Built to Last: Successful Habits of Visionary Companies (Good to Great Book 2)

by Jim Collins

We attribute this widespread readership to four primary factors. First, people feel inspired by the very notion of building an enduring, great company. We’ve met executives from all over the world who aspire to create something bigger and more lasting than themselves—an ongoing institution rooted in a set of timeless core values, that exists for a purpose beyond just making money, and that stands the test of time by virtue of the ability to continually renew itself from within.

What is a visionary company? Visionary companies are premier institutions—the crown jewels—in their industries, widely admired by their peers and having a long track record of making a significant impact on the world around them. The key point is that a visionary company is an organization—an institution. All individual leaders, no matter how charismatic or visionary, eventually die; and all visionary products and services—all “great ideas”—eventually become obsolete. Indeed, entire markets can become obsolete and disappear. Yet visionary companies prosper over long periods of time, through multiple product life cycles and multiple generations of active leaders.

They sought to be clock builders, not time tellers.

Reality: Contrary to business school doctrine, “maximizing shareholder wealth” or “profit maximization” has not been the dominant driving force or primary objective through the history of the visionary companies. Visionary companies pursue a cluster of objectives, of which making money is only one—and not necessarily the primary one. Yes, they seek profits, but they’re equally guided by a core ideology—core values and sense of purpose beyond just making money. Yet, paradoxically, the visionary companies make more money than the more purely profit-driven comparison companies.

while keeping their core ideologies tightly fixed, visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals.

Reality: Only those who “fit” extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work. If you go to work at a visionary company, you will either fit and flourish—probably couldn’t be happier—or you will likely be expunged like a virus. It’s binary. There’s no middle ground. It’s almost cult-like. Visionary companies are so clear about what they stand for and what they’re trying to achieve that they simply don’t have room for those unwilling or unable to fit their exacting standards.

Myth 11: You can’t have your cake and eat it too. Reality: Visionary companies do not brutalize themselves with the “Tyranny of the OR”—the purely rational view that says you can have either A OR B, but not both. They reject having to make a choice between stability OR progress; cult-like cultures OR individual autonomy; home-grown managers OR fundamental change; conservative practices OR Big Hairy Audacious Goals; making money OR living according to values and purpose. Instead, they embrace the “Genius of the AND”—the paradoxical view that allows them to pursue both A AND B at the same time.

Having a great idea or being a charismatic visionary leader is “time telling”; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is “clock building.” In the first pillar of our findings—and the subject of this chapter—we demonstrate how the builders of visionary companies tend to be clock builders, not time tellers. They concentrate primarily on building an organization—building a ticking clock—rather than on hitting a market just right with a visionary product idea and riding the growth curve of an attractive product life cycle.

If you are a prospective entrepreneur with the desire to start and build a visionary company but have not yet taken the plunge because you don’t have a “great idea,” we encourage you to lift from your shoulders the burden of the great-idea myth. Indeed, the evidence suggests that it might be better to not obsess on finding a great idea before launching a company. Why? Because the great-idea approach shifts your attention away from seeing the company as your ultimate creation.

Luck favors the persistent. This simple truth is a fundamental cornerstone of successful company builders. The builders of visionary companies were highly persistent, living to the motto: Never, never, never give up. But what to persist with? Their answer: The company. Be prepared to kill, revise, or evolve an idea (GE moved away from its original DC system and embraced the AC system), but never give up on the company. If you equate the success of your company with success of a specific idea—as many businesspeople do—then you’re more likely to give up on the company if that idea fails; and if that idea happens to succeed, you’re more likely to have an emotional love affair with that idea and stick with it too long, when the company should be moving vigorously on to other things.

Motorola’s founder, Paul Galvin, dreamed first and foremost about building a great and lasting company.67 Galvin, architect of one of the most successful technology companies in history, did not have an engineering background, but he hired excellent engineers. He encouraged dissent, discussion, and disagreement, and gave individuals “the latitude to show what they could do largely on their own.”68 He set challenges and gave people immense responsibility so as to stimulate the organization and its people to grow and learn, often by failures and mistakes.69 Galvin’s biographer summarized, “He was not an inventor, but a builder whose blueprints were people.”70

highly visionary companies: They do not oppress themselves with what we call the “Tyranny of the OR”—the rational view that cannot easily accept paradox, that cannot live with two seemingly contradictory forces or ideas at the same time.

core ideology is so fundamental to the institution that it changes seldom, if ever.

And—this is the key point—they have had core ideology to a greater degree than the comparison companies in our study.

A key step in building a visionary company is to articulate a core ideology. Drawing upon what we saw in the visionary companies, we’ve created a practical two-part definition of core ideology. Companies we’ve worked with have found this definition to be a useful guide for setting their own ideologies.

Visionary companies tend to have only a few core values, usually between three and six. In fact, we found none of the visionary companies to have more than six core values, and most have less. And, indeed, we should expect this, for only a few values can be truly core—values so fundamental and deeply held that they will change or be compromised seldom, if ever.

