How Exceptional Companies Think
By Michael Raynor and Mumtaz Ahmed
Portfolio/Penguin, $29.95, 231 pages
Why do some companies achieve exceptional performance while so many others struggle to survive? That's the question Deloitte's Michael Raynor and Mumtaz Ahmed—along with an international team of dozens of researchers at Deloitte—set out to answer with their book The Three Rules .
From a database of more then 25,000 companies from hundreds of industries covering 45 years, they uncovered 344 companies—including McDonald's, IBM and Microsoft—that qualified as statistically "exceptional." But more than five years of research couldn't produce a consistent pattern of behavior among those companies identified as "exceptional." But then they shifted their thinking and examined now not so much how the companies act, but how the companies think.
The results are revealed in the book. So what, you may ask, are the three rules? Well, Raynor and Mumtaz lay them out this way: 1) Better Before Cheaper: Do not compete on price. Price-based competition can work, but only rarely does it drive exceptional performance; 2) Revenue Before Cost: Do not try to cut your way to greatness. The advantages of higher revenue tend to be more valuable than the advantages of lower cost; 3) There Are No Other Rules: No matter what you face, do not give up on the first two rules. Change whatever you must about your business—markets, technologies, people—but no matter what, stick with Rules 1 and 2.
The authors point out that when a company's leadership is faced with a strategic decision or new challenge, the best way forward is for him or her to ask which of the alteratives is most consistent with the three rules. It's a winning formula every time, they say. And it's sure hard to argue after you read about the results.
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