Chapter 2
Clock Building, Not Time Telling
Above all, there was the ability to build and build and build—never stopping, never looking back, never finishing—the institution.... In the last analysis, Walt Disney’s greatest creation was Walt Disney [the company].
RICHARD SCHICKEL, THE DISNEY VERSION1
I have concentrated all along on building the finest retailing company that we possibly could. Period. Creating a huge personal fortune was never particularly a goal of mine.
SAM WALTON, FOUNDER, WAL-MART2
Imagine you met a remarkable person who could look at the sun or stars at any time of day or night and state the exact time and date: “It’s April 23, 1401, 2:36 A.M., and 12 seconds.” This person would be an amazing time teller, and we’d probably revere that person for the ability to tell time. But wouldn’t that person be even more amazing if, instead of telling the time, he or she built a clock that could tell the time forever, even after he or she was dead and gone?3
Having a great idea or being a charismatic visionary leader is “time telling”; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is “clock building.” In the first pillar of our findings—and the subject of this chapter—we demonstrate how the builders of visionary companies tend to be clock builders, not time tellers. They concentrate primarily on building an organization—building a ticking clock—rather than on hitting a market just right with a visionary product idea and riding the growth curve of an attractive product life cycle. And instead of concentrating on acquiring the individual personality traits of visionary leadership, they take an architectural approach and concentrate on building the organizational traits of visionary companies. The primary output of their efforts is not the tangible implementation of a great idea, the expression of a charismatic personality, the gratification of their ego, or the accumulation of personal wealth. Their greatest creation is the company itself and what it stands for.
We came upon this finding when the evidence from our research punched holes in two widely held and deeply cherished myths that have dominated popular thinking and business school education for years: the myth of the great idea and the myth of the great and charismatic leader. In one of the most fascinating and important conclusions from our research, we found that creating and building a visionary company absolutely does not require either a great idea or a great and charismatic leader. In fact, we found evidence that great ideas brought forth by charismatic leaders might be negatively correlated with building a visionary company. These surprising findings forced us to look at corporate success from an entirely new angle and through a different lens than we had used before. They also have implications that are profoundly liberating for corporate managers and entrepreneurs alike.
THE MYTH OF THE “GREAT IDEA”
On August 23, 1937, two recently graduated engineers in their early twenties with no substantial business experience met to discuss the founding of a new company. However, they had no clear idea of what the company would make.* They only knew that they wanted to start a company with each other in the broadly defined field of electronic engineering. They brainstormed a wide range of initial product and market possibilities, but they had no compelling “great idea” that served as the founding inspiration for the fledgling company.
Bill Hewlett and Dave Packard decided to first start a company and then figure out what they would make. They just started moving forward, trying anything that might get them out of the garage and pay the light bills. According to Bill Hewlett:
When I talk to business schools occasionally, the professor of management is devastated when I say that we didn’t have any plans when we started—we were just opportunistic. We did anything that would bring in a nickel. We had a bowling foul-line indicator, a clock drive for a telescope, a thing to make a urinal flush automatically, and a shock machine to make people lose weight. Here we were, with about $500 in capital, trying whatever someone thought we might be able to do.4
The bowling foul-line indicator didn’t become a market revolution. The automatic urinal flushers and fat-reduction shock machines didn’t go anywhere, either. In fact, the company stumbled along for nearly a year before it got its first big sale—eight audio oscilloscopes to Walt Disney for work on the movie Fantasia. Even then, Hewlett-Packard continued its unfocused ways, sputtering and tinkering with a variety of products, until it got a boost from war contracts in the early 1940s.
Texas Instruments, in contrast, traces its roots to a highly successful initial concept. TI began life in 1930 as Geophysical Service, Inc., “the first independent company to make reflection seismograph surveys of potential oil fields, and its Texas labs developed and produced instruments for such work.”5 TI’s founders, unlike Hewlett and Packard, formed their company to exploit a specific technological and market opportunity.6 TI started with a “great idea.” HP did not.
