2 pages Article Notes

SEPTEMBER-OCTOBER 1 9 9 6

MOI

by James C. Collins and Jerry I. Porras

We shall not cease from exploration And the end of all our exploring Will he to arrive where we started And know the place for the first time,

T.S. Eliot, Four Quartets

Companies that enjoy enduring success have core values and a core purpose that remain fixed while their business strategies and practices end- lessly adapt to a changing world. The dynamic of preserving the core while stimulating progress is the reason that companies such as Hewlett- Packard, 3M, Johnson & Johnson, Procter & Gam- ble, Merck, Sony, Motorola, and Nordstrom be- came elite institutions able to renew themselves and achieve superior long-term performance. Hewlett-Packard employees have long known that radical change in operating practices, cultural norms, and business strategies does not mean los- ing the spirit of the HP Way - the eoinpany's core principles. Johnson & Johnson continually ques-

tions its structure and revamps its processes while preserving the ideals embodied in its eredo. In 1996, 3M sold off several of its large mature businesses- a dramatic move that surprised the business press- to refocus on its enduring core purpose of solving unsolved problems innovatively. We studied com- panies such as these in our research for Built to Last: Successful Habits of Visionary Companies and found that they have outperformed the general stock market by a factor of 12 since 1925.

fames C. Collins is a management educator and writer based in Boulder, Colorado, where he operates a man- agement learnmg laboratory for conducting research and working with executives. He is also a visiting prof es- sor of business administration at the University of Vir- ginia in Charlottesville. Jerry I, Porras is the Lane Profes- sor of Organizational Behavior and Change at Stanford University's Graduate School of Business m Stanford, California, where he is also the director of the Executive Program in Leading and Managing Change. Collins and Porras are coauthors o/Built to Last: Successful Habits of Visionary Companies (HarperBusiness, 1994).

HARVARD BUSINESS REVIEW September-October 1996 65

VISION

Truly great companies understand the difference between what should never change and what should he open for change, hetween what is gen- uinely sacred and what is not. This rare ahility to manage continuity and change - requiring a con- sciously practiced discipline - is closely linked to the ahility to develop a vision. Vision provides guid- ance ahout what core to preserve and what future to stimulate progress toward. But vision has hecome one of the most overused and least understood words in the language, conjuring up different im- ages for different people: of deeply held values, out- standing achievement, societal honds, exhilarating goals, motivating forces, or raisons d'être. We rec- ommend a conceptual framework to define vision, add clarity and rigor to the vague and fuzzy con- cepts swirling around that trendy term, and give practical guidance for articulating a coherent vision within an organization. It is a prescriptive frame- work routed in six years of research and refined and tested hy our ongoing work with executives from a great variety of organizations around the world.

A well-conceived vision consists of two major components: core ideology and envisioned future. ¡See the exhihit "Articulating a Vision.") Core ide- ology, the yin in our scheme, defines what we stand for and why we exist. Yin is unchanging and com- plements yang, the envisioned future. The envi- sioned future is what we aspire to hecome, to achieve, to create-something that will require sig- nificant change and progress to attain.

Core Ideology Core ideology defines the enduring character of

an organization - a consistent identity that tran- scends product or market life cycles, technological hreakthroughs, management fads, and individual leaders. In fact, the most lasting and significant contrihution of those who huild visionary com- panies is the core ideology. As Bill Hewlett said about his longtime friend and busi- ness partner David Packard upon Packard's death not long ago, "As far as the company is concerned, the greatest thing he left hebind bim was a code of ethics known as the HP Way." HP's core ideology, wbicb has guided the company since its incep- tion more than 50 years ago, includes a deep respect for tbe individual, a dedication to af- fordable quality and reliability, a commitment to community responsibility (Packard bimself be- queathed bis $4.3 billion of Hewlett-Packard stock to a charitahle foundation), and a view that tbe

company exists to make technical contrihutions for tbe advancement and welfare of humanity. Compa- ny huilders such as David Packard, Masaru Ibuka of Sony, George Merck of Merck, William McKnight of 3M, and Paul Galvin of Motorola understood tbat it is more important to know who you are than wbere you are going, for wbere you are going will cbange as the world around you changes. Leaders die, products hecome ohsolete, markets change, new technologies emerge, and management fads come and go, hut core ideology in a great company endures as a source of guidance and inspiration.

Core ideology provides tbe glue tbat boids an organization together as it grows, decentralizes, di- versifies, expands glohally, and develops workplace diversity. Think of it as analogous to the principles of Judaism tbat beld tbe Jewish people together for centuries without a homeland, even as they spread throughout the Diaspora. Or think of the truths held to he self-evident in tbe Declaration of Inde- pendence, or the enduring ideals and principles of the scientific community that bond scientists from every nationality together in the common purpose of advancing human knowledge. Any effective vi- sion must embody the core ideology of the organi- zation, which in turn consists of two distinct parts: core values, a system of guiding principles and tenets; and core purpose, tbe organization's most fundamental reason for existence.

