In the attached article, Michael Raynor and Mumtaz Ahmed argue that much of the strategy and management advice that business leaders embrace turn out to be unreliable or impractical. That’s because most management gurus have underestimated the power of chance. Thus, a company may do extremely well for a few years – possibly due to serendipitous circumstances – only to falter. Many companies identified by Tom Peters and Robert Waterman in ‘In Search of Excellence’ and by Jim Collins in ‘Good to Great’ slipped badly after the books were released.
To understand what makes great companies great, Raynor and Ahmed undertook a statistical study of thousands of companies to try and identify the few that have been truly exceptional over a long period of time. And they found something truly startling: Exceptional companies have essentially followed three elementary rules:
1. Better before cheaper—in other words, compete on differentiators other than price.
2. Revenue before cost—that is, prioritize increasing revenue over reducing costs.
3. There are no other rules—so change anything you must to follow Rules 1 and 2.
According to Raynor and Ahmed, the rules are foundational concepts – not specific behaviours or general strategies – and do explain the success of exceptional companies.
It is as simple as that; or is it?
Read the article here