A book that has stood the test of time about the timeless principles of building great businesses.
While some of the companies profiled have fallen in stature since publication, for a book written in 1994, it has aged remarkably well.
The principles of company-building remain relevant for everyone from Fortune 500 companies to new startups.
Recommended for anyone working in business, but particularly those thinking about building a business of their own.
Twelve Shattered Myths
Myth 1: It takes a great idea to start a great company.
Reality: Starting a company with a “great idea” might be a bad idea. Few of the visionary companies began life with a great idea. In fact, some began life without any specific idea and a few even began with outright failures.
Myth 2: Visionary companies require great and charismatic visionary leaders.
Reality: A charismatic visionary leader is absolutely not required for a visionary company and, in fact, can be detrimental to a company’s long-term prospects.
Myth 3: The most successful companies exist first and foremost to maximize profits.
Visionary companies pursue a cluster of objectives, of which making money is only one—and not necessarily the primary one.
Myth 4: Visionary companies share a common subset of “correct” core values.
Reality: There is no “right” set of core values for being a visionary company. Indeed, two companies can have radically different ideologies, yet both be visionary.
Myth 5: The only constant is change.
Reality: A visionary company almost religiously preserves its core ideology—changing it seldom, if ever.
Myth 6: Blue-chip companies play it safe.
Reality: Visionary companies may appear straitlaced and conservative to outsiders, but they’re not afraid to make bold commitments to “Big Hairy Audacious Goals” (BHAGs).
Myth 7: Visionary companies are great places to work, for everyone.
Reality: Only those who “fit” extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work.
Myth 8: Highly successful companies make their best moves by brilliant and complex strategic planning.
Reality: Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and—quite literally—accident. What looks in retrospect like brilliant foresight and preplanning was often the result of “Let’s just try a lot of stuff and keep what works.”
Myth 9: Companies should hire outside CEOs to stimulate fundamental change.
Reality: In seventeen hundred years of combined life spans across the visionary companies, we found only four individual incidents of going outside for a CEO—and those in only two companies.
Myth 10: The most successful companies focus primarily on beating the competition.
Reality: Visionary companies focus primarily on beating themselves.
Myth 11: You can’t have your cake and eat it too.
Reality: Visionary companies do not brutalize themselves with the “Tyranny of the OR”—the purely rational view that says you can have either A OR B, but not both.
Myth 12: Companies become visionary primarily through “vision statements.”
Reality: The visionary companies attained their stature not so much because they made visionary pronouncements (although they often did make such pronouncements).
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 single leader and through multiple product life cycles is “clock building.”
In one of the most fascinating and important conclusions from our research, we found that creating and building a visionary company absolutely does not require either a great idea or a great and charismatic leader. In fact, we found evidence that great ideas brought forth by charismatic leaders might be negatively correlated with building a visionary company.
Indeed, few of the visionary companies in our study can trace their roots to a great idea or a fabulous initial product. J. Willard Marriott had the desire to be in business for himself, but no clear idea of what business to be in. He finally decided to start his company with the only viable idea he could think of: take out a franchise license and open an A&W root beer stand in Washington, D.C. Nordstrom started as a small, single-outlet shoe store in downtown Seattle (when John Nordstrom, just returned from the Alaska Gold Rush, didn’t know what else to do with himself). Merck started merely as an importer of chemicals from Germany. Procter & Gamble started as a simple soap and candle maker—one of eighteen such companies in Cincinnati in 1837. Motorola began as a struggling battery eliminator repair business for Sears radios.
Furthermore, some of our visionary companies began life like Sony—with outright failures. 3M started as a failed corundum mine, leaving 3M investors holding stock that fell to the barroom exchange value of “two shares for one shot of cheap whiskey.” Not knowing what else to do, the company began making sandpaper.
Bill Boeing’s first airplane failed (“a handmade, clumsy seaplane copied from a Martin seaplane” which flunked its Navy trials), and his company faced such difficulty during its first few years of operations that it entered the furniture business to keep itself aloft!
Indeed, the evidence suggests that it might be better to not obsess on finding a great idea before launching a company. Why? Because the great-idea approach shifts your attention away from seeing the company as your ultimate creation.
