Built to Last
What will you learn from the summary?
Everyone’s trying to be #1, but only a few companies manage to do it successfully. They’re not only at the top. They tend to stay there for years and even decades. The authors decided to embark on a 6-year study on how visionary companies achieved long-term success. In this book, you’ll learn about what these big companies have in common and what is their secret to success.
Who will learn from this summary?
Managers and employees
About the author
Jim Collins is the author of 6 books that have more than 10 million copies sold worldwide. He is also a researcher, speaker, and consultant. Jerry Porras is an organizational theorist and Professor Emeritus of Organizational Behavior at Stanford University Graduate School of Business.
Built to Last: Successful Habits of Visionary Companies
Jim Collins And Jerry I. Porras
What does it take to get your name on the news? How can you be legendary in a way that everyone in the room will automatically recognize you? What things can you do to get to the top and stay there indefinitely?
Who doesn’t want to be rich and famous? The bad news is that everyone’s trying to scramble to the top. The good news is that anyone can be #1. If you have the goal of being the best company in your field, what’s stopping you? Is it because you don’t know where to start or do you have no clue how to sustain success?
You can bet that the questions you have now are something the CEOs of visionary companies also thought about. Even the famous brands you know had to start somewhere, and that’s usually at the bottom. Believe it or not, the companies you will learn about didn’t start successful right away. They stayed in the dark for many years—even decades—before they got to where they are now. They worked hard, disciplined themselves, and faced challenges.
In this book, you’ll learn about the findings of a 6-year research project made by the authors themselves. Jim Collins and Jerry Porras studied visionary companies and analyzed what they had in common, and what made them the best of the best. You’ll also get to see how other less successful companies fared in comparison to these visionary companies.
You’ll also learn how these companies managed to thrive over the years despite the increasing competitors in the industry they’re in. If you’re planning to start your own business read on and learn a thing or two about how companies like IBM, Disney, and Sony achieved success.
The Best of the Best
The authors of this book made sure to use the word “visionary” when it came to the companies they studied instead of “successful” or “enduring”. The visionary companies that they researched for six years were visionary because they proved themselves to be the elites of the industry. They’re more than successful or enduring. These companies are the best of the best. They were in the game long before you were born, and they survived each setback that time has thrown at them.
Although they’re considered visionary, these companies are far from perfect. Walt Disney almost had to shut down when corporate raiders tried to claim the company as theirs in the 1980s. Boeing suffered difficulties in the mid-1930s, late 1940s, and early 1970s when they had to let go of 60,000 employees. Sony had nothing but product failures during the first five years of its life. IBM almost went bankrupt in 1914, 1921, and the 1990s. Yet, these visionary companies are thriving even now. It’s because, amidst these multiple setbacks, they showed resiliency. They managed to bounce back every single time.
It’s because of their resiliency that they attained long-term performance. These visionary companies are here now, and you bet that they’ll still be around in the next 50 years. Being at the top also means that they have high financial returns. If you decide to invest $1 in one of the visionary companies, your stock fund will grow up to $6,000 by the end of the 60 years. Aside from being a good investment, these companies also shaped the society that you’re a part of right now.
3M’s Scotch tape and Post-It Notes greatly helped students when it came to their projects and note-taking. ATMs pioneered on a wide scale by CitiCorp made accessing money easier. Sony’s Walkman made a huge impact when it came to making music portable. A lot of people’s childhoods were touched and inspired by Mickey Mouse. These visionary companies left a huge mark on this world, and they have ultimately influenced the products that will come out in the years to come.
As the authors spent six years of their lives studying these companies, they took extra care in determining which companies were considered “visionary”. They also debunked several myths, such as leaders that had to have the charisma or that companies only exist to maximize profits. One of the many things that the authors learned from their research was that anyone could start a visionary company. You should stop saying, “It’s not for me” because 6-year research proved that anyone could make it to the top and stay there.
More Than Profits
As mentioned in the previous chapter, it isn’t just money that drives visionary companies to consistently be at the top. It’s their core ideology that guides and inspires people within their organization to do the best they can. This core ideology sparks a sense of purpose within people and discourages them from only focusing on money. They let their ideals come first before the profit.
Think of core ideology as the foundation of who you are, what you stand for, and what the company is all about. Visionary companies are visionary because they apply their core values to what they do. They don’t treat it as just words to put on the hallways of the building. The core values drive them to do what they are good at, and they think of profit as just something that happens after.
This is the ideology of Merck & Co., a pharmaceutical company. When they reached 100 years, they published a book entitled Values and Visions: A Merck Century. In the book, the company didn’t focus on how they were a pharmaceutical brand that prospered for a hundred years. Instead, they emphasized their history that had been guided by ideology.
George Merck II articulated this ideology by saying that they were workers who were inspired by the thought of advancing medical science and being of service to humanity. In 1991, Merck’s chief executive Roy Vagelos also said that whatever success they had as a company was also a victory against diseases. Merck & Co. didn’t just decide to have a humanistic angle so that they’d appear more likable, they embodied this purpose as well.
