As part of our 30th-anniversary issue, Inc. asked Jim Collins, author
of Good to Great and Built to Last, what we might expect in the next
30 years. His answer: uncertainty, chaos, turbulence, and risk. In
other words, it's not a bad time to be an entrepreneur
From: Inc. Magazine, April 2009 | By: Bo Burlingham
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You would be hard pressed to find two individuals more determined to
uncover the secrets of business success than Jim Collins and Bo
Burlingham. Collins is the author of the best-selling business books
Built to Last and Good to Great, both of which address this simple but
vexing question: Why do some companies become great while others
flounder? Burlingham, an editor-at-large of Inc., has spent his career
pondering the same question. The author of Small Giants and co-author
of The Knack (with Inc. columnist Norm Brodsky), as well as two books
with open-book-management guru Jack Stack, Burlingham joined the
magazine's staff in 1983 and has developed an unmatched ability to get
inside some of the nation's most fascinating organizations. For Inc.'s
30th anniversary, we decided to bring these two business thinkers
together for a conversation that would serve as a kind of state-of-the-
entrepreneurial nation -- examining where we have been, where we are,
where we are headed, and what it will take to succeed once we get
there. Burlingham met with Collins at his research firm, the
ChimpWorks, in Boulder, Colorado. An edited transcript of the
conversation follows.
I saw your talk at the last Inc. 500 conference and was struck by your
thoughts about the evolution of business over the past 100 years. You
believe that every 20 or 30 years, there is a major development that
we become aware of only in retrospect.
Yes, that's right. Around the turn of the last century, for example,
we began to see the business corporation emerge as a building block of
modern society, but if you'd made that observation to people in 1900,
they wouldn't have known what you were talking about. Then, in the
period of the 1920s to '40s, we saw the emergence of management as a
fundamental function and discipline in society. It was Peter Drucker
who best articulated that idea. He saw that we were becoming a society
in which management would be one of the central, important professions
-- like medicine or law. Then came the third big development, which
really flourished after the Second World War: the idea that work can
be systematically broken down into pieces and reassembled in ways that
dramatically increase both performance and humanity.
Where does entrepreneurship fit in?
That was the next big development. Up to about 1980 or so, we tended
to view entrepreneurship as sort of a weird black art. There were
these crazy, creative people who weren't like normal people. They
didn't work for other people. They went off and started their own
things. But beginning in the 1980s, there was a huge shift, and I
think Inc. had a lot to do with it. We began to get the idea that
entrepreneurship is a systematic, replicable process. Along with that
recognition came a variety of mechanisms -- capital mechanisms,
education mechanisms, media mechanisms, and so on. We realized that
being an entrepreneur is a choice. It's not about temperament or
personality. It's about action.
That's interesting. There were a lot of mavericks at our early
conferences, but in the late 1980s, they began giving way to
professional entrepreneurs.
I think we saw the best of entrepreneurship in the '80s. I invited
Steve Jobs to my entrepreneurship class at Stanford in 1988 or '89. He
was doing NeXT at the time. He said, "We aren't creating computers. We
are creating bicycles for the mind." That was his phrase. He said the
most efficient locomotive vehicle is a bicycle, and you could create a
bicycle for the mind. It just happened to be a personal computer. Now,
that way of looking at a business is very different from thinking,
We're creating a company so everybody can get rich and retire. If
that's how Jobs had seen it, he would have quit a long time ago. Same
with Yvon Chouinard at Patagonia. He wanted to make incredible
products, but those products would be part of something bigger --
creating a role model for people who wanted to build a sustainable
organization. It was a noble vision of entrepreneurship, and a lot of
these entrepreneurs shared it.
Some people might be surprised to hear you speak so passionately about
entrepreneurship, considering that both Built to Last and Good to
Great focused on giant public companies.
It just seemed to me that the best way to understand how great
entrepreneurs become great company builders was to take the greatest
companies of the 20th century and then rewind the tape of history to
when they were start-ups. So, let's look at what Bill Hewlett and
David Packard were doing and what [Sony founders] Akio Morita and
Masaru Ibuka were doing and what Sam Walton was doing when he had two
stores. There are thousands of start-ups, far fewer successful start-
ups, fewer still that become successful companies, even fewer that go
from successful company to enduring company, and a tiny handful that
become great, enduring companies. I wanted to know how the great,
enduring ones got started. So, for me, Built to Last was an
entrepreneur's book.
How do you define entrepreneurship?
