Ready to discover the secrets behind the success of iconic companies like Ford, Merck, and Hewlett-Packard? Curious to understand how vision statements translate into practices that shape everything from strategies to building layouts? Intrigued by the idea of a perfect balance between preserving core values and driving progress? Let's dive in and explore the power of alignment and visionary leadership!

Built to Last

Let's delve into the intriguing world of visionary companies - premier institutions with a lasting impact, setting standards for their respective industries, and making a significant mark on the world. 

We examine each company's entire history, looking at everything from organization and business strategy to products and services, technology, management, culture, values, policies, and the external environment. We discuss financial statements dating back to 1915, monthly stock returns from 1926, and an overview of each industry represented by the companies. 

Visionary companies were not built on great ideas alone. Many started without a specific idea or had a slow start, much like the tortoise in the famous parable. They didn't rely on charismatic leaders; instead, they prioritized building an enduring institution. 

Unlike the common belief, these companies didn’t exist primarily to maximize profits. They pursued a cluster of goals, guided by a core ideology or purpose beyond just making money. And amazingly, they made more money than the more profit-driven companies. 

The most successful companies were not risk-averse. They committed to Big Hairy Audacious Goals (BHAGs) that pushed them forward. They focused on beating themselves, constantly asking how they could improve. 

Also visionary companies were not great workplaces for everyone. Only those who fit well with the company's core ideology and high standards thrived. They experimented, learned from trial and error, and sometimes, even accidents. 

We shatter twelve common myths about successful companies, showing that visionary companies are more than just successful or enduring. They are the best of the best, serving as role models for management practices worldwide. 

What Sets Visionary Companies Apart from the Rest?

Imagine meeting someone who could precisely tell the time and date by looking at the sun or stars. Impressive, right? Now, what if instead, this person built a clock that could tell the time forever? This analogy introduces the idea of "clock building" versus "time telling" in the context of building enduring companies.

For instance, Walt Disney and Sam Walton were not just visionaries with great ideas; they were architects who built organizations that could thrive beyond their lifetimes. Disney's greatest creation was not just Mickey Mouse or Disneyland, but the Disney company itself. Similarly, Walton’s true success was not just Wal-Mart’s retail concept but the robust organization behind it.

Contrary to popular myths, the success of visionary companies like HP, Sony, and Wal-Mart did not stem from a single great idea or charismatic leadership. Bill Hewlett and Dave Packard of HP started without a clear product idea, trying anything to keep their fledgling company afloat. Sony’s founders had no specific product in mind, brainstorming a range of possibilities after starting their company. Sam Walton began with a single store and a simple passion for retailing, building incrementally over decades.

The research shows that visionary companies often started without a groundbreaking idea. For instance, HP’s first big product was an audio oscillator sold to Disney for "Fantasia," but the company truly succeeded by continually adapting and innovating. In contrast, companies like Texas Instruments and Kenwood began with a specific technological opportunity but did not necessarily achieve the same long-term visionary status.

Building a visionary company involves more than just a great initial product or market insight. It’s about creating an organization that can adapt and thrive over time. This perspective is evident in companies like 3M, which began as a failed mining venture, and Boeing, which had early setbacks but persisted to become an industry leader.

The concept of "clock building" extends beyond products to leadership. Visionary company leaders like GE’s Charles Coffin focused on building robust organizational systems rather than relying on their charisma alone. They created environments conducive to innovation and growth, ensuring the company’s success beyond their tenure.

Visionary companies also often embrace the "Genius of the AND," balancing seemingly contradictory forces. They can be conservative yet bold, idealistic yet pragmatic, investing for the future while performing well in the short term. This duality allows them to adapt and evolve continuously.

Ultimately, the success of these companies is not about one great idea or a charismatic leader but about building an enduring organization. This shift in perspective—from being a time teller to a clock builder—can liberate managers and entrepreneurs to focus on creating companies that stand the test of time.

Clock Building vs Time Telling: The Secret to Building Enduring Companies

Let's explore the importance of core values and principles in successful businesses. These values and practices, often established by the founders, define the company's purpose beyond just making profit.

CEO of Hewlett-Packard, John Young, in 1992 emphasized that profit is not the sole reason for the existence of a company. Instead, it exists for more fundamental reasons. Similarly, Merck & Company, an American pharmaceutical company, stated in their internal management guide that they are in the business of preserving and improving human life.

