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Built to Last
Lessons from a book by Jim Collins
This book, in an abstract way tells historical alphas on building a great company which survives all economic cycle. The author is always critical in nature, and the book is very well researched. Every question you will have while reading a paragraph will probably be answered in the following paragraph. There are lots and lots of ideas for everyone at every stage of company.
What is a Company ?
It’s very often due to need, conditions, situations and urgencies we think of company as a money milking cow.
A company in it’s survival phase can be anything, money monster, bad working conditions etc. Because the strongest, fittest survive in the short term. Survival in short term is as important as survival in long term. Because even if we would want survival to be discontinuous it is not. If you are dead in a small span of time, there is no long term for you.
A company is a long duration of time is not just about profits, it’s about people. It’s about how good of a enabler your company is.
In it’s essence, a company is a group of people working together, surviving together. A company due to it’s culture and selection process can attract a certain type of people. An antifragile culture, an antifragile team, an antifragile vision can survive bottoms and highs of economy and changing world order.
I am not sure how good of an example Kodak is. But I really admire this. It started as a camera company in 1888. It even invented digital camera in 1989. But kept is as secret because the management feared it would lead to decrease in their existing cash-flow from reels/films. Then re-invented itself in 2013 as a chemical company, after going through bankruptcy in 2012.
When you’re talking to a bunch of corporate guys about 18 to 20 years in the future, when none of those guys will still be in the company, they don’t get too excited about it — Steven Sasson, the guy who invented digital camera
All individual leaders, no matter how charismatic or visionary, eventually die; and all visionary products and services—all great “great ideas”—eventually become obsolete.
Some Myths about Visionary Companies
It takes a great idea to start a great company
Few of the visionary companies began life with a great idea
Often get off to a slow start, but win the long race
Visionary companies require great and charismatic visionary leaders
A charismatic visionary leaders is absolutely not required for a visionary company.
Some of the most significant CEO’s in the history companies did not fit the model of high-profile charismatic leader—indeed some explicitly shied away from that model
The most successful companies exist first and foremost to maximize profits
Visionary company pursue a cluster of objectives of which making money is just one of them and not necessarily the primary one
Yet, paradoxically the visionary companies make more money than the more purely profit-driven company.
Visionary companies share a common subset of “correct” core values.
There is no “right” set of core values for being a visionary company.
The crucial variable is not the content of company’s ideology, but how deeply it believes it’s ideology and how consistently it lives breathes and expresses it in all that it does.
The only constant is change
A visionary company almost religiously preserves it’s core ideology—changing it seldom, if ever.
Yet while keeping their core ideologies tightly fixed, visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals.
Blue chip companies play it safe.
They are not afraid to make Big Hairy Audacious Goals.
Visionary companies have judiciously used BHAG’s to stimulate progress and blast past the comparison companies at crucial points in history.
Visionary Companies are great places to work for everyone.
You will either fit or expunged like a virus. It’s binary.
Don’t have room for those unwilling or unable to fit their standards.
Highly Successful companies make their best moves by brilliant and complex strategic
Nope, they make their best moves by experimentation.
Companies should hire outside CEO’s to stimulate fundamental change.
The most successful companies focus primarily on beating the competition
Nope, “How can we improve ourselves to do better tomorrow than we did today”, They ask this question day in and day out.
You can’t have your cake and eat it too
The embrace “Genius of the AND” view that allows them to pursue both A and B at the same time.
These are the concepts which is elaborated further in the following chapters. You can stop reading here if you want.
Myth of Great Idea
The builders of Visionary Companies were highly persistent, living to the motto: Never, never, never give up. But what to persist with? Their answer: The company. Be prepared to kill, revise or evolve the idea. but never give up on the company.
Spend less time being a time teller, and spending more of your time being a clock builder.
The continual stream of great products and services from highly visionary companies stems from them being outstanding organizations, not the other way around.
Myth of Charismatic Leader
We are not claiming architects of these companies were poor leaders. We’re simply pointing out that a high-profile, charismatic style is clearly not required for building a visionary company.
Consider Jack Welch, the high profile CEO at General Electric in the 1980’s and early 1990’s. We cannot deny that Welch played a huge role in revitalizing GE or that he brought an immense energy, drive, and a magnetic personality with him to the CEO’s office.
But obsessing on Welch’s Leadership style diverts us from a central point, Welch grew up in GE; he was a product of GE as much as the other way around. Somehow GE the organization had the ability to attract, retain, develop, groom, and select Welch the Leader.
The point that all of this explanation was trying to make, was that it doesn’t really matter if the leader is charismatic or not, as long as they are builder and architects whose intention is to try to build an organization rather than their own persona.
There is no question that I have the personality of a promoter … But underneath that personality, I have always had the soul of an operator, somebody who wants to make things work well, then better, then the best they possibly can… —Sam Walton, Walmart
Tyranny of the OR
Figure out a way to have both A AND B
a relatively fixed core ideology
AND vigorous change and movement
conservatism around the core
AND bold, committing, risky moves
clear vision and sense of direction
AND opportunistic groping and experimentation
Big Hairy Audacious Goals
AND incremental evolutionary progress
selection of managers steeped in the core
AND selection of managers that induce change
AND operational Autonomy
extremely tight culture
AND ability to change, move and adapt
investment for the long-term
AND demands for short term performance
philosophical, visionary and futuristic
AND superb daily execution
organization aligned with a core ideology
And organization adapted to it’s environment
The test of first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain ability to function — Scott Fitzgerald
More than profits
If it were possible to establish conditions where persons could become united with a firm spirit of teamwork and exercise to their heart’s desire their technological capacity … then such an organization could bring untold pleasure and untold benefits… Those of like minds have naturally come together to embark on these ideals — Masaru Ibuka, Sony
In an Earlier chapter it mentioned that, how Disney avoided an hostile takeover because the executives believed in vision and culture of the company (one of the reason).
