Built to Last: The True Test of Timeless Companies

Jim Collins on why Built to Last is not about business performance, why the list doesn't matter, and why the laws of physics will never change.

Fast Company: What originally sparked the thinking behind Built to Last?

Jim Collins: I remember the original spark very vividly. Essentially, Jerry was teaching organization behavior and systems theory stuff. And he had a lot of pieces of the puzzle but just felt there was something missing in the whole systems theory view of the world. I on the other hand had been teaching entrepreneurship and small business. And I ran into the problem that when you looked at just case studies you don't necessarily know how to separate out real timeless principles that make something great versus just happenstance or luck. For example Apple Computer was just very much in the right place at the right time. So if you taught a case on Apple Computer, how do you know its success had anything to do with the principles it might have been following? How much of it might have just been due to luck of being in the right place at the right time? So Jerry and I got together and figured out that there would be a method to be able to identify timeless principles that really explain and really provide guidance for how to build something exceptional rather than just luck, happenstance, practices of the moment, the right technology, a single leader or any of those things which are really more idiosyncratic rather than systemic principles.

FC: Looking back on Built to Last, would you still have used the CEO survey?

Collins: That's like if you came to me and said, "I've read all your work over the years and I want to talk about the best paper you ever did in college. Given everything you know now, is there anything you'd do a bit differently?" Of course there is, because you know more.

That said, what's remarkable about that survey is how incredibly solid of a list it gave us. I think every company on the list is still a standalone company. If you look at how the list has held up over time, it's still a panoply of some of the more remarkable companies in American history. Some are up, some are down. But that was true even when we selected them. IBM was down when we selected it. And you have to think about what BTL was trying to do. BTL was trying to put its finger on the timeless principles that separate out truly enduring, great, iconic institutions. BTL was not about business performance. BTL was about identifying the timeless principles that enable you to take a company from merely successful to an iconic position in the entire culture of society. Let me repeat that. BTL was not about business performance.

I'd come back and I'd ask the question, how would you identify companies like that now? The interesting thing is that, in retrospect, I think the survey for that question is still the best method. Two premises: One, BTL was not about business performance. You couldn't use a clinical selection. You have to use something where you ask discerning judges, who do you think really meets that test? And we felt that a stratified sample of CEOs of all different sizes and types of companies would be the most discerning judges of that question. Given that question and given that BTL was not about business performance, then I would rewind the tape and say I cannot think of a better -- if you had to pick only one selection mechanism -- I cannot think of a better method in retrospect.

The survey card we sent to CEOs was a very simple card. It said please identify five companies, using whatever criteria you want, that you consider highly visionary. We did not define visionary. I think we probably could have phrased that a little better. At the time, I would say that visionary was probably the best word we had. And I think that if you think about it -- what is a visionary company? -- a visionary company is one that would have had a visionary impact on the world. It didn't just perform well; it changed our world somehow. That's what a visionary company would do. It would be one that everybody would look to as having led the way in some dimension, that our lives are permanently changed or affected. And I think the word visionary is a pretty good word for capturing that idea.

FC: But performance still matters?

Collins: We did an interesting analysis in the book, where we analyzed, just picking who would have been the best performing companies over say certain period. And it wasn't the same list. In fact if we were just selecting on performance we would have picked a different list. And we put that list in the appendix. Not only did we say the book wasn't about performance, we went so far as to say, not only that, if you would have picked on performance, you would have picked a different list. Only one of those top 18 performers actually made it in to our study. And most of the companies there, you wouldn't look at today as really meet the BTL test. That is, how many of them meet that test of having an impact on society, that truly visionary standard of the companies? How many of them brought the 747 to the world? How many of them invented Disneyland? How many of them brought the IBM 360? How many of them changed the entire retailing landscape by redefining service? Or invented product management? The companies that are on this list, the best-performers over 10 years, they didn't have that stature. So I think that we were very, very clear, with our readers.

FC: What companies would be on the BTL list today and which ones would be off?

