by Dan Oswald
I was traveling last week and had tossed a couple of recent copies of Harvard Business Review (HBR) into my briefcase before leaving home. So on the plane, I dutifully grabbed the April issue and was greeted by a cover that said, “We Studied 25,453 Companies over 44 Years to Find the 3 Rules for Success.” As was HBR’s intention, they had my attention.
I opened the magazine to the appropriate page and found this eye-popping title: “Three Rules for Making a Company Truly Great.” Wow! If only I had known it could be that easy. I can follow rules pretty well. Spell things out for me, and I can get with the program. At this point, I was intrigued but skeptical. It has never seemed to me that business is as easy as some pundits who offer advice make it out to be, but maybe—just maybe—the authors of the article had stumbled upon the Holy Grail of management.
I learned early that you need to consider the source of the advice you receive. Many of the people writing these articles and books have never managed anything in their lives. They are career professors or journalists who think that crunching data and talking to people can somehow replace real-life experience. My least favorite professor in graduate school was a marketing instructor who had never worked a day in a marketing department in any company, large or small. Of course, he had “consulted” with companies but had never lived what he was teaching. Want to learn what it takes to be successful? Get to work and discover success through years of trial and error. Live with your mistakes, and celebrate your successes.
Back to the HBR article. The very first sentence states: “Much of the strategy and management advice that business leaders turn to is unreliable or impractical.” That’s an honest admission from a couple of guys about to provide a few thousand words of strategy and management advice. Of course, they go on to say that their advice is different because it is the result of rigorous research—a statistical study of thousands of companies. It sounded like they were crunching data and talking to people. I remained skeptical.
Very early in the article, the authors reveal what they refer to as “three seemingly elementary rules” that made certain companies great. (Drum roll, please.) They are:
- Better before cheaper—compete on differentiators other than price.
- Revenue before cost—prioritize increasing revenue over reducing costs.
- There are no other rules—you must follow Rules 1 and 2.
Well, there you have it. I had a couple of immediate thoughts about what I had just read. I remained skeptical, and the fact that the authors claimed their rules were “elementary” only heightened my skepticism. Remember, nothing in business is easy. I tend to follow the Thomas Edison way of thinking: “Genius is one percent inspiration and 99 percent perspiration.” I also felt a little misled by the authors. Let’s be honest—they really offered only two rules.
After further consideration, I decided that the rules themselves may be “elementary,” but that doesn’t mean following them is easy. The authors freely admit that their rules don’t “dictate specific behaviors; nor are they even general strategies.” So the bottom line is that I could follow these two rules and fail miserably if my behavior and that of the people in my organization aren’t consistent with the behaviors of successful individuals. And I need to come up with successful strategies surrounding these basic rules to expect a positive outcome. Isn’t that where the rubber meets the road? A couple of grand, overarching rules are great, but it’s all in the execution. That’s the difficult part.
So what about the two rules the authors put forward? It’s hard to argue with producing a quality product. Our household owns one Mac. Apple, with the largest market cap in the world, has done pretty well following the “better before cheaper” rule. But I’m also a huge fan of Southwest Airlines, and it’s hard to argue with the company’s success. It advertises as the “low fare” airline. I would maintain that it succeeds at being “better and cheaper.”
The second rule is “revenue before cost.” I believe growth is the key to long-term success in any business. If you’re not growing, you’re slowly dying. But again, it comes down to execution. You can’t employ a strategy of growth at any cost. I’ve seen plenty of companies fail chasing growth without regard to cost—it just doesn’t work. In most cases, I would say it’s better to increase profits through revenue growth than cost reduction, but there are exceptions. For instance, closing unprofitable stores or killing an unprofitable product line might reduce revenues and costs, resulting in higher profits. Would anyone argue that you should simply put unprofitable revenues ahead of cost reduction? The devil is in the details, and only those working in the business are truly intimate with those details.
The article is worth reading. If nothing else, it can cause you to think about your business and how these rules might apply. You can consider whether you are already following the rules. If so, what have the results been? What people and strategies have you applied to the rules to get those results?
But in the end, it all comes down to knowing your customers, your business, and your people to develop the very best approach for your company. These general rules are great for the pundits, but for those of us in the trenches, the devil is in the details.