Whatever Happened to "Built to Last"?, 31 Years Later by Joseph E. Johnson

Introduction

?In 1994, I and many others read the expert-proclaimed “Built to Last” (BTL) book by Jim Collins and Jerry Porras. ?The book was considered to be a breakthrough book in how to successfully run companies at the time. ?The book promised to unveil the “secret sauce” of corporate longevity and profitability, showcasing 18 visionary and successful companies that the authors believed were destined for enduring greatness. These weren't just any companies; they were the best of the best at the time. Names like General Electric, IBM, and Walt Disney resonated with a promise of perpetual success. Fast forward to 2025, and the story these companies tell is far more complex and sobering than anyone could have predicted. This article is a review on the “Built to Last” concepts and the 18 BTL companies. Did Collins and Porras get it right? Or were they just making stuff up and selling books? Read on and you’ll find out if these companies were built to last.

The Grand Promise

"Built to Last" wasn't just another business book; it was THE blueprint for corporate immortality. Collins and Porras argued that these 18 companies possessed unique qualities that set them apart:

1. A core ideology that transcended profit-making
2. The ability to preserve their core while stimulating progress
3. “Big Hairy Audacious Goals (BHAGs)” (yes those were the exact words) that pushed them beyond comfort zones
4. A cult-like culture that fostered loyalty and innovation
5. Home-grown management that understood the company's DNA

The authors claimed that these characteristics would enable the companies to continually outperform the market and their competitors for decades to come. The business world embraced this idea with fervor, and "Built to Last" became a must-read for executives and MBA students alike.

The Harsh Reality

However, the data from 1994 to 2025 tells a different story, one that challenges the very foundations of the book's premises. Let's break down the performance by looking at Table 1, that lists the 18 BTL companies, their stock price on January 1, 1994 and January 17, 2025, and their (calculated) compound annual growth rate (CAGR) over that time. Note that the calculated CAGR for stocks like Marriott, Hewlett Packard and Philip Morris, their initial stock offering date, and not January 1, 1994, was used. ?The table also lists the same data for the Standard & Poor’s top 500 stocks (S&P 500). The table is ordered with the highest to the lowest CAGR and includes an average CAGR for the 18 stocks. There is a also graph of the BTL companies versus their CAGR numbers, too (Graph 1). The reader is also advised to ?see the stock charts of each of the 18 BTL companies in the Appendix. These charts are invaluable as one can see stock performance over the years, and with further research determine the cause of the stock pricing.

?

TABLE 1: 18 BTL Company Performance from 1994 to 2025

?

Graph 1: The CAGR (1994-2025) for the 18 BTL Companies with S&P 500 Line

?

The Numbers

• The Average CAGR of "Built to Last" companies was 6.87%
• The S&P 500 CAGR was 8.60%
• Only 6 of the 18 BTL companies (1/3rd) surpassed the S&P 500 performance
• The majority, 12 BTL companies (2/3rd ) lagged the S&P 500 performance

This 1.73% CAGR difference between the BTL Avg and S&P 500 might seem small, but compounded over 31 years, it represents a huge difference in performance. An investment of $1,000 in 1994 would have grown to:

• $7,843.86 if spread equally across the 18 "Built to Last" companies, whereas it would be
• $12,904.01 if invested in the S&P 500

That's a relatively large difference of over $5,000 – more than the original investment itself and 63% more than the 18 BTL company stock average.

Winners and Losers: A Closer Look

Some companies did live up to their "Built to Last" moniker:

1. American Express (AXP) led the pack with an astounding 12.67% CAGR, more than doubling the average.
2. Marriott (MAR), despite data only available from 1998, showed impressive growth at 11.20% CAGR during that time.
3. Walmart (WMT) continued its retail dominance with a 10.30% CAGR.
4. IBM (IBM), despite facing numerous challenges, managed a respectable 9.61% CAGR.

However, for every success story, there are struggles and declines:

