurs. By understanding how disciplined innovation works in practice, readers will gain practical frameworks for making better strategic choices in their own uncertain environments.

Chapter 1: The Paradox of Success: Discipline Over Disruption (1970s-2000s)

The period from the 1970s through the early 2000s represented one of the most turbulent eras in modern business history. Companies faced oil shocks, stagflation, technological disruption, regulatory upheaval, and globalization - all creating an environment where survival, let alone success, seemed increasingly difficult. Yet amid this chaos, certain companies didn't merely survive; they thrived, outperforming their industry indexes by at least 10 times over sustained periods. These weren't just successful companies; they were extraordinary performers in extraordinarily turbulent environments. Southwest Airlines exemplifies this phenomenon. If you had invested $10,000 in Southwest on December 31, 1972, when it was just a tiny outfit with three planes serving three Texas cities, your investment would have grown to nearly $12 million by 2002 - a return 63 times better than the general stock market. This performance exceeded even celebrated companies like Walmart, Intel, and Disney. Similarly, biotech company Amgen delivered returns more than 24,000 percent above the market from its founding through 2002, despite operating in the notoriously volatile biotechnology sector. What distinguished these "10X companies" wasn't what conventional wisdom might suggest. They weren't necessarily more innovative, visionary, or risk-taking than their less successful counterparts. Southwest Airlines didn't pioneer the low-cost airline model; it copied Pacific Southwest Airlines. Amgen wasn't the most innovative biotech company; Genentech created twice as many patents. Instead, these companies displayed a paradoxical blend of behaviors: fanatic discipline, empirical creativity, and productive paranoia, all animated by a deep sense of purpose beyond just making money. The research revealed that successful leaders in turbulent environments weren't the bold, risk-seeking visionaries celebrated in business mythology. Intel's Andy Grove, Microsoft's Bill Gates, and Progressive Insurance's Peter Lewis were intensely disciplined, methodical, and even conservative in many aspects of their approach. They maintained unwavering consistency in their core values and methods while carefully validating new ideas before making major commitments. They built substantial buffers against unexpected shocks and remained hypervigilant even during good times. As Bill Gates famously said, "If I really believed this stuff about our invincibility, I suppose I would take more vacations." This paradoxical combination of discipline and innovation proved especially valuable during industry disruptions. When healthcare reform created uncertainty in the medical device industry in the early 1990s, Stryker maintained its disciplined approach of growing net income by 20 percent every year, while its comparison company USSC pursued aggressive growth and eventually collapsed. When the airline industry faced deregulation, Southwest stuck to its proven operating model while PSA abandoned its formula to become more like major carriers, ultimately disappearing in a merger. The pattern repeated across industries: disciplined innovators outperformed reactive revolutionaries. The implications extend far beyond business. In any turbulent environment - whether education systems facing technological change, healthcare organizations navigating reform, or governments addressing global challenges - success comes not from predicting the unpredictable or constantly reinventing oneself, but from building organizations capable of thriving in uncertainty through disciplined people, thought, and action. The greatest leaders create pockets of order amid chaos, not by controlling external circumstances but by controlling how they respond to those circumstances.

Chapter 2: The 20 Mile March: Consistency Amid Chaos (1977-1998)

