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Only about one-tenth of one percent of start-up U.S. companies ever achieve revenues of $250 million or more. And of those companies that reach $250 million in sales, only one in three - about one-thirtieth of one percent-will growto reach $1 billion in sales. Most companies tend to start small and stay that way. Only handful ever manage to “break through” from small company status and become large enterprises.
So, the question is what are these breakthrough companies doing right? To look for answers, more than 7,000 entrepreneurial companies which appeared on Inc. magazine’s annual list of the 500 fastest growing companies were studied. Ninety-four of these companies have revenues of $250 million or more. From that pool, the nine best performing companies in terms of annual revenue growth, return on equity and return on sales were determined. Those nine breakthrough companies were then analyzed over a five year period to try and identify the “secrets of their success”.
What emerged from this study was there are six practices which distinguish the breakthrough companies from their everyday counterparts. Breakthrough companies do these six things well and that seems to underpin their ability to make the transition to major-player status in their fields. If you aspire to join this rather exclusive circle, a good starting point would be to make these six practices your own.
KEITH McFARLAND is the founder of his own consulting firm, McFarland Strategy Partners. He has served as associate dean of the Pepperdine University School of Business and Management, and as CEO of two technology companies, Collectech Systems and Nivo International. McFarland Strategy Partners has assisted major companies such as Morgan Stanley, EGL and Prudential, and growth companies, including Vans, House of Blues and others. Mr. McFarland is a graduate of Pepperdine University and writes a regular online column for Business Week.
The Web site for this book is at www.breakthroughcompany.com.
This is a summary and not a critique or a review of the book. It does not offer judgment or opinion on the content of the book. This summary may not be organized chapter-wise but is an overview of the main ideas, viewpoints and arguments from the book as a whole. This means that the organization of this summary is not a representation of the book.
Breakthrough companies are not built to meet the needs, preferences or whims of their founders. Rather, there is an underlying belief what’s good for the organization should come first. Breakthrough companies are committed to building something which is larger than any of their individual employees, even the firm’s founders.
The builders of breakthrough companies typically “crown the company” rather than “crown” themselves. In other words, they work to build something which is bigger than any one person, even the CEO. They put the interests of the firm above their own personal preferences. Instead of attempting to build loyalty to themselves, savvy breakthrough company leaders commit to doing the best job possible for their organizations.
Breakthrough companies generally go through four distinct stages of growth:
In the one-man band stage, the company’s management are pretty much personally involved in running the business or managing its technical aspects. As the company grows to become a tribal clan, the managers start to spend a little of their time leading and coaching. That proportion of time allocated to coaching increases again when the business grows further. The leaders then become like the village elders. By the time the business has taken on a life of its own and has become a sovereign organization, the bulk of the management’s time is allocated to leading, coaching and shaping strategy.