The Most Successful Companies in the World: What Do They Have In Common?
by Shel Horowitz
The most successful companies in the world have some surprising things in common. For instance, their CEOs are all listed in the local phone directory -- but none of those CEOs wears a tie to work. Or even has a private office.
Most of these are family-owned, privately held -- and they have annual revenues ranging from $3,000,000,000 to $60,000,000,000. In one of the most dynamic presentations in the Family Business Center's history, Jason Jennings, author of Think Big, Act Small: How America's Best Performing Companies Keep the Start-up Spirit Alive, described the process of researching 100,000 companies around the world to find the ten top performers. Nine are included in the book; the tenth is in India while all the others are American, so he's saving that company for another book.
The criteria: at least ten percent growth in both profits and revenues, every year, for ten years. And of the fewer than 20 to meet both requirements, some were eliminated because management was in trouble: a big pile of product-liability lawsuits, a race discrimination consent decree, or an animal testing problem, for instance. The nine who made the cut: SAS Institute (software, Cary, NC); Sonic Drive-In (fast food, Oklahoma City, OK); Cabela's (hunting and fishng gear, Sidney, NE); Koch Industries (diversified companies, Wichita, KS); Dot Foods (food redistribution, Mt. Sterling, IL); Medline Industries (hospital supplies, Mundelein, IL); Petco Animal Supplies (pet products, San Diego, CA); Strayer Education (private university, Arlington, VA); and O'Reilly Automotive (auto parts, Springfield, MO).
Jennings mentioned Commerce Bank, of New Jersey, in his talk, but not in the book. This was a single-location bank that so dissatisfied a key customer (owner of the local Burger King franchise) that he bought it, created a customer-focused culture, and has taken Manhattan by storm.
Note the geography of these companies: most are small towns in the Midwest and South; only Commerce is in the Northeast and only Petco is in the West. Only three are in major cities: San Diego, Oklahoma City, and Washington (which borders Arlington, VA). Spending about two years researching, Jennings and his associates isolated five "secrets" of this phenomenal success.
1. They have a cause, not a wimpy, committee-driven "mission statement."
People who work there know they're part of a big, bold, meaningful idea to fix a problem or make the world better.
Example: "The best-managed company in the world today is Golden West Financial; they have increased shareholder value by 20 percent a year for 42 years." Founder Marion Sandler, one of two women in an executive position on Wall Street at the time, bought an S&L after she was told she had the wrong plumbing to ever be a Wall Street partner. "She said, 'we've worked for nothing but bad role models. We're going to build a meritocracy where it doesn't matter your race, age, ethnicity, where the best idea wins, ego is out the door, and nobody gets stuck'" behind a deadbeat who gets promoted because of connections, not merit.
2. They let go of things that aren't working — even entire companies.
Let go of "yesterday's breadwinners" and of doing things the way they've always been done.
Two negative examples: When Oldsmobile sales were moribund, General Motors upped its ad budget for the brand from $100 million to $500 million, and hired a new ad agency, The company "squandered $500 million of shareholder equity" before GM finally shut it down. Similarly, Montgomery Ward kept coming back to GE Capital for cash infusions: $1.6 billion over ten years, and it gained nothing.
Positive example: Koch Industries examines each of its hundred subsidiaries every year. It has sold off or closed 100 companies in the past decade.
3. They understand that success is not about mere customer satisfaction— but about utterly delighting the right customers…and choosing not to do business with the wrong customers.
You learn how to utterly satisfy your customers simply by asking them.
Example: At Cabela's, "The chairman sits down each morning to every single customer communication received the day before, Five hours a day.
He reviews every one, and pens on it what's to be done to make it right -- that day! Before he goes to lunch, he walks around [to department managers], 'here are your four, here are your eight. Get them done by 3:00.' It's a complete commitment to customers."
4. Everyone in the company thinks and acts like an owner.
They know -- and evangelize -- the value of the company, and they know what value they add. They are empowered to make decisions and compensated for the value they add.
Example: "Charles Koch introduced me to a 26-year-old guy who had made a $5 billion decision. He said, 'he's better prepared and has more knowledge to make that decision than I do.'"
5. The leaders see themselves as stewards.
They share information freely, make themselves accessible, avoid artificial barriers (like fancy offices and fancy suits), and pitch in whenever and wherever they're needed. In general, they do this out of the public eye; they don't seek publicity, and they don't have an exit strategy, because they love what they do.
And why keep secrets when, Jennings points out, "A 15-year-old kid in Sri Lanka, with broadband, has access to the same information as a CEO."
Example: Pat Tracy, CEO of Dot Foods, explained to Jennings why his home phone number is listed in the local directory. "There are only two kinds of people who want to talk to me: a customer, or someone who works for me." And Tracy wanted to be available to both.
Says Jennings, "We never found one leader at one of these companies wearing a tie. They're dressed crisp and clean, but casual -- khakis and polo shirts. It tempts credulity to say 'we all have a common purpose, but by the way, I dress better than you.'"
That kind of openness allows someone on the production floor to call out to Tracy as he walks through the plant, "Hey, Pat, that new machine you bought is a piece of crap."