The Three Rules

April 29, 2013
Deloitte executives Raynor (The Innovator's Solution) and Ahmed were determined to find out what made certain companies succeed and others fail, and set out to perform the ultimate "success study." With a research team from Deloitte, they analyzed 45 years of Compustat data on more than 25,000 unique companiesâcompiling nearly 300,000 pieces of data (company-year observations) from 1966 to 2010. In the process, they identified three categories of organizations: Miracle Workers, Long Runners, and Average Joes. The authors looked at the behavioral differences among the companies studied, but there was no single area in which successful companies stood outâthey excelled in virtually every area. But there were three rules that held firm. Rule #1: Better before cheaper (don't compete based on price). Rule #2: Revenue before cost (higher revenue is more advantageous than lower costs in achieving profitability). Rule #3: There are no other rules. The book offers a solid and engaging analysis, but one that is performed without much further insight into the dozens of comparative case studies presented, such as a comparison between Merck ("miracle worker"), Eli Lilly ("long runner"), and KV Pharmaceutical ("average Joe"). The dry writing and repetitive message make this book a tough sell for any but the most devoted success-seeker. Agent: Wesley W. Neff, Leigh Bureau.

May 15, 2013
A rigorous and lively study of excellence in business performance. Working from a multiyear database of 25,000 corporations, Deloitte Consulting officers Raynor (The Innovator's Manifesto: Deliberate Disruption for Transformational Growth, 2011, etc.) and Ahmed have narrowed down the data to identify the qualities of three tiers of performance, across nine economic sectors: "miracle workers," "long runners" and "average Joes." The authors' results run counter to the current prevailing wisdom, which favors return-driven, short-term interest over long-term concentration on building a lasting business. They base their three rules--"better before cheaper," "revenue before cost" and "there are no other rules"--on the performance of the 27 companies that comprise their grid, and their data shows that companies that can build an advantage based on nonprice factors tend to outperform companies that attempt to grab market share by competing on price alone. Businesses that successfully build revenue as a first priority also outperform those that focus mostly on controlling costs. Since there are multiple ways of evaluating both "better" in nonprice terms and the relationship between revenue and costs, based on the particular situation, their first two rules define a substantial area for the application of managerial talent over time. The authors argue for a fundamental shift in point of view, which is more valuable than many other specific recipes for business success. Their rules make possible "a widespread and shared consistency of action that is all but unachievable otherwise" and permit a balance between short-term and longer-term considerations. Raynor and Ahmed provide a way to separate exceptional performance from the noise of day-to-day statistical variation. A major contribution to the literature of business success.

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June 15, 2013

Oddly, despite the title, there are only two rules: "better before cheaper," which boils down to not competing on price and "revenue before cost," which concerns making money versus cutting costs. Authors Raynor (The Innovator's Solution) and Ahmed, both Deloitte executives, base their proposed rules on an extensive financial data-mining project involving 25,000 companies from 1966 to 2010. From this, they identified companies that had exceptional return on assets over the 44-year span. In addition, they identified runner-up companies in each of the nine major industries covered, as well as companies that exemplified average financial performance. These sets of three companies for each of the nine industries are the focus of the title. Acronyms and financial calculations abound as the authors expound on the two rules and how the best companies illustrate them. Almost one-third of the book is devoted to statistical appendixes and tables, outlining the data and calculations on which the research is based. VERDICT Somewhat repetitive and reminiscent of an overlong academic journal article, this book should be considered primarily where there is business research interest.--Susan Hurst, Miami Univ. Libs., Oxford, OH

Copyright 2013 Library Journal, LLC Used with permission.

May 15, 2013
What makes a great company great? How much of corporate success is due to random good luck or to good planning and execution that can be passed along to help other companies? Raynor and Ahmed analyzed performance data on more than 25,000 companies from 1966 to 2010 to uncover the essential elements of high corporate achievement. After settling on 344 exceptional companies, they explored those factors that set the exceptional apart from all others in industries as varied as semiconductors, pharmaceuticals, and confectionary. Looking beyond regulation, competition, and myriad other factors, they boiled down success to three rules: better before cheaper, revenue before cost, and don't get distracted by anything other than the first two rules. Among the exceptional performers are Merck in pharmaceuticals, Abercrombie & Fitch in retail, and Maytag in appliances, each described in excruciating detail to explain how it outperforms competitors. But beyond the tables, charts, and statistics lies a book written in very accessible language and with a simplicity of focus on the basics that can apply to any sector and any business.(Reprinted with permission of Booklist, copyright 2013, American Library Association.)