Built to Last—Not
In 1994, Jerry Porras and Jim Collins wrote “Built to Last--” which it certainly has, ranking #935 on Amazon, lo these thirteen years later. (Collins’ later “Good to Great” ranks even higher). The aim was to diagnose “landmark,” “outstanding,” and “exceptional” companies (adjectives from the bookflaps).
Almost all great books get something very right. In this case, it was the characteristic of “visionary” that they identified. The “vision thing” is as important as ever.
But often, even great books don’t age well. Time reveals a flaw in the foundation, maybe not critical, but a source of confusion—something just not quite right, something that begins over time to annoy.
In this case—it’s the title itself.
The book picks twelve matching pairs of companies—e.g. Westinghouse vs GE, Merck vs. Pfizer, Ford vs. GM—and explores why we think one is better than another. “Better” is also defined in stock market performance terms, so we’ve got long-term value creation as a criterion, along with brand power, and a few others.
Some have critiqued the choices—ditto for "In Search of Excellence"—-for not being valid over time (both Ford and GM today are candidates for the dustbin of history, for example). But the choices stand up pretty well—if your game is to be lasting.
But—what precisely makes “lasting” the criterion for describing a company as landmark, outstanding, or exceptional?
What used to be valuable about continuity over time was:
- stock market performance for investors
- employment and economic stability for workers
- community involvement for host governmental units
- a dependable brand for consumers.
Let’s see how well these criteria have stood the test of thirteen years.
• The vast majority of owners these days are not shareholders looking to hitch their wagon long term to a particular organization. They are pension and other funds looking for performance, managed by hired guns ready to swap equities at the drop of a quarterly hat, or leave them entirely for the latest hot category, e.g. private equities—hardly bastions of vision.
More importantly—financial instruments have evolved enough that shareholders don’t need to buy a corporate package—they can create the virtually the same performance through a blended mix of instruments reflecting currency, geography, industry and risk profiles. This is not at all a bad thing: it greatly enhances the ability of investors to pick precisely what they want. Which is not, frankly, a lasting organization.
• Employees of a lasting organization are not likely to be well-served unless that organization is participating in most of the global trends affecting its business. Those include outsourcing, globalization and technological investments. Job security at the cost of growing irrelevance is the short-term opiate of the unions.
• Community involvement doesn’t necessarily require a sustained physical presence—the core values an organization carries with it ought to be recognizable quickly with a given locality or other community.
• Branding is a funny thing—it is usually the word we use to describe the retail B-to-C feeling we get when we know what a name stands for. But test yourself: who owns Jif Peanut Butter? Skippy? If a brand clearly conveys something over time, we don’t much care about the visionary nature of the company producing it. The consumers of YouTube don’t seem to be terribly concerned about whether it will last into next month—but it was visionary, and it did what consumers wanted, at least yesterday.
The truth is: focusing on “lasting” as an attribute of a company these days is likely to confuse rather than enlighten. The continued existence of a particular corporate organization is a pretty un-inspiring goal, when you think of it.
Ironically, the continued existence of a particularly corporate instantiation probably requires high turnover in shareholders, employees, geographies and even consumers. So who exactly cares if it’s lasting?
The point is not to last. The point is to do great things for all your constituents. Where continued existence helps, great. Otherwise, standing water stagnates. The visionary thing works; but these days, the vision had better be to change, morph, grow, evolve, turnover, shift.
Built to last is not a desirable adjective anymore, it’s likely a critique.
Steve Lishansky of Koanetic Consulting International in Boston – http://www.koanetic.com – told us last week in an interview, "The Hardest people to work with are the people who have been reasonably successful doing unsustainable things." I can’t get his statement out of my mind.
Steve’s company works with the top corporate leaders in the country specifically on the changing nature of business, leadership and society.
When I read your post this morning I realized that the most threatened companies are those that have been reasonably successful doing unsustainable things – or, "built to last – and stagnate."
Charlie – What a great post! I’ve spent my career in companies that haven’t lasted and have never challenged the assumption that "lasting" was such a great thing. You raise a compelling argument that it’s not. One thing I wonder about, however, is the impact that perpetually accelerating change will have on people psychologically. At some point, will we have a collective nervous breakdown? Will only the fittest – i.e., those best able to deal with instability and new, new, new – survive? Will people one day look back on the notion of "relaxation" as quaint? (It was sure fun while it lasted.)
You’ve revealed the key trait of trust. It’s a human characteristic and not an institutional characteristic. Perhaps a firm can create in its employees a culture of always doing great things for customers, vendors, and partners. But for you and me as clients of those whom we trust, the bond of trust is personal, human, emotional, and discrete. It lasts as long as it lasts.
Thanks for a great article!
Hey Charlie —
Having read your blog on Built to Last, I come away feeling somewhat like I’ve had a Chinese meal — satisfied with an enjoyable meal but knowing that in an hour or two, I’ll be hungry again.