Core Values. Core values are the essential and en- during tenets of an organization. A small set of timeless guiding principles, core values require no external justification; they have intrinsic value and importance to those inside the organization. Tbe Walt Disney Company's core values of imagination and wholesomeness stem not from market require- ments hut from tbe founder's inner belief that imagination and wbolesomeness should he nur- tured for their own sake. William Procter and James Gamhle didn't instill in P&G's culture a focus on product excellence merely as a strategy for success

ideology provides the glue that holds an organization

together through time.

but as an almost religious tenet. And that value has been passed down for more than 15 decades hy P&G people. Service to the customer-even to the point of suhservience-is a way of life at Nordstrom tbat traces its roots hack to 1901, eight decades before

66 HARVARD BUSINESS REVIEW Septemhcr-Octoher 1996

Articulating a Vision

(J Core values D Core purpose

lÜ-to-.ÍU-yearBHAG ¡Big, Hairy, Audacious Goal) J Vivid description

customer service programs became stylish. For Bill Hewlett and David Paekard, respeet for the individ- ual was first and foremost a deep personal value; they didn't get it from a book or hear it from a man- agement guru. And Ralph S. Larsen, CEO of John- son & Johnson, puts it this way; "The eore values embodied in our eredo might he a eompetitive advantage, but that is not why we have them. We have them beeause they define for us what we stand for, and v̂ ê would hold them even if they became a eompetitive disadvantage in eertain situations."

The point is that a great company decides for itself what values it holds to be core, largely inde- pendent of the current environment, competitive requirements, or management fads. Clearly, tben, there is no universally right set of core values. A company need not have as its core value cus- tomer service (Sony doesn't) or respect for the indi- vidual (Disney doesn't) or quality (Wal-Mart Stores doesn't) or market focus (HP doesn't) or teamwork (Nordstrom doesn't). A company might have oper- ating practices and business strategies around those qualities without having them at the essence of its being. Furthermore, great companies need not have likable or humanistic core values, although many do. The key is not what core values an organization has but that it has core values at all.

Companies tend to have only a few core values, usually between tbree and five. In fact, we found tbat none of tbe visionary companies we studied in our book bad more than five: most had only tbree or four. (See the insert "Core Values Are a Company's Essential Tenets.") And, indeed, we sbould expect that. Only a few values can be truly core-tbat is, so

fundamental and deeply held tbat they will cbange seldom, if ever.

To identify tbe core values of your own organiza- tion, pusb with relentless honesty to define wbat values are truly central. If you articulate more tban five or six, chances are that you are confusing core values (wbich do not cbange) with operating prac- tices, business strategies, or cultural norms (wbicb should be open to cbange). Remember, the values must stand tbe test of time. After you've drafted a preliminary list of the core values, ask about eacb one. If tbe circumstances cbanged and penalized us for holding this core value, would we still keep it? If you can't honestly answer yes, tben tbe value is not core and should be dropped from consideration.

A high-tecbnology company wondered wbether it sbould put quality on its list of core values. Tbe CEO asked, "Suppose in ten years quality doesn't make a boot of difference in our markets. Suppose the only tbing tbat matters is sbeer speed and horsepower but not quality. Would we still want to put quality on our list of core values?" The mem- bers of tbe management team looked around at one anotber and finally said no. Quality stayed in tbe strategy of tbe company, and quality-improvement programs remained in place as a mechanism for stimulating progress; but quality did not make the list of core values.

Tbe same group of executives tben wrestled witb leading-edge innovation as a core value. Tbe CEO asked, "Would we keep innovation on the list as a core value, no matter how tbe world around us changed:" This time, tbe management team gave a resounding yes. Tbe managers' outlook migbt be summarized as, "We always want to do leading- edge innovation. That's who we are. It's really im- portant to us and always will be. No matter what. And if our current markets don't value it, we will find markets tbat do." Leading-edge innovation went on tbe list and will stay tbere. A company sbould not cbange its core values in response to market cbanges; ratber, it sbould cbange markets, if necessary, to remain true to its core values.

Wbo should be involved in articulating tbe core values varies witb tbe size, age, and geograpbic dis- persion of tbe company, but in many situations we bave recommended what we call a Mars Group. It works like tbis: Imagine tbat you've been asked to re-create tbe very best attributes of your organiza- tion on anotber planet but you have seats on tbe rocket sbip for only five to seven people. Whom sbould you send? Most likely, you'll cboose tbe people who bave a gut-level understanding of your core values, tbe highest level of credibility witb tbeir peers, and the highest levels of competence.

HARVARD BUSINESS REVIEW Sept ember-October 1996 67

Core Values Are a Company's Essential Tenets

Merck a Corporate social responsibility D Unequivocal excellence in all aspects of

tbe company Ü Science-based innovation D Honesty and integrity • Profit, hut profit from work that benefits

humanity

Nordstrom • Service to tbe customer above all else D Hard work and individual productivity n Never being satisfied • Excellence in reputation; being part of

something special

Philip Morris C The right to freedom of choice G Winning - beating otbers in a good fight

We'll often ask people brought together to vi'ork on core values to nominate a Mars Group of five to seven individuals (not necessarily all from the as- sembled group). Invariably, they end up selecting highly credible representatives who do a super job of articulating the core values precisely because they are exemplars of those values-a representative slice of the eompany's genetic code.

Even global organizations composed of people from widely diverse cultures can identify a set of shared core values. The secret is to work from the individual to the organization. People involved in artieulating the eore values need to answer several questions: What core values do you personally bring to your work? (These should be so fundamen- tal that you would hold them regardless of whether or not they were rewarded.) Wbat would you tell your children are the core values that you hold at work and that you hope they will hold when they become working adults- If you awoke tomorrow morning with enough money to retire for tbe rest of your life, would you continue to live those core val- ues? Can you envision them being as valid for you 100 years from now as they are today? Would you want to hold those core values, even if at some point one or more of them became a competitive disadvantage? If you were to start a new organiza- tion tomorrow in a different line of work, what core values would you build into the new organization regardless of its industry? The last three questions are particularly important because they make the crucial distinction between enduring core values

D Encouraging individual initiative Ü Opportunity based on merit; no one is entitled

to anything D Hard work and continuous self-improvement

Sony n Elevation of the Japanese culture and

national status G Being a pioneer - not following others; doing

the impossible G Encouraging individual ability and creativity

Walt Disney G No cynicism G Nurturing and promulgation of "wholesome

American values" G Creativity, dreams, and imagination G Fanatical attention to consistency and detail G Preservation and control of tbe Disney magic

that sbould not change and practices and strategies tbat should be changing all the time.

