The ultimate competitive advantage: secrets of continually developing a more profitable business model

398 Pages·2003·1.27 MB·English

by  Donald Mitchell

The Ultimate Competitive Advantage: Secrets of
Continually Developing a More Profitable Business
Model
by Donald Mitchell and Carol Coles ISBN:1576751678
Berrett-Koehler Publishers © 2003 (310 pages)
Filled with detailed new knowledge, questions and
management processes, combining the most
successful companies’ latest methods.
Table of Contents
The Ultimate Competitive Advantage— Secrets of Continually
Developing a More Profitable Business Model
Foreword
Preface
Introduction - Build Market Leadership and Prosperity
Prologue - Profiles in Business Model Innovation
Part One - The Most Productive Areas for Business Model
Innovation
Chapter 1 - Increase Value Without Raising Prices and Costs
Chapter 2 - Adjust Prices to Increase Sales Profitably
Eliminate Costs That Reduce Customer and
Chapter 3 -
End-User Benefits
Part Two - Provide Sustained Benefits for All Stakeholders
Further Improve Your Business Model and Build
Chapter 4 -
a Buffer for Lean Times
Chapter 5 - Share Benefits Fairly with All Who Create Them
Part Three - Expand Business Model Innovation
Start Business Model Innovation Ahead of
Chapter 6 -
Competitors and Stay Focused
Enhance Your Organization’s Ongoing Business
Chapter 7 -
Model Innovation Capability
Part Four - Pursue Higher-Potential Business Model Improvement
Focus on the Areas of Highest Potential Growth
Chapter 8 -
and Profitability
Chapter 9 - Expand the Benefits You Provide and Share
Epilogue - Greater and Longer Lasting Benefits
Index
List of Sidebars
Back Cover
With The Ultimate Competitive Advantage, the authors have
drawn on their proprietary experiences with and knowledge of
top-performing small to large companies and nonprofits to raise
CEO and company standards again. They show how all
organizations can continually reinvent themselves to build
increasing competitive advantages while improving growth and
profitability. In doing so, they cite previously secret lessons
from top-performing business leaders to guide you.
About the Authors
Donald Mitchell is CEO and chairman and Carol Coles is COO
and president of Mitchell and Company, a strategy consulting
firm they cofounded in 1977. They have contributed to many
business model innovations, including more profitable ways to
gain market share, adjust prices, reduce costs, add new
customer benefits, improve customer and product mix, lower
costs of capital, increase stock-price multiples, attract more
supportive shareholders and anticipate stock-market reaction
to corporate decisions. Mitchell and Coles are coauthors of The
2,000 Percent Solution (with Robert Metz) and The Irresistible
Growth Enterprise
.
The Ultimate Competitive Advantage— Secrets
of Continually Developing a More Profitable
Business Model
Donald Mitchell and Carol Coles
Copyright © 2003 by Donald Mitchell and Carol Coles. All rights
reserved. No part of this publication may be reproduced, distributed, or
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Library of Congress Cataloging-in-Publication Data
Mitchell, Donald, 1946–
The Ultimate Competitive Advantage : secrets of continually developing a
more profitable business model / Donald Mitchell, Carol Coles.
p. cm.
Includes bibliographical references and index.
ISBN 1-57675-167-8 (alk. paper)
1. Competition. 2. Strategic planning. 3. Industrial management. I. Coles,
Carol. II. Title.
HD41.M57 2003
658.4'012—dc21
2002190856
First Edition
08 07 06 05 04 03 10 9 8 7 6 5 4 3 2 1
Copyedited by Bernice Pettinato, Beehive Production Services.
Composition and production services by Westchester Book Group.
To all those who taught us to look for a better way.
About the Authors
DONALD W. MITCHELL is chairman and chief executive officer of
Mitchell and Company, a management consulting firm established in
1977 to specialize in business strategy. He is also cofounder of Leading
Executive Organizations 100, Inc., which facilitates advanced executive
learning by CEOs, CFOs, division presidents, corporate planners and
investor relations executives. Prior to cofounding Mitchell and Company,
Mr. Mitchell served as director, strategic planning for Heublein, Inc.,
where he was also responsible for acquisitions and divestitures. After
graduate school, he worked as a project manager at The Boston
Consulting Group, Inc. in Boston under the direction of well-known
strategist, Mr. Bruce D. Henderson.
