Built To Last: Successful Habits of Visionary Companies

Originally published: 1994. The edition reviewed was published in 2005

Author: Jim Collins & Jerry I. Porras

Page count: 304

Genre: Business

 

This is one of the classics in business books. I remember, in most of the MBA orientations I have attended, at least one speaker recommends the students to read this book. It is an extensive research on visionary companies that have been successful for decades. It also pays attention to the competitors of visionary companies. It dwells deeply on what makes an organization successful and keeps it on top for a long time and on factors that made organizations less successful/ a failure. This book is for leaders, founders and managers who want to build great organizations and teams.

Most of the organizations are running after latest management practices and there is no dearth of such seasonal fads. Instead of changing the organization according to latest ‘in-fashion’ practices companies should go back to basic fundamentals of building an organization. Every chapter of the book starts with ancient Chinese depiction of dualism or Yin and Yang. In eleven chapters and following FAQs and appendices, this book talks about fundamentals of dualism in business along with elaborate examples.

A good vision & a visionary company builds on the interplay between two complementary forces: Core ideology (Core ideology, values & purpose) and envisioned future (BHAGs or Big Hairy Audacious Goals). Preserve the core and stimulate progress – this is the essence of this book and single most important point to take away

Visionary companies have a core ideology that is a vital force that shapes the organization. E.g. Johnson & Johnson’s Credo. Core ideology of the company does not change with change in leadership or market. It usually remains unchanged for decades or more often lifetime of an organization. When articulating core ideology, the key step is to capture what is authentically believed and not what another companies/outside world are doing. Usually, the core values range between three and six. If any organization is having more than six core values, it means it has not defined its ideology correctly. Core purpose is the set of fundamental reasons for a company’s existence beyond just making money. How to define purpose – ask this question “Why not just shut this organization down, cash out and sell the assets?” and push for an answer that would be valid now and even after 100 years. That answer would be the purpose of organization. A visionary company continually pursues but never fully achieves or completes its purpose. E.g. Disney’s purpose defined by Walt Disney, “Disneyland will never be completed as long as there is imagination left in the world”

BHAG (Big Hairy Audacious Goals) are a powerful mechanism to stimulate progress. They should be bold and exciting and should fall well outside the comfort zone. There should always be follow-on goals to prevent complacency in employees. Although progressive, they should be consistent with core ideology of organization. Companies should always make BHAGs a way of life in the organization. E.g. Boeing set goal of developing 707 jet when there was no such aircraft in commercial flying industry. They followed up with BHAG of developing 727 & 737 aircrafts.

Essence of a visionary company comes in the translation of its core ideology into every fabric of organization – into goals, strategies, policies, processes, cultural practices, management behaviors, building layouts, job design etc. Four common characteristics of cults (a cult is a body of persons characterized by excessive devotion to some person, idea or thing) that visionary companies display to a greater degree than other companies: fervently held ideology, indoctrination, tightness of fit & elitism. Visionary companies create a culture that reinforces dedication to an enduring core ideology. People pick up all the signals in their work environment, they notice small things – and then decide how they should behave. Visionary companies pay attention to nitty gritty details & align everything to core ideology and doggedly correct misalignments. E.g. Nordstrom gives every employee a handbook, organizes Nordie functions and promotes socializing between Nordies. Reminders & motivational quotes are posted on walls, employees receive ‘heroics’ & prizes and are recognized by the company for exceptional customer service. These companies institutionalize the question “How can we do better tomorrow than we did today?” as a way of life & try to install powerful mechanisms to create discomfort. E.g. When P&G was not getting enough competition in market it made its brands compete directly with each other in order to improve.

Another way of progress apart from BHAGs is evolutionary progress. An organization can evolve into larger & better corporations by doing, experimenting, failing, fixing mistakes, being acceptive of mistakes, providing a room to employees for experimentation, giving operational autonomy & creating tangible mechanisms to stimulate evolutionary progress. Eg. 3M progressed from a mining company into an organization having hundred of products in nineties.

Creating and building a visionary company does not require either a great idea or a charismatic leader. E.g. Walmart (If you go by the textbook definition of charisma, Sam Walton was not a charismatic man. started a departmental store, similar to many other stores in America. It was not a great or a novel idea. But he kept building Walmart step by step, until the company grew exponentially after “rural discount”

Profitability is a necessary condition for existence and a means to more important ends, but it is not the end in itself. It is like essentials for body, they are not the point of life but without them there is no life

Visionary companies tend to be more demanding of their people than other companies, both in terms of performance & congruence with ideology. They tend not to have much room for people unwilling or unsuited to their demanding standards. They also do a better job than comparison companies at developing and promoting highly competent talent from inside the company. Visionary companies develop, promote & carefully select managerial talent grown from inside the company to a greater degree than comparison companies.  E.g. GE had home-grown CEOs for over a century. This requires a carefully thought & developed mechanism for management development & leadership continuity. E.g. Bob Galvin worked in Motorola for sixteen years before becoming the President of company. If visionary companies have to go outside for a top manager, they look for candidates who are highly compatible with their core ideology. Managers at visionary companies invest more time, money & effort in acquiring technical know-how, new employees, management methods & innovative practices.

Thus, in a visionary company, if an outsider were to drop, he/she would be able to infer the vision of organization right away without explicitly reading it anywhere.