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Successful Habits of Visionary Companies

For This Guru, No Question Is Too Big


A lifelong climber, Jim Collins brings the same doggedness to his research, exploring
mysteries like why some companies succeed and, in his latest book, how successful
companies can implode.

By ADAM BRYANT
Published: May 23, 2009

Jim Collins times himself and tries to stick to his goal of spending half his workday on
creative pursuits like his research. To keep the “other” category small, he keeps his
company small.

JIM COLLINS calls his third-floor offices in the heart of this mountain-ringed city a
“management lab.” But little distinguishes his workspace from most others, save for a
few things.

There is, for example, the small sign outside the door: “ChimpWorks.” In case anybody
doesn’t get the point, a large Curious George doll sits in a leather chair, delivering the
we-ask-a-lot-of-questions-here punch line. And in a corner of the white board at the end
of his long conference room, Mr. Collins keeps this short list:

Creative 53%

Teaching 28%

Other 19%

That, he explains, is a running tally of how he’s spending his time, and whether he’s
sticking to a big goal he set for himself years ago: to spend 50 percent of his workdays on
creative pursuits like research and writing books, 30 percent on teaching-related
activities, and 20 percent on all the other things he has to do.

These aren’t ballpark guesstimates. Mr. Collins, who is 51, keeps a stopwatch with three
separate timers in his pocket at all times, stopping and starting them as he switches
activities. Then he regularly logs the times into a spreadsheet.

He has a good jump, too, on another overarching goal he’s set for himself: to produce a
lasting and distinctive body of work.

Within the sprawling and overpopulated world of self-styled gurus dispensing advice on
management and leadership, Mr. Collins is in rare company. His last two books — “Built
to Last” and “Good to Great” — were breakout hits, selling about seven million copies
combined.

Rather than presenting silver-bullet formulas that are easily forgotten, Mr. Collins’s books
offer tangible frameworks for understanding why organizations succeed. His winning
streak is about to be tested with his just-released book, which takes a turn, as he says, to
the “dark side,” focusing on why companies fail. At any other time, it would seem a long
shot, in that it lacks the upbeat message of his previous books. But his timing, given the
number of once-great companies now in ruin, couldn’t have been better.

It seems that Mr. Collins, for all his exacting approaches to time management and
research, has been blessed with something he cannot control: repeated bouts of flat-out
luck.

He started researching his new book, titled “How the Mighty Fall: And Why Some
Companies Never Give In,” in 2005. Back then, the Dow Jones index had passed 10,000
and was still climbing, eventually to more than 14,000, and Bear Stearns, Lehman
Brothers, General Motors and Fannie Mae still had bright futures.

Now the stages of decline that he maps out in the book — hubris born of success;
undisciplined pursuit of more; denial of risk and peril; grasping for salvation with a
quick, big solution; and capitulation to irrelevance or death — offer a kind of instant
autopsy for an economy on the stretcher.

He writes that he’s come to see institutional decline as a “staged disease” — harder to
detect but easier to cure in the early stages — which is likely to foster a sense of
corporate hypochondria in many readers.

He started working on his previous book, “Good to Great: Why Some Companies Make
the Leap ... and Others Don’t,” in the mid-1990s, smack in the middle of New Economy
fever.

“Good to Great” was finally published in late 2001 — not long after the dot-com bubble
burst, the pixie dust surrounding visionary leaders had fallen away, and the 9/11 terrorist
attacks shook the country to its core. The book struck a chord with its back-to-basics
message: Quiet but determined leaders who remained focused on clear and simple goals
were the real success stories of corporate America.

It won a following, about four million copies’ worth, that extended well beyond the
business world and included football coaches, pastors and school principals.

“We were really slow, and so it comes out right after everything is falling apart,” Mr.
Collins recalls. “If we had come out in 1998, I don’t think anyone would have read it.”

His first best seller, “Built to Last: Successful Habits of Visionary Companies,” another
five-year project, which he co-wrote with Jerry I. Porras, came out in 1994, on the heels
of the re-engineering craze in corporate America; it also went on to sell millions of
copies.

And his next book, which he is writing with Morten T. Hansen and is due out in two or
three years, is about why certain companies manage to thrive through tumultuous times.

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“I think it’s just pure luck,” says Mr. Collins, parsing his track record in an interview
here. “You flip a coin and it comes up heads, and you flip a coin and it comes up heads,
and you flip a coin and it comes up heads, and one day you have four heads in a row. You
can’t really say you made it come up heads.”

But it’s not all luck, of course.

PART of the Jim Collins method borrows from other hypersuccessful people. He
approaches every aspect of his life with purpose and intensity.

Consider a few examples.

Four days after his first date with Joanne Ernst in the spring of 1980 — an eight-mile run
when both were students at Stanford — they were engaged, and married later that year.

