SEPTEMBER-OCTOBER 1996

MOI

by James C. Collins and Jerry I. Porras

We shall not cease from explorationAnd the end of all our exploringWill he to arrive where we startedAnd know the place for the first time,

T.S. Eliot, Four Quartets

Companies that enjoy enduring success havecore values and a core purpose that remain fixedwhile their business strategies and practices end-lessly adapt to a changing world. The dynamic ofpreserving the core while stimulating progressis 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 themselvesand achieve superior long-term performance.Hewlett-Packard employees have long known thatradical change in operating practices, culturalnorms, and business strategies does not mean los-ing the spirit of the HP Way - the eoinpany's coreprinciples. Johnson & Johnson continually ques-

tions its structure and revamps its processes whilepreserving 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 solvingunsolved problems innovatively. We studied com-panies such as these in our research for Built toLast: Successful Habits of Visionary Companiesand found that they have outperformed the generalstock market by a factor of 12 since 1925.

fames C. Collins is a management educator and writerbased in Boulder, Colorado, where he operates a man-agement learnmg laboratory for conducting researchand 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 StanfordUniversity's Graduate School of Business m Stanford,California, where he is also the director of the ExecutiveProgram in Leading and Managing Change. Collins andPorras are coauthors o/Built to Last: Successful Habits ofVisionary Companies (HarperBusiness, 1994).

HARVARD BUSINESS REVIEW September-October 1996 65

VISION

Truly great companies understand the differencebetween what should never change and whatshould he open for change, hetween what is gen-uinely sacred and what is not. This rare ahility tomanage continuity and change - requiring a con-sciously practiced discipline - is closely linked tothe ahility to develop a vision. Vision provides guid-ance ahout what core to preserve and what future tostimulate progress toward. But vision has hecomeone of the most overused and least understoodwords in the language, conjuring up different im-ages for different people: of deeply held values, out-standing achievement, societal honds, exhilaratinggoals, 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 givepractical guidance for articulating a coherent visionwithin an organization. It is a prescriptive frame-work routed in six years of research and refined andtested hy our ongoing work with executives from agreat variety of organizations around the world.

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

Core IdeologyCore ideology defines the enduring character of

an organization - a consistent identity that tran-scends product or market life cycles, technologicalhreakthroughs, management fads, and individualleaders. In fact, the most lasting and significantcontrihution of those who huild visionary com-panies is the core ideology. As Bill Hewlett saidabout his longtime friend and busi-ness partner David Packard uponPackard's death not long ago, "As faras the company is concerned, thegreatest thing he left hebind bim wasa code of ethics known as the HPWay." HP's core ideology, wbicb hasguided the company since its incep-tion more than 50 years ago, includesa deep respect for tbe individual, a dedication to af-fordable quality and reliability, a commitment tocommunity responsibility (Packard bimself be-queathed bis $4.3 billion of Hewlett-Packard stockto a charitahle foundation), and a view that tbe

company exists to make technical contrihutions fortbe advancement and welfare of humanity. Compa-ny huilders such as David Packard, Masaru Ibuka ofSony, George Merck of Merck, William McKnightof 3M, and Paul Galvin of Motorola understood tbatit is more important to know who you are thanwbere you are going, for wbere you are going willcbange as the world around you changes. Leadersdie, products hecome ohsolete, markets change,new technologies emerge, and management fadscome and go, hut core ideology in a great companyendures as a source of guidance and inspiration.

Core ideology provides tbe glue tbat boids anorganization together as it grows, decentralizes, di-versifies, expands glohally, and develops workplacediversity. Think of it as analogous to the principlesof Judaism tbat beld tbe Jewish people together forcenturies without a homeland, even as they spreadthroughout the Diaspora. Or think of the truthsheld to he self-evident in tbe Declaration of Inde-pendence, or the enduring ideals and principles ofthe scientific community that bond scientists fromevery nationality together in the common purposeof 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 andtenets; and core purpose, tbe organization's mostfundamental reason for existence.

