Repeatabilty: The base for enduring business.

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Schumpeter’s “creative destruction” has become a favorite term in business development; but does one not often destroy more than create? Yes, answers Chris Zook from consulting giant Bain in his “Harvard Business Review” blog which also introduces his new book “Repeatability: Build Enduring Businesses for a World of Constant Change”, co-written with James Allan.
 
The researchers from Bain analyzed the data from 70,000 companies and found that the majority, 42.000, earned shareholder returns below inflation rates. Only 9% were characterized by sustained and profitable growth. Overall, all companies combined aggregated net returns of US$ 19 trillion, however only 100 companies generated more than half of that total. These 100 companies are characterized by their ability to replicate success in what the author calls the “Great Repeatable Model”. To repeat success depends on a business model which keeps internal complexity low, is based on a long term perspective and concentrates on the genuine strengths of the model. Consequently three design principles are proposed: a well differentiated core, closed loop learning, and clear non negotiables. They point to companies like IKEA, Nike and financial services company Vanguard Group as examples of this approach.
 
It is in fact much easier to talk about “creative destruction” and “disruption” than to endure it; the frequent failures rarely make headlines. The model draws attention to the need to reconsider two historical principles of organizational design, simplicity and stability. Some companies like KODAK developed problems because their success made them blind to technological innovation, but many more fail because they become too complex in both their internal structure and the business fields they want to cover. To keep it simple is always a good idea.