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Big Winners and Big Losers: The 4 Secrets of Long-Term Business Success and Failure

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“This book reveals the secrets of the long-term better-than-industry performance of the winners. I t shows distinct patterns in the 1992 to 2002 results. The differences in outcome are not random or a matter of mere chance. The circumstances that the big winners and big losers faced were similar. What explains the differences in performance is that the winners pursued and executed different strategies than the losers. In this book, I reveal how the traits of the big winners came together into larger patterns made up of a sweet spot, agility, discipline, and focus. Firms that achieved advantage wove together these elements into larger wholes. The positive aspects of the separate components supported and reinforced each other. Similarly, the negative traits of the losing firms supported and reinforced each other…Most of the insights in this book derive from the reports that the managers wrote. Their names and the companies they analyzed are listed in the Acknowledgments. The reports pointed me in certain directions, but I take full responsibility for where I ended up. The conclusions are my own. I presented the results and obtained feedback at a number of venues…All long, lessons are learned and specific advice is given on what a company can do to become a big winner and avoid being a big loser. This advice is concrete, specific, and actionable. It is among the most important takeaways you will get from this book (from the Preface).”

In this context, Alfred A. Marcus divides this invaluable book into fourteen chapters. At the end of each chapter, he summarizes these chapters as following:

1. Persistent Winning and Losing – Achieving sustained competitive advantage is not easy. You cannot dismiss any element. A sweet spot, agility, discipline, and focus are essential. Although managers might able to identify future opportunities, few have the agility to move into them, the discipline to protect them, and the focus to take full advantage of them…

2. Companies That Hit and Missed the Mark – This chapter has shown that firms that are big winners and firms that are big losers are hard to find. Being a big winner is harder than being a big loser. Some industries have no firms that are big winners or big losers. Firms that are big winners are concentrated in large industries; in large industries, there is more open space for finding a sweep spot. Big winners are smaller than big losers. Small firms are more agile than large firms. Their smallness makes it easier for them to escape detection. They are more likely to avoid competitive retaliation. Big winners and big losers are in industries with higher market returns. The potential profits are greater. There is more risk and more opportunity…

3. Companies That Keep Winning – This chapter has described the nine big winners that are the subject of further analysis in this book. Several points stand out. The nine winning companies succeeded despite being in small industries that did not have good returns. These industries were not ones where they could easily find sweet spots no other firms occupied. The big winners succeeded despite low overall returns in the industries in which they competed. These firms were survivors of a poor overall stock market in the first six months of 2002. The fact that their sales tended to be spread out helped them do well in this period. When the tech market collapsed, they had alternative customers to which they could turn…

4. Sweet Spots – This chapter has provided examples of the sweet spots that the big winners occupied. These sweet spots depend on gaining control over the classical five forces in strategy starting with customers. Big winners gained control of the five forces through the following measures: (1) co-designing products and services with their customers, (2) embedding themselves in their customers’ central processes and infrastructure, and (3) being a broker between themselves, their customers, and their suppliers. The sweet spots that the big winners occupied increased their alignment with their customers…

5. Agility – This chapter has shown the moves that the big winners made. They were agile. There was no single formula they followed, but a general pattern to their agility. They responded swiftly to threats and opportunities. Their small size gave them great flexibility. They grew their business in accord with their customers’ changing needs. They moved toward new and promising markets where their customers had specialized needs that only they could meet…

6. Discipline – This chapter has shown the discipline that the sweet spot companies displayed. They maintained ongoing, effective programs that reduced costs and raised quality. They took control of distribution. They smoothly managed their acquisition. They created special cultures that got their employees involved. They monitored and influenced regulatory changes and promptly complied with government laws and requirements. They not only put themselves in sweet spots, but they also developed the capabilities to protect them…

7. Focus – This chapter has shown the type of focus that sweet spot companies exhibited. They concentrated on their core strengths. They did not chase opportunities that were too risky. They had plans for product enhancements, extensions, and sequels. Their dedication to their customers was near total. Extensive collaboration led them to meeting the cutting-edge needs of customers for solutions. They were not in the business of providing mere isolated products, no matter how technically superior the products might be. With great care, they applied these principles to their global expansion. They identified markets with growth potential. They developed and extended the reach of their high-growth, application-specific products and deepened their penetration of global markets…

8. Companies That Keep Losing – This chapter provides information about the industries in which the big losers competed, the products they sold, and their competitors. This analysis parallels that of Chapter 3, “Companies That Keep Winning.”

