In a world of growing economic uncertainty and turbulence, sustaining a systematic journey of curiosity into what makes companies great is anything but easy.

But following some of the principles of success he uncovered, Jim Collins did just that, writing four best-selling books during that time: Built to Last: Successful Habits of Visionary Companies; Good to Great; How the Mighty Fall: And Why Some Companies Never Give In; and Great by Choice: Uncertainty, Chaos, and Luck – Why Some Thrive Despite Them All.

The books, with over 10 million copies sold, have influenced top companies around the world, including Apple, Microsoft, Intel, and Starbucks. When Al Gore led an effort to restructure the United States federal government while serving as vice president, he solicited Collins's advice. In 2011, Collins placed fourth on the Harvard Business School's list of the 50 Most Influential Management Gurus.

"He is the management scholar who has analyzed why companies rise and fall in the most systematic way," says AppWorks Ventures founding partner Jamie C. Lin, who has devoured all of Collins's books.

Collins had no inkling he was embarking on a grand journey when he decided to change the focus of a course on entrepreneurship and small business he was teaching at the Stanford Business School in 1988.

"I wrote an opening sentence for the syllabus that said, 'This was going to be a course on how to take a small business or a new venture and build it into an enduring, great company.' For whatever reason, to this day, I really don't know why. That just kind of hit me," he says.

"I didn't know I was starting a 25-year project. I just started out thinking I really need to have some understanding of what makes an enduring, great company."

Many of the concepts arising from his study of 20,000 enterprises have become widely accepted in business circles. They include Level 5 Leadership, describing leaders who are humble but driven to do what's best for the company, and the "20-Mile March," which touts the virtues of setting an audacious goal, and achieving it through consistent and disciplined action backed by extensive preparation for the unexpected.

With Great by Choice completing his quarter of a century journey, his focus has turned to cultivating a new generation of leaders, especially school principals and young entrepreneurs. He was appointed in August 2012 to head a leadership studies program for the United States Military Academy at West Point over two years to help cadets prepare to become the next generation of Army leaders.

In this exclusive interview with CommonWealth Magazine, the first he has given to Taiwanese media, he talks about his journey, his research and the attributes that help companies and individuals find success. Here are some highlights:

---

Q: Many people have been worried about the weak economy since the financial crisis hit in 2008. In Taiwan, especially, the economy is not as robust and creative as in the past and our businessmen pursue volume rather than profit, with some big companies having high revenues but only 5 percent gross margins. What can they do to go from good to great?

A: We're going to of course have volatility. We're going to have tremendous levels of uncertainty and destabilizing events. And that's going to stay with us permanently.

So if someone is leading an organization, what should they be thinking about based on these timeless principles, even in the face of all of this change today?

The single most important beginning place is to have enough of the right Level 5 Leaders and to have the right people to help you navigate the world that you're operating in.

That just sort of hands-down trumps everything, because the world is uncertain, and the world is full of things that can hit us from any side at any time. You really can't predict what's going to happen. That's impossible. If you try to predict what's going to happen, and you base your plans based on those predictions, you're very likely going to get killed because you're almost certainly going to be wrong.

So if we can't predict what's going to happen, the most powerful thing you can do is to make sure that you have the right people who are able to respond to the unexpected things that are going to happen. Your strategy ultimately has to be a people strategy, not a strategic strategy, because the strategies are perhaps going to be rendered irrelevant quickly. But the right people can adjust to that.

The Importance of People and Fighting Arrogance

"I've got the 5 percent margins. I've got the economic pressures. I've got the fact that manufacturing is falling. I've got all of these sorts of things."

Yes, that's all true. But the first thing you have to ask yourself is, do I have the right people in my key seats to be able to handle this. Because it doesn't matter what my strategy is if I don't have the right people. You're not going to be able to outperform unless you have those right people.

The second key is those people being led by Level 5 Leaders. We wrote about this a lot in Good to Great, but I go back to it because in a world that is so dangerous – and so full of things that can absolutely hurt you, your nation, your organization, your industry – arrogance is lethal. If you ever think you're bigger than these forces, you are very likely to find yourself in serious trouble. We used in Great by Choice the analogy of David Brashears going up Mt. Everest. David was very humble relative to the mountain because when you go up on Everest, as great a climber as David is, he's a consummate Level 5 in his humility relative to the mountain.

That's because he understands that the mountain is bigger than him, and the weather is more severe and that there are lots of things up there than can kill him. As a result even though he's setting out to do this incredibly audacious thing, to put a camera on top of Everest, to climb Everest with the best team, and to get everybody back alive, he comes at it with tremendous humility, including practicing changing film cartridges in minus 60 degree freezers, literally going to meat freezers and practicing his camera changes. Without that humility you make the kinds of mistakes where the mountain will kill you.

