SMaC Recipe is a concept developed in the book Great by Choice. A SMaC recipe is a set of durable operating practices that creates a replicable, consistent success formula. The word “SMaC” stands for Specific, Methodical, and Consistent. A solid SMaC recipe is the operating code for turning strategic concepts into reality, a set of practices more enduring than mere tactics.
It is like the U.S. Constitution, both durable and practical, yet also amendable. Great companies and social enterprises change their SMaC recipe no more than about 20 percent per decade, so a key SMaC question is, What is the right 20 percent to change?
In this episode, Kevin Lawrence and Brad Giles discuss why SMaC recipes are important, and why they help companies maintain discipline. Also, they provide several SMaC examples and outline how to build a SMaC recipe.
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Brad Giles 00:00
Welcome to the Growth Whisperers where everything we talk about is building enduring great companies. My name is Brad Giles, and today I’m joined with my co host, Kevin Lawrence. Kev, how’re you doing today?
Kevin Lawrence 00:25
Doing great, Brad. I just love doing the show, you know. It gives us a chance to put our heads together and think about stuff that really matters for our clients. It’s kinda like we’re doing like a mini refresher, and even some, some in depth thinking about different aspects of our work on a weekly basis. And I’m, I’m really enjoying it.
Brad Giles 00:53
Yeah, good. Good to hear. I’m enjoying it too. It’s good stuff. So as always, we’d like to start with a word or phrase of the day, Kev, what do you got today?
Kevin Lawrence 01:04
Huh, you know, I didn’t even think about it. I’m thinking about it as we speak. And I think so it’s gonna be a great one. It might not be an original one. It could be an inspiring one. Do you want me to go? The word is opposite. So conventional wisdom and conventional thinking takes you down a certain road. And it gives you more consistent or predictable results to what other people are getting. Sometimes doing the opposite is a really powerful technique. Recently, we had at the racetrack that remembers that car racetrack when there was a big annual event. And it was going to be in general, it’s good. And a bunch of us decided to make it a costume party, even though it wasn’t. And we all went in costume and had a riot. So it was the opposite of what everyone else did. Seems like we may have been the people having the most fun at the whole event. And it was an amazing time. But it was kind of you know, it was thinking the opposite going not against the grain in an aggressive or abrasive way. It was just everyone’s going down one way we did basically the exact opposite. And in our minds got notably better results. And so it reminds me in the business of how we ended up being too Same, same and like everyone else. And as what could you do this the opposite? And potentially be better or at least more fun?
Brad Giles 02:40
Well, mine is replace busy with stupid. I think I might have said that maybe 50 episodes ago, I think you did. But you know, I’ve been very busy. For a whole range of reasons. Most of which is self inflicted. So whenever you’re saying the context for that very quickly is that you might meet someone and they’ll say hi, how are you doing? And the response would be poor. I’m pretty busy. So you replace busy with stupid Oh, I’m pretty stupid. Well, that hurts.
Kevin Lawrence 03:29
It is but it’s a great it is a great one. I remember hearing something similar Brad. It was one of the industrialists, like Henry Ford. And he said, you know, back in the days that if a man would be you know, today be a person. But if a person can’t do their job in 40 hours a week, they’re incompetent. Now, I’ve always held that as a benchmark. And an aspiration. I just, you know, the hard part is I can make all kinds of excuses, maybe, but you know, I am very busy. And I like to be busy. You know, I’m one of these people, I don’t like to sit around, I like to do stuff. I just got to make sure I balance off the doing the work stuff, and the doing this stuff with my family and my friends and other things. So that and that’s why I wrote a book and that’s why my mom decided that the concept of work life balance is silly. That’s a whole other story. But I like that busy is stupid. And replace busy with stupid, replace busy with stupid, and do the opposite of what everyone else is doing. Which is similar train of thinking. Awesome. Excellent. So what the heck are we talking about today, Brad?
Kevin Lawrence 04:41
Oh, tell you what, I’ve said this before. But these we’re gonna have a cooking class.
