Driving Success In Your Business

Authors: Nohria, Joyce and Robertson
Publisher: Harvard Business Review,
July 2003


One of the more challenging questions in business is “What do we need to do to succeed?” In the July 2003 edition of the Harvard Business Review, an article titled “What Really Works” attempts to answer this question.

According to a study performed on 160 businesses, “companies that outperformed their industry peers excelled at four primary management practices:

  • strategy
  • execution
  • culture
  • structure

which were supplemented by mastering two out of four secondary management practices:

  • talent
  • innovation
  • leadership
  • mergers and partnerships

This was referred to as the “4 + 2 formula for business success“, and if followed consistently, companies have an excellent chance at “superior business performance.”

What does it mean to excel in the four primary management practices? The following is a summary of what is suggested in the article:

Strategy – “develop a clear strategy and consistently communicate it to customers, employees, and shareholders.” This requires a “deep, certain knowledge about your company’s target customers and a realistic appraisal of your own capabilities.” Ensure that your strategy drives your pricing model and the customer base you are targeting. Strategy impacts many decisions. For example, the location of your operations or the kind of products you put on your shelves. It also impacts whether to pursue opportunities. Consider if the opportunity complements the core business and if not, how it will impact ongoing operations.

Execution – “develop and maintain flawless operational execution. It is critical to recognize customers’ needs and to focus energies and resources on making those related processes as efficient as possible.” To demonstrate this, take the common example of a company implementing a new operational software program. It is not the purchase of the software that leads to excelling in execution practices. Instead it is how well the new technology is embraced and used to enhance productivity growth.

Culture – create a culture that “champions high-level performance and ethical behaviour.” “Goals and values must be written in clear, forceful language and pay is tightly linked to performance.” Goals established at the employee level must be congruent with goals established at the corporate level.

Structure – “build a flat organizational structure with flexible divisional boundaries so departments can openly communicate. Managers are then able to exchange ideas and identify practices that are beneficial to the entire organization.” Companies studied that were successful in this area, maintained an organizational structure that was as simple as possible. “It made little difference whether the companies were organized by function, geography, or product, it was the simplicity that mattered.”

The next piece is to complement strengths in the four primary practices by committing to excel in two of four secondary practices. According to the article, these are as follows:

Talent – “Hold onto talent!” the article suggests. More often than not, companies that were highly successful promoted talent from within as opposed to buying it. With this comes a “commitment to train and prepare employees for new jobs in the company, however, the pay back is reliability, continuity and loyalty.”

Innovation – to excel in innovation means to “go beyond improving products only marginally.” Successful companies are “focused on finding new product ideas or technological breakthroughs that can transform their industries.” These companies are industry leaders, always one step ahead of their competitors.

Leadership – “choosing a great chief executive officer is key.” It is not the personal characteristics, but the skills he or she possesses that is critical. First, the CEO must aspire to “build relationships at all levels in the organization and present themselves as fellow employees rather than masters.” They also must have the foresight to “spot opportunities and problems.” As it is usually the board of directors that selects the CEO, it is crucial that they “understand the business and have a stake in the company’s financial performance.”

Mergers and Partnerships – the research performed indicated that the most successful companies were those that completed “several small deals in a year rather than large, occasional deals.” And most importantly, these deals focused on creating synergies between the two parties. In order to do this, “a system must be developed for identifying, screening, and closing deals.”

To review the article in its entirety, go to the Harvard Business Review website at www.hbr.org where you can purchase a full reprint for a nominal cost.