Robert Lane's managing philosophy boils down to a simple point: He believes great companies can always do better.

 

"You set the bar really high," Lane said. "We want to perform on average better than our very best year."

 

This isn't idle talk. Lane is chairman and CEO of Deere & Co. (NYSE:DE) DE, an iconic $22.1 billion manufacturer of tractors and field machines that's given farmers a leg up for 170 years.

 

Since taking over Deere seven years ago, Lane and his managers have taken the Moline, Ill.-based maker that made its mark in 1837 by inventing a new horse-drawn plow on a moonshot.

 

Deere now sells high-tech harvesters with Global Positioning Systems that let farmers cut crops with data from space. It also makes tractors in China and India for sale in other developing nations.

 

U.S. farmers upping corn production to meet demand for ethanol biofuels are expected to buy Deere's vehicles for years to come. They'll also have more cash to buy tractors because of record corn prices fanned by government subsidies.

 

"Farmers are trading up to new and better equipment, and that's good for Deere," said Morningstar analyst John Kearney.

 

Such bullish forces have helped Deere's shares jump almost 300% since August 2000, when Lane's watch began. They now trade at about 147. The stock's up 55% in 2007.

 

Deere's third-quarter earnings jumped 28% to $2.37 a share, beating analyst views by 38 cents. Sales also rose a better-than-expected 6% to $6.63 billion on strong global sales.

 

Deere predicts equipment sales will increase about 16% in the fourth quarter, and the company raised its full-year forecast to 7%, up from 6% in May.

 

Nice Tail Wind

 

"Deere's fundamentals are pretty good," Morningstar's Kearney said. "They have a strong wind at their back. There's nothing that shows it will turn down in the near term."

 

Deere owes more to deft management than luck. Lane and his team unscrewed past notions about how firms should be run to set Deere on a new course. They also realigned key units so they're more in line with fast-changing business trends.

 

One of Lane's managing tips: Companies should be less like families and more like high-performance teams. "In families, everybody pulls for everybody else," he said. "Your uncle gets invited to dinner even if he doesn't bring anything to the table. But performance teams are like rowing teams -- everybody must do what's expected."

 

Lane believes that winning firms also need to develop new ways of gauging performance. "If markets are strong, your performance has to be that much stronger," he said.

 

When Lane took charge, Deere was hitched to some old economy realities. It was fighting the riptide of a cyclical downturn in farming with too many on its payroll. Its tractors cost too much to roll off the factory floor. R&D for new tech was lagging, just as new markets like China and India were taking off.

 

"The business was good but not great," Lane said. "The question was, how could we build a business that was as great as our products?"

 

The 57-year-old Washington, D.C., native stresses that Deere's reputation for providing durable farm equipment and great customer service was never at risk during the slump. But the maker of shiny green tractors needed some work under the hood.

 

Fast-forward to 2007. Lane and his team have retooled the way the 50,000-employee firm does business. They've cut costs, inventories and non-core assets. Competing units were consolidated, and Deere's distribution system was streamlined. Lane's team got unions to support the changes.

 

The other interesting point 19 that Lane shook up the company as an insider. He was able to change Deere from the inside because he spent years learning how the company worked.

 

Lane joined Deere in 1982 after a stint in global banking and rose through the ranks. He began as an exec in Deere's construction-equipment unit. Lane has also been chief financial officer, head of the worldwide farming equipment unit, and president and chief operating officer. He's gone to China more than 25 times and taken long trips to India, Africa and South America.

 

One of Lane's key moves when he took over Deere in 2000 was to forge a new metric for measuring corporate performance. It's called shareholder value added, or SVA.

 

It provides a clearer picture of Deere's future for investors, customers and employees.

 

Lane felt that pressure to perform needed to be turned up, from the corner suite to the factory. Laying down this yardstick was Lane's way of doing it.

 

In the process, Lane and his team shattered the "good enough" mentality that vexes many companies.

 

SVA measures pretax profit left over after subtracting the cost of enterprise capital. Deere fuels SVA growth by paring costs, dumping bad assets and investing wisely.

 

As a benchmark, Deere's equipment units usually target a return on operating assets of 20%. The final SVA figure is an annual lump sum for the entire firm that shows how much was added to shareholder value. The more SVA, the better it is for the company.

 

In 2006, Deere's SVA totaled $948 million. In each of its three fiscal years from 2004-06, it kept doubling its SVA totals from the year before.

 

"It was a transformational moment for the company," said Michael Mack, Deere's CFO.

 

Under SVA, all of Deere's 24,000 salaried employees also get written online performance targets that are reviewed twice yearly. "All their goals are aligned" so that everyone pulls together, Lane said.

 

Intelligent Tractors

 

Deere is also forging ahead in digital technology. It's R&D labs in Moline have virtual reality rooms that project computer-generated, 3-D images on walls so engineers can check new product designs for durability. Walking around "inside" these virtual images, engineers quickly decide how to reduce defects and slash the costs of design and manufacturing.

 

"Our machines are becoming intelligent," Lane said.

 

Lane is a nautical buff who compares keeping Deere on an upward tack to trimming sails.

 

"You can have a great sail, but if it's all trim and no wind, you're not going to get very far," he said. "The same's true if you have all wind and no trim." The trick, he says, is to trim your sails to catch the wind as never before.