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Three Rules for Making Any Company Great

Michael Raynor and Mumtaz Amhed nail it in their article in the April Harvard Business Review:

  1. Better before cheaper—in other words, compete on differentiators other than price.
  2. Revenue before cost—that is, prioritize increasing revenue over reducing costs.
  3. There are no other rules—so change anything you must to follow Rules 1 and 2.

I disagree with their critique of Jim Collins’ Good to Great and Tom Peters’ In Search of Excellence, but it’s noteworthy that their conclusions are essentially the same. That is, the findings of Collins and Tom Peters can be boiled down to these three things. Or, perhaps better, these three rules are derivatives of the even deeper and more foundational realities that Collins and Peters show.

The extent to which these three rules are violated is truly breathtaking!

  • Brian Popp

    Matt,

    I too read that article, and found their premise to be lacking. The implicit premise is that the only purpose of business is to make the most money. This very narrow premise predictably leads to a focus on margin/quality/price. A business should exist for a far greater purpose than making money, and its success must be determined by its progress toward that greater purpose. The article specifically mentioned several companies that I would say have been hugely successful at their mission, despite not having tremendous financial results.

  • Matt,

    What do you think of Apple right now as a company, in light of this post?

    BTW, thanks for your recent e-mail.

    Alex

  • Matt,

    What do you think of Apple right now as a company, in light of this post?

    Alex

    BTW, thanks for your recent e-mail.

  • Matt

    Brian: I very much agree that business exists for a far greater purpose than making money. That is one of the things I like so much about Jim Collins’ work. He even shows on the basis of research that the companies that exist for _more than profit_ actually make more profit in the long-term. Though the most important point there is that, regardless of whether it results in more profit or not, businesses have to have a purpose beyond making money.

    In relation to these three rules: What I see is that when businesses only see their purpose in relation to profit, they tend to focus on cost-cutting as opposed to revenue growth. That’s not always the case, but usually the ill-chosen focus of cost cutting is justified on the basis of “profit.” I think it’s good to see that the cost cutting focus actually militates against profit in the long-term, thus removing that argument from those who have the odd commitment to mediocrity in the name of “making money.” I think, though the reason is the pursuit of their greater purpose and not ultimately making money, the businesses that exist first for their greater purpose tend to follow these rules. In other words, I think these three rules are the rules that a pursuit of more than profit leads to.

  • Matt

    Alex:

    Under Jobs, Apple exhibited the “more than profit” approach par excellence. Their aim was not simply to make money, to be artful and produce excellent products that change the world and make life better. Toward the end of his life, Jobs talked in even more detail about this and the importance of building an enduring company on the basis of principles.

    Now, of late, I don’t know and haven’t kept up with their business practices enough. I read an article several months ago arguing that Apple was jettisoning its commitment to put the customer first, in favor of a focus more on efficiency. If that is true (and I don’t know if it is), their decline is coming.

    Matt