Brad Giles 04:48
It’s time I’m excited. We’re talking about the SMAC recipe right, the specific, methodical and consistent recipe for success. This is the thing that gets a lot of leadership team members excited because it’s like, hang on, once they understand the concept, hang on. If we can stick to this stuff, we are destined to succeed.
Brad Giles 05:14
It’s an awesome, awesome concept.
Kevin Lawrence 05:17
Well, speaking of the mind, my term was opposite. I’m quite thrilled that you get excited by coming up with a recipe for discipline. I don’t know that the companies I work with get excited about it. But you know, you have an opposite view. And I appreciate your opposite view. It’s, it’s something you got to do, like, you know, it’s almost like figuring out the guardrails or whatever it happens to be, but I, I, maybe it’s your enthusiasm about it that gets people excited about it.
Brad Giles 05:50
No, it’s the results that we produce that get people excited about.
Kevin Lawrence 05:54
Very good. All right, proving that you are not indeed stupid. Excellent. All right. So let’s talk about the SMAC list. It is a really powerful piece from his book, right by choice. I love it. And the companies that we’ve done this with it is a guideline. And right now in turbulent times, we go back to it, even even even one of the companies that I work with, I know the smack list from a similar company, and it was about the balance sheet. And then I saw his and I was and this is going back almost a year ago, whoa, buddy, this ain’t gonna work. I see how you’re running your balance sheet. And my clients in the identical industry has a smack list directly related to balance sheet and you are blowing it up. And so that created a great conversation which created notable balance sheet improvements and a nice last nine months. But it was, you know, the similar business had already figured it out and he hadn’t and you didn’t want him to learn the hard way. Because you don’t want to get smack. You know, we can always say this backlist, it’s from lessons that you get smacked with.
Brad Giles 07:07
Yeah, yeah. Well, that’s certainly a part of it. It’s about your failures and disappointments. This is jumping forward a little bit and your repeatable successes. So we’re analyzing with thinking about those things. So maybe let’s start off and, and let’s see how Jim Collins, the founder of the concept describes it. SMAC recipe is a concept developed in the book Great by Choice. A SMAC recipe is a set of durable operating practices that creates a record replicable, consistent success formula. The word smac stands for specific, methodical and consistent. A solid smack recipe is the operating code for turning strategic concepts into reality, a set of practices more enduring than mere tactics. It is like the US Constitution, both durable and practical, and also amenable great companies and social media amendable amendable amendable. Thank you very much. Great companies and social enterprises change this SMAC recipe no more than about 20% per decade. So a key SMAC question is, what is the right 20% To change? So that’s Jim Collins definition.
Kevin Lawrence 08:25
And if you want to read more on that, you can read that right? That’s right off his site. He’s got some further information on SMAC. And obviously read the book Great by Choice where you can get a lot more in depth. But it’s a very simple, powerful concept aside that helps you to stay in your lane and not get yourself in trouble by doing a bunch of things that you should, I wouldn’t say stay in your lane, stay focused and discipline on the things that really matter.
Brad Giles 08:54
That’s the problem, right? Distraction. That’s it.
Kevin Lawrence 08:57
It is it’s dangerous. So when Great by Choice he studied, and when he called 10x ers. Companies that beat their index by 10 times during an unstable period. So he was looking for these people that thrives in really riskier times.
Brad Giles 09:14
Yeah. So stable. We’re going into an unstable period. Now, if you could beat your companies or your competitors or your industry, but 10 times in this unstable period. That’s why Great by Choice matters.
Kevin Lawrence 09:32
And that’s why most of our clients are very excited about this economic shift that we’re experiencing, because it opens up opportunities like crazy for good operating companies or excellent operating companies, because the ones that aren’t running that will get really wobbly, which creates more opportunities for us. So basically, they outperform their peers by more than 30 to one that’s the textures that are kind of studied, and that this principle was found in and Brad, you want to explain how it relates to the hedgehog because the Hedgehog is one of the other powerful concepts. And they believe that was good to great or built to last.
