76 pages • 2 hours read
Jim CollinsBuilt to Last: Successful Habits of Visionary Companies
Nonfiction | Book | Adult | Published in 1994A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Introduction-Chapter 2Chapter Summaries & Analyses
Introduction Summary
The Introduction challenges the notion that visionary companies result from charismatic leaders or specific industry dynamics. The key to long-term success, the authors argue, lies in establishing a visionary and enduring core ideology beyond mere goals or strategies. This ideology should encompass fundamental principles that guide an organization’s decisions and actions. The authors then stress the importance that a company is able to manage continuity and change, claiming that if it can do so while steadfastly preserving its core ideology, it will be set up for success.
Chapter 1 Summary: “The Best of the Best”
In 1988, Jim Collins and Jerry Porras embarked on a six-year research venture to unravel the behaviors and attributes of visionary companies, ultimately presenting their findings in the seminal work Built to Last. The opening chapter serves as a comprehensive exploration, defining visionary companies, introducing scrutinized companies, dispelling prevalent myths, and elucidating research methodologies.
Visionary companies, according to Collins and Porras, are “premier institutions in their industries, widely admired, and possessing a lasting impact despite changes in leadership and products” (1). The authors set six criteria for identifying such companies, including leadership in their fields, admiration from professionals, a lasting impact on the world, endurance through leadership changes, survival through various product life cycles, and establishment before 1950. In contrast, comparison companies are successful but lack these visionary qualities, providing a basis for insightful comparisons.
Exceptional resilience characterizes visionary companies, with their average stock value growth over 56 years being six times that of their counterparts. The authors scrutinize 18 pairs of companies (3M versus Norton, American Express versus Wells Fargo, Boeing versus McDonnell Douglas, Citicorp versus Chase Manhattan, Ford versus GM, General Electric versus Westinghouse, Hewlett-Packard versus Texas Instruments, IBM versus Burroughs, Johnson & Johnson versus Bristol-Myers Squibb, Marriot versus Howard Johnson, Merck versus Pfizer, Motorola versus Zenith, Nordstrom versus Melville, Philip Morris versus RJR Nabisco, Procter & Gamble versus Colgate, Sony versus Kenwood, Wal-Mart versus Ames, and Walt Disney versus Columbia) to draw compelling comparisons.
Collins and Porras challenge 12 myths associated with visionary companies, debunking notions that exceptional ideas guarantee success, charismatic leaders are universally advantageous, and profit-centric companies fare better than those guided by core ideologies. They assert that visionary companies maintain their core philosophy while adapting to changing times and motivating their workforce through bold goals.
Inspired by probing questions about corporate visions, the authors identified 18 diverse companies for analysis. First, they meticulously curated a set of companies for analysis, ensuring a comprehensive and globally diverse representation by surveying CEOs across various industries. From the responses, the authors pinpointed the 20 most frequently mentioned companies, implementing a criterion that excluded those established after 1950, culminating in a final list of 18 companies.
Subsequently, Collins and Porras strategically selected comparison companies for each visionary counterpart to focus on discerning the distinctive features that set visionary companies apart. These comparison companies shared similar founding dates with their visionary counterparts, operated within the same market sphere, and notably garnered fewer CEO mentions in the survey. The pivotal criteria included ensuring that comparison companies, while relatively successful, lacked the defining characteristics and success that distinguish visionary entities.
The rigorous research process, encompassing historical analysis and Porras’s “Organization Stream Analysis,” revealed fundamental principles guiding visionary companies. Collins and Porras then tested their findings in their work as business consultants. This created a feedback loop wherein the authors gathered research, disseminated the research into a usable framework, and then tested this framework. The test results provided more data, which was then added to the research, starting the loop again. The authors encourage a critical evaluation of their work, acknowledging limitations while asserting the practical applicability of their findings to businesses of all sizes.
Chapter 2 Summary: “Clock Building, Not Time Telling”
Collins and Porras draw on the analogy of clocks to illustrate their perspective on company leadership. They argue that while an individual who can tell time simply by observing the sky is remarkable, teaching others to build a clock has a more enduring impact.
In the context of visionary companies, the organization must transcend individual leaders. These companies emphasize building the organization over promoting products and services, with leaders serving as architects for the company’s longevity.
This shift to using the products as vehicles for the company, as opposed to the reverse, challenges the conventional belief that great companies originate from great ideas. For instance, Hewlett-Packard started with two friends wanting to establish a business together, relying on $500 and an engineering background to create whatever they believed would sell. In contrast, Texas Instruments began with a great idea—seismograph surveys—but failed to attain the success of Hewlett-Packard.
Most visionary companies in the study did not begin with a groundbreaking idea or product. Some, like Sony, Boeing, 3M, and Disney, even began with outright failures, with their comparison companies surpassing them. While Johnson & Johnson, Ford, and GE started with great ideas, GE’s choice of direct current (DC) power systems, when Westinghouse’s alternating current (AC) was superior, showcases the flaw in the idea. Ford established his 3rd automotive company in 1903 but did not produce the Model T until 1908. While only three visionary companies arguably started to pursue a great idea, 11 of the comparison companies began that way. Similarly, 10 comparison companies experienced more significant initial success than the visionary companies.
Essentially, visionary companies’ most significant creation is the company itself. Products and services shift with trends and needs, but the company endures. This contrasts with conventional business recommendations suggesting that a product or idea should birth the company. Visionary companies view products as tools to promote the company rather than the widely accepted reversal.
The authors employ George Westinghouse and Charles Coffin to illustrate leadership differences. Westinghouse, a charismatic leader and brilliant inventor, fell behind GE despite initially promoting a superior product—AC power. In contrast, Charles Coffin, though neither charismatic nor an inventor, positioned GE as a research laboratory. He shifted efforts to AC power when it became evident that DC posed too many risks, saving the company. A company should transcend any idea or product, and if the goal is to create a lasting company rather than promote a product or idea, the company has a better chance of enduring.
