Customer Reviews

Built to Last: Successful Habits of Visionary Companies

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This book reminds me of the hero in the classic Greek tragedy. The hero is always magnificent, but has a tragic flaw. This is a magnificent book with a tragic flaw.

Porras and Collins set out to write a book about visionary companies, and they did just that. They chose the companies they would study based on specific, detailed criteria.

They wanted to study companies that had been premier institutions in their industries and widely admired while they made an imprint on the world around them. They wanted their companies to have multiple generations of chief executives and to have gone through multiple product or service lifecycles. And they wanted the companies to have been around for a long time - founded before 1950.

They compared each of their visionary companies with another company that was not a premier visionary company. Many of the comparison companies were solid performers. They were good companies, but not great companies. That's one of the great things about the book. You can see the distinction between good performance and great performance.

Another thing that makes the book great is the extensive research. The project took six years, and the authors and their research team dug into critical issues and came up with fascinating insights and comparisons.

Read this book and you will learn about the characteristics of great companies that have an impact on the world around them. The discussions will enrich your understanding of what makes a great company. This will be especially valuable to you if you're in the process of building a company that you want to be great.

That's the great part, the hero part. What about the flaws?

The first flaw is that essentially performance for each of these companies is equated with market performance. There are lots of things the authors could have used, such as return on assets, for example. But share price is easy to track over time and is used as a surrogate for greatness. I'm not sure that that's the best criterion.

What you are actually reading about is a selection of excellent, visionary companies that were perceived as good investments by the market. This "perception" issue is not addressed in the book.

The second flaw is more important. While this book tells you marvelous things about companies that are admittedly great and about some of the things that make for greatness in companies, and while it mixes statistical data with telling anecdotes, it falls short in one critical area. The book doesn't tell you anything about how to achieve greatness.

In other words, it describes what greatness might be and it gives you some examples of companies who have achieved it, but the book ultimately left me with the nagging desire that the authors would have given me some "how to." As far as you can tell from reading the book, these companies were always great.

That may not be a problem for you if you're just starting a company. You've got a clean slate to start from. But if you're guiding an already-established company, or a part of it, I think you'll wish for a few examples of companies that became great after performing at some lesser level.

That's the bottom line in my recommendation. If you're looking for a book that describes greatness and where you'll pick up a wealth of ideas and good historical knowledge about great companies, buy this book. If, on the other hand, what you want is a book that describes in some detail how to achieve that greatness, this may not be the book for you.

This book will show you how to take your business from just average to great but even more importantly, make it last. Built to Last is a must read for all business people. Read this right along with Good To Great and Double Digit Growth.

Take your company to unequaled growth and leave a legacy.

This is one of the business classics in the past twenty years. It has sold a huge number of copies and I am sure many of those purchased copies were actually read! As impressive as its sales numbers have been, the way it has affected the approach to the way business was discussed and talked about for the past dozen years has been even more impressive.

Yes, there are always newer fads and business is subject to fads more than most fields of human endeavor. There are lots of theories about why this is so, but it might have something to do with the new managers coming in wanting to bring something new with them and so the previous guy's stuff is no good. Hence, something comes and something goes for reasons beyond its ability to run business in a sound and profitable way. However, when something comes along with some real substance it spreads and lasts, at least for awhile. The ideas of core values and big (hairy audacious) goals hit a chord and lasted. Of course, today they are part of the air businesspeople breathe rather than a quote from this book.

The authors looked at a number of big companies and found a list of those that had been around a long time, been financially successful, and were on a roll at the time of this book (but they don't say this is one of their criteria). They also found some comparable big company that hadn't found the level of success of the "visionary company" as they call the successful firms. They then looked for some traits common to those big successful companies that might explain their success.

The four big principles they came up with were: 1) Be a clock builder - or architect - not a time teller [once you read the chapter it will be clear], 2) Embrace the genius of the AND, 3) Preserve the core / stimulate progress, and 4) seek consistent alignment.

All this has to do with being opportunistic, building the organization that best supports the opportunities you are pursuing rather than letting the organization dictate what you pursue, that success requires doing seemingly contradictory goals simultaneously, making sure that the core culture gets preserved (if it has been a successful culture), and making sure that the whole process is focused on the core ideology - the core values and core purpose of the organization. Sounds simple? It's not. And even so, the "visionary" companies the book lauded a dozen years ago have all, or almost all, fallen on various levels of hard times since the book came out.

This fact is addressed in a soft way in the frequently asked questions addition for this paperback addition. There is also a new last chapter on building the vision and a section on questions for research (this acknowledges areas left unexplained by the book).

A book that has been this influential deserves your attention if you are interested in business literature. However, as with all of these books, use the principles as they apply to your real life in the real world of competitive business rather than treating them as some kind of final truth.

