Disruption followed by stratospheric growth rates have long been the start-up ideal, but a new study explores the foundational elements of sustainable growth that apply both to early-stage firms and established brands.

This is according to two members of the venture capital firm General Catalyst, writing in the Harvard Business Review. Hemant Taneja, managing director, and chairman Ken Chenault (formerly CEO of American Express) isolated the critical areas of strategy that lead to long term growth.

“Enduring companies are not one-trick ponies,” they write. Companies with a long-term vision must accept that as the market changes around them, systemic transitions – transformations – are a fact of life. “What was once novel becomes a commodity over time.”

They point to American Express, the credit card issuer that Chenault ran from 2001 to 2018. What began as a regional freight express business in 1850s New York became a money order business when its president was frustrated converting letters of credit into cash. This led to the invention of the travellers cheque, among other innovations.

What’s noteworthy was the business’s ability to see a new opportunity and fold it into its existing operations. The founders, “let their commitment to providing ‘unsurpassed service’ to their customers drive their strategic thinking, allowing them to sense both new marketplace opportunities and forces that might jeopardize their existing business.”

Despite the romanticism of the single-minded founder, a la Steve Jobs, enduring companies are able to be flexible because individual business segments are able to make their own decisions from early on in a company’s life-cycle.

It is a flexibility of leadership, aided and framed by a core set of values, typified in Disney, the authors write. That combination allowed the firm to “rapidly iterate” its way into content, commerce, and experiences over 50 years. This began with Walt Disney’s multi-strategy approach, which sought to instil the company’s ideas through rigorous training, emphasising “vision and values, behaviors over intentions, and purpose over task”. As a result, the company trusts employees as stewards and allows decisions to be made without layer upon layer of steering committees.

This has continued under current CEO Bob Iger, whose tenure has seen a raft of major acquisitions. Even with established companies such as Marvel, Disney deploys the values-based system of leadership to allow newly acquired companies the autonomy to keep making the decisions that made them worth buying in the first place.

But the longevity thesis goes broader. “We focus on endurance as a fundamental design principle because we believe the best businesses are intrinsically aligned with the long-term interests of society,” say Taneja and Chenault. Companies that take the long view from the outset will be better placed to adapt to that society.

“Developing clarity about the core value they create for society, the adaptive capacity that will enable them to transition as markets evolve, and the system of leadership will increase the odds that they endure beyond their founding generation”, Taneja and Chenault conclude.

Sourced from Harvard Business Review