Big Winners and Big Losers: The 4 Secrets of Long-Term Business Success and Failure

Big Winners and Big Losers: The 4 Secrets of Long-Term Business Success and Failure

by Alfred A. Marcus
     
 

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What keeps great companies winning, year after year, even as yesterday's most hyped businesses fall by the wayside? It's not what you think — or what you've read. To find the real answers, strategic management expert Alfred Marcus systematically reviewed detailed performance metrics for the 1,000 largest U.S. corporations, identifying 3% who've

Overview

What keeps great companies winning, year after year, even as yesterday's most hyped businesses fall by the wayside? It's not what you think — or what you've read. To find the real answers, strategic management expert Alfred Marcus systematically reviewed detailed performance metrics for the 1,000 largest U.S. corporations, identifying 3% who've consistently outperform their industry's averages for a full decade. Many of these firms get little publicity: firms like Amphenol, Ball, Family Dollar, Brown and Brown, Activision, Dreyer's, Forest Labs, and Fiserv. But their success is no accident: they've discovered patterns of success that have largely gone unnoticed elsewhere. Marcus also identified patterns associated with consistently inferior performance: patterns reflected in many of the world's most well-known companies. Drawing on this unprecedented research, Big Winners and Big Losers shows you what really matters most. You'll learn how consistent winners build the strategies that drive their success; how they move towards market spaces offering superior opportunity; and how they successfully manage the tensions between agility, discipline, and focus. You'll learn how to identify the right patterns of success for your company, build on the strengths you already have, realistically assess your weaknesses, and build sustainable advantage one step at a time, in a planned and logical way.

Editorial Reviews

Soundview Executive Book Summaries
Secrets of Long-Term Business Success and Failure
After studying the performance metrics of the 1,000 largest U.S. corporations, strategy expert Alfred A. Marcus has turned up the top 3.2 percent of the companies that have outperformed their industries for an entire decade, from 1992 to 2002. In Big Winners and Big Losers, Marcus shows how these firms create the business strategies that drive their success. He also describes the characteristics of the companies that failed to outperform their industries and offers advice that other firms can use to avoid joining these losers at the bottom of the heap.

What makes a firm a winner? Marcus writes, “Big winners base their success on being in sweet spots and having focus, discipline and agility.” Likewise, he adds, big losers fail because they are in “sour spots. They have the traits of diffuseness, ineptitude and rigidity.”

To get the information that led to the conclusions he reaches in Big Winners and Big Losers, Marcus enlisted the help of more than 500 managers with more than seven years experience who worked for more than 35 multinational companies, including Target, Best Buy, American Express, Deloitte Touche, Unisys and United Health. The reports written by these managers were used to create the initial material from which Marcus extracted the insights he develops and reveals.

Winning and Losing
In the first part of Big Winners and Big Losers, Marcus explains why some firms continuously win and others regularly lose. He also describes the methodology he used to determine which companies in his study were winners and losers.

The second part of Big Winners and Big Losers provides an in-depth analysis of the winners, including descriptions of the sweet spots they occupied and the ways in which they demonstrated the agility to move into these spots, the discipline to protect these spots, and the focus to exploit and extend these spots.

In the third part of his book, Marcus describes the sour spots that the losers found themselves in, and points out how they were too rigid to move out of these spots, too inept at defending the positions they found themselves in, and unable to extend and exploit them. He also explores two companies that successfully created turnarounds and offers a list of best practices companies can use to avoid the mistakes of the losers.

Sweet Spots
Marcus writes that a sweet spot that a big winner worked to create is a noticeably better position than the position of the company’s competitors. This is a position that is “virtually uncontested,” he adds.

You know you are in a sweet spot when:

  • You stay close to your customers.
  • You are intimate in your understanding of their needs.
  • You cater to groups of customers whose desires you know well and with whom you have developed trusting relationships.
  • You build your business around a clear value proposition for the customer groups you know well.

Regularly delivering more value to your customers than your competitors is the key to being in a sweet spot, Marcus explains.

