Building a company for Success
Four traits common to the greats
Contrary to popular belief, entrepreneurship is a long and arduous journey. Those that embark on it seek more freedom, control and purpose in their lives. Financial wealth plays a big role in this, but so do other factors such as health, family and relationships. What makes it a personal journey as well is that the entrepreneur must choose the metrics of success they want to live by and strive towards.
When my own journey started in 2017, I set out not just to build a company, but to build one that is truly successful. I wanted the company to be a world-class institution, something that is respected and looked upon as a benchmark for the companies of tomorrow. But companies come in various shapes and sizes, and when you ask people what is a successful company you will get many different answers back. Success is quite a nebulous term after all.
However, I’m pretty sure that when I mention the words “successful company”, various names already come to your mind. Google, Tesla, Uber and Apple — these are the common ones. What about Microsoft, Facebook, Toyota and Instagram? What about older more established giants like Disney, IBM, Berkshire Hathaway, and 3M? It seems it’s easier to agree upon the companies that are successful than to define the criteria of success itself. But therein is a good place to start.
Over the past few years, as I’ve been attempting companies of my own, I naturally looked to these companies for inspiration and guidance. I learned their stories, studied their principles and analysed their decisions. I tried to discern from the greatest what it was that they did (and still do) really well. What are the criteria, the aspects, the traits that make these companies the successful entities that they are today?
Well, I think I’ve found the answer, in the form of four key traits. These traits are what I believe to be the ingredients of a successful company. A company that can create more value than it consumes, that moves society towards a better future, that responds positively to the needs of the world and continues to do that over time. To reach this level of success, a company must:
- Find the best solutions to meaningful problems
- Create real value (economic wealth)
- Improve life and greater society for all its stakeholders
- Build a strong culture that unites, sustains and perpetuates the company
1. Find the best solutions to meaningful problems
I believe that a company should exist, as its core purpose, to solve a problem for humanity. There are many global problems that face us today as a civilisation. Things like climate change, poverty and insufficient basic education. Then there are other problems, more personal problems; things like finding a taxi ride, buying a book online and being able to watch your favourite series whenever you want to. These may seem like trivial problems in comparison, yet the people that experience them feel them acutely, and desire for a world in which they are solved.
Companies exist to solve these various types of problems, and hence, create that desired world.
For almost every problem you can think of there’s a solution invented or distributed by a company. Today there are companies of various sizes across the world bringing solutions to market. As consumers, we will often choose the best solution to our problem given our lifestyle constraints and personal values.
But, what exactly is a problem?
Well, according to Edward de Bono in his book Lateral Thinking, “A problem is defined as the difference between what one has and what one wants”.
In mathematical form: Problem = x-y
Where x = what you want, y = what you have, and x > y
Note, if x = y, you do not have a problem. You feel content.
And if y > x, you have more than you want, and you feel blessed and grateful.
If you reflect upon the communication of some of the most successful companies of today you’ll notice something interesting. Their communication is designed strongly to remind consumers of the “problem” they (the customers) have. They remind you “this is what you have”. Then they inspire customers with a better future, saying “this is what you want”. The customer then imagines and feels this difference, sees it as a problem and understands that the company can solve it for them. This motivates customers to take action.
Customers, like all people, want a world in which their problems are solved and they’re living better lives.
Maslow’s Hierarchy
Humans, while unique, share similar physiological and psychological needs. These needs (or problems) can be grouped into a tiered structure/hierarchy and this was proposed by the psychologist Abraham Maslow (in his 1943 paper titled “A theory of human Motivation”). His work was highly impactful, and it has been widely used to understand human needs and behaviour. These human needs are expressed in a hierarchical diagram known as Maslow’s Hierarchy of Needs.
Maslow’s theory stated that a person must satisfy the needs on the lower tiers of their pyramid before they are able to satisfy the needs of the higher tiers.
However, the diagram makes an even clearer point — human beings have a multitude of needs that have to be satisfied in order for a human being to realise its true potential. All across the world, we each find ourselves toiling at different rungs on the hierarchy at different stages of our lives. Growth and self-improvement for a human being means seeking to fulfill their current needs while progressing up the pyramid towards self-actualisation and self-transcendence.
The story of SpaceX
When I think of a company that does an excellent job of communicating the problem it solves, I think of SpaceX.
