Cutting Edge: Management: In The BHAG
Mark Henricks, Cutting Edge: Management: In The BHAG.  Vol. 27, Entrepreneur Magazine, 08-01-1999, pp 65-67.

Right now, Don Speer runs a company that provides gaming-operations consulting to American Indian casinos and runs a handful of budding online gaming sites. In five years, however, he hopes to be somewhere very different. "Our goal," says the chairman, president and CEO of Inland Entertainment Corporation in San Diego, "is to be the most successful casino in the world."

That's a grand objective, but what might sound like braggadocio to some, is clearly recognizable to others as a BHAG. The acronym stands for "Big, Hairy, Audacious Goal" and is pronounced "bee-hag." It's a concept popularized in the 1995 business bestseller Built to Last: Successful Habits of Visionary Companies (Harper Business) by Jim Collins and Jerry Porras.

In their book, Collins and Porras examined a group of large, successful companies and found one of the things that distinguished them from similar but less successful competitors was that the more successful companies had one or more very ambitious, clear and inspiring long-term objectives. They dubbed these goals "BHAGs" and claimed that having a good BHAG was one of the best ways a company could improve its chances for long-term prosperity.

Boeing, which bet its future on the 747 jetliner in the 1960s, and IBM, which made a similarly sizable gamble on the 360 mainframe computer around the same time, based their long-term success on BHAGs. Similar BHAGs propelled the likes of Citicorp, General Electric and Wal-Mart,
 says Collins, a business researcher and writer in Boulder, Colorado. "We're reading about those companies today," he says, "because they achieved their BHAGs."

WHERE IT ALL BEGAN

BHAGs came out of Collins' classes at Stanford University in the late 1980s. Collins, a professor of entrepreneurship and small business, often presented Apple Computer as an entrepreneurial success story for students to study. But soon he began wondering what, exactly, made Apple successful and whether those elements could be singled out by looking at other prosperous companies. The research he undertook to answer that question spawned Built To Last--and the concept of BHAGs.

Since then, this unlikely phrase has entered the business lexicon. Articles in The New York Times and Harvard Business Review have examined BHAGs as serious tools for businesses. Today, Collins admits he never envisioned the term BHAG taking its place alongside empowerment, reengineering and other buzzwords of modern management, but he feels the concept has intrinsic value.

The main benefit of a BHAG, according to Collins, is to inspire and focus organizations on achieving long-term objectives that are consistent with its purpose. One of the most famous BHAGs was the goal of landing a man on the moon before 1970. This BHAG, which was set by President John F. Kennedy in 1961, energized NASA, captured the attention of the American public, and resulted in one of the most impressive accomplishments by any organization.

GOALS OF SCALE

Your own BHAG need not be as dramatic as a moon landing, Collins says, but it should have the same traits characterized by Kennedy's vision. Aside from audacity, a good BHAG should meet three criteria:

1 It should have an extensive time frame, ranging from 10 to 30 years. "Doubling sales in five years is too short a goal," says Collins. "For an entrepreneur, 10 years is a nice time frame."

2 It should be clear, compelling and easily expressed in plain English. "If you need a wordsmith [to read the] statement, it isn't a BHAG," Collins says. Examples of clear BHAGs are General Electric's corporate goal of being first or second in every market it serves. To test your BHAG's clarity, Collins suggests you try saying it using different words but without changing the meaning.

3 The BHAG should be consistent with your company's values and purpose. When Henry Ford set the BHAG of democratizing the automobile, it was perfectly in keeping with the Ford Motor Co.'s reason for being, Collins says. Should Ford have chosen to, say, revolutionize the railroad
industry, it would have been a poor BHAG.

Just how big should a BHAG be? It depends. City Bank, the precursor to Citigroup, set a BHAG in 1915 to become the preeminent financial institution in the world. Because it then consisted of just one bank, that ambition was undoubtedly a BHAG.

Sam Walton had a more modest initial goal of making his first small store into the most profitable five-and-dime in Arkansas. Later, Walton gradually expanded Wal-Mart's BHAGs until in 1990, he set the goal of reaching $125 billion in sales by 2000--which the company exceeded in 1998.

You can decide what your BHAG ought to be by talking over company goals with your managers and employees, Collins suggests. But be patient, listen to all suggestions and wait for the right idea to surface. "The way a good BHAG usually happens," he says, "is when somebody states it, and everybody says, 'That's a great idea; let's do it.'
"

OVERCOMING OBSTACLES

The beauty of BHAGs is they don't require consultants, training, management retreats or costly new technology. They do, however, carry risks. In fact, significant risk is almost an essential lement of a good BHAG.

Many companies whose BHAGs are cited as major reasons for their prominence basically bet everything on achieving their BHAG. For example, IBM invested $5 billion--a huge amount three decades ago--to develop its 360 computers and, in the process, outmoded most of its existing machines. Had the product failed, the company would likely have failed as well, Collins says.

You don't have to bet the farm on a BHAG, however. City Bank, for instance, wasn't placing itself at any special risk by setting its BHAG of being a dominant financial institution. But Collins says riskier BHAGs tend to be better because they engage and excite the people in the organizations that adopt them. "I like the ones that if you don't achieve them, you die, because that stimulates creativity," he says.

No matter what the stakes, your BHAG should be something of a gamble. Ideally, it will be a goal you know your organization can achieve but that appears unlikely to others--even possibly your own employees. As a guideline, Collins suggests you set your sights on achieving a BHAG with no more than a 50 to 70 percent likelihood of success.

NOT JUST FOR THE BIG GUYS

One of the most intriguing results of the Collins and Porras BHAG study was the finding that in order to be effective, companies have to put BHAGs in place while they are infant enterprises. Only one of the 18 firms the authors studied set up a BHAG after reaching a mature size. "It turns out," Collins says, "that the real key is to give your company good parenting."

What if you don't have a BHAG now? Not to worry, says Collins. Not every company, nor even every great company, has a BHAG. Big, hairy, audacious goals focus companies on specific objectives. As long as a company is doing what it takes to be better, it doesn't really matter
why it's doing it, says Collins. "The key is to stimulate progress," he says. "A BHAG helps you do that."

NEXT STEP

 Built to Last: Successful Habits of Visionary Companies by Jim Collins
and Jerry Porras (Harper Business). The paperback edition of the 1995 bestseller contains a new introduction and an additional chapter. Chapters 5 and 11 focus on BHAGs.

Plan to stay small forever? We didn't think so. One way to shoot for the big leagues is to think big--Big, Hairy, Audacious Goals, that is.

Figure 1 [Figure not reproduced] DESTINATION KNOWN: Today, consulting provider and online gaming entrepreneur. Tomorrow, king of casinos. Just how will Don Speer get there? By the nspiration and focus provided by his BHAG, no doubt.

Mark Henricks is an Austin, Texas, writer who specializes in business topics and has written for Entrepreneur for nine years.

Mark Henricks, Cutting Edge: Management: In The BHAG.  Vol. 27, Entrepreneur Magazine, 08-01-1999, pp 65-67.