The Market for Painkillers
One example of the search for a sweet spot is the hunt for an effective, gentle pain reliever. At one time, Excedrin, Anacin and Bufferin were in a high-effectiveness, low-gentleness category. All three pain relievers were better than aspirin, but Tylenol held the gentleness space to itself, which became the source of Tylenol’s strength. Marcus explains, “If someone were to find the truly highly effective, extremely gentle pain reliever, this person would be in a sweet spot, a truly unassailable position until it could be matched by a competitor.”

Marcus identifies nine big winners that keep on winning. These include Dreyer’s, Forest Labs, Ball, Family Dollar and Activision. After detailing what they did right to consistently stay in the sweet spot, he describes how other companies can do the same things that kept these companies thriving. Alternatively, he offers the tales of nine losers, including Snap-On, Goodyear and The Gap, to describe what others can do to avoid the sour spots these companies found themselves trapped within.

Why We Like This Book
By weeding out the rare winners and losers from the 1,000 largest firms, and identifying what they did right and wrong in their pursuit of competitive advantage, Marcus has performed a great service for all companies both large and small. With numerous recommendations to go with his extensive research, he offers a strong base on which others can grow and prosper. Copyright © 2006 Soundview Executive Book Summaries

Product Details

ISBN-13:
9780131451322
Publisher:
Pearson Prentice Hall
Publication date:
10/28/2005
Pages:
400
Product dimensions:
6.20(w) x 9.30(h) x 1.40(d)

Read an Excerpt

Preface

Companies that keep winning are rare. What maintains their momentum and accounts for their ongoing success? This book compares firms that have achieved long-term success with firms that have experienced persistent failure. It provides four secrets that explain why the winning firms have done so well. From the history of the winners, I extract the critical attributes that contributed to their performance. Each firm had a distinct pattern. Being a big winner means carrying out (i) a well-executed niche strategy that achieves a balance between (ii) agility, (iii) discipline, and (iv) focus.

Managing the tension among such attributes is not easy. Big winners bring together opposing traits. Other firms can imitate the individual traits of winning companies, but they cannot match the overall pattern. Similarly, big losers do not fail because of one or two bad qualities. Their poor performance is a consequence of a combination of many bad attributes.

Each trait that this book brings to light provides a valuable lesson in itself. Practicing managers have much to learn from this breakdown of the qualities that contribute to the creation of long-term advantage and disadvantage. The main challenge that they face, however, is in managing the tension between contrasting traits—a sweet spot and agility on the one hand, and discipline and focus on the other. The degree to which you can manage this tension influences the extent to which you can achieve long-term success.

Being a long-term winner—a dynasty rather than a mere one-time victor—is hard. From 1992 to 2002, few firms hit this mark. Only about 3 percent of the 1,000 largest U.S. corporations outperformedtheir industry's average market performance. About 6 percent underperformed this average. More firms performed consistently poorly than consistently well. Companies that are big winners generally operate under the radar. They are relatively unknown. They include such firms as Amphenol, Ball, Family Dollar, Brown & Brown, Activision, Dreyer's, Forest Labs, and Fiserv. Their story has yet to be told. In comparison, companies that suffer from sustained competitive disadvantage are better known. They include such familiar names as Goodyear, the Gap, Safeco, Hasbro, and Campbell Soup.

This book reveals the secrets of the long-term better-than-industry performance of the winners. It shows distinct patterns in the 1992 to 2002 results. The differences in outcome are not random or a matter of mere chance. The circumstances that the big winners and big losers faced were similar. What explains the differences in performance is that the winners pursued and executed different strategies than the losers. In this book, I reveal how the traits of the big winners came together into larger patterns made up of a sweet spot, agility, discipline, and focus. Firms that achieved advantage wove together these elements into larger wholes. The positive aspects of the separate components supported and reinforced each other. Similarly, the negative traits of the losing firms supported and reinforced each other.

