Built to Last: The True Test of Timeless Companies

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?