Collins: It's really an irrelevant question. Let me ask you a question. What is BTL about? BTL is not about these companies. Let me repeat that. That's a really important point and if you don't get that point, you don't understand the work. BTL is not about these companies. Good to Great is not about the GTG companies. The new research I'm doing now, here's the question I'm answering: How do you endure brutally turbulent events and still become great? Now let me ask you a question: Do you need to know who my companies are to be interested in that question? How to endure brutally turbulent events, big bad scary things out of your control, inherently unpredictable that can rip away control of your own destiny. And yet how can you survive those things and still end up being a great company or building something great or having a great life? Of course it's an interesting question. Now if I write a book on that question, are you going to come back and say that that book is about the companies? No, you're going to say it's about the question. It's pure theory, derived by empirical data.

What is BTL about? It's about discovering the timeless principles that make iconic companies that weave themselves into the fabric of the world. How did we discover those timeless principles? By discovering a set of companies that met that test at some point in their history and comparing them to what? To others that did not. So it doesn't matter if you picked a different list today so long as the companies met that test and you did rigorous paired comparisons. You would get the same timeless principles. The companies would be different.

Do the laws of physics change? Does f=ma change if you derive it by looking at billiard balls or whether you derive it by dropping pens from the leaning tower of Pisa? You don't go back and say f=ma no longer applies.

FC: Does it bother you when people focus on the list?

Collins: Somebody who focuses on the list, that's kind of like saying that physics is about billiard balls. No, physics is about physics.

I think for the most part, my experience has been that people haven't gotten hung up on the list of companies. I'll put it this way: At least, intelligent, practicing leaders haven't gotten hung up on it. If I'm sitting there with the CEO of a major hospital chain or a major corporation or a startup company, they don't look at me and say, "So, gosh do you think that Disney kind of negates any of this today?" I never get that question. What I get is, "We're really trying to preserve the core and stimulate progress here and I'm really struggling with how best to bring about that idea." I almost never get questions about the companies from people who are really trying to use the ideas.

It's like if you studied what makes good health. Let's suppose you and I want to do a study. We want to know what makes for leading a healthy life. And we take 50 people who have outstanding health at a certain stage of their life. And let's suppose we matched those against people who are chronically sick but came from similar demographics. We match-paired them all. We do a nice controlled match-paired study. Now let's suppose we discover that exercise, diet, and sleep are three principles of health. Now let's suppose 10 years later, somebody calls you and says we're doing a retrospective on your study on health and we found that five of your original subjects, two of them took up smoking, one of them became obese, and all of them gave up exercise. We'd like to ask whether that questions the important of diet, sleep, and exercise. No. Would you question that? No you'd say five of our study sets stopped sleeping well, eating well, and getting enough exercise. And if you were to do the study today, would those five make it into the study? Maybe not.

It's not hard. It's not intellectually challenging once you stand back and think about it. When people criticize from the list, I scratch my head and think what an odd thing. To update the list today, for me that wouldn't be a worthwhile endeavor because I was more interested in answering the big unanswered question of how do you turn good into great, than updating a list. My problem is not a lack of ideas. My problem is that I've got one life, maybe 60 years of productive work total, 65 if I'm lucky. And that is 1/100th of what I need to execute on the ideas I have. I'm always pointed on the horse looking forward.

I'll tell you the one thing I have been incredibly frustrated with, though. Probably the thing that is most -- what I've had to most hammer into people, what people don't get as easily -- is that the BTL ideas are very much about the "And." One of the things that really has frustrated me has been peoples' perception that BTL is about preservation, conservation, stasis, stability. To be built to last, you have to be built to change. And we always said that. If you read chapter four, where we introduce the most important law of physics to come from this book, the most important chapter of this book. Preserve the core and stimulate progress. You can have the most deeply cherished and meaningful core ideology, but if it just sits still or refuses to change, the world will pass it by.

