PDF Summary:Built to Last, by Jim Collins and Jerry Porras

Many enterprises come and go, but visionary companies endure for generations. These companies are the gold standard in their respective industries, remaining prosperous throughout many decades and at the hands of many different leaders. Beyond attaining financial success, they’ve also become household names, ingraining themselves into our collective psyche—it’s hard to imagine a world without them or their products, from Band-Aids to Post-it Notes to Mickey Mouse.

But what is the key to these companies’ longevity and tremendous success? Bestselling author Jim Collins and Stanford professor Jerry I. Porras embarked on a six-year research project to answer this question. In this book, you’ll find the fruits of their research, learn the important concepts behind enduring success, and get practical advice for building a company that lasts.

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Visionary companies are crucially able to distinguish between a core philosophy—timeless, unchanging principles—and non-core practices—manifestations of this core philosophy that change constantly to keep up with an ever-evolving world.

• For example, Boeing’s core philosophy is, “Being on the leading edge of aviation,” while their non-core practice is making jumbo jets. If they stop making jumbo jets and start making flying cars, they would be changing a non-core practice while still adhering to their core ideology.

When you mistake a non-core practice that can be changed for a core ideal that can’t be changed, you remain stagnant and will eventually fall behind as the world passes you by. It’s thus important to maintain the yin of preserving the core alongside the yang of stimulating progress. A visionary company uses a core philosophy to define the boundaries between what they can and can’t do, then use a drive for progress to fly within those lines.

Myth 7: Visionary Companies Are Ultra-Conservative

The research revealed that one of the ways visionary companies stimulate progress is not conservative: They set daring, seemingly impossible goals, or what Collins and Porras coined Big Hairy Audacious Goals (BHAGs, pronounced bee-hags). These BHAGs typically take 10 to 30 years to achieve and only have a 50 to 70 percent probability of success—but visionary companies see them as eminently doable.

There are different types of BHAGs: Ambition BHAGs can be quantitative (“become a $1 billion company by X”) or qualitative targets; challenger BHAGs focus on beating the competition; icon BHAGs seek to emulate established players; and refresher BHAGs are big changes that are great for old or big organizations that need a shot in the arm.

When coming up with your BHAG:

• Be precise about the language that you use so that it’s easy to understand and unambiguous.
• Reflect on your goal’s audacity and ensure that it pushes you out of your comfort zone.
• Check your goal’s alignment with your core philosophy.

Increase your chances of achieving your BHAG by fully committing to it, being driven by something greater than profit, and building it into the organization so that it transcends any disruption such as a change in leadership. Lastly, it’s essential that you keep setting more BHAGs even as you cross others off your list so that you don’t become complacent.

Myth 8: Anyone Can Fit Right Into a Visionary Company

For many people, working at a visionary company is the dream. But, as the research reveals, not everyone can work at these dream companies; some people just don’t fit in. This is because visionary companies want to preserve their core philosophy and thus make sure that everyone in the company is compatible with their ideals.

Visionary companies are so single-minded when it comes to preserving their core that they’re almost cult-like. In their quest to ensure that everyone in the company is on the same page, they’ve demonstrated the following cult-like practices and characteristics:

1. Alignment: Visionary companies have a tough screening process and systems—rewards for actions that adhere to the core philosophy and penalties for non-adherence—to ensure that new hires fit seamlessly into the organization.
2. Indoctrination: Visionary companies thoroughly immerse new employees in the core philosophy. They have orientation seminars and even full-blown “universities” to teach the company’s history, values, and traditions.
3. Exclusivity: Visionary companies want their employees to feel like they are part of a special, elite group. They encourage their workers to socialize among themselves and not with outsiders. For example, IBM took “employee socialization” to a new level: The company managed country clubs where IBMers could mix and mingle exclusively with other IBMers.

These cult-like practices may seem like an almost unhealthy desire to control their people. But having these practices in place not only maintains the core but also enables companies to entrust their employees with operational autonomy. When they see that employees embody what the company is all about, visionary companies give them the wings to fly.

Myth 9: Visionary Companies Carefully Plan Everything

The authors debunk the myth that visionary companies’ success is wholly a result of deliberate planning. While visionary companies are strategic planners, some of them reached new heights through something akin to Charles Darwin’s evolutionary theory: Species evolved over time through a process of “variation,” changing to adapt to their environment, and then “selection,” wherein only the strongest variants survive.

While visionary companies do a fair amount of strategic planning, such as setting BHAGs, they also make use of their own process of variation and selection, keeping the best results of their experiments and making the most of opportunities that come their way.

If you want to stimulate evolutionary progress, you have to make room for unplanned variation and allow your people to experiment and get creative. You have to act quickly and seize opportunities that come your way. Accept that mistakes are all part of the process—evolution isn’t perfect; failed experiments are an inherent part of it, just as weak mutations don’t survive as a species evolves.

• For example, Johnson & Johnson had successful experiments like Band-Aids, but also had many failed experiments, such as kola stimulants, ibuprofen pain relievers, and colored casts that stained hospital linens.

