built to last - successful habits of visionary companies

Series: Harper Business Essentials

Paperback: 368 pages

Publisher: HarperBusiness; 3 edition

(June 24, 2004)

Language: English

ISBN-10: 0060516402

ISBN-13: 978-0060516406

BUILT TO LAST Successful Habits Of Visionary Companies

JAMES COLLINS & JERRY PORRAS

Main Theme

The creation of a viable and successful company organization which grows and prospers is the most impressive achievement in the business world. The best companies in history are the visionary companies.

Visionary companies are the premier companies operating in any business field. These companies have a worldwide reputation

for excellence in their chosen field. Visionary companies prosper over a long time period, through multiple product life cycles

and multiple generations of active leaders.

Visionary companies are world-class corporations such as 3M, American Express, Boeing, Citicorp, Ford, General Electric,

Hewlett-Packard, IBM, Johnson & Johnson, Marriott, Merck, Motorola, Nordstrom, Phillip Morris, Procter & Gamble, Sony, Wal-Mart and Walt Disney.

The same guiding intangibles and real world mechanisms which these companies used to become visionary companies can be

adapted and used by almost any company seeking growth and progress.

The Source Of Success Of A Visionary Company

NECESSARY REQUIREMENTS

1. A CLOCK BUILDING ORIENTATION

The company itself is the ultimate creation of the builders of visionary companies, not the

products the company offers to consumers.

2. A CORE IDEOLOGY

Visionary companies always have core values - the reason the company exists beyond just

making money.

3. THE PARADOX

Visionary companies have an amazing ability to move forward and evolve while at the same

time staying true to their core values.

4. A DRIVE FOR PROGRESS

Visionary companies have a strong and overbearing drive to keep moving forward, to achieve

more, to make a larger than life impact on the world.

TANGIBLE MECHANISMS

1. BOLD IMPRESSIVE GOALS

Visionary companies often use bold, ambitious and highly emotional major goals to move the

company forward in leaps and bounds.

2. CULT LIKE CULTURES

Visionary companies build a formal organization which preserves the core ideology in a number

of mutually reinforcing and tangible ways.

3. TRY A LOT OF IDEAS AND KEEP WHATEVER WORKS

Visionary companies throughout history have made some of their best moves not through good

planning but by allowing on-the-job experimentation, and even by accident.

4. HOME GROWN MANAGEMENT

Visionary companies promote managers from within the cult like culture of the company’s

employees. This provides continuity and preserves the core of the company.

5. GOOD ENOUGH NEVER IS

Visionary companies have an ingrained attitude that the company must continue to move

forward and exceed yesterday’s performance standards.

6. ALIGNMENT

The essence of a visionary company is that everything the company does is precisely aligned

with the company’s core values and drive for progress.

These are the guiding

intangibles that are necessary requirements for

all visionary companies.

These are the real-world

mechanisms that visionary

companies use to translate

the guiding intangibles into

reality.

Main Idea

1. VISIONARY COMPANIES

Built To Last - Page 2 -

GENERAL ELECTRIC Started in 1892 by Thomas Edison, GE developed direct current systems while the competitors concentrated on

In the final analysis, the creation of a viable and successful company organization which grows and prospers is the most impressive achievement in the business world. The best companies in history are the visionary companies.

Visionary companies are the premier companies operating in any

business field. These companies have a worldwide reputation for excellence in their chosen field. Visionary companies prosper over a long time period, through multiple product life cycles and multiple generations of active leaders.

Supporting Ideas

Creating and building a visionary company does not require a

great product idea or a charismatic leader. In fact, most companies that start on the strength of a great product or a strong leader struggle to ever fully reach their potential. Most of the highly successful companies actually started with rather vague concepts about what the company would do.

In fact, rather than seeing a visionary company as a vehicle for a

new product, it is in fact more accurate to see the products as a vehicle for the company. From this perspective, the company persists beyond any one specific idea - good or bad.

Most successful visionary company builders are highly persistent. They might be willing to revise or improve any idea that has not worked out in practice, but they never give up on the company and its future. If the success of a company depends on the success of the first product alone, there will be problems. If the product fails, people may give up on the company. Conversely, if the product succeeds, the company may be tempted to stick with that product too long even after the company should move on to other projects.

A continual stream of great products and services flow from

visionary companies as a direct result of these companies being outstanding organizations, not the other way around. Visionary companies have an uncanny ability to continually change and evolve across numerous product life cycles.

