But to really understand a Great Repeatable Model's℠ differentiation, you have to ask two questions:
- How do the differentiations reinforce one another to define a repeatable business model? Singapore Airlines provides exceptional service yet has one of the lowest cost structures among its direct competitors. These two interlocking forms of differentiation propel the company's success.
- What are the assets and capabilities at the heart of the differentiation? Answering this question requires drilling down into the heart of the company's model. If the advantage is in unit costs, for instance, where exactly do the advantages show up on the P&L, and how defensible are they? If the advantage is speed to market, what are the processes that are superior to those of competitors?
Differentiation and growth. The power of a repeatable model's differentiation lies in its ability to foster sustained growth over time. Some companies, such as Vanguard or IKEA, have grown by offering new products, targeting more (and more precise) customer segments and adding services, all while maintaining their fundamental focus. Others, such as NIKE or the commodities trading company Olam International, grow by entering new markets with an adapted version of their core model. And some multicore businesses, such as United Technologies Corp. or Procter & Gamble, have developed a coherent management system that they apply to every business they are in (see figure).
A strong repeatable management model allows companies to add value to acquisitions. Danaher Corp., for instance, has grown steadily by acquiring industrial companies in a variety of niche markets and instituting a unique business system based on the principles of lean manufacturing. Danaher's data shows a consistent ability to improve the margins of acquisitions, often by as much as five to 10 percent of revenues. Danaher itself is one of the best-performing multicore companies in the world.
Next principle: Clear nonnegotiables