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

Book Description

What keeps great companies winning, year after year, even as yesterday's most hyped businesses fall by the wayside? It's not what you think -- or what you've read. To find the real answers, strategic management expert Alfred Marcus systematically reviewed detailed performance metrics for the 1,000 largest U.S. corporations, identifying 3% who've consistently outperform their industry's averages for a full decade. Many of these firms get little publicity: firms like Amphenol, Ball, Family Dollar, Brown and Brown, Activision, Dreyer's, Forest Labs, and Fiserv. But their success is no accident: they've discovered patterns of success that have largely gone unnoticed elsewhere. Marcus also identified patterns associated with consistently inferior performance: patterns reflected in many of the world's most well-known companies. Drawing on this unprecedented research, Big Winners and Big Losers shows you what really matters most. You'll learn how consistent winners build the strategies that drive their success; how they move towards market spaces offering superior opportunity; and how they successfully manage the tensions between agility, discipline, and focus. You'll learn how to identify the right patterns of success for your company, build on the strengths you already have, realistically assess your weaknesses, and build sustainable advantage one step at a time, in a planned and logical way.

Table of Contents

  1. Big Winners and Big Losers
    1. Preface
      1. How This Book Was Written
    2. About the Author
    3. 1. Persistent Winning and Losing
        1. A Sweet Spot
        2. Agile, Disciplined, and Focused
        3. Managing the Tension
          1. Real Trade-Offs
        4. In Summary
    4. 2. Companies That Hit and Missed The Mark
        1. Characteristics of Winners and Losers
        2. Time and Industry as Reference Points
        3. Continued Outstanding Performance
        4. How Market Leaders Create Shareholder Value
        5. In Summary
    5. 3. Companies That Keep Winning
        1. Amphenol
        2. SPX
        3. Fiserv
        4. Dreyer's
        5. Forest Labs
        6. Ball
        7. Brown & Brown
        8. Family Dollar
        9. Activision
        10. In Summary
    6. 4. Sweet Spots
        1. Co-Design
          1. Example 1: Amphenol
            1. Niche Marketing
            2. Leverage
            3. Full Integration
          2. Example 2: SPX
            1. Providing Solutions
            2. Multiple Growth Platforms
          3. Example 3: Ball
            1. Helping with Brand Differentiation
            2. Meeting Changing Needs
            3. Price, Service, Quality, and Performance
        2. Embed
          1. Example 1: Fiserv
            1. Seamless Integration
            2. Comprehensive Bundling
            3. Outsourcing
            4. Independence
          2. Example 2: Dreyer's
            1. Mastering A Challenging Niche
            2. Distribution
            3. Total Immersion
            4. Brand-Building
          3. Example 3: Family Dollar
            1. Underserved Customers
            2. Old-Fashioned Neighborhood Experience
            3. Simplicity
        3. Broker
          1. Example 1: Forest Labs
            1. Licensing
            2. Products Sold Abroad
            3. Targeted Sales Force
          2. Example 2: Brown & Brown (B&B)
            1. Retail Outlet
            2. Small and Focused
            3. The Best Deal
          3. Example 3: Activision
            1. Rapport with Prime Audience
            2. Hub in the Spoke of a Wheel
        4. In Summary
    7. 5. Agility
        1. Respond Swiftly to Threats and Opportunities
          1. Respond Quickly to Overcapacity and to Changes in Market Demand
          2. Respond Quickly to the Threat of Large Companies
          3. Respond Quickly to Powerful Industry Players
          4. Respond Quickly to Industry Consolidation
          5. Respond Quickly to Innovation
        2. Don't Get Too Big—With Smaller Size Comes Greater Flexibility
          1. Be the Best, Not the Biggest
          2. Enjoy New Product Development Without Expensive R&D
          3. Leverage Outsiders
          4. Operate Under the Radar of Large Firms
          5. Be Flexible
        3. Grow Your Business in Accord with Your Customers' Changing Needs
          1. Work Closely with Customers on Product Design and Delivery
          2. Collaborate Closely with Customers on Special Projects
          3. Develop Intimacy with Customers Through Joint Ventures and Long-Term Contracts
          4. Grow Your Business with Innovative Products
          5. Grow with Customized Products and Services
          6. Grow Via Alliances
