by Jim Collins, Jerry I. Porras
Last annotated on February 11, 2015
Introduction
to the Paperback Edition
First, people feel inspired by the very notion of building an enduring,
great company.
Second, thoughtful people crave time-tested fundamentals; they’re tired of
the “fad of the year” boom-and-bust cycle of management thinking.
Third, executives at companies in transition find the concepts in Built to
Last to be helpful in bringing about productive change without destroying the
bedrock foundation of a great company (or, in some cases, building that bedrock
for the first time).
Fourth, there are many visionary companies out there, and they’ve found the
book to be a welcome confirmation of their approach to business.
Diversity is a strength, especially when rooted in a common understanding
of what we stand for and why we exist.
The only truly reliable source of stability is a strong inner core and the
willingness to change and adapt everything except that core.
Chapter 1
The Best of the Best
Myth 1: It takes a great idea to start a great company. Reality: Starting a
company with a “great idea” might be a bad idea.
Myth 2: Visionary companies require great and charismatic visionary leaders.
Reality: A charismatic visionary leader is absolutely not required for a
visionary company and, in fact, can be detrimental to a company’s long-term
prospects.
Myth 3: The most successful companies exist first and foremost to maximize
profits. 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.
Myth 4: Visionary companies share a common subset of “correct” core values.
Reality: There is no “right” set of core values for being a visionary company.
Myth 5: The only constant is change. Reality: A visionary company almost
religiously preserves its core ideology—changing it seldom, if ever.
Myth 6: Blue-chip companies play it safe. Reality: Visionary companies may appear
straitlaced and conservative to outsiders, but they’re not afraid to make bold
commitments to “Big Hairy Audacious Goals” (BHAGs).
Myth 7: Visionary companies are great places to work, for everyone. 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.
Myth 8: Highly successful companies make their best moves by brilliant and complex
strategic planning. Reality: Visionary companies make some of their best moves
by experimentation, trial and error, opportunism, and—quite literally—accident.
Myth 9: Companies should hire outside CEOs to stimulate fundamental change.
Reality: In seventeen hundred years of combined life spans across the visionary
companies, we found only four individual incidents of going outside for a
CEO—and those in only two companies.
Myth 10: The most successful companies focus primarily on beating the competition.
Reality: Visionary companies focus primarily on beating themselves.
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.
Myth 12: Companies become visionary primarily through “vision statements.” Reality:
The visionary companies attained their stature not so much because they made
visionary pronouncements (although they often did make such pronouncements).
Chapter 2
Clock Building, Not Time Telling
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.
we suggest that the continual stream of great products and services from
highly visionary companies stems from them being outstanding organizations, not
the other way around. Keep in mind that all products, services, and great
ideas, no matter how visionary, eventually become obsolete. But a visionary
company does not necessarily become obsolete, not if it has the organizational
ability to continually change and evolve beyond existing product life cycles.
We’re simply pointing out that a high-profile, charismatic style is clearly
not required for building a visionary company.
Walton valued change, experimentation, and constant improvement. But he
didn’t just preach these values, he instituted concrete organizational mechanisms
to stimulate change and improvement.
make a shift in thinking as fundamental as those that preceded the
Newtonian revolution, the Darwinian revolution, and the founding of the United
States.
Prior to the Newtonian revolution, people explained the world around them
primarily in terms of a God that made specific decisions.
people began to look for basic underlying dynamics and principles of the
entire system. That’s what the Newtonian revolution was all about.
Similarly, the Darwinian revolution gave us a dramatic shift in thinking
about biological species and natural history—a shift in thinking that provides
fruitful analogies to what we’ve seen in the visionary companies. Prior to the
Darwinian revolution, people primarily presumed that God created each and every
species intact and for a specific role in the natural world:
to the dramatic revolutions in political thought of the seventeenth and
eighteenth centuries, the prosperity of a European kingdom or country depended
in large part on the quality of the king
Now compare the good-king frame of reference with the approach taken at the
founding of the United States. The critical question at the Constitutional
Convention in 1787 was not “Who should be president?
the founders of the country concentrated on such questions as “What
processes can we create that will give us good presidents long after we’re dead
and gone?
But notice: In the case of the United States, it’s not a cold, mechanistic
Newtonian or Darwinian clock. It’s a clock based on human ideals and values.
It’s a clock built on human needs and aspirations. It’s a clock with a spirit.
the important thing to keep in mind is that once you make the shift from
time telling to clock building, most of what’s required to build a visionary
company can be learned. You don’t have to sit around waiting until you’re lucky
enough to have a great idea. You don’t have to accept the false view that until
your company has a charismatic visionary leader, it cannot become a visionary
company.
