1. Download the diagnostic tool at jimcollins.com, and do the exercises with your team. Yes, I thought this was self-serving at first. Then I looked it, considered that it’s free and doesn’t require you to sign up for anything, and immediately saw his point.
2. Get the right people in the key seats. This comes from Collins’ famous observation that building a company is like driving a bus. You need a driver, but you also need the right people in all the key seats. So, says Collins, figure out how many key seats you have, and make a plan that will make sure you get all the key seats filled by the end of the year.
3. Once a quarter, have a brutal facts meeting. Be careful about who you include in this meeting. You will be discussing just the brutal facts. This is not the time to express opinions or strategize. Repeat: Only discuss the brutal facts.
4. Set a 15 to 25-year big, hairy audacious goal (BHAG). This is a goal that is concrete enough, and ambitious enough, to guide your company’s progress for years. Collins writes that “With his very first dime store in 1945, Sam Walton set the BHAG to ‘make my little Newport store the best, most profitable in Arkansas within five years.’ He continued to set BHAGs, which continued to get larger and more audacious, as his company grew.
5. Commit to a “20-mile march” that you will bring you to your big hairy audacious goal. Collins makes the analogy to someone who is trying to walk across the county. The best approach, says Collins, is to attempt to travel the same distance every day. If you’re on a 2-mile march, says Collins, you don’t bolt 30 miles ahead when the weather is good. You go 20 miles. When the weather is bad, you can’t sit inside and complain – you still have make 20 miles.
What does this have to do with entrepreneurship? In his research, Collins found that companies that perform consistently do much better than those that do spectacularly one year and are feeble the next. That’s because if you overextend in good years, when opportunity appears to be everywhere, you may not have the resources to get through the lousy years. The 20-mile march is a metaphor for the milestone that you can reach day-in and day-out.
6. Place at least one really big bet in the next three years, based on having fired bullets first. No entrepreneur has unlimited resources, just as no small army has unlimited gunpowder (this metaphor may be dated, but you get the point). The best use of limited gunpowder, or resources, says Collins, is to fire bullets to ensure that your aim is calibrated properly and that you can indeed hit your target. Only when you’re sure of your ability to hit your target should you load lots of gunpowder into a cannonball and fire away. “Fire bullets to calibrate. Fire cannonballs to go big,” says Collins.
7. Practice productive paranoia. Collins says he fondly refers to his entrepreneurial subjects as PNFs, or paranoid neurotic freaks. “Successful companies have three to ten times the cash on their balance sheets as their peers even when they are very small,” says Collins. Or as one of the CEOs he studied said to him, “We’re very proud of the fact that we’ve predicted 11 of the past three recessions.”
How exactly can one practice productive paranoia? Collins recommends making a plan that will allow you to go for an entire year with no revenues, and still survive.
8. Get a high return on your next luck event. Collins says that both great and mediocre companies encounter the same amount of luck, good and bad. What matters, he says, is how well they’re able to capitalize on it. Collins refers to this as ‘return on luck.’ “How are you doing on luck?” he asks. “Have you turned your bad-luck events into a big part of what makes your company great? Are you squandering your good-luck events?”
9. Make a to-do list. “If you have more than three priorities, you don’t have any,” says Collins. For every major ‘to-do’ on your list, you should have a corresponding item that you will stop doing. The ‘stop-doing’ list.
10. Commit to a set of core values that you will want to build your enterprise on, without changing them, for 100 years.
“Kimberly Weisul is editor-at-large for Inc. Before joining Inc., she was a senior editor at BusinessWeek, where she spearheaded coverage of entrepreneurship and small business. She is also the co-founder of One Thing New. @weisul”