Harvard Business Review, HBR, recently posted a very interesting article on what makes companies successful “Three Rules for Making a Company Truly Great” http://hbr.org/2013/04/three-rules-for-making-a-company-truly-great/ar/1 Their metric was Return On Assets (ROA). They looked at over 25,000 companies from 1966 to 2010. “After repeatedly trying and failing to isolate measurable behaviors that were consistently relevant to success, the authors [of the study] shifted their emphasis away from what these companies did, to hypotheses about how they thought. They realized that the choices these companies had made were consistent with three seemingly elementary rules”. Three rules for success are:
- Better before cheaper—in other words, compete on differentiators other than price.
- Revenue before cost—that is, prioritize increasing revenue over reducing costs.
- There are no other rules—so change anything you must, to follow Rules 1 and 2.
So there are three rules and the 3rd one doesn’t count!
As a salesperson I love these rules and as a business owner I appreciate the credulity of statistical research. Let’s look at the first rule.What would a company focus on if it wanted to differentiate its product or service from the competition? Branding, marketing and sales, will help to position your company’s offerings based on value and not price. Com-modification of a company’s product or service is death. And who has the most influential role on how your service or product is differentiated? The salesperson. I see rule one as the importance of positioning the company to provide the most value to the customer or client. Quality and value are how you separate your product or service from the competition. Nothing new there, but statistical recognition of what we all knew to be right is satisfying, and from Harvard no less.
Now, revenue over reducing costs. I like this one too; it’s true that reducing overhead or fixed costs, brings money directly to the bottom line. But, for a company’s long term benefit it is more important to raise revenues then to focus on cutting costs. Who yagonna call if you need more revenue? Salespeople On Demand! So that’s it folks, irrefutable proof from one of the world’s smartest institutions. It’s true, it all starts with the sale, but now we can say,“sales is the differentiating factor in determining if a company is going to be considered good for it’s investors, or great” and we got proof.