Core Purpose. Core purpose, the seeond part of core ideology, is the organization's reason for being. An effective purpose reflects people's idealistic mo- tivations for doing the company's work. It doesn't just describe the organization's output or target customers; it captures the soul of the organization. [See the insert "Core Purpose Is a Company's Rea- son for Being.") Purpose, as illustrated by a speech David Packard gave to HP employees in 1960, gets at the deeper reasons for an organization's existence beyond just making money. Paekard said,

I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company's existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion tbat a group of people get togetber and exist as an institution tbat we call a company so they are able to accomplisb sometbing collectively that they could not accomplish separately - they make a contribu- tion to society, a phrase which sounds trite but is funda- mental.... You can look around |in the general business world and] see people who are interested in money and notbing else, but the underlying drives come largely from a desire to do something else: to make a product, to give a service - generally to do something which is of value.'

Purpose (whicb sbould last at least 100 years) should not be confused witb specific goals or busi-

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VISION

ness strategies (which should change many times in 100 years). Whereas you might achieve a goal or complete a strategy, you cannot fulfill a purpose,- it is like a guiding star on the horizon-forever pur- sued but never reached. Yet although purpose itself does not change, it does inspire change. The very fact that purpose can never be fully realized means that an organization can never stop stimulating change and progress.

In identifying purpose, some companies make the mistake of simply describing their current prod- uct lines or customer segments. We do not consider the following state- ment to reflect an effective purpose: "We exist to fulfill our government eharter and participate in the sec- ondary mortgage market by pack- aging mortgages into investment seeurities." Tbe statement is merely descriptive. A far more effective statement of purpose would be that expressed by the executives of the Federal National Mortgage Association, Fannie Mae: "To strengthen the social fabric by continual- ly democratizing home ownership." The secondary mortgage market as we know it migbt not even ex- ist in 100 years, but strengthening the social fabric by continually democratizing home ownership can be an enduring purpose, no matter how much the world changes. Guided and inspired by this pur- pose, Fannie Mae launched in the early 1990s a se- ries of bold initiatives, including a program to de-

velop new systems for reducing mortgage under- writing costs by 40% in five years,- programs to eliminate discrimination in tbe lending process (backed by $5 billion in underwriting experiments); and an audaeious goal to provide, by tbe year 2000, $1 trillion targeted at 10 million families that bad traditionally been shut out of home ownership - minorities, immigrants, and low-income groups.

Similarly, 3M defines its purpose not in terms of adhesives and abrasives but as the perpetual quest to solve unsolved problems innovatively-a purpose

Core ideology consists of core values and core purpose.

Core purpose is a raison d'être, not a goal or business strategy.

that is always leading 3M into new fields. MeKin- sey & Company's purpose is not to do management consulting but to help corporations and govern- ments be more successful: in 100 years, it might involve methods other than consulting. Hewlett- Packard doesn't exist to make electronic test and measurement equipment but to make technical contributions that improve people's lives - a pur- pose that has led the company far afield from its origins in electronic instruments. Imagine if Walt

Core Purpose Is a Company's Reason for Being

3M: To solve unsolved problems innovatively

Cargill: To improve the standard of living around the world

Fannie Mae: To strengthen the social fabric by continually democratizing home ownership

Hewlett-Packard: To make technical contributions for the advancement and welfare of humanity

Lost Arrow Corporation: To he a role model and a tool for social change

Pacific Theatres: To provide a place for people to flourish and to enhance the community

Mary Kay Cosmetics: To give unlimited opportunity to women

McKinsey & Company: To help leading corporations and governments be more successful

Merck: To preserve and improve human life

Nike: To experience the emotion of competition, winning, and crushing competitors

Sony: To experience the joy of advancing and applying technology for the benefit of the public

Telecare Corporation: To help people with mental impairments realize tbeir full potential

Wal-Mart: To give ordinary folk the chance to buy the same things as rich people

Walt Disney: To make people happy

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VISION

Disney had conceived of his company's purpose as to make cartoons, rather than to make people happy; we probably wouldn't have Mickey Mouse, Disneyland, EPCOT Center, or the Anaheim Mighty Ducks Hockey Team.

One powerful method for getting at purpose is the five whys. Start with tbe descriptive statement We make X products or We deliver X services, and then ask, Why is tbat important? five times. After a few whys, you'll find that you're getting down to tbe fundamental purpose of tbe organization.

We used tbis method to deepen and enricb a discussion about pur- pose wben we worked with a certain market-research company. Tbe exec- utive team first met for several hours and generated the following state- ment of purpose for tbeir organiza- tion: To provide the best market- researcb data available. We tben asked tbe follow- ing question: Wby is it important to provide the best market-researcb data available? After some discussion, tbe executives answered in a way tbat reflected a deeper sense of tbeir organization's pur- pose: To provide tbe best market-researcb data available so tbat our customers will understand tbeir markets better tban tbey could otberwise. A furtber discussion let team members realize tbat tbeir sense of self-wortb came not just from helping customers understand tbeir markets better but also from making a contribution to their customers' success. Tbis introspection eventually led the com- pany to identify its purpose as: To contribute to our customers' success by helping tbem understand tbeir markets. Witb tbis purpose in mind, the com- pany now frames its product decisions not witb tbe question Will it sell? but witb the question Will it make a contribution to our customers' success?