In 1977, when John Brown became CEO of medical device company Stryker, he established what would become known as "the law" - Stryker would achieve 20 percent net income growth every year. This wasn't merely a target or hope; it was a non-negotiable performance benchmark that became ingrained in the company's culture. Brown created the "Snorkel Award" for those who fell behind, and at company meetings, those who hit their 20 Mile March sat at the CEO's breakfast table while others ate elsewhere. From 1977 through 1998, Stryker hit this goal more than 90 percent of the time. What makes this remarkable is that Brown maintained this discipline even when Wall Street criticized him for not growing faster during boom times. Meanwhile, Stryker's comparison company, United States Surgical Corporation (USSC), pursued aggressive growth, betting on new surgical technologies and pushing inventories onto hospitals. When healthcare reform created uncertainty in the early 1990s, USSC faltered. By 1998, it no longer existed as an independent company, while Stryker continued its steady march upward. This pattern of consistent performance amid industry turbulence became known as the "20 Mile March" - a concept inspired by Antarctic explorer Roald Amundsen, who succeeded by maintaining a consistent pace regardless of conditions. Southwest Airlines demonstrated similar discipline in its financial performance. From 1990 through 2003, when the airline industry as a whole turned a profit in just 6 of 14 years, Southwest generated a profit for 30 consecutive years. Even more telling was Southwest's restraint during good times. Despite having more than a hundred cities clamoring for Southwest service in 1996, the company opened only four new cities that year. This self-imposed constraint allowed Southwest to maintain quality, preserve its culture, and build cash reserves that would prove crucial during industry downturns. When the September 11, 2001 attacks devastated the airline industry, Southwest had $1 billion in cash and the highest credit rating in the industry, allowing it to maintain operations without cutting jobs or flights. Progressive Insurance applied the same principle to its underwriting performance. The company maintained a target "combined ratio" of 96 percent - meaning that for every $100 of insurance sold, it would pay out no more than $96 in losses and overhead combined. Progressive achieved this ratio 27 out of 30 years from 1972 to 2002. When its comparison company, Safeco, abandoned this discipline in the 1980s and made a "giant step" acquisition in 1997, it suffered unprofitable combined ratios for years afterward. Progressive's disciplined approach allowed it to steadily gain market share, rising from the 13th largest auto insurer to the 4th largest during this period. The 20 Mile March works for three key reasons. First, it builds confidence through tangible achievement in adverse circumstances. Second, it reduces the likelihood of catastrophe when hit by turbulent disruption. Third, it helps exert self-control in an out-of-control environment. When systematically examining times of industry turmoil, the researchers found that in 29 events where companies 20 Mile Marched into turbulence, they emerged with good outcomes 100 percent of the time. In contrast, companies that failed to 20 Mile March heading into turbulence emerged with good outcomes only 3 out of 23 times. The principle extends beyond financial metrics. It can be a student-performance march for a school, a patient-safety march for a hospital, or an innovation march like Intel's commitment to Moore's Law. The key is consistency - setting clear performance markers with constraints, tailored to your enterprise, within your control, with an appropriate timeframe, and achieving them with great consistency. This approach creates stability amid chaos, allowing organizations to thrive in uncertainty not by predicting the unpredictable but by controlling their response to it.

Chapter 3: Fire Bullets, Then Cannonballs: Empirical Validation Before Commitment

When Southwest Airlines was founded in Texas, its business plan was remarkably simple: copy Pacific Southwest Airlines (PSA). Southwest's president Lamar Muse said frankly that they developed their airline "around the ideas that have proven to be successful for Pacific Southwest Airlines." Southwest executives visited PSA operations, took copious notes, and essentially photocopied PSA's operating model down to the fun, zany culture and smiling aircraft. This revelation challenges the entrenched myth that successful leaders in turbulent environments are bold, risk-seeking visionaries who create revolutionary innovations. Even more surprising was what researchers discovered in biotechnology, where the correlation between innovation and success should be closest to 100 percent. Genentech, widely regarded as one of the most innovative companies in biotechnology history, created twice as many patents as Amgen. Yet Amgen's financial performance outpaced Genentech by more than thirty to one. After analyzing hundreds of innovation events across multiple industries, researchers found that being more innovative didn't necessarily lead to better performance. What mattered more was how companies approached innovation - specifically, their blend of creativity with discipline. This approach is captured in the metaphor of "firing bullets, then cannonballs." Imagine you're at sea with a hostile ship bearing down on you and limited gunpowder. If you use all your gunpowder on one big cannonball and miss, you die. But if you fire small bullets first to calibrate your aim, then use your remaining gunpowder on a well-aimed cannonball, you succeed. In business terms, bullets are low-cost, low-risk, low-distraction experiments that help you determine what works. Once you have empirical validation, you can concentrate resources on a calibrated cannonball - a significant commitment based on accumulated evidence. Amgen exemplified this approach in its early days. Starting with just a small group of scientists and investors in 1980, they "tried recombinant-DNA technology on virtually everything," firing bullets at leukocyte interferon, hepatitis-B vaccine, growth hormones, and many other targets. By 1984, erythropoietin (EPO) showed the most promise, and Amgen concentrated resources on this "calibrated cannonball," which became the first super-blockbuster bioengineered product in history. In contrast, comparison companies often fired "uncalibrated cannonballs" - big bets without empirical validation. PSA launched its "Fly-Drive-Sleep" initiative, buying hotels and a rental-car company without testing the concept first. Intel demonstrated the same principle when developing its memory chips and later microprocessors. The company had a motto: "Intel Delivers." While innovation played a role, Intel's obsession with manufacturing, delivery, and scale made the difference. As co-founder Robert Noyce explained, "It was our ability to deliver the parts that swung the balance in our favor." Intel would test new technologies in small ways before committing massive resources to production facilities. This empirical approach allowed Intel to make its historic pivot from memory chips to microprocessors in 1985, a decision based on years of evidence about which business would be more viable. Even Apple's retail store success under Steve Jobs followed this pattern. Before rolling out Apple Stores worldwide, Jobs built a full prototype store near Apple headquarters, tested it, completely redesigned it, tested again, and only then began expanding. This approach of marrying fanatic discipline with empirical creativity - firing bullets before cannonballs - proved more valuable than raw innovation in creating sustained success in uncertain environments. The key insight is that in an unpredictable world, pure analysis isn't enough. Empirical validation matters more. This principle applies beyond business - educational institutions testing new teaching methods, healthcare organizations piloting new care models, or government agencies experimenting with policy innovations can all benefit from firing bullets before cannonballs. The approach reduces risk while increasing the likelihood that major commitments will succeed, creating a path to disciplined innovation in any turbulent environment.