When she announced over breakfast one day that she thought she could win an Ironman
Triathlon, Mr. Collins gave up his job at Hewlett-Packard to help her train, be her roadie
and negotiate her sponsorships with companies like Nike and Budweiser. Joanne won the
1985 Hawaiian Ironman Triathlon.

Back then, he says, his wife was the better-known half of the couple, and everyone
assumed that his name was Jim Ernst.

For his 50th birthday — his “gift to myself,” as he put it — Mr. Collins, a lifelong
climber, trained for 18 months to try a climb El Capitan, the 3,000-foot vertical rock
formation in Yosemite National Park.

Most climbers take a few days for the ascent. He wanted to do it in less than 24 hours. So
he trained with a younger, stronger partner. He studied weather patterns at Yosemite
going back almost 100 years to figure out the best window for an attempt. They climbed
the first 1,400 feet in the dark, and completed the ascent in 19 hours.

Oh, he sleeps with vigor, too. He figures that he needs to get 70 to 75 hours of sleep
every 10 days, and once went to a sleep lab to learn more about his own patterns. Now —
surprise, surprise — he logs his time spent on a pillow, naps included, and monitors a
rolling average.
“If I start falling below that,” he says, pointing to the short list on his whiteboard, “I can
still teach and do ‘other,’ but I can’t create.”

Mr. Hansen, his co-author on the current turbulence project, occasionally teases Mr.
Collins about his relentless self-improvement.

“I always laugh about the sleep log,” he says.

Mr. Collins also is quite practiced at saying “no.” Requests pour in every week for him to
give speeches to corporations and trade associations. It could be a bustling sideline, given
that he commands a top-tier fee of $65,000 to dispense his wisdom. But he will give only
18 speeches this year, and about a third of them will be pro bono for nonprofit groups.

Companies also ask him to consult. But he mostly declines, agreeing only if the company
intrigues him and if its executives come to Boulder to meet him. Over two half-day
sessions, for $60,000, he will ask pointed questions and provide very few answers.

“I am completely Socratic,” he said, “and I challenge and push; they come up with their
own answers. I couldn’t come up with people’s answers.”

Book tours? No. Splurging with the millions he’s earned from his books? No, too.

He and his wife still live in the 2,500-square-foot Craftsman-style house they bought
when they moved back from California 14 years ago to Boulder, their hometown. He
keeps his overhead low, with a staff of five people, and adds students for research work
as needed.

This orientation — a willingness to say no and focus on what not to do as much as what
to do — stems from a conversation that Mr. Collins had with one of his mentors, the late
Peter F. Drucker, the pioneer in social and management theories.

“Do you want to build ideas first and foremost?” he recalls Mr. Drucker asking him,
trying to capture his mentor’s Austrian accent. “Zen you must not build a big
organization, because zen you will end up managing zat organization.”

Therefore, in Jim Collins’s world, small is beautiful.

“We could have had a big consulting firm and training firm and it would have been a
huge lucrative machine,” he says. “But I want to answer the questions.”

THOSE questions have a certain good-dumb flavor. Why do certain companies enjoy
enduring success? How did some companies make the transition from good to great?
Why do certain companies thrive in turbulent times?

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Whenever an intriguing question arises, usually spawned by a good conversation, Mr.
Collins becomes obsessed with it. “Like a wolf, it grabs me around the throat and it won’t
let go,” he says.

His new book, “How the Mighty Fall,” grew out of a discussion he led in the fall of 2004
at West Point, with 12 Army generals, 12 chief executives and 12 leaders of nonprofit
organizations.

Mr. Collins put this question on the table: “Is America renewing its greatness, or is
America dangerously on the cusp of falling from great to good?”

At a break, one C.E.O. pulled him aside and asked him a question that boiled down to,
“How would you know if your successful company is on a path to decline?”

An article trying to answer that question grew into his current book. He looked for useful
matched pairs — similar companies whose performance clearly diverged at a certain
point.

Once he narrowed the field, he compiled decades of data and articles on each company to
help explain what led to an inflection point, then kept sifting the data for patterns,
divining theories from the data, and seeking out arguments to tell him why the theories
were flawed.

It’s roughly the same method he’s used for all of his books.

“Jim is a very interesting combination of things,” said Mr. Porras, his co-author on “Built
to Last” who taught Mr. Collins many of the research techniques he uses today. “He’s
amazingly creative, amazingly disciplined, amazingly thorough. He has strong opinions
about things, but after a lot of arguments, he certainly would change his mind. A lot of
people who have strong opinions never really let go of them.”

For each book, he hires a research team of university students, up to a dozen at a time, to
help him during long summers of work. He is picky about whom he hires, typically from
Stanford and the University of Colorado. They’re not always business students; they
might be studying law or engineering or biochemistry.

