Visionary Companies - Continued...Part 2

One of the argument presented in this book about distinguishing characteristic of a Visionary Company and a (I would say) not a Visionary Company is that; Visionary companies embrace the "Genius of the AND" rather than the "Tyranny of the OR".

One of the key aspect of highly visionary companies: They do not oppress themselves with what we call "Tyranny of the OR" – 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 proclamation as:

"You can have change OR stability"
"You can be conservative OR Bold"
"You can have low cost OR high Quality"
"You can create wealth for your shareholders OR you do good for your society"
"You can be idealistic (values – driven) or Pragmatic (profit – driven)"

Instead of being oppressed by the Tyranny of the OR", highly visionary companies liberate themselves with the "Genius of the AND" – the ability to embrace both extremes of a number of dimensions at the same time.

The authors are not merely talking about a balance here. "Balance" implies going to the midpoint, fifty-fifty, half-and-half. A visionary company doesn’t seek balance between short-term and long-term, for example. It seeks to do very well in the short-term and very well in the long-term too. A visionary company doesn’t merely balance between idealism and profitability; it seeks to be highly idealistic and highly profitable.

Does all these things sound Irrational? Perhaps. Rare? Yes. Difficult? Absolutely. The test of a first rate intelligence is the ability to hold two opposing ideas in mind at the same time, and still retain the ability to function – F. Scott Fitzgerald. This is exactly what the visionary companies are able to do.

Let’s have a look at an example of one of the Visionary Company. Lets understand how it was able to embrace the "Genius of AND" and not the "Tyranny of the OR". The company featured here is Merck & Company.

When Merck & Company reached its hundredth birthday, it published a book entitled Values and Visions: a Merck Century. Notice something? The titled doesn’t even mention what Merck does. Merck could have titled the book From Chemicals to Pharmaceuticals: A Merck Century or A Hundred Years of Financial Success at Merck. But it didn’t. It chose instead to emphasize that it has been throughout its history a company guided and inspired by a set of ideals. In 1935 (decades before "values statements" became popular), George Merck II articulated those ideals when he said, "[We] are workers in industry who are genuinely inspired by the ideals of advancement of medical science, and of service to humanity." IN 1991 – fifty-six years and three full generations of leadership later – Merck’s chief executive P.Roy Vagelos sang the same idealistic tune: "Above all, let’s remember that our business success means victory against disease and help to humankind."

With these ideals as a backdrop, dont be surprised that Merck elected to develop and give away “Mecitizan“, a drug to cure "river blindness," a disease that infected over a million people in the Third World with parasitic worms that swarmed through body tissue and eventually into the eyes, causing painful blindness. A million customers is a good-sized market, except that these were customers who could not afford the product. Knowing that the project would not produce a large return on investment – if it produced on at all – the company nonetheless went forward with the hope that some government agencies or other third parties would purchase and distribute the product once available. No such luck, so Merck elected to give the drug away free to all who needed it. Merck also involved itself directly in distribution efforts – at its own expense – to ensure that the drug did indeed reach the millions of people at risk from the disease.

Asked why Merck made the Mectizan decision, Vagelos pointed out that failure to go forward with the product could have demoralized Merck scientists – scientists working for a company that explicitly viewed itself as "in the business of preserving and improving human life." He also commented:

When I first went to Japan fifteen years ago, I was told by Japanese business people that it was Merck that brought streptomycin to Japan after World War II, to eliminate tuberculosis which was eating up their society. We did that. We didn’t make any money. But it’s no accident that Merck is the largest American pharmaceutical company in Japan today. The long-term consequences of [such actions] are not always clear, but somehow I think they always pay off.

Pragmatic Idealism (No "Tyranny of the OR")

Did Merck’s ideals – ideals that had consistently defined the company’s self-identity since the late 1920s – drive the Mectizan decision? Or did Merck make the decision for pragmatic reasons – good long-term business and good PR? The answer: Both. Merck’s ideals played a substantial role in the decision and the evidence suggests that Merck would have gone ahead with the project regardless of whether it created long-term business benefits for the company. But the evidence also suggests that Merck acted on the assumption that such acts of goodwill "somehow … always pay off." This is a classic example of the "Genius of the AND" prevailing over the "Tyranny of the OR." Merck has displayed throughout most of its history both high ideals and pragmatic self- interest. George Merck II explained this paradox in 1950:
I want to …. Express the principles which we in our company have endeavored to live up to…. Here is how it sums up: We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.