The SpaceX mission is to reduce the risk we face as a species residing on a single planet by creating a colony on Mars. The problem, as explained by SpaceX, is that by living on one planet we have put, quite literally, all of our eggs in one basket. As our own technologies get more powerful, the chance of an existential disaster rises exponentially.
Furthermore, there are other dangers such as asteroids and earthquakes that could significantly reduce humanity’s way of life, if not eliminate human life or all life completely. Looking back at Maslow’s hierarchy, we can see this existential problem threatens both our Safety and Physiological needs. A risk to our survival (personally and as a species) is definitely a meaningful problem.
The solution that SpaceX is working towards is being able to send humans to Mars to establish the first human colony outside planet Earth. Along the way, it needs to create sustainable, dependable technology and hire the best people for the job. Notice that the solution they offer (the human colony on Mars) solves the Safety and Physiological “problem” of being confined to one planet. By having another colony on Mars, we have a copy of the hard-drive of the human species, thereby hedging our risks and increasing our chance of survival over the long-term.
Not only is the company building a solution for humanity, the company itself is also a solution to the many needs engineers and other professionals have when looking for a company to dedicate their time and energies to.
As an employee, SpaceX does the following:
- Pays you well (need covered: physiological, safety)
- Gives you a peer group of intellectuals (need covered: belonging)
- Is widely renowned as one of the most innovative companies to work for (need covered: prestige).
- Espouses an incredibly high standard to which everyone needs to perform, thereby creating the environment that allows them to realise their potential (need covered: self-actualization)
- Reveres the importance of the mission, giving all employees an opportunity to work on something bigger than themselves (need covered: sense of meaning).
Working at SpaceX can satisfy all six stages of Maslow’s Hierarchy, if at least partially, so it’s no wonder it’s employees refer to it as the “Most amazing and rewarding company to be a part of”.
SpaceX has inspired us with a vision of a future in which we have interplanetary travel, a colony on Mars and are zooming around the solar system as a multi-planetary species. This is something I think most people find quite thrilling and because of that we rally behind this company and want to see it succeed.
The “best solution” depends on who’s it for
A successful company, however, doesn’t always need to solve such large scale problems. Any problem is a cause of some sort of suffering and people always seek solutions to their suffering.
As we learnt from Maslow, we have many different needs to satisfy and so we are always looking for solutions that satisfy those needs the best. For the various kinds of problems, we see many solutions in the market at various prices. From household cleaning products to consumer electronics and pet care, there are products to solve almost any problem humans have. And humans seek out the best solutions to their problems.
Now, the best solution does not solely mean the most technologically superior solution to the problem. There are other factors to take into account to determine what makes this solution the “best”. In fact, like many things in life it is up to us to determine the factors of importance for which we will be seeking to optimise. An economic consideration is obviously paramount. But the ethical constraint is also important. How does this impact humanity and life for humans? How does this impact the lives of other living beings? How does it affect the larger environment?
A person will focus on satisfying the needs most important to them, and that depends on where a person is situated in their Hierarchy of Needs. For those that struggle to survive, satisfying physiological needs trump all others, and price becomes a huge determining factor. For someone who has a stable income and wants to contribute more positively to the environment, a company’s values and practices become much more important in their decision making process.
Successful businesses find the best solutions to problems given the constraints of the environment they find themselves in. They use their understanding of the economic system, their customers and their own capabilities to create a business model that is both robust and profitable. By understanding the needs of the market well, especially their main customer, they are able to focus accordingly and design the best solution for that market.
They reach the best possible solution by maintaining a strong feedback loop with the market through continuous engagement, listening and iteration while maximising the amount of value (wealth) created for the main customer.
This brings us to the second trait of a successful company.
2. Create real value (economic wealth)
The purpose of profit
In Understanding Financial Statements (2nd Edition) it is written that “the distinguishing objective of business is widely regarded as maximising the wealth of owners.” What this is commonly interpreted as is that a business exists to make a profit, which is what’s remaining once all the expenses incurred in running the business are settled. It infers that profit is to be used to solely grow the wealth of the owners.
I disagree with this notion.
Firstly, I define a company on more holistic terms. I see a company as an entity created by a collection of individuals with a purpose to improve society in some way. Profit might mean you have a successful business but not necessarily a successful company. There are many ways to achieve profits and not all of them benefit all stakeholders involved, or are good for the environment. Think about companies who’ve turned to offshore manufacturing, displacing livelihoods locally, or those that depend on child labour.
