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Thanks to @wup242 for the suggestion to discuss emerging quality. It's a really important one for me.
I was really surprised at some of the top performers over the last decade+.
Truly enjoyed this whole conversation, give a listen: https://twitter.com/twiii_podcast/status/1386049234244456450
I was really surprised at some of the top performers over the last decade+.
Truly enjoyed this whole conversation, give a listen: https://twitter.com/twiii_podcast/status/1386049234244456450
Traits of quality:
-Persistently high ROICs that are consistent from 1 year to the next
-Either very high margins or very high capital turnover-slight digression, far too many people focus on margins alone.
-Persistently high ROICs that are consistent from 1 year to the next
-Either very high margins or very high capital turnover-slight digression, far too many people focus on margins alone.
-Somewhat fixed cost structure where incremental growth leads to incremental margins above core margins
-Growth requires little incremental capital
Strong management team with aligned interests
-An appropriate capital structure
-Growth requires little incremental capital
Strong management team with aligned interests
-An appropriate capital structure
-Little to no competition
-Can grow at or above GDP between persistence of existing customer base and modest customer growth
-Can grow at or above GDP between persistence of existing customer base and modest customer growth
Traits of EMERGING quality:
Return on incremental invested capital that’s greater than ROIC
High operating leverage
-Secular growth forces-the addressable market itself is growing swiftly and the company is growing faster than the industry aka gaining share
Return on incremental invested capital that’s greater than ROIC
High operating leverage
-Secular growth forces-the addressable market itself is growing swiftly and the company is growing faster than the industry aka gaining share
-Multiple levers to grow, including deepening customer relationship & customer count
-Consumer surplus and an underpriced product--long-term pricing power that can either be used to drive top line growth, keep competition at bay, or build towards "scale economics shared.”
-Consumer surplus and an underpriced product--long-term pricing power that can either be used to drive top line growth, keep competition at bay, or build towards "scale economics shared.”
-Competition is either low or rationalizing
-Often you’ll face large platforms attacking the market as well--here there are factors to address on a case-by-case basis, but singular focus around a core essence and alignment of interests with whoever you are servicing are crucial
-Often you’ll face large platforms attacking the market as well--here there are factors to address on a case-by-case basis, but singular focus around a core essence and alignment of interests with whoever you are servicing are crucial
-Very clearly defined and articulated problem the company solves for customers
-Knowing who the customer actually is
-A product itself that is not “finished” and has opportunity to improve in multiple directions
-Knowing who the customer actually is
-A product itself that is not “finished” and has opportunity to improve in multiple directions
-Should have both horizontal and vertical possibilities--back to the adjacent possible podcast
-When this is informed by the acquisition of data every day that can be directly deployed to improve the product, this is especially powerful
-When this is informed by the acquisition of data every day that can be directly deployed to improve the product, this is especially powerful
