Success Summaries

Success Summaries
The Best Ideas Simplified

Built to Last
Successful Habits of Visionary Companies

Summary Overview

Built to Last is the result of a study the author

undertook to discover what makes visionary
companies—the crown jewels in their industries—so
exceptional. The author studied 18 companies, each in
a different industry, that met the following criteria:
By Jim Collins and
Jerry I. Porras • They are the premier company in their
industry.
CONTENTS • They are widely admired by knowledgeable
THE BEST OF THE BEST businesspeople.
Page 2 • They have made a lasting imprint in society.
MORE THAN PROFITS
Page 3 • They have had multiple generations of chief
PRESERVE THE CORE, executives.
SIMULATE PROGESS • They have been through multiple product or
Page 4
BIG HAIRY AUDACIOUS service life cycles.
GOALS • They were founded before 1950.
Page 5
CULT-LIKE CULTURES
Page 5 The study took six years to complete at the Stanford
HOME GROWN Graduate School of Business. Collins and Porras use
MANAGEMENT
Page 8
the results to compile a blueprint for visionary success.
GOOD ENOUGH NEVER
IS The seven timeless principles of visionary companies
Page 8
THE END OF THE
include: Be clock-builders, not time-tellers; embrace
BEGINNING the “and”, reject the “or”; more than profits; walk the
Page 9 talk; preserve the core ideology while stimulating
BUILDING THE VISION
Page 10
progress; never-ending process; and build the vision.

Success Summaries
Success Summaries

The Best of the Best

The study compared the 18 visionary companies against 18 control companies that have
had average or slightly above-average success in their industries. It found contradictions
to the following commonly held beliefs:
1. It takes a great idea to start a great company. Most visionary companies don’t
start with a great idea. They get off to a slow start, but they win the long race.
2. Visionary companies require charismatic leaders. Leaders of visionary
companies care more about long-term growth than on being great leaders.
3. The most successful companies exist by maximizing profit. Visionary
companies have core values that include, but are not limited to, making money.
4. Visionary companies share the “right” core values. Visionary companies have
many different values—but they believe those values deeply.
5. The only constant is change. Visionary companies have a strong drive for
progress, but their core values stay fixed.
6. Blue-chip companies play it safe. Visionary companies appear conservative, but
they motivate their employees by making bold, exciting commitments.
7. Visionary companies are great workplaces for everyone. They are great places
to work—if you fit with the core ideology.
8. Being visionary involves brilliant strategic planning. Visionary companies try
lots of things and stick with what works.
9. Outside CEO’s can make a company visionary. Most visionary companies do
not bring in outside leadership.
10. Visionary companies focus on their competition. Visionary companies focus
on beating themselves.
11. Great companies know they can’t have everything. Visionary companies don’t
settle for “or.” They work out brilliant ways to have “and.”
12. A great vision statement equals a visionary company. Visionary statements do
not automatically lead to visionary success.

Be a Clock Builder, Not a Time Teller

Imagine you met a person who could tell you exactly what time of day it was by looking
at the sky. It’s an amazing talent. But far more useful is the person who builds a clock so
that everyone can tell time, even after the builder is gone. Charismatic leaders are time
tellers. But the leaders of visionary companies are clock builders.
The Myth of the Great Idea
Great ideas are like time tellers. You don’t need one to start a visionary company.
• Dave Hewlett and Bill Packard decided to start a company, then figure out what
to make and sell. Texas Instruments, the moderately successful control company,
started with an idea: reflection seismograph surveys for oil developers.
• Sony went from bean paste soup to golf equipment before settling on electronics.
The control company, Kenwood, had a product in mind from conception.
• Sam Walton, the founder of Wal-Mart, didn’t aim for discount retail at the
start. It took him twenty years to hit on the winning Wal-Mart formula. But
Ames, the control company, was founded as a discount rural retailer.

