High-Performance Business Going the distance How the world’s best companies achieve high performance
By Tim Breene and Paul F. Nunes
After three years of original research,industry analysis and rigorous testing,Accenture has developed a compelling set
英國留學生MBAdissertationof practical insights for companies thataspire to uncommon business success.8 www.accenture.com/Outlook10 www.accenture.com/Outlook
As Julia Kirby notes in her HarvardBusiness Review article, severalrecent and well-known attempts todefine business success have usedcriteria that, on closer inspection,begin to look suspiciously like popularitycontests. For example, it hasnot been uncommon for researchersto identify successful companiesby simply polling influential businessexecutives, and then buildinga list of high-profile, often iconiccorporations. Only then, after thehigh performers have been identified,do the researchers delve intothe details to make the case forwhy these companies were chosen.At Accenture, we have come tobelieve instead that businesssuccess must be defined bothHigh-Performance Business
1 Julia Kirby, “Toward a Theory of High Performance,” Harvard Business Review, July-August 2005.
What does high performance mean, and how can organizationsincrease their chances of becoming high-performancebusinesses?
These have been the driving questions behind an ongoingAccenture program of original research that is now enteringits fourth year. This effort has been important, not only interms of our ability to help our clients achieve success butalso in the context of the larger marketplace of ideas: Arecent Harvard Business Review survey recognized Accenture’s
High Performance Business research program as one of the10 most notable initiatives in the field during the past quarter
century.1 Among the results produced by our research todate is a rich collection of published work, including morethan 30 articles on high performance that have appeared inOutlook since October 2003.
Having established the broad principles of high performance,
we are now building on this foundation by conducting amore detailed analysis of the practical steps to achieving
business success. As we prepare to immerse ourselves in thisnext logical phase of our program, it seems appropriate to
summarize, refine and integrate what we have learned in asingle article—and to highlight a few of the latest insights
we’ve gained from observing and working with a numberof high-performance businesses during the past three years.
Methods and meansqualitatively and quantitatively:What determines whether an organization
is a high performer is notonly reputation and stature butalso data and metrics.
Another distinction that sets ourresearch apart from similar exercisesis the sheer scale of theundertaking. Thus far we havecarefully analyzed more than 6,000companies, including more than500 high performers. The effort hasinvolved the active participation#p#分頁標題#e#
of hundreds of Accenture's topmanagers and senior executivesfrom across the company, representing
a broad spectrum of functionaland industry expertise.
From the beginning, the AccentureHigh Performance Business initiativewas framed around enterprise valuecreation. We were not interested ininsight for insight’s sake but in discoveriesthat could be applied toimproving results for organizations,
in the public as well as the privatesector, in ways that are relevant totheir stakeholders.
A high standardThe definition of “high performance”we settled on—the enduring or sustained
out-performance of peers,across business and economic cycles,often across generations of leadership,and as measured by widelyaccepted financial metrics—sets ahigh standard, to be sure. Manycompanies can appear to be highperformers in the short run—byriding favorable market conditions,for example, or by being fortunatewith a single product or marketposition—only to decline quicklywhen business conditions turnagainst them.To be a true high performer, on theother hand, a company must surviveand thrive across economic and
market disruptions. Fewer than 10percent of public companies meet
this mark. But our discussions withexecutives across many industrieshave confirmed that they believe
this standard is what defines organizationsas high performers.Our field experience enabled usto refine our selection method forhigh performance. Our originalbenchmark—a focus on three-, fiveandseven-year average total returnto shareholders—served us well as
a starting point. But a better understandingof performance, we found,is enabled by the use, not of asingle measure but of a set ofmeasures. To this end, we nowregard performance over five key
dimensions, grading each on acurve against competitors in a carefully
considered peer set. The five
dimensions are:
• Growth, as measured by revenueexpansion.
• 英國留學生MBAdissertationProfitability, as measured by thespread between the return oncapital and the cost of capital.
