The Breakthrough Imperative

Mark Gottfredson, Steve Schaubert

• Publisher: HarperCollins e-books
• Year: 2009
• ISBN:
  9780061869976
• Topic: Betriebswirtschaft
• Subtopic: Verwaltung

Every general manager today—all the way up to the CEO—is expected by his or her stakeholders to achieve new breakthroughs in performance—and fast. Those who don't make visible progress toward that goal within the first year or two will likely find themselves looking for another job. It is precisely because of this growing breakthrough imperative that managers today, whether in corporations or nonprofits, need to get off to a fast start. They don't have time for mistakes or for going back and redoing what they should have done right in the first place.

But, despite the intensity of these pressures, despite the high expectations and short time frames, a number of CEOs and general managers turn in truly exceptional results. How do they meet and exceed the breakthrough imperative? To answer this question, consultants and former managers Mark Gottfredson and Steve Schaubert interviewed more than forty CEOs from both industry and the nonprofit sector, conducted an intensive study of what successful managers do right—and what some do wrong—and drew on their own combined fifty-plus years of experience at Bain & Company, where their insights have consistently been found in the pages of the Harvard Business Review. Together they came up with the four straightforward principles—deceptively simple yet remarkably powerful—that everyone must follow to succeed at achieving breakthrough results:

1. Costs and prices always decline
2. Competitive position determines options
3. Customers and profit pools don't stand still
4. Simplicity gets results

Although seemingly simplistic, mastering these four laws means mastering the basics of great management—a foundation on which to build the rest of one's management strategy. Whether you're managing a small work group or a multinational corporation, a single division or an entire nonprofit, The Breakthrough Imperative presents these core laws of business to help you determine where you are, just how far you can go, and how to get there with stellar results.

APPENDIX 1

Research Methodology

This book is based on data from focused research, surveys, interviews, and analyses. The studies and methods are summarized in this appendix.

ADDITIONAL RESEARCH BASED ON THE PROFIT FROM THE CORE DATABASE

Purpose

To determine whether the CEOs of companies defined as sustained value creators (SVCs) were a significant and systematic factor in determining their companies’ performance.

Method

In preparation for writing his first book, Profit from the Core, our colleague Chris Zook compiled a database for Bain & Company of 1,854 public companies in the G8 economies with sales over $500 million. The database, maintained and updated, was used most recently by Zook in his latest book, Unstoppable, and now contains 1,804 companies. Of these, only 202 qualify as SVCs. As Zook defines them, SVCs are companies with 1995 sales more than US$500 million; compound annual growth rates greater than 5.5 percent for revenue and profit in the years 1995 through 2005; and shareholder return greater than zero over the same period.

Focusing on these 202 companies, we first researched publicly available CEO start dates and departure dates in the years from 1995 to 2005. A total of 413 CEOs led those 202 companies during the period. Next, we examined stock-price performance compared with the relevant incountry index over the span of each CEO’s tenure (or to December 2005, if that came first). On average, we found that the SVC CEOs outperformed their market index by a ratio of three to one.

Our team then investigated whether there were meaningful differences in stock price during a CEO’s tenure. We found that for the first six months of a CEO’s tenure, the SVCs’ stock performance on average tracked the broader index very closely, at a ratio of 1.1 to 1.0. Stock performance then crept up steadily under the same CEO’s leadership, requiring six years to outperform the broader index on average by two to one. It took the full average CEO tenure of nine years for the companies to outperform by three to one.

RESEARCH ON CEO DEPARTURES

Purpose

To identify whether CEOs leaving their company for performance-related reasons had apparently not adhered to one of the four laws.

Method

We analyzed data from Challenger, Gray & Christmas, an executive outplacement firm that tracks CEO departures.1 Of 1,478 total CEO departures from U.S. companies in 2006, we randomly selected 225 for further study. Of these, 38 percent were deemed to be related to the CEO’s performance (including disagreements with the board). That figure was comparable to the rate found in a similar study conducted by the consulting firm Booz Allen Hamilton.2 Booz Allen found that 32 percent of a sample of 357 departures of CEOs who left their jobs in 2006 were performance related or due to disagreements with the board. (Other reasons for departures included mergers, regular transitions such as planned retirements, health issues, and legal issues or wrongdoing.)

We then examined press articles, expert interviews, company Web sites, and other public sources to analyze each of the performance-related departures in greater depth. In 91 percent of the cases we found that CEOs departing for performance-related reasons had not followed at least one of the four laws described in this book, or had not taken actions consistent with the laws. This sample has a 95 percent confidence level that the results are accurate to plus or minus 10 percentage points.