THE COMPANY ITSELF IS THE ULTIMATE CREATION
We had to shift from seeing the company as a vehicle for the products to seeing the products as a vehicle for the company.
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 an idea, but never give up on the company.
But we suggest that the continual stream of great products and services from highly visionary companies stems from them being outstanding organizations, not the other way around.
Instead of being oppressed by the “Tyranny of the OR,” highly visionary companies liberate themselves with the “Genius of the AND”—the ability to embrace both extremes of a number of dimensions at the same time. Instead of choosing between A OR B, they figure out a way to have both A AND B.
A visionary company doesn’t simply balance between idealism and profitability; it seeks to be highly idealistic and highly profitable. A visionary company doesn’t simply balance between preserving a tightly held core ideology and stimulating vigorous change and movement; it does both to an extreme.
Our research showed that a fundamental element in the “ticking clock” of a visionary company is a core ideology—core values and sense of purpose beyond just making money—that guides and inspires people throughout the organization and remains relatively fixed for long periods of time.
IN short, we did not find any specific ideological content essential to being a visionary company. Our research indicates that the 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.
Core Ideology = Core Values + Purpose
Core Values = The organization’s essential and enduring tenets—a small set of general guiding principles; not to be confused with specific cultural or operating practices; not to be compromised for financial gain or short-term expediency.
Purpose = The organization’s fundamental reasons for existence beyond just making money—a perpetual guiding star on the horizon; not to be confused with specific goals or business strategies.
Visionary companies tend to have only a few core values, usually between three and six. In fact, we found none of the visionary companies to have more than six core values, and most have less.
An effective way to get at purpose is to pose the question “Why not just shut this organization down, 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 the future.
It is absolutely essential to not confuse core ideology with culture, strategy, tactics, operations, policies, or other noncore practices.
Core ideology in a visionary company works hand in hand with a relentless drive for progress that impels change and forward movement in all that is not part of the core ideology.
IF you are involved in building and managing an organization, the single most important point to take away from this book is the critical importance of creating tangible mechanisms aligned to preserve the core and stimulate progress.
The specific methods of preserving the core and stimulating progress that distinguished the visionary companies from the comparison companies fall into five categories:
Like the moon mission, a true BHAG is clear and compelling and serves as a unifying focal point of effort—often creating immense team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines.
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.
A BHAG only helps an organization as long as it has not yet been achieved.
GUIDELINES FOR CEOS, MANAGERS, AND ENTREPRENEURS
Here are a few key take-away points you might want to keep in mind as you consider BHAGs for your own organization:
We found four common characteristics of cults that the visionary companies display to a greater degree than the comparison companies.
THE MESSAGE FOR CEOS, MANAGERS, AND ENTREPRENEURS
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 through such practical, concrete items as:
Using 3M as a blueprint for evolutionary progress at its best, here are five basic lessons for stimulating evolutionary progress in a visionary company.
To the five lessons just given we must therefore add a sixth: Never forget to preserve the core while stimulating evolutionary progress.
Simply put, our research leads us to conclude that it is extraordinarily difficult to become and remain a highly visionary company by hiring top management from outside the organization.
Equally important, there is absolutely no inconsistency between promoting from within and stimulating significant change.
The critical question asked by a visionary company is not “How well are we doing?” or “How can we do well?” or “How well do we have to perform in order to meet the competition?” For these companies, the critical question is “How can we do better tomorrow than we did today?” They institutionalize this question as way of life—a habit of mind and action.
You’re probably getting the impression that the visionary companies are not exactly comfortable places. And that’s precisely the impression you should be getting.
COMFORT is not the objective in a visionary company. Indeed, visionary companies install powerful mechanisms to create discomfort—to obliterate complacency—and thereby stimulate change and improvement before the external world demands it.
MANAGERS at visionary companies simply do not accept the proposition that they must choose between short-term performance or long-term success. They build first and foremost for the long term while simultaneously holding themselves to highly demanding short-term standards.
Visionary companies invested much more aggressively in human capital via extensive recruiting, employee training, and professional development programs.