Visionary companies also have the organizational strength to transcend and outlast any individual founder or leader and remain energetically committed to success over a number of generations.

Being dynamic and charismatic as a business founder is not a disadvantage, neither is it a prerequisite. Some of the most successful visionary companies have been founded by people who are strong willed but low key in their personalities.

Examples of Early Start-Up Stories of Visionary Companies

Most of the companies that are now accepted as world-class within their own business field struggled to get up and operating. Yet, despite slow beginnings, these companies have risen above their competitors and developed into the powerhouses of today.

Some examples:

3M Founded in 1902 to operate a mine which failed after selling only one ton of material. Moved into sandpaper manufacture in 1905 and gradually added more products. Today, one of the most dynamic and innovative companies in history.

AMERICAN EXPRESS Founded in 1850 as a freight company which entered the travelers cheque business when the company president had trouble cashing a personal cheque while overseas.

BOEING Founded in 1915 to manufacture airplanes, preferably using wood ( since William Boeing was an ex-lumber merchant). His first airplane failed and the company was so desperate for business in the early days that it manufactured furniture.

alternating current technology which eventually prevailed in the U.S. GE struggled until it moved to A.C. technology.

HEWLETT PACKARD Commenced business in 1937 in the electronics field, struggled through early days with contract engineering jobs. In 1939, the company sold a few oscilloscopes and 17 employees by 1941.

MARRIOTT

Started in 1927 with an A&W root beer stand which later began offering Mexican food. Within three years, the Marriotts had three outlets running 24-hours a day and decided to expand further afield.

MOTOROLA Commenced operating in 1928 building battery eliminators and handling service work. Began manufacturing car radios in 1930 and after a long struggle finally turned profitable and then moved on to other products.

PROCTOR & GAMBLE

Proctor, a candlemaker and Gamble, a soapmaker decided to pool their efforts to sell soap and candles in 1837. (About 18 companies were doing the same thing at that time).The company turned profitable in 1847 and has expanded its product line over the years.

SONY Began operating in Japan in 1945 to apply technology to consumer products. Struggled to keep operating by selling heating pads until the company moved on to tape recording machines. Developed the pocket radio in 1955.

WALT DISNEY

Walt couldn’t find a job in the movie business in 1923 so he started his own company doing animations. Struggled to survive until 1928 when Mickey Mouse was introduced.

WAL-MART Sam Walton opened a shop in 1945 but he lost his lease in 1950. He moved to Arkansas and had another two stores open in a short space of time, and opened his first large store in 1962.

FORD

Founded in 1903 - Henry Ford’s third company in as many years - the Ford Motor Company introduced the Model A successfully. The company’s real success began in 1908 with the introduction of the revolutionary Model T.

IBM Started in 1890 as the Computing, Tabulating, Recording Company, IBM struggled until 1914 when Thomas Watson Sr. was hired. The company moved into leadership in tabulating machines and eventually computers.

Key Thoughts

‘‘As I look back on my life’s work, I’m probably most proud of

having helped to create a company that by virtue of its values, practices and success has had a tremendous impact on the way companies are managed around the world. And I’m particularly proud that I’m leaving behind an ongoing organization that can live on as a role model long after I’m gone.’’

---- William Hewlett, Cofounder, Hewlett-Packard

‘‘I have concentrated all along on building the finest retailing

company that we possibly could. Period. Creating a huge personal fortune was never particularly a goal of mine.’’

---- Sam Walton, Founder, Wal-Mart


2. CLOCK BUILDING,‘‘AND’’ VERSUS ‘‘OR’’

Main Idea Main Idea

2. MORE THAN PROFITS

The company itself is the ultimate creation of the builders of visionary companies, not the products the company offers to

consumers. It is a case of clock building (creating something that

will last for a long time) versus time telling (single product successes).

Visionary companies do not limit themselves to one choice or

another. Instead, they embrace the growth opportunities that are available through the pursuit of two completely different objectives.

Supporting Ideas

The ongoing stream of superior products and services that

visionary companies generate are a direct result of the company being an outstanding organization, not the other way around.

All products, no matter how visionary, eventually become superseded. The long-term successful organizations have the ability to continually change and evolve beyond existing products into new, untapped areas.

Many conventional companies believe there are serious constraints on what can and cannot be achieved. For example, it is commonly assumed a company can either create wealth for its shareholders or do good for the world.

Visionary companies generate much of their driving force by

seeking to turn any "OR" choices such as that into "AND" situations. In other words, a huge amount of positive energy is created by actively trying to achieve two distinct objectives which seem to be mutually exclusive.

