Built to Last: Successful Habits of Visionary Companies
by Jerry I. Porras, Jim Collins
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Book Summary Information
Author: Jerry I. Porras, Jim CollinsEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2004-11
ISBN: 0060566108
Number of pages: 368
Publisher: HarperBusiness
Book Reviews of Built to Last: Successful Habits of Visionary Companies
Book Review: Sogit's Book review
Summary: 4 Stars
Every corporation must have future goals in mind, stating either where they want the company to be in the future or certain task they seek to accomplish. People are told throughout their life to set goals that they wish to achieve, in order to better themselves. Majority of the time we are told to set reasonable goals, however in Built to Last Mr. Jim Collins and Mr. Jerry I. Porras shows us that visionary companies that set what they call Big Hairy Audacious Goals (BHAGs) are the most successful. They define Big Hairy Audacious Goals as clear and compelling goal that engages their employees. In the eighteen cases preformed throughout the book in fourteen of them the visionary company displayed BHAGs where the comparison company didn't. These audacious goals majority of them started at the beginning of the company with claims to become the leader of their respective industry. For a startup company this is a very bold and clear goal, it engages the employees and lets them know where the company is striving to be. This is tangible as well, it can be easily measured. General Electric's BHAG, stated "To become number one or number two in every market we serve and revolutionize this company to have the speed and agility of a small enterprise." Employees at GE were stimulated by this statement and strived to achieve this which pushed the company to become the dominant corporation it is today. Another key aspect of BHAGs, is that if the BHAG is accomplished it is up to management to create a new one that will continue to stimulate progress. We are shown examples where companies achieve their goals that they have set and then become complacent and competitors are able to pass them by. Ford is one example of this, when Henry Ford stated his BHAG for Ford a car in every working man's garage. After the invention of the assembly line and driving down production cost Ford realized Mr. Ford's dream, but then didn't set a new goal for continuing success in the future. General Motors was then able to surpass Ford and take over the automobile industry, until Ford woke up again. Keeping the employees of a company motivated is key ingredient in making a visionary company.
Mr. Collins and Mr. Porras also notice a characteristic of visionary companies of how their employees are all very happy and most are proud to work for their respective companies. They notice the trend that satisfied employees are an important key to having a visionary company. It is not that visionary companies are the best companies for anyone; it is just that they do a very good job of weeding out the employees that do not fit in with the core values of the company. The visionary companies do this by selecting young employees (typically recent graduates) that they can mold into the type of employee that demonstrates the company's core values. They mold employees by starting them at the bottom of the company and having them work their way up by meeting certain goals or sales. They keep encouraging their employees to reach these goals with positive reinforcement, such as pictures on the wall, and discount or pay incentives. Companies will also encourage employee to attend after work functions to get the feeling of family atmosphere throughout their corporation. They also encourage the spread of positive stories that employees have performed in order to benefit the customer or to reach certain goals. All these types of activities and awards bring employees together so they strive to work harder but more importantly make the employees that are not reaching these goals or buying into the core values of the company feel a little bit like an outcast; which normally leads to them leaving the company. Some of the visionary company's employees are so closely knit that in the book Built to Last they refer to them as cult-like cultures. When they say cult-like cultures it is no in a derogatory term, but that they have a clear understanding of who they are, what they are about, and what the company is trying to achieve.
This type of atmosphere amongst employees also inspires innovations, with the employees feeling of a family and being part of something bigger they are always looking for ways to better the company. This leads to employees either trying new strategies or creating new products and presenting them to the company in order to better the corporation. Management in the visionary companies have noticed this, and have established programs to allow the discovery of new products to flourish. One quote from a former CEO of 3M Corporation Mr. Richard P. Carlton "Our Company has, indeed, stumbled onto some of its new products. But never forget that you can only stumble if you're moving." Throughout the book we notice numerous famous products that we use every day were invented as accidents, such as baby powder, band- aids, and credit cards. Some visionary companies even have a policy throughout their work day that employees must work on the development of new products for a certain amount of time a day. The company understands that every experiment is not going to lead to a successful product, but that they cannot move into the future unless they are attempting to better themselves for their consumers. The authors describe this process as an analogy to a tree with branches, always building new branches with innovations and keeping the ones that work and building upon them, and cutting off the branches that didn't work, until you have a healthy tree.
Another important strategy that visionary companies use pertaining to their employees is in house promotion. Through key examples they show the importance of promotion from within, and the importance of having management training programs always throughout the corporation. Visionary companies are always mentoring potential future managers and executive's officers, this way there is never a lull in management. Another reason for this is to make sure the successor is familiar with the company values and adheres to them. Through examples we have seen in some of the comparison companies, outside CEO's can come in and change the company core values which is confusing not only to their customers but to their employees as well. Promotion from within also helps the employees buy into the company, striving to better the company because they are under the impression that one day they can benefit from their attributes to the company. It is an incentive to work harder and get noticed; since management made the jump from stockroom employee to upper management, any employee can do the same.
The importance of "growing" a future CEO from inside the company is well addressed in chapter "Home Grown Management." In the authors' opinion a great achievement of any visionary company is that they employ the management-succession process, which enables them to secure their normal flow of operations in case something unpredictable happens and current management and the CEO can no longer manage the company. We could agree that the management succession process is crucial to any company. The authors of the book prove their point by presenting very clear examples of the companies who did and did not use the management-succession strategy.
GE is presented as a company which followed a management-succession process. The company designed its own procedure to select a CEO out of internal candidates who had the best knowledge of the company's business and internal operations. The authors believe that the prominent attention to leadership continuity in GE was one of the major contributing factors to making it a visionary company.
