Introduction
In the business world, some companies stand out from the rest. These are the organizations that have not only achieved great success but have managed to sustain it over decades, sometimes even centuries. These are the visionary companies, and they have a lot to teach us about what it takes to build an enduring, successful business.
"Built to Last" by Jim Collins is a groundbreaking book that delves into the secrets of these extraordinary companies. Through extensive research and analysis, Collins and his team identified 18 visionary companies and compared them with their less successful counterparts to uncover the principles that set them apart.
This book isn't just another collection of business tips or strategies. It's a deep dive into the DNA of truly exceptional organizations, revealing the timeless principles that have allowed them to thrive through changing markets, technologies, and leadership. Whether you're an entrepreneur, a business leader, or simply someone interested in what makes great companies tick, "Built to Last" offers valuable insights that can transform the way you think about business and success.
The Power of Visionary Companies
Enduring Success
One of the most striking things about visionary companies is their ability to succeed over the long haul. These aren't flash-in-the-pan successes that burn bright and fade away. Instead, they're organizations that have stood the test of time, often outlasting multiple generations of leadership and weathering significant changes in their industries.
To put this success into perspective, consider this: if you had invested a single dollar in a visionary company back in 1926, by 1990, that dollar would have grown to an astonishing $6,356. Compare that to $955 for the comparison companies and a mere $415 for the general market, and you start to see just how exceptional these visionary companies truly are.
This kind of enduring success isn't a matter of luck or circumstance. It's the result of specific principles and practices that these companies have embraced and refined over time. And that's exactly what "Built to Last" sets out to uncover.
Beyond Great Ideas and Charismatic Leaders
One of the most surprising findings of the research is that visionary companies don't rely on great ideas or charismatic leaders for their success. In fact, many of these companies started without a clear product idea at all.
Take Sony, for example. When the company was founded, its leaders had no specific product in mind. They actually held a brainstorming session to come up with ideas, considering everything from sweetened bean paste to miniature golf equipment. Similarly, when Bill Hewlett and Dave Packard started Hewlett-Packard (HP), they experimented with a wide range of products, including automatic urinal flushers and bowling foul-line indicators.
As for leadership, while visionary companies certainly had capable people at the helm, they weren't necessarily the larger-than-life figures we often associate with business success. Many were actually quite modest and down-to-earth.
So if it's not about great ideas or charismatic leaders, what is the secret to these companies' success?
Building Idea and Leader Factories
The real strength of visionary companies lies in their ability to function as idea and leader factories. Instead of relying on a single brilliant product or an irreplaceable CEO, these companies have built organizations that consistently generate great ideas and develop strong leaders.
Think of it like this: having a great idea or a visionary leader is like being able to tell the time by looking at a clock on the wall. It's useful in the moment, but it doesn't help you in the long run. Building a visionary company, on the other hand, is like building your own clock – a reliable machine that keeps producing value year after year, regardless of who's in charge or what specific products are being made.
This approach allows visionary companies to adapt to changing markets and technologies while still maintaining their core strengths. It's a key reason why these companies have been able to thrive for so long, even as individual products become obsolete and leaders come and go.
The Power of Core Ideology
More Than Just Profits
One of the most striking characteristics of visionary companies is that they're driven by something more than just the pursuit of profits. While making money is certainly important, these companies are guided by a higher purpose – a core ideology that gives meaning to their work and shapes their decisions.
This core ideology consists of two main elements: core values and purpose. Core values are the fundamental beliefs that guide the company's actions, while purpose is the reason the company exists beyond just making money.
Take Johnson & Johnson (J&J) as an example. In 1935, the company's CEO, Robert W. Johnson Jr., wrote a document called "Our Credo" that laid out the company's responsibilities. Interestingly, making money for shareholders was listed last, after responsibilities to customers, employees, and the community. This doesn't mean J&J doesn't care about profits – they're very successful financially – but it shows that profit isn't their primary driver.
Staying True to Core Values
What's remarkable about visionary companies is how they manage to stay true to their core ideologies even as they pursue profits and growth. These companies find ways to be pragmatic in their business decisions without compromising their fundamental beliefs.
