Building Great Companies

EXTRA MILE

SUSTAINING BUSINESSGROWTH

Workshop Handout

Mohammad Farooque AliJanuary 30, 2014

In this workshop the entire focus is inclined on building a visionarycompany through the learning about motivation, change and most importantly about the concept of Vision because a life without a vision is a life without a direction, a life full of confusions and contradictions.

WHETHER YOU PREVAIL OR FAIL DEPENDS MORE ON

WHAT YOU DO TO YOURSELF THAN ON WHAT

THE WORLD DOES TO YOU

JIM COLLINS

Sustaining Business Growth 2014

Table of ContentsPreface..............................................................3

Introduction to the Workshop.........................................4

Participant Introduction.............................................6

Training Norms & Guidelines for the Participants………………………………………………………………………………7

Learning Objectives of this Workshop ................................8

Prologue : Reasons for Organizational Failure……………………………………………………………………………………10

Your Company’s Vision for 2024………………..………………………………………………………………………………………12

Chapter 1 : Definitions.............................................13Sustainable Business, Vision, Visionary Companies, Core Purpose, Core Values, Core Ideology, Envisioned Future, BHAGs, Clock Building Initial Considerations………………………………………………………………………………………………………………………..16

Chapter 2 : Personal Mastery……………………………………………………………………………………………………………19

Case Study Company Introduction ……………………………………………………………………………………………………21

S-Mart & Shan Foods

Chapter 3 : Visionary Companies ………………………………………………………………………………………………………22

Core Ideology, Core Values, Difference Between Core Values & Core Practices, Core Purpose, Envisioned Future, 10-30 Year BHAGs, Vivid Descriptions

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Chapter 4 : The Vision Framework ……………………………………………………………………………………………………30

Vision, Functions of Vision, Characteristics of Vision, Articulating aVision

Chapter 5 : Successful Habits of Visionary Companies................33First Who…Then What, ‘Clock Builder’ Not ‘Time Teller’, Embrace the Genius of the ‘AND’, Preserve the Core/Stimulate Progress, BHAGs, Cult-Like Culture, Try a lot of Stuff and Keep what Works, Homegrown Management, ‘Good Enough’ Never Is

Core Ideology Determination Exercise................................43

Bibliography .......................................................50

Preface"Everyone wants to live on top of the mountain, but all the happiness and growth occurs while

you're climbing it.” ― Andy Rooney

Welcome to Extra Mile’s Workshop on keeping businesses sustained!

The main aim is to identify clear and meaningful ways to organizational success. In this

workshop the entire focus is inclined on building a visionary company through the learning about motivation, change and most importantly about the concept of Vision because a life

without a vision is a life without a direction, a life full of confusions and contradictions.

This workshop has been designed to give you the fundamental paradigms,tools and the language to address this complex yet important subject. This workshop will not only empower your concepts and personality but it will also set the ground for making your organization powerful.

Designed to facilitate your learning in this workshop, this manual hasthe summary of key concepts, definitions and exercises.

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One of our key findings is the idea of "Preserve the Core/Stimulate Progress"; no enterprise can become or remain truly great without a core set of principles to preserve, to build upon, to serve as an anchor, to provide guidance in the face of an ever-changing world. At the same time, no company can remain great without stimulating progress -- change, renewal, improvement, and the pursuit of BHAGs (Big Hairy Audacious Goals). When you blend these two together -- Preserve the Core AND Stimulate Progress -- you get a magical dialectic that keeps a company or organization vibrant over time.

During my life experiences, I got to learn that how a man can turn theimpossible real by getting motivated. I, like many other people, have learnt the importance of change and how imperative it is to embrace the right change at the right time. I have also learnt that having a clear vision lessens the chances of failure. Over the course of the period that I have lived like any other individual I have learnt the significance of motivating others and get motivated by others.

I pray to ALLAH (swt) that this knowledge enriches your life. I wish you a wonderful learning experience,

Best Regards,Mohammad Farooque AliFounder and Director Extra Mile

Introduction to the WorkshopThere are about 3.2 million enterprises in Pakistan and 93% ofthose are SMEs .Only a few small companies grow to become medium-

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sized and even fewer grow into the new large companies in thefuture.

The workshop is all about how to build companies that aresustainable and perform well and are also considered as goingconcerned and designed for executives who want to see theircompanies prosper eternally. The program will stress on theimportance of building such an organization as opposed to thecontemporary product-focus or customer-focus. Products may turnobsolete, customers may move forward but if the organization isinnovative enough, it can keep a fair share of any market.

This workshop is not about charismatic visionary leaders. It isnot about visionary product concepts or visionary marketinsights. Nor even it is just about just having a corporatevision. This workshop is about something far more important,enduring and substantial. This workshop is about visionarycompanies. What is a visionary company? VCs are premierinstitutions – the crown jewels – in their industries, widelyadmired by their peers and having a long track record ofsignificantly impacting the world around them.

All individual leaders, no matter how charismatic or visionary,eventually die; and all visionary products and services – all‘great ideas’ eventually become obsolete. Indeed entire marketscan become obsolete and disappear. Yet visionary companiesprosper over long periods of time, through multiple productlifecycle and multiple generations of active leaders.

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Try to think of five to ten organizations that meet the followingcriteria:

Premier institution in its industry Widely admired by knowledgeable businesspeople Made an indelible imprint on the world in which we live Had multiple generations of chief executives Been through multiple product (or service) life cycles

Companies that meet these criteria are visionary companies. Theyare more than successful. They are more than enduring. In mostcases, they are the best of the best in their industries, andhave been that way for decades. Many of them served as rolemodels – icons, really for – the practice of management aroundthe world. Yet, as extraordinary as they are, the visionary companies do nothave perfect, unblemished records. Sony had repeated productfailures during its first five years of life. Ford posted one ofthe largest annual losses in American business history ($3.3billion in three years) in the early 1980s before it began animpressive turnaround and long needed revitalization. IBM wasnearly bankrupt in 1914, then again in 1921, and is havingtrouble again in the early 1990s.Indeed, all of the visionary companies faced setbacks and mademistakes at some point during their lives, and some areexperimenting difficulty as we converse in this workshop. Yet –and this is the key point – visionary companies display aremarkable resiliency, an ability to bounce back from adversity.

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Hence, visionary companies attain extraordinary long-termperformance. Your $1 invested in the group of comparisoncompanies would have grown to $955 – more than twice the generalmarket. But your $1 in the visionary companies stock fund wouldhave grown to $6,356 – over six times the comparison fund andover fifteen times the general market from 1926 to 1990. The exciting thing, however, is to figure out why these companieshave separated themselves into the special category that weconsider highly visionary. How did they begin? How did theymanage the various difficult stages of corporate evolution fromtiny start-ups to global institutions? And, once they becamelarge, what characteristics did they share in common thatdistinguished them from other large companies? What can we learnfrom their developments that might prove useful to people whowould like to create, build and maintain such companies? Weinvite you on a journey through the rest of this workshop todiscover answers to these questions.

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Participant Introduction

Name:

Company:

Designation:

How long have you been with this organization?

Qualification:

Hobbies:

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Training Norms and guidelines for the participants

Timings: It is highly appreciated that participants take into consideration the importance to be punctual. The break timings will be foretold and so it is expected that participants follow them strictly and get back to their respective places on time after every break period.

Mobile/Cell Phones: Training should be undertaken with full concentration and seriousness. Accordingly, we cannot make any allowance or compromise on mobile phone usage inside the trainingroom. While we strongly urge participants to keep their phones turns off, if that is not possible, the sets may be kept on silent or vibration mode. Although emergency calls may be attended by walking out of the room.

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Questions & Answers: We strongly request participants to askquestions. No question is irrelevant or trivial. We shall answer your question regardless of the time asked.

Workshop Language: Depending largely on the choice of the participants (and partially on the facility of the trainers), thetraining shall be conducted in English, Urdu or a mix of both thelanguages.

General Instructions: Pre-workshop questionnaire- Please fillthe pre-workshop questionnaires.

Names on the manual: Participants are requested to please write their names on the manuals and keep them secure at all times.

Valuables: All valuables like mobile phones must be kept on theperson of the participants- and especially so when leaving the training room, especially when going for lunch and breaks. The organizers are unable to assume any responsibility for the loss of misplaced of lost valuables.

