Posted by Chris Zook on 25th April, 2012
Chris Zook is the author of the best-selling business book trilogy: Profit from the Core, Beyond the Core, and Unstoppable. His latest book -- Repeatability: Build Enduring Businesses for a World of Constant Change (co-authored with Jimmy Allen) was published in March 2012 by Harvard Business Review Press.
“Commander’s intent” is a legacy of Napoleon Bonaparte. It is a way that the strategy and priorities of a mission can be stated in a simple, and operational, way so that the field commanders at the front line and the most senior general can have a shared view of what is most important. At its best, a one-page “Commander’s intent” creates a more aligned organization that can respond faster by decentralizing decisions better. The practice is even more important in today’s world of near-instant electronic surveillance and response.
Yet, the typical business organization today, to its peril, is going in the opposite direction:
Today, only 9 per cent of companies worldwide have achieved even a modest level of sustained, profitable growth in the past decade (5.5 per cent real growth in revenues and profits while earning the cost of capital) and the percentage has been declining for decades. Sustained growth is getting harder, though few deny that change in the world creates plenty of opportunities for most businesses. What can be done about this?
We recently completed a three year study at Bain & Company which concluded that the growing complexity of companies has become the silent killer of profitable growth – slowing companies down at the same time that markets are moving ever faster.
We examined hundreds of companies to define the design principles of businesses that permit faster response and better ability to adapt to change than their rivals. We called these companies the “Great Repeatable Models.” What we found at their centre was an essential simplicity of concept, and ability to use the hidden power of simplification as a competitive weapon increasing speed and the ability to learn, while controlling the growth of complexity that can accumulate like barnacles, layer after encrusted layer.
A wonderful example is the company Olam – a 20-year old company in a tough market. Olam manages the supply chain of agricultural commodities from developing countries to large food processors (like taking cashews from farms in Nigeria to plants in Europe). Olam is highly differentiated because it is the only company to insist that its managers live in the rural areas at the farm gate. By managing the chain end-to-end, Olam has created a repeatable formula, with very clear non-negotiables that everyone understands. This has allowed it to extend into nearly 20 products in over 60 countries. Olam was the best IPO in the region when it was launched, and in 2011, CEO Sunny Verghese was named CEO of the year.
Since startup, Olam has followed the design principles of the Great Repeatable Models to become one. As Sunny Verghese explained to me:
“Our model is completely repeatable. Everyone from me down to the front line manager understands the strategy in the same way. This is an enormous advantage in a fast changing market like ours.”
Our work has shown that in these situations less effective management teams fight complexity with ever more complexity in an endless cycle, while the most successful executives are able to muster the courage and focus to fight complexity with simplicity. If your own success is feeling more and more unrepeatable – then maybe its time for a dose of good old-fashioned simplicity?
Chris Zook is a partner at the management consulting firm Bain & Company. He is co-head of Bain’s global strategy practice. The Profit from the Core books offer a blueprint to finding new sources of growth from a core business, based on a three-year study of thousands of companies worldwide. Chris ranked No. 50 in the Thinkers50 in 2007.
What the world's management thinkers are thinking. The Thinkers50 Daily is out http://t.co/5KTaxeTLat4 hours ago
Thinkers50 Strategy Award Nomination! Vijay Govindarajan of Tuck. More info http://t.co/WWZZgBWhB2yesterday
Look out for 3 new Thinkers50 interviews nxt week w @tammyerickson, plus Doug Ready on talent and Lauren Ready on Taking Charge.yesterday
Learn what the world's leading business thinkers are thinking! The Thinkers50 Daily is out now http://t.co/qQRHam80IJyesterday