The five whys can help companies in any indus- try frame tbeir work in a more meaningful way. An asphalt and gravel company might begin by saying. We make gravel and asphalt products. After a few whys, it could conclude tbat making asphalt and gravel is important because tbe quality of the infra- structure plays a vital role in people's safety and ex- perience; because driving on a pitted road is annoy- ing and dangerous; because 747s cannot land safely on runways built witb poor workmansbip or inferi- or concrete; because buildings with substandard materials weaken witb time and crumble in earth- quakes. From such introspection may emerge this purpose: To make people's lives better by improv- ing tbe quality of man-made structures. Witb a sense of purpose very mucb along tbose lines, Gran-

ite Rock Company of Watsonville, Califomia, won tbe Malcolm Baldrige National Quality Award-not an easy feat for a small rock quarry and aspbait company. And Granite Rock bas gone on to be one of the most progressive and exciting companies we've encountered in any industry.

Notice tbat none of tbe core purposes fall into the category "maximize sbarebolder wealtb. " A pri- mary role of core purpose is to guide and inspire.

Listen to people in truly great companies talk about their

achievements—you will hear little about earnings per share.

Maximizing sbarebolder wealtb does not inspire peo- ple at all levels of an organization, and it provides precious little guidance. Maximizing sharebolder wealtb is tbe standard off-tbe-shelf purpose for tbose organizations tbat bave not yet identified tbeir true core purpose. It is a substitute - and a weak one at tbat.

Wben people in great organizations talk about tbeir acbievements, tbey say very little about earn- ings per sbare. Motorola people talk about impres- sive quality improvements and tbe effect of tbe products tbey create on the world. Hewlett-Packard people talk about tbeir tecbnical contributions to tbe marketplace. Nordstrom people talk about beroic customer service and remarkable individual performance by star salespeople. Wben a Boeing en- gineer talks about launching an exciting and revo- lutionary new aircraft, sbe does not say, 'T put my beart and soul into tbis project because it would add 37 cents to our earnings per sbare."

One way to get at the purpose tbat lies beyond merely maximizing sbarebolder wealtb is to play tbe "Random Corporate Serial Killer" game. It works like this: Suppose you could sell tbe com- pany to someone wbo would pay a price tbat every- one inside and outside tbe company agrees is more tban fair (even witb a very generous set of assump- tions about the expected future casb flows of the company). Suppose furtber tbat tbis buyer would guarantee stable employment for all employees at tbe same pay scale after tbe purchase but witb no guarantee tbat tbose jobs would be in tbe same in- dustry. Finally, suppose tbe buyer plans to kill tbe company after the purchase - its products or ser- vices would be discontinued, its operations would

70 HARVARD BUSINESS REVIEW Sept ember-October 1996

be sbut down, its brand names would he shelved forever, and so on. The company would utterly and completely cease to exist. Would you accept the offer? Why or why not? What would be lost if tbe company ceased to exist? Wby is it important tbat tbe company continue to exist? We've found tbis exercise to be very powerful for belping hard-nosed, financially focused executives reflect on their orga- nization's deeper reasons for being.

Another approach is to ask each member of the Mars Group, How could we frame tbe purpose of this organization so tbat if you woke up tomorrow morning with enough money in the bank to retire, you would nevertbeless keep working here? Wbat deeper sense of purpose would motivate you to con- tinue to dedicate your precious creative energies to this company's efforts?

As they move into the twenty-first century, com- panies will need to draw on the full creative energy and talent of tbeir people. But wby should people give full measure? As Peter Drueker has pointed out, the hest and most dedicated people are ulti- mately volunteers, for tbey have the opportunity to do something else with their lives. Confronted witb an increasingly mobile society, cynicism about corporate life, and an expanding entrepre- neurial segment of the economy, companies more than ever need to bave a clear understanding of their purpose in order to make work meaningful and therehy attract, motivate, and retain outstand- ing people.

Discovering Core Ideology You do not create or set core ideology. You dis-

cover core ideology. You do not deduce it by looking at the external environment. You understand it hy looking inside. Ideology has to he authentic. You cannot fake it. Discovering core ideology is not an intellectual exercise. Do not ask. What core values

You discover core ideology looking inside. It has to be authentic. You can't fake it

should we hold? Ask instead, Wbat core values do we truly and passionately hold? You should not confuse values that you think the organization ought to h a v e - b u t does n o t - w i t b authentic core values. To do so would create cynicism throughout tbe organization. ("Who're they trying to kid? We

all know tbat isn't acore value around here!") Aspi- rations are more appropriate as part of your envi- sioned future or as part of your strategy, not as part of tbe core ideology. However, authentic core val- ues tbat have weakened over time can be consid- ered a legitimate part of the core ideology-as long as you aeknowledge to the organization that you must work hard to revive them.

Also he clear that the role of core ideology is to guide and inspire, not to differentiate. Two compa- nies can have the same core values or purpose. Many companies could bave the purpose to make technical contributions, but few live it as passion- ately as Hewlett-Packard. Many companies could have the purpose to preserve and improve human life, hut few hold it as deeply as Merck. Many com- panies could have tbe core value of heroic customer service, but few create as intense a culture around that value as Nordstrom. Many companies could have the core value of innovation, hut few create tbe powerful alignment mechanisms that stimu- late the innovation we see at 3M. The authenticity, the discipline, and the consistency with wbicb the ideology is lived-not tbe content of the ideology- differentiate visionary companies from tbe rest of tbe pack.

