Precision climbing: calculate risks and fire bullets before cannonballs, best-selling author Jim Collins says.

Author:Ostdick, John H.
Position:PRECISION CLIMBING - Interview

Even dressed in a dark suit, blue dress shirt and tie, and black tassel loafers, Jim Collins seems at home on low-level rocks near the Crown Rock Trailhead in boulder, Colo. The rock faces here are intimate friends, having served as his backyard playhouse most of his life.

At the urging of his chief of staff. Amy Humble, however, he changes into his climbing shoes for the duration of a photo shoot. After all, proper footwear is part of any SMaC climbing recipe (a Collins term for the concept of Specific, Methodical and Consistent, a tested protocol that is empirical). On the rocks or at an entrepreneurs desk, the recipe is not about being risk-averse but about taking all the controllable risk you can out of the equation.

The former Stanford University researcher has spent the past 25 years grappling with the results of intricate analytical studies of U.S. companies to determine how the best--and the merely good ones or failures around them--handle risk, grow and prosper during good times and bad. Six books (some with co-authors) and overall world sales of more than 10 million copies later, he has arrived at some quantifiable practices that the most successful companies adopted.

"Our research has shown it's very rare that great entrepreneurs are necessarily big, swing-for-the-fence risk takers," Collins says back at his offices, 15 minutes away on 13th Street. "One of the big things [we found] is this notion of empirical creativity, the process of fire bullets and then fire cannonballs." In the Collins vernacular, bullets are low-risk, low-cost, low-distraction tests that validate an opportunity and don't overextend an organization; cannonballs are riskier, more costly business-defining initiatives--an uncalibrated cannonball is a high-risk gamble, and a calibrated one, essential for achieving greatness, is a calculated risk proved by rigorous testing (i.e., the lessons of firing many bullets).

"What's really interesting about the fire-bullets-and-fire-cannonballs process is that it's not that they kept things small," he says. "The greatest companies did big, big bets. They only convert to a cannonball once they've fired enough bullets to gain the empirical validation that the bet will work. At some point, you put a lot of chips down to get the results these companies did."

Collins, almost as passionate a student of history as he is of climbing and adventure, talks animatedly as he gets up from his chair and retrieves a book off a nearby shelf for reference. An oversized stuffed Curious George, something of a company mascot, sits next to one of the shelves, which are peppered with titles such as The Right Stuff, The Last Viking, Winston Churchill's The World Crisis, Lincoln at Gettysburg Peter Drucker's Management and Darwin's The Origin of Species.

The best-selling author sets the tone for most of his conversations by first asking penetrating questions himself and listening intensely--a trait he learned from his hero and mentor, management theory pioneer Drucker. His first impulse--to satisfy his burning curiosity, to learn from a guest--is as compelling as his drive to share his views.

Cases in Point

Companies like Texas-based startup Southwest Airlines didn't just emerge from the clouds, he notes. "The founders of Southwest took a risk, but what they did was copy the model of PSA [a California-based airline that was having success at the time]," he explains. "They visited PSA, studied their operations. PSA had calibrated the process for them, had proven it could work in California. They had years of empirical success. The Southwest folks could look at it and say, That will work. We can copy that.' Their cannonball as entrepreneurs wasn't to do something that hadn't been tried before: It was to do something already proven, and do it in Texas."

And Bill Gates didn't make an outlandishly crazy bet in founding software pioneer Microsoft, Collins says. "Bill Gates did not drop out of Harvard until it was announced that the first Altair [the microcomputer that made its debut in 1975] was going to be coming out. He and [Microsoft co-founder] Paul Allen had been working with computers for a long time, and the Altair was going to need a programming language. So the empirical facts led them to the cannonball--quitting Harvard, living on the floor in Albuquerque, N.M. These...

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