Six Lessons From The Fast Lane
By Ellen Florian Research Associates Susan Kaufman, Joan Levinstein

(FORTUNE Magazine) – For the head of any public company, growth, like yardwork, is the job that's never done--the new blanket of autumn leaves falling before you're able to haul the first batch away. "Growth is the biggest challenge that CEOs face," says Chris Zook, author of Beyond the Core and a senior partner at Bain & Co. "It's the No. 1 issue on their minds right now."

Perhaps that's because robust expansion of the kind that lands a company on a list like this one is so rare. According to Bain, only 9% of the 8,000 companies that it studied around the world have increased revenues and profits during the past ten years at a rate of more than 5.5% and earned their cost of capital. What's more, in Bain's most recent survey of global executives, nearly three-quarters said that finding the next wave of profitable growth will be the most difficult in their businesses' history.

That's why it's critical to learn from those that get it right. So we plucked six diverse companies from our sizzling 100--ranging from a century-old food manufacturer to a videogame king--and peeked inside their toolsheds. Their lessons may be your company's path to growth.

Create Serial Success ELECTRONIC ARTS /No. 30

In August 2003, videogame maker Electronic Arts released Madden NFL 2004--the newest version of its wildly successful franchise--and waited for the cash to roll in. Over the next three weeks the $50 football game sold two million copies, grossing a cool $100 million. Ka-ching! This year the story is even better. In the first week that Madden NFL 2005 hit shelves, the game sold 1.5 million units, the biggest launch in the game's history. In the past 15 years the franchise has sold more than 37 million copies, and there's no end in sight. Ka-ching! Ka-ching!

That may sound like just a bit of good luck, but it's only a fraction of the story. What EA has with Madden and other games is one of growth's great hidden weapons: a business model that can be applied over and over. "The company that is looking for a new source of growth every few years has a much more difficult mission than a company that has a really powerful repeatable model that it can keep adapting and refining," says Bain's Zook.

Adapt and refine--that's the game for EA. Each year a group of developers in Florida adds new features and updates the entire NFL roster for the new Madden game. And each year the technology in the game becomes ever more realistic--from the expressions of Ravens linebacker Ray Lewis to the wrinkles in the jersey of Rams running back Marshall Faulk.

EA started the process with Madden, but it has systematically transferred its franchise know-how to games based on soccer, NASCAR, the NBA, and golf (Tiger Woods is the name brand), among others. Outside of sports, the company takes the same tack. The Sims, a digital dollhouse that is a bestseller, continually refreshes coffers with its expansion packs for everything from pets to hot dates to vacations. EA holds licenses for Harry Potter, Lord of the Rings, and James Bond. "We go after the ones where there is a body of underlying fiction so that people are already familiar with the characters and storylines," says CEO Larry Probst. "And we look for properties where we know there will be multiple iterations on the movie. We think that's a pretty safe bet."

Indeed it is. When Harry Potter and the Prisoner of Azkaban hit theaters in June, EA launched its new game the same day in 30-plus languages on five platforms. (Yes, EA also repeats its games for various consoles.) In under two months, it has sold 2.5 million copies, raking in about $100 million.

EA's wash, rinse, repeat business has propelled the debt-free company into a nearly $3 billion revenue-generating machine--70% of which is from the renewable part of the business. By sales, EA is the fourth-largest public software company in the U.S., trailing only Microsoft, Oracle, and Computer Associates. Over the past ten years, the company's revenue and profit has grown by an annual compound rate of more than 20%. That's a record worth copying.

Know Thy Customer COACH /No. 42

The mid-1990s message from Japanese consumers to Coach was loud and clear: Sayonara. Same-store sales growth fell off a cliff in the latter half of 1995, plummeting from 40% to 5%. Such a sudden rejection by fashion-forward Japanese shoppers was not only surprising but scary. Sure enough, Coach's U.S. consumer research began to show some alarming trends. As business casual took hold of the fashion landscape, the leather-bag maker, which had always earned high marks for quality, was found lacking in three other important characteristics that women wanted: fun, fashion, and femininity--qualities that had them looking toward Gucci and newcomer Kate Spade. "They were beginning to capture the imagination of our classic user," says CEO Lew Frankfort, a 25-year veteran of the company. "Particularly the younger consumer who was just entering adulthood."

