Note: This is part of a series of Walton Insights reviews of classic books on business and leadership.
Here are two realities that apply to all companies: One, they can be built to last and still fail. Two, they can go from good to great and back to good or, worse, to bankruptcy.
This comes as no surprise to anyone who has ever been involved in starting, building, or maintaining a business. Sustained success is hard. That’s why it’s so rare.
I kept those realities in mind while reevaluating the relevance of Good to Great by Jim Collins and Built to Last by Collins and Jerry Porras.
Of the 18 companies highlighted as “visionary” in Built to Last, almost all still fit the original criteria established by Collins and Porras – they are at least 50 years old, are considered premier institutions in their industry, are widely admired by knowledgeable business leaders, have made an indelible imprint on the world, have thrived under multiple generations of CEOs, and have been through multiple product or service life cycles.
That doesn’t mean they haven’t weathered significant storms. Citicorp, for instance, merged with Travelers Group in 1998, became Citigroup, spun back out in 2002, was declared insolvent in 2008, and found new life thanks to a government bailout. Motorola, meanwhile, split into Motorola Mobility and Motorola Solutions. Google bought Motorola Mobility and then sold it to Lenovo, while Motorola Solutions remains on the Fortune 500 (at 418).
In Good to Great, meanwhile, Collins and his team researched whether companies could break free of the complacency that comes with being “good” and rise to the level of “great.” Here the criteria were companies with “15-year cumulative stock returns at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next 15 years.”
Are the companies that he highlighted still great? Frankly, I didn’t invest the time to research their cumulative returns over the past 15 years. Less scientific analysis, however, would indicate that most of the 11 companies the book featured as good to great examples are still at least good.
The most notable exception would be Circuit City, which went bankrupt and liquidated its store. Of the others, only Gillette (which sold to P&G) and Pitney Bowes aren’t listed on the Fortune 500.
None of this, in my opinion, qualifies as a case for or against reading or re-reading these books or removing them from the list of classics. It’s the enduring value of the lessons learned, not the ongoing success of the companies, that makes the books worth reading.
Collins, Porras, and their research teams looked at all those companies (and a long list of comparison companies) to see what they did right to achieve what they had achieved. It was a snapshot in time, not a forecast for the future. And what they found remains true, regardless of whether some of the companies (their leaders, in particular) stopped doing the things that made them great or set them up to last.
If you want to build a company that will last for generations, you still need to “focus on more than profits,” set “big hairy audacious goals,” create “cult-like cultures,” and “try a lot of stuff and keep what works”—all principles taught in Built to Last. And Good to Great ideas like cultivating Level 5 leadership, the hedgehog concept, and the flywheel all still apply.
The books aren’t perfect: I never cared for the clock building analogy, and a good bit of what they preached as counter-intuitive or innovative thinking now seem a bit old-school. Ideas, like people and companies, age and some age better than others.
These remain books that every business student and business leader should read, even if they don’t merit the type of in-depth study they merited a decade or two ago. The value is in considering how to apply the best ideas from the authors in light of our volatile, higher-tech, faster-paced world. But none of the advice in these books will hurt your business. Indeed, it will only make your business better, provided you apply it wisely and consistently. Perhaps the ideas haven’t gone from good to great, but they were built to last.