Similarly, in today's world of very difficult economies, of a very unpredictable geopolitical situation, or whatever financial crisis might be coming around the bend, it's a little like climbing Mt. Everest. If you don't come at things with a tremendous level of humility, of how there are forces out there that are very big, and they can really hurt you, and you think you're bigger than them, and you bring a tremendous amount of arrogance to them, you're going to get clobbered.

That is central. Without the Level 5 Leaders and without the right people in the key seats, there's very little you can do in the face of these great forces that your business leaders face.

Q: So your advice to Taiwanese businessmen is to focus on people.

A: Focus on people and the right leaders as a starting point.

Here's the question. I like to change dilemmas into different questions. If you're a leader in Taiwan today, you're struggling with what to do, and that is a very good question, but it is secondary. You should change your "what" question to a "who" question, like if you ask, "What can we do about currency issues?" No, the question should be "Who should I have be responsible for currency issues?"

'Return on Luck'

Q: Your 25-year journey seems like your Odyssey. Did you hear sirens in the waves that took you off course? 

A: There are actually lots of times sirens came, and I've had to be very conscious of it. The sirens come in the form of productive opportunities. But if I filled my schedule entirely with seductive opportunities, I would never be able to pursue my curiosity. My Odyssey is curiosity.

Great by Choice had some of the most wonderful side ideas that I didn't expect. That's the beauty of curiosity. The whole topic of return on luck was one of those things which – when you talk about real curiosity – was just like, "We've got to answer this question." That alone was worth the project. The idea was to define and quantify luck and then to rigorously ask the question, does luck differentiate?

But then to come upon this delicious idea of return on luck, the idea that a big part of it is recognizing when these luck events happen. You don't cause it when it happens. But what someone like a Bill Gates or a Steve Jobs or a John Brown had or an Andy Grove had, they have this ability to be able to recognize when luck events happen and then to just grab and make so much more of it or make the most of the really bad events.

Steve Jobs took the painful things that happened when he lost his company in the 1980s, grew as a person, grew as a leader, grew in how to think about a group, and become fanatic about getting the right people. When he came back to Apple, he got his return on all those things rather than letting them crush him. They had made him stronger.

To me that idea of how you turn the bad things, the things that really deck you, into opportunities that differentiate you by how you get a higher return on them, I found that an absolutely fascinating part of the journey.

Q: You came up with three principles on how great companies behave. How did you come up with these three principles (fanatic discipline, empirical creativity, and productive paranoia)?

A: The beauty of being driven by curiosity is that you don't know the answers when you start. If you know the reasons when you start, there's no reason to go on the Odyssey. We didn't know these would be the differentiating behaviors of leaders who vastly outperform others in chaotic and uncertain times.

We discovered them through empirical analysis. Where we ended up is where the data takes you. There were very rigorous questions and we kept looking at the leaders and saying what was differential about these leaders? What did they have that the other leaders did not have? And what did they do when they ran their company? 

By asking those questions repeatedly, you eventually begin to see the real systematic differences that those leaders had. They were fanatically disciplined, they were very empirical in their creativity and they were very productive in their paranoia.

It's really the qualifiers that are very powerful in this. It's not just that they're disciplined, it's that they're fanatics. It's not just that they're creative, because everybody is creative, that' s the nature of being a human being. What's different about these leaders is the empirical aspect of their creativity, that their creative detection is based on empirical validation. It wasn't just that they were afraid or paranoid, which they were, but their ability to make that very productive, to be able to translate their paranoia into productive action.

Fanatic Discipline as Source of Creativity

Q: So in your mind, which principle is the most important?

A: It sort of depends on the day you ask me (laughs). I think probably the fanatic discipline is the most important because it then allows you to be disciplined in how to do your creativity and to be disciplined to not let the fear get the best of you.

I think that if you have the fanatic discipline, then that allows you to say, now I'm going to be able to take my natural creativity and I'm going to have the discipline to fire bullets before I fire cannonballs, and then I'm going to have the discipline to be able to scale my innovations into something bigger. Turning something from an idea into a big success.

Having ideas is easy. Converting them into big successful cannonballs is very difficult. The only way to do that is if you're disciplined.

On the fear side, if you're undisciplined, the fear will just make you frozen because you're just scattered in response to what you are afraid of. If you're disciplined, you will be appropriately afraid of the risks, but what (you're) going to do with great discipline is manage those risks in such a way that (you) still achieve your goals.

