Built to Last

On a whim, I picked up Built to Last: Successful Habits of Visionary Companies (Harper Business Essentials) at an airport bookstore. I had heard the name of it before, and it was better than I expected. (I’m also a bit of a sucker for business books)

The idea of the book is to examine “visionary” companies (premier in their industry, widely admired, etc.) and try to figure out what makes them different. So the first step is to identify visionary companies, which they did by sending out a survey to top CEOs. (they also set an arbitrary cutoff of founding before 1950) So they ended up with a list like 3M, GE, HP, Proctor & Gamble, Boeing, Disney, Johnson & Johnson, Philip Morris, etc. Then they searched for comparison companies in the same industry that were founded at a similar time and were successful but not “visionary”. So HP got compared with Texas Instruments, Disney was paired up with Columbia, GE was paired up with Westinghouse, etc. Then with these comparisons, they looked for patterns to see what was different.

Their findings were interesting: a “great idea” at a company’s founding isn’t necessary, or even early success. You don’t need a great or charismatic visionary leader for a visionary company. The visionary companies did not play it safe. And so on.

Then the book distills these down into what it takes to have a visionary company. The biggest thing is that a visionary company needs a fixed core ideology and a clear vision. By this they don’t mean just having a vision statement, but having a purpose (beyond “make money”) that is widely recognized and taken seriously within the company. For example, Sony was founded with a “pioneer spirit” (and the idea of raising the reputation of Japanese electronics – Sony was founded right after World War II), HP was founded to provide something that is unique and to make technical contributions, Johnson and Johnson focuses on aiding the “art of healing”, Philip Morris focuses on freedom of choice and “the right to smoke”.

This was probably the most interesting part of the book for me. Learning about companies core beliefs (especially compared to a lot of the comparison companies which boiled down to “make money”) was actually kind of inspiring.

The book goes out of the way to point out that there’s no “right” vision, but just that having one that is authentic and guides decision making is what seems to matter. Some companies focused on customers, some on employees, some on their products or services, some on risk taking, and some on innovation. Again, just having a vision statement is not enough.

The rest of the book talks about other things that the visionary companies tend to do. One is “Preserve the Core and Stimulate Progress”, meaning always remain true to your core values, but don’t be afraid to try different non-core things. Similarly, “making a profit” can’t really be a core value, but you can’t ignore it either. (this is the “Genius of the AND”) Another is trying a lot of stuff and keeping what works. Yet another is home grown management which seems highly correlated with being a visionary company – that way your upper management has spent a lot of time in the company and learning and internalizing its values.

The authors spent a great deal of time on their methodology and trying to make sure that this was a scientific(ish) study. Ideally we would examine two companies that were founded at the same time, one with these principles and one without, and see how they turned out. Since we can’t do that, we have to examine historical data, which can lead to various biases. For example, maybe embracing these principles leads to a 99% chance of failing in the first 20 years and a 1% chance of massive visionary success. This seems like a pretty big problem, and one that the authors touched on but didn’t have a very convincing argument for.

Anyway, I enjoyed it a lot, and clearly it’s something that’s read at National Instruments because I recognized a lot of the terms used (BHAG, Profitable Core, etc.), which was kinda neat. It’s available for lending and is a fairly quick read.

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