Gary Hamel - Strategic Intent - The Innovation Show

Episode Transcript
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(00:00):
Strategies based on imitationare transparent to competitors

(00:03):
who have already mastered them.
Moreover, successful competitors rarelystand still, so it's not surprising
that many executives feel trapped ina seemingly endless game of catch-up,
regularly surprised by the newaccomplishments of their competitors.
For these executives and theircompanies, regaining competitiveness

(00:24):
will mean rethinking many ofthe basic concepts of strategy.
As strategy has blossomed,the competitiveness of Western
companies has withered.
This may be coincidence,but resourcefulness.
The pace at which newcompetitive advantages are
being built rarely enters in.
In this respect, traditionalcompetitor analysis is like a

(00:44):
snapshot of a moving car by itself.
The photograph yields littleinformation about the car's speed
or direction, whether the driveris out for a quiet Sunday drive
or warming up for the Grand Prix.
Yet managers have learned throughpainful experience that a business's
initial resource endowment, whetherbountiful or meager is an unreliable

(01:06):
predictor of future global success.
This is from the Harvard BusinessReview Magazine from 2005.
It is from an article that became famous,an article that also became this beautiful
little book that I have, strategic intentwritten by CK Prahalad, and our guest

(01:26):
for this series that is just magnificent.
Gary Hamel.
Welcome back.
Yeah.
Nice to be back
2005
You know, I think it actually wasoriginally published earlier than
that, maybe sometime in the 1990s,
the magazine was where I firststumbled across it, and it's published

(01:47):
there, but also, as I said, it'spublished in this beautiful book.
what I really, really wanted to shareabout this one, Gary, was let's imagine
these names are justified that they,they, they're your company today because
Gary talks about companies in the 1970s.
Him and CK really studiedcompanies like that.

(02:07):
Gary has deep expertise in eastern cultureand eastern business, and you said in
1970 few Japanese companies possessed theresource base, manufacturing volume or
technical prowess of the US and Europeanindustry leaders, but companies like
Komatsu, which had less than 35% as large,

(02:29):
yes, they pounced upon competitors.
They came from below, which is areally important aspect of today's
show, and they took them by surprise.
Maybe we'll give an overview againfor those people who may have missed
our early episodes where we talkedabout CK but where you, and he really
explored the East and saw how theytook advantage of our mental atrophy

(02:50):
or strategic atrophy in the west.
Yeah.
You know, it's easy to takean endowment for granted.
So the fact that your company, has along history, the fact that you maybe
have loyal customers, the fact that, youhave a large installed, base, the fact

(03:14):
that you, are located in a country witha lot of resources, a lot of technology,
great universities and so on, you know,it's just easy to take that for granted
and assume that that somehow insulatesyou from what is going on in the world.
And I think you're right, Aidan.
I think you saw it when we wrote thatmany years ago, and you see it now.
You see a certain kind of, I don'tknow if intellectual laziness is the

(03:36):
right word, but certainly complacency.
I think if you look at what hashappened, you look at Europe, you know
that has struggled outside of a coupleindustries, like maybe automobiles and
pharmaceuticals has really struggledto maintain its place in the world.
the US has also like deep, challengesin, semiconductors, in advanced
computing, in material science and so on.

(04:00):
every company is either movingforward or going backwards,
but there is no standing still.
And, you know, there's noability to rely on history as
a guide to what happens next.
So I do think having that perpetualhealthy anxiety, that concern, and

(04:20):
as we talked about a bit last time,Avoid the tendency to just kind of
discount or explain away new challengesor new competitors and so on.
That's part of what I was talkingabout and just the absolutely critical
role that ambition plays, in strategy.
You know, at the time I was writing thatCK and I were writing that, and it, you
know, it's still true today, strategywas mainly seen as, , you know, we're in

(04:43):
this industry, are we in this segment?
Are we in this segment?
You know, where do we price?
What channels do we use?
It was kind of this very static,kind of like chess game kind of thing
against a known set of competitors.
And then somebody comes along andkind of throws the chess pieces in
the air and says like, let's thinkabout this in a very different way.
so, you have to not only havesuperior resources, but you have

(05:06):
to have superior foresight and.
A bigger dose of ambition ifyou're gonna hope to stay relevant.
I thought I'd just touch on somethingbefore we get into the article, and that
concept of strategic intent, Somethingyou touched on there and we talked
about it before we came on, is actuallyapportioning the time to think and the