Neither did Sony. When Masaru Ibuka founded his company in August of 1945, he had no specific product idea. In fact, Ibuka and his seven initial employees had a brainstorming session—after starting the company—to decide what products to make. According to Akio Morita, who joined the company shortly after its founding, “The small group sat in conference ... and for weeks they tried to figure out what kind of business this new company could enter in order to make money to operate.”7 They considered a wide range of possibilities, from sweetened bean-paste soup to miniature golf equipment and slide rules.8 Not only that, Sony’s first product attempt (a simple rice cooker) failed to work properly and its first significant product (a tape recorder) failed in the marketplace. The company kept itself alive in the early days by stitching wires on cloth to make crude, but sellable, heating pads.9 In comparison, Kenwood’s founder, unlike Ibuka at Sony, appeared to have a specific category of products in mind. He christened his company with the name “Kasuga Wireless Electric Firm” in 1946 and “since its foundation,” according to the Japan Electronics Almanac, “Kenwood has always been a specialist pioneer in audio technology.”10
Like fellow legendaries Ibuka and Hewlett, Sam Walton also started without a great idea. He went into business with nothing other than the desire to work for himself and a little bit of knowledge (and a lot of passion) about retailing. He didn’t wake up one day and say, “I have this great idea around which I’m going to start a company.” No. Walton started in 1945 with a single Ben Franklin franchise five-and-dime store in the small town of Newport, Arkansas. “I had no vision of the scope of what I would start,” Walton commented in a New York Times interview, “but I always had confidence that as long as we did our work well and were good to our customers, there would be no limit to us.”11 Walton built incrementally, step by step, from that single store until the “great idea” of rural discount popped out as a natural evolutionary step almost two decades after he started his company. He wrote in Made in America:
Somehow over the years folks have gotten the impression that Wal-Mart was something that I dreamed up out of the blue as a middle aged man, and that it was just this great idea that turned into an over-night success. But [our first Wal-Mart store] was totally an outgrowth of everything we’d been doing since [1945]—another case of me being unable to leave well enough alone, another experiment. And like most over-night successes, it was about twenty years in the making.12
In a twist of corporate irony, Ames Stores (Wal-Mart’s comparison in our study), had a four-year head start over Sam Walton’s company in rural discount retailing. In fact, Milton and Irving Gilman founded Ames in 1958 specifically to pursue the “great idea” of rural discount retailing. They “believed that discount stores would succeed in small towns” and the company achieved $1 million in sales in its first year of operation.13 (Sam Walton didn’t open his first rural discount retail store until 1962; until then, he had simply operated a collection of small, main-street variety stores.)14 Nor was Ames the only other company that had a head start over Walton. According to Walton biographer Vance Trimble, “Other retailers were out there [in 1962] trying to do just what he was doing. Only he did it better than nearly anyone.”15
HP, Sony, and Wal-Mart put a large dent in the widely held mythology of corporate origins—a mythology that paints a picture of a far-seeing entrepreneur founding his or her company to capitalize on a visionary product idea or visionary market insight. This mythology holds that those who launch highly successful companies usually begin first and foremost with a brilliant idea (technology, product, market potential) and then ride the growth curve of an attractive product life cycle. Yet this mythology—as compelling and pervasive as it is—does not show up as a general pattern in the founding of the visionary companies.
Indeed, few of the visionary companies in our study can trace their roots to a great idea or a fabulous initial product. J. Willard Marriott had the desire to be in business for himself, but no clear idea of what business to be in. He finally decided to start his company with the only viable idea he could think of: take out a franchise license and open an A&W root beer stand in Washington, D.C.16 Nordstrom started as a small, single-outlet shoe store in downtown Seattle (when John Nordstrom, just returned from the Alaska Gold Rush, didn’t know what else to do with himself).17 Merck started merely as an importer of chemicals from Germany.18 Procter & Gamble started as a simple soap and candle maker—one of eighteen such companies in Cincinnati in 1837.19 Motorola began as a struggling battery eliminator repair business for Sears radios.20 Philip Morris began as a small tobacco retail shop on Bond Street in London.21
Furthermore, some of our visionary companies began life like Sony—with outright failures. 3M started as a failed corundum mine, leaving 3M investors holding stock that fell to the barroom exchange value of “two shares for one shot of cheap whiskey.”22 Not knowing what else to do, the company began making sandpaper. 3M had such a poor start in life that its second president did not draw a salary for the first eleven years of his tenure. In contrast, Norton Corporation, 3M’s comparison in the study, began life with innovative products in a rapidly growing market, paid steady annual dividends in all but one of its first fifteen years of operations, and multiplied its capital fifteenfold during the same time.23
Bill Boeing’s first airplane failed (“a handmade, clumsy seaplane copied from a Martin seaplane” which flunked its Navy trials), and his company faced such difficulty during its first few years of operations that it entered the furniture business to keep itself aloft!24 Douglas Aircraft, in contrast, had superb initial success with its first airplane. Designed to be the first plane in history to make a coast-to-coast nonstop trip and to lift more load than its own weight, Douglas turned the design into a torpedo bomber which he sold in quantity to the Navy.25 Unlike Boeing, Douglas never needed to enter the furniture business to keep the company alive.26
Walt Disney’s first cartoon series Alice in Cartoon Land (ever heard of it?) languished in the theaters. Disney biographer Richard Schickel wrote that it was “by and large a limp, dull and cliché ridden enterprise. All you could really say for it was that it was a fairly ordinary comic strip set in motion and enlivened by a photographic trick.”27 Columbia Pictures, unlike Disney, attained substantial success with its first theater release. The film, More to Be Pitied Than Scorned (1922), cost only $20,000 and realized income of $130,000, thus launching Columbia forward with a sizable cash cushion that funded the making of ten additional profitable movies in less than two years.28
WAITING FOR “THE GREAT IDEA” MIGHT BE A BAD IDEA
In all, only three of the visionary companies began life with the benefit of a specific, innovative, and highly successful initial product or service—a “great idea”: Johnson & Johnson, General Electric, and Ford. And even in the GE and Ford cases, we found some slight dents in the great idea theory. At GE, Edison’s great idea turned out to be inferior to Westinghouse’s great idea. Edison pursued direct current (DC) system, whereas Westinghouse promoted the vastly superior alternating current (AC) system, which eventually prevailed in the U.S. market.29 In Ford’s case, contrary to popular mythology, Henry Ford didn’t come up with the idea of the Model T and then decide to start a company around that idea. Just the opposite. Ford was able to take full advantage of the Model T concept because he already had a company in place as a launching pad. He founded the Ford Motor Company in 1903 to capitalize on his automotive engineering talent—his third company in as many years—and introduced five models (Models A, B, C, F, and K) before he launched the famous Model T in October of 1908.30 In fact, Ford was one of 502 firms founded in the United States between 1900 and 1908 to make automobiles—hardly a novel concept at the time. In contrast to the visionary companies, we traced the founding roots of eleven comparison companies much closer to the great-idea model: Ames, Burroughs, Colgate, Kenwood, McDonnell Douglas, Norton, Pfizer, R.J. Reynolds, Texas Instruments, Westinghouse, and Zenith.
