Built To Last Book Definitive Book Summary
by Jim Collins & Jerry Porras
Key Facts and Insights Explained (In Just 7 Minutes)
Overview
Today you’re going to learn exactly how you can grow a succesful company…
…and you’re going to do so by looking at what you can learn from the GREATS!
In this “Built to Last” review – a fantastic book by researchers Jim Collins and Jerry Porras – we’re going to find out the character traits of great companies that have enjoyed huge success throughout a continuous time period.
These companies generally are:
- Admired by knowledgeable business people
- Premier institutions within their industry
- Have made a significant world impact
- Experienced numerous service or product life-cycles
- Have had several CEO generations
- Were founded prior to 1950
In fact:
I’ve used some of these approach to grow my businesses and achieve exponential PROFITS.
Ready to get started?
Enjoy!!!
Let’s start by looking at why these companies are so valuable and what makes us so sure…
Jim and Jerry compared visionary companies with comparison companies that were constructed around the same time period and focused on very similar industries. For example, GM vs. Ford, or Texas vs. HM Instruments. Basically, these were companies that were outshining those already on the market.
They discovered that if $1 was invested into comparison companies, the return doubled that of the general type of market; but if $1 was invested in a visionary company, then the return was fifteen times as much.
So, these companies do have something worth knowing about the key factors necessary to being succesful AND staying succesful over a long period of time.
But how is it done?
Let’s find out.
Building clocks – not telling the time.
To begin with, Jim and Jerry highlighted the initial difference between comparison companies and vision companies.
They did this by using the metaphor of Clock Building vs. Time Telling. Time Telling equates to being focused on being a charismatic leader of a company or maybe brainstorming a fantastic idea, whereas the focus of the Clock Builder is to create an amazing company that thrives beyond the realms of any leader or product cycle.
What is really interesting is that not many of the greatest companies included in their study began as the result of an initial brilliant product or an excellent idea.
When Masaru Ibukain founded Sony in 1945, initially no product idea existed. Two possible first products that were considered were bean-paste soup and miniature golf equipment. In the end, they agreed on a rice cooker.
The first product – which was a tape recorder – was a failure in the marketplace.
For many visionary companies, the ultimate goal was never a product designed to be a runaway hit…
Instead, it was the creation of an enduring company.
The book describes the shift in viewing the products like vehicles for company creation, rather than the company like a vehicle for product development.
The visionary company creators were prepared to revise or even kill a product that was failing, but were never going to give the company itself, up. When the focus shifts from creating great products to the creation of an enduring company something really extraordinary happens – the realization hits that, to succeed, a charismatic high-profile leader is not necessary.
‘OR and the Tyranny of it.’
Interestingly, Jim and Jerry also discovered that visionary companies quite often didn’t make the same trade-offs similar companies were making.
Most companies give choices – either you have stability or change; high quality or low cost – but visionary companies would always find a compromise and have both.
More Than Just Profit
The existence of visionary companies is not solely to make money – something which typically doesn’t apply to comparison companies.
Business School will highlight that the company’s primary purpose is to ensure profit for its shareholders.
Making money is obviously necessary for a company to survive. Only in Silicon Valley can companies go on for years burning through mountains of cash and still stay in business.
Visionary companies don’t prioritize profit. What they put forward is their dreams and hopes of what achievements the company is capable of other than creating a profit.
Built to Last calls this the company’s core ideology. It comprises of a set of simple precepts, as follows:
- This is us
- This is what we’re about
- We stand for this
- The company core values are enduring and essential.
Core ideology consists of a mixture of purpose and core values, together with principles that are the driving force behind all decisions made within the company.
An example that is often cited is The Johnson & Johnson Credo (if you can, look it up).
Basically, a company’s purpose comprises of a set of reasons beyond its existence and mere money making.
The company’s purpose should be fundamental, broad and enduring, and should be something to pursue continuously and never to achieve.
Walt Disney said (and I quote):
‘Disneyland will never be completed, as long as there is imagination left in the world.’
Preserving the core while stimulating progress
IBM’s founder’s son, Thomas J. Watson, Jr., and the company’s second president, summarises the point the book’s authors are putting across with:
“If an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except its basic beliefs as it moves through corporate life… The only sacred cow in an organization should be its basic philosophy of doing business.”
The book’s central concept is to preserve the core yet still stimulate progress.
Progress stimulation is an internal drive in visionary companies, not external. They don’t wait to be told by the market that it’s time for them to make improvements – they do it by themselves.
The most important factor is to understand the meaning of your core. Many companies in comparison groups often mistake tactics and strategies as being their core, which in turn means that their strategy and tactics aren’t changed enough.
This approach also allows drifting from the initial core purpose, which leads to a somewhat rudderless company obsessed with strategies and tactics – which, eventually, will cease working.
So, now that the book’s core idea has been scaled down, let’s have a look at the five categories that you can use to become a visionary company and to stimulate progress while preserving your core.
PART 2 – Now it's your turn: How You can Build GREAT COMPANY with (BHAGs) Big Hairy Audacious Goals
Generally, I have a phobia over anything that is hairy and big – however, there are exceptions.
BHAGs are basically commitments (often risky and challenging goals) to which visionary companies channel their efforts.
It’s like having a trusted regular goal compared to the commitment of a daunting and vast challenge.