(05:27):
discipline of that, the discipline tolearn and how much of a competitive
advantage that is in this day andage where we outsource that thinking
oftentimes to consultants, but we don'thave it in our essence in the company.
And for me it's changed my career,this learning from brilliant people
like yourself actually reading thebook, which is just, I mean, that

(05:48):
should be a price of entry, a price ofadmission to actually read the book.
But it's so rare to actuallysit through and read that book.
And even getting people to attendconferences, as you know well, as I know
well is so difficult to pry them awayfrom the doing to doing more thinking.
And I just thought you'd shareyour concept on that because
it seems to be getting worse.

(06:09):
Well, I think it is, and I think, youknow, several things are at work there.
two or three things thatcome to mind immediately.
one is so many people who are writing,creating content of the world of
business and management and so ontoday, with social media and so on.
just feel compelled to createcontent all the time, whether it's
really deep or worthwhile or not.

(06:31):
I remember, a couple years ago havingsome conversation with some personal
branding consultant And of course, theirwhole goal is, Hey Gary, you need to
blog every day and write something everyI go like, I just don't have that many
really breakthrough ideas every day.
They like, they, they're hard to comeup with a really new way of thinking.
Something that hopefully is kind ofprofound illuminating frame breaking.
You know, writing every day almost,you just guarantee it's, it's just

(06:53):
triviality, So, so we're just like awashin content it's not easy to kind of sift
through that and go like, well, what'sreally worthwhile and what's gonna last?
think the second phenomena is likeour attention now is so fragmented.
You know, you, you go to many ofthese magazines online and like
the first thing they tell youis how long it's gonna take you.

(07:13):
You're like three minuteread, five minute read, right?
Like, don't tell me it's a 20 minute read.
Dear God, I can't spare 20 minutes.
And at the same time, we're allsitting around binge watching, right?
So, you know, but we just, youknow, our attention is spended.
so, you know, what you see is justlike all these listicles, you know,
five ways to do this or whatever, know,everything, you know, you wanna be

(07:37):
like digestible and easy and whatever.
Well, there's nothing that's digestible.
There's nothing easy.
There's nothing quick that's gonnamake a profound difference in
anybody's life or in their business.
And so, you know, Ithink that's part of it.
I think, you know, the, the kindof meta level thing is obviously
we're, we're, all of us are stillstuck in these old organizational
models and assumptions and so on.

(07:59):
one of the books that probably influencedme almost more than anything else , was
Thomas Koons, the Structure of ScientificRevolutions, which I'm guessing must
have been written in the seventies,maybe eighties, maybe even before.
But, you know, he went backand, and the question he was
asking is, does science proceed?
Like, not smoothly, butin these leaps right?

(08:21):
Kind of punctuated equilibrium.
And, and what he argued wasthat in field of, of science or
inquiry, you know, you get stuck.
And you get a dominant way of thinking,and it is preserved and kind of
almost an intellectual hegemony.
and it's preserved by, you know,the elite, those who have a
stake in that way of thinking.

(08:41):
And it takes an overwhelming amount ofevidence and new thinking before you
kind of break free of that and go like,okay, well that was kind of stupid.
Like, maybe we shouldthink about it this way.
And I, I remember what he, what hesaid, he said the future's almost,
and he was talking about science, butit's too generally the future's almost
always created by people who were youngor had no stake in the status quo.

(09:09):
So I think, you know, whoever youare, if, if you care about building an
organization that is more capable thanaverage, that is better than average,
you have to look for ideas, insights,and so on that are not average, right?
That are, that are, thatare surprising to you.
And may indeed come from outside theworld of, of, of, of kind, of management.

(09:31):
And, because most of what's writtenin, you know, I can, I can pick up a,
a management book, a business book, andI usually don't even have to get all
the way through the preface before Iknow whether it's worth reading or not.
If it, if it basically takes 90% of theexisting way we think about strategy
management market as a, as a given.
Okay.
You know, may, maybe it's helpfulto you if you're like a beginner

(09:52):
and you're starting out, butyou've been around a while, been
inside organizations for a while.
You really have to make aconcerted effort to look for things
that kind of outside the norm.
And sometimes those things will be stupid.
Right?
And you go like, well, that was wacky.
the highest compliment I ever get iswhen somebody reads something I wrote
and say, Gary, was like completely.

