Built to Last summary

Contrary to what most people believe, the success of a visionary company is not dependent on great ideas.

The founder of Sony, for example, had no specific idea of what products his company would make. He actually held a brainstorming session after founding the company to evaluate business ideas ranging from sweetened bean-paste to miniature-golf equipment.

Visionary companies have a higher purpose for their existence than to merely chase profits. Together with the companies’ core values – enduring tenets that guide their every decision – this purpose forms their core ideologies: a set of stable principles that guides the company through generations, much like the “truths” of the American Declaration of Independence.

Consider for example the pharmaceutical company Johnson & Johnson (J&J). In 1935, the CEO, Robert W. Johnson Jr., wrote out the company’s core ideology in a document called “Our Credo,” which listed the company’s responsibilities: first to their customers, second to their employees and so forth. Finally, fifth and last on the list, after all the other responsibilities had been fulfilled, Johnson said that shareholders should receive “a fair return.”

The real heart of what makes visionary companies so successful is that while they jealously guard the permanence of their core ideologies, the manifestations of that core ideology are always open for change and progress. For example, Wal-Mart’s drive to “exceed customer expectations” is a stable element of its core ideology, but the customer-greeters at the entrance to their stores are a practice that can change. Similarly, Boeing’s core ideology is to be a pioneer in the field of aviation, but building jumbo jets is a manifestation of that ideology that can change.

This flexibility demonstrates how visionary companies refuse to abide by the so-called tyranny of the OR, whereby a company must choose between staying true to its core ideology or stimulating progress. Instead, visionary companies use the genius of the AND – experimenting and developing – while still adhering to their core ideologies.

To drive progress, visionary companies often set themselves extremely bold objectives – so-called big hairy audacious goals (BHAGs) – to which they commit utterly and completely. BHAGs are so ambitious that they often seem unrealistic, especially to outsiders. Nevertheless, they’re also clear and tangible enough to energize and focus the organization.

A well-known example of a non-corporate BHAG is the one set by John F. Kennedy in 1961 when he proclaimed that the U.S. would take a man to the moon and back safely by the end of the decade. At the time, this was an almost ludicrously bold commitment, but it did get the U.S. moving vigorously forward.

Visionary organizations pursue their core ideologies so single-mindedly that their corporate cultures are almost cult-like. For example, new employees quickly find themselves socializing primarily with their colleagues, and they are encouraged to be secretive about the inner workings of their companies.

Employees often become completely immersed in the core ideology. Consider IBM, for example, where future managers in training would rise and sing songs from an IBM songbook:

While the visionary companies studied often had outstanding CEOs at their helm at one time or another, what was even more impressive was their ability to continually produce such high-quality leaders.

The organizations focused hard on cultivating managerial talent within the company so that new leaders could be counted on to continue in line with the company’s core ideology. At the same time, visionary companies engaged in timely succession-planning to ensure continuity in leadership even if something unexpected were to happen.

Charles Darwin discovered that evolution is a series of successful “experiments” in which slight variations are introduced to a species and the strongest new variants survive. Similarly, the visionary companies studied understood the need to stimulate a similar evolutionary progress within their businesses. They encouraged their employees and management to experiment with new ideas, products and practices, some of which became great successes.

Consider for example J&J’s famous Band-Aids. They were born when an employee put together some surgical tape and gauze to quickly bandage his wife’s fingers after she accidentally cut herself with a kitchen knife. When he mentioned the idea to the J&J marketing department, they embraced it and eventually, Band-Aid products became the company’s best-selling category.

While many companies claim to adhere to idealistic values, encourage experimentation or embrace constant progress, very little is seen in practice. The visionary companies studied, on the other hand, managed to translate their values into reality by creating concrete mechanisms that affected the daily lives and decisions of employees.

3M did not merely say, “We want our employees to be more innovative.” Instead, it implemented several mechanisms to encourage this idea, one example was allowing employees to use 15 percent of their time on pet projects and dictating that 30 percent of each division’s annual sales must come from products less than four years old.