Success Summaries
Success Summaries

The Myth of the Charismatic Leader

The study found that high-profile, charismatic leaders were not required to make a
company visionary. In fact, most visionary companies don’t have charismatic leaders.
• William McKnight from 3M was described as gentlemanly, humble, and modest.
• Bill Hewlett is friendly and down-to-earth.
• Bill Allen, leader of Boeing, was calm, pragmatic, and shy.
• Procter and Gamble were restrained and conservative.
An Architectural Approach: Clock Builders at Work
The evidence suggests that leaders at the formative stages of developing great companies
are more focused on “building” than “leading.”
• Citicorp vs. Chase. James Stillman of Citicorp stepped aside from leadership
before his time to allow his bank to grow under the leadership of his employees.
At Chase, Albert Wiggin sought self-aggrandizement. Business Week wrote of
him that “The Chase Bank is Wiggin and Wiggin is the Chase Bank.”
• Wal-Mart vs. Ames. Sam Walton encouraged employees to come up with their
own ideas to help the business run better. He groomed a successor, invested in
his employees, and sought to build a lasting company. The Gilmans at Ames
passed down decisions and ideas from the top. They made unwise acquisitions,
focused only on market share, and did not groom a successor.
• Motorola vs. Zenith. Paul Galvin, Motorola’s founder, aimed to build a lasting
company. He hired excellent engineers and gave them freedom to discover new
ways to success. Eugene McDonald of Zenith, however, handled his company
with iron-fisted control. But he did not prepare a successor, and the company
sank after his death.
Advice for CEO’s, Managers, and Entrepreneurs
The success of visionary companies does not come from miracle ideas or all-knowing
leaders. Instead, it comes from the underlying processes and dynamics that make a great
company. Leaders must focus less on being visionary themselves, and more on building
a company that fosters those dynamics.
Interlude: Tyranny of the “OR”
• Conventional wisdom states that success involves a trade-off between two things:
lower prices or higher quality, for example. This is the Tyranny of the “OR.”
• Visionary companies find ways to have two conflicting things without sacrificing
one for the other, and without compromising in the middle ground.

More than Profits

In 1935, George Merck made the following statement: “We are workers who are
genuinely inspired by…service to humanity.” Fifty years later, Merck made the decision
to develop and give away Mectizan, a drug that cures a parasitic disease that affects
millions in third world countries.

When asked why the company made this decision, CEO P. Roy Vagelos said that “our
business success means victory against disease and help to humankind.” The company
still followed its long-standing ideals, despite the detriment to its bottom line.

Success Summaries
Success Summaries

Pragmatic Idealism
• Visionary companies don’t reject profits. They believe they can follow their
ideals and earn profits at the same time. They don’t believe they must choose.
• Many visionary companies have idealistic core values. They also take specific
steps to incorporate those ideals in everyday practice and innovation.
Core Ideology: Exploding the Profit Myth
• Profitability is necessary for existence, but it is not an end in itself.
• Most visionary companies put people first: then products, then profit.
• There is no specific ideology that is “right” or “wrong.” The difference is how
committed the company is to its ideals.
Words or Deeds?
• Visionary companies indoctrinate their employees more thoroughly than the
comparisons. The cultures of visionary companies are extremely powerful.
• Visionary companies are more careful than control companies about choosing and
nurturing top executives based on a fit with core ideals.
• Visionary companies are consistent in following their ideals. They permeate
goals, strategies, tactics, and organizational design.
Advice for CEO’s, Managers, and Entrepreneurs
Good company leaders must build core values and purpose into their companies.
• Core values are a small set of guiding principles the company abides by.
• Purpose is a company’s fundamental reason for existence beyond profit.

