Built to Last: Successful Habits of Visionary Companies

 Built to Last: Successful Habits of Visionary Companies is the breakthrough work by Jim Collins and Jerry I. Porras. It is the predecessor to the transformational book Good to Great: Why Some Companies Make the Leap... and Others Don't that I read last year. For Built To Last, the authors spent six years analyzing a number of companies that had been in business for at least 50 years, and had managed to achieve spectacular results throughout their lifetime. Each company was paired with a comparison company that was similar in many ways, but which had achieved far less impressive results over a similar lifespan. Focusing on the difference between the 20 companies in the visionary vs. non-visionary set, the authors presented one overarching theme, and a number of supporting ideas. The list of visionary companies included GE, 3M, HP, Nordstroms, Merck, Proctor & Gamble, Citibank, Disney, Boeing, Motorola, Phillip Morris and Marriott.

The key recommendation for the book was to "Create tangible mechanism designed to preserve the core and stimulate progress".

Although these two principles might seem to be in conflict, the authors described a "yin and yang" system of opposing but necessary checks and balances.

The core of a business is the guiding ideology and purpose that can endure over many years and is unaffected by changes in the external environment. Leaders of a business may have started with this core first, or it may have developed over time. However, having a clear but limited set of core values and a supporting ideology was an important characteristic of the visionary companies.
A significant portion of the book was devoted to identifying the core values and ideology.  These values were almost always separate (and at times even at odds) with the necessary requirement of making a profit. They formed the foundation that continued to guide, inspire and focus the company in a volatile environment.

Two questions can be helpful in discovering/uncovering the core values of a company.

1.. What would we still want to do even if the market did not value it. What would we still be doing in 100 years that would be meaningful, even if the mechanics of how we accomplished it had completely changed?

2. If someone offered us a substantial buyout package to close our doors, what reasons would we have to reject the offer and continue? What is our value to the world?

There is no correct answer, but finding the answer for your company will help to define what is unique about it. One surprising finding was that having values appeared to be more important than what the values were. For example, Phillip Morris values individual freedom, responsibility and a strong desire to win, and these values permeated the culture even though the end result of those values was a profitable tobacco company that stands at best on very dubious moral grounds.

There were two primary mechanisms used to preserve the core ideology:

1. Promote home-grown management.

2. Build a cult-like culture.  It's a great place to work for those who buy into the core ideology. Those who don't fit are "ejected like a virus"

One of the more disturbing findings was that visionary companies were often cult-like, providing very concrete mechanisms intended to reinforce the core ideology to a level that went way beyond typical "corporate culture".

Visionary companies:

- Insure a tightness of fit either before hiring through tight screening, or soon after through a clear weeding process
- Create a sense of belonging to something special
- Provide ongoing corporate training programs with ideological as well as practical content,  teaching values, norms, history and tradition
- Encourage socialization within the organization on and off the job
- Promote from within, and explicitly link compensation and/or advancement policies to following the corporate ideology
- hire young, and indoctrinate
- Create and highlight a corporate mythology of heroes and examples
- Utilize unique terminology that reinforces the sense of belonging to an elite group
- Encourage corporate songs, pledges, affirmations or cheers that reinforce psychological commitment
- Provide awards and recognition for those who show great effort consistent with the ideology, as well as punishments
- Emphasize corporate heritage and values in written and verbal communications

Stimulating progress was similarly distilled down to a few mechanisms:

1. Set Big, Hairy, Audacious Goals (BHAGs)

BHAGs must be simple to understand, and pack an emotional punch. They are not boring missions statements, but concrete, easily stated goals that are so inspiring that they could persist even without the initial leader. They must be achievable, but only barely. The company must stretch to achieve them, and leaders must also be aware that once one is successfully completed, complacency can set it without another large goal. BHAGs must also remain in line with the core ideology.

2. Try lots of experiments, keeping what works and discarding the rest.

Mistakes and failures are a critical part of creation and success. Learn to fail faster, and to not repeat the same mistakes. Also, mistakes in execution are completely different from transgressions against the core values of the company, which are not tolerable.