Chapter 4: Leading Above the Death Line: Productive Paranoia in Action

On May 8, 1996, high on Mount Everest, filmmaker David Breashears faced a crucial decision. Looking down from 24,500 feet, he saw more than fifty climbers heading up the mountain toward his IMAX film team. Despite good weather, Breashears made a surprising choice: he and his team would go down and return later. This decision likely saved their lives, as just days later, eight climbers died in the greatest disaster in Everest history, including experienced guides Rob Hall and Scott Fischer who had passed Breashears on their way up. What distinguished Breashears from the other expedition leaders wasn't just his decision that day, but his preparation months before. Breashears had brought enough oxygen canisters for more than one summit bid and enough supplies to stay at Everest for an extra three weeks. When the storm hit, he could go down, wait, and still have reserves for another attempt. In contrast, Hall's team had oxygen for only one summit bid, putting them in an all-or-nothing situation that proved fatal when conditions deteriorated. This Everest story perfectly illustrates how exceptional leaders practice what researchers call "productive paranoia" - maintaining hypervigilance about what might go wrong, even in good times. This approach was exemplified by Intel's financial management during the 1990s. By the late 1990s, Intel's cash position had soared to more than $10 billion, reaching 40 percent of annual revenues. Financial theory might call this inefficient, but Intel leadership worried about rare but catastrophic scenarios. Analysis of 300 years of balance sheets showed that companies that outperformed their industries by at least 10 times carried 3 to 10 times the ratio of cash to assets compared to median companies. This financial conservatism proved crucial during industry downturns, allowing these companies to continue investing in innovation while competitors retrenched. Southwest Airlines demonstrated this principle following the September 11, 2001 terrorist attacks. When the airline industry faced its greatest crisis, Southwest had $1 billion in cash and the highest credit rating in the industry. While other major airlines cut operations and laid off thousands of employees, Southwest didn't cut a single job or flight. It turned a profit in 2001 and 2002, gained market share, and by the end of 2002 achieved a market capitalization greater than all other major U.S. airlines combined. This outcome wasn't luck - it resulted from decades of disciplined financial management that created the margins of safety needed to weather extreme turbulence. Productive paranoia also involves bounding risk - particularly three types: Death Line risk (which can kill the enterprise), asymmetric risk (where the downside far outweighs the upside), and uncontrollable risk (which cannot be managed). Analysis of company histories showed that the most successful companies took less risk than comparison cases across all three categories. They also managed time-based risk by adjusting decision speed to the pace of events - "go slow when you can, fast when you must." This approach allowed them to maintain stability while still responding decisively when circumstances required it. The essence of productive paranoia is preparing before storms hit, bounding risk, and maintaining the dual-lens capability to zoom out (to see the big picture) and zoom in (to focus on execution details). As Intel's Andy Grove famously said, "Only the paranoid survive." But this isn't debilitating paranoia - it's productive paranoia that channels concern into preparation and action. Leaders who practice this approach recognize that not all time in life is equal. They prepare for defining moments that matter more than others, ensuring they have the resources and capabilities to deliver their best when those moments arrive. This principle extends beyond business to any domain facing uncertainty. Educational institutions building financial reserves, healthcare organizations preparing for pandemics, or government agencies creating resilience against natural disasters all benefit from productive paranoia. By assuming conditions can unexpectedly change, violently and fast, and preparing accordingly, organizations create the capacity to survive and even thrive through turbulence that destroys less prepared competitors.