Most people are under the impression that a successful company is one that is highly profitable, and that turning a profit is the express purpose of the company. This is a common misconception.
Profit is not the purpose of a company, it is the outcome of the company. It is a measuring stick by which companies are judged to be value-adding economic entities. Profit is the outcome of a company fulfilling its purpose successfully within the rules of its environment. A business needs to produce profit to survive in the same way you need to produce blood to survive. But to say a company’s purpose is to make more profit is just as incorrect as saying you live in order to make more blood.
If a company generates more value (measured in money) than it consumes, it is a profitable company. Profits are not only important for rewarding the owners of the business, but are needed to keep the business growing and adapting. This is extremely important: profits allow companies to grow and innovate. More profit generated means more ambitious projects can be launched and markets entered. This also means more risks avoided, mitigated or deferred and this gives the business a better chance to continue its survival.
In addition, generating a surplus profit allows you, as a company, to compensate your employees better. This, in turn, results in better produced and delivered products and services as well as a reduced churn of employees. This has a reinforcing effect on the company culture, resulting in a faster transfer of skills and knowledge between experienced and junior employees. This translates to increased revenues, better customer experiences, a stronger brand and a better business.
Hence, profit does not exist to just be accumulated and distributed. It needs to be strategically and continuously invested into the company in every way to strengthen its competitive advantages and increase its defensibility in the market. Every company seeking long-term survivability should be investing a portion of their profit towards these activities. It results in a powerful feedback loop that strengthens the company and improves its ability to create more value (and generate more profit) in the future.
Create wealth for people and get paid for it
In Paul Graham’s thoughtful essay “How to make wealth” (a personal favourite), he recommends that the best way to get wealthy is “…to start or join a startup. That’s been a reliable way to get rich for hundreds of years.” He posits that there are many ways to get rich, and a startup is just one of them. Successful startups — the ones that become successful companies “…make money by creating wealth and getting paid for it”.
I don’t think it’s a coincidence that two of the most successful companies in the world live by this principle.
The first one is Apple, a technology leader and world-class innovator. It’s also known for being one of the most profitable companies in the world. They have an exceptionally strong brand, and their products are known for their superior build quality and simple and intuitive user experience. This was what their customers valued and the company delivered this to them. As a result, they have been the leading smartphone device in several markets for many years, even though their devices command a premium price and competitors often offer better technological specifications at lower prices.
Apple uses the profits they make from the sale of their devices to maintain their technological and brand advantage, thereby sustaining the generation of new profits. They do not offer a wide range of highly specified products nor do they prioritise offering the cheapest price. They are focused instead on high quality manufacturing and design of a limited number of devices that deliver a cohesive, minimalist and exceptionally user-centric user experience. In August 2018, Apple (42 years after its founding in 1976) became the first company in the world to surpass $1 Trillion in market cap.
The second company that has generated vast economic wealth (by relentlessly focusing on creating value for its customers) is Amazon. You may know it today as a hugely successful company, yet for a long period of its life it had maintained very low profit margins. Forbes magazine states, “Whereas most retailers maintain operating profit margins between 3% to 15%, Amazon has long averaged between 1% to 2%”.
This is due to Amazon’s philosophy which is based on customer centricity and long term thinking. Jeff Bezos is famed for his letter to investors in 1997 in which he outlined the values and long term strategy for Amazon. Two notable headings — “It’s all about the long term” and “Obsess over customers”.
Since then, Amazon has continually channelled profits away from the bank towards new projects and ventures. You see, Amazon wasn’t actually marginally profitable — it simply channelled most of its excess profits towards new growth initiatives and gambles before the accounting year was done. The Motley Fool did an analysis of Amazon’s true profitability and came up with: “Still, while it’s impossible to measure the true cost of all of Amazon’s growth initiatives, it’s clear that the company’s moves to expand its fulfilment capacity, speed up deliveries, and in-source some of its logistics are hurting its near-term profitability.”. It’s due to these many growth initiatives that Amazon has become the multifaceted company that it is today.
Amazon’s strategy has paid off: a clear focus on creating wealth for their customers, in terms of solving for their needs and wants, rather than on creating wealth for the owners through distribution of short term profits, has resulted in tremendous growth in the company’s portfolio of products and services.
