Chapter 10
The End of the Beginning

This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

WINSTON S. CHURCHILL¹

It’s become fashionable in recent decades for companies to spend countless hours and sums of money drafting elegant vision statements, values statements, mission statements, purpose statements, aspiration statements, objectives statements, and so on. Such pronouncements are all fine and good—indeed, they can be quite useful—but they’re not the essence of a visionary company. Just because a company has a “vision statement” (or something like it) in no way guarantees that it will become a visionary company! If you walk away from this book thinking that the most essential step in building a visionary company is to write such a statement, then you will have missed the whole point. A statement might be a good first step, but it is only a first step.

The essence of a visionary company comes in the translation of its core ideology and its own unique drive for progress into the very fabric of the organization—into goals, strategies, tactics, policies, processes, cultural practices, management behaviors, building layouts, pay systems, accounting systems, job design—into everything that the company does. A visionary company creates a total environment that envelops employees, bombarding them with a set of signals so consistent and mutually reinforcing that it’s virtually impossible to misunderstand the company’s ideology and ambitions.

We’ve made this point in a number of ways in preceding chapters. But it is an important enough point—indeed, it just might be the most important point to take away from this book—that we choose to bring our findings to a close with this short capstone chapter illustrating the central concept of alignment that has run throughout these pages. By “alignment” we mean simply that all the elements of a company work together in concert within the context of the company’s core ideology and the type of progress it aims to achieve—its vision, if you like. (We see vision as simply a combination of an enduring core ideology plus envisioned progress for the future.) Consider the following three examples of alignment at its best.

THE POWER OF ALIGNMENT: FORD, MERCK, AND HEWLETT-PACKARD

Ford

We wrote in an earlier chapter about how executives at the Ford Motor Company wrote a statement of “Mission, Values, and Guiding Principles” (MVGP) as a key part of its remarkable 1980s turnaround. The MVGP listed people and products ahead of profits and emphasized the central importance of quality improvement, employee involvement, and customer satisfaction. But the MVGP statement did not bring about the turnaround, at least not by itself. Had Ford not dramatically translated the MVGP into reality—had it not aligned its operations, strategies, and tactics to be consistent with the MVGP—then Ford would have failed in the turnaround and we wouldn’t be writing about it in this book.

For the first time in its history, Ford fully implemented statistical quality control and instructed production managers to shut down a line in the event of a bad part or faulty material.² But Ford didn’t stop with its own plants. It also carried the drive for quality to its suppliers with its “Q1” program that screened suppliers based on quality ratings and whether the supplier had also implemented statistical quality control. Ford provided education seminars and hands-on assistance for its suppliers to help them meet Q1 standards, which Ford continually increased over time.³

Ford created employee involvement programs, thus making line employees key team members of the quality improvement effort. Not only that, it created participative management programs to instruct managers and supervisors in how to support the employee involvement programs. It further reinforced these programs by placing greater emphasis on participative management skills as a factor in promotions.⁴ To keep employees better informed and therefore feeling more involved with the company, Ford invested in a satellite television system to communicate Ford news and information to employees before they would have a chance to see it on TV or read it in the newspaper.⁵ To forge a direct link between employees and the success of the company, Ford negotiated a profit-sharing clause with labor—the first ever in its contract with the United Auto Workers.⁶ Ford’s relationship with labor improved to such an extent in the early 1980s that the union made Philip Caldwell an honorary member upon his retirement—the first CEO of an American car company to ever be inducted into the UAW.⁷

To get the company back to its “car” roots, Ford created a separate group with the BHAG of creating a completely new car, truly world-class in its segment and designed with the customer more in mind than at any time since the Model T. Ford backed what became known as the Taurus/Sable program with a $3.25 billion budget, the largest in Ford’s history by a factor of four times. With Taurus/Sable, Ford began soliciting input from production workers about the design years before it was ready for production.⁸ To reinforce the importance of customer input and satisfaction, Ford’s highest-ranking executives attended focus group sessions to hear directly what customers had to say. The company instituted an extensive “Quality-Commitment-Performance” follow-up program to solicit customer input on the quality of dealer service and created the prestigious President’s Award to recognize dealerships with the highest customer ratings.⁹

In hundreds of ways—big and small—Ford translated the MVGP into daily practice, into reality. And that is the real force behind Ford’s remarkable turnaround. Can you imagine the cynicism that would have erupted had Ford published the MVGP but then not translated the rhetoric into reality? Labor would have been cynical. Customers would have been cynical. Shareholders would have been cynical. And the whole turnaround probably would have failed.

