BuilttoLast:SuccessIulHabitsoIVision-

aryCompanies
By]amesC.Collinsand]erryIPorras,HarperCollinsPublishers,ewYork,Y(jj)
TheauthorssoughttoidentiIythepracticesthatdiBerentiatestellarcompaniesIromthegoodor
averageones.Theymethodicallyandobjectivelyresearchedbothvisionarycompaniesandcom-
parisoncompanies(similaronesIoundedclosetothesametime)overavarietyoIproductandserv-
iceindustries,anddiscoveredconsistentpatterns.
\hatqualitiesdenneavisionarycompany:

Premierinitsindustry

\idelyadmiredbybusinesspeople

Hasmadeindelibleimprintontheworld

HashadmultiplegenerationsoICLOs

Hasenduredmultipleproduct/serviceliIecycles

Over,oyearsold
VisionarycompaniesarenottheonlysuccessIulorenduringonesintheirindustry--theysimply
outperIormalltherest.Stockreturnsover;,yearsIorvisionarycompaniesoutperIormedthoseoI
othersuccessIulcompaniesincomparableindustriesbyaIactoroI6,andoutperIormedthegeneral
marketbyaIactoroI,.
Myths and Truths about Visionary Companies
Myth: Creatcompaniesstartwithgreatideas.
Truth: Visionarycompaniesareactuallylesslikelytohavestartedwithagreatidea.
Mythz: Visionarycompaniesrequirecharismatic,visionaryleaders.
Truthz: Charismatic,visionaryleadersoItenaredetrimentaltolong-termsuccess,toomuch
attentiongetsplacedonindividualleadershipinsteadoIonestablishinganenduring
institution.
Myth: Visionarycompaniesputprontsnrst.
Truth: ProntsareonlyoneoIasetoIpriorities--usuallynotthetoppriority.
Myth: Visionarycompaniessharecommoncorevalues.
Truth: CorevaluesoIvisionarycompaniescanberadicallydiBerent
Myth,: Theonlyconstantischange.
Truth,: Avisionarycompanypreservesitscoreideology.
Myth6: Blue-chipcompaniesplayitsaIe.
Truth6: TheyoItenbettheIarm.
Myth;: Visionarycompaniesaregreatplacestowork.
Truth;: OnlyiIyountthecoreideologyveryclosely.
Myth8: Thebestmovesaremadebybrilliant,complexstrategicplanning.
Truth8: Accidents--trialanderror--aretheoriginoImostbigsuccesses.
Mythj: CompaniesshouldhireCLOsIromtheoutsidetostimulatechange.
Truthj: Home-grownmanagementisakeyIactorIorlong-termsuccess.
Mytho: TopcompaniesIocusonbeatingthecompetition.
Trutho: TheyIocusonbeatingthemselves.
Myth: Youhavetochoosebetweenmutuallyexclusiveitems.
Truth: Visionarycompaniesngureouthowtohaveboth.
Mythz: Companiesbecomevisionarythroughvisionstatements.
Truthz: VisionstatementsareaverysmallpartoIthewholeprocess.
Visionarycompaniesdon'tjusttelltime,theybuildclocks.LiketheIramersoIthe\.S.Constitu-
tion,theirleadersseektobuildanenterprisethatwilllastwellbeyondtheirtenure.Theleaders
spendlesstimetryingtobeproductvisionariesorcharismaticleaders,andmoretimeIocusingon
beingorganizationalvisionaries.
CeniusoItheAnd(oTyrannyoItheOr):VisionarycompaniesngureouthowtohavebothoI
whatappeartobemutuallyexclusiveitems.Lxamples:

