Some believe companies are great because of leadership. Others fervently think it’s agile collaboration and innovation. Some say luck or serendipity play a larger role in this increasingly random, complex and connected world. Yet, perhaps it’s simply a matter of following three rules, suggests Michael E. Raynor and Mumtaz Ahmed, based on a staggering amount of research. Because their provocative book is complex, in places, I’ve condensed some core points into a primer of sorts that may spur you to want to read more.
Three Somewhat Surprising Rules to Enduring Company Success
1. Better before cheaper: When you must decide between making something better or cheaper, choose to improve rather than cut prices.
2. Revenue before cost: When you must decide between finding a way to increase revenue or reducing cost, choose to look at ways to increase revenue.
3. Change anything to follow Rules 1 and 2. Why? See 4.
How to Succeed over the Long Haul by Following These Rules
4. The twin shockers: There are no strong correlations between specific behaviors and exceptional company performance; and there is no strong connection between innovation and exceptional outcomes for the companies, thus the third rule.
5. Therefore, paradoxically, you don’t need to be exceptional in order to help make your company exceptional, yet you will probably be seen as such if you help your company stick to the three rules.
6. In the rare times when you find a way to avoid the tradeoffs inherent in Rules 1. And 2. you are on the path towards greater innovation, as described by Raynor in The Innovator’s Manifesto.
7. Put Rules 1 and 2 into practice: When allocating scarce resources or making other decisions among competing priorities, choose what will most enhance the non-price factors of what you sell, and which will most enable you to increase prices or to sell in greater volume.
8. The three rules facilitate organization-wide strategic alignment because they are simple, accurate and generally applicable.
9. Unlike the familiar admonition in many business books to “have a clear strategy” where there is actually no metric or other way to really know what is “clear”, you can know how your prices compare to what your competition charges. And, via durability, selection, delivery time and other measures, you can measure whether you are better. Thus you know whether you are following the rules… See the rest of the column at Forbes.