9. Sour Spots – Companies find themselves in sour spots when they lose control over the classic five industry forces, the most important of which is customers. You can avoid losing control by doing the following: (i) make sure that you are able to sell your products and services at prices that your customers can afford; (ii) price these products and services at levels that enable you to make a profit; and (iii) have business models that are simple enough that you can carry out tasks and activities well. Being in a sour spot means distance and misalignment with customers. It means that you are unable to sell them sufficient quantities of goods and services to be consistently profitable. Your customers’ switching costs are low, and it’s easy for them to abandon you. This chapter has provided examples of sour spots you should avoid…

10. Rigidity – This chapter has shown the failed moves of the big losers. They tended to rely exclusively on the expansion of their core products for growth. These products were hard-to-differentiate commodity products sold on the basis of price. Big losers accumulated additional product capacity at high prices even though there was insufficient demand for their product. They did not respond vigorously when they experienced a decline in their core business. Their size took away from their flexibility. Because they were rigid, they inhabited sour spots.

11. Ineptness – This chapter has shown the ineptness of the big losers. They did not develop capabilities to defend the positions they occupied. They lacked skills to provide customers best-in-class service and customizable offerings at low cost. Also, these losing companies did not gain mastery over the supply chain and were ineffective in managing their acquisitions. They neither motivated their employees to ensure that their moves were well-executed, nor did they adhere to high ethical standards and have the capabilities to manage regulation. They were in sour spots not only because of rigidity and ineptness, but also because of a lack of focus.

12. Diffuseness – This chapter has shown the lack of focus that the big losers showed. They spread themselves thin and failed to maintain clear strategic direction. They were unable to identify and emphasize markets with future promise. They tended to rely on global business to try to fix domestic problems. None of what they did worked quite as intended.

13. Winning and Losing Practices – This chapter has explained what it takes to be a consistent long-term winner. It takes finding a niche that no one else occupies, but that is not enough. You need the agility to move that space, the discipline to protect it, and the focus to fully exploit. You must do it all. Anything less, and being a big winner will be beyond your reach.

14. Turnarounds – The lessons in this chapter have special relevance if you are trying to manage yourself out of decline or trying to keep your company’s strengths intact. The key to being a big winner is to find a sweet spot. Focus on it. Have the discipline to protect it. Have the agility to move it. The key to being a big loser is the opposite. Be diffuse, inept, and rigid, and you will find yourself in a sour position.

Strongly recommended

Only about 3% of the 1,000 largest U.S. corporations outperformed their industry's average market performance during the 1992-2002 decade, while about 6% underperformed. Companies that suffer sustained poor performance include familiar names such as Goodyear, the Gap, Safeco, and Campbell Soup; those consistently doing well are relatively unknown and smaller - eg. Family Dollar, Dreyer's, and Brown and Brown (insurance broker).

Marcus et al conclude that winners had strong strategies that stayed within a "sweet spot" (eg. little or no competition; a low-cost producer position), agility to get to and/or maintain that position, discipline, and focus to stay within their sweet spot. "Big Winners and Big Losers" goes on to then elaborate on comparisons of winners and losers, within specific sectors.

All the preceding makes eminent sense - the problem is that it is hard to use as a strategy guide and soon begins to contradict other situations.

Unfortunately, "Big Winners and Big Losers" is hauntingly reminiscent of Tom Peters' 1984 "In Search of Excellence" - the approach was similar, and a number of "best practice" companies were identified. The problem was that not too many years later, many/most of them had since faded. Another problem is that the book covers so many firms and so much ground that it is unable to provide much useful information - eg. just how did Dreyer's build up its 90% distribution market share?

Marcus et al also suggest that smaller firms have an advantage. But what about Wal-Mart? Would Wal-Mart be better off at a smaller size - some have concluded that it would, on the basis of tracking its ROI data over time which sometimes lags Family Dollar. Further, Wal-Mart was once was in almost the identical competitive position as Family Dollar (praised by "Big Winners and Big Losers"). Should Wal-Mart have stayed small - doubtful for at least three reasons - 1)Wal-Mart would not have the strong clout with suppliers that it now does. 2)It probably would have been subsequently bought up by another firm and no longer in existence. 3)Finance and economics both teach that maximum profits are attained when marginal costs reach the level of marginal revenues - not at any particular size level.

