How to identify great companies - 1x to 10x

How to identify great companies:

Warning: It’s next to impossible to exactly pinpoint great companies. It’s easy to do so in hindsight. Said so that should not prevent us to study what makes companies great. This is a work in progress.

Source from the book: Great by Choice by Jim Collins (Also other books Good to Great by the same author).
In the book, the author defined great companies or 10x companies as outliers vs competitors in the same industries for the same period. Then they studied 10x and competitors and identified characters of 10 x companies.

Characters of 10 x companies:
Have fanatic discipline, productive paranoia and creativity. 20 Mile March (consistently go 20 Miles daily), Fire bullets then cannonballs (Start small before going big), Leading above death line (manage risk and Leader Five), Smac (Specific, Methodical and Consistent) and Luck (10x are not luckier but more prepared).

If we study in a similar line for the Indian contest, 10x co is defined as significantly higher in Revenue, Profit and Market Cap with a history of 10-15 years Vs their close competitor.

As per my opinion, we have the following 10x companies.
Divis, L & T, Bajaj Finance, Titan, Indigo airlines and HDFC.

  • This may be a small list. If we go deeper, in sub-segment, then we can find more. You may suggest along with numbers.
  • Those companies are at least 4-5 times higher in terms of Revenue, Profit or Market Cap than their nearby competitors.
  • Famous companies like HDFC Bank or TCS may not be eligible as they are less than 2x of their nearby competitors like ICICI Bank and Infosys respectively.
  • Other which don’t qualify 10x are Asian paints (its sales is less than 3 times than nearby competitors), Pidilite is an FMCG chemical company, not a typical chemical company. And last Reliance being conglomerate as it’s difficult to understand.

I tried to studies those companies and try to find common characteristics.

  1. Divis

Stands for: Trust, vision and Hardworking
When Dr. Divi move out from Dr reddy’s Lab, some 100+ people also resigned and joined him. He didn’t enter into a formulation as he values trust more and doesn’t want to compete with innovators.

Much detail is not available for Dr Divis. He falls into the leader 5 category.

Source: Forbes India - Murali Divi: The Accidental Chemist

  1. L & T
    L&T can be divided before and on Mr. A Naik. L&T since its inception was a great company on construction and turnkey projects. Bahai or lotus temple is made by L&T many years ago. Also, Mr. A Naik wants to work for L&T after his engineering.
    Mr. Naik - Hard working and passionate. 18 hours work no off on weekend. He took his first holiday 22 years after joining the company

  2. Bajaj Finance
    Over 100 data scientists and analysts have been hired by Bajaj Finance to analyse customer data generated from millions of customers that the company gives loans to every year.
    We would give money not to the one who desperately needs it but to those who currently didn’t want it.
    8 cr client data
    30 second approval time

How do you balance the fact that you don’t take a large enough risk that will shut the company down, but you take a lot of small and medium risks because otherwise, you’re never pushing the boundaries of what is ordinary, to do something extraordinary.
Bajaj says he is personally involved in HR.

  1. Indigo airlines
    Staff at the check-in counters, aircrew and sales and marketing staff are hired only after Bhatia meets each of them individually.
    Turnaround time of less than 30 minutes. Obviously less time on the ground means more time in the air spend more than 11 hours a day in the sky, compared to the industry average of eight or 10 hours. Buys only one type of aircraft and keeps operational costs as low as possible along with an emphasis on punctuality market share of 43.2%, focuses on three pillars – offering low fares, being on-time and delivering a hassle-free experience.

For example, the airline stocks no hot food on board and has no loyalty program (only adds to costs, he insists). Not to launch with old, leased planes. But we didn’t want to cut any corners on quality The Company not only had to pay a down payment of just 4%, but also received a 40% discount on list price for placing an order for 100 aircraft.

IndiGo saves fuel by using different ways. First, they use software to optimize flight planning for minimum fuel burning routes and altitudes, and also use latest fuel saving technology. Second, Indigo has inducted Airbus A320neo family to their fleet, which claims to deliver 15% less fuel consumption and 8% lower operating costs. The company is also involved in Fuel hedging after the government allowed it in 2007.

