People have asked me how I chose the companies that appear in my book Small Giants: Companies That Choose To Be Great Instead of Big. I had five criteria.
(1) I looked for companies that had made a choice to forgo revenue growth or geographical expansion in order to achieve other remarkable ends. "Choice" is the key word there. For purposes of studying the phenomenon, I wanted companies that could have taken another path--that had the opportunity to grow much faster and get much bigger--but had decided not to because they had other ambitious goals.
(2) I looked for companies that were admired and respected in their industries. After all, who can better judge a company than the people who compete against it, or at least work in the same field, and know all the subtleties of the business? I figured that, if they think a company is great, very likely it really is great.
(3) I looked especially hard for companies whose achievements had been recognized by other independent observers. This, for me, was a comfort factor. I liked to know that people other than I had decided the company was worthy of special recognition.
(4) The size issue was tricky because perceptions of size are so subjective. To a someone with two employees and $500,000 in sales, a $10-million business is huge. Then again, in an industry dominated by multi-billion dollar companies with tens of thousands of employees, a firm with 3,000 employees would be small. I decided it was important to focus on companies that operated on what you might call "human-scale." By that, I mean companies in which it was still possible for the top leaders and owners to know everyone working in the organization.
(5) Last, but not least, I wanted companies that were both privately owned and closely held--that is, companies whose stock is owned by a small number of like-minded people, most of whom work in the business. The reason was simple enough: The companies I was interested in had made choices based on criteria other than maximizing the return on investment. You can't do that if you have legal and moral obligations to outside investors who have given you their money precisely because they want to maximize their return on investment.
The odd part was that, after 20 years at Inc., I had no idea how many companies fitting my criteria I would find or what industries and geographical locations they would be in. But more about that later. Meanwhile, I'm curious to know what you think of my criteria. If we were going to do another search for small giants--as we plan to--how should we modify the criteria. Are there other criteria we should add?
Bo Burlingham is the editor at large for Inc. magazine. Check back for more posts on Small Giants on Fresh Inc.
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