Fortune is out with its “Most Admired Companies” issue, and my reaction to this year’s list is the same as my reaction to the list every year: What is the point of this exercise? There are all sorts of companies and leaders that I admire, and I admire them for all sorts of different reasons, but the Fortune list invariably strikes me as a case of rounding-up-the-usual suspects, a business version of People‘s annual “Most Fascinating People” issue.
Who are the Top Five organization’s on Fortune’s list for 2011? Apple, Google, Berkshire Hathaway, Southwest Airlines, Procter & Gamble. Anybody shocked? Who were the Top Five in 2010? Apple, Google, Berkshire Hathaway, Johnson & Johnson, Amazon. I guess it’s noteworthy that J&J, after a brutal year, slipped to Number 17, or that Amazon, despite a great year, slipped from Number 5 to Number 7.
But does any of this matter? I think not.
What does matter is the chance to use the list as a spur for all of us to think about the companies we admire — and about what explains that admiration. I spend much of my time visiting organizations of many different shapes and sizes, in many different fields, with very different business strategies, product offerings, and organizational cultures. At the end of each visit, I do ask myself whether or not this is an organization I “admire” in the sense that I went to tell other people — readers of my books, visitors to this blog — about what I saw and learned at the company.
So here are the five factors that I weigh as I add to or subtract from the list of organizations that I admire:
1. What ideas does this company stand for? There are plenty of organizations with cool technology or hot products. But for me, the most admirable companies don’t just sell competitive products and services. They stand for important ideas — ideas meant to shape the competitive landscape in their field, ideas meant to reshape the sense of what’s possible for customers, employees, and investors.
2. Does this company work as distinctively as it competes? You can’t do something compelling, distinctive, original in the marketplace unless you do something compelling, distinctive, original in the workplace. Strategy is culture, culture is strategy.
3. Has this company created an emotional and psychological contract with its customers? Success today in every field is about so much more than price, performance, features — pure economic value. It is about passion, emotion, identity: sharing your values. The companies that I admire aren’t just efficient and productive, they are memorable to encounter.
4. Is this company a leader in creating leaders up and down its ranks? The organizations I admire don’t just lead their industries in terms of innovation or financial performance or market share. They also understand that the only sustainable form of long-term business leadership is the capacity to create grassroots leaders at every level of the organization.
5. Is this company as consistent as it is creative? What strikes me about so many of the great companies I’ve gotten to know is that even in a world of constant change and fast-moving markets, they don’t change their strategies and practices in response to outside forces. They are confident about the ideas in which they believe, the culture they have created, their connections with customers, and are willing to stick to their strategies even as the word around them is in turmoil. As Jim Collins, the great management guru, has argued, “The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.”
So here’s my questions to all of you: How do you figure out which companies are truly worth admiring, and thus worth studying and learning from? What are the attributes that define business greatness in your mind?
Reprinted from Harvard Business Review