How to Build a Resilient Business?
Starting a new business is always a risk. Statistics show that only about half of new businesses survive past the five-year mark. But some companies seem to defy the odds, sailing through economic downturns and disruptive changes that sink their competitors.
What makes these businesses so resilient? After studying enduring companies like W.L. Gore, 3M, IBM, and Michelin Tires, I’ve identified several key factors that allow companies to thrive for decades or even centuries. Understanding these success strategies can help entrepreneurs build businesses poised for long-term growth.
They Foster Innovation But Avoid Radical Change
Innovative companies try new things but avoid sudden, radical shifts in strategy or culture. For example, IBM has continually reinvented itself over its 100+ year history. From farm equipment to mainframe computers to AI, it has ridden wave after wave of technological change.
But such transitions take place slowly, giving the company time to build capabilities. Although offerings change, IBM’s focus on business customers and corporate culture remains steady. This balance of change and consistency provides stability over the long haul.
They Are Managed With a Long-Term Mindset
Publicly traded companies often make decisions aimed at keeping shareholders happy in the short term. But enduring companies take a long view.
Privately held companies have the advantage of not facing quarterly scrutiny. For example, family-controlled Michelin has operated since 1889. And consumer products giant SC Johnson has been run by the same family for five generations.
Being privately managed allows them to invest in the future rather than maximize immediate gains. And having long-term leaders provides continuity of purpose and culture.
They Maintain Conservative Debt Levels
Taking on too much debt can sink companies when times get tough. Many of the most enduring companies maintain low debt levels and avoid overleveraging.
For example, W.L. Gore, known for Gore-Tex fabrics, operates debt-free. SC Johnson has maintained a AAA credit rating since 1937. This gives them financial flexibility to keep investing during downturns.
They Keep Costs Under Control
It’s easy for companies to let costs creep up over time. However enduring businesses diligently control expenses, even during growth phases.
Nucor Steel, for example, has a decentralized structure giving plant managers authority over operations while executives focus on overall strategy. This helps keep overhead costs lean. And Swiss pharmaceutical firm Roche penalizes divisions that exceed their budgets.
Avoiding “lifestyle creep” in costs contributes to long-term health. Procter & Gamble, for instance, has systematized cost reduction efforts across the massive company. This operational discipline is key to thriving through ups and downs.
They Stick to Their Core Strengths and Identity
Diversification can help companies weather downturns in particular markets. However, over-diversifying into too many areas can stretch focus and resources too thin.
Many enduring companies instead build deep capabilities in a particular domain and then expand gradually to adjacent markets. For example, 3M started with abrasives and adhesives and then leveraged its bonding knowledge into tapes, bandages, and more.
Staying centered on core competencies allows companies to get really good at something instead of being mediocre in too many areas. This helps cement a competitive advantage over decades.
They Avoid Mergers and Acquisitions
Many companies try to grow quickly via mergers and acquisitions. However research suggests most M&A deals fail to create shareholder value. They tend to do better when growing organically.
Enduring companies are often disciplined about M&A. SC Johnson, for example, continues to drive growth through new products and global expansion. And automaker Honda has avoided large mergers, instead entering new segments like jets and robots through internal development.
Avoiding big mergers decreases risk. And doubling down on organic growth leverages existing capabilities. This helps set up enduring companies for steady expansion.
They Maintain a Strong Culture
Company cultures can weaken over time if not purposefully developed. But enduring companies work to build cohesive cultures that last.
Outdoor gear maker Patagonia has a famously robust culture centered on sustainability and work/life balance. And Toyota’s culture of kaizen (continuous improvement) empowers every employee to identify ways to do things better.
Developing a “purpose beyond profits” and shared mindset allows companies to pass enduring values down to new generations of employees and leaders.
They Invest Heavily in Talent Development
Skills and knowledge walk out the door every time an employee leaves. That’s why enduring companies invest heavily in talent development, including both formal training programs and on-the-job learning opportunities.
IBM is famous for its professional development programs. Michelin also runs its own university to build employee skills. And Roche spends heavily on training its pharmaceutical researchers.
Developing skills and knowledge within the company helps retain talent while building capabilities that can sustain competitiveness. This commitment to learning also builds an employer brand that helps attract top talent.
They Maintain Conservative Products and Services
Many companies fail by expanding too quickly into unproven offerings, and overextending capabilities. Enduring companies resist chasing “hot” new trends, instead sticking to products and services they know they can deliver.
For example, ChapStick lip balm has survived nearly 100 years by avoiding new flavors and instead doubling down on the familiar, dependable original. And 3M continues leveraging its core technologies like adhesives into related products with its “30% Rule” guiding new product development.
Conservative product introductions avoid risks of market rejection and quality problems that could undermine customer loyalty. Delivering consistent offerings preserves trust built over time.
They Communicate Honestly With Customers
Customers today are quick to call out inauthentic marketing and lack of transparency. Enduring companies build trust by communicating honestly and openly with customers.
B2B buyer Intel stated its “Truth and Transparency” policy years ago as a promise to be open about product capabilities, regardless of the impact on sales. And SC Johnson vows to list all ingredients, even in fragrances exempt from labeling laws, to show it has “nothing to hide”.
Communicating with candor and authenticity helps cement customer loyalty that sustains companies through complex markets and economic changes. By listening carefully to customers, enduring companies continuously refine offerings to better serve needs.
They Constantly Improve and Adapt Products, Services, and Operations
Change is inevitable, so companies need the flexibility to adapt. Enduring companies have institutionalized methods for continuously improving and updating how they operate.
For example, Toyota’s lean manufacturing system empowers frontline workers to halt production if they see a problem so it can be addressed immediately. And Intel has “tick-tock” development cycles continuously improving microprocessor technology.
Building systems to identify issues and adapt quickly helps companies improve and respond to evolving markets. As the oft-cited Charles Darwin quote says, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
They Maintain High Employee Ownership and Engagement
Empowering employees helps companies fully leverage talent. Many enduring companies embrace employee ownership and open communication.
At Mars Inc., for example, the family owners solicit input from all associates. And Amgen uses open “huddles” to share information and gather employee ideas.
Highly engaged employees care about the company’s success like owners. And giving workers a voice builds an understanding of markets and operations. Tapping this knowledge through inclusive practices helps companies avoid insular and outdated decision-making, sustaining competitiveness.
They Have Missions Beyond Profits
Profitability is necessary for survival but not sufficient for enterprises to endure for decades and generations. The most lasting companies also have a sense of purpose beyond profits.
Outdoor apparel maker Patagonia works to build environmental sustainability into its operations and products. Global pharmaceutical firm Roche strives to improve health outcomes for patients worldwide. And SC Johnson seeks to foster community well-being where its employees live and work.
Connecting work to a deeper mission gives people meaning and motivation that carries companies through ups and downs along with bottom-line results. Serving societal benefits as well as financial targets helps build public goodwill.
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In Conclusion
Launching and growing a business is always challenging. But enduring companies defy the odds by sticking to their purpose, taking care of employees, avoiding excess risk, and continuously adapting and improving.
Companies that can embrace change while also preserving their core identities are better positioned to thrive in the long run. By studying the track record of century-spanning enterprises, entrepreneurs can identify strategies and best practices to set up their own ventures for sustaining success.
Though there are no guarantees, instilling resilience from the start gives durability the best chance. With the right blend of innovation and consistency, conservatism and creativity, and purpose and pragmatism, companies can build the longevity that eludes so many young enterprises. By making decisions for the long run instead of just the next quarter, founders can grow something that lasts.