This commitment to core ideology becomes especially important during tough times. When Ford faced a major crisis in the 1980s, instead of just focusing on short-term fixes, the management team took time to discuss and clarify what the company stood for and how they could honor the values of founder Henry Ford. This grounding in their core ideology helped guide them through the crisis.
It's worth noting that the specific content of a company's core ideology isn't what matters most. What's crucial is that the company has an authentic ideology and sticks to it rigorously. Whether a company's core values revolve around innovation, customer service, or environmental responsibility, what matters is that these values are genuine and consistently acted upon.
Preserving the Core and Stimulating Progress
The Genius of the AND
One of the key insights from "Built to Last" is that visionary companies manage to do two seemingly contradictory things at once: they preserve their core ideologies while also stimulating constant progress and change. This is what Collins calls "the genius of the AND."
Many companies fall into the trap of the "tyranny of the OR," thinking they have to choose between staying true to their core values OR adapting to change. Visionary companies reject this false dichotomy. They find ways to honor their core ideologies AND push for continuous improvement and innovation.
For example, Wal-Mart's commitment to "exceed customer expectations" is a stable part of its core ideology. But how they achieve this can change over time. The practice of having greeters at store entrances is one manifestation of this ideology, but it's not set in stone – it could be changed or replaced with something else that better serves customers.
Relentless Pursuit of Progress
While visionary companies are steadfast in their core ideologies, they're also relentless in their pursuit of progress. They never settle for "good enough" and are always looking for ways to improve their products, processes, and organization.
This drive for progress is deeply ingrained in these companies. It's not just about reacting to market changes or competitive pressures – it's a fundamental part of who they are. J. Willard Marriott, founder of the Marriott Corporation, embodied this spirit with his motto: "Keep on being constructive, doing constructive things, until it's time to die... make every day count, to the very end."
To stimulate progress, visionary companies use a combination of bold goal-setting and concrete mechanisms that encourage innovation and improvement. This balanced approach allows them to push for big changes while also making steady, incremental progress day by day.
Big Hairy Audacious Goals (BHAGs)
Aiming for the Stars
One of the ways visionary companies drive progress is by setting what Collins calls "Big Hairy Audacious Goals," or BHAGs. These are extremely ambitious objectives that might seem almost unrealistic to outsiders, but they serve to energize and focus the entire organization.
A famous non-corporate example of a BHAG is President John F. Kennedy's 1961 declaration that the U.S. would put a man on the moon and bring him back safely by the end of the decade. At the time, this seemed like an almost impossible task, but it galvanized the nation and drove rapid progress in space technology.
In the business world, Boeing set a BHAG when it committed to developing the 747 jumbo jet. This was an enormously risky and expensive project, but Boeing pursued it with single-minded determination. The company's CEO stated that they would complete the jet even if it consumed the entire company – which it nearly did, as sales initially fell short of expectations and Boeing had to lay off a significant portion of its workforce.
The Power of Audacious Goals
What makes BHAGs so powerful is that they're clear and tangible, yet so ambitious that they force the company to think and act in new ways. They create a sense of urgency and excitement that can unite an entire organization behind a common purpose.
Moreover, BHAGs often take on a life of their own, persisting even as leadership changes. Just as the U.S. space program continued after Kennedy's death, visionary companies pursue their BHAGs across generations of leaders. And once a BHAG is achieved, these companies set new ones, always pushing themselves to reach higher.
It's important to note that while BHAGs are extremely ambitious, they're not random or disconnected from the company's core purpose. They always align with the company's core ideology, serving as a powerful way to manifest that ideology in concrete goals and actions.
The Cult-Like Cultures of Visionary Companies
Immersion in Core Ideology
One of the most striking features of visionary companies is the intensity of their corporate cultures. These cultures are so strong and all-encompassing that they can seem almost cult-like to outsiders.
In these companies, employees often find themselves deeply immersed in the company's core ideology. This immersion goes beyond just knowing the company's mission statement – it becomes a way of life. For example, at IBM, new managers in training would actually sing songs from an IBM songbook, with lyrics like "March on with I.B.M., Work hand in hand..."
