Difference between the best companies and the rest

Surveys have revealed that most senior executives believe that their companies do not have a winning strategy, nor do they have the right capabilities to execute the strategy. Companies that are great at both strategy and execution don’t necessarily follow existing industry practices. Below are a few things they do that contradicts conventional management wisdom, but if followed in your respective industries would lead to long term sustainable advantage.

Don’t pursue growth mindlessly

The best companies do not pursue growth for making the headlines. They have single minded clarity on what they do best, what their value proposition is, and focus on building capabilities that help in delivering this. For example, Ikea only focussed on designing furniture that is supposed to impact everyday life, that is frugal, and can be self-assembled. It never tried to leverage its brand for luxury sofas or interior furnishings, although there may certainly have been intense pressure for faster growth.

Focus on what you do best rather than copy

Managers in most companies feel that they should copy what competitors are doing, especially so called “best practices”. For example, if a competitor claims to have a certain type of CMM or ISO certification, typical companies start spending precious management bandwidth to follow suit. But the best companies rather focus on building & scaling their own inhouse capabilities – those that will eventually give them a competitive advantage, and that is hard for others to copy. Example: Many small niche restaurants have stood the test of time, because they focussed on what they did best, and continue to keep serving those specialities, but never felt the pressure to copy or benchmark themselves with competition. Brahmin’s café at Shankarpuram, Bangalore still makes and serves the best vada, chutney and coffee. They never ventured into other items, and even after many decades, they get sold out in a couple of hours.

Leverage unique company culture

Many large companies hire consultants, who are asked to come in and transform the company to overcome execution problems, and they usually suggest changes in structure and incentives. But the best companies always resist such disruptive change, and instead leverage the culture of the company to drive change that is most effective and lasting. Smaller companies, and especially, owners of mid-size companies are great examples of transformation and usually get this right, by leveraging their own unique culture. But the larger companies try these disruptive changes for a time, at least until a leadership change. They are constantly under pressure to project such initiatives to their stakeholders. They perhaps survive due to the momentum that have built in the market. Otherwise it would be a disaster. But, had they nurtured their culture and laid it as a foundation, they would be a in a better position to weather any storm.

Build on strengths and cast-off flab

Companies often go on a cost reduction spree across the board based largely on evaluation of economic parameters. This might lead to sub optimal performance, and sometimes could be damaging in certain functional areas. The best performing companies though, evaluate strategy, and carefully consider where costs should be reduced. Instead, they might even pump in resources into capabilities that matter the most and need building. According to an article in HBR, Lego that was losing huge amounts of money in 2004, went on to become the largest toy company in 2015. They did this by cutting business like theme parks where they had no core competence. They instead focussed on the building blocks that they were best known for.

Systematically create the future

In a nutshell, these companies did not ape others, but methodically went about creating their own future by doing what they did best. Leadership in these companies need to be a cut above the others. They must believe in themselves, and it takes a lot of nerve to not cave into pressure from stakeholders, to not fall into the trap of aping others, and relentlessly improve whatever they do best.