purposebeyondprontALpragmaticpursuitoIpront

nxedcoreideologyALconstantprogress

investmentIorthelonghaulALshort-termperIormance

tightcultureALabilitytochangeandadapt
More than Prots: Core Ideology
Prontabilityistocompanieswhatoxygen,Iood,andwaterareIorthebody:necessaryIorexistence,
butnotthereasonIorliving.Less-successIulcompaniesoItenIocustooexclusivelyonprontability,
andoItenIailtodevelop&reinIorceacoreideology.Visionarycompaniesconstantlyreiterateand
reinIorcetheircorebelieIs.LxamplesoIcorevalues:
Merck PreserveandimprovehumanliIe
Sony TobewhereengineerscanIeeljoyoIinnovation,toelevate]apan's
culture,andtoapplyadvancedtechnologytotheliIeoIthegeneral
public.
Ford Peoplenrst,productssecond,prontsthird.
HP Providennestelectronicequipmentwhichmakesacontributionto
society.
]ohnson&]ohnson Productusersnrst,employeessecond,managementthird,communi-
tiesIourth,andstockholderslast(unchangedsincej)
Boeing Pioneeringaviation
Motorola Superiorproductsandservices,Iairprices,adequatepront,reasonable
shareholderreturn
PhilipMorris Passionateaboutcigarettes
Preserve the Core AND Stimulate Progress
VisionarycompanieskeeptheircorebelieIssacred,butthemaniIestationsoIthosebelieIsaresub-
jecttochange.Lxample:\al*Martcoulddoawaywithgreeters,butwouldstillnndwaystoex-
ceedcustomerexpectations".
VisionarycompaniesinstitutionalizeboththeircorebelieIsandtheirdriveIorprogress.Lxamples
includeLisney\niversity,HP'sPromoteIrom\ithinpolicy,Procter&Camble'sinternalbrand
competition,M'sspend,%oIyourtimeonanyprojectyouwant",M'srenewalrule(z,%oIdi-
visionsalesshouldcomeIromproductsintroducedinthepast,years).
Big, Hairy, Audacious Goals (BHAGs)
LikethemoonmissionoIthej6os,aBHACisaclear,compelling,Iocusing,andstimulatinggoal
(notjustastatement).VisionarycompaniesdenneBHACs(alwaysconsistentwiththecoreideol-
ogy),achievethem,thendennenewBHACs.Lxamples:
Boeing Lverynewplanemodelariskyventure,pushingtechnologytothe
limit
PhilipMorris \henitsmarketsharewasonlyo%:BecometheCMoItheto-
baccoindustry
Ford \henoneoIoautomakers:BuildthemotorcarIorthemulti-
tudes
Sony ]ustaIter\orld\arII:ChangetheimageoI]apaneseproducts
aroundtheworld
Citibankinthe8jos Becomeagreatnationalbank
Citibankinj, BecomethemostpowerIulworldnnancialinstitution
Citibankinthej6os PerIormeveryuseIulnnancialservice,anywhereintheworld
BHACsappearmoreaudacioustooutsidersthantoinsiders,whobelievetheycanachieve.
Cult-like Cultures
CulturesoIvisionarycompaniesarebinary:eitheryountoryoudon't.Thecoreideologyissocon-
stantlyreinIorcedthatyouhavetobuyinIullyoryou'reousted.Visionarycompaniestendto:

HoldideologyIervently

Indoctrinateitsemployees

Lnsureatightntbetweentheemployeeandtheideology

CarryanattitudeoIelitism
Lxamples:ordstrom,IBM,Lisney,Procter&Camble,Marriott
Try a Lot of Stuff and Keep What Works
SuccessusuallycomesIromlotsoIexperimentation.TrylotsoIvariations,keepwhatworks,and
nxordiscardwhatdoesn't.AsinLarwinism,it'ssurvivaloIthenttest.However,thevariations
shouldbeintentionalandnotjustrandomchance.
Manyvisionarycompaniesactivelypromoteexperimentation.Lxamples:M,\al*Mart,]ohnson
&]ohnson,Motorola,HP.
Home-Grown Management
VisionarycompaniesplancareIullyIorCLOsuccession--oItenmanyyearsbeIorethechange--
andrarelyhireCLOsIromoutside.LessercompaniesoItenrelyonasingleleader,thenscramble
Iorasavior"(usuallyanoutsiderunIamiliarwiththeculture)whentheleader(orhispolicy)Iails.
Good Enough Never Is
VisionarycompaniesinstitutionalizepoliciesthatcreatediscomIort,preventcomplacency,and
stimulatechangeandimprovementbeIoretheexternalworlddemandsit.Lxamples:
Merck Yieldmarketshareasproductsbecomecommodities
Motorola CutoBmatureproductsthatarestillsellingwell
Boeing LyesoItheLnemy:iIwewerethem,howwouldweattackBoeing:
\al*Mart BeatYesterday"ledgerbook
HP Payasyougo--nodebtallowed(contrarytonnancetextbookrecommenda-
tions)
VisionarycompaniesalsodemandplanningIorthelongtermwhilestillmeetingshort-termsales
goals.TheytendtobeearlieradoptersoInewtechnologies,andcontinuetobuildevenduring
toughtimes.
The End of the Beginning
Keepingeveryoneinthecompanyalignedwiththecoreideologyrequiresconstantwork.You
neverwillreachapointwhereyougettostopandrest.Forbestresults,uselotsoItacticsthatre-
inIorceeachothertokeepaconsistentmessagedeliveredtoemployeesandtheworld.
Epilogue
Thegoodnews:it'sallbasicstuBwithinthereachoIeverymanager,andcanbeappliedthroughout
acompanyorevensimplyinanindividualdepartment.
Thebadnews:it'shardworkthatneverends,andtherearenoshort-cuts.