A Repeatable Formula for Success

March 16, 2010
Five design principles characterize the most successful companies, Bain says.

Profitable growth in an unstable economic recovery. That's what companies are looking for as even the best have been severely tested over the past few years. To achieve that level of success, companies must be hyper-vigilant in maintaining their focus and creating repeatable formulas for success, say Chris Zook and James Allen, senior partners at Bain & Co. and co-authors of Profit from the Core: A Return to Growth in Turbulent Times. The 2001 book recently was re-released with findings from a 10-year study by Bain of more than 2,000 companies.

One warning that emerges from the study results: Don't over-invest in the weakest businesses to make them stronger while neglecting the stronger businesses and assuming continued profits. More often, it's the stronger business that has the greatest opportunity for growth, Bain says.

Five principles help successful companies create a repeatable formula to remain focused and profitable, according to Zook and Allen. The principles are:

  • Have a well-defined business core and understand how you have made it work for you. The authors stress that the business core is not necessarily so narrowly defined as a company's primary product or service, but can include four to seven assets that may include such intangibles as brand and talent. That said, "Most strategic errors come from inadequate self-awareness of the core," Zook states.
  • Have up to 10 non-negotiable principles about the business.
  • Have a strong bias toward distributed leadership. That means fewer layers of management.
  • Have a strong, closed feedback loop system to keep information coming in from customers.
  • Keep the number of key operating measures small. Be sure everyone at all levels understand those measures and believe in them.

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