Coach had a fashion emergency on its hands. To solve it, Frankfort opted for an extreme makeover. He brought in Reed Krakoff from Tommy Hilfiger as his new creative director, with a mandate to rethink the product line. Under his watch Coach started unveiling bags that used lighter-weight materials mixed in with its trademark leather--a boost not only to the company's staid, all-leather-all-the-time image but also to its bottom line, thanks to the cheaper materials. Coach branched out into other accessories--watches, scarves, and outerwear. Stores metamorphosed from dark, reverent, library-like rooms to lighter, airier spaces. And instead of introducing products twice a year, Coach began offering fresh merchandise every four weeks. The makeover was breathtaking. Since 2000, the company's compound annual sales growth has been 25%.

Frankfort and Krakoff were able to engineer the turnaround so quickly in large part because of Coach's extensive market-research program. The company has been quizzing its U.S. customers on a regular basis since 1988. (It didn't start its program in Japan until 1993--one reason, the company says, that it was caught by surprise when sales fell off in 1995.) Today Coach annually interviews at least 10,000 customers individually (primarily by telephone) to keep tabs on how the brand is faring in their minds. During the company's transformation, clerks intercepted shoppers to ask about specific products, whether they preferred chrome or nickel, or if they thought the length of the strap was right.

Coach also tests its products carefully in a limited number of its 174 stores in North America six months before a product comes out. This way it can gauge final demand and respond by either ramping up or slowing production. "It's street-level information, multiple angles, not just surveys and focus groups," says Adrian Slywotzky, co-author of How to Grow When Markets Don't and a managing director at Mercer Management Consulting. "It's so many different ways of trying to get at what the customer is thinking. And it's not just every six to 12 months. It's all the time." To top it off, the company stands firmly behind its products. You can bring in a Coach bag and have it repaired free for the natural life of the bag. The company fixes 100,000 a year.

The result of all that attention to detail is that consumers seem willing to up the ante on what they'll pay for a Coach bag. Although the average tote this fall will cost $250, a bag called the Soho Ocelot Top Handle will retail for a hefty $598. Coach knows its customers will pay it.

Aim Before Innovating GENENTECH /No. 61

In an industry that sets its sights on the bet-the-farm blockbuster approach to drug development, it sometimes pays to step back and take aim before firing. "That can mean not going after the huge markets that everybody's going after, where all the science has been picked over," says consultant Michael Treacy, author of Double-Digit Growth. "Sometimes that involves going after market segments where perhaps there's been a lot less effort." Biotech firm Genentech is doing just that: moving away from the mob-chasing, big-market, one-size-fits-all opportunities, and instead innovating through "targeted therapies"--that is, treatments for specific sets of patients, mostly in the areas of oncology and immunology.

The approach is paying off. In the past three years revenue and earnings growth has been cruising at a double-digit clip, and Genentech's stock has shot up 130%. In less than a year the company scored three new drugs approved by the FDA--asthma drug Xolair in June 2003, psoriasis treatment Raptiva in October 2003, and Avastin in February 2004, the first ever approved therapy that stops the growth of cancer by targeting the tumor's vital blood supply--quite a feat for a company its size, and one that should open up a new phase of growth. In fact, in the first full quarter that Avastin has been on the market, the company raked in $133 million in sales, far exceeding analyst expectations.

A recent company warning that the drug can raise the risk of blood clots in some patients has made investors jittery, though analysts believe those potential serious complications are unlikely to hurt the drug's sales very much. Avastin, which has been shown to extend the survival of people with late-stage colorectal cancer, is now also being tested as a treatment for other forms of cancer--which could mean rich additional markets.

Genentech's strategy includes looking at drugs with $300 million to $500 million potential, drugs that other companies might ignore. Take Herceptin, the company's six-year-old breast cancer drug, which is targeted at the 25% of patients whose tumors happen to harbor a particular gene. Last year the drug brought in $425 million. That number may not bowl you over, but it's a nice 13% chunk of Genentech's revenue. "It won't move Pfizer's needle very much," says CEO Arthur Levinson. "But it moves ours." What's more, the fact that the drug was a targeted therapy sharply reduced the typically substantial cost of drug testing--a process that can easily take ten years or more and involve thousands of participants in clinical trials. Being able to eliminate the 75% of women who didn't have the gene allowed Genentech to do a two-year study with a mere 500 patients.