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Learning objectives of this workshop

By the end of the workshop you should have learnt the following:

The technical meaning of the words:

VisionVisionary CompanyCore PurposeCore ValuesCore IdeologyEnvisioned FutureClock buildingBHAG

Details of the following concepts:

Reasons for business failure

The concept of core ideology (core values and purpose)

The concept of personal mastery

The significance on building and nourishing organizations rather than individuals to achieve sustainability

The concept of prevailing myths in the business world

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The importance of having a uniform understanding of terms and concepts among the group of people working together

The different functions of vision

The characteristics of vision

The concept of BHAG

The different ways to achieve sustainability

The understanding that visionary companies are market leaders in terms of financial strength as well as organizational performance.

Appreciate the significance of clock building over time telling

An understanding of how to build vision

The belief of ‘good enough’ is not enough

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How can we do better tomorrow than we did today?

The first rule of business is to survive and the guiding principle of

business economics is not the maximization of profit, it is the

avoidance of loss. Peter

Drucker

Prologue

Reasons for Organizational Failure

As discussed above, of the 93% businesses in Pakistan, only some companies are able to move from the category of ‘Small Enterprise’ to the category of ‘Medium Enterprise’. Fewer make itto the ‘Large Enterprise’ category. There are many reasons due towhich many companies are unable to sustain in Pakistan, let aloneachieve success. The reasons can be categorized in the societal and individual areas.

On the societal level, one of the problems that we face as a nation is that there is no interaction between the business schools and the business community. The academia focuses on what is being practiced abroad, that which is irrelevant to the Pakistani business environment. It doesn’t incorporate in its

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curriculum the local entrepreneurial mindset. Hence the inappropriate incubation of fresh business graduates lead to unworkable business models and unrelated knowledge. On the other hand, the business community doesn’t feel its responsibility to keep in touch with the business schools, through financial backing as well as letting their organizations to be used as casestudies for faculty research and inclusion in courses. There is aneed to create a truly entrepreneurial institute with financial assistance and support of business community.

Other problems that we face at the societal level include the unsupportive business environment in that there are no mentors available for new entrepreneurs, the legal process of business registration takes weeks and months to get completed, and the lawand order situation throughout the country is deteriorating on a daily basis.

There are also many problems at the individual level. The first and foremost is that individuals are starting the business for all the wrong reasons such as to make money, to be autonomous & independent, to be able to spend more time with the family, unavailability of jobs. Hence there isn’t any vision for the future and the company doesn’t aim to give a worthy product to the society. Consequently, there is no strategic direction. Thereisn’t any interest in creating value for society. The picture of the future is vague. There is insufficient planning as there are no worthy objectives.

Businesses that have started are also facing problems such as lack of experience at all levels of the organization. Sometimes there is the problem of dysfunctional management (lack of focus, planning, standards) while at other places the problem is of an incorrect business model. Sometimes there is failure to communicate value propositions, whereas somewhere there is poor decision making. Sometimes there is no knowledge of financial management, employee relations etc.

Owners themselves may also act as destructors. Some of them are highly over confident while others are too much of risk averse.

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Some have a narrow focus or are conflict disinclined or may even be stubborn. Hence they lose the big picture. Sometimes there is a lack of succession plan as there is a one man show. Sometimes there is nepotism i.e. preferential treatment. Sometimes there are power struggles.

For some companies that achieve a little success there come the problems of unexpected, uncontrollable growth. This pushes the company to move into unprofitable markets. Sometimes they borrow too much to facilitate the growth which leads to liquidity problems. Liquidity problems may also come when there is insufficient capital due to absence of ‘cash cushion’ for operating expenses or absence of cash reserves for fixed capital.When there is unexpected or uncontrollable growth, it may also lead to loss of original ultimate vision

Other reasons may include the incidents where a business doesn’t know the importance of consumers. Many Pakistani businesses fail to realize that the customer is the king. Hence, there is no touch point with customers. These days, dialogue is the key – markets are conversations. It is imperative for the businesses toknow what the customers want, what they think of the product or service that the business provides. Not doing so leads to the situation where businesses become slow in responding to customer interactions and hence start to lose their customers.

Some entrepreneurs who develop a new product or service also face difficulties because there isn’t enough demand at profit-making prices. Sometimes, competition may have economies of scalewhile at other times the idea may not be that much attractive.

These are some of the reasons that are mainly due to undefined vision framework for the company’s future. Some other reasons whybusinesses fail in Pakistan are poor location, poor inventory management, poor credit arrangement management, poor accounting and sometimes personal use of business funds

Now we shall turn to the solution of this huge problem of business failure in Pakistan. However, before that we will

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discuss the meaning of some of the terminology used in the workshop.

“Your Company’s Vision for a Particular Year”

Worksheet: What is your company’s vision for theyear 2024?

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CHAPTER 1 : Definitions

Most of the problems in life occur when there are not standard definitions of certain concepts that are frequently used in the conversation among the interlocutor. The ambiguities lead to severe consequences and among them the breakdown of relationship is on the top. People often lose trust and confidence of the bondand affiliation.

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In order to get the most of this course, it is imperative to understand certain terms right from the beginning to avoid any misunderstanding later on.

MEANING OF:

THE WORD “IMPORTANT”:

MEANINGS WORDS

WORD LIST

Select a word from the list which best depicts the following meaning: ―The picture of the future that one wants to see.

AimObjectives Mission Vision Goal

Select a word from the list which best depicts the following meaning: ―The reason for seeing this picture of the future.

Purpose DreamAspiration Reason

Select a word from the list which best depicts the

Planning Goal settingLong range planning

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following meaning: ―How will this future be achieved?

Hope WishStrategy

VISION:

Vision is the inspiring word chosen by successful leaders to clearly and concisely convey the direction of the organization. By crafting a clear vision statement, you can powerfully communicate your intentions and motivate your team or organization to realize an attractive and inspiring common visionof the future.

A Vision outlines WHERE you want to be.

VISIONARY COMPANIES:

A visionary company can easily be defined as a leading innovatorin its industry that consistently improves upon its market share,increases its profit share and shows stakeholder concern over that of the company as a whole. The precedence of adding value tothe society objective over profitability does not mean that visionary companies do not strive to earn money. Just as any human needs oxygen to live, organizations also need growing earnings to sustain. However, like individuals who want to have ameaningful life, attain their success meanwhile adding vitality to their lives, organizations that add value to the society whilestriving for excellence surely do give back much higher returns to their stakeholders as well along the way.

The following is a comparison of ratio of cumulative stock returns of Visionary Companies, Comparison Companies and the General Market from 1926 to 1990. The graph illustrates that visionary companies return more than 6 times the stock returns ofcomparison companies (where comparison companies return nearly the twice of the general market. Hence we see that focusing on

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the excellence of the organization leads to much better results in terms of financial position as well than that of organizationsthat consider profitability as their sole purpose of existence.

CORE PURPOSEPurpose could be described as the heartbeat or soul of one’s ideology or as the “most fundamental reason for being”.

CORE VALUESCore values are the beliefs and guiding principles.

CORE IDEOLOGYCore ideology defines an individual’s or a company’s timeless character.

Core ideology = Core value + Purpose

ENVISIONED FUTURE

Envisioned future-the second primary component of the vision framework- consists of two parts: a ten to thirty years “Big Hairy Audacious Goal” the BHAG and a ‘vivid description’. The phrase “envisioned future” contains a paradox. On the one hand, it conveys the sense of concreteness- something vivid and real; you can see it, touch it, and feel it. On the other hand, it portrays a time yet unrealized, a dream, hope or aspiration.

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BHAGBig, Hairy, and Audacious Goals”.

Pronounced as ‘BEE Hag’, a BHAG is 20-50 year goal, has a clear finish line and a company should be able to determine when the goal has been achieved.

CLOCK BUILDINGBuilders of visionary companies concentrate primarily on buildingan organization – building a ticking clock. Their greatest creation is the company itself and what it stands for.

INITIAL CONSIDERATIONS

The vision of health for three individuals over the next five years: Currently all three individuals are around 35 years of age, are enjoying good health with no illnesses or complications. All of them are around 5 feet and 9 inches tall and weigh around 80 kg.

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Ahmed

(Category A)

Babar

(Category B)

Shaboo

(Category C)

GOOD HEALTH

1. Weight: 75 kg

2. Waist: 32

3. Pulse: 68

4. Cholesterol: 140

5. Body-Fat Ratio:12%

6. Endurance: Can

jog 5 km, brisk

walk of 8 km

GOOD HEALTH

1. Weight: 75-80 kg

2. Waist: 32-34

3. Pulse: 75-80

4. Cholesterol:

150-170

GOOD HEALTH

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Worksheet: Impact on individual choices based upon the differences in visions for health: Please explain the types of diets, exercise regimens and schedules (sleeping, eating, etc.) that the three individuals will need to take to be able to reach their respective visions:

Ahmed

(Category A)

Babar

(Category B)

Shaboo

(Category C)

Diet

Exercise

Regularity in lifestyle e.g. sleeping etc.