He prefers to learn as much as he can about them before he meets them. “Because if I
meet them, I may like them, and then all the assessment of the person is going to be
filtered by the fact that I like them, and what I really want to see is the quality of their
work,” he says.

So he will look at their transcripts. “If they even have a small glitch in their academic
record over the last year, they don’t really get considered,” he says. “I need people who
have that just weird need to get everything right.”
He gives the candidates a list of different academic activities, including field work and
lab work, and makes them rank the activities in order of preference, to give him a clear
idea of their interests.

If they clear other hurdles, he will finally meet them in person. He’s looking for four
intangibles: smart, curious, willing to death-march (“there has to be something in their
background that indicates that they just will die before they would fail to complete
something to perfection”) and some spark of irreverence (“because it’s in that fertile
conversation of disagreement where the best ideas come, or at least the best ideas get
tested”).

“So I look for somebody who on the one hand was an Eagle Scout, because that’s death-
marching,” he explained. “And, on the other hand, somebody who took time off to travel
to 14 third-world countries on no money.” One of his researchers, an M.B.A. student, had
studied medieval literature at Princeton and served in the Marines.

The research on his books can cost up to $500,000. (For the first two, he was writing
personal checks out of his and his wife’s personal savings.) With the research complete,
Mr. Collins retreats into “cave mode” for months and months, seven days a week — a
period when his wife says he is “there, but not there.”

He will read through every page of every binder that’s been assembled, making notes that
he will then use for a first draft.

“I call it monk mode, and I love monk mode,” he says.

Writing is not so much fun — “painful,” “excruciating” and “brutal” is how he describes
the process. It’s not that he’s after a certain lyricism. His writing is clear and unadorned.
But it does feel as if every sentence has been pressure-tested and carefully calibrated so
that it doesn’t go beyond what he can back with evidence from one of his binders.

It is slow going.

“If I’m going really, really fast, I can do a page of finished text a day, on average,” he
says. A 36-page monograph he published, “Good to Great and the Social Sectors,” took
him the better part of two years to write. It sold 400,000 copies.

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He then gets feedback from a large circle of people. To make sure they don’t hold back,
he refers to them as his “critical readers,” and types in large letters atop the manuscript,
“Bad First Draft.”

“That gives them the freedom to say, ‘Jim already knows it’s bad, so let me tell him how
it’s bad,’ ” he says.
THE findings are by no means pure science — everything does get filtered through Mr.
Collins’s brain, after all. And there are plenty of critics, taking issue with what they say
are generic and obvious points, based on research methods that are not as ironclad as they
appear.

Others have pointed out that some of the companies he held up as models in “Good to
Great,” including Fannie Mae and Circuit City, no longer look so good or great — or, in
the case of Circuit City, are even in business.

On his Freakonomics blog, Steven D. Levitt wrote last year that the message of a book
like “Good to Great” is “that the principles that these companies use not only have made
them good in the past, but position them for continued success.” He added, “To the extent
that this doesn’t actually turn out to be true, it calls into question the basic premise of
these books, doesn’t it?”

Mr. Collins takes issue with the criticism, even devoting a long passage in his new book
to defending “Good to Great” in light of the subsequent failures of some companies it
praised.

“Just because a company falls doesn’t invalidate what we can learn by studying that
company when it was at its historical best,” he writes.

He says the merits of analyzing the reasons for a company’s long winning streak — or,
for that matter, a sports team’s — are just as valid even if the company or team can’t
maintain the winning formula. If people eat right and exercise, then stop doing so, it
doesn’t make those habits any less valid, he writes.

Still, anyone looking for code-cracking formulas for success in business is going to be
disappointed by Mr. Collins’s books — and every other book, for that matter. What he
offers are provocative models for assessing why companies succeed and fail, supported
by research that fills dozens of boxes now stored in his basement.

He also has a deft touch with metaphors that enliven what might otherwise read like dry
case studies — flywheels and doom loops, hedgehogs and foxes, and a bus analogy
borrowed from “The Electric Kool-Aid Acid Test” by Tom Wolfe.

VIGOROUS debates continue on blogs about the merits of Mr. Collins’s books. One of
the more thoughtful comments, on Business Pundit, says, “The points in the Good to
Great book may seem very general, however you’ll be amazed that not many people
understand ‘general’ concepts like that things don’t happen overnight or the importance
of facing facts.”

Given that every company and industry is different, the books’ real value may be not so
much in the answers they provide, but in the questions they raise — the kind that every
company and manager should be asking.
Mr. Collins’s success has provided him with a financial cushion that allows him to search
around, without worry, hoping to stumble upon more of those throat-grabbing wolves.
“Now, fortunately, I can probably spend the rest of my life picking any question I want to,
regardless of whether it will be profitable,” he says. “I can just let my curiosity wander
unleashed.”

END