What Moving from Good to Great Means for CIOs Who Want to Lead

Jim Collins, author of best-selling business books Good to Great and (with Jerry Porras) Built to Last, is nearing completion of his latest research effort, a look at organizations that have thrived while operating in environments characterized by severe disruption. An avid rock climber, Collins uses the analogy of performing well high on a mountain, in an environment characterized by fast-moving and unpredictable forces. Collins believes that most leaders today feel they are metaphorically moving higher on the mountain, and notes that this might be especially true for CIOs. He and his research colleague, Morten Hansen, have been researching the question of why some companies prevail in such environments, while others fail to perform (or survive).

Collins shared some of his initial findings at the CIO Leadership Conference held April 29-May 1. After his talk, Collins spoke with CIO Senior Editor Stephanie Overby about what CIOs can learn from his research on leadership, including what he calls the "asymmetric risk" IT leaders must manage every day, and why CIOs are uniquely qualified to succeed in the CEO role.

CIO: You spend a lot of your time studying CEOs. At the CIO Leadership conference where you spoke earlier this year, you had the chance to spend some time with leading CIOs. What did you learn?

Collins: As we got to talking, I was really struck by the duality of risk and opportunity CIOs have to manage. On the one hand, a couple people talked about threats of cyberterrorism. I mean, this is real stuff — I had no idea how real. You add that to how dependent companies are on their information systems and technology systems — one CIO I spoke to said that it used to be if we went down for a few hours it was annoyance; now it's a catastrophe — and that's a huge burden. Man, this is one of those really, really tough jobs in life where every day that's a success, you're invisible. Yet the one day when something goes wrong, you become very visible. What a hard job when you think about it.

At the same time I was really struck by how CIOs are really energized by wanting to help push the organization forward, to do innovative things, to bring in things that advance the flywheel of business.

Thinking about how they deal with that duality is how I came up with the image of CIOs being like climbers. You don't want to just cower in your tent and never go up. That's not living. That's not really being a CIO. At the same time you don't want to make the one mistake that will kill you. That duality of putting yourself in a risky environment — going for the summit, going to try to do something bold and being really disciplined about protecting your systems, not making the one mistake that will bring us down. I wouldn't go so far as to say no other role in the business is like that. I don't know that. But it strikes me that this role is pretty far out on that curve.

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Is there increasing value in having the ability to manage what you call asymmetric risk?

As we study entire enterprises moving higher on the mountain, CEOs are increasingly managing asymmetric risk. Something happens and there's a stock meltdown or a company gets acquired or something bad happens and it instantly explodes in the 24-hour news media. That need to manage asymmetric risk will be increasingly a CEO requirement. CIOs have been trained in that. They live in that.

Yet, the leap from CIO to CEO is still not all that common.

I don't know if that will change. But let me share something from our Good to Great research. We look carefully at backgrounds of people who became key CEOs in companies during the eras we studied. A lot came from unusual backgrounds. Bill Allen, who was one of the greatest CEOs in history and brought Boeing back from the brink was a lawyer. Darwin Smith was a lawyer. Herb Kelleher at Southwest Airlines was a lawyer. David Maxwell was a lawyer. The most prevalent background in the best CEOs we studied was law. But how often do you hear of law as a path to the chief executive position?

But lawyers are very disciplined thinkers who also manage asymmetric risk. That's part of the nature of law. Now it may be rare that lawyers become CEOs, but when they do get in that role, their training has been very, very good and they have been exceptional. CIO training strikes me as potentially having some very good training for corporate leadership.

Do you have any advice for managing asymmetric risk?

In the research we're doing on prevailing in the face of disruption, we find that the ability to recognize and manage asymmetric risk to be a crucial capability. The companies that we've studied that have done really well in these environments are always squirreling away slack in their systems so they can absorb a shock. They're very conservative financially, which gives them options. They can always try to climb again another day. They never stretch themselves too thin or grow too fast, so that when the shocks come (and the shocks are going to come), they have built in shock absorbers. If you stretch yourself to the limit, you amplify your asymmetric risk.

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In Good to Great, you explored the incredible amount of effort it takes to begin to transform an organization. But you proposed that once it is started, the momentum builds like a flywheel. You're now doing some research on the downshift from "great" to "good". How difficult is it to sustain that momentum over time, particularly in times of great market shifts?

Our research indicates that the flywheel concept applies as much in times of change as in times of stability, perhaps even more so. Over the long course of history, a great company is built by a series of good decisions executed with supreme excellence, accumulating one on top of another over a long period of time. No decision or event, no matter how big, accounts for more than a small portion of the total outcome. Greatness is a cumulative process, even in times of dramatic change. And never forget: the most important flywheel decisions are people decisions. If you get the right people, they can adapt to a changing world.

The very nature of our research method — studying those that attained and sustained greatness in contrast to those in similar circumstances that failed to become great (or failed to sustain it) reduces the role of circumstance in explaining outcomes. If one company rises and the other falls, yet they both have similar circumstances at the start of the inflection, then the answer cannot be circumstance.

My colleague Morten Hansen and I are nearing completion of a six-year research effort studying companies that went from startup to greatness in environments characterized by turbulent disruption. We've deliberately selected companies in the most severely turbulent industries, using the following climbing analogy: If you wake up in the security of base camp and a storm moves in, you'll probably be fine. But if you find yourself at 27,000 feet as a vulnerable little speck on the side of Mount Everest, where the storms are bigger, faster moving, inherently unpredictable, and the environment less forgiving, a storm just might kill you.