1. Ford (F) was the only company to show negative growth, with a CAGR of -0.18%. Ford was severely affected by the 2008 financial crisis, posting a record $12.7 billion loss, and experiencing its worst trading day on November 19, 2008, with a 33.33% stock drop. The automotive industry has faced significant disruptions, including shifts towards electric vehicles and changing consumer preferences which Ford has lagged in. Over the years Ford has struggled with persistent quality problems (whatever happened to their “Quality is #1” slogan?), leading to increased warranty costs, lawsuits, and customer dissatisfaction. The company's transition to electric vehicles has also been slow and costly, with Ford's EV division reporting significant losses.
2. Citigroup (C), once a “king” of banking, barely grew with a CAGR of just 1.01%, scarred by the 2008 financial crisis with their overextended housing market investments. The bank required a $476 billion bailout from the U.S. government, and its stock price collapsed from over $500 per share in 2006 to under $1 in 2009. Now regulation, under performance and reputation has stagnated stock growth.
3. General Electric (GE), the company that epitomized American industrial might, managed only a 5.03% CAGR, a shadow of its former glory. GE's decline has been dramatic with multiple causes. Under Jack Welch's leadership, GE focused on short-term profitability, stock performance and financial engineering, which later proved unsustainable. GE with its "financial engineering", faced multiple SEC investigations for multiple financial and accounting “ irregularities”, including auditing, damaging investor confidence. The company also expanded into many diverse businesses, making it difficult to manage effectively, and GE Capital, the company's financial arm and “golden” department, nearly sank the company during the 2008 financial crisis. Questionable acquisitions, such as the $9.5 billion purchase of Alstom's power business, proved to be additional costly mistakes.
4. Sony (SONY), despite its consumer electronics prowess, achieved a mere 4.36% CAGR, struggling to keep pace with tech innovations. ?Sony was slow to adapt to changing consumer electronics markets, particularly in the shift from hardware to software and services. The company had financial mismanagement, posted significant losses in the early 2010s, with a record loss in 2012. ?Sony faced intense competition in key markets like televisions, smartphones and image sensors did not keep up to pace with their rivals. ?Despite these challenges, Sony has shown signs of improvement in recent years, with stronger performance in its gaming and entertainment divisions.

Key Learnings: Unpacking the Fallacy Jim Collins and Jerry Porras were wrong in many (most?) of their “Built to Last” concepts, but learnings can be made, including:

1. Past Performance is No Guarantee of Future Success: The book's selection criteria, heavily based on historical performance, proved insufficient in predicting long-term success. Companies like C, GE and Ford, once the face of corporate excellence, faced significant challenges in adapting to changing market dynamics.
2. Adaptability Over Tradition: Companies that thrived, like American Express and Walmart, successfully pivoted their business models in response to technological disruptions and changing consumer behaviors. AXP's shift towards a more diverse financial services portfolio and WMT's embrace of e-commerce proved crucial.
3. Diversification is Key: An investor who put equal amounts in all 18 companies would have significantly underperformed the S&P 500. This underscores the importance of diversification in investment strategies and the risks of concentrating investments based on perceived corporate strength.
4. Industry Matters More Than Ever: Technology and consumer-focused companies generally outperformed industrial conglomerates, reflecting broader economic shifts towards a service and technology-driven economy. The struggles of GE and Ford highlight this trend.
5. The Power of Index Investing: The S&P 500's superior performance demonstrates the strength of passive, diversified investing strategies. It challenges the notion that a select group of "visionary" companies can consistently outperform the broader market. Another note, Citigroup’s significant financial investments in the housing market in 2007-2008, rather than diversifying their portfolio, set stage for their continued stagnation from that point on.
6. Corporate Culture is Not Enough: While the book emphasized the importance of strong corporate cultures, the data suggests that culture alone is insufficient. Companies need to balance maintaining their core values with the flexibility to adapt to market changes.
7. The Double-Edged Sword of Size: Many of these companies were industry leaders in 1994. However, their size, which once provided advantages, sometimes became a liability, making it harder to pivot quickly in response to market changes. For example, GE’s continual growth model by acquiring companies was detrimental.

?

Conclusion: Rewriting the Rules of Corporate Longevity

The "Built to Last" story serves as a powerful reminder of the dangers of corporate hubris and the falsehoods of even the most well-researched business theories. While a minority of companies lived up to their promise, most faltered, and as a group, failed to beat the market in the long run. This outcome challenges the thinking and understanding of what makes a company truly built to last.

What are some takeaways and lessons learned? In the dynamic and often unpredictable world of business and investing, adaptability, diversification, and a healthy skepticism of "sure things" (hubris?) are perhaps the only strategies truly built to last. The companies that will thrive in the coming decades may not be those with the strongest traditions or the most celebrated cultures, but those most capable of reinventing themselves with customer and client needs in mind, while staying true to their core purpose.

Looking to the future, the tale of "Built to Last" shows that corporate destiny is not preordained. ?It's a continuous journey of adaptation, innovation, and sometimes, reinvention. In the end, perhaps the most valuable lesson is not to focus on how to build a company that lasts forever, but how to build one that can change and grow with the times, and remain relevant and valuable in an ever-changing and evolving marketplace.

?? 2025 All rights reserved. This article is copyright protected. Please contact author about authorized use.

References:

Collins, J. C., & Porras, J. I. (1994). Built to Last: Successful Habits of Visionary Companies. New York, NY: Harper Business.

Stock Information from Yahoo Finance https://finance.yahoo.com

?

?

Appendix:

Charts of stock prices from Jan 1994-Jan 2025 (except for MAR,HPE, PM- where date is public offering); S&P chart first followed by BLT Companies in alphabetical order

?

?

?

?

?

?

?