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.