(10:12):
Illuminating and unexpected, butcompletely logical, you know,
that's, that's what you're going for.
So I think, you know, some of thepeople we've talked to through our
interviews, like Bill Gore, whostarted W Gore or Jaman at hire.
These people were deep studentsof management thinking, right?
And, you know, if you start tothink about management, really

(10:33):
this very important socialtechnology, we'll come back to this.
you really want to understand,what we take for granted.
What is the state of the art?
What's out on the bleeding edge?
I would guess that most people inmanagement and business, they don't read
one management book, business book a year.
Like, what the heck?
Like how do you stay up to speed?

(10:53):
when I first met Minno, when I was inhis office in Ingal, He had a giant
wall filled with every management bookthat I could imagine, like a C'S worth.
and he could quote it and he knew it.
so yeah, we have to avoid this tendencyto be, lazy and to be, content with
the incremental and the trivial.
And, just take the time tolook for the deeper truths.

(11:14):
And that thing you said like the bestbusiness people I know are learners.
They're constant learners and UN learners.
They challenge.
I was thinking about when you weresaying that about Kun and the plank
principle Max Plank, the whole idea thatscience advances because people die off.
And how you told me and I learned fromyou how the same happened with generals.
they actually used the same old strategiesand were killing people on their own.

(11:39):
And it was only, they only changedand adopted the new technology
because , the generals died off.
But I was thinking about thatdeeply that the same thing happened.
I dunno if you know this when, sayyou, you were a professor or you put
out some scientific paper that youngchallengers don't challenge that paper
until that person dies off because ofthe fear of the consequence of speaking

(12:00):
truth to power and saying, I actuallydisagree with that, which I thought was
absolutely incredible, which speaks towhat happens inside organizations as well.
Yeah, the tendency, for powerful peopleto, deflect the challengers is pretty
much, a story of human nature and so on.
and last time we talked a littlebit about, you know, the need for

(12:21):
senior people to really welcomedescent and to seek out people
who have different points of view.
I think for CK and I, I must say alot of this, I learned from him, or at
least it was instinctive for him, andhopefully it became instinctive for me.
CK was born in India, an influentialfamily, but, outside of, the western
world, the world of business andso on, did his PhD at Harvard.

(12:45):
I started out in my undergraduatecareer in a very small college.
I think both of us kind offelt like outsiders, right?
it wasn't the usual, you know, Iused to describe this and this is not
the way I would describe it anymore,it's probably slightly mean to say
it, but I used to talk about theHarvard, McKinsey kind of axis, right?
and you know, the people who hadcome up through those systems

(13:07):
and those institutions and werevenerated for their wisdom and so on.
And yet, you know, they were alldrinking the same bath water.
They all had more or less thesame way of thinking about things.
And I think, CK and I both reallychallenged ourselves to take
an outsider's view, maybe youcall it a beginner's mind view.
in any conversation, the question wewould ask, like, okay, what are people

(13:30):
not talking about and why what are theassumptions that everybody has that maybe
are worth, challenging, or like how doesall of this, reinforce the self-interest
of the people we're talking to?
And those, you just train yourmind to ask those questions.
What aren't people talking about?
What are the assumptionsthey have in challenged?
What about this, supportstheir own self-interest?

(13:52):
are there any contrary examplesanywhere in the world that might help
us, think differently about this?
Is there a whole nother fieldof inquiry that has principles
that might illuminate this?
Right.
And you train, you know, I thinkI mentioned sometime before, and
it's even more true in the world ofai, that you know, it's impossible
to create value by knowing more.
You only create value by knowingdifferent, kind of training yourself

(14:15):
to have that outsider's point ofview, and almost by definition,
sometimes it'll make you like.
you'll have some enemies and it'llbe seen maybe as, I don't wanna say
a crank, hopefully not that, butcertainly as, yeah, guy's a little
bit off on the fringe, but I don'tknow of any other way to really say
something that's new and worthwhile.