Allow everyone to exercise a degree of autonomy. From their experiments will come progress. Also allow them to be persistent. Let them work through an idea. Companies that grant substantial operational autonomy have as a prerequisite a set of clear and guiding principles, a mission and purpose. For example, Nordstroms provided a one-page employees manual that boiled down to use your best judgment to make the customer happy. Once the core values have been clarified to provide a guiding framework and direction, then autonomy frees up the employees to move forward with those larger objects as they see fit.

3. Good enough never is. Practice continuous self improvement and set up mechanisms to guard against complacency.

Visionary companies drove themselves harder than the comparison companies. They build "mechanisms of discontent" to "obliterate complacency"  and bring about change and improvement from within still keeping true the core values.

Leaders a visionary companies were "clock builders", not "time tellers". They worked to create patterns today that would lay the foundations for success in the future.

Life in a visionary company is not supposed to be easy, in fact doing well is not even an end goal. Rather, the goal is to always do better tomorrow than you did today.

Mechanism examples:

• Disney didn't leave ideology up to chance. It created Disney University and required all employees to attend classes on Disney history and traditions.
• HP instituted a promote-from-within policy, and encorporated values from the "HP Way" into the annual review process, making it very difficult for anyone to rise through the ranks without demonstrating core values.
• Marriott instituted rigorous employee screening, employee indoctrination programs, and customer feedback loops.
• Nordstrom's created a cult of customer service reinforced by rewards and penalties. "Nordis" who treat the customer well become well-paid customer heros, and those who treat the customer poorly are ejected.
• Motorola committed to six sigma quality, and pursued quality awards.
• GE created one of the first corporate R&D labs to drive innovation.
• Boeing made huge commitments to technological innovations, where failure could have killed the company.
• P&G created an internal competition mechanism that put internal product against product to bring out the best
• 3M decentralized, initiated a 15% time project, created an internal venture capital fund, and introduced a rule that 25% of each division's annual sales should come from products introduced the last 5 years.

In Built to Last, the authors make a strong case for visionary companies as a social institution driven by a shared ideology and set of goals, and  far beyond merely a profit-making venture.  The high-level strategies that visionary companies use to both preserve the core AND to stimulate progress are:

1. Make the shift from time telling to clock building (focus on building processes for the future, with an emphasis on building an organization that will endure)

2. Reject the tyranny of the OR. Embrace the genius of the AND. By changing the approach, it can be possible to have both quality and  low prices, for example.

3. Have a core ideology and core purpose beyond just making money

4. Have a drive for progress, an "almost primal urge for change and forward movement in all that is not part of the core ideology"

5. Preserve the core and stimulate progress through tangible mechanisms.

Built To Last has earned its place as one of the most thought-proving business books of the last 20 years, and although I found the ideas in Good to Great to be even more applicable and actionable, I would definitely recommend Build to Last as a follow-on.

Multipliers: How The Best Leaders Make Everyone Smarter

In Multipliers: How The Best Leaders Make Everyone Smarter, authors Liz Wiseman and Greg McKeown outline 5 key disciplines that differentiate "multipliers" (leaders who increase the intelligence and output of the people around them), and contrast these multipliers with "diminishers" (leaders who, although smart, actually decrease the effective intelligence and productivity of the people they lead).

“We’ve all had experience with two dramatically different types of leaders. The first type drains intelligence, energy, and capability from the people around them and always needs to be the smartest person in the room. These are the idea killers, the energy sappers, the diminishers of talent and commitment. On the other side of the spectrum are leaders who use their intelligence to amplify the smarts and capabilities of the people around them. When these leaders walk into a room, light bulbs go off over people’s heads; ideas flow and problems get solved. These are the leaders who inspire employees to stretch themselves to deliver results that surpass expectations. These are the Multipliers. And the world needs more of them, especially now when leaders are expected to do more with less."

