Wednesday, November 27, 2019

The Best Run Companies are the Sustainable Companies

Guest post from Sam Hua and Nan Hua:

Business people talk all the time about wanting to build ‘hundred-year companies’. But a   hundred years of what? A hundred years of growth? A hundred years of development? Or a hundred years of survival?

The key should be survival, so the company will be alive and kicking in a hundred years, passed on across generations. This is the ultimate achievement in business. As for a hundred years of growth – well, no company has yet managed to do that.

Most public companies see their strategy as being entirely dictated by growth. Balance sheets, income statements and cash flow statements are
cranked out every year. And so, we’ve gotten to the point where public companies can’t even look beyond the current year in their ‘strategic vision’.

Now let’s talk about development.

What is development? Growth means more money; development means more capabilities. Development is the process of gaining the capability to survive in the future.

When a company’s revenues reach a peak, it could very well be the eve of its destruction. Why? Because this year’s success is the result of inertia from the past. If you don’t develop the ability to continue to survive next year, you might be gone by then. If you have piles of cash on hand but your company faces the risk of failure, that shows you don’t have a scientific outlook on development – all you’re focusing on is growth. This was Nokia’s problem.

Many business people, the most successful ones, often say that their companies are 6-18 months away from failure. These people are said to be ‘always focusing on the next crisis’. Sometimes they’re accused of faking it to keep their employees in line. But it’s really none of these things. They are not guarding against sudden crises, they just have a clear understanding of how companies survive and develop – everything a company has today is the result of good decisions yesterday. But if good decisions aren’t being made today, then the company won’t survive tomorrow. It’s a cause and effect dynamic.

What’s an even higher achievement than development? Survival. When we talk about building a 100-year company, we don’t mean the company is going to grow for 100 years, we mean the company will still be around in 100 years. The ultimate achievement in business is sustainable operation – the company always survives and never disappears. How do you do this? By always having new cards in hand. If you never want to be left behind by society, you need to be always useful to it so that it keeps you around. You have to always think about your killer products, authoritative expertise and dreams come true for the next year, next five years, next decade. This is the foundation of our strategy.

Sam Hua and Nan Hua are  founding partners of Shanghai H&H Marketing Consulting
Company and the authors of SUPER SIGNS: Taking Your Brand To The Ultimate Level.

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