Building a vision

Building Your Company’sVision

by James C. Collins and Jerry I. Porras

Reprint 96501

Harvard Business Review

SEPTEMBER-OCTOBER 1996

Reprint Number

HarvardBusinessReviewJAMES C. COLLINS AND JERRY I. PORRAS BUILDING YOUR COMPANY’S VISION 96501

DAVID A. THOMAS MAKING DIFFERENCES MATTER: A NEW PARADIGM 96510AND ROBIN J. ELY FOR MANAGING DIVERSITY

ANN MAJCHRZAK BREAKING THE FUNCTIONAL MIND-SET IN 96505AND QIANWEI WANG PROCESS ORGANIZATIONS

N. CRAIG SMITH, ROBERT J. THOMAS, A STRATEGIC APPROACH TO MANAGING PRODUCT RECALLS 96506AND JOHN A. QUELCH

RICHARD B. FREEMAN TOWARD AN APARTHEID ECONOMY? 96503WITH COMMENTARIES BY: ROBERT B. REICH, JOSH S. WESTON,JOHN SWEENEY, WILLIAM J. MCDONOUGH, AND JOHN MUELLER

GEORGE STALK, JR., DAVID K. PECAUT, BREAKING COMPROMISES, BREAKAWAY GROWTH 96507AND BENJAMIN BURNETT

JOHN STRAHINICH HBR CASE STUDYTHE PITFALLS OF PARENTING MATURE COMPANIES 96508

BARBARA E. TAYLOR, RICHARD P. CHAIT, SOCIAL ENTERPRISEAND THOMAS P. HOLLAND THE NEW WORK OF THE NONPROFIT BOARD 96509

THOMAS DONALDSON WORLD VIEWVALUES IN TENSION: ETHICS AWAY FROM HOME 96502

JAMES P. WOMACK IDEAS AT WORKAND DANIEL T. JONES BEYOND TOYOTA: HOW TO ROOT OUT WASTE AND 96511

PURSUE PERFECTION

MARC LEVINSON BOOKS IN REVIEWCAPITALISM WITH A SAFETY NET? 96504

We shall not cease from explorationAnd the end of all our exploringWill be to arrive where we startedAnd know the place for the first time.

T.S. Eliot, Four Quartets

Companies that enjoy enduring success havecore values and a core purpose that remain fixedwhile their business strategies and practices end-lessly adapt to a changing world. The dynamic ofpreserving the core while stimulating progress is the reason that companies such as Hewlett-Packard, 3M, Johnson & Johnson, Procter & Gam-ble, Merck, Sony, Motorola, and Nordstrom be-came elite institutions able to renew themselvesand achieve superior long-term performance.Hewlett-Packard employees have long known thatradical change in operating practices, culturalnorms, and business strategies does not mean los-ing the spirit of the HP Way – the company’s coreprinciples. Johnson & Johnson continually ques-

tions its structure and revamps its processes whilepreserving the ideals embodied in its credo. In 1996,3M sold off several of its large mature businesses –a dramatic move that surprised the business press–to refocus on its enduring core purpose of solvingunsolved problems innovatively. We studied com-panies such as these in our research for Built toLast: Successful Habits of Visionary Companiesand found that they have outperformed the generalstock market by a factor of 12 since 1925.

HARVARD BUSINESS REVIEW September-October 1996 Copyright © 1996 by James C. Collins and Jerry I. Porras. All rights reserved.

HBRSEPTEMBER-OCTOBER 1996

James C. Collins is a management educator and writerbased in Boulder, Colorado, where he operates a man-agement learning laboratory for conducting researchand working with executives. He is also a visiting profes-sor of business administration at the University of Vir-ginia in Charlottesville. Jerry I. Porras is the Lane Profes-sor of Organizational Behavior and Change at StanfordUniversity’s Graduate School of Business in Stanford,California, where he is also the director of the ExecutiveProgram in Leading and Managing Change. Collins andPorras are coauthors of Built to Last: Successful Habits ofVisionary Companies (HarperBusiness, 1994).

by James C. Collins and Jerry I. Porras

Truly great companies understand the differencebetween what should never change and whatshould be open for change, between what is gen-uinely sacred and what is not. This rare ability tomanage continuity and change – requiring a con-sciously practiced discipline – is closely linked tothe ability to develop a vision. Vision provides guid-ance about what core to preserve and what future tostimulate progress toward. But vision has becomeone of the most overused and least understoodwords in the language, conjuring up different im-ages for different people: of deeply held values, out-standing achievement, societal bonds, exhilaratinggoals, motivating forces, or raisons d’être. We rec-ommend a conceptual framework to define vision,add clarity and rigor to the vague and fuzzy con-cepts swirling around that trendy term, and givepractical guidance for articulating a coherent visionwithin an organization. It is a prescriptive frame-work rooted in six years of research and refined andtested by our ongoing work with executives from agreat variety of organizations around the world.

A well-conceived vision consists of two majorcomponents: core ideology and envisioned future.(See the exhibit “Articulating a Vision.”) Core ide-ology, the yin in our scheme, defines what we standfor and why we exist. Yin is unchanging and com-plements yang, the envisioned future. The envi-sioned future is what we aspire to become, toachieve, to create – something that will require sig-nificant change and progress to attain.

Core IdeologyCore ideology defines the enduring character of

an organization – a consistent identity that tran-scends product or market life cycles, technologicalbreakthroughs, management fads, and individualleaders. In fact, the most lasting and significantcontribution of those who build visionary com-panies is the core ideology. As Bill Hewlett saidabout his longtime friend and busi-ness partner David Packard uponPackard’s death not long ago, “As faras the company is concerned, thegreatest thing he left behind him wasa code of ethics known as the HPWay.” HP‘s core ideology, which hasguided the company since its incep-tion more than 50 years ago, includesa deep respect for the individual, a dedication to af-fordable quality and reliability, a commitment tocommunity responsibility (Packard himself be-queathed his $4.3 billion of Hewlett-Packard stockto a charitable foundation), and a view that the

company exists to make technical contributions forthe advancement and welfare of humanity. Compa-ny builders such as David Packard, Masaru Ibuka ofSony, George Merck of Merck, William McKnightof 3M, and Paul Galvin of Motorola understood thatit is more important to know who you are thanwhere you are going, for where you are going willchange as the world around you changes. Leadersdie, products become obsolete, markets change,new technologies emerge, and management fadscome and go, but core ideology in a great companyendures as a source of guidance and inspiration.

Core ideology provides the glue that holds anorganization together as it grows, decentralizes, di-versifies, expands globally, and develops workplacediversity. Think of it as analogous to the principlesof Judaism that held the Jewish people together forcenturies without a homeland, even as they spreadthroughout the Diaspora. Or think of the truthsheld to be self-evident in the Declaration of Inde-pendence, or the enduring ideals and principles ofthe scientific community that bond scientists fromevery nationality together in the common purposeof advancing human knowledge. Any effective vi-sion must embody the core ideology of the organi-zation, which in turn consists of two distinct parts:core values, a system of guiding principles andtenets; and core purpose, the organization’s mostfundamental reason for existence.

Core Values. Core values are the essential and en-during tenets of an organization. A small set oftimeless guiding principles, core values require noexternal justification; they have intrinsic value andimportance to those inside the organization. TheWalt Disney Company’s core values of imaginationand wholesomeness stem not from market require-ments but from the founder’s inner belief thatimagination and wholesomeness should be nur-tured for their own sake. William Procter and JamesGamble didn’t instill in P&G’s culture a focus onproduct excellence merely as a strategy for success

but as an almost religious tenet. And that value hasbeen passed down for more than 15 decades by P&Gpeople. Service to the customer – even to the pointof subservience – is a way of life at Nordstrom thattraces its roots back to 1901, eight decades before

VISION

66 HARVARD BUSINESS REVIEW September-October 1996

Core ideology provides the gluethat holds an organization

together through time.

customer service programs became stylish. For BillHewlett and David Packard, respect for the individ-ual was first and foremost a deep personal value;they didn’t get it from a book or hear it from a man-agement guru. And Ralph S. Larsen, CEO of John-son & Johnson, puts it this way: “The core valuesembodied in our credo might be a competitive advantage, but that is not why we have them. Wehave them because they define for us what we standfor, and we would hold them even if they became a competitive disadvantage in certain situations.”

The point is that a great company decides for itself what values it holds to be core, largely inde-pendent of the current environment, competitiverequirements, or management fads. Clearly, then,there is no universally right set of core values. A company need not have as its core value cus-tomer service (Sony doesn’t) or respect for the indi-vidual (Disney doesn’t) or quality (Wal-Mart Storesdoesn’t) or market focus (HP doesn’t) or teamwork(Nordstrom doesn’t). A company might have oper-ating practices and business strategies around thosequalities without having them at the essence of itsbeing. Furthermore, great companies need not havelikable or humanistic core values, although manydo. The key is not what core values an organizationhas but that it has core values at all.

Companies tend to have only a few core values,usually between three and five. In fact, we foundthat none of the visionary companies we studied inour book had more than five: most had only three orfour. (See the insert “Core Values Are a Company’sEssential Tenets.”) And, indeed, we should expectthat. Only a few values can be truly core–that is, so

fundamental and deeply held that they will changeseldom, if ever.

To identify the core values of your own organiza-tion, push with relentless honesty to define whatvalues are truly central. If you articulate more thanfive or six, chances are that you are confusing corevalues (which do not change) with operating prac-tices, business strategies, or cultural norms (whichshould be open to change). Remember, the valuesmust stand the test of time. After you’ve drafted apreliminary list of the core values, ask about eachone, If the circumstances changed and penalized usfor holding this core value, would we still keep it? Ifyou can’t honestly answer yes, then the value is notcore and should be dropped from consideration.

A high-technology company wondered whetherit should put quality on its list of core values. TheCEO asked, “Suppose in ten years quality doesn’tmake a hoot of difference in our markets. Supposethe only thing that matters is sheer speed andhorsepower but not quality. Would we still want toput quality on our list of core values?” The mem-bers of the management team looked around at oneanother and finally said no. Quality stayed in thestrategy of the company, and quality-improvementprograms remained in place as a mechanism forstimulating progress; but quality did not make thelist of core values.

The same group of executives then wrestled withleading-edge innovation as a core value. The CEOasked, “Would we keep innovation on the list as a core value, no matter how the world around uschanged?” This time, the management team gave a resounding yes. The managers’ outlook might besummarized as, “We always want to do leading-edge innovation. That’s who we are. It’s really im-portant to us and always will be. No matter what.And if our current markets don’t value it, we willfind markets that do.” Leading-edge innovationwent on the list and will stay there. A companyshould not change its core values in response tomarket changes; rather, it should change markets,if necessary, to remain true to its core values.

Who should be involved in articulating the corevalues varies with the size, age, and geographic dis-persion of the company, but in many situations wehave recommended what we call a Mars Group. Itworks like this: Imagine that you’ve been asked tore-create the very best attributes of your organiza-tion on another planet but you have seats on therocket ship for only five to seven people. Whomshould you send? Most likely, you’ll choose thepeople who have a gut-level understanding of yourcore values, the highest level of credibility withtheir peers, and the highest levels of competence.

HARVARD BUSINESS REVIEW September-October 1996 67

Articulating a Vision

Core Ideology M Core values M Core purpose

Envisioned Future M 10-to-30-year BHAG (Big, Hairy, Audacious Goal) M Vivid description

We’ll often ask people brought together to work oncore values to nominate a Mars Group of five to seven individuals (not necessarily all from the as-sembled group). Invariably, they end up selectinghighly credible representatives who do a super jobof articulating the core values precisely becausethey are exemplars of those values–a representativeslice of the company’s genetic code.

Even global organizations composed of peoplefrom widely diverse cultures can identify a set ofshared core values. The secret is to work from theindividual to the organization. People involved inarticulating the core values need to answer severalquestions: What core values do you personallybring to your work? (These should be so fundamen-tal that you would hold them regardless of whetheror not they were rewarded.) What would you tellyour children are the core values that you hold atwork and that you hope they will hold when theybecome working adults? If you awoke tomorrowmorning with enough money to retire for the rest ofyour life, would you continue to live those core val-ues? Can you envision them being as valid for you100 years from now as they are today? Would youwant to hold those core values, even if at somepoint one or more of them became a competitivedisadvantage? If you were to start a new organiza-tion tomorrow in a different line of work, what corevalues would you build into the new organizationregardless of its industry? The last three questionsare particularly important because they make thecrucial distinction between enduring core values


that should not change and practices and strategiesthat should be changing all the time.

Core Purpose. Core purpose, the second part ofcore ideology, is the organization’s reason for being.An effective purpose reflects people’s idealistic mo-tivations for doing the company’s work. It doesn’tjust describe the organization’s output or targetcustomers; it captures the soul of the organization.(See the insert “Core Purpose Is a Company’s Rea-son for Being.”) Purpose, as illustrated by a speechDavid Packard gave to HP employees in 1960, getsat the deeper reasons for an organization’s existencebeyond just making money. Packard said,

I want to discuss why a company exists in the first place.In other words, why are we here? I think many peopleassume, wrongly, that a company exists simply to makemoney. While this is an important result of a company’sexistence, we have to go deeper and find the real reasonsfor our being. As we investigate this, we inevitably cometo the conclusion that a group of people get together andexist as an institution that we call a company so they areable to accomplish something collectively that theycould not accomplish separately – they make a contribu-tion to society, a phrase which sounds trite but is funda-mental.… You can look around [in the general businessworld and] see people who are interested in money andnothing else, but the underlying drives come largely froma desire to do something else: to make a product, to give a service – generally to do something which is of value.1

Purpose (which should last at least 100 years)should not be confused with specific goals or busi-

Core Values Are a Company’s Essential Tenets

Encouraging individual initiativeOpportunity based on merit; no one is entitled to anythingHard work and continuous self-improvement

SonyElevation of the Japanese culture and national statusBeing a pioneer – not following others; doing the impossibleEncouraging individual ability and creativity

Walt DisneyNo cynicismNurturing and promulgation of “wholesome American values”Creativity, dreams, and imaginationFanatical attention to consistency and detailPreservation and control of the Disney magic

MerckCorporate social responsibilityUnequivocal excellence in all aspects of the companyScience-based innovationHonesty and integrityProfit, but profit from work that benefits humanity

NordstromService to the customer above all elseHard work and individual productivityNever being satisfiedExcellence in reputation; being part of something special

Philip MorrisThe right to freedom of choiceWinning – beating others in a good fight

ness strategies (which should change many timesin 100 years). Whereas you might achieve a goal orcomplete a strategy, you cannot fulfill a purpose; itis like a guiding star on the horizon – forever pur-sued but never reached. Yet although purpose itselfdoes not change, it does inspire change. The veryfact that purpose can never be fully realized meansthat an organization can never stop stimulatingchange and progress.

In identifying purpose, some companies makethe mistake of simply describing their current prod-uct lines or customer segments. Wedo not consider the following state-ment to reflect an effective purpose:“We exist to fulfill our governmentcharter and participate in the sec-ondary mortgage market by pack-aging mortgages into investment securities.” The statement is merelydescriptive. A far more effectivestatement of purpose would be thatexpressed by the executives of theFederal National Mortgage Association, FannieMae: “To strengthen the social fabric by continual-ly democratizing home ownership.” The secondarymortgage market as we know it might not even ex-ist in 100 years, but strengthening the social fabricby continually democratizing home ownership canbe an enduring purpose, no matter how much theworld changes. Guided and inspired by this pur-pose, Fannie Mae launched in the early 1990s a se-ries of bold initiatives, including a program to de-

velop new systems for reducing mortgage under-writing costs by 40% in five years; programs toeliminate discrimination in the lending process(backed by $5 billion in underwriting experiments);and an audacious goal to provide, by the year 2000,$1 trillion targeted at 10 million families that hadtraditionally been shut out of home ownership –minorities, immigrants, and low-income groups.

Similarly, 3M defines its purpose not in terms ofadhesives and abrasives but as the perpetual questto solve unsolved problems innovatively–a purpose

that is always leading 3M into new fields. McKin-sey & Company’s purpose is not to do managementconsulting but to help corporations and govern-ments be more successful: in 100 years, it mightinvolve methods other than consulting. Hewlett-Packard doesn’t exist to make electronic test andmeasurement equipment but to make technicalcontributions that improve people’s lives – a pur-pose that has led the company far afield from itsorigins in electronic instruments. Imagine if Walt

VISION


Core ideology consists of corevalues and core purpose.

Core purpose is a raison d’être,not a goal or business strategy.

Core Purpose Is a Company’s Reason for Being

3M: To solve unsolved problems innovatively

Cargill: To improve the standard of living around the world

Fannie Mae: To strengthen the social fabric by continually democratizing home ownership

Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity

Lost Arrow Corporation: To be a role model and a tool for social change

Pacific Theatres: To provide a place for people to flourish and to enhance the community

Mary Kay Cosmetics: To give unlimited opportunity to women

McKinsey & Company: To help leading corporations and governments be more successful

Merck: To preserve and improve human life

Nike: To experience the emotion of competition, winning, and crushing competitors

Sony: To experience the joy of advancing and applying technology for the benefit of the public

Telecare Corporation: To help people with mental impairments realize their full potential

Wal-Mart: To give ordinary folk the chance to buy the same things as rich people

Walt Disney: To make people happy

Disney had conceived of his company’s purpose asto make cartoons, rather than to make peoplehappy; we probably wouldn’t have Mickey Mouse,Disneyland, EPCOT Center, or the Anaheim MightyDucks Hockey Team.

One powerful method for getting at purpose isthe five whys. Start with the descriptive statementWe make X products or We deliver X services, andthen ask, Why is that important? five times. After a few whys, you’ll find that you’regetting down to the fundamentalpurpose of the organization.

We used this method to deepenand enrich a discussion about pur-pose when we worked with a certainmarket-research company. The exec-utive team first met for several hoursand generated the following state-ment of purpose for their organiza-tion: To provide the best market-research data available. We then asked the follow-ing question: Why is it important to provide thebest market-research data available? After somediscussion, the executives answered in a way thatreflected a deeper sense of their organization’s pur-pose: To provide the best market-research dataavailable so that our customers will understandtheir markets better than they could otherwise. A further discussion let team members realize thattheir sense of self-worth came not just from helpingcustomers understand their markets better but alsofrom making a contribution to their customers’success. This introspection eventually led the com-pany to identify its purpose as: To contribute to ourcustomers’ success by helping them understandtheir markets. With this purpose in mind, the com-pany now frames its product decisions not with thequestion Will it sell? but with the question Will itmake a contribution to our customers’ success?

The five whys can help companies in any indus-try frame their work in a more meaningful way. Anasphalt and gravel company might begin by saying,We make gravel and asphalt products. After a fewwhys, it could conclude that making asphalt andgravel is important because the quality of the infra-structure plays a vital role in people’s safety and ex-perience; because driving on a pitted road is annoy-ing and dangerous; because 747s cannot land safelyon runways built with poor workmanship or inferi-or concrete; because buildings with substandardmaterials weaken with time and crumble in earth-quakes. From such introspection may emerge thispurpose: To make people’s lives better by improv-ing the quality of man-made structures. With asense of purpose very much along those lines, Gran-

ite Rock Company of Watsonville, California, wonthe Malcolm Baldrige National Quality Award–notan easy feat for a small rock quarry and asphaltcompany. And Granite Rock has gone on to be oneof the most progressive and exciting companieswe’ve encountered in any industry.

Notice that none of the core purposes fall into the category “maximize shareholder wealth.” A pri-mary role of core purpose is to guide and inspire.

Maximizing shareholder wealth does not inspire peo-ple at all levels of an organization, and it providesprecious little guidance. Maximizing shareholderwealth is the standard off-the-shelf purpose forthose organizations that have not yet identifiedtheir true core purpose. It is a substitute – and aweak one at that.

When people in great organizations talk abouttheir achievements, they say very little about earn-ings per share. Motorola people talk about impres-sive quality improvements and the effect of theproducts they create on the world. Hewlett-Packardpeople talk about their technical contributions tothe marketplace. Nordstrom people talk aboutheroic customer service and remarkable individualperformance by star salespeople. When a Boeing en-gineer talks about launching an exciting and revo-lutionary new aircraft, she does not say, “I put myheart and soul into this project because it wouldadd 37 cents to our earnings per share.”

One way to get at the purpose that lies beyondmerely maximizing shareholder wealth is to playthe “Random Corporate Serial Killer” game. Itworks like this: Suppose you could sell the com-pany to someone who would pay a price that every-one inside and outside the company agrees is morethan fair (even with a very generous set of assump-tions about the expected future cash flows of thecompany). Suppose further that this buyer wouldguarantee stable employment for all employees atthe same pay scale after the purchase but with noguarantee that those jobs would be in the same in-dustry. Finally, suppose the buyer plans to kill thecompany after the purchase – its products or ser-vices would be discontinued, its operations would

VISION


Listen to people in truly greatcompanies talk about their

achievements–you will hearlittle about earnings per share.

be shut down, its brand names would be shelvedforever, and so on. The company would utterly andcompletely cease to exist. Would you accept the offer? Why or why not? What would be lost if thecompany ceased to exist? Why is it important thatthe company continue to exist? We’ve found thisexercise to be very powerful for helping hard-nosed,financially focused executives reflect on their orga-nization’s deeper reasons for being.

Another approach is to ask each member of theMars Group, How could we frame the purpose ofthis organization so that if you woke up tomorrowmorning with enough money in the bank to retire,you would nevertheless keep working here? Whatdeeper sense of purpose would motivate you to con-tinue to dedicate your precious creative energies tothis company’s efforts?

As they move into the twenty-first century, com-panies will need to draw on the full creative energyand talent of their people. But why should peoplegive full measure? As Peter Drucker has pointedout, the best and most dedicated people are ulti-mately volunteers, for they have the opportunity todo something else with their lives. Confrontedwith an increasingly mobile society, cynicismabout corporate life, and an expanding entrepre-neurial segment of the economy, companies morethan ever need to have a clear understanding oftheir purpose in order to make work meaningfuland thereby attract, motivate, and retain outstand-ing people.

Discovering Core IdeologyYou do not create or set core ideology. You dis-

cover core ideology. You do not deduce it by lookingat the external environment. You understand it bylooking inside. Ideology has to be authentic. Youcannot fake it. Discovering core ideology is not anintellectual exercise. Do not ask, What core values

should we hold? Ask instead, What core values dowe truly and passionately hold? You should notconfuse values that you think the organizationought to have – but does not – with authentic corevalues. To do so would create cynicism throughoutthe organization. (“Who’re they trying to kid? We

all know that isn’t a core value around here!”) Aspi-rations are more appropriate as part of your envi-sioned future or as part of your strategy, not as partof the core ideology. However, authentic core val-ues that have weakened over time can be consid-ered a legitimate part of the core ideology – as longas you acknowledge to the organization that youmust work hard to revive them.

Also be clear that the role of core ideology is toguide and inspire, not to differentiate. Two compa-nies can have the same core values or purpose.Many companies could have the purpose to maketechnical contributions, but few live it as passion-ately as Hewlett-Packard. Many companies couldhave the purpose to preserve and improve humanlife, but few hold it as deeply as Merck. Many com-panies could have the core value of heroic customerservice, but few create as intense a culture aroundthat value as Nordstrom. Many companies couldhave the core value of innovation, but few createthe powerful alignment mechanisms that stimu-late the innovation we see at 3M. The authenticity,the discipline, and the consistency with which theideology is lived – not the content of the ideology –differentiate visionary companies from the rest ofthe pack.

Core ideology needs to be meaningful and inspi-rational only to people inside the organization; itneed not be exciting to outsiders. Why not? Becauseit is the people inside the organization who need tocommit to the organizational ideology over thelong term. Core ideology can also play a role in de-termining who is inside and who is not. A clear andwell-articulated ideology attracts to the companypeople whose personal values are compatible withthe company’s core values; conversely, it repelsthose whose personal values are incompatible. Youcannot impose new core values or purpose on peo-ple. Nor are core values and purpose things peoplecan buy into. Executives often ask, How do we get

people to share our core ideology?You don’t. You can’t. Instead, findpeople who are predisposed to shareyour core values and purpose; attractand retain those people; and let thosewho do not share your core values goelsewhere. Indeed, the very processof articulating core ideology maycause some people to leave when

they realize that they are not personally compatiblewith the organization’s core. Welcome that out-come. It is certainly desirable to retain within thecore ideology a diversity of people and viewpoints.People who share the same core values and purposedo not necessarily all think or look the same.


You discover core ideology bylooking inside. It has to beauthentic. You can’t fake it.

Don’t confuse core ideology itself with core-ideology statements. A company can have a verystrong core ideology without a formal statement.For example, Nike has not (to our knowledge) for-mally articulated a statement of its core purpose.Yet, according to our observations, Nike has a pow-erful core purpose that permeates the entire organi-zation: to experience the emotion of competition,winning, and crushing competitors. Nike has acampus that seems more like a shrine to the com-petitive spirit than a corporate office complex. Giant photos of Nike heroes cover the walls, bronzeplaques of Nike athletes hang along the Nike Walkof Fame, statues of Nike athletes stand alongsidethe running track that rings the campus, and build-ings honor champions such as Olympic marathonerJoan Benoit, basketball superstar Michael Jordan,and tennis pro John McEnroe. Nike people who donot feel stimulated by the competitive spirit andthe urge to be ferocious simply do not last long inthe culture. Even the company’s name reflects asense of competition: Nike is the Greek goddess ofvictory. Thus, although Nike has not formally ar-ticulated its purpose, it clearly has a strong one.

Identifying core values and purpose is thereforenot an exercise in wordsmithery. Indeed, an organi-zation will generate a variety of statements overtime to describe the core ideology. In Hewlett-Packard‘s archives, we found more than half adozen distinct versions of the HP Way, drafted byDavid Packard between 1956 and 1972. All versionsstated the same principles, but the words used var-ied depending on the era and the circumstances.Similarly, Sony’s core ideology has been statedmany different ways over the company’s history. At its founding, Masaru Ibuka described two key elements of Sony’s ideology: “We shall welcometechnical difficulties and focus on highly sophisti-cated technical products that have great usefulnessfor society regardless of the quantity involved; weshall place our main emphasis on ability, perfor-mance, and personal character so that each individ-ual can show the best in ability and skill.”2 Fourdecades later, this same concept appeared in a state-ment of core ideology called Sony Pioneer Spirit:“Sony is a pioneer and never intends to follow oth-ers. Through progress, Sony wants to serve thewhole world. It shall be always a seeker of the un-

VISION


Big, Hairy, Audacious Goals Aid Long-Term Vision

Target BHAGs can be quantitative or qualitative

Become a $125 billion company by the year 2000 (Wal-Mart, 1990)Democratize the automobile (Ford Motor Company, early 1900s)Become the company most known for changing the worldwide poor-quality image of Japanese products (Sony, early 1950s)Become the most powerful, the most serviceable, the most far-reaching world financial institution that has ever been (City Bank, predecessor to Citicorp, 1915)Become the dominant player in commercial aircraft and bring the world into the jet age (Boeing, 1950)

Common-enemy BHAGs involve David-versus-Goliath thinking

Knock off RJR as the number one tobacco company in the world (Philip Morris, 1950s)Crush Adidas (Nike, 1960s)Yamaha wo tsubusu! We will destroy Yamaha! (Honda, 1970s)

Role-model BHAGs suit up-and-comingorganizations

Become the Nike of the cycling industry (Giro Sport Design, 1986)Become as respected in 20 years as Hewlett-Packard is today (Watkins-Johnson, 1996)Become the Harvard of the West (Stanford University, 1940s)

Internal-transformation BHAGs suit large,established organizations

Become number one or number two in every market we serve and revolutionize this company to have the strengths of a big company combined with the leanness and agility of a small company (General Electric Company, 1980s)Transform this company from a defense contractor into the best diversified high-technology company in the world (Rockwell, 1995)Transform this division from a poorly respected internal products supplier to one of the most respected, exciting, and sought-after divisions in the company (Components Support Division of a computer products company, 1989)

known.… Sony has a principle of respecting and en-couraging one’s ability…and always tries to bringout the best in a person. This is the vital force ofSony.”3 Same core values, different words.

You should therefore focus on getting the contentright – on capturing the essence of the core valuesand purpose. The point is not to create a perfectstatement but to gain a deep under-standing of your organization’s corevalues and purpose, which can thenbe expressed in a multitude of ways.In fact, we often suggest that oncethe core has been identified, man-agers should generate their ownstatements of the core values andpurpose to share with their groups.

Finally, don’t confuse core ideology with the con-cept of core competence. Core competence is a stra-tegic concept that defines your organization’s capa-bilities–what you are particularly good at–whereascore ideology captures what you stand for and why you exist. Core competencies should be wellaligned with a company’s core ideology and are of-ten rooted in it; but they are not the same thing. Forexample, Sony has a core competence of miniatur-ization – a strength that can be strategically appliedto a wide array of products and markets. But it doesnot have a core ideology of miniaturization. Sonymight not even have miniaturization as part of itsstrategy in 100 years, but to remain a great compa-ny, it will still have the same core values describedin the Sony Pioneer Spirit and the same fundamen-tal reason for being–namely, to advance technologyfor the benefit of the general public. In a visionarycompany like Sony, core competencies change overthe decades, whereas core ideology does not.

Once you are clear about the core ideology, youshould feel free to change absolutely anything thatis not part of it. From then on, whenever someonesays something should not change because “it’spart of our culture” or “we’ve always done it thatway” or any such excuse, mention this simple rule:If it’s not core, it’s up for change. The strong versionof the rule is, If it’s not core, change it! Articulatingcore ideology is just a starting point, however. Youalso must determine what type of progress youwant to stimulate.

Envisioned FutureThe second primary component of the vision

framework is envisioned future. It consists of twoparts: a 10-to-30-year audacious goal plus vivid de-scriptions of what it will be like to achieve the goal.We recognize that the phrase envisioned future is

somewhat paradoxical. On the one hand, it conveysconcreteness – something visible, vivid, and real.On the other hand, it involves a time yet unreal-ized–with its dreams, hopes, and aspirations.

Vision-level BHAG. We found in our researchthat visionary companies often use bold missions –or what we prefer to call BHAGs (pronounced

BEE-hags and shorthand for Big, Hairy, AudaciousGoals)–as a powerful way to stimulate progress. Allcompanies have goals. But there is a difference be-tween merely having a goal and becoming commit-ted to a huge, daunting challenge–such as climbingMount Everest. A true BHAG is clear and com-pelling, serves as a unifying focal point of effort,and acts as a catalyst for team spirit. It has a clearfinish line, so the organization can know when ithas achieved the goal; people like to shoot for finishlines. A BHAG engages people – it reaches out andgrabs them. It is tangible, energizing, highly fo-cused. People get it right away; it takes little or noexplanation. For example, NASA’s 1960s moonmission didn’t need a committee of wordsmiths tospend endless hours turning the goal into a verbose,impossible-to-remember mission statement. Thegoal itself was so easy to grasp–so compelling in itsown right – that it could be said 100 different waysyet be easily understood by everyone. Most corpo-rate statements we’ve seen do little to spur forwardmovement because they do not contain the power-ful mechanism of a BHAG.

Although organizations may have many BHAGsat different levels operating at the same time, vi-sion requires a special type of BHAG–a vision-levelBHAG that applies to the entire organization andrequires 10 to 30 years of effort to complete. Settingthe BHAG that far into the future requires thinkingbeyond the current capabilities of the organizationand the current environment. Indeed, inventingsuch a goal forces an executive team to be vision-ary, rather than just strategic or tactical. A BHAGshould not be a sure bet – it will have perhaps only a 50% to 70% probability of success – but the orga-nization must believe that it can reach the goal any-way. A BHAG should require extraordinary effortand perhaps a little luck. We have helped compa-nies create a vision-level BHAG by advising them


Companies need an audacious10-to-30-year goal to progress

toward an envisioned future.

to think in terms of four broad categories: targetBHAGs, common-enemy BHAGs, role-modelBHAGs, and internal-transformation BHAGs. (Seethe insert “Big, Hairy, Audacious Goals Aid Long-Term Vision.”)

Vivid Description. In addition to vision-levelBHAGs, an envisioned future needs what we callvivid description – that is, a vibrant, engaging, and specific description of what it will be like toachieve the BHAG. Think of it as translating the vi-sion from words into pictures, of creating an imagethat people can carry around in their heads. It is aquestion of painting a picture with your words. Pic-ture painting is essential for making the 10-to-30-year BHAG tangible in people’s minds.

For example, Henry Ford brought to life the goalof democratizing the automobile with this vivid de-scription: “I will build a motor car for the greatmultitude.… It will be so low in price that no manmaking a good salary will be unable to own one and enjoy with his family the blessing of hours ofpleasure in God’s great open spaces.… When I’mthrough, everybody will be able to afford one, andeveryone will have one. The horse will have disap-peared from our highways, the automobile will betaken for granted…[and we will] give a large num-ber of men employment at good wages.”

