Lesson 9: Strategy: BHAGs

“Think little goals and expect little achievements. Think big goals and win big success.” — David Joseph Schwartz

Welcome to Lesson 9 of the B-Tribe Business Mastery Program.

In this lesson we’re going to explore another core strategy from Good to Great by Jim Collins – the “Big Hairy Audacious Goal” or BHAG*.

As the name suggests, your BHAG is a big, ambitious, long-term goal. It’s a powerful long-term vision that unifies and motivates teams into a common challenge and ambition. It points everyone in the same direction, giving them an articulated target to work toward.

Here are some examples of BHAGs:

• Reaching 10% of all Australians with a “gifted experience” is Naomi Simson’s 2015 goal for her Sydney-based company Red Balloon.
• Averaging $1 revenue from every man, woman, and child in the U.S. per week is Fred Deluca’s 2010 focus for Subway.
• Crush Adidas. (Nike, 1960s)
• "To become #1 or #2 in every market we serve and revolutionize this company to have the speed and agility of a small enterprise." GE
• Transform this company from a chemical manufacturer into one of the preeminent drug-making companies in the world. (Merck, 1930s)
• Become the dominant player in commercial aircraft and bring the world into the jet age. (Boeing, 1950)

What is a BHAG

“Most people overestimate what they can do in one year and underestimate what they can do in 10 years” — Bill Gates

At its simplest, a BHAG is a long-term, 10 to 25-year goal, guided by your company’s core values and purpose.

But it’s more than just a goal. It’s a challenge that is so audacious that it might feel as if you’d never achieve it. However, your BHAG must be connected to your company’s underlying strategy or else it just becomes an aspirational statement or a random number.

All companies need articulated goals. But there’s a discerning difference between having a goal and becoming committed to a huge, daunting challenge. And that’s where the BHAG has its power – it gets you and your team out of thinking too small.

Think of the moon mission in the 1960s. President Kennedy and his advisors could have gone off into a conference room and drafted something like "Let's beef up our space program," or some other such vacuous statement. The most optimistic scientific assessment of the moon mission's chances for success in 1961 was fifty-fifty and most experts were, in fact, more pessimistic. Yet, nonetheless, Congress agreed (to the tune of an immediate $549 million and billions more in the following five years) with Kennedy's proclamation on May 25, 1961, "that this Nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth." Given the odds, such a bold commitment was, at the time, outrageous. But that's part of what made it such a powerful mechanism for getting the United States, still groggy from the 1950s and the Eisenhower era, moving vigorously forward.

Like the moon mission, a BHAG is clear and compelling and serves as a unifying focal point of effort – often creating immense team spirit. It has a clear finish line, so the organisation can know when it has achieved the goal; people like to shoot for finish lines.

A BHAG engages people– it reaches out and grabs them in the gut. It’s tangible, energising, highly focused. People "get it" right away; it takes little or no explanation.

Collins noted that "The envisioned future should be so exciting in its own right that it would continue to keep the organization motivated even if the leaders who set the goal disappeared."

Four Categories of BHAGs

There are four categories of BHAGs you can consider:

1. Target Oriented: These BHAGs define a specific quantitative (numerical) or qualitative targets. Here are a few examples of Target-Oriented BHAGs:
   1. A computer on every desk and in every home. (Microsoft)
   2. Enable human exploration and settlement of Mars. (SpaceX)
   3. Become a $125 billion company by year 2000. (Wal-Mart, 1990)
   4. Become the dominant player in commercial aircraft and bring the world into the jet age. (Boeing, 1950)
2. Competitive: These BHAGs focus on a "Common-Enemy." These BHAGs bring teams together to beat a large competitor in your industry. This David vs. Goliath mentality can be very motivating (everyone loves an underdog, right?). This type of BHAG might be especially applicable if you are in an industry or a niche with a clear leader whose customers you are after. Here are some examples of what this might look like:
   1. Crush Adidas. (Nike, 1960s)
   2. Yamaha wo tsubusu! We will destroy Yamaha! (Honda, 1970s)
3. Role Model: This category of BHAG is great for up-and-coming organisations that aspire to be like the great companies in their niche. Instead of thinking of companies that you are in direct competition with (like in the Competitive BHAG), think about companies that are known to be great in the same ways that you want your company to be great. Here are some examples:
   1. Become the Nike of the cycling industry. (Giro Sport Design, 1986)
   2. Become as respected in 20 years as Hewlett-Packard is today. (Watkins-Johnson, 1996)
4. Internal Transformation: This category is best for larger, more established companies (think GE, Apple, etc). This category can be for a division within a large company seeking to change the way it functions within the organisation, or for the whole company to redefine itself.

Setting Your BHAG

Your BHAG should meet the following criteria, as well as fitting into one of the four categories above. It should be:

1. Action-oriented & clear (who, what, where, by when).
2. Compelling and gripping – people "get it" right away.
3. Must connect with your company’s strategy.
4. Expands your company’s current capabilities.
5. Bold, bordering on hubris and the unattainable (about 70% achievable).
6. Is long-term, a minimum of 10-years or more.

BHAG Visibility

Once you’ve defined your BHAG, there’s no power in leaving it in the top drawer! The purpose of your BHAG is to become integral to your company’s DNA, driving your unified vision.

A great example of a visible, “lived” BHAG is Naomi Simson’s Red Balloon.

The business Red Balloon helps individuals and companies gift someone a unique experience, like a Formula 1 racing experience or hot air ballooning experience. To provide her people with a tangible long-term goal, in 2005 Simson set a ten-year goal to provide 10% of Australia’s 20 million citizens with a gifted experience. To keep this BHAG visible, Simson installed a large LCD screen in their lobby that displays a running total of the number of experiences provided to date, updated instantly whenever another experience is booked – an actual figure of a person appears on the screen and is shown being added to the total.

Now that’s motivating!

Aligning BHAG & Profit Per X

When defining your BHAG, it is handy to align it to your Profit per X metric. In this way, your BHAG maintains tight alignment to your company’s underlying strategy.

For example, the denominator (the “X”) in Southwest Airlines Profit per X metric was “number of planes” (as opposed to “seats” used by many airlines). Southwest’s BHAG in year 2000 was to have a certain number of planes in the air by year 2010.

Note the alignment here: By focusing on the strategic metric of profitability per plane, their BHAG of attaining a certain number of planes within a certain time period provides their team with a clear, bold and unified vision, whilst growing profit.

Can you guess what Red Balloons Profit per X metric is? Whilst pursuing the BHAG of 2,000,000 gifted experiences by 2015 (10% of Australia’s 20 million citizens), Red Balloons Profit per X metric is “profit per experience.”

Again, by energising their team with the bold vision of pursuing 2,000,000 gifted experiences, whilst focusing on the underlying strategic metric to maintain a level of profit per experience, they’re able to achieve admirable growth whilst in-profit.

It’s the specific focus of driving your business around a key unit – planes or experiences - and then making your long-term goal some aspirational number of these units - that makes for a cohesive and powerful forward vision.

*BHAG is a Registered Trademark of Jim Collins and Jerry Porras.

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Actions

1. Review your Profit per X metric.
2. Extrapolate some challenging and ambitious 10+ year goals with your leadership team.
3. Refine goals into a cohesive stretch BHAG that meets the above criteria and is aligned to your core values and strategy.
4. Permeate your BHAG throughout your corporate culture and track as a metric.