Ideology: Entrepreneurship’s Critical Component

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One of the books that I’m reading right now is Built To Last by Jim Collins. It reviews some of the world’s most historically successful companies, comparing them to very similar (from an industry or product offering standpoint) rival companies. His purpose is to attempt to identify why two seemingly similar companies, operating within and during the same markets, can so often experience such different levels of longevity and success. What makes these companies, across a wide range of industries, so different?

In one chapter, he explains an example that really stood out to me and, without a doubt, has clear implications for the culture of entrepreneurship that many business owners operate in today.

Collins describes when Masaru Ibuka started Sony among what he rightly describes as “the ruins of a defeated and devastated 1945 Japan.” Ibuka had just $1,600 in personal savings at the time, which he used to rent out an abandoned telephone operator’s room in a war-torn, destroyed old department store.

It doesn’t get much more ‘startup’ than that.

Collins describes how the vast majority of entrepreneurs in this situation (then, or now) would quickly jump to action. Made anxious by the fireside crackle of their monthly burn rate, most would focus on defining the obvious:

• Quick! What is our product?
• How is it differentiated? (or, for the hip ones — ‘What are we disrupting?‘)
• Also…who will buy this?
• How (soon) can we begin generating cash flow?

The best and brightest would continue, defining personas, channels, targeting and messaging. It’s a no-brainer. These are the elements that will build our $1,600 raft while it’s sink or swim…right?

Ibuka did something amazing. Despite the pressures around him, he didn’t operate from a place of P&L panic. Far before turning a profit, he wrote Sony’s first “prospectus.” In it, he outlined not only the purposes of incorporation, but included clear, thoughtful management guidelines.

Here is a guy, sitting in a charred, glorified phone booth with no clear plan or method for paying the rent in the foreseeable future…and he writes out management guidelines. In his book, Collins includes a paraphrased translation of them:

• We shall eliminate any unfair profit-seeking, persistently emphasize substantial and essential work, and not merely pursue growth.
• We shall welcome technical difficulties and focus on highly sophisticated technical products that have great usefulness in society, regardless of the quantity involved.
• We shall place our main emphasis on ability, performance, and personal character so that each individual can show the best in ability and skill.

Collins explains this perfectly:

How many entrepreneurial companies do you know that included such idealistic sentiments in their founding documents? How many corporate founders have you come across that think about such grand values and sense of purpose when simply struggling to bring in enough cash to keep the doors open? How many companies have you encountered that articulate a clear ideology at the start of the company, yet cannot articulate a clear idea of what products to make?

The consistent discovery that is reached in this book is that the companies that establish, grow and last far beyond their competitors know who they are and why they exist. Of course, profit must be a priority in any sound company but, according to Collins and his team’s research, it’s never the reason for existence.

Despite what many founders would likely say to a journalist or in a team rally, unfortunately, this is all too rare. From Sony, to Boeing, Johnson & Johnson, Disney and many others — there is always a clear ideology that lays the foundation for the pragmatic decisions to be made. When these two work together, unrivaled success happens.

Applying In Entrepreneurship Today

Collins’ observations are spot on — increasingly so. As entrepreneurship becomes more and more of a buzzword, in a ‘get rich quick’ world of crowd-funding, Silicon Valley-themed television shows (a show I love, by the way) and ‘the next Facebooks,’ it’s critical for companies and startups of any size to establish an ideology. Why are you here? What won’t you compromise on? If you don’t know, what are you guided by?

Most importantly, it is critical that all decisions are made relentlessly in alignment with this ideology. It will influence every decision, from product to finance.

It can’t just be a feel good document, framed and hanging on the wall. It must be an accessible, wrinkled outline, figuratively present in every conversation cross-functionally. When it’s built into a culture correctly, teams won’t operate from a place of fear or pure fiscal calculation; they will be free to make decisions confidently in the spirit of what they know the company exists for.

When Ibuka wrote his prospectus, it wasn’t because it sounded good to potential investors. It wasn’t because he needed to create a cool culture that would attract the hippest workforce available. It was because he felt as though the only way to run his company was by these ideals. It didn’t matter who was looking, it would be what he stood for. The result? A culture within his company (which has experienced some profitability by the way), guided by these ideals for over 70 years.

Product is critical. Messaging is critical. Cash flow is critical. These are all pragmatic parts of sound business, but what Collins describes is a research-backed, critical reality of entrepreneurship (and business as a whole).

Guiding a company’s future with only the results of prior decisions (or, commonly, the ambitions of one) is like taking a left, when you don’t know which way is north. Companies need a compass, and the companies with genuine ideology as that compass consistently outperform those without.

I am still making my way through Built To Last, but absolutely recommend it. Would love to hear thoughts. You can see all of my favorite books (and send me a recommendation of your own) on my Reading List.