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.