Merck

In the late 1920s, George W. Merck formulated the backbone of Merck’s vision. Building upon core values of integrity, contribution to society, responsibility to customers and employees, and the unequivocal pursuit of quality and excellence, he envisioned Merck as a world-class company that benefits humanity through innovative contributions to medicine—a company that makes superb profits not as the primary goal, but as a residual result of succeeding at that task. At the 1933 opening of the Merck Research Laboratory, he said:

We believe that research work carried on with patience and persistence will bring to industry and commerce new life; and we have faith that in this new laboratory, with the tools we have supplied, science will be advanced, knowledge increased, and human life win ever a greater freedom from suffering and disease. . . . We pledge our every aid that this enterprise shall merit the faith we have in it. Let your light so shine—that those who seek the Truth, that those who toil that this world may be a better place to live in, that those who hold aloft that torch of Science and Knowledge through these social and economic dark ages, shall take new courage and feel their hands supported, [emphasis his]¹⁰

We’re certainly impressed with George Merck’s visionary pronouncement—especially given that he spoke these words over sixty years ago, long before “vision statements” became popular. But his words and sentiments alone, as inspiring and impressive as they are, do not—indeed, could not—make Merck a visionary company. The truly outstanding thing about Merck is how consistently it has aligned itself with the core ideology and the type of progress envisioned by George Merck.

For example, the company didn’t just create a standard industrial R&D lab. Instead, it set the BHAG of creating a research capability so outstanding that it could “talk on equal terms with the universities and research institutes.”¹¹ In fact, Merck explicitly designed the research laboratories to have an academic atmosphere and appearance—to look so much like a college that it quickly became known as the “Merck Campus.”¹² Furthermore, instead of keeping its pure research behind locked doors, Merck encouraged its research scientists to publish in scientific journals—a key move that attracted many a top scientist.¹³ It also encouraged its researchers to collaborate with scientists at academic and noncompeting industrial research laboratories outside of Merck—an unusual step that improved the quality of their published work. The company recruited prominent academic scientists to serve on the board of directors¹⁴ and created a dual career track that allowed scientists to pass up promotions into management without financial penalty.¹⁵ Merck even went so far as to list the scientific publications of its researchers in recruiting materials, much as an academic institution lists the publications of its faculty. As one scientist summed up:

Merck is like MIT or Harvard or any other academic institution with an outstanding reputation for research. You have to want to do your science intensely.¹⁶

To further encourage scientific exploration and experimentation, Merck gave research scientists “the greatest possible latitude and scope in pursuing their investigations, the utmost freedom to follow promising leads—no matter how unrelated to ... practical returns.”¹⁷ Unlike most American corporations, Merck prohibited marketing input into the pure research process until products had clearly entered the development stage.¹⁸ As CEO P. Roy Vagelos put it:

We keep basic research exclusively in the hands of research. We keep marketing out of the way until products are being tested on humans. We don’t want concerns about “market potential” to get in the way of basic scientific exploration and experimentation that can lead to big break-throughs.¹⁹

These and similar practices have remained essentially intact at Merck for six decades, even though many of them fly in the face of conventional business doctrine. Along the way, Merck has added other practices that, although unconventional, make perfect sense at Merck. For instance, Merck explicitly rejected budgets as a planning or control tool in R&D. It creates new product project teams and explicitly does not give them a budget. Instead, team leaders (“champions”) must persuade people from a variety of disciplines to join the team and to commit their resources to the project. This process creates a survival-of-the-fittest selection process where the best projects attract resources and the weakest perish.²⁰ Unlike its more diversified competitors, Merck adopted the unconventional strategy of being one of the least diversified pharmaceutical companies, placing all bets on its ability to innovate new, breakthrough drugs.²¹ Merck lives with the self-imposed requirement that new products must be significantly better than the competition, else they cannot be introduced to the market—a highly risky strategy that can produce long droughts if nothing good comes down the pipe.²²