Preserve the Core, Stimulate Progress

A core ideology is important. But without change and innovation, the company will
become obsolete. Great companies change while preserving their core values.
Drive for Progress
• The drive for progress is a deep human urge to continue exploring and learning.
It is not an intellectual understanding that change is necessary.
• Driven companies don’t wait for market data to tell them it’s time to change.
They innovate for innovation’s sake alone, because they are compelled to.
• Visionary companies are both self-confident and self-critical. They are self-
confident because they set daring goals; they are self-critical because they push
for self-induced change, believing they can always be better.
Preserving the Core AND Stimulating Progress
• Holding fast to a cherished ideology is a conservative act. Pushing for everlasting
change is a radical act. Visionary companies do both.
• The core ideology allows innovation by giving a solid base around which a
company can experiment and evolve.
• The drive for innovation powers the implementation of the core goal.
• Many companies have ideals they do not translate into reality. Great companies
translate their ideals into tangible performance.
Advice for Managers, CEO’s, and Entrepreneurs
If you want to run a visionary company, you must create tangible mechanisms that both
preserve core ideals and stimulate progress.

Success Summaries
Success Summaries

Big, Hairy, Audacious Goals

Boeing took a risk when it developed the first commercial jet. It had failed in the
commercial market before; market surveys indicated little interest in the product; and
they had to gamble $15 million of their own money to make the prototype.

Despite these problems, Boeing rose to the challenge—and the jet age was born. Its
control company, Douglas Aircraft, took a wait-and-see approach to jet engines—and
they still have not caught up to Boeing.
BHAG’s: A Powerful Mechanism to Stimulate Progress
• BHAG’s (Big, Hairy, Audacious Goals) are powerful ways that companies can
inspire their employees and customers.
• A BHAG is a clear, compelling, and engaging goal that everybody understands
right away.
• BHAG’s drive forward progress. The voice of prudence says the goal is not
reasonable; but the company says “we will do it anyway.”
• BHAG’s look more impossible from the outside than the inside. Visionary
companies are confident to the point of hubris; it never occurs to them that they
can’t meet the goal.
The Goal, Not the Leader (Clock Building, Not Time Telling)
• When John F. Kennedy declared that America would send a man to the moon, he
was setting an audacious goal. But it was not Kennedy who inspired the goal: the
goal itself was inspiring.
• Some companies stall after a charismatic leader leaves. Visionary companies set
goals that keep the company inspired long after the leader is gone.
• Visionary companies can continually reinvent themselves with audacious goals,
no matter who the leader is.
Advice for CEO’s, Managers, and Entrepreneurs
• BHAG’s can be set at any level of a company’s operation.
• An organization can have multiple BHAG’s.
• BHAG’s must be simple and easy to understand.
• A good BHAG is inspiring in its own right. It gets people excited.
• Once a company has achieved a BHAG, it must prevent complacency by
instituting a new one.
• All BHAG’s must be consistent with the company’s core ideals.

Cult-Like Cultures
Visionary companies have strong cultures. They may be great places to work, but only
for those who have the right personality to thrive in the company’s distinctive culture.
Visionary companies are extremely clear about who they are and what they want to
achieve. They do not have room for employees who are not a perfect fit.
Ejected Like a Virus
All visionary companies have different cultures. There are, however, a few common
threads between them.
• Passionately held ideals. Visionary companies have fervent ideals that
employees at every level must buy into.

