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Choosing to Be Great

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What makes a "10Xer" – an individual or enterprise that surpasses the competition by an order of magnitude? Which Taiwanese companies have attained the traits to succeed spectacularly in the face of adversity?

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Choosing to Be Great

By Fuyuan Hsiao
From CommonWealth Magazine (vol. 524 )

The last mile. It's 40 degrees Celsius, an energy-sapping sun pounding down. The two liters of water carried on the trek, long gone, the sweat drenching the runner's shirt evaporating within minutes.

The 49-year-old president of Hill Ever Technology Corp., Toff Lee, in what may seem like sheer madness, ran through the Gobi Desert for four days, traversing wind-sculptured desert-like "yardangs," hills, riverbeds and gravel plains and treading across salt-laden soil that crunched under his feet like brittle frosting.

He had little time to appreciate the vast desert landscape, his senses fully occupied by the sounds of his plodding steps and his own panting and the question that relentlessly tormented him: "What am I doing here?"

"This was an important milestone in my life. Having made it through this, is there anything else that would be hard to accomplish?" says Lee in his office after his four-day run, pondering the significance of the adventure for himself and his business.

The New CEO Fad: Extreme Experiences

Extreme experiences have emerged as the "hot" pastime among corporations and organizations, because they reflect the constant change and chaos now prevalent in real life and the business world.

The latest trend in management studies is to embrace participation in all forms of extreme competitions, exposing people to unfathomable tribulations and changing situations that force them to find a formula for success amid chaos through management and leadership skills.

Jim Collins, who pioneered the study of how companies achieve excellence in his 2001 book Good to Great, is an adherent of that philosophy.

He spent nine years researching his most recent project, Great by Choice, beginning in 2002, during which time the world has endured a global financial crisis, the Great Recession, and soaring government debt. From his study of over 20,000 companies, Collins identified seven that rose to greatness amid uncertainty and even chaos and have performed 10 times better than their industry rivals over a period of 15 years.

In analyzing how these "10Xers" maintained their leadership positions in an extreme environment, Collins identified three core behaviors that keyed their success: fanatic discipline, empirical creativity and productive paranoia.

10Xer Core Behavior No. 1: Fanatic Discipline

Discipline means displaying extreme consistency of action – consistency of values, goals, performance standards and methods – Collins says, and it keeps companies from overreacting to sudden events or blindly following herd instincts. 10X companies are not only disciplined, they are fanatical in staying disciplined.

Herb Kelleher, the co-founder of Southwest Airlines, which made a profit for 30 years in a row without furloughing an employee, worked seven days a week until 8 or 9 p.m. every night and he would always read before going to bed. Whenever he appeared in public, he would dress flamboyantly. That was his form of consistent "discipline," and it highlighted Southwest Airlines' core value: making customers happy.

In Great by Choice, Collins also uses the concept of a "20 Mile March" to symbolize the discipline needed to pursue excellence. Successful "20-mile marchers" have two common traits:

A. Clear performance markers: They set goals that are challenging but not impossible to attain.

B. Self-imposed Constraints: When 10Xers face opportunities, they stick to pre-set upper bounds on how far and how fast they will proceed.

"Set goals, be prepared, walk 20 miles every day, no more or no less, take steady steps forward," said Frans van Houten, CEO of Dutch conglomerate Royal Philips Electronics in an interview with CommonWealth Magazine, explaining that the "20 Mile March" is an important determinant in the success or failure of a company.

TSMC, Chang Chun: Using Discipline to Fight Temptation

Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, is a 10X company known for its fanatic discipline. TSMC chairman Morris Chang imposes the same fiscal discipline regardless of the economic environment, insisting on maintaining a strong cash flow, investing only when orders are confirmed and tightly controlling capital expenditures and capacity planning.

"If we don't see an opportunity, regardless of whether the economy is good or bad, we won't invest. That's our strategy," Chang told CommonWealth Magazine. When TSMC builds a factory and buys equipment, it's because the company is relatively confident of securing orders. It does not arbitrarily change course simply because of a shift in economic tides.