In other words, we found that the visionary companies were much less likely to begin life with a “great idea” than the comparison companies in our study. Furthermore, whatever the initial founding concept, we found that the visionary companies were less likely to have early entrepreneurial success than the comparison companies. In only three of eighteen pairs did the visionary company have greater initial success than the comparison company, whereas in ten cases, the comparison company had greater initial success than the visionary company. Five cases were indistinguishable. In short, we found a negative correlation between early entrepreneurial success and becoming a highly visionary company. The long race goes to the tortoise, not the hare.
In Appendix 2, we give a more detailed description of the founding roots of all the visionary and comparison companies. (Even though it’s in an appendix—we put it there so as not to break the flow of the text—we encourage you to browse through it.)
If you are a prospective entrepreneur with the desire to start and build a visionary company but have not yet taken the plunge because you don’t have a “great idea,” we encourage you to lift from your shoulders the burden of the great-idea myth. Indeed, the evidence suggests that it might be better to not obsess on finding a great idea before launching a company. Why? Because the great-idea approach shifts your attention away from seeing the company as your ultimate creation.
THE COMPANY ITSELF IS THE ULTIMATE CREATION
In courses on strategic management and entrepreneurship, business schools teach the importance of starting first and foremost with a good idea and well-developed product/market strategy, and then jumping through the “window of opportunity” before it closes. But the people who built the visionary companies often didn’t behave or think that way. In case after case, their actions flew in the face of the theories being taught at the business schools.
Thus, early in our project, we had to reject the great idea or brilliant strategy explanation of corporate success and consider a new view. We had to put on a different lens and look at the world backward. We had to shift from seeing the company as a vehicle for the products to seeing the products as a vehicle for the company. We had to embrace the crucial difference between time telling and clock building.
To quickly grasp the difference between clock building and time telling, compare GE and Westinghouse in their early days. George Westinghouse was a brilliant product visionary and prolific inventor who founded fifty-nine other companies besides Westinghouse.31 Additionally, he had the insight that the world should favor the superior AC electrical system over Edison’s DC system, which it eventually did.32 But compare George Westinghouse to Charles Coffin, GE’s first president. Coffin invented not a single product. But he sponsored an innovation of great significance: the establishment of the General Electric Research Lab, billed as “America’s first industrial research laboratory.”33 George Westinghouse told the time; Charles Coffin built a clock. Westinghouse’s greatest creation was the AC power system; Coffin’s greatest creation was the General Electric Company.
Luck favors the persistent. This simple truth is a fundamental cornerstone of successful company builders. The builders of visionary companies were highly persistent, living to the motto: Never, never, never give up. But what to persist with? Their answer: The company. Be prepared to kill, revise, or evolve an idea (GE moved away from its original DC system and embraced the AC system), but never give up on the company. If you equate the success of your company with success of a specific idea—as many businesspeople do—then you’re more likely to give up on the company if that idea fails; and if that idea happens to succeed, you’re more likely to have an emotional love affair with that idea and stick with it too long, when the company should be moving vigorously on to other things. But if you see the ultimate creation as the company, not the execution of a specific idea or capitalizing on a timely market opportunity, then you can persist beyond any specific idea—good or bad—and move toward becoming an enduring great institution.
For example, HP learned humility early in its life, due to a string of failed and only moderately successful products. Yet Bill Hewlett and Dave Packard kept tinkering, persisting, trying, and experimenting until they figured out how to build an innovative company that would express their core values and earn a sustained reputation for great products. Trained as engineers, they could have pursued their goal by being engineers. But they didn’t. Instead, they quickly made the transition from designing products to designing an organization—creating an environment—conducive to the creation of great products. As early as the mid-1950s, Bill Hewlett displayed a clock-building perspective in an internal speech:
Our engineering staff [has] remained fairly stable. This was by design rather than by accident. Engineers are creative people, so before we hired an engineer we made sure he would be operating in a stable and secure climate. We also made sure that each of our engineers had a long range opportunity with the company and suitable projects on which to work. Another thing, we made certain that we had adequate supervision so that our engineers would be happy and would be productive to the maximum extent.... [The process of] engineering is one of our most important products [emphasis added].... we are going to put on the best engineering program you have ever seen. If you think we have done well so far, just wait until two or three years from now when we get all of our new lab people producing and all of the supervisors rolling. You’ll see some real progress then!34
Dave Packard echoed the clock-building orientation in a 1964 speech: “The problem is, how do you develop an environment in which individuals can be creative? ... I believe that you have to put a good deal of thought to your organizational structure in order to provide this environment.”35 In 1973, an interviewer asked Packard what specific product decisions he considered the most important in the company’s growth. Packard’s response didn’t include one single product decision. He answered entirely in terms of organizational decisions: developing an engineering team, a pay-as-you-go policy to impose fiscal discipline, a profit-sharing program, personnel and management policies, the “HP Way” philosophy of management, and so on. In a fitting twist, the interviewer titled the article, “Hewlett Packard Chairman Built Company by Design, Calculator by Chance.”36
BILL Hewlett and Dave Packard’s ultimate creation wasn’t the audio oscilloscope or the pocket calculator. It was the Hewlett-Packard Company and the HP Way.
