When it comes to running a successful company, one book says there are just a trio of tenets to remember.
All good things seems to come in threes. Those awe-inspiring pyramids at Giza (above). The first three Star Wars movies. Motown songbirds The Supremes. Which brings me to The Three Rules: How Exceptional Companies Beat the Odds by Michael Raynor and Mumtaz Ahmed.
So who are Raynor and Ahmed? High-achievers one hopes, with a book title like this.
Let's start with Ahmed, because he's the one with Hong Kong roots. Born and raised in Pakistan, Ahmed studied as an accountant in the UK and later worked in Canada, before establishing a business consultancy in Hong Kong in 1993. He later moved to San Francisco, where today he's chief strategy officer at Deloitte.
Canadian Raynor, a director at Deloitte, has already penned three well-received business titles . He has an MBA from the Richard Ivey School of Business and earned his DBA from Harvard Business School.
Together, they led a team of eminent business analysts who looked at more than 25,000 companies over a number of years to identify the core "rules" that result in sustained superior performance.
The book explains the comprehensive and rigorous methodology the team used to analyse company performance. We also learn of how this methodology was developed, and how thorny challenges were overcome in the process. This is all presented with remarkable lucidity.
Sifting through the results, the authors identified three rules of paramount importance.
Firstly, "better before cheaper". Companies that sustain their performance in the long run do so through delivering non-price benefits and added value. This includes things such as outstanding brand recognition, functionality, and the overall impact made on the consumer.
Secondly, "revenue before cost". Sustaining performance requires more than just creating value; that value must somehow be manifested in profits. Moreover, the "P" is the more important letter in P&L.
Finally - and here Raynor and Ahmed do a smart alec on the reader - there are no other rules! Thankfully this is the book's only annoying part.
The authors posit that the fundamentals for sustained success are simply and solely based on making decisions and executing strategies that put "better" before "cheaper" and "revenue" before "cost". They explain these rules by providing a number of case studies that look at three companies in the same industry. Again there's a breakdown into that magic number, three.
First there are "miracle workers", companies which exhibit winning performance over time to the extent that they have clearly got the formula right. Second are "long runners", players whose performance is good, but more variable. Finally there are "average Joes", average or low performers who muddle along, generally in keeping with industry averages.
Particularly compelling is the section on one of the authors' favourite companies: Merck. The global pharmaceutical giant produced compounded annual revenue growth of over 11 per cent between 1966 and 2010.
The book's level of advice and detail is a little too superficial for a C-suite reader. But for middle managers, investors and others, this is a sound read that reaffirms the basics, and in a highly readable manner.
Some might find fault with the authors' two rules. More than a few would argue that cost is rather more relevant to high-performance than the authors claim. For example, the technological advantages provided by the fine-tuned development of the microchip in the 1970s slashed calculator component costs by over 90 per cent. The result was billions of dollars in new sales to customers for whom calculators were finally affordable. Similar results have followed other technological developments.
Two other gripes. First, while the authors discuss the lofty principals of their three rules, there's much less input on how to stick to them - or make them stick in an organisation. Secondly, given Ahmed's background, this study is a tad too North America-centric - even if the pearls of wisdom it contains are generally universal.
EXPLOSIVE ADVICE ON BEATING CAREER ODDS
Big-screen special-effects creator and specialist Ellen Poon is best-known for her work on Inception (2010), The Green Mile (1999) and Jurassic Park (1993). Now she’s got another blockbuster on her CV, the recent Disney hit Frozen (2013). She explains her own three rules for success.
Persevere “The global financial crisis was hard, even on movie-industry professionals. Be faithful to your true calling; you’ll get there in the end. Follow your passion, which is not the same as following the money. If you do so tenaciously, the money will come.”
Spread out “Diversify your skill set, especially if you’re in an industry that’s technology-reliant. The pace of change today is breathtaking.”
Live to the max “I’m rather bicultural now, but the Hong Kong gal in me still says: ‘Work hard, play hard!’”