Interlude No “Tyranny of the OR” (Embrace the “Genius of the AND”)
Instead of being oppressed by the “Tyranny of the OR,” highly visionary
companies liberate themselves with the “Genius of the AND”—the ability to
embrace both extremes of a number of dimensions at the same time. Instead of
choosing between A OR B, they figure out a way to have both A AND B.
A visionary company doesn’t seek balance between short-term and long-term,
for example. It seeks to do very well in the short-term and very well in the
long-term.
Chapter 3
More Than Profits
Contrary to business school doctrine, we did not find “maximizing
shareholder wealth” or “profit maximization” as the dominant driving force or
primary objective through the history of most of the visionary companies. They
have tended to pursue a cluster of objectives, of which making money is only
one—and not necessarily the primary one.
PROFITABILITY is a necessary condition for existence and a means to more
important ends, but it is not the end in itself for many of the visionary
companies. Profit is like oxygen, food, water, and blood for the body; they are
not the point of life, but without them, there is no life.
VISIONARY companies like Motorola don’t see it as a choice between living
to their values or being pragmatic; they see it as a challenge to find
pragmatic solutions and behave consistent with their core values.
IN short, we did not find any specific ideological content essential to
being a visionary company. Our research indicates that the authenticity of the
ideology and the extent to which a company attains consistent alignment with
the ideology counts more than the content of the ideology.
Core Ideology = Core Values + Purpose
Core Values = The organization’s essential and enduring tenets—a small set
of general guiding principles; not to be confused with specific cultural or
operating practices; not to be compromised for financial gain or short-term
expediency.
Purpose = The organization’s fundamental reasons for existence beyond just
making money—a perpetual guiding star on the horizon; not to be confused with
specific goals or business strategies.
IN a visionary company, the core values need no rational or external
justification. Nor do they sway with the trends and fads of the day. Nor even
do they shift in response to changing market conditions.
Chapter 4
Preserve the Core/Stimulate Progress
Like core ideology, the drive for progress is an internal force.
Although the core ideology and drive for progress usually trace their roots
to specific individuals, a highly visionary company institutionalizes
them—weaving them into the very fabric of the organization.
INTENTIONS are all fine and good, but it is the translation of those
intentions into concrete items—mechanisms with teeth—that can make the
difference between becoming a visionary company or forever remaining a wannabe.
IF you are involved in building and managing an organization, the single
most important point to take away from this book is the critical importance of
creating tangible mechanisms aligned to preserve the core and stimulate
progress. This is the essence of clock building.
Chapter 5
Big Hairy Audacious Goals
A BHAG engages people—it reaches out and grabs them in the gut. It is
tangible, energizing, highly focused. People “get it” right away; it takes
little or no explanation.
AS in the Philip Morris case, BHAGs are bold, falling in the gray area
where reason and prudence might say “This is unreasonable,” but the drive for
progress says, “We believe we can do it nonetheless.” Again, these aren’t just
“goals”; these are Big Hairy Audacious Goals.
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.
A BHAG should be so clear and compelling that it requires little or no
explanation. Remember, a BHAG is a goal—like climbing a mountain or going to
moon—not a “statement.” If it doesn’t get people’s juices going, then it’s just
not a BHAG.
A BHAG should fall well outside the comfort zone. People in the
organization should have reason to believe they can pull it off, yet it should
require heroic effort and perhaps even a little luck—as with the IBM 360 and
Boeing 707.
A BHAG should be so bold and exciting in its own right that it would
continue to stimulate progress even if the organization’s leaders disappeared
before it had been completed—as happened at Citibank and Wal-Mart.
A BHAG has the inherent danger that, once achieved, an organization can
stall and drift in the “we’ve arrived” syndrome, as happened at Ford in the
1920s. A company should be prepared to prevent this by having follow-on BHAGs.
It should also complement BHAGs with the other methods of stimulating progress.
Finally, and most important of all, a BHAG should be consistent with a
company’s core ideology.
Chapter 6
Cult-Like Cultures
“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.
IBM attained its greatest success—and displayed its greatest ability to
adapt to a changing world—during the same era that it displayed its strongest
cult-like culture.
THE point of this chapter is not that you should set out to create a cult
of personality. That’s the last thing you should do.
Rather, the point is to build an organization that fervently preserves its
core ideology in specific, concrete ways. The visionary companies translate
their ideologies into tangible mechanisms aligned to send a consistent set of
reinforcing signals. They indoctrinate people, impose tightness of fit, and
create a sense of belonging to something special through such practical,
concrete items
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.
Chapter 7
Try a Lot of Stuff and Keep What Works
WE like to describe the evolutionary process as “branching and pruning.”
The idea is simple: If you add enough branches to a tree (variation) and
intelligently prune the deadwood (selection), then you’ll likely evolve into a
collection of healthy branches well positioned to prosper in an ever-changing
environment.
