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How to design a successful, repeatable business model

A new book by Bain & Company partners Chris Zook and James Allen suggests that Apple, IKEA, Nike, and other top companies have successful businesses because of a boring trait: repeatability.
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Written by Reena Jana on

Chris Zook and James Allen, both partners at management consulting firm Bain & Company and co-heads of Bain's Strategy practice, spent years tracking more than two hundred companies, including IKEA, Apple, and Nike, to analyze their ongoing successes. And then they discovered that the secret sauce to these leading corporations' profits, customer loyalty, and strong brand recognition isn't the implementation of daring new ideas year after year, even if their product offerings seem fresh each season. Instead, what they have in common are business models that focus on a rather boring concept: repeatability.

Zook and Allen have just published a new book with this very title, Repeatability, released this week by Harvard Business Review Press. Intriguingly, the authors use the word "design" to describe the intentionality of companies to create products and services in ways that encourage long-term financial success, by following concepts that are easy to apply over and over again.

The authors outline what they call three "design principles" that some of the world's most innovative companies tend to follow. Product designers: these principles aren't directly relevant to your work, despite the language used to describe them. Instead, Zook and Allen offer business strategies that could help executives design a plan of action that could result in both ongoing cost savings and strong sales.

Here are Zook and Allen's three design principles for repeatability, in the context of business-model success:

1. A strong, differentiated core. What this refers to is creating an easily identifiable focus for the company. The authors point to Nike, which enters new markets by simply adapting their core business, high-performance athletic wear, over and over again. Procter & Gamble, which has many different markets and an overwhelming number of products, has designed a "coherent management system that they apply to every business they are in." This system is what the company is known for, Zook and Allen write. In other words, P&G is known and admired for how it's efficiently managed--it's their core.

2. Clear non-negotiables. Translated from jargony language, this principle refers to the idea that successful businesses tend to distill their basic strategy into simple "prescriptions" that anyone in the company can understand. This helps influence decisions at all levels toward common goals. The authors cite IKEA, which was founded with this saying in mind: "Reach good results with small means. Expensive solutions are often a sign of mediocrity." This has become IKEA's main and unwavering mantra, and it affects even the most minute design or cost decision. Examples include avoiding red pigments in mugs because they are more costly than other pigments, or asking designers to alter the shape of cups just so they can be manufactured and shipped more inexpensively, thus passing the cost savings to consumers. As well as creating some uniquely shaped cups, of course.

3. Systems for closed-loop learning. What this means in non-"business-ese" is that it is necessary to create ways to harvest continual product and performance feedback from three groups: core customers, key operations staff, and frontline employees. Constantly garnering information from these communities via surveys and other tools can help identify and fix problems early, as well as expose what product development, management, and other approaches are successful.

Yes, some of these ideas might seem obvious, as much how-to advice from business books often does. But, to be fair, one reason they may seem so is that they are so consistently executed by the well-known companies profiled--by design, as Zook and Allen analyze.

Images: mastahanky/Flickr

This post was originally published on Smartplanet.com

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