built to last

This is the second installment of our unofficial Business 101 series, and I feel it has good applications to all facets of professional life, whether you're an entrepreneur or an artist representing yourself.  I hope you find something of use in it.

_________________________________________________________________________

Hi, team,

This book by James (later Jim) Collins and Jerry Porras is considered one of the bibles of business literature for good reason.  I should also mention that I got all of the books from the SLO library (including the inter-library system), so you can find any/all of them there, if you're interested in reading more.  

This book focuses on "visionary companies" and how they differ from other also very successful companies (like American Express vs. Wells Fargo, Citicorp vs. Chase) and debunks the following twelve myths:

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

Reality: "Few of the visionary companies began life with a great idea.  In fact, some began life without any specific idea and a few even began with outright failures... Visionary companies were significantly less likely to have early entrepreneurial success than the comparison companies in our study.  Like the parable of the tortoise and the hare, visionary companies often get off to a slow start, but win the long race."

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

Reality: "A charismatic visionary leader is absolutely not required for a visionary company and, in fact, can be detrimental to a company's long-term prospects... Like the founders of the United States and the Constitutional Convention, they concentrated more on architecting an enduring institution than on being a great individual leader."

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

Reality: "Contrary to business school doctrine, 'maximizing shareholder wealth' or 'profit maximization' has not been the dominant driving force of primary objective through the history of the visionary companies... Yes, they seek profits, but they're equally guided by a core ideology-- core values and sense of purpose beyond just making money.  Yet, paradoxically, the visionary companies make more money than the more purely profit-driven comparison companies."

Myth 4.  Visionary companies share a common subset of "correct" core values.

Reality: "There is no 'right' set of core values for being a visionary company... The crucial variable is not the content of a company's ideology, but how deeply it believes its ideology and how consistently it lives, breathes and expresses it in all that it does.  Visionary companies do not ask, 'What should we value?'  They ask, 'What do we actually value deep down to our toes?'" 

Myth 5.  The only constant is change.

Reality: "Core values in a visionary company form a rock-solid foundation and do not drift with the trends and fashions of the day; in some cases, the core values have remained intact for well over one hundred years... Yet, while keeping their core ideologies tightly fixed, visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals."

Myth 6.  Blue-chip companies play it safe.

Reality: "Visionary companies may appear straitlaced and conservative to outsiders, but they're not afraid to make bold commitments to 'Big Hairy Audacious Goals' (BHAGs).  Like climbing a big mountain or going to the moon, a BHAG may be daunting and perhaps risky, but the adventure, excitement, and challenge of it grabs people in the gut, gets their juices flowing, and creates immense forward momentum.  Visionary companies have judiciously used BHAGs to stimulate progress and blast past the comparison companies at crucial points in history."

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

Reality: "Only those who 'fit' extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work.  If you go work at a visionary company, you will either fit and flourish-- probably couldn't be happier-- or you will likely be expunged like a virus.  It's binary.  There's no middle ground.  It's almost cult-like.  Visionary companies are so clear about what they stand for and what they're trying to achieve that they simply don't have room for those unwilling or unable to fit their exacting standards."

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

Reality: "Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and-- quite literally-- accident.  What looks in retrospect like brilliant foresight and preplanning was often the result of 'Let's just try a lot of stuff and keep what works.'  In this sense, visionary companies mimic the biological evolution of species.  We found the concepts in Charles Darwin's Origin of Species to be more helpful for replicating the success of certain visionary companies than any textbook on corporate strategic planning."

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

Reality: "In seventeen hundred years of combined life spans across the visionary companies, we found only four individual incidents of going outside for a CEO-- and those in only two companies.  Home-grown management rules at the visionary companies to a far greater degree than at the comparison companies (by a factor of six).  Time and again, they have dashed to bits the conventional wisdom that significant change and fresh ideas cannot come from insiders."

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

Reality: "Visionary companies focus primarily on beating themselves.  Success and beating the competitors come to the visionary companies not so much as the end goal, but as a residual result of relentlessly asking the question 'How can we improve ourselves to do better tomorrow than we did today?'  And they have asked this question day in and day out-- as a disciplined way of life-- in some cases for over 150 years.  No matter how much they achieve-- no matter how far in front of their competitors they pull-- they never think they've done 'good enough.'"

