Synopses & Reviews
Finally, an answer to the ultimate business question: How do some companies achieve exceptional performance over the long term?
In every sector, theres an outlier. In the pharmaceutical industry, its Merck. In discount retail, its Family Dollar. It used to be Wrigley in candy and Maytag in appliances. Other superstars have been hidden in plain sight, like Heartland Express in trucking or Linear Technology in semiconductors. How do these exceptional companies deliver superior performance over the long run despite facing the same constraints as competitors? What are they doing differently? What can we learn from them?
Michael E. Raynor and Mumtaz Ahmed have analyzed data on more than 25,000 companies spanning forty-five years. Their five-year study began with a sophisticated statistical analysis to identify which companies have truly exceptional performance, 344 in all.
In collaboration with teams of researchers, Raynor and Ahmed then put a carefully chosen representative sample of twenty-seven companies under the microscope to uncover what made the stand-out performers different. They found that exceptional companies, when faced with difficult decisions, follow three rules:
- Better before cheaper. They rarely compete on price.
- Revenue before cost. They drive profits through price and volume, not thrift.
- There are no other rules. Everything else is up for grabs, and they are willing to change anything to remain true to the first two rules.
The rules provide an indispensable compass that any company can use to chart its own path to greatness. Is it better to keep price down or invest in creating value that commands a higher price? Should you focus on talent and developing the abilities of your people or build processes to extend the capabilities of your organization? How about acquiring a sizable competitor to secure economies of scaleor a small start-up to gain access to new technology? According to Raynor and Ahmed, the right answers to these and just about every other question are the ones most closely aligned with the rules.
The Three Rules is built on a powerful combination of large-scale data analysis and in-depth case studies. Its guidance will increase the chance that your organization can become truly exceptional.
Synopsis
A data-driven look at the ultimate business question: What makes some companies outperform over the long term? Every industry has had outliers that deliver superior performance over the long run, despite facing the same constraints as competitors. In the pharmaceutical industry, it’s Merck; in retail, it’s Abercrombie & Fitch; in appliances, Maytag. What do these companies do differently? Drawing on Deloitte’s insights and analysis of almost 25,000 companies spanning forty-five years, the authors identified 394 companies that are true long-term standouts in every kind of industry—medical devices, trucking, semiconductors, even discount stores. Using cutting-edge statistical analysis coupled with detailed case studies, they discovered that what sets those companies apart is not just how they act, but how they think. Exceptional companies, when faced with tough choices, follow three rules:
- Better before cheaper. They rarely compete on price.
- Revenue before cost. They drive profits through price and volume, not thrift.
- There are no other rules. Everything else is up for grabs.
Raynor and Ahmed explain how executives can apply these rules to their organizations to take control of their destinies and deliver exceptional long-term performance.
About the Author
MICHAEL E. RAYNOR is a director at Deloitte Services LP, where he explores corporate strategy, innovation, and growth with clients in a variety of industries. He is the coauthor, with Clayton Christensen, of
The Innovators Solution, and the author of the bestselling and critically acclaimed
The Strategy Paradox and
The Innovators Manifesto.
MUMTAZ AHMED is a principal in Deloitte Consulting LLP and the chief strategy officer of Deloitte LLP, responsible for the U.S. firms strategy, corporate development, innovation, eminence, and brand.
www.thethreerules.com