Built to Last

 Till now I was explaining one term or concept which I learnt from reading a particular book. Now that I have run out of terms or concepts to explain, I will turn to summarizing the books I have read. When I read these books, I knew I was learning something new and after all these years I still remember that I enjoyed reading the book and that it was very interesting. What I have forgotten is what exactly I learnt from the book!!! I had to check  one or two sites and see what was in the book and things came rushing back. So, here is my summary of Built to Last book by Jim Collins.

 

This book describes the research done by Jim on various companies. He observed that some companies managed to stay at the or near the top for more than 50 years while other companies seem to rise to the top for a few years and then fall into oblivion. He then analysed what was common in the companies that remained at the top. Some of the companies he selected are – 3M, Johnson&Johnson, Merck, Wal-Mart,IBM, Philip Morris etc.

The common characteristics he found are –

 

Clock Building Vs. Time Telling

 

The Built to last companies seemed to do well irrespective of who is CEO. Some of the companies like 3M and Merck have histories of over 100 years and yet are at top. He says this is because of process of clock building. “Built to Last” companies have leaders who teach the management how to build clocks so that they can tell the time on their own, while leaders in other companies want to be stars. Hence they tell the time but do not teach others how to tell the time. So, once the star CEO steps down, the company no longer does well.

An example of time teller in my opinion is Steve Jobs of Apple. I truly belive the company is doomed once he exits. Why do I say that? The management threw him out in 1990s and the company declined. They brought him back and he has produced hits like ipod and iphone. He was on medical leave for a few months the company releases a product like iPad. Yes,I am predicting it to be a failure… I think Steve jobs hasn’t taught the management how to “tell the time”.

 

Do not look for profits in everything

 

The author gives the example of Merck which distributed medicine for some disease in Africa free of cost in 1920s because people of africa could not afford the cost. Similarly, they provided medicine to Japanese after the world war II at cost price since the country was devastated by nukes.

 

These actions caused a lot of loss to the company in the short run, but it built up enormous amount of good will amongst japanese and Africans. The result is that they are the number 1 company in the very rich and profitable market of Japan now.

 

BHAG

 

Big Hairy Audacious Goals. Every company should have one to drive the people, make them passionate about the work they do.  Ratan Tata had one – A car for every indian family.

 

The BHAG clearly galvanised the tata engineers to excel in every aspect of car design to result in a beautiful creation called Nano.  I am sure that if Ratan had just said I want a car that costs less than 2lakhs, we would have got a far worser product. 

 

Does your company have a BHAG?

 

The author says BHAGs should be something the company has never done before, but it should not be such that the company can never achieve it. It’s something like the stretch goals, but which ignites the passion in the employees.

The author says, once the BHAG is achieved, the leadership should look for a new one.

 

Strong Cultures 

 

Every Built to Last company had very strong sense of company culture. He also explains a culture is built on stories( it might have been a different book…not sure). Once, Packard of HP found the room where lab equipment are kept locked. The story says that he was so furious that he got a hammer and broke open the lock. He wanted to convey that any engineer in HP should have all the equipment available to him even if he comes up with an idea in the middle of the night.

 

Innovation

 

No company can survive for 100 years without innovating. 3M is an excellent example of a company that surprises people with their new products every year. In fact our office would have been a far worser place had it not been for their post-it notes and cellophane tape. How is it that the company manages to innovate so well?

 

It is because the management has innovation in their performance criteria. They have a rule that 20% of their revenues must come from products that was invented in the last 5 years. This might not sound like much for us, but remember that it is a 100 years company and their revenues are in billions because of hits like cellophane tape. In fact I read in an article in business today last week that they have upped the target to 30% recently since most of the management was hitting their target of 20% easily… 

3M products that I have noticed –

• cellophane tape
• post-it notes
• The new fangled reflectors on the concrete dividers on Bangalore roads!!
•  My car’s sun film
• The mat in UB city’s 2nd floor. i.e the ones near the doorway to go to fountain and food court.
• Scotch Brite!!
• Used to see their 3.5 inch floppy disks…

They are everywhere… Do let me know if you find any 3M product that is not mentioned above.

There were other points as well like home-grown management which I don’t remember too clearly.

Do you think your company is built to last?

Note: – I am going to edit this post if iPad becomes a hit.There will be no trace of my wrong prediction…However if I am right, I will become a management “guru” and TV channels will approach me for interviews whenever a new product is launched….Muhahahaha