Success Summaries
Success Summaries

• Indoctrination. Visionary companies encourage legends built up around heroic

employees; chants and cheers; and getting new employees to socialize recruits.
• Tightness of fit. Employees that fit the culture get lots of positive recognition.
Those who don’t get negative recognition.
• Elitism. People on the “inside” are special. “Outsiders” are clearly defined.
Analysis of the study’s data revealed the following about the cultures of visionary
companies compared with their controls:
• In eleven out of eighteen, the visionary company had stronger social
indoctrination into their core ideals.
• In thirteen out of eighteen, the visionary company showed a more strict tightness
of fit throughout its history.
• In thirteen out of eighteen, the visionary company showed a greater sense of
elitism.
• In fourteen out of eighteen, the visionary company’s culture more strongly
resembled a cult.
IBM’s Rise to Greatness
Indoctrination: Watson hired young, impressionable people and promoted from within.
His training programs systematically indoctrinated new hires into the corporate culture.
He established IBM-run country clubs to encourage employees to socialize only with
each other.
• A tight fit: Employees were instructed how to dress, how to groom themselves,
and how IBM “company men” should behave.
• Elitism: Two generations of CEO’s have strived to instill in their employees the
belief that IBM was a special company, the best place in the world to work.
The Magic of Walt Disney
• Indoctrination: Every employee, at every level, must attend the company’s new
employee orientation. New hires are taught Disney-specific language in which
the crowd at a theme park is an “audience,” a job description is a “script,” and
working is “being onstage.”
• A tight fit: Employees are carefully screened, and a dress code is strictly
enforced. Employees cannot wear facial hair, dangling earrings or heavy makeup.
• Elitism: Disney cultivates an image of itself and its employees as important and
special in the lives of children.
Total Immersion at Procter and Gamble
• Indoctrination: Procter and Gamble is located in a small community where
employees are relatively isolated. They are expected to socialize together, belong
to the same churches and clubs, and see each other on weekends.
• A tight fit: Procter and Gamble is a worldwide company. Yet no matter the
nation in which they work, all employees are expected to conform to corporate
culture first.
• Elitism: Procter and Gamble describes itself to employees as a moral company
that has had a strong impact on American history, and one of the best in the
world.

Success Summaries
Success Summaries

Advice for Managers, CEO’s, and Entrepreneurs

Visionary companies are not cults. While cults revolve around certain visionary leaders,
these companies revolve around their core ideologies. To run a visionary company, your
company must preserve its ideals in tangible ways. Some tactics include:
• Orientation and ongoing training that emphasizes the core ideals.
• Internal training schools.
• On-site and after-hours socialization programs.
• Hire young and promote from within.
• Highlight your top performers by encouraging heroic tales and customer letters.
• Use unique language that makes employees feel they belong to a special group.
• Use corporate cheers, songs, and pledges that reinforce commitment.
• Hire only those who are the right fit.
• Link your rewards and advancements to adherence to the ideology.
• Be tolerant of honest mistakes; less tolerant of those who breach company ideals.
• Encourage employees to buy in with stock options and profit sharing.
• Celebrate your employees so that they feel they belong to something special.
• Emphasize company ideals in all verbal and written communication.

Try a Lot of Stuff and Keep What Works

Many visionary companies stumble on their most successful products and services by
accident.
Corporations as Evolving Species
• Visionary companies make evolutionary progress as well as BHAG progress.
• Unlike BHAG’s, which set a clearly defined goal, evolutionary progress involves
trying a lot of different products and staying with what works.
• BHAG’s involve big, bold statements. Evolutionary progress involves small,
incremental steps.
Darwin’s Theory of Evolution Applied to Visionary Companies
• Darwin’s theory of natural selection states that species evolve through undirected
variation and natural selection. Genetic variation ensures that at least some
members of a species will survive and reproduce.
• When the environment changes, animals with the right genetic traits get
“selected” for success.
• Visionary companies evolve the same way. They offer a variation of products.
As the business environment changes, certain variations are selected for success.
Branching and Pruning at 3M
Innovative visionary company 3M encourages its employees to innovate. It has had
many failed products, but also many successes. It keeps the successes and discontinues
the failures. Its managerial practices include:
• Listen to original ideas, no matter how far-fetched they sound.
• Encourage; don’t criticize.
• Hire the right people, then leave them alone.
• If you put fences around people, you get sheep.
• Encourage experimental doodling.

Success Summaries
Success Summaries

• Give it a try: quick!

Advice for CEO’s, Managers, and Entrepreneurs
• Give it a try. When in doubt, try something new—even if you don’t know how it
will work out.
• Accept that mistakes will be made. You can’t tell ahead of time which
innovations will work and which won’t. Mistakes are a crucial part of evolution.
• Take small steps. Small steps can lead to big strategic shifts.
• Give employees the room they need. Follow 3M’s advice. Hire the right
people, and give them room to figure out how to meet your objectives.

