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. 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. 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. 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. 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. 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. 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. 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. You have a long list of books on your Web site 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.

Scott S. Smith is a West Hollywood freelance writer.