One of Washington's hottest companies is one you've probably never heard of.
You may be aware of its founder David Bradley, who used some of the proceeds from selling the business to buy the Atlantic Monthly and the National Journal. Or maybe you've heard of Jeff Zients, who took the helm after Bradley, but now heads up one of the local groups hoping to buy the Washington Nationals.
Despite its low profile, however, the Corporate Executive Board is one of those companies that stumbled into an unmet market, invented a business model for serving it and has owned the "space" ever since. Its revenue has grown nearly fourfold over the last five years, its profit nearly fivefold -- long since surpassing the Advisory Group, its former parent, from which it was spun off in 1997. And after getting caught in the stock market bust, CEB's share price has taken off in the past three years, generating annual returns to investors of more than 40 percent and creating more than a hundred millionaires among its 1,900 employees.
The old joke about management consultants is that they borrow your watch and charge you $500 an hour to tell you the time. That's perhaps an overly cynical description of what CEB does. The company gets senior executives to share confidential details about their operations and success stories, collects and analyzes the data, and then disseminates its conclusions about "best" and "worst" practices back to those same executives in reports, customized research and on-site training sessions for employees. They've identified 36 different program areas -- everything from supply chain to sales management to employee benefits -- around which to organize their research and activities.
At this point, CEB has convinced 400 of the Fortune 500 companies -- from Alcoa to Wal-Mart, with a few government agencies thrown in-- to sign up for membership in an average of 3.7 CEB programs, each at an average annual price of $36,000. But the most impressive statistic may be the 91 percent annual renewal rate, reflecting not only to the quality of CEB's research, but the relentlessness of its sales force. Here's a company that spends 80 cents on sales, marketing and customer relations for every dollar it spends on producing its research and services.
Even Bradley, who invented the CEB model, and Zients, who launched CEB as a public company in 1999, express astonishment at CEB's sustained growth.
The basic idea behind CEB is that most problems corporate executives face already have been faced and solved by someone, somewhere, so there's no need to reinvent the wheel. Its members-only Web site contains an archive of 275,000 "best" and "worst" practices and 600 performance yardsticks against which companies can compare themselves.
But its competitive strength comes from the in-depth studies done in response to issues that the executives themselves highlight in surveys each year.
Several years ago, human resources managers wanted to know how to reestablish the "social contract" between companies and workers after a round of layoffs. CEB's conclusion: Don't bother. The social contract is never coming back and your employees know it. (They certainly got that right.)
Another study tried to explain why so many successful companies seemed to stall upon reaching $20 billion in sales. The culprits: a breakdown in innovation, a lack of diversity in the backgrounds of senior managers, and the arrogance that comes with market leadership.
And in 2004, CEB told clients that if they hadn't yet launched an India-outsourcing strategy, forget about it, since the cost advantages would disappear by 2007.
Although some of CEB's top talent hails from blue-chip consulting firms -- Chairman Jay McGonigle was a McKinsey partner, chief executive Tom Monahan an alumnus of Deloitte & Touche -- these are not CEB's real competitors. What competition there is comes from industry-focused research organizations, like the Gartner Group, or industry and professional associations.
CEB's pitch to Wall Street is that, with $350 million in annual revenue, the company has only begun tapping a potential $3 billion worldwide market. With 70 percent of its business still from the United States, CEB is likely to encounter cultural barriers peddling largely American business practices to companies in Europe and Asia. And the next downturn in the consulting cycle could lead firms like Booz Allen and Boston Consulting Group to leverage their brand names and underused talent to compete with CEB in the customized research market.
But my guess is that Corporate Executive Board won't have any trouble filling its new, expanded office space across the river in Rosslyn. This is still an impressively entrepreneurial company that has enhanced Washington's management talent and boosted the city's standing as a global business center.