The 5 key disciplines of the multiplier (and their corresponding diminisher behaviors) are:

Multiplier: Talent Magnet: Attracts talented people and utilizes them at their highest point of contribution
Diminisher: Empire Builder: People must report to me to be useful

Become a genius-watcher. Identify the key talents of the people around you, and then connect them with opportunities.

Identify talent, shine the spotlight by recognizing their specific abilities publicly, remove the weeds/nonperformers publicly, and always trying to understand how, why and when a situation will allow someone to be successful. Use the 5 whys to understand the underlying cause of someone's success, build a hyposthesis, confirm that with the person and their peers, and then give them an opportunity.

People do not need to report to you to be able to contribute. Tap into their discretionary effort, and they will be able to give even more.

Tips for building up your genius-watching skills:

Identify the areas of strength of the 8 or 10 people that you associate with most often. Keep track of the things that they do both freely and well. Build some assumptions, and then get feedback from others, and the talented person as well. Find ways to give them opportunities.



Multiplier: Liberator: Creates an intense environment that requires a person's best thinking and work

Diminisher: Tyrant: Creates a tense environment that suppresses creativity and risk-taking

People can only give their best efforts, it can't be taken from them, so give them space to step up. Free them to think, but expect their best effort. The most critical aspect of the liberator is their ability to build an environment with high expectations, but where people feel safe to explore.

Get yourself out of the way. When talking with others, differentiate between "soft" opinions (areas where you don't care much, but are throwing something out, musings, "feel free to disregard this") and "hard" opinions (areas where you have a strong interest in a particular outcome).

Give people the freedom to succeed, or fail (in a way that is not devastating). Publicize your mistakes, making it known that failures are an accepted part of risk-taking and progress. Consider even creating/sharing the "screwup of the week". Expect that failures are necessary for progress. Strive to fail faster, and to never repeat failures by learning from them. Iterate rapidly.

Demand the very best from people. Don't be afraid to ask "Is this your best work?" and then expect them to rework it until they can answer yes.

Multiplier: Challenger: Define an opportunity that allows people to stretch
Diminisher: Know-it-all: Gives directives that showcase their knowledge

People grow stronger with challenges. Your job as a leader is to ask the biggest questions, to reframe and/or refocus problems and beliefs, to identify a starting point, and to generate belief that the end can be achieved. Present a concrete challenge, but don't be afraid to let other people fill in the blanks.

Ask hard questions, shape the path foward, co-create the plan, and build momentum with early but significant successes. You can "helicopter down", going from the 10,000 foot strategic plan to something concrete and practical to demonstrate that what you are asking is only improbable or difficult, not impossible.

Know-it-alls limit the ceiling of their organization, and refocus organizational energy on understanding what the boss wants to hear. Challengers force an organization to expand beyond its previous limits by asking bigger questions than they can answer by themselves.

Multiplier: Debate Leader: Together, we can come up with the answers
Diminisher: Decision Maker: I need to have all the answers

• Attempt to run an entire debate without answering any questions, only answering them.
• Ask and/or expect evidence for people to back up their views. Make this a habit rather than a way of putting people on the spot to promote a culture of fact-based decisions.
• Make sure that all voices (particularly the quiet ones) are represented.
• Use debate to drive decisions, not to block it, and to use it as a thinking process.
• Encourage people to switch sides and then argue the other side's point. Drive home the point that the debate is to test the validity of ideas.
• Give space for other people's ideas to flourish. Limit yoursself to a specific amount of contribution in any discussion or meeting (Try the poker chip challenge. 5 chips, each for somewhere between 30 seconds and two minutes of contribution. Use your speaking time wisely). 
• Don't be afraid to be a decision maker. Consensus decisions are not always necessary, but be sure to clarify how the decisions get made.

Multiplier: Investor: With guidance and coaching, they'll figure it out.
Dimisher: Micro-manager: I need to drive direction through my direct involvement.
They will never figure it out without my direction

Do not take over ownership of problems from your staff. If you need to step up in a meeting to clarify a point or refocus the debate, be sure to "hand the marker back". Step back out of the spotlight, and turn it over to whoever was leading before. Allow people to own the own solutions to their problem; guide and support them, but don't disempower them or teach them to give up or expect to be replaced when things get hard.