Core Values. Core values are the essential and en-during tenets of an organization. A small set oftimeless guiding principles, core values require noexternal justification; they have intrinsic value andimportance to those inside the organization. TbeWalt Disney Company's core values of imaginationand wholesomeness stem not from market require-ments hut from tbe founder's inner belief thatimagination and wbolesomeness should he nur-tured for their own sake. William Procter and JamesGamhle didn't instill in P&G's culture a focus onproduct excellence merely as a strategy for success

ideology provides the gluethat holds an organization

together through time.

but as an almost religious tenet. And that value hasbeen passed down for more than 15 decades hy P&Gpeople. Service to the customer-even to the pointof suhservience-is a way of life at Nordstrom tbattraces its roots hack to 1901, eight decades before

66 HARVARD BUSINESS REVIEW Septemhcr-Octoher 1996

Articulating a Vision

(J Core valuesD Core purpose

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

customer service programs became stylish. For BillHewlett 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 valuesembodied in our eredo might he a eompetitiveadvantage, but that is not why we have them. Wehave them beeause they define for us what we standfor, and v e would hold them even if they becamea eompetitive disadvantage in eertain situations."

The point is that a great company decides foritself what values it holds to be core, largely inde-pendent of the current environment, competitiverequirements, 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 Storesdoesn't) or market focus (HP doesn't) or teamwork(Nordstrom doesn't). A company might have oper-ating practices and business strategies around thosequalities without having them at the essence of itsbeing. Furthermore, great companies need not havelikable or humanistic core values, although manydo. The key is not what core values an organizationhas 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 foundtbat none of tbe visionary companies we studied inour book bad more than five: most had only tbree orfour. (See the insert "Core Values Are a Company'sEssential Tenets.") And, indeed, we sbould expectthat. Only a few values can be truly core-tbat is, so

fundamental and deeply held tbat they will cbangeseldom, if ever.

To identify tbe core values of your own organiza-tion, pusb with relentless honesty to define wbatvalues are truly central. If you articulate more tbanfive or six, chances are that you are confusing corevalues (wbich do not cbange) with operating prac-tices, business strategies, or cultural norms (wbicbshould be open to cbange). Remember, the valuesmust stand tbe test of time. After you've drafted apreliminary list of the core values, ask about eacbone. If tbe circumstances cbanged and penalized usfor holding this core value, would we still keep it? Ifyou can't honestly answer yes, tben tbe value is notcore and should be dropped from consideration.

A high-tecbnology company wondered wbetherit sbould put quality on its list of core values. TbeCEO asked, "Suppose in ten years quality doesn'tmake a boot of difference in our markets. Supposethe only tbing tbat matters is sbeer speed andhorsepower but not quality. Would we still want toput quality on our list of core values?" The mem-bers of tbe management team looked around at oneanotber and finally said no. Quality stayed in tbestrategy of tbe company, and quality-improvementprograms remained in place as a mechanism forstimulating progress; but quality did not make thelist of core values.

Tbe same group of executives tben wrestled witbleading-edge innovation as a core value. Tbe CEOasked, "Would we keep innovation on the list asa core value, no matter how tbe world around uschanged:" This time, tbe management team gavea resounding yes. Tbe managers' outlook migbt besummarized 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 willfind markets tbat do." Leading-edge innovationwent on tbe list and will stay tbere. A companysbould not cbange its core values in response tomarket cbanges; ratber, it sbould cbange markets,if necessary, to remain true to its core values.

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

HARVARD BUSINESS REVIEW Sept ember-October 1996 67

Core Values Are a Company's Essential Tenets

Mercka Corporate social responsibilityD Unequivocal excellence in all aspects of

tbe companyÜ Science-based innovationD Honesty and integrity• Profit, hut profit from work that benefits

humanity

Nordstrom• Service to tbe customer above all elseD Hard work and individual productivityn Never being satisfied• Excellence in reputation; being part of

something special

Philip MorrisC The right to freedom of choiceG Winning - beating otbers in a good fight

We'll often ask people brought together to vi'ork oncore values to nominate a Mars Group of five toseven individuals (not necessarily all from the as-sembled group). Invariably, they end up selectinghighly credible representatives who do a super jobof articulating the core values precisely becausethey are exemplars of those values-a representativeslice of the eompany's genetic code.

