Michael Raynor, Mumtaz Ahmed

Exceptional companies all have the same recipe (better before cheaper, revenue before cost) but use different ingredients. In addition to creating superior levels of performance, exceptional companies deliver superior levels of performance for longer than anyone has a right to expect. It seems worth exploring, then, if and how exceptional companies adapt. Is exceptional performance a function of deep moats and thick ramparts, or does it require agility and flexibility to cope with competitors’ attempts to imitate a winning formula, or with the technological, regulatory, or other environmental changes that can render onetime advantages useless, or even turn them into liabilities?

We found that not only were there no patterns between companies from different performance categories, there were no patterns across time within individual companies. So not only did Miracle Workers and Average Joes show no differences in their appetites for M&A, but individual Miracle Workers were just as likely to adopt M&A as to abandon it over time. In short, what mattered when assessing how a behavior affected performance was not the behavior or even its implementation, but the contribution made to a company’s adherence to or deviation from the first two rules. Where Lost It Miracle Workers typically changed in ways that violated the rules, Found It Miracle Workers became more aligned with the rules. Most revealing, Kept It Miracle Workers often showed evidence of the greatest degree of change in their specific behaviors, but always in the service of remaining in alignment with the rules. We conclude from this that exceptional performance demands an ability to change in order to stay the same.

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