1. Netflix — Reed Hastings. The CEO of Netflix, Hastings, is only 50. He co-founded Netflix in 1998. The company’s first target was Blockbuster, the huge and highly profitable movie rental retail chain. Blockbuster had revenue of over $5 billion and nearly 6,000 stores when Netflix was founded. Hastings believed that it was more convenient for people, who watch DVDs at home, to receive them at home. He was right. Blockbuster is now bankrupt while Netflix has over 20 million subscribers.
But Hastings’s innovations did not stop there. As broadband technology developed and became widely spread in 2004 and 2005, Netflix used it to launch a business that allowed consumers to stream premium content from Netflix servers to their PCs. The service was upgraded two years later so the films and TV shows could be streamed straight to televisions.
Hastings has also set up deal to license content directly from studios, which poses a major threat to cable TV and telecom fiber-to-the-home businesses. Hastings changed the video rental, video delivery system, and premium content access infrastructure models, all within just 13 years. Netflix shares shot up 1000% in five years, a gain that’s even better than Apple’s.
2. Ford — Alan Mulally. Mulally has been Ford’s CEO since 2006 when he took the helm from William Clay Ford Jr., one of a long line of Fords who had run the car manufacturer. Mulally’s first contribution to one of the largest industries in the world was to prove that someone from outside the industry could run a car company better than those who had worked in it for decades. Even GM now has a new CEO who is new to the business. Mulally brought the discipline of a gifted general manager and treated Ford as a corporate clean sheet.
Mulally’s greatest accomplishment was likely the fact that Ford managed to avoid the eventual bankruptcy of the rest of the U.S. car industry. He did so by operating like an investment banker. Mulally increased Ford’s borrowing capacity to $23 billion just before the huge downturn in the economy. His actions were unprecedented. He pledged virtually all of Ford’s assets for access to the capital. Mulally then took the unusual step of pressing Washington to support his two primary competitors, GM and Chrysler. He knew that if either failed, Ford’s access to parts would be severely compromised.
Mulally also forced his engineers to view the car engine from different perspective. Ford’s engineers created a new technology which could give a four cylinder engine the power of six, and a six cylinder the power of an eight. This could be done without hybrid technology or diesel. EconoBoost engine was born, and since 2007 it has powered many of the company’s models.
3. Amazon — Jeff Bezos. Amazon’s CEO and founder, only 47-years-old, started that company to compete with brick-and mortar-bookstores. That was in 1994. At the time, the move was a long shot. E-commerce was almost unheard of and untested. Wide broadband adoption was a decade away. Bezos was not profit-hungry. He said shortly after Amazon was founded that he was prepared for it to lose money for three or four years. Bezos was convinced it would take that long for Amazon to reach the critical mass of sales to sustain the company’s model over the long term.
Bezos later decided that Amazon could sell more than books to its growing customer base. Rather than buying inventory and selling products he did not understand well, he allowed “affiliates” to market their goods and services using Amazon.com’s infrastructure. Amazon eventually created its own businesses to market goods and services, from beauty products to furniture to consumer electronics. With each case, he added to Amazon’s revenue by attacking the tradition store models of companies like Best Buy.
The most important invention made by Amazon, the Kindle e-reader, took it back to its bookstore roots. The new consumer electronics device and the Amazon’s inventory of e-books made the physical books unnecessary. Consumers could download thousands and thousands of books and “carry” them around in their devices, whose is often less than that of one large book. Amazon does not disclose Kindle sales, but analysts put them into the millions and say that the number of Kindles sold each quarter continues to grow.
4. Berkshire Hathaway — Warren Buffett. The “greatest investor in history” did not change American business. Buffett, however, created the largest mutual fund in the world, with him alone making the investment decisions. The Oracle of Omaha buys some companies outright. He buys large amounts of stock in other companies. With others yet, he loans money in the form of bonds.
Buffett now owns one of the largest railroads in the world, Burlington Northern, which he took private two years ago. He controls several insurance and re-insurance companies, including Geico and General Re. Buffett also takes friendly positions from time to time in America’s blue chip companies and sells them without notice when he believes he has either made or lost enough money. These investments have included Coca Cola, American Express, CostCo, Bank of America, GE, MasterCard, and Walmart.
Buffett has also perfected a form of financing that is unique to him, primarily because of his reputation. He can quickly take position in troubled companies as he did in Goldman Sachs and Bank of America. He insists on terms that trade his reputation for agreements, and that make his investments almost immediately profitable. Buffett’s gift may be investing, but his revolutionary move was to create the world’s largest one-man conglomerate and make it work almost perfectly.
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