High Performance Companies

The easy-to-adopt strategies that make companies from Coca-Cola to Starbucks perennial over-performers and that you can use, too

High Performance Companies complements the frameworks for strategy making detailed in many existing books, proposing a number of rules of thumb (or principles) that companies can consider when making their day-to-day decisions which, in turn, will determine their actual strategies. These principles traverse a wide range of scenarios, such as strategic changes implemented by companies, resource allocation decisions—especially towards building durable assets—and resource acquisition through inorganic means.

The book adopts a reader-friendly approach by teasing out the lessons to be found in detailed cases studies from interesting companies. The writing minimizes jargon while maintaining rigor, especially with regard to the applicability and relevance of the strategic principles to different business contexts.

• Cites extensive evidence in support of the proposed arguments, without sacrificing readability
• Combines both short and long case studies within each chapter to demonstrate the general applicability of the principles presented
• Uses a variety of examples ranging from well-known companies such as Coca-Cola, Singapore Airlines, and Starbucks to relatively lesser known companies such as Illinois Tool Work, SAS Institute, and Heng Long Leather to show that the principles presented are applicable everywhere

Providing valuable new insight into what makes a business successful and how to replicate this in a company of any size, High Performance Companies is an essential addition to the library of any manager or student of business.

Foreword xi

Preface xiii

Acknowledgments xv

1 My Motivations 1

Introduction and Positioning 1

Seven Concerns Raised by the Content and Approach of Other Books 6

A Book on Strategic Principles: The Idea 11

Approach of the Book 11

Organization of the Book 13

The Final Word 15

2 Discover Diamonds among Coals 19

Resources, Firm Strategy, and Performance 19

Acquisitions Fitting the “Discover-Diamonds-among- Coals” Adage 22

Mittal Steel: Discovering Diamonds among Coals—Consistently! 25

Building a Global Empire through Acquisitions 27

The Recipe for Success 29

How Mittal Polishes Raw Diamonds 34

The Final Word 37

3 Build Durable Assets 45

Durable Assets and Performance 45

Tiger Balm: Durable Assets Withstand Twenty Years of Neglect 52

Pawning the Family Heirloom 55

Restoring the Tiger Balm’s Roar through Investments in Durable Assets 56

The Recipe for Success 58

The Tiger Balm Case and Its Implications for a Strategy Based on Durable Assets 59

The Final Word 61

4 Focus on Small Wins 69

Big Hits, Big Flops, and Their Performance Implications 69

Small Wins: An Alternative Route to Superior Performance? 72

YKK’s Small Wins Lead to Market Dominance 73

The Lincoln Electric Company’s Small- Wins- Based Strategy 76

Illinois Tool Works: Scoring Big with Numerous Small Wins 80

The Four Cornerstones of ITW’s Strategy 81

The Final Word 89

5 Integrate to Innovate 97

The Importance of Innovation 97

Innovation Strategies 99

Innovation through Integration 101

SAS Institute: The Consummate “Integrator” 102

Fanuc: Industry Dominance through Integration and Innovation 107

Integration of External Knowledge at Fanuc 110

Internal Integration at Fanuc 113

The Final Word 114

6 Advance (Strategically and Competitively) During a Crisis 121

Crises as Common Events 121

Top Managers and Crises 123

Contents ix

The Tylenol Crisis and Johnson & Johnson 124

Toyota Fumbles 127

Singapore Airlines (SIA): Proactive Management of Crises 133

SIA’s Response to the East Asian Economic Crisis 133

The SQ 006 Crash in Taiwan and SIA’s Response 135

The Final Word 140

7 Beware of the Incremental (Strategic Change)! 149

Importance of Strategic Change and Its Performance Implications 149

Mixed Performance Outcomes of Strategic Changes at Starbucks and McDonald’s 151

Strategic Changes and Their Performance Implications at Tupperware 156

Tupperware’s Social Impact and Performance 156

The Beginnings 158

The Growth Years 159

Innovative Business Model 159

Strategic Changes 161

Putting the Strategic Changes and Their Performance Impacts in Perspective 165

The Final Word 166

8 Strategic Principles in a Nutshell 173

Strategic Principles and Their Relevance 173

Simple yet Powerful 173

Applicability Beyond Large Companies 175

Applicability Across Geographies 177

Some Common Themes (and Factors) Across the Examples 179

CEOs and Top Managers Set the Correct Example 179

A Clearly Conceived Strategy That Often Defi es Conventional Wisdom 180

Long View 181

Managing Risks 182

Careful Attention to Execution or Implementation Issues and Management of People Resources 183

In Conclusion 184

Index 189

Since obtaining a PhD degree in Strategic Management from the University of Michigan, Nitin Pangarkar has spent more than 15 years teaching Strategic Management in business schools around the world. In addition to his teaching in degree programs, he has also addressed several managerial conferences and conducted training sessions for blue-chip companies based in the US, Europe and Asia.

