Built to Last: Successful Habits of Visionary Companies

Built to Last: Successful Habits of Visionary Companies

by James C. Collins, Jerry L. Porras

Built to Last equips readers with the knowledge and tools they need to start and run successful businesses. Drawing from the authors’ six-year research on visionary companies, you’ll learn the right habits and strategies that will help you become successful for decades.

Summary Notes

The Characteristics of Visionary Companies

Visionary companies are the most successful and admired in their industries, having a long history of making a major impact on the world. To uncover the key factors that drive their exceptional long-term success, the authors embarked on a six-year research project, comparing visionary companies to a control group of comparable companies.

The results of the research showed that visionary companies have the ability to recover from difficult times and achieve extraordinary long-term performance due to their resilience.

Interestingly, the authors also discovered that it's not just about what a company's core values are, but how consistent and authentic they are. They were able to boil down all the information they gathered into a few key concepts and used insights from non-business disciplines to inform their thinking.

Actions to take

Building a Successful Company Incrementally

Creating a successful company doesn't always require a groundbreaking idea or product. Take Bill Hewlett and Dave Packard, for example, who started their company without a clear idea of what they were going to make. Even Sony's first product attempt failed in the marketplace, but it still went on to become a highly successful company.

If you don't have a great idea or product yet, consider starting your company incrementally. Sam Walton, the founder of Walmart, started with just one Ben Franklin franchise five-and-dime store and gradually built his company step by step until the idea of rural discount emerged nearly two decades later.

But here's the thing: when it comes to leadership, it's more important to focus on building the organizational traits that make a company successful rather than trying to embody specific traits of a visionary leader. By doing this, you can create a lasting legacy and positively impact more people rather than just making a fortune.

Actions to take

Putting People and Products Before Profits

To be truly successful, companies should prioritize people and products over profits. A strong set of values is essential for any business, regardless of its success or failure.

It's crucial to remember the order of priority: people, products, and then profits. When companies put people first, they can create products that truly meet their customers' needs and provide jobs with fair wages. This not only benefits the company but also helps to create a thriving community around it.

Beyond just making money, companies should strive for a purpose that goes deeper. By having a clear mission and values that extend beyond profit, companies can build a loyal following of customers and attract employees who care about the work they do. This can lead to even greater success and a positive impact in the world.

Actions to take

Identifying Core Values and Purpose

You may have heard the term "vision" being used quite often, but it is not always well understood by many. It is commonly associated with remarkable achievements, strong principles, and ambitious objectives.

For an organization to be successful, it must differentiate its core values and purpose from its business strategies and practices. The most successful companies have a core ideology that remains unchanged while also encouraging progress and change in other areas.

A well-crafted vision is made up of two parts: core ideology and an envisioned future. Core ideology is made up of core values and a core purpose. Core values are what the organization fundamentally believes in, while core purpose is the reason why it exists in the first place. To achieve the vision, the organization needs to align its strategies with its core ideology and move toward the envisioned future.

Actions to take

Setting Big, Audacious Goals

Creating ambitious objectives can motivate and encourage people to collaborate and accomplish something truly remarkable. This can also help teams focus their efforts and establish a sense of purpose.

Big corporations, like Boeing and General Electric, have leveraged bold missions, known as BHAGs (Big Hairy Audacious Goals), to drive progress.

BHAGs are clear and captivating objectives that serve as a unifying focal point, promoting a strong sense of team spirit. With a clear endpoint, organizations can recognize when they have accomplished the goal.

Actions to take

Cult-like Cultures: Benefits for Companies and Individuals

Companies that have a cult-like culture can be beneficial for both the company and its employees. These companies tend to be more demanding of their employees, both in terms of job performance and how well they fit in with the company's values.

Nordstrom and IBM are prime examples of companies that adopt this approach. They have a rigorous screening process to ensure that only those who fit with the company's ideology are hired.

Studies have shown that visionary companies tend to have a greater cultism than comparison companies. So, having a strong corporate culture can actually be a major factor in a company's success.

Actions to take

Unexpected Success Through Opportunistic Experimentation

Companies can experience tremendous growth by taking risks and experimenting with new ideas. Johnson & Johnson, Marriott, and American Express are all examples of companies that have achieved success through experimentation.

To stay ahead of the competition, evolutionary progress is an important concept for companies. It involves taking calculated risks and making small changes that ultimately lead to a significant impact. To encourage this progress, companies should empower their employees to take the initiative and experiment with new ideas.

Giving employees the freedom to explore and test new ideas can foster a culture of innovation, where breakthroughs usually occur. This could not only lead to a company's success but could also give you a competitive edge in the marketplace.

Actions to take

Succession Planning for Quality Leadership

Effective succession planning is a critical factor for companies seeking to maintain a strong and capable senior leadership team. Take it from Jack Welch, a former CEO of General Electric, who believed that choosing his successor was the most important decision he had to make. Essentially, succession planning is important for maintaining continuity.

Companies like General Electric and Colgate have a longstanding tradition of promoting from within. This helps them preserve their core values and ensure the continuity of quality leadership. Contrastingly,

Westinghouse has had nearly twice as many CEOs as General Electric, some with tenures of less than two years. This is partly because they didn't plan for succession and often hired CEOs from outside the company.

To avoid these kinds of issues, companies should focus on developing and promoting talent within their organization. This way, they can be sure that they're building a pipeline of qualified candidates who are aligned with the company's values and vision. This can also help companies avoid the headaches that come with subpar leadership and short-lived tenures.

Actions to take

Building a Visionary Company

To create a thriving business, one must put in a great deal of effort, demonstrate a commitment to ongoing improvement, and maintain a forward-looking perspective. Companies that have a vision recognize that contentment breeds complacency, which can ultimately result in a decline in success. Such businesses invest for the long term while also upholding high short-term standards.

Take the founders of Hewlett-Packard (HP), for instance. David Packard and Bill Hewlett had a long-term vision for their company. They invested in new property, plant, and equipment, reinvested a good chunk of their earnings back into the company, and paid out fewer cash dividends to shareholders. This allows them to maintain an excellent reputation and stay ahead of the competition in the marketplace.

Actions to take

Aligning Your Company for Visionary Success

To achieve success, a company must ensure that all aspects of its business are aligned with its core values and goals. A great example of this is Ford Motor Company's successful turnaround in the 1980s, which was largely due to the company's alignment of its operations, strategies, and tactics with its mission, values, and guiding principles (MVGP).

Ford implemented several initiatives, such as statistical quality control, the Q1 program for suppliers, employee involvement programs, participative management programs, a satellite television system, profit-sharing agreements with labor, and the Taurus/Sable program to reinforce its MVGP. These initiatives served to align the company's actions and signals with its core values, and they played a significant role in Ford's successful turnaround. Ultimately, companies should also focus on markets that value technical contributions.

By doing so, companies will be able to establish themselves as leaders in the market and create a culture where team members are inspired to achieve great things.

Actions to take

Preserving the Core While Stimulating Progress

To create a truly visionary company, you need to understand the difference between your core ideology and other practices like culture, strategy, tactics, operations, and policies. It's not enough to just have a general idea of what you're doing - you need to have a clear intention and passion for both preserving your core values and driving progress.

The most innovative companies have dared to take bold risks and tackle problems that others have ignored. This internal drive for progress fuels continual innovation and forward movement.

By staying true to your values and purpose, while also pushing for innovation and evolution, you can create a company that's truly visionary - one that can change the world for the better.

Actions to take

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