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“Luck plays an immensely important role in the fortunes of a business, but it’s only a springboard to future growth,” Warren East, chief executive of Rolls-Royce, is a CFO Club speaker alumni. We go back at our archives to see what the former boss of Arm Holdings thought about what makes companies successful.
Luck
Luck is hugely important in business. Luck can happen once and it can propel a company far ahead of its competitors, like a roll of the dice in a game of snakes and ladders. However, what differentiates very successful companies from the ones which don’t make it is that when they get lucky, they also learn to create their own luck, like bridge or chess players.
Change
Businesses are always changing. When I worked at Arm, an important element of the culture was the tolerance of change. Arm was built in the 1990s when the semi-conductor industry was significantly changing in terms of structure and manufacturing processes. Change creates opportunity. The company was very lucky to come to the industry at that time, however, it continued to embrace that change.
People and a strong leadership team
Regardless of a company’s size and its sophistication, business is conducted among people. Even in online companies, the core business functions, such as negotiating supplies or product creation, are conducted by people and they are key to its success. Skills can be learnt and knowledge acquired but attitude is a more innate factor. This particularly applies to the leadership team. The quality of the leadership team will be one of the key reasons for success.
Successful leaders need to be strong and good at working with the team. A good illustration of how an effective team works is the Cambridge May Bumps. If you watch student boat races, you can clearly see how a good team works – maximum individual effort is synchronised to create the most effective team. Each of the three words in “strong leadership team” is important: they must be strong individuals, they must practice good leadership and they must work well as a team.
Creating a sustainably differentiated product
To have a long term relationship with its customers, a business has to create products that are clearly differentiated from the offers of its competitors, and are perceived as such by its customers. A successful company has to be able to continue this differentiation sustainably. Its management should know what differentiates their business today and what will differentiate it in five and ten years’ time.
This is closely related to the company’s marketing and its business model. It has to provide economic advantages to the customer and this requires a good understanding of what enables its customers to win in their businesses. This will help it develop a long term roadmap for its product or service.
Innovation
Innovation is a key ingredient in this process. It’s not only R&D-related but also applies to manufacturing, marketing, purchasing and all other business processes.
Ability to manage growth and pace
There are many examples of successful businesses which plateau after a period of successful growth. To avoid this, the company’s management team should consider the following questions:
The architecture that suited a small business is not suitable for a large one. You need to be able to decide: do you want to be a lumbering goliath or a lean, mean, fast machine? That’s why you need to invest time before it’s too late to decide how you want to manage the growth.
I don’t know who first coined the phrase “it’s a marathon not a sprint” or what the original context was. You can apply it to business, but I would add that to be successful, it should be a fast marathon. Keeping the right pace over the long haul is key.
Finally, think global from the word go!
Warren East is the Chief Executive of Rolls-Royce. He is a former CEO of Arm Holdings, the world’s leading semiconductor IP company. He has been a non-executive director at a number of companies, such as Dyson, BT and Micron. By training, he is an engineer with an MA in Engineering Science from Oxford University. He was awarded a CBE in 2014.
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