I take a broad view of it. The traditional definition -- founding an
entity designed to make money -- is too narrow for me. I see
entrepreneurship as more of a life concept. We all make choices about
how we live our lives. You can take a paint-by-numbers approach, or
you can start with a blank canvas. When you paint by numbers, the end
result is guaranteed. You know what it's going to be, and it might be
good, but it will never be a masterpiece. Starting with a blank canvas
is the only way to get a masterpiece, but you could also blow up. So,
are you going to pick the paint-by-numbers kit or the blank canvas?
That's a life question, not a business question.
It has to do with your ability to handle risk, no?
Not risk. Ambiguity. People confuse the two. My students used to come
to me at Stanford and say, "I'd really like to do something on my own,
but I'm just not ready to take that much risk. So I took the job with
IBM." And I would say, "You're not ready for risk? What's the first
thing you learn about investing? Never put all your eggs in one
basket. You've just put all your eggs in one basket that is held by
somebody else." As an entrepreneur, you know what the risks are. You
see them. You understand them. You manage them. If you join someone
else's company, you may not know those risks, and not because they
don't exist. You just can't see them, and so you can't manage them.
That's a much more exposed position than the entrepreneur faces. But
there's lower ambiguity on the paint-by-numbers path: very clear but
more risky. The entrepreneurial path: very ambiguous but less risk. Of
course, the truth is that it's all ambiguous, anyway. If you think you
can predict the future, you're crazy.
I don't know many people who feel they can predict the future these
days.
We've had a wake-up call. Some people had it sooner than others. After
the bubble burst in 2000, I was talking about the ideas in Good to
Great with some portfolio companies of venture capitalists. They said,
"This is all very interesting. But we're running out of cash. The
bubble's burst. We're going to die. What does your research have to
say to us?" Frankly, I had nothing to say except, "Gee, bummer." But
as I thought about it, I realized those technology companies were
experiencing something that was going to happen to everybody, only
most of us didn't know it yet.
An image popped into my head. It was a climbing analogy. Most people
are in the comfort of base camp, and they can go on doing what they're
doing even if there is a big storm. But the people who wake up high on
that mountain in a howling storm are in grave danger, like the
technology people after the bubble burst. It hit me that we're all
heading up there, whether we like it or not. We're heading into a
world characterized by big events, big forces, massive storms. We're
going to be vulnerable little specks high on the mountain when the
storm hits out of nowhere. And if we're not prepared, we're going to
die up there. Or we're going to be in real serious trouble.
How do you prepare for something you can't see coming?
That was the question. I thought, OK. We need to understand what
separates those who do well from those who don't do well when the
world spins completely out of our control. How are we going to study
this question? This was in 2002. We decided to look at the 50 best-
performing IPOs since 1970-72 and see how they did 15 years out. They
were small and vulnerable when they came into the world. We'd ask
them, "What did you do on that mountain? How did you do so well?" Of
course, we found others that didn't do as well. We just finished six
years of what we call our turbulence research.
That was a great question to be asking in 2002. It's what everyone is
wondering about today.
We are now, I think, having to adjust to dealing with a world that is
going to be ferocious. We don't have any practice with that. People
like me who grew up in the postwar period are not practiced at the
volatilities, the turbulence, the uncertainties of the world that will
probably define the second half of my life.
You sound pessimistic.
No. It is only in times like these that you get a chance to show your
strength. In the end, I think we need to have absolute faith in our
ability to deal with whatever is thrown at us. And we need to have a
complete, realistic paranoia that a lot can be thrown at us. It's our
ability to put those two contradictory ideas together: We need to be
prepared for what we can't predict and, at the same time, have this
total, unwavering faith that we will find a way to deal with all of
it. And I believe we will. I don't believe the world will treat us
well, but we will figure out how to do very well.
What's the source of your optimism?
A lot of it has to do with the young generation. A general at West
Point told me, "This is the most inspired and inspiring generation to
come through West Point since 1945." I see the same thing with the
young people who come to work for me. They have a sense of
responsibility and service and a lack of cynicism that is remarkable
and wonderful. It's an ethos, and it's collective. That's what's
really powerful. It's connected technologically. It's not grandiose,
but there is a fundamental assumption of being part of a much larger
world and a much larger set of aspirations. The world can be a really
awful, brutal, turbulent place. And yet I'm hopeful precisely because
of this generation of kids. I really think we ought to just give them
the keys as soon as we can. Let them run it.
Do you see that ethos manifesting itself in the world of
entrepreneurship?
Absolutely. I'll give you my entrepreneur for this decade: Wendy Kopp
of Teach for America. Her organization is truly an entrepreneurial
creation that is out to utterly transform education. It's taking an
entrepreneurial, let's-do-something approach to tackling a massive
social problem.