Here, your article is good reading, well put together and with cogent thoughts that leave me feeling satisfied. But after an hour or two of pondering, I’m not feeling very full. Somehow, I disagree with the contention that longevity — "built to last" — has no value, but am not really sure why.
It would seem to me that corporations that have been around for a long time have the ability and the resources (money, staff and equipment) to engage the world economy better than smaller companies. But then, why do I equate "long time" with "big" or "many resources"? I suppose there are companies out there that have been around for a long time that are undercapitalized and have let their abilities stagnate. But I look at a GE, or IBM, and see big, built to last, companies that are doing a good job of reinventing themselves, of adapting to new circumstances, of meeting, and winning, the challenges of a global economy.
But then, we can look at GM, Ford, maybe even Xerox, and see big companies that seem to be unable to get it right, and who are living on their fat reserves from times past. And where might we put duPont? That was a hot company for many years, which seemed to survive the CFC debacle and come out ahead. Many of the basic items we use every day were invented there. But now what?
So I suppose I would contend that "built to last" lets a company weather some down times better than smaller companies that may go under if they don’t "do it right" every day of the year. Does that mean I equate "built to last" with fat? I suppose so and argue that fat has value in making our Chinese meal last longer for us once we’ve eaten it.
Inchoate thoughts which may improve with time.
Thanks for keeping me honest, Jim. I’ll try to state things more cleanly. I believe that the pursuit of continued existence can get in the way of more fundamentally important objectives. How’s that?
Some companies did re-invent themselves, as you note, and some did not. But I’m not sure that’s an agument in favor or against the goal of lasting a long time, if we allow that to be set as a goal in and of itself.
The company that lasted the longest time with which I had personal familiarity was McCrory Stores (some of you may know them as owners of JJ Newberry). They were a five and dime store, and lasted over 100 years, which is phenomenal for any company, let alone a retailer.
But they did it—in my humble opinion—but seeking out the very lowest common denominator, by becoming very locally responsive. They never developed much in the way of mass economies, or store image, or brand—but they stayed on, store by store, serving basically neighborhoods. They survived—but so what?
I look at some of the prolonged agony that people have been put through over the years at companies like GM or Kodak or pick your favorite, and I have to wonder: what if someone had just said, "if a brand new owner came in to this business, would we really locate them in Detroit? Or Rochester? " These are companies, just to pick on two, who were so out of touch with major discontinuities in their world that they were living on the fumes of dreams.
I’m talking about wasted shareholder resources, cynical middle managers, and untrained-for-anything line employees. When the only apparent route to significant change is bankruptcy, we’re lacking tools in the arsenal to do a decent job of change. Interestingly enough, the private equity business is in some ways taking on that function on behalf of management or public owners, who couldn’t seem to do it on their own.
Continued existence? Not as an end in and of itself. As Michael Benidt quotes at the top of this, those who believe in it are the hardest to work with. And as Brooks says, these companies are supposed to work for us—employes, shareholders, society—not themselves. There oughta be a corporate sunset law of sorts.
Maureen’s question I think is a key one; how can we all get used to greater rates of change? I’d note, for starters, that pretty much we already have. I remember when the artist Grandma Moses died (70s or so?) at about age 100, someone asked her near the end what the biggest change was, and she said the rate of change. Well, she hadn’t seen nothin’ yet, but we’re still truckin’ along, more or less…
This post can also be found at http://corporatevigilancecarnival.blogspot.com/
Thank you for your submission.
Ben Yoskovitz adds some very personal and specific thoughts to this topic over at startupspark.com . Interesting stuff.
Based on personal experience living in a company in survival mode, he suggests that
Great post, Charles! Maureen Rogers referred to it in commenting on my musings, “Built to Last,” at http://www.tompeters.com – so I quoted several lines from your post. I’ve been wrestling with how to best communicate this message in manufacturing environments, and you’ve given me some ideas! Thanks.
I ponder how even great companies survive long term. The very concept of lasting [forever] if not desirable can almost seem counter intuitive (given the capital markets). I see the cycle of even those companies "built to last" as destined to un-last or unravel. In the beginning, there is great euphoria. The future is bright, money is raised. As [sales] growth continues, so stock price climbs. Then we track growing market shares. As market share grows ever higher, growth starts to slow. Pricing goes premium and the real game becomes growing the industry. The goodwill of the brand name becomes current currency. Stock dividends come into the picture and the stock stops its ascension upwards in anticipation of further deceleration. Because of the slower growth, there is rotation in the institutions owning the shares. And if market share does continue to grow (depending on how much the industry itself still grows), finally the threat of anti-monopoly or fat cat management inevitably set in. Brand extensions fall flat or dilute the original brand name. Stock price crumbles. Time for reinvention. Merger, takeover, MBO, LBO or other follow to start another cycle. If the company has created a true brand with a real DNA (and a passionate consumer base), then one has to believe the brand may survive, even if the company does not. Whether or not the companies cited in Built to Last continue to survive given the ever changing consumer habits, all the remainder are subject to the laws of a true life cycle.