I believe a much more sustainable foundation for excellence is achieved through studying the speed, efficiency, and quality aspects of "The Toyota Production System," some other credible approach to significant cycle-time reduction, and Larry Bossidy's "Execution," and "Confronting Reality." These lessons are truly generally applicable.

This book represents the best of what I love about Wharton Press.

A topic like big winners and big losers lends itself to having some egomaniac who fails to understand the difference between being lucky and great, hire a ghostwriter to produce a pointless pontification full of meaningless clichés and generalizations.

Instead, Alfred A. Marcus, a management professor at the University of Minnesota, compares and contrasts the practices of successful and failing firms. To achieve this, he enlisted more than 500 practicing managers, divided them into teams of five or six and directed them to review the performance of a company that either out-performed or underperformed its market group for 10 years.

Their critiqued reports lead to four themes. Big winners:

1. Occupied sweet spots.
2. Possessed the ability to move into these spots.
3. Disciplined themselves to defend their spots.
4. Exploited and extended their positions.

The reports revealed big losers:

1. Occupied sour spots.
2. Were rigid.
3. Could not defend their positions.
4. Could take advantage of their positions.

What fascinated me about this book is Marcus' discussion of how the individual companies managed the nuisances or tensions created by the four themes.

Achieving sustained competitive advantage is never easy. Firms that consistently do it are worthy of study and investment. Marcus's book provides managers and investors with a unique prism through which to view their opportunities.

The book provides an excellent (and very long!) resource for understanding some main characteristics of companies that make them a winner or loser. While the obvious target audience is managers, the book is certainly useful for academics, business-info-junkies and investors alike. The methodology used by the author is explained in the excerpt posted on amazon.com and is a good indicator of the comprehensive research and thought process that was clearly required for this book. It is interesting to note that the famous blue chips (GEs, P&Gs of the world) were not listed as "winners". The notion of product, price and service differentiation is well explained through the entire book, covering its various aspects. A short review for a "huge" tome like this one will never do full justice. However, the reader can be assured that this easy-to-read book packs every page with enough information to make you want to read the entire book and more! An excellent read, a must-have. Just clear out 2-3 weeks for reading the book, though.

"Big Winners and Big Losers: The 4 Secrets of Long-term Business Success and Failure. Many examples provided in the characteristics of winners and losers. Four Sections: Introduction, Winners, Losers, Conclusion

Twelve Chapters:

1. Persistent Winning and Losing
2. Companies that Hit and Missed the Mark
3. Companies that Keep Winning
4. Sweet Spots
5. Agility
6. Discipline
7. Focus
8. Companies that Keep Losing
9. Sour Spots
10 Rigidity
11 Ineptness
12 Diffuseness
13 Winning and Losing Practices
14 Turnarounds

Companies that consistently outperform their competitors and stay above the index their industry is rare. In a ten-year period from 1992 to 2002 only three out of 1,000 companies were above their own industry's market performance.

As for errors that contributed to losing, there is a study on 3 companies that made products that were too cheap. Because they produced items that were so inexpensive they couldn't provide the specialization their customers needed and these companies couldn't earn a sufficient profit. IMC, Goodyear, and Safeco. IMC was providing "value-added customer service," even though IMC's products faced strong and consistent competition. Goodyear was in the maturing industry of tires, but continued to only stay with tires as their profit share was diminishing. This meant diminishing margins. Safeco targeted markets that were too large and homogeneous.

Paying up-front for royalty payments:
Hasbro had licensed "Star Wars" action figures in the past. They sold very well. In 1999 Hasbro signed a lucrative contract that cost $581 dollars on a pay-out to Lucas, but the sales were dismal, as the 1999 film didn't cause kids to buy. Mattel, Hasbro's main competitor paid $20 million for the right so "Harry Potter" books and films, and scored well. Times, like people change, and there are always new things coming out

There are a hundreds of examples in "Big Winners and Big Losers" that are interesting. Important is that if a company is losing it need not be permanent. Changes can be made. The same goes for the Winners as very few stay at the top consistently. Helpful book to anyone in any type of business. If someone is generally interested in business books this is one of the more readable.

