The most successful companies stay on top by consistently setting seemingly impossible goals and organizing to achieve them. This process of ambitious goal-setting and execution sustains success. Breakthroughs demonstrate a company's vigor. Unless an organization persists in challenging itself to improve, it risks complacency and losing market share. The key to enduring leadership and success is relentlessly pursuing new audacious objectives and marshaling resources to reach them. Over 10 years we've studied 70 breakthrough firms. We've gleaned much wisdom from these companies and leaders that I'll synthesize to share lessons for catalyzing breakthroughs. It starts with the breakthrough mindset.
A breakthrough is a major business innovation significant enough to transform the future direction of a company, either by changing its core business model or moving it into new markets. Successful breakthroughs fundamentally reshape a firm and often its industry. Breakthroughs can impact four key dimensions of business performance: Profitability - A breakthrough may allow one firm to achieve substantially higher profit margins than its competitors in the same industry. For example, a new production process or business model could dramatically lower costs relative to rivals. Operating Performance - A breakthrough could provide operational excellence, allowing a company to pursue opportunities that competitors lack the efficiency to exploit. Dell Computer's direct sales and manufacturing model enabled it to underprice rivals and rise from an obscure player to the top PC seller worldwide. Market Position - An innovation may allow a new entrant or niche player to disrupt an industry and become the market leader. Countrywide Credit equipped loan officers with decision support systems to approve loans in minutes, transforming itself from a small resale specialist into the largest US home lender. Company Profile - A breakthrough can massively raise a company's visibility and brand image. Charles Schwab's 1976 innovation of discount brokerage services grew his fledgling firm into one with millions of customers and over $700 billion under management. As business consultant Bill Davidson notes, breakthroughs drive cycles of superior performance. Firms must continually innovate to sustain dominance as competitive advantages inevitably erode over time. Breakthroughs most often originate from new market entrants, but can arise from any part of an industry's structure. According to Davidson, breakthrough innovations redefine standards of cost, quality, speed, and customer value. They disrupt equilibrium, allowing the innovator to gain market share from less adaptive competitors. Firms able to combine advantages in multiple areas often leverage breakthroughs to achieve industry leadership. Sustained leadership requires ongoing innovation as rivals imitate successful breakthroughs. But firms who continually pioneer meaningful innovations tend to dominate their industries for long periods. As Davidson emphasizes, breakthroughs translate operational and financial gains into market share gains. Davidson observes that breakthrough companies share common strategic and leadership principles. They remain focused on their mission yet keep strategy flexible to capitalize on new opportunities. They promote collaboration and creative abrasion between groups. And they cultivate resilient leadership that can rapidly respond to both failure and success without losing strategic direction.
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