Worksheet: Impact on individual choices based upon the differences in visions for health:Based on the workings of the previous page, please answer the following questions:

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Question 1: Who amongst the three has the most direction in his life in regards to what to eat, when and what to exercise and howmuch to sleep?

□ Ahmed □ Babar □ Shaboo

Question 2: Even if they don‘t quite reach their targets, who hasa better chance of having good health over the next five years?

□ Ahmed □ Babar □ Shaboo

Question 3: What percentage of people, if asked about their vision of their health over the next five years, will answer likeAhmed (this means will speak about things like cholesterol, body fat ratio, pulse rate, endurance etc), what percentage of people will respond like Babar and what percentage will answer like Shaboo which is that they will just say good health?

The percentage of people who belong to Ahmed‘s category (A): % The percentage of people who belong to Babar‘s category (B): % The percentage of people who belong to Shaboo‘s category (C): %

Question 4: In your view which category of people do you belong to?

□ Category A (Ahmed) □ Category B (Babar) □ Category C (Shaboo)

Question 5: Which category would you like to belong to?

□ Category A (Ahmed) □ Category B (Babar) □ Category C (Shaboo)

Question 6: Why would you like to be in the category that you have chosen above?

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Question 7: Based on the workings that you have done in this exercise, would it be safe to say that majority of the people doesn’t have very clear visions, especially in the long term? (True/False)

Question 8: Again based on the workings that you have done, wouldit be safe to say that the higher the clarity in one‘s vision in a particular area of one‘s life, the higher the chances of success in that area? (True/False)

CHAPTER 2 : Personal Mastery

What strange creatures human beings are.

“Man surprised me most about humanity because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the futurethat he does not enjoy the present; the result being that he does

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not live in the present or the future; he lives as if he is nevergoing to die, and then dies having never really lived.”

― Dalai Lama XIV

The future might be anyone’s guess. Almighty ALLAH swt has created us the greatest of all creations. HE has made a thing- Hope to make us believe that what we hold as our desires is also achievable as a reality. What all we need to do is to follow our dreams of a better world, and keep on trying, even when there seems to be little hope, because it is the right thing to do as every act of compassion makes a difference!

Set your vision on where you want to be, by focusing on where you are now, and take each step, moment by moment.

THE CONCEPT OF PERSONAL MASTERY

Senge describes personal mastery as the ‘discipline of personal growth and learning’; while this includes attaining a high level of technical and professional competency, Senge believes that people need to be spiritually aware too.

It is the discipline of continually clarifying and deepening our personal vision, of focusing our energies, of developing patience, and of seeing reality objectively. The discipline of personal mastery starts with clarifying the things that really matter to us, of living our lives in the service of our highest aspirations.

Let’s be clear: personal mastery is a life-long journey and pursuit, and is not something to possess or a destination to arrive at. Learning and growth need to take place on multiple levels including spiritual, mental, emotional, social, and physical.

People have their own will, their own mind, and their own way of thinking. They rush too much with worried minds and are impatientof results. That is why one of the most important things people

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need is the spiritual strength. But unfortunately, we have cut ourselves off this. If people are not motivated themselves, therewill simply be no personal growth and no learning. The disciplinerelated to personal growth and learning has been coined as “PERSONAL MASTERY.” It is although grounded in competence and skills, it goes beyond these two. The word “mastery” suggests gaining dominance over people and things. But mastery can also mean “a special level of proficiency”, in every aspect of life whether it is personal or professional. It requires spiritual growth which simply means approaching one’s life as a creative work, living life from a creative as opposed to reactive viewpoint.

ADVANTAGES OF HOLDING PERSONAL MASTERY:

-People with a high level of personal mastery are acutely aware of their ignorance, their incompetence, and their growth areas.

-People with a high level of personal mastery live in a continuallearning mode.

-People with high level of personal mastery are more committed.

-Personal mastery enables people to take more initiatives.

-People with personal mastery learn faster.

-Personal mastery makes people have a broader and deeper sense ofresponsibility.

DEVELOPING PERSONAL MASTERY:

The way to develop a sense of personal mastery is to approach itas a discipline, as a series of practices and principles that must be applied to be useful.

As a result when personal mastery becomes a discipline in our lives, it embodies two underlying movements. The first is continually clarifying what is important to us. Ultimately this

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realization compels us to craft a vision. The second is continually learning how to see current reality more clearly.

The ability to focus on ultimate intrinsic desires, not only on secondary goals, is a cornerstone of personal mastery.

Personal Mastery must be a discipline. It is a process of continually focusing and refocusing on what one truly wants, on one’s vision.

“THE DISCIPLINE OF PERSONAL MASTERY LEADING TOWARDS THE VISION”

Most adults have little sense of real vision, they usually see goals and objectives as their vision but vision is a totally different thing.

WHAT A VISION IS:

The simplest way to define Vision is that “Vision is the picture of the future one wants to see.” However, it requires a lot more understanding to fully know what vision is.

Vision is multifaceted. One face of the vision is the material facet like where one wants to live and how much money one desiresto have etc. The other face is the personal facet, such as health, freedom and being true to oneself. There is a service facet too such as helping others or contributing to the state of knowledge in a field. All the faces are what anyone can truly want. In addition to this clarifying one’s vision is one of the easier aspects of personal mastery.

Case Study Company Introduction

S-MARTCompany Profile

Business Sector Retail Outlet (Super 28


Market)

Location North Nazimabad, Karachi

Business Type Partnership turned to sole proprietorship

Monthly Average Sale Rs. 2.0 to 2.2 million

Net Profit Margin 6-8%

No. of Employees 6-8 persons

Total life 10 years (business terminated)

Reason for failure Decisions influenced bybusiness myths

Shan FoodsCompany Profile

Business Sector Manufacture & Marketingof Food Brands

Head Office Location Korangi Industrial Area, Karachi

Business Type Sole Proprietorship

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turned into Private Limited Company

Monthly Average Sale Approximately Rs. 1.7 million

Net Profit Margin

No. of Employees 1000

Total Life 33 years (going concern)

Distribution Network 374 (Pakistan) & 60 (across 45 countries)

Manufacturing Facilities

Pakistan, UAE, Saudi Arabia

Reason for Success Decisions influenced byvisionary thinking

CHAPTER 3 : Visionary Companies

What makes it so difficult to sustain any business?

The answer is very simple. We may not have sustainability, notably because there is not sufficient courage to welcome change, to accept motivational guidelines and to have an ultimate vision. Only those companies can achieve sustainability that wake up partway through life and realize that they are heading away from the above three most significant principles of business. Such companies are regarded as VISIONARY COMPANIES.

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“Only Visionary Companies sustain.”

VISINARY COMPANIES: VCs

“Visionary companies are premier institutions-the crown jewels- in their industries, widely admired by their peers and having a long track record of making a significant impact on the world around them. The key point is that a visionary company is an organization-an institution. All individual leaders, no matter how charismatic or visionary, eventually die; and all products and services-all “great ideas”- eventually become obsolete. Indeed, entire markets can become obsolete and disappear. Yet visionary companies prosper over long periods of time, through multiple product life cycles and multiple generations of active leaders.”

Some of the names of the VCs are 3M, IBM, Johnson & Johnson, Marriott, Motorola, Procter & Gamble, Sony and Walt Disney etc. Local Examples may include Shan Foods Pvt Ltd (on the path of becoming a VC), Dawn Newspaper,

VCs distinguish themselves as a very special and elite breed of institutions. They are the best of the best in their industries. It is very surprising that VCs do not have perfect, unblemished records. Indeed, most of the visionary companies face setbacks and make mistakes at some point during their lives, and some are experiencing difficulty. Yet- and this is a key point- visionary companies display a remarkable resiliency, an ability to bounce back from adversity.

As a result, visionary companies attain long term performance. Not only do VCs do more than just generate long term financial returns; they also penetrate themselves into the very fabric of society. Imagine how different the world would have looked and felt without Scotch tape or 3M Post-it notepads, Tide detergent and ivory soap, ATM and Johnson & Johnson Band Aids and General Electric light bulbs and appliances, calculators and Motorola cellular phones and paging devices. For better or worse, these companies have made an indelible imprint on the world around them.

Visionary Companies are more than successful.31


The most astonishing feature regarding VCs is that they display remarkable resiliency- an ability to bounce back from adversity.