INTERVIEWS WITH CEOS AND GENERAL MANAGERS

Purpose

To gather the wisdom, advice, and lessons learned from a cross-section of the most consistently successful general managers of the last couple of decades.

Method

We developed a long list of managers who had created substantial performance improvement in their organizations, including heads of nonprofits and the mayor of Providence, Rhode Island. We compiled much of this list by polling Bain partners who headed our offices or industry practices about appropriate contacts in their geographies. The full list of interviewees follows.

Gerard Arpey, chairman and CEO, AMR Corp.

Elisabeth Babcock, CEO, Crittenton Women’s Union

Greg Brenneman, CEO, Quiznos; former president and COO, Continental Airlines; former CEO, Burger King

John Chidsey, CEO, Burger King

David Cicilline, mayor, Providence, Rhode Island

Richard Crawford, CEO, The CrawfordGroup; former chairman, Cambridge Industries

Paul Fulton, retired president, Sara Lee Corp., Hanes

Pier Francesco Guarguaglini, chairman and CEO, Finmeccanica S.p.A.

Jim Haas, retired president, National Steel

Ralph Heath, executive vice president and COO, Lockheed Martin Aeronautics

Idris Jala, CEO, Malaysia Airlines

Mano Kampouris, retired CEO, American Standard

Jim Keyes, chairman and CEO, Blockbuster; former CEO, 7-Eleven Stores

Jim Yong Kim, cofounder, Partners In Health

Warren Knowlton, CEO, Graham Packaging; former CEO, Morgan Crucible

Wendy Kopp, founder and CEO, Teach For America

Kathleen Ligocki, former CEO, Tower Automotive; former president, Ford of Mexico

George Lorch, retired CEO, Armstrong

John Lundgren, chairman and CEO, The Stanley Works

Bill McDermott, president and CEO, SAP Americas and Asia Pacific Japan

Jacques Nasser, former CEO, Ford Motor

David Noko, managing director, De Beers Consolidated Mines

Kevin Rollins, former CEO, Dell

Mitt Romney, former CEO, Salt Lake Organizing Committee

Fred Rowan, CEO, Carter’s

Gabe Schmergel, retired CEO, Genetics Institute

Hal Sperlich, former president, Chrysler

Gerald Storch, chairman and CEO, Toys “R” Us

John Taylor, CEO, Borealis

Philip Teel, corporate vice president and president, Northrop Grumman Ship Systems

Henri Termeer, chairman and CEO, Genzyme

Sol Trujillo, CEO, Telstra

Sunny Verghese, group managing director and CEO, Olam International

Jürgen von Kuczkowski, former CEO, Vodafone Germany

Bill Walczak, CEO, Codman Square Health Center

David Weidman, chairman and CEO, Celanese

Mike White, vice chairman, PepsiCo International

Meg Whitman, president and CEO, eBay

SURVEYS OF EXECUTIVES

Purpose

To develop quantitative evidence complementing the qualitative interviews. Our goal was to substantiate some of the key findings with more comprehensive information.

Methods

1. A survey in January 2006 by Bain & Company, in partnership with eRewards, of executives. Responses were received from 183 CEOs, chief operating officers, and business-unit presidents from companies with more than $500 million in annual sales. This detailed performance-improvement survey covered a broad range of industries in North America. It assessed the respondents’ usage of key performance-improvement tools, and it asked their opinions on a variety of issues facing CEOs today.

2. A survey in January 2005 by Bain & Company, in partnership with the Economist Intelligence Unit. Responses were received from 960 executives internationally across industries. This survey was part of Bain’s multiyear research since 1993 on management tools and trends; it was supplemented with follow-up interviews on the circumstances under which various tools are most likely to produce results. One of the findings was that 68 percent of executives globally believe that excessive complexity is raising costs and hindering growth. Among Asian executives, the figure is 81 percent.

ANALYSIS OF PERFORMANCE IMPROVEMENT BY OTHER COMPANIES

Purpose

To examine the decisions and actions underlying substantial performance improvement at successful companies, and, conversely, to discover what had contributed to the underperformance of struggling or bankrupt businesses.

Method

We screened the top 1,000 publicly traded companies from public sources to find companies that had achieved or failed to achieve substantial performance improvement. For companies that passed the screen (outpaced the mar...