Home Grown Management

During the combined histories of all the companies, the survey only found four examples
of outside CEO’s brought in to take over a visionary company. Almost every time, the
leaders of these great companies are groomed and chosen from the inside.
Promote From Within to Preserve the Core
• It isn’t the quality of the leadership that separates visionaries from other
companies. It’s the continuity of good leadership.
• Visionary companies have strong plans for succession. They select from among
their top executives; they have a rigorous selection process, and they take time to
prepare the chosen successor.
• Without a strong succession plan, companies have discontinuity problems: no
internal candidates who can do the job. They are forced to bring in an outsider
who has not internalized the company’s ideology.
• Companies that believe an outsider is required to rescue their company have
“savior syndrome.”
• The key for any visionary company is to have a plan in place that ensures a
smooth succession—and hire from within so you can preserve the core values of
the company.
Advice for Managers, CEO’s, and Entrepreneurs
• Research has shown that it is extremely difficult for a company to succeed by
bringing in an outside CEO.
• Visionary companies promote from within, without limiting their capability for
change.
• Managers at all levels of a company should have a succession plan in place.
• Even small companies should think about succession.
• The crucial question for any company is not only how well they perform now, but
how well they will perform in generations to come.

Good Enough Never Is

The most critical question visionary companies ask isn’t “how well are we doing?” but
“how can we do better?”
Mechanisms of Discontent
• Comfort is not what visionary companies aim for. Instead, they set up
mechanisms to eliminate complacency and encourage new innovation.

Success Summaries
Success Summaries

• General Electric’s “work out” process: employees meet to discuss new ideas and
come up with concrete proposals. Upper managers cannot add to the discussion,
but must decide on the spot—without procrastinating, and in front of the whole
group—whether or not to pursue the ideas.
• Boeing’s “eyes of the enemy” program: managers must develop strategy from the
perspective of competitors: devise plans to exploit the company’s weaknesses,
and then devise how the company should respond.
• Wal-Mart’s “beat yesterday” ledgers: Walton’s ledgers automatically compared
sales for that day to sales on that day one year earlier.
Build For the Future (and Do Well Today)
• Visionary companies don’t accept that they may have to sacrifice short-term
success for long-term growth. They build for the future while holding themselves
to high performance standards in the present.
• Visionary companies invest in the future to a greater extent than controls.
• They invest in the company more than they pay out to shareholders.
• They invest more resources into recruiting and retaining the right people.
• They also invest more heavily in technical knowledge, managerial know-how, and
industry practices.
Advice for Managers, CEO’s, and Entrepreneurs
If you are interested in building a visionary company, ask yourself the following
questions:
• What “mechanisms of discontent” can you implement to fight complacency?
• What are you doing to invest in the future while ensuring you excel in the
present?
• Does your company build for the future—even during difficult times?
• Does your company reject complacency? Does it compete with itself, working
every day to do better than yesterday?

The End of the Beginning

The essence of a visionary company is a core ideology that permeates everything the
company does. Simply writing a vision statement is not enough.
The Power of Alignment: Ford, Merck, and Hewlett-Packard
• Ford. Ford engineered a dramatic comeback in the 1980’s by following its own
creed: put people and products ahead of profit. They discontinued a line of cars
due to malfunctions. They tightened quality standards for employers. And they
set a BHAG: design a completely new car with the customer in mind.
• Merck. Merck’s focus is on integrity and contribution to society. In support of
these ideals, it established a research facility on par with the best universities. It
also recruited prominent professors to serve on its board of directors. They are
now one of the top drug-makers in the world.
• Hewlett-Packard. The ideal in this company is to design electronics that benefit
humanity—not just the company. To that end, the company does not introduce
products into markets where it can make no significant technical contribution—no
matter how hot the market is.