For example, visionary companies seek strong long-term growth,

but not at the expense of short-term profits. And they seek dynamic growth without changing their core values. The business of overcoming these contradictions creates a situation of tremendous synergy and forward momentum.

It is a business paradox which visionary companies excel at overcoming.

Key Thoughts

‘‘When I talk to business schools occasionally, the professor of

management is devastated when I say that we didn’t have any plans when we started - we were just opportunistic. We did anything that would bring in a nickel. We had a bowling foul-line indicator, a clock drive for a telescope, a thing to make a urinal flush automatically and a shock machine to make people lose weight. Here we were, with about $500 in capital, trying whatever someone thought we might be able to do.’’

---- Bill Hewlett, Cofounder, Hewlett-Packard

‘‘Somehow over the years folks have gotten the impression that

Wal-Mart was something that I dreamed up out of the blue as a middle aged man, and that it was just this great idea that turned into an over-night success. But our first Wal-Mart store was totally an outgrowth of everything we’d been doing since 1945 - another case of me being unable to leave well enough alone, another experiment. And like most overnight successes, it was about twenty years in the making.’’

---- Sam Walton, Founder, Wal-Mart

‘‘The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.’’

---- F. Scott Fitzgerald

‘‘Disneyland will never be completed as long as there is imagination in the world.’’

---- Walt Disney

A fundamental ingredient of any visionary company is a core

ideology - core values and a sense of purpose beyond simply making money - that guide and inspire company personnel and remains ingrained over long periods of time.

Supporting Ideas

The core values of a visionary company frequently lead the company to participate in projects which are aligned with these core values, regardless of whether those projects create long-term business benefits for the company.

A primary element in the development and nurture of visionary

companies is a set of basic precepts or a core ideology that serve as guiding principles and a dynamic shaping force for the business enterprise. Maximizing shareholder wealth has not been the dominant primary objective of any of history’s most successful visionary companies.

While visionary companies require core ideologies, there is no

single "magic" ideology that is shared by all visionary companies that should be copied. The critical issue is not to mimic others, but

to develop a core ideology that you personally feel passionate about and motivated by.

The successful visionary companies do not adopt a core ideology simply because it is the thing to do. It goes deeper than that. The core ideology creates a pervasive culture within the company which is so intense that anyone not aligned with it finds the company hard to work for.

An ideal core ideology is made up of core values (the company’s

two or three enduring guiding principles) and purpose (reasons for the company’s existence beyond just making money.) Visionary companies always move into exciting new business areas without losing sight of their ideals and core ideologies.

Key Thoughts

‘‘Our basic principles have endured intact since our founders conceived them. We distinguish between core values and practices: the core values don’t change, but the practices might. We’ve also remained clear that profit - as important as it is - is not why the Hewlett-Packard Company exists; it exists for more fundamental reasons.’’

---- John Young, Cofounder, Hewlett-Packard

‘‘Sony is a pioneer and never intends to follow others. Through

progress, Sony wants to serve the whole world. It shall be always a seeker of the unknown. Sony has a principle of respecting and encouraging one’s ability and always tries to bring out the best in a person. This is the vital force of Sony.’’

---- Akio Morita, Chief Executive, Sony

‘‘Maximizing shareholder wealth has always been way down the

list. Yes, profit is a cornerstone of what we do - it is a measure of our contribution and a means of self-financed growth - but it 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. There is a symmetry of logic in this. If we provide real satisfaction to real customers - we will be profitable.’’

---- John Young, Chief Executive, Hewlett-Packard

‘‘Boeing is always reaching out to tomorrow. This can only be

accomplished by people who live, breathe, eat and sleep what they are doing. I am associated with a large group of knowledgeable dedicated people who eat, breathe and sleep the world of aeronautics. Man’s objective should be opportunity for greater accomplishment and greater service. The greatest pleasure life has to offer is the satisfaction that flows from participating in a difficult and constructive undertaking.’’

---- Bill Allen, Chief Executive, Boeing


3. PRESERVE THE CORE/STIMULATE PROGRESS

Main Idea Main Idea

4. BOLD, IMPRESSIVE GOALS

The essence of a visionary company is a paradox - visionary

companies have an amazing ability to move forward and evolve

with their markets while simultaneously staying true to their essential core ideology.

Supporting Ideas

Visionary companies have an enormous drive to go further, to do

better and to create new possibilities. They typically have a curious mix of self-confidence and self-criticism.

