Book Review By - Nitesh Agrawal

Built to Last
By James C. Collins and Jerry I. Porras

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Introduction:

Built to Last makes a unique and valuable contribution to current business literature by applying
this view to the corporation. They write, “We set out to discover the timeless management
principles that have consistently distinguished outstanding companies.” The authors conclude
that the most successful companies eschew merely following the latest fad. And the authors argue
that a company does not require one great idea or some charismatic CEO to be successful. Rather
the most successful companies in the world operate according to powerful and effective
principles that are reproducible by any ambitious company (or department) that will take the time
to understand and rigorously apply them. Built to Last sets out those principles.

Ask the Experts

In August of 1989, Stanford University’s James C. Collins and Jerry I. Porras sent survey’s to
700 Fortune 500, and Inc. 500 and 100 company CEO’s. These business leaders were heads of
industrial and service companies, both private and public. Each executive was asked to name five
or less companies that they saw to be “highly visionary.” After receiving 165 responses (23.5%
of those queried), the authors selected the twenty companies most frequently listed. Then, with
the desire to exclude any company that might still be the benefactor of one great idea or leader,
they threw out any company that began after 1950. They ended up with 18 companies, with
1897 being the average founding date.

Realizing that these exceptional companies would have many characteristics in common with
many other un-exceptional companies, the authors decided to select a group of comparison
companies in order to determine the distinctive characteristics of the 18 visionary companies.
Collins and Porras chose a sister comparison company for each visionary company, guided by the
visionary company’s date of founding, its product and markets. In addition, the comparison
company could not be what they call “a dog company,” but it must be at least moderately
successful.
These are the companies studied in Built to Last:

The Visionary Companies The Comparison Companies

3M Norton
American Express Wells Fargo
Boeing McDonnell Douglas
Citicorp Chase Manhattan
Ford GM
General Electric Westinghouse
Hewlett-Packard Texas Instruments
IBM Burroughs
Johnson & Johnson Bristol-Myers Squibb
Marriott Howard Johnson
Merck Pfizer
Motorola Zenith
Nordstrom Melville
Philip Morris RJR Nabisco
Procter & Gamble Colgate
Sony Kenwood
Wal-Mart Ames

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Walt Disney Columbia

Indicative that the CEOs were accurate in evaluating the success of these 18 visionary companies
is the fact that $1 invested in on January 1, 1926 would have yielded $6,356 at the end of 1990.
This is fifteen times the performance of the general market ($415). And the $955 that the
comparison companies would have netted after a similar investment shows that they too have
been moderately successful, also out performing the general market.
The authors then undertook a study unique in business literature: they studied each of these
eighteen visionary companies and their sister comparison companies through their entire history.
In this way, they sought to discover the timeless principles that determined the companies’
respective successes.

Clock Building, Not Tome Telling

One of the central ideas of Built to Last is that the leaders of the great visionary companies of the
last one hundred years have focused on building the company rather than exclusively on building
a product or presenting a service. The well-made product or the radically pro-customer service is
seen as being serendipitous to the building of the company itself. The writers teach that if you
focus on building a great company, then the excellence of service and product will naturally
follow. Collins and Porras use a metaphor to illustrate this point. They draw the distinction
between leaders who are able to merely “tell the time” or those, which have the capacity to “build
clocks.” Those who can quickly motivate those around them by dent of their large or charismatic
personality are time-tellers. Or, leaders that achieve a fast success on the basis of a great idea tell
time. But the leaders who put together and maintain companies that succeed over time are those
who build clocks. The successes of these companies transcend the occasional charismatic leader
and the intermittent great idea.
The writers use this metaphor to shatter the myth that great companies require charismatic leaders
or fantastic product ideas. Bill Hewlett and Dave Packard started a company with only the desire
to do something in electronic engineering. Bill says, “We did anything that would bring in a
nickel. We had a bowling foul-line indicator, a clock drive for a telescope, a thing to make a
urinal flush automatically, and a shock machine to make people lose weight. Here we were, with
about $500 in capital, trying whatever someone thought we might be able to do”.

