| Can we effectively distil the approaches to business success? |
What if all the business and management wisdom could be distilled down to just a few steps to make your organisation a success? - Would we be interested in the result ? Of course we would.
Recent Research by two Harvard Academics has tried to do just that. Raynor and Ahmed undertook a statistical survey of 25,000 US companies that had traded on US stock exchanges between 1966 and 2010.They measured performance as a return on assets (ROA), a metric they argued reliably measured management efforts rather than changes in business expectations, the latter being deemed a primary source of shareholder returns. They identified 344 exceptional companies - 174 whose ROA fell in the top 10% of all companies studied and 170 long runners whose ROA fell in the top 20%-40% of those companies studied.
After repeatedly trying to isolate measurable behaviours that were associated with success the authors moved away from what companies did to how they made their policy choices -- how they thought about their challenges.
They soon identified that these successful companies operated in adherence to the following rules;
1. Better Before Cheaper -- In other words they always competed on differentiators other than price.
2. Revenue Before Costs -- Always prioritise increasing revenues over reducing costs
3. There are no other rules -- So change what you do to ensure you follow rules 1 and 2.
So that is it? The answer to all of our business problems? -- Well it is easy to identify the seeds of some very interesting approaches to making your organisation truly great.
We do need to become concerned with the quality of what we do -- perhaps sometimes we too easily cut our expenditure without trying to identify new markets and revenue streams at the same time
Perhaps there are some lessons for us all here?
