What makes a successful company?
The starting point for what makes a successful company has to be your aims. Most companies will have a number of things on the list. These are likely to include a decent return on capital, a sustainable business model, and satisfaction among a range of different stakeholders (and especially customers).
Frameworks are the tools by which we achieve success. They can be highly focused on a specific business problem or quite general in terms of strategy. Surprisingly few frameworks consider overall business success. Jim Collins and Jerry Porras address the subject in Built To Last. Jim Collins also shares his thoughts on business successes in Good To Great. They are fantastic reads and full of good counsel. My considerations as to what makes successful companies come from observations on good and bad business practice over the years.
Companies that focus on a specific segment of the market or a particular product or service have an advantage over those that spread themselves thinly. If you only do one thing, the chances are that you will do it very well. Specialisation almost always leads to a commercial advantage. Focus leads to strong brand strength. You will be known as the go to company for “….”.
Your focus may be on a group of customers – a particular segment of the market. This means you will know your customers, their needs and have products tailored to meet them. Customers love specialists.
Care is needed because your strength that arises from focus can become an Achilles heel. There will be temptations to diversify and find new opportunities. Some of these may be possibilities but they are like a tennis drop shot – great if they come off but so often they don't.
One of Jim Collins’ tenets is to get the right people on the bus, the wrong people off the bus, and the right people in the right seats. This is critically important. What makes great companies are leaders who have an eye for the right people. Leaders need people who can make their strategy happen. This is where things get interesting because leaders look to recruit successful people. I take a slightly different view. I would look for people who may not have achieved success but who have obvious talent and who can work in a tough environment. They must be hungry for success, possibly because they are from the wrong side of the tracks. They are likely to be young and this will be frightening to the older guys. And being tough doesn't mean being nasty, it means being able to take the inevitable knocks they will face. They will have the stamina to stay the course when the going gets difficult.
The right people will also have focus. They will accept responsibility, work hard, delegate whenever it is appropriate, and learn from their mistakes. They will lead from the front and inspire others.
Successful companies have a great culture. It is something that is not easy to put your finger on. It is the way things get done in the company. Culture is the company's beliefs that are shared by all the employees. It is what motivates people to get up in the morning and makes them want to go to work. It is the glue that holds the company together. Creating a great culture takes time and almost always emanates from the leaders. It is built on a foundation of trust that gives people the confidence to take initiatives and not be bound by rules and regulations.
So there you have it. Three things that make a successful company – focus, people, and culture. You will notice I haven't mentioned money. Money is almost always available with the right focus, people and culture. And, I haven't specifically mentioned leadership although it is through leadership that culture is created, the right people are chosen, and a focus strategy is developed.