In The BHAG

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 element 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.

This article was originally published in the August 1999 print edition of Entrepreneur with the headline: In The BHAG.