After discussing a problem with someone, turn it back to them with a simple statement like "you're smart,   you'll figure it out" or "I'm sure you can take it from here". Allow people to learn from taking the solution all the way, and don't teach them to quit once they've reached a roadblock that requires escalation.

Train people to come with you not only with a problem, but also with a potential solution: take the time to think about what the right answer is. No "awk" without a "f-i-x".

Don't be a "bungee manager", jumping in to save the day when things are exciting, and then disappearing after claiming victory for yourself and/or losing interest.

Other ideas:

• The 30 day challenge: Take one of each of these areas, and focus on it for 30 days at a time.
• The question of the year: Pick one question, and pursue the answer for an entire year

Some stats about leaders from the author's research:

• Leaders rated strong in none of the five areas were in ~34th percentile
• Leaders rated strong in only one of the areas were in the 64th percentile, while leaders rated strong in two and three of the areas jumped up to 70th and 84th percentile respectively when they had no strong deficiencies. So concentrate on your strongest area, and your weakest one. 
• Build your strength, and improve your biggest weakness into the average range.

The critical takeaway from the stats is that having/building strength in only a couple areas can clearly differentiate you as a leader.

Key Ideas:

When you identify and tap into someone's talents, you can engage them in a way that can cross organizational boundaries. Inspire, focus and drive debate to a conclusion, don't control it. Learn to create an intense environment, not a tense one, by setting high expectations AND giving autonomy and freedom to fail. Return ownership of solutions to anyone who comes to you with a problem after providing coaching and support.

The authors also offer an online assessment tools that helps to determine where you fall in the multiplier-dimisher spectrum:

Overall, Multipliers: How The Best Leaders Make Everyone Smarter is an extremely good book full of clear ideas and case studies to clarify the principles. Their recommendations are so concrete that it makes them easy to put into practice and to test.



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Driven: How Human Nature Shapes Our Choices by Paul R. Lawrence and Nitin Nohria

In Driven: How Human Nature Shapes Our Choices, Harvard Business School professors Paul Lawrence and Nitin Nohria present a unified theory of human motivation. They identify the following four primary drives, each unique and separate from each other in significant ways such that they cannot be reduced further, and which together form the basis for other drives. They are:

D1. The drive to acquire. This drive includes the desire for objects of value and unique experiences, status and influence. Sexual conquest would fall under this desire, while sexual intimacy would be D2.

D2. The drive to bond and form long-term relationships.

D3. The drive to learn, to increase our understanding of ourselves and the world around us.

D4. The drive to defend our self, our loved ones, our possessions, our community and our beliefs.

The authors begin by attempting to explain their background, and how the narrowed focus of the vertical scientific disciplines have been unable to arrive at a unified theory of why we do what we do. By tracing back to earliest humanity, when the great leap in human intelligence and/or society occurred, they point to a biological basis for the drives that was reinforced by successful evolution.

Each of the four drives has a positive and negative side. In moderation, each drive aids survival, and can help the species to thrive and to be happy. However, when carried to extremes, each drive can be destructive.

In the final part of the book, the authors point out how knowledge of their four drives can be used to build environments where people can prosper and thrive, meeting each of their four primary drives, and they point out two case businesses as case studies. They discuss HP as a model of a company that embraced all four of the drives to create a successful culture. The “HP Way” was based on the principles of individual ownership and responsibility, collaboration within groups, knowledge sharing, and a sense of community.

Unfortunately, Driven teeters awkwardly between a scholarly work and a book aimed at the mass market. On one hand, they try to build a solid case for why their four drives are necessary and sufficient based on studies in various fields. On the other hand, they then make a series of unsupported off-the-cuff remarks that greatly undermine their credibility. The writing itself is quite dry, and they spend far too much time talking about their credentials and editorializing.

