Realizing the High Performance Enterprise
Pellet, Jennifer, Chief Executive (U.S.)
What are the commonalities among companies that achieve enduring success? And how do you instill them at your organization?
Mention high performance enterprise and the usual suspects come to mind. Microsoft, for its culture of innovation; Wal-Mart, for its revolutionary distribution system; Toyota, for its production system; and Dell, for continually streamlining its supply chain, are among them. But the continuing success of these behemoths goes beyond any single defining achievement. In short, success that endures for decades rather than years is indicative of a deeply instilled and carefully refined mix of competencies and skills that allows an organization to unleash its full potential.
That there is no silver bullet to sustainable success won't come as a news flash to CEOs. Nor will the fact that the specific solutions most widely credited for delivering consistent top-line growth and shareholder return are often sophisticated processes tailored to a company's industry and competitive position within that industry. And yet most high performing enterprises share common characteristics and behaviors that predispose them to success. In fact, those characteristics and behaviors translate across industries, as well as across the globe, agreed CEOs gathered for a recent roundtable cosponsored by Chief Executive and Accenture.
After a three-year study of data from hundreds of companies, the consulting firm Accenture dubbed this predisposition "competitive essence," a quality exhibited by the one company out of 10 that outperforms its competitors for a decade or more. "Competitive essence has three components: market focus and positioning, distinctive capabilities, and performance anatomy," said Vernon Ellis, international chairman of Accenture. Distinctive capabilities refer to mastering various functions, while performance anatomy refers to the organizational characteristics that support that capability, explained Ellis. "Each is important, but even more important is that they're kept in balance, aligned with one another, and constantly renewed."
Procter & Gamble CEO A.G. Lafley agreed. "What I think about all of the time is whether our goals, strategies, structure, systems, culture and leadership are all on the same page and growing in the same direction," he said. "It sounds easy, but over the past 30 years I've found it difficult-difficult at the country operating unit level, difficult at the category operating unit level, and very difficult at the company global strategy and operating level. But if you can achieve it, you have a much better chance of delivering consistent, sustainable growth."
For P&G, alignment is reinforced by a customer-centric theme that runs through every aspect of the company's operations. Where once the company relied upon its muscle as a major player to jam store shelves with a dizzying array of popular brands like Crest or Tide, today emphasis has shifted to getting close enough to consumers to create brand new products. "We spend an inordinate amount of time, money and resources on truly understanding consumers of everyday household and personal care products," Lafley noted. "The most valuable stakeholder at P&G is a loyal consumer of one of our brands or product lines."
Beating Back Commoditization
In a business environment increasingly characterized by rapid commoditization, commitment to innovation is ever more critical-and P&G evidences that in spades. The company's R&D spending tops that of the next five competitors combined. (see sidebar, page 48.) But equally intrinsic to its success is its ability to monitor competition and maintain a competitive edge.
"When I joined the company in the mid-'70s, we looked at branded competition from the Unilevers, Nestles, Colgate-Palmolives, and Kimberly-Clarks of the world," explained Lafley. "But that's just one layer of competition today. Now we have other layers in retailer brands and private labels and in the entrepreneurial companies rising in Brazil, India, Mexico, Eastern Europe, and China. …