After he started Sony, Masaru Ibuka joined in a meeting with his seven first employees to decide
what to make! Their first product, a rice cooker, didn’t work. What Built to Last calls their “first
significant product,” which was a tape recorder, failed on the market. 3M began with a corundum
mine that was so unsuccessful that its stock dropped to what the authors call the “barroom
exchange value” of “two shares for one shot of cheap whiskey”. Their second president was not
able to take a salary for his first eleven years! Imagine how profitable Procter & Gamble would
be today if they still sold lamp oils, candles, and hog fat soap!

Three of the visionary companies Collins and Porras selected started with a great idea, while
eleven of the eighteen comparison companies started this way. Ten of these comparison
companies were initially more successful than their sister visionary companies. Collins and
Porras conclude, “In short, we found a negative correlation between early entrepreneurial success
and becoming a highly visionary company”. They suggest that the reason for this inverse
relationship is that the great idea distracts the leaders of the company from focusing on the
company as what they call “the ultimate creation”.

Do We Build A Product or a Company?

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The authors present the creator of visionary company General Electric, Charles Coffin, as a clock
builder. While not an inventor, he did establish the General Electric Research Lab, a fundamental
component of GE that has richly rewarded the company with many good ideas. George
Westinghouse, on the other hand, not only founded Westinghouse but fifty-nine other companies
as well. He was a productive inventor. He correctly believed that Westinghouse’s AC electrical
system would prevail over the General Electric’s DC system. The authors comment,
“Westinghouse’s greatest creation was the AC power system; Coffins greatest creation was the
General Electric Company.”1[9] He focused more on the company itself and, as a result, GE has
been the more successful company over time. Hewlett-Packard also shows this emphasis. In the
mid-1950’s Bill Hewlett said, “Engineering is one of our most important products”. At HP, it is
the process of creating a product and the organization of the company intrinsic to that process that
is primary, not the product itself. Collins and Porras conclude, “The continual stream of great
products and services from highly visionary companies stems from them being outstanding
organizations, not the other way around”.

In Search of the Mythopoeic “Great Leader”

The authors challenge their readers to identify William McKnight. Most people even in the
business world have never heard of him. And yet William McKnight was a top executive of
Minnesota, Mining, and Manufacturing Company (better known as 3M) for fifty-two years!!
Ibuka of Sony was thought of as being introspective and reserved. Procter and Gamble are
described as “stiff, prim, proper, and reserved -- even deadpan.” Collins and Porras call Bill Allen
“the most significant CEO in Boeing’s history.” He’s been described as having a benign
appearance. The word “restraint” is used to describe Merck’s George W. Merck. Contrary to
conventional popular wisdom, the visionary companies aren’t populated at the top with
tremendous charismatic visionary leaders over their histories. The evidence suggests that the
organization is more critical to the success of the company rather than the presence of a large
personality.

In concluding their discussion of the distinction between time telling and clock building, the
writers suggest that rather than waiting for the big idea or the high-profile charismatic leader,
aspiring visionary companies can rather focus on learning the principles that underlie the
visionary companies’ success.
More Than Profit

What’s at the center of the fine running clocks studied by Collins and Porras? It’s a core
ideology. It’s the values and beliefs that form the foundation of the company’s existence. It is, in
fact, the company’s raison d’être. The authors found that seventeen of the eighteen companies
that they studied were guided more by their ideology and less by the desire to “maximize
shareholder wealth.”

In 1960, David Packard was speaking with a group of his employees responsible for a
management development program that HP was initiating. To them, he stated,
I want to discuss why a company exists in the first place. In other words, why are we here? I
think many people assume, wrongly, that a company exists simply to make money. While this is
an important result of a company’s existence, we have to go deeper and find the real reasons for
our being. As we investigate this, we inevitably come to the conclusion that a group of people get

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together and exist as an institution that we call a company so they are able to accomplish
separately, they make a contribution to society, a phrase which sounds trite but is fundamental.

