What Really Works

What Really Works: The 4+2 Formula for Sustained Business Succes
William Joyce, Nitin Nohria, and Bruce Robertson, Harper Business, 2

The book What Really Works: The 4+2

Formula for Sustained Business
Success is based on a five-year,
intensive research project with the
help of 50 leading academics and
consultants to analyze the experience
of 160 of companies over a ten-year
period.

What Works

The researchers identified eight elements

four primary and four secondary that
directly correlated with superior
corporate performance as measured by
total return to shareholders.
Winning companies achieved excellence
in all four primary elements, plus two of
the secondary ones hence the 4+2
formula.

What Doesnt Work

The research found no correlation

between a companys investment in
technology and its total return to
shareholders over the decade of the
study.
The research found no correlation
between corporate change programs
and achieving superior results in total
return to shareholders.

The research identified four types of

companies from 1986-1996:

Winners
Climbers
Tumblers
Losers

The 4+ 2 Formula for

Business Success

Four primary elements:

Strategy
Execution
Culture
Structure

Four secondary elements:

Talent
Leadership
Innovation
Mergers and partnerships

Winners

Had high scores in all four primary

elements.

Strategy, execution, culture, and

structure

And high scores in at least two of the

secondary elements.

Talent, leadership, innovation, and

mergers and partnerships.

Primary Element: Strategy

Devise and maintain a clearly stated,

focused strategy.
Whatever the strategy, it will work if it is
sharply defined, clearly communicated, and
well understood by employees, customers,
partners, and investors all stakeholders.
One of the key mandates of winning
companies was a focus on growth.
Enabling a doubling of the existing core
business every five years.

Primary Element: Execution

Develop and maintain flawless

operational execution.
Winners consistently meet the expectations
of their customers by delivering on their
value proposition.

Bad quality will hurt. A company cannot afford to

be in the bottom half of the perceived quality
rankings, but it is safe as long as it remains in the
top third.

Winners consistently slash operational costs

while increasing productivity by 6 to 7
percent every year.

Primary Element: Culture

Develop and maintain a performanceoriented culture.

Winners embrace corporate cultures that
support high-performance standards,
which employees universally accept.
Winners dealt quickly with poor
performers, especially those who dont
abide by the values of the organization.

Primary Element: Structure

Found structure follows strategy.

Build and maintain a fast, flexible, flat
organization.
Winners create and adapt structures that
reduce bureaucracy and simplify work.
Simpler is faster and better.

Secondary Element: Talent

Hold on to talented employees and

find more.
The most important indicator of the depth
and quality of talent in an organization is
whether it can grow its own stars from
within.
Promote from within.

Secondary Element:
Leadership

Keep leaders and boards of directors

committed to the business.
CEOs, on the average, contributed only 15
percent of the variance in corporate
performance, for better or worse.
Good CEOs are chosen by good boards
on which the board members
understand the business and are
passionately committed to a companys
success.

Secondary Element:
Innovation

Make innovations that are industry

transforming.
Most important is to anticipate rather than
react to disruptive events in an industry.

Secondary Element:
Mergers and Partnerships

Make growth happen with mergers and

partnerships.
Companies that do relatively small deals
(less than 20 percent of their existing size)
are likely to be more successful than
organizations that do large, occasional
deals.

What Winners Do in
Strategy

Build strategy around a clear value

proposition for customers.
Develop strategy from the outside in. Base it
upon what customers, partners, and
investors have to say and how they behave.
Maintain antennae that allow them to finetune strategy to changes in the marketplace.
Clearly communicate their strategy to all
stakeholders.
Are wary of the unfamiliar.

What Winners Do in
Execution

Deliver products and services that

consistently meet customers
expectations.
Empower front lines to respond to
customer needs.
Constantly strive to improve
productivity and eliminate all forms of
excess and waste.

What Winners Do In Culture

Inspire all to do their best.

Reward achievement with praise and
pay-for-performance, but keep raising
the performance bar.
Create a work environment that is
challenging, satisfying, and fun.
Establish and abide by clear company
values.

What Winners Do With

Structure

Eliminate redundant organizational

layers and bureaucratic structures and
behaviors. Simplify, simplify, simplify.
Promote cooperation and the exchange
of information across the whole
company.
Put their best people closest to the
action and keep their front line stars in
place.

What Winners Do With

Talent

Fill mid- and high-level jobs with

internal talent whenever possible.
Create and maintain top-of-the-line
training and educational programs.
Design jobs that will intrigue and
challenge the best performers.
Top management becomes personally
involved in winning the war for talent.

What Winners Do In
Leadership

Inspire management to strengthen its

relationships with people at all levels of the
company.
Inspire management to hone its capacity to
spot opportunities and problems early.
Appoint a board of directors whose members
have a substantial financial stake in the
companys success.
Closely link the pay of the leadership team to
performance.

What Winners Do In
Innovation

Introduce disruptive technologies and

business models.
Exploit new and old technologies to
design products and enhance
operations.
Dont hesitate to cannibalize existing
products.

What Winners Do In
Mergers and Partnerships:

Acquire new businesses that leverage

existing customer relationships.
Enter new businesses that complement
their companys existing strengths.
With a partner, move into new
businesses that can use the
partnerships talents.
Develop a systematic capability to
identify, screen, and close deals.

Winning

Exceptionally difficult juggling act

must keep all six plates (4+2) in the air
spinning at the same time. If one falls
down, they all fall.
The 4+2 factors are all interrelated and
must always function at the highest
level to continue to be a winner.
Staying on top is more difficult than
getting there.

But winners manage it by:

Having a focused strategy

Flawlessly executing
Having a performance-based culture
Having flat, simple structure

Plus, having two of the following four:

Talent
Leadership
Innovation
Mergers and partnerships

And never, never, never, never letting

up.