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Compelling advice for organizational strategy
on February 23, 2012
Only about 9 percent of global companies have been able to achieve more than a modest level of sustained and profitable growth over the course of the last decade, according to Chris Zook and James Allen in this book. Enduringly successful companies maintain a for a simplicity at their core by adhering to a consistent set of principles which the authors describe as "great repeatable models".
The research used by the authors provides the following significant findings:
* 80 percent of variation in financial returns among all businesses in the world is accounted for by their performance relative to other companies within their industry, as opposed to their choice of market.
* New growth initiatives--organic or by acquisition--have success rates of only about 20-25 percent, much lower than most executives realize.
* The odds of success (surviving and re-establishing a profitable trajectory) in redefinition are extremely low, less than one in ten.
A significant majority of the companies which were successful over the long term had "great repeatable models" , and the three most important design principles for such models were:
* A strong, well-differentiated core, involving unique assets and deep competencies
* Clear non-negotiables involving a common understanding of the company's core values and the key criteria used to make trade-offs in decision making
* Systems for closed-loop learning, for driving continuous improvement across the business
In my view this book makes a key contribution to the field of business strategy. The business environment has changed permanently over the past decade and it is now much more difficult to create sustained profitability. The three key design principles identified by the authors do seem to be very important for future success. I found the authors' reasoning compelling, and I highly recommend the book to anyone involved in devising organizational strategy.