1. Do you have an emotional bond with your customers?
Competing strictly on price, quality, and features is the road that most companies travel. But in a world of overcapacity and sensory overload, there will always be some company that can do things a little cheaper or better than you can.
Companies that prosper over the long term don't just offer good deals. They exude genuine affection for their customers. How else to explain the enthusiasm that Internet shoppers display for Amazon and its palpable devotion to customers? Folks who buy bikes from Harley-Davidson are so nuts about them that Harley has created a program to reassure potential customers that they can buy a Harley without being a fanatic.
One Company, Many Leaders"We call it fluid leadership. People figure out what they're good at, and that shapes what their roles are. There's not just one leader. Different people lead during different parts of the process."
Al West, CEO, SEI Investments Co.
2. Does your strategy stand out from the crowd?
You can't do great things for your shareholders if you're satisfied with doing things "a little better" than your rivals. If you want to win big, you have to think different. That's the strategic lesson of the dominance of Dell in the computer business, of Southwest Airlines' 30-year flight to growth and profitability in an industry oozing red ink, and of the fast rise of Washington Mutual in an industry in which most big players are slashing costs, cutting branches, and downsizing customer expectations.
Behind the success of each of these companies are strategic ideas that challenged the status quo in their industry. That's why so many companies that are leaders today were once dismissed as mavericks, wild cards, insurgents. Their strategies seemed unfamiliar and even strange to the incumbent powers — many of whom now look longingly at what the mavericks have built. Today, the acid test of strategy is originality.
3. Are you a fun place to work — and a fun organization to do business with?
The most productive companies tend to be the most playful companies. Think of Southwest Airlines and the experience of flying on one of its planes. There's a reason that the experience often feels so entertaining: Southwest evaluates job candidates in part on their sense of humor.
You don't have to be downbeat to be disciplined. People are hungry for a workplace that doesn't always feel like work — where they're invited to express their personality, to bring their personal interests to the office, to laugh as well as buckle down.
Likewise, the most successful products tend to be the ones that bring a smile to the face of customers: Who's not happy after eating a Krispy Kreme doughnut, purchased in a colorful shop with a see-through window into the doughnut-making equipment?
Commerce Bank, with its brightly clad employees, its smartly designed branches, and its colorful change-counting machines, manages to make banking (yes, banking) a fun and even memorable experience.
4. Are you built to change?
The only certainty in business today is that some crucial elements of your strategy — the competitive landscape, your customer's expectations, the underlying economics of your industry — will be different tomorrow. The half-life of a great idea, a new product, or a popular marketing campaign has never been shorter. That's why change itself has become a core capability in organizations that prosper over the long term. The best companies may look to the past as a source of inspiration, but they don't allow it to become an excuse for imitation. They look to history for continuity but not for repetition.
IBM and Microsoft have done masterful jobs of reshaping strategy, product offerings, and R&D priorities in the face of dramatically new circumstances — from the explosion of the Internet to the surging popularity of open-source software to the mission-critical rise of Web services and e-commerce. The two companies are usually rivals, and they come at many business opportunities with different promises and products. But both have made radical (and often difficult) changes without dismantling their organizations or falling into a death spiral. Change, while far-reaching, has become a normal part of doing business.
Values Make The Difference"We don't fit the stereotypes. There's plenty of managerial edge in this company — the culture creates it. Whole Foods is a social system. It's not a hierarchy. We don't have lots of rules handed down from headquarters in Austin. We have lots of self-examination. ...Peer pressure substitutes for bureaucracy. [It] enlists loyalty in ways that bureaucracy doesn't."
John Mackey, CEO, Whole Foods Market
5. Do you embrace the value of values?
Today, more than ever, customers don't just ask, What products do you make? They also ask, What values do you stand for? The company with the clearest sense of purpose wins.
That's why Whole Foods Market logs head-spinning growth in the supermarket business. The company's fierce commitment to its fresh, nutritious products keeps its customers believing and its employees working hard. Starbucks Coffee is another case in point. At the heart of its success is not just premium coffee or fashionable outlets; it's a worldview — the allure of an affordable luxury — that connects with customers and attracts a certain kind of employee.
6. Are you as disciplined as you are creative?
Creating long-run value means delivering short-run results — every quarter, every week. There is no contradiction between creativity and execution. Indeed, the most innovative companies tend to be the most disciplined when it comes to making their numbers.
What's so noteworthy about such business game changers as Cisco Systems, FedEx, and Wal-Mart is how seamlessly they combine cutting-edge strategies with real-time information — and metrics that let senior executives (and in-the-trenches managers) know how well the company is doing at any moment in time. Fast companies understand that what gets measured really does get attention — so they pay attention to what they measure.
The Talent Premium"We have the best people in the industry, as measured by education, intelligence, initiative, work ethic, and work record. We find them and go after them."
Peter Lewis, CEO, Progressive Corp.
7. Are you winning the battle for talent?
You can't keep your customers happy if your organization is filled with people who are unhappy (or untalented). And if you want to fill your company with great ideas (see question 2), then you have to fill it with smart people. Fast companies recognize both of these principles, which is why they treat the human element in business — whom they hire, whom they promote, how they keep everyone motivated — just as seriously, just as creatively, just as rigorously as they treat finance, R&D, or marketing.
That's one reason why Southwest Airlines consistently outperforms its bitter rivals: The company is without peer when it comes to the science of effective motivation and savvy hiring. SEI Investments, a fabulously successful player in an entirely different business, has organized itself around a team-based, fast-flowing, ever-changing workplace that makes it remarkably productive.
