What Drives a Company’s Success?
Booz & Company and strategy+business have introduced an online survey to explore the relationship between management theory, corporate identity, and high performance.
An oil and gas drilling company from Oklahoma invests in attracting geoscientists and developing them into leaders, parlaying its prowess with talent to a leading position in its industry. An internationally beloved Danish toymaker reduces the complexity of its product line to fit the new realities of big-box toy stores, and turns around its financial prospects. A small Singapore-based firm becomes one of the world’s largest high-tech manufacturers by emphasizing lean production and forward-looking technology, instead of relying on low-wage labor. These three companies—Devon Energy, the Lego Group, and Flextronics—changed their corporate identities and, as a result, are admired in their industries for their track record of success.
Today, more than 90 percent of the people offered a job at Devon accept it—compared with just 42 percent in 2007, and far above the prevailing rate in the oil and gas industry, where there is fierce competition for qualified staff. Lego went from annual losses of around 30 percent in 2004 to consistently rising profits (up 35 percent during one six-month period in 2011). Flextronics, which had shrunk to only three Asian factories in 1993, is now a US$30 billion company with clients that include Apple, Lenovo, LG Electronics, and Danaher. In 2009, Danaher Test and Measurement awarded its coveted Outstanding Supplier Award to the Flextronics subsidiary Multek.
Devon, Lego, and Flextronics are hardly unique. There are hundreds of companies in business today—from Apple and Amazon to Zappo’s and Zara (Inditex)—that are known for their success, as well as for their distinctive corporate identities. But there is no generally accepted management theory on why these particular companies have succeeded. When a firm’s performance is admired by its peers, what is the causal factor that generated these results? Is it the capabilities it brings to market—the way it does things that customers value? Or is the size and scale that give it leverage over the other companies in its industry? Is it the agile, fast-moving, innovative management style of its executives? The sagacity of its strategic decisions? Or the operational excellence that allows it to continually improve its quality while reducing its costs?
Because we’re interested in knowing what you think about what drives business success, we invite you to join us in a bit of pragmatic research into management theories and their impact on performance. Booz & Company, the firm that publishes strategy+business, has developed an online survey called the Company Success Survey. It asks you to name the companies in your industry to which you pay closest attention (including companies where you have worked). You will then consider the attributes that distinguish them from other companies, and some of the important strategic trade-offs that they have made—for example, choosing to be competent across a broad range of activities rather than excelling at a few and being just good enough in many others.
In this survey, which will take you only about 10 minutes, you can let us know what you consider to be the reasons for a company’s success. When we combine your observations—about your own company and the other companies you know well—with those of others, they could give us all a better understanding of the factors that make a difference. Those who take the survey will receive an early report of the results and their implications for management theory.
Our starting point for this survey was the idea, put forth by Booz & Company CEO Cesare Mainardi in a seminal s+b article, “The Right to Win,” that companies determine their destiny through the choices they make. Every business decision is, in effect, a bet about some management theory on why certain efforts are successful while others fail. Mainardi looked back at the course of strategic ideas from 1960 onward and concluded that over the years corporate decision makers had been propelled by four such theories. The positioning theory, whose champions include Michael Porter, based its actions on staking out a place in a growing industry with manageable competition; success went to those who held a commanding place in their market. The theory of execution, led by W. Edwards Deming, Ram Charan, and Larry Bossidy, proposed that continuous improvement and operational excellence, when properly mastered, could lead a company to success. Henry Mintzberg is a leading exponent of the adaptation theory, which proposed adaptability and agility as the paramount virtues of a company, particularly in a turbulent world. Finally, the concentration theory, put forth by C.K. Prahalad, Gary Hamel, and Christopher Zook, attributed enterprise success to the ability of a company to make the most of a small set of core businesses and focus on them.
For every one of these theories, we can find examples of companies that succeeded that way—and we can also find contradictions and ambiguities. The steady success of the Exxon Mobil Corporation, for instance, can be attributed to its extraordinary scale and scope. Or would you attribute that success, instead, to the company’s disciplined approach to execution? Its adaptability in the face of challenges like the Valdez oil spill? Or its continued reliance on a focused core business?
Our Company Success Survey is thus designed to help broaden and deepen our (and your) level of thinking about the forces that provide a firm with sustained advantage. All individual responses will be kept strictly confidential, and only aggregated survey results will be reported. We invite you to join us, and you’ll be the first to know what we find. The survey is available here.
- Art Kleiner is editor-in-chief of strategy+business.
- Nadia Kubis is a principal with Booz & Company based in Zurich.