A commonly quoted BHAG is Kennedy announcing to the world that before the ’60s were over, the US would have a man land on the moon.
For a BHAG to be effective, it needs to be both compelling and clear. The team must understand it immediately, and it should require little explanation.
In the ’80s, GE’s goal fit the bill perfectly. It was to be either first or second in every serviceable market and to revolutionize the company so that it had the agility and speed of a smaller enterprise.
When reading through your BHAG, a small part of you should tell you that the goal set is unreasonable – BUT another part should say, “so what, nothing can stop me anyway!!”
Those outside of your company may think (or even tell you!) that you’re mad; however, when the goal is set correctly, it will drive your company’s energy towards ensuring that it is achieved.
What’s your BHAG? Why not drop me a comment below…
Cultures that are cult-like
Visionary companies create an excellent workplace for those who believe in their core ideology. Those who don’t fit are ejected – all of which helps with preservation of the core.
When you know what your values are and where you’re heading, you will usually expect more from your team, which leads people to make the comparison to cults.
As Jim and Jerry pointed out, several characteristics are shared:
- Fervently held ideologies
- Indoctrination
- Elitism
- The tightness of a fit
When working within a visionary company, quite often you will be reminded of the specific purposes and BHAG.
If you are fortunate enough to become a permanent team member, then the rewards will be great, because out of your friends, you will feel a sense of elitism, as you will be the one who is working on something more significant than merely earning a cheque.
To complete the comparison, people that surround you will no doubt make accusations that you are ‘drinking the Cool-Aid.’ But don’t worry, that’s ok because that is what is required for a company to become a visionary one.
The final point about this topic (remember this ISN’T about creating personality cults!!!) is about the creation of a mission and purpose.
Try loads of Stuff – only keeping what WORKS !!
This sounds like what a lot of people in today’s society would refer to as the method of Lean Start-up.
Visionary companies see a high level of experimentation and action – usually undirected and planned – which produces new unexpected progress paths that allow companies that are visionary to copy the biological evolution of the species.
3M’s former CEO, Richard Carlton, once said:
"Our company has, indeed, stumbled onto some of its new products. But never forget that you can only stumble if you are moving."
Several visionary companies did transit from one specific market to another – however, this didn’t happen as a result of strategic planning, but opportunism, experimentation, or even accident.
In 1850, American Express started life in the freight industry, initially shipping hard cash. Due to money orders being created, there was a fall in demand for the shipping service of money. This then prompted them to design a money order, which was named the ‘Express Money Order’. This is the transformation that led to the company we are familiar with today.
All of the visionary companies showed this behavioural trait.
Post-It Notes were initially an experiment of permanent adhesive by 3M that failed, which was then used by one of its engineers to mark his pages in the church’s hymn book. As the saying goes, from there onwards the rest is history…
To create a culture whereby evolutionary progress is king, you need to start with the following principles:
Try it – adjust your findings then keep moving.
Accept mistakes happen and will be part of the course. Experimentation is all about not knowing what you’ll find. Some things work – others don’t. Accept that the process does include making mistakes. Take little steps, as these steps will serve two purposes. To begin with, little mistakes will not destroy the company; and lots of little steps create a path to making real progress.
Allow people room to grow and to try out new things.
Make the previous steps part of everyday culture.
Management that is Home-Grown
Visionary companies tend to show more promotion from within the company. This is good as it means that all senior management positions are generally filled by individuals who have already spent time working with and understanding the company’s core ideals.
This is a win-win situation which requires no further explanation.
Keep in mind that, to ensure smooth transitions from generation to generation, you will need a long-term succession plan and management development process.
If you’re doing an excellent job developing internal talent and are keeping them immersed in the company’s core purpose, there shouldn’t be any problem in finding an amazing executive from your ever-evolving team.
Is anything ever good enough?
Visionary companies see continual processes of on-going self-improvement with the goal of always being better and better.
The crucial question to ask each visionary company isn’t ‘compared to our competition, how are we doing?’ but rather ‘how can we improve tomorrow on what we did today?’.
Often, visionary companies will want to create discomfort – which enables them to create changes BEFORE the demands of the external world.
For example, P&G at the beginning of the ’30s had the best of everything – the best people, marketing, and products.
Sounds perfect, right?
Well, they then worked on creating a structure of the brand management whereby each P&G brand was able to compete with one another directly.
The authors found various discomfort mechanisms in order to clamp down on complacency within each visionary company.
A practice that was implemented by Boeing was named ‘eyes of the enemy’ whereby managers were assigned the tasks of creating business plans with the purpose of ultimately destroying Boeing – followed by brainstorming plans to counteract these potential threats.
The visionary companies’ goals are to maintain the longevity of the company’s long-term health, which will always require continual investment in the future.
Included are both good and bad times. Long-term health should never be sacrificed for short-term profits.
The Conclusion:
What is interesting is that the majority of what’s in Built To Last had already been written – and is re-appearing now 35 years later!!
The point to keep in mind is that initially these principles were needed to build the foundations of an enduring company… However, nowadays they are needed to merely survive.
So make sure you follow them!!
Now, over to you…
Do you already have Big Hairy Audacious Goals (BHAGs) or are brainstorming some?
Or maybe you have a question…
Either way, feel free to leave your comments below and I’ll be sure to answer them as soon as they come in.