Even global organizations composed of peoplefrom widely diverse cultures can identify a set ofshared core values. The secret is to work from theindividual to the organization. People involved inartieulating the eore values need to answer severalquestions: What core values do you personallybring to your work? (These should be so fundamen-tal that you would hold them regardless of whetheror not they were rewarded.) Wbat would you tellyour children are the core values that you hold atwork and that you hope they will hold when theybecome working adults- If you awoke tomorrowmorning with enough money to retire for tbe rest ofyour life, would you continue to live those core val-ues? Can you envision them being as valid for you100 years from now as they are today? Would youwant to hold those core values, even if at somepoint one or more of them became a competitivedisadvantage? If you were to start a new organiza-tion tomorrow in a different line of work, what corevalues would you build into the new organizationregardless of its industry? The last three questionsare particularly important because they make thecrucial distinction between enduring core values

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

to anythingD Hard work and continuous self-improvement

Sonyn Elevation of the Japanese culture and

national statusG Being a pioneer - not following others; doing

the impossibleG Encouraging individual ability and creativity

Walt DisneyG No cynicismG Nurturing and promulgation of "wholesome

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

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

Core Purpose. Core purpose, the seeond part ofcore 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'tjust describe the organization's output or targetcustomers; 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 speechDavid Packard gave to HP employees in 1960, getsat the deeper reasons for an organization's existencebeyond 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 peopleassume, wrongly, that a company exists simply to makemoney. While this is an important result of a company'sexistence, we have to go deeper and find the real reasonsfor our being. As we investigate this, we inevitably cometo the conclusion tbat a group of people get togetber andexist as an institution tbat we call a company so they areable to accomplisb sometbing collectively that theycould 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 businessworld and] see people who are interested in money andnotbing else, but the underlying drives come largely froma desire to do something else: to make a product, to givea 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-

68 HARVARD BUSINESS REVIEW September-October 1996

VISION

ness strategies (which should change many timesin 100 years). Whereas you might achieve a goal orcomplete a strategy, you cannot fulfill a purpose,- itis like a guiding star on the horizon-forever pur-sued but never reached. Yet although purpose itselfdoes not change, it does inspire change. The veryfact that purpose can never be fully realized meansthat an organization can never stop stimulatingchange and progress.

In identifying purpose, some companies makethe mistake of simply describing their current prod-uct lines or customer segments. Wedo not consider the following state-ment to reflect an effective purpose:"We exist to fulfill our governmenteharter and participate in the sec-ondary mortgage market by pack-aging mortgages into investmentseeurities." Tbe statement is merelydescriptive. A far more effectivestatement of purpose would be thatexpressed by the executives of theFederal National Mortgage Association, FannieMae: "To strengthen the social fabric by continual-ly democratizing home ownership." The secondarymortgage market as we know it migbt not even ex-ist in 100 years, but strengthening the social fabricby continually democratizing home ownership canbe an enduring purpose, no matter how much theworld 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 toeliminate 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 badtraditionally been shut out of home ownership -minorities, immigrants, and low-income groups.

Similarly, 3M defines its purpose not in terms ofadhesives and abrasives but as the perpetual questto solve unsolved problems innovatively-a purpose

Core ideology consists of corevalues 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 managementconsulting but to help corporations and govern-ments be more successful: in 100 years, it mightinvolve methods other than consulting. Hewlett-Packard doesn't exist to make electronic test andmeasurement equipment but to make technicalcontributions that improve people's lives - a pur-pose that has led the company far afield from itsorigins 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 aroundthe world

Fannie Mae: To strengthen the social fabric bycontinually democratizing home ownership

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

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

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

Mary Kay Cosmetics: To give unlimited opportunityto women

McKinsey & Company: To help leading corporationsand 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 applyingtechnology for the benefit of the public

Telecare Corporation: To help people with mentalimpairments realize tbeir full potential

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

Walt Disney: To make people happy

HARVARD BUSINESS REVIEW September-Octobt-r Í996 69

VISION

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

One powerful method for getting at purpose isthe five whys. Start with tbe descriptive statementWe make X products or We deliver X services, andthen ask, Why is tbat important? five times. Aftera few whys, you'll find that you'regetting down to tbe fundamentalpurpose of tbe organization.