Similarly, at the Walt Disney Company, employees were expected to fully embody the company's commitment to wholesome family fun. This went so far that men with facial hair weren't allowed to work at Disney theme parks, and anyone caught using profanity in Walt Disney's presence was immediately fired, no exceptions.
High Standards and No Compromise
Visionary companies maintain these strong cultures by setting very high standards and refusing to compromise on them. New employees quickly find that they either fit in and thrive, or they struggle and leave. There's very little middle ground.
This might sound harsh, but it serves an important purpose. By maintaining such high standards, visionary companies ensure that everyone in the organization is fully committed to the company's core ideology and way of doing things. This creates a cohesive, focused workforce that can drive the company forward with remarkable unity of purpose.
Avoiding Groupthink
While this intense culture might sound like a recipe for groupthink, visionary companies actually manage to avoid this pitfall. Because employees are so well-aligned with the company's core values and purpose, they can be given a lot of freedom to experiment and innovate within that framework.
This is a key difference between visionary companies and actual cults. While cults typically stifle individual thought and creativity, visionary companies encourage it – as long as it's in service of the company's core ideology and goals.
It's also worth noting that these strong cultures aren't built around charismatic leaders or founders. While such figures might exist, the culture is centered on the company's core ideology, not any individual person. This allows the culture to persist and evolve even as leadership changes over time.
Cultivating Leadership from Within
A Continuous Stream of Leaders
One of the most impressive features of visionary companies is their ability to consistently produce high-quality leaders. While these companies often have outstanding CEOs, what's even more remarkable is how they manage to maintain excellent leadership across generations.
This is no accident. Visionary companies put a lot of effort into cultivating managerial talent within their ranks. They focus on developing future leaders who understand and embody the company's core ideology, ensuring continuity even as individual leaders come and go.
General Electric (GE) is a prime example of this approach. While Jack Welch is perhaps GE's most famous CEO, the company has actually enjoyed a century of Welch-caliber leadership thanks to its emphasis on internal management training and succession planning. In fact, more GE alumni have gone on to become executives at other American corporations than alumni from any other company.
Planning for the Future
Another key aspect of leadership in visionary companies is their focus on succession planning. These companies don't wait until a CEO is about to retire to start thinking about who will take over. Instead, they plan far in advance to ensure a smooth transition.
For example, Bob Galvin, the former CEO of Motorola, began planning for the next generation of leadership a full quarter-century before he actually left the company. This kind of long-term thinking ensures that there's always a pipeline of capable leaders ready to step up when needed.
The Pitfalls of External Leadership
In contrast to visionary companies, their less successful counterparts often relied on hiring external CEOs. While this might bring in fresh perspectives, it also often led to leaders who weren't familiar with the company's culture and core ideology. In some cases, these external CEOs would try to steer the company in entirely new directions, often with disastrous results.
Moreover, some comparison companies had CEOs who actively hindered succession planning, sometimes even sabotaging potential successors. This left these companies in a difficult position when the CEO eventually left, often leading to periods of instability and poor performance.
Encouraging Experimentation and Evolution
The Power of Small Experiments
Visionary companies understand that progress often comes through a process of evolution – trying many small experiments and building on the ones that work. This is similar to how biological evolution works, with slight variations leading to improvements over time.
These companies encourage their employees to experiment with new ideas, products, and practices. While many of these experiments fail, some become huge successes. For example, J&J's famous Band-Aids were born when an employee put together some surgical tape and gauze to quickly bandage his wife's cut fingers. When he mentioned the idea to J&J's marketing department, they embraced it, and Band-Aids eventually became one of the company's best-selling product categories.
Creating Space for Innovation
To foster this kind of experimentation, visionary companies often create specific mechanisms or policies. 3M, for instance, has a famous "15 percent rule" that allows employees to use 15 percent of their working time on any pet projects they feel passionate about. This policy led to the creation of many successful products, including Post-It Notes, which came about when two separate pet projects collided in an unexpected way.
What's particularly noteworthy about 3M's approach is that they continued to support the development of Post-It Notes even when early market studies were negative. This willingness to persist with promising ideas, even in the face of initial setbacks, is a key feature of visionary companies.
