What do successful companies look like? How do they organize themselves? What are common traits of successful and unsuccessful ones? What strategies and values do they share?
I think about these questions often as an operator, investor, leader, employee, consumer, and human scientist. Partially out of curiosity, partially a desire to better calibrate my identification powers, and partially because these observations apply across the many domains of life. I've found dedicating attention to and learning from these observations to make me better in all of those capacities.
So whether you're an operator or investor, hiring manager or job candidate, organizational leader or employee - there are some valuable insights for you. And a few surprises I came across while researching examples.
Before we get rolling, this is by no means a comprehensive accounting. And I'm by no means omnipotent. I see this as a continuous work in progress, a model always updating and behind.
Like a good forecast, the paramount question is: how wrong am I? Over time and with help from readers just like you ;), I'll be less wrong tomorrow than I was yesterday.
Characteristic #1: Truth Seeking Culture
*Credit to Mike Maples Jr for putting this concept into words so clearly.
This one is first and foremost. So essential on every dimension of building a great product and business. At the root of every disruption, innovation, purchase, partnership is this fundamental element we call truth. The truth eventually wins the day, the question is when will it arise - not if it will arise.
I have a hypothesis: at the core of every great company is a fundamental truth or set of truths.
To illustrate, here are few B2C slanting examples:
Amazon - people are cheap, lazy, and want options.
Apple - people want to be cool and life to be easy.
Google - people crave information and don't want to work for it.
IKEA - people like insource accomplishment and outsource blame.
Airbnb - people prefer uniqueness and authenticity.
Facebook - people crave connection and self-expression.
Starbucks - people prefer familiarity and reliability.
GitHub - people prefer openness, developers hate answering questions that could be self-service.
Peloton - people want privacy and convenience, don't want to smell other people sweating.
Coca-Cola - people prefer familiarity and sugar.
Spotify - people want to make things theirs and access their things whenever, wherever.
Lululemon - people want to be cool and look more fit than they are.
Slack - people prefer instant gratification to the burden of emailing.
Instagram - people value what other people think more than their own time.
Costco - people like value and simplicity.
Oracle - people don't like change.
Seeking the truth is a core component of what's made humans humans in the past, and hopefully, in the future as well. However, finding the truth in the age of information and the new digital economy, becomes more rare by the day. Therefore, cultivating a culture of truth seeking and a team of truth seekers becomes more valuable by the day.
From the Case Study Archives
Companies/organizations who exemplify a truth seeking culture:
Bridgewater Associates - The world's largest hedge fund is known for Ray Dalio's "idea meritocracy" where the best ideas win out through radical transparency and honest debate. Employees are encouraged to be "intellectually honest" and criticize each other's ideas openly.
Intel - The O.G. culture and technology driven tech company. Former Intel CEO Andy Grove created what he called a "culture of disagreement" that encouraged open and vigorous debate. Their culture was based on seeking the truth through arguments, not accommodation and compromise. Success came through solving hard problems, not avoiding them.
Inverse examples of not so good at truth seeking:
Wells Fargo - Leadership encouraged ruthless sales practices without concern for ethics or customers. Middle managers and employees who raised concerns were ignored or fired. This emphasis on aggressive growth over truth and long-term sustainability led to the damaging account fraud scandal that hurt millions of customers and the company's reputation. Also happens to be my dumbest investment to date...
Nokia - Nokia failed to grasp the speed of the smartphone revolution. Middle managers saw the iPhone coming but senior leaders were wedded to the feature phone model that had been successful. A culture where "bad news" was discouraged meant dire warnings didn't reach the top until too late. By the time Nokia pivoted, they had lost significant market share.
Characteristic #2: Creates net new value, for an eco-system, in a non-zero sum fashion
*Credit to Hamilton Helmer's 7 Powers for putting this concept into words so clearly.
This is my favorite definition of a platform business model. Economic systems weighted towards free markets, at least slightly (e.g. the US), behave like complex adaptive systems (see Complexity by Mitch Waldrop, great resource). Businesses and business models that thrive over long periods of time inside a complex system almost certainly exemplify this trait. Those who don't are too easily and too readily displaced.
It's also a characteristic shared in Biology. The actors most likely to survive and propagate are the ones that create more total value for multiple other actors than they extract. Natural selection theory applied to genes and organisms are the most illustrative use cases. My favorite example comes from semiconductor land, and also includes what has to be one of my favorite quotes. Taiwan Semiconductor Manufacturing Company (TSMC) has been a revelation since it was founded 1987.