Similarly, Masaru Ibuka’s greatest “product” was not the Walkman or the Trinitron; it was Sony the company and what it stands for. Walt Disney’s greatest creation was not Fantasia, or Snow White, or even Disneyland; it was the Walt Disney Company and its uncanny ability to make people happy. Sam Walton’s greatest creation wasn’t the Wal-Mart concept; it was the Wal-Mart Corporation—an organization that could implement retailing concepts on a large scale better than any company in the world. Paul Galvin’s genius lay not in being an engineer or inventor (he was actually a self-educated but twice-failed businessman with no formal technology training),37 but in his crafting and shaping of an innovative engineering organization that we’ve come to call the Motorola Company. William Procter and James Gamble’s most significant contribution was not hog fat soap, lamp oils, or candles, for these would eventually become obsolete; their primary contribution was something that can never become obsolete: a highly adaptable organization with a “spiritual inheritance”38 of deeply ingrained core values transferred to generation after generation of P&G people.
We ask you to consider this crucial shift in thinking—the shift to seeing the company itself as the ultimate creation. If you’re involved in building and managing a company, this shift has significant implications for how you spend your time. It means spending less of your time thinking about specific product lines and market strategies, and spending more of your time thinking about organization design. It means spending less of your time thinking like George Westinghouse, and spending more of your time thinking like Charles Coffin, David Packard, and Paul Galvin. It means spending less of your time being a time teller, and spending more of your time being a clock builder.
We don’t mean to imply that the visionary companies never had superb products or good ideas. They certainly did. And, as we’ll discuss later in the book, most of them view their products and services as making useful and important contributions to customers’ lives. Indeed, these companies don’t exist just to “be a company”; they exist to do something useful. But we suggest that the continual stream of great products and services from highly visionary companies stems from them being outstanding organizations, not the other way around. Keep in mind that all products, services, and great ideas, no matter how visionary, eventually become obsolete. But a visionary company does not necessarily become obsolete, not if it has the organizational ability to continually change and evolve beyond existing product life cycles. (In later chapters, we will describe how the visionary companies achieve this.)
Similarly, all leaders, no matter how charismatic or visionary, eventually die. But a visionary company does not necessarily die, not if it has the organizational strength to transcend any individual leader and remain visionary and vibrant decade after decade and through multiple generations.
This brings us to a second great myth.
THE MYTH OF THE GREAT AND CHARISMATIC LEADER
When we ask executives and business students to speculate about the distinguishing variables—the root causes—in the success of the visionary companies, many mention “great leadership.” They point to George W. Merck, Sam Walton, William Procter, James Gamble, William E. Boeing, R. W. Johnson, Paul Galvin, Bill Hewlett, Dave Packard, Charles Coffin, Walt Disney, J. Willard Marriott, Thomas J. Watson, and John Nordstrom. They argue that these chief executives displayed high levels of persistence, overcame significant obstacles, attracted dedicated people to the organization, influenced groups of people toward the achievement of goals, and played key roles in guiding their companies through crucial episodes in their history.
But—and this is the crucial point—so did their counterparts at the comparison companies! Charles Pfizer, the Gilman brothers (Ames), William Colgate, Donald Douglas, William Bristol, John Myers, Commander Eugene F. McDonald (Zenith), Pat Haggarty (TI), George Westinghouse, Harry Cohn, Howard Johnson, Frank Melville—these people also displayed high levels of persistence. They also overcame significant obstacles. They also attracted dedicated people to the organization. They also influenced groups of people toward the achievement of goals. They also played key roles in guiding their companies through crucial episodes in their history. A systematic analysis revealed that the comparison companies were just as likely to have solid “leadership” during the formative years as the visionary companies. (See Table A.3 in Appendix 3.)
In short, we found no evidence to support the hypothesis that great leadership is the distinguishing variable during the critical, formative stages of the visionary companies. Thus, as our study progressed, we had to reject the great-leader theory; it simply did not adequately explain the differences between the visionary and comparison companies.
Charisma Not Required
Before we describe what we see as the crucial difference between the early shapers of visionary companies versus the comparison companies (for we do think there is a crucial difference), we’d like to share an interesting corollary: A high-profile, charismatic style is absolutely not required to successfully shape a visionary company. Indeed, we found that some of the most significant chief executives in the history of the visionary companies did not have the personality traits of the archetypal high-profile, charismatic visionary leader.
Consider William McKnight. Do you know who he is? Does he stand out in your mind as one of the great business leaders of the twentieth century? Can you describe his leadership style? Have you read his biography? If you’re like most people, you know little or nothing about William McKnight. As of 1993, he had not made it into Fortune magazine’s “National Business Hall of Fame.”39 Few articles have ever been written about him. His name doesn’t appear in the Hoover’s Handbook sketch of the company’s history.40 When we started our research, we’re embarrassed to say, we didn’t even recognize his name. Yet the company McKnight guided for fifty-two years (as general manager from 1914 to 1929, chief executive from 1929 to 1949, and chairman from 1949 to 1966) earned fame and admiration with businesspeople around the world; it carries the revered name Minnesota, Mining, and Manufacturing Company (or 3M for short). 3M is famous; McKnight is not. We suspect he would have wanted it exactly that way.
