Built to Last

And after 6 years of research, they released their findings in
Built To Last
Built To Last
, known as "one of the most influential business books of our era"
In the late 1980s, two Stanford UniversityStanford University Business Strategy Professors discovered an unusually facinating pattern among 18 companies.
These companies had a median life-span of 100+ years AND had significantly outperformed the average stock market.
They wondered what made these companies achieve such an extraordinary result, better than 99.99% of companies in human history!
So like any other good scientist, they conducted a research project.
In this research project they created a control group of 18 other companies who also had a median life-span of 100+ years but less successful that the extraordinary companies.
They wanted to identify underlying characteristics of highly visionary companies and to effectively communicate findings so that they can influence management.
So they compared the 18 companies in the main group with 18 companies in the sample group.
This groundbreaking study reveals the simple but inspiring differences that set these visionary companies apart from their less successful competitors.
The timeless advice uncovered in this book will help readers discover the importance of adhering to a core ideology while relentlessly stimulating progress.
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Visionary Companies Teach us Through their Enduring Success
The so called "visionary companies" have a lot to teach us.
They are companies with long track-records for success and widely admired as the crown jewels of their industries.
What's more, their success is enduring – they prosper even as great leaders retire and individual hit-products become obsolete.
To properly study and learn from these companies, the authors first had to identify them by surveying hundreds of prominent CEOs for the names of companies they considered visionary.
The 18 most commonly mentioned firms – including such venerable names as the Walt Disney Company, Marriott Hotels, and Merck – were included in the study.
The visionary companies were then paired up with comparison companies: firms that shared similar products and markets but which, while not being outright poor performers, were called “visionary” far less often in the CEO survey.
Both groups of companies were then examined across their considerable life spans (the average founding date lay in the 1890s for both groups).
Based on massive amounts of data from interviews, annual reports, financial statements, news articles and many other sources, all aspects of these corporations were studied, ranging from their ownership structures to their cultures.
To understand the extraordinary success of the visionary companies, consider this fact:
If you had invested a dollar in their shares in 1926, that dollar would have been worth $6,356 by 1990.
Compare that to $955 if you had invested in the comparison companies, and only $415 if you had invested in the general market, and you'll see just how impressive the visionary companies' performance is.
No wonder that all manner of Fortune 500 companies have been fascinated by the findings of this study.
Go Beyond a Great Leader to Build a Great Institution
Visionary companies are like machines that constantly produce great products and leaders.
Contrary to what most people believe, the success of a visionary company is not dependent on great ideas.
The founder of Sony, for example, had no specific idea of what products his company would make.
He actually held a brainstorming session after founding the company to evaluate business ideas ranging from sweetened bean-paste to miniature-golf equipment.
They experimented with almost farcically diverse ideas, such as automatic urinal flushers and bowling foul-line indicators.
Hence, it seems that great ideas are not necessary for the start of a visionary company.
Nor are high-profile, charismatic leaders.
While visionary companies did have superb individuals at the top of their organization, they were often down-to-earth, reserved and modest people.
But then, what is the secret of enduring success?
Many comparison companies had great ideas and strong leadership, yet they all fell behind the visionary companies eventually.