Now, Amazon operates many large profitable business lines, yet it still continues to innovate in new directions and as well as deeper into their current verticals. Within the retail space, it opened a convenience store without checkout lines and launched a new service that delivers packages to the trunks of cars for free. Time will tell what the return will be on these ventures. In Jan 2020, Amazon (founded 26 years earlier in 1994) became the second company in the world to surpass $1 Trillion in market cap.
“From the beginning, our focus has been on offering our customers compelling value” — Jeff Bezos, CEO Amazon, 1997 Letter to Shareholders
The verdict: successful companies do not focus on creating profit, but on creating wealth for their customers and they do this by creating the best products and services that satisfy their customers’ needs and wants. For Amazon, their customers’ needs were around larger selection of products, cheaper prices and faster delivery. For Apple, their customer’s needs were a superior user experience and premium build quality. These are two different needs, two different markets, and wealth for each one is represented differently.
What is common between these companies is their ability to consistently understand what their customers’ needs truly are, and then to innovate in that direction. While the paths they carved to the top were different, what’s common between these trillion-dollar behemoths is that their ideology of relentlessly putting the customer first is key to their success.
By focusing on creating value (wealth) for their customers and succeeding, these companies earned profits. This, in turn, allowed them the opportunity to invest in research and development to further create more wealth (value) for their customers. This creates a positive feedback loop between a company and its customers which in turn creates strong bonds of trust and builds a positive brand.
However, to be truly successful a company must widen its definition of “customer” to include all its stakeholders, i.e. all the people and entities affected by the company. It needs to build bonds of trust and goodwill with all the entities within its sphere of influence. This ensures that everything the company needs to survive and grow exists in a positive harmonious relationship with the company. This gives the company its greatest chance of survival.
Thinking in this way makes you realise that a company must be something that adds value not only to its paying customer(s). A company is also a product to its suppliers, investors, employees, etc.
Look at the relationship a company has with its employees. Employees choose to pay the company with their time and energy and in return the company gives them monetary compensation, prestige and other benefits. This is how the company itself is a product for employees. We saw this example of SpaceX in relation to its own employees above.
In the same line of thinking, suppliers, investors, and even the country itself can also be thought of as customers of the company too. Each type of customer has different needs from the company, as the company has different needs from them. A company must work on serving those various customers well and positively.
As a company is able to expand its “products” beyond its main customer to its other stakeholders, the additional value and wealth it generates for society is multiplied. This results in the company becoming a fantastic engine of change for society. It coordinates material and human resources in such a way that it eliminates problems and makes the world a better place.
It becomes a positive engine of society and this is what the third trait of success represents.
3. Improve life and greater society for all its stakeholders
Companies, even if focused on one particular problem, will always end up solving a bunch of other problems as second order consequences or necessities. For example, through employment and interaction with other businesses they stimulate the greater economy, creating more jobs and putting a dent in the social problems we face. The longer a company exists, the more chance it has of putting a dent in the problems it solves.
However, there seems to be an assumption today that if your main purpose is to solve a social problem, you’re a Non-Profit Organisation (NPO), and you cannot, should not, be profitable. On the flip side, it is often perceived that if, as a corporate entity, you are making a profit, then you cannot be acting in the best interests of everyone; there must be someone getting screwed over. It is a false dichotomy. Profitable companies can indeed benefit all stakeholders and NPO’s should aim to be profitable. In both cases, the entity’s longevity and impact is greatly enhanced by becoming more sustainable.
The concept of a business is not new; having existed as early as the 8th century B.C., and most likely earlier. Yet while businesses have evolved relatively slowly since then, in recent decades the rate of change has accelerated. This evolution of businesses has been brought about mostly by the technological advancements, but also the economic and regulatory advancements, of our times. One thing remains the same — businesses exist to solve a need for people.
The degree to which a company does this largely determines its assimilation into the cultural landscape and its overall success. Take Uber for example — a company that has changed our way of life quite significantly. The reason for this? There are two customers of Uber, not one. The other type of customer is the cab drivers themselves, the supply side, who now work as independent contractors providing a service via the platform. Uber, thoroughly solving the needs of the market well, has become a poster child for the Silicon Valley movement and is valued at around $80 Billion (when this was written), yet it still hasn’t turned a profitable year. This is quite in line with the philosophy of solving the needs of the market first, and generating (figuring out) profits later.