Consistent with their ideals, Merck developed a drug to cure “river blindness” that was currently infecting over a million people in third-world countries. This disease came in the form of parasitic worms that went into the eyes, causing painful blindness. The company knew that most of the people who needed the cure couldn’t afford the medicine. That’s why Merck gave it away for free.
When CEO Vagelos was asked why they made that decision, he said it would have been such a demoralizing moment for scientists at Merck & Co if they didn’t help out. Especially since what the company stood for was preserving and improving human life.
You might be wondering whether Merck’s decision at that time was based on their ideology or because they could gain something from it. The answer is both. Merck was hitting two birds with one stone because not only did they help out the people with “river blindness”, but they also created a good reputation for themselves. CEO Vagelos didn’t have to choose because Merck could do both. They gave more, and they earned more.
Although it might seem that Merck lost a lot of money when the company gave away the drug for free, this decision paid off in the future. It boosted the company’s reputation and gained them more investors.
Preserve the Core/Stimulate Progress
Although visionary companies each have a core ideology, it isn’t enough to make them the best of the best. When everything around you is constantly changing, you should hold on to your core ideology. That’s what visionary companies did. They changed almost everything about the company except for what they stood for.
Often, other companies get this confused and instead change their core ideology and let non-core practices remain. It can be hard to identify at first what essentially are core and non-core practices. You should be able to distinguish the two from each other because if you don’t, you’ll waste your time clinging to non-core practices. If you keep clinging to those, you’re stopping yourself from adapting to change and moving forward.
If you want your company to be a visionary one, you must preserve your core ideology at all costs. However, the outcome of this ideology should be open to changes. These outcomes are cultural norms, strategies, policies, goals, organization structures, and reward systems. These are all things you can change so that you can adapt to the changing times.
Here are some examples of companies’ core ideology and their non-core practices. HP’s core ideology is that they should respect and have concern for individual employees, and this shouldn’t change. However, giving employees fruits and doughnuts at 10 AM every day is a non-core practice that can be changed. Boeing’s core ideology is to ensure they are the leading edge of aviation and its pioneers. This shouldn’t change. However, the strategy of committing to jumbo jets is something they can change because this is a non-core practice. Lastly, Wal-Mart’s core ideology is to exceed customer expectations. The company can change its non-core practice of having customer greeters at the front doors.
What other factors do visionary companies have that make them the best? Aside from core ideology, they have a relentless drive for progress. Visionary companies are inspired and motivated to create, explore, change, and improve continuously. They are never satisfied with how things are, even if the company is doing great. Like an itch that can never be satisfied by scratching it, visionary companies persist in the name of progress.
They always think that they can go further, and they always find new possibilities. This drive was found in Citicorp when they set the goal of becoming the most widespread financial institution in the world, even though they were still a small company. This drive was also relentless in Walt Disney when he created Disneyland, even though there was no data to prove that his wild dream would be a success.
Visionary companies rely on their core ideology when it’s time to experiment, evolve, or change. When the company is clear about its core values, it can easily vary its strategies and movements for anything that’s non-core.
The core ideology should also be paired with a drive for progress. Since without moving forward, and without change, the company will fall behind in this world that’s always changing.
Now that you have your core ideology and a drive for progress, it’s time to institutionalize them. This means that you make these two evident and tangible in your organization. This isn’t just your “culture”. It’s something that preserves your ideology and stimulates progress. For instance, Walt Disney created Disney University, every employee was required to attend. They called their seminars “Disney Traditions”. Marriott, the founder of Marriott Hotels, didn’t just recite the core values as if he was reading something off a textbook, he applied meticulous employee screening mechanisms and systems for customer feedback.
Big Hairy Audacious Goals
Another thing that the authors observed in visionary companies, they didn’t just have goals. They had Big Hairy Audacious Goals or BHAG. A BHAG is something that inspires people to move forward even if the project seemed impossible to accomplish. It creates a strong team spirit and has a clear finish line. Think of the moon mission during the 1960s. You probably wouldn’t give it a second thought now because humankind has been making lots of achievements when it comes to space. However, think about living in the 60s and how advances like these were only possible in comic books. The moon mission was impossible for NASA back then. It was a crazy idea. However, during President Kennedy’s term, he made it the government’s mission to get a man to the moon and bring him back to Earth safely. Such a commitment was outrageous, but NASA still pushed forward.
This is an example of a BHAG. It is a project that is downright impossible, but people are still motivated to see it through. Another important component of a BHAG is that it’s easy to digest. When the Kennedy administration declared that they were going to make a man land on the moon, people got it right away. They didn’t need to release a statement containing complicated and headache-inducing words. Kennedy just announced what they were going to do. A BHAG is so motivating that you could say it in different ways, but everyone can still understand it. An example of this would be between General Electric and Westinghouse.
GE’s vision statement was to become #1 or #2 in every market. As for Westinghouse, they had the vision statement of total quality, market leadership, technology drive, focused global growth, and diversification. GE made their BHAG clear and compelling while Westinghouse was more complicated.