The takeaway for managers is to build your advantage one by one in a planned and logical way in which you start by understanding your company's existing traits. But you cannot stop there. You must continue with an awareness of how these separate traits fit together in broader and more comprehensive patterns. Do not lose sight of the fact that the more comprehensive patterns that create advantage and disadvantage bring together contradictory elements. You have to combine a sweet spot, agility, discipline, and focus, and you must avoid a sour spot, rigidity, ineptness, and diffuseness. This book highlights these patterns—on the one hand, a pattern of advantage that consists of a well-defined market niche achieved through agility, discipline, and focus; and, on the other hand, a pattern of disadvantage that rests on a poorly defined market niche sustained by rigidity, ineptness, and diffuseness.How This Book Was Written

I enlisted the support of more than 500 practicing managers to write this book. They worked for such well-known multinational companies as Target, Best Buy, Guidant, Cargill, General Mills, Medtronic, Wells Fargo, American Express, 3M, Ecolab, Boston Scientific, Honeywell, U.S. Bancorp, Piper Jaffray, Carlson Companies, West Group, Northwest Airlines, St. Paul Companies, Seagate, ADC, Intel, United Defense, Johnson Controls, Deloitte Touche, Supervalue, Polaris, Rosemount, Eaton, RBC Dain Rauscher, Unisys, Home Depot, Allina, Toro, United Health, Thrivent, Donaldson, and Ernst and Young.1 The managers had more than seven years of work experience. Teams of five to six managers wrote reports on two firms. They compared characteristics of companies that achieved long-term success and companies that endured long-term failure. One of the companies substantially outperformed the average stock market performance of its industry for 10 years, and the other underperformed the average stock market performance of its industry for the same period. (See below for a list of these firms.)

Sector

Winner

Loser

Technology

Amphenol

LSI Logic

Manufacturing/appliance

SPX

Snap-On

Software

FiServ

Parametric

Food

Dreyer's

Campbell Soup

Drugs/chemicals

Forest Labs

IMC Global

Manufacturing/industrial

Ball

Goodyear

Financial

Brown & Brown

Safeco

Retail

Family Dollar

Gap

Entertainment/toys

Activision

Hasbro


The managers explained the reasons for the former company's sustained success and the latter company's sustained failure. To explain this difference, they examined the evolution of the companies' strategies. They obtained information from annual reports—in particular, the first section where executives discuss their strategy—and consulted other sources. A list of the sources on which they drew is found at the end of this book.

Five groups of managers were assigned to each of the nine company pairs. They addressed the following questions:

  • What were the external challenges the companies faced?

  • What were the internal strengths and weaknesses the companies had to meet these challenges?

  • What moves did the companies make?

  • Why were the moves of one of the companies more successful than the moves of the other?

The managers prepared 42 reports of about 30 pages each on nine company pairs. Following is an outline of a typical report.

Typical Report Outline

Explaining Sustained Competitive Advantage and Disadvantage: Strategies for Prolonged Business Success

  • The Executive Summary states what you found. What distinguishes the companies? Why has one done so much better than the other?

  • The Introduction should include a brief description of the companies, including details about their history, mission, goals, objectives, location, number of people employed, and main products and markets.

  • Relevant performance statistics should be provided. Relevant is the important word.

  • Identify the critical competitive challenges that the companies faced. How do the challenges differ?

  • Identify the key internal strengths and weaknesses the companies had. How do these differ?

  • Summarize the main moves the companies made. How did the companies choose to respond to the challenges they faced and why?

  • Do an analysis of why, based on the strategies carried out, one company performed so much better than the other.

  • Conclude and speculate on what you think will happen in the future.

  • A reference page is required.

  • Appendixes are permitted.

The managers made oral presentations based on initial drafts of their reports. During these sessions, they were subject to criticism. They were challenged to sharpen their conclusions about the traits that contributed to sustained competitive advantage and disadvantage.2 Their reports were supposed to be analytical, not descriptive. The aim was to develop a theory of why some multinationals thrived in the long term, whereas others did not.

This project started in the fall of 2002. By the spring of 2003, I had listened to three rounds of oral reports and felt I was hearing similar themes—that the big winners did much better than the big losers because (i) they occupied sweet spots, (ii) they had the agility to move into these spots, (iii) they had the discipline to protect these spots, and (iv) they had the focus to exploit and extend these spots. The big losers had the opposite characteristics. (i) They were in sour spots, (ii) they were too rigid to move out of these spots, (iii) they were inept at defending positions in which they found themselves, and (iv) they were not able to extend and exploit positions they occupied. I asked the last two groups of managers for challenges to this theory so that I could fine-tune and improve it.

