In the business world, there’s a cliche that executives only look at their careers in 90 day increments since the pressure to deliver impressive earnings in the stock market is ever present. While some pressure can be helpful, this short term perspective can drive companies into unfortunate decisions such as failing to take an interest in values and succession planning. Reading “Built To Last” Successful Habits of Visionary Companies” by Jim Collins and Jerry I. Porras is an excellent corrective to the short term philosophy that is popular in much of the business world. By citing carefully researched case studies from companies such as Proctor & Gamble, Merck and Walt Disney, the book shares several key lessons on how to build an organization that lasts for decades if not centuries.
Past readings of Jim Collins will know that he prides himself on his robust, social science approach to business research. Just like “Good To Great” and “Great By Choice,” Collins focuses on publicly traded companies though he argues that these lessons apply in other contexts as well. The claim that principles from the business world can be applied elsewhere is not unique to Collins (e.g. this Wall Street Journal article Family Inc suggesting the merits of a weekly family status meeting). However, Collins has made efforts to explore how his ideas can apply in other contexts in the book, Good to Great and the Social Sectors.
The pursuit of grand goals – Big Hairy Audacious Goals (BHAGs) – is one of the most inspiring aspects of the book and a way to bring people together. As a mechanism to stimulate progress, BHAGs are quite appealing, especially when it is a concrete goal. For example, Boeing committed to build the 727, the first in a long series of successful commercial jets. Developing a prototype aircraft required “roughly a quarter of [Boeing's] corporate net worth.” Committing to such a daring project is hard to imagine now – few companies in the 21st century appear interested in taking such risks. Yet, that sense of daring and committment to nearly impossible goals is quality that “Built To Last” associates with visionary, long lasting companies.
Beyond earnings and goals, what is it actually like to work at the visionary companies described in “Built To Last”? Such companies take their people very seriously and tend to invest heavily in home grown management skills and build “cult-like cultures.” At first, the “cult-like cultures” point struck me as extreme. However, “Built to Last” argues that a belief in a company’s elite status is a key reason that IBM grew from a small seller of business machines in the 1920s to one of the world’s most successful companies. The belief in IBM’s self-concept predated the company’s success by decades – that belief helped the company keep going through its tough years. Companies profiled in the book also put their money into culture building: “In 1887, P&G introduced a profit-sharing plan for workers, making it the oldest profit-sharing plan in continuous operation in American industry.” Why build culture? Collins and Porras argue that such culture building activities are an essential way to “preserve the core” of a company over time.
The greatest lessons I’ll take from “Built To Last” is the long term perspective. It’s possible to build organizations that thrive long after the founder is gone. In a time when many people focus on selling companies fast to maximize profits, let’s remember that’s not the only way to run a business. You can build a firm that actually stands for principles like technical innovation (HP), outstanding customer service (Nordstrom) or advancing health (Merck).