Merck, in fact, epitomizes the ideological nature – the pragmatic idealism – of highly visionary companies. The authour's research showed that a fundamental element in the "ticking clock" of a visionary company is a core ideology - core values and sense of purpose beyond just making money – that guides and inspired people throughout the organization and remains relatively fixed for long periods of time. The authors also emphasize the crucial element that exists paradoxically with the fact that visionary companies are also highly effective profit-making enterprises.

Now, the readers might be thinking: "Of course it’s easy for a company like Merck to proclaim and pursue inspirational ideals – Merck makes drugs that do in fact save lives, cure disease, and relieve suffering." The authors agree to this point. But in contrast to its comparison company, Pfizer – a company in the same industry, a company that also makes drugs that save lives, cure disease, and relive suffering – the authors found Merck to have been more ideologically driven.

Whereas Merck titled its history Values and Visions, Pfizer titled its history, Pfizer … An informal History. Whereas Merck has explicitly and prominently articulated a consistent set of high ideals for four generations, the authors found no evidence of similar discussions at Pfizer untill the late 1980s. Nor did they find at Pfizer any incident analogous to the Mectizan or streptomycin decisions at Merck.

Whereas George Merck II explicitly took a paradoxical view of profits ("medicine is for the patient …the profits follow"), John McKeen, president at Pfizer during the same era as George Merck II, displayed a somewhat more lopsided perspective: "so far as is humanly possible," he said, "we aim to get profit out of everything we do." According to an article in Forbes, McKeen believed that "idle money was a sinfully non-productive asset." While Merck hoarded cash for investment in new research and drug development efforts, McKeen launched a frenetic acquisition binge, purchasing fourteen companies in four years and diversifying into such areas as farm products, women’s toiletries, shaving products, and paint pigments. Why? To make more money, regardless of the line of business. "I would rather make 5% on $1 billion in sales than 10% on $300 million [in ethical drugs]," said McKeen. The authors dont mean to quibble over strategies here (diversification via acquisition versus focus and innovation via R&D); but the evidence suggests that Pfizer during this era displayed more of a purely pragmatic profit orientation than Merck.

Of course, a company like Merck could afford to have a high ideals. As of 1925, when George Merck II took over from his father, the company already had a track record of substantial business success and a sizable financial cushion. Might it be, therefore, that having high ideals is merely a luxury for companies such as Merck that are so successful that they can afford to proclaim an ideology? No. We found that high ideals – a core ideology – often existed in the visionary companies not just when they were successful, but also when they were struggling just to survive.

Visionary Companies - Part 1

Right through my B-School days, I have been very much fascinated by what we call "Visionary Companies" and "Visionary Leaders". I used to dream about these companies and imagine how would it be build a that sort of a Business Organization - "A Visionary Company". What it takes for anyone to build that kind of an Organization? What are the ingredients of such an institution? While thinking about all these, I came across a book titled "Built to Last" by James C Collins and Jerry I. Porras. This is not a business book but a book about building enduring, great human institutions of any type-volunteer, schools, churches and governments". This is not a book about visionary leaders. It is a book about 18 visionary companies—that are the crown jewels—in their industries:

• Premier institutions in its industry
• Widely admired by their peers
• 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
• Founded before 1950

The author's research findings has shattered twelve myths about Visionary Companies and Visionary Leaders:

Myth 1: It takes a great idea to start a great company.

Reality: Starting a company with a Great Idea might be a Bad Idea. Few of the visionary companies began life with a great idea. In fact, some began life without any specific idea, and a few even began with outright failures. Furthermore, regardless of the founding concept, the visionary companies were significantly less likely to have had early entrepreneurial success than the comparison companies in our study. Like the tortoise and the hare, visionary companies often get off to a slow start, but win the long race.

Myth 2: Visionary companies require great and charismatic visionary leaders.

Reality: A charismatic visionary leader is absolutely not required for a visionary company and, in fact, can be detrimental to a company's long-term prospects. Some of the most significant CEOs in the history of visionary companies did not fit the model of the high-profile, charismatic leader - indeed, some explicitly shied away from that model. Like the founders of the United States at the Constitutional Convention, they concentrated more on designing enduring institutions than on being great individual leaders.

Myth 3: The most successful companies exist first and foremost to maximize profits.