The following is the vision framework of visionary companies:

Vision is dependent on some important components. The first and the major component is the Core Ideology.

CORE IDEOLOGY:

For Collins and Porras, the authors of BUILT TO LAST, Core Ideology is absolutely integral to vision setting. Core ideology defines the enduring characteristic of an organization- its self identitythat remains consistent through time and transcends product/market life cycles, technological breakthroughs, management fads, and individual leaders. In fact the most lastingand significant contribution of the architects of visionary companies is the core ideology.

Core ideology = Core value + Core Purpose

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CORE VALUES:

When you contemplate your personal values, you usually have a sense of what is truly important to you—the characteristics that you couldn’t live without. For Collins and Porras, core values are as natural as breathing.

In the Book BULIT TO LAST, it has been found that “companies tend to have only a few core values, usually between three and five”—any more than this and they believe that core values are being confused with other factors. From their perspective, ‘core’ means that a value is “so fundamental and deeply held that [it] will change seldom, if ever.”

Consistent with this idea, they believe that core values cannot be created but must instead be discovered.

An example of core values for a company might include:

“A commitment to innovation and excellence”, Apple Computer is perhaps best known for having a commitment to innovation as a core value. This is embodied by their "Think Different" motto

The point is that a great company decides for itself what values it should hold. There is no universally right set of core values.For example Sony doesn't have the core value of customer service and Disney doesn’t have the core value of market focus etc.

The key is not what core values an organization has but that it has core values at all.

DIFFERENCE BETWEEN CORE VALUES AND PRACTICES:

It is immensely important to make the crucial distinction between corevalues and practices. Often values and practices are taken as synonymsand results in big confusions.

CORE VALUES PRACTICES

Core Values are timeless. Practices are short-lived.

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Core Values remain fixed and never change.

Practices should never stop changing.

A Core Value is an academic institution in itself.

A Practice adopted to support the core value is academic tenure.

Core Value is free from interference.

Practices can be interfered into.

CORE PURPOSE:

In many ways, core purpose is similar to core values: it is deeply held and unchanging, and it must be discovered rather thancreated.

For Collins and Porras, every individual or every organization has a purpose, even if it hasn’t been articulated yet. Purpose motivates and inspires. A true purpose motivates to achieve the vision. Collins and Porras’ best description of core purpose is:

“…like a guiding star on the horizon—forever pursued but never reached.”

To determine your core purpose, Collins and Porras, in Built to Last,suggest asking questions such as:

How could we frame the purpose of this organization so that if you woke up tomorrow morning with enough money in the bank to retire, you would nevertheless keep workinghere?

Both the writers are of the opinion that core purpose is what you feel proud in describing your work you do for a living.

ENVISIONED FUTURE:

According to Collins:

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“Where core ideology resides in the background, ever-present and ‘in the woodwork’”, an envisioned future is “in the foreground, focusing people’s attention on a specific goal… [It] is bold, exciting and emotionally charged.”

An envisioned future is the means through which core ideology is translated into a tangible goal that stretches and challenges thecompany’s vision.

What the envisioned future actually means is the planning criterion for the execution of the vision into reality. It is of no wonder that for the fulfillment of one’s vision there is always the needto take bold steps along with their clear and detailed articulation.

Thus, the other half of the picture is completed only when the planning criterion is brought forth. The envisioned future has two major elements.

1. 10-30 years BHAGS 2. Vivid Description

10-30 YEARS BHAGS:

Collins and Porras coined the acronym BHAG.

For Collins;

“A BHAG should not be a sure bet—it will have perhaps only a 50% to 70% probability of success”.

However, a company should nonetheless believe that it can achieve the goal. To set BHAGs a company has to have unreasonable self-confidence or unreasonable self-ambition.

The easiest way to explain BHAGs is to compare them to stretchingand challenging organizational goals. BHAGs take a certain time period for their accomplishment.

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BHAG should be concise (usually no more than a sentence or phrase), easy to understand.

The envisioned future should be so exciting in its own that it would continue to keep the person motivated.

For Collins and Porras, their vision framework is about preserving the core. It is about managing both continuity and change.

Collins and Porras believe that;

“without vision, organizations have no chance of creating their future, they can only react to it.”

Those organizations that have their vision clearly envisioned hold inherent capabilities to achieve their goals, to outlast changes in leadership, and ultimately, to prosper.

At a recent event held by Warwick Business School, Professor MarkTaylor, Dean of WBS, described an effective vision as needing to be:

“Out of reach but not out of sight”

The above research is applicable in both personal and corporate levels.

In other words, you should be able to visualize yourself or organization achieving the vision but it should not be possible for you or your organization to reach out and take hold of the vision straight away. True vision is a balance between these two ideas.

Vision should be a future-oriented goal that is exciting, inspiring, motivating and more than a little stretching. It should challenge you to achieve more and to push you beyond your comfort zone.

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http://www.wbs.ac.uk/


Out of reach but not out of sight is also a perfect description of BHAGs.

According to Jim Collins VCs are the companies that do not run away from being audacious in terms setting their goals. Think of the Moon mission in the 1960s. President Kennedy and his advisorscould have gone off into a conference room and drafted something like “Let’s beef up our space program” or some other such vacuousstatement. The most optimistic scientific assessment of the moon mission chances for success in 1961 was fifty-fifty and most experts were, in fact, more pessimistic. Yet, nonetheless, Congress agreed with Kennedy’s proclamation on May 25, 1961, “that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth.” Given the odds, such a bold commitment was, at that time, outrageous. But that’s part of whatmade it such a powerful mechanism for getting the United States, still groggy from the 1950s, moving vigorously forward. Thus landing the moon was an audacious thought and instead of thinkingit as an absurd or an unrealistic approach people actually took it seriously and worked on it to turn it into a reality.

This concept is more prevailing in VCs as compared to non VCs. According to this term, all companies have goals. But there is a difference I having a goal and becoming committed to a huge, daunting challenge. Like the moon mission, a true BHAG is clear and compelling and serves as a unifying focal point of effort- often creating immense tem spirit. It has a clear finish line, sothe organization can know when it has achieved the goal. A BHAG engages people-it reaches out and grabs them in the gut. It is tangible, energizing, highly focused. People “get in” right away;it takes little or no explanation. The moon mission did not need a committee to spend endless hours negotiating the goal into a verbose, meaningless, impossible-to-remember “mission statement.”

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In short the BHAG aims to “define its destiny in broad but clear terms. You need an overarching message, something big, but simpleand understandable.”

Take for example the case of Phillip Morris versus R.J. Reynolds.In 1961, R.J. Reynolds had the largest market share (almost 35%),greatest size, and highest profitability in the tobacco industry.Phillip Morris, on the other hand, was a sixth0pace also-ran withless than 10 percent market share. But Phillip Morris had two things going for it that R.J. Reynolds did not. First and certainly not to be discounted, Phillip Morris had recently repositioned a little known women’s cigarette with a cowboy mascot that would prove to be a huge success. And second, PhillipMorris had something to shoot for.

Coming from behind, Phillip Morris set the audacious goal for itself of becoming the General Motors of the tobacco industry. Phillip Morris then committed itself to this goal and rose from sixth to fifth, from fifth to fourth, and so on until it blasted long time leader R.J. Reynolds out of first place. During this same time period, R.J. Reynolds displayed a stodgy, good-old-boy,clubby atmosphere and no clear, driving ambition for itself otherthan to attain a good return for shareholders.

To seriously entertain such ambitious and audacious as the distant sixth place player in an industry dominated by entrenchedplayers does not suggest timidity. Indeed, following the rationalmodels of strategic planning, it would suggest arrogant stupidity, not farsighted wisdom. We have sometimes used the Phillip Morris situation with MBA students well schooled in strategic planning. Almost none of them think the company should go for the big cigar; as one student put it, “They do not have the right strategic assets sand competencies; they should stick to their niche.” Certainly,Phillip Morris could have been wrong, long forgotten, and we

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would not be writing about it in this handout. But, equally certain, had Phillip Morris timidly held to its industry niche and not challenged Goliath, we would not be writing about them inthis handout either.

As in Phillip Morris case, BHAGs are bold, falling in the gray area where reason and prudence might say “This is unreasonable,” but the drive for progress says, “We believe we can do it nonetheless.” Again, these are not just “goals”; these are Big Hairy Audacious Goals.

Let’s look at another example of audacity in a young, small company. In the late 1950s, Tokyo Tsushin Kogyo (a relatively small company, largely unknown outside of its home country) took the costly step of discarding its original name in favour of a new one; Sony Corporation. The company’s bank objected to the idea: “It has taken you ten years since the company’s founding to make the name Tokyo Tsushin Kogyo widely known in the trade. After all this time, what do you mean byproposing such a nonsensical change?”