Key ideas: Humans have four primary drives, the drive to acquire, bond, learn and defend that are all critical for our survival and success. Although the relative intensity of each drive will vary from person to person, we require all four to be met, and a successful business or social environment will address all four needs. Defending our beliefs is a core drive. In the same way that we rise to the defense of our community, we defend the ideas that we have adopted when they are threatened.

It is interesting to compare Driven with Drive by Daniel Pink. Pink talks about the need for autonomy, mastery, and purpose, and also addresses the need for payment as well. However, his goal is to identify the situations in which intrinsic motivation can flourish, assuming that the basic need for compensation has been addressed. Pink perhaps pays too little attention to the need to acquire/gain status, but his thesis is that those are primarily extrinsic motivations that science has shown to have a negative or at best neutral impact of creative thinking.

I listened to the unabridged audiobook version from Audible.

Review: Drive: The Surprising Truth About What Motivates Us by Daniel Pink

In his 2011 book Drive: The surprising truth about what motivates us, Daniel Pink offers a compelling and intriguing case for what he terms Management 3.0, the principles that will guide management in the 21st century.  Motivating knowledge workers, people who must exercise creative thinking to solve novel problems in new and unique ways where the correct answer is not even clear from the start, is significantly different than for the more manual and/or repetitive task-oriented workers that have been common for the last 150 years. In particular, creative thinking is significantly enhanced by intrinsic motivation, and impaired by extrinsic motivation, so the goal of management will be increasingly to set up situations that foster intrinsic motivation. Surprisingly, the effects of traditional extrinsic carrot (bonus/equity/perks if/then thinking) and stick (firing/humiliation/pressure) can actually impair creativity. Pink points to the following three principles for fostering intrinsic motivation:

1. Autonomy. Control over the four 4 Ts.

• Time (when work is done. Flex time)
• Tasks (what gets done. Allow people to pursue their own solutions to problems)
• Technique (Allow them to implement the solutions as they see best)
• Team (Allow freedom to collaborate with people of their choosing)

2. Mastery. People naturally want to become better at the things that they do. Enable people to continually improve by pursing "goldilocks" tasks: things that are not too easy, but not too hard. Strive to create "flow", the optimal state where focus, ability and desire converge. Encourage a climate of perpetual improvement, limited only by a person's desire to discover, learn and practice new ideas and techniques.

3. Purpose. People have a need to take part in something bigger than themselves that has greater meaning. Clarify what that larger purpose is, and

Citing a number of scientific studies, he points out that behavioral scientists have known about these ideas for decades, but that traditional management has been very slow to adapt to the changing science. For example, managers and companies should seek to remove compensation from the discussion, rather than motivate workers through bonuses. Multiple studies confirm that rewards-based compensation is actually counter-productive for tasks requiring creative thinking and problem-solving (although it IS effective for tasks with requiring little or no creativity). Pay employees a fair/good salary (relative to their peers, and to the industry), and allow them to focus on the intrinsic motivation of the job. Use pay to attract and retain talent. See also "Good to Great" for a detailed discussion of this idea.

In addition to management, Pink points out that the same ideas can be applied to education and child-rearing. As nearly all the tasks that are routine or well-suited to automation are leaving the US, the skills our children will require have shifted, and we need to shift our educational styles too. He includes a number of resources in the book, including a detailed summary of the contents.

Key idea: Fostering intrinsic motivation is key to tasks that require creative thinking. Autonomy, mastery and purpose are the building blocks of intrinsic motivation.

Other interesting ideas:

• Management is a technology, not an innate human condition. Be aware and treat it as such.
• Companies like Google use 20% time to give greater autonomy and drive innovation. End result: successful new products
• Results-only work environments (ROWE) are pioneering even greater  workplace autonomy

This is one of the most important books I read in 2011. Backed up by research, and presented in an entertaining and though-provoking way with concrete examples, the books makes a solid case for change. Pink goes out of his way to make the ideas easy to absorb, providing a number of resources like a detailed summary that can serve as a refresher, and a number of conversation starters.

There are many parallels to the ideas discussed in Good To Great. In particular, while GTG talks about the importance of hiring self-motivated people, and then not demotivating them, Drive fills in the gaps to explain how specifically to encourage self-motivation.