The reports the managers wrote were the raw material I used to write this book. I carefully read the reports again and again and searched for consensus views. Recall that for each company pair, I had five reports.3 I considered the reports the managers wrote to be reliable because they were written by competent practitioners who had been trained in the concepts and methods of strategic management. As a check on the findings, I did not accept information from a single report as valid unless I had additional confirmation. Through these means, I tried to eliminate errors of fact or interpretation.

Most of the insights in this book derive from the reports that the managers wrote. Their names and the companies they analyzed are listed in the Acknowledgments. The reports pointed me in certain directions, but I take full responsibility for where I ended up. The conclusions are my own. I presented the results and obtained feedback at a number of venues: Business Policy division sessions at the Academy of Management and seminars at the University of Minnesota, Arizona State University, Hong Kong Technical University, Hebrew University, the Technion, and Tel Aviv University. Both Prentice Hall and Wharton provided detailed critiques of early drafts of this book, to which I responded with substantial rewrites.4

This book is organized as follows. The first chapter explains why some firms continuously win and others regularly lose. Chapter 2 gives details on how the winning and losing companies were chosen. Chapters 3 through 7 provide an in-depth analysis of the winners—the sweet spots they occupied and the ways in which they exhibited agility, discipline, and focus. Chapters 8 through 12 are a parallel analysis of the losers—the sour spots they found themselves in and how they showed rigidity, ineptness, and diffuseness. Chapter 13 summarizes the main lessons. It is a code of best practices. Chapter 14 is essential reading if you want to achieve a turnaround. It tells you what to do to start a take-off and avoid a nosedive.

All along, lessons are learned and specific advice is given on what a company can do to become a big winner and avoid being a big loser. This advice is concrete, specific, and actionable. It is among the most important takeaways you will get from this book.

  1. The managers were enrolled in programs at the University of Minnesota—either the part-time MBA program at the Carlson School of Management or the part-time Master's of Technology (MOT) program at the Center for Technology Development and Leadership. They were taking a course in strategic management, where I introduced them to classical analytical techniques used in strategy, such as five-force analysis and product positioning. See Alfred A. Marcus, Management Strategy: Achieving Sustained Competitive Advantage (New York: McGraw Hill-Irwin, 2005). The managers applied the techniques to pairs of companies prior to analyzing the big winners and losers. The companies they analyzed were: Intel and AMD, Barnes and Noble and Amazon.com, Dell and Gateway, Best Buy and Circuit City, Morgan Stanley and Charles Schwab, Time Warner and Disney, Coke and Pepsi, Monsanto and Dupont, and Wal-Mart and Spartan Foods. See Alfred A. Marcus, Winning Moves: A Casebook (Lombard, IL: Marsh Publications, 2005)

  2. I also asked for a review and comparison of other books that claimed to have found the secrets of winning and losing companies. (See Appendix A.)

  3. I used the reports as the jumping-off point for my observations. I looked for recurring themes and coded and grouped common elements.

  4. In the fall of 2004, I validated my findings by having a fresh group of managers analyze 10 new company pairs.

Sector

Winner

Loser

Aerospace/defense

United Tech

Raytheon

Chemicals

Cytec

International Flavors

Computer software

Veritas

Compuware

Food production

Pilgrim's Pride

Tyson

Food and drug

Whole Foods

Winn-Dixie

General merchandisers

Dollar General

Saks

Health care

Omnicare

Magellan

Home equipment

Fortune Brands

Newell Rubbermaid

Motor vehicles and parts

Thor

Exide

Wholesalers diversified

Watsco

Audiovox



© Copyright Pearson Education. All rights reserved.

Meet the Author

Alfred A. Marcus is Edson Spencer Chair of Strategic Management and Technological leadership at the University of Minnesota, Carlson School of Management, where he has been on the faculty since 1984. At Carlson, he teaches and conducts research in strategic management, macroeconomics, business ethics, and business and the natural environment. He has also served as Visiting Professor at MIT's Sloan School of Management. Marcus is author or coeditor of eleven books and has published numerous articles in journals, such as the Strategic Management Journal, Academy of Management Journal, Academy of Management Review, Organization Science, California Management Review, and The Journal of Forecasting. He has consulted and worked with many major corporations including 3M, Corning, Excel Energy, General Mills, and IBM.

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