Jim Collins, co-author of Built to Last, laments that most new ventures are instead Built to Flip:
“I developed our business model on the idea of creating an enduring, great company — just as you taught us to do at Stanford — and the VCs looked at me as if I were crazy. Then one of them pointed his finger at me and said, ‘We’re not interested in enduring, great companies. Come back with an idea that you can do quickly and that you can take public or get acquired within 12 to 18 months.’ “A former student was reporting to me on her recent experiences with the Silicon Valley investment community. As an MBA student at Stanford, she had taken my course on building enduring, great companies. She had come up with a superb concept that involved doing just that. But when she took the idea to Silicon Valley, she quickly got the message: Built to Last is out. Built to Flip is in.
Collins notes that “there are at least two categories of companies that should not be built to last”:
The first category is “the company as disposable injection device.” In this model, the company is simply a throwaway vessel, a means of developing and injecting a new product or an innovative technology into the world. Most biotechnology and medical-device ventures fall into this category. They function as a highly decentralized form of large company R&D — in effect, serving as external labs for one or another of the large, powerful pharmaceutical companies that dominate the world market. With most such ventures, the only question is which large company will end up owning a given technology. One example: Cardiometrics Inc., a Mountain View, California company that set itself up in 1985 for the purpose of developing a device that could gather data on the actual extent of coronary disease in a patient. (The goal was to reduce the number of people who undergo unnecessary bypass surgery.) Cardiometrics was not built to last, and in 1997 it was acquired by EndoSonics Corp., a heart-catheter company in Rancho Cordova, California that has a distribution network capable of reaching millions of patients. In this case, acquisition by another company made perfect sense — economically, organizationally, strategically, entrepreneurially. And the acquisition in no way demeaned the contribution that the founders and employees of Cardiometrics had made in developing a vital new technology. For companies like this one, it is eminently reasonable to do the hard work of creating a product that can make a distinctive contribution — and then to sell the product to a company that can leverage it faster, cheaper, and better.In retrospect, we can all point to companies that should have viewed themselves as “built not to last.” Confronting that reality would have helped them understand that they were never more than a project, a product, or a technology. Lotus, VisiCorp, Netscape, Syntex, Coleco — all of these companies would have served themselves and the world better if they had accepted their limited purpose from the outset. Ultimately, they squandered time and resources that might have been applied more efficiently elsewhere.
The second category is “the company as platform for a genius.” In this model, the company is a tool for magnifying and extending the creative drive of one remarkable individual — a visionary who has immense talent but lacks the temperament required to build an enduring, great company. Once that person is gone, so is the company’s reason for being. The best historical example is Thomas Edison’s R&D laboratory. The purpose of that enterprise was to leverage Edison’s creative genius: Edison would spin his ideas and then flip them out to people who could build companies around them. That’s what he did with the lightbulb, and that’s how General Electric came into being. When Edison died, his R&D laboratory died with him — as indeed it should have.
Recent adaptations of the genius model include Polaroid (Edwin Land) and DEC (Ken Olsen). And the jury is still out on what may prove to be the most successful and powerful genius platform of all time — Microsoft. Despite the company’s profitability and stature, there is no moral or business-logic reason why Microsoft must outlast the guiding presence of Bill Gates.