Core ideology needs to he meaningful and inspi- rational only to people inside the organization; it need not be exciting to outsiders. Wby not? Because it is tbe people inside the organization wbo need to commit to the organizational ideology over the long term. Core ideology can also play a role in de- termining who is inside and who is not. A clear and well-articulated ideology attracts to the company people whose personal values are compatihle witb the company's core values; conversely, it repels tbose whose personal values are incompatihle. You cannot impose new core values or purpose on peo- ple. Nor are core values and purpose things people can buy into. Executives often ask, How do we get

people to share our core ideology? You don't. You can't. Instead, find people who are predisposed to share your core values and purpose; attract and retain tbose people; and let tbose who do not sbare your core values go elsewhere. Indeed, tbe very proeess of articulating core ideology may cause some people to leave when

they realize that they are not personally compatihle with the organization's core. Welcome that out- come. It is certainly desirahle to retain witbin the core ideology a diversity of people and viewpoints. People who sbare tbe same core values and purpose do not necessarily all think or look the same.

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VISION

Don't confuse core ideology itself witb core- ideology statements. A company can bave a very strong core ideology witbout a formal statement. For example, Nike bas not (to our knowledge) for- mally articulated a statement of its core purpose. Yet, according to our observations, Nike bas a pow- erful core purpose tbat permeates the entire organi- zation: to experience tbe emotion of competition, winning, and crusbing competitors. Nike has a campus that seems more like a sbrine to tbe com- petitive spirit than a corporate office complex. Giant photos of Nike heroes cover tbe walls, bronze plaques of Nike atbletes bang along tbe Nike Walk of Fame, statues of Nike athletes stand alongside tbe running track that rings the campus, and build- ings honor champions sucb as Olympic maratboner Joan Benoit, basketball superstar Micbael Jordan, and tennis pro John McEnroe. Nike people wbo do not feel stimulated by the competitive spirit and the urge to be ferocious simply do not last long in tbe culture. Even tbe company's name reflects a sense of competition: Nike is tbe Greek goddess of victory. Tbus, altbougb Nike has not formally ar- ticulated its purpose, it clearly has a strong one.

Identifying core values and purpose is tberefore not an exercise in wordsmithery. Indeed, an organi- zation will generate a variety of statements over time to describe tbe core ideology. In Hewlett- Packard's arcbives, we found more than half a dozen distinct versions of the HP Way, drafted by David Packard between 1936 and 1972. All versions stated the same principles, but tbe words used var- ied depending on the era and tbe circumstances. Similarly, Sony's eore ideology bas been stated many different ways over tbe company's bistory. At its founding, Masaru Ibuka described two key elements of Sony's ideology: "We shall welcome technical difficulties and focus on highly sophisti- cated technical products that have great usefulness for society regardless of tbe quantity involved; we shall place our main emphasis on ability, perfor- mance, and personal character so tbat each individ- ual can show the best in ability and skill."' Four decades later, tbis same concept appeared in a state- ment of core ideology called Sony Pioneer Spirit: "Sony is a pioneer and never intends to follow oth- ers. Through progress, Sony wants to serve tbe whole world. It shall be always a seeker of the un-

Big, Hairy, Audacious Goals Aid Long-Term Vision

Target BHAGs can be quantitative or qualitative

D Become a $125 billion company by the year 2000 [Wal-Mart, 1990)

• Democratize the automobile (Ford Motor Company, early 1900s)

• Become tbe company most known for changing the worldwide poor-quality image of Japanese products (Sony, early 1950s)

• Become the most powerful, the most serviceable, tbe most far-reaching world financial institution tbat has ever been (City Bank, predecessor to Citicorp, 1915)

D Become tbe dominant player in commercial aircraft and bring the world into the jet age (Boeing, 1950)

Common-enemy BHAGs involve David-versus-Goliath thinking

• Knock off RJR as tbe number one tobacco company in the world [Pbilip Morris, 1950s)

C Crush Adidas [Nike, 1960s) n Yamaha wo tsubusu! We will destroy Yamaba!

(Honda, 1970s)

Role-model BHAGs suit up-and-coming organizations

G Become tbe Nike of tbe cycling industry [Giro Sport Design, 1986)

D Become as respected in 20 years as Hewlett-Packard is today (Watkins-Johnson, 1996)

D Become tbe Harvard of the West (Stanford University, 1940s)

Internal-transformation BHAGs suit large, established organizations

D Become number one or number two in every market we serve and revolutionize tbis company to bave the strengths of a big company combined witb the leanness and agility of a small company (General Electric Company, 1980s)

D Transform tbis company from a defense contractor into tbe best diversified high-tecbnology company in the world (Rockwell, 1995)

O Transform this division from a poorly respected internal products supplier to one of the most respected, exciting, and sougbt-after divisions in the company (Components Support Division of a computer products company, 1989)

72 HARVARD BUSINESS REVIEW September-October 1996

known.... Sony has a principle of respecting and en- couraging one's ability...and always tries to bring out tbe best in a person. This is tbe vital force of Sony.'" Same core values, different words.

You sbould tberefore focus on getting tbe content r i g b t - o n capturing tbe essence of tbe core values and purpose. Tbe point is not to ereate a perfect statement but to gain a deep under- standing of your organization's core values and purpose, wbicb Can then be expressed in a multitude of ways. In fact, we often suggest tbat once tbe core has been identified, man- agers sbould generate their own statements of tbe core values and purpose to share witb tbeir groups.

