Shiny Companies

We love shiny

We don’t love dull objects. We love shiny objects.

We love shiny companies just as we love shiny objects. We want to emulate shiny companies.

We look for shiny lessons. Apple was number 4 on the 2020 Fortune 500. Apple did X? X is exciting! We want to do X! CVS Health, number 5 on the Fortune list, did Y. Y is for yawn.

The opposite of shiny companies

The opposite of a shiny company is a dull company. We don’t love dull companies. We want to be like Apple. Shiny!

In its famous growth/share matrix, BCG labeled companies as “dogs” (or sometimes “pets”) if they had low relative market share and operated in low-growth markets. You read it right: They rated humans’ best friends lower than cows and question marks. Well, I say this: Have you played fetch with a cow? Have you established a meaningful relationship with punctuation?

Which big companies are shiny?

The table above shows the 50 largest companies in the USA in 2020, measured by revenue. Lots of familiar names. (The tables above and below, and the graphs below, are all based on the 2020 Fortune 500.)

Which of those companies are shiny and which are dull? My nominations below, in which green means shiny and grey means dull. I based my nominations on name recognition, high-tech products, and newsworthiness. You might disagree. That’s fine. Feel free to recolor the table.

I rated 15 of the Fortune 500 as shiny and 35 as dull. I didn’t set out to hit those numbers; that’s just how it turned out.

When we look at those 50 companies, we see how they scored on revenue:

The 50 companies’ combined revenue was $6.85 trillion. The shiny companies, 30% of the 50 companies, accounted for 27% of the revenue.

Shiny companies employ 29% of the people who work for the Fortune 50 companies.

If we remove two outliers, dull Walmart and shiny Amazon, shiny companies account for about the same percentage of workers.

What makes shiny companies shiny

Two words: market value.

The 15 shiny companies on the 2020 Fortune 50 account for a wildly disproportionate 62% of the Fortune 50’s market value.

I don’t mean to advocate or dispute wealth versus other metrics. I just want to understand which metric correlates with shiny.

Market value seems a promising candidate, perhaps because it sells such inspirational tales of fame and celebrity, bold innovation, and hitting the jackpot, as opposed to maintaining a big grey machine that keeps on humming along. Where’s the shiny joy in running pharmacies, such as CVS Health at Fortune number 5? (Other than saving lives with vaccines and medicines, of course.) Alphabet is shinier at number 11, with a market value ten times that of CVS.

Let's mull the dull

Maybe we ought to pay more respect to the dull companies. They’re big, too; that’s how they got into the top 50 list. The dull companies account for about 85% of the assets of the Fortune 50.

For a variety of reasons, asset-intensive companies tend to have relatively low profits and hence lower market values. (For much more on that subject, see The PIMS Principles.) On the other hand, many dull companies have prospered for a long time. They’ve learned a thing or two. Plus, longevity matters to employees and communities.

So I ask again: Should we emulate the shiny or dull?

It's a trick question

The trick is that the question assumes we will learn something valid and useful by studying stories from shiny and dull companies. The trick is about emulation itself.

When we emulate a company, we implicitly think like this: If we do what they did, we’ll get what they got.

Emulating shiny companies can charm us into corporate-hero worship. Emulating dull companies can lull us into a false sense of humming-along security.

Steve Jobs was a visionary who pushed hard for products that were “insanely great”. True. What about the black turtlenecks? Seriously, they were part of the gestalt. What about the HR department that hired teams of engineers? What about the competitors who were slow to innovate or follow?

When Apple introduced the soft keyboard on its phones, Blackberry and others suffered a big competitive setback. Over time, though, Apple’s competitors keep catching up. That’s not Apple’s failure or competitors’ success. It’s just what we expect to happen in competitive marketplaces. (See also “Strategy Fundamentalism: Why You Shouldn’t Bet on Halos and Horns”.)

In my workshops, I ask people to name a company that succeeded. Many pick Apple or Tesla. I ask them why Apple or Tesla succeeded. They don't say Apple or Tesla succeeded because competitors blew it. They talk about the shiny, ineffable magic of Steve and Elon.

When we point to one or two things that companies “did”, we reduce complex successes and failures to one or two actions, one or two personality traits. It’s like companies that say, “with a single click you can _____”, while ignoring the innumerable clicks that preceded that single click.

Actions and traits don’t play out in a vacuum. Try this: Think about what has to happen for actions and traits to pay off. Try this too: Think about what has to not happen.

Emulation vs. inspiration

Emulation is what happens when I buy the same golf clubs as Tiger Woods and expect to golf like him.

Inspiration is another matter.

Inspiration can come from desperation, as I see sometimes in business war games. It can come from perspiration, as in trying and trying and finally making a breakthrough. It can come from admiration, as in looking at other companies and other industries and getting ideas.

American folksinger Arlo Guthrie said, you can’t have a light without a dark to put it in. Inspired by him, I say that if you have a dark, put a light in it. Who knows what you’ll find? Don’t worry whether it’s shiny or dull. Worry about whether it’s inspirational and useful. 

And while you’re at it, use your candle to light the flame for someone else.

#competing #strategy #strategicthinking

New article, published June 2022 by the Institute for Management Development (Lausanne and Singapore): “Should you back the lone genius or trust the wisdom of the crowd?”

Image credits, in the order shown (all from Pixabay.com)

• Shiny objects: cygig 
• Shiny companies (Apple): raphaelsilva 
• Dull companies: Mylene2401 
• Similar people: geralt
• "And then Elon...": OpenClipart-Vectors
• Cat playing golf: naobim
• The End: geralt