Instead of focusing on a single product or a single leader, the visionary companies studied built themselves into outstanding organizations that constantly churned out great ideas and great leaders.
The real creation of the founders was not a product at all but the company itself; constantly advancing independently of any one person or idea.
Think of a clock on the wall.
Having one great idea or visionary leader is like getting a glimpse of that clock and being able to tell the time in that instant.
But building an organization that constantly generates great ideas and leaders is like building your own clock: a reliable machine.
Find your Purpose & Core Values
Visionary companies are driven more by a core ideology than profits, but they still prosper.
Visionary companies have a higher purpose for their existence than to merely chase profits.
Together with the companies core values – enduring tenets that guide their every decision – this purpose forms their core ideologies: a set of stable principles that guides the company through generations, much like the valyes of the American Declaration of Independence.
Consider for example the pharmaceutical company Johnson & Johnson (J&J).
In 1935, the CEO, Robert W. Johnson Jr., wrote out the company's core ideology in a document called “Our Credo,” which listed the company's responsibilities: first to their customers, second to their employees and so forth.
Finally, fifth and last on the list, after all the other responsibilities had been fulfilled, Johnson said that shareholders should receive “a fair return.”
Likewise, most visionary companies studied were not primarily after profit.
Nevertheless, while some ideologies may seem soft or idealistic, visionary companies managed to find a way to stay pragmatic in their business decisions and make profits without ever wavering from their core ideologies.
A core ideology is important not only when visionary companies prosper but also when they hit upon trouble.
For example, when Ford faced a dire crisis in the 1980s, instead of just fighting fires, its management team stopped to discuss and clarify what the company stood for and how they could espouse the values of the founder, Henry Ford.
Ford's comparison company, General Motors, made no such effort.
Though every visionary company studied had a core ideology, their content varied greatly.
What counts is not the content of the ideology but rather that an authentic ideology exists and is rigorously acted upon.
BHAGs enable Teams to Truly Excel
Visionary companies use big hairy audacious goals to stimulate progress.
Implementing stretch goals allows organizations to truly excel.
To drive progress, visionary companies often set themselves extremely bold objectives – so-called Big Hairy Audacious Goals (BHAGs) – to which they commit utterly and completely.
BHAGs are so ambitious that they often seem unrealistic, especially to outsiders.
Nevertheless, they're also clear and tangible enough to energize and focus the organization.
A well-known example of a non-corporate BHAG is the one set by John F. Kennedy in 1961 when he proclaimed that the U.S. would take a man to the moon and back safely by the end of the decade.
At the time, this was an almost ludicrously bold commitment, but it did get the U.S. moving vigorously forward.
Boeing set many BHAGs during its history, including its commitment to developing the 747 jet.
Boeing pursued this goal single-mindedly, without ever even considering the possibility of failure.
The CEO stated that they would complete the jet even if it consumed the entire company, which it nearly did: at one stage roughly 86,000 people – some 60% of their workforce – were laid off as sales of the plane did not meet expectations.
Similarly, Thomas J. Watson Sr., the founder of the Computer Tabulating Recording Company, set a BHAG by renaming his company – which sold coffee grinders and butcher scales – to reflect his ambition for global status.
The new name was audacious at the time: International Business Machines (IBM).
BHAGs often take on lives of their own.
Just as the space program continued after Kennedy's death, the visionary companies studied pursued their BHAGs even as new CEOs and directors came and went.
Once a BHAG was achieved, new ones were set – always in line with the company's core ideology.
In 1969, humanity set foot on the moon for the first time.
This was a previously unimaginable, daunting feat with a high risk of failure, and it stretched NASA to its limits.
But once an organization has the necessary focus, alignment and tracking systems in place, such high-risk challenges can be undertaken.
These challenges are sometimes called "stretch goals", or BHAGs which stands for Big Hairy Audacious Goals.
Stretch goals are OkrsOkrs that are a daunting challenge to OKR contributors.
Research backs up the effectiveness of stretch goals, with studies showing that stretched employees exhibit higher levels of motivation, productivity and engagement.
But how does an organization know whether stretch goals are right for them?
Well, at GoogleGoogle , OKRs are separated into two distinct categories:

Stretch objectives


Committed objectives
Whereas committed objectives usually have to do with day-to-day metrics such as sales or hiring, stretch objectives are all about bigger-picture ideas.
And while committed objectives are meant to be met with 100-percent success, stretch objectives at Google fail about 40 percent of the time.
Now, unlike Google, not all companies have a safety net of cash to fall back on if a high-risk stretch OKR fails.
But with enough cash on hand, stretch goals have the chance of a big payoff.
Take Google's web browser Chrome, for example.
The initial 2008 OKR behind the development of the browser stated that the goal was to make browsing the web as quick and effortless as flipping through a magazine.
The Chrome team's first stretch goal was overambitious: they wanted to get 20 million weekly users by the end of 2008.
But the difficulty of achieving this goal inspired the team to keep upping their development game and focusing on the end goal, however unreachable it seemed.
The goal of twenty million weekly users was only reached in early 2009, but that didn't deter the Chrome team from setting more stretch goals to keep up the challenge.
For 2009, the stretch goal was set at 50 million, but they only reached 38.
However, by 2010, they finally managed to meet their stretch goal of 111 million users.
Now, in 2018, Gooogle ChromeGooogle Chrome is used by over a billion people on mobile devices alone!
Strong Cultures are Cult-Like
Visionary organizations are almost cult-like – new recruits either thrive or leave.
Visionary organizations pursue their core ideologies so single-mindedly that their corporate cultures are almost cult-like.
For example, new employees quickly find themselves socializing primarily with their colleagues, and they are encouraged to be secretive about the inner workings of their companies.
Employees often become completely immersed in the core ideology.
Consider IBM, for example, where future managers in training would rise and sing songs from an IBM songbook:

“March on with I.B.M., Work hand in hand…”
Similarly, the Walt Disney Company expected its employees to live and breathe its core ideology of wholesome family fun.
For example, men with facial hair were not accepted as employees at theme parks, and anyone heard uttering a four-letter word in the presence of Walt Disney himself was fired immediately – no exceptions.
There is not much room in visionary companies for people who do not meet their tough expectations and standards.
New employees often find that either they fit right in and thrive, or they perform poorly, are unhappy and exit the company quickly.
In this regard, there are no compromises at visionary companies.
Conversely, because the employees are confident and can be counted on to adhere to the company's core ideology, they can also be given the leeway to experiment.
This stimulates progress and enables the company to avoid the dangerous group-think endemic in many cults.
Note though that visionary companies are not personality cults, centered around a charismatic CEO or founder but rather around the core ideology of the company.
Though charismatic personalities can also drive passionate work, such “cults” invariably collapse when the person leaves.
Experiment ALOT and Keep What Works
Visionary companies stimulate evolutionary progress by encouraging experimentation.
Charles Darwin discovered that evolution is a series of successful “experiments” in which slight variations are introduced to a species and the strongest new variants survive.
Similarly, the visionary companies studied understood the need to stimulate a similar evolutionary progress within their businesses.
They encouraged their employees and management to experiment with new ideas, products and practices, some of which became great successes.
Consider for example J&J's famous Band-Aids.
They were born when an employee put together some surgical tape and gauze to quickly bandage his wife's fingers after she accidentally cut herself with a kitchen knife.
When he mentioned the idea to the J&J marketing department, they embraced it and eventually, Band-Aid products became the company's best-selling category.
Or consider 3M, which directed its employees to use 15 percent of their working time to work on any pet projects they felt like.
Two such projects by two separate employees eventually collided to produce the famous Post-It Notes.
This would never have happened if 3M hadn't actively encouraged experimentation and allowed its employees to continue with their pet projects, even when early market studies were negative.
Contrast this with 3M's comparison company, Norton, which actually discouraged the pursuit of opportunities outside of its traditional product lines.
One aspect of evolution is that some – or even most – variations fail; the same is true in business.
J&J experienced some very prominent failures too, for example, its colored casts for children with bone fractures.
The casts quickly turned hospital bed sheets into something resembling modern art and threw hospital laundries into chaos.
Visionary companies understood that failed experiments are the necessary price to pay for evolution and must not be punished lest further experimentation be discouraged.
Cultivate & Hire Leaders from Within
Visionary companies produce a continual stream of high-caliber leaders.
While the visionary companies studied often had outstanding CEOs at their helm at one time or another, what was even more impressive was their ability to continually produce such high-quality leaders.
The organizations focused hard on cultivating managerial talent within the company so that new leaders could be counted on to continue in line with the company's core ideology.
At the same time, visionary companies engaged in timely succession-planning to ensure continuity in leadership even if something unexpected were to happen.
Consider for example the General Electric Company (GE), whose most famous CEO is without a doubt, the legendary Jack Welch.
But actually thanks to the company's fervent emphasis on internal management training and CEO succession, GE has enjoyed a century of Welch-caliber CEOs.
In fact, more GE alumni have gone on to become executives of American corporations than the alumni of any other company.
And Welch himself outlined his plan for succession seven years before retiring, though even this seems last-minute compared to Bob Galvin, the former CEO of Motorola, who began planning for the next generation a quarter-century before finally leaving.
In contrast, the comparison companies often hired external CEOs who were unfamiliar with the company and who sometimes began steering it in new, wholly ill-conceived directions.
Also, the CEOs at comparison companies were often near-tyrannical and engaged in very little succession planning, which left gaping holes in the companies' leadership when they left.
Some comparison companies even had CEOs who actively hindered succession planning and sabotaged would-be candidates.
These companies then stumbled when the troublesome CEO finally left.
Strive to do Better Everyday
Visionary companies don't just talk – they take concrete actions to implement their values.
While many companies claim to adhere to idealistic values, encourage experimentation or embrace constant progress, very little is seen in practice.
The visionary companies studied, on the other hand, managed to translate their values into reality by creating concrete mechanisms that affected the daily lives and decisions of employees.
3M did not merely say, “We want our employees to be more innovative.”
Instead, it implemented several mechanisms to encourage this idea, one example was allowing employees to use 15 percent of their time on pet projects and dictating that 30 percent of each division's annual sales must come from products less than four years old.
Likewise, visionary companies did not merely talk about constant improvement; rather, they created mechanisms to ensure it.
Wal-Mart, for example, spurred constant growth with so-called “Beat Yesterday” ledgers, which were used to compare each day's sales to those of the year prior.
Similarly, Hewlett-Packard instituted a grueling process of ranking its employees annually to stop those who gained a high status from just coasting.
The visionary companies also took concrete actions in the long run.
They invested far more than comparison companies in creating new technologies and business practices, training and developing their human capital, as well as in supporting research and development.
For example, when Merck wanted to become a force in medical research, it deliberately modeled its labs on academic ones and allowed its researchers to publish their findings in academic journals – very unusual for private companies at the time.
It also decided the product-development process should be driven by research rather than marketing as it was in many other companies.
This attracted top scientists to Merck's labs.