Finally, don't eonfuse core ideology witb tbe con- cept of core competence. Core competence is a stra- tegic concept that defines your organization's capa- bilities-what you are particularly good at-wbereas core ideology captures wbat you stand for and wby you exist. Core competencies sbould be well aligned witb a eompany's core ideology and are of- ten rooted in it; but tbey are not tbe same tbing. For example, Sony bas a core competence of miniatur- ization-a strength tbat can be strategically applied to a wide array of products and markets. But it does not bave a core ideology of miniaturization. Sony migbt not even bave miniaturization as part of its strategy in 100 years, but to remain a great compa- ny, it will still bave tbe same core values described in tbe Sony Pioneer Spirit and the same fundamen- tal reason for being-namely, to advance tecbnology for tbe benefit of tbe general public. In a visionary company like Sony, core competencies change over the decades, wbereas eore ideology does not.

Once you are clear about tbe core ideology, you sbould feel free to cbange absolutely anything tbat is not part of it. From then on, whenever someone says sometbing sbould not cbange because "it's part of our culture" or "we've always done it tbat way" or any sucb excuse, mention this simple rule: If it's not core, it's up for cbange. Tbe strong version of the rule is, // it's not core, change it! Articulating core ideology is just a starting point, bowever. You also must determine wbat type of progress you want to stimulate.

Envisioned Future

Tbe second primary component of tbe vision framework is envisioned future. It consists of two parts: a lO-to-30-year audacious goal plus vivid de- scriptions of what it will be like to aehieve the goal. We recognize that tbe pbrase envisioned future is

somewbat paradoxical. On tbe one band, it conveys concreteness - something visible, vivid, and real. On tbe otber band, it involves a time yet unreal- ized-witb its dreams, bopes, and aspirations.

Vision-level BHAG. We found in our research tbat visionary companies often use bold missions- or wbat we prefer to call BHAGs (pronounced

Companies need an audacious lO-to-30-year goal to progress

toward an envisioned future.

BEE-bags and sbortband for Big, Hairy, Audacious Goals|-as a powerful way to stimulate progress. All companies bave goals. But tbere is a difference be- tween merely baving a goal and becoming commit- ted to a buge, daunting cballenge-sucb as climbing Mount Everest. A true BHAG is clear and com- pelling, serves as a unifying focal point of effort, and acts as a catalyst for team spirit. It bas a clear finisb line, so tbe organization can know wben it bas achieved tbe goal; people like to sboot for finisb lines. A BHAG engages people-it reacbes out and grabs tbem. It is tangible, energizing, bigbly fo- cused. People get it rigbt away; it takes little or no explanation. For example, NASA's 1960s moon mission didn't need a committee of wordsmitbs to spend endless bours turning tbe goal into a verbose, impossible-to-remember mission statement. Tbe goal itself was so easy to grasp-so compelling in its own rigbt-tbat it could be said 100 different ways yet be easily understood by everyone. Most corpo- rate statements we've seen do little to spur forward movement beeause they do not contain the power- ful mechanism of a BHAG.

Altbougb organizations may have many BHAGs at different levels operating at tbe same time, vi- sion requires a special type of BHAG-a vision-level BHAG that applies to the entire organization and requires 10 to 30 years of effort to complete. Setting the BHAG tbat far into tbe future requires tbinking beyond tbe current capabilities of tbe organization and tbe current environment. Indeed, inventing sucb a goal forces an exeeutive team to be vision- ary, ratber tban just strategic or tactical. A BHAG should not he a sure b e t - i t will have perhaps only a 50% to 70% probability of suceess-but the orga- nization must believe that it can reach tbe goal any- way. A BHAG should require extraordinary effort and perbaps a little luck. We have belped compa- nies create a vision-level BHAG by advising them

HARVARD BUSINESS REVIEW September-October 1996 73

VISION

to think in terms of four broad categories: target BHAGs, c o m m o n - e n e m y BHAGs, role-model BHAGs, and internal-transformation BHAGs. (See the insert "Big, Hairy, Audacious Goals Aid Long- Term Vision.")

Vivid Description. In addition to vision-level BHAGs, an envisioned future needs what we call vivid description - that is, a vibrant, engaging, and specific description of what it will be like to achieve the BHAG. Think of it as translating the vi- sion from words into pictures, of creating an image that people can carry around in their heads. It is a question of painting a picture with your words. Pic- ture painting is essential for making the lO-to-30- year BHAG tangihle in people's minds.

For example, Henry Ford brought to life the goal of democratizing the automobile with this vivid de- scription: "I will build a motor car for the great multitude.... It will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the hlessing of hours of pleasure in God's great open spaces.... When I'm through, everybody will he able to afford one, and everyone will have one. The horse will have disap- peared from our highways, the automobile will be taken for granted...[and we will| give a large num- her of men employment at good wages."

The components-support division of a computer- products company had a general manager who was able to describe vividly the goal of becoming one of

You must translate the vision from words to pictures with a vivid description of what it will be like to achieve your goal.

the most sought-after divisions in the company: "We will be respected and admired by our peers.... Our solutions will be actively sought by the end- product divisions, who will achieve significant product 'hits' in the marketplace largely because of our teehnical contribution.... We will have pride in ourselves.... The hest up-and-coming people in the company will seek to work in our division.... Peo- ple will give unsolicited feedback that they love what they are doing.... [Our own] people will walk on the halls of their feet.... [They] will willingly work hard because they want to.... Both employees and customers will feel that our division has con- tributed to their life in a positive way."