THE MESSAGE FOR CEOS, MANAGERS, AND ENTREPRENEURS
If you’re involved in building and managing a company, we urge you to consider the following questions:
The essence of a visionary company comes in the translation of its core ideology and its own unique drive for progress into the very fabric of the organization—into goals, strategies, tactics, policies, processes, cultural practices, management behaviors, building layouts, pay systems, accounting systems, job design—into everything that the company does.
LESSONS OF ALIGNMENT FOR CEOS, MANAGERS, AND ENTREPRENEURS
You never reach final success. You have to work at it constantly. Here are some guideposts.
VISIONARY companies do not rely on any one program, strategy, tactic, mechanism, cultural norm, symbolic gesture, or CEO speech to preserve the core and stimulate progress.
It’s the remarkable comprehensiveness and consistency over time that counts. It’s the nearly overwhelming set of signals and actions—signals to continually reinforce the core ideology and to stimulate progress—that lead to a visionary company.
People don’t work day-to-day in the “big picture.” They work in the nitty-gritty details of their company and its business.
Little things, like business cards for salespeople at Nordstrom to send the signal, “We want you to be a sales professional.” Little things, like Wal-Mart giving employees at the lowes level complete departmental financial reports to send the signal, “You are a partner in the company and we want you to run your department as your own little business.”
Visionary companies don’t put in place any random set of mechanisms or processes. They put in place pieces that reinforce each other, clustered together to deliver a powerful combined punch. They search for synergy and linkages.
THE real question to ask is not “Is this practice good?” but “Is this practice appropriate for us—does it fit with our ideology and ambitions?”
If you look around your company right now, you can probably put your finger on at least a dozen specific items misaligned with its core ideology or that impede progress—“inappropriate” practices that have somehow crept through the woodwork. Does your incentive system reward behaviors inconsistent with your core values? Does the organization’s structure get in the way of progress? Do goals and strategies drive the company away from its basic purpose? Do corporate policies inhibit change and improvement? Does the office and building layout stifle progress?
Attaining alignment is not just a process of adding new things; it is also a never-ending process of identifying and doggedly correcting misalignments that push a company away from its core ideology or impede progress. If the building layout impedes progress, change the building layout or move. If the strategy is misaligned with the core, change the strategy.
A company must have a core ideology to become a visionary company. It must also have an unrelenting drive for progress. And finally, it must be well designed as an organization to preserve the core and stimulate progress, with all the key pieces working in alignment. These are universal requirements for visionary companies.
However, the specific methods visionary companies use to preserve the core and stimulate progress will undoubtedly change and improve. BHAGs, cult-like cultures, evolution through experimentation, homegrown management, and continuous self-improvement—these are all proven methods of preserving the core and stimulating progress. But they are not the only effective methods that can be invented. Companies will invent new methods to complement these time-tested ones.
THIS IS NOT THE END
But as you walk away from reading this book, we hope you will take away four key concepts to guide your thinking for the rest of your managerial career, and to pass on to others. These concepts are:
We think this has profound implications for what you take away from this book. It means that no matter who you are, you can be a major contributor in building a visionary company. You don’t have to wait for the great charismatic visionary to descend from the mount. You don’t have to hope for the lightning bolt of creative inspiration to strike with the “great idea.” You don’t have to buy into the belief that building visionary companies is something mysterious that only other people do.
It also means that life will probably be more difficult for you from here on. It means helping those around you to understand the lessons of this book. It means accepting the frightening truth that you are probably as qualified as anyone else to help your organization become visionary. And it means recognizing that you can begin right now—today—to apply the lessons of this book.
Finally, and perhaps most important of all, it means working with a deep and abiding respect for the corporation as an important social institution in its own right—an institution that requires the care and attention we give to our great universities or systems of government. For it is through the power of human organization—of individuals working together in common cause—that the bulk of the world’s best work gets done.
So this is not the end. Nor even the beginning of the end. But it is, we hope, the end of the beginning—the beginning of the challenging and arduous, but eminently doable task of building a visionary company.
Want to get my latest book notes? Subscribe to my newsletter to get one email a week with new book notes, blog posts, and favorite articles.