Build to Last

In a world of constant change, the fundamentals are more important than ever: In this era of dramatic change, we’re hit from all sides with lopsided perspectives that urge us to hold nothing sacred, to “re-engineer” and dynamite everything, to fight chaos with chaos, to battle a crazy world with total, unfettered craziness. Everybody knows that the transformations facing us—social, political, technological, economic—render obsolete the lessons of the past. Well, “everybody” is wrong. The real question is what is the proper response to change? We certainly need new and improved business practices and organizational forms, but in a turbulent era like ours, attention to timeless fundamentals is even more important than it is in stable times. The book Built to Last studied the founding, growth, and development of exceptional companies that have stood the test of time, companies like Hewlett-Packard, 3M, Motorola, Procter & Gamble, Merck, Nordstrom, Sony, Disney, Marriott, and Wal-Mart. Those “visionary companies” had both endurance, with an average age of nearly 100 years, and sustained performance. For example, their stock has performed 15 times better than the overall stock market has since 1926. This book  also studied each visionary company in contrast to a “comparison company” that had roughly the same shot in life but didn't turn out as well—3M with Norton, P&G with Colgate-Palmolive, Motorola with Zenith, and so on. By studying companies that have prospered over the long term, we were able to uncover timeless fundamentals that enable organizations to endure and thrive. This book studied those visionary companies not only as big business but also as start-ups and growth companies. And they succeeded from their earliest days by adhering to the same fundamentals that can help today’s growth companies emerge from the turbulence of the 1990s to become the HPs, 3Ms, and P&Gs of the 21st century. By paying attention to the six timeless fundamentals that follow, you can learn from what those organizations did right and build your own visionary company.

Make the company itself the ultimate product—be a clock builder, not a time teller: Imagine that you met a remarkable person who could look at the sun or the stars and, amazingly, state the exact time and date. Wouldn’t it be even more amazing still if, instead of telling the time, that person built a clock that could tell the time forever, even after he or she were dead and gone? Having a great idea or being a charismatic visionary leader is “time telling;” building a company that can prosper far beyond the tenure of any single leader and through multiple product life cycles is “clock building.” Those who build visionary companies tend to be clock builders. Their primary accomplishment is not the implementation of a great idea, the expression of a charismatic personality, or the accumulation of wealth. It is the company itself and what it stands for.

Build your company around a core ideology: In 17 of the 18 pairs of companies in this research, they found the visionary company was guided more by a core ideology—core values and a sense of purpose beyond just making money—than the comparison company was. A deeply held core ideology gives a company both a strong sense of identity and a thread of continuity that holds the organization together in the face of change. The word ideology chosen because we found an almost religious fervor in the visionary companies as they grew up that we did not see to the same degree in the comparison companies. 3M's dedication to innovation, P&G's commitment to product excellence, Nordstrom’s ideal of heroic customer service, HP’s belief in respect for the individual—those were sacred tenets, to be pursued zealously and preserved as a guiding force for generations.

Build a cult-like culture: Architects of visionary companies don’t just trust in good intentions or “values statements;” they build cult-like cultures around their core ideologies. Walt Disney created an entire language to reinforce his company's ideology. Disneyland employees are “cast members.” Customers are “guests.” Jobs are “parts” in a “performance.” Disney required—as the company does to this day—that all new employees go through a “Disney Traditions” orientation course, in which they learn the company's business is “to make people happy.”

Home grow your management: In more than 1,700 years of combined history, only four cases in visionary companies in which an outsider was hired as chief executive—and that in only 2 of the 18 companies! In contrast, the less successful comparison companies were six times more likely to go outside for a CEO. The findings simply do not support the widely held belief that companies should hire outsiders to stimulate change and progress.  Insiders preserve the core values, understanding them on a gut level in a way that outsiders usually cannot. Yet insiders can also be change agents, building on the core values while moving the company in exciting new directions.

Stimulate progress through BHAGs, experimentation, and continuous improvement: To build a visionary company, you need to counterbalance its fixed core ideology with a relentless drive for progress. While core ideology provides continuity, stability, and cohesion, the drive for progress promotes change, improvement, innovation, and renewal.  In a visionary company, continuous improvement is a way of life, not a management fad. The critical question is not “How can we do well?” or “How can we meet the competition?” but “How can we do better tomorrow than we did today?” The challenge is to build for the long term while doing well today.

Embrace “the genius of the and”: If there's one lesson from the finding to keep in mind above all others, it is this: Clock build your company so that it preserves a passionately held core ideology and simultaneously stimulates progress in everything but that ideology. Preserve the core and stimulate progress. A truly visionary company embraces both ends of a continuum: continuity and change, conservatism and progressiveness, stability and revolution, predictability and chaos, heritage and renewal, fundamentals and craziness. And, and, and.