Chapter 5: SMaC Recipes: Creating Order Through Methodical Consistency

In early 1979, as the airline industry faced the sweeping disruption of deregulation, Southwest Airlines CEO Howard Putnam considered a critical question: Did this radical change require Southwest to revolutionize how it operated? His answer was no. Instead, he articulated what researchers call a "SMaC recipe" - Specific, Methodical, and Consistent operating practices that would guide Southwest through turbulence. Putnam's recipe wasn't vague. It specified concrete practices: remain a short-haul carrier with under two-hour segments; utilize the 737 as the primary aircraft; maintain quick 10-minute gate turns; stay out of food services; use cash-register tickets; avoid seat selection; and more. What makes this remarkable is that the elements on Putnam's list changed only about 20 percent in a quarter of a century, despite fuel shocks, strikes, recessions, interest-rate spikes, the Internet revolution, and the September 11 terrorist attacks. While Southwest's comparison company PSA abandoned its proven formula after deregulation to become more like United Airlines, Southwest kept most of its recipe intact despite analysts claiming Kelleher needed to "rethink his keep-it-simple strategy." Southwest went on to become one of the most admired companies in the world, while PSA sold out to US Air and disappeared. This pattern repeated across industries. Progressive Insurance maintained its commitment to achieving a 96% combined ratio (paying out no more than $96 in losses and overhead for every $100 in premiums) for over 30 years. Stryker kept its "one fad behind" approach to innovation for decades. Intel upheld Moore's Law through multiple technology generations. When analyzing 117 recipe elements across all companies, researchers found that comparison companies changed their recipes four times more than the most successful companies. The signature of mediocrity wasn't an unwillingness to change; it was chronic inconsistency. Apple's history provides a perfect illustration of both the danger of straying from a recipe and the value of restoring it. By the mid-1990s, Apple had fallen far from its early glory days, with a revolving door of CEOs and inconsistent positioning. When Steve Jobs returned in 1997, he didn't revolutionize the company so much as return it to the principles he'd used two decades earlier: designing products to work seamlessly together, making design friendly and elegant, obsessing about secrecy before big launches, and marketing to individuals rather than businesses. "The great thing is that Apple's DNA hasn't changed," Jobs said in 2005. However, these successful companies weren't rigid. They amended their recipes when conditions truly warranted, but they did so carefully and rarely. Intel's exit from memory chips in 1985 illustrates this approach. When Japanese competitors drove prices down by 80% in two years, Intel leaders asked, "If we were replaced and new management came in, what would they do?" The answer was to exit memory chips and focus on microprocessors. Yet Intel kept most other elements of its recipe intact, including Moore's Law, its manufacturing approach, and its commitment to R&D during recessions. The researchers compare this approach to the U.S. Constitution's amendment mechanism. The Constitution provides a coherent, consistent framework, yet includes a high-threshold process for change. After the Bill of Rights in 1791, there were only 17 amendments in the next 220 years, despite enormous changes in society and technology. Similarly, the most successful companies maintain consistency while allowing for carefully considered evolution. This principle applies beyond business. Educational institutions with clear pedagogical approaches, healthcare organizations with consistent care protocols, and government agencies with well-defined operating procedures all benefit from SMaC recipes. The key insight is that far more difficult than implementing change is figuring out what works, understanding why it works, grasping when to change, and knowing when not to. By developing clear recipes based on empirical validation, adhering to them with discipline, and amending them (rarely) when conditions merit, organizations create order amidst chaos and consistency amidst disruption.