Brad Giles 10:13
Yeah, so Jim’s got a really good definition of this smac as it relates to the hedgehog. So, the hedgehog Think about it like this hedgehog is very high level, smac is very specific. And when you build them both, they should connect really well together. So this is Jim’s definition of a hedgehog concept is a simple crystalline concept that flows from a deep understanding about the intersection of purpose or your core purpose, what you can be the best at and the profit per X or the driver of your economic engine. Okay, so imagine the Venn diagram we’ve done episodes on the hedgehog before. Imagine a Venn diagram. In one circle is your core purpose in another circle is your profit parex Or what is the single economic driver of your business. And then in the third circle is what you can be the best at the Hedgehog is at the center of that is very high level concept. On the other hand, a smack is the code for translating a high level hedgehog concept into specific action and for keeping an organization focused in the same direction, thereby building flywheel momentum.
Kevin Lawrence 11:34
Awesome. So how are they built? Interesting, I just looked over a second. One of the companies that work with him doing some work with this week just sent me their smack list. Just it’s a great time. Yeah. So how are they built? Well, you analyze all the stuff that’s gone right? And gone wrong in good times, and bad times. And then you build this list. It’s like a playbook. So in one of the companies that I work with the Father, their father, there’s three awesome brothers that I work with a company called Ashiana. In India, just a shout out to Michelle Varun and conqueror. And their wonderful father wound on Gupta founded the business and taught them a bunch of principles over the year of how to manage their business well, and how to look, they have been successful long term, we took his wisdom. Through them, I never got to meet the man, although he’s a wonderful man. Everything they told me about him, and we built the smack list. It’s basically what would dad say to do? Right to make sure that the business endured over the long term. And it’s, it’s, it’s some great stuff. And if we look at their smac, and I’m gonna give you specifics, but you know, we talk about, you know, that they do multi tower developments all around India, well, the first tower needs to be sold to a certain percentage before you start building the second. And in real estate development, people get excited and get ahead of themselves, and you might get the first 120 5% sold, and well, let’s get going on the second one. Well, that’s a surefire way to get in trouble. They talk about the other types of real estate that they don’t get into. They talk about leverage on their balance sheet. They talk about how much cash to have on hand at all times. They also talked about the fact that they don’t rezone land, they buy land that’s ready to go, and they don’t land bank, some companies have a strategy to have land for 50 years. That is, that’s called land banking, it’s a different strategy, they don’t do it. So it’s even taught, it’s also called burning cash. It is, but if you have a lot of it, and you can buy it at 1000 bucks an acre, and then sell it at a million, it can be a beautiful model, but it consumes a lot. Yeah. And they also talk about the fact that they always maintain their properties forever, whatever they build, they always take care of it, even though it’s sold. And for those in the West. It’s like you know, strata titled properties, but they still maintain it. So they can have a list of them and give you all the details. But they have this the stuff that they learn, and we refer back to it all the time. And in turbulent times, we go and look at it and we stick to it. And if there’s a question that comes up against it, like it violates the smack anyways, they’re, they’ve done a beautiful job with it. But an example of this is, you know, this is a company has been around for decades. And they want it to stay for decades. Yeah. And so it’s keeping the wisdom of all of us and it’s their own lessons but lessons that they learned from their father and their father learned in his ears all into the DNA of the company so they stay smart.
Brad Giles 14:54
So SMAC recipes are built, analyzing your failures and discipline. moments and your repeatable successes, not the one offs not like, you know, we won this award or we got lucky here. It’s the repeatable successes. So that then culminates in a list of about eight to 10 items. And it’s like, it’s, it’s like we always and we never, we always do this or we do that. So we want to give you a couple of examples here as well. So Southwest Airlines is a airline that we would always backup before you get in.
Kevin Lawrence 15:29
It’s also so that when people come in with awesome new ideas, don’t kill the business. I mean, if you look at Southwest, like they’re a freakishly successful business, but they’re also freakishly different than every other freaking airline out there on almost every way you could look at them. It’s just everyone’s ears are good. It’s, it’s to protect you from new ideas as much as it is bad decisions or dangerous decisions.