A long story made short - Morris Chang spent many years at one of the world's best technology companies, Texas Instruments (TXN). After he was passed over for the CEO role, and bounced around a few times in the US - he moved to Taiwan and started TSMC. TSMC, then and now, is a semiconductor foundry. You can think of that as highly collaborative and technical contract manufacturing. Prior to TSMC, if you wanted to make a chip, you had to design, manufacture, and distribute. On a brutally fast innovation cycle (Moore's Law). All 3 are hard, technical problems - but the manufacturing is a massive financial problem (huge capex and opex required to fab chips). TSMC starting offering the fabrication as a service, enabling an explosion of chip designers to spin out of larger chip companies and start their own. The old guard of the chip industry (e.g. Intel and AMD, still around today) were not thrilled about this new model and met it with derision. They thought it would always be a second rate way to run a semi company. The famous quote from Jerry Sanders of AMD:
"Real men have fabs"
Hilarious as it is and probably was at the time, it turns out real men, like Morris Chang, create horizontal and vertical value in their ecosystems. TSMC is currently one of the top 10 most valuable companies in the world, by market cap, and the most strategically important company in the world for anyone who uses technology.
From the Case Study Archives
Companies/organizations who exemplify creating net new value, for an ecosystem, in a non-zero sum fashion:
AWS (Amazon Web Services) - AWS created a whole new market for cloud computing services. It allowed companies to access computing resources in a flexible, pay-as-you-go model. This unlocked new capabilities and value for thousands of startups and businesses. AWS grew the pie of cloud-based business value.
Square - Square's electronic payments system generated net new value by enabling more seamless and lower-cost transactions, especially for small/informal businesses. This benefit exceeds any costs to legacy models like banks. The overall value generated through exchange and commerce expands. Better experience and more security for all parties in the transaction. Value created, not just redistributed.
Inverse examples of not so good:
Groupon - Their business model of taking a large percentage of revenue from deals with local merchants ended up being extractive of their business partners. Probably good intentions, to be clear, but the results are what they are. Many businesses found that the Groupon deals did not result in repeat customers or profitability. Merchants became unwilling to offer deals.
Myspace - First off, a poor user experience in comparison to the social media products that won. Second off, they never got the monetization mechanisms rolling - in a way that created value for both sides. Their ad model was more similar to display ads on webpages. Regardless of how you feel about privacy now, it's clear the hyper personalized advertising model Facebook led the charge on worked better.
Characteristic #3: Optimism always wins
Credit to NZS Capital for putting this so simply, and to Acquired for backing it up with tons of case studies.
To any student of human history, this is one of the cardinal rules. The optimists have been right over and over again. Until recently, this was a fundamental rule of history - the human condition gets better with time. Yuval Harari's work, Sapiens – A Brief History of Humankind, called this rule into question - persuasively - for the first time in modern history. It's worth examining unbridled optimism further.
However, I find it difficult to revoke the mountain of evidence. By almost any measure of the human condition - lifespan, health, wealth, equity, collective intelligence, individual intelligence, mobility, mortality rates, communication, knowledge, etc. - being a human in modern times is preferable.
The same is true for commerce and businesses (likely inextricably linked to the human condition). Being a business in modern times is preferable to the past. Without recycling the same logic with different language, any examination of financial performance and wealth creation will suffice here. This view could be challenged with valid reasons, but on the balance, less convincing reasons.
To bring the philosophical arc to a close, businesses that flourish as things get better for humans are more likely to succeed. In the short term, this may or may not be true. In the long term, this is almost certainly true.
From the Case Study Archives
Companies/organizations who exemplify optimism always wins:
Tesla - Tesla has faced no shortage of challenges from cash crunches and manufacturing "hell" to skepticism over Elon Musk's ambitious vision. But Musk's drive to accelerate sustainable transport and will to make his futuristic ideas reality against all odds has fueled Tesla's unlikely survival and leadership in electric, autonomous vehicles. His will creates reality.
GitHub - Tom Preston-Werner, Chris Wanstrath and PJ Hyett optimistically thought open-source code collaboration could catalyze innovation, launching GitHub with faith in a niche concept. Through positivity, GitHub spread beyond expectations to become how millions of developers work together today. Their optimism built a foundation for future progress.
Inverse examples of not so good at optimism:
Xerox - known for its photocopiers and printing technology, encountered difficulties in the late 20th century due to a lack of optimism and foresight. Despite inventing many groundbreaking technologies, including the graphical user interface (GUI) and the mouse, Xerox failed to capitalize on these innovations. The company's leadership was pessimistic about the commercial potential of these technologies and instead focused on their core photocopier business. This narrow perspective prevented Xerox from becoming a dominant player in the emerging personal computing industry.
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