Three Rules for Exceptional Companies

Morgan O'Rourke


June 27, 2013

book-ThreeRules300Every organization wants to be great, but actually getting there is easier said than done. To be sure, certain companies seem to have it all figured out, but no matter how many corporate success stories you may read, there is no real consensus on what works and what doesn’t. Success or failure all seems to boil down to unique circumstances that can’t be duplicated. So the question remains: Just what is it that makes exceptional companies exceptional?

To find the solution, Deloitte executives Michael Raynor and Mumtaz Ahmed decided to crunch some numbers. They looked for trends in a massive database containing 45 years’ worth of data on 25,000 companies—some 300,000 separate reports. They grouped companies into three categories: Miracle Workers (best of the best), Long Runners (still great, but at a lower level and for longer) and Average Joes (middle of the road). In the pharmaceutical sector, for example, Merck is a Miracle Worker, Eli Lilly is a Long Runner, and KV Pharmaceutical is an Average Joe.

In time, the authors developed three rules that separated Miracle Workers from the rest. Rule #1: “Better before cheaper.” The best companies don’t compete on price; they focus on value and quality. Rule #2: “Revenue before cost.” Companies that focus on creating revenue, rather than just trying to cut costs, are more successful. Rule #3: “There are no other rules.” Successful companies recognize that everything else in their business is flexible, and while they may make necessary changes, they never lose sight of “better before cheaper” and “revenue before cost” as their overriding strategies.

Although the book grows somewhat repetitive, with case study after case study, these rules do give companies a useful set of guidelines for tough decisions. Whether a company is thinking about making an acquisition, developing a product or starting a strategic risk management program, as long as it keeps these three rules in mind, everything else should fall into place.

Maybe it is really that simple.

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)