I've recently been reading a book called Built to Last about the properties and behavior of successful companies. The basic premise of the book rests on a research project performed by a couple of Stanford business school profs in the early 90s in which they identified a series of "visionary" companies (including HP, Sony, Merck, Disney, Walmart, and a range of others) and head-to-head comparison companies (Texas Instruments, Zenith, Pfizer, etc). With these lists in hand, the authors identify common threads present in the "visionary" companies and absent from the comparison group. This methodology is far from scientific (and can be a bit distracting, to be honest), but the book does identify some interesting features of these companies.
One of the main features, highlighted in the third chapter of the book, is the presence of a core ideology within the "visionary" companies that was given equal, or often stronger footing than increasing profitability or company value. The exact specifics of the core ideology varied widely between the companies (many focused on the experience for the customer, while others focused on creativity and innovation, and still others focused on the environment for employees), but the authors argue that the presence and adherence to an ideology was more important than the ideology itself. This result is a bit strange on the surface, but I think there might be a few reasons it could be true, and given that the book is primarily focused on companies that have much larger ambitions than most small businesses, I also wanted to think about how much of the logic is relevant to companies that aren't necessarily planning to one day dominate their market.
One of the key pragmatic benefits to a core ideology can be a way to differentiate your company from your competitors. Everyone is presumably trying to make money and grow their company, so core principles provide an additional marker of what makes you unique. It can furthermore help to carve out a niche without even intending to, as a fair number of consumers may share your values and thus be more interested in your product (either out of idealism, or because a common vision leads to a better fit of a product).
Growth and scaling
From the perspective of larger companies (or small companies that one day hope to be larger companies), a core set of values can serve as a way to maintain a consistent identity across a large number of employees and managers. I think this is probably one of the main benefits of a generic adherence to an ideology (absent any ideologic specifics) for large companies, such as the "visionary" ones from the study. For small businesses, I think this aspect probably doesn't contribute a huge amount, but having it in place prior to growth seems like it could be rather useful.
Planning and optimization
The final point (and one that is even more speculative than the previous two) I want to consider is that the presence of a core ideology provides an alternative path to growing and improving your company. While it may seem counter-intuitive (and possibly incorrect), I think core values are often easier to plot a course towards than things like long term growth in company valuation or profitability. We've talked a number of times before about how challenging it can be to forecast business decisions with any reasonable accuracy, but focusing strictly on profits requires a company to do exactly that. In theory, if a set of core principles is likely to lead to profitability, they may easier to plan for and adhere to.
Anyway, as I said up front, it's hard to know exactly how to interpret the results from Built to Last, but it's at least worth considering what types of core ideals your company does or should reflect. Tyler and I kind of stumbled across ours inadvertently when starting Less Annoying Software (and decided to put it right in our company name). That said, our focus on keeping our software as un-annoying as possible and keying on user experience really has been a benefit in helping to guide many of our decisions. As for Built to Last on the whole, I haven't made it the whole way through yet, but I may post a couple more thoughts along the way. So far it's interesting if nothing else to see what has worked for some wildly successful companies in the past, even if it's hard to say whether those practices were crucial, causal, or repeatable.
Sign up to receive updates in your inbox