Collins's principle of the "20 Mile March" can also help companies resist the temptation of going beyond their capabilities.

Petrochemical conglomerate Chang Chun Group is Taiwan's most profitable unlisted company, with sales in 2012 of NT$180 billion. One of its subsidiaries, Dairen Chemical Corp., had net income per share of nearly NT$30 in 2012, the highest of any company in Taiwan's chemicals sector.

Dairen Chemical founder and chairman Suhon Lin declares without hesitation how important discipline is to him. Before deciding on any investment project, he says, he carefully assesses several factors. Will he have access to raw materials? Could the plan violate patents? What is needed for the process to be efficient and at what cost? How big is the market? How many competitors are there?

That discipline was even evident 30 years ago when Lin considered investing in a semiconductor plant as the sector was just taking off. He flew to Japan to get the advice of Hitachi, the leading semiconductor company at the time. A Japanese friend urged him to stay away, describing the business as "a bug that eats through money."

Lin remembers that there were good arguments on both sides – the sector had great potential, but his group lacked the necessary capabilities. In the end, although the opportunity was tempting, Lin decided against going ahead with the investment.

The discipline preached by Collins's doctrine of the "20 Mile March" applies not only to companies but also to individuals.

For the past 30 years, painter and writer Liu Ka-shiang has gotten up a little after 6 a.m. every day and proceeded to write or paint for two to three hours. His "20 Mile March" involves taking notes, as he carries a notebook with him wherever he goes to record his observations. The dozens of notebooks he has filled provide an inexhaustible source of material for his works.

"Discipline means the kind of happiness that comes from getting things finished," Liu says, explaining that the discipline he brings to his writing has been internalized to the point that he feels "weird" on days he doesn't write. More generally, the writer believes that discipline fills his life with joy and stimulates him to think about things that others have never considered.

10Xer Core Behavior No. 2: Empirical Creativity

Another trait of "10Xers," according to Collins, is that they directly engage with empirical evidence and use it to make bold, creative moves.

In the second half of May, Taiwanese ultramarathoner Tommy Chen completed the 520-kilometer Track Outback Race, becoming the youngest competitor ever to complete the grueling test and the first Taiwanese to complete ultramarathons on seven continents.

Chen, who turned 27 on June 10, was able to complete eight ultramarathons on seven continents within five years not only because of his fanatic discipline, but also because he often empirically tests his running strategy, leaving little to chance.

Tommy Chen's Unusual Laboratories

Before competing in the North Pole marathon in April 2010, Chen wanted to simulate the extreme cold he would face and made over 100 calls trying to borrow a refrigerated container to train in, without success. He ultimately got lucky, however, borrowing a freezer from hypermart RT-Mart with the help of the retailer's public relations director at the time, Margery Ho. For three consecutive days, Chen ran for more than two hours a day in the 16.5 square-meter freezer in temperatures of minus 20 degrees Celsius.

To prepare for the 160-kilometer nonstop Brazil Running Adventure Race in May 2012, Chen again enlisted the help of Ho, who by that time was working for Carrefour, to use the retailer's central ovens to get acclimated to the intense heat he would face in the forbidding Brazilian desert. He trained in an ambient temperature of 50 degrees generated by four ovens set at over 200 degrees.

"He pushed himself to the limit through self-discipline, resolve, and repeated experiments to achieve his goal," observes his good friend Ho.

In a competitive scuffle, innovation can help companies fight their way out of a bind, but on its own, it is not enough.

In their book Will and Vision: How Latecomers Grow to Dominate Markets, management scholars G.J. Tellis and P.N. Golder studied the markets for 66 types of products and found there was no absolute correlation between the market leaders and the market innovators. Only 9 percent of the markets' "first movers" ended up as the winning companies in their fields.

Collins observes that once enterprises meet the innovation threshold, they still must add discipline and creativity into the equation if they want to be 10 times better than their rivals.