Sony’s Akio Morita responded simple that it would enable the company to expand worldwide, whereas the prior name could not easily be pronounced in foreign lands.

You must be thinking that such a move does not represent something particularly audacious; after all, most small to midsize companies eventually look to overseas markets. And it is not that big of a deal to change a corporate name from Tokyo Tsushin Kogyo to Sony. But look closely at that the reason Akio Morita gave for this move, for therein lies an immense BHAG:

Although our company was still small and we saw Japan as quite a large and potentiallyactive market… it became obvious to me that if we did not set our sights on marketing abroad, we would not grow into the kind of company Ibuka and I had envisioned. We

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wanted to change the image [around the world] of Japanese products as poor in quality.

In the 1950s, “Made in Japan” meant “cheap, junky, poor quality.”In reading through materials on the company, we concluded that Sony not only wanted to be successful in its own right, but to become the company best known for changing the image of Japanese consumer product as being poor quality. Having less than a thousand employees and no overseas presence to speak of, this wasnontrivial ambition.

VIVID DESCRIPTION:

On the other hand a vivid description is a company’s opportunity to express in detail what it will feel like to achieve its goal.

For Collins and Porras, a vivid description is essential to making a BHAG tangible. Vivid description is a “vibrant, engaging” picture that brings your company’s goal to life. For example, climbing K-2 is certainly a goal but the vivid description would be that how it’d really feel to stand on that peak and look out across the mountain ranges below.

SONY (1954)

Core Ideology Envisioned Future

Core Purpose 30-year BHAG

To experience the sheer joy of innovation and the application of technology for the benefit and pleasure of the general public

Become the company most known for changing the worldwide image of Japanese products as being of poor quality

Core Values Vivid Description40


Elevation of the Japanese culture and national status

Being a pioneer—not following others; doing the impossible

Encouraging individual ability and creativity

We will create products that become pervasive around the world. We will be the first Japanese company to go into theAmerican market and distribute directly. ... We will succeed with innovations like the transistor radio that American companies have failed at. ... Fifty years from now, our brandname will be as well known as any on Earth ... and will signify innovation and quality that rivals the most innovativecompanies anywhere. ... “Made in Japan” will mean something fine, not shoddy.

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Chapter 4 : The Vision Framework

“Our commitment must be to continue the vitality of this company- its growth in physical terms and also its growth as an institution-so that this company, this

institution, will last through the ages.” John G. Smale (former CEO, Procter & Gamble)

Vision:

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Over a long period of time people have been taking predictions asvisions. This amalgamation of totally different concepts has brought chaos and resulted in nothingness.

PREDICTION: is what we foreshadow on the basis of the current circumstances.

VISION: is what we desire or want to see in the future.

It may happen and so often happens too that predictions totally contradict our visions. Most of the companies plan according to their predictions. But VCs plan according to their Vision.

“You can and should shape your own future; because if you don’t someone else surely will.”

Joel Barker

Functions of Vision:

1- Vision provides direction.2- One may get to face a severe risk if there is no correct and

clear vision.

3- Vision is a root for motivation.

4- Vision provides all the arms and strength to wrestle adversities.

5- Vision assists to diagnose opportunities and further helps to make most of those opportunities.

Characteristics of a Vision:

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1- Achievability: What are the possible ways and grounds that may help in achieving your vision within the limited available resources?

2- Clarity: Vision needs to be comprehensible and concrete enough so that it may explain the main idea in transparent and unblurred way.

3- Nobility: Perhaps this is the biggest trait of an ultimate vision. Nobility enables your vision to embrace the lives ofpeople other than yourself for Altruism (disinterested and selfless concern for the well-being of others.)

To the great businessmen, winning is what it’s all about, but only if others win withthem.

4- Heroic Generosity: How much courage do you have to be willing to be agreeable to endure for your vision?

The greatest creation is the company itself and what it stands for.

To have a clear vision it is wise to have a core ideology. It is important to know in the beginning of the concept of core ideology that does the content of the core ideology matter? Are there any common elements or prevalent patterns across the core ideologies in the VCs?

According to the retrospect it is found that the core ideologies of the VCs show up no single item consistently across all the VCs.

*Some companies, such as Johnson & Johnson and Wal-Mart, made their customers central to their ideology; others, such as Sony and Ford, did not.

*Some companies, such as HP and Marriott, made concern for their employees central to their ideologies; others such as Nordstrom and Disney, did not.

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*Some companies, such as Ford and Disney, made their products or services central to their core ideology; other, such as IBM and Citicorp, did not.

*Some companies, such as Sony and Boeing, made audacious risk taking central to their core ideology; others, such as HP and Nordstrom,did not.

*Some companies, such as Motorola and 3M, made innovation central to their ideology; others, such as P&G and American Express, did not.

In short we did not find any specific ideological content essential to being a visionary company. Our research indicates that the authenticity of the ideology and the extent to which a company attains consistent alignment with the ideology counts more than the content of the ideology.

INTENTIONS are all fine and good, but it is the translation of those intentions into concrete items- mechanisms with teeth-that can make the difference between becoming a visionary company and forever remaining a wannabe.

ARTICULATING A VISION:

A well conceived vision consists of two major components-core ideologies and an envisioned future. Notice the direct parallel to the fundamental “preserve the core/stimulate progress” dynamic. A good vision builds on the interplay between what we stand and for and why we exist” that does not change (the core ideology) and sets forth “what we aspire to become, to achieve, to create” that will require significant change and progress to attain (the envisioned future)

To pursue the vision means to create organizational and strategicalignment to preserve the core ideology and stimulate progress

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toward the envisioned future. Alignment brings the vision to life, translating it from good intentions to concrete reality.

Company builders like David Packard, Masaru Ibuka of Sony, GeorgeMerck of Merck, William McKnight of 3M, and Paul Galvin of Motorola understood that it is far more important to know who youare than where you are going, for where you are going will certainly change as the world about you changes. Leaders die; products become obsolete, markets change, new technologies emerge, management fads come and go; but core ideology in a greatcompany endures as a source of guidance and inspiration.

Core ideology provides the bonding glue that holds an organization together as it grows, decentralizes, diversifies, expands globally, and attains diversity within.

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CHAPTER 5 : Successful Habits Of Visionary Companies

FIRST WHO…THEN WHAT

The first step in taking a company towards greatness isn’t to seta new direction, vision and strategy for the company and then to get people committed and aligned behind that new direction. The first step is to get the right people on the bus (and the wrong people off the bus) and then figure out where to drive. The companies on the path to greatness understood these 3 simple truths. If they began with ‘who’ rather than ‘what’ adaptation tothe changing world was easier as if the direction of the company’s struggles changed the people who joined because of the initial direction would leave. If people joined because of who else was on the bus, changing directions wouldn’t matter. Secondly, having the right people means that the problem of motivation and managing people largely goes away. Thirdly, havingwrong people means that even if the company discovers the right direction, it still won’t be great because great vision without great people is irrelevant. Dick Cooley of Wells Fargo, with chairman Ernie Arbuckle, instead of mapping out a strategy to cater to the expected but unknown deep shifts in the banking industry focused on injecting an endless stream of talent directly into the veins of the company, without any specific job in mind in the early 1970s. Their approach was simple. They got the best people, built them into the best managers in the industry and accepted the fact that some of them will be recruited to become CEOs of other companies. Similarly David Maxwell of Fannie Mae came aboard during its darkest days (the company was losing $1million every single business day). Despite the immense pressure to act, to do something dramatic, to seize the wheel and start driving, Maxwell focused first on getting theright people on Fannie Mae management team. One executive at the

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company put it this way “You can’t fake it at Fannie Mae. Either you knew your stuff or you didn’t, and if you didn’t, you’d just blow out of here”.

These companies look like tough places to work for, and they are but they’re not ruthless cultures, they’re rigorous cultures. This means they consistently apply exacting standards at all times and at all levels, especially in upper management. The good-to-great companies rarely use head-count lopping as a tacticand almost never used it as a primary strategy. In contrast, Collins found layoffs being used five times more in comparison companies than in the good to great companies. There are three practical disciplines for being rigorous rather than ruthless. Namely,

1. When in doubt, don’t hire – keep looking: Circuit-city, another good to great company had a banner at Christmas “Always looking for great people” instead of the more routine best prices and deals ads on other stores. Alan Wurtzel of Circuit-city spent the bulk of his time in the early years focused on getting the right people on the bus,whereas Sidney Cooper of Silo spent 80 percent of his time focusing on the right stores to buy. Five years into Wurtzel’s tenure, both the companies had essentially the same business strategy yet Circuit-City took off like a rocket, beating the general stock market 18.5 to 1 in the 15 years after its transition from good to great, while Silo struggled along until finally acquired by a foreign company. Same strategy, different people, different results.

