What Makes a Company Great?
The In Search of Excellence for the 1990s has arrived. It is Built to Last: Successful Habits of Visionary Companies, by James C. Collins and Jerry I. Porras (HarperBusiness, 1994). Focusing on 18 companies identified as role models by a broad range of business leaders, the two Stanford business-school professors explore a simple but elusive issue: What distinguishes companies that have displayed remarkable performance over an extended period from comparable companies that have not?
The answers challenge numerous business myths. We've all heard, for example, that a company needs to hire a chief executive from the outside if it wants to effect basic change. Yet in the 1,700 years during which these companies have collectively operated, they have gone outside for a CEO on only four occasions. Among other provocative findings: "A charismatic visionary leader is absolutely not required for a visionary company and, in fact, can be detrimental to a company's long-term prospects."
But perhaps most fascinating is the information about the early histories of the companies, summarized here. As Chuck Berry would say, it goes to show you never can tell.
Citicorp. Began as private credit union; had no coherent strategy for nearly 70 years
Procter & Gamble. Formed by merger of a candlemaker and a soapmaker; operated out of same small building for first 15 years
Philip Morris. Began as simple retail tobacco shop in London for first seven years before starting to make cigarettes
American Express. Formed by merger of companies owned by Wells, Fargo, and Butterfield; was immediately profitable
Johnson & Johnson. Grew steadily from start, thanks to innovative products, emergence of hospitals
Merck. Began as sales branch of German company; was successful from start; began manufacturing after 10 years
General Electric. Also formed by merger; had successful first year but cash problems in year two; grew steadily thereafter
Nordstrom. Started as a shoe store; was profitable, but didn't add second store until 1923
3M. Mining business failed after selling one ton of material; stumbled for 11 years
Ford. Was successful with first car, the Model A; in 1908 the Model T revolutionized the industry
IBM. Floundered for first three years, and board considered liquidation; hired Thomas J. Watson in 1914
Boeing. First airplane failed navy tests; struggled for five years; survived on loans and by making furniture and speedboats
Walt Disney. First films provided barely enough cash flow to survive; stumbled until Mickey Mouse appeared, in 1928
Marriott. Began as A&W root-beer stand; added hot food and became Hot Shoppe; was successful from start
Motorola. Barely survived first two years, making and repairing battery eliminators for Sears; then came up with car-radio concept, and busines took off
Hewlett-Packard. Began as contract manufacturer with $5,100 in first-year sales; employed only 17 people as late as 1941
Sony. Struggled with failed rice cooker and failed tape recorder; was kept alive via crude heating pads; first hit: pocket radio in 1955
Wal-Mart. Started as Ben Franklin five-and-dime franchise; lost lease and store in 1950; relaunched as Walton's five-and-dime