We used tbis method to deepenand enricb a discussion about pur-pose wben we worked with a certainmarket-research company. Tbe exec-utive team first met for several hoursand 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 thebest market-researcb data available? After somediscussion, tbe executives answered in a way tbatreflected a deeper sense of tbeir organization's pur-pose: To provide tbe best market-researcb dataavailable so tbat our customers will understandtbeir markets better tban tbey could otberwise.A furtber discussion let team members realize tbattbeir sense of self-wortb came not just from helpingcustomers understand tbeir markets better but alsofrom making a contribution to their customers'success. Tbis introspection eventually led the com-pany to identify its purpose as: To contribute to ourcustomers' success by helping tbem understandtbeir markets. Witb tbis purpose in mind, the com-pany now frames its product decisions not witb tbequestion Will it sell? but witb the question Will itmake a contribution to our customers' success?

The five whys can help companies in any indus-try frame tbeir work in a more meaningful way. Anasphalt and gravel company might begin by saying.We make gravel and asphalt products. After a fewwhys, it could conclude tbat making asphalt andgravel 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 safelyon runways built witb poor workmansbip or inferi-or concrete; because buildings with substandardmaterials weaken witb time and crumble in earth-quakes. From such introspection may emerge thispurpose: To make people's lives better by improv-ing tbe quality of man-made structures. Witb asense of purpose very mucb along tbose lines, Gran-

ite Rock Company of Watsonville, Califomia, wontbe Malcolm Baldrige National Quality Award-notan easy feat for a small rock quarry and aspbaitcompany. And Granite Rock bas gone on to be oneof the most progressive and exciting companieswe've encountered in any industry.

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

Listen to people in truly greatcompanies talk about their

achievements—you will hearlittle about earnings per share.

Maximizing sbarebolder wealtb does not inspire peo-ple at all levels of an organization, and it providesprecious little guidance. Maximizing sharebolderwealtb is tbe standard off-tbe-shelf purpose fortbose organizations tbat bave not yet identifiedtbeir true core purpose. It is a substitute - and aweak one at tbat.

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

One way to get at the purpose tbat lies beyondmerely maximizing sbarebolder wealtb is to playtbe "Random Corporate Serial Killer" game. Itworks 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 moretban fair (even witb a very generous set of assump-tions about the expected future casb flows of thecompany). Suppose furtber tbat tbis buyer wouldguarantee stable employment for all employees attbe same pay scale after tbe purchase but witb noguarantee tbat tbose jobs would be in tbe same in-dustry. Finally, suppose tbe buyer plans to kill tbecompany 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 shelvedforever, and so on. The company would utterly andcompletely cease to exist. Would you accept theoffer? Why or why not? What would be lost if tbecompany ceased to exist? Wby is it important tbattbe company continue to exist? We've found tbisexercise 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 theMars Group, How could we frame tbe purpose ofthis organization so tbat if you woke up tomorrowmorning with enough money in the bank to retire,you would nevertbeless keep working here? Wbatdeeper sense of purpose would motivate you to con-tinue to dedicate your precious creative energies tothis company's efforts?

As they move into the twenty-first century, com-panies will need to draw on the full creative energyand talent of tbeir people. But wby should peoplegive full measure? As Peter Drueker has pointedout, the hest and most dedicated people are ulti-mately volunteers, for tbey have the opportunity todo something else with their lives. Confrontedwitb an increasingly mobile society, cynicismabout corporate life, and an expanding entrepre-neurial segment of the economy, companies morethan ever need to bave a clear understanding oftheir purpose in order to make work meaningfuland therehy attract, motivate, and retain outstand-ing people.

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

cover core ideology. You do not deduce it by lookingat the external environment. You understand it hylooking inside. Ideology has to he authentic. Youcannot fake it. Discovering core ideology is not anintellectual exercise. Do not ask. What core values

You discover core ideologylooking inside. It has to beauthentic. You can't fake it

should we hold? Ask instead, Wbat core values dowe truly and passionately hold? You should notconfuse values that you think the organizationought to have-but does not-wi tb authentic corevalues. To do so would create cynicism throughouttbe 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 partof 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 longas you aeknowledge to the organization that youmust work hard to revive them.

