Business That Really Works

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					What Really Works



What Really Works: The 4+2 Formula for Sustained Business Success,
William Joyce, Nitin Nohria, and Bruce Robertson, Harper Business, 2003.
   The book What Really Works: The 4+2
    Formula for Sustained Business Success is
    based on a five-year, intensive research
    project with the help of 50 leading
    academics and consultants to analyze the
    experience of 160 of companies over a ten-
    year period.
What Works

   The researchers identified eight elements –
    four primary and four secondary – that
    directly correlated with superior corporate
    performance as measured by total return to
    shareholders.
   Winning companies achieved excellence in
    all four primary elements, plus two of the
    secondary ones – hence the 4+2 formula.
What Doesn’t Work

   The research found no correlation between
    a company’s investment in technology and
    its total return to shareholders over the
    decade of the study.
   The research found no correlation between
    corporate change programs and achieving
    superior results in total return to
    shareholders.
   The research identified four types of
    companies from 1986-1996:
    –   Winners
    –   Climbers
    –   Tumblers
    –   Losers
The 4+ 2 Formula for Business
Success
   Four primary elements:
    –   Strategy
    –   Execution
    –   Culture
    –   Structure
   Four secondary elements:
    –   Talent
    –   Leadership
    –   Innovation
    –   Mergers and partnerships
Winners

   Had high scores in all four primary
    elements.
          Strategy, execution, culture, and structure
   And high scores in at least two of the
    secondary elements.
          Talent, leadership, innovation, and mergers
           and partnerships.
Primary Element: Strategy

   Devise and maintain a clearly stated,
    focused strategy.
    – Whatever the strategy, it will work if it is sharply
      defined, clearly communicated, and well
      understood by employees, customers, partners,
      and investors – all stakeholders.
    – One of the key mandates of winning companies
      was a focus on growth.
        Enabling a doubling of the existing core
         business every five years.
Primary Element: Execution

   Develop and maintain flawless operational
    execution.
    – Winners consistently meet the expectations of
      their customers by delivering on their value
      proposition.
          Bad quality will hurt. A company cannot afford to be
           in the bottom half of the perceived quality rankings,
           but it is safe as long as it remains in the top third.
    – Winners consistently slash operational costs
      while increasing productivity by 6 to 7 percent
      every year.
Primary Element: Culture

   Develop and maintain a performance-
    oriented culture.
    – Winners embrace corporate cultures that support
      high-performance standards, which employees
      universally accept.
    – Winners dealt quickly with poor performers,
      especially those who don’t abide by the values of
      the organization.
Primary Element: Structure

   Found ―structure follows strategy.‖
   Build and maintain a fast, flexible, flat
    organization.
    – Winners create and adapt structures that reduce
      bureaucracy and simplify work.
        Simpler is faster and better.
Secondary Element: Talent

   Hold on to talented employees and find
    more.
    – The most important indicator of the depth and
      quality of talent in an organization is whether it
      can grow its own stars from within.
        Promote from within.
Secondary Element: Leadership

   Keep leaders and boards of directors
    committed to the business.
    – CEOs, on the average, contributed only 15
      percent of the variance in corporate
      performance, for better or worse.
        Good CEOs are chosen by good boards on
         which the board members understand the
         business and are passionately committed to a
         company’s success.
Secondary Element: Innovation

   Make innovations that are industry
    transforming.
    – Most important is to anticipate rather than react
      to disruptive events in an industry.
Secondary Element: Mergers
and Partnerships
   Make growth happen with mergers and
    partnerships.
    – Companies that do relatively small deals (less
      than 20 percent of their existing size) are likely
      to be more successful than organizations that do
      large, occasional deals.
What Winners Do in Strategy

   Build strategy around a clear value proposition for
    customers.
   Develop strategy from the outside in. Base it upon
    what customers, partners, and investors have to
    say and how they behave.
   Maintain antennae that allow them to fine-tune
    strategy to changes in the marketplace.
   Clearly communicate their strategy to all
    stakeholders.
   Are wary of the unfamiliar.
What Winners Do in Execution

   Deliver products and services that
    consistently meet customers’ expectations.
   Empower front lines to respond to customer
    needs.
   Constantly strive to improve productivity
    and eliminate all forms of excess and waste.
What Winners Do In Culture

   Inspire all to do their best.
   Reward achievement with praise and pay-
    for-performance, but keep raising the
    performance bar.
   Create a work environment that is
    challenging, satisfying, and fun.
   Establish and abide by clear company
    values.
What Winners Do With
Structure
   Eliminate redundant organizational layers
    and bureaucratic structures and behaviors.
    Simplify, simplify, simplify.
   Promote cooperation and the exchange of
    information across the whole company.
   Put their best people closest to the action
    and keep their front line stars in place.
What Winners Do With Talent

   Fill mid- and high-level jobs with internal
    talent whenever possible.
   Create and maintain top-of-the-line training
    and educational programs.
   Design jobs that will intrigue and challenge
    the best performers.
   Top management becomes personally
    involved in winning the war for talent.
What Winners Do In Leadership

   Inspire management to strengthen its relationships
    with people at all levels of the company.
   Inspire management to hone its capacity to spot
    opportunities and problems early.
   Appoint a board of directors whose members have
    a substantial financial stake in the company’s
    success.
   Closely link the pay of the leadership team to
    performance.
What Winners Do In Innovation

   Introduce disruptive technologies and
    business models.
   Exploit new and old technologies to design
    products and enhance operations.
   Don’t hesitate to cannibalize existing
    products.
What Winners Do In Mergers
and Partnerships:
   Acquire new businesses that leverage
    existing customer relationships.
   Enter new businesses that complement their
    company’s existing strengths.
   With a partner, move into new businesses
    that can use the partnership’s talents.
   Develop a systematic capability to identify,
    screen, and close deals.
Winning

   Exceptionally difficult juggling act—must
    keep all six plates (4+2) in the air spinning
    at the same time. If one falls down, they all
    fall.
   The 4+2 factors are all interrelated and
    must always function at the highest level to
    continue to be a winner.
   Staying on top is more difficult than getting
    there.
   But winners manage it by:
    –   Having a focused strategy
    –   Flawlessly executing
    –   Having a performance-based culture
    –   Having flat, simple structure
   Plus, having two of the following four:
    –   Talent
    –   Leadership
    –   Innovation
    –   Mergers and partnerships
   And never, never, never, never letting up.

				
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