In fact, throughout its history, Merck has set BHAGs that—bold as they might be—were aligned perfectly with its ideology:

 

Early 1930s: BHAG to build a research capability so outstanding that it could “talk on equal terms with the universities and research institutes” (described earlier).²³

Early 1950s: BHAG to transform itself into a fully integrated pharmaceutical company in order to participate fully in the dramatic changes in medicine—backed by a “bet the company” acquisition of pharmaceutical giant Sharp & Dohme that gave Merck a well-established distribution and marketing network.²⁴

Late 1970s: BHAG “to establish Merck as the pre-eminent drug maker worldwide in the 1980s.”²⁵

Late 1980s: BHAG to become the first drug maker with advanced research in every disease category.²⁶

Early 1990s: BHAG to “redefine the pharmaceutical paradigm” with a $6 billion acquisition of Medco to create more of a direct link with end customers.²⁷

 

Merck also has a long track record of being well aligned with its ideology of corporate responsibility. A lot of companies talk about corporate social responsibility, equal opportunity, and other such lofty ideals. But how many of these companies were one of the first to donate to the United Negro College Fund, as Merck did in 1944?²⁸ How many were the first in their industry to establish an Office of Minority Affairs, as Merck did in the 1960s?²⁹ How many companies in the 1970s required that all senior executives include affirmative action goals in their annual objectives and tied them to bonuses, stock options, ratings, and merit increases?³⁰ How many were recognized by the National Organization for Women for “vigorous programs to recruit, develop, and promote women and minorities”? How many were selected by Black Enterprise and Working Mother as one of the best places for women and minorities to work in America?³¹ How many large industrial companies have a woman as a chief financial officer?³² How many companies would have brought streptomycin to Japan—at no profit—to eliminate a serious outbreak of tuberculosis after the end of World War II?³³ How many companies would have made the decision to develop Mectizan to cure river blindness and to give it away free?³⁴ How many have set an explicit environmental BHAG, such as “to reduce our release of toxins into the environment by 90% by 1995”?³⁵ Indeed, to a far greater degree than most companies, Merck has consistently translated its social conscience into practice.

Merck doesn’t just envision progress and excellence in its employees. It commits to progress and excellence. Getting a job at Merck is like applying to graduate school—rigorous and thorough. Merck often requires candidates to deliver multiple written recommendations about their qualifications for working at Merck—just like applying to a top-flight educational institution.³⁶ Merck invests heavily in employee recruiting, development, and retention. It rates managers on their success at recruiting and retaining top talent. By the 1980s, Merck had one of the lowest turnover rates in industry (5 percent versus the U.S. average of 20 percent).³⁷

Finally, Merck consistently reinforces its core ideology, decade after decade, day after day—in shareholder reports, in recruiting materials, in employee manuals, in self-published books, in historical videos, in executive speeches, in orientation seminars, in articles for outside magazines and journals, and in a myriad of internal magazines and newsletters. When we asked Merck to send us any documents that might describe its values and purpose, Merck provided us with no fewer than eighty-five distinct items, some dating back to the turn of the century. In 1991, the company put on an extensive and elaborate centennial celebration, with publication of books, articles, speeches, videos, historical analyses—all with tremendous emphasis on the company’s heritage and values. It is simply impossible to work at Merck and not be immersed in the ideology; it pervades everything, and has done so for nearly a century. As Jeffrey L. Sturchio, Merck’s director of science and technology policy, summed up:

I used to work at another major American corporation before coming to Merck. The basic difference I see between the two companies is rhetoric versus reality. The other company touted values and visions and all the rest, but there was a big difference between rhetoric and reality. At Merck, there is no difference.³⁸

Hewlett-Packard

Bill Hewlett and Dave Packard envisioned HP as a role-model corporation, known for progressive personnel practices, innovative and entrepreneurial culture, and an unbroken string of products that make a technical contribution. “Our main task,” wrote Dave Packard, “is to design, develop, and manufacture the finest [electronic equipment] for the advancement of science and the welfare of humanity. We intend to devote ourselves to that task.”³⁹ HP director Fred Terman used the lofty phrase “Model Social Institution” to describe the company’s aspirations.⁴⁰ Later, Hewlett boiled down HP’s guiding principles into what he called the “Four Musts”: The company must attain profitable growth; the company must make its profit through technological contribution; the company must recognize and respect the personal worth of employees and allow them to share in the success of the company; and the company must operate as a responsible citizen of the general community.⁴¹

All fine and good, but Hewlett and Packard’s vision would have been essentially useless if not translated into practice. Like Merck, HP stands out not as much for its lofty values and aspirations, but for the comprehensive and consistent way it aligned with them.

