By Chris Zook and James Allen
(Harvard Business Review Press, 270 pages, $30)
Looking for the next big, new thing in your industry?
Consider that it may not be all that new. Instead, it may have elements of what your company is already doing, retooled to power it further. Repeatability – taking your competitive advantage and applying it anew – can hold the seeds of success.
That’s the essence of the message from Chris Zook and James Allen, two strategy consultants with international management consulting firm Bain & Co. You can see the success of repeatability, for example, when you walk into an IKEA store and buy a Billy bookcase.
“IKEA has not attempted to diversify into businesses that would inspire a different model nor has it reinvented itself,” the authors note in Repeatability. The Swedish company hasn’t tried to open traditional furniture shops or morphed into a seller of some other retail product. Instead, it continues to offer wooden furniture in flat packs for self-assembly, with stores built around a flow that encourages spontaneous purchases. Products all have been designed to hit a target selling price that consumers will consider a bargain.
And IKEA continues to push those prices down: Bookcases are not complicated products, but the company continues to innovate on the materials, fasteners and construction details of the Billy, to the point that costs have dropped by 76 per cent in constant dollars from the product’s introduction in 1979.
Nike Inc. also succeeds with repeatability. In sport after sport, it develops partnerships with top stars and designs products that, with the added power of its brand and efficient supply chain, brings in buyers.
In 1989, the authors note, its main rival, Reebok International Ltd., was comparable in size, product line, and recognition and profitability. But Reebok never found a repeatable format. Instead, it tried Ralph Lauren footwear, Boston Whaler boots and Western boots, to take some examples. It fell by the wayside as Nike repeated its formula sport by sport by sport.
The authors’ research began with a database of 8,000 companies which showed that 80 per cent of the variation in financial returns among all businesses is accounted for by their performance relative to other companies, as opposed to their choice of markets.
As well, most new growth initiatives fail, they found. Companies have only a 20- to 25-per-cent success rate, whether through growth attempted from within or from without by acquisitions. One reason: The initiatives prove more complex than initially realized. And most of the bold redefinitions we hear about, in which companies try to shift dramatically, end up failing.
The authors found three crucial factors that seem to account for about half the variation in performance within an industry (which they consider a remarkable explanatory power given the many elements they evaluated):
1. A strong, differentiated core
The best companies are sharply different from competitors along a dimension – a specific asset or special service or capability – which translate into behaviours or products that served as the driving core of success. For Pixar, it’s character development in animation; at IKEA, it’s the flat-pack furniture design.
2. Non-negotiable values
At successful companies, managers and employees all understand its core values and the key criteria that would determine tradeoffs in decision-making. These are non-negotiable principles, which everyone knows and follows. As companies grow and become more complex, these clear-cut principles make it easy for individuals to execute strategy.
3. Closed-loop learning
Successful companies have well-developed systems to learn from customers and the surrounding environment, so they can make continuous improvements and adapt to change. When fundamental changes in the market threaten a key premise of the company’s success model, it reacts with urgency to the potentially mortal threat.
These three principles form what the authors call the essence of “the great repeatable model” that breeds success. Of course, repeatable models can stop repeating: This happens when companies lose their focus, often with an erosion of operational excellence, or fail to react swiftly enough to changing markets and technologies.
In short, the authors conclude: “Repeatable models are the best way to capture your greatest successes and replicate them again and again. Strategies built around repeatable models account for a large and increasing share of success stories in business.”
One reason for the success is that repeatability offers simplicity. Your company does have to continually improve, but it doesn’t have to lurch into strange, new initiatives or redefine itself every year or two. Instead, company leaders have to understand the reasons for the success, share the non-negotiables with their staff, and keep adapting these principles as the world changes.
Repeatability will be interesting for senior executives and others concerned with strategy. It is clearly written, with lots of examples to help to guide readers through the strategic concepts.
Bob Willard, the former IBM executive who lives in Whitby, Ont., and has produced some excellent books about sustainability for business, has recently released The New Sustainability Advantage (New Society Publishers, 203 pages, 19.95), which substantially reworks his first book on its 10th anniversary.
Prolific and popular author Brian Tracy has two new offerings: Earn What You’re Really Worth (Vanguard Press, 255 pages, $29) about how to maximize your income in any market; and Kiss That Frog!, co-written with his psychotherapist daughter Christina Tracy Stein (Berrett-Koehler, 145 pages, $26.95), about how to turn negatives into positives in your work and life.
In By Invitation Only (Portfolio, 266 pages, $29.50), Alexis Maybank and Alexandra Wilkis Wilson share how they built designer-fashion, flash-sale website Gilt.com.Report Typo/Error