McKnight began work in 1907 as a simple assistant bookkeeper and rose to cost accountant and sales manager before becoming general manager. We could find no evidence that he had a highly charismatic leadership style. Of the nearly fifty references to McKnight in the company’s self-published history, only one refers to his personality, and that described him as “a soft-spoken, gentle man.”41 His biographer described him as “a good listener,” “humble,” “modest,” “slightly stooped,” “unobtrusive and soft-spoken,” “quiet, thoughtful, and serious.”42
McKnight is not the only significant chief executive in the history of the visionary companies who breaks the archetypal model of the charismatic visionary leader. Masaru Ibuka of Sony had a reputation as being reserved, thoughtful, and introspective.43 Bill Hewlett reminded us of a friendly, no-nonsense, matter-of-fact, down-to-earth farmer from Iowa. Messrs. Procter and Gamble were stiff, prim, proper, and reserved—even deadpan.44 Bill Allen—the most significant CEO in Boeing’s history—was a pragmatic lawyer, “rather benign in appearance with a rather shy and infrequent smile.”45 George W. Merck was “the embodiment of ‘Merck restraint.’ ”46
We’ve worked with quite a few managers who have felt frustrated by all the books and articles on charismatic business leadership and who ask the sensible question, “What if high-profile charismatic leadership is just not my style?” Our response: Trying to develop such a style might be wasted energy. For one thing, psychological evidence indicates that personality traits get set relatively early in life through a combination of genetics and experience, and there is little evidence to suggest that by the time you’re in a managerial role you can do much to change your basic personality style.47 For another—and even more important—our research indicates that you don’t need such a style anyway.
IF you’re a high-profile charismatic leader, fine. But if you’re not, then that’s fine, too, for you’re in good company right along with those that built companies like 3M, P&G, Sony, Boeing, HP, and Merck. Not a bad crowd.
Please don’t misunderstand our point here. We’re not claiming that the architects of these visionary companies were poor leaders. We’re simply pointing out that a high-profile, charismatic style is clearly not required for building a visionary company. (In fact, we speculate that a highly charismatic style might show a slight negative correlation with building a visionary company, but the data on style are too spotty and soft to make a firm statement.) We’re also pointing out—and this is the essential point of this section—that both sets of companies have had strong enough leaders at formative stages that great leadership, be it charismatic or otherwise, cannot explain the superior trajectories of the visionary companies over the comparison companies.
We do not deny that the visionary companies have had superb individuals atop the organization at critical stages of their history. They often did. Furthermore, we think it unlikely that a company can remain highly visionary with a continuous string of mediocre people at the top. In fact, as we will discuss in a later chapter, we found that the visionary companies did a better job than the comparison companies at developing and promoting highly competent managerial talent from inside the company, and they thereby attained greater continuity of excellence at the top through multiple generations. But, as with great products, perhaps the continuity of superb individuals atop visionary companies stems from the companies being outstanding organizations, not the other way around.
Consider Jack Welch, the high-profile CEO at General Electric in the 1980s and early 1990s. We cannot deny that Welch played a huge role in revitalizing GE or that he brought an immense energy, drive, and a magnetic personality with him to the CEO’s office. But obsessing on Welch’s leadership style diverts us from a central point: Welch grew up in GE; he was a product of GE as much as the other way around. Somehow GE the organization had the ability to attract, retain, develop, groom, and select Welch the leader. GE prospered long before Welch and will probably prosper long after Welch. After all, Welch was not the first excellent CEO in GE’s history, and he probably will not be the last. Welch’s role was not insignificant, but it was only a small slice of the entire historical story of the General Electric Company. The selection of Welch stemmed from a good corporate architecture—an architecture that traces its roots to people like Charles Coffin, who, in contrast to George Westinghouse, took an architectural approach to building the company. (We will more thoroughly discuss Welch and GE in Chapter 8.)
AN ARCHITECTURAL APPROACH: CLOCK BUILDERS AT WORK
As in the case of Charles Coffin versus George Westinghouse, we did see in our study differences between the two groups of early shapers, but the differences were more subtle than “great leader” versus “not great leader.” The key difference, we believe, is one of orientation—the evidence suggests to us that the key people at formative stages of the visionary companies had a stronger organizational orientation than in the comparison companies, regardless of their personal leadership style. As the study progressed, in fact, we became increasingly uncomfortable with the term “leader” and began to embrace the term “architect” or “clock builder.” (A second key difference relates to the type of clock they built—the subject of later chapters.) The following contrasts further illustrate what we mean by an architectural, or clock-building, approach.
