Transformation Framework Part II: Sources & Methods in 'Built to Last'

The methodology of Built to Last includes surveys, quantitative financial analysis, and qualitative literature review followed by a detailed matched pairs analysis to yield the eight characteristics of a visionary organization. In order to avoid any preconceptions, BTL did not establish a hypothesis; it began as a open-ended study without an agenda or preconception that might have otherwise introduced bias.[1]

First, BTL identified a population of “visionary” corporations. Distributing a survey to the Chief Executive Officer (CEO) of all Fortune 500 (F500) industrial and service companies, the five hundred largest private corporations (INC 500), and the hundred largest public companies (INC 100) Collins and Porras asked each CEO to nominate who they deemed were visionary companies.[2] The survey established the definition of ‘visionary’ as “a premier institution… widely admired by [its] peers, having a long track record of making a significant impact on the world around them,” and that “prosper over long periods of time, throughout product life cycles and multiple generations of active leaders.”[3] In short, a visionary company is defined as one with longevity, profitability, and social impact. The CEO survey was used to reduce bias. In comparison to other potential respondents, CEO’s were assumed to have comparably deep awareness and insight into various industries and companies.[4] After receiving a 23 percent response rate eighteen corporations were nominated.[5]

Second, comparison companies (CC) were chosen in order to conduct a matched-pairs analysis. Rather than merely opine what the most important characteristics, or choosing those characteristics common to visionary corporations, BTL consciously intended disambiguate the distinguishing traits between visionary and CC that were also common among most if not all visionary corporations.[6] As such, like competitors were chosen carefully for each of the visionary companies to ensure each comparison represented an apt analogy. Each visionary and CC exhibited similar business characteristics related to, though not exclusively, organizing arrangements, social factors, physical setting, use of technology, leadership, products and services, vision and mission, and market and environmental factors.[7]

Third, BTL controlled for longevity and performance. By selecting comparison companies that began prior to 1950 it ensured sufficient information was available for each corporation.[8] By ensuring each CC and performed as well or better than the general stock market it ensured visionary companies were being compared to relatively strong, not lackluster competitors.[9] That is, BTL intended to discover the distinguishing characteristics between habitual gold medal winners and a periodic silver or bronze medal winner, not the distinguishing characteristics between a gold medal winner and a second string varsity athlete.

Fourth, BTL established a large research scope. BTL gathered information on, then compared individual competitor-pairs throughout their entire existence.[10] That research included all books, all major news and business periodical articles, all case studies from five leading business schools’ publications, and large quantities of internal documentation from each visionary and Comparison Corporation (CC).[11] Finally, the authors conducted post-study CEO interviews and consulting engagements in order to confirm their findings[12] Their findings fall into four groups: core ideology, audacious goals, cultism, and purposeful evolution.

This particular matched pair technique lends additional legitimacy and specificity to the authors’ findings. The authors do not merely determine the distinguishing factors between visionary companies and the overall competitive market. Their findings are more specific, describing the distinguishing characteristics between visionary companies, which far out perform the market, and good companies that, though they endure and maintain market parity have not, comparatively speaking, delivered as conspicuous a financial performance and social impact.

           BTL has one central implication. It is a blueprint for building an enduring organization, not just a large commercial corporation.[13] A sufficiently large data set (over one thousand corporations) with continuous performance data (U.S. dollars) and a common, industry-recognized schema for grading business outcomes (long-term financial performance) were used as the basis for an equally well-structured matched-pairs analysis that illustrate the distinguishing characteristics between visionary corporations and like competitors. Because of the richness and depth of data available on public corporations and the sound approach to leveraging that information, the lessons of the study are as certain as a social science study of this kind can be.

That being said, the authors of BTL do suffer from one issue, which they acknowledge in preface of the tenth anniversary version of their book. Though BTL describes the characteristics that distinguish visionary companies from average ones, they do not truly describe how to become visionary.[14] That is, BTL describes what a transformed enterprise looks like but does not indicate how to transform. In the context of our academic discussion regarding qualitative and quantitative data, we should also highlight one other caveat. Though BTL is certainly systematic and uses a sufficiently performance-based definition of visionary, it is not a wholly quantitative study. To that extent, a critic who could show bias in the means used to quantify relatively qualitative characteristics of visionary and comparison corporations might have grounds for disagreeing with Collins and Porras or with our framework. We will not discuss this matter in any detail in this thesis. For a closer analysis of the grading schema used in their analysis, refer to the appendices in BTL.

[1] Page 21.

[2] Last, 13.

[3] Last, 1.

[4]Last, 14.

[5] Built to Last corporations include Minnesota Mining and Manufacturing (3M), American Express, Boeing, CITI Corporation (CITICorp), Ford, General Electric, Hewlett-Packard, International Business Machines (IBM), Johnson & Johnson, Marriott, Merck, Motorola, Nordstrom, Proctor & Gamble, Phillip Morris, Sony, WalMart, and Disney

[6] Last, 3.

[7] Last, 274.

[8] Last, 16.

[9] Last, 19.

[10] Last, 18.

[11] Last, 279.

[12] Last, 20.

[13] Last, 245.

[14] Last, xiv.