When you boil it down, sustainable profit growth is driven by these three factors:
- Operating Excellence. A proposition only has value for a customer once it can be delivered time and time again. Creating and executing a way to make this happen at an affordable cost is, perhaps, less glamorous than creating the offer in the first place but, in reality, is what will bring in the money.
- Distinctiveness. Successful companies are more than operationally focused; they are also distinctive. They have an instantly recognisable brand and target their offer on those customer groups most likely to react positively to their proposition.
- Agility. As consumer tastes, technology and the external environment changes, successful companies evolve to meet the new needs and realities. Nothing fails like success and the winners find ways to continuously raise the bar, innovate and adapt.
The leader’s job is to create an organisation that excels on all three attributes. The big point, though, is that corporate success requires achievement on all three dimensions. Unlike the Meatloaf song, two out of three is not good enough and only position 4 on the chart leads to sustained success.
- Imprisoned by past success. This company may have a distinctive proposition (or at least had one in the past) and can operate effectively, but its lack of agility means that performance declines over time as it fails to evolve its business to new external realities. Recent examples: Kodak, The Gap, Woolworths.
- Unable to keep your promises. A business that has a clear and distinctive proposition and has the agility to adapt its offer, but which is insufficiently focused on its operational effectiveness, will lose customers as it fails to live up to its reputation or its desired brand position. Recent examples: Starbucks, Rentokil Initial.
- Lost in the crowd. A company that operates effectively and is agile enough to try new things, but which is insufficiently distinctive, will fail to generate clear advantages or deliver superior profits. As a consequence they may simply fade away or be acquired by a competitor. Recent examples: Somerfield, bmibaby, Superdrug.
- Success Sweet Spot. These companies manage – for a sustained period – to combine all three attributes and deliver superior returns and profit growth. Recent examples: McDonalds, Ryanair, Apple.
Where is your company on this chart and what steps do you need to take to reach and maintain position #4?
© Stuart Cross 2009. All rights reserved.