Case studies

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AB Inbev is today the combination of Ambev, the leading beer company in South America; Interbrew, one of the leaders in Europe; and, recently, Anheuser-Busch, the leader in North America. It is now the largest beer company in the world, with 2010 revenues of $36 billion. Central to the success of AB Inbev is its repeatable model for managing costs, operations, and assets, which traces much of its origin to the Brazilian Ambev. Ambev reports separate results, not distorted by the continuous string of combinations driving the parent company, and has shown a return to shareholders of 29 percent during the past 10 years. Return to top

American Express’s repeatable model for charge cards and payment systems traces back to 1850. During the fifteen years up to the 2008 financial crisis, American Express increased profits by 10 times and achieved 17 percent annual return to shareholders, while gaining considerable market share in its core card business and remaining highly profitable throughout the 2008–2009 financial crisis. CEO Ken Chenault has referred to American Express as "a company of repeatable models." Return to top

Since the launch of the first iPod in 2001, Apple has driven its strategy through a series of repeatable models defined by the sequence of its products (iPod, iPad, iPod touch, MacBook Air, iPhone, Apple TV), by the sequence of content on iTunes (music, video, TV, books, etc.), and through its geographic expansion. During the 10 years from 2001 to 2010, Apple grew its profits from a loss to $18 billion in operating income and to a market value of more than $250 billion, making it the most valuable technology company in the world. Return to top

ASML is the world market leader in manufacturing lithography equipment that allows its customers, such as Intel, Samsung, and TSMC, to make ever-smaller, faster, and more efficient electronic chips for computers, tablets, and smart phones. ASML was founded in 1984, and used to be a small player in the lithography space with Japanese giants Nikon and Canon as its main competitors. By consistently focusing on developing the best lithography equipment, and investing throughout the economic cycle, it was able to become market leader in 2002. Since then ASML has consolidated its leadership position, and now effectively is the only player in the top segment of the market. Return to top

Berkshire Hathaway is the investment vehicle of multibillionaire Warren Buffett. The company aims "to maximize Berkshire’s average annual rate of gain in intrinsic business value on a per-share basis," following a short set of investment principles, buying underperforming businesses, improving them, and holding them for the long term." Over the past two decades, Berkshire has returned 16 percent per year to its shareholders. Return to top

BHP Billiton is the world’s largest mining company. In 2001 the Australian Broken Hill Proprietary (BHP) and the South African Billiton merged to become the company that would turn out to be the most successful player in the mining industry. BHP Billiton acquires strong "tier 1" mines when they are underpriced due to the economic cycle. Its diversified portfolio along with a strong, relatively stable cash flow then enables it to invest in improving the mining operations. Moreover, BHP Billiton has proved to be very successful in reducing the enormous complexity of running a $53 billion corporation with more than one hundred operations in twenty-five countries, producing a dozen different commodities. For instance, it has reduced the nine thousand different management authorities that it identified throughout the company to just thirty. In the eight years since the merger, BHP Billiton has grown revenues at 15 percent per year and operating income at 29 percent while generating an annual total shareholder return of 22 percent. Return to top

Danaher has been the best-performing multicore company ("conglomerate") in the world over the past twenty years. The company has been built up by a series of acquisitions—about eighty-five companies during the past 10 years, with the parent corporation each time applying the Danaher Business System (its repeatable model) to increase consistently the margins of the acquired companies by up to 10 points. Today, the Danaher Business System has become the way the company manages its business and the way the center adds value. In 2010 Danaher grew to a $13 billion company with $1.8 billion of earnings. An investor who invested $100 in Danaher in 1989 would have about $10,000 now for that investment; over the past twenty years, Danaher has returned an average of 24 percent per year to shareholders. Return to top

DaVita’s repeatable model is the development and management of centers for the treatment of renal failure patients. In 1999, the company was in serious trouble, with revenues of $1.4 billion, losses of $67 million, a government investigation, 40 percent employee turnover, and stock price collapse. Today, DaVita has attained sustained value creator status for 10 years, growing to $6.1 billion in revenue in 2009, increasing its market share from 12 percent to 29 percent, and driving its stock price from below $2 per share in 2000 to more than $70 per share at the end of 2010. The turnaround of DaVita is a classic example of the power of all three of our design principles to turn around a business and create value. Return to top

