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When you think of the best and most-loved brands, why are they so good at what they do? A few things stand out. They’re customer-focused, consistently delivering high-quality products or services. They value their employees. They’re innovative and flexible. They offer an excellent return on investment, rewarding shareholders year after year.
In business, there’s a word that sums up those qualities: durability. And more often than not, it can mean the difference between success and failure for a company. Simply put, a durable business is one built for the long haul — one that will still be around and thriving in 100 years.
There are many examples of durable businesses, but one of my favorites is Costco. The retailer started with a simple thesis and stuck to it, it keeps executing for customers and investors, it has posted more than 10% compound annual growth over the past 35 years, and its Kirkland Signature brand alone generates a staggering $58 billion in annual revenue in its latest fiscal year — more than Nike.
But achieving durable business status is no small feat. Not only does it require great products, exceptional teams and consistently superb customer experiences, but it also requires intentional choices by leaders — and a commitment to principles that aren’t always easy to execute. Still, it’s a worthwhile pursuit. In these uncertain economic times, durability is something investors care deeply about as they seek growth without risk. This flight to safety is why you see them flock to a company like Apple, another textbook durable business.
As the leader of a company that puts durability at the center of all we do, it’s my job to stay laser-focused on building something to last. Here are five ways I believe leaders can scale with durability in mind.
Related: 4 Ways to Boost Your Company’s Odds of Long-Term Success
1. Don’t spend money on things you don’t need
That might be stating the obvious, but it’s often overlooked. A durable business is customer-centric and fiscally responsible. Many organizations get into trouble because once they start making money, they stop focusing on the bottom line and forget why they exist in the first place: to serve their customers.
They could learn from Amazon, which has stayed frugal despite massive growth. In all of his early shareholder letters, Jeff Bezos famously repeated this mantra: Obsess over customers and watch the bottom line. Amazon may now be the world’s second-largest company by revenue, but it still gives employees budget doors to use as desks — a tribute to Bezos’ original DIY workstation.
One study found that frugal companies succeed partly because they consistently control spending. Rather than reactively slash costs, they’re also more resourceful with people and products. Ingvar Kamprad, founder of highly durable IKEA, put it this way: “Expensive solutions are often a sign of mediocrity, and an idea without a price tag is never acceptable.”
2. Be consistently good…and repeat
To achieve durability, a company doesn’t have to be the best in its industry at everything. But it does need to deliver a consistently good customer experience over and over again. As dull as that may sound, it’s crucial. When McKinsey surveyed 27,000 U.S. consumers across 14 industries, consistency emerged as the linchpin of customer satisfaction.
Durable businesses are also thoughtful about their target customers — as well as their employees, shareholders, supply chain partners and other stakeholders. Sometimes that means saying no. I’m not suggesting that a business fire customers by mail. But if the company isn’t the best fit for someone, do them a favor by telling them in the nicest possible way (whenever possible, we also help people find other opportunities). Ensuring stakeholder alignment helps leaders build a durable business by executing on their long-term vision and strategy.
Related: How to Finally Get Some Consistency Behind Your Branding
3. Remember that people matter more than product
If a business has a quality product, investors will jump on board, right? Not so fast. Having the right people can be a bigger draw. When investors go looking for a durable company, they often consider the headwinds or tailwinds in the market, the management team and the product, in that order. Their rationale: If the product is lousy, great management can fix it.
Focusing on people is one of the keys to durability. Companies with better human capital management generate a bigger chunk of their revenue from innovation, according to a recent study. There’s also evidence that developing and skilfully managing people means more consistent earnings, greater resilience during a crisis and better talent retention.
This underscores the importance of assembling a team of A players. And while hiring mistakes are inevitable, they have to be caught early. Mediocrity can easily seep into an organization when a B player sticks around long enough to hire someone even worse. It can also get expensive. According to one estimate, employee disengagement due to poor management costs U.S. businesses as much as $1.2 trillion a year in lost productivity.
Rather than ignore the problem until it spirals out of control, a leader must take action by owning and fixing their mistake. Sometimes that could mean investing in B players’ development or simply putting them in an environment where they’re more likely to succeed.
4. Go to where the work happens
At my company, we look for leaders, not managers. A leader goes where the work is being done. This is sometimes referred to as management by walking around (MBWA), a practice adopted by Toyota, another durable business. If the executive team identifies an internal problem that threatens the company’s profitability, taking a stroll through the office or the factory floor could yield a solution that might not otherwise have occurred to them.
Being physically present as a leader also signals that everyone is working toward a common goal — another hallmark of durability. To that end, I recently put on a hard hat and walked around one of our construction sites just to see how the work was going. I also chat with team members who don’t report directly to me and make a point to fly out and meet customers over dinner.
As a company grows, maintaining that kind of executive presence is easier said than done. But it’s still important to find ways to show up for the team in person.
Related: What’s the Secret to Becoming a Leader? Stop Being a Boss.
5. Know when your people need a course correction
Above all, good leaders should see the big picture, but they must also be maniacal about the details when it comes to product, culture, process — and people. If the team is headed toward the company’s True North and somebody veers just one degree off, in six months they could be going in the opposite direction, with potentially disastrous consequences for the long-term plan. Any leader who aims to build a durable business must spot people wandering off-course early — and assertively get them back on track.
Agility matters here, too. Without wavering from their core business, a leader should ensure that the team is nimble enough to adapt to changing market conditions and other events.
Achieving durability isn’t easy. In our trend-driven and reactive society, it might even sound old-fashioned. Ultimately, durable companies outperform their peers by being consistent, customer-focused and fiscally prudent. When customers and investors have so many other choices, leaders owe it to themselves and their people to build a business that lasts.
