Small Ideas

Finding the next big idea by exploring small ones – by Rishi Khaitan

Thoughts on Great Companies

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A couple of weeks ago, someone asked me: What makes a company great?

I thought about it for a minute, but couldn’t at the time come up with an answer that I was satisfied with.  Since that conversation, I have continued to think about this question and have arrived at a definition that I actually like quite a bit:

A great company is a company that not only makes a great product, but innovates on the business model to make the company’s product accessible.

Google web search is obviously a great product.  But what if you had to pay for each search?  Amazon’s mission has always been to offer the best possible customer experience.  But what if Amazon’s prices were higher than those of other retailers?  Thankfully, we don’t have to answer such questions because both Google and Amazon innovated on the business side of their respective companies.  Advertising allows Google to offer free search and superior business operations enables Amazon to offer extremely competitive prices.

Intuitively, this definition makes a lot of sense.  “Great” companies tend to be those that change the world in some way.  Well, the way you change the world is generally not by delighting only a small segment of customers.  Instead, it is by putting your products/services into the hands of a large many customers that real impact is made.  From Ford to Walmart to Intel, these companies are considered “great” because they led paradigm shifts in their respective product/service categories.

But, what then, about a company like Ferrari?  Is Ferrari not a great company?  Since the company’s start it has sold essentially hand-built exotic sports cars that are far out of reach for the vast majority of the population.  They could have gone the direction of the Corvette and tried to innovate in terms of design, production methods, etc. to build a more affordable, high-volume, yet still potent sports car.  But they never have.  Yet Ferrari’s contribution to motorsports is staggering and undeniable.

Taking a step back, does this then mean that a company that chooses to stay focused on a niche will never be eligible for “great” status?  I guess it depends on what one really implies by the word “great”… Hmm, I guess I need to do some more thinking about this.

Written by Rishi Khaitan

March 22nd, 2010 at 1:31 am

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