The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- In the movie City Slickers, Curly the old cowboy gives advice to a visitor, "The secret to life is one thing," he says. When asked what that one thing is, Curly answers, "That's what you've got to figure out." Could there be one thing that accounts for business success? There may be. That one thing is flawlessly executing the fundamentals. Every athlete has heard it from his/her coach. But it is also true in business.
1. Managing a Business Strategy
2. Maintaining a Nimble Organization
3. Cultivating a High-Performance Culture
4. Executing With Discipline For example, take Kmart and Wal-Mart ( WMT). These two companies were financially similar at the start of the study. But 10 years later, Kmart was considered a loser. During the study period, Kmart executives focused on managing quarterly financial results. Again and again, executives tried to "manage the score" by cutting headcount and slashing prices. Wal-Mart, a winner, chose a different path. It focused on improving its fundamentals in purchasing, supply chain and data-driven merchandising. This allowed Wal-Mart to build muscle for future price fights. If it strengthened its fundamentals, financial results would follow.
Evergreen MethodologyThe Evergreen Project began in 1986 by assembling four companies from 40 industries. Each company started in about the same financial condition, but performance diverged over the next decade to declare, in 1996, a winner in each industry. The research team found that there were four fundamental areas responsible for generating the win (i.e., strategy, execution, culture and structure). All winners performed well in all four areas. Additionally, winners succeeded in any two of four secondary areas (talent, leadership, innovation and mergers/partnerships). The researchers called this the 4+2 formula. Companies meeting the 4+2 criteria had a 90% chance of being the industry winner. More importantly, the vast majority of the winners crowned in 1996 still dominate today: For example: Wal-Mart, Dollar General ( DG), Duke Energy ( DUK), FedEx ( FDX), P&G ( PG), Nucor ( NUE), GE ( GE), Home Depot ( HD), Seagate ( STX), Walgreen ( WAG), etc., sustained success for 26 years. Diligently managing the fundamentals just might be the "one thing."
The FundamentalsManaging a Business Strategy. Winners have strong capabilities in strategic planning and invest time to do it well. For example, for more than a decade, IBM ( IBM) has sent business unit senior teams to the IBM Strategic Leadership Forum to set strategy and execution plans in a 4½ day workshop. Contrast this with executive teams that piece together a strategy from two-hour sessions over many months. By the time their plan is complete, it's obsolete. Winners design their strategic plan -- from the outside-in -- to produce a compelling customer value proposition. Think Target ( TGT). Its value proposition is "psychic comforts at value prices." That's actually what it feels like when walking into a Target store. Job well done. Maintaining a Nimble Organization. Evergreen researchers found that there is no "best" organizational structure (e.g., product, geography, business units with P&L). What really matters is whether organizational arrangements reduce bureaucracy and simplify work. GE ( GE) made bureaucracy-busting a core value and started its journey by deploying Work Outs across the company. Winners, like GE, view process and policy simplification like the never-ending process of painting a bridge. Another method winners use to reduce bureaucracy is to flatten their organization. IBM annually audits sales management spans of control to exceed 12:1. Nucor deploys only four management levels. In Nucor's flat organization, the role of the manager is to provide advice and support so that employees can make decisions on their own. In flat organizations, managers cannot be king.
My grandfather was a world-class speed skater in the early 1900s. Years later when he watched me run on my high school track team, he would yell, "Form, form, form, then comes the speed!" The same is true with corporations. Manage the fundamentals well and financial results will follow. That is the one thing that separates the best from the rest.