Brad Giles 16:01
Yeah. And we’ll get back to your property client that you mentioned, any one of those things, people could get excited about that. And it’s different this time, or it’s in that in that geography, things aren’t like that, or this is a once in a lifetime opportunity, we’ve got to jump on it. And these are the things that pop up in the moment or without the wisdom of, you know, the lived experience, perhaps or when we’ve forgotten the lived experience, we’ve forgotten the pain. These are the things that endure and keep us on the straight and narrow. Yep, they really are. And remember, this is deeply connected to their hedgehog, and all of the other parts of their values and their purpose, and everything else that they do. So I don’t think we’re going to go through all 10 of them. But I just want to pick out a few. So the first one would be utilize the 737 as our primary aircraft for 10 to 12 years. We don’t use other aircraft, it would be so tempting. But we stick to the 737. All of our mechanics, all of our people know those in those aircraft inside out. We only have to carry certain spares. There’s so many things that come out of that. And you know, it matters. The second one I’ll go through is continued high aircraft utilization, and quick turns 10 minutes in most cases.
Kevin Lawrence 17:49
10 minutes. It’s insane how quick that they can do that.
Brad Giles 17:57
Yeah. So when you’re making a new decision to bring on a new software, or a new geography or whatever it might be, can we do it in 10 minutes, can we still maintain our turnarounds in 10 minutes.
Kevin Lawrence 18:11
That’s why they don’t have reserved seating, because it takes too long to mess around. You just go in like you’re getting on a bus. Like everything they do practically comes down to that one point is it’s quick turnaround, maximizing the part of their strategy is called wheels up keeping the plane in the air. And that’s what they’re so damn different than every other airline.
Brad Giles 18:33
I get so excited about these disciplines. The next one, continued low fares and high frequency of service. That’s pretty simple. But this is the one I love, stay out of food services.
Kevin Lawrence 18:49
And you know, there’s going to have been many executives over there as well you know, the margin we can make on that food. And then we’d be more premium airline. And then we could compete with the other guys. You know what I learned about Herb Kelleher, the founder, and he was at one of his shareholder meetings and people were comparing the rates of Southwest compared to other airlines. And they’re saying that we should be charging more because we were cheaper than other people by way too much. And he’s like, in the nicest way possible. Sir. I don’t think you understand our business. The airlines aren’t our competition. Greyhound bus lines is. And in his mind, they were a Greyhound bus with wings. That was the business model. Everything is just like Greyhound but you strap wings on that thing. And everyone else wanted to be a big boy or big girl airline. And he just didn’t Greyhound doesn’t serve food they never have and they probably never will.
Brad Giles 19:47
Yeah. Next one, very quickly retaining Texas as our number one priority and only go into state if high density short haul markets are available to us. It’s very, very clear when You’re breaching that rule, right? Yep. It really is. So that’s the smack one. Obviously, I think we mentioned earlier, it typically only changes less than 20% per decade. So this is stuck around for a very long time for didn’t give you another amplifier.
Kevin Lawrence 20:19
I think in southwestern history they’ve been around. Think since the 70s. And correct me if I’m wrong, they’ve been around a long, long time. Incredible profitability, quarter. I mean, amazing, amazing, amazing performance. borderlinx, they’re still running 730 sevens is the only thing they run. Again, just sticking to the simple basics. All right, continue on.
Brad Giles 20:43
It’s the distractions that ruin us. So here’s another example a company called Connect wise I T. I love this SMac. Okay, so here’s four key points out of their 10 points, SMac. So the first one is ces there it right system engineers must be 80% billable. Now I used to own it company. I know how important that is, right? That is everything. If you can’t get your people to a certain billable amount, and get them to stay there, everything falls apart. Second one, we will sell hardware with a 20% margin target, you can imagine how much grief they would have had, you bet you don’t understand this is a big opportunity, we need to sell it at 5%. Or this is what the company put me the competition to doing. This is the price we’re gonna have to go in at 5% to win that deal. Next one, this is probably my favorite smac item of all of this macro items. I love it. We don’t take on doctors or lawyers as clients. Can you imagine the grief that they have had to put that as a smac item?
Kevin Lawrence 22:00
I love to know more, it’s probably not appropriate. But I’d love to know more.
Brad Giles 22:04
I don’t have anything against doctors or lawyers. But in their company, they obviously have had a lot of failures and disappointments in that arena. And so they’ve said, This is what we don’t do.
