What Really WorksWhat Really Works

What Really Works: The 4+2 Formula for Sustained Business Success, William Joyce, Nitin Nohria, and Bruce Robertson, Harper Business, 2003.

The book The book What Really Works: What Really Works: The 4+2 Formula for Sustained Business Success is based on a five-year, is based on a five-year, intensive research project with the intensive research project with the help of 50 leading academics and help of 50 leading academics and consultants to analyze the experience consultants to analyze the experience of 160 of companies over a ten-year of 160 of companies over a ten-year period.period.

What WorksWhat Works

The researchers identified eight The researchers identified eight elements – four primary and four elements – four primary and four secondary – that directly correlated with secondary – that directly correlated with superior corporate performance as superior corporate performance as measured by total return to measured by total return to shareholders.shareholders.

Winning companies achieved excellence Winning companies achieved excellence in all four primary elements, plus two of in all four primary elements, plus two of the secondary ones – hence the 4+2 the secondary ones – hence the 4+2 formula. formula.

What Doesn’t WorkWhat Doesn’t Work

The research found no correlation The research found no correlation between a company’s investment in between a company’s investment in technology and its total return to technology and its total return to shareholders over the decade of the shareholders over the decade of the study.study.

The research found no correlation The research found no correlation between corporate change programs between corporate change programs and achieving superior results in total and achieving superior results in total return to shareholders. return to shareholders.

The research identified four types of The research identified four types of companies from 1986-1996:companies from 1986-1996:– WinnersWinners– ClimbersClimbers– TumblersTumblers– LosersLosers

The 4+ 2 Formula for The 4+ 2 Formula for Business SuccessBusiness Success

Four primary elements:Four primary elements:– StrategyStrategy– ExecutionExecution– CultureCulture– StructureStructure

Four secondary elements:Four secondary elements:– TalentTalent– LeadershipLeadership– InnovationInnovation– Mergers and partnershipsMergers and partnerships

WinnersWinners

Had high scores in all four primary Had high scores in all four primary elements.elements.

Strategy, execution, culture, and Strategy, execution, culture, and structurestructure

And high scores in at least two of the And high scores in at least two of the secondary elements.secondary elements.

Talent, leadership, innovation, and Talent, leadership, innovation, and mergers and partnerships.mergers and partnerships.

Primary Element: StrategyPrimary Element: Strategy

Devise and maintain a clearly stated, Devise and maintain a clearly stated, focused strategy.focused strategy.– Whatever the strategy, it will work if it is Whatever the strategy, it will work if it is

sharply defined, clearly communicated, and sharply defined, clearly communicated, and well understood by employees, customers, well understood by employees, customers, partners, and investors – all stakeholders.partners, and investors – all stakeholders.

– One of the key mandates of winning One of the key mandates of winning companies was a focus on growth.companies was a focus on growth.

Enabling a doubling of the existing core Enabling a doubling of the existing core business every five years.business every five years.

Primary Element: ExecutionPrimary Element: Execution

Develop and maintain flawless Develop and maintain flawless operational execution.operational execution.– Winners consistently meet the Winners consistently meet the

expectations of their customers by expectations of their customers by delivering on their value proposition.delivering on their value proposition.

Bad quality will hurt. A company cannot afford Bad quality will hurt. A company cannot afford to be in the bottom half of the perceived quality to be in the bottom half of the perceived quality rankings, but it is safe as long as it remains in rankings, but it is safe as long as it remains in the top third. the top third.

– Winners consistently slash operational Winners consistently slash operational costs while increasing productivity by 6 to costs while increasing productivity by 6 to 7 percent every year.7 percent every year.

Primary Element: CulturePrimary Element: Culture

Develop and maintain a performance-Develop and maintain a performance-oriented culture.oriented culture.– Winners embrace corporate cultures that Winners embrace corporate cultures that

support high-performance standards, support high-performance standards, which employees universally accept.which employees universally accept.

– Winners dealt quickly with poor Winners dealt quickly with poor performers, especially those who don’t performers, especially those who don’t abide by the values of the organization.abide by the values of the organization.

Primary Element: StructurePrimary Element: Structure

Found “structure follows strategy.”Found “structure follows strategy.” Build and maintain a fast, flexible, flat Build and maintain a fast, flexible, flat

organization.organization.– Winners create and adapt structures that Winners create and adapt structures that

reduce bureaucracy and simplify work. reduce bureaucracy and simplify work. Simpler is faster and better.Simpler is faster and better.

Secondary Element: TalentSecondary Element: Talent

Hold on to talented employees and Hold on to talented employees and find more.find more.– The most important indicator of the depth The most important indicator of the depth

and quality of talent in an organization is and quality of talent in an organization is whether it can grow its own stars from whether it can grow its own stars from within.within.

Promote from within.Promote from within.

Secondary Element: Secondary Element: LeadershipLeadership

Keep leaders and boards of directors Keep leaders and boards of directors committed to the business.committed to the business.– CEOs, on the average, contributed only 15 CEOs, on the average, contributed only 15

percent of the variance in corporate percent of the variance in corporate performance, for better or worse.performance, for better or worse.

Good CEOs are chosen by good boards Good CEOs are chosen by good boards on which the board members on which the board members understand the business and are understand the business and are passionately committed to a company’s passionately committed to a company’s success.success.