At the end of the day, the company’s products and policies represent its values and its vision for the future (the one it wants to create). When you purchase something from that company, you cast your “economic vote” — you give your money (economic power) to that company so that it will work to make that future more likely to happen.
Today, we are blessed with a variety of companies that exist to fulfill the various needs of our lives. These companies create products of varying standards, in ethical and unethical, sustainable and unsustainable ways. And this is why it’s more important than ever to be a conscious consumer.
Conscious consumerism may be a buzzword, yet the idea is as old as business itself. Businesses propose to create a world for people in which their problems are solved. People support these businesses because they find that world and proposal appealing. By consciously choosing the products we consume (and the companies we support as a result), we vote for the kind of future and society these companies stand for. We vote for the kind of world we want.
Vote wisely.
A cup of Starbucks, please
If you want to support a company that’s taking care of society, one of the companies I’d recommend choosing is Starbucks. Founded in 1971, it was only acquired by Howard Schultz (it’s now famous leader) later in the 1980s.
From a product standpoint, Starbucks didn’t just make great coffee. It also reinvented the “coffee shop” — from being a normal commercial space it now became a place one could go to rest, relax and take a break from work.
In addition, Starbucks truly cares for its employees. You can see this in their extensive employee programme, for which a lot of people are grateful for in helping them launch their careers. Treating employees with respect and commitment created a beautiful culture in which the best employees chose to work at Starbucks, and Starbucks customers get to interact with these amazing individuals. Another important business practice of Starbucks is to also invest in farmer programs, designed to strengthen economic development in local communities, while also caring for the environment.
The law sets the bar for how companies should behave and act. They set the limits for behaviour, yet these standards often represent the minimum a company must comply with. An example is setting the minimum wage you can pay employees. Or the maximum amount of pollution you can emit. Of course, there is no (legal) maximum you can pay or minimum to the amount of pollution you can emit.
Regulation changes slowly (as is always the case) and lags technological and scientific progress. In many cases, regulation was set up when companies stepped beyond certain thresholds and it resulted in significant negative effects on society. That’s when the government decided they needed to step in and prevent companies from behaving in these negative ways. And so, they set and imposed regulations and standards.
Hence regulation merely sets the passing grade for companies. If a company wants to be truly successful, to be meaningful to society, to be a leader — it must go above and beyond regulation. It must strive, not just to live up to, but exceed, the desires and needs of the various customers it serves. It must set the bar, the benchmark and lead from the front of the pack, so that others may look on in admiration and follow in their stead.
Starbucks has definitely set a high bar. By shifting to a larger stakeholder focus, they have shown themselves as a positive economic force of society, garnering them lots of goodwill and a strong brand.
Larger organisations have been following suit. It is possible they have realised their myopia, gained some self-awareness and started looking at other stakeholders of their business as “customers” as well. They could also just be following the trend of the market; merely copying what successful companies are doing in order to attract sales and stay relevant. This is still good.
Irrespective of motive, we are seeing a positive trend in the number of companies actively reducing their carbon footprints, treating employees better, improving their efficiencies, engaging better with suppliers and investing back in local communities.
Become a net-positive to all
I think of economics as a system or game. It is an environment with a set of rules. The winners of the game are the businesses that survive (and thrive) in this environment. The system is supposed to be designed in such a way that by playing the game well and winning, a company inherently makes life better for its stakeholders. It is supposed to be a fair place that rewards the victors and punishes the losers. However, our current economic system doesn’t work this way; it is broken. Though perhaps, as something that is the product of our own creative endeavours, it is better thought of as a “work in progress”. The largest game is the society we live in and it is something that continuously evolves.
For a while now, the players of the game have run amok. Companies that were winning laid claim to a large portion of the profits, and it didn’t matter to them if these profits were generated at the cost of society (the Enron’s, Steinoff’s and Theronos’ of the world). These companies focused maniacally on making profit and on convincing the world they were a great company because of it. They lost sight of taking care of their customers’ needs, and thereby lost their right and ability to earn money because they lost sight of creating value for the most important stakeholder, the customers.
The good news is this is changing as well. With the rise of the internet, the digitalization of the economy and blockchain technology, it’s becoming harder for these companies to hide and get away with their crimes. More so, consumers are wisening up, demanding more and choosing better. The world is changing.
