How Creating Value for Others Built One of the World’s Most Successful Companies
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Charles G. Koch
Notes
Being aggressive, providing the best service, and developing the best relationships still describe our aspirations today—no matter the business.
…mutually beneficial voluntary transactions based on trust are the hallmark of economic freedom and vital to good profit.
Successful businesspeople stand on ground that is “crumbling beneath their feet,” said Joseph Schumpeter...every business should profit solely by creating real value for others, and not at all by attempting to slow down “the perennial gale of creative destruction.”
Koch treats a portion of the potential profit from a missed opportunity as an actual loss when determining an employee’s incentive compensation… Working on a profitable activity is wasteful when there is an even more profitable activity that could be performed instead…It is usually wasteful to develop detailed information beyond what is necessary to make good decisions.
If Principled Entrepreneurship were a coin, one side would be value creation for the customer. The other side would be conservation of resources.
…business must have a vision specific enough to guide its strategies, decision making, allocation of resources, and the roles, responsibilities, and expectations of all employees. Each vision also needs to be aspirational… Expectations should always be clear, specific, and, whenever possible, measurable. They should focus on the desired outcomes rather than on the activities that might be required to produce those outcomes.
…benchmarking—the process of identifying, understanding, and adopting superior practices from anywhere in the world.
In our experience, an apprentice model is effective in developing employees. At Koch, this model entails four phases: I do, you watch; I do, you help; you do, I help; you do, I watch.
…sometimes longtime experience can be more dangerous than inexperience.