Enterprise Rent-A-Car runs the largest private fleet of vehicles in the world, of more than a million cars. The company began in 1957 to provide what it calls "replacement" rentals to people whose vehicles were disabled or under repair. Today, Enterprise has achieved more than 70 percent market share in this specialized rental niche, using one of the best examples of a repeatable model adhering to our three design principles that we have found. In recent years, Enterprise has used its cash flow to purchase the Alamo and National car rental businesses, expanding into adjacencies of leisure and business airport travel, where it is now applying the elements of its repeatable model. Return to top

Hankook Tire has been one of the fastest-growing tire companies in the world during the past decade. Its repeatable model is centered on its ability to build and manage low-cost tire plants. The company started as a low-cost and lower-quality Korean tire company, but through its model of continuous improvement has maintained its cost levels while achieving world-class quality levels. From 2001 to the end of the decade, Hankook increased its stock price by 10 times and became a leader in the fastest-growing Asian markets, such as China and Korea. Return to top

Hilti is a Liechtenstein-based company in the business of designing and distributing tools and supplies for the construction industry. Its repeatable model is built around a direct- to-customer distribution system (nearly all of the market is indirect) and its methods of working closely with the customer to design tools with superior functionality—driving a price premium of more than 20 percent in many of its core product lines, like drilling systems. Hilti has a consistent 6 percent growth rate over fifty years and a track record of continuous profitability. Return to top

In less than a decade, Huawei has grown from a cheap, "me too" electronics manufacturer that no Western company had heard of, into one of the world’s leading and most innovative telecom and network equipment suppliers. Huawei is viewed today by many traditional telecom equipment vendors as their primary competitive threat of the future. Its largely employee-owned organization is focused on fast cycle times and a short distance between management and the front line. Huawei’s installation times are dramatically shorter than for incumbents, with similar or better product quality and 20–30 percent lower prices. In 2002 Huawei’s revenues were $2.1 billion in size; by 2010 they reached $28 billion, a more than tenfold increase in eight years—with industry-leading (14 percent) profit margins. Return to top

IKEA is the most successful furniture manufacturer and retailer in the world. Since its founding in 1943, IKEA has consistently refined and improved its repeatable model. The IKEA model contains many differentiated elements, from its store layout to its flat packaging of all furniture for customer assembly to the way it designs and sources furniture to tiered price points. IKEA’s core market is Europe, where it is nearly 10 times as large as its nearest competitor. Over the past twenty-five years, IKEA has grown by 13 percent per year in a market that grows 5 percent per year. IKEA’s operating margins are above 15 percent, more than double the industry average profit level. Return to top

Larsen & Toubro (L&T) is the largest infrastructure construction organization in India, with operations extending far beyond the Indian subcontinent. The company traces its origin to 1938, with the wonderful signature phrase "we make things that make India proud." Since A. M. Naik became CEO in 1999, L&T has grown its revenues at 22 percent, to $12 billion, and its profits at a 45 percent annual rate, to $1 billion. Central to this success were a period of shrinking to its construction core in order to grow and the application of a repeatable approach to project-based large-scale construction. Return to top

Since 1955, LEGO has focused on perfecting and extending its "LEGO system of play" with its signature product, familiar interlocking plastic blocks. The LEGO system itself is a metaphor for the repeatability of its business model, which has resulted in more than sixty LEGO blocks for every person on earth and its designation as "toy of the century." In an aspiration to become "the strongest brand to families with children" during the 1990s, LEGO departed from its core repeatable model, to its peril, declining to a level of losses of 21 percent of revenues in 2003, having destroyed an average of $400,000 per day for more than 10 years. Jørgen Vig Knudstorp became CEO of the company in 2004 and has engineered a return to the repeatable model of the past, and its renewal, driving profitability up to 25 percent of revenues in 2009. Even during the economic downturn, the company’s repeatable model generated continuous market share gains and earnings growth of 55 percent per year. Return to top

Li & Fung is the most successful manager of manufacturing supply chains running from Asia (especially China) to Europe and North America. The company traces its origins to an export company in 1906 and its current strategy to a complete redefinition of its business model by the brothers William and Victor Fung during the 1980s. From 1999 to 2009, Li & Fung achieved 20 percent annual revenue growth, 20 percent profit growth, and 25 percent total return to shareholders per year. Fueling its growth is a highly repeatable business model organized around individual customers for the management of their complete supply chain—sometimes all the way to the door of the retail store. Return to top

