How can you turn a Big Idea into a billion-dollar business? Of all the American companies that came public in the past 25 years, only 5% achieved $1 billion in revenue; in contrast, more than 25% went out of business. We all chase the dream of growth, but very few achieve remarkable success. Is there an actionable success pattern that these elite companies followed?
I believe so. As an executive, I believed there had to be a useful set of guideposts to manage growth by. But as I searched I found no quantitative dissection of the success pattern for turning a "Big Idea" into a stand-alone billion-dollar business. This launched a study to reverse-engineer the success of billion-dollar companies, the result of which I call Blueprint Companies and discuss in
Blueprint to A Billion
While Blueprint Companies represent 5% of the American companies that went public since 1980, the big surprise is their disproportionate impact: They account for 56% of employment in 2005 and 64% of market value created! Blueprint Companies are the heart of America's innovation and growth. Their products enhance our everyday lives.
Need proof? Think how often you use
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Blueprint Companies followed a unique revenue growth pattern: exponential growth. Think of exponential growth as growing at least 50% or even doubling every year. This is the only growth pattern that will turn a small business into a billion-dollar Blueprint Company. To achieve this growth, Blueprint Companies implemented these seven essentials.
The Seven Essentials to Achieve Exponential Growth
Create and Sustain a Breakthrough Value Proposition
A value proposition states the benefits customers receive from using a company's products or services in terms that the customer understands. The best Blueprint Companies not only created but sustained breakthrough value propositions.
Exploit a High-Growth Market Segment
Opportunities exist in a lot of industries. Some industries have more opportunities than others. However, industries such as specialty stores generated the highest number of Blueprint Companies with 18 firms: AutoZone, Staples, Tractor Supply, Williams-Sonoma, PetSmart, and others. This occurred because there were multiple market segments to address within this industry: office supplies, teen fashions and pet supplies, to name a few. In contrast, there are numerous cases where a single company arises out of an industry to become the only player to achieve $1 billion in revenues--witness Harley-Davidson.
Marquee Customers Shape the Revenue Powerhouse
Customers can be more than customers. The best of them can serve as an extension of your sales force. They become your most effective sales team. These marquee customers shape the company by testing and deploying the product, by recommending the company to their peers and simply by providing exponential revenue growth on a per-customer basis.
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Leverage Big Brother Alliances for Breaking into New Markets
The complement to marquee customers is a big brother-little brother alliance relationship. These alliances, in which a bigger company helps a smaller one, provides credibility to the little brother, gives it market intelligence, and leads it to marquee customers. Microsoft's early alliance with IBM is a perfect example.
Become the Masters of Exponential Returns
A fairly common management behavior suggests that allocating more resources toward developing and introducing products will solve innovation problems. This often leads to an over-investment situation. The technology industries serve to illustrate what it takes to create the highest value per company. They were cash-flow-positive early and sustained this positive cash flow to $1 billion revenue. Shareholder returns for being a top-performing Blueprint Company are more than compelling: an average of 87% returns to their shareholders while exceeding analysts' expectations 80% of the time!
The Management Team: Inside-Outside Leadership
One of the pivotal essentials that enables the other steps to be executed simultaneously is a dynamic leadership pairing in which one leader (or team) faces outward toward markets, customers, alliances, and the community while the other leader (or team) focuses inward to optimize operations. Contrary to the somewhat popular belief that one leader is the leader, this inside-outside leadership pair is highly prevalent among Blueprint Companies: Microsoft, eBay, Yahoo! and Tractor Supply, to name just a few.
The Board: Made Up of Essentials Experts
Blueprint boards are not packed with investors, as one would think. Blueprint companies recruited customers, alliance partners and other Blueprint CEOs to the board -- and that makes a big difference. I call them essentials experts because their role is linked to the shaping and execution of one or more of the essentials.
More than 90% of Blueprint Companies used five of these essentials. Applying one to your situation is good, three is better; applying five or more will turbo-charge your business to achieve exponential growth.
Are you an investor? Then use the Blueprint approach to screen for America's most successful growth companies!
David G. Thomson has been leading business growth for 20 years in general management and executive sales/marketing at Hewlett-Packard and Nortel Networks. He also served as an associate principal during his five years at McKinsey & Co. Thomson's "Blueprint to a Billion" insights have appeared in major print and online publications across the U.S, including The New York Times, Fortune Small Business, Investor's Business Daily, CNN.com, Forbes.com, Leader to Leader (formerly the Peter Drucker Foundation), The Kansas City Star and The Denver Post. For more information about David Thomson, please