Achieving and sustaining business success over the long term is extremely difficult. New products are created, widely used for a short time and then replaced by something better. Even businesses that satisfy basic human needs are not guaranteed a profitable market as it is always possible for another business to arise that does things better, faster and cheaper. In this minefield of problems, some businesses have managed to flourish, outperforming all others to achieve tremendous success. Marcus presents a series of case studies, explaining why some are successful beyond all relative expectations and why others can't seem to hit the ground with a hammer when they drop it.
Marcus regularly uses the analogies of the "sweet spot" and the "sour spot." A "sweet spot" is when a company manages to put itself in a position where it is relatively easy to make a profit and a "sour spot" is when a company is in a position where it is difficult to make a profit. Chapters 3 through 7 form the section called "Winners" and are a description of companies that succeed and the sweet spots that allow them to succeed. Chapter 3 is a list of companies that have succeeded and four a list of some of the sweet spots. Chapter five explains the ways a company can retain the agility to respond quickly to changing market conditions, six a list of the ways a company can maintain the internal discipline in order to stay focused and seven describes what to keep your focus on.
Chapters eight through twelve form the section called "Losers" and are a description of some companies that have failed and the reasons for their failure. Chapter eight is a list of companies that keep on losing, nine a description of the sour spots, ten a list of the ways a company can be too rigid for modern markets, eleven the ways in which a company can be inept and twelve some ways in which a company can lose focus and become too diffuse in their approach.
In the end, good advice is valuable only if you are willing to concede that you don't know everything and can learn from others. There is good advice in this book, but there is also the clear statement that one of the reasons that companies get into sour spots and stay there is because their leaders are not nearly as gifted and talented as they think they are. The hurdle of recognizing the need for assistance is one that many cannot leap; however if you can make that essential jump, then this book is a valuable purchase. If that is not the case, you might as well save your money.

Dr. Marcus has developed a most interesting way of looking at pairs of companies that are nominally in the same industry but where one of the pair has been a Big Winner and another a Big Loser. He does not look at the spectacular successes like Microsoft, but industries in mundane industries like food, retail, and toys.

From this analysis he was able to identify four key points where the winners consistently did well and the losers did poorly. These points were:

Find a spot, a niche if you will in the marketplace.

Be agile enough to find and move into the spot you found.

Have the discipline to concentrate your resources where they can do best.

Identify your core strengths and play to them.

After identifying these core points he had a second series of companies analyzed in terms of these four points. The second research confirmed his findings.

I'm not so sure that companies are willing to recognize their own failures in regard to these issues. But as a way to look at companies from an investment point of view this might be a good way to analyze investment opportunities.

Reader-friendly Big Winners and Big Losers is a quick read, and it offers many interesting twists on common problems with corporations. This is one of those rare books that presents important research findings, and then explains in a clear, concise and compelling manner how to take that learning and directly apply it to make a company a winner! This is one of those rare books that business executives will read and keep handy for reference.

That is all I will write about the book. I could write on and on about how good this book is. Read it. It will change the way you think about business.

Whatever its original name, each of the companies on the annual Fortune 500 list began with only a few employees and modest resources. For James Cash Penney and Sam Walton, one small store was an "acorn" which eventually grew into a forest of "oak trees." It is important to keep this in mind when reading Marcus' book. Also, that of the 1 million U.S. small businesses started in 2005, more than 80% of them will be out of business within 5 years and 96% will have closed their doors before their 10th birthday. These are indeed chilling statistics.

Of course, there will always be more big "losers" (e.g. underperformed the average stock market performance of their industry for 10 years) than big "winners" (e.g. outperformed the average stock market performance of their industry during the same period) so the question is, "Why have some small companies become Big Winners and most others have not?" This is the question which drove Marcus' research and subsequent analysis of what he learned.

In this context, he takes the same approach which other business thinkers have. For example: "Why do some companies last for decades but most don't?" (Jim Collins in Build to Last) and "How can a mediocre or even a good company become great?" (Collins again in Good to Great); "What do the highest-performing companies share in common?" (Jason Jennings in Think Big, Act Small); and "Why do most small companies fail?" (Michael Gerber in E-Myth Mastery).

