The Three Rules for Success

Posted on May 7, 2013 ยท Posted in Competitive Strategy

The April 2013 Harvard Business Review has a prescient article titled “The Three Rules for Success.” Like much of the work of Jim Collins it is based on a large sample of companies and long histories at each. Michael Raynor and Mumtaz Ahmed, the authors start with humor. There are only two rules.

Rule One: Better Before Cheaper

“The major finding is that competitive positions built on greater differentiation through brand, style, or reliability are more likely to drive exceptional performance than positions built on lower prices.” Interestingly the PIMS data base, which also includes multiple years of history at many companies reached similar findings many years ago. They however did not state as succinct a conclusion.

Rule Two: Revenue Before Cost

Besides finding value for the customer, a company must capture value for itself. Revenue is the key. Either higher prices or higher volume or both.

Rule Three: There Are No Other Rules

This “non-rule” really confirms the first two. In the pursuit of profit, everything is on the table but the first two rules.

The authors confess that these rules were only found after shifting the study from what the companies were doing to how they thought. How does your company think about these three rules?