• Positioning for the future, as representedby the portion of shareprice that cannot be explained bycurrent earnings (what we call
“future value”) and by the portionof the industry total each company’sfuture value represents.
• Longevity, as measured by theduration of out-performance intotal return to shareholders.
• Consistency, as measured by thenumber of years out of seven thepeer set median in profitability,
growth and positioning for thefuture was beaten.The delicate balance when it comes
to metrics is that one must alwaysweigh simplicity against completeness.For example, it became clearfrom our research that using simple
cutoffs to pick the high performers—Outlook 2006, Number 3 11like “top quartile” or “top five” companies—yielded inconsistentresults.Companies with nearly identical performanceended up with differentrankings because of such arbitrarymetrics. Yet such capricious cutoffshave been used for decades as ameans of selecting top performers.#p#分頁標題#e#
A key contribution of our researchprogram has been the addition of“grading on a curve”—that is, looking
for statistical outliers. In ourupdated methodology, each measureof performance now has one or
more core metrics associated withit, such as five-year total returnto shareholders.
To be sure, any measures of highperformance must be sensitive to theunique characteristics of individualindustries, a consideration that
required us to make minor adjustmentsto the metrics, to ensure aproper understanding of a particular
measure within a particular industry.But the five dimensions of performancethemselves remain unchanged
and at the heart of our approach.We also have grouped all five metrics
under something we call “peer competitiveness,”which is the compositeof the relative scores of the five measures
and which ultimately showcasesthe high performers. Peer competitiveness,however, also clearlydemonstrates an important lesson:
All performance is relative within anndustry. If the peer set is changed—for example, by rejecting some competitorsbecause they are too smallor too big—performance almostinevitably changes as well, becausethe expectations will have changed.
After developing the peer sets andevaluating relative performance, weidentified companies that met ourstrict definition of a high-performancebusiness. If some of thesecompanies were obvious, others surprisedus. Having made that identification,
it was necessary to determinewhat accounted for the differences
in relative performance within each
peer set. This exercise has proceeded
along two tracks: industry analyses
and functional analyses.
Accenture’s industry teams have
conducted months of research using
combinations of a wide range of
approaches—from broad-based, indepth
executive surveys to multivariate
regression analyses—to
determine the core drivers of performance
within each industry peer set.
(Individual reports on 10 industries
have appeared to date in Outlook.)
This critical nexus of functional
mastery studies and industry analysis
is one of the hallmarks of Accenture’s
research into high performance. While
each industry has its own unique
competitive characteristics, and
while each business function must
be understood in the context of the
business it supports, it is possible to
look across the drivers of performance
in industries as well as business functions
and glean insights into consistent
themes and sets of emphases.
After analyzing the performance
leading companies, there emerged
a sense of the commonality of
high performance—the attributes
of excellence that can transcend
and unite otherwise disparate organizations.
We called this common
ground “competitive essence,”#p#分頁標題#e#
which, in turn, is comprised of
the three “building blocks” of high
performance: market focus and
High-Performance Business
Industry analyses of high performance
12 www.accenture.com/OutlookOutlook 2006, Number 3 13
position; distinctive capabilities;
and performance anatomy (see
sidebar, page 14).
The three building blocks have
provided an essential means of
organizing our insights into high
performance, and each of the three
has been the subject of its own
英國留學生MBAdissertationextended treatment in Outlook.
(For a complete list of all Outlook
articles on high-performance business,
see page 17.) Along the way,
however, the industry and functional
research has continuously
enriched our understanding of the
nature of these components of
high performance.
For example, extensive research
within three very different industries
has yielded important insights into
how companies achieve the right
market focus and position. Our study
of high performance among health
care providers highlighted how companies
in this sector need to rethink
markets to achieve high performance.
One way the industry’s high performers
distinguished themselves was by
recognizing and exploiting growth
opportunities in preventive health
care and health maintenance; this
reinforced our belief that agility in
markets and a view to multiple
strategic horizons are key elements of
the right market focus and position.
