What drives great companies? In an environment of
unprecedented complexity, traditional explanations and prescriptions are no
longer adequate. To become a high-performance business today requires an
entirely new framework of understanding—and a new set of practical,
solutions-oriented capabilities.
By Tim Breene Outlook Journal, October 2003
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PDF Help   When Copernicus and Galileo suggested that the earth
revolved around the sun, rather than vice versa, they were not asking fellow
scientists to observe new data. What they were proposing was a different
framework for understanding information that had been observed for centuries.
Their hypothesis was intended to replace an ancient and respected worldview.
The new theory ultimately took hold, after extended and notorious resistance,
because it offered a better explanation of the phenomenon than its predecessor.
During the most recent global economic boom, many observers
thought they had uncovered a better framework for understanding business. The
assumptions of the eCommerce revolution, they suggested, were a new and better
paradigm for understanding high-performance businesses. Now deeply
disappointed, those same believers may be falling back on long-held beliefs
that, in fact, high performance is driven by the same factors that have always
driven it.
  At
Accenture, we have found that enough has changed that neither traditional
explanations nor the eRevolution point of view provide an adequate basis for
understanding business today. We do not see a return to pre-boom business
conditions; current conditions constitute a structurally different operating
environment, with long-term and hard-to-predict consequences for global
companies. Moreover, we have observed that there is a noteworthy absence of
practical, solutions-oriented frameworks to help companies navigate toward high
performance in this complex new era.
In the past six months, we have embarked on a program to
integrate what we have learned and to test our hypotheses against our
experience with our clients as well as through objective research. Our program
seeks to understand the high-performance business—as it operates in an
industry-specific context. It also seeks to lay the foundation of a discipline
that a company can use to become a high-performance business. This article,
based on the preliminary findings, is the first in a series.
Powerful Trends
The dramatically
altered environment that makes high performance so critical to business success
today has been emerging for years, although its actual arrival was masked by
the boom and attendant business confidence of the late 1990s. There has been no
systemic trigger, identifiable in retrospect, as was the case with the alarm
bells in the financial system that heralded the Great Depression or the
oil-production nationalizations and price hikes that tipped the world economy
into recession in the 1970s.
 Instead there has been a steady accumulation of a number of
powerful, interconnected trends, some that have gained momentum over the long
term, others of more recent origin. Accenture research identifies eight key
trends (see sidebar1)
that constitute a new watershed era for global business—an environment of fluid
market and industry boundaries; shifting regional risk and opportunity; rapidly
changing formulas for economic value; disparate economic shocks; and
geometrically increased decision variables.
In this environment, the characteristics of high performance
need to be redefined in the context of specific industries and particular
periods of time if they are to be practical and helpful. This does not mean
that there are not characteristics, such as superior leadership, that transcend
industry lines. However, they need to be modified and applied in both an
industry and a buyer value-driven context.
Our findings do suggest that all high-performance businesses
share certain features, notably a hierarchy of five capabilities that are never
the result of happenstance.
One, they all possess a kind of institutional acuity, the
insight to consistently discern the important industry drivers of present and
future value. High performers have an uncanny ability to sense and respond to
major environmental shifts.
Two, high-performance businesses are masters of action. They
have the ability to translate their unique insights about the drivers of
current and future value into differentiated operating models and business
architectures.
Three, they understand which of their core competencies are
critical to driving current and future value. They focus on mastering these
core competencies, and they are frequently innovators in these areas of core
competence.
Four, high-performance businesses are not obsessed with "made here." When they have determined that an activity is noncore, or that the
development of a core activity needs to be accelerated, they intelligently
outsource or seek alliance and partnership opportunities.
 Last,
they share certain intrinsic cultural characteristics that predispose them to
high performance. This critical factor—a kind of high-performance genetic
code—is difficult to replicate and even hard to measure. But it is imprinted on
every aspect of the high-performance organization and operating model (see sidebar2).
Management Paradox
Although our
findings show no one formula for success for a high-performance business, the
presence of all five of these features explains one of these companies' common
capabilities: balancing present and future agendas. They manage seemingly
paradoxical values—flexible workforces and employee loyalty, for example, or
globally driven change imperatives and the local empowerment of management, or
a willingness to enter new markets and highly disciplined risk management. They
understand they must be tortoises and hares. In addition, they know how to
harness technology and make appropriate investments with a focus on long-term
success—rather than short-term cost reduction.
Our research in the healthcare industry shows that companies
with these five capabilities outperform their peers. We looked at the records
of the largest US health-plan providers from 1990 to 2003. We identified the
best as those companies that outperformed their industry peers in terms of
total shareholder return as well as market value added over both the short and
long term. There were three distinct structural inflection points in the
health-plan market during that time.
What emerged were a handful of companies that not only
dominated each strategic period but also were able to excel throughout the
period under study. Five distinct building blocks supported this high
performance.
First, the repeat high performers were able to sense major
shifts in buyer values and market conditions. The key buyer values, it turns
out, shifted with changing conditions, from tightly managed care in the
1990-1995 period, to product flexibility and open-plan models in the 1995-2000
period, to administrative cost-management skills in the 2000-2003 period.
Winners were able to harness these trends, while lower performers tended to
fight the last war.
Second, the high performers did not just sense value shifts;
they made fluid transitions in their business models—for example, by changing
the way they interacted with the medical community.
Third, high performers were consistently well above average
across their key functions—underwriting, claims, customer service and network
management. Lower performers, by contrast, always seemed to have one or two
functional weak links, such as information technology, that compromised their
overall performance.
Fourth, high performers used partnerships selectively in
their businesses. For example, one high performer addressed the senior citizen
marketplace through an alliance with the AARP.
Finally, high performers lived by a unique, balanced
scorecard performance culture that is taken seriously at all levels of the
company.
 In another research effort—to test the impact of
mastering core competencies—Accenture teamed with INSEAD and Stanford
University to investigate and measure high performance in supply chain
management. The key driver of this competency in a high-performance business,
our research reveals, is the decision by company management to make supply
chain management strategic rather than operational, and the subsequent efforts
to translate that decision into the company’s business architecture and
operating model. High-performance companies that have mastered supply chain
management realize a premium of anywhere from 7 percent to 26 percent over
their peers in market capitalization, depending on their industry.
Accenture’s investigation of high performance will continue
in coming months with additional research to both refine our framework of
understanding and articulate a process to apply it with receptive and committed
organizations. Our belief is that high-performance companies are not only born;
they can be made.
 About the Author Tim
Breene is Accenture's chief strategy officer and is responsible for
the company's Growth & Strategy function. He is also a member of
Accenture's Management Committee, Executive Committee and Global Leadership
Council. Since joining the company in 1995, Mr. Breene has held a number of
senior positions, including managing partner of Strategic Services; managing
partner, Global Service Lines; and group chief executive of the Management Consulting capability group. Mr. Breene is based in Boston.
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