That's interesting. Of course, it's a not-for-profit.
Yes, but think about the leading entrepreneurs of the past three
decades: Steve Jobs, Ken Iverson, Herb Kelleher, Anita Roddick, Yvon
Chouinard, Howard Schultz, Jeff Bezos. What jumps out at you as being
consistent across all those people?
The larger purpose of what they were doing.
Right. They defined success on a very big scale. For Steve Jobs, it
was about much more than selling computers. For Yvon Chouinard, more
than clothing. For Anita Roddick, more than cosmetics. For Howard
Schultz, more than coffee. For Jeff Bezos, more than online retailing.
Wendy Kopp fits right in. We're talking big -- millions of kids,
transforming society. The ambitions are huge.
Steve Jobs was in the very first issue of Inc., back in April 1979.
How have the basic skills required to build a great company changed
from then to now?
I would say that the basic principles have largely not changed, but
the skills are always changing. For example, nothing would suggest
that the importance of the who has changed. If anything, our
turbulence research reinforces the idea that the most important
decisions are always who decisions. Whether you're running a business
in 1812, 1886, 1925, 1950, 1975, 2000, 2050, I see nothing to
contradict the principle that who comes first and what comes second,
for a very simple reason: If you cannot predict the what, you have to
be able to do a good job with the who, because the what is going to be
constantly shifting.
What exactly do you mean by doing a good job with the who?
Do you have a culture of people who A. share a set of values, B. have
very clear responsibilities, and C. perform? Those who build a culture
around those ideas are building upon something that is largely
unchangeable.
But what has changed if you're building a business now, as opposed to
10, 20, or 30 years ago?
The skills. You need to be continually learning. For example, if you
accept the idea that work is infinite and time is finite, you realize
you have to manage your time and not your work. You need a laserlike
focus on doing first things first. And that means having a ferocious
understanding of what you are not going to do. The question used to be
which phone call you wouldn't take. Now, it's the discipline not to
have your e-mail on. The skill is knowing how to sift through the
blizzard of information that hits you all the time. That's a different
skill from what you needed 50 years ago, but the fundamental
principles don't change.
I also see huge changes in the environment for entrepreneurship over
the past 30 years.
Since 1979, I would suggest, there have been five key evolutions that
have helped bring to life the idea of entrepreneurship as a
systematic, replicable process. They amplify it. They facilitate it.
They reinforce it. Number 1 has to do with capital mechanisms. Venture
capital was still a relatively new concept in the 1970s. Now, you have
all kinds of venture funds, angel networks, private equity, search
funds. There's also the democratization of the stock market, which
made it easier for companies to have IPOs. If you compare 1979 with
2009, the evolution of the capital markets has been a big change and a
really positive one.
Actually, there are all kinds of resources available to entrepreneurs
today that weren't around in 1979 -- including, dare I say, Inc.
That's the second evolution: the idea that entrepreneurship is a
learnable process and the emergence of various education mechanisms to
support it. In 1979, there were almost no entrepreneurship courses in
business schools. Now, there are hundreds. You have the rise of
resources like Inc., explicitly targeted at entrepreneurs and designed
to give them practical guidance as well as inspiration. There is a
fairly robust literature in the form of books. These are all premised
on the concept that entrepreneurship is learnable -- a big change from
1979.
And meanwhile, entrepreneur itself has turned from a bad word into a
good word, which is the third evolution. It used to be that
entrepreneurs were viewed as exploitative or sleazy. But the popular
image of entrepreneurship has undergone a drastic transformation --
from negative to not only socially acceptable but heroic. That draws
more and young people into entrepreneurship.
Are you saying that the image of entrepreneurship has changed even
though the fundamental nature of entrepreneurship is pretty much the
same?
Not exactly. That's the fourth evolution. There has been a big shift
away from seeing the essence of entrepreneurship as the creation of a
better mousetrap to viewing it as the development of a better process.
Did Starbucks have a better mousetrap? Did Home Depot have a better
mousetrap? There's always an element of the better mousetrap, but
there are lots of really great mousetraps and very few really great
processes -- whether it be a process of building a brand, building a
culture, rolling your approach out to the world. To me, building a
better mousetrap seems a very strange way to think of
entrepreneurship. Isn't it much more important to create a better
process that will produce many mousetraps over time?
But people who focus on the mousetrap have a different mindset from
those who focus on the process. In a sense, you're talking about
inventors as opposed to company builders, aren't you?