For example, HP has a long history of showing respect for employees in a multitude of tangible ways. In the 1940s, it introduced a “production bonus” (essentially a profit-sharing plan) that paid the same percentages to the janitor as to the CEO, and created a catastrophic medical insurance plan for all employees—actions virtually unheard of at that time, especially in a small company.⁴² When the company went public in the 1950s, all employees at all levels with six months of tenure received an automatic stock grant and became eligible for a stock option program.⁴³ Soon thereafter, HP instituted an employee stock purchase program, with a 25 percent subsidy from the company.⁴⁴ To reduce the chance of layoffs, HP passed up large government contract opportunities—profitable as they might be—if they would lead to “hire-and-fire” tactics.⁴⁵ It required divisions to hire HP insiders first before looking to the outside, providing further secure employment across the entire company (not to mention keeping the culture tight).⁴⁶ When facing corporate-wide downturns, HP generally asked all employees to take every other Friday off and reduce their pay by 10 percent, rather than imposing a 10 percent layoff.⁴⁷ HP was one of the first American companies to introduce flextime opportunities for employees at all levels and to conduct extensive employee surveys to gauge and track employee concerns.⁴⁸ It was also one of the first American companies to introduce an open-door policy in which employees could bring grievances all the way to the top without retribution.⁴⁹ To promote communication and informality and to deemphasize hierarchy, HP created a wide-open floor plan; no manager at any level would be allowed to have a private office with a door—a very unusual practice in the 1950s. Not surprisingly, HP has remained nonunionized, as one HPer described:

Several attempts at unionization were made but failed dismally. What union could make headway in a company whose employees felt an integral part of management, and who invited the pickets in out of the cold to share hot coffee and doughnuts at coffee breaks?⁵⁰

Similarly, HP took many steps to reinforce the importance of technological contribution and to promote an entrepreneurial environment. Beginning in the 1950s, HP sought to hire only top 10 percent graduating seniors from respected engineering schools, rather than hiring more experienced but less talented engineers from industry.⁵¹ (Thirty years later, HP was still viewed at top engineering schools as the elite job offer.)⁵² Like 3M, HP pursued a strategy of producing new and better products each year as its primary source of growth, rather than seeking to ride the product life cycle and maximize unit volume of older products. In 1963, more than 50 percent of HP’s sales came from products introduced in the previous five years; by 1990, this had improved to 50 percent of sales from products introduced in the previous three years.⁵³ And they couldn’t be just any new products; me-too or copycat products were always weeded out, no matter what the market potential. “If you had the opportunity to listen in on one of our management sessions,” explained Bill Hewlett, “you would find that many approaches are rejected because people feel there is not enough of a technical contribution to justify bringing a particular product to market.”⁵⁴ This tough, self-imposed standard led HP to bypass high-volume markets—such as IBM-compatible personal computers—until it could figure out a way to enter with a technological contribution. What follows is an actual conversation between a seasoned lab manager and a young product manager at HP in 1984:⁵⁵

 

PRODUCT MANAGER:	“We’ve got to introduce an IBM-compatible personal computer now. That’s where the market is going. That’s where the volume is. That’s what customers primarily want.”
LAB MANAGER:	“But where’s the technological contribution? Until we figure out a way to make an IBM-compatible personal computer with a clear technical advantage, then we just can’t do it—no matter how big the market.”
PRODUCT MANAGER:	“But what if that’s not what customers want? What if they just want to run their software and don’t really care about technical contribution? And what if the market window will close unless we act now?”
LAB MANAGER:	“Then we shouldn’t be in that business. That’s not who we are. We simply shouldn’t be in markets that don’t value technical contribution. That’s just not what the Hewlett-Packard Company is all about.”