Reality: Maximizing shareholder wealth has not been the dominant driving force or primary objective through the history of the visionary companies. They have pursued a cluster of objectives, of which making money is only one - and not necessarily the primary one. Yes, they seek profits, but they're also guided by a core ideology: core values and a sense of purpose beyond just making money. Yet, paradoxically, we found that the visionary companies make more money than the more purely profit-driven comparison companies.

Myth 4: Visionary companies share a common subset of "correct" core values.

Reality: There is no right set of core values for a visionary company. Indeed, two companies can have radically different ideologies, yet both be visionary. Core values in a visionary company don't even have to be "enlightened" or humanistic (although they often are). The crucial variable is not the content of a company's ideology, but how deeply it believes in its ideology and how consistently it lives, breathes, and expresses it in all that it does. Visionary companies do not ask, "What should we value?" They ask, "What do we actually value deep down to our toes?"

Myth 5: The only constant is change.

Reality: A visionary company almost religiously preserves its core ideology, changing it seldom, if ever. Core values in a visionary company form a rock-solid foundation and do not drift with the trends and fashions of the day; in some cases, the core values have remained intact for well over one hundred years. And the basic purpose of a visionary company - its reason for being - can serve as a guiding beacon for centuries, like an enduring star on the horizon. Yet, while keeping their core ideologies tightly fixed, visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals.

Myth 6: Blue chip companies play it safe.

Reality: Visionary companies may appear straitlaced and conservative to outsiders, but they're not afraid to make bold commitments to Big Hairy Audacious Goals (BHAGs). Like climbing a big mountain or going to the moon, a BHAG may be daunting and perhaps risky, but the adventure, excitement, and challenge of it grabs people in the gut, gets their juices flowing, and creates immense forward momentum. Visionary companies have judiciously used BHAGs to stimulate progress and blast past the comparison companies at crucial points in history.

Myth 7: Visionary companies are great places to work, for everyone.

Reality: Only those who fit extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work. If you go to work at a visionary company, you will either fit and flourish or you will likely be expunged like an antibody. There's no middle ground. Visionary companies are so clear about what they stand for and what they're trying to achieve that they simply don't have room for those unwilling or unable to fit their exacting standards.

Myth 8: Highly successful companies make their best moves by brilliant and complex strategic planning.

Reality: Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and - quite literally - accident. What looks in retrospect like brilliant foresight and planning was often the result of "Let's just try a lot of stuff and keep what works." In this sense, visionary companies mimic the biological evolution of species. We found the concepts in Charles Darwin's Origin of Species to be more helpful for replicating the success of certain visionary companies than any textbook on corporate strategic planning.

Myth 9: Companies should hire outside CEOs to stimulate fundamental change.

Reality: In 1,700 years of combined lifespans across the visionary companies, we found only four individual incidents of going outside for a CEO - and those in only two companies. Homegrown management rules at the visionary companies to a far greater degree than at the comparison companies. Time and again, they have dashed to bits the conventional wisdom that significant change and fresh ideas cannot come from insiders.

Myth 10: The most successful companies focus primarily on beating the competition.

Reality: Visionary companies focus primarily on beating themselves. Beating competitors comes to the visionary companies not so much as the end goal, but as a residual result of relentlessly asking the question "How can we improve ourselves and do better tomorrow than we did today?" In some cases they have asked this question day in and day out for more than 150 years. No matter how much they achieve - no matter how far in front of their competitors they pull - good is not good enough.

Myth 11: You can't have your cake and eat it too.

Reality: Visionary companies do not brutalize themselves with the "tyranny of the or ": the purely rational view that says you can have either A or B, but not both. They reject having to choose stability or progress; cult-like cultures or individual autonomy; homegrown managers or fundamental change; conservative practices or Big Hairy Audacious Goals; making money or living with values and purpose; and so on. Instead, they embrace the genius of the and - the paradoxical view that allows them to pursue both A and B at the same time.

Myth 12: Companies become visionary primarily through vision statements.

Reality: The visionary companies attained their stature not so much because they made visionary pronouncements (although they often did make such pronouncements). Nor did they rise to greatness because they wrote one of the vision, values, purpose, mission, or aspiration statements that have become popular in management today (although they wrote such statements more frequently than the comparison companies and decades before it became fashionable). Creating a statement can be a helpful step in building a visionary company, but it is only one of thousands of steps in a never-ending process of expressing the fundamental characteristics we identified across the visionary companies.