Self-confidence allows a visionary company to set far-reaching

and highly ambitious goals, frequently flying in the face of conventional wisdom and market opinion. It simply does not occur to visionary companies that they might fail.

At the same time, a healthy dose of self criticism makes a visionary company change and improve, usually before the outside world is even aware a change is needed. This requires self-discipline and a willingness to move forward and adapt.

Most visionary companies seek to be both highly progressive and

highly ideological. The dynamics created by this interplay between two seemingly conflicting ideals can be extraordinarily powerful. The existence of a core ideology provides a base of continuity from which progress can be launched. At the same time, an ongoing drive for forward progress enables the core ideology to remain valid and relevant to the company.

Visionary companies develop formal and highly structured ways

to institutionalize both core ideologies and an enthusiasm for forward progress into the fabric of the company. In tangible and specific ways, visionary companies translate their intentions into reality. Strategies, tactics, systems, structures and organization are all designed to work together in concert.

Key Thoughts

‘‘If an organization is to meet the challenges of a changing world,

it must be prepared to change everything about itself except its basic beliefs as it moves through corporate life. The only sacred cow in an organization should be its basic philosophy of doing business.’’

---- Thomas J. Watson, CEO, IBM

‘‘You can’t just keep doing what works one time, because

everything around you is always changing. To succeed, you have to stay out in front of that change.’’

---- Sam Walton

‘‘We’re proud of our successes, and we celebrate them. But the

real excitement comes in figuring out how we can do even better in the future. It’s a never-ending process of seeing how far we can go. There’s no ultimate finishing line where we can say ‘‘we’ve arrived.’’ I never want us to be satisfied with our success, for that’s when we’ll begin to decline.’’

---- Hewlett-Packard Marketing Manager

‘‘Above all, there was the ability to build and build and build - never

stopping, never looking back, never finishing - the institution. In the last analysis, Walt Disney’s greatest creation was Walt Disney the company.’’

---- Richard Shickel, The Disney Version

Highly visionary companies often use bold, ambitious and highly

emotional major goals to move the company forward. The achievement of a huge, daunting challenge propels the company forward with new found strength and momentum.

Supporting Ideas

Bold, impressive goals unify and energize companies by serving

as a single focus for the company’s energies and activities. The goal must be clear and compelling, as well as easily stated in just a few words. It must create momentum, get people moving and be exciting.

The value of a bold goal is the internal energy and commitment

generated. Only goals that are achieved help any organization. Accomplishment, not good intentions, are the key in the world of business. And once a bold goal has been reached, the company must keep pressing forward with new goals or it risks falling back into complacency or lethargy.

Invariably, bold goals require an element of risk. Most of history’s

most impressive achievements have been made when a company’s entire future has been at risk. Yet these goals, while looking highly ambitious to outside observers, are seen as achievable by the people inside the organization - with a bit of luck and a heroic effort.

An important benefit of an effective bold and impressive goal is

that it will provide momentum and purpose through numerous generations of leadership. The goal takes on a life of its own, separate and independent from the leader who sets the goal.

The setting of bold and impressive goals needs to be an ongoing

process. Otherwise, the company can stall in a ‘‘we’ve arrived’’ mindset. To prevent this, follow-on complimentary goals must be set on an continuing basis.

Bold and impressive goals alone don’t make a visionary company. The goals must be closely aligned with the core ideology which lies at the heart of the visionary company. Bold goals must be directly linked to the core ideology of the company. The huge challenge on which the company is about to embark must be directly related to the company’s entire reason for existence.

Examples of bold, impressive goals

General Electric GE will become #1 or #2 in every market we serve and we will revolutionize this company to have the speed and agility of a small enterprise.

Henry Ford

To build a motor car for the great multitude. It will be so low in price that no man making a good salary will be unable to own one. Everybody will be able to afford one and everyone will have one.

Boeing Aircraft Company

The Boeing Company will build the 747 even if it takes the resources of the entire company.

Key Thoughts

‘‘Of all the things I’ve done, the most vital is coordinating the

talents of those who work for us and pointing them toward a certain goal.’’

---- Walt Disney, Founder, Walt Disney Company

‘‘Although our company was still small and we saw Japan as quite

a large and potentially active market, it became obvious to me that if we did not set our sights on marketing abroad, we would not grow into the kind of company Ibuka and I had envisioned. We wanted to change the image around the world of Japanese products as poor in quality.’’

