In Search of Excellence: Lessons from America's Best-Run Companies

by Thomas J. Peters

Support for Champions. Champions are pioneers, and pioneers get shot at. The companies that get the most from champions, therefore, are those that have rich support networks so their pioneers will flourish. This point is so important it’s hard to overstress. No support systems, no champions. No champions, no innovations.

In the excellent companies, there are five attributes of communication systems that seem to foster innovation:

Communication systems are informal.

Communication intensity is extraordinary. Two companies known for their no-holds-barred

Communication is given physical supports. A

Forcing devices.

IBM’s “Fellow” program is the classic. The IBM Fellows are a manifestation of Watson, Sr.’s, desire to foster “wild ducks” (Watson got the metaphor from Ibsen). There are about forty-five of them, heralded as “dreamers, heretics, gadflies, mavericks, and geniuses” in a recent Newsweek ad. “There are less of us than there are corporate vice presidents,” said one. A Fellow is given virtually a free rein for five years. His role is quite simple: to shake up the system. Indeed they do. One of

The intense, informal communication system acts as a remarkably tight control system, even as it spawns rather than constrains innovation.

It all works — champions, venture teams, informal communications, voluntary assignment of team members, support for failure, and the like — because of the incessant focus on keeping the bureaucracy limited.

But the most important notion, as we’ve said time and again, is that there aren’t any one or two things that make it all work. Sure, the champion, the executive champion, and the venture team are at the heart of the process. But they succeed, when they do succeed, only because: heroes abound; the value system focuses on scrounging; it’s okay to fail; there’s an orientation toward nichemanship and close contact with the customer; there’s a well-understood process of taking small, manageable steps; intense, informal communications are the norm; the physical setting provides plenty of sites for experimentation; the organizational structure is not only accommodating but highly supportive of 3M-style innovation; and the absence of overplanning and paperwork is conspicuous, as is the presence of internal competition. That’s about a dozen factors. And it’s all of them functioning in concert — over a period of decades — that makes innovation work at 3M.

Let us make clear one final prefatory point. We are not talking about mollycoddling. We are talking about tough-minded respect for the individual and the willingness to train him, to set reasonable and clear expectations for him, and to grant him practical autonomy to step out and contribute directly to his job.

People in important management positions should not only be enthusiastic themselves, they should be selected for their ability to engender enthusiasm among their associates.”

The theme of fun in business runs through a great deal of the excellent companies research. The leaders and managers like what they do and they get enthusiastic about it. Or, as Howard Head said in a recent speech, “It seems to me you have to be personally associated with what you do. I just love design. If it weren’t fun, I wouldn’t do it.”

When Ed Carlson was president of United Airlines, he said: “Nothing is worse for morale than a lack of information down in the ranks. I call it NETMA — Nobody Ever Tells Me Anything — and I have tried hard to minimize that problem.” Analyst Richard Pascale observes that Carbon

Sadly, the excellent companies’ policy of making information available stands in vivid contrast to typical management practice, in which so many fear that “they” will abuse the information, and that only competitors will benefit. It’s one more big cost of not treating people as adults — or indeed, as winners.

Every excellent company we studied is clear on what it stands for, and takes the process of value shaping seriously. In fact, we wonder whether it is possible to be an excellent company without clarity on values and without having the right sorts of values. Led by our colleague Allan Kennedy, we

the end, whatever the source, myths are institution builders. The art of creative leadership is the art of institution building, the reworking of human and technological materials to fashion an organism that embodies new and enduring values.

As James MacGregor Burns has said, “The cardinal responsibility of leadership is to identify the dominant contradiction at each point in history.” Any business is always an amalgam of important contradictions — cost versus service, operations versus innovation, formality versus informality, a “control” orientation versus a “people” orientation, and the like.

The specific content of the dominant beliefs of the excellent companies is also narrow in scope, including just a few basic values: 1. A belief in being the “best” 2. A belief in the importance of the details of execution, the nuts and bolts of doing the job well 3. A belief in the importance of people as individuals 4. A belief in superior quality and service 5. A belief that most members of the organization should be innovators, and its corollary, the willingness to support failure 6. A belief in the importance of informality to enhance communication 7. Explicit belief in and recognition of the importance of economic growth and profits.

The excellent companies recognize that opportunity finding is a somewhat random and unpredictable process, certainly not one that lends itself to the precision sometimes implied by central planning. If they want growth through innovation, they are dependent on lots of people, not just a few in central R&D. A corollary to treating everyone as innovator is explicit support for failure.

An effective leader must be the master of two ends of the spectrum: ideas at the highest level of abstraction and actions at the most mundane level of detail. The value-shaping leader is concerned, on the one hand, with soaring, lofty visions that will generate excitement and enthusiasm for tens or hundreds of thousands of people. That’s where the pathfinding role is critically important. On the other hand, it seems the only way to instill enthusiasm is through scores of daily events, with the value-shaping manager becoming an implementer par excellence. In this role, the leader is a bug for detail, and directly instills values through deeds rather than words: no opportunity is too small. So it is at once attention to ideas and attention to detail. Attention

Leaders implement their visions and behave persistently simply by being highly visible. Most of the leaders of the excellent companies have come from operational backgrounds. They’ve been around design, manufacturing, or sale of the product, and therefore are comfortable with the nuts and bolts of the business. Wandering about is easy for them because they are comfortable in the field.

By wandering around I literally mean moving around and talking to people. It’s all done on a very informal and spontaneous basis, but it’s important in the course of time to cover the whole territory. You start out by being accessible and approachable, but the main thing is to realize you’re there to listen. The second is that it is vital to keep people informed about what’s going on in the company, especially those things that are important to them. The third reason for doing this is because it is just plain fun.

David Ogilvy makes much the same point: “Do not summon people to your office — it frightens them. Instead go to see them in their offices. This makes you visible throughout the agency.

This, in brief, then, is the excellent companies’ story. They do acquire; but they acquire and diversify in an experimental fashion. They buy a small company or start a new business. They do it in manageable steps…and clearly contain the risks. And are willing to get out if it doesn’t work.

Considering our findings, we would like now to propose a hybrid alternative to all of these forms, to describe the properties of a potential “structure of the eighties,” one that will respond to the three prime needs revealed above: a need for efficiency around the basics; a need for regular innovation; and a need to avoid calcification by ensuring at least modest responsiveness to major threats. Accordingly, we think of the resultant structural “form” as based on “three pillars,” each one of which responds to one of these three basic needs. To respond to the need for efficiency around the basics there is a stability pillar. To respond to the need for regular innovation, there is an entrepreneurial pillar. And to respond to the need for avoiding calcification, there is a “habit-breaking” pillar. In

we find that autonomy is a product of discipline. The discipline (a few shared values) provides the framework. It gives people confidence (to experiment, for instance) stemming from stable expectations about what really counts.

The skill with which the excellent companies develop their people recalls that grim conflict we first mentioned in Chapter 3: our basic need for security versus the need to stick out, the “essential tension” that the psychoanalyst Ernest Becker described. Once again the paradox, as it is dealt with in the excellent companies, holds. By offering meaning as well as money, they give their employees a mission as well as a sense of feeling great. Every man becomes a pioneer, an experimenter, a leader. The institution provides guiding belief and creates a sense of excitement, a sense of being a part of the best, a sense of producing something of quality that is generally valued. And in this way it draws out the best