Secondary Element: Secondary Element: InnovationInnovation

Make innovations that are industry Make innovations that are industry transforming.transforming.– Most important is to anticipate rather than Most important is to anticipate rather than

react to disruptive events in an industry.react to disruptive events in an industry.

Secondary Element: Secondary Element: Mergers and PartnershipsMergers and Partnerships

Make growth happen with mergers and Make growth happen with mergers and partnerships.partnerships.– Companies that do relatively small deals Companies that do relatively small deals

(less than 20 percent of their existing size) (less than 20 percent of their existing size) are likely to be more successful than are likely to be more successful than organizations that do large, occasional organizations that do large, occasional deals.deals.

What Winners Do in What Winners Do in StrategyStrategy

Build strategy around a clear value Build strategy around a clear value proposition for customers.proposition for customers.

Develop strategy from the outside in. Base it Develop strategy from the outside in. Base it upon what customers, partners, and upon what customers, partners, and investors have to say and how they investors have to say and how they behavebehave..

Maintain antennae that allow them to fine-Maintain antennae that allow them to fine-tune strategy to changes in the marketplace.tune strategy to changes in the marketplace.

Clearly communicate their strategy to all Clearly communicate their strategy to all stakeholders.stakeholders.

Are wary of the unfamiliar.Are wary of the unfamiliar.

What Winners Do in What Winners Do in ExecutionExecution

Deliver products and services that Deliver products and services that consistently meet customers’ consistently meet customers’ expectations.expectations.

Empower front lines to respond to Empower front lines to respond to customer needs.customer needs.

Constantly strive to improve Constantly strive to improve productivity and eliminate all forms of productivity and eliminate all forms of excess and waste.excess and waste.

What Winners Do In CultureWhat Winners Do In Culture

Inspire all to do their best.Inspire all to do their best. Reward achievement with praise and Reward achievement with praise and

pay-for-performance, but keep raising pay-for-performance, but keep raising the performance bar.the performance bar.

Create a work environment that is Create a work environment that is challenging, satisfying, and fun.challenging, satisfying, and fun.

Establish and abide by clear company Establish and abide by clear company values.values.

What Winners Do With What Winners Do With StructureStructure

Eliminate redundant organizational Eliminate redundant organizational layers and bureaucratic structures and layers and bureaucratic structures and behaviors. Simplify, simplify, simplify.behaviors. Simplify, simplify, simplify.

Promote Promote cooperationcooperation and the and the exchange of information across the exchange of information across the whole company.whole company.

Put their best people closest to the Put their best people closest to the action and keep their front line stars in action and keep their front line stars in place.place.

What Winners Do With What Winners Do With TalentTalent

Fill mid- and high-level jobs with Fill mid- and high-level jobs with internal talent whenever possible.internal talent whenever possible.

Create and maintain top-of-the-line Create and maintain top-of-the-line training and educational programs.training and educational programs.

Design jobs that will intrigue and Design jobs that will intrigue and challenge the best performers.challenge the best performers.

Top management becomes personally Top management becomes personally involved in winning the war for talent.involved in winning the war for talent.

What Winners Do In What Winners Do In LeadershipLeadership

Inspire management to strengthen its Inspire management to strengthen its relationships with people at all levels of the relationships with people at all levels of the company.company.

Inspire management to hone its capacity to Inspire management to hone its capacity to spot opportunities and problems early.spot opportunities and problems early.

Appoint a board of directors whose members Appoint a board of directors whose members have a substantial financial stake in the have a substantial financial stake in the company’s success.company’s success.

Closely link the pay of the leadership team to Closely link the pay of the leadership team to performance.performance.

What Winners Do In What Winners Do In InnovationInnovation

Introduce disruptive technologies and Introduce disruptive technologies and business models.business models.

Exploit new and old technologies to Exploit new and old technologies to design products and enhance design products and enhance operations.operations.

Don’t hesitate to cannibalize existing Don’t hesitate to cannibalize existing products.products.

What Winners Do In What Winners Do In Mergers and Partnerships:Mergers and Partnerships:

Acquire new businesses that leverage Acquire new businesses that leverage existing customer relationships.existing customer relationships.

Enter new businesses that complement Enter new businesses that complement their company’s existing strengths.their company’s existing strengths.

With a partner, move into new With a partner, move into new businesses that can use the businesses that can use the partnership’s talents.partnership’s talents.

Develop a systematic capability to Develop a systematic capability to identify, screen, and close deals. identify, screen, and close deals.

WinningWinning

Exceptionally difficult juggling act—Exceptionally difficult juggling act—must keep all six plates (4+2) in the air must keep all six plates (4+2) in the air spinning at the same time. If one falls spinning at the same time. If one falls down, they all fall.down, they all fall.

The 4+2 factors are all interrelated and The 4+2 factors are all interrelated and must always function at the highest must always function at the highest level to continue to be a winner. level to continue to be a winner.

Staying on top is more difficult than Staying on top is more difficult than getting there. getting there.

But winners manage it by:But winners manage it by:– Having a focused strategyHaving a focused strategy– Flawlessly executingFlawlessly executing– Having a performance-based cultureHaving a performance-based culture– Having flat, simple structureHaving flat, simple structure

Plus, having two of the following four:Plus, having two of the following four:– TalentTalent– LeadershipLeadership– InnovationInnovation– Mergers and partnershipsMergers and partnerships

And never, never, never, never letting And never, never, never, never letting up.up.