---- Akio Morita, Co-founder, Sony

Main Idea

5. CULT-LIKE CULTURES


6. TRY A LOT OF THINGS. KEEP WHAT WORKS

Main Idea

Visionary companies build a formal organization which preserves

the core ideology in specific ways. People who work at these

companies feel they belong to something special, something

elite.

Supporting Ideas

The formal organization of visionary companies often utilizes

items such as:

Intense total immersion orientation and training programs.

Rigorous promotion from within traditions.

Awards and contests for outstanding accomplishments which

are in line with the core ideology.

Ongoing incentive programs linked to ownership shares in

the company.

Visionary companies tend to be great places to work if you agree

with the company’s core ideology. If it turns out you don’t agree,

however, they can turn out to be hell on earth.

These companies tend to be more demanding of their staff than

ordinary companies. Working there tends to be a binary proposition. If you fit, it’s highly motivating and elite. If you don’t fit in, you’ll feel miserable and leave. Passions run high in the visionary companies.

Working at a visionary company is almost like joining a cult. There

is generally a feeling of elitism and an almost fanatical loyalty among the long-term staff members. It’s the corporate equivalent of belonging to the U.S. Marine Corps. You either shape up or ship out.

Cult like devotion built around the core of the company combine

with diversity, adventure and esprit de corps to produce a dedicated team of employees who achieve miracles. This empowers the visionary company to turn people loose to experiment and innovate.

Key Thoughts

‘‘Now, I want you to raise your right hand and repeat after me:

From this day forward, I solemnly promise and declare that every time a customer comes within ten feet of me, I will smile, look him in the eye and greet him. So help me Sam.’’

---- Sam Walton to his employees

‘‘This is not a corporate history. It is a history of a deeply human

struggle over ideas, values and hopes for which men and women were willing to give themselves over, values at times so evanescent that some people could dismiss them as silly, values so deep that others became students of them, dedicated their careers to making them come alive, became enraged and embittered when they seemed to be violated, and turned poetic and inspired in their defense. This is what is impressive about the name ‘‘Disney’’: no one is neutral...Walt Disney was a genius or a charlatan, a hypocrite or an exemplar, a snake-oil salesman or a beloved father figure to generations of children.’’

---- Joe Fowler, Prince of the Magic Kingdom

‘‘Competition to get into Procter & Gamble is tough...Recruits,

when they sign on, may feel they have joined an institution rather than a company...No one ever comes into P&G at a middle or top management level who has garnered his or her experience at another company. It just doesn’t happen. This is an up-through-the-ranks company with a vengeance. There is a P&G way of doing things, and if you don’t master it or at least feel comfortable with it, you’re not going to be happy here, not to speak of being successful.’’

---- The 100 Best Companies to Work for in America

The history of visionary companies shows that frequently they

make some of their best moves not by detailed strategic planning but by experimentation, opportunism and by accident.

Supporting Ideas

Many examples of key strategic moves made by visionary companies came about by evolutionary progress rather than strategic planning.

By its very nature, evolutionary progress is quite distinct from

bold, ambitious goals. Evolutionary progress is ambiguous, incremental and often unsuccessful. In essence, it is unplanned progress made by the company.

Evolutionary progress is made by adding enough branches and

intelligently culling out whatever does not work in practice. The end result is you end up with a collection of healthy branches which are well positioned to flourish regardless of their external environment.

To a company, it means try lots of things, keep those that work

and discard those that don’t. The history of most real-world success stories are filled with favorable accidents, trial-and-error and a willingness to give initiative its head and be prepared to fail periodically.

Visionary companies aggressively encourage and harness evolutionary progress. It is an organizational climate rather than a brilliant strategic plan. Any company can profitably create an environment in which new products can be developed. Key characteristics of this type of environment are:

1. A tradition of vigorous action. Whatever happens, don’t sit still. Keep moving.

2. An acceptance that mistakes will be made and accidents will happen. Failures are an integral aspect of evolutionary progress.

3. Take small steps that won’t break the bank if they don’t pan out

as expected.

4. Give people the room and resources they need to try an original idea.

5. Build tangible business mechanisms that encourage and reward innovators who are trying new ideas.

6. The company’s core ideology must be preserved while stimulating evolutionary progress. Every new product developed must fit the company’s core ideology.

Key Thoughts

‘‘Our company has, indeed, stumbled onto some of its new products. But never forget that you can only stumble if you’re moving.’’

