Built To Last
By Jim Collins and Jerry Porras
After six years of studying the successful habits of visionary companies, authors Jim Collins and Jerry Porras wrote Built To Last to document their findings. Visionary companies are those that have distinguished themselves in their field, impacted the world, and established a long record of outperforming the competition. The companies studied were chosen by surveying hundreds of CEOs to find which companies they held in high regard. It transpired that the top 18 included in the book were founded around the end of the 19th century, making them companies with a proven formula for standing the test of time. The authors’ research charted the growth of these exceptional companies, taking an in-depth look at the numbers, the cultures, and the key moments in their corporate history. They compared their performance to that of competitors established around the same time or since, and they searched for answers to the question of what keeps these companies ahead of the rest; what has made them built to last?
My Top 3 Takes from the Summary
Viewing yourself as a “clock builder” rather than a “time teller” will set you apart from other companies.
Visionary companies have unchanging core ideologies.
Companies that get ahead and stay ahead set themselves audacious goals.
The Successful Habits of Visionary Companies
The authors liken building a company that continues to thrive long after the founder has gone or the founding product has become obsolete to “clock building” rather than “time telling.” Someone who has the skills to tell the time by reading the sun or stars may be remarkable, but someone with the skills to build a clock that makes it possible for anyone to tell the time forever more is infinitely more remarkable. Being a charismatic, visionary leader, or having a great idea, makes you a time teller, whereas building a company that outlives you makes you a clock builder. In visionary companies, managers are clock builders who make the company their greatest creation.
The examples used to illustrate the difference between clock building and time telling include Motorola and Zenith. The authors point out that the founder of Motorola, Paul Galvin, didn’t set out with a dream of making battery eliminators for radios – the company’s first product – he dreamed of building a great company that would last. By developing people, he achieved exactly that. His approach was to set challenges and give people responsibility for achieving them, actively seeking contributions and encouraging discussion and disagreement.
Zenith, on the other hand, was founded on Eugene F McDonald’s charismatic personality. He was undeniably a brilliant leader, and for three decades kept his company a competitor to Motorola, but he gave no thought to promoting the initiative in his people, or any consideration to management succession. After his death, Zenith lost the spark, energy, and drive he’d provided, and it only takes a comparison between the performance of the two companies today to understand the value of clock building over time telling in leadership.
A company’s core ideology is described as the sense of purpose and values it has beyond simply making money. Pharmaceutical company Merck is used as an example of company values being used to guide actions. George Merck said, “(We) are workers in the industry who are genuinely inspired by the ideals of advancement of medical science, and of service to humanity.” These values were echoed many years later by a Merck CEO who said, “Above all, let’s remember that our business success means victory against disease and help to mankind.” This ideology was demonstrated when the company developed a drug to cure “river blindness” in developing countries. The hope was that it would sell to government agencies for a small profit, but when no one bought the drug, Merck gave it away to the nations that needed it. It can be argued that this was good public relations that could pay off in the future, but it was also an indication of Merck’s unchanging core ideology across many generations, or as George Merck said, “We try never to forget that medicine is for people. It’s not for the profits. The profits follow …”
In contrast, Pfizer, Merck’s competitor in the industry, didn’t promote company values or ideals until well into the 1980s, and one former CEO is quoted to have said, “So far as is humanly possible, we aim to get profit out of everything we do.” It’s the authors’ observation that visionary companies tend to be driven more by ideals than by profits, and the ideologies at their core are unchanging. However, it takes core ideals coupled with a relentless drive for progress to get ahead and stay ahead. This is something Sam Walton, founder of Walmart, pointed out when he said, “You can’t just keep doing what works one time, because everything around you is always changing. To succeed, you have to stay out in front of that change.”
Change is always happening, and change is necessary, but a lesson learned from visionary companies is that the one thing that must never change is the company's ideology. The authors highlight this point by comparing the “core beliefs” of Walmart and Boeing against those of IBM. “Exceed customer expectations” is Walmart’s unchanging core belief. “Being in the leading edge of aviation; being pioneers,” is Boeing’s permanent core value. Having greeters at the front door of every store is a Walmart practice that could change, but exceeding customer expectations is set in stone. Building jumbo jets is a Boeing practice that could change, but being pioneers will remain unchanged. By comparison, IBM began to shift away from its “three basic beliefs” of respecting employees, making customers happy, and working hard to do things right, choosing instead to emphasise non-core values such as mainframe computers, blue suits, and white shirts – a shift the authors believe may have halted the company’s progress. The point they make is that in any business, operations, strategies, products, and culture must change over time, but the core ideology must never change.