          7. Grow by Means of Integration with Your Customers' Infrastructure
          8. Grow by Controlling Distribution
        4. Move Toward New and Promising Markets Where Customers Have Specialized Needs Only You Can Meet
          1. Move to Specialty Markets
          2. Move to New Industries
          3. Move to New Concepts
          4. Move to Alternative Markets and Suppliers
          5. Move to Underserved Niches
          6. Move to Creative People
          7. Move to the Back Office
          8. Move to Low-Income Consumers
        5. Be an Aggressive Acquirer, Taking Advantage of the Opportunities to Broaden and Enhance Your Product Offerings
          1. Be a Consolidator
          2. Purchase Diverse Firms
          3. Purchase Competitors
          4. Broaden Geographic Scope
          5. Purchase for Talent and Efficiencies
          6. Purchase Best-of-Breed Companies with Proven Track Records
        6. Be Sufficiently Diversified So That You Can Compensate for a Decline in One Segment with Strengths in Another Segment
          1. Diversify into New Markets
          2. Diversify into Varied Products
          3. Diversify into New Technology
          4. Diversify into Generic Products
          5. Diversify into Small Niches
          6. Diversify into Multiple Platforms
          7. Diversify into Related Products
        7. In Summary
    8. 6. Discipline
        1. Maintain Ongoing, Effective Programs That Reduce Costs and Raise Quality
          1. Use Systems Such as Advanced Computer-Aided Design and Manufacturing, Statistical Process Control, and Just-in-Time Inventory
          2. Rely on a Value Improvement Process (VIP), with the Goal Being to Increase EVA (Economic Value Added)
          3. Install Process Controls, Share Best Practices, and Prune Inefficient Operations
          4. Design with Customers and Elicit Competitive Bids from Vendors
          5. Institute a Formal Project Review Process
          6. Develop Best-in-Class Service Paired with Volume-Driven Efficiency
          7. Create a Direct Store Delivery (DSD) System
          8. Rely on No-Frills Stores, Innovative Store Designs, and Neighborhood Locations
        2. Control Distribution
          1. Rely on Globalization and Long-Term Supply Agreements
          2. Negotiate with Suppliers to Get Good Deals for Customers
          3. Use Global Sourcing and Contacts with Independent Product Developers
          4. Maintain Systems to Closely Monitor Sales
          5. Establish Unique Technology to Keep Track of Merchandise
        3. Make for Smooth Transitions in Managing Your Acquisitions
          1. Be Adept at Selecting Targets
          2. Have a Formal Process for Consolidating Acquired Businesses
          3. Carefully Evaluate Target Companies and Quickly Integrate Them
          4. Screen Acquisitions Carefully Prior to Purchase
          5. Develop Proficiency at Identifying, Acquiring, and Integrating New Businesses
        4. Create a Special Culture to Get Your Employees Involved
          1. Have Selective Hiring That Breeds Loyal Employees
          2. Give Recognition and Show Respect
          3. Hire Skilled, Well-Trained, Energetic, and Aggressive Employees
          4. Give Employees the Opportunity to Make a Difference
        5. Monitor and Influence Regulatory Changes, and Promptly Comply with Policies That Affect the Firm
          1. Establish a Good Environmental Record
          2. Promote Ethics and Integrity
          3. Willingly Comply with Regulations
        6. In Summary
    9. 7. Focus
        1. Focus on Core Strengths—Stick to Your Mission
          1. Streamline by Spinning Off Noncore Businesses That Detract from Your Mission
          2. Focus Away from Activities That Have High Risk of Failure
          3. Gain Flexibility by Selling Products While Other Companies Take on the Risks of Development
          4. Exploit Brands Through Sequels and Related Products
          5. Have a Plan to Reach Out Through New Channels
          6. Totally Dedicate Yourself to a Single Customer
        2. Develop High-Growth, Application-Specific Products for Markets with Growth Potential
          1. Extend Collaborative Solution Providing Activities to New Domains
          2. Derive Advantage from Solutions, Not Patented Technology
          3. Identify and Satisfy Critical Customer Needs
          4. Limit Selling to Products with Large Demand
          5. Use Service to Be on the Cutting Edge of Customers' Needs
          6. Carefully Target Special Niches
        3. Extend Your Global Reach
          1. Capitalize on Overseas Market Growth
          2. Make Acquisitions to Extend Global Presence
          3. Combat Domestic Overcapacity with Global Growth
          4. Provide High Service Levels to Foreign Clients
        4. In Summary
