“Be number 1 or 2, or get out.” – How does this mantra keep this company at the top of its game? [Tuesdays: Return Driven Strategy]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
As someone who’s been in the business and consulting industry for 30+ years now, I find Return Driven Strategy (RDS) effective in managing my team.
This pyramid-shaped framework has 11 tenets and 3 foundations. When applied properly in your own business strategy, these principles will help you achieve true wealth and value creation.
Professor Joel Litman and Dr. Mark L. Frigo explained this framework in detail in their book, “Driven.”
In today’s article, let’s focus on RDS’ Tenet 3—Target and Dominate Markets.
Continue reading to know the basic guidelines of wealth creation, and what real growth and profitability mean in the business world.
Return Driven Strategy
“Be number 1 or 2, or get out.”
This statement sounds a bit ambitious but it only highlights the importance of being a dominant player in an industry. It signifies the importance of being a leader in fulfilling certain customer segments’ needs.
Many companies plan and act with this mantra of being first or second… and the first business to popularize this statement?
General Electric (GE)!
Photo from RoboForex Blog
GE is a multinational company founded in 1892 and headquartered in Boston, Massachusetts. The company has long been a leader in the power, renewable energy, aviation, and healthcare industries.
Today, GE also leads in delivering solutions across additive manufacturing, materials science, and data analytics. It ranks among the Fortune 500 companies as the 33rd largest firm in the US by revenue.
Targeting and Dominating the Right Markets
For over 125 years, GE has risen to the challenge of “building a world that works.” It brings innovative solutions that deliver essential energy, healthcare, and transportation infrastructure. These technologies have spurred world-transforming changes and improved the lives of billions.
One of the people who enabled GE to rise to the top and achieve a strong market position?
Photo from USA Today
Welch (November 19, 1935 to March 1, 2020) was the Chairman and CEO of GE from 1981 to 2001. Even after he has passed, he remains to be one of the most popular CEOs in the world. His name is listed in every list of top CEOs and is associated with leadership, cost-cutting, and decision making.
During his 20-year tenure as GE’s CEO, he grew the company’s profits from USD 1.5 billion to over USD 15 billion, and the market valuation from USD 14 billion to more than USD 400 billion.
In fact, some investors who invested USD 1,000 in GE stock when Welch became CEO in 1981 saw their investments grow to USD 50,000 by the time Welch stepped down in 2001.
This shows the business leader was truly effective in leading and managing GE—the firm not only became a dominant leader in its industry but also a good business to invest in!
So… what were Welch’s significant contributions to the company?
As soon as he took over as CEO of GE, he consistently insisted that the firm had to be number 1 or 2 in every business it was in, or else get out.
By “number 1 or 2,” he meant GE must be the leanest, lowest cost, and worldwide producer of quality goods and services.
Using this mantra, Welch effectively positioned the company as a leader in most of its markets both locally and internationally, selling and closing poor-performing units along the way. He believed underperforming units—businesses where GE was not number 1 or 2 in its respective markets—had to be “fixed, sold, or closed.”
What else did Welch do as CEO of GE?
Under his command, GE entered markets that were previously considered to be away from its industrial manufacturing core. The company also launched new products that took over various markets in the US and other parts of the world.
Additionally, Welch promoted cutting-edge initiatives that produced significant cost efficiencies, like the implementation of Motorola’s “Six Sigma” program and the digitalization of GE’s procurement process.
For him, a successful business strategy is done in 3 important steps:
Step 1: Come up with a smart, realistic way to gain a sustainable competitive advantage.
Step 2: Put the right people in the right jobs to drive step 1 forward.
Step 3: Actively seek out best practices to achieve the goal in step 1.
Through Welch’s strategies and contributions, GE achieved significant growth, expanded its reach, and dominated various markets.
- Grow the business when cash returns are above average business returns.
- Shrink when cash returns are already below or expected to be below averages.
These are similar to GE and Welch’s “Be number 1 or 2, or get out” statement, right?
To effectively target and dominate markets, companies should focus more on being a leader in their revenue-generating offerings and let go of underperforming offerings rather than “try to be the best in a bad industry.”
Aside from that, businesses should know the customer segments they are producing goods and services for. Professor Litman and Dr. Frigo say wealth-creating firms have a realistic understanding that customers must exist with a “deep enough unfulfilled need” to justify the upfront investment to create and deliver offerings.
Take note of these return-driven insights for successful business strategies!
Remember that in targeting and dominating the markets, a simple rule shines forth: Once appropriate market segments are identified, corporate actions should seek to dominate those segments.
… and only segments that can be reasonably dominated should be targeted in the first place.
Stay tuned for more business case studies related to Return Driven Strategy!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Tuesdays: Return Driven Strategy”
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo said that the goal of every long-term successful business strategy should incorporate the combined necessity of “making the world a better place” and “getting wealthy.”
That is why they created Return Driven Strategy and Career Driven Strategy—frameworks that were built to help leaders and professionals plan and evaluate businesses so they can also help others achieve their organizational goals and career goals.
The frameworks describe the plans and actions that drive returns for anyone in an organization such as independent contractors, marketers, brand managers, communicators, and other people in any field. These actions lead to the creation of wealth and value for customers, employees, shareholders, and the society.
Every Tuesday, we’ll highlight case studies, business strategies, tips, and insights related to Return Driven Strategy and Career Driven Strategy.
In planning, building, or managing brands and businesses, these strategies, case studies, and guidelines will help you choose what specific actions to take and when to take them.
Hope you found this week’s insights interesting and helpful.
Stay tuned for next Tuesday’s “Return Driven Strategy!”
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