One area for further exploration would be the crossover between intrinsic and extrinsic motivation. I don't believe that the lines are as clearly drawn as Pink posits. For example, the successful person who states that they were driven (intrinsically motivated) by the burning desire to "not be poor", to provide security and safety for their families, or to be remembered, all of which would be fall in Pinks classification as extrinsically motivated, but which also share some elements of a greater purpose.

See Also:

• Good to Great: Why some ccompanies make the leap... and others don't
• Where Good Ideas Come From: The Natural History Of Innovation
• Daniel Pink's TED Talk on the surprising science of motivation 

Review: Switch: How to Change Things When Change Is Hard

I recently completed the audiobook version of  Switch: How to Change Things When Change Is Hard by Chip Heath and Dan Heath. In this excellent book, they break down change factors into three components: the logical mind, the emotional mind, and the environment. Borrowing a metaphor from another excellent book, The Happiness Hypothesis, they characterize human decision making as a rider perched atop an elephant. Although the rider (the logical mind) has the power of foresight, thinking and planning for the future, he can only exercise limited control over the greater strength of the emotional mind, the elephant. When emotions take over and runs wild, the tiny rider has only limited control and must hang on for the ride. The rider thinks about tomorrow, skipping the cake today for a healthier body next summer. However, without the elephant, the rider has difficulty making decisions and taking action. They summarize their recipe for change as follows:

1. Direct the rider. Often what appears to be inaction or resistance is simply confusion. Script the critical change steps into simple, crystal-clear actions that can be easily followed. Look for early, or previous successes (bright spots), and identify the key components to change. Often large, complex problems seem to demand complex solutions, but by looking for common elements in the bright spots, we can make progress through simple steps. For example, a weightloss campaign that targets whole milk as the largest single source of fat simply suggested buying skim/1% milk and was effective. Solutions-based therapy is another example of the "bright spot" technique. When in your relationship/career/life were you happy.

2. Motivate the elephant. What looks like laziness is often exhaustion. People have a limited amount of self control, and expending this control fighting their elephant decreases their capacity for other efforts. Make an emotional appeal that is directed at making people feel something. Aligning logic and emotion is critical. Knowledge does not bring about change, only emotion and desire change behavior. Powerpoint displays rarely get peoples' blood boiling, so find more visceral ways to get your point across. In one example, as part of a campaign to reform corporate purchasing, a glove shrine with more than 400 gloves, many identical except for their prices, was piled on a fancy executive's table to demonstrate the insanity of each business unit independently negotiating  and purchasing its own supplies. Always think, "what is the feeling here".

3. Shape the path. What looks like a people problem is often a situation problem. A good leader doesn't ask "what's wrong with these people, they just aren't getting it". Rather, consider what factors in the environment can be changed to influence the outcome. As an example, they described an experiment in which people at a movie theater were given large or extra large buckets of badly tasting popcorn. Repeated experiments confirmed that people given the extra large buckets ate more. Changing the bucket size changed behavior.

Other ideas:

Rally the herd: Use peer pressure to drive conformity. If the majority of people are already doing the desired behavior, publicize it and encourage people to do the right thing. For example, publicize that 70% of employees get their expense in on time, or 90% of reviewers complete their review within X amount of time. As a corollary, don't publicize statistics that reinforce undesired behavior, e.g. only 30% of employees submit their expense reports on time.

Make use of action triggers. Encourage behavior by tying it to a specific time and place or event. For example, ask employees returning from a conference to "write up some notes for the team when the fasten seatbelts sign goes off on the flight home". Students asked to write a paper over break did better when they specified when and where they would write it.

Use checklists. The "lowly checklist" is extremely effective at making sure that procedures are followed, or ideas are primed. For example, the "cisco pre-acquisition checklist" was a useful tool for ensuring that basic questions were asked prior to acquisition.

I highly recommend Switch: How to Change Things When Change Is Hard for anyone attempting to create change at the personal, organizational or even societal level.