2. When you know you need to make a people change, act: When Colman Mockler became CEO of Gillette, he spent 55% of his time during his first two years in office changing or

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moving his management team commenting “Every minute devotedto putting the proper person in the proper slot is worth weeks of time later.” Two questions can help in knowing the‘when you know’ part. First, if it were a hiring decision (rather than the firing one) would the company hire the person again? Second, if the person came to tell the company that he or she is leaving to pursue an exciting newopportunity, would the company management feel terribly disappointed or secretly relieved?

3. Put your best people on your biggest opportunities, not your biggest problems: In early 1960s Phillip Morris and R.J. Reynolds were deriving their major revenue from domesticmarkets (99 percent for Phillips Morris to be exact). However Joe Cullman at Philips Morris identified international markets as the single best opportunity for long-term growth. Cullman placed his number one executive from the primary domestic market, George Weissman, inchargeof international. Even George was doubtful “I didn’t know whether I was being thrown sideways, downstairs or out of the window”. Yet 20 years later, Weissman built international into the largest and fastest growing part of the company, Marlboro became the best selling cigarette in the world three years before it became number one in US. Managing the company’s problems can only make it good, building its opportunities, however, is the only way to become great. But, when a company decides to sell off its problems, it is necessary not to sell off its best people.

CLOCK BUILDER NOT A TIME TELLER:

Now another important aspect that has been dealt is that it is taught in the courses of strategic management and entrepreneurship business schools that among the first and

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foremost things the well developed product market strategy is important and then the company should think about the window of opportunity. But people who begin VC do not think in this way. They first seek for the opportunity and for them the above mentioned important things are secondary. Thus we even need to reject the ideas of a brilliant strategy explanation of corporatesuccess. It should be incinerated into our minds that “luck favors the persistent.” It is obvious when one begins the business against the conventions certain disastrous results are to be faced yet with the will of never giving up on any failure finally destines to success. Time telling means that the watch has been the aim right since the beginning. However, VCs never think of the fabulous watch. They think of the hand behind the building of that watch. The institution i.e. an organization is the only focus of VCs. They always aim to be a clock builder rather than time teller.

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 is April 23rd, 1401, 2:36 am, and 12 seconds.” This person would be an amazing time teller, and we would probably revere that person for the ability to tell time. But would not 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?” Having a great idea or being a charismatic visionary leader is ‘time telling’ while building agreat company that can prosper far beyond the presence of any single leader and through multiple life cycles is ‘clock building’. Builders of visionary companies concentrate primarily on building an organization – building a ticking clock – rather than hitting a market just right with a visionary product idea and riding the growth curve of an attractive product life cycle.

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It suggests the shift to seeing the company itself as the ultimate creation. If you are involved in building and managing acompany, this shift has significant implications for how you spend your time. It means that spending less of your time thinking about specific product lines and market strategies, and spending more of your time thinking about organization design. Collins should not be misunderstood by the idea that the VCs never had superb products or good ideas. They certainly did. The difference is that VCs don’t exist just “to be a company”; they exist to do something useful. Keep in mind that all great ideas, products and services eventually become obsolete. But the VCs themselves never become obsolete.

For instance, bill Hewlett and Dave Packard decided first to start a company and then figure out what they would make. Texas Instuments started with a great idea, HP did not. Similarly Sam Walton of WalMart commented in an NY Times interview “I had no vision of the scope of what I would start, but I always had confidence that as long as we did our work well and were good to customers, there would be no limit to us”.

EMBRACE THE “ GENIUS OF THE AND’’

This is the rational view that cannot easily accept paradox that cannot live with two seemingly contradictory forces or ideas at the same time. The “Tyranny of the OR” pushes people to believe that things must be either A OR B, but not both. It makes such proclamations.

You can have change OR stability.

You can be conservative OR bold.

You can have low cost OR high quality.

You can have creative autonomy OR consistency and control.

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You can invest for the future OR do well in the short-term.

You can make progress by methodical planning OR by opportunistic groping.

You can create wealth for your shareholders OR do good for the world.

You can be idealistic (value-driven) OR pragmatic (profit-driven)

On the contrary of the above statements VCs reject the tyranny ofOR, and accept the “Genius of the AND”-the ability to embrace both extremes of a number of dimensions at the same time. Insteadof choosing between A OR B, they figure out a way to have both A and B.

It makes such proclamations.

You can have purpose beyond profit AND pragmatic pursuit of profit.

You can have a relatively fixed core ideology AND vigorous changeand movements.

You can have conservatism around the core AND have bold, committing, risky moves.

You can have a clear vision and sense of direction AND can have opportunistic groping and experimentation

You can have investment for the long term AND demands for short term performance.

In addition to this it should also be taken into consideration that we are not talking about mere balance here. “BALANCE” implies going to the midpoint, fifty-fifty, half and half. VCs donot simply balance between idealism and profitability; it seeks to be highly idealistic and highly profitable. As according to F.

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Scott Fitzgerald, “The test of the first rate-intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”This is exactly what the VCs are able to do.

PRESERVE THE CORE/ STIMULATE THE PROGRESS

As we have discussed earlier core ideology as an essential component of a visionary company.

But core ideology alone cannot make a visionary company. If an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except its basic beliefs as it moves through corporate life. The only sacredcow in an organization should be its basic philosophy of doing business.

For instance,

HP’s “Respect and concern for the individual employees” is permanent, unchanging part of its core ideology; serving fruit and doughnuts to all employees at 10 am each day is a noncore practice that can change.

Similarly 3M’s “respect for individual initiative” is a is permanent, unchanging part of its core ideology; the 15% rule (where technical employees can spend 15 percent of their time on projects of their choosing) is a noncore practice that can change.

Merck’s “We are in the business of preserving and improving human life” is permanent, unchanging part of its core ideology; its commitment to research targeted at specific diseases is part of a noncore strategy that can change.

Boeing’s “Being on the leading edge of aviation; being pioneers” is permanent, unchanging part of its core ideology; commitment to building jumbo jets is part of a noncore strategy that can change.

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Although, the core ideology and drive for progress usually trace their roots to specific individuals, a highly visionary company institutionalizes them – weaving them into the very fabric of theorganization. Walt Disney didn’t leave its core ideology up to chance; it created Disney University and required every single employee to attend “Disney Traditions” seminars. Hewlett-Packarddidn’t just talk about the HP Way; it instituted a religious promote-from-within policy and translated its philosophy into thecategories used for employee reviews and promotions, making it nearly impossible for anyone to become a senior executive withoutfitting tightly into the HP Way. Marriot didn’t just talk about its core values; it instituted rigorous employee screening mechanisms, indoctrination processes, and elaborate customer feedback loops.

Shan’s core ideology is to delight customers by producing top quality products by adopting Shariah Compliant management strategies. No stone is left unturned in making its customers feel superior because customers are the sole motive for its existence and motivation behind the continuous innovation happening at Shan. Be it the finest selection of premium quality ingredients, use of state of the art technology or the most modern packaging methods, Shan is a brand which encompasses all. Also it has never forgotten its policy of being Shariah Compliantin all its strategic and operational planning and SOPs. From honest and mutually beneficial employment contracts to Islamic advertising to fulfilling brand promises, Shan has preserved its core value of promoting an Islamic culture.

Organizations often have great intentions and inspiring visions for themselves, but they don’t take the crucial step of translating their intentions into concrete items. Even worse, they often tolerate organization characteristics, strategies, andtactics that are misaligned with their admirable intentions, which creates confusion and cynicism.

BHAGs

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BHAGs can be applied to stimulate progress at any level of an organization. Nordstorm successfully sets BHAGs all up and down the company – from regions, to stores, to departments, to individual salespeople.

A BHAG should be so clear and compelling that it requires little or no explanation. Remember, a BHAG is a goal – like climbing a mountain or going to moon – not a ‘statement’. If it doesn’t get people’s juices going, then it’s just not a BHAG. A BHAG should fall well outside the comfort zone. A BHAG should be so bold and exciting in its own right that it would continue to stimulate progress even if the organization’s leadership disappeared beforeit had been completed. A BHAG has an inherent danger that, once achieved, an organization can stall and drift in the ‘we’ve arrived’ syndrome, as happened at Ford in the 1920s. Finally, andmost important of all, a BHAG should be consistent with a company’s core ideology.

