Blueprint to a Billion
A study of billion-dollar companies identifies seven essentials for turning a breakthrough innovation into exponential growth.
By David G. Thomson
Mar. 24, 2006
Microsoft, Oracle, BEA, Google, Symantec along with many examples in other industries such as Staples, Genentech, Starbucks and Nike are members of an elite group of companies that managed to turn breakthrough innovations into billion-dollar businesses. What did these and other high-growth companies do to achieve such a goal? What blueprint do they follow to produce such results?
It took three years of in-depth research to answer these questions. The result is the first quantitative assessment of the success pattern across a distinct group of 387 "Blueprint Companies" - the 5% that have IPO-ed since 1980 and grown to $1 billion revenue. They represent America's highest growth companies: they achieved exponential revenue growth and returns.
What does it take to become a billion-dollar company? I realized the answer would not come from qualitative approaches focusing on innovation or organization lifecycles but from a quantitative and fact-based analysis of America's high growth companies. I started my journey in the technology sector including the software industry but quickly found this common pattern across all industries. The analysis had to hinge on what is often overlooked: revenue performance. Every company can innovate and invest, even over-invest in order to grow. However, not every company can create stellar revenue growth.
The Blueprint Companies, including the Software Blueprint Companies, had a simple but definable growth characteristic: they not only grew fast and consistently, they exhibited exponential revenue growth. You may think that Google's growth is unique. And it is but it did follow this pattern along with Siebel Systems, eBay and many others. A company's exponential revenue growth has three definable parts: the first is the time from founding to the inflection point. Second, the inflection point is the point where the business demonstrates its breakout to exponential revenue growth. This point marks the moment when the business was fully formed as a system - a pipeline of customers, a product or service that is generating a concrete business model and an organization capable of sustaining growth. The third part is exponential growth to $1 billion revenue. This last part was truly exponential and of course at different growth rates.
You may think that $1 billion is along way off. And it is in terms of dollars when you are an entrepreneur. The good news is once you are at the inflection point; the time to get to $1 billion revenue can actually be faster and with a more predictable journey than getting to the inflection point!
One of the key counterintuitive financial insights is the time frame and trajectory of Blueprint Company revenue growth. By centering the revenue curves at the inflection point, also known as year 0 in normalized time, I found that revenue growth from the inflection point to $1 billion revenue had two distinct parts: the time to the inflection point was highly variable from the founding year to the inflection point, which was then followed by three trajectories to $1 billion revenue that centered on 4-, 6- and 12-year trajectories. One might naturally assume that the time to the inflection point is correlated with the trajectory the business follows to $1 billion revenue. Not true. For example, Google went from its founding year to the inflection point in 2 years and went up the front side of the 4-year trajectory to become one of the fastest growing companies. In contrast, Cisco took 7 years to get to the inflection point before going up the 4-year trajectory. Microsoft was a 6-year trajectory company. The mean time for tech from founding to the inflection point, including software, is 5 years.
It took three years of in-depth research to answer these questions. The result is the first quantitative assessment of the success pattern across a distinct group of 387 "Blueprint Companies" - the 5% that have IPO-ed since 1980 and grown to $1 billion revenue. They represent America's highest growth companies: they achieved exponential revenue growth and returns.
What does it take to become a billion-dollar company? I realized the answer would not come from qualitative approaches focusing on innovation or organization lifecycles but from a quantitative and fact-based analysis of America's high growth companies. I started my journey in the technology sector including the software industry but quickly found this common pattern across all industries. The analysis had to hinge on what is often overlooked: revenue performance. Every company can innovate and invest, even over-invest in order to grow. However, not every company can create stellar revenue growth.
The Blueprint Companies, including the Software Blueprint Companies, had a simple but definable growth characteristic: they not only grew fast and consistently, they exhibited exponential revenue growth. You may think that Google's growth is unique. And it is but it did follow this pattern along with Siebel Systems, eBay and many others. A company's exponential revenue growth has three definable parts: the first is the time from founding to the inflection point. Second, the inflection point is the point where the business demonstrates its breakout to exponential revenue growth. This point marks the moment when the business was fully formed as a system - a pipeline of customers, a product or service that is generating a concrete business model and an organization capable of sustaining growth. The third part is exponential growth to $1 billion revenue. This last part was truly exponential and of course at different growth rates.
You may think that $1 billion is along way off. And it is in terms of dollars when you are an entrepreneur. The good news is once you are at the inflection point; the time to get to $1 billion revenue can actually be faster and with a more predictable journey than getting to the inflection point!
One of the key counterintuitive financial insights is the time frame and trajectory of Blueprint Company revenue growth. By centering the revenue curves at the inflection point, also known as year 0 in normalized time, I found that revenue growth from the inflection point to $1 billion revenue had two distinct parts: the time to the inflection point was highly variable from the founding year to the inflection point, which was then followed by three trajectories to $1 billion revenue that centered on 4-, 6- and 12-year trajectories. One might naturally assume that the time to the inflection point is correlated with the trajectory the business follows to $1 billion revenue. Not true. For example, Google went from its founding year to the inflection point in 2 years and went up the front side of the 4-year trajectory to become one of the fastest growing companies. In contrast, Cisco took 7 years to get to the inflection point before going up the 4-year trajectory. Microsoft was a 6-year trajectory company. The mean time for tech from founding to the inflection point, including software, is 5 years.
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