 

The lab manager won hands down, as they almost always do at HP. “As important as they are,” said Bill Hewlett, “marketing people must play a secondary role in the question of product definition.”⁵⁶ For years, HP shunned market input in favor of the “Next Bench Syndrome”—a strategy of engineers solving their own technical problems as the primary means of identifying opportunities for technical and market contribution.⁵⁷ In the 1950s and 1960s, HP titled its product lists “Contribution to the Test Equipment Field” [emphasis ours]—an interesting and revealing detail.⁵⁸ Corporate-wide hero recognition programs were generally geared toward the engineers who invented new gadgets, not those who sold them. Career advancements also reflected the technological emphasis; over 90 percent of division general managers at HP hold technical degrees.⁵⁹

To promote an entrepreneurial culture, HP early on adopted a management method of “provide a well-defined objective, give the person as much freedom as possible in working toward that objective, and finally, provide motivation by seeing that the contribution of the individual is recognized throughout the organization.”⁶⁰ Later, as the company rapidly expanded in the 1950s, it extended this management method into a decentralized structure of highly autonomous divisions set up as little businesses with self-control over their own R&D, production, and marketing strategies and wide discretion in operating decisions (within the bounds, of course, of the HP ideology). When entering a new business, HP would usually create a new division and turn it loose to figure out how best to enter the market. According to Hewlett:

We simply said, “Here’s the field we want to enter; now you define the particular item you can build.” The presumption was that they would design it on the best technology available.⁶¹

To further reinforce entrepreneurship, HP dispersed its divisions into several states, rather than locating them all near headquarters. The company then allocated R&D funds to reward innovation—the most innovative divisions getting the most resources. (Even though HP has a central laboratory called “HP Labs,” it allocated the vast majority of R&D funds to its divisions.)⁶² Facilities that began as manufacturing plants could only attain full divisional status by creating (with boot-strapped funds) an innovative new product and taking it to market.⁶³ And, unlike most companies, HP encouraged its international divisions to develop R&D capabilities, rather than merely remaining sales and distribution centers.⁶⁴

Equally important as what HP did do is what it did not do, regardless of prevailing management theories or fads. Recall, for instance, how HP shunned corporate debt (even though such a practice is “irrational”) because Hewlett and Packard believed debt would erode entrepreneurial discipline. Unlike many high-technology companies, HP avoided outside investors like venture capitalists because “they can push companies to grow too fast, and if you grow too fast, you can lose your values.”⁶⁵ In stark contrast to most corporations, HP forbade the personnel department from getting involved in personnel problems:

Taking care of his or her people is the most important part of every management job. . . . In no case is the personnel department expected to handle the manager’s personnel problems—he or she must accept and handle the personnel responsibility to be a good manager.⁶⁶

A particularly revealing example of HP following its own vision and not falling prey to management fads and fashions of the day came in the 1970s, when the “learning-curve/market-share” theory of corporate strategy swept American business. Touted by prestigious management consulting firms and taught at top-flight business schools, it became a pervasive management tool adopted by thousands of executives across the corporate landscape. Operating under the theory that greater market share leads to lower costs and eventually greater profits, managers at a wide range of companies began cutting prices in order to gain market share. For roughly a decade, this theory dominated strategic thinking. But not at HP, which explicitly rejected the learning curve theory and held itself to a different standard: “If a product isn’t good enough to make an excellent gross margin in the first year, then it’s not a product with a significant technical advantage and the Hewlett-Packard Company shouldn’t be making it, period.”⁶⁷ Packard explained to his managers in 1974: “If I hear anybody talking about how big their share of the market is or what they’re trying to do to increase their share of the market, I’m going to personally see that a black mark gets put in their personnel folder.”⁶⁸

Finally, HP—like Ford and Merck—has gone to great lengths to continually immerse employees in the tenets of what became known as the “HP Way.” Hewlett and Packard took all their managers off-site in the 1950s to the “Sonoma Conferences,” where they penned HP’s ideology and ambitions into a document “somewhat similar to the U.S. Constitution—a document expressing basic ideals subject to current interpretation and to amendment.”⁶⁹ Soon thereafter, HP began a strict promote-from-within policy, implemented extensive interviewing processes that emphasize “adaptability and fit” to the HP Way, and created a program to indoctrinate first-line supervisors. “We recognized very early that it was important to have your first line managers indoctrinated or oriented toward the philosophy because . . . they’re the company to most people,” explained Dave Packard.⁷⁰