Companies who live by sound principles and values, who are fair and transparent, and who function as larger “good citizens” of the economic system are the ones that we (as consumers) want to survive, to carry society forward. These are the companies that we trust to build and sustain our future. These are the kinds of companies we must all stand behind. And we can support these companies in many ways — with our purchasing power, by spreading their message through our social networks, or even by working for these companies ourselves.
The successful companies of tomorrow do not solely exist to solve a problem for a single customer and to maximise profits. They work to solve problems for their various stakeholders the best they can, get rewarded for the value they create in the form of wealth (profit), and then use that created wealth as a means to better the lives of the various stakeholders they impact as they grow the business. By being a net-positive to everyone they interact with, they continuously generate goodwill and return business. And let’s not forget — recurring revenue is sustainable revenue!
This means that a company that’s a net-positive to all is a sustainable company. It is an engine of positive change in the world. By being a value-adding economic entity, it becomes something that makes life and society better as long as it continues to function and grow. What makes the difference to the long-term survivability of the company is the process by which the company continues to grow and adapt to serve its customers. This is driven in large part by the culture that binds the company together.
If a company seeks to exist for the long term, to continue to survive in the “infinite game”, it must have a strong culture that unites the people of the company together around shared values, vision and purpose.
These values define the personality of the company, what it stands for, its reason to exist. It is also the basis for how the company works and behaves in the world. As new people join the company, they are indoctrinated into these values and principles and behaviours (culture). Thus the company’s essence can remain true as it adapts to a changing world while aiming to fulfill its mission and realise its vision.
A company’s culture is the connective fabric that unites and coordinates the people within it based on its values and towards fulfilling its mission. A strong culture ensures that a company can continue existing in the world, serving as a positive engine for change for all its stakeholders.
This brings us to the fourth and final trait of a successful company.
4. Build a strong culture that unites, sustains and perpetuates the company
Culture, like success, can be a nebulous term. For most of my life, however, I didn’t even know companies had a thing called “culture”.
I always thought of companies as being mechanical, robotic institutions that humans pass time in and earn a paycheck from. Time in, money out. It seemed to me that companies served only a functional purpose.
It was only when I started working as a professional that I realised companies had personalities too. They formed bonds and relationships with customers. The stirred up emotions and rallied people with the things they said, the things they believed in and the things they didn’t.
As Simon Sinek says, “People don’t buy what you do, they buy why you do it.”
It turns out that those human-like “personality” traits were part of what company culture was. It was the way the senior people in the office behaved around each other. It was the way employees talked to clients, and how they felt about the company’s purpose. It was the kinds of words used, their manner of dress and the kinds of suppliers they worked with. Their actions and words spoke to me of their values — what truly mattered to them.
This company culture was, to me, a standard of behaviour; a standard of thought and action that displayed what the people of the company, and hence the company itself, truly valued.
Culture, as I define it now, is the set of written and articulated, as well as non-written and non-articulated, rules and habits by which everyone in the company abides by and has in some way agreed upon.
Sometimes the culture can be explicit, in the form of rules around working hours, meeting etiquette or expense policies. Sometimes a culture can be assumed, merely by way of not meeting any resistance. This is dangerous, as it can result in the lowering of standards which starts to diminish the values of the company, and that’s usually when things start falling apart.
A company is always in flux because the people that comprise it are always moving in, up or out of the company. As such, the company culture is also an ever-changing element of a company.
The culture of a company is responsible for the way it operates in its economic environment and the world at large. It is the glue, the essence, that binds the people of the company together into the cohesive whole.
Culture is the “personality” of the company.
A sustainable culture
According to the Cambridge dictionary, sustainability is defined as “The quality of being able to continue over a period of time”
So then, what is a sustainable culture?
Applying the definition above, I would define a sustainable culture as one that has a high likelihood of keeping itself going and ensuring the company’s success. Naturally, if a company dies, the culture goes too. Hence a sustainable culture must as its first priority be able to perpetuate the company’s economic success.
A company is made up of people. But over time people change and leave the company. On the other side of the equation, new people enter the company and bring with them their own ways of thinking and working. In some cases it is good; in other cases it’s counter-productive. Over time, as new people replace the founding members, part of the culture is passed on and part of it changes to suit the people and the times. If the culture is strong and robust, the culture maintains adherence to its core principles and values and continues to be successful in aiding the business to serve its customers. As a person grows over time, dropping parts of themselves they do not like and are not working and adding in parts they want, so too must a company. That’s what makes up a sustainable culture — a culture that can exist for a long period of time yet also adapt to the changing environment, all the while staying true to its roots.