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

Core ideology needs to he meaningful and inspi-rational only to people inside the organization; itneed not be exciting to outsiders. Wby not? Becauseit is tbe people inside the organization wbo need tocommit to the organizational ideology over thelong term. Core ideology can also play a role in de-termining who is inside and who is not. A clear andwell-articulated ideology attracts to the companypeople whose personal values are compatihle witbthe company's core values; conversely, it repelstbose whose personal values are incompatihle. Youcannot impose new core values or purpose on peo-ple. Nor are core values and purpose things peoplecan buy into. Executives often ask, How do we get

people to share our core ideology?You don't. You can't. Instead, findpeople who are predisposed to shareyour core values and purpose; attractand retain tbose people; and let tbosewho do not sbare your core values goelsewhere. Indeed, tbe very proeessof articulating core ideology maycause some people to leave when

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

HARVARD BUSINESS REVIEW Scptemher-Octoher 1996 71

VISION

Don't confuse core ideology itself witb core-ideology statements. A company can bave a verystrong 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 acampus that seems more like a sbrine to tbe com-petitive spirit than a corporate office complex.Giant photos of Nike heroes cover tbe walls, bronzeplaques of Nike atbletes bang along tbe Nike Walkof Fame, statues of Nike athletes stand alongsidetbe running track that rings the campus, and build-ings honor champions sucb as Olympic maratbonerJoan Benoit, basketball superstar Micbael Jordan,and tennis pro John McEnroe. Nike people wbo donot feel stimulated by the competitive spirit andthe urge to be ferocious simply do not last long intbe culture. Even tbe company's name reflects asense of competition: Nike is tbe Greek goddess ofvictory. Tbus, altbougb Nike has not formally ar-ticulated its purpose, it clearly has a strong one.

Identifying core values and purpose is tbereforenot an exercise in wordsmithery. Indeed, an organi-zation will generate a variety of statements overtime to describe tbe core ideology. In Hewlett-Packard's arcbives, we found more than half adozen distinct versions of the HP Way, drafted byDavid Packard between 1936 and 1972. All versionsstated the same principles, but tbe words used var-ied depending on the era and tbe circumstances.Similarly, Sony's eore ideology bas been statedmany different ways over tbe company's bistory.At its founding, Masaru Ibuka described two keyelements of Sony's ideology: "We shall welcometechnical difficulties and focus on highly sophisti-cated technical products that have great usefulnessfor society regardless of tbe quantity involved; weshall place our main emphasis on ability, perfor-mance, and personal character so tbat each individ-ual can show the best in ability and skill."' Fourdecades 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 tbewhole 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 MotorCompany, early 1900s)

• Become tbe company most known for changingthe worldwide poor-quality image of Japaneseproducts (Sony, early 1950s)

• Become the most powerful, the most serviceable,tbe most far-reaching world financial institutiontbat has ever been (City Bank, predecessor toCiticorp, 1915)

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

Common-enemy BHAGs involveDavid-versus-Goliath thinking

• Knock off RJR as tbe number one tobaccocompany 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-comingorganizations

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

D Become as respected in 20 years asHewlett-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 everymarket we serve and revolutionize tbis companyto bave the strengths of a big company combinedwitb the leanness and agility of a small company(General Electric Company, 1980s)

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

O Transform this division from a poorly respectedinternal products supplier to one of the mostrespected, exciting, and sougbt-after divisions inthe company (Components Support Division of acomputer 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 bringout tbe best in a person. This is tbe vital force ofSony.'" Same core values, different words.

You sbould tberefore focus on getting tbe contentrigbt-on capturing tbe essence of tbe core valuesand purpose. Tbe point is not to ereate a perfectstatement but to gain a deep under-standing of your organization's corevalues and purpose, wbicb Can thenbe expressed in a multitude of ways.In fact, we often suggest tbat oncetbe core has been identified, man-agers sbould generate their ownstatements of tbe core values andpurpose 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-wbereascore ideology captures wbat you stand for andwby you exist. Core competencies sbould be wellaligned witb a eompany's core ideology and are of-ten rooted in it; but tbey are not tbe same tbing. Forexample, Sony bas a core competence of miniatur-ization-a strength tbat can be strategically appliedto a wide array of products and markets. But it doesnot bave a core ideology of miniaturization. Sonymigbt not even bave miniaturization as part of itsstrategy in 100 years, but to remain a great compa-ny, it will still bave tbe same core values describedin tbe Sony Pioneer Spirit and the same fundamen-tal reason for being-namely, to advance tecbnologyfor tbe benefit of tbe general public. In a visionarycompany like Sony, core competencies change overthe decades, wbereas eore ideology does not.