Embracing Failure as Part of the Process
Of course, not all experiments are successful. J&J, for instance, had a notable failure with their colored casts for children with bone fractures. The casts ended up turning hospital bed sheets into something resembling modern art, causing chaos in hospital laundries.
However, visionary companies understand that such failures are a necessary part of the evolutionary process. They don't punish failed experiments (as long as they were conducted responsibly), because they know that doing so would discourage further innovation. Instead, they view these failures as learning opportunities and encourage employees to keep experimenting.
This approach stands in stark contrast to many of the comparison companies studied. For instance, Norton, 3M's comparison company, actually discouraged the pursuit of opportunities outside its traditional product lines, limiting its ability to innovate and evolve.
From Talk to Action
Concrete Mechanisms for Change
One of the key differences between visionary companies and their less successful counterparts is how they translate their values and goals into concrete actions. While many companies talk about values like innovation or constant improvement, visionary companies create specific mechanisms to make these ideals a reality in their day-to-day operations.
For example, 3M doesn't just say they want their employees to be more innovative. They back this up with concrete policies, like the 15 percent rule mentioned earlier. They also have a policy stating that 30 percent of each division's annual sales must come from products less than four years old. These kinds of specific, measurable goals turn abstract values into tangible actions.
Similarly, Wal-Mart's commitment to constant improvement is reflected in their "Beat Yesterday" ledgers, which compare each day's sales to those of the previous year. This creates a constant push for growth and improvement at all levels of the organization.
Long-Term Investments
Visionary companies also demonstrate their commitment to their values through long-term investments. They consistently invest more than comparison companies in areas like new technologies, business practices, employee training and development, and research and development.
Merck provides a great example of this approach. When the company decided to become a force in medical research, they didn't just increase their R&D budget. They completely redesigned their research labs to resemble academic institutions and allowed their researchers to publish findings in academic journals – a very unusual practice for private companies at the time. They also decided to drive their product development process through research rather than marketing, which was the norm in many other companies.
These decisions required significant investment and went against conventional business wisdom. But they aligned perfectly with Merck's core ideology and long-term goals. As a result, they attracted top scientists to Merck's labs and positioned the company as a leader in pharmaceutical research.
Walking the Talk
What sets visionary companies apart is not just that they have lofty ideals or ambitious goals. It's that they consistently take concrete actions to make those ideals and goals a reality. They don't just talk about their values – they live them, invest in them, and create systems to ensure they're reflected in every aspect of the company's operations.
This commitment to action is a key reason why visionary companies are able to maintain their success over such long periods. Their values and goals aren't just words on a wall or in an annual report – they're deeply ingrained in the company's practices, policies, and culture.
Conclusion: The Essence of Visionary Companies
As we've explored the various principles and practices of visionary companies, a clear picture emerges of what sets these extraordinary organizations apart. At their core, visionary companies are defined by their ability to balance two seemingly contradictory forces: a steadfast commitment to their core ideology and a relentless drive for progress and change.
This balance is reflected in every aspect of how these companies operate:
They have a clear sense of purpose that goes beyond just making money, yet they're also highly profitable.
They maintain strong, almost cult-like cultures, yet they encourage individual innovation and experimentation.
They set audacious, sometimes seemingly impossible goals, yet they also focus on small, incremental improvements.
They plan far into the future, yet they're also highly adaptable to changing circumstances.
They have strong, consistent leadership, yet they're not dependent on any single leader or idea.
What's particularly remarkable about these companies is how they've managed to maintain these qualities over such long periods, often spanning multiple generations of leadership and massive changes in technology and market conditions.
The lessons from "Built to Last" are valuable not just for large corporations, but for organizations of all sizes and even for individuals. The core principles – having a clear sense of purpose, balancing stability and change, setting ambitious goals while focusing on continuous improvement, and turning values into concrete actions – can be applied in many different contexts.
Ultimately, what "Built to Last" teaches us is that truly great, enduring success doesn't come from a single great idea or a charismatic leader. It comes from building an organization that can generate great ideas and develop strong leaders consistently over time. It's about creating a "clock" that can tell time for generations, not just a timepiece that works for the moment.
By understanding and applying the principles of visionary companies, we can all work towards building organizations and careers that don't just succeed in the short term, but truly stand the test of time.