Sort of. That actually brings me to the fifth evolution, which is
related to the one I just mentioned. It has to do with what we might
call the stages of entrepreneurship. I can see three stages that
seemed to predominate at different times in the past 30 years or so.
In Stage One entrepreneurship, you have a great idea. That's fairly
primitive, but it's what people thought about entrepreneurship in
1979. Next, we went into Stage Two, in which you build a successful
business. Then, in the 1990s, we got to the next stage: building a
great company. That is different, because a great company will have,
over time, many successful businesses. I think that may be why Built
to Last spoke to entrepreneurs. It was about the company as the
ultimate creation.
And now, I'm thinking we might be on the cusp of a Stage Four. I'm
putting a big question mark next to it, but I think we might be in a
stage of going from a great company to a great movement.
A movement?
Yes, a movement. Something bigger than the company. Think about the
early days of Apple, which went through all of these stages. They
started with a great idea: "Gee, we've got this neat little computer.
People want it." Then, they built a great business around the Apple
II. Next came the conceptual step of saying, "Actually, Apple is a
company from which many things will happen." The shift was very clear.
And on top of that was the whole notion of a movement -- putting
technology in the hands of individuals, giving them a lot more power.
You see that with a lot of Web 2.0 businesses: The customers become
part of the company.
Exactly. So, maybe that's what we are seeing now -- idea, business,
company, movement. And that's why I have the inclination to see Wendy
Kopp as the heroic entrepreneur of the decade. She had a great idea.
She proved its worth. She built Teach for America into a great
company. But what she is doing goes beyond the company. It's about a
process that will utterly transform people, and they in turn will
utterly transform education in this country. That is a movement. And
if you think about this and about these Gen-Y kids, they get it coming
out of the gate.
In other words, it's not just about having a good idea or building a
successful business or even a successful company. The movement is the
ultimate expression of the idea.
Well, you can't have a great company if you don't have a successful
business, and you can't have a successful business if you don't at
least have a workable idea. So, in order to be a Stage Four
entrepreneur, you have to have Three, Two, and One. You cannot build a
movement without having a strong, strategically sound business
underneath, held together by a really effective set of processes and
values. Those mechanisms enhance the discipline of what you're doing
and therefore enhance the creativity. Creativity and discipline go
hand in hand.
I don't know Teach for America well, but I did go to see High Tech
High in San Diego, and I was struck by how good a businessperson the
CEO, Larry Rosenstock, is. Is that a change from a previous generation
of social entrepreneurs?
I don't know if it's a change, but I think that, as time goes along,
the line between the social sector and the business sector will become
increasingly blurred. We tend to think that the business sector will
teach the social sector, that the social sector is the less
sophisticated cousin. In that, we are wrong. We may actually have more
to learn from your friend at High Tech High and from Wendy Kopp than
they have to learn from those of us in the business sector. Obviously,
they have fundamentally different economic mechanisms. But leaders of
social-sector organizations have to get things done without the same
levers of power available to leaders in the business sector. Business
owners and chief executives have had a tremendous amount of
concentrated power. They don't really have to lead. If I put a gun to
your head, I can get you to do a lot of things. It means I have power.
It doesn't mean I've led. In business, we largely have power, not
leadership. In a social-sector organization, power is diffuse. So,
getting things done requires the ability to truly lead. If you want to
create a movement, you can't order it or demand it or will it into
existence by exerting concentrated power. It just won't work.
I'm curious about what you yourself learn from your studies of great
companies. Do you get ideas you can apply to your company?
I know we're developing important things in our research when it
changes me. Every study has had an impact on the way I go about doing
what I do. What I've learned from the turbulence research has already
started to affect my life. I've become a total paranoid, neurotic
freak. It has shown me the importance of building in big shock
absorbers. I keep a year's operating budget in cash in the bank across
the street all the time and run this place so that we could go an
entire year without a penny of revenue. I learned that from reading
about Bill Gates in the early days of Microsoft. I want to be able to
say at any given time, "If we don't get a penny for three years, we'll
be fine." So, we can focus on our work.
You're a serious rock climber, and there seems to be something about
business and climbing that resonates with people. The metaphors come
tumbling out, one after another.
Climbing has had a gigantic influence on how I think about everything.
I started climbing at 14, and it was the first time that I was really,
really aware of consequences. Kids think they can get away with stuff,
but gravity doesn't care if you have an excuse. It will kill you. It's
completely indifferent. And I just gravitated to the idea that this is
very real. It's also why I have such affection for entrepreneurs.