Louis Vuitton is one of the most aspirational global brands— customers around the world are willing to pay $1,000 or more to own one of the timeless handbags with the famous LV logo. Its repeatable model consists of showcasing a mix of classic and fashionable design through its own retail locations, with superior quality, customization, and service—and no discounts, ever. Over the past decade, the brand grew by 10 percent annually (market growth was 3 percent), with operating profit margins of more than 40 percent—beating its competitors by at least 10 to 20 percentage points. Return to top

MSC is the leading distributor in the United States of supplies for the metalworking industry. The company traces its origins to Sid Tool company, a local distributor in Lower Manhattan in 1941. In 1994 the management team recognized that they had the elements of a business with leadership economics and a repeatable model to expand nationally. In a low-growth market, MSC grew from $194 million to $1.5 billion by 2009, a rate of 16 percent per year. Return to top

Nike is the world’s leading supplier of athletic shoes and equipment. The company traces its origin to the original " Waffle Trainer," which started a revolution in running shoe design. The company was founded in 1964 by Phil Knight, who remains chairman today. Nike is one of the best examples we have seen of a repeatable model, honed over a long period of time, and focused on identifying, entering, and increasing the industry profit pool in one segment of sports after another, from tennis to cycling to football. Over a twenty-five-year period, Nike increased sales and earnings more than twenty times, and shareholder investments more than one hundred times—a total 20 percent annual shareholder return during this period. Return to top

Olam began in 1989 with a project to bring cashews from Nigeria to the food producers of Europe. Over time, the management team, led by CEO Sunny Verghese, developed a repeatable model to manage risk and supply chains for agricultural products from developing economies to food producers. We found that Olam is one of the best examples in the world of our three design principles of Great Repeatable Models℠ from start-up to maturity. Olam has experienced more than 25 percent annual growth rates in earnings and profits since 2001. It has now extended its repeatable model to more than fifty countries, fourteen products, and multiple new processing steps in the supply chains, achieving a revenue level in 2010 of just over $8 billion. Since its IPO in 2005, the share price has more than tripled despite a difficult industry cycle. Return to top

Procter & Gamble is one of the most enduring and iconic consumer products companies, with products spanning from Tide detergent to Gillette shavers. From 1996 through 2001, earnings were flat and the company seemed to have stalled out. A. G. Lafley, a longtime P&G loyalist, took over as CEO, with a mission to rejuvenate and strengthen the company’s famous repeatable model for managing brand businesses, focus the portfolio, and develop new products. The strategy worked, leading to an 18 percent annual increase in profits from $5.9 billion to $17.9 billion EBIT. Fifteen of P&G’s twenty-one core brands are leaders in their category today. We used this example in the book to illustrate the power of renewing your repeatable model of the past. Return to top

Reckitt Benckiser is formally based in the United Kingdom but describes itself as a "global" FMCG company. The company was created from the merger between British Reckitt & Colman and Dutch Benckiser in 1999. Since then it has grown revenues at 10 percent annually and profits at 31 percent, and created an annual shareholder return of 17 percent—far outperforming its larger rivals, such as P&G, Unilever, and Colgate-Palmolive. It has done so by employing a strategy that is focused on building a few extremely strong "power brands" (e.g., Calgon, Clearasil, and Finish) and investing heavily in the innovation and marketing of these brands—even throughout the financial crisis. In 2006 the CEO stated that he intended "to do plenty more of the same, . . . repeating our strategy for delivering profitable growth. We believe that the simplicity and clarity of our strategy helps us with the execution as our strategy is so well understood throughout the Company." Return to top

Scania is the leading manufacturer of trucks for the European market, based in Södertälje, Sweden. In the fifteen years up to the financial crisis, it grew revenues fivefold to SEK 89B (about $13 billion). Scania has realized this growth by doubling down on its core European heavy truck market, divesting its aviation business, and consciously leaving alone the very different U.S. market. It continuously expanded its core customer base in Western Europe, as well as the services it offered to those customers, such as financing, parts logistics, and fleet management. Scania then replicated this model into the high-growth Eastern European countries and other emerging markets. Its share price has multiplied threefold between 2000 and 2010, and throughout the crisis Scania has remained profitable for every single quarter, while financials in Q3 of 2010 were back again at precrisis levels. Return to top

