Finding Companies with a Clear Sense of “Why” Might Be a Great Way to Locate Winning Investments

I recently finished reading a book by Simon Sinek titled “Start with Why”. It’s a simple book that tries to tackle an important question: Why are some leaders and companies able to inspire a huge following while others can’t?

In Sinek’s book, Apple Inc was used as an example of a tech-company which had developed a cult-like following. Apple was also contrasted against other companies making similar products – like Dell, Hewlett-Packard, and Samsung Electronics – that simply couldn’t inspire the same sort of loyalty.

A higher purpose

The phenomenon happened, Sinek argued, because Apple has always positioned itself as more than just an electronic gadget manufacturer.

Instead, the company associates itself with much bigger ideas like thinking outside the box, fighting against the status quo, and in a sense, struggling against conformity; Apple’s “Think different” advertising slogan and “1984” advertising campaign are great examples of those.

And, it just so happens that the products that Apple makes are only there to demonstrate and help bring to life its cause, its “Why”. (Meanwhile, try asking a consumer the “Why” behind a company like Dell or Samsung – you will likely get a blank stare.)

The importance of “Why”

It is important for a company to have a clear sense of “Why” because it can create loyalty amongst both its employees and customers. It’s not hard to imagine customers of Apple forcefully defending the company’s products; it’s much tougher to imagine the same thing happening to Dell.

Such customer loyalty had been one of the important reasons behind Apple’s corporate success and phenomenal share price gains. At the start of October 2001, the month when Apple’s first iPod was released, the tech outfit was worth USS$1.11 per share and had net income of a negative US$25 million. Fast forward to today, and Apple’s worth some US$124 per share and had earned US$44.5 billion in profit.

A higher calling in Singapore

Taking that concept along, let’s take a look at the companies listed in Singapore. Is there a company in Singapore with a clear sense of “Why” and has it proved to be a great investment as well?

I had discussed this topic with a few of my colleagues and we came to the conclusion that one of the few companies in Singapore with a clear sense of “Why” would be healthcare services provider Raffles Medical Group Ltd (SGX: R01). The company’s “Why” is perhaps best exemplified by this excerpt from my colleague Chong Ser Jing’s article:

“Raffles Medical Group’s co-founder Dr. Loo Choon Yong once gave a telling sound-bite regarding the culture of the company. He 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 for our patients.”

Doctors, nurses, and everyone else within the company have likely taken Loo’s aphorism to heart, judging from how Raffles Hospital has been well-received amongst patients. For instance, in the 2013 and 2012 Customer Satisfaction Index of Singapore survey carried out by the Institute of Service Excellence, the hospital scored first and second spots respectively in Customer Satisfaction ratings in the healthcare sector.”

And the result? Raffles Medical Group’s shares have chalked up a total gain of around 970% over the past decade with dividends reinvested.

It might sound ironic, but there are many instances where companies that do not focus too much on the profitability of their business ends up being the ones that really rake in the profits. And often, it starts with a simple “Why.”

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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 Stanley Lim does not own any companies mentioned above.