Ask anyone who they think is the greatest sports franchise of all time. In every sport, most people will come up with the same few teams. Next, ask them what sets those teams apart from the rest, and most people will name key players, coaches or tactics. What makes teams achieve legendary status is complete domination over a long period of time, which is only possible if you have an enduring competitive advantage.
While most people think competitive advantage is achieved through one thing or a few distinct attributes– a star player, a legendary coach, or unique tactical approach– it’s never the case. It's usually the combination of multiple things stitched together coherently that compounds over time to give a team a real, lasting, competitive advantage. The same is true in business.
Study history and it will become abundantly clear that great teams and companies are built on a clear philosophy– a set of values and guiding principles woven through the fabric of the organization, expressed coherently through every decision and action, and visible at every touchpoint.
It is certainly true at the companies that we admire most at grio: Apple, Nike, Patagonia and Amazon, to name only a few. While they’ve all made our list for different reasons; Apple for its industry-defining products; Nike for its marketing genius; Patagonia for its incredible corporate responsibility; and Amazon for its obsession with customer satisfaction; they all have in common this fundamental idea that to build an enduring company with a great brand, you need a clear philosophy.
A great philosophy has three key characteristics: focus, coherence and compound effect.
The guiding philosophy at every great company can usually be distilled down to a singular idea that serves as the throughline that connects everything the company does: from product and strategy, to culture and marketing. At Amazon, it’s Customer-Centricity. At Apple, it’s Design Excellence. At Brunello Cucinelli it’s Humanistic-Capitalism. At Patagonia it’s Sustainability. At grio, it’s Empathy-Led. When building a company, there are quasi unlimited choices and opportunities. Building a competitive advantage is as much about what you choose to do as it is about what you refuse to do. The only way to know which are the right decisions to make and which are the right opportunities to seize, is to have a clear north star.
Great companies and brands are built through coherent actions. Those coherent actions create a flywheel effect. At Amazon, customer satisfaction is delivered through a huge selection of products that create convenience, low prices and great customer experience. And in order to yield that kind of customer satisfaction, Amazon had to drive operational excellence, frugality to drive costs down, and a long term mindset that prioritizes customer’s value over shareholder’s value. Every decision is measured against the mission and vision of becoming earth’s most customer-centric company. It all has to be coherent.
Amazon’s Flywheel drawn by Jeff Bezos.
What great teams and great companies do is rarely a secret. But it’s almost impossible to duplicate because it’s the combination of multiple things that compound over time. If Amazon’s competitive advantage was lower prices, then a company would only have to lower their prices to beat Amazon. But simply lowering prices without structural changes lowers profit margins in a race to the bottom. If making great products was enough, then some of Apple’s competitors would be able to surpass them through innovation alone. But it's Apple's philosophy, its culture of innovation, the integration of hardware and software, the close network of iOS, and the legendary Steve Jobs, among other things, which all compound over time into something greater than the sum of its parts.
Dynasties are not built on the brilliance of a single player, even if that player is Michael Jordan. They are born out of a guiding philosophy that informs everything players, coaches, staff and front office do. Ultimately, the best way to create an enduring competitive advantage is not to focus on singular or isolated features, but to have a clear guiding philosophy. At grio, we’ve endeavored to create our own and to help other companies create theirs too.