Cerner’s annual Total Shareholder Return over the past 15 years (as of 9/5/14) was 25.23 percent, compared with the S&P 500’s 4.6 percent, according to Morningstar. That performance came about because of Cerner’s underlying business and the leadership that spawned it.
Cerner is a healthcare IT company started in 1979, and run since by co-founder and CEO Neal Patterson. Cerner has an asset-light, highly scalable business design and plays in a high-growth market space. The company mines it for solutions it can deliver early with superior value propositions: prominently, employing operational efficiency for its customers and ideally engendering a high switching cost.
These days, Cerner is riding market demand for its electronic medical-records solution, one of the very few that meets Federal standards. Meeting them qualifies Cerner’s customers, hospitals and other healthcare providers for a preferred reimbursement rate from Medicare and Medicaid. The amounts involved are not chump change, so Cerner is now an obvious choice to help its customers make more money, something struggling facilities welcome.
Cerner excels at seeing embryonic market needs, then takes the risk to address them, and it does so creatively and well. Fueling this growth is Patterson’s passion to enable improved and lower cost health-care delivery through interoperability and higher quality outcomes.
Founder Jim Koch took his great-great grandfather’s recipe for beer and, with the help of two pals from his Harvard Business School days, formed Samuel Adams Beer. That company, which evolved into Boston Beer, has delivered a compound average total annual return of 39.8 percent over the past three years and 24.6 percent over the past 10 years. Why?
For Jim, Boston Beer’s now CEO Martin F. Roper, and their brewmasters, including Dr. Joseph Owades, it’s all about the products, well-honed methods for concocting and making great ones and their passion. To capture as much share of the beer-drinker stomach as possible and to drive overall product velocity, they now make a wide variety of craft beers. They keep experimenting—their beers are voted on by their communities and in worldwide beer-tasting competitions (and discontinued if appropriate). The company has even funded a division, Alchemy & Science, to serve as an R&D lab for new beer ideas.
Further enhancing their value proposition, Boston Beer introduced its Freshest Beer Program, an inventory-management initiative that prevents their beer from sitting in distributors’ non-temperature-controlled warehouses for too long. To show they’re serious, Boston Brewing will buy back beer that’s past its peak-freshness date.
What’s more, they’re good guys—as evidenced by the fact that they shared their excess hops with other craft brewers, at cost, during a 2008 shortage.
Harley gets a lot right: creating a passionate “customer tribe” through its Harley Owner’s Group (repeat sales, price premiums); extensive customization capabilities; flexible, as well as surge manufacturing, so as to meet sudden spikes in demand; and a reputation for quality.
Harley’s challenge is an aging core U.S. market, resulting in slow growth. There are, however, large, fast-growing, lower-end motorcycle markets in China and India, and Harley is reaching out to a broader demographic with their Street line of cycles.
Interestingly, Harley’s bad-ass, black-leather-brand image creates both enthusiastic fans in one group and those who don’t relate (a larger group). So Harley’s opportunities to scale worldwide are, in a sense, limited by its brand. Harley’s management recognizes this situation and is trying to evolve. Establishing more culturally resonant brands overseas and leveraging its customer cultivation, design and manufacturing expertise could have wheels, but it surely won’t be easy.