what everyone is doing. Even though the data would
indicate that it should, the reality is that these big
moves usually don’t enter the C-level conversations
the way they should.
Bradley: Let’s put that together… we know resource
re-allocation should be 5 or 6 percent and most companies do 2 percent so we need to find a way to triple
a company’s resource re-allocation. So, why is that so
hard to make happen? Well, that’s where we start to get
into the human factors… in order to do this, someone
has to lose. The executives believe us on the data; they
know we’ve done our homework but it’s often tough to
convince them to take the necessary steps.
Consulting: You talk quite a bit about The Power Curve in
the book. Can you explain it?
Bradley: The Power Curve says that when you look
at a snapshot of time, the middle 60 percent of companies are earning their cost of capital. That’s actually not a bad thing; those companies generally earn
shareholder return, pay investors back and can make
incremental improvements. So, let’s not begrudge
that everyday hard work that the middle 60 percent
do. It’s just that the Top 20 percent are so remarkably
different than the middle 60. An 8 percent chance to
participate in that top quintile is extremely valuable.
And when we look at the data, 78 percent of them
stay in the middle, but over a ten-year period, about
one in 12—or about 8 percent—jump from the mid-
dle to the top. The question is why do some make the
jump and others don’t? That’s where our research led;
what gives a company better odds vs. a company that
had really poor odds. When we talk to CEOs, they’re
often surprised by how hard it is to make a move on
the Power Curve—that 8 percent statistic really reso-
nates. They’re also surprised by the fact that compa-
nies in the top quintile capture nearly 90 percent of
the economic profit created—some 30 times as much
as those in the middle three quintiles.
Consulting: It doesn’t sound like there’s a shortage of
ideas or initiative—you talk about that specifically in
the chapter about choosing the right hockey stick—but
which ones to pursue seems like the toughest decision.
Is that why more companies don’t make the big moves
or take the big risks?
Bradley: There are lots of ideas; everyone has a plan
and everyone has a hockey stick idea, but having
something in a to-do list is not the same as a big
move. And that’s the power of these calibrations, the
power of the strategy benchmarking. Let’s go back to
the one we’ve already talked about, resource re-allocation. Everyone is talking about how they are pursuing new growth businesses but if you’re not moving
6 percent of your budget to new places, you’re not
making a big move.
Smit: One proof point of whether a big move is being
made is if the company is taking the first step, which
““The biggest impact for companies comes from keeping up a steady drumbeat of big moves—things like M&A deals, or the productivity improvements that are significantly greater than your competitors. If your strategy doesn’t involve several of these, the odds are stacked against you.