(14:36):
Otherwise, it's an, otherwiseit's an echo chamber.
Absolutely.
and I love, you know, your visual wayof thinking through cartooning as well.
My version is metaphor.
Metaphor helps me stick thecontent to, so it stays with me.
And one of the metaphors that came tomind is to do with strategic intent.
I started to write an article as I doabout, mostly 'cause I have so much

(14:58):
content from great books like this.
And then it let, I let it marinate andthen something will happen and I go, oh,
that's, that's that thing in real life.
And the great movie director,James Cameron, the guy who brought
us movies like The Abyss andTerminator, I read about what
happened with him with Terminator.
He had this great strategic intent.
He had this real ambition aboutcreating this amazing machine.

(15:21):
And the technology justwasn't available yet.
But he really put a massivechallenge to the technologists and
tried to push them, but they justweren't able to push far enough.
So that was Terminator one.
It was only a 6 million budget.
And then he made the movie The Abyssand the technology had come on and he
made, if anybody remembers this, thisliquid kind of alien, undersea alien.

(15:43):
And then Terminator two came alongand he was able to do what he wanted
for Terminator one in Terminator twoand made a massive box office hit.
And I thought about how it's exactlywhat you talk about in this article and
this book is the strategic intent drovethem, but also they were willing to go
as far as the capabilities would bringthem, but then build new capabilities.

(16:07):
And then there's a shift in themarket someplace and they're unlocked.
Yeah, that's, you know, I think everybody,somewhere in your life, you need to have
this thing in the back of your head,this thought that says, wouldn't it be
great if Something that's ambitious,something that you would like to do.
Certainly James Cameron had this visionof what he wanted to communicate,

(16:28):
what he wanted to see on the screen.
Right?
and, but, couldn't quite bring it to bear.
But that's the only way youcreate the future, right?
You have to have, you know, and Ithink just so many of this are just
captive to, what is and struggleto think about what could be.
and we're told all the time,well, that's like impossible.
Can't do that.
That's not gonna work.
I mean, I have that experiencelike literally almost every day

(16:51):
where I challenge somebody or someorganization, whatever, and like, well,
you know, has anybody ever done that?
And I'm not sure that's possible.
Does the technology allow it?
And, there's hardly even the willingnessto say, okay, let's just think about
whether that's a worthwhile thing to do.
And now let's see, like what?
Like, okay, how might we do?
It's just impulse to makeimmediate judgment, right?

(17:13):
And like dismiss or not based on immediatefeasibility is so deep in how we think.
You know, one of the, I've I've beenreading, I think we, I mentioned this name
and he's, somebody you know as well, IanMcGilchrist, and then I've been reading
a book by David Bentley Hart called, I'llget the title wrong, but I think it's
something like The Gods are in All Things.

(17:36):
it's really, a treatise on humanconsciousness, and particularly kind
of on the left brain, right brain.
And Ian Mcg writes about the same thing.
And I think, you know, in businessthat the, you know, we've just
way over indexed on pragmatism.
we've way overindexed on likesupposed rationality, in other
words, like left brain rationality.

(17:56):
and you know, so you haveorganizations that are just not
capable of doing great things.
And of course, if, if you knowthat if you're a bureaucrat, you
know, bureaucrats are paid to, rootout unhelpful exceptions, right?
Variances that, you know,degrade quality or whatever.

(18:18):
Well, the dangers that aftera while, every variance looks,
you know, every, every exceptionlooks to you like a threat.
And so, you know, as, as you've seenin public and private sector, is
kind of the ratio of bureaucrats.
Everybody else goes up.
the, you know, there are fewer,fewer exceptional ideas or things
that like get in the oxygen.
And so organizationsbecome more, more mediocre.

(18:41):
And, so that's, you know, that's very muchthe spirit of, of that piece on strategic
intent that you have to work to imaginea what before you have a conversation
about the how and like and, and, and workbackwards to then invent the how right?
Rather than just assumingthat, you know, when Komatsu

(19:03):
and I used to teach that case.
It's an old, old case.
I doubt it's taught anymore, but acase of Komatsu versus Caterpillar.
And of course Caterpillar'sa fine company.
I think, you know, they'restill around and doing great.
But Komatsu is also a very strongcompany and came kind of outta nowhere.
Komatsu had this ambition thatwas completely unwarranted by
its size or resources, right?

