Visionary Companies

December 2001 -- Built to Last: Successful Habits of Visionary Companies .  By James C. Collins and Jerry I. Porras. (New York: HarperCollins, 1994. 336 pp. $26.00.)

If I had to recommend one book in the field of organizational behavior, Built to Last would be it. The authors, James Collins and Jerry Porras, conducted extensive research on "visionary companies"—members of an elite group of companies that outperform and outlive their competition.

In order to identify the distinguishing characteristics of these companies, the authors avoid the trap of comparing them to "straw companies"—total failures or poor performers. Rather, they draw the comparison to companies that are considered successful and yet lack the same edge—the endurance, the financial success, and the stature—of their visionary counterparts. For example, visionary companies such as Boeing, Hewlett Packard, Procter & Gamble, and Walt Disney, are compared with McDonnell Douglas, Texas Instruments, Colgate, and Columbia, respectively.

The authors shatter twelve myths that people have about successful organizations, and then present the facts about them. One myth states: "The most successful companies exist first and foremost to maximize profits." The implicit philosophy behind this myth is the anti-principled philosophy of pragmatism: Do whatever it takes to make money, or, since the ultimate purpose of a business is to maximize profits, use whatever means is necessary to attain that end.

The reality, however, is that visionary companies, while caring about profits, are first and foremost guided by a strong ideology—clear values and a coherent sense of purpose that go beyond merely striking it rich. Paradoxically, these visionary companies, whose primary focus is not making money, end up being the most profitable. One dollar invested in the general market in 1926 would have grown to $415 in 1990; one dollar invested in the companies used here as a comparison group would have grown to $955 in the same period; while one dollar invested in a visionary company in 1926 would have been worth $6,356 by 1990. Companies that have strong values and adhere to them are also the most successful ones: The moral is the practical.

Another myth that the book overturns is: "Visionary companies are great places to work, for everyone." Such a myth, predicated on the notion that a manager should first and foremost please his employees, is a product of the postmodern assertion that each person is entitled to express himself and behave according to his feelings; that "anything goes"; that no philosophy is better than another; and that therefore an organization's duty is to cater to employee whims.

The reality is that only individuals who fully subscribe to the company's core ideology and values enjoy working for it. Managers of visionary companies do not try to please their employees; they understand the primacy of reason over emotion, and that an organization must be run according to principles that are inviolable, whether or not these make everyone happy. These organizations simply don't have room "for those unwilling or unable to fit their exacting standards." The managers of such organizations understand that the price of trying to please everyone is the ultimate demise of the business. Sound moral leadership, refusal to compromise on values, even though potentially unpopular, is the practical path to success.

The principal concern of managers in visionary companies is not winning popularity contests, or gaining the approval or disapproval of others—whether of employees, the general pubic, or the competition. They are not engaged in social metaphysics. They run their organization based on sound principles that work; their focus is not on others, but on the company. In fact, one of the myths that the book dispels is the notion:"The most successful companies focus primarily on beating the competition." The reality is that, while visionary companies learn from their rivals, their primary standard of evaluation is themselves. They focus on their own needs and wants, constantly asking: "How can we improve ourselves to do better tomorrow than we did today?" To extend Ayn Rand's notion from the individual level to the level of the organization, these companies are first-handers.

It is interesting to look at countries—the largest organizations—through the lens ofBuilt to Last. The most successful country in the world, the United States, is a visionary country, at least historically, with the constitution as its core ideology. In contrast to the United States we have the "pragmatists," countries that lack any moral foundation and merely look toward maximizing their profit, regardless of means.

Countries in Southeast Asia are a case in point. For many years people pointed to the Asian Miracle as a model for growth. Malaysia and Indonesia, for example, were put up as poster countries that enjoyed a faster growth rate than Europe or America. These countries did not concern themselves with adhering to any code of values—except for pragmatism, that is, doing what works. Observing the growth rate of these countries, most people did not have the philosophical understanding necessary to recognize the inevitable presence of a time-bomb in this immoral system. For these people, the Asian Miracle (fueled by a hodgepodge of contradictory values) was threatening to replace American Values (such as independence, integrity, and inalienable rights) as the model for growth and prosperity. However, the financial crisis of 1997 and its aftermath clearly demonstrated that while a value-free country might be successful in the short run, in the long run the virtuous shall inherit the earth.

Built to Last is not without its flaws, the most serious one being its value-neutral approach: The authors argue that there are no "right" set of core principles that a company needs to follow in order to be successful. What the authors lack is a reality-based philosophy, a philosophy that would have helped them recognize that all the visionary companies in their sample share most if not all of the following core values: independence, integrity, honesty, justice, productiveness, pride, and benevolence.

A useful question to ask oneself while reading Porras and Collins's excellent study of visionary companies is: "Am I built to last?" The main ideas in the book apply as much to the individual as they do to a business or a country. People often do not live long enough to pay the price, in dollars and cents, of lacking a coherent purpose and values. But in the ultimate currency—the currency of happiness—visionary people are the most successful. Only a visionary person—a person in possession of a clear sense of purpose, who subscribes to the primacy of reason over emotion, who is a first-hander—can build a life of lasting happiness.

A graduate of Harvard University,  Tal Ben-Shahar  is a consultant and teacher in the field of organizational behavior.

This article was originally published in the December 2001 issue of Navigator magazine, The Atlas Society precursor to The New Individualist.  

‍