Once you are clear about tbe core ideology, yousbould feel free to cbange absolutely anything tbatis not part of it. From then on, whenever someonesays sometbing sbould not cbange because "it'spart of our culture" or "we've always done it tbatway" or any sucb excuse, mention this simple rule:If it's not core, it's up for cbange. Tbe strong versionof the rule is, // it's not core, change it! Articulatingcore ideology is just a starting point, bowever. Youalso must determine wbat type of progress youwant to stimulate.

Envisioned Future

Tbe second primary component of tbe visionframework is envisioned future. It consists of twoparts: 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 conveysconcreteness - 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 researchtbat visionary companies often use bold missions-or wbat we prefer to call BHAGs (pronounced

Companies need an audaciouslO-to-30-year goal to progress

toward an envisioned future.

BEE-bags and sbortband for Big, Hairy, AudaciousGoals|-as a powerful way to stimulate progress. Allcompanies bave goals. But tbere is a difference be-tween merely baving a goal and becoming commit-ted to a buge, daunting cballenge-sucb as climbingMount 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 clearfinisb line, so tbe organization can know wben itbas achieved tbe goal; people like to sboot for finisblines. A BHAG engages people-it reacbes out andgrabs tbem. It is tangible, energizing, bigbly fo-cused. People get it rigbt away; it takes little or noexplanation. For example, NASA's 1960s moonmission didn't need a committee of wordsmitbs tospend endless bours turning tbe goal into a verbose,impossible-to-remember mission statement. Tbegoal itself was so easy to grasp-so compelling in itsown rigbt-tbat it could be said 100 different waysyet be easily understood by everyone. Most corpo-rate statements we've seen do little to spur forwardmovement beeause they do not contain the power-ful mechanism of a BHAG.

Altbougb organizations may have many BHAGsat different levels operating at tbe same time, vi-sion requires a special type of BHAG-a vision-levelBHAG that applies to the entire organization andrequires 10 to 30 years of effort to complete. Settingthe BHAG tbat far into tbe future requires tbinkingbeyond tbe current capabilities of tbe organizationand tbe current environment. Indeed, inventingsucb a goal forces an exeeutive team to be vision-ary, ratber tban just strategic or tactical. A BHAGshould not he a sure bet-i t will have perhaps onlya 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 effortand 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: targetBHAGs, common-enemy BHAGs, role-modelBHAGs, and internal-transformation BHAGs. (Seethe insert "Big, Hairy, Audacious Goals Aid Long-Term Vision.")

Vivid Description. In addition to vision-levelBHAGs, an envisioned future needs what we callvivid description - that is, a vibrant, engaging,and specific description of what it will be like toachieve the BHAG. Think of it as translating the vi-sion from words into pictures, of creating an imagethat people can carry around in their heads. It is aquestion 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 goalof democratizing the automobile with this vivid de-scription: "I will build a motor car for the greatmultitude.... It will be so low in price that no manmaking a good salary will be unable to own oneand enjoy with his family the hlessing of hours ofpleasure in God's great open spaces.... When I'mthrough, everybody will he able to afford one, andeveryone will have one. The horse will have disap-peared from our highways, the automobile will betaken 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 wasable to describe vividly the goal of becoming one of

You must translate the visionfrom words to pictures with avivid description of what it willbe 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 significantproduct 'hits' in the marketplace largely because ofour teehnical contribution.... We will have pride inourselves.... The hest up-and-coming people in thecompany will seek to work in our division.... Peo-ple will give unsolicited feedback that they lovewhat they are doing.... [Our own] people will walkon the halls of their feet.... [They] will willinglywork hard because they want to.... Both employeesand customers will feel that our division has con-tributed to their life in a positive way."

In the 1930s, Merck had the BHAG to transformitself from a chemical manufacturer into one of thepreeminent drug-making companies in the worid,with a research capability to rival any major univer-sity. In describing this envisioned future, GeorgeMerck said at the opening of Merek's research facil-ity in 1933, "We believe that research work carriedon with patience and persistence will bring to in-dustry and commerce new life; and we have faiththat in this new laboratory, with the tools we havesupplied, science will be advanced, knowledge in-creased, and human life win ever a greater freedomfrom suffering and disease.... We pledge our everyaid that this enterprise shall merit the faith we havein it. Let your light so shine-that those who seekthe Truth, that those who toil that this world maybe a better plaee to live in, that those who hold aloftthat torch of science and knowledge through thesesocial and economic dark ages, shall take new cour-age and feel their hands supported."