And IndiGo also has the aircraft taxi to the terminal with one engine, shutting down the second engine to save fuel. This moderates the aeroplane’s speed in the air and saves fuel.

  1. Titan

Titan entered 11 European markets—opening offices in London and Paris—with steel quartz watches. It hired European designers and roped in a London advertising agency, leading to a huge debt pileup. “We had no idea that the ‘Made in India’ tag would be such a negative,” says Bhat. “Since then, we’ve always done a pilot before large-scale rollouts.

every month we have to generate cash and not just brand image,” he says. “We have to buy less and sell more. Keep less inventory.”

  1. HDFC
    About Deepak Parekh, One thing that best explains his outsized stature in the world of business, it would have to be his penchant for doing things right, which is why Parekh is the go-to man for policy makers and the government. He is instrumental for UTI and Satyam revival.

He has the habit of gifting miniature yellow signboards to colleagues and business associates. The little yellow signboard has compliance written on it, with a sketch of a slippery slope below it.

Even at 70, he can cram 48 hours in a single day.

Others in list: Apollo Hospital

Conclusion: All those companies have incredible managers (CEO). Hence to date story of companies is equivalent to the story of CEO.

Common characters of CEO of 10x co: Hard working, Innovative, People’s manager and Consistent.

This is a work in progress. You may join, comment, suggest…


I don’t have the necessary experience to make any kind of statements with multibaggers. But I think something external has to happen apart from what is happening with a company. There have to be some external factors, tailwinds so to speak which propelled the company to become highly successful, factors even the companies might not have imagined.

Sunrise sectors - Although the first movers will not always become big, in fact if the theme does not play out properly the first mover may even go busy. Always risky to be in a business which no one is in. With limited capital, why would I want to bet my house, if the outcome is a coin toss.

Change in trends - The availability of certain goods or the availability of better goods are what people are after and a company which first senses these changes and offers products which with network effect creates a moat, the moat becomes wide and finally the company becomes a household name. These trends have to sustain and spread and should not be fads. In order for the trends to reach a wide scale, I think the products should be available to all classes, like FMCG. If they are novelty items, the reach will be limited. Trends may start for any reason, but the spread happens only when majority wants to be a part of it. Generic to branded plays are examples.

Policy changes - The changes are to be continued by the next regimes. If a theme starts and is given importance and if the policy changes with the change of power, some promising companies may stop moving. The incentives have to be carried out the same, if not get increased for a decade or so to see visible changes.

Technological changes - Unless one comes with a differentiating product or service that is not available elsewhere one cannot command a premium price. To an extent I don’t think this quality of innovation remains forever unless it the part of the thinking, part of the DNA, so to speak. Success or failure, one keeps on experimenting, and becomes bigger with successful endeavor, as time passes. Google, Amazon I think are examples.

Consolidation - This happens over the course of decades sometimes. A lot of companies have to be out of the business for various independent reasons and give the chance for the big to become bigger. A small innovative company will always be a threat, will always make a dent to the big ones, and gain market share and become big soon, so the big ones despite big have to be nimble. Bajaj Finance comes to mind, who would have thought that you get a loan when purchasing an item from a store where you have never been to before. To get a loan, you have to go to a bank.

It is one thing to see multibaggers begin and become right in front of our eyes, and it is another thing to invest at the beginning and follow the company for years to experience. It takes a lot of things to have such an experience, as we know, including luck.

Just my thoughts and I am yet to experience a lot of what was said above.


Great by @ChaitanyaC. Agree with your thoughts on finding multi beggar or consistent compounded.

Said so the topic is slightly different, here we are discussing great companies - they are great or outlier not only because of the points you mentioned like sunrise sectors, trend change etc. Their competitors in the same sector also got the same benefits. E.g. Bajaj Finance vs M&M F or L&T F; but why BF outlier? What is in their culture? What has different strategies or innovation done by BF? Same with titan, where most players are struggling like PC Jewel or Kalyan etc. Vs titan is flying. What’s the reason?

I recommend reading a book by Jim Collins. Thanks again for adding value to the discussion.