My company is 13 years old this month. We’ve reached the average age of US corporations. We’ve succeeded in replacing me — our Grand Rapids headquarters has been more than ably run by Mike and Shawn since January of this year. Heck, we even recently outlived our first dishwasher.
And yet, like our age in human years, we’re a gangly teenager in some ways. We’re still growing into our recently expanded Michigan presence — Detroit and Ann Arbor still have plenty of unmet potential. We’re adapting our internal operations to multiple offices, and we’re refining how an Atomic office at full scale operates.
A few years ago I realized our short-term future was secure, so I started thinking more about the long-term. My initial long-term goal was to have Atomic outlive my involvement in the company. That goal drove me to work on succession, ownership, and governance. Last year at Path to Craftsmanship, I shared a revised long-term goal: I want Atomic to be the first 100-year-old software design and development consultancy. Barring crazy extensions in life expectancy, I’m unlikely to witness this achievement, but it’s my goal nonetheless. I want to set Atomic on the path of Stora, the 700+ year old Swedish forest products company. (It was called Stora Kopparberg when I worked there in the summer of 1983.)
What I like about my 100-year goal is that working to achieve it improves the company today, and that in turn impacts the lives of everyone associated with the company. I believe the attributes of long-lived companies make them more stable, more humane, more fulfilling, more interesting, and more profitable.
For the Path to Craftsmanship talk, I speculated that these attributes would help us achieve our goal:
- financially conservative
- self-renewing, internal ownership
- stable governance
- leadership succession
- an ability to adapt (customer/market focus)
- a good place for craftspeople to work
Since that talk, I’ve fired myself as Managing Partner in our Grand Rapids office, taken the title of CEO, and started working across our offices. That “promotion” made me think even more seriously about Atomic in the year 2101. What common attributes do 100+ year old companies have? What should I work on now if that’s my long-term goal?
Lessons from IBM
When IBM turned 100 a few years ago, Samuel Palmisano, their CEO at the time, identified three characteristics he believed were critical to getting IBM to the centenary mark:
- a company not defined by a product or business model or service offering
- no overly-strong attachment to the past, or past successes
- the ability to outlive a charismatic leader through focus on a culture and the company
She found that long-lived Japanese companies shared the following attributes and their corresponding practices:
- Had a clarity and continuity of corporate culture and values
- keep the business in the family
- maintain original name and brand
- observe traditions
- Focused on relationships
- treat suppliers and customers as partners
- maintain and add to their technological abilities
- keep close connections to their local community
- Balanced tradition and innovation through gradual change
- keep management methods up-to-date
- continuously develop new business relationships
- continuously develop new products and services
The common attributes TenHaken found among long-lived American companies were:
- Strategic focus
- focus on their main business, occupying a niche
- not focusing on growth for growth’s sake
- Investments in long-term and loyal employees
- don’t lay people off when work is low
- have above-average compensation including good benefits
- offer employee profit sharing
- A service orientation
- excellent customer service for existing customers
- developing new customers not the focus
- offer services to their loyal customers, even when not profitable
- Driven by core values
- commonly understood, tribal knowledge and values; seldom documented, externalized or explicitly taught
Royal Dutch Shell’s Study
An unpublished study by Royal Dutch Shell from the 1970s was focused on large companies. The investigator of the study wrote a very interesting book upon retirement, comparing companies to living organisms and looking for the common survival traits of long-lived companies. The Living Company posits that long-lived companies:
- Are sensitive to their environment; learn and adapt
- Have a strong, cohesive, identity, and role in a community
- Are aware of the ecology in which they operate, both internally and externally
- Control the financial means of their growth, operations, and evolution
Interestingly, the Shell study found that return on shareholder investment, material assets, industry, product line, or country of origin had no correlation with company longevity.
Built to Last
Published in 1994, Jim Collin’s first business book blockbuster, Built to Last, found five common traits among long-lived companies:
- Built around a core ideology
- Have a cult-like culture
- Homegrow management and leadership
- Stimulate progress through audacious goals, experimentation, and continuous improvement
- Aren’t dogmatic; embrace both ends of various continuums
Results of My Meta-Study
I’ve previously written and talked about the three things every sustainably successful company needs to get right: idea, execution, and culture. Sustainable success is clearly related to longevity. My informal study-of-studies lead me to a common set of attributes of companies with extraordinary longevity. I think about these attributes, and the corresponding practices and behaviors that create them, as being organized into external and internal factors.
External Factors – Idea
The external attributes of long-lived companies correspond to idea.
- Awareness – Track changing customer needs and the market closely.
Learning – Measure, reflect. Experiment with new offerings and ideas.
- Adaptability – Continuously improve. Manage change effectively.
- Focus – Stick to a clear, cohesive business offering.
- Growth – Make growth a potential consequence of success, not a goal by itself.
- Service – Focus on excellent service.
- Loyalty – Prioritize loyal customers over new customers, new services, and even profitability.
- Ecosystem – Treat suppliers as long-term partners.
Internal Factors – Execution, Culture
The internal attributes of long-lived companies correspond to execution and culture.
- Identity – Maintain a strong, consistent identity (name, brand) for the company over time.
- Leadership – Leaders and managers are caretakers, subordinate to the company, not the focus.
- Values – Company values and beliefs are well-known and shared.
- Community – The company sees itself as a member of a community and acts accordingly.
- Culture – Culture is distinctive, explicitly transmitted, and acts as a binding agent and source of identification for employees.
- People – Employees are nourished and protected, not easily expendable in lean times.
- Compensation – Compensation is above average.
- Profit – Profit is shared broadly.
- Promotion – Key positions are filled by long-term employees.
- Spending – Operate frugally, spend thoughtfully.
- Finances – Maintain cash reserves and reliable sources of capital.
Looking at the list of attributes above generally makes me happy with what we’ve built at Atomic. It gives me a rubric for evaluating ideas and initiatives for the long-term. Barring disruption by the singularity, I think we’re headed in the right direction to achieve my 100-year goal.
- A framework to define and describe organizational culture - January 21, 2020
- Atomic Ownership, Part 6: Lessons Learned - November 26, 2019
- Atomic Ownership, Part 5: Distributions - May 1, 2019
- Atomic Ownership, Part 4: Financing employee ownership - April 4, 2019
- Atomic Ownership, Part 3: Valuation - January 2, 2019