Our study of high performers among
independent oil companies helped
cement our conviction that although
scale was not a sure determinant of
success in this industry subset, the
right scale, achieved through effective
and strategic mergers, acquisitions
and divestitures, is essential to an
effective market focus and position.
Seeking to understand business performance
in the turbulent and variously
regulated utilities industry
illustrated for us the importance of
aligning organization and business
model design with market conditions
to achieve near-perfect market
focus and position. RWE in Germany,
with more than 200 energy and utility
interests in its portfolio, is just
one example of a company that has
leveraged a new, multinational, integrated
portfolio model to improve
its performance. And because the
intersection of ownership model and
market openness has proven to be
such a strong determinant of performance
in this dynamic industry, we
came to recognize that achieving
the right market focus and position
is not a single choice but rather a
series of choices that must be constantly#p#分頁標題#e#
kept in balance.
Other industry research has provided
a deeper understanding of the role of
distinctive capabilities. In the automotive
industry, our study of high
performance has demonstrated the
importance of being able to simultaneously
offer innovative, differentiated
products and services while
reducing the cost and complexity
that has traditionally been associated
with innovation. German automaker
Volkswagen, for example, builds its
Golf, SEAT Toledo and Audi TT models
on top of the same platform,
reducing the number of component
parts it must manage. Coupled with
similar insights from a range of other
industry peer sets, including airlines
and banking, what we characterize
as “differentiation on the outside
and simplification on the inside” has
become an important new element in
our understanding of the distinctive
capabilities building block.
Innovation as an essential capability
in achieving high performance is a
lesson we also learned from our study
of the consumer packaged goods
industry, and one that helped to
round out our thinking about how
companies create and sustain distincHigh-Performance Business
Market focus and position
Market focus and position are the “where and how to compete”
aspects of business strategy. High-performance businesses have
remarkable clarity when it comes to setting strategic direction.
They are always found where the market action is. When one
market matures, they’re ready with the next big thing.
Over the course of our research, as we began to understand the
importance of market focus and position, we were struck first by
the lingering misconceptions about the importance of scale to
business success. Some of our earliest published findings strongly
suggested that scale by itself rarely leads to high performance:
Few of the largest companies in each peer set were high-performance
businesses, and few companies managed to maintain outperformance
as they scaled their businesses.
Our focus has since expanded to looking at the market factors
that lead to out-performance. In fact, later in this issue, we
introduce our insights into the importance of effectively managing
the many types of customer loyalty (see page 30).
Distinctive capabilities
When our research turned to an examination of truly distinctive
capabilities among high performers, we began to understand
the critical interplay between capabilities and value creation,
a relationship that goes to the heart of our High Performance
Business research. We have seen that to create value, each high
performer develops a formula for doing business—either at the
enterprise or business unit level—that successfully translates#p#分頁標題#e#
a big idea regarding customer needs into a unique set of connected
business processes and resources that cost-effectively
satisfy those needs. We refer to these customer-centric formulas
for value creation as “business algorithms.”
Based on that initial work, we are now expanding our research to
cover a number of new areas. We are seeing the critical importance
of creating product and service variety to satisfy the demands of
today’s more sophisticated and global customers, while at the same
time managing the inherent complexity this creates. We now refer
to this organizational skill as the ability to achieve “differentiation
on the outside and simplification on the inside.”
We have also recently invested in creating more powerful tools
to support our existing ability to document an organization’s
capabilities and measure the contribution each is currently making
(and could potentially make) to business performance. As we
move forward with our research, we will be working with selected
clients to apply these tools to an analysis of their business.
Performance anatomy
Long-term business success has a cultural component, to be sure.
Spend any amount of time with executives and employees of a
high-performance business, and you will get an almost palpable
sense of the company as a distinctive community. In the course
of our research, however, we found that discussions of corporate
culture often end up being less precise and actionable than one
might wish.
Accordingly, we developed a concept we called “performance
anatomy” as a unique way to approach the core and common
business elements related to culture, leadership and the workforce.
