Wednesday, May 30, 2018

Fortune 500 and the Art of Execution

The Fortune 500 Companies 2018 rankings came out last week, and browsing the list, the following random thoughts struck me about the list and the technology industry:

  • Walmart - you can be in a very, very traditional brick-and-mortar business (yes, they have been making inroads into e-commerce, but for the most part, Walmart is a traditional retailer), but as long as you keep doing things well, you can be in the top 10. Not only that, you can be the top-ranked company by revenues for a sixth year in a row. In this case, you can be numero uno, with annual revenues that top five-hundred billion dollars - $500 billion, be more than twice the size of the second-ranked company (Exxon-Mobile is ranked second, with annual revenues of $244B), and also employ the most employees (2.3 million).
  • Apple - you can be a mass-market luxury brand (yes, that is a contradiction in terms), sell only a handful of products (its Mac, iPhone, and iPad product lines bring in 79% of its revenues) and be in the top 10 - ranked fourth. You will also get to make the profits of any company - $48 billion. You also get to be the most highly valued company - at $922 billion.
  • Amazon - you can sell almost everything under the sun, sell it almost all online (its foray into physical stores and its acquisition of Whole Foods notwithstanding), employ the second-most employers of any company in America, be a $100 billion plus company, yet grow revenues by more than thirty per-cent (to $177 billion), and crack the top 10 - ranked eighth. You also get to be the second-most highly valued company on earth, at $765 billion.
  • Netflix: you do only one thing: in this case, streaming video content on-demand and producing your own content, almost triple your profits (199% jump year-on-year), not be in the top 200, and yet deliver the best 10-year returns to shareholders (48%, annualized!
  • The top five most valuable companies on the list are all technology companies - Apple, Amazon, Alphabet (the parent company of Google), Microsoft, and Facebook.
Bottom line? What is common across all these companies is a relentless focus on execution. Execution - a simple lesson to learn, yet incredibly difficult to practice. Flipkart, the Indian e-commerce giant in which Walmart (press release) bought a 77% stake for $16 billion, valuing the company at $22 billion, learned that the hard way, when it lost focus in its fight against Amazon.

Further suggested reading:

This is an expanded version of my LinkedIn post.

© 2018, Abhinav Agarwal. All rights reserved.