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

Reality: "Visionary companies do not brutalize themselves with the 'Tyranny of the OR'-- the purely rational view that you says you can have either A OR B, but not both.  They reject having to make a choice between stability OR progress; cult-like cultures OR individual autonomy; home-grown managers OR fundamental change; conservative practices OR Big Hairy Audacious Goals; making money OR living according to values and purpose.  Instead, they embrace the 'Genius of the AND'-- and the paradoxical view that allows them to pursue both A AND B at the same time."

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

Reality: "The visionary companies attained their stature not so much because they made visionary pronouncements (although they often did make such pronouncements).  Nor did they rise to greatness because they wrote one of the vision, values, purpose, mission, or aspiration statements that have become popular in management today (although they wrote such statements more frequently tan the comparison companies and decades before it became fashionable).  Creating a statement can be a helpful step in building a visionary company, but it is only one of thousands of steps in a never-ending process of expressing the fundamental characteristics we identified across the visionary companies."

Core ideology = core values + purpose

Core values: the organization's essential and enduring tenets-- a small set of general guiding principles; not to be confused with specific cultural or operating practices; not to be compromised for financial gain or short-term expediency.

Purpose: the organization's fundamental reasons for existence beyond just making money-- a perpetual guiding star on the horizon; not to be confused with specific goals or business strategies.

An example of a culture committed to customer service and excellence is Nordstrom's, whose employee handbook is a 5"x8" card that reads in its entirety:

Welcome to Nordstrom

We're glad to have you with our Company.

Our number one goal is to provide 

outstanding customer service.

Set both your personal and professional goals high.

We have great confidence in your ability to achieve them.

Nordstrom Rules:

Rule #1: Use your good 

judgment in all situations.

There will be no additional rules.

Please feel free to ask your department manager,

store manager or division general manager

any question at any time.

Jim Nordstrom said, "We view our people as sales professionals.  They don't need rules.  They need basic guideposts, but not rules.  You can do anything you need to at Nordstrom to get the job done, just so long as you live up to our basic values and standards."

Applying Darwin's theory of evolution to visionary companies: "branching & pruning"

If you add enough branches to a tree (variation) and intelligently prune the deadwood (selection), then you'll likely evolve into a collection of healthy branches well positioned to prosper in an ever-changing environment.

Jack Welch of General Electric used "planful opportunism" (excerpted from Tichy/Sherman's Control Your Own Destiny or Someone Else Will):

"Instead of directing a business according to a detailed... strategic plan, Welch believed in setting only a few clear, overarching goals.  Then, on an ad hoc basis, his people were free to seize any opportunities they saw to further those goals...[Planful opportunism] crystallized in his mind...after he read Johannes von Moltke, a nineteenth century Prussian general influenced by the renowned military theorist Karl von Clausewitz [who] argued that detailed plans usually fail, because circumstances inevitably change."

3M's philosophy:

- Hire good people, and leave them alone.

- Listen to anyone with an original idea, no matter how absurd it might sound at first.

- Encourage; don't nitpick.  Let people run with an idea.

- If you put fences around people, you get sheep.  Give people the room they need.

- Give it a try-- and quick!

Lesson learned from 3M:
"When in doubt, vary, change, solve the problem, seize the opportunity, experiment, try something new (consistent, of course, with the core ideology)-- even if you can't predict precisely how things will turn out.  Do something.  If one thing fails, try another.  Fix.  Try.  Do.  Adjust.  Move.  Act.  No matter what, don't sit still.  Vigorous action-- especially in response to unexpected opportunities or specific customer problems-- creates variation."

Good Enough Never Is

"There is no finish line in a highly visionary company.  There is no 'having made it.'  There is no point where they feel they can coast the rest of the way, living off the fruits of their labor.  Visionary companies... attain their extraordinary position not so much because of superior insight or special 'secrets' of success, but largely because of the simple fact that they are so terribly demanding of themselves.  Becoming and remaining a visionary company requires oodles of plain old-fashioned discipline, hard work and a visceral revulsion to any tendency toward smug self-satisfaction."

Okay!  I'll stop here.  If you have any questions or want to know more about any of this (without necessarily reading the book), feel free to ask me anytime.

Hope you found this useful.

J :-)