---- Richard Carlton, Former CEO, 3M Corporation

‘‘Failure is our most important product.’’

---- R.W. Johnson, Former CEO, Johnson & Johnson

‘‘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. Plentiful opportunism crystallized in his mind after he read renowned military theorist Karl von Clausewitz who argued that detailed plans usually fail, because circumstances inevitably change.’’

---- Tichy & Sherman, Control Your Own Destiny Or Someone Else Will

‘‘We live by the motto, ‘‘Do it. Fix it. Try it.’’ If you try something

and it works, you keep it. If it doesn’t work, you fix it or try something else.’’

---- Wal-Mart Executive

Main Idea

7. HOME GROWN MANAGEMENT


Main Idea

8. GOOD ENOUGH NEVER IS

Visionary companies develop, promote and carefully select managerial talent from within the company to a greater degree than other companies. This is another key step in preserving the core of the visionary company.

Supporting Ideas

A vital issue for any company is the continuity of high quality leadership. The future management of the company is an integral part of the operations of any visionary company which intends to last through multiple product cycles.

Some companies, like General Electric, have a long heritage of

developing an impressive depth of in-house management expertise which the company can draw on. The change of top management in these companies is a serious issue, for which planning often starts some nine or ten years in advance.

‘‘The management succession process that placed venerable General Electric in Welch’s hands exemplifies the best and most vital aspects of the old GE culture. Prior CEO Reginald Jones spent years selecting him from a group of candidates so highly qualified that almost all of them ended up heading major corporations. Jones insisted on a long, laborious, exactingly thorough process that would carefully consider every eligible candidate, then rely on reason alone to select the best qualified. The result ranks among the finest examples of succession planning in corporate history.’’

---- Tichy and Sherman Control Your Destiny Or Someone Else Will

Visionary companies take great pains to develop, promote and

carefully select managerial talent grown inside the company than other companies. This continuity preserves the company’s core values better than any other strategy.

By contrast with the visionary company approach, other

companies tend to handle management succession by crisis rather than by planning. These companies frequently appoint a new chief executive in turmoil or under pressure where a company white knight is required. In that situation, the company often drifts away from its core values.

In essence, it is impossible for a highly visionary company to hire

top management from outside the organization. Succession and continuity issues are vital to building a company which will have ongoing vitality and success. The selection of the future management of the company should be an important issue with any growing company.

In the case of visionary companies, the entrepreneurial model of

building a company around a great idea, growing quickly, cashing out and passing management of the company over to outside professional managers has never yet produced a successful visionary company.

Key Thoughts

‘‘One responsibility we considered paramount is seeing to the

continuity of capable senior leadership. We have always striven to have proven backup candidates available, employed transition training programs to best prepare the prime candidates, and been very open about succession planning. We believe that continuity is immensely valuable.’’

---- Robert Galvin, Motorola Corporation 1991

Visionary companies tend to have an ingrained attitude that reinforces the concept that the company must continue to move forward and beat yesterday’s performance standards.

Supporting Ideas

Visionary companies never worry about simply beating the competition. They focus instead on beating their own previous results. That is, visionary companies tend to never have a mindset which says they have it made and can relax now - rather, visionary companies demand more and more of themselves. They actually go out of their way to stimulate creative discontent as a spur to ever higher levels of achievement and accomplishment.

Some visionary companies create a system of internal competition where new products compete directly with the company’s existing products. Others set targets that a set percentage of total sales must come from new products. Still others cut off mature products in order to encourage development of new product lines.

Managers at visionary companies tend to build their companies

first and foremost for long-term success while simultaneously requiring highly demanding short-term performance standards. This long-term focus may take the form of investment in technical know-how, new technologies and innovative industrial practices.

Visionary companies are built on a foundation of solid and consistent hard work, dedication to improvement and a mindset focused on building for the future. Some examples of the way visionary companies go about generating creative discontent:

Boeing assigns managers to look at products as if they worked for their fiercest rival, and to unearth weaknesses to exploit and strengths to leverage.

Wal-Mart keeps a ‘‘Beat Yesterday’’ ledger which tracks sales

figures on the same day one year ago. This year has to be up on last year day by day, or there are serious problems.

General Electric have groups of employees who put forward

concrete proposals to managers who must make a decision on the spot and follow through on those decisions.

Merck yields market share as products become commodities, forcing the company to produce new innovations to grow and prosper.

Hewlett-Packard rates all employees relative to their peers, and insists on a pay-as-you-go no debt policy whenever the company decides to develop new products.