Yes, Sony made crude heating pads and sweetened bean paste soup to keep itself alive (pragmatism), but it always dreamed and pushed toward making pioneering contribution (idealism).
sequence of three P’s — people, products and profits — Ford
In reviewing articles on Motorola and Zenith, we noticed that the articles on Motorola constantly emphasized “intangible” aspects of of the company—it’s informality, egalitarianism, technological drive, and optimistic ever-forward feeling—whereas the articles on Zenith after McDonald’s death put more emphasis on financial condition, market share, and other purely financial items
An important question to get to the purpose of a company ?
Why not just just shut this organization, cash out, and sell off the assets ? and to push for an answer that would be equally valid both now and one hundred years into future.
This chapter is worth revisiting, to get a better understanding of what constitutes an ideology, values and purpose. And how to soul search this and avoiding pitfalls like mimicking.
Preserve the core and Stimulate Progress
A visionary company careful preserves and protects it’s core ideology, yet all the specific manifestations of it’s core ideology, must be open for change and evolution.
It’s absolutely essential to not confuse core ideology with culture, strategy and tactics, operations, policies, or other non-core practices.
The core ideology enables progress by providing a base of continuity
The drive for progress enables the core ideology, for without continual change and forward movement, the company—the carrier of the core—will fall behind in an ever changing world
A highly visionary company institutionalizes them—weaving them into the very fabric of organization.
Have concrete tangible mechanisms to preserve the core ideology and to stimulate progress.
Walt Disney doesn’t leave it’s core ideology up to chance; it created Disney University and required every single employee to attend “Disney Tradition” seminars. Hp didn’t just talk about the HP way; it instituted a religious promote from within policy.
Tangible Concrete Specific Solid. Look inside a visionary company and you’ll see ticking, bonging, buzzing…clattering clock. You’ll see tangible manifestations of it’s core ideology and drive for progress everywhere.
The gears of the mechanism of the ticking clock don not grind against each other but rather work in concert—in alignment with each other.
Big Hairy Audacious Goals
It’s used as a tool to stimulate progress in an organization.
Right Questions to ask regarding BHAG
Does it stimulate forward progress
Does it create momentum
Does it get people going
Does it get people’s juices flowing
Do the find it stimulating, exciting, adventurous
Are they willing to throw their creative talents and human energies into it.
Does it fit our core ideology
Commitment and Risk
A goal cannot be classified as BHAG without a high level commitment to the goal
Risk do not always come without pain
Orientation and ongoing training programs that have ideological as well as practical content , teaching such things as values, norms, traditions etc
Internal universities and training centers
On-the-job socialization by peers and immediate supervisors
Rigorous up-through-the-ranks policies— hiring young, promoting from within, and shaping the employee’s mind-set from a young age
Exposure to the pervasive mythology of “heroic deeds” and corporate exemplar
Unique Language and terminology that reinforce a frame of reference and a sense of belonging to a special elite group
Corporate songs, cheers, affirmations, or pledges that reinforce psychological commitment
Tight screening processes, either during hiring or within a first few years
Incentive and advancement criteria explicitly linked to fit with the corporate ideology
Recognition. Tangible and visible penalties
Tolerance for honest mistakes
Office layout to reinforce ideals
Constant verbal and written emphasis on corporate values
Try a Lot of Stuff and Keep What Works
Evolutionary Progress is unplanned progress
Detailed plans usually fails because circumstance usually fail
Listen to anyone with an original idea, no matter how absurd it sounds
Encourage; Don’t nitpick. Let people run with an idea.
Hire good people, and Leave them alone
If you put fences around people, you get sheep. Give people the room they need.
Encourage experimental doodling
Give it a try—and quick
Select New Innovative ideas.
To meet a demonstrable human need.
Make a little, Sell a little, Take small steps. Big things often evolve from small things
It also has beautiful solid mechanism to keep this spirit in place. Worth checking out.
There is a full chapter which reinforces this thought that you should carefully vet and develop leadership in-house to preserve your core and stimulate progress instead of going outside.
Good Enough Never is
There is no ultimate finish line in a highly visionary company. There is no “Having Made It”. There is no point where they feel they can coast the rest of the way, living off the fruits of their labor.
Visionary companies install powerful mechanism to create discomfort to obliterate complacency and thereby stimulate change and improvement before the external world demands it.
Questions to ask ?
What “mechanism of discontent” can you create that would obliterate complacency and bring about change and improvement from within, yet are consistent with you core ideology
What are you doing to invest in the future while doing well today ?
Does your company adopt innovative new methods and technologies before the rest of industry ?
How do you respond to downturns ? Does your company continue to build for the long term even during difficult times ?
Does your company reject doing well as an end goal replacing it with the never ending discipline of working to do better tomorrow than it did today
Then there is a chapter on building systems and processes which aligns with company’s vision. Another on description of BHAG and then FAQs and then Appendices. That’s All
Thanks for reading. I am glad you took out time from your busy life to read this.