By James Ledbetter and Jacob Weisberg
Sunday, September 14, 2008
Ask yourself this question: Aside from the company where you or members of your family work, how many companies do you actually care about? We think that for a lot of us, there are only four: Starbucks, Apple, Google and Amazon -- call them the SAGA companies. Of course, reducing what's exciting about American business to SAGA is an exaggeration, but stay with us for a bit while we make a case that these four corporations represent a distinctive and distinctively American contribution to 21st-century capitalism.
The SAGA companies do very different things and are of hugely different sizes: Google's market capitalization is about $158 billion; Starbucks is down to about $12 billion. Yet they share some remarkable traits. At the most basic level, each has transformed not only a specific commercial marketplace but also some important aspect of contemporary life -- computing and music for Apple, information and advertising for Google, coffee for Starbucks, books for Amazon. In doing so, each has had an appreciable impact on our daily routines, taken on a looming presence in popular culture, and often engendered an intensity of feeling more often associated with tastes in entertainment or political views. Together, they have created a new model of business innovation, culture and values.
But what, really, do the SAGA companies have in common? Here's a start:
· They have a ubiquitous presence. Ubiquity doesn't necessarily make SAGA companies global market leaders; the worldwide proportion of computer users who own Apples is small and will probably never catch up to the formidable PC. But in many countries, iPod usage is surging, and all the world wants an iPhone. As for the others, Yahoo retains a slight global edge over Google in Web traffic, but that will probably not last much longer, and it is Google whose name is synonymous with finding information on the Web. (We figure that between us, we perform 100 Google searches a day and can easily go for weeks without using another search engine.) Amazon may not dominate e-commerce outside the United States as much as it does inside, but in few of the countries where Amazon operates Web sites is there a competitor that sells more books online. Starbucks manages to be everywhere and also across the street.
· They reflect the comparative advantage of today's America . . . Dial back to the Fortune 500 list of 1958, and there's no mistaking the difference: a half-century ago, the iconic U.S. companies were about making and moving stuff: General Motors, Ford and Chrysler were all in the top 15. Oil companies and steel manufacturers filled the other top slots, along with General Electric, Eastman Kodak and the company still widely called in those days International Business Machines. Granted, SAGA companies do not rank that high on today's list, although they are often more profitable than firms that bring in more revenue. Nonetheless, they represent the dramatic shift away from domestic manufacturing and toward an idea-driven, consumer-focused, value-added economy. It is also not coincidental that all four companies are based on the West Coast, reflecting the shift in America's demographics and centers of innovation.
· . . . yet they are genuinely global. Not very long ago, the undisputed symbols of American business abroad were Disney, McDonald's and Coca-Cola. Those brands remain tremendously powerful, but they have long felt as if they were monoliths imposed on other countries from abroad. (It's hardly surprising that McDonalds outlets are frequently the targets of anti-globalization protests.) By contrast, SAGA companies blend more easily into their environments by allowing international customers to explore their own tastes and preferences. Amazon could never get away with selling only American books and DVDs; an iPod has no obvious nationality, and despite some carping from European regulators, Google functions fairly seamlessly as an international Internet tool.
· They are restless innovators. None of these companies made its business by being the first to add any new physical thing to peoples' lives: Starbucks did not invent coffee or even the coffee house; with the exception of the Kindle, almost every item available on Amazon is conceived of and produced off the Amazon campus; Apple didn't invent the computer, the cellphone or the MP3 player; and Google invented neither the search engine nor the paid search model.
For the most part, SAGA companies don't invent; they perfect. The SAGA triumph is one of tweaks and packaging. That can sound lightweight, even derogatory, but it shouldn't be underestimated; remember that when Amazon started doing business in 1995, the vast majority of Americans had never bought anything online and had legitimate reasons to fear doing so. What SAGA companies have taught the world is that there is strong business sense in focusing maniacally on what customers want and then finding the most effective ways to deliver it.
· They follow their founders. Howard Schulz, Steve Jobs, Larry Page and Sergei Brin, and Jeff Bezos are as different as personalities come in business: Schulz is a famously nice guy; Jobs pretty much the opposite of a nice guy. Page, Brin and Bezos don't fit the stereotype of the charismatic chief executive at all. But each of these leaders continues to be central to his company's identity and has remained (or returned) as an embodiment of the company's culture and values. Jobs has kept Apple intensely focused on product and advertising design. Bezos has rooted Amazon to delivering top-notch customer service. Page and Brin embody Google's belief in algorithmic solutions, experimentation and bottom-up creativity.
· They engage consumers on an almost spiritual level. This may sound a bit silly, but it is crucial in understanding why people feel so passionate about SAGA companies. Think of the reaction this summer when Starbucks announced it would close 600 outlets: There were protests and petition campaigns throughout the country. Americans reacted as if they had a legal right to lattes within short reach of their homes and offices. In large part, this is because the companies inspire both a sense of community and the ability to create personal brands -- I am my iPod -- which is a powerful combination.
In a book published last year called "Firms of Endearment," three business writers argue that America is going through what they call an Age of Transcendence and that successful companies understand they need to appeal to stakeholders on a level that is more than just dollars and cents. That approach is literally built into SAGA companies, such as Google's famous "20 percent time," which allows employees to work on personal projects during office hours. But it also means tapping into the passion of customers, suppliers, communities and stockholders. Each strives not only for profit and growth but also for social and even moral significance.
These commonalities help explain why many other innovative and successful companies -- Yahoo, Whole Foods and Microsoft, for instance -- don't make the SAGA cut at the moment. Yahoo hasn't changed anything about American life. Whole Foods is a presence in upscale life but has yet to achieve the mindshare of a Starbucks. Microsoft is no longer characterized by a strong sense of purpose. There are a few other companies that we think of as potential SAGAs. One is Netflix, whose SAGA status will probably depend on how it adapts its business to the age of digital downloads. Another is Facebook; its explosive growth and deep engagement suggest SAGA-like passion, but it is still relatively young and occupies a space vulnerable to fads.
Of course, SAGA companies themselves aren't invulnerable. Each has gone through a crisis. With the exception of Apple, each might now be plausibly said to be going through a slump (as Apple did in the mid-1990s). Both Starbucks and Apple had to bring back founders to run the companies after investors and even many customers lost faith with corporate leadership. Starbucks's plan for global growth has stalled and may never be realized, and Google has been criticized for failing to develop and integrate the companies it has gobbled up in recent years. But it's the ability to admit shortcomings and to retool the corporation that sets the SAGA companies apart. Even when they're going through tough times, they're still the companies we want to read about.
James Ledbetter is editor of the Big Money. Jacob Weisberg is editor in chief of the Slate Group and author of "The Bush Tragedy."