Mastering nitty-gritty leadership strategies.

• Author: Treacy, Michael
• Position: Cover Story

A pair of articles on two sides of leadership; a myth breaking look at leadership techniques: then leadership development.

The first examines several arguably 'glamorous-less' leaders who prefer disciplined and rigorous approaches over "glamorous." Yet riskier strategies involving daring acquisitions, bold innovations or breakthrough business models--and have created potent strategies for driving fast growing companies that achieve double digit growth.

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Much of the media love to cover leaders who play business on a grand scale--the game-changing acquisition, the bet-the-house blockbuster product innovation, the breakthrough new business model. Yet in recent years, the leaders and the leadership strategies of many fast-growing companies--American International Group (AIG), Paychex Inc., Capital One Bank and Washington Mutual Inc., among them--have been anything but headline-grabbing.

In fact, they may seem mundane: adding product features here and there that delight customers and eke out market share gains; bringing unique capabilities to push aside competitors in markets related to the core; diving into arcane but fast-growing niches before anyone else.

It's time to put a certain stereotype of the successful corporate leader to rest. Boston-based GEN3Partners studied the growth strategies of 130 U.S. public companies in the years from 1997 to 2002. The study compared the growth strategies of companies that had double-digit increases in revenues and gross profits to the strategies of companies that didn't grow as fast, and found that more often than not it wasn't the daring designers of high-risk strategies--the grand acquisitioner, the bold innovator or the breakthrough business modeler--who ran the fastest-growing companies.

Leaders of the fastest-growing were not the Wayne Huizengas--who mesmerized Wall Street with his vision of a mega-car retailer (AutoNation Inc.) that would muscle the automobile makers for power and profits until the hard realities of that market brought his vision down to earth. Nor were they the Jerry Levins--the former CEO of Time Warner who vaporized billions in shareholder wealth by merging his firm with America Online Inc.

The truly great leaders of the fastest-growing companies were, arguably, less glamorous executives--like Maurice Greenberg, CEO of $81 billion (revenue) AIG, the largest U.S. insurance company; Thomas Golisano of payroll services powerhouse Paychex; Ken Kutaragi, who spawned an $8 billion videogame business from nothing and swept Sony Electronics Inc. past industry leaders Nintendo Co. Ltd. and Sega Corp.; and Noel Forgeard, who has led Airbus S.A.S., step by step, past The Boeing Co. for leadership of the commercial aviation market.

These executives have a common leadership style: They prefer disciplined, rigorous and less-risky approaches to growth over grander, riskier strategies such as big acquisitions, blockbuster product initiatives and new business launches. They and others like them--Jeffrey Immelt, when he ran General Electric Co.'s Medical Systems division; Richard Fairbank, founder and CEO of Capital One; and Kerry Killinger, who turned Washington Mutual (WaMu) into the biggest savings and loan institution in the U.S.--found growth from four less-grandiose revenue sources: base retention, share gain, market positioning and adjacent markets.

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How did these leaders lead their companies to rapid growth by pursuing these four grind-it-out, less dramatic growth paths? And how can others learn these lessons and build such a leadership strategy in their organizations?

Builders of Base Retention

Companies such as Nextel Communications, GE, Harrah's Entertainment Inc. and WaMu are masters at keeping good customers in the fold and reducing revenue shrinkage from customer churn. That's critical, because the cost of acquiring replacement customers--the cost of marketing and sales--can be exorbitant.

Before Jeffrey Immelt became GE's CEO in 2001, he led the company's GE Medical Systems business to 18 percent compound annual revenue increases from 1997 to 2000, when it grew to a $7.3 billion operation. (GE Medical has doubled in revenue since then.) Immelt made it increasingly difficult for GE Medical customers to leave the fold. How? By helping the...