I just finished completing my private assessment of performance of major service providers few minutes back – the last one in my list to report published results a couple of hours back. In my assessment, leaving aside all inherent advantages, I find that the leading edge companies have one thing in common - superior execution skills.
I came across this economist article on Goldman Sachs – The article starts by highlighting that even when compared with leaders in other industries, Goldman makes spectacular returns. As it explains the real reason why Goldman should matter to outsiders is because it stands at the centre of a two-decade-long transformation of the financial markets and a new approach to risk. The bankers' innovations have brought huge rewards to their industry. Look at the impressive statistics that characterize its business:
- The face value of contracts in interest-rate and currency derivatives is now more than $200 trillion—16 times America's GDP.
- A further $17 trillion is outstanding in (even newer) credit-default swaps, which allow bond investors to lay off the risk of issuers defaulting.
- The face value of Goldman's derivatives exposure is more than $1 trillion.
- The net exposure, after offsetting all its positions, is $58 billion, against shareholders' funds of $28 billion.
- In the past decade it has garnered revenues of more than $125 billion, more than three times the level in the previous decade.
- Among its latest record-busting yardsticks was a 40% quarterly return on equity.
- The average pay-packet of its 24,000 staff last year was $520,000—and that includes a lot of assistants and secretaries.
All these are achieved with
- Confidence to take more risks than its competitors do.
- Innovative approach towards creating the service practices
- Goldman's CEO, Hank Paulson, says, " GS is a hard place to be hired, a hard place to be promoted and a hard place to stay." Clearly the results accentuate the efficacy of having such lofty & strict norms
While business models built on strategies centered on grandeur vision, markets & service offerings are important, what clearly distinguishes those who succeed consistently vs others is the ability to deliver things by executing well – the passion, discipline and the drive to be the best at whatever one does makes all the difference and GS is a standing testimony to this.
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