I walked into Barns & Noble (my favorite hangout) last week and, as usual, I spent my time looking at business books. I paid particular attention to the large amount of books revealing the secrets of successful companies and how they achieved this status. In the same section were books on the founders of successful companies; these books were at least several hundred pages each. Most business owners/managers don’t have the time to read all these books and hundreds of others on the same topic to pull out the essential ingredient to help them transform their companies.
I remembered a short article I recently read on this very topic. Someone else had already done all the research; I just had to apply it. The following are a few highlights from this timely article:
- The research was conducted using 25,000 companies that have traded on the U.S. stock exchange, between 1966 and 2010.
- The list was shortened to 174 companies that consistently made the top 10 percent and another 170 companies in the top 20 to 40%.
- Two years of research on these companies eventually showed a common trait that did not involve innovation, or technology or other specific behavior.
- One finding was that the top 10% competed on being better than their competition. (Through their branding, appeal, style, durability, etc.)
- These 10% rarely competed on the basis of price. They continued to invest in order to keep their prices higher than their rivals and stressed such features as product quality, service levels, and other benefits.
Now for the summation of their findings, put forth in the following three rules:
- 1. Better before cheaper: Top-performing companies are much more likely to compete on some measure of superiority versus low prices.
- 2. Revenue Before Cost: Margins matter, and even when high-performing companies lower prices to compete they still charge more than other companies.
- 3. There are no other rules.
So what do these rules teach us? A good way to start is to examine your company’s competitive position and profitability formula. Take a good look at your overall operation including product/service delivery, internal operational systems, marketing efforts, and unique benefits that are offered. It’s also very important to have a mindset that reaches for excellence and will not settle for anything less. With these rules as a foundation, you can “reach for the stars.”
Parts of this article are from an article in Build magazine written with the co-operation of Deloitte.
Successful Leadership is achieved only when nothing less than excellence is accepted. Nick Petra
Nick J. Petra CFP