As shared before, my review methodology is to give a book some time so I can accurately comment to the degree of which it impacted my life. In the case of "Built to Last," I am writing a review a full 3 years after completing this most excellent book.

I am not exaggerating, then, when I say that this is among a select group of the most powerfully influential business books I've read. There is something about the methodology, the way the conclusions are presented, that makes it stand out as an excellent read. The content is, as some would say, quite "sticky."

Take, for example, their selection criteria for what constitutes an "Visionary Company." The company had to be in business something like 60 years, so they can see how a culture had "outgrown" their genesis business model (think about that!!!). They had to be outstanding market leaders, so there is some tie to the bottom line, and so on. Personally, these metrics have become ingrained, such that I repeatedly find myself gauging where my organization is relative to these metrics.

Secondly, the book expands upon each attribute of a "visionary company," such as having "big hairy audacious goals (BHAG's)," or having what some call a "cult-like culture." Each section expands upon each with direct examples of how the identified companies espouse these attributes.

For example, there is much discussion on how firms such as Boeing is famous of undertaking aggressive projects (BHAG's), or how Nordstrom's culture is so powerful it's akin to oil and water (the right people just fit; the wrong people are self-ejected).

I have found it fascinating, however, to watch the featured companies since completing the book. HP, for example. Why in God's name would HP chose to get into the PC business? This barely appears to align with "The HP Way." And for a while it appeared that Boeing no longer attacked BHAG's when they rejected the notion of a super-sonic passenger airliner, although their involvement in the Joint Task Force Fighter project certainly appeared in-line with their culture.

Finally, I have noted many books whose authors were influenced by this book. Either the book itself was directly referenced, or the ideas were clearly gained from its reading. My recommendation: buy it and read it. I doubt you will ever forget it.

I would not necessarily agree that the predecessor was a better book. The two books have different purposes, and I believe both are very helpful.

The authors present their research process and findings, as well as 12 myths:

Myth #1: It takes a great idea to start a great company.

Myth #2: Visionary companies require great and charismatic visionary leaders.

Myth #3: The most successful companies exist first and foremost to maximize profits.

Myth #4: Visionary companies share a common subset of "correct" core values. [Note: by this, they do not mean to say that values are not important; on the contrary. However, they explain that there is no specific set of values common to all successful companies, but that these vary from one to another.]

Myth #5: The only constant is change.

Myth #6: Blue-chip companies play it safe.

Myth #7: Visionary companies are great places to work, for everyone.

Myth #8: Highly successful companies make their best moves by brilliant and complex strategic planning.

Myth #9: Companies should hire outside CEOs to stimulate fundamental change.

Myth #10: The most successful companies focus primarily on the competition.

Myth #11: You can't have your cake and eat it too.

Myth #12: Companies become visionary primarily through "vision statements".

The authors debunk each of these myths by presenting their findings.

One of the most powerful lessons, which I underlined, is this: "... most of them view their products and services as making useful and important contributions to customers' lives... they exist to do something useful..."

The authors show that companies with long-term and solid success throughout time are not simply focused on making money or growing their business by X% annually. They have a stronger and greater mission, and their products and service exist primarily to support that vision. This is why, even when products become obsolete, the company with a strong sense of purpose continues to change and evolve beyond product life cycles. An important lesson for most companies in corporate America.

This is an inspiring book, and informative. It answers the "what" question convincingly. I missed answers to the "why" questions. Why, for example, are successful visionary companies characterized by their emphasis on ethical standards? There are many possible explanations: the staff of the company are inspired by the ideals and give more to their employer; the companies reap payoffs in the long term from grateful recipients of their honorable deeds; the companies acquire a good reputation which increases sales and hence profits. More interesting, is the question of the logic of ethics in the business game - not even touched by these authors.

According to Jim Collins and Jerry Porras, it does not matter what the company ideology is, as long as it is passionately believed by the management and employees. I find this a dubious claim, and not supported by the data. The ideological frameworks of the companies that were studied are not interchangeable, not for the trivial reason that the ideology of another company happens not to be the one believed by each of them. Boeing is unlikely to spend money on a program to cure river blindness in Africa. Why does Merck do this? Clearly, a pharmaceutical firm does well to invest in a reputation for medical generosity that flows from a passion for making people well? Merck is purchasing precisely the trust that pays-off in the medical market place. Trust reduces transaction costs, and in some cases is almost as good as a monopoly. Boeing, on the other hand, must buy a brand name attached to their dedication to engineering excellence. It does matter what companies are passionate about.

My company operates on the Internet. Our pledge includes the words: "The tragedy of the commons is the propensity of users to take more from the commons than they give. We undertake to contribute more to the commons than we take. Our presence shall make the Internet safer, more useful and greater fun." Why is this a suitable ideology for our company? The answer is not that this is one we happen to believe in, and feel passionate about - although we do. Rather, this ideology is strategically fitting. We enhance to our brand name, and therefore the value of our software, by adding our reputation to the web applications we write.