Key Thoughts

‘‘Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself.’’

---- William Faulkner

‘‘People would always say to my father, ‘‘Gee whiz, you’ve done

real well. Now you can rest.’’ And he would reply, ‘‘Oh, no. Got to keep going and do it better.A ’’

---- J. Willard Marriott Jr., Chairman, Marriott

‘‘Discipline is the greatest thing in the world. Where there is no

discipline, there is no character. And without character, there is no progress. Adversity gives us opportunities to grow. And we usually get what we work for. If we have problems and overcome them, we grow tall in character, and the qualities that bring success.’’

---- J. Willard Marriott Sr.

‘‘The pay-as-you-go philosophy provides great discipline all the

way down. If you want to innovate, you must bootstrap. It is one of the most powerful, least understood influences that pervades Hewlett-Packard.’’

---- HP Vice-President

Main Idea

9. THE END OF THE BEGINNING


Visionary companies typically show a willingness, even an eagerness, to cull out any element out of step with the core.

This cleansing process is not a one-off event, but an ongoing Just because a company has a vision statement, it is not a visionary company. The essence of a visionary company is an ability to translate its core ideology and drive for progress into everything the company does.

Supporting Ideas

Visionary companies create such a powerful environment around

their core ideology that there is no ambiguity among staff. All the

various elements of the company,including all trappings associated with normal corporate activities, work together in

harmony to focus on the vision.

The entire resources of a visionary company are aligned on

translating core values into reality. Specifically, operations, strategies and tactics are all aligned with the core values. Visionary companies find hundreds of ways to translate core values into daily reality.

Being well aligned with the corporate core ideology allows the

visionary company to constantly move upward and onward. It becomes simply impossible to work at this type of company without becoming immersed by the ideology.

Visionary companies are consistently effective at translating core

ideology into practice by:

1. Painting the whole picture. You cannot point to just one concept alone that will create a visionary company. Rather, it is the synergy created by a number of different elements all correctly aligned and working in tandem that creates the driving force behind a successful long-term visionary company.

A visionary company is a composite of a number of concepts,

strategies and ideas. There is no single item that makes the whole company work but a large number of small elements all working together in harmony. It’s hard to master, but whenever it happens, world-class results are created.

2. Sweating the small stuff. People might talk about the big picture, but the day to day grind is carried out at the coal face where every little detail counts. It’s the nitty-gritty details that employees use to measure whether the management really buy the overall vision, or whether it’s a case of say one thing and do another.

Most visionary companies take an extraordinary (bordering on obsessive) amount of interest in the most minute and commonplace details.

3. Focus, not broad beam. Visionary companies do not try a little bit of everything. Rather, they develop integral business elements that reinforce and amplify each other. The different elements are consistent with each other, sending the same message to employees and customers. In this way, visionary companies link everything together for increased impact.

4. March to their own drum, not to the world at large.

Visionary companies show a consistent ability to make impressive breakthroughs because of their preference to make their own luck, even when it flies in the face of conventional wisdom. That is, visionary companies are willing to go against conventional business practices to remain true to themselves.

Visionary companies don’t ignore reality. Rather, they concentrate on adopting business practices that are consistent with their own core ideologies and ambitions, regardless of the popularity or otherwise of the concept.

5. Weed out any misalignments. Alignment means everything about a company is consistent and focused on the same objective. It is also a continual process in which anything not aligned with the core ideology is dropped.

feature of company operations.

6. Keep the core while inventing new methods. A visionary company must have both a core ideology and an unrelenting drive for progress. It must be well designed with all

elements working together and in alignment.

The specific methods by which the core is preserved while

progress is encouraged may change and evolve over the years. Companies continue to develop new methods to achieve these objectives.

The visionary companies of tomorrow are already out there doing things their competitors find strange. These types of companies are always going to be at the cutting edge of management practice in any society. The trick is to be trying new mechanisms to establish what does work, while taking full advantage of the proven performers of the past.

Key Thoughts

‘‘Merck believes that research work carried on with patience and

persistence will bring to industry and commerce new life; and we have faith that in this new laboratory, with the tools we have supplied, science will be advanced, knowledge increased and human life win ever greater freedom from suffering and disease. We pledge our every aid that this enterprise shall merit the faith we have in it. Let your light so shine - that those who seek the Truth, that those who toil that this world may be a better place to live in, that those who hold aloft the torch of Science and Knowledge through these social and economic dark ages, shall take new courage and feel their hands supported.’’

