High ideals, to be sure. But don’t confuse high ideals with modest ambitions. Companies with the most values-based critiques of their industries often turn out to be the savviest and most aggressive competitors. The stock market value of fun-loving Southwest Airlines exceeds the stock market value of every other U.S. airline put together. Quality-obsessed HBO was the first network in TV history to generate more than $1 billion in annual profits. ING Direct holds assets of more than $40 million per employee; the average for U.S. banks is about $5 million per employee. In other words, Arkadi Kuhlmann’s outfit is eight times more productive than the competition at generating assets. Who says high-minded values can’t drive cutting-edge performance?
2. Do you have a vocabulary of competition that is unique to your industry and compelling to your employees and customers? And we mean a real, honest-to-goodness, only-spoken-here business language. Commerce Bank, a fabulously successful financial services company that we’ll visit in chapter 7, has such a unique strategy, and such a homegrown vocabulary, that it actually publishes a dictionary of “Commerce Lingo.” New employees learn the meaning of “One to Say Yes, Two to Say No”: “The rule that states all employees can say ‘yes’ to a customer, but must first check with their supervisor before saying ‘no.’” They learn the essence of “retailtainment”: “The art of engaging customers and creating moments of magic so that every customer leaves Commerce with a smile.” And on it goes for pages, explaining terms that eventually become second nature and ultimately make Commerce a one-of-a-kind competitor.
Or consider the most exciting and fast-growing company in one of the world’s dullest and slowest-growing businesses. Much as Southwest Airlines has registered gravity-defying performance in a deadweight industry, Whole Foods Market has brought a fresh model of competition to a stale business mired in copycat strategies. The famously high-end grocer (nickname: Whole Paycheck) opened its first store in 1980 and went public in 1992. As of 2007 it had 190-plus stores, 42,000 employees, $5.6 billion in revenue—and a stock market performance that looks more like Google’s than that of its notoriously low-return rivals in the grocery business. (Investors who put $100,000 into the IPO had $3.5 million 13 years later.)
But the success of Whole Foods isn’t just about organic produce or high-priced fish. It’s about a truly original business strategy that sets it apart from the competition and shapes what the company sells and how it operates. Whole Foods chairman and CEO John Mackey has developed a business ideology that blends a taste for libertarian politics, a commitment to selling healthy foods and ensuring the compassionate treatment of animals, an eagerness to share financial information and decision-making authority up and down the organization, and a true zest for growth.2
That competitive ideology shapes how the company communicates with employees, customers, and even investors. Whole Foods has issued a “Declaration of Interdependence” that will never be confused with the bland, generic-sounding mission statements that most companies paste on cubicle walls and forget immediately. The Declaration, which was developed in 1985 and revised in 1988, 1992, and 1997, is a richly worded, painstakingly crafted document that is both aspirational and candid.
Indeed, the statement ends with the rare (and refreshing) admission that the company, like any organization, doesn’t always live up to the ideals it espouses. The Declaration “reflects the hopes and intentions of many people,” it reads. “We do not believe it always accurately portrays the way things currently are at Whole Foods Market so much as the way we would like things to be. It is our dissatisfaction with the current reality, when compared with what is possible, that spurs us toward excellence and toward creating a better person, company, and world.”
Companies that think differently about their business invariably talk about it differently as well. What language does your company speak?
3. Are you prepared to reject opportunities that offer short-term benefits but distract your organization from its long-term mission? At every company we’ve explored in these first two chapters, the road to prosperity has been determined in part by the road not taken—choices not to pursue markets that looked seductive but were at odds with the company’s advocacy agenda, decisions to turn down customers who could pay the bills but didn’t fit the strategic bill.
Scott Bedbury, a marketing wizard who played a key role in brand-building for Nike and Starbucks, and whom we’ll meet again in chapter 8, likes to say that some of the best moves he ever made were the growth opportunities he passed up. He calls it the “Spandex Rule of Branding,” and it applies to strategy as well as marketing: “Just because you can doesn’t mean you should.”
The Spandex Rule helps to explain why ING Direct passes on business opportunities that would make traditional bankers salivate. It explains why Craig Newmark and Jim Buckmaster of Craigslist are determined to keep looking for reasons not to charge visitors, even though the site’s devoted users, both buyers and sellers, are certainly prepared to pay for some services. It explains why Southwest Airlines has never adopted some of the most common practices of its rivals.
“The ‘invisible’ decisions that you make to stay on purpose can be ten times more important than your visible decisions,” argues Roy Spence. “Nothing’s more difficult than saying no to an attractive opportunity. And nothing’s more important.”
4. Can you be provocative without provoking a backlash? One key test of any would-be disruptor is whether he or she can also be a convincing diplomat. That insight may be the most enduring contribution of the rise and fall of Netscape, the company that single-handedly defined the revolutionary fervor of the dot-com boom. Eventually, waving a red flag at Bill Gates and his colleagues is Redmond, Washington, forced Netscape to wave the white flag as an independent company.
Even a fire-breathing maverick like Arkadi Kuhlmann appreciates the virtues of diplomacy. Not with his competitors, mind you, but with his colleagues. After all, ING Group operates in many of the businesses that Kuhlmann loves to critique, from home mortgages to credit cards. So he is careful to reassure his Dutch brethren that he’s a team player as well as an industry reformer. Back in the 1990s, when he launched ING Direct Canada, Kuhlmann named the conference rooms at bank headquarters after Dutch villages—a symbolic gesture that received a warm welcome in Amsterdam. Indeed, Kuhlmann’s diplomatic skills are so well developed that when Fortune surveyed the parent company’s American presence, it concluded that the operation that felt most Dutch was ING Direct USA.3
5. If your company went out of business tomorrow, who would really miss you and why? We first heard this question from advertising maverick Roy Spence, who tells us that he got it from strategy guru Jim Collins. Whatever the original source, the question is as profound as it is simple—and worth taking seriously as you evaluate your approach to strategy and competition.
Why might a company be missed? Because it’s providing a product or a service so unique that it can’t be provided nearly as well by any other company. Because it’s created a workplace so dynamic that most employees would be hard-pressed to find a similar environment somewhere else. Because it has forged a uniquely emotional connection with customers that other companies can’t replicate. Precious few companies meet any of these criteria—which may be why so many companies feel like they’re on the verge of going out of business.
HBO is not one of those companies. In today’s 500-channel cable