As Marcus explains, "I enlisted the support of more than 500 practicing managers to write this book. They worked for such well-known multinational companies as Target, Best Buy, Guidant, Cargill, General Mills, Medtronic, Wells Fargo, American Express, 3M, Ecolab, Boston Scientific, Honeywell, U.S. Bancorp, Piper Jaffray, Carlson Companies, West Group, Northwest Airlines, St. Paul Companies, Seagate, ADC, Intel, United Defense, Johnson Controls, Deloitte Touche, Supervalue, Polaris, Rosemount, Eaton, RBC Dain Rauscher, Unisys, Home Depot, Allina, Toro, United Health, Thrivent, Donaldson, and Ernst and Young. The managers had more than seven years of work experience. Teams of five to six managers wrote reports on two firms. They compared characteristics of companies that achieved long-term success and companies that endured long-term failure."

Big Winners and Big Losers is organized as follows. The first chapter explains why some firms continuously win and others regularly lose. Chapter 2 gives details on how the winning and losing companies were chosen. Chapters 3 through 7 provide an in-depth analysis of the winners -- the sweet spots they occupied and the ways in which they exhibited agility, discipline, and focus. Chapters 8 through 12 are a parallel analysis of the losers -- the sour spots they found themselves in and how they showed rigidity, ineptness, and diffuseness. Chapter 13 summarizes the main lessons. It is a code of best practices. Chapter 14 is essential reading if you want to achieve a turnaround. It tells you what to do to start a take-off and avoid a nosedive.

"All along, lessons are learned and specific advice is given on what a company can do to become a big winner and avoid being a big loser." Marcus goes on to point out that the advice he provides "is concrete, specific, and actionable. It is among the most important takeaways you will get from this book."

It would be a disservice both to Marcus and to those who have not as yet read this book were I to identify the four "secrets" of long-term business success and failure. They are best revealed within the context Marcus establishes for them. None of the "secrets" is a head-snapper. The greatest value of this brilliant book is the aforementioned context of each. One of my complaints of many other business books is that their authors devote most of their attention to concepts, theories, hypotheses, etc. and, in my opinion, insufficient attention to practical advice as to how they can be applied. This is a variation of the "80-20 Rule." To his great credit, Marcus reverses the percentages: approximately 20% of his remarks focus on "what" and 80% on "how."

Well-done!

I'm from switzerland and a software engineer. In my workplace I concentrate on technical stuff and I don't think too much about business.
However, in the last few years I have come to the conclusion that many technical people tend to over emphasize technology. They use their experience with technology to impress other people, rather than to fullfill their customers needs and wishes. As a result they forget about what customers really want and the products they create are
far too complex for the ordinary people to use.

I decided to read this book to get in touch with the business perspective and to learn how to succeed in the business world. Not surprisingly, it's all about fullfilling customer's needs and finding the right balance between different poles. The three most important poles are business, customer and technology. Finding the balance between all these is the art of creating a successfull company.

This book mentions many failing and succeeding companies. In my opinion the companies "Parametric" and "Family Dollar" are the best examples of a failing and succeeding company.

A good example of a company which invested too much in technology is parameteric. It created the very sophiscated CAD-tool called Pro Engineer. I has lots of features, but without sufficient training it is not possible to use this product. But "Parametric" does not offer training. Instead, it concentrates allmost all its efforts into making "Pro Engineer" even more sophisticated, thus making customers more frustrated and finally make them switch to other products. Had Parametric listened to its customers they would have improved their range of services. I have seen many companies failing like Parametric in the last few years.

On the other hand, the grocery store chain "Family Dollar" shows that it is possible to earn lots of money just by serving other people's everday needs. The "Family Dollar"-shops are in low class regions and therefore very close to its customers. They prefer shopping in "Family Dollar" not only because it is very close, but also many customers don't have a car to go to a different shop such as Wal Mart. And Wal Mart is not interested to move into these low class region and compete against "Family Dollar" as the money the could make there is not enough. Wal Mart has better opportunities to grow. In conclusion "Family Dollar" occupies a sweet spot, where noone else wants to go.

I like this book because it points out that it is important to concentrate on many points rather than just one. This is the reason so many "We are the best company" fail in the long term. The truth is multidimensional and the world has more than one dimension.