While there are many profitable business, and some that earn twice or more above industry averages, there exists an elite class of “visionary” corporations which go far beyond financial performance. According to authors Collins and Porras, such companies impact society at large in a profound way. Not only well-known, not only leaders in their industry, not only long-lasting, they become woven into the fabric of society. Built to Last is a semi-scientific attempt to determine what distinguishes this premier category of companies from the rest.
The authors performed a retrospective cohort study of 18 businesses. Nine “visionary” companies, as identified by a survey of hundreds of CEO’s were “carefully matched” to nine “comparison companies.” To satisfy the longevity criterion, only businesses founded prior to 1950 were considered. Selection criteria for comparison firms included: 1) Highly profitable company (average performance above general stock market by factor of two), and 2) Similar origins, both geographically and in offerings to the paired visionary company. After the selection process, the authors performed a comprehensive analysis of each pair of companies throughout their entire history in several broad dimensions, looking not only for elements common to the visionary companies, but more importantly when such features were noticeably lacking in the comparison companies. The authors openly admit that a retrospective cohort can only establish correlation, not causation. However, they are very proud of the “scientific” selection criteria which should enable the research to be reproduced.
Their findings run contrary to commonly held business theories, namely that great ideas (products / services) and charismatic leadership are necessary for a great company. “The data,” write the authors, do not support the theory. Rather, visionary companies, when compared to others, are distinguished by one overarching principle: They preserve a core ideology while simultaneously stimulating progress. This is the unifying theme and message of the book.
The authors develop this theme with various methods and principles, each of which is supported in “the data” as a distinguishing characteristic of visionary companies:
- Overtly teach and “indoctrinate” the core ideology to all employees, at all levels, creating intense loyalty and a sense of belonging to something special. Reject those who do not “tightly fit” the core values, beliefs, and behaviors, while rewarding those who do.
- Set “big hairy audacious goals” (compatible with the core ideology) which not only motivate, but also inspire
- “Evolutionary” exploration yields revolutionary discoveries and progress. This exploration creates a “tree” of options. The decision of which branches to prune and which to pursue is determined by the core ideology and not by market opportunity or even current business strategy. Leaders may leap through risky, narrow windows of opportunity, sometimes altering the entire nature of the business (as when American Express became a financial institution by inventing the “float” as a simple add-on service to it’s travel services business, despite previous promises that it would not engage in that industry).
- Promote from within and prepare for multi-generational leadership steeped in the core ideology; as with audacious goals, the organization is far more and outlives any individual leader, even if considered one of the greatest CEO’s of all time (Jack Welch of GE)
- “Good enough never is.” Constantly strive for personal, professional, and organizational improvement. Plenty of “good, old-fashioned hard work.”
It is not enough for the top-level leaders to follow these practices; rather, visionaries companies create financial, social, and procedural systems “with teeth” to execute the above practices. Collins and Porras carry a hopeful message that such wonderful results are within the reach of any who will seriously and diligently pursue these principles.
I was quite impressed with the attempts to be exhaustive in studying the long history of all 18 companies, through both internal corporate documents as well as outside observations. Accordingly, the text is extensively referenced. The narratives and message are motivational and inspiring. But more than just feel-good success stories, the authors explain the reasons for the success, which rings true. The writing is engaging, rich, and intriguing, yet applicable for the business reader who wants to apply the findings to a living organization.
However, throughout the book, I was repeatedly unsettled with the idea that present-day CEO’s, when asked “Which companies are visionary?” would produce a solid data set in which to mine for nuggets of ageless business wisdom. Furthermore, the potential for bias in the selection of comparison companies troubled me as well. While I cannot provide a better search criteria, I feel there must be one.
While the methodology may be imperfect, the book is quite helpful. I recommend Built to Last to those who want to climb the Mt. Everest of business development. Not for those who want to “go big, sell out, and die with the most toys.” Not for those seeking a great individual legacy. No, the vision held by Collins and Porras is that the greatest contributions to society come through organizations which are greater individuals. For the humble leaders seeking to build an institution to serve others for decades after they, individually, are gone. For those looking to follow shining star examples from the past. For those who share this noble vision, Built to Last will serve you well.