The components-support division of a computer-products company had a general manager who wasable to describe vividly the goal of becoming one of

the most sought-after divisions in the company:“We will be respected and admired by our peers.…Our solutions will be actively sought by the end-product divisions, who will achieve significantproduct ‘hits’ in the marketplace largely because ofour technical contribution.… We will have pride inourselves.… The best up-and-coming people in thecompany will seek to work in our division.… Peo-ple will give unsolicited feedback that they lovewhat they are doing.… [Our own] people will walkon the balls of their feet.… [They] will willinglywork hard because they want to.… Both employeesand customers will feel that our division has con-tributed to their life in a positive way.”

In the 1930s, Merck had the BHAG to transformitself from a chemical manufacturer into one of thepreeminent drug-making companies in the world,with a research capability to rival any major univer-sity. In describing this envisioned future, GeorgeMerck said at the opening of Merck’s research facil-ity in 1933, “We believe that research work carriedon with patience and persistence will bring to in-dustry and commerce new life; and we have faiththat in this new laboratory, with the tools we havesupplied, science will be advanced, knowledge in-creased, and human life win ever a greater freedomfrom suffering and disease.… We pledge our everyaid that this enterprise shall merit the faith we havein it. Let your light so shine – that those who seekthe Truth, that those who toil that this world maybe a better place to live in, that those who hold aloftthat torch of science and knowledge through thesesocial and economic dark ages, shall take new cour-age and feel their hands supported.”

Passion, emotion, and conviction are essentialparts of the vivid description. Some managers areuncomfortable expressing emotion about theirdreams, but that’s what motivates others. Churchillunderstood that when he described the BHAG fac-ing Great Britain in 1940. He did not just say, “BeatHitler.” He said, “Hitler knows he will have tobreak us on this island or lose the war. If we canstand up to him, all Europe may be free, and the lifeof the world may move forward into broad, sunlit

uplands. But if we fail, the wholeworld, including the United States,including all we have known andcared for, will sink into the abyss of a new Dark Age, made more sinisterand perhaps more protracted by thelights of perverted science. Let ustherefore brace ourselves to ourduties and so bear ourselves that ifthe British Empire and its Common-wealth last for a thousand years, men

will still say, ‘This was their finest hour.’” A Few Key Points. Don’t confuse core ideology

and envisioned future. In particular, don’t confusecore purpose and BHAGs. Managers often exchangeone for the other, mixing the two together or failingto articulate both as distinct items. Core purpose –not some specific goal – is the reason why the orga-nization exists. A BHAG is a clearly articulatedgoal. Core purpose can never be completed, where-as the BHAG is reachable in 10 to 30 years. Think of the core purpose as the star on the horizon to be chased forever; the BHAG is the mountain to beclimbed. Once you have reached its summit, youmove on to other mountains.

VISION


You must translate the visionfrom words to pictures with avivid description of what it willbe like to achieve your goal.

Identifying core ideology is a discovery process,but setting the envisioned future is a creativeprocess. We find that executives often have a greatdeal of difficulty coming up with an excitingBHAG. They want to analyze their way into the fu-ture. We have found, therefore, that some execu-tives make more progress by starting first with thevivid description and backing from there into the

BHAG. This approach involves starting with ques-tions such as, We’re sitting here in 20 years; whatwould we love to see? What should this companylook like? What should it feel like to employees?What should it have achieved? If someone writes anarticle for a major business magazine about thiscompany in 20 years, what will it say? One biotech-nology company we worked with had trouble envi-sioning its future. Said one member of the execu-tive team, “Every time we come up with somethingfor the entire company, it is just too generic to beexciting – something banal like ‘advance biotech-nology worldwide.’” Asked to paint a picture of thecompany in 20 years, the executives mentionedsuch things as “on the cover of Business Week as amodel success story…the Fortune most admiredtop-ten list…the best science and business gradu-ates want to work here…people on airplanes raveabout one of our products to seatmates…20 consec-utive years of profitable growth…an entrepreneuri-al culture that has spawned half a dozen new divi-sions from within…management gurus use us as anexample of excellent management and progressivethinking,” and so on. From this, they were able toset the goal of becoming as well respected as Merckor as Johnson & Johnson in biotechnology.

It makes no sense to analyze whether an envi-sioned future is the right one. With a creation – andthe task is creation of a future, not prediction–therecan be no right answer. Did Beethoven create theright Ninth Symphony? Did Shakespeare create theright Hamlet? We can’t answer these questions;they’re nonsense. The envisioned future involvessuch essential questions as Does it get our juicesflowing? Do we find it stimulating? Does it spurforward momentum? Does it get people going? The

envisioned future should be so exciting in its ownright that it would continue to keep the organiza-tion motivated even if the leaders who set the goaldisappeared. City Bank, the predecessor of Citicorp,had the BHAG “to become the most powerful, themost serviceable, the most far-reaching world fi-nancial institution that has ever been” – a goal thatgenerated excitement through multiple genera-

tions until it was achieved. Similar-ly, the NASA moon mission contin-ued to galvanize people even thoughPresident John F. Kennedy (the leaderassociated with setting the goal) diedyears before its completion.

