Fast Company: In an author's note in the paperback edition, you write that you and Jim Collins didn't pick the title of Built to Last. Is it the right title?
Jerry Porras: I think that that title is really the right title. When organizations last, it doesn't mean that 100 years later they look exactly the way they look now. But it does mean that there are some fundamental roots, some fundamental characteristics that don't change. If we think of the evolution of human beings and we look at them across thousands of years, there are some fundamental things that don't change. They have two legs, two arms, two eyes; those are fundamental principles of what it takes for us to survive and be effective. And I think organizations have the same sort of characteristics. That's what we were trying to identify. As a result, the title continues to capture the essence of the work that we did.
FC: On pages five and six you have two big charts showing the stock returns of the visionary companies. In light of what we've been through with investor scandals, as well as increasing quarter-by-quarter pressure on stock prices, do you still think this is a good measure?
Porras: Let me be clear. The visionary companies were not selected based on the stock return measure. That measure was something we took after the companies were selected by the CEO survey. When you're looking at over 100 years' worth of history it's really difficult to find one single measure that's quantifiable, that's relatively reliable, and that people have some confidence in. So that's really how we landed on saying let's look at the stock performance of these companies. Clearly, we've had all these outrageous things happening in the last five or six or seven years that have affected what we consider an appropriate measure of performance. And we've got these very inflated price earnings ratios and so on.
But still, even given that, when we're looking at long periods of history, there isn't anything in my mind that's more reliable than that.
FC: Why did you pick the word "visionary" in the first place?
Porras: That goes back to the roots of how the research actually evolved. These are not clean processes. Very early on, Jim and I were talking about what guides a company. Is it purpose or is it mission? And where does that come from? We sort of evolved and said it comes from great leaders. Well, what are great leaders? You've got to remember that this is back in the late 1980s. People were writing books about great leaders and they were calling them visionary leaders. So we were laboring under the very simple model that it takes a great leader to create and lead a great company.
We were talking about this particular issue and then said if you need to have a really great leader to lead a great company, who's the charismatic visionary leader of 3M? Then we said, God, we don't know. We started looking at 3M and found that they had had a heck of a lot of leaders since their founding in the early 1900s. But none of them could be classified as a charismatic visionary leader, any larger-than-life, walk-on-water types. When we saw that, we said something's going on here, not in the leader, because you had all of these different leaders and none of them seemed to fit the bill of what a great leader's all about. It's got to be someplace else, where could it be? We think it's in the company.
When you look at the data, the vast majority of the visionary companies didn't start out with a great product. If you call a product a visionary product, if you will, they didn't start out with that. They started out with more of, we want to get in business, we want to make some contributions. It wasn't until some leader early in the history of the company transformed it, like William McKnight at 3M. The founders at 3M didn't have the sort of perspective that McKnight had.
I would say what's more important in these companies is that they want to live their values, they want to serve their purpose. And if we do that really well, the money comes. It's a different paradigm for the leadership of these companies. In a traditional company, the perspective is that we will shoot for the target of maximizing profits. If we do that it will allow us to make more money than if we did not shoot for that target. The visionary companies, they say we will shoot for the target of living our core values and pursuing our purpose. And if we do that, the money comes. And the data show that more money comes to them than to the people who shoot for maximizing profit or shareholder wealth.
FC: What's the great virtue of building for the long-term?
Porras: I think the virtue of the long-term is to have a set of missions and a set of contributions that shape and influence a society you're in. And if you think about how our great companies have helped to shape our society -- and I think in very positive ways -- you can't get that sort of influence from short-term thinking. Yes, we do have to have innovation and we do have to have change. But I'm not convinced that all the innovation and all the change is just coming from the brand new companies. I think that most of it does. But I think a lot of the change -- and I'm talking very subjectively because I haven't done any analysis of this -- much of what we consider to be the useful change that has come from the small or brand new companies is change that doesn't endure. Whereas I think that the sorts of changes that come from BTL-types of companies are changes that tend to endure over longer periods of time. As a result those changes really influence and affect a society over a longer term. I don't believe that we should have one or the other. I think anyone who says these old companies, these big companies that have been around, like 3M and Merck and all that, are dinosaurs and done away with, I think that's really shallow thinking.
FC: What lessons do you take from the visionary companies that have stumbled since Built to Last came out a decade ago?