These and other companies understand that the best way to win battles in the product market or the financial markets is first to win the battle in the talent market.
8. Do you use technology to change expectations and reshape your business?
Most companies have lost their zeal for tech-driven transformation. But fast companies keep the faith. They believe that the Internet remains the most powerful laboratory for business experimentation ever. It transforms how people work together, how companies interact with customers, and the economics of entire industries. There is nothing more disruptive today than an original strategic insight fueled by a savvy application of computers and communication.
That's the breakthrough formula behind the miraculous growth of eBay. The insight: the natural desire for "person to person" commerce, made effortless by the Internet. It's also the formula behind the explosive growth of the Apollo Group and its Web-enabled University of Phoenix. The insight: an explosive demand for lifelong learning, especially among busy people. Meanwhile, Cemex has leveraged the revolution in high-speed communications to create a whole new approach to delivering cement to construction sites — using cutting-edge technology to reshape an old-line business.
A Hunger For Change"We have a culture in which people really want to move quickly....Our people complain that we move more slowly than we used to. But some of that more measured approach is appropriate, and it's much better than being stuck in a situation where the CEO has to invigorate a place and keep shouting, 'Come on guys, let's move!'"
Steve Ballmer, CEO, Microsoft Corp.
9. Are you built for speed?
Being fast doesn't mean being reckless. But fast companies do understand the cost of hesitation and delay — whether it's responding to a customer complaint or launching a new product. Successful companies know that time is as valuable a resource as money or head count.
A commitment to speed explains the success of Progressive, a fast company in an industry that's undeniably slow: insurance. The company boasts that it settles auto-insurance claims before competitors know that there's been an accident. Electronic Arts, a true superpower of the games industry, is one other company that is serious about time — in its own case, making sure that its programming teams meet demanding deadlines even as they pursue breakthrough creativity. One key resource: an intranet library that lets developers share best practices and technologies with one another across the company. By working smarter, everyone works faster.
10. Have you built a company of leaders?
There's much more to leadership than the vision and charisma of the CEO. The most effective form of leadership is grassroots leadership: The companies with the most confident and committed leaders, deepest in the ranks, are the companies that win.
Royal Dutch/Shell Group, a gigantic organization in one of the world's most basic industries, has maintained a spirit of growth and innovation in part through its GameChanger program, which gives in-the-trenches innovators the resources and the freedom to maneuver outside of the established hierarchy. Nucor, a best-of-breed company in another basic industry, is justifiably famous for pushing decision-making authority deep into its ranks and looking for frontline employees and middle managers who work with their brains as well as their brawn.
The Power of Grassroots Leadership"The people at the so-called bottom of an organization know more about what's going on than the people at the top. The people in the trenches are the ones in the best position to make critical decisions. It's up to leaders to give those people the freedom and the resources that they need."
Martin Sorrell, CEO, WPP Group
Sidebar: From Challengers to Champions: Fast Companies by the Numbers
For eight years, Fast Company has scoured the world to identify and chronicle "fast companies" — organizations that embody the attributes that define the best ways to compete, work, and win. The 25 companies listed below represent the best of all of the companies we've written about. Their stock-market performance over one-, three-, and five-year periods speaks to the enduring value that they have created. As a group, these 25 companies posted an average stock-market return of 111% over the past five years. By contrast, the Dow Jones Industrial Average lost 9% of its value over the past five years.*
|Apollo Group||Phoenix, AZ||46.0%||309.3%||244.7%|
|Cisco Systems||San Jose, CA||-16.4%||-82.3%||17.2%|
|Commerce Bank||Cherry Hill, NJ||-11.8%||114.6%||98.7%|
|Dell Computer Corp.||Round Rock, TX||2.4%||-49.6%||59.8%|
|eBay Inc.||San Jose, CA||56.7%||-2.1%||991.5%|
|Electronic Arts Inc.||Redwood City, CA||-0.2%||65.5%||152.7%|
|FedEx Corp.||Memphis, TN||-1.2%||42.4%||53.1%|
|Harley-Davidson Motor Co.||Milwaukee, WI||-30.2%||-3.6%||134.1%|
|Hindustan Lever Ltd.||Mumbai, India||-31.7%||-40.2%||-12.1%|
|IBM Corp.||Armonk, NY||-22.1%||-33.3%||48.8%|
|Krispy Kreme Doughnut Corp.||Winston-Salem, NC||-14.7%||267.1%||NA|
|Microsoft Corp.||Redmond, WA||-15.0%||-54.2%||6.7%|
|Nucor Corp.||Charlotte, NC||-38.4%||-23.6%||-32.4%|
|Pixar Animation Studios||Richmond, CA||46.1%||54.1%||54.9%|
|Progressive Corp.||Mayfield Village, OH||9.4%||143.2%||37.7%|
|Royal Dutch/Shell Group||London, UK||-24.2%||-27.2%||-28.7%|
|SEI Investments Co.||Oaks, PA||-37.1%||39.6%||126.2%|
|Southwest Airlines||Dallas, TX||-22.6%||2.2%||59.3%|
|Starbucks Coffee Co.||Seattle, WA||8.8%||13.0%||119.3%|
|Washington Mutual Inc.||Seattle, WA||8.1%||101.8%||8.4%|
|Whole Foods Market Inc.||Austin, TX||25.1%||172.3%||67.0%|
|WPP Group||London, UK||-50.8%||-67.6%||-5.3%|
*A note on methodology: Returns calculated as of April 1, 2003. Composite performance reflects an unweighted average of stock values of the 25 fast companies compared with the DJIA, which is itself an unweighted average of 30 stocks. Data from SmartMoney.com and Dow Jones.