For example, Merck developed Mectizan, a drug to cure a disease that infected over a million people in the third world, knowing that these were customers who could not afford the product. Merck gave the drug away for free, showing that its primary focus wasn't profit, but rather the betterment of society.

Companies like Ford, Merck, and Sony have also demonstrated that having an enduring core ideology is crucial for visionary companies. Core ideology goes beyond making profits and serves as a guiding star for the organization. The core values and purpose of a company are its essence and should not be compromised for financial gain.

Another key element of a visionary company is its commitment to its employees. In 1994, Don Petersen, former CEO of Ford, stated that putting profits after people and products was magical. The company believed that its employees played a vital role in its success and should be treated with respect and fairness.

However, not all companies share this perspective. Some are driven by purely financial objectives. For instance, Pfizer, a competitor of Merck in the pharmaceutical industry, focused on diversification and profit maximization, showing less ideological drive.

In essence, visionary companies are guided by a core ideology that transcends economic considerations. This ideology, which often includes values like integrity, respect for individual employees, service to customers, and contribution to society, guides and inspires the entire organization. It is not about having the "right" ideology, but about having an authentic one that truly guides the company's decisions and actions.

Can Core Values and Principles Determine the Success of Your Business?

Building a visionary company goes beyond having a groundbreaking idea or being a charismatic leader. It's about preserving core values while stimulating progress and change.

In this dynamic process, it's crucial to differentiate between core values and non-core practices. For instance, HP's "Respect and concern for individual employees" is a core value, while serving fruit and doughnuts at ten A.M. each day is a non-core practice that can change. 

Visionary companies like IBM often lose sight of this balance. They confuse core values with specific policies or practices, clinging to non-core items for too long and hindering their ability to adapt and move forward. 

Successful companies have a relentless drive for progress, pushing for continual change and improvement. This drive is not about meeting external demands, but comes from an innate urge to innovate and excel. It led Walt Disney to build Disneyland without market data, and Boeing to undertake bold projects like the B-747 despite uncertain market demand. 

In a visionary company, the drive for progress goes hand in hand with preserving core values. While the core values provide stability and continuity, the drive for progress urges change and forward movement. They work together, enabling, complementing, and reinforcing each other. 

However, having a core ideology and drive for progress is not enough. These intangible elements need to be translated into concrete mechanisms to truly make a difference. For instance, Walt Disney didn't just leave its core ideology to chance; it created Disney University and required all employees to attend "Disney Traditions" seminars. 

Visionary companies, therefore, preserve their core values and stimulate progress. They push boundaries, continually adapt, and never settle for the status quo. Through a combination of self-confidence and self-criticism, they achieve great things and become something truly extraordinary. 

Visionary Leadership: Balancing Core Values and Progress for Extraordinary Success

Imagine standing in Boeing’s shoes in 1952. Your team proposes a groundbreaking commercial jet, the 707, despite the company’s military focus and financial risks. Rival Douglas Aircraft opts for caution, sticking with propeller planes. Boeing’s bold choice catapults it into the jet age, leaving Douglas in the dust.

This audacity isn’t luck. It’s a pattern at Boeing, from the B-17 bomber to the revolutionary 747. Leaders like William Allen committed fully, even when the stakes were high. Such boldness is a hallmark of visionary companies, driven by Big Hairy Audacious Goals (BHAGs).

BHAGs are more than grand plans; they’re transformative challenges. Take GE under Jack Welch. His clear, compelling goal—“to become number 1 or 2 in every market we serve”—rallied the company. Compare this to Westinghouse’s vague vision statement, and the difference is clear.

Consider Henry Ford’s 1907 BHAG: “To democratize the automobile.” His vision of affordable cars for everyone spurred relentless innovation, making Ford a giant in the auto industry. Similarly, Sony’s founders Masaru Ibuka and Akio Morita set out to change the perception of Japanese products as low quality. Their BHAG? A pocket-sized radio. Despite skepticism, they succeeded, revolutionizing consumer electronics.

Sam Walton’s Wal-Mart is another beacon of BHAGs. From making his first store the most profitable in Arkansas to aiming for $125 billion in sales, Walton’s bold targets drove relentless progress.