Citicorp Versus Chase
James Stillman, Citicorp’s president from 1891 to 1909 and chairman to 1918, concentrated on organizational development in pursuit of his goal to build a great national bank.48 He transformed the bank from a narrow parochial firm into “a fully modern corporation.”49 He oversaw the bank as it opened new offices, instituted a decentralized multidivisional structure, constructed a powerful board of directors composed of leading CEOs, and established management training and recruiting programs (instituted three decades earlier than at Chase).50 Citibank 1812–1970 describes how Stillman sought to architect an institution that would thrive far beyond his own lifetime:
Stillman intended National City [precursor to Citicorp] to retain its position [as the largest and strongest bank in the United States] even after his death, and to ensure this he filled the new building with people who shared his own vision and entrepreneurial spirit, people who would build an organization. He would step aside himself and let them run the bank.51
Stillman wrote in a letter to his mother about his decision to step aside, to the role of chairman, so that the company could more easily grow beyond him:
I have been preparing for the past two years to assume an advisory position at the Bank and to decline re-election as its official head. I know this is wise and it not only relieves me of the responsibility of details, but gives my associates an opportunity to make names for themselves [and lays] the foundation for limitless possibilities, greater even for the future than what has been accomplished in the past.52
Albert Wiggin, Stillman’s counterpart at Chase (president from 1911 to 1929), did not delegate at all. Decisive, humorless, and ambitious, Wiggin’s primary concern appeared to be with his own aggrandizement. He sat on the boards of fifty other companies and ran Chase with such a strong, centralized controlling hand that Business Week wrote, “The Chase Bank is Wiggin and Wiggin is the Chase Bank.”53
Wal-Mart Versus Ames
No doubt Sam Walton had the personality characteristics of a flamboyant, charismatic leader. We cannot help but think of his shimmy-shaking down Wall Street in a grass skirt and flower leis backed by a band of hula dancers (to fulfill a promise to employees for breaking 8 percent profit), or his leaping up on store counters and leading hundreds of screaming employees through a rousing rendition of the Wal-Mart Cheer. Yes, Walton had a unique and powerful personality. But so did thousands of other people who didn’t build a Wal-Mart.
Indeed, the key difference between Sam Walton and the leaders at Ames is not that he was a more charismatic leader, but that he was much more of a clock builder—an architect. By his early twenties, Walton had pretty much settled upon his personality style; he spent the bulk of his life in a never-ending quest to build and develop the capabilities of the Wal-Mart organization, not in a quest to develop his leadership personality.54 This was true even in Walton’s own eyes, as he wrote in Made in America:
What nobody realized, including a few of my own managers at the time, was that we were really trying from the beginning to become the very best operators—the most professional managers—that we could. There’s no question that I have the personality of a promoter.... But underneath that personality, I have always had the soul of an operator, somebody who wants to make things work well, then better, then the best they possibly can.... I was never in anything for the short haul; I always wanted to build as fine a retailing organization as I could.55
For example, Walton valued change, experimentation, and constant improvement. But he didn’t just preach these values, he instituted concrete organizational mechanisms to stimulate change and improvement. Using a concept called “A Store Within a Store,” Walton gave department managers the authority and freedom to run each department as if it were their own business.56 He created cash awards and public recognition for associates who contribute cost saving and/or service enhancements ideas that could be reproduced at other stores. He created “VPI (Volume Producing Item) Contests” to encourage associates to attempt creative experiments.57 He instituted merchandise meetings, to discuss experiments that should be selected for use throughout the entire chain, and Saturday morning meetings, which often featured an individual employee who tried something novel that worked really well. Profit sharing and employee stock ownership produced a direct incentive for employees to come up with new ideas, so that the whole company might benefit. Tips and ideas generated by associates got published in the Wal-Mart internal magazine.58 Wal-Mart even invested in a satellite communications system “to spread all the little details around the company as soon as possible.”59 In 1985, stock analyst A. G. Edwards described the ticking Wal-Mart clock:
Personnel operate in an environment where change is encouraged. For example, if a ... store associate makes suggestions regarding [merchandising or cost savings ideas], these ideas are quickly disseminated. Multiply each suggestion by over 750 stores and by over 80,000 employees (who can potentially make suggestions) and this leads to substantial sales gains, cost reductions and improved productivity.60
Whereas Walton concentrated on creating an organization that would evolve and change on its own, Ames leaders dictated all changes from above and detailed in a book the precise steps a store manager should take, leaving no room for initiative.61 Whereas Walton groomed a capable successor to take over the company after his death (David Glass), the Gilmans had no such person in place, thus leaving the company to outsiders who did not share their philosophy.62 Whereas Walton passed along his clock-building orientation to his successor, postfounder CEOs at Ames recklessly pursued disastrous acquisitions in an blind, obsessive pursuit of raw growth for growth’s sake, gulping down 388 Zayre stores in one bite. In describing Wal-Mart’s key ingredient for future success, David Glass said “Wal-Mart associates will find a way” and “Our people are relentless.”63 Ames CEO of the same era said, “The real answer and the only issue is market share.”64
In a sad note, a 1990 Forbes article on Ames noted, “Co-founder Herbert Gilman has seen his creation destroyed.”65 On a happier note, Sam Walton died with his creation intact and the belief that it could prosper long beyond him, stronger than ever. He knew that he would probably not live to the year 2000, yet shortly before he died in 1992, he set audacious goals for the company out to the year 2000, displaying a deep confidence in what the company could achieve independent of his presence.66
Motorola Versus Zenith
