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Three Rules for Business Success

By Ryan Rieches

In April 2013, Harvard Business Review ran a cover story on “The 3 Rules for Success.” Rarely have I come across an article that is so deeply rooted in data, yet its findings, so simply stated. In addition, it’s amazing the number of business people I have spoken with who have recited the three rules back to me – ah, the power of clarity and simplicity! I can’t help but relate it back to the art of B2B brand strategy – taking the complex and making it simple.

For some background – two senior executives from Deloitte studied 25,453 public companies over a 44 year span to find the common core strategies for sustainable success. The answers are quite elementary at first, but in reality, often difficult to follow in the long run.

Rule #1 Better before cheaper (better to compete on differentiation rather than price)
Rule #2 Revenue before cost (prioritize increasing revenue over reducing costs)
Rule #3 There are no other rules (change anything you must to follow the first two)

The research concluded that the best companies behaved as though these principles guided their important decisions, from acquisitions to diversifications to resource allocation to pricing. For me, the challenge seems to be the consistency that is required during economic cycles, changing leadership and ongoing competitive pressures.

As I reflect on these rules, let me begin with #1 – Better before cheaper. As RiechesBaird develops brand strategies for corporate clients, we seek to uncover, define and build a sustainable competitive advantage – and then clearly proclaim this new brand promise. The article concurs that competitive positions built on greater differentiation through brand, style or reliability are more likely to drive exceptional performance than positions built on lower prices.

I can’t remember an example over the last twenty years where we have suggested positioning a company on price. Don’t get me wrong – companies have to be competitive, but the reality is that it’s just an ante into the game – differentiation that is relevant to the core customer is what creates sustainable success.

With rule #2 – Revenue before cost, it seems quite easy on the surface. Yet as businesses slowly come back from the depths of the Great Recession, the focus for most companies over the last five years has been to reduce cost. Just now are we starting to see cautious optimism towards growth. The harsh reality is that for companies who did not invest in their future, they are now left behind, outmaneuvered by the competition and scrambling to catch up – often costing more in the long run. It’s a proven fact that the most cost efficient time for companies to invest in their brand is during an economic downturn. It’s just very difficult to do so. The best companies stay focused on revenue, invest in their future, and manage expenses by driving out inefficiencies.

In summary, I don’t think much needs to be said about rule #3. I recommend you read the full article as a number of case studies are cited. There are many paths to finding long term success, but I believe competitive differentiation that is relevant to your target audience will be a lasting foundation for growth.