A Surprising Thing That Great Companies Tend To Do That Leads To Great Profits

My American colleague Matt Koppenheffer was at the Transact 2014 payment technology conference in the USA recently. Writing about his experiences, Matt recounted how an executive from internet search giant Google (NASDAQ: GOOG) (NASDAQ: GOOGL) had made an almost-off-handed remark that seemed to encapsulate the mentality that really successful companies have.

The executive, Ariel Bardin, said: “Making money, all this kind of stuff… that comes later. Google really wants to drive mobile payments forward, and focus on the customer.”

And there you have it, the important mentality that separates great companies from the rest of the pack: The focus on the customer and on providing great products or service. If you treat your customers right, the profits will come.

According to Matt, “if we look at many of the things that Google is doing, Bardin’s approach – let’s get it right, then worry about making lots of money from it later – seems to run through a lot of it.” With profits that had exploded from US$106 million in 2003 to US$12.9 billion (yes – that’s billion with a ‘b’) in 2013, there’s something to be said for Google’s apparent nonchalance about making a profit.

And the thing is, Google’s hardly a unique example. Consider this 2012 quote from Apple’s (NASDAQ: AAPL) senior vice president of industrial design, Jonathan Ive:

We are really pleased with our revenues but our goal isn’t to make money. It sounds a little flippant, but it’s the truth. Our goal and what makes us excited is to make great products. If we are successful people will like them and if we are operationally competent, we will make money.”

With Apple’s quantum leap in profits from US$69 million for the Sep 2003 financial year to US$37 billion for the 12 months ended Sep 2013, it’s again hard to argue that there really is something to the mentality of not worrying about profits that these two great companies have.

But, could it be that such a mentality could only work in the technology industry and in Western business climates? Turns out, that’s not the case.

In a Feb 2014 interview, healthcare provider Raffles Medical Group’s (SGX: R01) founder and current executive chairman, Dr. Loo Choon Yong, said: “We have a little aphorism of our own – “look after the patients and the business will look after itself”. I preach this all the time because we should do what is the best of our patients.”

With this focus on treating patients right and on providing great service, Loo has led Raffles Medical Group through more than a decade of consistent growth with profits growing from S$3.7 million in 1997 (the year it went public) to $85 million in 2013. Along the way, the company has also been one of the best healthcare operators in Singapore. Its shares, in a reflection of its corporate growth, has been a solid market-beater, gaining 611% to its current price of S$3.33 since its close at a split-adjusted price of S$0.468 on its first day of trading. Singapore’s market bellwether, the Straits Times Index (SGX: ^STI), has gained only 60% to its current level of 3,253 points in comparison.

It might not always be true, but companies with a relentless focus on building something great for customers (be it a service or a product) instead of concentrating on making a profit might just be the ones that, paradoxically, end up making the biggest profits.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Apple and Raffles Medical Group.