Built to last

1. If we compared the
visionary companies to a bunch of abysmal failures,
we’d certainly 􀀑nd di􀀑erences, but not helpful
di􀀑erences.
We decided to undertake the daunting task of examining
the companies throughout their entire histories. we
believed that
Second, and even more important, we believed that
only an evolutionary perspective could lead to
understanding the fundamental dynamics behind
visionary companiesWe
didn’t just ask “What attributes do these companies have
How did they manage the
transition from start-up to established
corporation? How
did they handle transitions from founder to
secondgeneration
management? How did they deal with
historical events such as wars and
depressions? How did
they handle the invention of revolutionary
new
technologies?”
We pursued this historical analysis

2. • 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.”
• companies tend to be clock builders, not time tellers.
• They concentrate primarily on building an organization
• —building a ticking clock—rather than on hitting a
• market just right with a visionary product idea and
• riding the growth curve of an attractive product life
• cycle. And instead of concentrating on acquiring the
• individual personality traits of visionary leadership, they
• take an architectural approach and concentrate

3. • The primary output of their e􀁄orts is not the tangible
• implementation of a great idea, the expression of a
• charismatic personality, the grati􀁄cation of their ego, or
• the accumulation of personal wealth. Their greatest
• creation is the company itself and what it stands for.
• the company stumbled along for nearly a year
• before it got its 􀁄rst big sale—eight audio oscilloscopes
• to Walt Disney for work on the movie Fantasia. Even
• then, Hewlett-Packard continued its

4. • Merck started merely as an
• else to do with himself). Merck started merely as an
• importer of chemicals from Germany.18 Procter &
• Gamble started as a simple soap and candle maker—one
• of eighteen such companies in Cincinnati in 1837.19
• Motorola began as a struggling battery eliminator repair
• business for Sears radios.20 Philip Morris began as a
• small tobacco retail shop on Bond Street in London.
• 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.”22 Not knowing
• what else to do, the company began making sandpaper.
• 3M had such a poor start in life that its second president
• did not draw a salary for the 􀁄rst eleven years of his
• tenure.

5. • In contrast, Norton Corporation, 3M’s comparison
• in the study, began life with innovative products in a
• rapidly growing market,
• only three of the visionary companies began life
• with the benefit of a specific, innovative, and highly
• successful initial product or service—a “great idea”:
• Johnson & Johnson, General Electric, and Ford.
• Luck favors the persistent. This simple truth is a
• fundamental cornerstone of successful company builders.
• 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.
• 3M is famous; McKnight is not
• THE MYTH OF THE GREAT AND CHARISMATIC
• LEADER
• architect an institution that would thrive far
• beyond his own lifetime:

6. • No “Tyranny of the OR”
• (Embrace the “Genius of the
• AND”)
• The “Tyranny of the OR” pushes people to believe that
• things must be either A OR B, but not both. It makes
• such proclamations as:
• • “You can have change OR stability.”
• • “You can be conservative OR bold.”
• • “You can have low cost OR high quality.”
• • “You can have creative autonomy OR consistency
• and control.”
• • “You can invest for the future OR do well in the
• short-term.”
• • “You can make progress by methodical planning OR
• by opportunistic groping.”
• • “You can create wealth for your shareholders OR do
• good for the world.”
• • “You can be idealistic (values-driven) OR pragmatic
• (profit-driven).”
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.
extremes of a number of dimensions at the same time.
Instead of choosing between A OR B, they 􀀑gure out a
way to have both A AND B. “Balance”
implies going to the midpoint, 􀁄fty-􀁄fty, half and half. A
visionary company doesn’t seek balance between shortterm
and long-term, for example. It seeks to do very well
in the short-term and very well in the long-term.
explicitly speaks 􀁄rst to
ideals beyond pro􀁄t, and then emphasizes the
importance of pro􀁄t within the context of those ideals.