In one of our daughter businesses we are a broker of information from merchants to consumer (information about products that are available) and from consumer to merchant (we generate real time demand curves for a large range of commodities). We have pledged not to become a trader. Why? In ethical terms, we should not be a trader because our insider information would give rise to conflict of interest. The trust that we gain by not being a trader, and hence remaining a disinterested supplier of market information, enables us to broker Coasian agreements with reduced transaction costs between the parties on the Internet. The advantage is large. It is on the Internet commons that trust is scarce. We are able to purchase this by foregoing some potentially profitable trades, and that pays us more in the long term in our role as an information service provider.

Our ideology was designed to give us the greatest possible strategic advantage in our markets. That is not to say we do not believe in our ideals, but that the nature of our ideology is important. It does matter what we believe. It matters what you believe, and it matters that you understand that it matters.

I strongly recommend "The Modern Firm" by Roberts. Read this alongside "Built to Last". Roberts is a harder read, but he gets under the logic of corporate dynamics better than Collins and Porras. Because "Built to Last" is characterized by an ubiquitous analytical paucity, Jim Collins and Jerry Porras' interpretations of their data are not always correct. That is a pity. Their findings are exciting, inspiring even, and the book despite its limitations is a good read.

Collins and Porras' basic observation in this book, where they compare the practices of visionary to those of a matched set of good, though not great, companies, is that average companies are driven by the power of "or:" You can have either short term profits OR long term growth, either stability OR progress. Visionary companies, on the contrary, embrace the power of "and:" You can preserve the core AND stimulate progress.

That said, the authors go on to describe how great companies build structures that embrace these often contradictory goals. The great companies Collins and Porras study, contrary to popular belief, are not profit focused at their core. Instead, they are `value' focused. These values are a sort of nucleus, around which leaders in visionary companies grow the company.

And that is not the only difference between visionary companies and the more average comparison companies. The visionary companies surveyed consistently produced leaders steeped in the company's ideology. These home grown leaders are the result of deliberate corporate design, an orientation to corporate structure that the authors call "clock building instead of time telling." In short, among the final products of visionary companies are competent leaders that carry on the core. And once developed, these leaders are then encouraged to experiment boldly, keeping only what works (i.e. what is effective and in alignment with the core).

A very entertaining book, it is among the best, easiest to follow guide to strategy imaginable. I also like the fact that it addresses not only macro level concerns, but also provides guidelines to help folks like me, stuck in middle management positions, apply these concepts. It is well written, the case studies compelling, and I like being able to follow the authors' research methods in the appendices. It is this thorough research which raises the book several notches above the now-classic "In Search of Excellence."

A visionary company, say the authors, is one that is the premier organization in its field, one that has had a long standing impact on the world, and has had an average stock-return performance of fifteen times the general market since 1926. The authors of Built to Last spent six years studying visionary companies in-depth to uncover the underlying factors that helped them to outperform the competition. They first polled hundreds of CEO's to find out what companies they most esteemed. They then chose eighteen to profile in-depth and also researched a competitor to compare them with.

Here are some of their findings about visionary companies:

· Visionary company founders take an architectural approach to building their firms. They concentrate on the company's processes, systems and values, not their products. They also develop their managers and employees, so that the company survives long after the visionary leader is gone.

· Ideals and core ideologies drive visionary companies, not profits alone. Visionary companies have basic precepts that say, "This is who we are; this is what we stand for; this is what we're all about."

· Visionary companies commit to Big, Hairy, Audacious Goals (BHAG's), that serve as unifying focal points for development. These goals should be clear and compelling, involve risk, be consistent with the core ideology of the company, and be so bold and exciting that progress will continue even if leaders leave before the goal is achieved.

· Visionary companies have cult-like cultures. They are great places for people to work, if the people "fit" into the company culture and ideology.

· Visionary companies use home-grown management. Of the eighteen companies studies, only four times did one of them go outside of the firm for a CEO.

If anyone wants to know about the practices of the best business corporation around the world, this is the book. The companies selected are the best with reference to their policies and vision. And all the analysis is based on the data and facts collected by authors and are available in the book.

No wonder it took 6 years to research and write such a book. A must read for all business students and practitioners. If you want to know how to make a company last for 100 years with all the twists and turns of economic cycles, this is it.

...even though he wrote this one first, I'd recommend reading them in reverse order if you haven't read them before. This (and "Good to Great") are destined to become business bibles, kept hand near every manager's desk and referred to on a regular basis. Great companions to "First, Break All the Rules" and "Now Discover Your Strengths".