Mr. Mitchell has contributed to many business process innovations that
have been used successfully by companies to create improved business
models. These process innovations address improved ways to profitably
gain market share, adjust prices, reduce costs, add new customer
benefits, develop a more profitable customer and product mix, lower the
cost of capital, expand the stock-price multiple, develop a more
compatible shareholder base and anticipate stock-market reaction to
corporate decisions and performance.
He has led strategic consulting assignments for several hundred major
companies during four decades. He often speaks before groups of CEOs
and CFOs.
Mr. Mitchell has coauthored The 2,000 Percent Solution, helping
companies make faster progress by creating outstanding solutions for
their most significant problems, and The Irresistible Growth Enterprise,
helping companies learn how to benefit from unpredictable changes in
business, economic and social trends. He has been widely quoted in
major business publications concerning business strategy and
investments and has published more than twenty-five articles on related
subjects. He is listed in a number of biographical references including
Who’s Who in the World.
He graduated magna cum laude with an A.B. in modern European history
from Harvard College and holds a J.D. degree from Harvard Law School.
He attended Harvard Business School and studied marketing there while
a second year student at Harvard Law School, receiving a Distinction on
his second-year marketing project for New York Magazine. He is a
member of the bar in Massachusetts.
Mr. Mitchell served on the board of Literacy Volunteers of Massachusetts
from 1993 until 2001. He has been treasurer of the Harvard Law School
Association and a member of the boards of the Harvard Alumni
Association and the Harvard Cooperative Society.
He was born and raised in San Bernardino, California, and now resides in
the Boston area with his family.
CAROL BRUCKNER COLES is cofounder, president and chief operating
officer of Mitchell and Company. She has spent over twenty-six years
designing management processes to help companies develop the
strategic potential of their businesses and improve their market value.
Prior to 1977, Ms. Coles served as manager of strategic planning for
Heublein, Inc., where she was responsible for developing and instituting
the strategy audit process and involved in acquisition and merger
activities.
She is coauthor of The 2,000 Percent Solution and The Irresistible
Growth Enterprise. She has frequently been quoted in the business press
about the future direction of major corporations and the stock market. Ms.
Coles has been a guest speaker at annual conferences for Business
Week’s CFO Forum, Institutional Investor, the National Investor Relations
Institute and YPO. She has been listed in Who’s Who of American
Women and served as a director of Boston chapter of The Planning
Forum.
Ms. Coles has a B.A. degree from New York University and an M.A. in
economics and education from Columbia University.
She was born and raised in New York City and now lives in the Boston
area with her family.
Donald W. Mitchell and Carol Bruckner Coles may be reached at
[email protected].
Acknowledgments
The Ultimate Competitive Advantage was improved by the assistance of
well over a thousand people, and space does not permit us to thank each
of you individually here. We hope you know we appreciate and care
about you, and are indebted to you for what you did to make this book
possible. Thank you!
We acknowledge the following people for their special contributions:
Mitchell and Company’s clients since our founding in 1977 deserve first
mention and thanks because they provided the opportunity to develop the
insights in this book. We thank them for providing for our firm’s success,
as well, so that we had the time and resources to devote to this project.
Some of the examples in this book also profile our clients. Although we
have not indicated so in the manuscript, they know who they are. We
especially appreciate having had the opportunity to serve as consultants
in creating some of the business model innovations described here. We
appreciate our clients’ willingness to let us disclose their stories. Many
dozens of client executives also took time to provide helpful comments
that were used to revise the manuscript.
The tracking research on which this book is based would not have
occurred without the encouragement and support of Chief Executive
Magazine. We especially want to thank former long-time edi-tor, J. P.
Donlon, for his assistance in improving our questions and analyses from
year to year. His curiosity helped us first notice that frequent business
model innovation was occurring among our study group. Several other
editors and writers at Chief Executive Magazine assisted us in other
useful ways. The magazine’s fine reputation helped open many doors
that might otherwise have remained closed to us in the study’s early
days.
We want to specially thank the hundreds of CEOs, their staffs and their
companies who assisted us since 1992 to understand the causes of their
successes in achieving outstanding business performance. We
particularly appreciate those who participated in our surveys, and let us
perform in-depth interviews and conduct on-site visits to operations.