That's not to say that the company ignores the blockbuster. Rituxan, a treatment for non-Hodgkin's lymphoma jointly developed with IDEC Pharmaceuticals (now Biogen Idec), brought in close to $1.5 billion in sales last year. But Genentech's strength has been knowing when not to swing for the fences. A few solid base hits can put just as many runs on the board.

Make Room to Grow CHICO'S /No. 26

Sometimes growth comes faster than a company can handle. As for expert advice with that problem, any Boy Scout can furnish it: Be prepared. Take, for example, clothing retailer Chico's.

The company was enjoying the benefits of learning from its past mistakes when it made a brand new one. It was 1999, and Chico's was growing again after cutting off a mid-1990s flirtation with small-sized customers who didn't fit its core market--affluent baby-boomer women, sizes 4 to 16, who prefer easy-wear, easy-care attire.

To ramp up business further, Chico's reintroduced a frequent-shopper program it had suspended in the mid-1990s called Passport Club that gives special awards and discounts for loyal customers. Chico's advertised in national magazines and blitzed consumers with direct mail. Shoppers responded, signing up in droves. On one fateful Saturday in 1999 the DOS-based register system reached critical mass and crashed in about 200 stores nationwide. "It was a left hook," says CEO Scott Edmonds. "We didn't see it coming. So we said, What else is going to break if we're going to take this business from $300 million to a billion?"

Apparently, quite a lot. To prevent any similar meltdowns, the company embarked on a program it calls "bridge to a billion." It has included a new, Windows-based point-of-sale system in each store and other IT upgrades, a state-of-the-art distribution center, and an expanded management team. "Before we drove the brand, we needed to have everything in place," says Edmonds.

They worked quickly. In 2002, Chico's moved its distribution center from Fort Myers, Fla., where the company is based, to a highly automated 230,000-square-foot facility in Winder, Ga., and has since seen double-digit decreases in labor costs related to distribution. And last September the company flipped the switch on its new IT platforms.

Chico's is now on track to break $1 billion in revenues this fiscal year. And the company has done it without once interrupting its double-digit tear in same-store sales. Its stock has soared 237% in the past three years. Says Edmonds: "We're working on our bridge to $2 billion."

How will it get there? By opening more Chico's stores, for one thing. Based on numbers from the company's Passport Club database, analysts estimate that the retailer has penetrated a mere 11% of its potential market of 35-to 55-year-old women earning $100,000-plus (approximately 900,000 of Chico's most loyal customers generated 72% of sales). Last fall Chico's, which is debt-free, spent $93 million to buy Maryland specialty retailer White House/Black Market, which focuses on younger women who prefer sexier clothes than the typical Chico's customer would wear. The acquisition has been viewed as a very good fit.

And this fall Chico's is disrobing ten intimate-apparel stores for its core shopper, who may not feel quite at home in Victoria's Secret. Will the loyal but less figure-conscious Chico's woman buy it? Hard to say right now. But one thing is sure: Chico's will be ready for her if she does.

Find the Right Path SYMANTEC /No. 24

When John Thompson, a 28-year veteran of IBM, arrived in April 1999 to transform Sy-mantec, the company was a modest, $632 million consumer-software publisher with an array of unrelated products and a good distribution network. It didn't take long to see what the problem was: Symantec didn't have a core technology to drive the business. So two months later Thompson took his senior management team offsite for a few days to tackle some rather meaty strategic issues--including, most notably, where Symantec's growth might lie.

"The leadership of any company has to dig in and figure out where a company can best excel, and search for an opportunity where there is a fit, before it can figure out how to deploy its resources to achieve that growth," says Ram Charan, a long-time advisor to several big companies and author of Profitable Growth Is Everyone's Business. Symantec had a popular program called Norton AntiVirus, which it had acquired in 1990. When the meeting ended, the executive team came back to the office with a razor-sharp focus: Internet security.

