Neil Goodwin on new research into the success of organisations

What Really Works, published by Harvard Business Review, is a five-year study of the experiences of 160 organisations over a 10-year period aimed at finding out why some organisations are more successful than others.

The organisations that outperformed their competitors were found to excel at four primary management practices: devising a clearly stated and focused strategy; maintaining flawless operational management; developing a performance-orientated culture and creating a flat and flexible structure.

However, these organisations also embraced any two out of the following four secondary management practices: holding on to talented staff and finding more of the same; making industry-transforming innovations; finding leaders committed to the business and its people; and seeking growth through carefully selected mergers and partnerships.

The secrets of success

The Four Principles of Ensuring Success, also published by Harvard Business Review, is a comprehensive study of large organisations to determine why some businesses have managed to perform at a very high level over long periods of time.

The research yielded four main conclusions for organisations to pursue for longer-term success: exploit existing assets and capabilities before exploring new ones; diversify but only after careful consideration; remember organisational mistakes and talk about them to make sure they are not repeated and; be conservative about change - great organisations seldom make radical changes and take care in their planning and implementation.

There is much overlap between these two pieces of research quite apart from each being grounded in the real world of nearly two hundred organisations. The links between strong operational management and exploiting assets and between culture and talking about organisational mistakes are two obvious examples. Organisations that do not have a culture in which open discussion is encouraged will bury their mistakes and not learn from them.

The key here is the chief executive. Research in the NHS has shown them to be the single biggest influence on their organisation's style, tone and culture.

The story of Glaxo's introduction of Zantac in 1981 is a good example of exploitation of someone else's invention. Glaxo was a latecomer to the then hot area of ulcer treatment, launching Zantac five years after SmithKline's best-selling Tagamet. There was no medical advantage offered by Zantac; all it offered was the need for patients to take fewer tablets each day.

'Me-too' services

Conventional wisdom was that a 'me-too' product would never win more than 50 per cent of the market. However, since SmithKline had already invested in educating doctors about the new type of ulcer treatment, all Glaxo had to do was sell on the basis of the benefits of Zantac versus Tagamet. It was a bold, highly successful and profitable move and as they say, the rest is history. Glaxo eventually purchased SmithKline in 2000, thereby pursuing growth via merger rather than having to build its own pipelines.

There are benefits of these two pieces of research to organisations providing NHS services. Taken together, the 4+2 rule of What Really Works and The Four Principles of Ensuring Success provide a practical and easily understood strategic framework for the NHS, which is only now learning to devolve aspects of strategic planning to its constituent players.

In addition, the numerous lessons from the papers, of which the story of Glaxo and Zantac is merely one example, can help stimulate strategic development thinking as organisations consider how to operate in a world where both competition and collaboration between services are expected. Just think 'me-too' services instead of 'me-too' products.