7. • visionary company continually pursues but
• never fully achieves or completes its purpose—like
• chasing the earth’s horizon or pursuing a guiding star.
• Walt Disney captured the enduring, never-completed
• nature of purpose when he commented:
• Disneyland will never be completed, as long as there
• is imagination left in the world.103

8. • Preserve the Core/Stimulate
• Progress
• Wal-Mart’s “Exceed customer expectations” is a
• permanent, unchanging part of its core ideology;
• customer greeters at the front door is a noncore
• practice that can change.
• Merck’s “We are in the business of preserving and
• improving human life” is a permanent, unchanging
• part of its core ideology; its commitment to research
• targeted at speci􀁄c diseases is part of a noncore
• strategy that can change.
In the previous chapter, we presented core ideology as
an essential component of a visionary company. But core
ideology alone, as important as it is, does not—indeed
cannot—make a visionary company. A visionary company
carefully preserves and
protects its core ideology, yet all the speci􀁄c
manifestations of its core ideology must be open for
change and evolution.
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.
visionary
company displays a powerful mix of self-con􀁄dence
combined with self-criticism. Self-con􀁄dence allows a
visionary company to set audacious goalsSelf-criticism, on the
other
hand, pushes for self-induced change and improvement
before the outside world imposes the need for change
and improvement;

9. • Big Hairy Audacious Goals
• a true BHAG is clear and
• compelling and serves as a unifying focal point of e􀁄ort
• —often creating immense team spirit. It has a clear 􀁄nish
• line, so the organization can know when it has achieved
• the goal; people like to shoot for finish lines.

10. • General Electric17 Westinghouse18
• Become #1 or #2 in every Total Quality
• market we serve and Market Leadership
• revolutionize this company Technology Driven
• to have the speed and agility Global
• of a small enterprise. Focused Growth
• Diversified
• The point here is not that GE had the “right” goal and
• Westinghouse had the “wrong” goal. The point is that
• GE’s goal was clear, compelling, and more likely to
• stimulate progress, like the moon mission.

11. Reynolds had the largest market
share (almost 35 percent), greatest size, and highest
pro􀀑tability in the tobacco industry. Philip Morris, on
the other hand, was a sixth-place also-ran with less than
10 percent market share.19 But Philip Morris had two
10 percent market share. But Philip Morris had two
things going for it that R.J. Reynolds didn’t. First, and
certainly not to be discounted, Philip Morris had recently
repositioned a little-known women’s cigarette called
Marlboro as a general market cigarette with a cowboy
mascot that would prove to be a huge success. And
second, Philip Morris had something to shoot for.
Coming from behind, Philip Morris set the audacious
goal for itself of becoming the General Motors of the
tobacco industry.20 (Back in the 1960s, becoming “the
General Motors of the industry” meant becoming the
dominant worldwide player.) Philip Morris then
committed itself to this goal and rose from sixth to 􀀑fth,
from 􀀑fth to fourth, and so on until it blasted longtime
leader R.J. Reynolds out of 􀀑rst place. During this same
time period, R.J. Reynolds displayed a stodgy, good-oldboy,
clubby atmosphere and no clear, driving ambition
for itself other than to attain a good return for
shareholders.

12. • We see a similar pattern at Walt Disney Company,
• which has stimulated progress throughout its history by
• making bold—and often risky—commitments to
• audacious projects. In 1934, Walt Disney aimed to do
• something never before done in the movie industry:

13. • Cult-Like Cultures
• “Not here. Everybody starts at the bottom. Mr. Bruce,
• Mr. Jim, and Mr. John—the three Nordstrom brothers
• that make up the chairman’s o􀁄ce—they all started on
• the 􀁄oor. Mr. Bruce likes to remind us that he and his
• brothers were all raised sitting on a shoe sales stool in
• brothers were all raised sitting on a shoe sales stool in
• front of the customer; it’s a literal and 􀁄gurative posture
• that we all keep in mind.10 You get a lot of operational
• freedom here; no one will be directing your every move,
• and you’re only limited by your ability to perform
• (within the bounds of the Nordstrom way, of course). But
• if you’re not willing to do whatever it takes to make a
• customer happy—to personally deliver a suit to his hotel
• room, get down on your knees to 􀁄t a shoe, force
• yourself to smile when a customer is a real jerk—then
• you just don’t belong here, period. Nobody tells you to
• be a customer service hero; it’s just sort of expected.”11