Bigger, Better, Faster (by Jim Collins)
On a crisp February day in downtown Houston, I had an encounter with a giant dancing chicken. It was 6:30 in the morning, and I had just made my way into the Houston Convention Center to deliver a presentation to Sam's Club and Wal-Mart. The cavernous room was nothing more than a giant indoor stadium — you could easily have parked two or three 747 jets inside the arena. From my vantage point backstage, I saw 3,000 color-coded store managers: a blue group, a red group, and a green group, each representing a geographic region. All of these people were ringing cowbells, clapping, and cheering.
"We'd better talk about anything we need to now," said Kathleen, the wonderful person responsible for shepherding me around. "It's going to get pretty rowdy in a few minutes, and you won't be able to yell over the noise." That's when I noticed the giant chicken over in the corner, practicing its dance steps and warming up. Not far away, a rather grungy-looking rock band was setting up shop. They looked as though they had come straight from last night's gig.
"Do you want to go over your PowerPoint slides now?" the AV guy asked me. I looked out at the 3,000 color-coded store managers, glanced over at the dancing chicken, and sized up the rock band. "No, let's skip the graphics," I yelled over the noise. It didn't seem like a PowerPoint moment.
Then, at 6:45, the rock band hit the floor — bang! — and the place went nuts. Thousands of cowbells clanged. The band's lead singer, unshaven, wearing sunglasses and a Jaggeresque black-and-silver jumpsuit, ran around in the crowd while his buddies blasted out chords on fully cranked guitars. (Their amps went to 11.) Out came the dancing chicken, huge and proud, swinging its tail to the greater glory of discount stores. Two, three, four songs went by — each louder than the last — and it all culminated in the Wal-Mart rock song.
At precisely 7:00, the band stopped, and the chicken waddled off backstage (or wherever it is that giant chickens go when they're not dancing in front of 3,000 blue, red, and green store managers). Up on stage jumped three Sam's Club executives to lead a rousing rendition of the Sam's Club cheer.
"Give me an S."
"Give me an A."
"A!" . . . building up to a crescendo of ringing cowbells, stomping feet, and a cheering crowd.
I felt completely intimidated. How was I supposed to deliver a serious message about enduring great companies in the wake of a giant dancing chicken at 7 o'clock in the morning? But to my amazement, when it was my turn to speak and I raised the serious question of what it would take for them to build an even better company, the whole room became surprisingly attentive.
Here is what I learned from that experience: It is entirely possible for a company to grow to 1.4 million people and retain much of the vibrant culture and sense of purpose created by its entrepreneurial founder. I must admit, I hadn't thought that that was possible. By the time most companies reach $10 billion or $20 billion in revenue, they have long ago lost the entrepreneurial zeal that fueled them in the first place. By $50 billion, they have gone fully corporate, and their very success has made them complacent, dull, and slow. The usual story is that what was once a fast company — in its attitude, its values, its spirit, and its execution — eventually succumbs to inertia and spirals into a doom loop of mediocrity.
Yet if anything, Wal-Mart is gaining momentum. This fast company is becoming a faster company. Wal-Mart grows a Fortune 100 corporation each year. The company's culture is as strong as ever. And Wal-Mart has yet to reach the larger world outside of the United States. Here is the most startling fact of all: If Wal-Mart were to maintain its average growth rate from the past 10 years, it would become the world's first $1 trillion company within a decade.
Will Wal-Mart really become the first $1 trillion company? The odds are certainly against it. It would mean being a single corporation with more than 5 million employees — nearly half the total number of men and women in the U.S. Armed Forces during World War II and more people than are currently employed by the U.S. federal government. It would mean having annual revenues that are roughly on scale with the GDP of the UK; substantially in excess of the GDP of such countries as Australia, Canada, and Spain; nearly 10% of the entire U.S. economy; and equal to the government budgets of all 50 U.S. states combined . I remain skeptical about whether any company — including Wal-Mart — can reach this size without being crushed under its own weight.
Then again, back when Wal-Mart was one-tenth its current size, the idea of reaching a quarter of a trillion dollars in revenue seemed equally preposterous. In 1991, Jerry Porras and I wrote about Sam Walton's audacious goal in 1977 to reach $1 billion and about his audacious goal in 1990 to double the number of stores by 2000. We thought those were audacious goals — but then a Wal-Mart director reprimanded us for omitting the other part of the goal: to reach $125 billion, also by 2000. At the time, no company in history had attained that level of sales. "If someone thought [Walton's] original goal in 1977 was audacious," wrote the director, "he or she must be frightened by the present target."
We laughed. At the time, Wal-Mart had about $30 billion in revenue, and we doubted whether it could continue at the same pace — especially given the fact that Walton had passed the company to a leader who had seemingly undergone a charisma bypass. But under CEO David Glass, Wal-Mart not only reached its $125 billion goal, but it did so two years early.
I don't want to argue whether Wal-Mart will become the first $1 trillion company, or even whether this would be good or bad for society. (There are strong considerations on both sides of that question.) My point is that Wal-Mart teaches us valuable lessons. Not only does the company's story dispel the myth that size is necessarily at odds with speed, but it also illustrates a few of the timeless principles that make a company fast — and great — in the first place.
Greatness Is Cumulative.
Sam Walton began with a single dime store in 1945 and did not open his second store for seven years. Seven years! Twenty-five years later, Wal-Mart had only 38 stores. Today, Wal-Mart has about 4,000 stores, building up to that number through a process that has been slow and steady. Albert Einstein once quipped that the greatest mathematical discovery of all time is compound interest. That is the Wal-Mart story. Walton began with $72,000 in annual revenue, grew it at 29% per year for three decades, and then accelerated from there. In recent years, the company has settled into 16% per year average growth — but off a much, much larger base. That kind of cumulative growth achieved over seven decades turns a $72,000 dime store into a $1 trillion corporation.
You achieve greatness, it turns out, in much the same way that you turn a giant, heavy flywheel: It takes a huge amount of effort to get the thing moving from one turn to two, from two to four, from four to eight. But if you keep pushing in a consistent direction, you'll eventually hit a hundred, then a thousand, then a million RPMs. When you combine a consistent direction with substantial speed, you achieve something greater than either of those elements alone: momentum.
Consistency Enables Change.
The key to change is first to understand what not to change and then to feel free to change everything else. A key factor to Wal-Mart's trajectory is that it has never changed its DNA. Central to this set of core traits is a fanatical adherence to a deeply democratic idea: Wal-Mart exists to enable people of average means to buy more of the same things previously available only to rich folks. The company's whole model of using its power to extract lower prices from suppliers and then passing those savings along to customers derives from that core principle. Wal-Mart has been willing to try all sorts of new things — from creating supersized grocery stores to selling cars. The company keeps what works and gets rid of what doesn't but always remains guided by its core traits, which have not changed in more than 50 years.
A Vibrant Culture Is Productively Neurotic.
It's a statement that Sam Walton would have instinctively understood. Munching a burger one day at a diner near Wal-Mart's headquarters in Bentonville, Arkansas, Walton pointed to a man over in another booth. "That's Joe. I really admire Joe," Walton said to a colleague of mine, who witnessed the moment. "He used to be a truck driver and then started his own business raising chickens. Today, he's really successful, and I'd like to learn from him." Walton — by then worth well over $8 billion — finished his burger, ambled out to his beat-up old pickup truck, and returned to the pedestrian task of building his chain of discount stores.
Jim Collins is author of Good to Great and coauthor of Built to Last . He is a self-employed professor, operating out of his management- research laboratory in Boulder, Colorado.