built to last dr. ron lembke. survival what does a company need to have to survive? what does a...
Post on 21-Dec-2015
213 Views
Preview:
TRANSCRIPT
Built to LastDr. Ron Lembke
SurvivalWhat does a company need to
have to survive?What does a company need to do
to survive?
Learning from OthersWhat makes a company worthy
to study?◦Popular CEO? ◦Business Week covers, pithy
sayings?◦Corporate Image?◦Customer satisfaction?◦Stock return? 5 yrs/ 10yrs?◦P/E ratio, (past, future) etc.?◦Earnings growth?
Built to LastJim Collins and Jerry Porras, 1994What makes companies
visionary?◦Premier institutions (crown jewels) of
their industries◦Widely admired by their peers◦Long track record of significant
impact on the world around them◦The institution is visionary
Surveys to 700 CEOs◦Fortune 500 industrial, service
(sales)◦Inc. 500 private, Inc. 100 public
(growth)Up to 5 “highly visionary”
companies◦20 most frequently mentioned
companies◦Founded before 1950 (>= 38 yrs old)◦Avg age = 92 yrs◦Oldest 1812 (Citicorp)
Visionary Companies
Visionary Companies
3M
American Express
Boeing
Citicorp
Ford
General Electric
Hewlett-Packard
IBM
Johnson & Johnson
Marriott
Merck
Motorola
Nordstrom
Philip Morris
Proctor & Gamble
Sony
Wal-Mart
Walt Disney
Avoid:“Discover buildings”
Visionary & ComparisonCompanies
Visionary Company Comparison Company
3M Norton
American Express Wells Fargo
Boeing McDonnell Douglas
Citicorp Chase Manhattan
Ford GM
General Electric Westinghouse
Hewlett-Packard Texas Instruments
IBM Burroughs
Johnson & Johnson Bristol-Meyers Squibb
Marriott Howard Johnson
Merck Pfizer
Motorola Zenith
Nordstrom Melville
Philip Morris RJR Nabisco
Proctor & Gamble Colgate
Sony Kenwood
Wal-Mart Ames
Walt Disney Columbia
Founding era
IndustryFewer votesNot a dogSilver
medalist
Finding Common CharacteristicsWhat is the essential difference
between the visionary company and the others?
Historical analysis: how founded, how deal with depressions, recessions, crises◦Not watching last minute of a
marathon
Clock Building vs. Time TellingFocus on building an organization
You Need a “Great Idea”Two new grad decided to form a company
◦No clear idea of what to makeTried anything to make a buck
◦Bowling line foul indicator◦Clock drive for telescope◦Automatic urinal flusher◦Shock machine to lose weight◦Oscilloscopes to Disney
Specific technological and market opportunity◦Reflection Seismograph surveys of potential oil
fields
You Need a Great IdeaSam Walton
◦Wanted to work for himselfAmes
◦4 year head start◦Specifically focused on small towns
Great Ideas, continuedSony
◦Masaru Ibuka, 1945◦Brainstorming with 7 employees for
weeks Sweetened bean paste soup Miniature gold equipment Slide rules Rice cooker (didn’t work) Heating pads Cassette recorder – first significant
product
Inauspicious Beginnings3M corundum mine failed
◦Make sandpaper◦President didn’t draw a salary for 11
years◦Norton paid dividends, 15x capital
Boeing’s first plane failed◦Made furniture to stay alive
Douglas first coast-coast non-stop◦Turned into torpedo bomber for Navy
Company as Ultimate CreationNot specific productsCompany and its atmosphere,
attitude
Charismatic LeaderSome had charismatic leadersBut so did lots of other companiesWilliam McKnight
◦Gen Mgr, CEO, Chariman for 52 years◦Soft-spoken, good listener, humble, modest
Bill Allen, BoeingProcter and GambleBill HewlettJack Welch
◦Product of GE environment
Retail LeadershipWalton valued change,
experimentation, constant improvement◦Instituted concrete mechanisms to
encourage◦Awards and recognition for
improvements◦Profit sharing, highlighted employee
innovation◦Easily disseminate ideas◦Groomed successor
Ames – (Gilmans) control freaks
More than Profits“We are workers in an industry who are
genuinely inspired by the ideals of advancement of medical science, and of service to humanity.”◦George Merck II, 1935
Give away Mectizan river blindness drug◦Million people with parasitic worms◦Why? “in the business of preserving and
improving human life”1945 streptomycin to Japan, no profits
◦1993 largest American pharm corp in Japan
MerckI want to … express the principles which
we in our company have endeavored to live up to… Here is how it sums up: We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.” George Merck II, 1950
Afford High Ideals?High ideals – a core ideology
often existed not just when successful
Sony 1945 – codified ideologyPurposes of Incorporation
To establish a place of work where engineers can feel the joy of technological innovation, be aware of their mission to society, and work to their heart’s content
To pursue dynamic activities in technology and production for the reconstruction of Japan and the elevation of the nation’s culture
To apply advanced technology to the life of the general public
Sony ApproachLaunch products with no proven
demand◦First magnetic tape recorder in Japan
1950◦First all-transistor radio 1955◦First pocket-sized radio 1957◦First home-use videotape recorder
1964◦Sony Walkman 1979
Ford 1983Lost $3.3b in three years 43% net worthEmergency measuresClarified guiding principles
◦HF 1916 “I don’t believe we should make such an awful profit on our cars. A reasonable profit is right, but not too much. I hold that it is better to sell a large number of cars at a reasonably small profit…I hold this because it enables a larger number of people to buy and enjoy the use of a car and because it gives a larger number of men employment at good wages. Those are the two aims I have in life.”
