A basket of 18 companies outperformed the market by 15x from 1926 to 1990. What set them apart from comparison was counter-intuitive and crucial for understanding today’s economic climate. These companies still exist. Their continued success is built on longer-term thinking than their competitors. These companies look beyond their immediate horizon to prepare for an uncertain future, but how?
Jim Collins and Jerry Porras studied these companies in their book Built To Last. Re-visiting these findings today is eye-opening in what it reveals about the importance of learning as a process inside companies.
The Visionary Company Myth
So what sets these companies apart?
They probably focus on maximizing shareholder wealth, right?
Not exactly. While profits are important, these companies are primarily driven by a core ideology beyond simply making money (which we will get to). The values in this ideology guide everything from hiring to decision-making and help create a sense of purpose.
Take Johnson & Johnson (J&J), for example. The company has a well-articulated "Credo" engraved in stone at its headquarters that outlines its responsibilities to customers, employees, communities, and finally, shareholders—in that order.
This Credo was tested when the 1982 cyanide-laced Tylenol crisis led to seven deaths. J&J promptly recalled 31 million bottles at a $100 million cost, prioritizing consumer safety over immediate profit. The crisis response gained public approval and ensured long-term success by upholding its core values.
Ok, they probably have a high-profile, charismatic leader.
Actually no. In fact, studies of these companies suggested that such leaders could hinder a company's prospects for long-term health. When a company's identity is tied too closely to the identity of a single leader, the company is subject to volatility and instability that wouldn’t be there if leadership was more evenly distributed.
Surely the company was built on a great idea?
Again, you’d be wrong in assuming this. The authors found that a great initial idea is not a necessity for long-term success. Many visionary companies started with either unclear or quite ordinary ideas.
Take Hewlett-Packard (HP), for example. When Bill Hewlett and Dave Packard started their company in 1939, they didn't have a specific product idea in mind. They started in a garage with just $538 in the bank, and their first product was an audio oscillator, an electronic test instrument used by sound engineers. The company's success came from its commitment to ongoing innovation, its approach to management, its treatment of employees, and other factors emphasized in its core ideology.
Oh, then they were all universally recognized as “Great Places To Work.”
Nope. In fact, while these companies often have strong cultures, they might not suit everyone. Those who do not align with the company's core values might find it a difficult place to work, which is exactly what working at Apple is like. Considered a prestigious place to work due to its reputation for innovation, Apple's work environment is intense and demanding. The relentless pursuit of perfection can lead to long hours and high-stress situations. Moreover, Apple's culture emphasizes secrecy, which may not appeal to those who prefer a more open and collaborative environment.
Ok, then it must be down to brilliant and complex strategic planning… right?
Not really. The authors found that visionary companies often try out many things and keep what works rather than rely on intricate strategic planning.
3M is a perfect example. No complex strategic plan mapped out the creation of Post-it Notes. One employee, Spencer Silver, had developed a low-tack adhesive that didn't have immediate use. Another employee, Art Fry, came up with the idea of using this adhesive for bookmarks in his hymnbook. These casual, random explorations are what led to the creation of one of 3M's most iconic products.
3M has this random exploration institutionalized with their "15% Time" rule, which encourages employees to spend 15% of their time on projects unrelated to their regular work.
So what exactly did these 18 companies have in common?
What caused them to outperform everyone else?
We’ll take a closer look next week to find an answer.