Finally, an answer to the ultimate business question: How do some companies achieve exceptional performance over the long term?
 
In
every sector, there’s an outlier. In the phar­maceutical industry, it’s
Merck. In discount retail, it’s Family Dollar. It used to be Wrig­ley
in candy and Maytag in appliances. Other superstars have been hidden in
plain sight, like Heartland Express in trucking or Linear Technology in
semiconductors. How do these exceptional companies deliver superior
perfor­mance over the long run despite facing the same constraints as
competitors? What are they doing differently? What can we learn from
them?
 
Michael E. Raynor and Mumtaz Ahmed have analyzed data on
more than 25,000 com­panies spanning forty-five years. Their five-year
study began with a sophisticated statistical analysis to identify which
companies have truly exceptional performance, 344 in all.
 
In
collaboration with teams of researchers, Raynor and Ahmed then put a
carefully chosen representative sample of twenty-seven com­panies under
the microscope to uncover what made the stand-out performers different.
They found that exceptional companies, when faced with difficult
decisions, follow three rules:
Better before cheaper. They rarely compete on price.Revenue before cost. They drive profits through price and volume, not thrift.There
are no other rules. Everything else is up for grabs, and they are
willing to change anything to remain true to the first two rules. 
The
rules provide an indispensable compass that any company can use to
chart its own path to greatness. Is it better to keep price down or
invest in creating value that commands a higher price? Should you focus
on talent and develop­ing the abilities of your people or build
processes to extend the capabilities of your organization? How about
acquiring a sizable competitor to secure economies of scale—or a small
start-up to gain access to new technology? According to Raynor and
Ahmed, the right answers to these and just about every other question
are the ones most closely aligned with the rules.