Some of the top-performing companies opened their doors especially
wide, and we appreciate the remarkable ongoing access provided to us
by Mike Birck at Tellabs, Tom Golisano at Paychex and Mike Ruettgers at
EMC. If you would like to know more about the companies we have
investigated, go to www.mitchellandco.com and click on the “leading” file
folder second from the left. That will bring up a menu of our past lists of
successful CEOs and their companies, as well as our articles in Chief
Executive Magazine.
Some of the most interesting material in this book came from on-site
visits to the companies discussed while accompanied by our clients. We
are especially grateful to Alcoa-Fujikura, Cadence Design Systems, Dell
Computer, Disney, Electronic Data Systems, General Foods, General
Motors, Hewlett-Packard, IBM, Kroger, Motorola, Ritz-Carlton and Tellabs
for hosting visits that provided pivotal insights.
Almost every example in the book is based on in-depth interviews with
the person, company or organization described. We appreciate having
had access to dozens of individuals and companies for developing the
book’s examples. Many interviewees conducted their own research to
develop better answers to our questions and provided detailed company
materials for us to study. In all cases where we had access to significant
nonpublic information, we asked the individuals and companies involved
to review the manuscript for accuracy and for understandability, and
almost all assisted us in these ways. We appreciate these corrections
and improvements. Any errors in the book are the sole responsibility of
the authors.
We are especially grateful to Tom Golisano of Paychex and Bob Knutson
of Education Management for providing their thoughts in forewords to this
book about who should read The Ultimate Competitive Advantage and
what readers can expect to gain. Each man is an outstanding leader in
more ways than this book addresses, and their companies are
benchmarks in their industries of business model innovation. Pay
attention to what they say and do.
Some companies helped us with interviews, visits and background
material, but did not make it into the book. In most cases, this omission
was because the example did not work well with the manuscript’s
structure. We apologize for leaving these companies out. We have kept
our notes and believe that the material may be helpful in future books
and articles.
Our quantitative studies of top-performing companies and their CEOs
were ably assisted over the years by Zacks Data Services and Value
Line.
Many executives assisted in the book’s conceptual development. We
would especially like to thank the members of Loren Carlson’s CEO
Roundtable for helping us understand what small business CEOs needed
from this book. Roger Fridholm was tireless and effective in his help with
the book’s fundamental messages. We acknowledge and appreciate the
special contributions of Tim Althof, Mike Birck, Neil Bruckner, Dick Koch,
Laura Saxby Lynch, Gil Press, Mike Riley, Michael Sharp and Barry
Spielman.
During the drafting of the book, many executives, authors and academics
took the time to consider our questions and words. The comments and
ideas we received from the following people proved to be essential to the
final version of the book: Norman R. Augustine, chairman of the
executive committee, Lockheed Martin; Robert L. Bailey, chairman and
CEO of PMC-Sierra; Dennis W. Bakke, former president and CEO of
AES; Dr. Frank Baldino, Jr., president and CEO of Cephalon; Michael J.
Birck, chairman and CEO of Tellabs; John C. Bogle, founder and former
CEO of The Vanguard Group; Walter E. Boomer, chairman and CEO of
Rogers; Monroe J. Carell, Jr., former chairman and CEO of Central
Parking; J. Harold Chandler, chairman and CEO of UnumProvident; H.K.
Desai, chairman and CEO of QLogic; Daniel R. DiMicco, president and
CEO of Nucor; Dr. Peter F. Drucker, professor at Claremont College;
David T. Farina, principal and head of technology research at William
Blair & Co.; Yoel Gat, chairman and CEO of Gilat Satellite Networks; B.
Thomas Golisano, chairman and CEO of Paychex; James J. Gosa,
president and CEO of American Woodmark; Don R. Graber, chairman
and CEO of Huffy; Alan G. Hassenfeld, chairman and CEO of Hasbro;
Roger E. Herman, CEO of The Herman Group; Bill Jensen, president of
The Jensen Group, Dr. Rosabeth Moss Kanter, professor at Harvard
Business School; Edward L. Kaplan, chairman and CEO of Zebra
Technologies; Dr. Robert S. Kaplan, professor at Harvard Business
School; Larry G. Kirk, CEO of Hancock Fabrics; Robert B. Knutson,
chairman and CEO of Education Management; Richard E. Koch, adult
leader of Post 53; Philip Lader, chairman of WPP Group; Bernard
Liautaud, chairman and CEO of Business Objects; William F. Mahoney,