To create an effective envisionedfuture requires a certain level of un-reasonable confidence and commit-ment. Keep in mind that a BHAG isnot just a goal; it is a Big, Hairy, Au-

dacious Goal. It’s not reasonable for a small region-al bank to set the goal of becoming “the most pow-erful, the most serviceable, the most far-reachingworld financial institution that has ever been,” asCity Bank did in 1915. It’s not a tepid claim that“we will democratize the automobile,” as HenryFord said. It was almost laughable for PhilipMorris – as the sixth-place player with 9% marketshare in the 1950s – to take on the goal of defeatingGoliath RJ Reynolds Tobacco Company and becom-ing number one. It was hardly modest for Sony, asa small, cash-strapped venture, to proclaim the goalof changing the poor-quality image of Japaneseproducts around the world. (See the insert “PuttingIt All Together: Sony in the 1950s.”) Of course, it’snot only the audacity of the goal but also the levelof commitment to the goal that counts. Boeing didn’t just envision a future dominated by its com-mercial jets; it bet the company on the 707 and, later,on the 747. Nike’s people didn’t just talk about the idea of crushing Adidas; they went on a crusadeto fulfill the dream. Indeed, the envisioned futureshould produce a bit of the “gulp factor”: when itdawns on people what it will take to achieve thegoal, there should be an almost audible gulp.

But what about failure to realize the envisionedfuture? In our research, we found that the visionarycompanies displayed a remarkable ability to achieveeven their most audacious goals. Ford did democ-ratize the automobile; Citicorp did become themost far-reaching bank in the world; Philip Morrisdid rise from sixth to first and beat RJ Reynoldsworldwide; Boeing did become the dominant com-mercial aircraft company; and it looks like Wal-Mart will achieve its $125 billion goal, even with-out Sam Walton. In contrast, the comparison com-


What’s needed is such a bigcommitment that when peoplesee what the goal will take,there’s an almost audible gulp.

panies in our research frequently did not achievetheir BHAGs, if they set them at all. The differ-ence does not lie in setting easier goals: the vision-ary companies tended to have even more audaciousambitions. The difference does not lie in charis-matic, visionary leadership: the visionary com-panies often achieved their BHAGs without suchlarger-than-life leaders at the helm. Nor does thedifference lie in better strategy: the visionary com-panies often realized their goals more by an or-ganic process of “let’s try a lot of stuff and keepwhat works” than by well-laid strategic plans.Rather, their success lies in building the strength oftheir organization as their primary way of creatingthe future.

Why did Merck become the preeminent drug-maker in the world? Because Merck’s architectsbuilt the best pharmaceutical re-search and development organiza-tion in the world. Why did Boeingbecome the dominant commercialaircraft company in the world? Be-cause of its superb engineering andmarketing organization, which hadthe ability to make projects like the747 a reality. When asked to namethe most important decisions thathave contributed to the growth andsuccess of Hewlett-Packard, David Packard an-swered entirely in terms of decisions to build thestrength of the organization and its people.

Finally, in thinking about the envisioned future,beware of the We’ve Arrived Syndrome – a compla-cent lethargy that arises once an organization has

achieved one BHAG and fails to replace it with an-other. NASA suffered from that syndrome after thesuccessful moon landings. After you’ve landed onthe moon, what do you do for an encore? Ford suf-fered from the syndrome when, after it succeeded indemocratizing the automobile, it failed to set a newgoal of equal significance and gave General Motorsthe opportunity to jump ahead in the 1930s. AppleComputer suffered from the syndrome after achiev-ing the goal of creating a computer that nontechiescould use. Start-up companies frequently sufferfrom the We’ve Arrived Syndrome after going pub-lic or after reaching a stage in which survival nolonger seems in question. An envisioned futurehelps an organization only as long as it hasn’t yetbeen achieved. In our work with companies, we fre-quently hear executives say, “It’s just not as excit-

ing around here as it used to be; we seem to havelost our momentum.” Usually, that kind of remarksignals that the organization has climbed onemountain and not yet picked a new one to climb.

Many executives thrash about with missionstatements and vision statements. Unfortunately,


The basic dynamic of visionarycompanies is to preserve the

core and stimulate progress. It isvision that provides the context.

Putting It All Together: Sony in the 1950s

Envisioned Future

BHAGBecome the company most known for changing theworldwide poor-quality image of Japanese products

Vivid DescriptionWe will create products that become pervasive around the world.… We will be the first Japanesecompany to go into the U.S. market and distributedirectly.… We will succeed with innovations thatU.S. companies have failed at – such as the transistorradio.… Fifty years from now, our brand name will beas well known as any in the world…and will signifyinnovation and quality that rival the most innovativecompanies anywhere.… “Made in Japan” will meansomething fine, not something shoddy.

Core Ideology

Core ValuesElevation of the Japanese culture and national statusBeing a pioneer – not following others; doing the impossibleEncouraging individual ability and creativity

PurposeTo experience the sheer joy of innovation and theapplication of technology for the benefit and pleasureof the general public

most of those statements turn out to be a muddledstew of values, goals, purposes, philosophies, be-liefs, aspirations, norms, strategies, practices, anddescriptions. They are usually a boring, confusing,structurally unsound stream of words that evokethe response “True, but who cares?” Even moreproblematic, seldom do these statements have a direct link to the fundamental dynamic of vision-ary companies: preserve the core and stimulateprogress. That dynamic, not vision or missionstatements, is the primary engine of enduring com-panies. Vision simply provides the context forbringing this dynamic to life. Building a visionarycompany requires 1% vision and 99% alignment.When you have superb alignment, a visitor could

drop in from outer space and infer your vision fromthe operations and activities of the company with-out ever reading it on paper or meeting a single se-nior executive.

Creating alignment may be your most importantwork. But the first step will always be to recast yourvision or mission into an effective context forbuilding a visionary company. If you do it right, youshouldn’t have to do it again for at least a decade.

1. David Packard, speech given to Hewlett-Packard’s training group onMarch 8, 1960; courtesy of Hewlett-Packard Archives.

2. See Nick Lyons, The Sony Vision (New York: Crown Publishers, 1976).We also used a translation by our Japanese student Tsuneto Ikeda.

3. Akio Morita, Made in Japan (New York: E.P. Dutton, 1986), p. 147.

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