I rarely read books on leadership because I find them confusingly similar to good books on management and strategy. Whether you wish to consider it a matter of leadership, strategy or management, the six principles below are what I believe are necessary to build a great company (such as Coca Cola, Sony or Intel):
- Vision A large, panoramic view of how to serve a customer need or how to realize value from an unappreciated asset. This view is almost always based on an asymmetry of information wherein the founder develops an incredibly in-depth knowledge of his subject matter and an intense passion to pursue the goal.. Case example: Amazon
- Focus Dedication to a simply defined business concept which stands the test of time (and markets) without the need for diversification, acquisitions or "financial engineering" to generate above average growth. Investment in growth drivers alone is typically sufficient to achieve growth and market share objectives. Case example: Wal-Mart
- Values Large groups of people can only succeed where a clear value system is articulated and practiced by the senior management. The key values are honesty, fairness and respect for all people (whether they be employees, customers, shareholders or the community). Case example: JP Morgan
- Customer Focus Great companies have a unilateral focus on serving their customers and do not place a higher priority on investor expectations or competitor moves. Case example: Johnson & Johnson
- Low Cost Capital is invested in the growth drivers of the business and not frittered away on overhead and there is a constant effort to provide the customer with a cheaper, higher value product(s). Case example: Wal-Mart
- Exceptional People Great people are hired and retained in the key disciplines for the particular business, such as programming, merchandising or research. Today, almost everything else can be outsourced. Case example: Goldman Sachs
The most common mistake I see in entrepreneurs is a lack of focus, usually brought on by a lack of self-discipline. When growth or earnings expectations are not met, too many business owners resort to diversification into new businesses or use acquisitions as a means to improve expected results. Great companies grow organically because they constantly find ways to generate growth in their core business. Successful companies assume there is organic growth and then find the way to achieve it. Such an approach allows them to leverage their strengths and expertise and consequently typically results in lower risk, less capital intensive strategies.
The second common mistake is that the founder is not a good recruiter and ends up with mediocre people in key positions. Founders tend to recruit the wrong people because they fail to give recruiting sufficient priority (usually because they are wasting time micro-managing) or they lack the confidence to recruit people that may challenge them. A founder's vision is improved by the input of other exceptional people.
The most difficult deficiency to overcome is a lack of values, which comes about due to a lack of respect for other people. Without the proper value system a founder can not retain good people and no great company was ever built by just one exceptional founder.
In my experience a lack of customer focus can be overcome by a clearly articulated vision and a relentless pursuit of lower cost, higher value product. However, this approach may only work temporarily if your target customer develops new requirements and demands better quality products or a different type of product value (in which case you better become customer focused).
Many pundits typically list 8-10 qualities of great leaders and then say that no leader has all the qualities. This type of conclusion suggests to me that the pundits gave up on the analysis half way through. I worked for over ten years with the founders of two great companies--one in Indonesia and one in Japan and have met several other founders who built great companies with revenues in the billions. There is a simple set of key principles to follow to build a great company.