Chapter 6: Return on Luck: Transforming Fortune into Lasting Value

In May 1999, mountain climber Malcolm Daly fell 200 feet down an Alaskan peak, shattering his legs and beginning an epic fight for survival. Luck played multiple roles in this story - bad luck when his seemingly solid stance gave way, good luck when his rope wasn't completely severed, and extraordinary luck when a plane happened to fly by just as his partner reached base camp, accelerating his rescue before a 12-day storm hit the mountain. But Daly's survival wasn't just about luck. He had prepared physically and mentally for years, maintained a disciplined regimen to stay warm for 44 hours, and cultivated relationships with skilled people who would risk their lives to save him. This story frames a fascinating exploration of luck's role in organizational success. After analyzing 230 significant luck events across multiple companies, researchers found something surprising: the most successful companies were not generally luckier than comparison companies. The exceptional performers averaged seven significant good-luck events while comparison cases averaged eight. Bad luck was similarly distributed, with each group averaging about nine bad-luck events. There was no evidence that the most successful companies got their good luck earlier or that a single "luck spike" explained their success. The real difference wasn't in getting luck, but in what they did with it - their "Return on Luck" (ROL). Bill Gates provides a perfect illustration. Yes, Gates was lucky to be born when he was, to attend a school with computer access, and to see the Popular Electronics article about the Altair computer in 1975. But thousands of others had similar luck. What distinguished Gates was what he did with that luck - dropping out of Harvard, moving to Albuquerque, working around the clock to create BASIC for the Altair, and then sustaining that intensity for decades. As Gates himself noted, "We were in the right place at the right time. But we had been preparing for that moment, working on software, thinking about software before most people." Comparison companies often squandered good luck. AMD received a series of fortunate breaks in the mid-1990s: a court victory allowing it to clone Intel microprocessors, customer desire for an Intel alternative, and Intel's Pentium chip glitch. Yet AMD failed to execute, missing deadlines for its K5 chip and later failing to manufacture enough K6 chips to meet demand despite another stroke of luck with the NexGen acquisition. Despite extraordinary good fortune, AMD's stock fell more than 70 percent behind the general market from 1995 through 2002. Conversely, the most successful companies often turned bad luck into good outcomes. When California voters passed Proposition 103 in 1988, mandating 20 percent price reductions for auto insurance, Progressive Insurance CEO Peter Lewis could have seen it as a disaster. Instead, he used it as a catalyst to create "Immediate Response" claims service, available 24/7/365. Years later, Lewis called Proposition 103 "the best thing that ever happened to this company." By 2002, Progressive had risen from #13 to #4 in the American auto-insurance market. The essence of "managing luck" involves four elements: recognizing luck when it happens, knowing when to let luck disrupt your plans, being prepared to endure bad luck, and creating positive returns on both good and bad luck. All the concepts from the research - fanatic discipline, empirical creativity, productive paranoia, 20 Mile March, firing bullets then cannonballs, leading above the Death Line, and SMaC recipes - contribute to getting high ROL. They create the conditions where organizations can capitalize on good fortune and mitigate misfortune. This perspective on luck has profound implications for how we approach uncertainty. Rather than hoping for good luck or fearing bad luck, exceptional leaders focus on what they can control - their preparation, their response, and their ability to extract value from whatever circumstances they encounter. As UCLA basketball coach John Wooden put it, "Luck is when preparation meets opportunity." By building organizations capable of getting high returns on luck, leaders create their own good fortune even in the most unpredictable environments.

Summary

Throughout this exploration of exceptional organizations that thrived in uncertainty, a powerful truth emerges: greatness is not primarily determined by circumstances, luck, or external forces, but by conscious choice and disciplined action. The most successful companies didn't succeed because they faced easier conditions - they faced the same environments as their less successful counterparts. They succeeded because they responded differently, embodying specific behaviors that transformed uncertainty from a liability into an asset. The paradoxical blend of consistency and change, discipline and creativity, caution and courage created a foundation for sustained excellence amid chaos. The insights from this research offer profound implications for navigating our own uncertain futures. First, we must recognize that we control more than we think - even in the most turbulent environments, our choices and actions matter more than external circumstances. Second, consistency matters more than constant revolution; the signature of mediocrity isn't an unwillingness to change but chronic inconsistency. Third, empirical validation before major commitment reduces risk while increasing the likelihood of success - fire bullets before cannonballs. Fourth, preparing for what we cannot predict creates resilience when inevitable disruptions occur. Finally, luck is what we make of it - our return on luck, both good and bad, depends on our preparation and response. By applying these principles of disciplined innovation, we can create pockets of order amid chaos, not by controlling external circumstances but by controlling how we respond to them. As F. Scott Fitzgerald wrote, "One should be able to see that things are hopeless and yet be determined to make them otherwise." In the end, we are free to choose, free to become great by choice.

About Author

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Jim Collins

Librarian Note: There is more than one author in the GoodReads database with this name. James C. Collins is an American researcher, author, speaker and consultant focused on the subject of business management and company sustainability and growth.

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