We identified five core “winning mindsets” at the heart of
a high-performance anatomy—essential skills that determine how
and how well an organization approaches tasks critical to the
execution of its strategy.
We came to believe that performance anatomy embodies a company’s
unique approach to managing those elements common to
every business, and is therefore crucial to long-term effectiveness,
the quality and speed of decision making, and the mastery of
change and innovation. As a result, we have made a special effort
to understand the concept through a series of in-depth case
studies that, to date, have explored the performance anatomies of
four high performers: Harrah’s Entertainment, Constellation Energy
Group, Marriott International and, in this issue, UPS (see page 18).
These four case studies illustrate how high-performance businesses
acquire winning mindsets and drive them into action
and business improvement, and reveal how the executives at
these companies created and diffused the mindsets by word#p#分頁標題#e#
and deed. The case studies also explore the specific practices
that arose from the mindsets, and they connect those practices
to business results—outcomes that, in a virtuous cycle, reinforced
the mindsets that began the process.
The building blocks of high performance: What we’ve learned
Distinctive
Capabilities
Market focus
and position
Maximizing business
results by targeting
the right place at
the right time
Being customerfocused
to create
Out-executing a unique business
through consistent,
competitive mindsets
Performance
anatomy
Title tk tk
To achieve high performance, organizations need to get
three things right.
14 www.accenture.com/OutlookOutlook 2006, Number 3 15
tive capabilities. One particularly
strong example of this is the dramatic
business performance improvement
of Clorox, driven by the company’s
recent commitment to the regular
introduction of what it calls “gamechanger”
innovations.
Our research in the industrial products
sector revealed that one of the six
drivers of high performance is talent
management—a key component of the
performance anatomy building block.
Indeed, our study of this industry
provides an example of the sort of
high performer that less rigorous
attempts to define business success
might not turn up. Although perhaps
not a household name, the sure-footed
Danaher Corporation, an innovative
and diversified industrial equipment
maker, is a high performer in no small
part because of its investment in
training and leadership development.
An important byproduct of our
broad industry research has been
insights into the commonalities of
high performance across industries.
By giving executives in one industry
access to relevant lessons from
others, these insights encourage
a steady stream of fresh thinking
and innovation. We have seen lean
manufacturing practices in the
automotive industry inspire so-called
industrial banking in financial
services, for example, and the
openness of innovation processes
in the pharmaceuticals industry
inform the new-product practices
of consumer goods companies.
Along a track parallel to the industry
analyses, Accenture’s global
service lines—our groups of professionals
organized internally along
functional lines (including Supply
Chain Management; Human Performance;
Customer Relationship
Management; Finance & Performance
Management; and Strategy)—
as well as cross-functional
groups (including Information
Technology), took up the challenge
of understanding the contribution#p#分頁標題#e#
that capability mastery in key
functional areas makes to highperformance
business.
Each of these groups conducted
extensive, detailed studies of the
requisite set of capabilities within
its domain. In CRM, for example,
these capabilities included brand
management skills and customer
segmentation abilities. In Finance
& Performance Management, they
included finance operations, capital
stewardship and enterprise risk
management, while in IT they
included detailed capabilities
in infrastructure building and
systems integration.
The goal of the functional analyses
was to identify the contribution
those capabilities make—alone and
in groups—to business performance.
As part of this research, Accenture’s
function-oriented teams conducted
surveys across thousands of companies,
resulting in the creation of
a number of unparalleled benchmarking
data sets from which the
capabilities in each of these functional
areas in an individual company
can be analyzed for their level
of excellence and contribution to
business performance.
The critical insight that has come
out of our functional mastery studies
is that high-performance businesses
are generally characterized
by world-class mastery of capabilities
across nearly all functions.
Yet while this mastery is in most
instances a prerequisite for high
performance, it is not enough to
guarantee high performance.
The high-performance businesses
we observed also demonstrate a
higher level of capability excellence.