Our research examines companies that prevailed in such environments in contrast to those that did not prevail in the same brutal, turbulent, rapidly changing environments. No matter how we slice it, greatness — creating it and sustaining it — is a function first and foremost of conscious choice and discipline, not circumstance.

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What implication does that have for individual leaders, like the CIO?

Focus on building your organization into a pocket of greatness. Those who rose to senior leadership in the good-to-great companies focused first and foremost on delivering exceptional results, building the best accounting department or law department or whatever they had responsibility for, and letting those results speak. They became chief executive because they proved themselves as Level 5 leaders within their organizations, and others took notice. (Editor's note: In Good to Great, Collins defines five levels of leadership, from level one, the highly capable individual, to the level-five executive, who is capable of building enduring greatness through a paradoxical blend of personal humility and professional will.) And even if they didn't become CEO, they became key members of a Level 5 executive team. A Level 5 team lives by the idea that "no matter how much we achieve, we are always only good relative to what we can do next." One of the keys to sustained performance is to remain productively neurotic about how you could lose your position, about how you need to make yourself stronger tomorrow than you were today as a hedge against an uncertain future, about the need to be aware of the brutal facts. Perhaps CIOs can play an especially helpful role in tracking and presenting data, facts and trend lines — indicators of concern — so that the brutal facts might be confronted long before events mushroom into a significant setback.

Based on your interaction with CIOs, which you warn is relatively limited, you described IT leaders in your keynote speech as socially adept introverts. Why is that worth noting?

I'm a socially adept introvert.

We have a mythology of leadership that leadership and personality are the same thing. They're really not. Yes, some leaders are very extroverted. Some are very charismatic. There are some advantages to being charismatic, but here's the danger: It's very dangerous to be charismatic and wrong. If you're wrong and charismatic, you can convince everyone else you're right, which isn't in your best interest.

Our work has found that that tends to be more of a liability. The executives we studied were very good listeners, very good at asking questions. They weren't necessarily good at giving speeches or standing up in front of a room, although some learned well how to do this despite their shy nature.

If you come from a background that is more analytic, it's likely not your nature to be the extrovert. And it's worthwhile noting that many of the very best leaders and chief executives are exactly like that.

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You say that successful CIOs are probably good at "legislative leadership." What do you mean by that?

It came from some work we did in the social services sectors (education, hospitals, city management, universities) as opposed to corporations. What we found is that, unlike in business, you have leaders who get things done without concentrated power. It's like a senator, who is one of 100, who has to somehow figure out how to assemble points of power to get something done. Whereas if you're Wal-Mart founder] Sam Walton or some other CEO of a public company, you have enough to power to decide things on your own.

As I listened to CIOs talk, it began to dawn on me that if you don't have that concentrated executive power, the legislative skill set might be the same as we see in the social sector. You don't have the power to make something happen so you have to have the legislative ability to see where the points of power are and leverage them. How do you identify the pools of power and coalesce them to get to a decision in that direction even if it's not your decision to make? That's a legislative skill set.

One of the interesting things about legislative power is that people have to trust your motivations. They know you're arguing a point, but you're looking for the best overall outcome. Frances Hesselbein of the Girl Scouts did a lot of things to make outcomes happen. But everyone knew in the end that Frances would bleed green. It was all about the Girl Scouts. The more someone is in it for larger outcomes, the more legislative influence they have.

A legislative leader is always asking what's best for the organization and thinking about the multi-variant ways they can connect people to their vision. It's very artful and nuanced. The interesting thing is that most CEOs are now facing an increasingly diffuse power map, too. The pure power for the CEO of a public company is shrinking, with the increased power of boards, Sarbanes-Oxley, shareholders. They have to acquire more legislative skills to complement their executive power. Those who learn how to yield legislative power — like CIOs — might be well suited to those roles.

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Two of the biggest concerns for most CIOs at any given point in time are usually shrinking budgets and finding the right people. You've always said that people trump money every time.

If you look at it through an entrepreneurial lens, environments characterized by limited resources, what becomes very clear is that those who build the better ones understood that every seat on their minibus was too precious. It was a small number of seats in a scary environment while the company was vulnerable. But it was far more important to them to put as much energy as possible into putting the right people in the right seats. If I can only have three seats, all of whom are right people, that's fine. I'll get more done with three of the right people than if I were able to double my budget and have six people, three of whom aren't the right people.

The more uncertain and more dangerous our world, the more important [finding the right people] is. Using that climbing analogy, it's more important who your partner is on the end of the rope than whether you have the best gear. If you really think about it, what's really going to help you? People who can adapt to setbacks, adapt to resource constraints, adapt to uncertainty. One company we researched for Good to Great, [steel products maker] Nucor, said the key is we hire five, work them like 10 and pay them like eight.

CIOs are extremely concerned with motivating employees. But you've said, in as many words, that motivating people is a waste of time.

Our executives didn't spend a lot of time motivating people. They really didn't . They understood that the right people really are self-motivated. The real question is not doing the stupid thing that will de-motivate them. In a way, it's disrespectful to say I will motivate you. It's actually saying that you aren't a very motivated person. The employee is saying, excuse me, what I need is guidance and coaching and development, not motivation.

How does your concept of having the right people in the right seats apply when you are outsourcing work to a third party and have less connection to and control over people issues?

I just don't know. If it's a tight partnership, you still have some say in picking the right who's. How all that changes when you're outsourcing, I don't have an empirical data on. I'll say this: You can subcontract a lot of things, but you should never subcontract your thinking. In Good to Great, we found that the great companies who used consultants did not want answers from their consultants, they wanted data. They didn't want their consultants to do the thinking for them.

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E-mail Senior Editor Stephanie Overby at soverby@cio.com.