Even setbacks didn’t deter these companies. Boeing faced massive layoffs in the early 1970s but persisted with the 747. IBM’s risky $5 billion gamble on the 360 computer reshaped the industry, despite the enormous stakes.

BHAGs transcend individual leaders, creating a lasting drive for progress. They’re not just about ambition but about aligning with core ideologies. For instance, Walt Disney’s commitment to creativity and detail ensured projects like Snow White and Disneyland maintained the company’s core values while pushing boundaries.

To sustain momentum, companies need new BHAGs as old ones are achieved. This prevents the “we’ve arrived” syndrome that plagued Ford post-Model T. Visionary companies embed this boldness into their culture, ensuring progress through generations.

Can Big Hairy Audacious Goals Transform Your Organization into a Visionary Powerhouse?

Let's explore the concept of "Cult-Like Cultures" in companies and illustrate it with the examples of companies like Wal-Mart, IBM, Nordstrom, and Disney. These companies have managed to create a fervor among their employees, akin to that seen in cults, resulting in high levels of loyalty and dedication.

Wal-Mart, for instance, instills a vow in its employees to always greet customers with a smile, while IBM is known to motivate its employees to the point of ‘good brainwashing’. Nordstrom’s culture is all about taking pride in delivering exceptional customer service, even if it means going out of their way. Disney, on the other hand, uses terminology that reinforces the idea of being part of a unique and magical world. 

The employees in these companies are made to feel part of something special and are expected to adhere strictly to the company's core values and principles. They undergo intense indoctrination processes, receive rigorous training, and are rewarded for demonstrating the company's values.

However, this kind of culture may not be for everyone, as seen in the case of Robert, a new hire at Nordstrom. Despite the attractive prospects and benefits, he found it hard to fit in and eventually quit after 11 months. 

While the cult-like culture can seem restrictive, it’s not all negative. It can create a powerful sense of belonging and motivate employees to achieve great things. The key is to balance ideological control with operational autonomy, allowing employees the freedom to innovate within the framework of the company's values. 

In short, creating a cult-like culture is a powerful way for companies to preserve their core ideology and stimulate progress. It's not about creating a cult of personality, but about building an organization dedicated to its core values.

The Power and Pitfalls in Wal-Mart, IBM, Nordstrom, and Disney

Imagine a world where companies succeed not through meticulous planning but by embracing experimentation and seizing unexpected opportunities. This concept of "evolutionary progress" is akin to Charles Darwin's theory of natural selection, where varied experiments lead to the survival of the fittest ideas.

Take Johnson & Johnson, for instance. In 1890, a skin irritation led them to include soothing talc with their products, accidentally creating "Johnson’s Baby Powder," which evolved into a significant revenue stream. Similarly, a J&J employee's homemade bandage for his accident-prone wife became the iconic Band-Aid, solidifying their shift into consumer products.

Similarly, Marriott's journey began with a root beer stand and expanded into restaurants. Yet, an unexpected clientele at one location near Hoover Airport led them to cater prepackaged box lunches to passengers, sparking a new airport services division that grew to serve over a hundred airports.

Then, there's American Express. It started as a freight express business but transformed through small, opportunistic steps. In 1882, they introduced the successful "Express Money Order" and later, the "American Express Travelers Cheque" after their president struggled to cash letters of credit abroad. These moves unintentionally steered them into financial and travel services.

Lastly, 3M Corporation, admired by HP's Bill Hewlett, epitomizes evolutionary progress. Starting as a corundum mining failure, they transitioned to abrasives, and later, thanks to William McKnight's relentless experimentation, invented waterproof sandpaper and Scotch tape. McKnight fostered a culture of innovation with mechanisms like the "15 percent rule," allowing employees to pursue personal projects, leading to accidental yet groundbreaking products like Post-it notes.

3M's success contrasted starkly with Norton, a company that stuck rigidly to its knitting, focusing on grinding wheels and failing to diversify or encourage experimentation. While 3M thrived on its decentralized, innovation-driven culture, Norton stagnated and was eventually overtaken.

Lessons from these visionary companies highlight the importance of trying many things, tolerating failures, taking incremental steps, giving people room to innovate, and building mechanisms to stimulate progress. Crucially, while experimenting, they never lost sight of their core ideology, which served as a guiding force through their evolution.

Can Embracing 'Evolutionary Progress' Lead to Unexpected Success for Big Companies?