And we even talk about IBM in its time of trouble. We believe IBM began to lose its stature in the early '90s in part because it lost sight of this difference that you need both sides of the coin. The crucial thing is that you need hand-in-hand with that preserving of the core is this absolutely relentless, pounding, ferocious, neurotic, passionate drive for progress. They're anything but stasis. I'll share with you a very interesting little thing. Turns out when you study religious institutions, there's a very interesting thing, say a theological seminary. You ask yourself the question, which theological seminaries are better able to change? It turns out that it's the conservative ones. You ask yourself, why is that? It's because they have such clarity of their conservative values that they're more easily able to change all their practices. Because they're very clear about their values as an anchor point. So, if you were to say what I have learned since BTL, it's that people didn't get the "and." People will say, Well you know, it's a new world that's changing, you have really be able to embrace change. And I'm like, funny, we wrote six chapters on that. I don't understand. It's preserve the core and stimulate progress. What preserve the core/stimulate progress does is create an institutional set of processes that map to a very, very deep primal human distinction: our need to believe and our need to create.

FC: You've likened BTL's principles to physics. But it's possible to prove physics wrong?

Collins: Or right.

FC: Good point. So could someone ever prove BTL right or wrong?

Collins: I guess what I worry most about in our work -- my own fears. I think it's unlikely that preserve the core/stimulate progress would be overturned in 50 years, because it's such a deeply human, truthful insight about truly the way humans and systems work. I just don't think it's going to be overturned. It could be, I suppose. You could have simple enough evidence to subvert it. But I think with match-pair method and all that, I'm reasonably confident, I'd never say 100%, but reasonably confident. I'll tell you what I am worried about. I'm worried about what else we're going to discover that will make it such that what we've found so far is only 10 or 20% of the equation. I'm not scared of preserve the core/stimulate progress or Level 5 leadership from GTG being overturned. I'm scared that they're going to turn out to be so relatively insignificant compared to something we haven't discovered yet.

FC: Is that what motivates you to keep researching new areas?

Collins: I'm motivated by two things: curiosity and impact. Curiosity means, I don't want to look under the yellow hat, like Curious George, just to prove that I'm right. I want to look under the yellow hat to see what I see. True scientific inquiry. I just love the research process. I love discovering. The other side is impact. You know, I've already had success. I'm worried more about impact long beyond my lifetime. And you know, the only ideas that ultimately have impact are the ones that are right. Coming up with ideas just to have success -- and I never started a consulting firm, I never started a business out of this stuff. Peter Drucker once asked me, so do you want to build an organization to last or do you want to build ideas to last? I said, oh clearly the second. I want to build some ideas to last. And he said, then you must not build an organization. One of my goals in life is to leave behind a few ideas and methods of ideas that last. The only way that will happen is if they're right. History wipes out those who aren't right. So, unless you grasp that that's what I'm up to, you just can't grasp all this stuff. Success has just been incidental. In fact, I wasn't even prepared for success. It's been a complete surprise. In some ways it's been nice. In some ways, though, it's actually in some ways harder to be successful. I was never prepared for the problems of success. And they're a different set of problems and I'm a neophyte in learning how to deal with them.

If you rewound the tape to say 1999, right in the crux of the GTG research, right in the middle of it, just really buried down in it, we don't know what we're going to find, we're going through all this data. You go back to then and then you fast forward to 2004 and we have a million-and-a-half hardcover copies, I don't know how many around the world -- levels of success I could have never ever imagined, and you had asked me, which year am I happier, 2004 or 1999? Hands down, 10-to-1, 1999. Yeah. Not that I'm unhappy. But I just love picking new ideas off the tree. When things become more successful than you ever dared to hope or imagine, you find a very interesting thing. You get the rise of the critics and the moochers. I pretty much ignore the critics and unfortunately I have to deal with the moochers -- people who want to jump on the bandwagon and start GTG consulting firms or something. We get invitations for partnerships of that kind probably 2-3 times per week. We say no to them all. But it's people who want to get on that boat.

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