Thompson wasted no time ditching unrelated products, both weak and profitable. Even so, the antivirus business that remained wasn't enough to drive major growth. It was supported largely by individual consumers, which often makes for a volatile revenue stream. So Thompson decided he needed to beef up the business from the outside. In December 2000, Symantec began a series of acquisitions (one of the latest being Brightmail, an e-mail spam blocker), with the goal of building a market-dominating enterprise-software business focused on Internet security--offering corporate clients everything from firewalls to sophisticated intrusion-detection systems. "There is almost nothing about the company today, certainly from an enterprise point of view, that is anywhere near what we had in 1999," says Thompson.

That's for sure. Symantec, which largely missed the late-1990s run-up in technology stocks, has boomed as others have gone bust. Revenues last year grew to nearly $1.9 billion, up 33% from a year earlier, and net income of $371 million surged 50% in the same period. In the time that Thompson has been CEO, the company's stock has risen 841%.

But Thompson's enterprise strategy, while sound, turns out to be only part of the growth story. A funny thing happened on the way to building his software fortress. The Nimda virus attacked. So did Blaster, Mydoom, and a host of other worms. And this global assault by the nastier elements of Internet society had the effect of steaming up the consumer end of the business too. Thompson hadn't anticipated how underpenetrated the consumer market was for Symantec's core Norton AntiVirus product. "We became less concerned about what the mix was between consumers and enterprise buyers and more concerned about how we could take advantage," he says.

Now, Symantec is trying to milk the Norton brand for everything it can, selling the programs in gas stations in Germany and through Internet service providers, not just traditional retail outlets like Best Buy and CompUSA. Consumers can also buy through subscription. Last quarter Symantec's consumer-business segment grew by 67%; the quarter before that, 62%. Is it sustainable? Almost certainly not. But on the straight and narrow road to long-term growth, you shouldn't ignore the unexpected blossoms along the way--as long as you don't step too far off the path to pick them.

Be Patient J.M. SMUCKER /No. 92

It's not just choosy moms who choose Jif. So did a choosy company. But Smucker, a conservatively run enterprise known for its old-school virtues (patience, as you'll soon see, being one of them), had to play a 25-year waiting game for a brand it knew was a perfect fit. The wait paid off.

When Smucker announced the $1 billion acquisition of Jif peanut butter (along with Crisco to oil the wheels of the deal) from P&G in 2001, it was widely hailed from both an aesthetic and a strategic point of view. With each half of the sandwich being the leading brand in its category, Smucker now owned the new power couple of food products. Wall Street rewarded the move, which nearly doubled fiscal 2003 revenue to $1.3 billion. Shares in Smucker, which had largely languished during the 1990s, thanks to its single-digit growth rate, rose 40% over the next couple of years. "When you make acquisitions in areas where you really have deep knowledge and you have really great execution skills, only good things can happen," says consultant Treacy.

The purchase was a very smart move, even if it did take more than two decades. Paul Smucker, who headed the company from the early 1960s until his death in 1998, originally came a-courtin' the brand from P&G's John Smale. His sons, co-CEOs Tim and Richard, continued to woo the label when they took the reins. For years, "the conversation would go 'Thank you for your call, Tim, Rich, or Paul. We'll give you a call first,' " says Richard today. And for years the Smucker clan watched and waited and solidly managed their relatively small company. Its market share in fruit spreads increased by an average of 1% a year--quite a feat in the food industry, where companies tend to grow in microscopic measures.

The acquisition has energized the 107-year-old company, known for the gingham pattern on its jar lids and its sponsorship of Willard Scott's Today Show birthday announcements. Smucker is opening a new, $70 million plant in Kentucky to handle a new product that's growing in popularity, thaw-and-serve Uncrustables PB&J sandwiches. Indeed, the Smucker brothers seem to be downright bold these days, as they look to corner the middle aisle of the supermarket: In March the company announced an $840 million deal to buy the struggling International Multifoods, a company with a number of iconic brands, including Hungry Jack and Pillsbury baking products.

Analysts wondered whether the company might have gotten itself into a jam with this one, considering the high price and the fact that Atkins-inspired Americans are trying to cut carbs. Richard Smucker, who was on the company's board from 1997 to 2002, did his best to assure Wall Street researchers in a conference call that Smucker would be able to manage it: "These brands really need to have some love and attention," he said.

Who'd have thought such sweet virtues could be the secret to growth?