Written by: Pieter van den Berg
In our acquisition practice, the valuation of industrial companies is an important part of our work. This includes analyzing the so-called value-drivers for the company in question. Which elements primarily determine value? What are the drivers of growth?
Years ago, Jim Collins investigated which value drivers were decisive at 11 companies that achieved mediocre results for fifteen years and delivered extraordinary performance for at least fifteen years. In summary, these companies share some common characteristics.
The leaders of these companies have a combination of personal modesty and professional willpower, are modest and reserved, but have an unparalleled determination to make the company successful.
The crucial first step is to get the right people on board first before determining the company’s direction. This approach assumes that with the right people in the right positions, the rest will naturally follow. In fact, it is more important than the strategy itself.
The companies were willing to face harsh realities without losing faith in ultimate success. This requires an open culture of discipline and honesty, where facts are not ignored but rather used to drive progress.
The hedgehog concept stems from the idea that the hedgehog only wields one major essential point in the face of danger (putting up spines). By understanding what they could be the best at and what drives their economic engine, they stayed focused specifically on that.
Successful companies gradually built a so-called flywheel that starts slowly and then accelerates. This flywheel effect highlights the power of consistent effort and small but incremental improvements.
Companies create a culture of discipline, where people are driven to do the right thing. This requires not only discipline in action, but also a highly disciplined way of thinking. Successful companies used technology to enhance their already existing strengths, but they never let technology determine their strategy. At first glance, these points may not seem groundbreaking. But the question remains: can you apply them effectively in your business? Best of luck in advance!
This article was originally published in INTO Business magazine Haarlemmermeer-Schiphol of July 2024.