 | « Back to article | Print this article |
There's no secret formula that will make your company the next Google. Or is there?
David G. Thomson thinks there is. In his book, Blueprint to a Billion, Thomson identifies traits that fast-growing companies share. But this book isn't based on a theory, or even on Thomson's experience as a management consultant and sales executive. It's based on hard evidence.
Thomson identified the 387 firms that have gone public since 1980 and grown to $1 billion in revenue. It's a select group; only 5% of the companies that have gone public in the last 26 years fit his criteria.
But those firms have influence far beyond their numbers. According to his research, they account for 56% of employment and 64% of the market value created in the last few decades.
These 'Blueprint' companies didn't just grow fast; after hitting a certain point, usually around $50 million in annual revenue, they grew at an exponential rate, reaching the billion mark in four to 12 years. How did they do it?
Get a big idea. Okay, so this is easier said than done. But the good news is that there are three different types of billion-dollar ideas. The most well-known are "shapers of a new world," as Thomson says. Companies like Microsoft, eBay and Genentech created an entirely new type of business. Then there are "niche shapers," companies that redefine old worlds. Starbucks, for example, turned a cup of coffee into a $3 mini-luxury. Nike turned the running shoe into a status symbol.
Finally, there are "category killers"--new business models that run the old companies out of town. All the big box stores, like Staples and Autozone, are category killers, but so are open-source software companies.
Find a marquee customer. Wouldn't it be great if Microsoft started using your product? Sure, and companies like Cisco have ridden big-name customers on the road to exponential returns. But your marquee customers don't have to be billion-dollar companies.
At eBay, for example, "Powersellers" serve the purpose better than Bill Gates could. By recognizing its top sellers, eBay spurs them to sell more.
Meanwhile, the Powerseller logo instills trust in new buyers. And eBay holds Powerseller conferences, to build community and generate business-boosting ideas. There's another big company that could do more for its marquee customers, Thomson says: Apple.
"There are iPod fanatics out there," he says. "I've got three iPods, and I tell my friends about the iPod." But the company has no process--say, the iTunes version of a Powerseller--to recognize its biggest fans.
Embrace Big Brother. When a small fry teams up with a big guy, both companies benefit. Procter & Gamble, for example, licenses the Mr. Clean logo to smaller companies that make complimentary products.
The arrangement allows the company to take its brand into new areas, like the automotive industry, when it wouldn't spare the resources to invent those new products itself. Look for beneficial agreements you can strike with larger firms.
Master the inside/outside dynamic. Great companies are built by great teams. Thomson identifies several leadership pairs who brought their companies to $1 billion in revenue: Jeff Mallett and Tim Koogle at Yahoo!; John Shirley and Bill Gates at Microsoft; Patricia House and Tom Siebel at Siebel Systems. In all of these firms, Thomson says, one leader focused on the outside world, specializing in marketing and sales. The other focused on the inside of the company, specializing in operations and innovation.
Put billion-dollar experts on your board. When Thomson first started researching the board composition of the Blueprint companies, he expected he'd find investors on the boards. After all, conventional wisdom says companies do best when their leaders have skin in the game. In fact, he found that boards dominated by investors and management tended to struggle.
Companies that succeeded put customers and alliance partners ("Big Brothers") on their boards. They also looked to CEOs who had built billion-dollar companies before. Siebel Systems, for example, recruited Charles Schwab. But once again, Thomson's tips are easier to write than to implement. "CEOs who went to a billion dollars are a limited resource," he admits.