Visionary companies keep progressing by setting themselves BHAGs (pronounced bee-hags). These are big, hairy, audacious goals, and the authors use Boeing as an example. In 1952, Boeing’s workforce had dwindled from its World War II peak of 51,000 to just 7,500. The company recognised that it needed to get into commercial aviation, but it was viewed by airline companies as a bomber building firm. Boeing chose to commit to the BHAG of building a jet for commercial use, and the development of the Boeing 707 brought jet engines to commercial aviation.
Boeing’s competitor at the time was Douglas Aircraft. It chose to stick with propellor planes, perhaps waiting to see how the industry took to commercial jets, and by the time it introduced the DC-8 in 1958, it was too late to catch up with Boeing’s progress. Boeing is a company with a history of setting BHAGs. Eastern Airlines needed a plane that could land on La Guardia Airport’s notoriously short runway 4-22 in New York. This required very precise specifications in itself, but it also needed to hold 131 passengers, seat six abreast, and fly non-stop to Miami without refuelling. This was deemed by most to be an impossible task, but Boeing took it on and succeeded with its 727 – living up to its core value of being at the leading edge of aviation.
The authors’ use the examples of General Electric and its competitor Westinghouse to highlight that a good BHAG needs to be clear and compelling to unify and engage people. “To be the number one or two in every market” is General Electric’s goal, but Westinghouse is less engaging and compelling with its vaguer goals such as “market leadership, focused growth, total quality.”However, just as ideals on their own can’t keep a company progressing, goals on their own can’t bring about change unless there’s a commitment to making it happen.
With commitment, there may also be risks. Boeing committed to developing commercial jet planes, potentially risking the end of the company had it failed. Walt Disney committed to making Snow White in 1934, risking almost all of his company’s resources to make something many people believed to be a folly – because who would want to watch a feature-length cartoon? He succeeded, and then proposed a whole new kind of amusement park, once again setting himself a BHAG, all of which was very different to the approach being taken by competitors Columbia Pictures. Columbia produced a few good films, but it was never bold, risky, or visionary, and it was then sold in the 1980s, a time when Disney was rocketing back into popularity.
A good BHAG can take on a life of its own long after a company leader has gone. Sam Walton’s goal of making Walmart a $125 billion dollar company by 2000 was a goal that he knew would outlive him. (He died in 1992 aged 74). The authors provide the following pointers to help readers create their own visionary BHAGs:
A good BHAG should:
Require no (or very little) explanation, meaning it’s clear and compelling.
Take you outside of your comfort zone and require significant effort.
Be bold, exciting, and stimulating enough to stay alive even after a leader is gone.
Always be consistent with the company's core ideologies.
Ideology and Evolution
Walmart lives by a ‘do it, fix it, try it’ motto. If they try something that works they keep it. if it doesn’t work, they either fix it or try something else, but everything they try will always fit with the company’s core ideologies. As the authors put it, visionary companies don’t ask, “How well are we doing?” They ask, “How can we do better tomorrow than we did today?” Thinking this way and acting accordingly is a matter of habit in successful companies, and it requires discipline to keep demanding more of themselves. J Willard Marriot, the founder of the Marriot Corporation, once said, “Discipline is the greatest thing in the world. Where there is no discipline, there is no character. And without character, there is no progress.”
Continuous improvement isn’t just a buzzphrase in visionary companies. In the 1930s, Proctor and Gamble avoided complacency by creating a brand-management structure. As a company, they had marketing muscle thanks to an excellent product and excellent people, so this structure gave Proctor and Gamble brands the opportunity to compete as if from different companies. The authors comment that companies today often spend vast amounts of money and devote many hours to coming up with mission statements, vision statements, values statements, and so on, but these statements are not what makes a company a visionary company. The essence of a visionary company is found in its core ideology and its drive for progress – seen in everything the company does and in all who work there.
The message the authors convey is that every company, large or small, can learn and apply the successful habits of visionary companies, making them their own. Becoming a clock builder rather than a time teller is something that can be achieved by simply taking a moment to consider the processes you could put in place to solve problems, rather than always stepping in to deal with issues yourself. If your company doesn’t have an unchanging core ideology, create one, and to promote continued growth, set yourself some BHAGs that make everyone’s day at work more interesting. As a final note, they remind readers that the ideas they set out in the pages of the book are all useful, but they’re not the only ways to stimulate growth. The visionary companies of tomorrow by their very nature will be using ideas and methods that have yet to be thought of!
The hundreds of examples used make it not only very easy to understand the concepts but also to apply them at any level of business in any field. The underlying question being asked and answered by the authors is, “What makes the truly exceptional companies different from other companies?” and the findings of their research provide a blueprint for developing successful habits.
Bio of Authors
Jim Collins teaches at the Stanford University Graduate School of Business, and he is also a multi-million-copy bestselling author, speaker, and business management consultant.
Jerry Porras is an organisational theorist, and Lane Professor Emeritus of Organizational Behavior and Change at the Stanford University Graduate School of Business.