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Name: Built to Last
Rating: 4.5 (259 reviews)
Author: Jim Collins

Jim Collins

Successful Habits of Visionary Companies

4.5 (259 ratings)

19 mins

Topics

Strategy

Table of Contents

Built to Last
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Visionary companies can teach us through their enduring success.

So-called visionary companies have a lot to teach us. They are companies with long track-records for success and widely admired as the crown jewels of their industries. What’s more, their success is enduring – they prosper even as great leaders retire and individual hit-products become obsolete.

To properly study and learn from these companies, the authors first had to identify them by surveying hundreds of prominent CEOs for the names of companies they considered visionary. The 18 most commonly mentioned firms – including such venerable names as the Walt Disney Company, Marriott Hotels, and Merck – were included in the study. The visionary companies were then paired up with comparison companies: firms that shared similar products and markets but which, while not being outright poor performers, were called “visionary” far less often in the CEO survey.

Both groups of companies were then examined across their considerable life spans (the average founding date lay in the 1890s for both groups). Based on massive amounts of data from interviews, annual reports, financial statements, news articles and many other sources, all aspects of these corporations were studied, ranging from their ownership structures to their cultures.

To understand the extraordinary success of the visionary companies, consider this fact: if you had invested a dollar in their shares in 1926, that dollar would have been worth $6,356 by 1990. Compare that to $955 if you had invested in the comparison companies, and only $415 if you had invested in the general market, and you’ll see just how impressive the visionary companies’ performance is.

No wonder that all manner of Fortune 500 companies have been fascinated by the findings of this study.

Visionary companies can teach us through their enduring success.

Visionary companies are like machines that constantly produce great products and leaders.

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 are driven more by a core ideology than profits, but they still prosper.

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.”

Visionary companies preserve their core ideologies while relentlessly stimulating progress and improvement.

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.

Visionary companies use big hairy audacious goals to stimulate progress.

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 are almost cult-like – new recruits either thrive or leave.

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:

Visionary companies produce a continual stream of high-caliber leaders.

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.

Visionary companies stimulate evolutionary progress by encouraging experimentation.

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.

Visionary companies don’t just talk – they take concrete actions to implement their values.

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.

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What is Built to Last about?

Built to Last (1994) examines 18 extraordinary and venerable companies to discover what has made them prosper for decades, in some cases for nearly two centuries. This groundbreaking study reveals the simple but inspiring differences that set these visionary companies apart from their less successful competitors.

Built to Last is meant for every level of every organization, from CEOs to regular employees, and from Fortune 500 companies to start-ups and charitable foundations. The timeless advice uncovered in this book will help readers discover the importance of adhering to a core ideology while relentlessly stimulating progress.

Who should read Built to Last?

Anyone interested in how visionary companies have stayed successful for over a century
Anyone who wants to make their company, organization, department or team more purposeful
Anyone who wants to find tangible tools to drive progress, foster innovation or communicate values with their organization

About the Author

Jim Collins is an American author, lecturer and consultant, who, among other things, has taught at the Stanford University Graduate School of Business and is a frequent contributor to Fortune, Business Week and Harvard Business Review. His other book, Good to Great, has sold over four million copies.

Jerry I. Porras is an academic and business analyst. He is the Lane Professor Emeritus of Organizational Behavior and Change at the Stanford University Graduate School of Business. His primary interest lies in finding methods for aligning companies with their core purpose and values.

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