The real reason for our existence is that we provide something, which is unique.
The core ideology acts as a map for the visionary company. For example, in the case of Hewlett-
Packard, their core ideology guided them away from simply developing a personal computer only
because it was vastly popular. Hewlett-Packard would only enter the market when it felt that it
had something unique to contribute to the personal computer market technologically. That
resolve represented a commitment to a core value.

In 1950 George Merck II, head of the pharmaceutical giant Merck & Company, said,
“We try to remember that medicine is for the patient. We try never to forget that medicine is for
the people. It is not for the profits. The profits follow, and if we have remembered that, they
have never failed to appear. The better we have remembered it, the larger they have been.”
High rhetoric? Many years ago the parasitic worms, which caused “river blindness”, plagued
over one million people in Third World countries by swarming through body tissues and
eventually painfully blinding the eyes. Merck developed Mectizan hoping that some third party,
perhaps some government agency, would purchase the drug. No one did. And so Merck, because
of his core values, gave the drug to everyone who needed it. And using his own money, Merck
became directly involved in the drug’s distribution.

“The Tyranny of the OR” versus “The Power of the AND”

The authors periodically revisit what they call the “both/and” nature of the visionary companies.
Contradicting any presumption of inherent tension between strictly charting a company’s
progress by the compass of a core ideology and guiding a company by the desire to make money,
Built to Last highlights Merck’s decision to bring streptomycin to Japan. That drug-stopped
tuberculosis in Japan and the company made no money on this venture. Yet today, Merck is the
biggest pharmaceutical company America has on the island.

In 1916 Henry Ford said,

“I don’t believe we should make such an awful profit on our cars. A reasonable profit is right,
but not too much. 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 really believed this. And because of his ideology, Ford made the automobile the
ubiquitous icon of Americana. His ideology moved him to lower the price of the Model T by 58
percent between 1908 and 1916 (“because it enables a larger number of people to buy and enjoy
the use of a car”). His ideology constrained him to double the standard industry rate of pay for
his workers (“and because it gives a larger number of men employment at good wages”). In the
short run, both of these decisions were unprofitable. Yet in the long run, they are two ways that
Ford distinguished itself from the thirty plus car companies that existed at the dawn of the
automobile industry.

What changes and what Doesn’t

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One of the balancing acts that Built to Last explores in the visionary companies is that between
preserving the ideological core of the business while simultaneously stimulating progress. The
core preserved is the group of values that form the foundation of the company. Nothing is done
that is inconsistent with that set of values. And yet the stimulation of progress requires constant
flexibility and change. Even corporate culture is changeable, as long as that change does not
violate a core value.

For example, at 3M, “Respect for individual initiative” is a part of their core value group.
Procedurally, one way that this value is translated in their corporate culture is for every technical
employee to be given the chance to spend 15% of their workweek on a project of their own
choosing. This procedure could change; the value behind it must not. If the 15% procedure were
discarded by reason of some business exigency, that would not threaten the company’s growth. If
it were part of a management trend away from “Respect for Individual Initiative,” then the value
core of the company would be threatened and its structural integrity. Its long-term profitability
would be threatened, even if in the short run profits would increase or more money would be
saved.

The authors emphasize that once a company’s core values are determined (whether it’s by a
mission statement or a vision statement or whatever) then it is absolutely critical that management
put into place tangible mechanisms, which communicate and apply these values. They say,
“This is the essence of clock building.” Similarly, tangible mechanisms must also be instituted
that stimulate progress.

