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