SEPTEMBER-OCTOBER 1996

SIOI

by James C. Collins and Jerry I. Porras

We shall not cease from explorationAnd the end of all our exploringWill he 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 husiness strategies and practices end-lessly adapt to a changing world. The dynamic ofpreserving the core while stimulating progressis the reason that companies such as Hewlett-Packard, 3M, Johnson & Johnson, Procter & Gam-ble, Merck, Sony, Motorola, and Nordstrom he-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 husiness strategies does not mean los-ing the spirit of the HP Way - the eompany's coreprinciples. Johnson & Johnson continually ques-

tions its structure and revamps its processes whilepreserving the ideals embodied in its eredo. In 1996,3M sold off several of its large mature husinesses-a dramatic move that surprised the husiness press-to refocus on its enduring core purpose of solvingunsolved prohlcms 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 hy a factor of 12 since 1925.

fames C. Collins is a management educator and writerbased in Boulder, Colorado, where he operates a man-agement learnmg 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 1. Porras is the Lane Profes-sor of Organizational Behavior and Change at StanfordUniversity's Graduate School of Business m Stanford,California, where he is also the director of the ExecutiveProgram in Leading and Managing Change. Collins andPorras are coauthors o/Built to Last: Successful Habits ofVisionary Companies (HarperBusiness, 1994).

HARVARD BUSINESS REVIEW September-October 1996 65

VISION

Truly great companies understand the differencehetween what should never change and whatshould be open for change, between what is gen-uinely sacred and what is not. This rare ahility tomanage continuity and change - requiring a con-sciously practiced discipline - is closely linked tothe ahility to develop a vision. Vision provides guid-ance ahout 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 honds, exhilaratinggoals, motivating forces, or raisons d'etre. 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 hy 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 exhihit "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 hecome, 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, technologicalhreakthroughs, management fads, and individualleaders. In fact, the most lasting and significantcontrihution of those who build visionary com-panies is the core ideology. As Bill Hewlett saidahout his longtime friend and husi-ness partner David Packard uponPackard's death not long ago, "As faras the company is concerned, thegreatest thing he left hchind 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 reliahility, a commitment tocommunity responsihility (Packard himself he-queathcd his $4.3 hillion of Hewlett-Packard stockto a charitable foundation), and a view that the

company exists to make technical contrihutions forthe advancement and welfare of humanity. Compa-ny huilders such as David Packard, Masaru Ihuka 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 hecome obsolete, markets change,new technologies emerge, and management fadscome and go, hut 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 emhody 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 hut from the founder's inner helief thatimagination and wholesomeness should he 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

ideology provides the gluethat holds an organization

together through time.

but as an almost religious tenet. And that value hasheen passed down for more than 15 decades hy P&Gpeople. Service to the customer-even to the pointof suhservience-is a way of life at Nordstrom thattraces its roots hack to 1901, eight decades hefore

66 HARVARD BUSINESS REVIEW Septemhcr-October 1996

Articulating a Vision

(J Core valuesD Core purpose

lO-to-.^U-yearBHAG(Big, Hairy, Audacious Goal)J Vivid description

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 eore valuesembodied in our credo might be a competitiveadvantage, but that is not why we have them. Wehave them because they define for us wbat we standfor, and we would hold them even if they becamea competitive disadvantage in certain situations."

The point is that a great company decides foritself 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 hook 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 (wbichshould he 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 tbe circumstances changed and penalized usfor holding this eore 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; hut quality did not make thelist of core values.

The same group of executives then wrestled witbleading-edge innovation as a core value. The CEOasked, "Would we keep innovation on the list asa core value, no matter how the world around uschanged:" This time, the management team gavea 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 companysbould 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 eorevalues varies witb the size, age, and geographic dis-persion of the company, but in many situations wehave recommended what we eall 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 hut 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 Sept cm ber-October 1996 67

Core Values Are a Company's Essential Tenets

Mercka Corporate social responsibilityD Unequivocal excellence in all aspects of

the companyD Science-based innovationD Honesty and integrity• Profit, but profit from work tbat benefits

humanity

Nordstrom• Service to the customer above all elseD Hard work and individual productivityn Never being satisfied• Excellence in reputation; being part of

something special

Philip MorrisC The right to freedom of choicen Winning - beating others in a good fight

We'll often ask people brought together to vi'ork oncore values to nominate a Mars Group of five toseven individuals (not necessarily all from the as-sembled group). Invariably, they end up selectingbighly credible representatives who do a super jobof articulating the core values precisely becausethey are exemplars of those values-a representativeslice of the eompany'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 inartieulating the eore 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.) Wbat would you tellyour children are the core values that you hold atwork and that you bope they will hold when theybecome working adults- If you awoke tomorrowmorning with enough money to retire for tbe 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, wbat 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

n Encouraging individual initiative• Opportunity based on merit; no one is entitled

to anythingD Hard work and continuous self-improvement

Sonyn Elevation of the Japanese culture and

national statusa Being a pioneer - not following others; doing

the impossibleD Encouraging individual ability and creativity

Walt DisneyC No cynicismn Nurturing and promulgation of "wholesome

American values"G Creativity, dreams, and imaginationn Fanatical attention to consistency and detail• Preservation and control of tbe Disney magic

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

Core Purpose. Core purpose, the seeond 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. Paekard said,

I want to discuss why a company exists in the first place.In otber words, wby are we here? I think many peopleassume, wrongly, tbat a company exists simply to makemoney. Wbile 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 tbey areable to accomplisb sometbing collectively tbat tbeycould 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 andnotbing else, but the underlying drives come largely froma desire to do something else: to make a product, to givea service - generally to do something wbicb is of valne.'

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

68 HARVARD BUSINESS REVIEW September-Octobtr 1996

VISION

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 see-ondary mortgage market by pack-aging mortgages into investmentsecurities." Tbe 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 canhe 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 redueing mortgage under-writing costs by 40% in five years; programs toeliminate discrimination in the lending process(baeked by $5 billion in underwriting experiments);and an audaeious 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

Core ideology consists of corevalues and core purpose.

Core purpose is a raison d'etre,not a goal or business strategy.

that is always leading 3M into new fields. MeKin-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

Core Purpose Is a Company's Reason for Being

3M: To solve unsolved problems innovatively

Cargill: To improve tbe standard of living aroundthe world

Fannie Mae: To strengthen the social fabric bycontinually democratizing bome ownersbip

Hewlett-Packard: To make technical contributionsfor tbe advancement and welfare of bumanity

Lost Arrow Corporation: To be a role model and atool for social cbange

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

Mary Kay Cosmetics: To give unlimited opportunityto women

McKinsey & Company: To help leading corporationsand 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 tbe joy of advancing and applyingtechnology for the benefit of tbe public

Telecare Corporation: To help people witb mentalimpairments realize their full potential

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

Walt Disney: To make people happy

HARVARD BUSINESS REVIEW September-Octobt-r 1996 69

VISION

Disney had conceived of his company's purpose asto make cartoons, rather than to make peoplehappy; we prohably 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. Aftera 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 hest 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 hest market-research dataavailahle so that our customers will understandtheir markets hetter 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? hut 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 hegin 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 he oneof the most progressive and exciting companieswe've encountered in any industry.

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

Listen to people in truly greatcompanies talk about their

achievements—you will hearlittle about earnings per share.

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 contrihutions 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, 'T put myheart and soul into this project hecause 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 ahout 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 he discontinued, its operations would

70 HARVARD BUSINESS REVIEW Sept ember-October 1996

be shut down, its brand names would be shelvedforever, and so on. The company would utterly andcompletely cease to exist. Would you accept tbeoffer? Wby or why not? Wbat would he lost if thecompany ceased to exist? Why is it important thatthe company continue to exist? We've found thisexercise to he very powerful for helping hard-nosed,financially focused executives reflect on tbeir 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 witb enough money in tbe 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 totbis company's efforts?

As tbey 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 tbeir lives. Confrontedwith an increasingly mobile society, cynicismahout 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 hy lookingat the external environment. You understand it bylooking inside. Ideology bas to be autbentic. Youcannot fake it. Discovering core ideology is not anintellectual exercise. Do not ask. What core values

You discover core ideologylooking inside. It has to beauthentic. You can't fake it

should we bold? Ask instead. What core values dowe truly and passionately hold? You sbould notconfuse values tbat you tbink the organizationougbt to bave-hut 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 eore 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 he consid-ered a legitimate part of the core ideology-as longas you acknowledge to tbe organization tbat youmust work hard to revive them.

Also he elear 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, hut few live it as passion-ately as Hewlett-Packard. Many companies couldhave tbe purpose to preserve and improve bumanlife, but few hold it as deeply as Merck, Many com-panies could bave the core value of heroic customerservice, hut few create as intense a culture aroundthat value as Nordstrom. Many companies couldhave tbe core value of innovation, but few createthe powerful alignment mechanisms tbat stimu-late the innovation we see at 3M. Tbe authenticity,tbe discipline, and the consistency witb which tbeideology is lived-not the content of tbe ideology-differentiate visionary companies from the rest ofthe pack.

Core ideology needs to be meaningful and inspi-rational only to people inside tbe organization; itneed not he 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 elear 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. Youeannot impose new eore values or purpose on peo-ple. Nor are core values and purpose tbings peoplecan huy into. Executives often ask, How do we get

people to sbare our core ideology?You don't. You can't. Instead, findpeople wbo 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 tbat tbey are not personally compatiblewitb the organization's core. Welcome tbat out-come. It is certainly desirable to retain within tbecore ideology a diversity of people and viewpoints.People wbo share the same core values and purposedo not necessarily all think or look the same.

HARVARD BUSINESS REVIEW September-October 1996 71

VISION

Don't confuse core ideology itself vi'ith 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 Paekard hetween 1936 and 1972. All versionsstated the same principles, hut the words used var-ied depending on the era and the eircumstances.Similarly, Sony's core ideology has heen statedmany different ways over the company's history.At its founding, Masaru Ibuka described two keyelements 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 ahility, perfor-mance, and personal character so that each individ-ual can show the hest in ability and skill."' 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-

Big, Hairy, Audacious Goals Aid Long-Term Vision

Target BHAGs can be quantitative or qualitative

D Become a $125 billion company by the year 2000[Wal-Mart, 1990)

• Democratize the automobile (Ford MotorCompany, early 1900s)

• Became the company most known for changingthe worldwide poor-quality image of Japaneseproducts (Sony, early 1950s)

• Become the most powerful, the most serviceable,the most far-reaching world financial institutionthat has ever heen (City Bank, predecessor toCiticorp, 1915)

D Become the dominant player in commercialaircraft and bring the world into the jet age(Boeing, 1950)

Common-enemy BHAGs involveDavid-versus-Goliath thinking

• Knock off RJR as the number one tobaccocompany in the world (Philip Morris, 1950s)

C Crush Adidas (Nike, 1960s)n Yamaha wo tsubusu! We will destroy Yamaha!

(Honda, 1970s)

Role-model BHAGs suit up-and-comingorganizations

D Become the Nike of the cycling industry[Giro Sport Design, 1986)

D Become as respected in 20 years asHewlett-Packard is today (Watkins-Johnson, 1996)

D Become the Harvard of the West(Stanford University, 1940s)

Internal-transformation BHAGs suit large,established organizations

D Become number one or number two in everymarket we serve and revolutionize this companyto have the strengths of a big company combinedwith the leanness and agility of a small company(General Electric Company, 1980s)

D Transform this company from a defense contractorinto the best diversified high-technology companyin the world (Rockwell, 1995}

D Transform this division from a poorly respectedinternal products supplier to one of the mostrespected, exciting, and sought-after divisions inthe company (Components Support Division of acomputer products company, 1989)

72 HARVARD BUSINESS REVIEW September-October 1996

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.'" 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 andwhy 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, // 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 Future

The second primary component of the visionframework is envisioned future. It consists of twoparts: a lO-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

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

toward an envisioned future.

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-i t will have perhaps onlya 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

HARVARD BUSINESS REVIEW September-October 1996 73

VISION

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 lO-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 oneand 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

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

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 bave 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 worid,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, hut that's what motivates others. Ghurchillunderstood 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 ofa 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 ideologyand 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. Gore purpose-not some specific goal-is the reason why the orga-nization exists. A BHAG is a clearly articulatedgoal. Gore purpose can never be completed, where-as the BHAG is reachable in 10 to 30 years. Thinkof the core purpose as the star on the horizon tobe chased forever; the BHAG is the mountain to beclimbed. Once you have reached its summit, youmove on to other mountains.

74 HARVARD BUSINESS REVIEW September-October

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

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

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 hest science and business gradu-ates want to work here...people on airplanes raveabout one of our products to seatmates...2O consec-utive years of profitable growth...an entrepreneur-ial 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 hecoming as well respected as Merckor as fohnson & Johnson in biotechnology.

It makes no sense to analyze whether an envi-sioned future is the right one. With a crcation-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 [ohn 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 serviceahle, the most far-reachingworld financial institution that has ever heen," asGity 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 1930s-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. Boeingdidn'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 ahoutthe 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; Giticorp did become themost far-reaching hank 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-

HARVARD BUSINESS REVIEW Septemher-October 1996 75

Putting It All Together: Sony in the 1950s

Core Ideology

Cote ValuesG Elevation of the Japanese culture and

national status• Being a pioneer-not foUov̂ ring others; doing

the impossibleD Encouraging individual ability and creativity

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

Envisioned Future

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

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

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 architects

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-

built the best pharmaceutical re-search and development organiza- -. , . -. , j ^ . .

tion in the world. Why did Boeing 1 h e D a s i c d y n a m i c 01 v i s i o n a r ybecome the dominant commercial , . ^aircraft company in the world? Be- companies IS to preserve thecause of its superb engineering and 1 • 1 TJ. 'marketing organization, which had QOie SLYld S t i m U l a t e prOgreSS. i t ISthe 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 Paekard 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

VlSlOn that1the

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,

76 HARVARD BUSINESS REVIEW September-October 1996

VISION

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 adirect 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 sroup onMarch H, I960; courtesy of Hewlett-Packard Archives.

2. See Nick Lyons, The Sony Vision [New York: Crown Pubhshers, 1976|,We also used a translation hy our Japanese student Tsuneto Ikeda.

.1, Akio Moiiu, Made in lapan [New Yuik: E.P. Dutton, 19861, p. 147.

Reprint 96501 To order reprints, see the last page of this issue.

TOLU MouseCOOKlElS

l.oo AHEAD 1 oo

~\N& "^o-vX

3 :

^

CARTOON BY NICK DOWNES 77