Big Hairy Audacious Goals (BHAGs)

One of the mechanisms that the writers discovered visionary companies use to stimulate growth is
what they call BHAG’s or Big Hairy Audacious Goals. In 1952 Boeing’s engineers were
developing a vision for the first big commercial jet airplane. Previous to this point, four-fifths of
their business was from the United States Air Force. Commercial airlines were not interested in
jets. And Boeing estimated that it would take about 25% of the company’s net worth just to
develop a prototype. But because it fit with Boeing’s core ideology and because it would
stimulate growth, Boeing decided to move forward with the development of what came to be
known as the 707. Its comparison company, Douglas, did not bring a commercial jet aircraft to
market for another six years, and still never achieved the sales of Boeing.

Not all of the visionary companies used BHAGs. But the companies that do find that they enable
their employees to get a vision of the company’s core ideology incarnate. It’s touchable. It’s
tangible. And it’s big! Walt Disney saw a BHAG when he visualized Disney World. In the
beginning of the sixties, IBM spent more money to develop a new computer - the IBM 360 than
the United States Government had spent on the Manhattan Project.2[19] IBM took a huge gamble

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spending $5 billion on the 360; its success would cast most of their product lines into
obsolescence.

Target BHAG can be Quantitative or Qualitative. Examples:

• Become a $ 125 billion company by year 2000. (Wal-Mart, 1990)

• Democratize the automobile. (Ford, early 1900s)
• Become the company that most changes the worldwide image Japanese product as being
of poor quality. (Sony, early 1950s)
• To become the most powerful, most serviceable, the most far-reaching financial
institution that has ever been. (Citi Bank, 1915)
• Become the dominant player in commercial aircraft, and bring the world into jet age.
(Boeing, 1950)

Common-enemy BHAGs involving beating a common enemy—a David versus Goliath BHAGs.
Examples:
• Knock off RJR as the number one tobacco company in the world. (Phillip Morris, 1950s)
• Crush Adidas. (Nike, 1960s)
• Yamaha Wo tsubusu. (We will crush, squash, slaughter Yamaha!!). (Honda, 1970s)

Role model BHAGs are particularly effective for up-and-coming organization with bright
prospects. Examples:
• Become the Nike of the cycling industry. (Giro Sport Design, 1986)
• Become as respected in twenty years as Hewlett-Packard is today. (Warkins-Johnson,
1996)
• Become the Harvard of the West. (Stanford University, 1940s)

Internal transformation BHAGs tend to be effective in old or large organization in need of

organizational transformation. Examples:

• Become number one or two in every market we serve and revolutionize this company to
have strength of a big company combined with the leanness and agility of a small
company. (General Electric, 1980s)
• Transform this company from a defense contractor into the best-diversified high-
technology company in the world. (Rockwell, 1995)

Cult Like Culture

Consistent with its commitment to a strongly held core ideology, the visionary companies tend to
have an almost cult like atmosphere. The cultures are tight and inclusive. Not everyone will like
it. There is a distinguishable period of indoctrination into the culture at the beginning of an
employee’s career. Nordstrom's has this kind of atmosphere. They encourage employees to write
stories about the heroic exploits of fellow employees. They hire those who are young and more
malleable. They give more money, recognition, and prizes to those who perform in accordance
with their tightly defined core values. Those who fall short receive marks in their folder and
other penalties. They call themselves “Nordies.” These companies communicate those those
who work there are part of the elite. They are the chosen.

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Thomas J. Watson, Jr. put together country clubs, which IBM managed to encourage their
employees to socialize among themselves. In their training program, IBMers sing songs from the
Songs of the IBM like “Ever Onward” and “The Star-Spangled Banner.” The 1985 edition of The
100 Best Companies to Work For reads, “You must be willing to give up some of your individual
identity to survive [IBM].” Every employee of Walt Disney must go through Disney University.
No man has facial hair. They have their own nomenclature: on duty is “onstage;” a crowd is an
“audience;” a job description is a “script;” and so forth.

If any Walt Disney employee cursed in their founder’s presence, they were immediately
terminated. Procter & Gamble expects their employees to spend free time mostly with other
P&Gers, even go to the same churches! The company frowns on employees using luggage
identification cards that indicate they work for P&G. One mustn’t talk about business in a public
place.