But, what are these roots? Well, these are the company’s values.
A company’s values are the things it holds most dear to it, the things it attributes a higher “value” to over other things. This means that it ranks some things as better and more worthwhile than other things. Choosing values such as honesty, openness and customer-centricity can have a profound impact on the course of the company. Think about how customer-centricity and long-term thinking has shaped Amazon’s destiny or how radical honesty has served Bridgewater Associates. The values that a company chooses, and lives by, is the core DNA that steers the growth path and the ultimate form the company eventually takes.
From the company’s values, a set of principles and tactics can be derived which cover more specific workplace behaviour, norms and processes. This is where it is vital that important aspects of the company’s culture are documented and disseminated throughout the organization. Processes and systems are established to reinforce the values of the company, set the standards and share the learnings along the way. By sharing a common code, these processes align the various people and parts of the company to perform in a consistent and effective manner.
When the individuals in a company believe in and share the same values, it gives everyone in the company comfort and trust in each other’s future behaviour. By creating more trust, employees feel safe and perform better. This also creates a tribal bond, a strong network effect based on reinforcing social bonds and company culture. As a result, employees are less stressed and have fewer reasons to look for another job. If less people leave the company, you’ll be left with a stronger base of custodians of the company culture, resulting in less volatility within the organisation and more sustainability in the long term.
Therefore, to establish a sustainable culture, one of the first things a company must do is define the set of values that it will live by, and to get everyone to buy in and commit to them. They must bake these values into their decisions and products and always question how they can live by them better. I believe that any strong culture should have values around strong open communication, continuous improvement, empathy and of course, sustainability.
A culture of sustainability
A company that wants to be successful in the long-term will value sustainability and apply it to all aspects of the business. Take, for example, how employees live their lives. A company that requires employees to work 60+ hours a week in highly stressed environments will not have those employees around for a long time. This lifestyle inhibits people from building and maintaining strong relationships outside of work, having sufficient rest and recreation and living an overall balanced life. Employees might be able to work like this for a short time, but inevitably they will start to look elsewhere as the deficit grows in the other areas of their lives.
On the other hand, a company that emphasizes manageable working hours (e.g. 40 or less) and less stressful conditions would fare much better in maintaining its positive culture over time. It would also attract a much larger selection of employees that will be looking to build long term value within the company. And a side effect of having happier employees would be having more productive employees. This kind of lens (creating a better life for employees) can be applied even further towards suppliers, vendors and customers. It is no stretch of the imagination to say that improving these relationships will improve the long-term survivability of the company.
When you apply the lens of sustainability to the economics of the business model, you start thinking about the economic sustainability of the business. That refers to the ability of the company to continue to generate profit into the future. Sometimes, a company serves needs that may be more universal, such as food or healthcare, while others serve more transient needs, such as a digital migration service. At the end of the day, all products have a lifespan in the way they are packaged, marketed, sold, delivered. Every business model will be disrupted. It is up to the business to continually evaluate whether it is still economically sustainable, if it needs to think about new business models as its current ones start becoming obsolete.
Another important aspect to apply the sustainability lens to is the environment — referred to as environmental sustainability. This is critical when looking at the overall impact the business has on the environment and ultimately, society. Any damage to the environment that’s inflicted now is a problem that needs to be solved later on. And at that time it’s usually a bigger problem and more costlier to resolve. Naturally, the environmental impact of a company must be a critically examined element going forward as we are already suffering the drastic effects from the damage already inflicted by the many companies of the past.
Strong cultures, strong companies
When I think of a world leading company that’s created a sustainable culture, my answer (and one that I’m sure others would agree with) is BaseCamp — founded 19 years ago by Jason Fried, Carlos Segura, and Ernest Kimby. Since then, Jason Fried has become a role model and leader when it comes to building a company for sustainability and rethinking the concept of work itself.
One rule that BaseCamp emphatically enforces is their 40-hour work week. The principle is simple — everyone should get their work done in the allocated time. There are other aspects of life and if you don’t make time for them they will not get the time and attention they deserve. They don’t over-work themselves and there is no celebration of over-working. This means that when they are at work, they work. They maintain high levels of focus. They eliminate distractions, and make their office communication incredibly efficient. If they want to achieve more at work, they need to do it within the confines of a 40-hour work week.
