Source: The Economist: Schumpeter
Jim Collins has stayed at the top by practising what he preaches
WHY do some companies flourish for decades while others wither and die? Jim Collins got his start as a management guru puzzling about corporate longevity. Given that Mr Collins has remained at the top of his profession for almost two decades, it is worth applying the same question to him.
How has he produced one bestseller after another? His latest book, “Great by Choice”, is piled high in every bookstore. A previous one, “Good to Great”, sold more than 4m copies. And how has he achieved such oracular influence over bosses? In 2009, for example, Akio Toyoda, the president of Toyota, stunned the car industry by announcing that he had been reading Mr Collins’s “How the Mighty Fall” and had concluded that his company was in the fourth of Mr Collins’s five stages of decline.
Part of the answer lies in timing. “Built to Last” (1994) was a counterblast to the craze for ripping firms apart and “re-engineering” them. “Good to Great” (2001) was an antidote to the despair that gripped America in the wake of September 11th 2001 and the dotcom bust. “How the Mighty Fall” (2009) appeared as Lehman Brothers disintegrated and General Motors faced bankruptcy.
Another part of the answer lies in Mr Collins’s mastery of the dark arts of the management guru. He bases his arguments on mountains of data. His recent books come with several appendices in which he discusses his methodology and challenges possible objections. But he also produces an entire lexicon of—often cringe-making—buzzwords. Mr Collins’s favourites include “big hairy audacious goals”, “the hedgehog concept”, “the flywheel effect” and “level-five leaders”. (Don’t ask.)
His central message, which has remained the same through global booms and recessions, is admirably humdrum. He seeks to describe, in detail, how great bosses run their companies. After decades of minute observation, he concludes that hard work and perseverance matter more than genius. His heroes are self-effacing company men who spend years patiently building their organisations, rather than self-promoting egomaniacs who leap from fad to fad and firm to firm. In essence, Mr Collins is repackaging the universal message of self-help literature. Everybody can be successful, he argues, so long as they stick to a set of demanding but not impossible rules. For most company men and women, few of whom are geniuses, this is heartening news.
Mr Collins practises what he preaches. He rejected careers in both academia and consulting in order to focus exclusively on the question of what makes great companies tick. He moved back to his home town of Boulder, Colorado, collected a group of helpers who shared his fascination and set about producing a new book every four or five years. On a spreadsheet Mr Collins religiously logs how much time he spends on creative work, and how much on mundane tasks. He applies the same relentless determination to his hobby, mountain climbing, as he does to writing. He once climbed El Capitan, in Yosemite, in 24 hours—a feat that takes most experienced climbers three days.
His most recent book, “Great by Choice”, co-written with Morten Hansen, looks at how America’s most successful companies (ie, companies that have outperformed the stockmarket average for their industry by a factor of ten) have dealt with turbulence and chaos. Mr Collins studies an era, 1972-2002, that might seem calm compared with today (he likes to study decades’ worth of solid data). But he has chosen his companies from businesses such as information technology, drugs and airlines, which all suffered from extreme disruption.
Mr Collins challenges some common beliefs. Do turbulent times call for bold and risk-loving leaders, as so many people think? Probably not. Most of Mr Collins’s leaders are risk-averse to the point of paranoia. Bill Gates hung a picture of Henry Ford in his office to remind people that even geniuses can mess up, as Ford did in later life. Andy Grove, a co-founder of Intel, was constantly looking for “the black cloud in the silver lining”.
A second myth that Mr Collins punctures is that innovation is the only virtue that counts. Mr Collins’s companies were usually “one fad behind” the market. Southwest Airlines was almost a carbon copy of a pioneer that later stumbled, Pacific Southwest Airlines. Intel dominates the chip market because it delivers products efficiently, not because it generates original ideas. (Mr Grove kept a McDonald’s hamburger box on his desk, with the logo McIntel, to remind himself of this.)
Good to great to…Fannie Mae?
Mr Collins’s love of vanilla virtues is as refreshing as a bowl of ice cream. Other gurus who encourage companies to tear themselves apart in the name of “transformation” have caused terrible harm. Few companies have suffered much from trying to be more methodical. Yet it is hard to read Mr Collins’s latest work without feeling doubts. Are his conclusions as reliable as he implies? Some of the companies that he has celebrated over the years—Hewlett Packard and Motorola in “Built to Last” and Circuit City and Fannie Mae in “Good to Great”—have fallen from grace. Circuit City, an electronics retailer, went bust. Fannie Mae, a mortgage giant backed by the American government, is worse than bust, having burned up tens of billions of dollars of taxpayers’ cash. Mr Collins is allergic to egomaniacs, but how else can you describe the late Steve Jobs, perhaps the most successful businessman of his era?
This is not to say that Mr Collins’s insights are worthless; merely that they are less robust than he suggests. Most business books would profit from a bit more rigour. Mr Collins’s might profit from a bit more willingness to admit that, like all management gurus, he is dealing in clever hunches rather than built-to-last scientific discoveries.