We found no less than a hundred separate documented incidents of HP managers talking explicitly about HP’s values and purpose—in internal talks, in external speeches, in written materials, in individual conversations. They simply talked and acted on them constantly for decades. We also encountered dozens of “Bill and Dave stories” recounted over the years to convey the essence of the HP Way. For instance, when Bill Hewlett found a storeroom chain-locked on a weekend, he chopped and shredded the chain with a pair of bolt cutters and left it on the manager’s desk with a terse note that locked storerooms do not fit with HP’s notion of respect for its employees—or so the story goes.⁷¹ True or not, the stories illustrate how HP’s management worked continually to make the HP Way a genuine way of life. Barney Oliver, longtime general manager of HP Laboratories, summed up HP during its rise to prominence:

When I first joined HP in 1952 it was immediately apparent that nearly all of its 400 employees were enthusiastic about, loyal to, and proud of their company to an unusual degree. . . . As one employee put it, “I have the impression that Bill and Dave are working for me, rather than the other way around.” What surprises visitors today is that this same spirit has survived HP’s growth. It is unusual to find such spirit in a company with over 17,000 employees, but it is not surprising. For in a deeper sense, what was going on in those early days was a process of education in management. . . . Most of the early employees became extensions of Bill and Dave’s personalities and philosophies, and put these philosophies and techniques to good use when they took their places as line leaders, supervisors or division heads. . . . We all believe in [these philosophies] and practice them. They are part of our way of life.⁷²

LESSONS OF ALIGNMENT FOR CEOS, MANAGERS, AND ENTREPRENEURS

We applaud if you go off-site to discuss your corporate ideology, like Hewlett and Packard did in the 1950s. We encourage you to set lofty ambitions for your company, like George Merck did in the 1930s. We hope you will want to put to paper the guiding vision of your company, like Ford did. But never forget that such steps do not in themselves make a visionary company. You never attain final alignment. You never reach final success. You have to work at it constantly. Here are some guideposts.

1. Paint the Whole Picture

You’re probably feeling a bit overwhelmed by all the comprehensive detail about Ford, Merck, and HP. And that in itself is precisely the point!

VISIONARY companies do not rely on any one program, strategy, tactic, mechanism, cultural norm, symbolic gesture, or CEO speech to preserve the core and stimulate progress. It’s the whole ball of wax that counts.

It’s the remarkable comprehensiveness and consistency over time that counts. It’s the nearly overwhelming set of signals and actions—signals to continually reinforce the core ideology and to stimulate progress—that lead to a visionary company. Taken in isolation, each fact about Ford, Merck, and HP would be trivial, and certainly wouldn’t account for their visionary status. But in the context of hundreds of other facts, they add up to a consistent overall picture.

It would be a mistake to conclude that you could implement any single chapter of this book in isolation and have a visionary company. Core ideology alone cannot do it. The drive for progress alone cannot do it. A BHAG alone will not do it. Evolution through autonomy and entrepreneurship by itself will not do it. Home-grown management alone does not make a visionary company, nor a cult-like culture, nor even living the concept that good enough never is.

A visionary company is like a great work of art. Think of Michelangelo’s scenes from Genesis on the ceiling of the Sistine Chapel or his statue of David. Think of a great and enduring novel, like Huckleberry Finn or Crime and Punishment. Think of Beethoven’s Ninth Symphony or Shakespeare’s Henry V. Think of a beautifully designed building, like the masterpieces of Frank Lloyd Wright or Ludwig Mies van der Rohe. You can’t point to any one single item that makes the whole thing work; it’s the entire work—all the pieces working together to create an overall effect—that leads to enduring greatness. And it’s not just the big pieces, but also the itty-bitty details—the turn of phrase, the change in pace at just the right moment, the perfect off-center placement of a window, a subtle expression sculpted into the eyes. As the great architect Mies van der Rohe put it, “God is in the details.”

