Behind the scenes of the best in business
IBISWorld, a leading business information analytics firm, have released the thinking behind their top practices for corporate success. When the company conducted an analysis of Australian and overseas enterprises, the research group found the world's best organisations commonly pursue similar practices.
Practice #1: Embrace specialisation. "Focusing on a single industry is absolutely critical for businesses wanting to dominate in an increasingly global marketplace," explains IBISWorld's General Manager (Australia), Jason Baker.
"Gone are the days of dipping a finger into every pie, you will achieve much better growth by pursuing regional and global networks. Do one thing fantastically well, rather than numerous things satisfactorily," he advises.
Practice #2: Choose a position and stick with it. It doesn't matter if you are a major, niche or ultra-niche player in your field.
"This is essential for companies to secure a safe industry share in their chosen area," he says. The four positions likely to earn high returns are: major (25-75 per cent of industry revenue); niche (5 per cent of industry but more than 50 per cent of an industry segment); ultra niche (1 per cent of industry but 'owning' a product category in the industry); and exotic (0.1 per cent of industry but 'owning' a product group).
Practice #3: Intellectual property (IP) and research and development (R&D) should be valued above all other assets: "Whether or not your balance sheet reflects the fact, your IP is the heart of your venture - and it should be the core activity around which all else revolves."
In order to free up resources to focus on IP and R&D, IBISWorld believes successful businesses must outsource all non-core activities. "To secure competitive advantage and accelerate innovation, it is imperative companies outsource the management and operation of non-core activities," says Baker. "This allows them to focus on growth, expansion and business development, adding flexibility to an organisation."
Once businesses have made this leap, he says it's much easier for them to rapidly react and response to the needs of a fluctuating marketplace - whether speedy expansion or downsizing is required.
Practice #4: Eschewing ownership of hard assets such as land, buildings, equipment, debtors and stock is another practice of thriving corporations, with Baker describing hard assets as "lead in the saddlebag".
Increasingly popular methods for freeing up capital to direct towards IP and cash strength include using securitisation, operating leases, and factoring instead of asset-ownership.
Never has the old adage "it's not what you know but who" been more true, says Baker, with businesses being encouraged to create virtual corporations. "Draw upon networks, franchising and strategic alliances to minimise staff numbers and costs, while maximising reach and revenue," he says.
Practice #5:Plan outside-in, rather than inside-out. "It's important to first understand the external business environment, before developing your own structure, strategy and management."
Practice #6: Going global. The pursuit of international markets is strongly advised. "Expand overseas wherever possible, to take advantage of the 'global village' of the future," he says.
Practice #7: Develop a unique organisational culture. Not surprisingly, attracting and retaining good people is critical with IBISWorld recommending companies strive to develop a organisational culture, featuring "equal opportunities, contractualism and vision."
Practice #8:Stand-out leadership. "Senior management should lead an organisation before they manage it. It can be lonely at the top, but ultimate decision-making is not democratic. In fact, leadership is the opposite of management - its focus is external, rather than internal," Jason Baker explains.
Other best management practices include: valuing leadership over management, simplifying operations, developing achievable visions, sound business financing, encouraging staff self-development, embracing the borderless world, and becoming an information-intensive organisation.