Once you set aside the anecdotes about what makes an organization more innovative, it can be difficult to pinpoint exactly what works – and what can lead to obsolescence. New research on 97 consumer goods companies, however, now sheds a light on what precise actions lead to exceptional performance.
For many CEOs, there isn’t a big moment –possibly accompanied by thunderclaps and a total eclipse – which lets them know without a shadow of a doubt that their organization must shift gears or die.
Instead, it’s more like that old story about the boiling frog. If you put it in boiling water, the story goes, the frog will jump out before it’s boiled alive. But by putting it in cold water and slowly raising the temperature, the frog fails to perceive the danger and is slowly cooked to death.
Many CEOs, unfortunately, may find themselves in slowly heating water. Their organization is failing to be innovative or not adopting new technologies fast enough. Customer preferences change, and the organization begins to falter as it fails to adapt.
That’s why Deloitte Consulting decided to tackle the consumer goods industry, and look at 97 organizations in both asset profitability and revenue growth. The goal: to find the ones that consistently outperformed peers over a decade and learn exactly why they were successful, says Jacob Bruun-Jensen, principal in the U.S. Strategy service line Monitor Deloitte.
In the study, Deloitte identified 25 companies that were dubbed “exceptional winners.”
“What is it they were doing? We really wanted to understand,” he says.
After carefully combing through the data, here is the picture that emerged of these exceptional companies:
- They focus “intensely” on what they do best. The key for these organizations is that they created a coherent business and operating model.
- They drive value from three dominant business types. Those are operational excellence, product/brand leadership or customer solutions.
- They develop a set of critical and distinctive capabilities that work together as part of a self-reinforcing business model.
- They drive greater maturity in the distinctive capabilities than their peers.
Bruun-Jensen says there were some surprising results.
“The consumer goods industry is a big industry, and they don’t change rapidly,” he says. “But we found through our performance analysis that this is something that can be achieved across different companies. What matters is coherence and sticking to it. Any company can deliver exceptional performance. They don’t have to accept low performance.”
Bruun-Jensen says that as many companies feel the pressure of a rapidly-changing marketplace, they may be trying different things “in bits and pieces.” Based on the Deloitte research, that can be a mistake.
“If you’re good at something, stick to it,” he says.
But what exactly is the coherent business model that is a cornerstone of success? Deloitte’s research finds that to achieve it, organizations must: reconsider current models; prioritize five to six “mutually reinforcing and distinctive capabilities”; define what it will take to be world-class in those capabilities; and rapidly transform and test them through a series of “minimum viable transformations.”
“It’s surprising the number of companies that can’t articulate their dominant business model. They don’t know what distinctive capabilities they need to build,” he says. “If they decide to double down on something and put all their money into it, then be word-class at it. Test it and then learn rapidly. In the future you’re going to have to be much more agile.”
One of the companies cited as a case study by Deloitte for its “relentless focus” on its product/brand leadership is Monster Beverage Corp. The company has seen revenues rise from $92 billion in 2002 to $2.25 billion in 2014 and today is the second-largest energy drink maker in the world. Over the last decade, the company has delivered average annual revenue growth of 34%, research shows.
Instead of zeroing in on manufacturing and distribution, Monster has concentrated on marketing. Production is out-sourced to third-party manufacturers, on short duration agreements, while distribution is handled by full-service distributors, research finds.
It’s clear where Monster’s priorities are when examining its workforce: two-thirds of its more than 1,200 fulltime workers are in sales and marketing and the company has a chief brand officer.
“The beauty of this is that when you’re very focused on something – like marketing – then that helps you attract and retain the best talent, because that’s who the best and the brightest want to work for,” Bruun-Jensen says.
Another case study, Nu Skin, demonstrates how to be successful with another part of the exceptional performance equation: distinctive capabilities.
Nu Skin’s CFO Rich Wood says that what really distinguishes the business “is the deep and very intimate tie that we developed with our sales force.”
The more than 100,000 Nu Skin sales leaders are given tools and technology to be efficient, along with “seamless compensation” and education. Those efforts have allowed the company to cut its global new product roll-out from three years to less than one year.Posted in Agility, Business Innovation, Strategy | Tagged consumer goods, deloitte, monster beverage, Nu Skin, strategy