Success Summaries
Success Summaries

Advice for CEO’s, Managers, and Entrepreneurs

• Paint the whole picture. It’s consistency over time and adherence to a
company’s ideals that counts—more than any individual leader, product, or
symbolic gesture.
• Sweat the small stuff. Small details matter to employees. From giving
employees their own business cards to allowing every employee in on stock
options, your company sends signals to let them know how to behave. Make sure
you’re sending the right ones.
• Cluster—don’t shotgun. Visionary companies are consistent with their
managing practices, product design, standards, and ideology. They search for
synergy instead of instituting random, unconnected rules and regulations.
• Swim in your own current, even if it’s against the tide. Visionary companies
are true to themselves no matter what’s happening in the market or among their
competitors.
• Obliterate misalignments. Non-visionary companies may have practices that
clash with their core ideologies. Their bonus program encourages the wrong
behavior; their corporate policy inhibits innovation; or their strategy clashes with
the company’s purpose. Visionary companies eliminate these contradictions.
• Keep the universal requirements, while investing in new methods. Whether
you’re the CEO of a major company or an entrepreneur with a brand-new start-up,
you must innovate and change—without losing sight of your core goals.

Building the Vision

We all know vision is important—but what is it, and how do you formulate a great one?
The Vision Framework
A good vision consists of two elements.
• A core ideology. What do you stand for, and why do you exist?
• An envisioned future. What do you aspire to become, achieve, or create?
Core Ideology
• Core ideology is the enduring beliefs of a company. It stays consistent through
market changes, technological advances, industry innovations, and all other
changes in the outside world.
• Core ideology consists of two things: core values and core purpose.
• Core values are guiding principles. A company picks its guiding principles
regardless of the outside world.
• Core purpose is a company’s fundamental reason to exist.
• Core ideologies must be discovered organically; they cannot be artificially set.
Envisioned Future
• An envisioned future consists of two parts: a long-term BHAG, and a sense of
what the future will be like when the BHAG is achieved.
• A “vision-level BHAG” requires ten to thirty years to complete. It is a big,
ambitious goal that reaches beyond the current abilities of the company.
1. Target BHAG’s. These can be quantitative or qualitative. These include
“Become a $40 billion company by 2010” or “Democratize the
automobile.”

Success Summaries
Success Summaries

2. Common-enemy BHAG’s. These focus on beating an enemy: “Crush

Adidas” or “Surpass Howard Johnson’s as the top motel chain in
America.”
3. Role-model BHAG’s are perfect for new companies: “Become the Nike
of the cycling world” or “Become the West Coast’s Harvard.”
4. Internal transformation BHAG’s are effective for older, established
companies: “Transform our company from a little-known defense
contractor to the best airline manufacturer in the world.”
• The second component consists of vibrant, engaging, and specific descriptions of
how it will be once the company has reached the goal.
• Seeing the future is a creative process. You must paint a picture in words to
inspire your employees.
• Once you reach this future, beware of complacency. Instead, set a new BHAG.
Pulling it All Together
An example of all these elements fitting together into a cohesive vision in drug
manufacturer Merck.
Merck: Core Ideology
Core Values:
• Social responsibility as a company.
• Excellence in all facets of the company.
• Innovation based on science.
• Integrity and honesty.
• Profit from work that benefits humanity.
Purpose:
• To preserve and improve human life.
Envisioned Future
BHAG:
• To take this company from a chemical manufacturer to one of the best drug
makers in the world, with research that rivals major universities.
Vivid Description:
• With our success knowledge will be increased, science advanced, and human life
be freed from suffering and disease.

Key alignment, a key part of becoming a visionary company, requires two processes:
• Developing new alignments to keep the core preserved.
• Removing misalignments.

A truly aligned company has a clear vision that is reinforced at every level. This is the
clock builder’s true mission.

Success Summaries