Passion, emotion, and conviction are essentialparts of the vivid description. Some managers areuncomfortable expressing emotion about theirdreams, hut that's what motivates others. Ghurchillunderstood that when he described the BHAG fac-ing Great Britain in 1940. He did not just say, "BeatHitler." He said, "Hitler knows he will have tobreak us on this island or lose the war. If we canstand up to him, all Europe may be free, and the lifeof the world may move forward into broad, sunlit

uplands. But if we fail, the wholeworld, including the United States,including all we have known andcared for, will sink into the abyss ofa new Dark Age, made more sinisterand perhaps more protracted by thelights of perverted science. Let ustherefore brace ourselves to ourduties and so bear ourselves that ifthe 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 ideologyand envisioned future. In particular, don't confusecore purpose and BHAGs. Managers often exchangeone for the other, mixing the two together or failingto articulate both as distinct items. Gore purpose-not some specific goal-is the reason why the orga-nization exists. A BHAG is a clearly articulatedgoal. Gore purpose can never be completed, where-as the BHAG is reachable in 10 to 30 years. Thinkof the core purpose as the star on the horizon tobe chased forever; the BHAG is the mountain to beclimbed. Once you have reached its summit, youmove on to other mountains.

74 HARVARD BUSINESS REVIEW September-October

Identifying core ideology is a discovery process,but setting tbe envisioned future is a creativeprocess. We find tbat executives often bave a greatdeal of difficulty coming up witb an excitingBHAG. 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 tbevivid description and backing from tbere into tbe

What's needed is such a bigcommitment that when peoplesee 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; whatwould we love to see? Wbat sbould this companylook like? Wbat sbould it feel like to employees?Wbat sbould it have achieved? If someone writes anarticle for a major business magazine about tbiscompany 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 somethingfor tbe entire company, it is just too generic to beexciting - sometbing banal like 'advance biotecb-nology worldwide.'" Asked to paint a picture of tbecompany in 20 years, tbe executives mentionedsuch things as "on tbe cover of Business Week as amodel success story...the Fortune most admiredtop-ten list...tbe best science and business gradu-ates want to work bere...people on airplanes raveabout 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 anexample of excellent management and progressivetbinking," and so on. From this, they were able toset tbe goal of becoming as well respected as Merekor as Johnson & Johnson in biotechnology.

It makes no sense to analyze wbetber an envi-sioned future is tbe rigbt one. With a creation-andtbe task is creation of a future, not prediction-tbcrecan be no rigbt answer. Did Beethoven create theright Ninth Symphony? Did Shakespeare create therigbt Hamlet^ We can't answer these questions;they're nonsense. Tbe envisioned future involvessuch essential questions as Does it get our juicesflowing? Do we find it stimulating? Does it spurforward momentum? Does it get people going? The

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

tions until it was acbieved. Similar-ly, the NASA moon mission contin-ued to galvanize people even thoughPresident John F. Kennedy (the leaderassociated with setting the goal) diedyears before its completion.

To create an effective envisionedfuture requires a certain level of un-reasonable confidence and eommit-ment. Keep in mind tbat a BHAG isnot 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-reacbingworld financial institution that has ever been," asGity Bank did in 1915. It's not a tepid claim tbat"we will democratize tbe automobile," as HenryFord said. It was almost laughable for PhilipMorris-as the sixth-place player with 9% marketsbare in the 1930s-to take on the goal of defeatingGoliath RJ Reynolds Tobacco Gompany and becom-ing number one. It was bardly modest for Sony, asa small, casb-strapped venture, to proclaim tbe goalof cbanging the poor-quality image of Japaneseproducts around the world. (See the insert "PuttingIt All Together: Sony in tbe 1950s."| Of course, it'snot only tbe audacity of tbe goal but also tbe levelof eommitment to the goal that counts. Boeingdidn'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 abouttbe idea of crusbing Adidas; tbey went on a crusadeto fulfill tbe dream. Indeed, the envisioned futureshould produce a bit of tbe "gulp factor": wben itdawns on people what it will take to achieve thegoal, there sbould he an almost audible gulp.