    10. 8. Companies That Keep Losing
        1. LSI Logic
        2. Snap-On
        3. Parametric Technology
        4. Campbell Soup
        5. IMC Global
        6. Goodyear
        7. Safeco
        8. The Gap
        9. Hasbro
        10. In Summary
    11. 9. Sour Spots
        1. Too Expensive
          1. Example 1: LSI Logic
            1. Overdesigned Products
            2. Powerful Customers
          2. Example 2: Snap-On
            1. R&D Does Not Meaningfully Differentiate Products
            2. Products and Services Not Aligned with Sophistication Level of Customers
          3. Example 3: Parametric
            1. Insufficient Attention to Service
            2. Competitors in Lower-Priced Market
        2. Too Cheap
          1. Example 1: IMC
            1. Foreign Government-Subsidized Competitors
            2. Suppliers' Price Increases Can't Be Passed on to Customers
          2. Example 2: Goodyear
            1. No Clear Identity
            2. No Process of Working with Customers to Best Meet Their Needs
          3. Example 3: Safeco
            1. Price Sacrificed for Market Share
            2. Poor Contingency Plans for Covering Risk
        3. Too Broad and Complex
          1. Example 1: Campbell
            1. Inability to Anticipate Competitors' Moves
            2. Not Positioned Well on the Price/Quality Continuum
          2. Example 2: The Gap
            1. Prices and Quality Not in Customers' Comfort Zone
            2. Complex Business Model
          3. Example 3: Hasbro
            1. Few Powerful Customers Constitute High Percentage of Sales
            2. Business Model Requires Accurate Prediction and Timing
        4. In Summary
    12. 10. Rigidity
        1. Do Not Rely Exclusively on Expansion of Your Core Products for Growth
          1. Do Not Stick to an Original Business That Loses Promise
          2. Do Not Stay in a Niche That Is Out of Favor
          3. Do Not Expand into a Nonprofitable Business
          4. Do Not Stick Within a Weak Business Line
          5. Do Not Ignore Noncore Brands
        2. Avoid Over-Reliance on Hard-to-Differentiate Commodity Products Sold on the Basis of Price
          1. Do Not Move Toward Standard, Low-End Products
          2. Do Not Move Further Toward Commodities
          3. Do Not Move Further Toward Products Sold to Original Equipment Manufacturers
          4. Do Not Move Further Toward Risky Products with Declining Prices
          5. Do Not Venture Too Far from Core Strengths
        3. Do Not Accumulate Additional Capacity at High Prices When Demand Is Insufficient
          1. Do Not Buy Weak-Performing Firms in the Same Industry
          2. Do Not Allow Substantial Debt to Build Because of Your Acquisitions
          3. Do Not Buy Commodity Businesses
          4. Do Not Overpay for Acquisitions
          5. Keep Expansion in Line with Growth in Sales
          6. Avoid Risky Royalty Payments
        4. Respond Vigorously When Experiencing a Decline in Your Core Business Area
          1. Keep Up the Pace in New Product Offerings
          2. Maintain Skills in New Product Development
          3. Respond Rapidly to Core Market Decline
          4. Do Not Miss Changes in Demand
          5. Enter New Markets Rapidly
        5. Don't Lag in Recognition and Reaction to Changes in Your Customers' Tastes
          1. Don't Lag in Recognizing the Need for Enhanced Customer Service
          2. Don't Lag in Responding to Competitors' Innovations
          3. Don't Lose Touch with Core Customers
          4. Prepare for Change in Consumer Tastes
        6. Bigger Is Not Necessarily Better
          1. Take Advantage of Blunders by Competitors
        7. Move to Profitable Niches
          1. Anticipate Demand
          2. Avoid Bureaucracy
        8. In Summary
    13. 11. Ineptness
        1. Develop Capabilities to Provide Best-in-Class Service and Customizable Offerings at Low Cost
          1. Deal Effectively with Productivity Challenges
          2. Do Not Provide Less Service and Support When Losses Mount
          3. Do Not Allow Cost Savings to Erode Levels of Service
          4. Turnarounds Need to Improve Service, Lower Costs, and Define Unique Niches
          5. Do Not Underprice Products
          6. Do Not Allow Cost-Cutting to Result in a Neglect of R&D and Innovation
          7. Make Sure That Repeated Restructuring Works
        2. Gain Mastery Over the Supply Chain
          1. Develop Long-Term Customer Ties and Increase Your Power Over Your Suppliers
          2. Do Not Withhold Product
          3. Do Not Alienate Distributors and Dealers
          4. Cope with Powerful Retailers
          5. Do Not Lose Touch with Fashion
          6. Understand How to Accommodate Major Retailers
        3. Be Proactive in Managing Your Acquisitions