Myth 10: Hiring CEOs From Outside Can Revitalize a Company

Sometimes, flagging companies look to an outsider to be their savior. But visionary companies hardly ever look outside; in fact, within the era of study, they only hired 3.5 percent of their 113 chief executives from outside, versus comparison companies’ 22.1 percent out of 140. That’s because visionary companies ensure that they have a leadership continuity loop:

1. They develop leaders and come up with a succession plan. Visionary companies have formal management development programs to identify and train top managerial talent in the organization. Leaders also put a lot of thought into succession, sometimes planning years in advance.
2. They have a list of strong internal candidates. Visionary companies have a culture of developing and training leaders through intensive management training programs. As a result, the companies often have a number of capable candidates who are ready to take on a leadership role when needed.
3. They ensure continuous excellent leadership from within. Those who find themselves in leadership roles at visionary companies then keep the cycle going by planning for their successor.

These three elements form a never-ending loop that allows the company to maintain the core while stimulating progress. When any of these elements is missing, a company ends up with a leadership gap. Without good people leading the way, a company may find itself stuck, unsure of how to move forward. They may then scramble for a replacement from outside, hoping this savior will give the company some much-needed stimulation. However, an outsider who isn’t aligned with the company’s core philosophy may steer the company in a direction that may be damaging to the company.

If you’re a CEO or a member of top management, you should identify, train, and promote top managerial talent. Formulate a long-range succession plan so that passing the torch from one generation to the next will be seamless. If you’re a manager, think about developing leaders and coming up with a succession plan for your department or group. If you’re an entrepreneur, think long-term—start thinking about how your business can endure from generation to generation, long after you’re gone.

Myth 11: Visionary Companies Are Relentless Versus the Competition

Visionary companies aren’t obsessed with doing better than their competitors; instead, they’re primarily focused on beating themselves. At no point do visionary companies ever think that they’ve reached the finish line—continuous improvement is a part of who they are, and so they always demand more of themselves.

Visionary companies implement policies with teeth to ensure that they keep performing better than they did the year before. In particular, they do two things:

1. Seed discomfort. Visionary companies want their people to feel discontented with their accomplishments because it pushes them to strive for more. To create motivational discontent, visionary companies use various tactics. Some examples of these tactics are internal competitions between brands, forced innovation by getting rid of profitable product lines, and pooled rankings among employees.
2. Think long-term. Visionary companies think 50 years into the future and make long-term investments in several areas: new property, plants, and equipment; research and development; new management methods, industry practices, and technology; and human capital. They never sacrifice long-term goals for the sake of short-term profit.

The quest for self-improvement is never-ending, because success is never final. Even when a company is at the top, there’s no guarantee that they’ll stay there.

Myth 12: Vision Statements Are an Integral Part of Success

Having a vision statement can be useful, but it’s only the first step. Contrary to the myth, a vision statement doesn’t guarantee greatness; the real work is in bringing the vision to life. Visionary companies try to bring the vision to life by incorporating their core philosophy into everything they do and, most importantly, making sure their methods are aligned with each other.

Alignment means that everything a company does and every element reinforce each other. When a company doesn’t have alignment, constantly opposing forces significantly hinder their progress.

Seeking alignment is a tricky, never-ending process, but these actions help:

1. Take a big-picture approach. Visionary companies use a comprehensive, carefully thought-out, and consistent system to achieve the yin and yang of maintaining the core and stimulating progress. You can’t take a single element—a core ideology, BHAGs, evolution, a cult-like culture, management development—and create a masterpiece. It takes all of these things working together.
2. Pay attention to details. While a big picture is nice to look at, the small details are vital. Employees have a greater drive to achieve the vision when they see it consistently in the small, day-to-day signals and cues.
3. Put together mechanisms that reinforce each other. Visionary companies don’t introduce anything arbitrarily; each element works in concert with others. Visionary companies put together mechanisms that reinforce each other to deliver a clear, consistent message.
4. Be guided by your core. Visionary companies don’t let trends dictate their actions; rather than asking if a practice is “good” or “bad,” they ask if it’s something that’s aligned with their core.
5. Eliminate misalignments. While your core philosophy should remain sacred, everything else can evolve. When a company lets their non-core practices evolve, it’s easy to allow practices and policies that push the company away from its core philosophy or slow down progress. Stay vigilant and correct these misalignments.
6. Come up with new methods. Some visionary companies use more BHAGs, others use more mechanisms of discontent. You can use a combination of ideas from this book to see what works for your company, but you don’t have to stop there. You can invent new ways of maintaining the core and stimulating progress—as long as they’re true to your core philosophy.

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Taking all the key concepts together, the four key concepts behind building a visionary company are:

1. Focus on clock building, not time telling.
2. Tap into the “power of the and.”
3. Embrace the yin and yang of maintaining the core and stimulating progress.
4. Keep everything aligned.

Four concepts sound simple enough. Simple doesn’t mean easy, but with this framework, you can start applying these concepts, no matter who you are. Apply them to your organization, your fledgling business, or your team. Amplify your efforts by helping others around you understand the concepts and take them to heart. And always remember that enduring greatness, though challenging, is within your reach.