Built to … Deteriorate?

Management consultant & all-around organizational gadfly-guy Tom Peters has taken to criticizing Jim “Built to Last” Collins in speeches. Peters says that organizations are not built to last (the title of Collins’ best-selling management book); they are built to take advantage of ephemeral market opportunities and then they, or, more precisely, the people within them, move on. He even cites a few BTL companies, puckishly pointing out they seem to be built to deteriorate rather than last.

Fast Company has taken the bait in its November issue, and it looks back at the companies Jim Collins says were built to last, and the verdict is mixed:

Today, every one of the 18 companies cited is still in business, still a household name, still producing lightbulbs or computers or cigarettes or services or experiences. And while Collins and Porras eschew the idea of measuring total shareholder return — saying that if that was their goal, they’d have picked a different group — it turns out that they’re pretty darn good stock pickers.

Taken as a whole, the basketful of companies had a total shareholder return of 206% between August 1994 and August 2004, compared with 132% for the S&P over the same period. Citigroup alone has returned a breathtaking 848%. The nine companies in the comparison group that still trade today (some were sold to other companies and some went bust) returned just 32% on average. The original group included such doozies as Howard Johnson, Ames Department Stores, and Zenith Electronics — but also Pfizer and Texas Instruments, which have walloped the “visionary” companies they were matched against.

So it is mixed, and it gets more mixed if you take Citigroup out of the numbers. The BTL cohort suddenly turns in more earthbound numbers. And, more importantly, at least seven of the 18 BTL companies are having troubles:

It didn’t turn out that way for the seven companies that have faltered since the list first came out. While the S&P 500 Index has risen 132% in the 10 years ending August 31, Motorola is down 2% from its 1994 price; Sony has risen just 20% in a decade that worshipped technology companies; and Disney has been in a long slump, dogged by the 1996 acquisition of Capital Cities/ABC (a deal Collins lauded in 1995 as “another big Disney gulp”) and questions about CEO Michael Eisner’s leadership. It has only recently showed some improvement.