It must be stressed here that many of the items mentioned above are cultural. These practices
themselves don’t explain the success of these companies. What they do explain is the degree to
which the company takes its core ideology seriously. The way it communicates or expresses that
ideology varies from company to company; the level of commitment to their core values does not.
And that is the key point. If a company’s management really believes its core ideology, there will
be some tangible manifestations of that belief in the organization, culturally appropriate for the
company’s workforce and its socio-cultural environment.

All new hires at Disneyland experience a multi day training program where they learned 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 personnel department is “casting”.
• Being on duty is “onstage”
• Being off duty is “backstage”

Try a Lot of Stuff and Keep What Works

Visionary companies made some of their best moves not by detail strategic planning, but rather
by experimentation, trial & error, opportunism, and-quite literally-accident a “purposeful
accidents”.

In 1920, Earle Dickson used surgical tape, gauze, and a covering, which wouldn’t stick to skin to
make something to cover his wife’s wounds. She seemed predisposed to cutting herself with
knives in the kitchen. He mentioned it to the marketing people in Johnson and Johnson, where he
worked, and after much experimentation, the Band-Aid was born. It became J&J’s most
successful product category. In 1890 Fred Kilmer sent some Italian talc to a physician who said

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that his patients’ skin was being irritated by medicated plasters he had bought from Fred’s
company. This became “Johnson’s Toilet and Baby Powder.”

In 1937 J.Williard Marriott observed that people about to fly out of Washington, DC’s Hoover
Airport would buy food and stuff it wherever they could. He pondered this and the next day he
struck a deal with Eastern Air Transport to give them prepackaged lunches. Later he added
American Airlines. Eventually Marriott spread to over one hundred airports. Action.” The
writers present this step as another way to stimulate progress. They write, “...evolutionary
progress usually begins with small incremental steps or mutations, often in the form of quickly
seizing unexpected opportunities that eventually grow into major--and often unanticipated--
strategic shifts.”

One of the reasons that these changes are even possible is that the visionary companies tend to be
atmospheres that facilitate what’s been called intrepreneurship. Intrepreneurship is the
manifestation of innovation within an established business structure. Employees are given the
chance to try out their ideas and to spend company time and resources while on their exploration.
Tom Peters calls them “skunk works.”
“Seeing what works” presumes that much will not work. And so the visionary companies tend to
have a greater tolerance for innovative failure. Many mistakes accompany the intrepreneur on the
road to eventual success.

While the authors’ presenting evolution as a metaphor of a company seizing small incremental
opportunities to improve is, in our opinion, somewhat tortured and drawn out through this
chapter, nevertheless the progress of this type of change does reflect a habit of the visionary
companies.

“Home Grown Management”

Consistent with the visionary company’s deep, heartfelt commitment to its core ideology is its
tendency to promote from within. One of the reasons for this commitment is that it tends toward
preserving the core ideology. 3.5% of the 113 CEOs of the 18 visionary companies came from
outside of the company. 22.1% of the comparison companies’ 140 CEOs came from outside of
the respective company. The authors pointedly comment, “Across seventeen hundred years of
combined history in the visionary companies, we found only four individual cases of an outsider
coming directly into the role of chief executive.”

Procter & Gamble’s commitment to preserve its ideological core by consistently developing
management talent for successions at every level of its hierarchy, “P&G’s program for
developing managers is so thoroughgoing and consistent that the company has talent stacked like
cordwood -- in every job and in every level.” Reginald Jones of General Electric put together “A
Road Map for CEO Succession” seven years before Jack Welch took the helm. He then spent 2
years trimming down the list of potential CEO’s from inside the company from 96 down to 6.
Finally, Welch was chosen.