Westinghouse, in contrast to GE is presented in the book as a company that has been "rocked by periods of turmoil and discontinuity at the top." (Collins, J., Porras J.). The authors prove their point that Westinghouse paid significantly less attention to management development by referencing the fact that they tried to look for outside publications covering the internal succession process at Westinghouse, but were not able to find any substantial information. Major discontinuities in management, among other factors undermined Westinghouse's prospects of becoming a visionary company.
The authors also try to bring readers' attention to the idea that "top management does matter" in ensuring successful operations of any company.
The authors view on the top management's role is clearly presented in a following statement - "Top management will have an impact on an organization - in most cases, a significant impact. The question is, will it have the right kind of impact?" (Collins, J., Porras J.). The authors link the importance of top management's impact on an organization to a chosen strategy of "developing, promoting and carefully selecting managerial talent, grown from inside the company" in visionary companies. Comparison companies, on the other hand, neglect the concept of managerial impact which can be seen in a lack of continuity of quality leadership in those companies. The authors of the book clearly demonstrate that both the visionary companies and the comparison companies have had excellent top management at certain points in their histories. But the visionary companies have had better management development and succession planning (Collins, J., Porras J.).
An important concept of "discontent environment" in visionary companies that drives them to continue to develop is addressed in chapter 9 - "Good enough never is". The authors introduce a new distinctive quality of a visionary company - discontent. The research that the authors conducted supports the concept of continuous improvement, which developed in an institutionalized habit in visionary companies. A visionary company may not be a comfortable place to be in, and, as surprising as it may be, this is one of the major factors that makes a company visionary. The authors stress the idea that comfort is not the objective in a visionary company. In contrast, visionary companies install powerful mechanisms to create discomfort in order to obliterate complacency and thereby stimulate change and improvement before the external world demands it (Collins, J., Porras J.).
The authors did a lot of research to demonstrate the readers how "the concept of discontent" can benefit a company.
P&G is presented in the book as one of the visionary companies that realized early enough that any rise to prominence may cause the company to become "complacent, happy and fat." During the company's most successful years P&G had to develop a new radical marketing strategy that would allow P&G brands to compete with each other directly. Since the marketplace did not provide enough competition, P&G created its own system of competition just to keep the company strong.
By following clear examples presented in the book, we can completely agree with the authors' point of view that, continuous discontent stimulates further development and makes a company strive to do better tomorrow than it does today.
The authors of the book stress the importance of building for the future and doing well today. A distinctive management tactics used in visionary companies is that they do not accept the proposition that they must choose between short-term performance or long-term success. They build foremost for the long term while simultaneously holding themselves to highly demanding short-term standards (Collins, J., Porras J.).
The authors came to a conclusion, backed by a substantial evidence, that the visionary companies invested for the future to a greater degree than the comparison companies.
In their message to CEOs, managers, and entrepreneurs, the authors of the book urge the top managers to create "mechanisms of discomfort", invest in the future and innovate new methods and technologies before the rest of the industry, continue building for the long-term even in difficult times and make sure employees understand that comfort is not the objective (Collins, J., Porras J.).
The authors of the book have their own view on companies' "vision statements" as well.
Collins and Porras believe that the essence of a visionary company comes in the translation of its core ideology and its own unique drive for progress into very fabric of the organization - into goals, strategies, tactics, policies, processes, cultural practices, management behaviors, building layouts, pay systems, accounting systems, job design - into everything that the company does (Collins, J., Porras J.).
The authors conclude their message with reminding readers of the four key concepts to a successful management:
1. Being a clock builder - an architect - not a time teller;
2. Embracing the "Genius of the AND";
3. Preserving the Core and stimulating progress;
4. Seeking consistent alignment
Summary of Built to Last: Successful Habits of Visionary Companies
"This is not a book about charismatic visionary leaders. It is not about visionary product concepts or visionary products or visionary market insights. Nor is it about just having a corporate vision. This is a book about something far more important, enduring, and substantial. This is a book about visionary companies." So write Jim Collins and Jerry Porras in this groundbreaking book that shatters myths, provides new insights, and gives practical guidance to those who would like to build landmark companies that stand the test of time.
Drawing upon a six-year research project at the Stanford University Graduate School of Business, Collins and Porras took eighteen truly exceptional and long-lasting companies -- they have an average age of nearly one hundred years and have outperformed the general stock market by a factor of fifteen since 1926 -- and studied each company in direct comparison to one of its top competitors. They examined the companies from their very beginnings to the present day -- as start-ups, as midsize companies, and as large corporations. Throughout, the authors asked: "What makes the truly exceptional companies different from other companies?"
What separates General Electric, 3M, Merck, Wal-Mart, Hewlett-Packard, Walt Disney, and Philip Morris from their rivals? How, for example, did Procter & Gamble, which began life substantially behind rival Colgate, eventually prevail as the premier institution in its industry? How was Motorola able to move from a humble battery repair business into integrated circuits and cellular communications, while Zenith never became dominant in anything other than TVs? How did Boeing unseat McDonnell Douglas as the world's best commercial aircraft company -- what did Boeing have that McDonnell Douglas lacked?
By answering such questions, Collins and Porras go beyond the incessant barrage of management buzzwords and fads of the day to discover timeless qualities that have consistently distinguished out-standing companies. They also provide inspiration to all executives and entrepreneurs by destroying the false but widely accepted idea that only charismatic visionary leaders can build visionary companies.
Filled with hundreds of specific examples and organized into a coherent framework of practical concepts that can be applied by managers and entrepreneurs at all levels, Built to Last provides a master blueprint for building organizations that will prosper long into the twenty-first century and beyond.
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