Motorola’s founder, Paul Galvin, dreamed first and foremost about building a great and lasting company.67 Galvin, architect of one of the most successful technology companies in history, did not have an engineering background, but he hired excellent engineers. He encouraged dissent, discussion, and disagreement, and gave individuals “the latitude to show what they could do largely on their own.”68 He set challenges and gave people immense responsibility so as to stimulate the organization and its people to grow and learn, often by failures and mistakes.69 Galvin’s biographer summarized, “He was not an inventor, but a builder whose blueprints were people.”70 According to his son, Robert W. Galvin, “My father urged us to reach out ... to people—to all the people—for their leadership contribution, yes their creative leadership contribution.... Early on, [he] was obsessed with management succession. Ironically, he did not fear his own demise. His concern was for the company [emphasis ours].”71
In contrast, Zenith’s founder, Commander Eugene F. McDonald, Jr., had no succession plan, thus leaving a void of talent at the top after his unexpected death in 1958.72 McDonald was a tremendously charismatic leader who moved the company forward primarily through the sheer force of his gigantic personality. Described as “the volatile, opinionated mastermind of Zenith,” McDonald had “colossal self-assurance ... based on a very high opinion of his own judgment.”73 He expected all except his closest friends to address him as “Commander.” A brilliant tinkerer and experimenter who pushed many of his own inventions and ideas, he had a rigid attitude that almost caused Zenith to miss out on television.74 A history of Zenith states:
McDonald’s flamboyant style was echoed in the company’s dramatic advertising methods and this style, coupled with innovative genius and an ability to sense changes in public tastes, meant that for more than three decades, in the public perception McDonald was Zenith.75
Two and an half years after McDonald’s death, Fortune magazine commented: “[Zenith] is still growing and reaping profits from the drive and imagination of its late founder. McDonald’s powerful personality remains a palpable influence in the company. But Zenith’s future now depends on its ability and new drive to meet conditions McDonald never anticipated.”76 A competitor commented, “As time goes on, Zenith will miss McDonald more and more.”77
Galvin and McDonald died within eighteen months of each other.78 Motorola sailed successfully into new arenas never dreamed of by Galvin; Zenith languished and, as of 1993, it never regained the energy and innovative spark that it had during McDonald’s lifetime.
Walt Disney Versus Columbia Pictures
Quick, stop and think: Disney. What comes to mind? Can you create a clear image or set of images that you associate with Disney? Now do the same thing for Columbia Pictures. What comes to mind? Can you put your finger on distinct and clear images? If you’re like most people, you can conjure up images of what Disney means, but you probably had trouble with Columbia Pictures.
In the case of Walt Disney, it is clear that Walt brought immense personal imagination and talent to building Disney. He personally originated many of Disney’s best creations, including Snow White (the world’s first-ever full-length animated film), the character of Mickey Mouse, the Mickey Mouse Club, Disneyland, and EPCOT Center. By any measure, he was a superb time teller. But, even so, in comparison to Harry Cohn—Disney’s counterpart at Columbia Pictures—Walt was much more of a clock builder.
Cohn “cultivated his image as a tyrant, keeping a riding whip near his desk and occasionally cracking it for emphasis, and Columbia had the greatest creative turnover of any major studio due largely to Cohn’s methods.”79 An observer of his funeral in 1958 commented that the thirteen hundred attendees “had not come to bid farewell, but to make sure he was actually dead.”80 We could find no evidence of any concern for employees by Cohn. Nor could we find any evidence that he took steps to develop the long-term capabilities or distinct self-identity of Columbia Pictures as an institution.
The evidence suggests that Cohn cared first and foremost about becoming a movie mogul and wielding immense personal power in Hollywood (he became the first person in Hollywood to assume the titles of president and producer) and cared little or not at all about the qualities and identity of the Columbia Pictures Company that might endure beyond his lifetime.81 Cohn’s personal purpose propelled Columbia Pictures forward for years, but such personal and egocentric ideology could not possibly guide and inspire a company after the founder’s death. Upon Cohn’s death, the company fell into listless disarray, had to be rescued in 1973, and was eventually sold to Coca-Cola.
Walt Elias Disney, on the other hand, spent the day before he died in a hospital bed thinking out loud about how to best develop Disney World in Florida.82 Walt would die, but Disney’s ability to make people happy, to bring joy to children, to create laughter and tears would not die. Throughout his life, Walt Disney paid greater attention to developing his company and its capabilities than did Cohn at Columbia. In the late 1920s, he paid his creative staff more than he paid himself.83 In the early 1930s, he established art classes for all animators, installed a small zoo on location to provide live creatures to help improve their ability to draw animals, invented new animation team processes (such as storyboards), and continually invested in the most advanced animation technologies.84 In the late 1930s, he installed the first generous bonus system in the cartoon industry to attract and reward good talent.85 In the 1950s, he instituted employee “You Create Happiness” training programs and, in the 1960s, he established Disney University to orient, train, and indoctrinate Disney employees.86 Harry Cohn took none of these steps.
Granted, Walt did not clock build as well as some of the other architects in our study, and the Disney film studio languished for nearly fifteen years after his death as Disneyites ran around asking themselves, “What would Walt do?”87 But the fact remains that Walt, unlike Cohn, created an institution much bigger than himself, an institution that could still deliver the “Disney Magic” to kids at Disneyland decades after his death. During the same time period that Columbia ceased to exist as an independent entity, the Walt Disney Company mounted an epic (and ultimately successful) fight to prevent a hostile takeover. To the Disney executives and family, who could have made a tidy multimillion-dollar profit on their stock had the raiders been successful, Disney had to be preserved as an independent entity because it was Disney. In the preface to his book Storming the Magic Kingdom, a superb account of the Disney takeover attempt, John Taylor wrote:
To accept [the takeover offer] was unthinkable. Walt Disney Productions was not just another corporate entity... that needed to be rationalized by liquidation of its assets to achieve maximum value for its shareholders. Nor was Disney just another brand name.... The company’s executives saw Disney as a force shaping the imaginative life of children around the world. It was woven into the very fabric of American culture. Indeed, its mission—and it did, they believed, have a mission as important as making money for its stockholders—was to celebrate American values.88
Disney went on in the 1980s and 1990s to rekindle the heritage installed by Walt decades earlier. In contrast, Cohn’s company had little to save or rekindle. No one felt Columbia had to be preserved as an independent entity; if the shareholders could get more money by selling out, then so be it.
