Each year brings a new crop of business books and the management fads that they espouse. Re-engineering. Coopetition. Blur. The list goes on and on.

The authors tout companies that best exemplify their theories, often picking the darlings of the day. Some years ago, it was 3M, General Electric, and Merck. Today, it's Home Depot, Dell, and Southwest Airlines.

Many of these books become popular, and the theories become part of the repertoire of executives. But, few people take the time to go back years later and see whether the books hold up. The theories rarely have to face the test of time.

Context decided to remedy that deficiency. Every now and then, we will go back and review old books, rather than new ones. For our first batch, we went back to the mid-1990s and picked three of the most popular business books— Built to Last, Competing for the Future, and The Discipline of Market Leaders. Each was a best-seller. Each was touted by reviewers. Each was written by a pair of astute business observers.

Now, how to evaluate these business gurus in a reasonably objective way? It's difficult to measure the validity of management theories in isolation. Most sound pretty impressive when you read them. But you can measure the performance of the companies that the books tout as exemplifying the theories. If the theory has any validity, the companies that follow the theory should outperform their peers.

Given that our three choices were written in 1994 and 1995, we compared the stocks of the companies that were praised in the books against the performance of the S&P 500 from 1994 through 1998. Stock performance isn't a perfect measurement. A company may be in an industry, such as oil, that is under intense pressure. But, on average, it works pretty well.

So, how did these three books do? Not great, but not bad. The book that stands up best is Built to Last: Successful Habits of Visionary Companies, by James C. Collins and Jerry I. Porras, published in 1994. (This is also the only book that explicitly listed the companies the authors favored. The lists for the other two books had to be inferred from how prominently and positively the companies were mentioned in the introductions, index, and text. (Complete lists shown below.) The book that fares worst is Competing for the Future, by Gary Hamel and C.K. Prahalad, published in 1994. Landing in the middle is The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market, by Michael Treacy and Fred Wiersema, published in 1995.

If you bought the stock of the 18 companies that Messrs. Collins and Porras picked, you would have done better than most mutual fund managers. Eleven outperformed the S&P 500, while seven underperformed.

The key to the top performance of the selected companies is in the title of the book, Built to Last. The authors selected the 18 companies from among those that have proven themselves over an extended period. All the companies had to have been founded before 1950 and be leaders in their markets. The median founding date was 1902 (3M); the oldest was 1812 (Citicorp); and the youngest was 1945 (Sony and Wal-Mart). The companies they picked had outperformed the stock market by a factor of more than 15 between 1926 and 1990.

"All of the visionary companies in our study faced setbacks and made mistakes at some point during their lives, and some are experiencing difficulty as we write this book," Messrs. Collins and Porras wrote. "Yet—and this is a key point—visionary companies display a remarkable resiliency, an ability to bounce back from adversity."

They were right. Probably the most remarkable thing about their 18 picks is that, after four years of frenzied merger and acquisition activity, all but one of them are still intact. The only exception is Citicorp, which was bought by Travelers and became CitiGroup.

Some of these 18 companies have stumbled in the past few years. Nordstrom is having difficulty in a changing retail environment. Motorola has fallen behind its competitors in cellular phones. And Boeing is showing amazing ineptness in managing its forecasts and production despite having only one competitor and a handful of customers. Despite these problems, each remains a force in its industry.

What ties all these companies together? What is it that makes these companies successful over the long haul? As it turns out, there is no single reason. Messrs. Collins and Porras offer no grand theory. Instead, they offer up various unrelated tidbits like, "try a lot of stuff and keep what works," develop "home-grown management," focus on "more than profits," and have "big hairy audacious goals." Not very profound, but maybe it's the most honest approach.
 

Competing for the Future fared the worst, even though it probably had the most impact. The book convinced many executives that the most important way to set strategy was to look internally rather than externally. Executives, the authors say, are to define their organizations' core competencies and build on those, rather than look outward at the marketplace and find opportunities to exploit.

The book also argued that companies needed to actively shape their future by seeking breakthroughs. "Pursuing incremental advantage while rivals are fundamentally reinventing the industrial landscape is akin to fiddling while Rome burns," the authors wrote.

Competing for the Future was written as an antidote to the proliferation of business books in 1994 that were focused on making internal operations more efficient. In that, the book succeeds. But the book falls down in giving too much importance to companies that try to create the future, and not enough importance to companies that adapt to the future as it evolves. The future is created by lots of unexpected events, most of which are not under the control of a single company and are not readily foreseeable.

For example, the Internet is mentioned nowhere in Competing for the Future, even though it is the biggest challenge facing business today. (Nor, for that matter, is it mentioned in the other two books.) This is not because the authors are stupid. It's because the business environment changes so rapidly today that it is hard to foresee the events that will shape the future.

By focusing so heavily on companies that might create breakthroughs, the authors endorsed Electronic Data Systems, AT&T, and Apple. All three underwent serious problems in recent years even though the high-tech industry thrived. As a result, all have new chief executives. Messrs. Hamel and Prahalad also had the misfortune of picking three Japanese companies: Canon, Sony, and Honda. They remain good companies but have been dragged down by the Japanese economy.
 

In picking the companies for The Discipline of Market Leaders, Messrs. Treacy and Wiersema studied 80 companies that were leaders in their respective markets. According to the authors, each company succeeded because it pursued one of three approaches: providing the customer the best total cost (as Wal-Mart did); providing the best product (Intel); or providing the best total solution (Airborne Freight). This is a rather simple paradigm that helps explain how a company positions itself in a market. But there are many other factors that determine whether a company will succeed, and this book does not take them enough into account.

For example, the authors spend a whole chapter explaining how innovative AT&T's Universal Credit Card operation was. Yet the business was sold last year to Citicorp because it didn't fit with AT&T's focus on networking. Having a well-oiled operation in the wrong company doesn't work. Messrs. Treacy and Wiersema also have nothing but good things to say about Cott, a private-label maker of soft drinks. The company is in real trouble now and is shedding businesses, such as pet food, that it should not have entered.

What is the lesson? It's this: Business conditions change so rapidly these days that it is difficult to do much more than provide a snapshot of a company, or a business theory, that is applicable to that moment in time. Don't stop reading business management books. But remember that the authors are as fallible as anyone when it comes to identifying long-term winners and losers.