In one of the strangest names I’ve seen applied to a business principle, Jim Collins and Morten Hansen describe three key dimensions of what he calls "Productive Paranoia" in their book Great by Choice with the following chapter title: Leading Above the Death Line

The death line is the point that most people don't survive when climbing extremely high mountain peaks. Keep in mind that the book is studying businesses that have a "10X" performance. That is, they have 10 times better returns than comparison companies. Therefore these leadership principles are describer the leader as a "10Xer."

The authors use real stories of climbing expeditions to illustrate the concept of productive paranoia. Both were attempts at Mt. Everest in 1996; one succeeded and the other ended in tragedy. What do productively paranoid leaders do?

  1. They build cash reserves and buffers to prepare for unexpected events and bad luck before they happen.
  2. They bound three kinds of risk – Death Line risk, Asymmetric risk, and Encontrollable risk.
  3. They zoom out, then zoom in remaining hyper vigilant to sense changing conditions and respond effectively.

Let's take a closer look at each one.

Building Cash Reserves

10Xers understand that they cannot reliably and consistently predict future events, so they prepare obsessively - ahead of time, all the time – for what they cannot possibly predict. They assume that a series of bad events can hit them in quick succession, unexpectedly, at any time.

It’s what you do before the storm hits – the decisions and disciplines and buffers and shock absorbers already in place – that matters most in determining whether your enterprise pulls ahead, falls behind, or dies when the storm hits.

10Xers build buffers and shock absorbers far beyond the norm of what other do. The 10X companies they studied carried 3 to 10 times the ration of cash to assets relative to the median of what most companies carry and maintained more conservative balance sheets than the comparison companies throughout their histories, even when they were small enterprises.

Bounding 3 Kinds of Risks

10X cases are extremely prudent in how they approach and manage risk, paying special attention to three categories of risk:

  1. Death line risk (risk which can kill or severely damage the enterprise)
  2. Asymmetric risk (risk in which the downside dwarfs the upside)
  3. Uncontrollable risk (risk which cannot be controlled or managed)

The emphasis in all of these risks is their ability to scan the environment and give appropriate amounts of time and energy to their management. 

Zooming Out, Zooming In 

10Xers zoom out, and then zoom in. They focus on their objectives and sense changes in their environment; they push for perfect execution and adjust to changing conditions. When they sense danger, they immediately zoom out to consider how quickly a threat is approaching and whether it calls for a change in plans. Then they zoom in, refocusing their energies into executing objectives.

While you might not face the same circumstances in the church world as in the business world (especially in terms of generating revenue), you have a risk profile just as any business does.

Take a look at the environment around you – how much time before the risk profile changes?

What have you done to get ready for it?

Topics: Date: Nov 30, 1999 Tags: