Book Report – Built To Last by Jim Collins

Favorite Quotes

Above all, there was the ability to build and build and build – never stopping, never looking back, never finishing – the institution…Walt Disney’s greatest creation was Walt Disney (the company) – Richard Schnickel – The Disney Version

If an organization is to meet the challenges of a changing worlds, it must be prepared to change everything about itself except its basic beliefs as it moves through corporate life…the only sacred cow in an organization should be its basic philosophy of doing business.

“We’re proud of our successes, and we celebrate them. But the real excitement comes in figuring out how we can do even better in the future. It’s a never-ending process of seeing how far we can go. There’s no ultimate finish line where we can say “we’ve arrived.” I never want us to be satisfied with our success, for that’s when we’ll begin to decline.” – Hewitt-Packard Executive from Built To Last

“Of all the things I’ve done, the most vital is coordinating the talents of those who work for us and pointing them toward a certain goal.” – Walt Disney

“To continue our progress and service to American and the world, we need a healthy appreciation for those who exercise…the option for excellence, permitting the creation of something for all of us, enriching lives with new ideas and products. The best and hardest work is done in the spirit of adventure and challenge.” William McKnight – 3M

 

Key Takeaways 

A visionary company almost religiously preserves it’s core ideology. Core values form a rock foundation for the company.

Visionary companies make some of their best moves by experimentation, trial and error, opportunism and – quite literally – accident. “Let’s just try a lot of stuff and keep what works.”

Visionary companies focus primarily on beating themselves and not their competitors. They relentlessly ask the question “How can we improve ourselves to do better tomorrow than we did today?”

1.) CLOCK BUILDING, Not Time Telling. Instead of being a remarkable person who can look at the sun or stars and be able to tell the exact time. Wouldn’t that person be more amazing if instead of telling the time, he or she built a clock that could tell the time forever, even after he or she was dead and gone.

Having a great idea or being a charismatic visionary leader is time telling. Building a company that can prosper far beyond the presence of any leader or product life cycle is “clock building.” Always be focused on building an organization. Being an architect. Their greatest creation is the company itself and what it stands for.

Walmart was totally an outgrowth of everything we’d been doing since 1945 – another case of me being unable to leave well enough alone, another experiment. And like most over-night successes, it was about twenty years in the making. – Sam Walton

“There’s 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…I was never in anything for the short haul.

STORE WITHIN A STORE. Walton valued change, experimentation, and constant improvement. He didn’t just preach these values and instituted concrete organization mechanisms to stimulate change and improvement. The Store within the store concept was for each department manager to run their department as if it was their own business. He had VPI (Volume Producing Item) Contests to encourage create experiments by associates. Personnel operate in an environment where change is encouraged. Suggestions and Ideas are quickly spread through Walmart and expected.

Walt Disney – Paid greater attention to developing his company than developing himself. In the 1920’s he paid his creative staff more than he paid himself. In 1930’s he installed the first generous bonus system in cartoon industry to attract and reward good talent. In the 2950’s he instituted You Create Happiness training programs and in 1960’s he established Disney University.

Founding of United States built the country by asking questions not about creating the best president or founder but asking about how to build and enduring country. What processes can we create that will give us good presidents long after we’re dead and gone? What guidelines and principles should we construct that will give us the country that we envision? How should the country operate? Thomas Jefferson, James Madison and John Adams created a constitution that future leaders would be guided by. They were architects and clock builders.

2.) EMBRACE THE GENIUS OF THE AND.
Purpose beyond profit AND pragmatic pursuit of profit
Relatively fixed core ideology AND vigorous change and movement
Conservatism around the core AND bold, committing and risky moves
Clear vision and send 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
Idealogical control AND Operational Autonomy
Extremely tight culture (almost cult like) AND ability to change, move and adapt
Investment for the long term AND demands for short-term performance
Philosophical, visionary, futuristic AND superb daily execution “nuts and bolts”
Organization aligned with a core ideology AND organization adapted to its environment

3.) MORE THAN PROFIT – “I hold that it is better to sell a large number of cars at a reasonably small profit…I hold this because it enables a larger number of people to buy and enjoy the use of a car and because it gives a larger number of men employment at good wages. Those are the two aims I have in life.” – Henry Ford. Ford reduced prices by 58% from 1908 to 1916. He could have raised prices but kept lowering them and introduced the $5 worker day which was roughly twice the standard industry rate.

David Packard – HP – 1960 Talk to Staff. “I want to discuss why this company exists in the first place? In other words why are we are here. I think many people assume, wrongly, that a company exists simply make money….We inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so they are able to accomplish something collectively that they could not accomplish separately….the underlying drive comes largely from a desire to do something else – to make a produce- to give a service – generally to do something which is of value. The real reason for our existence is that we provide something which is unique that makes a contribution.”

Authenticity of the ideology and the extent to which a company attains consistent alignment with the ideology counts more than the content of the ideology. Johnson and Johnson & Wal-Mart made their customers central to ideology. HP and Marriott made their employees central to their ideology. Ford and Disney made their products and services central to their core ideology. Sony and Boeing made audacious risk taking central to their ideology. Motorola and 3M made innovation central to their ideology.

3M – Innovation: “Thou shalt not kill a new product idea.” American Express – Heroic Customer Service. Boeing – Being on the leading edge of aeronautics; being pioneers. Nordstrom – Service to customer above all else. Sony to experience the sheer joy that comes from the advancement, application, and innovation of technology that benefits the general public. Wal-Mart “We exist to provide value to our customers.” Walt Disney – To bring happiness to millions and to celebrate, nurture, and promulgate wholesome American values. Proctor and Gamble “product excellence and continuous self improvement.”

Visionary companies more thoroughly indoctrinate employees into a core ideology and create cultures that are almost cult-like around the ideology. The visionary companies attain more consistent alignment with their core ideology – in such aspects as goals, strategy, tactics, and organization design.

Beliefs must always come before policies, practices and goals. – Thomas Watson IBM
Visionary Companies tend to only have a few core values – usually between three and six. The key is what is authentically believed. HP Way – David Packard and Bill Hewlett’s deep convictions about the way a business should be built.

Purpose should serve to guide and inspire the organization fo years, perhaps a centaur or more. A visionary company continually pursues but never fully achieves or completes it’s purpose – like chasing the earth’s horizon or pursuing a guiding star. Walt Disney “Disneyland will never be completed, as long as there is imagination left in the world.” Disney can evolve from cartoons, to animated moved, to Mickey Mouse Club to Disneyland, to box office hits, to Disney cruises to now Disney+ but never outgrow the core task of bringing happiness to millions.

VISIONARY COMPANIES CAN, AND USUALLY DOES, EVOLVE INTO NEW EXCITING BUSINESS AREAS, YET REMAINS GUIDED BY ITS CORE PURPOSE.

Many companies take years to pin down their core ideology. HP and Motorola developed their core ideology more than a decade after founding the company.

Boeing can never be done pushing the envelope in aerospace technology. Marriot can evolve with new products but never outgrow the fundamental task of “making people away from home feel that they’re among friends and really wanted.”

4.) Preserve the Core, Stimulate Progress

“Paul Gavin urged us to keep moving forward, to be in motion for motions sake…He urged continuous renewal…change unto itself is essential. But, taken alone: it is limited. Yes, renewal is change. It calls for “do differently.” It is willing to replace and redo. But it also cherishes the proven basics. – Robert Galvin, Former CEO Mortorola

Wal-Marts “Exceed Customer expectations” is permanent and unchanging but customer greeters at front door is noncore practice that can change. Boeing’s “being on the leading edge of aviation; being pioneers” is permanent but commitment to building jumbo jets is a noncore practice that can change.

5.) Big Hairy Audacious Goals

A BHAG engages people – it reaches out and grabs them in the gut. It is tangible, energizing, highly focused. People “get it” right away; it takes little or no explanation.
The Moon Mission by President Kennedy is a BHAG. The goal has to be clear and compelling.

GE “To become #1 or #2 in every market we serve and revolutionize this company to have the speed and agility of a small enterprise.

Often the BHAGS are unreasonable but people believe they can do it anyway.

Henry Ford – 1907 . To build a motor car for the great multitude…It will be so low in price that no man making a door salary will be unable to own one – and enjoy with this family to blessing of course of pleasure in God’s open spaces…everyone will be able to afford one, and everyone will have one. The horse will have disappeared from our highways, the automobile will be taken for granted.”

This led Ford in the beginning however once Ford achieved it’s goal they became complacent because they didn’t set a new goal.
A BHAG only helps an organization as long as it has not yet been achieved. Never want to enter “We’ve arrived” mentality.

Walt Disney – Make bold and risky commitments to audacious projects. In 1934, Walt Disney aimed to do something never before done in the movie industry: create a full length animated feature film. In creating Snow White, most people in the industry called it Disney’s Folly. Walt used all of his resources and mortgaged everything but It became the highest grossing animated film ever. Two decades later, Walt had the BHAG of Disneyland, then Disney World, then EPCOT.

To set Big Hairy Audacious Goals requires a certain level of unreasonable confidence. It’s not modest to declare “we will democratize the automobile.” It’s not cautious to create Disneyland but all the visionary companies had this self confidence.

The BHAGs looked more audacious to outsiders than to insiders. The visionary companies didn’t see their audacity as taunting the gods. It simply never occurred to them that they couldn’t do what they set out to do.

Motorola founder Paul Galvin – constantly set BHAGs for his organization. In the 1940’s he set the goal for his team to profitably sell one hundred thousands TVS in first year at price of $179.95. His team told him that they don’t have capacity for that production and that they’d never sell that much because that would make their industry position third or fourth when the best they’ve been in home radio is seventh or eight. They didn’t even think they could break $200 in cost.

Galvin believed that vigorous movement in any direction is better than sitting still. Always something to shoot for. Galvin’s son uses the word “renewal” to capture the idea of continual transformation often attained through commitments to audacious projects. “At times we must engaged in an act of faith that key things are doable that are not provable.”

BHAG GUIDELINES: 1.) BHAG should be so clear and compelling that no explanation is needed.
2.) BHAG should fall well outside the comfort zone. People in the organization should have no reason to believe they can pull it off, yet it should require heroic effort and perhaps even luck 3.) A BHAG should be so bold and exciting in its own right that it would continue to stimulate progress even if the organizations leaders disappeared before it had been completed.
4.) A BHAG has the inherent danger that, once achieved, an organiztion can stall and drift in the “we’ve arrived” syndrome
5.) Finally, and most important of all, a BHAG should eb consistent with the company’s core ideology

6.) Cult Like Cultures

Nordstrom – Everyone starts at the bottom. If you are willing to do whatever it takes to make a customer happy, you will fit in here. Nobody tells you to be a customer service hero, it’s just sort of expected. At Nordstrom, you become a “Nordie” as many employees calls themselves. You spend most of your time with Nordies and they become your support group. Letters and notes are big with Nordies. They are called “heroics”. Nordstrom salespeople write them about each other. Those along with customer lettrs and employee thank you notes to customers determine which stores receive monthly prizes for service.

Don’t need to be soft environment. Visionary companies tend to be more demanding of their people than other companies, both in terms of performance and congruence with ideology. Because visionary companies have such clarity about who they are, what they’re all about, and what they’re trying to achieve, they tend to not have much room for people unwilling or unsuited to their demanding standards.

If you are willing to really buy in and dedicate yourself to what the company stands for, then you’ll be satisfied and productive and probably couldn’t be happier. If not you will not fit in and probably be ejected like a virus. It’s binary: You’re either in or you’re out and there seems to be no middle ground. It’s almost cult-like.

Four Common Characteristics.
1.) Fervently held ideology
2.) Indoctrination
3.) Tightness of Fit
4.) Elitism

You will have greatest ability to adapt to a changing world, when you have strongest cult like culture. IBM attained its greatest success during that era.

Disney forces a culture fit through it’s indoctrination, tightness of fit and elitism to preserve its core ideology. This is seen mostly through it’s hiring of potential recruits. Even in the 1960’s, Disney required all applicants to take an extensive personality test. All “cast members” go through Disney traditions. All cast members learn the new language. Employees are cast members. Customers are guests. A crowd is an audience. A work shift is a performance. A job is a part. A job description is a script. A uniform is a costume. The personal department is casting. Being on duty is onstage. Being Off duty is backstage.

Training at Disney. Trainer with new application. What business are we in. Everyone knows McDonald’s makes hamburgers. What does Disney make? New Hire: It makes people happen. Nobody has been hired for a job. Everybody’s been cast for a role in our show.

Disney language in publications: The company constantly emphasizes that Disney is special, different and magical.

Indoctrination at Proctor and Gamble. New employees must read it’s official biography “Eyes of Tomorrow” also known as “The Book.” All internal publications and orientation materials stress P&G’s history, values and traditions. P&Gers spend most other time together even outside of work.

Examples of How To Do It:
1.) Orientation teaching values.
2.) Internal Universities
3.) Rigorous Up-through-the-ranks hiring ideology – hire from within and grow in the organization.
4.) Unique language and terminology
5.) Corporate songs, cheers, affirmations, or pledges that reinforce psychological commitment
6.) Awards, contests and public recognition that reward people consistent with core ideology
7.) Buy In mechanisms (Financial – Time investment)
8.) Celebrations that reinforce successes, belonging and specialness
9.) Tight screening processes, either during hiring or pithing the first few years.
10.) Constant verbal and written emphasis on corporate values, heritage and the sense of being part of something special.

7.) TRY A LOT OF STUFF AND KEEP WHAT WORKS

Visionary companies made their best moves not by detailed strategic planning, but rather by experimentation, trail and error, opportunism and – quite literally- accident.

Evolutionary progress = branching and pruning. The idea is simple: If you add enough branches to a treat and intelligential prune the deadwood, then you’ll likely evolve into a collection of healthy branches well positioned to prosper in an ever-changing environment.

R.W. Johnson of Johnson and Johnson – “Failure is our most important product.”

3M the model of experimentation. Bill Hewlett of HP, when asked what companies he greatly admired and saw as a role model, he said “3M No doubt about it. You never know what they’re going to come up with next. The beauty of it is that they probably don’t know what they’re going to come up with next, either. But even though you can never predict what exactly the company will do, you know that it will continue to be successful.”

William McKnight 3M – “Listen to anyone with an original idea, no matter how absurd it might sound at first.” “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.”

3M – A lot of their best ideas were not planned – Scotch Tape, Post It Notes…they all happened because of experimentation. “We must possess a two-fisted generating and testing process for ideas…Every idea should have a chance to prove it’s worth, and this is true for two reasons. 1.) If it is good, we want it; 2.) If it is not good, we will have our purchased our insurance and peace of mind when we have proved it impractical.

Big things evolve from little things. Since you can’t tell ahead of time which little things will turn into big things, you have to try lots of little things and keep the ones that work and discard the ones that don’t.

Ways 3M Stimulates Progress and Experimentation.
1.) 15 percent rule – longstanding tradition that encourage technical people to spend up to 15% of their time on project of their own choosing and initiative.
2.) 25 percent rule – Each division is expected to generate 25 percent of annual sales from new products and services introduced in the previous five years. This was upped to 30 percent rule and 4 years in 1993.
3.) “Golden Step” award – granted for those responsible for successful new business ventures originated within 3M
4.) “Genesis Grants” – internal venture capital fund that distributes parcels of up to $50,000 for researches to develop prototypes and market tests
5.) “Own business” opportunities – 3Mers who successful champion a new product then get the opportunity to run it as his or her own project, department or division.

Lessons on how to develop this culture.
1.) Give it a try -and quick.
2.) Accept that mistakes will be made.
3.) Take small steps.
4.) Give people the room they need
5.) Mechanisms – build that ticking clock

You are expected to hit 30 percent new product goal. You want to receive Golden Foot Award and become and entrepreneurial hero. All systems are set for new experiments and innovation,

Marriott had no background in hotels when it branched into that business. Johnson and Johnson had no consumer goods experience when it began selling baby powder. HP had no experience in computers when it launched their first computer product. Disney had no knowledge of theme park business when it created Disneyland. IBM had no experience in electronics when it moved into computers.

8.) Home Grown Management
Promote from within to preserve the core. Visionary companies develop, promote, and carefully select managerial talent grown from inside the company to a greater degree than the comparison companies. In seventeen hundred years of combined history in the visionary companies, we found only four individual cases of an outsider coming directly into role of CEO.

At Disney, Walt developed no capable successor and the company floundered during the 1970’s as manager ran around asking themselves, “What would Walt Do?” Finally they hired Michal Eisner and one Disney cast member said “Eisner turned out to be more Walt than Walt.”

Nearly all key early architects of vision companies remained in office for long periods of time (32.4 years on average) Key is to take a long term view. Look ahead on the next generation fo the company and start building the bench.

9.) Good Enough Never Is.

The critical question Visionary companies ask themselves “How can we do better tomorrow than we did today?” This question becomes a way of life. There is no ultimate finish line for a visionary company. There is no “having made it.” Visionary companies are terribly demanding of themselves.

Proctor and Gamble created internal competition to compete with themselves because the marketplace did not provide enough competition. P&G Brands would compete against themselves. All different brands and departments compete against themselves when it comes to sales, revenue, profit, etc.

Wal-Mart Beat Yesterday Books. Books tracked sales figures on a daily basis in comparison to exact same day of the week one year earlier. Nordstrom measured Sales per hour (SPH) rankings relative to ones peers. Sales and Customer feedback impacts employee compensation and advancement at Nordstrom.

HP decisions during World War II. Revenue decline of 50 percent and the company was in a really tough position. They decided to hire talented scientists and engineers. They decided to keep their best and most expensive in-house talent. They saw the long term of the company and being ahead when things came back as their key initiative. Invest in people and experience and new products especially when most companies are doing the opposite.

Great leaders of visionary companies build first and foremost for the long term while simultaneously holding themselves to highly demanding short-term standards.

Visionary companies invest more in universities and education centers and intensive training and development programs. Motorola requires 40 hours per week of training per employee per year and requires 1.5% percent of payroll on training.

Questions to Ask:
What are you doing to invest for the future while doing well today?
Does your company adopt innovative new methods and technologies before the rest of the industry?
How do you respond to downturns? Does you company continue to build for the long-term even during difficult times?
Do people in your company understand that comfort is not the objective – that life is a visionary company is not suppose to be easy?

Story of the Black Belt. What is the meaning of the black belt? The sensei continues to ask the student. The student keeps getting the answer wrong. “The end of my journey” A well deserved reward for my hard work. The sensei continues to tell the student he is not ready. Until he shares what the The Black Belt really represents “The beginning – the start of a never-ending journey of discipline, work and the pursuit of an ever-higher standard.

10.) The End of the Beginning
Like 3M HP pursued a strategy of producing new and better products each year as it’s primary source of growth. In 1963, more than 50 percent of HP’s sales came from products introduced in the previous 5 years. By 1990, this had improved to 50 percent.

When entering a new business, HP would usually create a new division and turn it loose to figure out how best to enter the market. “We simply said, Here’s the field we want to enter, now you define the particular item you can build. The presumption was that they would design it on the best technology available.

Sweat the Small Stuff. Little details make a big impression. Nordstrom having business cards for their salespeople on the floor. Wal-Mart giving lowest level employees complete department financial reports. Johnson and Johnson allowing key divisions to put their own logos on products and leave off the J&J logo.

Obliterate Misalignments.
Does your company have bonuses or incentives that do reward behaviors that are inconsistent with your core ideology? Do goals and strategies drive the company away format’s basic purpose. Does the office layout stifle progress?

Four Takeaways Collins Leaves The Reader With.
1.) Be a Clock-Builder – an Architect – not a time teller.
2.) Embrace the “Genius of the AND.”
3.) Preserve the core/Stimulate progress
4.) Seek consistent alignment

 

What Will I Implement?

1.) DRAMATICALLY INCREASE THE AMOUNT OF TESTING AND EXPERIMENTING: Continually look for ways to practice Field Testing and Trial By Fire. Even the findings from this book were tested by Collins with over 30 separate consulting clients before publishing. We never know how something will do until we test it with our fans. How can we test more and experiment more on a daily, weekly, monthly and annual basis? Have each team within our team be responsible for a certain amount of experiments per quarter. Personally, I test and experiment daily with posts on LinkedIn but how can I test offerings as well. What will people sign up for that they may want?

2.) BE AN ARCHITECT – Build the believe system and operational guide to grow and build long after I am gone. The Fans First Way of Core Beliefs needs to stay strong but evolve to offer more guidance and direction.

3.) CORE IDEALOGY AND BELIEFS – Share on website, on social media and everywhere we can. Nail down language and belief system and share everywhere. Blogs, Vlogs, Photos, Graphics. Not just the Fans First Way but our beliefs on Changing the Game. You must know and believe in our beliefs to be a part of the team. You must be passionate about changing the game. Language is essential. What words are we constantly using. Different and Special like Disney? Fans First. Fantastical experience. Fanatical about Fans, etc.

4.) DEVELOP AN AWARD FOR EXPERIMENTATION & INNOVATION. Similar to 3M and their Golden Step award that is granted for successful new business ventures. We need to recognize and reward the behavior and actions we want to see. New products and new services will be needed to grow our company. An award and big time recognition will be needed to help reinforce that

 

How Does This Book Fit with the Fans First Way?

Preserve the Core is one of the main themes of the entire book. The key first is to understand your core and your purpose. Walt Disney is to make people happy. 3M is to solve unsolved problems innovatively. Hewlett-Packard – To make technical contributions for the advancement of welfare of humanity.

We have always been guided by the Fans First Way of bringing people together. We are similar to Disney in making people happy. We bring fun and are changing the game and fan experience to do this in every aspect of our business. However, the more we are clear with our belief system that it can be shared by everyone, the more we can make a difference and grow as a company.

As Collins says, “Build an organization that fervently preserves its core ideology in specific concrete ways. The visionary companies translate their ideologies into tangible mechanisms aligned to send a consistent set of reinforcing signals. They indoctrinate people, impose tightness of fit and create a sense of belonging to something special.

A cult-like culture can actually enhance a company’s ability to pursue big Hairy Audacious Goals, precisely because it creates that sense of being part of an elite organization that can accomplish just about anything.

Companies seeking an “empowered” or decentralized work environment should first and foremost impose a tight ideology, screen and indoctrinate people into that ideology, eject the viruses, and give those tho remain the tremendous responsibility that comes with membership in an elite organization. It means getting the right actors on stage, putting them in the right fame of mind, and then giving them the freedom to ad lib as they see fit. It means, in short, understanding that cult-like tightness around an ideology actually enables a company to turn people loose to experiment, change, adapt, and – above all – act.

Our decision filter has and always will be “is it fans first.” But to grow, we all need to be hungry to act and test more things and take more chances. We need to push ourselves to the next level. This book challenged that and has inspired me to encourage this “Try a lot of things and keep what works” and develop “Big Hairy Audacious Goals” for our people. This will elevate Fans First to the next level.