All ideas, products, and services eventually lose their market appeal. While both visionary and comparison companies offer great products and ideas, the latter tends to be too committed to supporting their products. Visionary companies prioritize growing the organization, making them more agile in fluctuating markets.
Likewise, even the best CEOs eventually pass away. However, visionary companies persist despite leadership changes, debunking the myth that great companies require charismatic, visionary leaders. The authors found no evidence that visionary, charismatic leadership propels companies to greatness. Several companies achieved greatness under leaders best described as “quiet” or “restrained.” Effective leadership during a company’s formative years stems from an organizational, rather than product-based, focus. The goal of every great leader should be to ensure the company continues to thrive without them.
The authors advise a shift in perspective for those aspiring to found a visionary company. Success is not solely the result of great ideas and strategy; instead, it emanates from organizational dynamics and processes that can be learned and applied to any company.
Introduction-Chapter 2 Analysis
In the initial chapters, Collins and Porras outline the research project that serves as the foundation for Built to Last. They expound on their objectives, highlight some of their most intriguing findings, and summarize their research process. The appendix addresses the challenges faced during the research.
A prominent issue in the research lies in the inherent challenges of experimentation within the social sciences, particularly when dealing with companies. The difficulty in isolating variables, establishing a control group, and preventing external factors from influencing the experiment pose a significant hurdle. However, it is noteworthy that Collins and Porras neither attempt to isolate variables nor establish a control group. Describing this as entirely impossible might be an exaggeration, as other business books, like SPIN Selling, try to establish some controls and limitations while documenting the challenges faced. Moreover, the field-testing sample size of 30 and the six-year time frame seem relatively small and short to determine the methods’ effectiveness in conclusively establishing visionary companies. Additionally, Collins and Porras provide neither the criteria they used to measure success nor any data illustrating the effectiveness of their framework. While Collins and Porras present valuable information and ideas, their assertion that they fully and successfully tested these ideas sometimes raises skepticism with critics of the book.
Collins and Porras acknowledge that their studies reveal correlations without establishing causations. They argue that the nature of corporations limits experimentation, yet they contend that their analysis of comparison companies sufficiently supports causation. However, they admit that their research lacks a confidence interval. The authors note that visionary companies exhibited their visionary characteristics before achieving success, which supports their argument. Nevertheless, the need for more data and experimentation is apparent to many who discuss the authors’ methods.
Another issue, highlighted in the appendix, is the omission of an examination of companies with visionary characteristics that failed. Moreover, no data is provided about the success or failure rate of companies with visionary characteristics, leaving readers unable to make an informed judgment about whether a visionary or conventional path is safer overall for a company. While the authors argue for the visionary path’s likelihood to lead to survival and excellence, they concede they have no data to substantiate this belief. Although Collins and Porras attempt to address some concerns by comparing visionary companies against similar competitors, the absence of overarching data creates a critical gap in their research.
Collins and Porras acknowledge that, for their purposes, success does not equate to being visionary. Among the top 18 companies with the highest return to investors in the decade preceding their project, only Wal-Mart made their list of visionary companies. This discrepancy indicates that the CEOs surveyed perceived “visionary” differently from “profitable.” Collins and Porras agree with the surveys’ assessment that profitable is not the same as visionary. However, they did not gather reasons why the CEOs considered certain companies visionary and others merely profitable.
Another concern in Collins and Porras’s research is using CEO surveys to establish a list of visionary companies. The authors note that using a survey to establish visionary companies skewed the results towards large, publicly traded companies. Likewise, most of the companies in the sample are American. Unfortunately, by their very nature, survey results tend to be biased. However, the CEO surveys were likely the most unbiased method available, given the criterion of peer respect for visionary companies.
The authors collected substantial data on various companies, organizing it into nine categories. They utilized Porras’s Stream Analysis method to review and graphically represent organizational development, interconnectedness, and change. While the authors mention using this method, they do not explain its application or provide examples, contributing to a sense of data loss.
The anecdotes support Collins and Porras’s arguments that visionary companies do not necessarily require brilliant ideas or charismatic leaders to succeed. However, there is a notable lack of concrete definitions for terms like “great idea” or “charismatic leader.” Without clear criteria, these seemingly straightforward concepts become ambiguous.
The issues with Collins and Porras’s research methods do not necessarily invalidate their findings, though they must be considered if a reader is to understand the material of this guide in full. The challenge lies in the initial implication that the presented framework is based on rigorous research and experimentation when much of the evidence is anecdotal. This does not discredit their conclusions but underscores their unproven nature. Collins and Porras acknowledge potential issues in the appendix and encourage objective examination of their work. This book requires critical consideration rather than passive absorption, especially in the first two chapters.
In conclusion, while Collins and Porras’s research in Built to Last provides valuable insights into visionary companies and their enduring characteristics, a critical examination reveals specific methodological challenges. The inherent complexities of experimentation in the social sciences, the relatively small sample size, and the limited timeframe for field testing raise questions about the generalizability and robustness of their findings. The absence of data on failed visionary companies, the ambiguity surrounding the criteria for success, and the reliance on CEO surveys introduce potential biases and gaps in the research. Although mentioned, the Stream Analysis method lacks a thorough explanation of its application, contributing to a sense of data loss in the work. While the anecdotes effectively illustrate vital points, the absence of concrete definitions for repeated terms adds a degree of nebulousness to their conclusions. Readers may benefit from approaching the presented framework with caution, recognizing the limitations of anecdotal evidence and the need for further research to validate the claims made by Collins and Porras.
