January 27, 2017
Interview with Michael Raynor, author of the book The Three Rules
Mike Carruthers:
If you have a business or are starting a business you may want to consider three rules to running that business. Rule #1…
Michael Raynor:
Focus on better before cheaper – which is to say don’t compete on price, compete on all those dimensions of value that aren’t price.
Michael Raynor, author of the book The Three Rules …
Don’t make a cheaper widget make a better widget. I’m not going to suggest that somehow someone out there hasn’t suggested that, that might be a good idea. What I would like to argue though, is we’re able to provide evidence that systematically companies that focus on non-price value are far more likely to deliver exceptional profitability than companies that focus on price-based value.
Rule #2 is to focus on revenue before cost.
Now the reason that’s important is that it could have gone the other way. The profit equation is very simple; profit equals revenue minus cost. And the math doesn’t care whether you increase profits by increasing revenue or by decreasing cost but it turns out that reality does care. Companies that drive profits by increasing their revenue are systematically more profitable than companies that drive their profits by decreasing their costs.
So rule #1 is better before cheaper. Rule #2 is focus on revenue before cost. And rule #3…
Perhaps somewhat ironically there are no other rules. And what that means is that you should be willing to change any and everything in order to stay true to those first 2 rules.