Oftentimes the decision to go outside of the company for any key manager, or a CEO, can be
motivated by a commendable desire to reinvigorate the company. Sometimes such a decision is a
company’s leadership’s way of fishing for fresh energy, or perhaps even new ideas, in the new
hire. Or, worse, the company is forced to go outside of itself to garner talent because it is not

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developing talent internally. Many times going outside of a company can be a desired short cut
that managers choose to jump-start an ailing organization. Instead of treating re-invigoration as a
crap shoot dependent on who can be pulled off the street, these companies need to change their
system - their organization - and not merely patch up their talent repertoire with the occasional
hire. And if the new worker enters a system that is not already one that empowers its employees,
she/he will have a more difficult time flourishing anyway.

Michael Hammer & James Champy, in their Reengineering the Corporation, write about the
company where workers are not expected to innovate or think or do anything other than simply
what they are told. They call it industrial feudalism. We have observed a similar prejudice in
today’s business environment: a prejudice against the hourly worker. If endemic to an
organization, this prejudice weakens the company significantly. This attitude does not allow the
synergy that can develop when a company realizes that all of its workers have something
significant to contribute. And this contribution is much, much more than the occasional good
idea dropped in the ubiquitous suggestion box. Visionary managers actively seek to engage the
brains of those who report to them, not just respond with condescending thanks when the hourly
employee or front-line employee presents a fine idea. Oftentimes, the desire to go outside of
one’s own company to hire talent reflects a subtle “professional” disdain for those already
working within the company, those who are waiting to be given a chance to show just what
they’re capable of.

Good Enough Never Is

Built to Last presents another mechanism, which the visionary companies employ to ensure
constant growth: creating corporate discomfort. In other words, the visionary companies are
never satisfied with what they have achieved so far, but are always stretching ahead to beat
themselves. Procter & Gamble allow brands to compete against each other within the company.
Motorola instituted a practice of stopping the production of developed products before they had
finished their product life cycle to force the constant developing of new products. Boeing uses a
mechanism that Collins and Porras call “the eyes of the enemy” in which managers act as if they
were managers of competition companies planning how to beat Boeing in the marketplace. Sam
Walton encouraged his retailers to always attempt to beat the sales of the same day in the
previous year.

The visionary companies also invested more of their profit back into the company while giving
out lower shareholder cash dividends than the comparison companies.
They also invest more in their people’s training, spending a significant amount in training centers.
Motorola sets a goal of forty hours of training per employee per year. Disney requires every one
of its employees to go through Disney University. 3M, Procter & Gamble, General Electric,
Marriott, IBM, and Motorola all have some form of training center.

City Bank consistently invested in imported new methods earlier than Chase Manhattan:

• Divisional profitability statements

• Merit pay
• Management training programs
• College recruiting program
• Organization by industry (versus geography)

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 • National charter
• ATMs
• Credit cards
• Retail branches
• Foreign branches

Indeed the principle of self-improvement stands out as one of the clearest differences between the
visionary and comparison companies.

Preserve the Core/ Stimulate Progress

The visionary companies have many, many instruments in place that reinforce the core ideology.
Merck has videos, books, seminars, speeches, outside magazine articles, journals, and internal
magazines and newsletters, which continuously stress the company’s core values. Hewlett-
Packard took its managers off-site in the 1950’s to write the company’s “constitution.” HP also
has a healthy dose of apocryphal and true “Bill and Dave stories” which usually are anecdotes
that illustrate HP core values. Nordstroms gives all of its salesperson’s business cards to
emphasize their core value that their employees are important and that they are professionals.
At the same time, the writers suggest that those companies that wish to operate on a par with the
visionary companies also need to exercise diligence to “correct misalignments” with core values.

