Collins is a student of enduring great companies — how they grow, how they attain superior performance, and how good companies can become great companies. Having invested more than a decade of research into the topic, Jim has co-authored four books — including the classic Built to Last, a fixture on the Business Week bestseller list for more than six years, and the New York Times bestseller, Good to Great: Why Some Companies Make the Leap…And Others Don’t, most recently, How the Mighty Fall: And Why Some Companies Never Give In. His work has been featured in Fortune, The Economist, Fast Company, USA Today, Industry Week, Business Week, Newsweek, Inc., and Harvard Business Review.
Driven by a relentless curiosity, Jim began his research and teaching career on the faculty of Stanford’s Graduate School of Business, where he received the Distinguished Teaching Award. After seven years at Stanford, Jim returned to his hometown of Boulder, Colorado, to found his management research laboratory. He is fond of saying, “I am a self-employed professor who endowed his own chair and granted himself tenure.” Collins set up his research lab in the same building where he attended grammar school. Still a place of learning, he uses the laboratory to conduct large-scale research projects to develop fundamental insights and then translate those findings into books, articles and lectures. He continues to conduct rigorous research while maintaining an active teaching schedule with leaders in the corporate and social sectors.
Note: After this interview was conducted, Collins published How the Mighty Fall: And Why Some Companies Never Give. In a second interview, we will discuss it and his latest book, Great By Choice: Uncertainty, Chaos, and Luck — Why Some Thrive Despite Them All, co-authored with Morten T. Hansen and published by Harper Business/An imprint of HarperCollins (Octiber, 2011).
Morris: Jim, if writing Built to Last today, would you use the same criteria
Collins: Yes, pretty much. The key criteria for an enduring great company are:
PERFORMANCE: The company must display superior financial performance relative to others’.
IMPACT: The company must have made a unique and significant impact on the world that it touches.
RESILIENCY: The company must be able to go through difficult times and emerge even stronger
LONGEVITY: The company must demonstrate these variables for a long period of time — decades, not just years.
Morris: You and Jerry Porras identify 18 common myths about the most enduring companies. Which of them seem to be as well-intrenched today as in 1994 when Built to Last was first published?
Collins: Great question. I would say the myth that the only constant is change. In a truly great company, change is a constant, but not the only constant. There are timeless principles of building great companies that never change.
Morris: One of the chapter titles is “Try a Lot of Stuff and Keep What Works.” What is the relevance, indeed the great importance of constant innovation and experimentation to a visionary company?
Collins: Try a lot of stuff, keep what works, and get rid of what doesn’t — this is the secret to the question of how to systematically “be lucky.” Luck is a variable in life. The question is, how do you ensure that you are more lucky than the next person? The answer lies in trying a lot of stuff and also having the discipline of persistence. Luck favors the persistent.
Morris: Can such initiatives alter the original vision?
Collins: You need to think of vision as having two components. On the one hand you have a Core Ideology, principally the core values of the company. The core values of a great company never change; they are like the ideals in the Declaration of Independence, the equivalent of “We hold these truths to be self-evident.” On the other hand, you have the Envisioned Future, principally the company’s BHAG (Big Hairy Audacious Goal). The big audacious goals of a company can change over time. For example, Starbucks evolved its goal to turning the Starbucks brand into the most respected and recognized consumer brand in the world after it had experimented with its store concepts and saw that such a goal was possible.
Morris: In Good to Great, you and your associates committed more than 15,000 hours of research to answering these questions: “Is it possible for a good, mediocre or even terrible organization to become great? If so, what are the underlying variables that enable it to do so?” Of all that you learned, what surprised you most?
Collins: We learned that companies in the most unlikely of circumstances can become great. Who would have thought that Walgreens could reach a point of beating the general stock market by fifteen times? Or that Nucor — a steel company — could beat the market nine times? We were surprised largely by what it did not take to make a great company. For example:
• Charismatic leaders are negatively correlated with greatness over time.
• Executive compensation has little bearing on whether or not a company becomes great.
• You should first get the right people on the bus and then figure out where to drive it — not the other way around.
• Better to confront the brutal facts than to set grand and lofty visions, at least at the start.
• Technology has virtually nothing to do with making a company great; it can only accelerate pre-existing greatness
Morris: You suggest that at least some good executives can become great leaders, reaching what you call “Level 5.” Are there underlying variables for them as they do so?
Collins: Level 5 leaders are to their companies what Abraham Lincoln was to the nation. The key to a Level 5 is ambition first and foremost for the cause, the company, the work — not yourself — combined with the will to make good on that ambition.
Morris: Is it possible to identify prospective Level 5 leaders during the interview process? If so, how?
Collins: Look not at what people say, but at what happened after they moved on to new, more challenging responsibilities. This is the key variable. If a high school sports coach retires, and the team declines after he or she left, then he or she was not a Level 5.
Morris: You suggest that great organizations “get the right people on the bus, the wrong people off the bus, and the right people in the right seats — and then they figured out where to drive it.” Which criteria help them to determine which are the right and wrong “passengers”?
Collins: Two things. First is fit with the company’s core values. Second is that people understand the difference between a “job” and a “responsibility.” If an air traffic controller said, “I did my job right” but the planes crashed, would it matter? No. You have responsibility, not a job: the planes don’t crash! Grasping this distinction separates the right people on the bus from others.
Morris: Finally, since Good to Great was published, have other important questions been seeking you out?
Collins: I’m interested in autopsies: how companies go from great to good to mediocre to bad to irrelevant. I’m also interested in how you build greatness amidst tremendous turbulence. Finally, I’d like to learn how to build great societies — not just companies — from schools to government agencies. Stay tuned.