What the highest-performing businesses do right

PwC recently conducted a survey of more than 2,000 business leaders in the US, the UK, Germany and Australia to quantify the effect of 40 areas of management practice and company investment, including leadership foresight, investment in business and operating model transformation, and the use of technologies like cloud and advanced analytics. As the chart above reveals, the findings were striking: companies in the top quintile of the index—those that adhere most closely to the management and investment practices studied—are leaving other businesses in the dust, capturing a performance premium worth more than 13 times that of their industry peers. The nonlinear shape of this distribution curve illustrates how companies that develop beyond a threshold level of evolution achieve what we’re calling “quadratic performance.”

What are these outperformers doing right? The survey suggests that they’re making mutually reinforcing investments in their business, operating and technology models, which in turn drive performance factors such as innovation, speed-to-market and flexibility. This occurs as quadratic companies: 

• reduce friction, or transaction costs—the time and resources needed to do business, both internally and across business ecosystems and service partnerships.
• engage business ecosystems and service partnerships to create value by improving data flows, generating privileged insights, enhancing customer value propositions, and freeing up resources to more sharply focus on the company’s own differentiating activities.
• approach key initiative and investment areas comprehensively by pursuing them beyond a threshold level of maturity or evolution—for instance, moving entirely to cloud-native technologies as opposed to migrating only certain aspects of the business to the cloud.

Combined with a willingness to allocate resources against the opportunities and threats posed by new technologies and collaborations, these actions represent a path forward for companies seeking to climb the quadratic curve of performance.