Porras: I think the stumbling can be divided into two camps. One is a stumbling that I think is driven by the organization drifting away from some of the core perspectives that have made it great. And I think the second is the stumbling that happens to companies because they are run by human beings, who make errors and they're existing in environments that are changing on them and sometimes their decisions don't match what the environments need so they stumble. But that's a temporary thing. They're still doing things right. But you go out and run the race and your toe catches a little indentation in the track and you lose your stride and you don't win the race.
What happened at Disney, for example, turned out, I believe, to be a sort of evolution in Michael Eisner in which he really failed to understand that he was building a great organization. That's why Disney had been great up to that point. It was because Walt had built an organization. And, yeah, Walt was the center of it. He was a very charismatic guy. But he was spending a lot of his energies and efforts in building the organization. Eisner didn't do that on his own. You go back and look at Frank Wells, who was number two to Eisner, who died in a helicopter crash. I think Wells was really running Disney and Eisner was more of the outside guy, the charismatic guy who would make the deals and all that. But the building of the organization and all that was Wells. Wells was really the builder of the organization. He was the one who was really making the right decisions and creating the strength in the organization to do all the things necessary to be great. He died, and Disney carried forward on the momentum of his work for a while, but then I think the momentum just kept getting slower and slower and then just finally kind of stopped and started reversing. Eisner has not been able to find it within himself to appoint someone to that second position. And I think as a result, a lot of the ways Disney has operated have been predicated on his making the decisions. And that slowed a lot of things down and a lot of poor decisions have been made. I think the latest rift with Pixar is as much as anything an example of Eisner's ego getting in the way of a good business deal. So here we have a leader who really was strong on the values that Disney needed to get back on track, but who was weaker on the building side.
FC: How do you think the list of visionary companies would look different today?
Porras: If we put no constraints on the survey in terms of age of the company, I think some that would come on it would be Microsoft. I think Intel would probably come on it. We made the decision to drop Apple and Compaq because at the time we did the survey, Apple was 13 years old and Compaq was 8 years old. Apple to me is the perfect example of the charismatic visionary leader being the driving force. In fact, when we did the survey, Apple was one of the most frequently mentioned, if not the most frequently nominated company. So what happened a year or two later? Steve Jobs leaves Apple. Apple sort of goes in the tank. A few years later, Jobs comes back to Apple. Apple starts to become a prime company again. That's a natural experiment almost. You withdraw one force and the thing changes, then you put it back in and it goes back to what it was. That's a pretty strong demonstration of the power of that leader and the fact that he has not built a great organization. I would think if we were doing the survey now, in terms of dropping off, I think probably people would drop Motorola off. I think there would be some question about Nordstrom. I think people might well drop Ford off it. But I'll betcha Toyota would be on it. Boeing would go off.
I think American Express probably wouldn't stay on it. I think the fact that they were on it in the first place was influenced by a BusinessWeek article that came out a week before we did the survey. And it had the picture of the CEO on the cover and underneath it were the words "visionary leader." So I think people just connected the two. That's the power of advertising.
I would say that if we were able to conduct an experiment in which we surveyed CEOs every 20 years and we did it for 100 years, I would predict that all these companies would be nominated and be on some master list of companies. We do not think that these are the only visionary companies in the country by any stretch. But we do think these companies fulfill the visionary criteria in terms of the framework that we evolved. There are others. There are points in time that surveys are affected by the circumstances of a particular situation. So at any particular point in time, one or more of these companies may be off or on. But I think over a long time period, they would all be on it.
FC: Do people tend to grab on to one or two buzzwords in Built to Last and ignore the rest?
Porras: I hear core values thrown around a lot. I look at what people are saying are core values that really don't seem to be that. Purpose is another one that really is a word that people throw out but when you look at what their purpose is, it's a description of what they're doing, rather than why they're doing what they're doing. So certainly there are circumstances in which some of these things have become buzzword-y. A company grabs on to Big Hairy Audacious Goals and that's all they have, nothing else. I guess I'm also really pleased to see that the vast majority of companies that I've encountered are really trying to use all of them. My belief is that the main reason for the durability of the book is that there are ideas in here, not just buzzwords. In essence what we did, what I think we did, was presented theory.
FC: Is there anything about the book that you wish you could go back and change?
Porras: I often feel a bit offended when someone asks when we are going to revise the book. It's 10 years old now. And, gosh, you know we think that we discovered ideas that are enduring and will last for 100 years. How can we be revising it in 10? Ask me in 50 years. In the 10 years that I've been talking about this with managers and dealing with organizations, there really isn't any significant thing that I would alter. I really continue to be confirmed in my dealings with managers that the fundamental ideas here still are very, very relevant. There's nothing in my mind that has really aided the invalidity of these findings.