Q: You emphasize firing bullets before firing cannonballs, the idea that great leaders take small steps before taking giant leaps. But many business consultants suggest leaders should look to make big changes in velocity and agility during difficult times. So what has led you to the conclusion that leaders should be more conservative?

A: Why we came to that conclusion is simply empirically what we found.

But why does it work? It's not that (the leaders) don't do big things. They do big things once they're empirically validated. Let's go back to David on Everest. Putting an IMAX camera on the top of Everest is not an incremental thing. It's a big thing. It's creative, it's bold, it's audacious, it's adventurous. Moving Microsoft to Windows when they didn't make operating systems, or doing the iPod, these were big things, but they were always based upon empirical validation. When Intel made the move to microprocessors, it looks like this big, agile, giant, bold, change-everything kind of move. The only problem with that story is the facts. What really happened is that they had been firing bullets all the way along on the microprocessor. They took a small step with the microprocessor to make a chipset for a calculator company. And then that worked. And then they began finding people wanted all these logic functions on a single chip, and that worked. It just kept getting more and more validated, so when finally Intel said let's now really go big with microprocessors, it was already empirically validated. So they had had already fired bullets, and then they fired a big cannonball.

Applying the Principles to Life

Q: Can these principles be applied to one's personal life? Can these three principles lead us to a successful or great life?

A: You've actually asked two questions because a great life and a successful life are different. To me a great life is one that has meaning at some level; a great life is one where you feel your life was well spent. 

For success, there's no question that the three principles here are enormously powerful at the individual level.

I know that for two reasons. The first is that I've found them very helpful, and I find I go back to them repeatedly, in particular knowing your 20-Mile March. It's really powerful, because the world's a very chaotic place, and if you don't have the discipline to sit down and march, you're not going to get the work done.

My 20-Mile March is called 50-30-20. It's tracking my time – 50 percent creative, 30 percent teaching, 20 percent other stuff that needs to get done. And on my white board in my lab office are actually my running totals. And I can see them for every month. My 20-Mile March is to try to keep the creative above 50 and the other below 20, and then stay on that. And I track it pretty rigorously.

My 20-Mile March is a creative march. I think the blend of creativity and discipline is the thing for me and, I think, for a company to strive for. So ironically, I've taken the idea of discipline and applied it to the notion of creativity, because my discipline is to make sure I spend enough time on the creativity.

Second, empirical creativity is very important. Even just thinking about living in a different part of town, you can either buy a new house (firing a cannonball) or just spend some time there to see if you like it (firing bullets). Life is not just about discovering new things, but how do you do them in a way that really moves you forward – fire bullets.

And then productive paranoia. People ask me, am I a glass-half-full or a glass-half-empty person? My answer has always been, I have a full glass, and I'm afraid it's going to shatter at any moment. That means, for example, that I'm financially conservative. Why? Being financially conservative enables you to take creative risks. If I hadn't been financially conservative all the way along, I wouldn't have had the capital or the conservative financial position to be able to invest in Built to Last and Good to Great and Great by Choice.

Q: Why can you choose to be great?

A: It's about the power of having a Big Hairy Audacious Goal (BHAG). So you're facing a 5 percent margin, you're facing global competition, you're facing all these challenges in a very difficult world. But you need to get your head above that. And one way to get your head above that is to say we can set a BHAG that is so big and so daunting and so difficult and so energizing that it will kind of get us above all of that and allow us to set off on doing something extraordinary. And then we have to ask what we need to do to accomplish that goal, because that will change us and make us better. If you have a big enough goal, you cannot not change. 

I think climbing's taught me a whole lot about that. It was a productive journey of despair. The hardest short climb I was able to do took me five years to climb 100 feet. I had to go back to this 100-foot section of rock over and over again for five years. I failed for five years. There was a real depth of despair like, "I'll never be able to do this climb. It's too hard for me." It's like a dark tunnel. You don't know if you'll come out the other side, but you keep figuring out ways to get a little higher and be a little better, and then you finally get to the other side and complete the climb. That teaches you that the journey of despair is part of the process rather than something you need necessarily to capitulate to.

Q: "Great by Choice" has been out now for about 18 months. What feedback has surprised you the most?

A: I think what surprised me the most is the extent to which people have found the ideas, even though they were research-based, practical, and not just for their businesses or organizations. I get comments from people about applying it to themselves, and that I did not expect. Some feedback has been, "I've given this to my son or daughter graduating from college. I think it would be good for them to think about this as they are heading out into their journey of life." They found the ideas to be practically beautiful, and I didn't expect that.