In the 1930s, Merck had the BHAG to transform itself from a chemical manufacturer into one of the preeminent drug-making companies in the worid, with a research capability to rival any major univer- sity. In describing this envisioned future, George Merck said at the opening of Merek's research facil- ity in 1933, "We believe that research work carried on with patience and persistence will bring to in- dustry and commerce new life; and we have faith that in this new laboratory, with the tools we have supplied, science will be advanced, knowledge in- creased, and human life win ever a greater freedom from suffering and disease.... We pledge our every aid that this enterprise shall merit the faith we have in it. Let your light so s h i n e - t h a t those who seek the Truth, that those who toil that this world may be a better plaee to live in, that those who hold aloft that torch of science and knowledge through these social and economic dark ages, shall take new cour- age and feel their hands supported."

Passion, emotion, and conviction are essential parts of the vivid description. Some managers are uncomfortable expressing emotion about their dreams, hut that's what motivates others. Ghurchill understood that when he described the BHAG fac- ing Great Britain in 1940. He did not just say, "Beat Hitler." He said, "Hitler knows he will have to break us on this island or lose the war. If we can stand up to him, all Europe may be free, and the life of the world may move forward into broad, sunlit

uplands. But if we fail, the whole world, including the United States, including all we have known and cared for, will sink into the abyss of a new Dark Age, made more sinister and perhaps more protracted by the lights of perverted science. Let us therefore brace ourselves to our duties and so bear ourselves that if the British Empire and its Common- wealth last for a thousand years, men

will still say, 'This was their finest hour."'

A Few Key Points. Don't confuse core ideology and envisioned future. In particular, don't confuse core purpose and BHAGs. Managers often exchange one for the other, mixing the two together or failing to articulate both as distinct items. Gore purpose- not some specific goal-is the reason why the orga- nization exists. A BHAG is a clearly articulated goal. Gore purpose can never be completed, where- as the BHAG is reachable in 10 to 30 years. Think of the core purpose as the star on the horizon to be chased forever; the BHAG is the mountain to be climbed. Once you have reached its summit, you move on to other mountains.

74 HARVARD BUSINESS REVIEW September-October

Identifying core ideology is a discovery process, but setting tbe envisioned future is a creative process. We find tbat executives often bave a great deal of difficulty coming up witb an exciting BHAG. They want to analyze tbeir way into tbe fu- ture. We bave found, tberefore, tbat some execu- tives make more progress by starting first witb tbe vivid description and backing from tbere into tbe

What's needed is such a big commitment that when people see what the goal will take, there's an almost audible gulp.

BHAG. This approacb involves starting witb ques- tions sucb as, We're sitting bere in 20 years; what would we love to see? Wbat sbould this company look like? Wbat sbould it feel like to employees? Wbat sbould it have achieved? If someone writes an article for a major business magazine about tbis company in 20 years, what will it say? One biotecb- nology company we worked witb bad trouble envi- sioning its future. Said one member of tbe execu- tive team^ "Every time we come up witb something for tbe entire company, it is just too generic to be exciting - sometbing banal like 'advance biotecb- nology worldwide.'" Asked to paint a picture of tbe company in 20 years, tbe executives mentioned such things as "on tbe cover of Business Week as a model success story...the Fortune most admired top-ten list...tbe best science and business gradu- ates want to work bere...people on airplanes rave about one of our products to seatmates...2O consec- utive years of profitable growth...an entrepreneur- ial culture tbat bas spawned half a dozen new divi- sions from within... management gurus use us as an example of excellent management and progressive tbinking," and so on. From this, they were able to set tbe goal of becoming as well respected as Merek or as Johnson & Johnson in biotechnology.

It makes no sense to analyze wbetber an envi- sioned future is tbe rigbt one. With a creation-and tbe task is creation of a future, not prediction-tbcre can be no rigbt answer. Did Beethoven create the right Ninth Symphony? Did Shakespeare create the rigbt Hamlet^ We can't answer these questions; they're nonsense. Tbe envisioned future involves such essential questions as Does it get our juices flowing? Do we find it stimulating? Does it spur forward momentum? Does it get people going? The

envisioned future should he so exciting in its own rigbt tbat it would continue to keep tbe organiza- tion motivated even if the leaders who set the goal disappeared. City Bank, tbe predecessor of Citicorp, had the BHAG "to become tbe most powerful, the most serviceable, tbe most far-reaching world fi- nancial institution tbat has ever b e e n " - a goal that generated excitement tbrougb multiple genera-

tions until it was acbieved. Similar- ly, the NASA moon mission contin- ued to galvanize people even though President John F. Kennedy (the leader associated with setting the goal) died years before its completion.

To create an effective envisioned future requires a certain level of un- reasonable confidence and eommit- ment. Keep in mind tbat a BHAG is not just a goal; it is a Big, Hairy, Au-

dacious Goal. It's not reasonable for a small region- al bank to set tbe goal of becoming "the most pow- erful, the most serviceable, tbe most far-reacbing world financial institution that has ever been," as Gity Bank did in 1915. It's not a tepid claim tbat "we will democratize tbe automobile," as Henry Ford said. It was almost laughable for Philip Morris-as the sixth-place player with 9% market sbare in the 1930s-to take on the goal of defeating Goliath RJ Reynolds Tobacco Gompany and becom- ing number one. It was bardly modest for Sony, as a small, casb-strapped venture, to proclaim tbe goal of cbanging the poor-quality image of Japanese products around the world. (See the insert "Putting It All Together: Sony in tbe 1950s."| Of course, it's not only tbe audacity of tbe goal but also tbe level of eommitment to the goal that counts. Boeing didn't just envision a future dominated by its com- mercial jets; it bet the company on the 707 and, later, on the 747. Nike's people didn't just talk about tbe idea of crusbing Adidas; tbey went on a crusade to fulfill tbe dream. Indeed, the envisioned future should produce a bit of tbe "gulp factor": wben it dawns on people what it will take to achieve the goal, there sbould he an almost audible gulp.

