The Start of Suc­cess­ful Com­pa­nies

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If you want to start a busi­ness, it seems you should at least know what type of busi­ness it’s go­ing to be.

Not so, say James C. Collins and Jerry I. Por­ras. In their new book, Built to Last: Suc­cess­ful Habits of Vi­sion­ary Com­pa­nies, the two Stan­ford Univer­sity Grad­u­ate School of Busi­ness pro­fes­sors de­bunk some tra­di­tional busi­ness school ideas.

“I feel like I should call back all my old stu­dents and say, “Sorry, I was wrong, this is how it re­ally goes, Collins said in an in­ter­view. They se­lected “vi­sion­ary” com­pa­nies, those that have been suc­cess­ful for more than a half cen­tury, and com­pared them with less suc­cess­ful com­pa­nies in the same fields.

They spoke with the ex­ec­u­tives of 18 vi­sion­ary com­pa­nies like Amer­i­can Ex­press, Citi­corp, Merck and Dis­ney. Vi­sion­ary com­pa­nies are more likely to have strong cor­po­rate in­fra­struc­ture, rather than strong ideas.

And they are more likely to take risks.

“When peo­ple say, “I’d love to start a com­pany, but I don’t have a great idea,’ I say,

“Nei­ther did Sony,

Hewlett-Packard,

Mar­riott, Mo­torola or Wal-Mart.

“They built com­pa­nies.

“They didn’t wait for lightning-bolt ideas,”

Mr Collins said.

Take Masaru

Ibuka.

Start­ing his com­pany

He started his com­pany in a rented room in a bombed­out de­part­ment store in Tokyo with seven em­ploy­ees, US$1,600 (FJ$3,567) of sav­ings and no idea of what to sell. His first prod­uct was a rice cooker.

It didn’t work.

Then he tried a tape recorder, but that failed, too.

He kept his floun­der­ing busi­ness alive by sell­ing heat­ing pads.

But to­day, his busi­ness, Sony, is one of the most suc­cess­ful in the world.

It be­came suc­cess­ful by what Collins and Por­ras call “clock build­ing” _ build­ing a cor­po­rate struc­ture that breeds more ideas.

And some of those ideas may not be sim­ple.

They may be Big Hairy Au­da­cious Goals or BHAGs (pro­nounced bee-hags).

That is the term the au­thors coined for go­ing for the im­pos­si­ble dream.

Wal-Mart is an ex­am­ple of a com­pany that built its name on a se­ries of BHAGs.

First, in 1945, Sam Wal­ton sim­ply sought to have the best va­ri­ety store in Arkansas within five years.

To do this, it needed to triple its sales vol­ume from US$72,000 (FJ$160,530.25) per year to US$250,000 (FJ$ 557,396.71) per year in 1945.

The store did that, mak­ing it the most prof­itable store in Arkansas and in the sur­round­ing five states.

Wal­ton set am­bi­tious goals in fol­low­ing years

In 1977, Wal-Mart set a goal of be­com­ing a US$1-bil­lion (FJ$2 b) com­pany in four years.

It did, more than dou­bling its size.

Now, Wal-Mart’s goal is to dou­ble the num­ber of its stores and in­crease its sales vol­ume per square foot by 60 per cent by the year 2000, ac­cord­ing to the au­thors.

“The point is, they have out­ra­geous goals with rea­son­able time frames,” Mr Collins said.

“They have some­thing to strive for.”

Mr Collins said the most sur­pris­ing dis­cov­ery he found in the six years he spent work­ing on the book was that the ex­ec­u­tives of th­ese highly suc­cess­ful com­pa­nies were just nor­mal peo­ple.

“Th­ese cor­po­ra­tions could have . . .” he paused, chuck­led, then said, “could have been started by you.”

Steps to suc­cess

In their book Built to Last, Stan­ford pro­fes­sors James

Collins and Jerry I. Por­ras de­bunk some long-stand­ing myths about suc­cess­ful com­pa­nies.

Con­ser­va­tive ap­proach

Vi­sion­ary com­pa­nies rely more on what the au­thors call, “Big Hairy Au­da­cious Goals” than on con­ser­va­tive prac­tices.

Fo­cus on prof­its

Vi­sion­ary com­pa­nies do not ex­ist pri­mar­ily to maximize prof­its or share­holder wealth _ they’re guided by a sense of pur­pose be­yond just mak­ing money.

Univer­sal val­ues

Vi­sion­ary com­pa­nies de­velop strong val­ues, but they are not nec­es­sar­ily the same from com­pany to com­pany.

Hav­ing a strong value sys­tem is more im­por­tant than what the value sys­tem is.

Hav­ing a “Great Idea”

You don’t have to have a “great idea” to start a suc­cess­ful com­pany.

Few vi­sion­ary com­pa­nies start with a great idea; some even be­gin with out­right fail­ures.

Masaru Ibuka, from early strug­gles and fail­ures to one of the most suc­cess­ful com­pa­nies in the world, Sony.

Built to Last: Suc­cess­ful Habits of Vi­sion­ary Com­pa­nies.

Front cover of James Collins and Jerry I. Por­ras’s book,

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