IF well understood and consciously harnessed, evolutionary processes can be
a powerful way to stimulate progress. And that’s exactly what the visionary
companies have done to a greater degree than the comparison companies.
ALTHOUGH the invention of the Post-it note might have been somewhat
accidental, the creation of the 3M environment that allowed it was anything but
an accident.
five basic lessons for stimulating evolutionary progress in a visionary
company.
1. “Give it
a try—and quick!”
2. “Accept
that mistakes will be made.”
3. “Take
small steps.”
4. “Give
people the room they need.”
5.
Mechanisms—build that ticking clock!
Chapter 8
Home-Grown Management
AS companies like GE, Motorola, P&G, Boeing, Nordstrom, 3M, and HP have
shown time and again, a visionary company absolutely does not need to hire top
management from the outside in order to get change and fresh ideas.
All individual leaders eventually die. But a visionary company can tick
along for centuries, pursuing its purpose and expressing its core values long
beyond the tenure of any individual leader.
Chapter 9
Good Enough Never Is
COMFORT is not the objective in a visionary company. Indeed, visionary
companies install powerful mechanisms to create discomfort—to obliterate
complacency—and thereby stimulate change and improvement before the external
world demands it.
MANAGERS at visionary companies simply do not accept the proposition that
they must choose between short-term performance or long-term success. They
build first and foremost for the long term while simultaneously holding
themselves to highly demanding short-term standards.
Chapter 10
The End of the Beginning
VISIONARY companies do not rely on any one program, strategy, tactic,
mechanism, cultural norm, symbolic gesture, or CEO speech to preserve the core
and stimulate progress. It’s the whole ball of wax that counts.
THE real question to ask is not “Is this practice good?” but “Is this
practice appropriate for us—does it fit with our ideology and ambitions?”
we hope you will take away four key concepts to guide your thinking for the
rest of your managerial career, and to pass on to others. These concepts are:
1. Be a clock builder—an architect—not a time teller. 2. Embrace the
“Genius of the AND.” 3. Preserve the core/stimulate progress. 4. Seek
consistent alignment.
Chapter 11
Building the Vision*
A very important point: You do not “create” or “set” core ideology. You
discover core ideology. It is not derived by looking to the external
environment; you get at it by looking inside. It has to be authentic. You can’t
fake an ideology. Nor can you just “intellectualize” it.
The role of core ideology is to guide and inspire, not to differentiate;
it’s entirely possible that two companies can have the same core values or
purpose.
Core ideology need only be meaningful and inspirational to people inside
the organization; it need not be exciting to all outsiders. It’s the people
inside the organization that need to be compelled by the core values and
purpose to generate long-term commitment to the organization’s success.
You cannot “install” new core values or purpose into people. Core values
and purpose are not something people “buy in” to. People must already have a
predisposition to holding them.
Don’t confuse core ideology with “statements” of the core ideology. A
company can have a very strong core ideology without a formal statement.
You should therefore focus on getting the content right—on capturing the
essence of the core values and purpose—not on wordsmithing the perfect
statement to be etched in stone. The point is not to create a perfect
“statement,” but to gain a deep understanding of your organization’s core
values and purpose which can then be expressed in a multitude of ways.
Finally, don’t confuse “core ideology” with the concept of “core
competence.” Here’s the difference: Core competence is a strategic concept that
captures your organization’s capabilities—what you are particularly good
at—whereas core ideology captures what you stand for and why you exist. Core
competencies should be well aligned with a company’s core ideology—and are
often rooted in its core ideology—but are not the same as its ideology.
Once you’re clear about the core ideology, you should feel free to change
absolutely anything that is not part of the core ideology.
If it’s not core, change it!
Don’t confuse core ideology and envisioned future, as managers often do. In
particular, we see managers confuse core purpose and BHAGs, exchanging one for
the other, mixing the two together, or failing to articulate both as distinct
items. Purpose is the organization’s fundamental reason for existence, which
like a star on the horizon can never be reached; it guides and inspires
forever. A BHAG, on the other hand, is a specific goal which, like a specific
mountain to climb, has a specific time frame and can be achieved. Whereas
identifying core ideology is a discovery process, setting the envisioned future
is a creative process.
It makes no sense to analyze whether an envisioned future is the “right”
one. With a creation—and the task is to create a future, not to predict the
future—there can be no right answer.
the visionary companies often realized their goals more by an organic
process of “try a lot of stuff and keep what works” than by well-laid strategic
plans. Rather, the source of their success lies in building the organization as
their primary means of creating the future.
Finally, in thinking about envisioned future, beware the “we’ve arrived
syndrome”—complacent lethargy that arises once an organization has achieved a
BHAG and fails to replace it with another.
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