Singapore Airlines successfully pursued a strategy of a highly differentiated customer service combined with low-cost operations. It has won the World’s Best Airline award from Condé Nast Traveler an astonishing twenty-two of twenty-three times, with costs per available seat kilometer lower than those of most other Asian airlines and just a third of the level of some of the traditional European airlines. In an industry that is notorious for its value destruction, Singapore Airlines has been profitable every single year since its founding in 1972, and between 1995 and 2009 it realized a 9 percent annual total shareholder return. Return to top

France-based Sodexo is one of the leading food service providers globally. It started in 1966, serving good-quality food to French company restaurants, schools, and hospitals. Since then, it has continuously improved and replicated its model into new services (e.g., maintenance), client segments (e.g., remote sites), and geographies (e.g., Belgium, the United Kingdom, and the United States). Throughout its expansion, Sodexo has maintained a very strong frontline focus, with about 95 percent of its employees working on its sites. Sodexo has an industry-leading client retention rate of 94.2 percent, and has realized an after-inflation revenue and profit growth of more than 10 percent per year over the past twenty years. Return to top

Tesco is the leading grocery chain in the United Kingdom. The company revolutionized its industry during the 1990s (despite the fact it was founded in 1919) by bringing to the U.K. market a large-volume, low-cost, high-service concept that included such innovations as customer discounts if the wait time at checkout is more than a few minutes. Over the past twenty-five years, Tesco has achieved 13 percent annual revenue growth, 16 percent profit growth, and an average of 16 percent shareholder return per year. Tesco’s repeatable model extends from its store model and supply chain management to the way it enters new categories, from petrol to pharmacy. In 2010 Tesco attained a scale of more than $90 billion and a U.K. market share of more than 30 percent. Return to top

Tetra Pak is a Swedish company whose repeatable model is built around its familiar laminated brick packs for foods and beverages. This private business traces its origins to its founding by Ruben Rausing in Lund, Sweden, in 1951. Tetra Pak is the overwhelming leader in this form of packaging and has experienced continuous growth and profitability for more than thirty-five years, now achieving a level of 158 billion packs sold per year and revenues of about $14 billion. The Tetra Pak system is highly repeatable, from its laminated materials to its machine configurations to its country organizations. Central to its strength as a company are core principles and beliefs put in place by the founder and nurtured and refined through successive generations of managers. Return to top

Toyota, the Japanese automobile company, is the father of many repeatable models in the world of heavy manufacturing. The Toyota system has been constantly studied, and copied, but never equaled. Toyota’s repeatable approach to cell manufacturing and continuous improvement has brought it from a low-cost, low-quality, niche producer in the 1970s to a global top-3 leader today. An example of the power of the Toyota model is the way in which it displaced General Motors in the U.S. market, from 3 percent market share in 1980 to 17 percent in 2010. During the past few years, Toyota encountered a series of crises around potential defects. Subsequent investigation has largely exonerated Toyota. Return to top

United Technologies Corporation (UTC) with $55 billion in 2010 revenues, has been one of the five best-performing multibusiness conglomerates in the world over the past fifteen years, with product lines running from Sikorsky helicopters to Carrier air- conditioning—all heavily engineered, industrial, global products. Central to the success of UTC is its corporate repeatable model, called Achieving Corporate Excellence (ACE). ACE is an operating model that defines a consistent management system across all of UTC’s businesses, from plant floor management to customer relationship management. Businesses are graded according to their performance along a consistent set of ACE dimensions, and ACE is central to how the company defines how it adds value to its portfolio companies. UTC is an example of how a diverse company can still benefit from some of the principles of repeatable models. From 1994 to 2009, UTC achieved annual shareholder returns of 17 percent. Return to top

Vanguard was founded by John Bogle in 1974 as an investment company built around a set of investment principles that have remained at its core since then. Central to the Vanguard repeatable model is the idea that most investors cannot beat the market, that index funds are often the best way to invest, that loyal customers dominate all else, and that the company would not pay for distribution by others. Today, Vanguard is the world’s largest mutual fund company, with $1.5 trillion under management. During the financial crisis from 2008 to 2009, Vanguard captured 45 percent of all the available investment funds in the United States. CEO Bill McNabb said to us that "Vanguard is at its core a repeatable model." Return to top