Built to Last: Jim Collins & Jerry Porras on the Moonshots Podcast

Welcome to the Moonshots Podcast

Introduction and Hosts

• Mike Parsons introduces the episode as number 65 of the Moonshots Podcast, welcoming co-host Chad Owen.

• Chad shares that he is recording from Texas, having left Brooklyn for warmer weather. He expresses excitement about diving into a new author series.

Previous Episode Recap

• The hosts recently wrapped up discussing Brené Brown's work, which was a departure from their usual topics. Listeners are encouraged to check out those episodes on moonshots.io.

Introducing Jim Collins

• Mike teases an upcoming focus on Jim Collins, highlighting his influential works such as "Built to Last." He emphasizes how these books have significantly impacted business strategy and concepts over the years.

• Chad notes that many people they meet reference Jim Collins' ideas, comparing him to renowned thinkers like Peter Drucker due to his analytical approach and impactful concepts like the Hedgehog Concept.

Importance of Research in Collins' Work

• Chad appreciates that Collins’ work is deeply rooted in extensive research rather than mere inspiration; he analyzes data from numerous companies to identify what makes them successful or not.

• The discussion highlights a common theme among authors like Cal Newport, Brené Brown, and Jim Collins: a commitment to rigorous research and understanding of their subjects.

Overview of Upcoming Episodes

• The podcast will cover three key books by Jim Collins: "Built to Last," "Good to Great," and "Great by Choice." Each book focuses on different aspects of building successful organizations—culture, practices, and human elements respectively.

• Mike stresses that insights from these books are valuable for anyone involved in teamwork or organizational development, making it essential reading for various audiences including investors and employees alike.

Engagement with Listeners

• Both hosts encourage listener feedback through their website or email, expressing gratitude towards new listeners joining in 2020 and inviting suggestions for future topics or authors they should explore. They acknowledge Carrie for her attention to detail regarding show notes corrections.

Understanding Organizational Foundations

The Inspiration Behind the Book

• The discussion begins with insights into what motivates individuals and organizations, highlighting the inspiration drawn from a specific company that influenced the book's creation.

Jim Collins' Research Journey

• Jim Collins reflects on his extensive research career since 1994, focusing on understanding what differentiates enduring great companies from others.

Historical Analysis of Great Companies

• Collins and his colleague Jerry Porras examined historical archives of notable companies like Hewlett-Packard (HP), Merck, and General Electric to identify long-term success factors.

Founding Principles of Hewlett-Packard

• An anecdote about David Packard’s original notes from HP's founding meeting in 1937 illustrates their initial uncertainty about product direction but clarity on organizational values.

Drucker's Influence on Company Values

• The founders’ approach mirrors Peter Drucker’s philosophy, emphasizing that their ultimate contribution was not a product but an organization built on strong values.

The Importance of Culture Over Products

Objectives That Define Success

• Packard articulated ten objectives in 1957 that laid the foundation for HP's culture, directly influenced by Drucker’s management principles.

Building a Lasting Company Culture

• The conversation highlights how HP's founders prioritized creating a robust company culture over immediate product decisions, which is essential for long-term success.

Lessons from Technology Giants

• Comparisons are made to other successful technology companies like Apple, where innovation stems from a strong foundational team rather than just individual products.

Legacy and Future Vision

Focus Beyond Immediate Success

• The discussion emphasizes the importance of looking beyond current achievements to build a legacy that contributes meaningfully to society.

Creating Teams for Innovation

• A key takeaway is that building great products requires fostering an environment where teams can innovate continuously rather than fixating solely on immediate market opportunities.

Understanding the Importance of "How" and "Why" in Business

The Role of Culture in Enduring Companies

• Jim Collins emphasizes that people are more interested in the "how" and "why" behind a business rather than just what it does, highlighting the importance of these elements for success.

• The concept of being "built to last" focuses on understanding the motivations and methods behind actions, which is crucial for long-term success.

• Collins argues that a strong company culture is essential; having clear values will attract great talent and lead to superior products.

Connection to Peter Drucker's Management Principles

• Collins' work validates Peter Drucker's management practices, particularly how Drucker influenced the founders of HP to establish their foundational objectives.

• During a talk at the Drucker Institute, Collins draws connections between his ideas and those of Drucker, reinforcing their relevance in modern management discussions.

Empirical Evidence Supporting Timeless Principles

• Collins asserts that research shows successful companies thrive not because they learn new things but because they fail to implement established principles effectively.

• He critiques financial institutions during the 2008 crisis, arguing that poor management practices led to failures rather than a lack of knowledge about sound principles.

