Strategic Thinking : How Exceptional Companies Think
In my experience as a consultant, the strategic thinking that successful companies employ is one of the biggest factors to their dominance and lifespan. It’s sometimes hard to accept but companies come and go very easily and the ones that do stay are bound to have something in common that the other competitors don’t.
Michael E. Raynor’s book entitled ‘The Three Rules: How Exceptional Companies Think’ strives to derive this X-factor, this subtle yet powerful formula that long-running dominating companies employ to stay ahead of others. I think that the research they’ve put into their search for the magic formula is extensive, sound and sensible, and I think sharing it with you can prove to be invaluable for your own enterprise.
Raynor details the three rules that the dominating companies in their study seem to follow for strategic thniking :
1. “Better before cheaper”.
Raynor and his colleagues noticed that the companies who survived the longest out of all the others in their study always sought to improve their products and services instead of focusing on pricing. I completely agree with them when they say that dictating the quality of their products and innovating to attract customers is the way to go instead of competing directly through prices.
2. “Revenue before cost”.
The best companies, according to Raynor, have strategic thinking that concentrate on how to generate more revenue instead of reducing costs. Since they have the best products, they don’t have to compete in a sea of other companies delivering the same products with the same cost. They make sure that people know their brand and what they get when they pay for goods or services. A trucking company that charges much more than the standard still has the highest profits because they have warranties and exceptional service.
3. “There are no other rules.”
In what could be the ultimate challenge to companies who want to stay ahead, Raynor explicitly states that strict adherence to the first two rules is essential. Deviating or getting distracted from delivering better products and services is going to spell the eventual demise of your firm.
Although running an enterprise is composed of so many decisions, making sure that you adhere to these simple rules is the best practice. Strategic thinking always calls for solid research data that should always be the tools you use along with these rules. It doesn’t make sense that you stick to a set of rules without the whole picture of your business or the industry. Always look at what the competition is doing and apply the rules. If they’re working to get cheaper materials, work to produce a better product or added feature. Don’t be afraid if the competition gets to one-up you for a few months; strategic thinking is for the long term.
If your competition is fighting you on price point, remember that cost isn’t part of the rules. Strive to give something extra. Zappos, the online shoe store, set itself apart by giving the best customer service despite the higher price and delivery rates. Keep in mind that people do want to pay for better service and accommodating after sales processes. Whereas some people said that Zappos wouldn’t get off the ground because no one wanted to buy shoes online, the company made sure that the experience of buying shoes with them was the best in the country.
In the end, strategic thinking is the best possible way to ensure that your company stays true to its ideals and values but at the same time. Just remember to think of competing through quality and better products instead of costs and pricing.