All quotes come from author interviews unless otherwise cited.
Introduction
1. Since our first book, Profit from the Core, in 2001, we have maintained a database of eight thousand public companies worldwide that we call the “Profit from the Core” database. It now contains thirty years of data, and we use it to analyze patterns of growth around the world; we refer to it as the “actuarial tables” of company growth. Today, worldwide, only about 11 percent of companies have achieved a decade of more than modest sustained and profitable growth that we defined as 5.5 percent revenue and profit growth (currency adjusted), and have also earned their cost of capital. See survey of 377 global executives in survey conducted for Bain & Company by the Economist Intelligence Unit (EIU) in March 2011.
2. Analysis done for our book Repeatability: Build Enduring Businesses for a World of Constant Change, based on 300,000 employee surveys that the company Effectory (its business is conducting employee surveys in Europe) analyzed in conjunction with our Bain team.
3. Gallup, State of the Global Workplace, 2013.
4. Bain analysis based on data from Capital IQ, company reports, and literature search. Founders index (n = 115) includes companies in the 2014 S&P 500 in which the founder is the CEO or was on the board for at least eight of the past ten years.
5. Bain evaluation of two hundred companies worldwide; internal study relying on literature search and experts.
6. Kevin J. O’Brian, “Nokia’s Success Bred Its Weakness: Stifling Bureaucracy Led to Lack of Action on Early Smartphone Innovation,” International Herald Tribune, September 27, 2010.
7. We examined this with a sample of twenty-five large companies with long histories whose value creation we traced to their beginnings. We then characterized the challenges and decisions facing the company during each period and sorted out the big value swings according to what was happening in the company at the time and its life stage. We found that the large swings in value relative to the stock market averages occurred when the prospects for future profitable growth change up or down significantly; we also found that these perceptions were related much more to the company performance relative to its industry than industry variations (in fact, over 80 percent of variation in value was within an industry grouping, not relative to the rise and fall of market growth expectations).
8. These estimates came from an analysis that we conducted with our global financial database in which we looked at the speed by which companies were growing as they reached Fortune 500 scale. We also used our database of eight thousand global companies over thirty years to look at the fastest-growth companies in the world that have scaled their business to over $10 billion in revenues. We find that companies are able to achieve this several times faster than in past decades. A similar analysis that we conducted ten years ago looked at speed of growth in the 1980s and 1990s, and came to a similar conclusion about the “speed to scale” record holders.
9. “Bain Brief: Strategy Beyond Scale,” February 11, 2015.
10. Based on analysis by our Bain team of entrants to and exits from the Fortune 500 list of companies from 1994 to 2014. We further validated this by studying the speed of revenue declines of fifty of the largest company stall-outs of the past ten years.
11. Survey of 377 global executives in survey conducted for Bain & Company by the Economist Intelligence Unit (EIU) in March 2011.
Chapter 1
1. Gallup, State of the Global Workplace, 2013.
2. This statistic is based on three mutually reinforcing sets of survey results. The first was a survey of Endeavor entrepreneurs at the annual meeting of Endeavor in San Francisco during 2013. The second was a survey of seventy executives, all company founders, in a workshop Chris Zook held in June 2013 at the Vlerick School of Management in Belgium. The third was Bain’s Founder’s Mentality Global Survey of 325 executives. All showed consistently strong results.
3. Bain evaluation of two hundred companies worldwide.
4. Bain & Company life cycle value analysis in which we took a sample of twenty large, public, global companies and analyzed the major swings in their market value over the course of their history, ascribing each swing to the life cycle period in which it happened, and whether it was in response to its predictable crises.
5. Survey of 377 global executives in survey conducted for Bain & Company by the Economist Intelligence Unit (EIU) in March 2011.
1. Bain & Company, Stall-Out Analysis, based on eight thousand public companies globally from 1993 through 2013 and a “deep dive” into a sample of fifty large stall-outs to look at causes and the trajectories in more detail.
2. Matthew S. Olson, Derek van Bever, and Seth Verry, “When Growth Stalls,” Harvard Business Review, March 2008.
3. Survey of 377 executives in North America, Western Europe, and Asia conducted jointly by Bain and EIU, March 2011.
4. Bain & Company analysis of fifty significant business transformations.
5. Bain analysis in which we took a sample of fifty industrial classifications (like public utilities or airlines) and worked with internal experts to identify the number of ways that the industry at the time was undergoing major turbulence (such as deregulation of the airlines or new pricing models like energy exchanges) or not.
6. John Kador, Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry (Hoboken, NJ: John Wiley & Sons, 2002).
7. Net Promoter Score is a measure of customer advocacy developed by Fred Reichheld, who showed a strong relationship between the score and the ability of a business to achieve profitable growth. It is a simple index based on asking customers to rate on a scale of 1 to 10 their inclination to recommend the product or service to a friend. The index is calculated by subtracting the percent of customers who are “detractors” (those giving only a rating of 0 to 6) from the percentage who are “promoters” (those giving a rating of 9 or 10). We looked at this index across a range of industries and company sizes and found a strong negative relationship between scale and Net Promoter Scores on average. Yet, in every category, there were always a few outliers of large companies that had maintained customer advocacy, even at large size, because of what they had done to maintain the founder’s mentality and to avoid balkanization of the experience.
8. Clayton Christensen, The Innovator’s Dilemma (Boston: Harvard Business Press, 1997).
9. Bain, Founder’s Mentality survey of 325 executives worldwide, September 2013.
10. Michael Mankins, Bain Brief: “This weekly meeting took up to 300,000 hours a year,” April 2014.
11. Temkin Group, “Employee Engagement Benchmark Survey,” January 2012.
12. David Packard, The HP Way: How Bill Hewlett and I Built Our Company (New York: HarperCollins, 2006).
13. A Letter from Walter Hewlett, Wall Street Journal, February 13, 2002.
14. Bill Taylor, “How Hewlett-Packard Lost the HP Way,” Harvard Business Review, September 23, 2011.
Chapter 3
1. See the blogs at www.foundersmentality.com website for a wide range of ideas on overriding systems.
Chapter 4
1. First estimated in Matthew S. Olson and Derek van Bever, Stall Points (New Haven, CT: Yale University Press, 2008), and verified by recent Bain & Company analysis showing that the risk and severity of stall-outs is increasing.
2. Niall Ferguson, “Complexity and Collapse,” Foreign Affairs, March 2010.
Chapter 5
1. David C. Robertson with Bill Breen, Brick by Brick (New York: Crown Business, 2013).
Chapter 6
1. Arthur Blank and Bernie Marcus with Bob Andelman, Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion (New York: Crown Business, 1999), xvii.
2. Sam Walton with John Huey, Sam Walton: Made in America (New York: Doubleday, 1992).
3. Ray Kroc with Robert Anderson, Grinding It Out: The Making of McDonald’s (Chicago, IL: Contemporary Books, 1985).
4. Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company (New York: Currency, 1996).
5. Vinod Mahanta and Priyanka Sangani, “Corporate Dossier,” Economic Times of India, November 9, 2013.
6. Unilever, https://www.unilever.com/sustainable-living/the-sustainable-living-plan/our-strategy/awards-and-recognition/.
7. Warren Bennis and Burt Nanus, Leaders: Strategies for Taking Charge (New York: Harper & Row Publishers, 1985).
8. Hamish McDonald, The Polyester Prince: The Rise of Dhirubhai Ambani (New South Wales, Australia: Allen and Unwin Pty. Limited, 1999).
9. Vikram Oberoi, interview.