Three rules

Perspectives

Three rules

Deloitte Perspective

January 2014 (Volume II)

BY / Michael e. Raynor and Mumtaz Ahmed
Illustration BY / David Clugston

  Since 2007, Mumtaz Ahmed and Michael Raynor, with support from colleagues from within Deloitte* and beyond, have been working to identify what counts as “exceptional performance” and the behaviors that cause it.

  The publication of The Three Rules: How Exceptional Companies Think (www.thethreerules.com) in May 2013 is the culmination of this years-long effort and provides an opportunity to look back and see how the journey has unfolded in these pages as they developed and tested their conclusions along the way.

  “Survival of the Fattest” in January 2010 looked at the secular decline in return on assets among US public companies, observing that middling performers were bulking up while poor performers were being punished more than ever and top performers were doing better than ever. That observation validated the relevance of their project: If superior performance is more difficult to achieve and more rewarding than in the past, understanding its underlying causes is insight worth having.

  Of course, Ahmed and Raynor are not the first to tackle this problem, as they acknowledged in “Rank Ignorance” (January 2011). Much popular business research lionizes companies that are merely salient, confusing popularity for meaningful economic performance. Statistical rigor is indispensable when separating the skilled from the lucky and picking out truly high-performing companies.

 

BY / Michael e. Raynor and Mumtaz Ahmed
Illustration BY / David Clugston
The article was originally published on Deloitte Review Issue 13, a publication from Deloitte University Press

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