One of my favourite books is “Hidden champions of the 21st century”. It is a book about very successful family run small companies that no one knows about. A fantastic antidote to all the scaling, VC, unicorns, IPO, exit, news bombardment.Against the business news by exception. That is not how most businesses operate. Most businesses want to survive, create an income, have some fun and have started pursuing an opportunity, dream, purpose or vision.
The hidden champions are companies, that have a long-term focus on multi-generational wealth creation, are passionate about what they are doing, are very good at it, own a market niche, are deeply grounded in a local community and look after their staff very well.
Hundred year plans
The operative word is “multi-generational”. Not five-year plans. Hundred year plans. Focussed on wealth. Not profit or cash flow. Wealth is more than profit. It is health, happiness, purpose, friendship, community, environment, etc. They have been applying triple bottom line before the term was even invented.
Not fluid capital but solid capital. Capital that stays and is essential for healthy local economic development. They are the backbone of the local and national economy. Companies that you can also refer to as “Firms of endearment”. Applying “lovability” principles to what they do. We should pay a lot more attention to those companies. Particularly in a fast-changing world. Because collectively these companies are more resilient, agile and more successful than all the unicorns you keep hearing about. Call them mini-unicorns.
Or call them small giants. “Small Giants: Companies That Choose to Be Great Instead of Big” is written by Bo Burlingham. Small giants are companies that have chosen not to focus on revenue growth or geographical expansion, pursuing instead other goals that they considered more important than getting as big as possible, as fast as possible. To make those trade-offs, the companies had found it necessary to remain privately owned, with the majority of the stock in the hands of one person, or a small group of like-minded individuals, or—in a couple of cases—the employees. The shareholders who owned the businesses I was looking at had other, non-financial priorities in addition to their financial objectives. Not that they didn’t want to earn a good return on their investment, but it wasn’t their only goal, or even necessarily their paramount goal. They were also interested in being great at what they did, creating a great place to work, providing great service to customers, having great relationships with their suppliers, making great contributions to the communities they lived and worked in, and finding great ways to lead their lives.
They learned that to excel in all those things, they had to keep ownership and control inside the company and, in many cases, place significant limits on how much and how fast they grew. The wealth they created, though substantial, was a byproduct of success in these other areas.
Soul, mojo, buzz
Companies with soul. Companies with mojo. Companies with a buzz. With excitement, anticipation, a feeling of movement, a sense of purpose and direction, of going somewhere. That happens when people find themselves totally in sync with their market, with the world around them, and with each other. Everything just seems to click. Unfortunately, most of the companies I know have eventually lost that quality.
What are the lessons?
- Soul can’t exist unless you have active, meaningful dialogue with stakeholders. The soul of a business grew out of the relationships and real conversations a company develops with its employees, customers, the community, suppliers, and investors.
- They focus on developing an emotional connection with their customers, they are authentic, and they do not compromise on quality and excellence.
- They have the ability to make customers feel that you’re on their side.
- In their view, great customer service involves demonstrating to customers that you value their business and will go the extra mile to keep it.
- They adopt value discipline, which means organising the entire company around tailoring products to customers’ individual needs.
- They cultivate exceptionally intimate relationships with customers and suppliers, based on personal contact, one-on-one interaction, and mutual commitment to delivering on promises.
- Everyone in the company knows how to explain the “mojo”.
- They ignore the advice on growth, expansion and growth.
- The owners build the kind of business they wanted to live in, rather than accommodating themselves to a business shaped by outside forces.
- They develop their own tailored management systems and practices,
- They put a lot of emphasis on education, teaching their employees about finance, service, leadership, and everything else involved in building a successful company.
- They are all passionate about what they do. With a deep emotional attachments to the business, to the people who worked in it, and to its customers and suppliers. Creating a family.
- The founders build a company that they enjoy and are proud of. That gives them a sense of accomplishment and fulfilment. That allows them to lead the kind of life he wanted. After all, isn’t that the purpose of going into business in the first place?
- They know that legal protection is a poor substitute for innovation.
