Jim Collins on how to build a great company while it’s small

Jim Collins is one of the most successful business thinkers, authors, and researchers of the modern era.

Earlier this year, he re-released his first book, Beyond Entrepreneurship, his most practical guide for people building up small businesses, written alongside his mentor William (Bill) Lazier in 1992.

In an interview with SmartCompany Plus, Collins shares his best advice for small business owners and entrepreneurs, and why he tells people obsessed with Silicon Valley to take a look at Australia.

The below responses have been edited for clarity and length.

Why people-picking skills are the biggest differentiator

It all starts with people. A great vision without great people is irrelevant.

I don’t care what stage you’re at, whether you’re a raw startup, partway down the road, an established big company. If you’re a leader in your environment your number one question is not what to do, where to go, it is who.

That is why disciplined people come first.

If you had to pick one thing, if you want to be outstanding, it’s not just about strategy, marketing, or tech skills.

You have to become exceptional at people decisions.

Then you can pick the right marketing person, the right strategy person.

Why he eschews interviews over experiences

All you know from somebody who interviews well, is that they interview well. They can make you feel good, and they can glow and they can pull you over with how charismatic they are. That doesn’t mean that when it’s really hard at the very last week of a 10 week journey, that they press down and do the hardest thing.

It’s like being a mountain climber. I can interview a partner to go mountain climbing, but how am I going to really know who I want on the end of the rope?

Life is not interviews. Life is decisions, pressure choices, judgment, how they work with other people, all the things that like you did an interview could never show you.

When I’m hiring researchers, I never interview them at first. I never do an interview, I might talk with them at the end of the process.

What I want to see is, they didn’t have a very good freshman year. But you know, what’s really interesting is they had a really stronger sophomore year. And then they got straight A’s in their junior year. And they are just knocking it out of the park in their senior year.

Now, this is a kid where the actual evidence, tangible, practical evidence, shows that when it was difficult, they recovered from it and got better. I would rather see that than have an interview.

Who was the captain of their sports team? Who was elected by their teammates? That tells you something.

Where small businesses go wrong with evaluating themselves

If you analyse how you’re doing, and equate the success of your startup or small business with the success of the specific idea you had to launch your company, that’s a misanalysis.

There’s a negative correlation between starting with a great idea, and building a great company. Starting a company with a great idea actually turns out to be a pretty bad idea.

Companies that became great often started with significant setbacks and failures. Sony started with a failed rice cooker, went to the second or third thing before moving to transistor radios. 3M started as a failed mine. HP’s first eight products failed.

If you have superb success early on, one of the great misanalysises is to think you were brilliant or good, when instead you were lucky.

And then because you think you were really good, you think that everything that you did led to that success, when you were just in the right place at the right time.

When your luck runs out, and you keep doing what you think made you successful, it turns around and bites you and kills you as a company.

If you always look at it and say any success we’ve had, we might have had more tailwinds, we might have had more luck than we deserved, we’d better always be analysing.

Then when the good conditions run out, we have the ability to persist on with the next thing. And the next thing after that.

The ultimate thing that you persist with is not a specific idea but the company you’re building, and the momentum machine. Amazon is far beyond selling books.

Why you should fire bullets, not cannonballs

What our research showed is how companies figure out how to make the decision about how best to deploy themselves.

Imagine you have a ship bearing down on you and you have a certain amount of gunpowder.

If you’re a small company, you have limited resources, capital, and taking on existing players you’re fairly vulnerable.

One approach is to say, we’re just going to pack all our gunpowder in a big cannonball. And we’re going to fire it at that ship and hope it hits. It sails out because the odds of your first hit succeeding are always low. Now you’ve fired all your gunpowder and you’re in trouble.

There’s another approach. You take a little bit of gunpowder and fire a bullet. It’s 30 degrees off. You fire another, and it’s 10 degrees off. Your third bullet hits.

When Intel was a tiny company they knew that they would be building a company in the world of microelectronics, but the question was what to do.

The founders gravitated towards memory chips, but didn’t know exactly what to do. They didn’t do that as a series of studies. They made one, and saw how it would do with customers. So they built three different types of memory chips (or three bullets).

Once they found the bullet that started to hit both in terms of that technology and what customers would actually want, they went all in and put their other options to the side.

It’s not studies. It’s bullets, actual practical bullets, followed by cannonballs. That’s what actually happens in the evolution of great companies.

What makes Australian companies successful overseas?

I think Australia has a marvelous entrepreneurial culture.

And the folks from Australia that I have spent time with, which have been building successful growth companies, they started in Australia.

There is something that allows them to get their flywheel turning in, in their home country.

When people aren’t paying attention to them in other parts of the world, they get the flywheel going.

And then when they go to the rest of the world, they’re really powerful and strong, because they’ve been able to build it on your big island.

And then when all of a sudden people wake up in other countries, and see something that’s become very successful, that’s come out of Australia, they’re often surprised.

Everybody thinks it’s all about Silicon Valley. I’m like, have you ever been to Australia? I’ve been very impressed with the ones that have come and spent time with me.