Mumbai: Two Indian companies, Infosys and HDFC Bank, along with the US-based company of Indian-origin Cognizant, figure in an elite group of 10 companies identified by Harvard Business Review (HBR) as the companies that have consistently performed better than others around the world over a ten-year period.
Calling this elite group of 10 companies as the 'Growth Outliers' among nearly 4,800 listed companies with market capitalization of at least $1 billion, HBR said some of the things these corporates do "don't match up well with some conventional ideas about growth". In an article titled 'How the Growth Outliers Do It' in HBR's latest issue, its author Rita Gunther McGrath searched for listed companies that have grown by at least 5% each year over a 10-year period ending 2009. The results showed that only 10 companies - three from US, two each from India and Spain, and one each from Japan, China and Slovenia - grew their net profit by at least 5% during the 10-year period. And only five grew both revenues and net profit every year.
"Data suggest a need to rethink our assumptions about corporate performance. Steady, consistent growth is difficult to achieve even at modest rates, never mind the double digits that corporate leaders are fond of promising," McGrath, a professor at Columbia Business School, wrote in article.
The findings of McGrath's analysis challenge some of the conventional beliefs. It was found that a company's growth rate is not determined by the industry it is in, that the larger a company gets, sustaining growth does not get harder, that consistently higher growth rates need not happen only in fast-growing markets or single geographic regions, or that growth does not necessarily slow down as companies age.
The findings also challenge the hugely popular idea that companies started by entrepreneurs would have an edge. "Although two of our outliers (Infosys and FactSet) were indeed start ups,...others (Indra Sistemas, ACS, Atmos, Krka) were the product of mergers and consolidations, and still others (Cognizant, HDFC Bank, Yahoo Japan) were spun out of or funded by existing organizations," the HBR noted.
Some common traits among these growth outliers were identified by McGrath and her colleagues during their research. According to them, these companies share certain common characteristics and their leadership, strategy and values are very stable. Some of those common characters are these companies are rapid adaptors, they make small bets early and diversify their portfolios, they are active acquirers.
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