As a business person, my favorite business book is “Built to Last – Successful Habits of Visionary Companies” written in 1994 by Jim Collins and Jerry Porras. This book is a data driven book that looks at the habits of 18 highly successful companies and contrasts their results to the second best competitor in their industries. The data support their arguments, but the book is an easy read and a not an arcane business book. To me, its lessons can be translated to any organization or governmental entity, be it national, state, province or local. If you would like to explore it more, check out the WikiLeaks summary of the book which is quite good.
While I read this book several years ago, today’s business, political and governmental climate of more short-term thinking troubles me. As our country does not have the patience to see if an idea works, we are destined to try small band-aid solutions that will never get at the underlying problems. I would say, though, band-aids can help if they move things incrementally forward, but many of our problems will take longer term planning and execution that will go beyond the terms of office of those making the decisions. This occurs in business as well as governments. The businesses who are publicly traded must meet analysts expectations on a quarterly basis. Think of how many times you have seen a business do better, but miss expectations and are crucified. So, it is not uncommon for businesses to forego longer term solutions that are not “accretive” or additive to short-term earnings.
Clearly, the same holds true in governments whether they are in the US or abroad. In these partisan days, we have too many people kicking the can down the road. They won’t take necessary action during times of prosperity and have predictable problems grow and must be resolved during times of economic strife. They did not learn their bible lessons from Joseph who had a dream that his Egyptian captors should save grain from the seven years of fortune, as seven years of famine would follow. I equate this example to the Bush tax cuts in the early part of the century that were not needed and started us back down a path of deficit problems.
In “Built to Last,” the 18 companies studied dwarfed the performance over time of that of their best competitors. They did not just dwarf the industry average performance; they significantly outperformed some very good companies. There were several lessons learned from these companies that formed the “successful habits” presented in the book. A brief review of these habits and some analogies follow:
Build a clock, don’t just tell time
These organizations were built from the outset to do more than just one thing. In fact, some of the companies failed at their first idea. Yet, they built a framework to develop new ideas and concepts. This is needed in government as well as business and non-profit organizations. What is the framework to plan and execute our strategies? In the US, this framework for future strategy has to be done in a thoughtful, non-partisan manner. Otherwise, we all will fail.
Be more than profits
These companies are all good community citizens. They recognize that for their business to flourish, their communities must be vibrant and take care of those less fortunate. This helps their customers and employees. It shows this is a great place to work. It also helps their shareholders, as the performance numbers are powerful. In the book it highlights how Dow Chemical survived one the worst chemical spill disasters in India, in part because they were a good community citizen. People knew the company was mortified by this tragedy and worked with them to rebound. Contrast this to the company whose coal-miners were killed in West Virginia two years ago. This company had a long history of trying to usurp the law and had a trail of audit issues for safety violations.
I equate this to some of our very conservative thinkers who want only to promote individual achievement. While we do need to reward and promote success, we have to be more than profits. Paraphrasing Gandhi, a community’s greatness is measured in how it takes care of its less fortunate. We have to help those in need climb the ladder. Otherwise we will end up with the haves and have-nots. Having seen the “Hunger Games” last night, it is not unlike some dictatorial cultures where those that have do well and those that do not live in poverty. We have places like that on Earth today and our economic disparity in our own country is rather disgraceful for a free country.
Preserve the core but stimulate progress
These companies had enviable track records of success and had a core set of businesses. Yet, they all looked to grow. They realized to survive they had to progress, to make things more efficiently, more effectively and seek new avenues for growth. Our country has an enviable construct of government. It bothers me greatly when people want to mess with that construct. That is our core. Yet, we do need to work to define what is truly needed and develop a longer term plan for progress. We have added tools (laws, regulations, bureaucracies) over time to help us progress, so we need to review these and make sure they are still effective. Where our tools are outdated, redundant or less effective, we should refine them to promote progress. But, we need to preserve the core.
