Building Ur Companys Vision

  • View
    3.293

  • Download
    0

Embed Size (px)

DESCRIPTION

Good article for SM

Text of Building Ur Companys Vision

  • 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 tea