Examples of Core Purpose:

3M To solve unsolved problems innovatively
Cargill: To improve the standard of living around the world
Hewlett-
Packard: To make technical contribution for the advancement and welfare of humanity
Israel: To provide a secure place on Earth for the Jewish people
McKinsey: To help leading corporations and governments be more successful
Merck: To preserve and improve human life
Nike: To experience the emotion of competition, winning, and crushing competitors
Sony: To experience the joy of advancing and applying technology for the benefit of
the public
Wal-Mart: To give ordinary folk the chance to buy the same things as rich people
Walt Disney: To make people happy

Coe Ideology Drive for Progress

Provide continuity and stability Urge continual change (new directions,

new methods, new strategies, and so on)

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Plant a relatively fixed stake in the ground Impels constant movement (towards
goals, improvement, an envisioned form,
and so on).

Limits possibilities and directions for Expand the number and variety of
the company (to those consistent with the possibilities that the company can
Content of the Ideology). consider.

Has clear content (“ This is our core Ideology Can be Content-free (“ Any progress
and we will not breach it “) is good, as long as it is consistent with
our core”)

Installing a core ideology is, by its very Expressing the drive for progress can
nature a conservative act. Lead to dramatis, radical, and
revolutionary changes.

The interplay between core and progress is one of the most important finding of the
Authors’ work

Building the Vision:

A well-conceived vision consists of two major components – core ideology and an

envisioned future. A good vision builds on the interplay: it defines “what we stand for and
why we exist” and sets forth “what we aspire to become, to achieve, to create”
Envisioned future consists of a BHAG (Big Hairy Audacious Goal), which takes 10- 30-years and
the whole organization to achieve and vivid descriptions of what it will be like when the
organization achieves it.

The “vivid description” is a vibrant, engaging, and specific description of what it will be
like to achieve the BHAG, translating the vision from words into pictures, an image that
people carry in their heads, picture-painting.

This requires thinking beyond the current capabilities of the organization and current
environmental trends, forces, and conditions. It should not be a sure bet – maybe 50-70%
probability – but the organization must believe ‘we can do it anyway.’ It should require
extraordinary effort, and perhaps a little luck.

Identifying core ideology is a discovery process, setting the envisioned future is a creative
process. “In identifying the core values, push with relentless self-honesty for truly CORE values.
If you articulate more than five or six, …you’re not getting down to the essentials….”
About each one, ask, “If the circumstances changed and penalized us for holding this core
value, would we still keep it?”

“Do not ask, ‘What core values should we hold?’ Ask instead: ‘what core values do we actually
hold?’ Core values and purpose must be passionately held on a gut level or they are not core.
Values you think the organization ‘ought’ to have, but that you cannot honestly say that it does

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have, should not be mixed into the authentic core values. To do so creates cynicism throughout
the organization.”

“Core ideology need only be meaningful and inspirational to people inside the organization; it
need not be exciting to all outsiders.” “You cannot ‘install’ new core values or purpose into
people. Core values and purpose are not something people ‘buy in’ to. People must already have a
predisposition to holding them. Executives often ask, ‘How do we get people to share our core
ideology?’ You don’t. You can’t! Instead, the task is to find people who already have a
predisposition to share your core values and purpose, attract and retain these people, and let those
who aren’t disposed to share your core values go elsewhere.”

“Once you’re clear about the core ideology, you should feel free to change absolutely anything
that is not part of the core ideology. From then on, anytime someone says something shouldn’t
change because ‘It’s part of our culture’ or ‘We’ve always done it that way’ or any of the other
excuses for resisting change, remind them of this simple rule: If it’s not core, it’s up for change.”

Frequently Asked Questions

Authors end their book with a helpful list of frequently asked questions.
The first question is “Where should we begin?” And that is an excellent place for us to end our
summary and comments. They give a number of answers to that query:

1 - Determine the company’s core ideology, which is comprised of two aspects:

a. What are the organization’s core values? There should be only five or six of these. And they
must not be time contingent. It is not what is popular at the present time. It’s a value that’s
upheld consistently no matter what.

b. Why does the company exist? The authors give a helpful question to determine this: “Suppose
we could shut this company down with no adverse economic consequences to employees or
owners. Why shouldn’t we do so? What would the world lose if the company ceased to exist?
What would we lose if it ceased to exist?”

