Jim Collins and Morten Hansen have written a book titled, Great By Choice in which they explore three behaviors that allow companies and organizations to thrive in chaotic and uncertain environments. I wrote about the first behavior, FANATIC DISCIPLINE, and the second behavior, EMPIRICAL CREATIVITY. In this post I’ll tackle the third core behavior employed by what they call “10x companies”: PRODUCTIVE PARANOIA.
Collins and Hansen make it clear: “The only mistakes you can learn from are the ones you survive” (p. 91). The idea of Productive Paranoia is not for leaders to walk around scared, afraid to make decisions and suspiciously paranoid about their employees. Rather, the authors note that leaders in the 10x companies constantly ask “What If.” They state, “The 10x winners in our research always assumed that conditions can–and often do–unexpectedly change, violently and fast. They were hypersensitive to changing conditions, continually asking, ‘What if?’” (p. 91)
Collins and Hansen examine three dimensions of productive paranoia employed by 10x organizations:
1. Build Cash Reserves and Buffers - Companies rarely hoard cash but rather deploy it, working hard to take advantage of new opportunities. However, the 10x companies were careful to build cash reserves and create a buffer against unpredictable environments. They were careful to prepare for the worst before it happened. This was a pattern since the early days of the 10x companies. Collins and Hansen observe: