Just Managing: Are Today's Firms Built to Last?
How can anyone manage to create a company that lasts beyond
the next great opportunity? By not focusing on the next great opportunity,
that's how. Also, by taking to heart one radical idea: The most
important creation of your company is not any singular product or
service, but the company itself.
In today's rapidly shifting markets and technology, the most important
question startups can ask is not what they can produce but what
they believe. This emphasis on values stems from one of the key
books about the Internet Economy, Built to Last by Jim Collins
and Jerry Porras. One of the most successful business books of the
past decade, it has sold more than 700,000 copies. It's been a fixture
on the Business Week bestseller list for five years and continues
to sell robustly.
One of the reasons for its success is that the book has become
a critical compass for new-economy companies that aspire to last
beyond the next market crest. Venture capital firms such as Benchmark
Capital give the book to every client, says Collins. Venture
Law Group's Craig Johnson and Amazon.com's swear by it.
One of the book's fundamental ideas is that managers should shift
from "seeing the company as a vehicle for the products to seeing
the products as a vehicle for the company." They can do so by using
core values to guide their direction and align the behavior of employees.
Out of such beliefs emanate every choice the company makes. For
Sony, the values include respect for and encouragement of
individual ability and creativity. For Merck, they include social
responsibility and science-based innovation.
What does your company value?
Outcome.com, a startup in San Francisco that is developing applications
for financial services companies, preaches empathy, privacy, innovation
and learning. "[These core values are] the fundamental center of
gravity at our company," says VP Steven Overman.
However simple, such ideas don't come easily. Overman was the
fifth person to join the company, and he says the first thing he
did was to spend a solid week with the other founders coming up
with the "outcome covenant." Founder Herb Stephens, a Built to
Last disciple, has been involved with several startups but saw
in Outcome an opportunity to launch with a truly different approach.
"Hypergrowth requires core values, and the way that you ensure
that they survive is that you talk about them all the time," Overman
says. And the company does more than talk: It has made a conscious
decision to base every decision on its beliefs. Every one of the
70 employees has gone through an orientation session focused on
the company values. Every recruit who comes to the company goes
through two separate interviews - one focused on skills and the
other focused on values. They must answer questions that test their
values, such as, "If you had a solution to a problem that you knew
would be unpopular but effective, what would you do?" Candidates
with poor marks on the values interview don't make the cut, regardless
of their skills.
Recently, the company encountered a hitch with financing. Series
B financing from one source that suddenly became doubtful forced
executives to consider paring expenses for the short term. Overman
and the others were torn over what to tell the troops. To reveal
weakness would spark doubt and uncertainty. But to withhold the
news might breach trust. The easy thing would have been to say nothing.
But, says Overman, after painful discussion, they asked themselves
what their core values dictated. They decided to share the truth.
"And the results were mixed," says Overman. While some employees
became stressed out, he says, "at the end of the day, it was the
right thing to do because we built more trust."
I can't provide a market barometer of success for Outcome yet.
The company has secured other funding and marked the alpha launch
of its product last week. But its emphasis on getting the right
things right from the outset contrasts markedly with the scores
of companies frantically chasing the next great score.
Jim Collins is thrilled that a growing number of Internet Economy
companies are wrestling with his ideas. But the book's allure among
Internet entrepreneurs has not surprised him at all.
Collins is working on another book and has turned up some conclusions
that may shock new founders. Of the more than 1,400 top companies
in his survey, he found only 11 that showed the ability to become
what he considers great. "While you can turn an established company
from a good one to a great one," he says, "the reality is that it
is a lot easier to do it from the ground up. Those entrepreneurs
who are trying to get it right from the get-go are giving themselves
much better odds not just at succeeding, but at having a truly great
The impact of Built to Last demonstrates that some of the
people founding companies today aren't in it solely for the frenzied
rush of VC money. Rather, a number of people see the rise of the
Internet Economy as an opportunity to build something of enduring
Read or print the Intro
and Chapter 1.
Read the book reviews at Inc
Read the publisher's press
this book from Amazon.com.
the companies that Tom discusses in the book
Hear a recent lecture by Tom on the Startup Garden
Buy my book and I will send you a worksheet and list of local
and industry resources for your startup. Simply send me an email
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Managing – articles that Tom wrote for The Industry Standard and some
written for Inc., Fortune Small Business, Harvard Management Update, and other
Read about other
books and web sites about starting your own business.