Nitin has authored dozens of cases, scores of research articles in academic journals, articles in newspapers and two books that have been translated into Mandarin. He serves on the Editorial Review Board of Strategic Management Journal, the most prestigious journal in the strategic management area.

What makes a company a star performer?

In an increasingly competitive and fast-paced business environment, a good strategy has become a matter of necessity rather than an option or choice. In High Performance Companies, Nitin Pangarkar—a world-recognized authority on business strategy—looks into the strategies of a diverse range of companies to see what makes them tick and how they have become perennial over-achievers.

Rather than proposing yet another framework for broad strategizing, Professor Pangarkar offers business leaders a practical, proven set of rules-of-thumb or principles that companies can consider while making their day-to-day decisions which, in turn, will determine their actual strategy. These principles traverse a wide spectrum of scenarios, such as strategic changes implemented by companies, resource allocation decisions especially towards building durable assets, and resource acquisition through inorganic means.

Minimizing jargon while maintaining rigor, the book’s reader-friendly approach engagingly draws out the message from detailed cases studies of well-known companies such as Coca-Cola, Singapore Airlines and Starbucks to lesser known companies such as Illinois Tool Works, SAS Institute, Fanuc and Heng Long Leather. A combination of both short and long case studies in each chapter demonstrate the general applicability of the principles and also improve the relevance to the reader by introducing diversity in contexts.

In High Performance Companies, Professor Pangarkar captures and illustrates perhaps the most important lesson of strategy: the best strategy processes and most effective strategies are based on relatively simple principles. Although elegant frameworks and analytical tools are useful in operationalizing these principles, the excellent examples and accessible style demonstrate the inherent value of each principle and the thought process behind it. I strongly recommend this book for both new strategy students and experienced decision-makers with an interest in refocusing on the essential basics.

Carl P. Zeithaml
Dean, McIntire School of Commerce University of Virginia (USA)

Nitin has addressed an important gap in strategic management literature by simplifying strategic principles for the business leader. He has demystified key principles for the business leader who has neither the time nor the inclination for elaborate process. His unique methodology for deriving success principles from a broad swathe of large companies and his honest addressing of the practical pitfalls and barriers to applying these principles adds credibility to his conclusions. Nitin has made important connections between leadership and strategic success as well as addressed the complex interaction between strategy and leadership. A very readable book!

Alok Mishra
Vice President, Asia Pacific for Strategic Marketing and Market Access, Johnson and Johnson

High Performance Companies provides an interesting perspective on organizational strategies. Nitin writes refreshingly from his personal study of organizations and useful case examples of “brand-name” organizations with strong presence in the global market. I heartily commend this book.

Grace Lee
Senior Vice-President, Citi Private Bank, Asia Pacific

High Performance Companies provides a powerful and focused set of core principles concerning vision, risk, and managing people. The book draws its ideas by examining a wide-ranging set of businesses, including both successful and struggling ventures, helping it to avoid the trap of simply “backcasting” from observed outcomes to apparent causes. Individually and, most powerfully, together, the six principles will help guide focused and practical action by strategic decision-makers in markets throughout the world.

Will Mitchell
J. Rex Fuqua Professor of International Management, The Fuqua School of Business, Duke University

Professor Pangarkar has delivered a remarkable, insightful and most importantly a defining collection of practical “thumb rules” useful to any business leader. These generic business guiding principles laced with illustrations of a cross-section of firms in different geographies across industries makes for a stimulating read. His absorbing analysis ranging from big-picture type strategic leaps to small yet effective tactical initiatives displays an array of ideas and tools ready for implementation. Most significantly, Professor Pangarkar’s deliberate effort to ensure “implement-ability” is clearly evident and makes this a must-to-have resource on every business leaders’ desk.

Srinidhi Raghvendra
COO, Straits Financial (Singapore)