But what about failure to realize the envisioned future? In our research, we found that the visionary companies displayed a remarkable ability to acbieve even tbeir most audacious goals. Ford did democ- ratize tbe automobile; Giticorp did become the most far-reacbing hank in the world; Philip Morris did rise from sixth to first and beat RJ Reynolds worldwide; Boeing did become the dominant com- mercial aircraft company; and it looks like Wal- Mart will acbieve its $125 billion goal, even with- out Sam Walton. In contrast, the comparison com-

HARVARD BUSINESS REVIEW Septemher-Octoher 1996 75

Putting It All Together: Sony in the 1950s

Core Ideology

Cote Values G Elevation of the Japanese culture and

national status • Being a pioneer-not following others; doing

the impossible Ü Encouraging individual ability and creativity

Purpose To experience the sheer joy of innovation and the application of technology for tbe benefit and pleasure of the general public

Envisioned Future

BHAG Become the company most known for changing the worldwide poor-quality image of Japanese products

Vivid Description We will create products that become pervasive around the world.... We will be the first Japanese company to go into the U.S. market and distribute directly.... We will succeed with innovations that U.S. companies have failed at - such as the transistor radio.... Fifty years from now, our brand name will be as well known as any in the world. ..and will signify irmovation and quality that rival the most innovative companies anywhere.... "Made in Japan" will mean something fine, not something shoddy.

panies in our research frequently did not achieve their BHAGs, if they set them at all. The differ- ence does not lie in setting easier goals: the vision- ary companies tended to have even more audacious ambitions. The difference does not lie in charis- matic, visionary leadership: the visionary com- panies often achieved their BHAGs without such larger-than-life leaders at the helm. Nor does the difference lie in better strategy: the visionary com- panies often realized their goals more by an or- ganic process of "let's try a lot of stuff and keep what works" than by well-laid strategic plans. Rather, their success lies in building the strength of their organization as their primary way of creating the future.

Why did Merck become the preeminent drug- maker in the world? Because Merck's architects

achieved one BHAG and fails to replace it with an- other. NASA suffered from that syndrome after the successful moon landings. After you've landed on the moon, what do you do for an encore? Ford suf- fered from the syndrome when, after it succeeded in democratizing the automobile, it failed to set a new goal of equal significance and gave General Motors the opportunity to jump ahead in the 1930s. Apple Computer suffered from the syndrome after achiev- ing the goal of creating a computer that nontechies could use. Start-up companies frequently suffer from the We've Arrived Syndrome after going pub- lic or after reaching a stage in which survival no longer seems in question. An envisioned future helps an organization only as long as it hasn't yet been achieved. In our work with companies, we fre- quently hear executives say, "It's just not as excit-

built the best pharmaceutical re- search and development organiza- , , . -. , j ^ . .

tion in the world. Why did Boeing 1 h e D a s i c d y n a m i c 01 v i s i o n a r y become the dominant commercial , . ^ aircraft company in the world? Be- companies IS to preserve the cause of its superb engineering and 1 • 1 TJ. ' marketing organization, which had QOie SLUá S t i m U l a t e p r O g r e S S . i t IS the ability to make projects like the 747 a reality. When asked to name the most important decisions that have contributed to the growth and success of Hewlett-Packard, David Packard an- swered entirely in terms of decisions to build the strength of the organization and its people.

Finally, in thinking about the envisioned future, beware of the We've Arrived Syndrome-a compla- cent lethargy that arises once an organization has

VlSlOn t h a t 1

the

ing around here as it used to be; we seem to have lost our momentum." Usually, that kind of remark signals that the organization has climbed one mountain and not yet picked a new one to climb.

Many executives thrash about with mission statements and vision statements. Unfortunately,

76 HARVARD BUSINESS REVIEW September-October 1996

VISION

most of tbose statements turn out to be a muddled stew of values, goals, purposes, philosophies, be- liefs, aspirations, norms, strategies, practices, and descriptions. Tbey are usually a boring, confusing, structurally unsound stream of words tbat evoke tbe response "True, but who cares?" Even more problematic, seldom do tbese statements have a direct link to the fundamental dynamic of vision- ary companies: preserve the core and stimulate progress. Tbat dynamic, not vision or mission statements, is the primary engine of enduring com- panies. Vision simply provides the context for bringing this dynamic to life. Building a visionary company requires 1% vision and 99% alignment. Wben you bave superb alignment, a visitor could

drop in from outer space and infer your vision from tbe operations and activities of the company with- out ever reading it on paper or meeting a single se- nior executive.

Creating alignment may be your most important work. But the first step will always be to recast your vision or mission into an effective context for building a visionary company. If you do it right, you shouldn't have to do it again for at least a decade.

1. David Packard, speech given to Hewlett-Packard's training sroup on March H, I960; courtesy of Hewlett-Packard Archives.

2. See Nick Lyons, The Sony Vision ¡New York: Crown Publishers, 197ñ|, We also used a translation hy our Japanese student Tsuneto Ikeda.

.Î, AkioMorita,MíHÍí'jij/íj/Jíi;i [New York: E.P, Dutton, 19861, p, 147.

Reprint 96501 To order reprints, see the last page of this issue.

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