The question becomes how to test innovation without taking it too far and ending up sunk in an innovation money pit?

Fire Bullets, then Cannon Balls

Collins offers the answer in Great by Choice: "fire bullets, then cannon balls." The straightforward principle suggests testing new ideas and products on a small scale to build up empirical evidence and validate what works best, and then concentrate resources on "firing cannon balls." The approach has the benefit of being "low cost, low risk, and low distraction," and enables companies to quickly learn from their mistakes.

Wowprime Corp., Taiwan's biggest restaurant group with 11 brands and an annual growth rate of 30 percent, stands out as one of the country's big winners that combines fanatic discipline and empirical creativity.

Wowprime vice chairman and CEO Endy Wang says that when his group launches a new brand, the company starts with a single restaurant to test the waters and create a profit model. It must meet five standards before a second outlet can be opened: a profit structure has been identified, the staff is well-trained, the work flow has been perfected, the product has proved attractive, and it has met the competitive challenge.

Launching a new brand and opening new restaurants can be cause for celebration, Wang explains, but without discipline, the new venture will not make money. "Only if you're disciplined will you avoid the itch to recklessly open a bunch of new outlets," he says.

10Xer Core Behavior No. 3: Productive Paranoia

When Microsoft was at its peak in the 1990s and recognized as the world's strongest software company, founder Bill Gates still lived in a constant state of fear, seen clearly in what became known as the "nightmare memo" that sent Microsoft shares tumbling by 11 percent over four days. In the 1991 memo, he listed several worries and threats about everything from competitors to Microsoft's customer-support shortcomings.

Gates admitted in 1994 that he considered failure on a regular basis and fretted about some high school students in a small room drawing up a weapon that would destroy Microsoft.

Though Gates was consumed by fear, he channeled it into constructive action that included extensive preparation. He took a conservative approach to managing the company's finances, insisting on building strong cash reserves, and kept operating costs down. He also developed a strong talent pool and was always working on the next software release to stay a step ahead of the competition.

In Great by Choice, Collins describes Gates' behavior as "productive paranoia." In an era where "black swan" events – major unpredictable events with huge impacts – are increasingly prevalent, companies need to have this kind of crisis consciousness.

According to Collins, most people see a light at the end of the tunnel, but 10Xers see a dark cloud in the midst of the light. This hyper vigilance helps them avoid the first step toward a dramatic fall: hubris.

Dairen Chemical's Lin is now 85 years old, but he still is at the office every morning at 8 a.m. every day and takes the bullet train to southern Taiwan once a week to check on the company's factory. His productive paranoia strong, Lin frequently warns his subordinates, "Good times don't last forever. Products have life spans. Situations can change." Only through constant innovation and effective execution can companies head off crises, Lin cautions.

Ang Lee: Fear as a Motivator

Two-time Oscar-winning director Ang Lee is another 10Xer with a healthy sense of paranoia.

"Being vigilant is the best state of mind for surviving, seeking knowledge, and learning," says Lee, who often fears being cast aside and channels those fears as motivation to continue to improve and innovate.

Choosing Success

On May 24, Taiwan's statistics bureau, the Directorate General of Budget, Accounting and Statistics, lowered its projection for Taiwan's growth in 2013 to 2.4 percent. CommonWealth Magazine's recently issued Top 2000 Survey also indicated that the profit-generating ability of Taiwanese companies is on the decline.

Indeed, Taiwan currently lacks human resources, money and administrative efficiency, but what the country may be most lacking are discipline and conscious choice.

"Greatness is not primarily a matter of circumstance; greatness is first and foremost a matter of conscious choice and discipline," writes Collins summing up the message of Great by Choice.

From individuals to companies and even the country, finding a path to breaking through the prevailing economic gloom and thriving amid uncertainty and chaos can start with setting a goal, pursuing it through a "20 Mile March" and relying on fanatic discipline to achieve it.

Translated from the Chinese by Luke Sabatier

Keywords:

好友人數