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

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9780131451322: Big Winners and Big Losers: The 4 Secrets of Long-Term Business Success and Failure

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.

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About the Author:

Alfred A. Marcus is Edson Spencer Chair of Strategic Management and Technological leadership at the University of Minnesota, Carlson School of Management, where he has been on the faculty since 1984. At Carlson, he teaches and conducts research in strategic management, macroeconomics, business ethics, and business and the natural environment. He has also served as Visiting Professor at MIT's Sloan School of Management. Marcus is author or coeditor of eleven books and has published numerous articles in journals, such as the Strategic Management Journal, Academy of Management Journal, Academy of Management Review, Organization Science, California Management Review, and The Journal of Forecasting. He has consulted and worked with many major corporations including 3M, Corning, Excel Energy, General Mills, and IBM.

Excerpt. Reprinted by permission. All rights reserved.:

Preface

Companies that keep winning are rare. What maintains their momentum and accounts for their ongoing success? This book compares firms that have achieved long-term success with firms that have experienced persistent failure. It provides four secrets that explain why the winning firms have done so well. From the history of the winners, I extract the critical attributes that contributed to their performance. Each firm had a distinct pattern. Being a big winner means carrying out (i) a well-executed niche strategy that achieves a balance between (ii) agility, (iii) discipline, and (iv) focus.

Managing the tension among such attributes is not easy. Big winners bring together opposing traits. Other firms can imitate the individual traits of winning companies, but they cannot match the overall pattern. Similarly, big losers do not fail because of one or two bad qualities. Their poor performance is a consequence of a combination of many bad attributes.

Each trait that this book brings to light provides a valuable lesson in itself. Practicing managers have much to learn from this breakdown of the qualities that contribute to the creation of long-term advantage and disadvantage. The main challenge that they face, however, is in managing the tension between contrasting traits—a sweet spot and agility on the one hand, and discipline and focus on the other. The degree to which you can manage this tension influences the extent to which you can achieve long-term success.

Being a long-term winner—a dynasty rather than a mere one-time victor—is hard. From 1992 to 2002, few firms hit this mark. Only about 3 percent of the 1,000 largest U.S. corporations outperformed their industry's average market performance. About 6 percent underperformed this average. More firms performed consistently poorly than consistently well. Companies that are big winners generally operate under the radar. They are relatively unknown. They include such firms as Amphenol, Ball, Family Dollar, Brown & Brown, Activision, Dreyer's, Forest Labs, and Fiserv. Their story has yet to be told. In comparison, companies that suffer from sustained competitive disadvantage are better known. They include such familiar names as Goodyear, the Gap, Safeco, Hasbro, and Campbell Soup.

This book reveals the secrets of the long-term better-than-industry performance of the winners. It shows distinct patterns in the 1992 to 2002 results. The differences in outcome are not random or a matter of mere chance. The circumstances that the big winners and big losers faced were similar. What explains the differences in performance is that the winners pursued and executed different strategies than the losers. In this book, I reveal how the traits of the big winners came together into larger patterns made up of a sweet spot, agility, discipline, and focus. Firms that achieved advantage wove together these elements into larger wholes. The positive aspects of the separate components supported and reinforced each other. Similarly, the negative traits of the losing firms supported and reinforced each other.

The takeaway for managers is to build your advantage one by one in a planned and logical way in which you start by understanding your company's existing traits. But you cannot stop there. You must continue with an awareness of how these separate traits fit together in broader and more comprehensive patterns. Do not lose sight of the fact that the more comprehensive patterns that create advantage and disadvantage bring together contradictory elements. You have to combine a sweet spot, agility, discipline, and focus, and you must avoid a sour spot, rigidity, ineptness, and diffuseness. This book highlights these patterns—on the one hand, a pattern of advantage that consists of a well-defined market niche achieved through agility, discipline, and focus; and, on the other hand, a pattern of disadvantage that rests on a poorly defined market niche sustained by rigidity, ineptness, and diffuseness.

How This Book Was Written

I enlisted the support of more than 500 practicing managers to write this book. They worked for such well-known multinational companies as Target, Best Buy, Guidant, Cargill, General Mills, Medtronic, Wells Fargo, American Express, 3M, Ecolab, Boston Scientific, Honeywell, U.S. Bancorp, Piper Jaffray, Carlson Companies, West Group, Northwest Airlines, St. Paul Companies, Seagate, ADC, Intel, United Defense, Johnson Controls, Deloitte Touche, Supervalue, Polaris, Rosemount, Eaton, RBC Dain Rauscher, Unisys, Home Depot, Allina, Toro, United Health, Thrivent, Donaldson, and Ernst and Young.1 The managers had more than seven years of work experience. Teams of five to six managers wrote reports on two firms. They compared characteristics of companies that achieved long-term success and companies that endured long-term failure. One of the companies substantially outperformed the average stock market performance of its industry for 10 years, and the other underperformed the average stock market performance of its industry for the same period. (See below for a list of these firms.)

Sector

Winner

Loser

Technology

Amphenol

LSI Logic

Manufacturing/appliance

SPX

Snap-On

Software

FiServ

Parametric

Food

Dreyer's

Campbell Soup

Drugs/chemicals

Forest Labs

IMC Global

Manufacturing/industrial

Ball

Goodyear

Financial

Brown & Brown

Safeco

Retail

Family Dollar

Gap

Entertainment/toys

Activision

Hasbro


The managers explained the reasons for the former company's sustained success and the latter company's sustained failure. To explain this difference, they examined the evolution of the companies' strategies. They obtained information from annual reports—in particular, the first section where executives discuss their strategy—and consulted other sources. A list of the sources on which they drew is found at the end of this book.

Five groups of managers were assigned to each of the nine company pairs. They addressed the following questions:

  • What were the external challenges the companies faced?

  • What were the internal strengths and weaknesses the companies had to meet these challenges?

  • What moves did the companies make?

  • Why were the moves of one of the companies more successful than the moves of the other?

The managers prepared 42 reports of about 30 pages each on nine company pairs. Following is an outline of a typical report.

Typical Report Outline

Explaining Sustained Competitive Advantage and Disadvantage: Strategies for Prolonged Business Success

  • The Executive Summary states what you found. What distinguishes the companies? Why has one done so much better than the other?

  • The Introduction should include a brief description of the companies, including details about their history, mission, goals, objectives, location, number of people employed, and main products and markets.

  • Relevant performance statistics should be provided. Relevant is the important word.

  • Identify the critical competitive challenges that the companies faced. How do the challenges differ?

  • Identify the key internal strengths and weaknesses the companies had. How do these differ?

  • Summarize the main moves the companies made. How did the companies choose to respond to the challenges they faced and why?

  • Do an analysis of why, based on the strategies carried out, one company performed so much better than the other.

  • Conclude and speculate on what you think will happen in the future.

  • A reference page is required.

  • Appendixes are permitted.

The managers made oral presentations based on initial drafts of their reports. During these sessions, they were subject to criticism. They were challenged to sharpen their conclusions about the traits that contributed to sustained competitive advantage and disadvantage.2...

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