Secrets of Corporate Longevity

Jim Collins, author of Good to Great and Great by Choice, and Stanford professor Jerry I. Porras explain what makes some companies significant, lasting and “visionary.” Their classic 1994 management guide remains relevant and insightful, though not every featured company managed to survive.

The authors’ analysis illuminates their in-depth research into decades of corporate history and operations. Their engaging, detailed narrative discusses and debunks business myths and provides actionable, sometimes counterintuitive guidance. With honesty and insight, they explain why some firms flourish and others fail.

Porras and Collins’s balance between a sense of humor and business ruthlessness is on near-constant display, and that is part of what has kept this work widely read over the past decades. Anyone can compile or study research; only a select few can glean from it unique insights and consistently worthwhile advice. Even a quick skim of these pages will demonstrate why this is a classic, indispensable guide for leaders.

Vision

Porras and Collins recount the saga of Bill Hewlett and Dave Packard, who founded the Hewlett-Packard Company (HP) in 1938 and led it through years of innovation, creativity and fiscal success. Hewlett-Packard maintained its long-term financial health for years after the founders left. 

By contrast, the authors cite how Texas Instruments – HP’s tech industry peer and a one-time Wall Street darling – nearly perished after co-founder, chairman and president Patrick Haggerty stepped down. Collins and Porras assert that visionary companies possess assets that last beyond the tenure of their famous leaders or hot products.

I’m probably most proud of having helped to create a company that by virtue of its values, practices and success has had a tremendous impact on the way companies are managed around the world.William R. Hewlett

Porras and Collins argue that visionary companies set the standards in their industries, gain the admiration of their peers, make a global impact with their success and survive their founders’ departures or deaths.

The authors clarify that the extensive research leading to this book defined “visionary companies” as launching prior to 1950 and enduring through multiple business cycles and generations of top executives.

“Great Ideas” and Early Failures

Collins and Porras refute “the myth of the great idea.” For example, when Hewlett and Packard spent $500 to launch HP, the authors reveal, they had no specific product or any grand plan to invent one. The authors underscore that among the 18 visionary companies they identified, only three – Ford, General Electric and Johnson & Johnson – started with a planned, successful idea, product or service. 

The authors explain that notable companies can begin in failure. For example, 3M started out as a “failed corundum mine.” They showcase Boeing and Disney as other early failures. Collins and Porras – demonstrating their counterintuitive insight – maintain that the lack of a grand idea or early success forces entrepreneurs to focus on building a great company rather than simply promoting a single product or service.

“Big Hairy Audacious Goals”

The authors can be witty and at times, self-amused. Take their position that visionary companies commit to major targets, which they call – with a smile – “Big Hairy Audacious Goals.” (BHAGs). These objectives, which must be clear and easy to explain, provide the fuel and the vehicle with which visionary companies move forward.

Cultural Fit

Porras and Collins find that visionary companies with strong workplace values and “tight-knit” social structures embrace employees who fit their culture, but expel misfits who don’t.

We found that the visionary companies tend to be more demanding of their people than other companies, both in terms of performance and congruence with the ideology.Jerry I. Porras and Jim Collins

They point out, for example, that if you disdain “Pixie Dust,” and don’t want to maintain a “clean-cut,” wholesome appearance, you should never apply for work at Disneyland.

“Purposeful Accidents” 

Porras and Collins delve into convenient, creative and practical accidents that generated profits and opportunities for visionary corporations. Their exploration of these accidents reads as an oblique endorsement of the necessity of good luck. For example, they cite the way Marriott moved into the airline catering and services business in 1937, as a result of its leader, J. Willard Marriott, noticing airline customers who were buying snacks before their flights.

Internal Channels

The authors find some amusement in the way media attention painted GE leader Jack Welch as a white knight who rode in and saved the company. They point out that Welch, like all of GE’s chief executives, was “home-grown” talent; he joined the company at age 24. The authors also disclose that, from 1915 to 1994, GE’s chief executives generated an average return on equity (ROE) of 28.29%, compared to Welch’s 26.29% ROE. Welch exemplifies the authors’ belief that visionary companies develop corporate leaders from rank-and-file employees whom they’ve schooled internally as candidates for higher positions.

Honesty

The authors repeatedly stress that core values form the basic building blocks of visionary companies. Disney, for example, was founded and built on its core values of imagination, creativity and wholesome attitudes. 

Ultimately this is not a business book, but a book about building enduring, great human institutions of any type.Jerry I. Porras and Jim Collins

To develop or redefine your organization’s core values, Porras and Collins suggest assembling the best possible internal group to generate a list of values and to examine that list rigorously together. 

A Classic

Reviewing this fundamental, time-proven, prescient, insightful business guide is like reviewing the Mona Lisa. You might find minor flaws here and there, or insist that it’s not to your taste, but you can’t argue with its worth or well-earned endurance. Collins and Porras let their copious research material teach them what mattered rather than imposing their views on the material or insisting that it conform to preconceived notions. Their own sense of discovery brings enduring further discoveries to business readers.

T.J. Rodgers, president and CEO of Cypress Semiconductor Corp, called this, “a ‘must read’ for any CEO who aspires to create a great company.” Amazon.com wrote of this widely acknowledge classic: “This analysis of what makes great companies great has been hailed everywhere as an instant classic and one of the best business titles since In Search of Excellence.”

Worthwhile books that also address that elusive search include Jack Welch’s Straight From the Gut and co-author Jim Collins’s other classics, including Good To Great and Great by Choice.