- They are part of something great and unique.
- They feel they will lose the uniqueness when you try to replicate the original.
- They write vision statements and then rewrite them, soliciting input from people inside and outside the business.
- They know that success means you’re going to have better problems.
- They understand the inevitability of unpredictable events.
- They slow down when they have to make big decisions.
- They work with guiding principles.
- They want a small lifestyle business, independence of corporate bureaucracy, and more control of their business and their life.
- They understand their place in the world
- They understand finance (metrics, margins, capital structure, cash flow, balance sheets)
- They keep their best people engaged and challenged by creating spin-offs
- They focus. Instead of trying to do it all, they want to be the best at a few things.
- They fire their bad clients and only work with companies that corporate citizens themselves, who are honest and good to the community.
- They believe that the real contributions they make are to their community and the positive impact they have on the lives of people around them Not the size of the company or the personal fortune.
- They are all intimately connected to the place where they are located that it is hard to imagine them being anywhere else.
- The company shapes their respective communities, and the communities shape them. They believe in “terroir”.
- They have symbiotic relationships with the communities, and the vitality of those connections is part of their mojo. The companies’ owners and employees have a strong sense of who they were, and where they belong, and how they are making a difference to their neighbours, friends, and others they touch. In some mysterious way, all that contributes to the buzz around the business, the passion people feel for what they are doing.
- They treat people right and pay them on time.
- They know that reputation is all you have, and that the word travels fast.
- They are faithful to the company’s heritage.
- They stay small because they want to know everyone.
- They focus on collegiality. On the feelings that employees have toward one another, the mutual trust and respect they feel, the enjoyment they get out of spending time together, their willingness to work through any conflicts that might arise, their collective pride in what they do, and their collective commitment to doing it well.
- They are aware of the little worlds they are creating internally. Culture as the unwritten constitution.
- They want their businesses to be places where people could lead fulfilling lives, and they see the quest to create such a business as a fulfilling mission in itself.
- They apply the servant leadership style.
- They have a “trust-and-track” approach to management, which involves educating employees about what it takes for the company to be successful, then trusting them to act accordingly.
- They are tough but fair with their staff. For example; if you’re late four times in any quarter, we show mercy. The fifth time you’re suspended. The sixth time you’re out. No excuses, no exceptions.
- They protect their gross margins.
- They have fun.
- They make social responsibility the cornerstone of the business, pledging “to do what is ‘right’ even when it does not seem to be profitable, expedient, or conventional.” The companies believe the highest purpose is to make worthy contributions to the common good.
- They have a CSO (Chief Spiritual Officer).
- They focus on professionalism—the company does what it says it’s going to do.
- They know that it is the managers and employees who do the work of the business day in and day out. They are the ones who convey the spirit of the company to the outside world. Accordingly, they are the company’s first priority. They believe that the customer comes second.
- They create a culture of intimacy, which includes transparency, keeping teams small, deliver training and education and pay attention to social and life events. Family.
- They know that if you want a company that cares, you need people who care, and they need to be motivated by more than money.
- They read of business books.
- They articulate, demonstrate, and imbue the company with a higher purpose.
- They make the work people do meaningful.
- They remind staff in unexpected ways how much the company cares about them.
- They have role models (Patagonia was mentioned a few times).
- They have a succession plan.
- They move from being entrepreneur-centric to being vision-centric. They ensure that by the time the founders are gone, the vision will be secure.
- They do not pay regular bonuses. Instead, they do things like trips abroad, the courses and the dinners and the ball games and the company van that you can borrow over the weekend if you’re moving.
Some cool quotes from the book:
- “One who sails by on excuses will drown in a sea of mediocrity.”
- “You can spill some milk if you don’t kill the cow.”
- “The start-up phase, the throw-up phase, and the grow-up phase.”
Blood is thicker
The keyword from the book is family. Not just a family business, but being run as a family. Which include the customers. True marketing 3.0. Culture as the USP or the not-to-copy. Social capital as part of your balance sheet.