In 1981, Jack Welch, a self-made man who joined General Electric (GE) straight out of graduate school, eventually took the helm as CEO. He was the latest in a long line of CEOs groomed from within the company, a tradition that allowed GE to maintain continuity and stability in its leadership. This practice of home-grown management is one of the key reasons why GE stands as a visionary company. 

Unlike its peer Westinghouse, which experienced periods of turmoil due to inconsistent leadership, GE maintained a steady hand by promoting insiders. 

Welch’s predecessor, Reginald Jones, was highly admired and left behind a well-managed company. Like his predecessors, Welch brought about significant changes in GE and laid the groundwork for its future prosperity. However, the selection process that led to Welch becoming CEO was not a hasty decision. It was a meticulously planned and executed endeavor, a reflection of GE's commitment to its core values and traditions.

Jones, realizing the importance of succession planning, initiated the process seven years before Welch's appointment. From a pool of 96 potential successors, all GE insiders, Jones narrowed down to six prime candidates, including Welch. These candidates were rigorously tested and evaluated, with Welch ultimately emerging as the winner.

The lesson from GE's story is clear: a company's longevity and success lie not just in the quality of its leadership, but in the continuity of quality leadership. This continuity is achieved by nurturing internal talent and carefully planning for leadership succession. It ensures that the company's core values are preserved, providing stability in times of transition and change.

For companies large and small, the importance of developing internal talent and planning for succession cannot be overstated. Even in the early stages of a company's life, taking a long-term view and planning for the future can set the stage for sustained success. After all, individual leaders may come and go, but a visionary company, grounded in its core values and driven by home-grown leadership, can thrive for centuries.

Jack Welch and the Power of Home-Grown Leadership: The Success Story of General Electric

American writer, William Faulkner, once stated, "Don't bother just to be better than your contemporaries or predecessors. Try to be better than yourself." This sentiment echoes through many successful companies, which prioritize constant improvement over resting on their laurels. 

The key question for these businesses isn't about meeting competition or current performance, but about how they can do better tomorrow. This drive for constant enhancement becomes a way of life, not an end goal.

An anecdote from Willard Marriott, Sr., sums it up: "Discipline is the greatest thing in the world. Where there is no discipline, there is no character. And gives us opportunities to grow. And we usually get what we work for." The concept of continuous improvement, which became a management catchphrase in the 1980s, has been a staple in visionary companies for much longer. It's not a fleeting trend but an institutionalized habit, a disciplined way of life.

Visionary companies understand that contentment leads to complacency and decline. They create mechanisms that generate discomfort and stimulate change. They don't aim for comfort but thrive on discontent. Richard Deupree at Procter & Gamble, for instance, proposed a brand management structure that would allow P&G brands to compete directly with other P&G brands, ensuring no brand could rest on its laurels. 

Visionary companies manage with both short-term and long-term perspectives. They don't believe in choosing between immediate performance or long-term success. They build first for the long term while also upholding demanding short-term standards. 

Consider the story of Marriott and Howard Johnson. While Marriott constantly pushed itself to improve, Howard Johnson became complacent. Marriott invested in customer feedback, employee training, and professional development programs, and adopted new methods and technologies ahead of the rest of the industry. Howard Johnson, on the other hand, neglected to invest in new product development, marketing programs, and plant modernization.

In short, the discipline of self-improvement is critical to becoming a visionary company. There are no shortcuts or magic potions; it requires hard work, dedication, and a continuous building for the future. Like a martial artist receiving a black belt, success in a visionary company represents the beginning of a never-ending journey of discipline, work, and the pursuit of an ever-higher standard.

Can Your Company Become Visionary by Championing the Discipline of Self-Improvement?

Visionary companies built their success not from eloquent vision statements, but from incorporating their values into every facet of their operation - from management behaviors and processes to building layouts and pay systems. 

Ford, for example, didn't just draft a statement of mission, values, and guiding principles; it implemented quality control, employee involvement programs, and customer satisfaction measures that aligned with these principles. 

Similarly, Merck's vision of benefiting humanity through innovative medicine wasn't just a statement; it was embodied in its research strategies, recruitment of top scientists, and commitment to corporate responsibility. 

Lastly, Hewlett-Packard's commitment to innovation and entrepreneurial culture was reflected in its decentralized structure, rigorous recruiting, and focus on technological contribution.

