Do you want to achieve sustained success in business?
When it comes to business, it’s hard to justify what elements contribute to a company’s success. People in executive roles have spent years trying to guess what makes a company succeed and usually, they guess wrong. On top of this, when the economy stumbles, even fewer people know how to adapt their company to keep it prospering.
Here, we will explain the eight practices that have been proven to allow business owners to achieve excellence. These practices have been tried and tested over a five-year study and can be categorised in two ways, four primary and four secondary practices. The study found that winning companies achieved excellence in all four primary practices and only two of the secondary practices. This is where the 4+2 formula for business success was born. The four primary management practices that proved successful were strategy, execution, culture and structure. The secondary areas for business success are talent, leadership, innovation, and mergers and partnerships.
The 4+2 practices created a surprising correlation between business and success. It was discovered that companies who scored high in all primary areas and two of the secondary areas, actually had more than a 90% chance of consistently delivering high shareholder value.
After 10 years of studying the companies, winners saw their sales increase an average of 415% and their operating income lift increased by 326%. Meanwhile, companies that did not follow the 4+2 formula only produced 62% in total returns to shareholders over the entire decade.
Below we will break down each of the eight practices that range from intuitive and counterintuitive disciplines for most businesspeople.
Practice #1
The process of devising and maintaining a focused strategy. Your strategy should double your core business every five years while also building a related new business about half the size. Additionally, your strategy should be sharp, defined and clearly communicated to your employees, customers, partners and investors.
A strategy focused on growing the core business among the winners was found to be a key feature of the 4+2 formula. A common mistake made by leaders is demanding more support from all sectors of their company and allow their resources to dwindle. A winning company can easily be distinguished by keeping its goals in mind and tailoring its budgets wisely to fit.
All about the execution
These five mandates allow managers to pursue their strategy successfully:
- Building a strategy around a clear value position to the customer
- Developing a strategy by working from the outside in, including what your customers, partners and investors say.
- Making sure the strategy is fine-tuned to changes in the industry.
- Ensuring that your strategy is communicated within your entire organisation and amongst your customers.
- Always be wary of the unfamiliar and grow your core business accordingly.
Practice #2
This practise is based on developing and maintaining a flawless execution. Not every customer can be delighted but it is possible to not disappoint them. Ensuring your business is high quality will ensure this. In theory, companies are safe if they stay within the top third of perceived quality rankings within their industry. Whereas winning companies are those that constantly reduce operational costs whilst productivity continues to climb, roughly 6%-7% every year.
Study and effort are the main factors in ensuring flawless execution and managers must be willing to overlook conventional knowledge. As an example, some companies competitively use IT to improve the execution of their strategy so that their business provides better power quality and service to their customers. Using a unique strategy like this one will allow it to grow at a rate that exceeds its competitors.
In this particular practice, three features were found to enhance the execution, such as delivering products and services that always meet their customers’ expectations, empowering the front lines of the business to continually respond to customer needs and finally, striving to improve productivity and ensuring there are no forms of waste or excess work.
Practice #3
The importance of developing a performance-oriented culture. The emergence of culture was a surprising addition to the four primary practices. It is only recently that some businesses have realised the importance of taking culture seriously and bringing this into their company. However, businesses that showed all staff having high levels of productivity happened to be the companies that won, rather than placing fun before work, as some corporates may advocate.
Results from the study suggest that winning corporate culture puts fun second in command with high-performance taking the lead instead. Celebrations come after the job is executed successfully, not before.
Although many companies believe that if their financial results overtake those of the year previous that this means their business is succeeding, but this is actually a false sense of security that many fall into. A year-to-year comparison is an insufficient measure of a successful business. Defining progress is best done by comparing your performance against your competitors for more accurate results. To ensure you’re a true performance-based business, you should always aim to exceed top-ranking businesses in all industries.
This practice has led us to discover four winning strategies for corporate cultures: inspiring all employees to do their best, establish and stick to, clear company values, always reward achievement with praise and more importantly, pay and finally keep raising your performance bar. It is also worth noting that creating a work environment that is challenging yet satisfying and fun, will always ensure you get the best out of your business.
Practice #4
The final practice we will explain is maintaining a fast and flexible organisation. The only structure that counts is keeping bureaucracy down and simplifying work. It’s no secret that policies and procedures are what keep large businesses functioning smoothly. On the other hand, too many policies and procedures can cause issues with progression and lower employees’ enthusiasm to work. Winners always ensure they’re painting the bridge, in other words, they ensure this is always a task to be maintained.
In summary, winning corporate structures can be achieved by following these mandates; eliminating redundant organisational layers and bureaucratic structures, promoting cooperation between information exchange across the entire company and finally keeping your best people close to the action.
Now that we have established the four primary management practices, we must assess the four secondary practices. It is worth noting that the 4+2 formula works with any two of the secondary practices, rather than a specific combination. Thus, any combination of two secondary practices with the four main practices will lead to success.
Secondary practices
- Ensure talented employees feel valued and are held onto. An important part of understanding your depth of quality of your talent, as a business, is whether you can grow talent from within instead of buying talent from outside sources. However, winning businesses don’t shy away from pursuing talent outwards entirely.
- Promoting wherever possible is a great way to ensure your company is winning. Designing jobs that challenge your best performers is another useful technique as they will feel that they’re winning the war of talent within the company.
- Industry-transforming innovation. You would think that winners would excel at innovation but only a small majority did. Businesses that succeed are those that always keep their eye on opportunities and create new, disruptive breakthroughs to potentially transform their industry. These companies also realise that using both new and existing technology together, will give them a big advantage over their competitors.
- Propel growth through partnerships and mergers. Generating growth internally is vital but not always enough when it comes to beating the competition. Buying new businesses that give you leverage on existing customer relationships are a great way to grow your business. You may also find that frequent small deals will benefit your business a lot more than the occasional large deal.
- Keeping your leaders and directors dedicated to your business is a clear and vital way to win in business. Leaders that communicate their vision with great passion and belief, will find that others will then adopt this same vision and keep them dedicated to your company. A dedicated team will then resolve any issues without hesitation, should they arise.
Inevitably, good CEOs are chosen by good boards. As long as your board members truly understand your business and are passionate about it, they will make the right decisions. Winning businesses ensure that board members have a substantial stake in their success and keep their pay linked to performance.
Did you know that less than 5% of all publicly-traded companies in the study maintained a total return to shareholders greater than their industry peers for more than 10 years?
This study offers hope to those wanting to succeed in business and gives companies an easy formula to follow to attain and more importantly, maintain success.
Looking to develop your business? Contact ACTION Coach today to get our expert help.
