Built to Last

1. Build the company, not just the product

The company itself is the ultimate creation.

Clock building, not time telling. Visionary companies focus on building enduring institutions rather than relying on a single great idea or charismatic leader. They create organizational structures, processes, and cultures that can thrive beyond any individual product or person. This approach allows for continual innovation and adaptation over time.

Examples:

• Hewlett-Packard: Focused on creating an innovative engineering environment rather than a single product
• Walt Disney: Built a company that could continue producing magic long after Walt's death
• 3M: Developed a culture of innovation that consistently produces new products across diverse industries

2. Preserve the core ideology while stimulating progress

Core ideology provides the bonding glue that holds an organization together as it grows, decentralizes, diversifies, expands globally, and attains diversity within.

Yin and yang of visionary companies. Successful organizations maintain a delicate balance between preserving their fundamental purpose and values (core ideology) while constantly adapting and evolving their strategies, practices, and goals. This duality allows them to remain true to their essence while embracing change and growth.

Key components:

• Core ideology: Enduring purpose and values that remain constant
• Drive for progress: Relentless push for change, improvement, and growth
• Operational practices: Constantly evolving strategies, products, and methods

3. Set Big Hairy Audacious Goals (BHAGs) to drive progress

A true BHAG is clear and compelling and serves as a unifying focal point of effort—often creating immense team spirit.

Ambitious targets inspire action. BHAGs are long-term, ambitious objectives that galvanize an entire organization. They provide a clear direction and energize employees, pushing the company to achieve extraordinary results.

Characteristics of effective BHAGs:

• Clear and compelling
• Long-term (10-30 years)
• Challenging but achievable
• Aligned with core ideology

Examples:

• Boeing's commitment to the 747 jumbo jet
• NASA's goal to put a man on the moon
• Walmart's aim to become a $125 billion company by 2000

4. Cultivate a cult-like culture aligned with core values

Visionary companies tend to be more demanding of their people than other companies, both in terms of performance and congruence with the ideology.

Strong culture, strong performance. Visionary companies develop intense, ideologically-driven cultures that attract like-minded individuals and repel those who don't fit. This creates a highly committed workforce aligned with the company's core values and purpose.

Cultural elements:

• Rigorous employee selection and indoctrination
• Clear boundaries between insiders and outsiders
• Sense of elitism and belonging to something special
• Consistent reinforcement of core values

Examples:

• Nordstrom's fanatical customer service culture
• Disney's emphasis on "wholesome" entertainment
• Johnson & Johnson's Credo guiding decision-making

5. Embrace "Try a lot of stuff and keep what works" mentality

Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and—quite literally—accident.

Evolutionary progress through variation and selection. Successful companies encourage widespread experimentation and quickly capitalize on unexpected opportunities. They create an environment that allows for multiple "mutations" and then select and amplify the most successful ones.

Key practices:

• Decentralized structure allowing for local innovation
• Tolerance for mistakes and failed experiments
• Rapid recognition and scaling of successful ideas
• Balance between planned strategies and opportunistic moves

Examples:

• 3M's "15% rule" allowing employees to work on personal projects
• Johnson & Johnson's accidental discovery of Band-Aids
• Sony's evolution from rice cooker to electronics giant

6. Develop and promote leaders from within

Home-grown management rules at the visionary companies to a far greater degree than at the comparison companies (by a factor of six).

Continuity of leadership. Visionary companies prioritize developing and promoting internal talent rather than bringing in outside CEOs. This ensures continuity of the core ideology and allows for smooth leadership transitions.

Benefits of home-grown management:

• Deep understanding of company culture and values
• Long-term perspective on company success
• Preservation of core ideology across generations

Examples:

• General Electric's rigorous succession planning process
• Procter & Gamble's tradition of promoting from within
• IBM's history of internal CEO selections

7. Foster a relentless drive for self-improvement

Visionary companies display a remarkable ability to achieve even their most audacious goals.

Good enough never is. Successful companies cultivate a perpetual dissatisfaction with the status quo, constantly pushing themselves to improve and innovate. They create mechanisms to stimulate progress and prevent complacency.

Self-improvement strategies:

• Setting stretch goals and raising standards
• Investing heavily in research and development
• Encouraging continuous learning and skill development
• Implementing rigorous performance measurement and feedback systems

Examples:

• Motorola's pursuit of Six Sigma quality standards
• Hewlett-Packard's commitment to continuous innovation
• Walmart's relentless focus on lowering costs and improving efficiency

8. Maintain consistent alignment between ideology and actions

Keep in mind that there is a big difference between being an organization with a vision statement and becoming a truly visionary organization.

Walk the talk. Visionary companies ensure that their actions, decisions, and operational practices consistently align with their stated core ideology. This alignment creates authenticity and reinforces the company's values throughout the organization.

Alignment practices:

• Translating core values into concrete policies and procedures
• Making key decisions based on ideological fit rather than short-term gain
• Regularly assessing and eliminating misalignments
• Communicating ideology through multiple channels and touchpoints

Examples:

• Merck's decision to develop and give away a cure for river blindness
• Southwest Airlines' commitment to employee satisfaction as a path to customer satisfaction
• Patagonia's environmental activism aligning with its core purpose

Last updated: August 7, 2024