High performers achieve
world-class excellence in a highly
select set of capabilities that we
now define as a distinctive capability:
Their unparalleled excellence
in this particular set of capabilities
is their unique business formula
for competitive advantage. Low
performers, on the other hand,
consistently lack the level of capabilities
mastery needed across a
range of functions to give them the
day-to-day operational excellence
that we have come to recognize
as the price of admission to even
above-average performance.
Functional analyses of high performanceHigh-Performance Business
Our understanding of high-performance
business has grown and
evolved, at least in part, because
of the size and ambitiousness of
the research effort Accenture has
committed to. But we also must
acknowledge the energy and enthusiasm
of the people throughout our
global practice, whose dedication
to this research and commitment
to continuous discovery have been
remarkable. We also applaud the
contributions of our clients, who
share our passion for achieving and#p#分頁標題#e#
sustaining high performance. We
believe such wide-ranging participation
legitimizes the research and
makes it more broadly relevant.
We now have our sights set on better
understanding the paths businesses
can and should take to arrive at high
performance. We have already begun
exploring these paths at the individual
company level; our series of case
studies exploring the performance
anatomy building block is just one
example of how our research is
expanding, and how we intend to
extend our research going forward.
In the coming months, you will see
and hear much more about how
companies recognize the need to
change their approach to business
performance—the triggers of transformation—
how they become committed
to achieving high performance, how
they set their course toward it and
how they traverse one of the many
possible paths to successful completion.
We will also describe the many
pitfalls that can and do arise—obstacles
to high performance that we are
already observing as a result of our
ongoing research on this topic.
We have begun a much deeper mining
of our database of peer-set competitor
metrics. We also recently completed
a cross-industry analysis of highperformance
businesses versus their
less successful peers, uncovering five
misconceptions about the nature of
high performance.
We will be publishing these findings
in an upcoming Special Edition of
Outlook, where we will also be
reporting on the importance of
enterprise systems in achieving high
performance, as well as reporting on
early findings about the nature of
transformation in high-performance
businesses. Over time, we will continue
to report broadly on the impact
of information technology and we will
continue to explore the very nature
of the building blocks themselves.
We began this journey three years
ago with the stated belief that highperformance
businesses are not only
born—they can be made. The years
since have only deepened this conviction,
as our research has produced
the evidence that companies really
can, through sheer force of will,
propel themselves along the paths
to high performance. We remain
committed to identifying both the
“what” and the “how” of high-performance
businesses. That commitment
will, in the coming months, deepen
and expand our journey of discovery,
moving toward illuminating the paths
to high performance.
About the authors
Tim Breene is Accenture’s group chief
executive of the Business Consulting
capability group and the company’s
chief strategy officer. He is also a#p#分頁標題#e#
member of the company’s Executive
Leadership Team, and he chairs
Accenture’s Innovation Council. Since
joining Accenture in 1995, Mr. Breene
has held a number of senior positions,
including managing partner of
Accenture Strategic Services and
managing partner of the company’s
global service lines. Mr. Breene is based
in Wellesley, Massachusetts.
[email protected]
Outlook Senior Contributing Editor Paul
F. Nunes is an executive research fellow
at the Accenture Institute for High
Performance Business in Wellesley,
Massachusetts, where he directs studies
of business and marketing strategy. His
work has regularly appeared in Harvard
Business Review and other publications.
His most recent book is Mass Affluence:
Seven New Rules of Marketing to
Today’s Consumers (Harvard Business
School Press, 2004).
[email protected]
Where we go from here
16 www.accenture.com/OutlookUnless otherwise noted, the following
articles have all appeared in Outlook journal
and are available online and as PDFs at
www.accenture.com/Outlook
Industry studies
Reports
Automotive: “Life the fast lane,” by John E.
Cunningham, Umar Riaz and Eric J. Johnson
(October 2004)
Automotive Suppliers: “Market leaders,
market makers,” by Umar Riaz and Eric J.