Henry Ford, crackpot$5 wage (per day)
◦Twice industry rate◦WSJ “economic blunders, if not crimes”◦Soon “return to plague him and the
industry he represents”◦Ford had “injected spiritual principles
into a field where they do not belong” – a heinous crime
◦Captains of industry lined up to condemn “the most foolish thing ever attempted in the industrial world”
David PackardI want to discuss why this company
exists…I think many people assume, wrongly, that a company exists to make money. While this is an important result of a company’s existence, we have to go deeper to find the real reasons for our being… to accomplish something collectively we could not accomplish separately… the underlying drives come largely from a desire to do something else – to make a product – to give a service generally to do something that is of value.
David PackardMaximizing shareholder value
has always been way down on the list.
Profit has never been the point in and of itself
The point, in fact, is to win, and winning is judged in the eyes of the customer and by doing something you can be proud of.
If we provide real satisfaction to real customers – we will be profitable
BoeingAll about being cutting edge
aviationDirector asked “what is the ROI?”
(on proposed 747)We’ve run some studies, but he
couldn’t recall the results“My God, these guys don’t even
know what the return on investment will be on the thing.”
Is there a Right ideology?◦Customers◦Employees◦Products or services◦Risk taking◦Innovation
Authenticity of the ideology and extent to which the company attains alignment with ideology counts more than the content of the ideology
Make it PervasiveIndoctrinate employees
◦When you endorse a point of view publicly, more likely to behave that way
Select managers based on fit with the ideology
Preserve the Core/Stimulate ProgressRespect for individual employees
is permanent, doughnuts and juice are not (HP)
Respect for individual initiatives, 15% rule is not (3M)
“Service to customer above all else” piano players (Nordstrom)
Drive for ProgressDeep, inner, compulsive driveWal-MartDisneyMotorola
BHAGs“Make no little plans, for they
have no magic to stir men’s souls”◦Daniel Burnham
Boeing, 1952No commercial aircraftMostly Air Force bombersCommerical airlines not
interested, reallyPropeller driven expected to
dominateDeveloping jet will cost three
times annual profitsWhat do you do?
◦You build the 707
Boeing 727Land at La Guardia 4,860 ft longNonstop NY-Miami6-abreast131 passengersHigh standards of indestructibility
BHAGsPeople get it right awayBig, simple, understandableThe reasonable man adapts
himself to the world: the unreasonable man persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.- Bernard Shaw, "Man and Superman"
Cult-like CultureYou fit in, or you don’tFervently held ideologyIndoctrinationGoodness of FitElitismNordstromDisney language
Promote from WithinPreserve the core4 cases of outside CEOsJames McNerny, 3M 2001-2005George Buckley 3M 2005-present
◦1in 10 chance of next promotion◦Own a fish farm
Try a lot of Stuff and keep what worksStumbling into best new
products: If you’re stumbling, at least you’re moving
If you put up fences, you get sheep
3M ◦WeToDry Sandpaper◦Post-its
Sony – put it out there, see what happens
The end?Paint the whole pictureSweat the small stuffCluster, don’t shotgunSwim in your own current, even if
you swim against the tideObliterate misalignmentsKeep the Universal requirements
while inventing new methods
top related