Built to Last What Is

Built to Last What is the difference between a good company and a great company? According to James Collins and Jerry Porras, companies such as American Express, Citicorp, General Electric, Hewlett-Packard, IBM, Johnson & Johnson, Marriott, Philip Morris, Procter & Gamble, 3M, and Wal-Mart -- all of which have far outperformed their major rivals in the market for decades -- are not simply profitable because they produce a good product, although all of them do, to varying degrees.

If producing a good product were enough, however, these companies would not be so spectacularly successful in comparison to other companies in the same industry. Instead, the authors say that these company's success stories are due to the fact that they all are visionary companies that create a creative and insular corporate culture, in contrast to rival competitors. In fact, when Collins and Porras statistically compare the profits of visionary companies against non-visionary companies according to their definition, the visionary companies outperform their major competitors by five times as much.

In analyzing what makes these companies unique, the authors conclude that contrary to conventional economic wisdom, creating a consistent, cohesive, and exclusive organizational culture (but one that is still responsive and can change with the needs of the consumer and the environment) is equally important as maximizing organizational efficiency. To coin the conventional self-help wisdom, a company must look within, rather than without.

Even core company processes, like standard operating procedures, engineering, and management must closely stick to the company's core beliefs It is a culture, almost a cult-like (the authors use that word unapologetically to describe the attitudes of Wal-Mart management) mentality that drives success. The authors focus on internal factors rather than the external factors that create success, and suggest that performance has far less to do with technology or number-crunching than one might suspect.

The book is structured along 'busting' a series of myths about company success, such as the conventional wisdom that it takes a great and unique idea to start a company, as many successful companies began without such an idea, or changed their initial product substantially. Examples of the successful visionary companies identified by the authors that began without such an innovative idea include Hewlett Packard and Sony.

In fact, Collins and Porras believe that having a singular, great initial idea often leads to a failure of adaptability and does not always translate into long-term growth. The second myth is that great and charismatic leadership is required for long-term success. Like being wedded to a great start-up concept, being shackled to the vision of a single, charismatic leader can be detrimental to a company's long-term prospects.

And still more jarring to conventional business wisdom is Built to Last's busting of the centrality of the concept of profit maximization -- of course, meeting a profit goal is ultimately necessary for an organization to survive but merely making the idea that generating 'lots of money' is good cannot be an organization's sole reason for its existence. The customer, after all, is interested in a good product, not the profit of the company where it purchases the product.

In fact, Hewlett-Packard began without using any outside funds so it would not need to maximize profits during the critical, early years of its development. Even more jarring is the idea that all great companies do not necessarily have the same core values. By Collins and Porras' definition all visionary companies have core values, but each set of values unique to the company and helps create its culture. Cultural commonality is the key, not a certain, particular value that is common to all successful companies.

Regardless of what these values are, these values never change, rather than assert that change is the only constant, Collins and Porras say that core values can and must last -- hence, the title of their work, Built to Last. Companies that are great remain fundamentally the same, yet adapt -- and adaptability comes with taking risks, not playing it safe. Truly great companies have what the authors call BHAG, or (Big Hairy Audacious Goals).

BHAG is the answer to the question of the paradox posed by some of the authors' assertions: how can an organization adapt, and move forward from the first key conceptions that founded the company, without losing track of the crucial core values? BHAG means that occasionally a company is forced to undergo a shift in its product, service, or customer base. This does not mean that it loses sight of its values.

An excellent example of how BHAG are complementary with a corporate value structure and vision is actually provided by the American government's attempt to put a man on the moon during the 1950s and 1960s. America did not lose sight of its values, and it changed leadership many times while fulfilling this mission, even though it was a new concept and goal for the nation to achieve.

A corporate example of a company that changed with the technological times and realigned its product focus is that of Boeing when it began the first era of commercial air travel when it built the 707. Boeing retained the same values and quality but shifted to different, bigger goals to meet the new realities of the aircraft market. There is a kind of 'bunker' mentality at great companies, like going to war, where every person must pull his or her weight.

This is also why it is decidedly not true that visionary companies are great places to work for everyone, rather these companies are more like self-selective clubs -- people must fit into the culture and buy into the ideals of the company. The company, again contrary to conventional wisdom, may not excel at strategic planning rather the visionary and great companies try many things and find a path through trial and error that helps the company advance its mission.

When change does happen within the corporate culture it usually comes from within, and usually not because of a focus on beating the competition, rather it comes from topping past self-imposed benchmarks. This is also why good chief executives and management seldom are imported from other organizations, regardless of their track records of success. What works in one organizational culture does not work in another organizational culture.

It is more important to succeed in keeping the culture and vision coherent, than staying hard and fast to a previous line of action or choices. One surprising fact provided by the book is that what most people know as the office supply company 3M started as a mining company, and Marriott was initially famous as a restaurant, not a hotel chain.

The shift of the core products of these companies demonstrate how hard decisions must be made when making selective choices, but these choices are how a true vision is achieved -- not through making vision statements. Vision is created by action. The first eleven principles or myth-busters might seem like a very 'soft' statement about corporate success -- that ideals and ideas and internal culture and loyalty mean more than dollars, sense, and strategic analysis of the external environment.

However, the final principle of action underlines the practical emphasis of the corporate case studies of the text. All of the companies provide products and services that add practical value to consumer's lives, they are useful to people, in short. Practicality means that profitable companies' core values do not have to be core moral, ethical or enlightening, although they can embrace these concepts. Even Phillip Morris,.