4 principles of enduring success by Christian Stadler Project: collecting data about total share holder returns over period

15 years from 40 companies which are older than 100, choosing 8 to 10 performance indicators to evaluate those companies; through analyzing data, number of hypotheses emerged about the basic differences between great companies and good companies. 4 below principles survived from the analysis: 1. Exploit before you explore It seems that one company could survive for a long term if they grow by efficiently exploiting the resources in hand rather than by exploration. They can compensate for the lack of exploration by being more efficient exploiters but they can not do vice versa: compensate the lack of exploitation by exploration. One good example is between Ericsson and Nokia. While Ericsson explored the new product with its GPRS wireless data communication resulting in high price and eventually had to combine its mobile business with Sony; Nokia focused (exploited) on the core business by cutting inventories, renegotiate component price, it remains a leading global competitor in mobile telephony. 2. Diversify your business portfolio: Although single business firms perform well in short run, but once their primary offering reaches the end of its life span, the next possibilities are decline, merger or sale. The great companies are adaptive; they diversify not only in product range but also in geographic, supply side, and customers. However, they are still very careful about diversifying. Example about Nokia: having suppliers in both US and Japan, they were not affected by the destruction of components in Albuquerque like Ericsson. 3. Remember your mistake: On one side, great companies have good stories to tell constantly to motivate people in continuous success. On the other hand, the lessons from failures in the past are passed through generations so that the mistake wont repeat again. For example, HSBC had experienced from difficulties in accessing London capital when financial condition in China became risky; after that, HSBC decided to develop a more balanced management between the trade finance business in the East and the capital allocation center in London. 4. Be conservative about change: Great companies go through radical change only at very selective moment when they could see a clear strategic case for restructuring their business portfolio and use their core values and principles as guidelines and approach change cautiously. For example: Siemens faced challenges from the changing power position of high technology, from pressure of merging 2 subsidiaries, from the retirement of current chairman and from German government on revealing its sensitive information. Siemens took action carefully, from disposition of its consumer businesses in 1957 to spinning off into a joint venture with Robert Bosch in 1967 and completing the merge of 2 subsidiaries in 1980.