---- George W. Merck, Founder

‘‘When I first joined HP in 1952 it was immediately apparent that

nearly all of its 400 employees were enthusiastic about, loyal to and proud of their company to an unusual degree. As one employee put it, ‘‘I have the impression that Bill and Dave are working for me, rather than the other way around.’’ What surprises visitors today is that this same spirit has survived HP’s growth. It is unusual to find such spirit in a company with over 17,000 employees, but it is not surprising. For in a deeper sense, what was going on in those early days was a process of education in management. Most of the early employees became extensions of Bill and Dave’s personalities and philosophies, and put those philosophies and techniques to good use when they took their place as line leaders, supervisors or division heads. We all believe in these philosophies and practice them. They are part of our way of life.’’

---- Barney Oliver, General Manager, HP Laboratories

3M

EXAMPLES OF CORE IDEOLOGIES

OF VISIONARY COMPANIES


NORDSTROM Service to the customer above all else; hard work and productivity; continuous improvement; excellence in

Innovation; absolute integrity; respect for individual initiative and personal growth; tolerance for honest mistakes; being in the business of solving problems; ‘‘Thou shalt not kill a new

product idea’’.

AMERICAN EXPRESS Heroic customer service; worldwide reliability of services;

encouragement of individual initiative.

BOEING Being on the leading edge of aeronautics; being pioneers;

tackling huge challenges and risks; product safety and reliability; integrity and ethics; ‘‘To eat, breathe and sleep the

world of aeronautics.’’

FORD

People are source of strength and products are end result of

efforts; profits are a necessary means and measure of success; basic honesty and integrity; the company is about

cars.

GENERAL ELECTRIC

Improving the quality of life through technology and innovation; individual responsibility and opportunity; honesty

and integrity; interdependent balance between responsibility to customers, employees, society and shareholders.

HEWLETT-PACKARD Make technical contribution to fields in which the company

operates; respect and opportunity for staff, including an opportunity to share in the success of the company; contribution to the community; create affordable quality for customers; profit and growth as a means to achieve all objectives.

IBM Give full consideration to the individual employee; spend whatever time is required to make customers happy; go the last mile to set things right; seek superiority in anything the

company undertakes.

CITICORP

Expansion of size, services and geographical reach; being out front of all other banks in innovation; provide opportunity

for entrepreneurialism and autonomy; meritocracy; aggressiveness and self-confidence.

JOHNSON & JOHNSON

Company exists to alleviate pain and disease; hierarchy of

responsibilities is to put customers first, employees second,

society third and shareholders fourth; individual opportunity

and reward based on merit; decentralization = creativity =

productivity.

MARRIOTT

Friendly service and excellent value trying to treat all customers as guests; put people number 1; work hard yet

keep it good fun; continual self-improvement; overcome adversity to build character; ‘‘Make people away from home feel that they’re among friends and really wanted.’’

MERCK In the business of preserving and improving human life, with all actions to be measured by success in achieving that goal;

honesty and integrity; corporate social responsibility;

scientific innovation not imitation; excellence in all aspects of the company; to generate profits by benefiting humanity.

MOTOROLA

To honorably serve the community by providing products and

services of superior quality at a fair price; continuous self-renewal; tapping the creativity of employees; to continually improve in ideas, quality and customer

satisfaction; treat each employee with dignity; honesty and integrity in all business aspects.

reputation; part of something special.

PHILIP MORRIS

Right to personal freedom of choice is worth defending (people can smoke if they want to, or buy anything that is legal); being the best and beating others; encouraging individual initiative; opportunity to achieve based on merit rather than gender, race or class; hard work and continuous improvement.

PROCTOR & GAMBLE

Product excellence; continuous self improvement; honesty; fairness; respect and concern for the individual.

SONY To elevate the Japanese culture and national status; to advance and apply innovative technology; to be a pioneer refusing to follow the others; to do the impossible; to respect and encourage each individual’s creativity and ability.

WAL-MART

Company exists to provide value to customers by making their lives better through lower prices and greater selection - everything else is secondary; to swim upstream and buck conventional wisdom; in partnership with employees; work with passion, commitment and enthusiasm; to run a lean operation; pursue ever-higher goals.

WALT DISNEY No cynics allowed; fanatical attention to consistency and detail; continuous progress through creativity, dreams and imagination; fanatical control and preservation of the company’s magic image; To bring happiness to millions and to celebrate, nurture and promulgate wholesome American values.