Five Minutes With Author Jim Collins
What does it take to be great, not just good? This Built to Last author reveals
what it takes to reach the top--and stay there.
October 01, 2001
"You need to build mechanisms that give you data with teeth so that unpleasant
truths can't be ignored."
In 1994, Built to Last: Successful Habits of Visionary Companies by Jim Collins
and Jerry Porras hit the business bestseller list. It has stayed there ever
since and even been translated into 16 languages. Collins and Porras, professors
at the Stanford University Graduate School of Business at the time they wrote
the book, conducted a five-year study of exactly how great companies--those that
are No. 1 in their markets--differed from merely good companies. And to shake
out short-term deviations, they took the long view: The oldest firm (Citicorp)
was founded in 1812, and the youngest (Wal-Mart) in 1945. They compared each top
corporation with a competitor that fell short: GE vs. Westinghouse, Marriott vs.
Howard Johnson, Motorola vs. Zenith, Walt Disney vs. Columbia Pictures.
The study uncovered many surprising insights, ones ambitious entrepreneurs use
to help direct their businesses. Collins himself acted on the findings: "I went
from being a professor of entrepreneurship to being an entrepreneurial
professor," he says. In 1995, Collins started a management laboratory in
Boulder, Colorado, where he continues to research and develop tools to improve
businesses. "Built to Last was really an entrepreneur's book," he says, "because
it was about the way these companies were founded and the genetic codes which
allowed them to become what they are now."
Collins' latest findings can be found in Good to Great, a study of how good
companies can transform themselves into great ones. We spoke with him about how
companies can reach the No. 1 position--and stay there for the long term.
Entrepreneur.com: Entrepreneurs may be disappointed to learn that the enduring
great companies were not generally built by charismatic founders with great
ideas.
Jim Collins: If you have great charisma, you need to recognize it as a
liability. Too often, firms become dependent on the charismatic leader, and they
tend to attract people who have a need to be around a hero. [Those people]
aren't the ones who will be able to take a legacy and run with it after the
founder leaves. Instead of a cult of personality, you should aim to build a
cult-like culture around your core business.
Second, you have to have mechanisms that reinforce your values. There's this
tiny rock-crushing firm, The Granite Rock Co. of Watsonville, California, which
received the Malcolm Baldridge Quality Award. At the bottom of each invoice, it
puts a notice [to customers] that it's OK to pay short if [they're not]
satisfied. They don't have to call Granite to complain; they don't have to
return the product. The customer has total discretion. That mechanism leaves no
doubt that true customer service is a core value for Granite.
Third, all decisions shouldn't simply be consistent, but super-consistent with
those values. There's a company in Bolton, Ontario, Husky Injection Moulding
Systems, that values total honesty with customers. If a salesperson there
honestly told a customer about the strengths and weaknesses of Husky's products
but wasn't forthright about the fact that a competitor's product would be better
for the customer's needs, then he would be fired for selling the Husky product.
Entrepreneur.com: Why should entrepreneurs care about what a small rock-crushing
firm like Granite Rock is doing?
Collins: It illustrates that you can build a progressive, great company in the
most mundane of industries. The organization has been completely infused with
the desire to make the customer happy. They don't compare themselves with other
rock quarries, but rather with Nordstrom. They have quality mechanisms in place
that are better than General Electric's.
Another value Granite Rock has is continuous learning, so when it found out that
[one of its] rock crushers couldn't read, the company arranged for him to become
literate. When [the company] won the Baldridge Award, he read one of the
acceptance speeches. They've decided to have the most enlightened management
compared with any company, even though they're privately held and can do
whatever they want.
Entrepreneur.com: Another message from your study is that a brilliant strategy
is not always the way to success.
Collins: Key strategic thinking needs to be done, like "What are our strengths?"
But the more common trait of the enduring firms isn't brilliant strategy but
brilliant execution. Often the BTL corporation and the ones we compared them
with had the same strategy. Disney wanted to make cartoons, nothing profound
about that. But what was different was, Walt brought superb attention to detail.
When they did Snow White, they worried about every single frame. Compare Procter
& Gamble with Colgate. [Colgate is] a very good company, but P&G surpassed it in
consumer branding because it hired better people and paid more attention to
execution.
Entrepreneur.com: You also discuss BTL firms that "try lots of stuff and see
what works"--hardly a strong master plan.
Collins: There's a great, maybe apocryphal, story about Gen. Dwight D.
Eisenhower. Once the troops landed on D-Day, he threw the plans in the waste
basket, saying, "Planning is priceless, but now that we're moving, plans are
worthless." You want to do a lot of thinking, but that's very different from
adhering to a plan. It's like mountain climbing: You can get killed if you don't
plan or killed by not learning to adjust.
Entrepreneur.com: Perhaps the most interesting idea in the book is that great
companies often pursue seemingly paradoxical goals.
Collins: It's what we call the "Genius of the And" rather than the "Tyranny
of the Or"--it's a trait of the best executives. It's learning to be able
to, for example, reject a choice between doing something for the short term and
something for the long term. The central idea is the need to make effective
decisions that address the realities of the short term, which lay the
foundations for the long term. Let's take investment in research and
development, which is done more by BTL companies than others. Maybe the
effective thing to do isn't to spend a million dollars this year on R&D but to
hire the very best person for that department for $150,000. Most dichotomies,
like quality or cost, are artificial.
Entrepreneur.com: But what if resources are limited?
Collins: The essence of the solution is to ask yourself, "What are the most
important things we can do that will allow us to make the most distinctive
contribution that makes economic sense and fits with our values?" Only those
with the best potential are pursued, and everything else is cut out to stretch
resources.
One of the things that stands out over time is to "keep some powder dry." If you
put everything you have into one cannonball and you try to hit a ship and miss,
you're out of luck. Entrepreneurs too often put too much gun powder into a
single shot. It would be much better to make lots of small shots to calibrate
for the cannon ball. I was told about a study of Harvard Business School
graduates who started their own companies. There was only one factor that was
significant in distinguishing those who eventually were successful and those who
weren't: When the successful graduates failed the first time, they still had
money left over.
Entrepreneur.com: You say that the most important trait of an entrepreneur is
the discipline of self-improvement.
Collins: When Verdi, at age 82, was working on a new opera, he was asked why. He
responded that he thought he still had a few years to get it right. I met
[Hewlett-Packard co-founder] David Packard in 1995, and he was still living in
modest circumstances, but he was still very excited with what HP was doing. They
were both satisfied with themselves, not with what they were doing.
Entrepreneur.com: You have a long list of books on your Web site http://www.jimcollins.com
that you recommend to businesspeople, though many don't appear to directly deal
with management issues. What would be a couple of the most interesting for
entrepreneurs?
Collins: One would be Son of the Morning Star: Custer and the Little Bighorn by
Evan S. Connell, a biography of Gen. George Armstong Custer. He reminds me of
entrepreneurs who have early success and then begin to think they're invincible.
The other would be Undaunted Courage: Meriwether Lewis, Thomas Jefferson, and
the Opening of the American West by Stephen E. Ambrose, about the Lewis and
Clark expedition. It's an ultimate entrepreneurial adventure, the 19th century
equivalent to landing on the moon. Too many people think, "I'll be happy when I
get there." Be careful what you wish for, because you might get it. Meriwether
Lewis committed suicide because once it was over, he felt there was no more
meaning. He was only really happy when he was on the journey. The real
entrepreneurial joy has to be being on the [trail] heading west.
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Scott S. Smith is a West Hollywood freelance writer.