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ANALYSIS

Top firms succeed better with ‘repeatable models’

Dubai, June 13, 2013

Nearly half of what differentiates the best performers from the worst, in any industry, lies in how the companies deploy three simple, yet powerful, repeatable business models, a report said.

“The most successful growth strategies consist of a business model that allows the company’s greatest successes to be tailored to new areas with the positive result repeated,” said Chris Zook and James Allen, co-heads of business consulting firm Bain & Company’s global strategy practice and authors of the book Repeatability: Build Enduring Businesses for a World of Constant Change.

The new book explains why the top 10 per cent and best-performing companies captured 85 per cent of global market value in the first decade of the new millennium.

New growth initiatives—organic or by acquisition—have success rates of only about 20–25 per cent according to Zook and Allen.

The three powerful yet simple business principles of Great Repeatable Model companies are:

Principle No. 1 – A Well-Differentiated Core: With their proprietary company database, the authors found that 93 percent of the top 20 percent of performers had some strong form of differentiation in their core.  They classify 15 types of differentiation – from low cost to differentiated product or service – that help top performers stand out three times better than the bottom 30 percent of performers, and demonstrate with company examples.

Principle No. 2 – Clear “Non-negotiables”:  Companies with Great Repeatable Models also have well-defined core principles that are widely and easily shared within the company, from top executives down to employees on the front line.  Such shared principles, specifically defined by the authors, have among the highest correlations to business performance.

In fact, Zook and Allen’s research shows that this is the number one place where strategies break down, accounting for roughly 50 percent of the yield loss.

“Nonegotiables form the ‘Commander’s Intent’ of business,” say the authors.  “They act to reduce the distance between the CEO and the front lines.”

Principle No. 3 – Closed-Loop Learning:  Top performers have developed learning processes to help them adapt faster than their competitors.  For example, they may have developed methods to gather instant, actionable feedback from customers. Speed of adaptation is key.

“Business history is littered with great business models—like Kodak, General Motors, Xerox and Sony—that eventually succumbed to their ‘arrested adaptation’ and not being able to change fast enough,” the authors noted.

“The Great Repeatable Model resonates within the Middle East business landscape because of the huge number of family businesses in the region,” said Allen.

“Repeatability is an important concept within the region’s dominant business model as the ‘founder’ mentality is easy to pass on between family members. This means that founding principles as well as positive attributes of an institution are more likely to be transferred from one generation of business leaders to the next.”

The authors drew on significant primary data sources including a comprehensive survey of 377 global executives, a database of 8,000 global companies tracking strategy against results over 25 years, and another database of 200 companies tracking practices, business models, and performance.

The book features 30 case examples, many with executive interviews, and focused analysis on groups of high performers.

The book advances the concepts first articulated by Zook and Allen more than a decade ago in their groundbreaking analysis of sustained value creation from Profit from the Core.

Companies featured include AmBev, P&G, American Express, Harley-Davidson, Publix, Apple, Huawei, Ikea, Bain Capital, Singapore Airlines, Cisco, Toyota, Dell and Vodafone, among others. – TradeArabia News Service




Tags: book | Learning | Bain & Company | business models |

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