Business Classics Follow-Up: Built to Last
By Mary Pat Campbell
The Stepping Stone, January 2025
Built to Last: Successful Habits of Visionary Companies, a business book demonstrating some classic research into success (or not) of publicly-traded companies, was published in 1994. But were their conclusions themselves built to last?
Authors James C. Collins and Jerry I. Porras covered the period Jan. 1, 1926 to Dec. 31, 1990 in stock market performance, and chose 18 companies from disparate industrial sectors they deemed “Built to Last” and paired them with 18 comparison companies from the same sectors. All were founded before 1950 to provide enough of a track record, so more recent companies such as Apple or Microsoft were necessarily excluded.
The research behind the book was quite involved, with CEO interviews, a variety of dimensions measured (both quantitative and qualitative), with some interesting results they claimed made companies “Built to Last” versus ordinary. They actually called the companies visionary in their text.
Using the table of contents from the 2011 e-book version,[1] one can pick up on some themes:
- Chapter 1: The Best of the Best
- Chapter 2: Clock Building, Not Time Telling
- Interlude: No “Tyranny of the OR”
- Chapter 3: More Than Profits
- Chapter 4: Preserve the Core/Stimulate Progress
- Chapter 5: Big Hairy Audacious Goals
- Chapter 6: Cult-Like Cultures
- Chapter 7: Try a Lot of Stuff and Keep What Works
- Chapter 8: Home-Grown Management
- Chapter 9: Good Enough Never Is
- Chapter 10: The End of the Beginning
- Chapter 11: Building the Vision
A few of the results were surprising initially, but made sense given what they were seeking. For example, they found that charismatic leaders were not the defining factors of the built to last (BTL) companies. This made sense, given they were looking at companies that had to have lasted beyond the tenure of a single CEO. These had to be companies that lasted and succeeded for at least 50 years.
Even without a specific cult of personality for a leader (think Steve Jobs), these companies did have strong corporate cultures (see chapter 6 above). The question can be how such cultures were built.
The book also has end matter with details on the companies, questions about the research problems (such as visionary companies that fail, more on that in a moment), tables of the data collected, etc. This is much more substantive than many business books I’ve read.
The central idea and buzz-term that emerged from this book was the Big Hairy Audacious Goals (BHAGs), which is in the middle of the book. Examples of BHAGs in the visionary companies include Boeing’s commercial jet program starting in the 1950s—first the 707, then the 727, and then the 747 in 1965.
To quote Built to Last: “A BHAG engages people – it reaches out and grabs them in the gut. It is tangible, energizing, highly focused. People “get it” right away; it takes little or no explanation.”[2]
BHAGs involve commitment and risk.
Critiques of Built to Last
In the following years of publication, many people criticized Collins and Porras’s research and results. They addressed some of these critiques with material added to the 2011 edition.
In the November 2004 issue of Fast Company,[3] authors Jennifer Reingold and Ryan Underwood looked at how the BTL companies had been doing in the decade since the book’s publication. They interviewed various people who were critical of the book’s results, indicating that the principles detailed were so broad that they could apply to almost any organization. They did find that many of the BTL companies were still outperforming, but was it just luck?
“Still, the fact remains that at least 7 of BTL's original 18 companies have stumbled (8 if you're cynical about HP)-scarcely better than the results you'd get by flipping a coin. And that raises the infernal question that dogs the critical analysis of any business book: Have companies struggled because they ignored the principles in the book or because they followed them?”[4]
One of the business professors they quoted, Richard D'Aveni, professor of strategic management at Dartmouth's Tuck School of Business, said, "It's so slippery, it's like grabbing a frog."
I know what he means—the core image being used in the book is the yin-yang symbol, often filled with two aphorisms with opposing truisms. The “Interlude: No ‘Tyranny of the OR’” is the concept here—they mean the exclusive OR here (as opposed to the mathematical OR, which allows both possibilities).
So one gets this “advice”:
- “purpose beyond profit” AND “pragmatic”
- “a relatively fixed core ideology” AND “vigorous change and movement”
- “Big Hairy Audacious Goals” AND “incremental evolutionary progress”
You may as well put up a sign that says, “DON’T MESS UP” and call it a day. It’s about as helpful.
If one were a leader trying to extract useful strategies from this book, you would probably feel like Mr. Furious being “trained” by the Sphinx by balancing a tack hammer on your head:
Mr. Furious : Okay, am I the only one who finds these sayings just a little bit formulaic? "If you want to push something down, you have to pull it up. If you want to go left, you have to go right." It's...
The Sphinx : Your temper is very quick, my friend. But until you learn to master your rage...
Mr. Furious : ...your rage will become your master? That's what you were going to say. Right? Right?
The Sphinx : Not necessarily.[5]
My own critique ten years ago:
The biggest problem in most of these recommendations for success is that they ignore how one gets people to do these things. This is a very high-level book. It will tell you the big things to shoot for, but there’s not much there to help with the very practical problem of how to achieve this extremely difficult goal.
There is the question of whether Collins and Porras simply lucked out in selecting their list of companies. They questioned this themselves, as they had selected IBM as one of their BTL companies and it had run into severe problems just as they were doing their research… and IBM turned it around just in time for their publication date (phew!). But even so—how have these companies performed in the 30 years since publications?
Random List of Companies?
In 2014, working off a hardcover first edition of Built to Last, I decided to look into how the BTL companies fared compared to the comparison companies since the 1994 publication of the book. I published my results in the November 2014 issue of The Stepping Stone.[6]
Interestingly, all the BTL companies still existed in 2014, just as they had in 2004, at least major parts of them did. In contrast, only nine of the 18 comparison companies still existed as publicly-traded companies, with one of those nine having gone bankrupt and re-issued stock so performance couldn’t be measured (GM). Another comparison company had been acquired by one of the other BTL companies (Columbia acquired by Sony)!
It’s a decade later now, thirty years after the original BTL book, so let’s see how these companies are doing now (see Table 1). To make it simple, the S&P 500 Compound Annual Growth Rate (CAGR) for the 8/1/2014–10/25/2024 period was 11.0%, so I will highlight those which underperformed with red.
Table 1
Built to Last Companies
That’s a lot of red.
So first, let me be fair: the S&P 500 is a capitalization-weighted index, and its performance may be a bit biased as a result.
I will note that some of the companies that are doing well in this past decade, such as Sony, did poorly in the prior period in which I was investigating how they performed. The long term can be truly brutal.
Many of these companies, even if they didn’t beat the 11% S&P average, did maintain positive returns for the decade and exceeded inflationary gains for the period. Just surviving as a publicly-traded company at that scale is an accomplishment.
But this comes back to the main takeaway I got from Built to Last, which they do have in the book: you cannot rest on your laurels for lasting success. I wrote that in my 2014 piece, and as I look back ten years later, I still find it to be true.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.
Mary Pat Campbell, FSA, MAAA, is vice president, Insurance Research at Conning Research & Consulting Inc. She can be reached at marypat.campbell@gmail.com or via LinkedIn.
Endnotes
[1] Collins, James C. and Jerry L. Porras, Built to Last: Successful Habits of Visionary Companies (New York: HarperCollins, 2011).
[3]Jennifer Reingold and Ryan Underwood. “Was ‘Built to Last’ Built to Last?”
Fast Company, Nov. 1, 2004, https://www.fastcompany.com/50992/was-built-last-built-last?page=0%2C0.
[5]Quotes from Mystery Men. https://www.imdb.com/title/tt0132347/characters/nm0836071/?ref_=tt_cl_c_7
[6]https://www.soa.org/globalassets/assets/library/newsletters/stepping-stone/2014/november/stp-2014-iss56-campbell.pdf
[7]Split into Motorola Mobility (MMI)—bought by Lenovo—and Motorola Solutions (MSI) in 2011; following MSI here.
[8]Data from Yahoo Finance, accessed Oct. 25, 2024. That’s for the entire table.