2. Sweat the Small Stuff

People don’t work day-to-day in the “big picture.” They work in the nitty-gritty details of their company and its business. Not that the big picture is irrelevant, but it’s the little things that make a big impression, that send powerful signals. Little things, like business cards for salespeople at Nordstrom to send the signal, “We want you to be a sales professional.” Little things, like Wal-Mart giving employees at the lowest level complete departmental financial reports to send the signal, “You are a partner in the company and we want you to run your department as your own little business.” Little things, like Motorola’s chairman sitting in for the quality improvement reports (which always topped the agenda) and then leaving for the financial reports to send the signal, “Quality improvement is our crusade, not just profits.” Little things, like allowing key divisions at Johnson & Johnson to put their own logos on their products—and leave off the J&J logo—to send the signal, “We want you to operate with the psychology of autonomous, entrepreneurial business units.” Little things, like Philip Morris sending employees home with a box of cigarettes along with their paycheck to send the signal “We’re proud of our product, no matter what the Surgeon General says.”

Social cognition research shows that individuals pick up on all the signals in their work environment—big and small—as cues for how they should behave. People notice little things. People remember stories not so much about grand heroics, but about little events like shredding the chain of a locked storeroom. People want to believe in their company’s vision, but will be ever watchful for the tiny inconsistencies that allow them to say “Aha! See, there you go. I knew management was just blowing smoke. They don’t really believe their own rhetoric.”

3. Cluster, Don’t Shotgun

Visionary companies don’t put in place any random set of mechanisms or processes. They put in place pieces that reinforce each other, clustered together to deliver a powerful combined punch. They search for synergy and linkages. Notice the clustering at Ford: statistical quality control methods reinforced by employee involvement programs reinforced by participative management training programs reinforced by promotion criteria based on participative management skills. Notice the clustering at Merck: recruiting of top scientists reinforced by allowing them to publish reinforced by allowing them to collaborate with outside scientists reinforced by the “Merck Campus” reinforced by the dual career track. Notice how it would be impossible to work at HP and not get the message that managers had better treat their people well or that divisions had better make profits by technical contribution. Working at HP is like being in a sound room equipped with not one but ten speakers working to amplify each other and send the same consistent messages from the floor, the ceiling, to the right, to the left, front, back, and sideways.

4. Swim in Your Own Current, Even if You Swim Against the Tide

Recall how Merck and HP took steps that flew in the face of conventional business practices in order to remain true to themselves. Alignment means being guided first and foremost by one’s own internal compass, not the standards, practices, conventions, forces, trends, fads, fashions, and buzzwords of the outer world. Not that you should ignore reality—quite the contrary—but your company’s own self-defined ideology and ambitions should guide all of its dealings with reality. If done right, you will likely astonish competitors, journalists, business professors, and others with idiosyncratic practices and strategies that, however unusual, make perfect sense for your company.

Johnson & Johnson, for example, made the decision to place its new headquarters right smack in the middle of blighted New Brunswick, New Jersey, in the 1970s not because it made the best business sense (it didn’t), but because it made the most sense in the context of the J&J Credo. Boeing held itself to aircraft design safety standards that far exceeded its competitors’ not because the market demanded it, but because Boeing’s ideology demanded it. 3M rejected the conventional business wisdom that a small growing company should concentrate on one line of business; a focus strategy simply didn’t fit with the type of innovative company 3Mers wanted to build. The learning-curve/market-share model may have become the latest rage among corporate executives in the 1970s, but it just didn’t make sense for HP.

The point here is not that the visionary companies pursue “good” practices and other companies pursue “bad” practices. “Good or bad” puts the wrong frame on it. What might be “good” at HP might be “bad” at Merck or 3M or Marriott or P&G.

THE real question to ask is not “Is this practice good?” but “Is this practice appropriate for us—does it fit with our ideology and ambitions?”

5. Obliterate Misalignments

If you look around your company right now, you can probably put your finger on at least a dozen specific items misaligned with its core ideology or that impede progress—“inappropriate” practices that have somehow crept through the woodwork. Does your incentive system reward behaviors inconsistent with your core values? Does the organization’s structure get in the way of progress? Do goals and strategies drive the company away from its basic purpose? Do corporate policies inhibit change and improvement? Does the office and building layout stifle progress?

Attaining alignment is not just a process of adding new things; it is also a never-ending process of identifying and doggedly correcting misalignments that push a company away from its core ideology or impede progress. If the building layout impedes progress, change the building layout or move. If the strategy is misaligned with the core, change the strategy. If the organization structure inhibits progress, change the organization structure. If the incentive system rewards behavior inconsistent with the core, change the incentive system. Keep in mind that the only sacred cow in a visionary company is its core ideology. Anything else can be changed or eliminated.