          1. Avoid Snags in Managing Mergers and Acquisitions
          2. Achieve Synergies
          3. Do Not Overpay
        4. Make Sure Your Employees Are Motivated
          1. Shun Disarray in Implementing New Systems
          2. Foster Good Relationships with Unions
          3. Motivate the Sales Force and Hold It Accountable
        5. Maintain High Ethical Standards and Develop Capabilities to Manage Regulation
          1. Avoid Accounting Scandals
          2. Deal Effectively with Environmental Challenges
          3. Comply with Regulations
          4. Manage Government Oversight
          5. Don't Resort to Price Fixing
        6. In Summary
    14. 12. Diffuseness
        1. Maintain a Clear Strategic Direction—Do Not Spread Yourself Too Thin
          1. Maintain Connections Among Your Main Businesses
          2. Create Synergy
          3. Have Related Holdings
          4. Establish a Long-Term Plan for Acquisitions and Divestitures and Stick to It
          5. Avoid Involvement at Too Many Different Ends of the Value Chain
          6. Simplify Instead of Expanding What You Do
          7. Ensure That Your Divisions Have Common Goals
        2. Focus on Markets That Have Future Promise
          1. Emphasize Markets, Not Product R&D
          2. Avoid Concentrating R&D on Limited User Groups
          3. Maintain Direct Customer Contact
          4. Identify and Pursue Promising Markets
          5. Support Rapidly Growing Product Lines
          6. Avoid the Complications of Different Brands
        3. Do Not Rely on a Global Focus to Fix Domestic Problems
          1. Avoid Failure in Global Acquisitions
          2. Maintain Service Levels to Increase Global Sales
          3. Don't Expect Global Expansion to Overcome Domestic Weakness
          4. Stay on Top of Policy Changes in Key Export Markets
          5. Expand International Presence to Meet Market Needs
          6. Be Aggressive in Pursuing Global Opportunities
        4. In Summary
    15. 13. Winning and Losing Practices
        1. A Sweet Spot
        2. An Example of the Search for a Sweet Spot: The Market for Painkillers
          1. Positioning for Advantage
          2. Co-Designing, Embedding, and Brokering
          3. Avoiding Misalignment
          4. A Diagnostic for Knowing if You Are in a Sweet Spot
          5. A Diagnostic for Avoiding a Sour Spot
        3. Agility, Focus, and Discipline: Finding a Balance
          1. Agility
          2. Discipline
          3. Focus
          4. Lessons
          5. Distinct Patterns
          6. Managing the Tension
          7. A Diagnostic: Knowing Your Level
        4. A Diagnostic for Knowing if Your Company is Focused, Disciplined, and Agile
        5. In Summary
        6. Dell's Focus and Discipline
    16. 14. Turnarounds
        1. Safeco
          1. Focus
            1. Focus on Your Core Strengths—Stick to Your Mission
          2. Discipline
            1. Create a Special Culture to Get Your Employees Involved
            2. Maintain Ongoing, Effective Programs to Reduce Costs and Raise Quality
          3. Agility
            1. With Smaller Size Comes Greater Agility
        2. SPX
          1. Diffuseness
            1. Maintain a Clear Strategic Direction—Do Not Spread Yourself Too Thin
          2. Ineptitude
            1. Uphold High Ethical Standards
            2. Don't Lag in Recognition and Reaction to Changes in Your Customers' Tastes
          3. Rigidity
            1. Bigger Is Not Necessarily Better
        3. In Summary
    17. A. Best Sellers Compared
    18. B. Using the Stock Market as an Indicator of Performance
    19. C. Additional Data on the Companies
    20. D. Patterns of Winning and Losing Companies
    21. Acknowledgments
      1. Amphenol and LSI Logic
      2. SPX and Snap-On
      3. Fiserv and Parametric
      4. Campbell and Dreyer's
      5. Forest Laboratories and IMC Global
      6. Ball and Goodyear
      7. Brown & Brown and Safeco
      8. Family Dollar, Inc. and Gap
      9. Hasbro and Activision
      10. Best Sellers (Appendix A)
      11. Validation Study
    22. Sources
        1. Amphenol and LSI Logic Sources
        2. SPX and Snap-On Sources
        3. Fiserv and Parametric Sources
        4. Campbell's and Dreyer's Sources
        5. Forest Laboratories and IMC Global Sources
        6. Goodyear and Ball Sources
        7. Brown & Brown and Safeco Sources
        8. Family Dollar Inc. and Gap Inc. Sources
        9. Hasbro and Activision Sources
    23. Endnotes
      1. Preface
      2. Chapter 1
      3. Chapter 2
      4. Chapter 4
      5. Chapter 6
      6. Chapter 8
      7. Chapter 10
      8. Chapter 11
      9. Chapter 12
      10. Chapter 13
      11. Chapter 14
      12. Appendix A
      13. Appendix B