Steady, Predictable Growth: The Rare Exception

What Drives Success?

Steady, predictable growth is what every big company strives for, and what investors prize above all else. But how many companies actually deliver? To answer this question, McGrath set out to discover the characteristics of companies that achieve consistent growth.

Criteria for Selection

To meet her initial criteria, a company had to have a market capitalization of at least $1 billion and to have grown by 5% each year over a five-year period. This selection process yielded a sample of 4,793 companies, but only 8% of them qualified.

A Closer Look

When the five-year period was doubled, only 10 companies qualified—and of those, only five had grown both revenues and net income every year. These “growth outliers” were the focus of McGrath’s research, and her findings are intriguing.

The Shared Practices of Success

So, what sets these successful companies apart? McGrath identified several key practices that distinguish them from others. For example:

• They diversify their portfolios with early, small bets;
• They manage major resource allocations centrally;
• They focus attention on culture and shared values;
• They hold on to their talent.

A Counterintuitive Profile

These practices might seem contradictory: nimble and adaptive, yet stable and predictable. But, according to McGrath, this seeming paradox is a feature, not a bug. Stability is what enables these companies to innovate and maintain steady growth.

Conclusion

In a world where growth is often unpredictable, the success of these “growth outliers” is a beacon of hope. By adopting certain practices and embracing stability, companies can achieve the growth they desire.

FAQs

What is the main criterion for selecting companies?

A company must have a market capitalization of at least $1 billion and grow by 5% each year over a five-year period.

How many companies met the initial criteria?

Only 8% of the companies in the sample of 4,793 qualified.

What are the key practices that distinguish successful companies?

They include diversifying their portfolios with early, small bets, managing major resource allocations centrally, focusing on culture and shared values, and holding on to their talent.

What is the paradox of successful companies?

Their leadership, strategy, and values are stable, yet they are also nimble and adaptive, which allows them to innovate and maintain steady growth.