The #1 Trick to Business Success

The #1 Trick to Business Success

Every time I pick up a book that is praised by the business world, I think to myself, “Great, an incredible realization that will make me wildly successful is only 250+ pages away.”

Yet, I still find myself wildly mediocre.

The tricks for success always revolve around the same mentality of “Doing The Right Thing.”

Haven’t you heard them all before? – “Make the right decisions with the right amount of risk,” “hire the right people,” “only take the right deals,” etc.

Have you ever found yourself saying, “I really want to make the wrong decisions and hire the wrong people?” If so, consider this your wake-up call. You have just reached an incredible realization within 120 words and my job here is done.

So what is the trick for success? Well, if you’re already in the mentality of “doing the right thing,” then I’ve come to this conclusion:

There isn’t one.

A trick is an illusion—a break from reality—and if you think you know the trick for success, then you’re better off writing a book about it than implementing it yourself. What if—instead of tricking your way to the top—you set rules for yourself along the way?

Here are three to start with:

  • Rule #1: Better before cheaper
  • Rule #2: Revenue before cost
  • Rule #3: There are no other rules

small__7369580478All tricks aside, these are three statistically proven tactics that are common among all successful companies traded on U.S. Exchanges from 1966 to 2010. The Harvard Business Review (HBR) published an article in April 2013 that tackled the problem of the typical truism advice riddling the business world and let the financials give the advice.

They defined “success” through measured performance regarding ROA, eliminating the flukes, lucky-ones and outliers that are often praised for their total shareholder return. Shareholder return often-times reflects external factors, such as investor and stock market expectations, and not the internal/ fundamental performance of the company. In fact, out of the 25,000 companies examined, only 174 qualified as truly exceptional.

After comparing all of the data, these three rules surfaced as commonalities among all of the companies. It’s important to note that these rules were non-negotiables at each company and they never wavered from these tactics.

Rule #1: Better before cheaper

In the long run, there will always be a faster gun in town. By offering a lower price or relying on discounts as a differentiation from competitors, your clients will become loyal to low prices and not your brand. This doesn’t mean that price positioning isn’t important, but remember “better” comes before “cheaper.” Focusing on non-price differentiators make your company “better” than competitors and become the target of brand loyalty.

Rule #2: Revenue before cost

Exceptional companies achieved profits through focusing on higher prices or greater volume. This shouldn’t be a foreign concept to any business owner, however the overwhelming majority of companies that fell behind exceptional companies focused too heavily on cost cutting rather than revenue raising. Cost leadership failed to provide a profitability advantage for those who stuck to it. In the long run, the focus on higher revenues drove out inefficiencies and lowered costs.

Rule #3: There are no other rules

HBR stressed there are other factors that affect performance, but they simply “couldn’t find consistent patterns of how they mattered.” They noticed that even when exceptional companies drastically changed critical determinants of performance, they kept in stride with the two guiding rules. Persistently following these rules were critical to all of the exceptional company’s success.

What do you think of these rules? Are there any that you would add? Do you agree? Let me know in the comments section!

photo credit: FutUndBeidl via photopin cc

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