GE’s statement stimulated progress, created momentum, and it enabled people to get their juices flowing. This is what BHAG is essentially about.
Westinghouse’s goal wasn’t wrong, but it didn’t motivate people to work towards it. A BHAG should always make the goal clear—no matter how far-reaching it may be—and it should also fit with the company’s core ideology. From the top to the bottom of the hierarchy, all employees must know the goal and how to achieve it.
Let’s take a look at Philip Morris and R.J. Reynolds, which are both in the tobacco manufacturing industry. R.J. Reynolds was at the top when it came to the tobacco industry while Philip Morris was in 6th place. However, Morris had two things that Reynolds didn’t. Philip Morris adjusted Marlboro’s image, which proved to be a huge success, and most importantly, Morris had a BHAG. Their BHAG was to replace Reynolds from their position in the first place. Of course, it seemed ridiculous to others since a 6th placer was trying to become the 1st placer. The 2nd-5th placers have laughed at Morris because of this crazy idea. Philip Morris did climb to the top and eventually replaced Reynolds as number 1 in tobacco manufacturing.
BHAG was also applied to the Walt Disney Company. In 1934, Disney made it their goal to create a successful full-length animated feature film called Snow White. Everyone was against it at that time. Some people asked, “Who would want to see a full-length movie in a cartoon?” Two decades later, more animated films such as Pinocchio and Bambi were created by Disney and released to an eager crowd.
Even though the authors dubbed the companies mentioned here as visionary companies, there’s still a huge chance that being employed there isn’t for everyone. How can you determine if you’re a good fit for a visionary company or not? Go back to what the company’s core ideology is and you’ll find an answer. If you can’t adjust to the HP way, then you don’t belong to the company. If you’re not comfortable with how fanatical Wal-Mart gets when it comes to its dedication to its customers, then don’t bother applying. If you can’t stomach Disney’s wholesomeness and make-believe, then you’d probably hate working there.
The reason why these companies are visionary is they expect and demand more from their people. Since they’re clear about who they are, what they stand for, and what they want to achieve, they want people who go above and beyond their standards. Visionary companies aim to foster a tight-knit group that only accepts dedicated members. If you can’t embody what the company stands for, you’ll probably be miserable there and would eventually be ejected. However, if you’re dedicated and it shows through your good performance, you’ll be satisfied working there. For the best of the best, there’s no middle ground, you either fit in with the company or not.
The authors described the cultures of visionary companies as cult-like. They found four things in common between visionary companies and cults. First, a strong core ideology, second, indoctrination, third, tightness of fit, and fourth, elitism. Let’s use Nordstrom, the American luxury department store, as an example of this.
Nordstrom’s core ideology is to deliver outstanding customer service. This is reinforced through the way they treat their employees. Nordstrom employees, Nordies, tell each other stories in which they heroically serve customers. In their back room, they also have reminders on what their goals are, such as getting high sales. Nordstrom also gives positive reinforcement like rewards, and recognition to those who are doing well. If you don’t embody their core ideology, you will be negatively reinforced with penalties. Nordstrom instills a sense of loyalty and dedication to whoever fits in with its ideology. If you can’t deliver or embody their goal of delivering outstanding customer service, you’re out. The authors don’t mean that visionary companies are cults. They’re just cult-like in their practices. Let’s look at IBM and its cult-like culture.
In 1914, Thomas Watson, Sr. vowed to create a company that had “dedicated zealots”. Watson placed a strict policy that salespeople had to be well-groomed and wear dark business suits. He encouraged salespeople to be married since married people were more likely to be loyal. They had to provide for their families. Another strict rule is that salespeople should not drink alcohol.
If you managed to pass the indoctrination or the hiring process of IBM, you’d be exposed to their cult-like tightness of fit. They had a “schoolhouse” that trained their employees, and each morning, they had to sing IBM songs out of the company songbook called Songs of the IBM.
Just like Nordstrom, IBM also glorified employees who embodied their core ideology through corporate songs composed in their honor. If you were dedicated and fit right in with what IBM stood for, you’d last for a long time with them.
In this book, you learned how the best of the best run their companies. Even though they’re in different industries and cater to different people, they have a lot of things in common. Visionary companies never give up, even though their efforts just led to failure after failure. They were resilient, and they learned from their mistakes.
Even though money was pouring in, visionary companies didn’t treat it as their main priority. They make sure that what they do is carried out successfully and that their core ideology is seen in every endeavor they pursue. Profit was important to them for sure, but it only came next to their core values. They used core ideology as a basis when it came to making improvements and determining what they could and couldn’t change. In every BHAG that they had, visionary companies made sure that it related to what they stood for.
It might take you a long time to get where you want to be in life but use these visionary companies as your inspiration. They didn’t become successful right away, and they faced struggle after struggle. Yet, they still marched on. Don’t ever stop finding ways to improve yourself because these top companies continuously improve themselves too.