Set Big Hairy Audacious Goals (BHAGS)
Many people have heard or used this term, but don’t know where it came from. These companies have been successful because they set bold goals or BHAGs. One of the boldest goals noted in the book is that of John F. Kennedy when he declared at his inauguration that America would put a man on the moon by the end of the decade. At the time, America had seen several launch failures, not unlike the recent North Korean missile failure. So, it was indeed a BHAG. And, Neil Armstrong walked on the moon in July, 1969. We need more of this in business and government. While the President has declared and set mpg standards for cars, something like we will make America’s energy production entirely green by 2050 would be a BHAG I think we should strive for. To do this would require a lot of planning, industry support and buy-in and execution. Industry knows global warming is happening, they just don’t want to come out in public and admit it clearly as it impacts their business. They are more focused on short-term profits rather than addressing longer term trends.
One of the more interesting habits was this one on cult-like cultures. They cited the customer service focus of Nordstrom and how the customer came before the shareholder. Their mantra is if we take care of the customer, the shareholders will make more money. They actually inverted the pyramid structure, putting the customer at the top. New employees would need to adopt this or leave. Other companies had similar culture issues. Equating this to our country, Americans believe fervently in freedoms. They also believe in fairness. So, when things begin to look unfair, Americans will act. That is our cult-like culture. Yet, we need our community conscious leaders to let us know when things are becoming unfair.
Try a lot of stuff and keep what works
The successful companies are constantly trying new ideas. Sometimes they fail. It notes the example of Texas Instruments who used to be a darling of Wall Street. Back in the 1970’s, they had a leadership group that would actually publicly humiliate you for perceived dumb ideas. Guess what happened? Idea creation went to zero and TI fell by the wayside. In an another example, I read where a CEO made a $10 million mistake on a new venture. The Chairman of the Board called him in and instead of telling him he was fired, congratulated him on trying something new. That is why he had hired him. This is an interesting converse to the TI story.
In today’s world, I hate to see when people are unfairly punished for failures, real or perceived. We are human and we mess up. We make decisions based on the best information available. I would want to understand why things failed. Why did Solyndra fail, e.g.? It was likely due to the Chinese government providing grants to solar energy companies to drive all competitors out of business. Yet, we see this as a poster child as to why not to invest in solar energy. That is very short-sighted as this industry is key to our future and is showing very promising developments.
Good enough never is
I switched the order of the chapters as I see a lot in this chapter with the above. These companies never rested on their laurels. They always said this is good, but we could be or do it better. They never are satisfied with good enough. They strived to be more. This is one of the geniuses of Steve Jobs. He never was satisfied with good enough. He was quite adamant and even an asshole about it. Yet, those who worked with him saw his vision come true time and time again. There were many times when he could have let an inferior effort get to the market place, but he was enamored with the art and elegance of the product. He wanted the Mac to look good on the inside as well as the outside. He wanted the walls of the factory to be painted white as it shows the dirt and had to be cleaned more. He wanted the impression that if we care so much about cleanliness, we really care about our products.
Home grown management
This habit was equally amazing to read about. I will cite these numbers incorrectly, but out of the 500 or so leaders these 18 companies had over time, 495 of them came from within. Meaning these companies promoted recognizable leaders from their own ranks. This went against a preconceived notion. In actuality, promoted leaders were recognized for their success as natural transitions, their promotion opened other promotions which led to better career-pathing and the companies benefited from the intrinsic knowledge of how to get things done in the company, whose counsel to seek out and whose to avoid.
My old company made the mistake of hiring outside leadership several times in the last eight years. Each time, the leaders were eventually fired. It became a revolving door. Each time the leaders would try ideas that had been tried before and failed in this company. Several times decisions were made and announced and the employees knew the day of the announcement that the decision was poor. They would inevitably not know who to trust, so they would bring in new leaders from outside. As these folks were not known commodities, the mistakes would be magnified. And, the good internal candidates would leave creating a greater void.
New blood is good when effectively used. A company needs new ideas. Yet, it cannot throw out what makes them successful with the bath water. Our country needs leaders of all types. We cannot have only new leaders who have never governed before. And, we cannot just rely on leaders who have only governed. We need people who know how to get things done who know others in other areas of government. Yet, we do need new ideas as well.
If you have not read this book, I would encourage you to do so. There are good lessons for many types of governance. The businesses and governments who think long term and embrace these successful habits will flourish. And, so will we as citizens, customers, shareholders and employees.