If you want to start a business, it seems you should at least know what type of business it's going to be.
Not so, say James C. Collins and Jerry I. Porras.
In their new book, Built to Last: Successful Habits of Visionary Companies, the two Stanford University Graduate School of Business professors debunk some traditional business school ideas.
"I feel like I should call back all my old students and say, "Sorry, I was wrong, this is how it really goes,' " Collins said in an interview Thursday.
They selected "visionary" companies, those that have been successful for more than a half century, and compared them with less successful companies in the same fields. They spoke with the executives of 18 visionary companies like American Express, Citicorp, Merck and Disney. Visionary companies are more likely to have strong corporate infrastructure, rather than strong ideas. And they are more likely to take risks.
"When people say, "I'd love to start a company, but I don't have a great idea,' I say, "Neither did Sony, Hewlett-Packard, Marriott, Motorola or Wal-Mart. They built companies. They didn't wait for lightning-bolt ideas," Collins said.
Take Masaru Ibuka. He started his company in a rented room in a bombed-out department store in Tokyo with seven employees, $1,600 of savings and no idea of what to sell.
His first product was a rice cooker. It didn't work. Then he tried a tape recorder, but that failed, too. He kept his floundering business alive by selling heating pads. But today, his business, Sony, is one of the most successful in the world.
It became successful by what Collins and Porras call "clock building" _ building a corporate structure that breeds more ideas.
And some of those ideas may not be simple. They may be Big Hairy Audacious Goals or BHAGs (pronounced bee-hags). That is the term the authors coined for going for the impossible dream.
Wal-Mart is an example of a company that built its name on a series of BHAGs. First, in 1945, Sam Walton simply sought to have the best variety store in Arkansas within five years.
To do this, it needed to triple its sales volume from $72,000 per year to $250,000 per year in 1945. The store did that, making it the most profitable store in Arkansas and in the surrounding five states.
Walton set ambitious goals in following years. In 1977, Wal-Mart set a goal of becoming a $1-billion company in four years. It did, more than doubling its size.
Now, Wal-Mart's goal is to double the number of its stores and increase its sales volume per square foot by 60 percent by the year 2000, according to the authors. "The point is, they have outrageous goals with reasonable time frames," Collins said. "They have something to strive for."
Collins said the most surprising discovery he found in the six years he spent working on the book was that the executives of these highly successful companies were just normal people.
"These corporations could have . . ." Collins paused, chuckled, then said, "could have been started by you."
Steps to success
In their book Built to Last, Stanford professors James C. Collins and Jerry I. Porras debunk some long-standing myths about successful companies
A charismatic leader isn't required for a visionary company.
Hiring talent from outside
Visionary companies find their CEOs from within.
Visionary companies rely more on what the authors call, "Big Hairy Audacious Goals" than on conservative practices.
Focus on profits
Visionary companies do not exist primarily to maximize profits or shareholder wealth _ they're guided by a sense of purpose beyond just making money.
Visionary companies develop strong values, but they are not necessarily the same from company to company. Having a strong value system is more important than what the value system is.
Having a "Great Idea"
You don't have to have a "great idea" to start a successful company. Few visionary companies start with a great idea; some even begin with outright failures.
SOURCE: Built to Last: Successful Habits of Visionary Companies (HarperBusiness; October 26, 1994)