These are some of the lessons for their CEOs and Managers:

1. Paint the Whole Picture: Visionary companies rely on a comprehensive and consistent set of signals and actions to reinforce their ideology and progress.
2. Sweat the Small Stuff: Small actions send powerful signals and reinforce the company’s vision.
3. Cluster, Don’t Shotgun: Reinforce values with interconnected mechanisms and processes.

4. Swim in Your Own Current: Be guided by your internal compass, not external trends.
5. Obliterate Misalignments: Constantly identify and correct practices that misalign with core values.
6. Keep the Universal Requirements While Inventing New Methods: Stick to the core ideology and drive for progress, but innovate new methods to achieve them.

Building a visionary company is not about waiting for a charismatic leader or a great idea. It’s about consistently aligning every aspect of the organization with its core values and ambitions. This journey is challenging but doable, and it starts with each one of us. 

Driving Success with Core Values: Lessons from Ford, Merck, and Hewlett-Packard

Building a vision for an organization is crucial for its success and longevity. Yet, the concept of 'vision' is often misunderstood and overused. A well-defined vision is a combination of the organization's core ideology and an envisioned future. 

Core ideology is the organization’s bedrock - its reason for being and the values it stands for. It’s what doesn't change even when everything else around does. For instance, Bill Hewlett, co-founder of HP, left behind 'The HP Way', a code of ethics that guided the company since its inception in 1938. It includes deep respect for the individual, a commitment to affordable quality, and a responsibility towards the community. 

The envisioned future, on the other hand, is the organization’s ambitious goal for the upcoming 10 to 30 years. It’s a goal that is challenging yet achievable and stimulates the organization to keep progressing. For instance, Sony's envisioned future in the 1950s was to change the global perception of Japanese products as being of poor quality.

When building a vision, remember to preserve the core while stimulating progress. This means holding on to the organization's core values and purpose, while continually evolving practices and strategies in response to a changing world. A strong vision binds an organization together, making it resilient through growth, diversification, and globalization.

In essence, a compelling vision is not just a statement. It is a guide for the organization, rooted in its core values and purpose, that inspires progress and change. It should be authentic, deeply held, and effectively communicated to all members of the organization. As a leader, your job is not just to articulate this vision, but more importantly, to align your organization to it, driving it away from misalignments and towards its envisioned future.

Can Your Organization's Vision Propel it Towards Success? 

Visionary companies are premier institutions that have a lasting impact and set standards for their industries. They are not built on great ideas alone, but rather prioritize building an enduring institution. 

These companies pursue a cluster of goals guided by a core ideology or purpose beyond just making money. They are not risk-averse and commit to Big Hairy Audacious Goals (BHAGs) that drive them forward. These companies are not great workplaces for everyone but those who fit well with the company's core ideology and high standards. 

Building a visionary company doesn't require a great idea or charismatic leadership. It requires a shift in perspective - from being a product visionary to being an organizational visionary. It's about building an institution that can evolve and prosper beyond the presence of any single leader or product.

Successful companies are guided by a set of fundamental beliefs and principles, which is referred to as "pragmatic idealism". These companies view profit as a necessary means to achieve their broader aims, rather than the ultimate goal. 

Visionary companies preserve their core values while stimulating progress and change. This balance is vital for success. The successful companies have a relentless drive for progress, pushing for continual change and improvement. However, having a core ideology and drive for progress is not enough. These intangible elements need to be translated into concrete mechanisms to truly make a difference. 

Creating a cult-like culture is a powerful way for companies to preserve their core ideology and stimulate progress. It's not about creating a cult of personality, but about building an organization dedicated to its core values.

Success can also stem from trial and error and opportunism. This process of evolution within companies involves taking small incremental steps or mutations and quickly seizing unexpected opportunities that prove successful. 

A company's longevity and success lie not just in the quality of its leadership, but in the continuity of quality leadership. This continuity is achieved by nurturing internal talent and carefully planning for leadership succession.

Alignment is crucial in companies. The essence of a visionary company lies in translating its core ideology and drive for progress into every aspect of their operations. 

Building a vision for an organization is crucial for its success and longevity. A well-defined vision is a combination of the organization's core ideology and an envisioned future. A strong vision binds an organization together, making it resilient through growth, diversification, and globalization.

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