A concept that’s a natural corollary from this philosophy of work is to reduce the “toxicity of meetings”. Meetings are incredibly inefficient with time, resources and energy. Basecamp has looked at this carefully and broken down the various functions meetings fulfill. They then put together better systems and ways of achieving those functions, often asynchronous and not imposing on others time and attention. Their company not only runs on little-to-no meetings, their main product is built to help other companies reduce this very overhead!
BaseCamp is also the poster child for the Lean Startup movement, having never raised external capital to fund the growth of their business. This means they had a high focus on building an economically sustainable business from the beginning! It also means they valued being in control of how they did things — they defined their values and steered their culture from the first day.
By questioning the concept of work, and what it means to employees, BaseCamp has created a really amazing environment where people are mentally engaged and don’t want to leave. They have a podcast where they discuss reinventing work — how to actually make it more enjoyable and sustainable. Through the company’s podcasts and the founders best-selling books, BaseCamp has also positioned itself as a thought-leader in the industry of digital work and startups, invariably creating a positive impact on company culture way beyond the confines of their own company. That’s what I call being a benchmark.
Another great example that drives home the point of having a culture of sustainability is GoreTex. The founder of GoreTex, Bill Gore, realised over his years that once a factory contained more than 150 people they were less likely to work together as a team, and relationships and harmony broke down. This inspired Robert Dunbar, who then researched this phenomenon. What Dunbar discovered was that across tribes and populations the most relationships a human being can maintain is 150 — this is frequently referred to as Dunbar’s number.
What Gore did at GoreTex was instill a culture, a principle that states once a business unit begins to approach 150, it must be split into its own unit. This allowed their company business units to continue to work efficiently and closely, and to not be taken down by bureaucracy and increasing red tape.
Bill Gore realised something inherently — a company works better, faster and more productively when the relationships are stronger between all the people who comprise it. Company retreats, office drinks, running clubs; all these non-work activities help colleagues to meet each other in a more relaxed setting, enabling them to get to know each other better. As the saying goes, you can learn more about a man in an hour of play than in a year of conversation. Because of this, relationships amongst colleagues are more real and deeper and so business communication and ideas move faster and smoother in the organisation resulting overall in a more effective and sustainable company.
GoreTex is a fascinating culture in that it’s innately focused on keeping the relationships between its employees stable, healthy and functioning at a high level. By organising business units around this philosophy, GoreTex has remained a great place to work for its employees, who feel more valued and embedded in the workplace. This model is replicable and can serve the company as it grows with more employees to maintain strong relationships and high level of performance. This is a strong, sustainable culture and a good sign this company will be around for a long time.
Starting with the End in Sight
Successful companies have achieved their status by embodying to a large degree each of the traits above. The best have, inherently, hit top marks in all four of them. I think that the order in which these measures of success are achieved is important as well, but naturally there will be exceptions. I have seen that some companies have focused on creating economic wealth first (making profit as soon as possible), instead of trying to find the best solutions first and then monetising them.
It is for this reason that I wanted to start with the end in sight. By understanding the path taken and the essential traits of successful companies, I can create a better path for myself. I wanted to know, to imagine, how the company that I want to build would need to look like when it reaches success.
Over these past years I’ve learned about and studied many different companies. I tried to understand how they reached success or failure. Every story may be unique, but there is one commonality — a company doesn’t become successful by accident. The future, especially one that is beneficial for all, won’t happen by chance. We have to create the picture of what we want and then do everything in our power to move towards it and make it a reality.
These four traits of success are the characteristics I admire in the companies of today and tomorrow. They are critical components and identifiers of the companies I will build and the companies I want to work with.
If you’ve thought about creating a company of your own, or improving the one you’re in, you may find these characteristics useful as guideposts. At the end of it all, we all have to support companies because we need goods and services from others to survive in this specialist world we live in. However, by carefully choosing the companies we want to support, the ones whose success coincides with our own, we take a bit of responsibility for the future that’s being created and play our role in making tomorrow a better place.
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Special thanks to Naven Naidoo, Neilan Naidoo, Garin Morgan, Sarvesha Moodley and Josiah Meyer for reading early drafts and providing excellent feedback.
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