QUINTEN KRZYSKOGARRETT MIZE

JONATHAN SCHNEIDERALLISON SCOTTALEX STEAKLEY

Great By Choice Chapter 4:

Fire Bullets, Then Cannonballs

“Fire Bullet, Then Cannonballs” Approach

Explains the success of 10X companies than big-leap innovations and predictive genius

Pacific Southwest Airlines (innovator)

Southwest Airlines (10X company)

“Anticipated that innovations might be a primary distinguishing factor for 10X success in unstable environments characterized by rapid change.”

The Big Surprise

66 wide-ranging markets, from chewing gum to the Internet

Only 9% of pioneers end up as the final winners in the market

64% of Pioneers failed outright

Pioneering Innovation: Good for society Statistically lethal for the individual pioneer

Pioneer?Saftey Razor

Instant Camera

Personal Computer Spreasheet

StarGillette

DubroniPolaroid

VisiCorpMicrosoft

10X were innovative enough to be successful but generally not the most innovative

Threshold InnovationIndustry Primary

Innovation Dimension

Innovation Threshold

Semiconductors New devices, products, &technologies

High

Biotechnology New drugs development, scientific discoveries, breakthroughs

High

Computer/ Software

New Products, enhancements, & technologies

High

Medical Devices New medical devices, application breakthroughs

Medium

Airlines New service features, new business models and practices

Low

Insurance New insurance products, new services features

Low

Creativity and Discipline

Advanced Memory System created the 1000-bit-memory-chip barrier a few months before Intel

By 1973 had taken over the market place The motto “Intel Delivers” is what set them

apart from their competitors With their ability to deliver on their

innovations is why they are a 10x company

Creativity and Discipline

Innovation without discipline leads to disaster. “This business lives on the brink of Disaster” Gordon Moore

After 1103’s success Intel rearticulated its core values placing discipline #1 However you must have both discipline and creativity

to truly be greatObsessive focus on innovation by itself does

not make for great success might even lead to demise

Bullets, Then Cannonballs

William K. Bowes and a group of scientist started a biotechnology company with no direction (Amgen)

This team fired many bullets on many different experiments from Hepatitis- B vaccine to Bioengineered indigo to dye jeans

After these many bullets finally fired a cannon ball with EPO the first super blockbuster bioengineered product in history.

What Makes a Bullet?

Low Cost- Size of bullet grows as the enterprise grows

Low Risk- minimal consequences if the bullet goes awry or hits nothing

Low Distraction- for the company as a whole but very distraction for a few employees

Uncalibrated Cannonballs

Embracing the “fire bullets, then cannonballs” principle requires Fire bullets Assess: Did your bullets hit anything? Consider: Successful bullets to cannonballs? Don’t fire uncalibrated cannonballs Terminate bullets that show no evidence of eventual

success

10xers (69% calibration rate) fired cannonballs Had an intended target

Comparison companies (22% calibration rate) Fired uncalibrated cannonballs Cannonballs flying all over the place

Calibrated cannonballs have an 83% success rate over the 23% success rate of uncalibrated cannonballs

PSA

Cannonball: “Fly-Drive-Sleep” Fail Generated losses every year

Then fired another to by big jets Bought big jets and then plane fuel went up Fail again Economy fell into recession

Calibrated Cannonballs Higher rate of success

Uncalibrated Cannonballs Can be successful, but that can be more dangerous

Ex: Tell your friend to go gamble and they win

10Xers learn from their Follies

When 10Xers fire un-calibrated cannonballs, they quickly learn from mistakes

Progressive: limit any new business to 5% of total corporate revenue until fine-tuned for sustained profitability

Broke this rule in mid 80s when they moved into selling insurance to trucking companies and transit bus systems

10Xers learn from their Follies

They took a huge loss on the venture, but learned from their mistake

Later moved into standard insurance, first by firing bullets then firing a cannonball

Then wanted to move into homeowner’s insurance, but found bullets hit nothing

Empirical Validation not Predictive Genius

Be creative but validate your ideas with empirical experience, figure out what works

1987 Bill Gates had to choose between DOS/Windows or OS/2

Gates worked on OS/2 but kept firing bullets on DOS/Windows development

Gates was smart enough to know he could not predict the future

DOS/Windows controlled the market by 1989

Discipline

Increased discipline resulted in improved liability ratios

All the major improvements came before any major break through product

Must be efficient within to afford creativity and innovation

Apple’s Bullets Fired

Initial product success came with a revamp of Apple’s first success; Macintosh Computer Made the most of what Apple already had

I Pod MP3 players already existed, but not with large data

storage capabilities All the parts necessary existed, just needed to be

pieced together Small leap forward; Extension of MP3 player

Apple’s Bullets Fired

iTunes People would rather buy music at ease and a

reasonable price than steal (i.e. Napster, Limewire) iTunes created easy access to a music store with

cheap prices for the music

Apple’s Cannonball

Once iPods, and iTunes had proven to be successful, owner’s of PCs wanted in Apple infiltrated 20 times the market they were

previously selling to by making iPod and iTunes software compatible with PC computers

Took over the music market

Chapter 4 Key Points

A"fire bullets, then cannonballs" approach better explains the success of 10X companies as opposed to big-leap innovations and predictive genius

A bullet is a low-cost, low-risk, and low-distraction test or experiment

10X cases fired a significant number of bullets that never hit anything

Chapter 4 Key Points

Two types of cannonballs, calibrated and uncalibrated Calibrated cannonballs have confirmation based on

actual experience uncalibrated cannonballs place big bets without

empirical validation

Unexpected Findings

In some matched pairs, the 10X cases proved to be less innovative than their comparison cases

10Xers have no better ability to predict changes and events than the comparisons

The combination of creativity and discipline, translates to the ability to scale innovation with great consistency