One of our research assistants observed that highly visionary companies seem to have self-confidence bordering on hubris (the dictionary defines hubris as “overbearing pride, confidence, or arrogance”). We came to call this the “hubris factor.” In mythological terms, you might think of it as taunting the gods.

THE BHAGs looked more audacious to outsiders than to insiders. The visionary companies didn’t see their audacity as taunting the gods. It simply never occurred to them that they couldn’t do what they set out to do.

BHAGs alone do not make a visionary company. Indeed, progress alone—no matter what the mechanism used to stimulate progress—does not make a visionary company. A company should be careful to preserve its core while pursuing BHAGs.

“VISIONARY,” we learned, does not mean soft and undisciplined. Quite the contrary. Because the visionary companies have such clarity about who they are, what they’re all about, and what they’re trying to achieve, they tend to not have much room for people unwilling or unsuited to their demanding standards.

At this point, you might thinking: But isn’t a tight, cult-like culture dangerous? Does it lead to group-think and stagnation? Does it drive away talented people? Does it stifle creativity and diversity? Does it inhibit change? Our answer: Yes, a cult-like culture can be dangerous and limiting if not complemented with the other side of the yin-yang. Cult-like cultures, which preserve the core, must be counterweighted with a huge dose of stimulating progress. In a visionary company, they go hand in hand, each side reinforcing the other.

“Give it a try—and quick!” For 3M, unlike Norton, the modus operandi became: When in doubt, vary, change, solve the problem, seize the opportunity, experiment, try something new (consistent, of course, with the core ideology)—even if you can’t predict precisely how things will turn out. Do something. If one thing fails, try another. Fix. Try. Do. Adjust. Move. Act. No matter what, don’t sit still. Vigorous action—especially in response to unexpected opportunities or specific customer problems—creates variation. Had McKnight not asked why Okie sent his cryptic letter requesting grit samples, or had Dick Drew not impulsively promised a solution for two-tone paint jobs, or had Spence Silver not done the experiment that textbooks said could not work, or had Art Fry not tried to solve his church choirbook problem—and so on for a thousand such “ifs”—then 3M wouldn’t be a visionary company.

“Accept that mistakes will be made.” Since you can’t tell ahead of time which variations will prove to be favorable, you have to accept mistakes and failures as an integral part of the evolutionary process. Had 3M nailed Okie and Drew to the wall (or fired them) for the failed car wax business, then 3M probably wouldn’t have invented Scotch tape. Remember Darwin’s key phrase: “Multiply, vary, let the strongest live, and the weakest die.” In order to have healthy evolution, you have to try enough experiments (multiply) of different types (vary), keep the ones that work (let the strongest live), and discard the ones that don’t (let the weakest die). In other words, you cannot have a vibrant self-mutating system—you cannot have a 3M—without lots of failed experiments.

Although the Post-it clan had trouble convincing other 3Mers that their weird sticky little notes had merit, no one ever told them to stop working on

Do not fall into the trap of thinking that the only way to bring about change and progress at the top is to bring in outsiders, who might dilute or destroy the core. The key is to develop and promote insiders who are highly capable of stimulating healthy change and progress, while preserving the core.

There is no ultimate finish line in a highly visionary company. There is no “having made it.” There is no point where they feel they can coast the rest of the way, living off the fruits of their labor.

The point here is not that a successful company should necessarily create internal competition in order to keep itself vibrant. The point is that it should have some sort of discomfort mechanisms in place to combat the disease of complacency—a disease that inevitably begins to infect all successful organizations. Internal competition is one such mechanism, but not the only one. We found a variety of mechanisms across the visionary companies.

If you walk away from this book thinking that the most essential step in building a visionary company is to write such a statement, then you will have missed the whole point. A statement might be a good first step, but it is only a first step.

We think this has profound implications for what you take away from this book. It means that no matter who you are, you can be a major contributor in building a visionary company. You don’t have to wait for the great charismatic visionary to descend from the mount. You don’t have to hope for the lightning bolt of creative inspiration to strike with the “great idea.” You don’t have to accept the debilitating perspective of “Well, let’s face it. Our CEO just isn’t a charismatic visionary leader. It’s hopeless.” You don’t have to buy into the belief that building visionary companies is something mysterious that only other people do.

Again, to reiterate the key finding from our Built to Last research, the fundamental distinguishing characteristic of the most enduring and successful corporations is that they preserve a cherished core ideology while simultaneously stimulating progress and change in everything that is not part of their core ideology. Put another way, they distinguish their timeless core values and enduring core purpose (which should never change) from their operating practices and business strategies (which should be changing constantly in response to a changing world). In truly great companies, change is a constant, but not the only constant. They understand the difference between what should never change and what should be open for change, between what is truly sacred and what is not.

If you want to encourage people to try a lot of stuff and keep what works, then you have to remove penalties for honest mistakes. Keep in mind that this is a never-ending process. When misalignments crop up you’ve got to kill them as quickly as possible. Think of misalignments as cancer cells. It’s best to get in there and cut them out before they spread too far.

Any specific how-to will almost certainly become obsolete. But the general concepts—adapted, of course, to changing conditions—can last as guiding principles well into the next century.