This episode explores the elusive nature of sustainable competitive advantage and shares three key principles for organizations to find and maintain it. Featuring insights from experts like Chris Zook, it examines the challenges posed by complexity and offers real-world examples from companies like IKEA, Enterprise Rent-A-Car, and Nike.
points out that it’s elusive for most companies. He notes that less than one in 10 companies even achieve a modest level of sustained and profitable growth over a 10-year period on average.
CHRIS ZOOK: Well, it’s quite interesting. The work in the book Repeatability was really borne of a paradox that we began observing, which was that from a database, we created about 8,000 businesses in the last 25 to 30 years at Bain & Company. We found that only now less than 1 in 10 companies achieve even a modest level of sustained and profitable growth over a 10-year period on average.
And they actually said– and we’d never heard this before– they overwhelmingly said it was managing their time and energy in the face of growing complexity. And when we probed further, it was really a sense that the world is moving faster. I just came from Davos. In one talk after another, I would hear economists, and historians, and even the leader of the forum say that it was almost as if history was happening faster.
And so we began a process of interviewing CEOs, and executives, and building another database of about 200 companies with a lot of their practices and characteristics of their strategies in search of what we call the design principles of enduring strategies.
A simple and great example is Vanguard, the company which, during the financial crisis, amazingly captured 40% of all the free money circulating in the United States. And it’s very interesting.
And if you talk to Andy Taylor, Jr., the son of the founder and CEO, until recently, he says that basically the whole company is built around one measurement, one feedback number, which they call ESQI. It’s a customer loyalty measure of, would you come back or not? And they actually rank order every single one of 8,000 branches every week, publish the data. And if you’re in the bottom section of that group, there are no promotions and no bonuses.
And yet, along the way, Nike developed a repeatable model around a few very simple and clear forms of differentiation to do with performance, and design of materials, and the brand, and their supply chain to Asia, and above all being superb at signing contracts with top athletes of the world, like Roger Federer.
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