But what about failure to realize the envisionedfuture? In our research, we found that the visionarycompanies displayed a remarkable ability to acbieveeven tbeir most audacious goals. Ford did democ-ratize tbe automobile; Giticorp did become themost far-reacbing hank in the world; Philip Morrisdid rise from sixth to first and beat RJ Reynoldsworldwide; 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 ValuesG Elevation of the Japanese culture and

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

the impossibleÜ Encouraging individual ability and creativity

PurposeTo experience the sheer joy of innovation and theapplication of technology for tbe benefit and pleasureof the general public

Envisioned Future

BHAGBecome the company most known for changing theworldwide poor-quality image of Japanese products

Vivid DescriptionWe will create products that become pervasivearound the world.... We will be the first Japanesecompany to go into the U.S. market and distributedirectly.... We will succeed with innovations thatU.S. companies have failed at - such as the transistorradio.... Fifty years from now, our brand name will beas well known as any in the world. ..and will signifyirmovation and quality that rival the most innovativecompanies anywhere.... "Made in Japan" will meansomething fine, not something shoddy.

panies in our research frequently did not achievetheir 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 audaciousambitions. The difference does not lie in charis-matic, visionary leadership: the visionary com-panies often achieved their BHAGs without suchlarger-than-life leaders at the helm. Nor does thedifference 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 keepwhat works" than by well-laid strategic plans.Rather, their success lies in building the strength oftheir organization as their primary way of creatingthe 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 thesuccessful moon landings. After you've landed onthe moon, what do you do for an encore? Ford suf-fered from the syndrome when, after it succeeded indemocratizing the automobile, it failed to set a newgoal of equal significance and gave General Motorsthe opportunity to jump ahead in the 1930s. AppleComputer suffered from the syndrome after achiev-ing the goal of creating a computer that nontechiescould use. Start-up companies frequently sufferfrom the We've Arrived Syndrome after going pub-lic or after reaching a stage in which survival nolonger seems in question. An envisioned futurehelps an organization only as long as it hasn't yetbeen 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 ybecome the dominant commercial , . ^aircraft company in the world? Be- companies IS to preserve thecause of its superb engineering and 1 • 1 TJ. 'marketing organization, which had QOie SLUá S t i m U l a t e prOgreSS. i t ISthe ability to make projects like the747 a reality. When asked to namethe most important decisions thathave contributed to the growth andsuccess of Hewlett-Packard, David Packard an-swered entirely in terms of decisions to build thestrength 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 that1the

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

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

76 HARVARD BUSINESS REVIEW September-October 1996

VISION

most of tbose statements turn out to be a muddledstew of values, goals, purposes, philosophies, be-liefs, aspirations, norms, strategies, practices, anddescriptions. Tbey are usually a boring, confusing,structurally unsound stream of words tbat evoketbe response "True, but who cares?" Even moreproblematic, seldom do tbese statements have adirect link to the fundamental dynamic of vision-ary companies: preserve the core and stimulateprogress. Tbat dynamic, not vision or missionstatements, is the primary engine of enduring com-panies. Vision simply provides the context forbringing this dynamic to life. Building a visionarycompany requires 1% vision and 99% alignment.Wben you bave superb alignment, a visitor could

drop in from outer space and infer your vision fromtbe 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 importantwork. But the first step will always be to recast yourvision or mission into an effective context forbuilding a visionary company. If you do it right, youshouldn't have to do it again for at least a decade.

1. David Packard, speech given to Hewlett-Packard's training sroup onMarch 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.

I "i í

TOLU MouseCOOKlElS

loo AHEAD 1 oo

~\N& "^o-vX

3 :

^

CARTOON BY NICK DOWNES 77

Harvard Business Review Notice of Use Restrictions, May 2009

Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost is licensed for

the private individual use of authorized EBSCOhost users. It is not intended for use as assigned course material

in academic institutions nor as corporate learning or training materials in businesses. Academic licensees may

not use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by any

other means of incorporating the content into course resources. Business licensees may not host this content on

learning management systems or use persistent linking or other means to incorporate the content into learning

management systems. Harvard Business Publishing will be pleased to grant permission to make this content

available through such means. For rates and permission, contact permissions@harvardbusiness.org.