Clock Builders, Bad Ideas and Winning Companies

By: Thomaz Srougi

Posted: 5/27/04

"CEOs eventually retire or die. But not winning companies for they have the organizational strength to transcend any individual leader..."

Most of us with entrepreneurial desires believe the idea precedes the company. We also believe we need a very good idea, not just a simple one to get there. We firmly see the company as the means to reach our idea, product. Yet, research from James Collins and Jerry Porras arrive at the opposite conclusion. They found that most successful companies were built before its founders had an idea, that most of them had actually poor ideas and that these companies were created by a type of entrepreneur denominated "clock builder." Mainly, they concluded that the best entrepreneurs first saw their product as the means for the company, and their success was related to success of their companies, not ideas and products.

Collins and Porras took six years to do their research and find its conclusions. They chose 18 winning companies in 18 industries before they started their research. They have analyzed what factors differentiated these companies from their competitors. Both researchers tried to identify the types of entrepreneurs involved in the foundation of such companies. They have divided entrepreneurs in two groups, the "time -tellers" and the "clock builders". Understanding their differences is key if you want to be an entrepreneur. Some companies elected were Citicorp, Merck, Nordstrom and Proctor & Gamble among others.

The time-teller is a remarkable person that has the ability to look to the sun and tell the precise time of the day at any moment, in hours, minutes and seconds. The time-teller has a wonderful and unique gift, and she would be revered for her ability to tell time. Yet, the problem with this time-telling aptitude is that it cannot be perpetuated. When the time-teller dies, his ability disappears with him.

The clock builder assembles clocks that also can precisely provide the hour, minutes and seconds at any time of the day. In contrast with the time-teller, the clock builder will perpetuate his ability to tell time by building the clock.

Companies function in the same way. Some companies were created by time-tellers and other companies by clock builders. One of the main characteristics of winning companies is that they were created by clock builders.

You want to be a clock builder. In analyzing these two profiles, Collins and Porras arrived at some conclusions. Clock builders focus on the architecture of the company. In words, the key people of the formative stages of the winning companies had a stronger organizational approach than those in other companies that performed below the winning ones. When the clock builders are gone, their values, vision and ability will be perpetuated with the organization they have created.

Before James Stillman, president of Citicorp from 1891 to 1909, retired, he filled the new Citicorp building with people who shared his own vision and entrepreneurial spirit in order to perpetuate Citicorp's core competencies and values. Stillman was a clock builder. He was concerned about creating mechanisms that would enrich his organization.

Yet, if you are more likely to be a time-teller, you need to rethink your values. Time-tellers are seen as pragmatic and individualistic leaders. Time-tellers are focused on the product, not organizations. Time-tellers' main goal is to increase market share and other profit measures. For clock builders, market share is a result achieved by a great organization.

Albert Wiggin, president from Chase from 1911 to 1929, did not delegate at all. He was a time-teller. He was seen as decisive, humorless, and ambitious. His primary concern appeared to be his own aggrandizement. Wiggin was definitely a time-teller. Interestingly, before Collins and Porras learned about Stillman and Wiggin, they had already classified Citicorp as a winning company and Chase as a competitor with smaller performance.

Most clock builders start the company without an idea. Another interesting conclusion from Collins and Porras is that clock builders are more likely to start a company before they even had an idea of what to sell. Evidence from their study showed that 84% of the winning companies were founded before a product was created. Many entrepreneurs, from winning companies, relied so much in the architecture of a company, which at the time the company was ready, they did not have an idea of what to sell.

This conclusion that the product precedes the company goes against everything we have learned from business school's books. There is no problem with having an idea before starting a company. And actually if you are planning to fund your effort with private equity, this might be the only path given the current mechanics of the process.

The fact is that the winning companies from the mentioned study were founded by people that saw the products as a vehicle for the company, and not the company as a vehicle for the products.

Perhaps, for this reason, winning companies are more likely to start with a poorly defined product idea, or even a bad one. Nordstrom started selling shoes. Merck started importing chemicals from Germany. Proctor & Gamble started producing candles. Because the founders of these firms were able to build outstanding organizations, their products became great.

If one relates the success of her company with the success of a specific idea, as many people do, than she is more likely to give up on the company if the idea fails. Collins and Porras argue that if one associates her company with the idea, "one is more likely to have a love affair with the idea, and stick with it for too long, while the company should be moving vigorously on to other things".

Al these ideas might seems a little awkward at first glance, but indeed these are the results from great research. If you are a potential entrepreneur or a CEO aspirant, you need to remember this. Winning companies, clock builders, perpetuation of an ability are important concepts. If you are interested, spend $18 bucks on Built to Last, from Collins and Porras. And always remember that "...leaders eventually die. But not winning companies for they have the organizational strength to transcend any individual leader..."