CULT-LIKE CULTURE

A small piece of interview has been shown below to make the abovepoint more vivid. (a job interview to hire an employee for Disneyland)

Trainer: What business are we in? Everybody knows McDonald’s makes hamburgers. What does Disney make?

New Hire: it makes people happy.

Trainer: Yes, exactly! It makes people happy. It doesn’t matter who they are, what language they speak, what they do, where they come from, what color they are, or anything else. We’re here to make them happy . . . . . Nobody has been hired for a job. Everybody has been cast for a role in our show.

All new hires at Disneyland experience a multiday training program where they quickly learn a new language.

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Employees are “cast members”

Customers are “guest”

A work shift is a “performance”

A job description is a “script”

A uniform is a “costume”

Being on duty is “onstage”

Being off duty is “backstage”

The point is to build an organization that persistently ferventlypreserves its core ideology, in specific, concrete days. The visionary companies translate their ideology into tangible mechanism aligned to send a consistent set of reinforcing signals. They indoctrinate people, impose tightness of fit, and create a sense of belonging to something special through such practical, concrete items as,

Orientation and ongoing training programs that have ideological as well as practical content, teaching such thing as values, norms, history, and tradititon

Internal ‘universities’ and training centers

On-the-job socialization by peers and immediate supervisors

Rigorous, up-through-the-ranks policies – hiring young promoting from within, and shaping the employee’s mind-set from a young age

Exposure to a pervasive mythology of ‘heroic deeds’ and corporate exemplars (for example, customer heroics letters, marble statues)

Unique language and terminology (such as Motorolans) that reinforce a frame of reference and the sense of belonging toa special, elite group

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Corporate songs, cheers, affirmations, or pledges that reinforce psychological commitment

Tight screening processes, either during hiring or within the first few years

Incentive and advancement criteria explicitly linked to fit with the corporate ideology

Awards, contests, and public recognition that reward those who display great effort consistent with the ideology. Tangible and visible penalties for those who break ideological boundaries

Tolerance for honest mistakes that do not breach the company’s ideology (non-sins); severe penalties or termination for breaching the ideology (sins)

Buy-in mechanisms (financial, time investments)

Celebrations that reinforce successes, belonging and specialness

Plant and office layout that reinforces norms and ideals

Constant verbal and written emphasis on corporate values, heritage and the sense of being part of something special

TRY A LOT OF STUFF AND KEEP THAT WORKS

“Failure is our most important product.” R.W. Johnson, Jr., Former CEO, Johnson & Johnson, (1954) .

3M’s McKnight had created an environment where ‘give it a try’ was an all-welcome idea. Working in this atmosphere, a young 3M employee named Dick Drew visited a customer site – an auto paint shop – and overheard a violent explosion of particularly vivid profanity. Two-tone auto paint jobs had become popular, but the improvised glues and adhesive tapes separating the two colors

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failed to mask properly, leaving behind ugly blotches and uneven lines.

“Can’t anyone give us something that will work?” yowled the paintman, storming across the paint shop.

“We can!” responded the 3M visitor. “I’ll bet we can adapt something at our lab to make foolproof masking tape.”

Drew discovered, however, that 3M had no such readily an adaptable product in the lab. So, like any true 3Mer, he inventedone: 3M masking tape. In response to opportunity disguised as a problem – a process to be repeated thousands of times – 3M had finally made its first incremental shift away from sandpaper. Five years later, in response to companies that had contacted 3M looking for a waterproof packaging tape, Drew built on the masking tape technology and invented a product destined to becomea household item worldwide: Scotch cellophane tape.

Scotch tape wasn’t planned. No one at 3M had any idea in 1920 that 3M would enter the tape business, and certainly no one expected that it would become the most important product line inthe company by the mid-1930s. Scotch was a natural outgrowth of the organizational climate McKnight created, not the result of a brilliant strategic plan.

Even more important than the Scotch tape itself, however, was thefact that 3M institutionalized the evolutionary process that led to Scotch tape. Richard P. Carlton, director of research and later president of 3M, codified the strategy of ‘variation and selection’ in 3M’s technical guidance manual as early as 1925.

3M did not select innovations based strictly on market size. Withmottoes like “Make a little, sell a little”, and “Take small steps”, 3M understood that big things often evolve from little things; but since you cant tell ahead of time which little thingswill turn into big things, you have to try lots of little things,keep the ones that work and discard the ones that don’t.

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Using 3M as an example, here are 5 lessons for stimulating evolutionary progress in visionary companies:

1) Give it a try-and be quick2) Accept that mistakes will be made

3) Take small steps

4) Give people the room they need

5) Mechanisms – build that ticking clock!

What not to do:

Let’s begin with an example. Chase Manhattan, ruled by an obsessively controlling David Rockefeller during the 1960s and 1970s, Chase Manhattan (known as “David Bank”) became a fear-filled environment where managers spent most of their time in meetings-not on making decisions and taking action. Chase managers lived with the mentally “Whew! One more day gone and we are not in trouble.” Even in the late 1980s, many senior managers at the bank would not try new ideas because “David might not like it.”

Thus what not to do is not to stick to the knitting but to the core!

In the book In Search of Excellence, Peters and Waterman counseled “Stick to the Knitting,” meaning, in their words, “the odds for excellent performance seem strongly to favor those companies thatstay reasonably close to the business they know.” Indeed, if 3M had defined its knitting as mining or sandpaper, then 3M would not be what it is today- nor would we have those fabulous Post-ittape flags that have helped us keep organized. From our standpoint, thank goodness 3M did not stick to its knotting! Furthermore, Norton stuck much closer to its knitting than 3M- and just look at the results. Zenith, too, stuck mush closer to its knitting (television and radio) than Motorola- right into decline. J & J had no consumer goods experience when it began selling baby powder. Marriot had no background in hotels when it branched into that business. HP had no expertise in the computer

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business in the 1960s when it launched its first computer product. Disney had no knowledge of the theme park business when it created Disneyland. IBM had no background in electronics when it moved into computers. Boeing had virtually no experience in the commercial aircraft business when it did the 707. Had American Express stuck to its knitting (freight express), it probably would not exist today.

We are not saying that the evolutionary progress equals wanton diversification, or even that a focused business strategy is necessarily bad. Wal-Mart, for example, has thus far remained resolutely focused on one industry-discount retailing-while simultaneously stimulating evolution within that narrow focus. Nor are we saying that the concept of “Stick to the Knitting” makes no sense. The real question is: What is the “knitting” in avisionary company? The answer: Its core ideology.

And to the five lessons this sixth one therefore needs to be added: Never forget to preserve the core while stimulating evolutionary progress. Keep in mind that evolution involves both variation and selection. Core ideology serves as a bonding glue and guiding force that holds a visionary company together while it mutates and evolves.

HOME GROWN MANAGEMENT

Jack Welch (CEO of GE) stated in 1991, “From now on, [choosing mysuccessor] is the most important decision I’ll make. It occupies considerable amount of thought almost every day”. This was nine full years before his retirement.

Throughout the workshop, we’ve downplayed the role of leadership in a visionary company. Yet it would be outright wrong to state that top management doesn’t matter at all. It would be naïve to suggest that any random person could become the CEO of the visionary company, and it would still be able to tick along in top form. Top management will have an impact on an organization –in most cases, a significant impact. The question is, will it have the right kind of impact? Will management preserve the core

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while making its impact? Over the period 1806 to 1992 only two visionary companies ever hired a chief executive directly from outside the company, compared to thirteen of comparison companies(Collins & Porras : 2002). In another study conducted in 2013, the researchers found out that out of 3,143 CEOs, 74% were insiders. Overall, insiders did better than outsiders; the insider’s average rank was 154 places higher than the outsiders. [Source: “The Best Performing CEOs in the World, HBR, Jan-Feb 2013]

Your company should have management development processes and long-range succession planning in place to ensure a smooth transition from one generation to next. Do not fall into the trapof thinking that the only way to bring about change and progress at the top is to bring in outsiders, who might dilute or destroy the core.

GOOD ENOUGH NEVER IS

“Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself.” William Faulkner.

The critical question asked by a visionary company is not “How well are we doing?” or “How can we do well?” or “How well do we have to perform in order to meet the competition?” For these companies, the critical question is “How can we do better

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Poor Management Developmen

t

Inadequate Succession Planning

Dearth of Strong

Internal Candidates

Leadership Gap

Corporate Stall

Search for a “Savior”


tomorrow than we did today?” They institutionalize the question as a way of life – a habit of mind and action.

