Fast 500 Execs on Today’s Economy

Economy“Despite a radically changed technology marketplace, the majority of CEOs of [these] companies are optimistic about the future of their companies and the technology industry,” Evans says.

Explaining the results of a survey of Fast 500 executives released in May, Evans says most of the companies are looking beyond current economic uncertainties. “[They are] investing in marketing and sales activities, hiring new employees and looking toward strategies that will help contribute to their continued growth, while shaving travel and administrative costs,” he says.

Deloitte & Touche reports 62 percent of CEOs say they are confident their companies will maintain the same high levels of growth they had in 1996-2000. “Innovation doesn’t stop just because the business climate goes cold,” says Scott Jarus, president of j2 Global Communications Inc., Hollywood, Calif., ranked No. 50 on the Fast 500.

Sounding like the leaders of “traditional” companies, the surveyed executives touted their companies’ work forces and strong marketing/sales efforts. “The only way to attract the interest of a potential buyer is to market them in a variety of ways, continually with subtlety, so you maintain a high level of visibility and credibility,” says PFSweb’s Layton. “A strong balance of the right media – telemarketing contacts, direct mail, personalized e-mail, mass e-mail, print and broadcast media advertising – is key to getting your potential client to look for your services when they need them.”

The Fast 500 spotlights companies that come a long way in a short time. But what about mature companies that produce spectacular results over the long haul?

To gain a historical perspective of what makes a successful company, author and former Stanford University faculty member Jim Collins examined the stock performance of companies during a 30-year span. Collins and his research team were interested in companies that showed so-so performance during the first 15 years, followed by cumulative returns of at least three times the market average in the next 15 years.

By this criteria, the hot companies turned out not to be technology giants like GE or Intel,
but – to use Collins’ word – “dowdy” old-econ­omy players including Walgreens, Gillette and Kroger. The experiences of these and eight other companies are detailed in Collins’ book Good to Great (Harper Business).

“These are not considered glam­­our companies, yet they blew those com­panies away,” Collins says. He notes, for ex­ample, that Wal­greens’ stock outper­for­m­ed Intel’s by two to one, and GE’s by five to one.

Yet, none of the Good to Great com­panies was headed by a star like GE’s Jack Welch. Just the opposite, in fact. As Collins tells US Business Review, the people who led these companies to greatness were the “antithesis of the egocentric, it’s-all-about-me leader.” Indeed, Collins’ team found that “charisma is a liability.”

The successful leader might turn out to be someone like Darwin E. Smith. Darwin who? Beginning in 1971, Smith grew Kimberly-Clark from an also-ran in the paper ind­ustry to the No. 1 paper-based con­sumer pro­ducts company in the world. Mild mann­ered and self-effacing, Smith told a reporter that he “never stop­ped trying to become qualified for the job.”

Nevertheless, Smith was able to engineer tough changes as CEO. For instance, he made the risky and dramatic decision to sell the com­pany’s paper mills to concen­trate instead on Kimberly-Clark’s con­sumer brands, such as Huggies and Scott. Smith was correct, of course, and 20 years after he was made CEO, Kimberly-Clark’s cumulative stock returns were 4.1 times the general market.

Smith was the epitome of what Collins calls a “level five” leader. Rather than trying to make a name for him- or herself in the CEO hall of fame, this person instead is focused “on the com­pany and building a great institution,” Collins says.

Collins’ finding is worth remembering the next time you’re interviewing executive can­didates. “Our problem,” he says of many com­panies, “is we keep putting the wrong person in charge because we think we need a charis­matic person.”

Another revelation in Good to Great con­cerns the role of technology – that if exec­utives in a “traditional” business are “look­ing for technology to help them turn the corner,” he says, “they are mistaken.”

“There is no case where a company [in the study] harnessed technology and made the leap from good to great happen,” he says. According to Collins, companies were more likely to be successful if they took a slow, deliberative approach to a new technology, such as the Internet.

Technology, he explains, is an accelerator of momentum, not a creator of it. Again, the model student in this regard is somewhat of a surprise: Walgreens.

While rival drugstore.com generated a buzz on Wall Street, Walgreen’s slow approach to the Web drew criticism. It shouldn’t have.

Collins explains that what looked from the outside like the dithering of a bricks-and-mortar drugstore chain actually amounted to Walgreens’ leadership saying “we’re not going to react to this [Internet] thing. We’re going to do this really different thing today – we’re going to engage our brains and think.”

In the end, Collins says, Walgreens devel­oped a Web site that best served its needs, while nearly doubling its stock price in a year. During the same period, drugstore.com had lost almost all of its initial stock value. (It’s worth noting that bricks-and-mortar com­panies have successfully outsourced tech­nology functions to Fast 500-type firms.)

Collins’ findings seem tailor-made to ease the worry, envy or cynicism of companies that don’t expect to ever appear on something like the Fast 500. Indeed, his conclusions hold out hope even for firms in what he calls “terrible” industries.

“Attaining great results really has nothing to do with the industry you’re in,” Collins concludes. “Greatness is not a function of circumstance, it’s a function of choice.”

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