The Journey to Exceptional Performance

When it comes to corporate financial performance, we typically think in absolute terms, measuring ROA in percentage points. We are less accustomed to thinking of corporate performance in relative terms, but knowing a company’s relative performance is essential to setting and achieving performance improvement targets and, eventually, exceptional performance.

Michael E. Raynor

When setting priorities it is helpful to distinguish between absolute and relative performance. Absolute performance sets the minimum requirements — are you in the red or black, are you growing or contracting? Relative performance, expressed in percentile rankings, tells you where you have the most room for improvement and sets an upper bound on what is reasonable for you, given how well you’re already performing … [ Read more ]

Rob Del Vicario, Michael E. Raynor, Mumtaz Ahmed

Calculating a company’s relative performance … is not straightforward, and for at least two reasons. First, we wish to capture the performance of the company that is a function of those factors most subject to the company’s control. When it comes to assessing a company’s historical performance, we typically wish to separate out the material impact that year, industry, and company size have on profitability. … [ Read more ]

A Way to Know If Your Corporate Goals Are Too Aggressive

For better goal-setting, it will help to understand where financial targets typically come from. Often, they’re based on past performance. But a company’s recent track record says nothing about how much its performance could or should improve; what’s needed is a useful assessment of a company’s probability of future success. One way to think about the likelihood of hitting a given performance increase is to … [ Read more ]

Michael E. Raynor and Mumtaz Ahmed

Our frustration with most success studies is not that any particular directive is wrong. Rather, somewhat ironically, it is that all too often many researchers offer prescriptions that could never be wrong; that is, their claims cannot be proven to be false.

Performance Can’t Be Measured by Company Growth Alone

When setting priorities it is helpful to distinguish between absolute and relative performance. Absolute performance sets the minimum requirements — are you in the red or black, are you growing or contracting? Relative performance, expressed in percentile rankings, tells you where you have the most room for improvement and sets an upper bound on what is reasonable for you, given how well you’re already performing … [ Read more ]

Michael E. Raynor

Explanatory power is a red herring when the objective is predictive accuracy.

Michael E. Raynor

I know of no systematic attempt to demonstrate the efficacy in use of any framework described in any major success study. In the absence of hard evidence, it is far more likely that whatever benefit practitioners might have perceived or realized has been the consequence of some or all of a form of placebo effect (you expect it to help, so you perceive that it … [ Read more ]

Michael E. Raynor

The next time someone offers you advice, ask yourself these two questions: Can I imagine the opposite ever making sense, and will I know if I’ve acted on it? If the answer to either one is “no,” you’re at grave risk of being led astray.

Michael E. Raynor

[Steve] Jobs, for all his impact, was still only one person. In extracting general principles from his career as a whole, we have precisely one data point with which to work. And you can draw any line you want through a single data point.

Michael E. Raynor

Learning something that is both new and true seems to be extraordinarily difficult only when it is extraordinarily important.
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In the words of one commentator, our rational mind is a mouse riding, and attempting to steer, the elephant that is our emotions. Since that elephant, even when entirely even-tempered, can wreak havoc with our rational intent, we must—at the risk of getting all new … [ Read more ]

Michael E. Raynor

If deductive reasoning were all it ever took to reach a correct conclusion, there would be far fewer bad decisions. The problem is, far too often the facts are either ambiguous or incomplete in ways we cannot see until it is too late. When we apply reason to unwittingly incorrect or unknowingly under-specified premises, we end up with precise, convincing, and completely wrong conclusions. It’s … [ Read more ]

Michael E. Raynor

Let’s keep in mind that for anything worthwhile, how we get it is often more important than the getting itself. In other words, how we make the numbers matters as much as whether or not we make the numbers. The numbers should be only one of the things we hope to make; the plan must count, too, and sacrificing the plan to the numbers is, … [ Read more ]

Michael E. Raynor

“Innovation” means more than just “new”—it means breaking a constraint, doing what had previously been, at best, only imaginable. Going beyond the current limits of the possible demands a suite of organizational tools that, like many types of medication, can have near-miraculous effects but insidious side effects. Indeed, freedom from strategic, financial, and operational constraints can be crucial to breaking new ground, but it can … [ Read more ]

The Journey to Exceptional Performance

When it comes to corporate financial performance, we typically think in absolute terms, measuring ROA in percentage points. We are less accustomed to thinking of corporate performance in relative terms, but knowing a company’s relative performance is essential to setting and achieving performance improvement targets and, eventually, exceptional performance.

Editor’s Note: another excellent entry in Deloitte’s Three Rules research series; this one offers fairly intuitive … [ Read more ]

Different Temptations, Same Rules

Do the Three Rules of exceptional performance apply to smaller companies? Differences in size and ownership structure, as well as resources and the demands of explosive growth, can make for a very different set of pressures and opportunities.

Found in Translation: The Lingua Franca of Exceptional Performance

The three rules that provided the title for Raynor and Ahmed’s recent book on exceptional performance are based on the large-scale and detailed study of American corporations. But do these findings mean anything outside of the American context? Do they need to be adapted? Are they even relevant?

Three Rules for Exceptional Performance

Maybe it’s time to have a look behind the generally accepted rules for successful, sustained performance. As readers will learn, and as these authors write, the rules that really drive companies to superior performance are quite different than what many of us have been led to believe.

Editor’s Note: an especially good read for the authors’ critical look at the flaws of most popular business … [ Read more ]

Explanations vs. Predictions

Our curiosity can usefully be seen as inquiries into two sorts of questions: Why/how did that happen? and, What will happen next? The former captures our desire to explain events; the latter addresses our need to predict them. Where does management science fall in this explanation/prediction space? I’m increasingly of a mind that providers of theories of management are often unwittingly in the explanation game … [ Read more ]

Advice on Good Advice

Identifying the drivers of superior long-term performance is a sufficiently fundamental question to have spawned a genre of business books. These “success studies” seek to uncover the causes of success by studying companies that have succeeded.

What do we have to show for the collective efforts of the researchers in this space? Rather less than one might hope, I fear. The reason lies not in the … [ Read more ]