J. Williard Marriot, Sr.., summed up while reflecting on the essence of success:

Discipline is the greatest thing in the world. Where there is no discipline, there is no character. And without character, there is no progress… Adversity gives us opportunities to grow. And we usually get what we work for. If we have problems and overcome them, we grow tall in character, and the qualities that bring success.

If necessity is the mother of invention, then discontent is the father of progress.

The visionary companies also invested much more aggressively in human capital via extensive recruiting, employee training and professional development programs. Merck, 3M, P&G, Motorola, GE, Disney, Marriot, and IBM all made significant investments in their ‘universities’ and ‘education centers’ for intensive training and development programs. Motorola, for example, targetsforty hours per week of training per employee per year and requires that every division spend 1.5 percent of payroll on training.

Shan Foods keeps focusing on improving the overall quality of itsproduct line by competing with itself. Winning countless local and international recognition such as the ITQI Award (three consecutive years), Consumer Choice Award (three consecutive years), and Export Performance Award (10 consecutive years) for taste, quality and customer confidence Shan is one brand which the customers have learned to trust with conviction and confidence across the globe. From Quality control since 1981 to Quality assurance system since 2000 to Food safety management system since of 2007 to Total quality management target of 2010 to Third party lab certification target of 2012 to finally ISO 22000 the ISO version of HACCP (Hazard Analysis and Critical

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Control Point) the company believes in continuous improvement andcompetition with self.

CORE IDEALOGY DETERMINATION EXERCISEThis exercise is to capture the authentic core values and core purpose of an imaginary organization. You can replicate this exercise at your organization. Your facilitator will now divide you into 3 groups. We shall not create pretty statements. Some words may be more inspiring and prettier than others, however thepurpose is to discover the core values that you shall be truly committed to in your imaginary organization.

Instructions for Determining Core Values:

1. Write down 3-5 core values for your imaginary organization in the space provided below. You have 10 - 15 minutes for this task.

______________________________

______________________________

______________________________

______________________________

______________________________

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2. Read this list to your group members. Now identify the 3 most common core values as determined by your group. Now write them down in the space given below.

______________________________

______________________________

______________________________

3. Test each of these 3 core values against the following test questions. You have 10 – 15 minutes for this task.

Core Value Candidate (1) : ______________________________

YES NO If you were to start a new organization, would youbuild it around this core value regardless of the industry?

YES NO Would you want your organization to continue to stand for this core value 100 years into the future, no matter what changes occur in the outside world?

YES NO Would you want your organization to continue this core value, even if at some point of time it seemed disadvantageous?

YES NO Would you continue holding this core value, even if the environment you are working in stood against this core value?

YES NO Would you let go those members of your organization who are reluctant to continue with this core value regardless of their experience andmastery in the field?

YES NO Would you personally continue to hold this core

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value even if you were not rewarded for holding it?

YES NO If you awoke tomorrow with more than enough money to retire comfortably for the rest of your life, would you continue to apply this core value to your productive activities?


YES NO If you were to start a new organization, would youbuild it around this core value regardless of the industry?


YES NO Would you want your organization to continue this core value, even if at some point of time it seemed disadvantageous?


YES NO Would you let go those members of your organization who are reluctant to continue with this core value regardless of their experience andmastery in the field?

YES NO Would you personally continue to hold this core value even if you were not rewarded for holding it?

YES NO If you awoke tomorrow with more than enough money

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to retire comfortably for the rest of your life, would you continue to apply this core value to your productive activities?


YES NO If you were to start a new organization, would you build it around this core value regardless ofthe industry?


YES NO Would you want your organization to continue thiscore value, even if at some point of time it seemed disadvantageous?


YES NO Would you let go those members of your organization who are reluctant to continue with this core value regardless of their experience and mastery in the field?

YES NO Would you personally continue to hold this core value even if you were not rewarded for holding it?

YES NO If you awoke tomorrow with more than enough moneyto retire comfortably for the rest of your life, would you continue to apply this core value to your productive activities?

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4. Now list for the group the core values to which you answeredYES to all of the test questions for that core value.

_____________________________

_____________________________

_____________________________

5. Now share this list with your group members and select the core values that for which nearly two-thirds of your group has answered as YES against all the test questions for that core value. Your group can take 15 – 20 minutes for this task.

6. Share these Core Values with your facilitator.

Instructions for determining Core Purpose.

1. At first take a look at the core purposes of some great companies.

Company Core Purpose

3M To solve unsolved problems innovatively

Merck To preserve and improve human life

Nike To experience the emotion of competition, winning and crushing competitors

Walt Disney

To make people happy

Fannie Mae

To strengthen the social fabric by democratizing home ownership

McKinsey To help corporations and governments be more 67


successful

Sony To experience the sheer joy of advancing and applying technology for the benefit of the public

2. Now write down a Core Purpose for your imaginary organization. You have 10 minutes for this task.

________________________________________________________________________

________________________________________________________________________

3. Read to your group, your proposed core purpose statement andtell them why you find it inspirational.

4. Listen to and write down the core purposes of the other group members. Test each core purpose against the criteria given in the text boxes. DO NOT TEST your own Core Purpose Statement against this criteria,

1. _____________________________________________________________________

_____________________________________________________________________

YES NO Do you believe that your purpose should inspire the other people as well who are working in yourorganization or your purpose does not need to inspire others as long as it satisfies you?

YES NO Can you envision this purpose being as valid 100years from now as it is today?

YES NO Do you believe that your purpose should be 68


fabricated on materialistic perspective or it should add into the welfare of humanity too?

YES NO Do you find your purpose assisting you in takingdecisions based on morality for your organization and its people?

YES NO Is this purpose authentic—something true to whatthe organization is all about—not merely words on paper that “sound nice”?

YES NO Do you think that people may turn cynical about your purpose or they would acknowledge it wholeheartedly?

YES NO When telling your children and/or other loved ones what you do for a living, would you feel proud in describing your work in terms of this purpose?

YES NO Do you believe that your purpose has been designed around reality or it is just a mere fantasy?

2. _____________________________________________________________________

_____________________________________________________________________


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YES NO Do you believe that your purpose is strong enough to help you developing your organization especially in terms of its products till the distant future?

YES NO Do you believe that your purpose should be fabricated on materialistic perspective or it should add into the welfare of humanity too?






3. _____________________________________________________________________

_____________________________________________________________________

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4. _____________________________________________________________________

_____________________________________________________________________








YES NO When telling your children and/or other loved ones what you do for a living, would you feel proud in describing your work in terms of this

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purpose?


5. Individually, select the purpose that best meets the given criteria and write it down in the space provided below.

_____________________________________________________________________

_____________________________________________________________________

6. Now as a group, select the purpose that best meets the given criteria and write it down in the space provided below. You have 10 minutes for this task.

_____________________________________________________________________

_____________________________________________________________________

7. Check this purpose again with the given criteria. You have 5 minutes for this task.



YES NO Do you believe that your purpose is strong

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enough to help you developing your organization especially in terms of its products till the distant future?







8. If most of you have answered YES for all of the given questions, then you have succeeded in developing a good core purpose for your imaginary organization. If that is not the case your facilitator will help you in repeating the process unless you have found your imaginary companies core purpose.

9. Now write down your final core purpose here.

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_____________________________________________________________________

_____________________________________________________________________

“We shall not cease from exploration

And the end of all our exploring

Will be to arrive where we started

And know the place for the first time.”

T.S. Eliot, Four Quarters

Bottom line:

You have plans. You have goals. You have ideas. Who cares? You have nothing until youactually do something.

Bibliography1. Jim Collins & Jerry I. Porras, Built to Last (HarperBusiness, an

imprint of HarperCollins Publishers, 1994)

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2. Malcolm Gladwell, The Tipping Point (Little, Brown and Company, March 2000)

3. Paulo Coelho, The Alchemist (HarperCollin Publishers India, 2006)

4. Stephen R. Covey, The 7 Habits of Highly Effective People (Simon & Schuster UK Ltd, 1989)

5. Dr. Spencer Johnson, Who Moved my Cheese (Vermilion)

6. Jim Collins, Good to Great (HarperBusiness, an imprint of HarperCollins Publishers Inc., 2001)

7. Suleman Ahmer, Strategic Visions (Workshop, 2014)

8. Peter M. Senge, The Fifth Discipline (Currency, 1990)

9. Morten T. Hansen, Herminia Ibarra, Urs Peyer, The Best-Performing CEOs in the World (Harvard Business Review Magazine, Jan-Feb 2013 issue)

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Building Great Companies

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Transcript of Building Great Companies