6. Keep the Universal Requirements While Inventing New Methods

A company must have a core ideology to become a visionary company. It must also have an unrelenting drive for progress. And finally, it must be well designed as an organization to preserve the core and stimulate progress, with all the key pieces working in alignment. These are universal requirements for visionary companies. They distinguished visionary companies a hundred years ago. They distinguish visionary companies today. And they will distinguish visionary companies in the twenty-first century. If we were to rewrite this book in the year 2095, we would find these same basic elements to distinguish the most enduring and successful corporations from the rest of the pack.

However, the specific methods visionary companies use to preserve the core and stimulate progress will undoubtedly change and improve. BHAGs, cult-like cultures, evolution through experimentation, homegrown management, and continuous self-improvement—these are all proven methods of preserving the core and stimulating progress. But they are not the only effective methods that can be invented. Companies will invent new methods to complement these time-tested ones. The visionary companies of tomorrow are already out there today experimenting with new and better methods. They’re undoubtedly already doing things that their competitors might find odd or unusual, but that will someday become common practice.

And that’s exactly what you should be doing in the corporations you work with—that is, if you want them to enter the elite league of visionary companies. It doesn’t matter whether you’re an entrepreneur, manager, CEO, board member, or consultant. You should be working to implement as many methods as you can think of to preserve a cherished core ideology that guides and inspires people at all levels. And you should be working to invent mechanisms that create dissatisfaction with the status quo and stimulate change, improvement, innovation, and renewal—mechanisms, in short, that infect people with the spirit of progress. If you can think of new methods to preserve the core that we haven’t written about in this book, then by all means put them in place. If you can invent powerful new mechanisms to stimulate progress, then give them a try. Use the proven methods and create new methods. Do both.

THIS IS NOT THE END

We’ve done our best to discover and teach here the fundamental underpinnings of truly outstanding companies that have stood the test of time. We’ve given you an immense amount of detail and evidence in this book, and we expect that few readers will remember every little item in these pages. But as you walk away from reading this book, we hope you will take away four key concepts to guide your thinking for the rest of your managerial career, and to pass on to others. These concepts are:

 

1. Be a clock builder—an architect—not a time teller.

2. Embrace the “Genius of the AND.”

3. Preserve the core/stimulate progress.

4. Seek consistent alignment.

 

We feel a bit like Dorothy in the Wizard of Oz, who after her long journey in search of the wizard, pulls back the curtain and discovers that the wizard isn’t a wizard after all. He’s just a normal human being. Like Dorothy, we discovered that those who build visionary companies are not necessarily more brilliant, more charismatic, more creative, more complex thinkers, more adept at coming up with great ideas—in short, more wizardlike—than the rest of us. What they’ve done is within the conceptual grasp of every manager, CEO, and entrepreneur in the world. The builders of visionary companies tend to be simple—some might even say simplistic—in their approaches to business. Yet simple does not mean easy.

We think this has profound implications for what you take away from this book. It means that no matter who you are, you can be a major contributor in building a visionary company. You don’t have to wait for the great charismatic visionary to descend from the mount. You don’t have to hope for the lightning bolt of creative inspiration to strike with the “great idea.” You don’t have to accept the debilitating perspective of “Well, let’s face it. Our CEO just isn’t a charismatic visionary leader. It’s hopeless.” You don’t have to buy into the belief that building visionary companies is something mysterious that only other people do.

It also means that life will probably be more difficult for you from here on. It means helping those around you to understand the lessons of this book. It means accepting the frightening truth that you are probably as qualified as anyone else to help your organization become visionary. And it means recognizing that you can begin right now—today—to apply the lessons of this book. Finally, and perhaps most important of all, it means working with a deep and abiding respect for the corporation as an important social institution in its own right—an institution that requires the care and attention we give to our great universities or systems of government. For it is through the power of human organization—of individuals working together in common cause—that the bulk of the world’s best work gets done.

So this is not the end. Nor even the beginning of the end. But it is, we hope, the end of the beginning—the beginning of the challenging and arduous, but eminently doable task of building a visionary company.