Revisiting Foundational Concepts

• The discussion highlights how revisiting fundamental management concepts can be challenging yet necessary for sustained success.

• The hosts express excitement about exploring enduring company visions further in upcoming segments.

Examples of Enduring Companies

Notable Companies on the Built-to-Last List

• The conversation shifts towards companies recognized as enduring performers, including 3M, American Express, Disney, GE, Johnson & Johnson, Procter & Gamble, Sony, and Warner Bros.

Spotlight on Disney's Success

• One host reflects on Disney as an exemplary case due to its ability to innovate while maintaining core strengths like creating nostalgic content.

• They discuss Bob Iger's leadership role in positioning Disney competitively against streaming giants like Amazon and Netflix.

The Resilience of Iconic Companies

Disney's Enduring Success

• The director and Collins discuss the longevity of companies like Disney, emphasizing their ability to create compelling content that keeps them relevant.

• Bob Iger is praised for his leadership at Disney, which has managed to stay ahead of competitors despite industry challenges.

Walmart's Unexpected Resurgence

• A decade ago, it seemed unlikely that Walmart would thrive again amidst competition from Amazon; however, it has shown resilience and adaptability.

• The discussion highlights how some companies are experiencing peaks (like Walmart and Disney), while others face significant struggles (e.g., Boeing and IBM).

Core Competencies vs. Innovation

• The conversation shifts to the importance of executing core competencies rather than solely focusing on innovation or disruption.

• Companies often lose their way when they stray from what made them successful initially.

Insights from Jim Collins' "Built to Last"

• Jim Collins discusses the significance of strong values in enduring companies, noting that all 18 studied companies remain independent and successful decades later.

• The probability of a random sample of large publicly traded companies being as successful as those in Collins' study is extremely low (0.02%).

Values Over Strategy

• Successful companies are distinguished not just by smart strategies but by a solid foundation of core values that guide their actions.

• These values provide motivation during tough times, highlighting the role of culture in business success.

Vision: The Driving Force Behind Company Culture

Importance of Vision in Organizations

• Employees dedicate themselves to organizations with clear purposes beyond profit-making; understanding 'why' they work there fosters loyalty.

Misunderstanding Vision

• Many companies fail to grasp or genuinely believe in their vision, treating it merely as a tagline rather than a guiding principle.

Practical Application of Vision

• Jerry Porras emphasizes translating the abstract concept of vision into actionable terms that can be measured within an organization.

Understanding Vision in Business

The Importance of Vision Statements

• Companies often struggle to translate their vision statements into tangible business performance, leading to a disconnect between aspirations and actual outcomes.

• Managers frequently develop visions in isolated retreats but fail to create comprehensive frameworks that address all organizational needs.

• A significant issue is the lack of understanding about what constitutes a true vision, which hampers effective implementation within organizations.

Challenges in Implementing Vision

• Research revealed that many companies do not effectively utilize their vision due to misconceptions about its meaning and application.

• Personal reflections highlight the difficulty leaders face in recognizing the value of vision exercises and measuring adherence to them.

• There is a perception that visions are often treated as mere slogans, detached from daily operations, complicating accountability for living up to these ideals.

Defining Enduring Organizational Greatness

• Jerry Porras emphasizes that a clear vision is essential for achieving enduring greatness within an organization.

• Enduring greatness consists of two components: consistent long-term performance and making significant contributions to society over time.

• Organizations must demonstrate outstanding performance over extended periods (20+ years), rather than just short-lived success.

Characteristics of Visionary Companies

• To be considered enduringly great, companies must perform well while also contributing positively to the world; profit alone does not suffice.

• The study compared 36 companies, identifying 18 as visionary based on their impact and longevity versus non-visionary counterparts who performed well financially but lacked societal contributions.

Insights from Historical Data

• Visionary companies like 3M, IBM, Walt Disney, Hewlett-Packard, Merck, and Johnson & Johnson have been studied extensively for their long-term impact and effectiveness since inception.

• These visionary firms outperformed market averages by approximately 16 times over several decades, showcasing the power of a strong organizational vision.

Chad Owen on Building Enduring Organizations

The Essence of Enduring Organizations

• Chad Owen emphasizes the importance of being an enduringly great organization, summarizing it as doing good for the world while also achieving financial success.

• He notes that this dual focus is a primary differentiator between successful companies and those that have fallen off the list of enduring organizations.

• A motto shared by Owen is "do well by doing good," highlighting the need for continuous high performance alongside consistent positive contributions to society.

Vision and Its Role in Organizational Success

• Jerry Porras stresses that a company's vision must inspire and support actions that lead to both doing well financially and making a positive impact.

• Companies falter when they lose sight of their vision, which should consistently guide them towards doing good, ultimately leading to financial success.

Characteristics of Effective Vision

• Porras argues that many organizations fail to leverage their vision meaningfully; it often exists merely as a statement in annual reports rather than guiding principles.

• An effective vision correlates directly with organizational performance and social impact, serving as a framework for strategy and individual behavior.

Practical Implications of Vision

• Doing good can be defined simply as delivering quality products and maintaining fair customer relations, not necessarily requiring certification or extensive measures.

• Living up to promises made to customers is considered the minimum standard for "doing good," emphasizing integrity in business practices.

Common Factors in Successful Visions

• Porras identifies common factors among successful visions: they should guide strategy development, inspire employees, shape organizational culture, provide direction over time, unify teams under a common goal, define identity, and motivate action.

• He encourages reflection on whether individuals understand their organization's vision and its significance in guiding collective efforts.

Vision and Strategy: A Deep Dive

Understanding Organizational Vision

• The speaker challenges the audience to evaluate how many requirements for a strong vision their organization meets, suggesting that most will find it lacking.

• There is a contrast between top-down and bottom-up perspectives on vision; while it should drive strategy from above, it must also inspire individual behavior from below.

• The realization that a vision is more than just a statement; it's about understanding its role in guiding both strategic direction and personal conduct within the organization.

The Role of Vision in Company Culture

• A well-crafted vision influences not only organizational strategy but also interpersonal interactions among colleagues, highlighting its complexity.

• Many organizations mistakenly believe that having a poetic vision statement suffices; however, true vision encompasses much more than eloquent wording.

Evaluating and Enhancing Company Vision

• Listeners are encouraged to reassess their company's vision to ensure it aligns with doing good while achieving success. Identifying gaps is crucial for improvement.

• The example of Hewlett-Packard (HP) illustrates how foundational objectives can shape company culture over time, emphasizing consistency in values.

Protecting Core Values

• A company's commitment to its core values should be unwavering, likened to "crown jewels" that must be safeguarded against any external threats or changes.

• Establishing a culture-first company begins with having a robust vision that promotes ethical practices alongside business success.

Audience Engagement and Show Updates

• The hosts express gratitude towards listeners who have rated the show on platforms like iTunes and Google Play, emphasizing the importance of feedback for growth.

• Fun statistics reveal the show's rising popularity internationally, showcasing listener engagement across various countries including Iceland and Panama.

Insights from Jim Collins on Leadership

• Transitioning into insights from Jim Collins, the discussion highlights the significance of people over products when founding companies—emphasizing commitment among team members as essential for success.

• An anecdote about Dick Cooley at Wells Fargo illustrates that effective leadership involves asking the right questions—not merely focusing on strategies but prioritizing team dynamics first.

The Importance of the Right Team

Getting the Right People on the Bus

• The speaker emphasizes that determining the direction (where to drive the bus) should come after assembling the right team. The focus should be on getting the right people in key positions first.

• It is crucial to prioritize "who" over "what." This means identifying and placing suitable individuals in leadership roles before strategizing on tasks or goals.

• The conviction in this approach is highlighted, suggesting that a clear understanding of team composition can significantly impact achieving a vision.

Call to Action: Evaluate Your Team

• A strong call to action is made for leaders to assess their teams regularly. If they find themselves lacking, they must make necessary changes to ensure they have the right people involved.

• Teams should engage in discussions about their purpose and how they can effectively collaborate, fostering an environment of support and inspiration.

Insights from Literature

• The discussion transitions into insights from Jim Collins' book "Good to Great," which has sold millions of copies. Readers are encouraged to familiarize themselves with its concepts before future discussions.

• Key takeaways include that long-term financial success isn't solely what defines great companies; making a positive difference in society also plays a significant role.

Upcoming Discussions and Themes

• Future episodes will delve deeper into themes from "Good to Great," including analogies related to discipline within organizations and further exploration of successful company traits.

• There’s excitement about continuing this series, as each author discussed offers valuable insights worth exploring beyond just one episode.

Personal Reflections and Goals

• One speaker shares personal fitness goals for 2020, indicating a commitment not only professionally but also personally, highlighting accountability among peers as part of their journey together.

• Both speakers express enthusiasm for maintaining motivation throughout their endeavors while engaging listeners in their shared experiences.