Kevin Lawrence 22:17
I have another client, another client – one company they work with loves to work with lawyers, it’s one of their key customers of another company work with that just understands the complexities of dealing with doctors, they work with them. Well, it’s a core customer. And it’s wonderful and hard because again, but they all have their challenges, but they it’s about knowing your customer and who it isn’t.
Brad Giles 22:43
I love it. This is how we win this. Remember, this is the recipe for success, we will not be living the recipe for success if we take on doctors or lawyers as clients. And then the last one from connect wise it, we won’t take on clients that have an IT department. Smart, smart, like, we might be tempted, we can sell them some hardware or they only want this little bit, we can’t produce the greatest success. So then when you add think about all of the components that would make up a smac. If you stick to it, great successes happens. But also if you regularly revisit it, let’s say quarterly, it’s going to tell you or prompt you to ask, Hey, Kev, why are we working with doctors, like we’ve got four doctors clients, and our spec says that we don’t work with clients, I must have so many conversations on this.
Kevin Lawrence 23:41
If we’re unsure about a decision, we run it through the flywheel to make sure it’ll add power to the flywheel. And then we run it through the smac months maximum circle run up through the smac to make sure that it’s consistent with the smack. Those are two points that help us to make good decisions amongst others. Those are two filters to help us to make good decisions. Yeah.
Brad Giles 24:03
So then how often do this max change? We mentioned the 20% earlier, but one example here was Intel, they make computer chips. So they only had one change in 1985. And very quickly the story there is that the Japanese competitors had started to dominate memory chips. And the founders of Intel came into a board meeting and they just said off the cuff. Well, if we were new to this company, what would we do and the responses would shut down memory chips tomorrow. And then that prompted them to change their snack recipe because the market had changed significantly but the point and then they shifted to focus on micro processes. But the point there is that we sometimes we have to change but not very often.
Kevin Lawrence 24:58
Yeah, and not very much Yeah, yeah, it’s basically there’s a massive new insight that we’ve had through the process. So it’s a great thing, a tool to have as the guardrails for your most important decisions, and basically principles that you stick by that allow you to be enduring and continue on your march towards greatness, to great, great thing, the smack recipe, my little takeaway is, it’s a list of all the things that have smacked you hard. And you’ve learned the hard way in business, and you don’t want to repeat. So just to do a quick review, we talked about the smack list concept from Jim Collins. Thank you, Jim, for your awesome research that finds these principles that we can use a very simple, simple tool with a great name came out of studying those most successful companies in turbulent times, we talked about how the Hedgehog is critical to understanding the core of your business. And the SMAC is almost the guidelines of this principles to stick to your hedgehog or bring your hedgehog to life. And, and make sure that you’re doing the right things that in the end can help to build momentum in your flywheel and not screw it up. And they’re built from all of our lessons that we talked about, we talked about the Southwest mark, and there are key things, a couple of other smacks that we don’t want from real estate one from it. And, and then Brad talked about how you know, they don’t change, maybe 20%, a decade, not much at all, and then just change when you get another big oopsie, or a big lesson about something that you want to tweak in your model. So great, Brad, I just love it. You know, when it’s making me think of one client that we work with that would probably benefit from this. And we probably need to put that on the agenda to get this done.
Brad Giles 26:42
Good to hear. Yeah.
Kevin Lawrence 26:44
So thanks for listening. This has been the Growth Whisperers podcast, Brad and I love sharing the learnings that we have from great thought leaders like Jim Collins and the wonderful companies that we work with around the world that implement these principles and get their insights and traction from it. To subscribe, please subscribe if you haven’t already to wherever you listen to podcasts. And even better yet, share with some friends. What other entrepreneurs or leaders do you know that you can share this with and rate it if you feel like it today? For the YouTube version, go to youtube.com Search the growth whispers it’s there you can watch us as we’re having our discussions. See some of the hand signals between us at times. And Brad and I both have newsletters. We put very thorough newsletters out on a weekly basis to all the people that we interact with. And we have other great resources on our websites. Brad’s is evolution partners.com.au and ours is Lawrence and co.com. Hope you have an awesome week. And if you don’t have your smac list, put it together. Have a great one.