Friday Forward - Great Company (#453)

Great companies all share three qualities. How does yours measure up?

“What makes a great company?”

I was asked this question in an interview recently. This topic has inspired many books over the years, and in today’s intense, competitive business cycle, earning the “great company” label feels more difficult than ever.

In my response, I outlined three traits that, in my experience, nearly all great companies share. These traits are often interconnected and critical to achieving sustainable success. However, in today’s fast-moving business landscape, possessing only two of these qualities is likely insufficient to maintain a market-leading position.

Great companies must have:

1. A Product or Service People Love

The foundation of any great company is a product or service that customers love so much they’re happy to pay for it. No matter how great your culture is or how efficiently you run your operations, your company won’t survive for long if people don’t want what you’re selling. 

While this seems obvious, I have seen so many companies enter the market with a product that people either simply don’t want or are unwilling to pay a price that will make the business sustainable.

Companies also make the mistake of thinking that if people love their product today, they’ll continue to buy it forever. But customer expectations evolve, technology changes, and competitors are always trying to get better, faster, and cheaper. Resting on your laurels is a recipe for disaster.

For example, consider Nokia. In the early 2000s, Nokia was the dominant player in the mobile phone industry, with a ubiquitous product and a dominant market share. But when the iPhone and Android bulldozed into the market, the company failed to embrace the smartphone revolution and quickly fell into a death spiral.

2. Great Culture and People

Great companies also have healthy cultures and excellent people. A company’s culture isn’t just about having nice perks like free snacks or casual Fridays. It’s about finding the best talent, setting a vision and values those people feel connected to and motivated by, and creating an environment that empowers those people to do their best work and grow with the business. Great organizations have cultures where top people are excited to come to work and feel valued for their contributions.

At the same time, culture can’t exist in isolation—it’s pretty hard to have a healthy culture if the company performs poorly for a long period of time because its product is deteriorating—see Boeing. To be fulfilled, people need to feel like their work contributes to a successful organization, and they need the growth opportunities that can only be found in an upwardly mobile company.

A great culture will foster growth, but it can’t save a company that doesn’t have a product or service that people want or love. Nokia also had an outstanding culture and was considered a top place to work, but once their product position collapsed in the face of more advanced competition, their culture started to collapse as well.

3. Operational Excellence

The third pillar of a great organization is what I call “operational excellence,” or the business of the business. This encompasses the often-overlooked processes that happen behind the scenes—payroll, customer service, invoicing, supply chain management, and the hundreds of other tasks that keep customers, partners and employees satisfied.

Even a company with a strong culture and a product that people love will struggle without operational excellence. I have a simple litmus test I use to evaluate a company’s operational health: can they pay an invoice on the first try? While it may seem trivial, this is such a basic necessity of a functioning business that I’ve found it to be a canary in a coal mine as a very reliable indicator of larger systemic problems. Companies that excel operationally also have a far better chance of thriving, even in challenging markets.

Great organizations find a healthy balance between these three components: a product or service that people love and that evolves with the times, a strong culture that empowers people to do their best work, and operational excellence that ensures the business runs smoothly day in and day out.

Think of the companies you admire most, and ones that are struggling, and evaluate them through this lens. How do they perform in each of these three areas?

Quote of The Week

"To improve is to change; to be perfect is to change often.” - Winston Churchill

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