A few weeks ago I reviewed Good to Great by Jim Collins, which I thought was one of the top books I’ve read this year. Inspired by my love for Collins’ work, I decided to pick up another classic from the same author, a book called Built to Last.
Built to Last, is a rigorous analysis of “visionary companies” – industry leaders that maintain dominance for 100 or more years, across multiple generations and product cycles. Collins uses this book to explain WHY some companies endure throughout the ages, while others that have the same shot in life – same industry, same size – falter and fade away.
The answer can be summarized simply: visionary companies revolve around a purpose.
A purpose is different from a business strategy. A strategy can be summed up as “we make X products for Y consumers.” Walt Disney, for example, could have said “we make cartoons for kids.” That describes what the company does, at least for now. But that doesn’t describe the core of why the company exists.
A purpose, by contrast, demands an enduring vision that will last for hundreds of years, based on principals that never become outdated. Disney’s mission, for example, is “to use our imagination to bring happiness to millions.”
The Paradox of Purpose
Perhaps this all sounds like fluff to you. “That’s great in theory,” you might be thinking, “but a company has to make money.”
That’s true. Great companies reject the myth that you either make money or have a clear conscience. They embrace the paradox that you can live by your values AND create profits.
Pharmaceutical company Merck, for example, poured hundreds of thousands of dollars into creating a medicine called Mectizan. This revolutionary drug cured people in the developing world from parasitic worms that invade their eyes, causing horrific and painful blindness.
Merck developed the drug with the hope that governments or nonprofits would buy and distribute the medicine.
When no buyer stepped up to the plate, Merck decided to distribute the medicine for free. It even poured additional tens of thousands of dollars into making sure the medicine reached the patients who needed it most.
Merck chose this route because it’s the right thing to do AND because it keeps their hardworking research team motivated.
“Failure to go forward could have demoralized Merck scientists – scientists working for a company that explicitly viewed itself as ‘in the business of preserving and improving human life,'” Collins says.
In other words, the company had an altruistic reason AND a self-interested reason, and those two reasons were compatible.
When you help others, you also help yourself.
Purpose Over Profit
If purpose and profit come into conflict, visionary companies put purpose first. The companies that stand the test of time are the ones that focus less on short-term profits and more on long-term mission.
These companies need to create profits to sustain themselves, but profit is not their reason for living. “Profit is like oxygen, food, water and blood for the body,” Collins says. “They are not the point of life, but without them, there is no life.”
In contrast, the historic “control group” – companies in the same industries and eras that eventually fizzed – focused more on profit and less on principal. They cut corners with their customers, dissatisfied their staff, and churned out mediocre products. Their quarterly reports looked great for a few years, but eventually they lost momentum.
More Myth Busting
Built to Last refutes the myth that you need a brilliant idea to start a brilliant company.
When Masaru Ibuka started Sony in war-ravaged 1945 Japan, he wanted to create a company. He had no idea what this company would sell. He tried his hand at selling lots of things, from sweet bean-paste soup to rice cookers, before he settled on electronics.
His central mission wasn’t to schlep VCR’s, it was — in his own words – “to establish a place of work where engineers can feel the joy of technological innovation.”
Companies that are too wedded to a particular product run the risk of being unable to adapt when that product becomes obsolete – and sooner or later, almost all products WILL become obsolete.
Similarly, companies too dependent on a charismatic leader run the risk of being unable to cope when that leader passes away. The best leaders, Collins found, are obsessively preoccupied with succession planning, with establishing the processes that will enable the company to thrive long after they’re gone.
It’s Not Just Companies …
Collins illustrates how these lessons are applicable to every organization, from a two-person startup to a parent-teacher association.
“Visionary companies come in many packages: large and small, public and private, high profile and reclusive, stand-alone companies and subsidiaries,” he says. It also comes in the form of non-profit organizations like the American Cancer Society, community and neighborhood groups, and religious institutions.
He even likens it to the birth of the United States. The founding fathers didn’t concern themselves with procedures and policies, he says. They didn’t obsess over the new country’s economic engine. Those details would come later.
First and foremost, they laid down a set of principals upon which their risky experiment, this new nation, would be based. The fine print would come later. ‘We the People’ came first.
Should You Read This?
I would not have written a 1,000-word description of this book if I didn’t love it.
This Book is For You If: You want an engaging, reader-friendly description of the fundamentals upon which visionary companies are based, and you want those lessons to be based on careful, rigorous analysis.
This Book is NOT For You If: If you weren’t a huge fan of Good to Great, you probably won’t like this book, either. Both books have the same format: a list of shared traits, heaps of case studies, and an understanding of the paradoxes that form their worldview.
Contributed by Paula Pant