Johnson (February 2005)
Banking: “The right combination,” by Norbert
Linn and Trevor J. Gruzin (June 2004)
Chemicals: “Driven to differentiate,” by
R. John Aalbregtse (February 2005)
Consumer Packaged Goods: “Cleaning up,”
by John Jackson, Susan S. Mann and John
Zealley (October 2005)
Energy: “Big thinkers,” by John Downie, Curt
J. Howes and Julie Adams (February 2005)
Health Care Providers: “Patient power,” by
William N. Higbie (October 2005)
Industrial Products: “Engineers of growth,”
by Thomas H. Walsh (January 2006)
Retail Hypermarkets: “Consuming passions,”
by Susan S. Mann, Jeffrey R. Smith and
Olivier Trouvé (June 2005)
Utilities: “Power plays,” by Omar Abbosh,
James C. Hendrickson and Etienne Deffarges
(June 2004)
CEO interviews
Brad Anderson, Best Buy: “The Best and
the brightest” (February 2005)
Bart Becht, Reckitt Benckiser: “Picking winners
at Reckitt Benckiser” (October 2005)
Larry Culp, Danaher Corporation: “A philosophical
approach to high performance”
(January 2006)
High performance in
the public sector
“A value model for the public sector,”
by Vivienne Jupp and Mark P. Younger
(February 2004)
“Transforming the public sector,” by Jane C.#p#分頁標題#e#
Linder and Jeffrey D. Brooks (October 2004)
Functional capabilities
mastery
Customer relationship
management
“The best and rest,” by John G. Freeland,
Stephen Dull and Paul F. Nunes
(October 2004)
“Marketing mastery matters,” by Marianne
Seiler, Paul F. Nunes and Jeffrey D. Somers
(May 2006)
“Think your customers are loyal? Think
again,” by Woody Driggs, Steven S. Ramsey
and Paul F. Nunes (this issue, page 30)
Finance and performance
management
“Future value: The $7 trillion challenge,”
by John J. Ballow, Robert J. Thomas and
Göran Roos (February 2004)
“A seat at the table,” by Chris Rutledge and
Rosanne Williams (June 2004)
Human performance
“Disturbing the system,” by Peter Cheese
(June 2004)
Information technology
“Breaking away: How to create value with
information technology,” Outlook Special
Edition (May 2004)
Outsourcing
“A matter of control,” by Jane C. Linder
(February 2004)
Supply Chain Management
“Supply chain and the bottom line,” by
Robert L. D’Avanzo, C. Edwin Starr and
Hans von Lewinski (February 2004)
Building blocks of
high performance
“Balance, alignment, renewal: Understanding
competitive essence,” by Tim Breene and
Paul F. Nunes (February 2005)
“Making the trend your friend,” by Karen
Crennan, Paul F. Nunes and Marcia A.
Halfin (May 2006)
Market focus and position
“Is bigger always better?” by Tim Breene
and Paul F. Nunes (October 2004)
“The right place, the right time,” by Tim
Breene, David Mann and Paul F. Nunes
(October 2005)
Distinctive capabilities
“Marks of distinction,” by Tim Breene,
Narendra P. Mulani and Paul F. Nunes
(June 2005)
“Innovation unbound,” by John Engel,
Anita M. Thompson, Paul F. Nunes and
Jane C. Linder (January 2006)
Performance anatomy
“In search of performance anatomy,”
by Tim Breene and Robert J. Thomas
(October 2004)
“Continuous renewal: Managing for the
upside,” by Jane C. Linder (June 2005)
Performance anatomy case studies
Harrah’s Entertainment: “Exploring the
mindset of the high performer,” by Walter E.
Shill and Robert J. Thomas (October 2005)
Constellation Energy: “A star is born,”
by Robert J. Thomas and Walter E. Shill
(January 2006)
英國留學生MBAdissertationMarriott International: “Why Marriott
shareholders sleep well at night,” by Robert
J. Thomas and Walter E. Shill (May 2006)#p#分頁標題#e#
UPS: “Inside the values-driven culture at
UPS,” by Robert J. Thomas, Jane C. Linder
and Ana Dutra (this issue, page 18)
For further reading . . .