2. Institute mechanisms in the company that preserve the core values. Is it a training center?
How many hours a year should employees be in training? Does the company have a library
where books that elucidate core values are available to all? What can be done to recognize
employees, in a big and public way, that heroically apply core values in their service to
customers, external and internal? Are those that best reflect the company’s core values the best
compensated? Are the awards of the company in line with these values?

3. Institute mechanisms in the company that stimulate progress.

Do all employees have a forum for expressing ideas for stimulating business? for better serving
the customer? What Big Hairy Audacious Goal would be appropriate? Is innovative failure

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allowed? Is failure encouraged?? Are intrepreneurial employees recognized with much fanfare
and hoopla?

4. Correct misalignments with the company’s core values.

Is there a regular forum for employees to highlight company practices that are inconsistent with
the company’s core ideology? Is the exploration of misalignment a regular topic of managers’
meetings? Is healthy peer pressure encouraged for those whose attitude is inconsistent with the
company’s core values?

The authors state that failure to take this step is a common mistake. Perhaps it is so common
because it is easier to institute a new process or policy or procedure, but to change one that
already exists is likely to threaten someone. Someone thought that it would be a good idea to put
that misaligned process in place to begin with, and someone else has probably grown quite
comfortable with it by now. Alignment is sometimes painful, but it is always necessary.

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Conclusion

Built to Last gives many examples of companies that have focused more on building a fine
organization rather than making a product, providing a service, or making a profit. Many of the
most successful companies of the last one hundred years have operated with an almost religious
fervor in their passionate commitment to a core ideology. They have a host of mechanisms in
place that preserve this core. They also creatively seek to stimulate progress by using such
mechanisms as Big Hairy Audacious Goals and constant incremental improvements. The
companies that would succeed in the 21st Century need not come up with the one fantastic idea,
or hire the charismatic and visionary CEO. The visionary companies of the next 100 years will
succeed because they have patiently applied the “laws of the farm,” the timeless principles that
have worked for the visionary companies of the last 100 years.

1 - Determine the company’s core ideology, which is comprised of two aspects:

a. What are the organization’s core values? There should be only five or six of these. And they
must not be time contingent. It is not what is popular at the present time. It’s a value that’s
upheld consistently no matter what.

b. Why does the company exist? The authors give a helpful question to determine this: “Suppose
we could shut this company down with no adverse economic consequences to employees or
owners. Why shouldn’t we do so? What would the world lose if the company ceased to exist?
What would we lose if it ceased to exist?”

2. Institute mechanisms in the company that preserve the core values. Is it a training center?
How many hours a year should employees be in training? Does the company have a library
where books that elucidate core values are available to all? What can be done to recognize
employees, in a big and public way, that heroically apply core values in their service to
customers, external and internal? Are those that best reflect the company’s core values the best
compensated? Are the awards of the company in line with these values?

3. Institute mechanisms in the company that stimulate progress.

Do all employees have a forum for expressing ideas for stimulating business? for better serving
the customer? What Big Hairy Audacious Goal would be appropriate? Is innovative failure
allowed? Is failure encouraged?? Are intrepreneurial employees recognized with much fanfare
and hoopla?

4. Correct misalignments with the company’s core values.

Is there a regular forum for employees to highlight company practices that are inconsistent with
the company’s core ideology? Is the exploration of misalignment a regular topic of managers’
meetings? Is healthy peer pressure encouraged for those whose attitude is inconsistent with the
company’s core values?

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The authors state that failure to take this step is a common mistake. Perhaps it is so common
because it is easier to institute a new process or policy or procedure, but to change one that
already exists is likely to threaten someone. Someone thought that it would be a good idea to put
that misaligned process in place to begin with, and someone else has probably grown quite
comfortable with it by now. Alignment is sometimes painful, but it is always necessary.

© www.hrfolks.com All Rights Reserved