THE MESSAGE FOR CEOS, MANAGERS, AND ENTREPRENEURS
One of the most important steps you can take in building a visionary company is not an action, but a shift in perspective. There will be plenty of action-oriented findings in the chapters that follow. But to make good use of them requires first and foremost acquiring the right frame of mind. And that’s the point of this chapter. We’re doing nothing less than asking you to make a shift in thinking as fundamental as those that preceded the Newtonian revolution, the Darwinian revolution, and the founding of the United States.
Prior to the Newtonian revolution, people explained the world around them primarily in terms of a God that made specific decisions. A child would fall and break his arm, and it was an act of God. Crops failed; it was an act of God. People thought of an omnipotent God who made each and every specific event happen. Then in the 1600s people said, “No, that’s not it! What God did was to put in place a universe with certain principles, and what we need to do is figure out how those principles work. God doesn’t make all the decisions. He set in place processes and principles that would carry on.”89 From that point on, people began to look for basic underlying dynamics and principles of the entire system. That’s what the Newtonian revolution was all about.
Similarly, the Darwinian revolution gave us a dramatic shift in thinking about biological species and natural history—a shift in thinking that provides fruitful analogies to what we’ve seen in the visionary companies. Prior to the Darwinian revolution, people primarily presumed that God created each and every species intact and for a specific role in the natural world: Polar bears are white because God created them that way, cats purr because God created them that way; robins have red breasts because God created them that way. We humans have a great need to explain the world around us by presuming that someone or something must have had it all figured out—something must have said, “We need robins with red breasts to fit here in the ecosystem.” But if the biologists are right, it doesn’t work that way. Instead of jumping directly to robins with red breasts (time telling), we have instead an underlying process of evolution (the genetic code, DNA, genetic variation and mutation, natural selection) which eventually produces robins with red breasts that appear to fit perfectly in the ecosystem.90 The beauty and functionality of the natural world springs from the success of its underlying processes and intricate mechanisms in a marvelous “ticking clock.”
Likewise, we’re asking you to see the success of visionary companies—at least in part—as coming from underlying processes and fundamental dynamics embedded in the organization and not primarily the result of a single great idea or some great, all-knowing, godlike visionary who made great decisions, had great charisma, and led with great authority. If you’re involved in building and managing a company, we’re asking you to think less in terms of being a brilliant product visionary or seeking the personality characteristics of charismatic leadership, and to think more in terms of being an organizational visionary and building the characteristics of a visionary company.
Indeed, we’re asking you to consider a shift in thinking analogous to the shift required to found the United States in the 1700s. Prior to the dramatic revolutions in political thought of the seventeenth and eighteenth centuries, the prosperity of a European kingdom or country depended in large part on the quality of the king (or, in the case of England, perhaps the queen). If you had a good king, then you had a good kingdom. If the king was a great and wise leader, then the kingdom might prosper as a result.
Now compare the good-king frame of reference with the approach taken at the founding of the United States. The critical question at the Constitutional Convention in 1787 was not “Who should be president? Who should lead us? Who is the wisest among us? Who would be the best king?” No, the founders of the country concentrated on such questions as “What processes can we create that will give us good presidents long after we’re dead and gone? What type of enduring country do we want to build? On what principles? How should it operate? What guidelines and mechanisms should we construct that will give us the kind of country we envision?”
Thomas Jefferson, James Madison, and John Adams were not charismatic visionary leaders in the “it all depends on me” mode.91 No, they were organizational visionaries. They created a constitution to which they and all future leaders would be subservient. They focused on building a country. They rejected the good-king model. They took an architectural approach. They were clock builders!
But notice: In the case of the United States, it’s not a cold, mechanistic Newtonian or Darwinian clock. It’s a clock based on human ideals and values. It’s a clock built on human needs and aspirations. It’s a clock with a spirit.
And that brings us to the second pillar of our findings: It’s not just building any random clock; it’s building a particular type of clock. Although the shapes, sizes, mechanisms, styles, ages, and other attributes of the ticking clocks vary across visionary companies, we found that they share an underlying set of fundamental characteristics. In the chapters that follow, we describe these characreristics. For now, the important thing to keep in mind is that once you make the shift from time telling to clock building, most of what’s required to build a visionary company can be learned. You don’t have to sit around waiting until you’re lucky enough to have a great idea. You don’t have to accept the false view that until your company has a charismatic visionary leader, it cannot become a visionary company. There is no mysterious quality or elusive magic. Indeed, once you learn the essentials, you—and all those around you—can just get down to the hard work of making your company a visionary company.
*The organizing meeting took place in 1937; the official founding occurred in early 1938.