(19:23):
Let's encircle Caterpillar.
And of course they did that by goingto the markets where Caterpillar
wasn't so strong, where, you know, themarkets weren't so big or whatever.
in developing countries and soon, and built out their strengths.
much like Chinese companieshave done more recently.
but, you could just imaginelike, Maru, what, are you insane?
so yeah, that's why, as I probablymentioned, but I'll say it

(19:45):
again, very few organizations aregenerally resource constrained,
but many are ambition constrained.
Absolutely love.
Up man.
And the Komatsu case.
In this paper you talk about theirambition, their strategic intent
was to encircle caterpillar.
I love that.
And the language of that isreally important because sometimes

(20:06):
it's a sidestep around them.
But the concept of coming from below.
The way I think about this is themilitary term, which is undermining, and
many people don't know what it actuallymeans, but it's like when there's
a big castle wall around a castle.
The idea was that soldiers would buryunder the wall and build a, a wooden

(20:27):
structure to be able to hold up theground, and then they'd leave it and
they'd burn the structure and literallythe walls would come tumbling down.
So what was their strength now becametheir weakness, and they were undermined.
And this is what all these companies did.
They undermined their competitor.
Cannon wanted to beat Xerox Honda,strove to be the second Ford,

(20:48):
which was important as well.
But they were high ambitions likeJames Cameron we talked about.
But they came from below and many ofthe US kind of looked at them, saw
them, didn't see them as a threat or hadoutsourced to them in the first place.
And then they went at theweak parts of the market.
And I really, really, if there'snothing else we get across today, Gary.
It's that history doesn't repeat what itrhymes that, that's exactly what happens

(21:11):
banks with, with these competitor banks.
They often gnaw away at pieces of thecustomer pie that the banks don't want
or don't see worthwhile, and then theybuild capability over time and they
come and they encircle them from below.
Yeah, I think, what is easyoffered to see is a competitor's

(21:31):
tactics, and their resources.
But what is much harder tosee is, are their intentions.
And so you can assume, youknow, and so you wanna spend
a lot of time thinking about.
Like, what do they say about this company?
what, you know, who are these people?
what are they setting out to do?
let me give a couple of contemporaryexamples, both of which happen to be kind

(21:52):
of in, sporting goods and sportswear.
you look at the Swiss companyon running and I spent a little
time talking to those folks.
you start and go like, well, thisis like a little niche thing.
They're somehow like, claiming Swissengineering and a running shoe.
Isn't that kind of precious?
And like, let's see where this goes.
Well, and then they just start buildingand building and building from there.
And then you have all therunning gear and the whatever.

(22:13):
And then they're, and, and ofcourse, you know, because initially
they can't afford the big brandinvestments of a Nike, Adidas.
They go to all the runningclubs and they're like people
try their gear and so on.
And so, you know, you had some superambitious founders and you know,
the thing is like, yeah, okay, likethey're going to, pick away the margin.
No.
What if they wanna go right after you?

(22:35):
But obviously they're not gonnaattack you head on by definition,
as you said, you can't afford it.
they die on the hill.
So you'll find a way of undermining it.
Another funny example, and I don't howsuccessful there'll be, there's, there's
a company called Vice, like, you know,VICE, that started out making golf
balls, world class golf balls, but forless than Titleist would charge, which

(22:57):
is now maybe $60 a dozen or something.
so they were maybe, maybe 60, 70%that and very, very good quality.
So you can look at 'em andthey were direct to consumer.
So, and very little marketing.
you can say, all right, wellthere's some like low end direct
to consumer market for golf balls.
Like, that's fine.
Well, if you look at them overthe last five years, they steadily
expanded into golf clothing.

(23:18):
They're now making golf clubs thatare very well reviewed and you
know, they're gonna be a competitorto Titleist, to tailor made to
whoever, like is in that industry.
So, you know, the things youwanna look at is, you know,
what's their velocity, right?
How quickly are they gainingmarket share, moving?
What kind of people Are they hiring,are they hiring people with new skills?
Is it clearly they may trying tobe, build, build new capabilities?

(23:40):
you know, exactly whereare they investing?
What, what are they patenting?
So, you know, you want to get asense of velocity and trajectory,
not just how big you are.
we talked the other day about,Adidas versus Lululemon, right?
Oh, isn't this yoga thing kind of cute?
some organizations, obviously do topout and end up being a niche, I don't
think that, Mercedes and BMW have toworry particularly about Ferrari, right?

(24:03):
That's fine.
But, they sure as hell neededto worry about Hyundai and now
their, brand genesis and so on.
So, worry about velocity, worryabout intention, and to some
extent about resources as well.
But if you use resources as thebarometer, you'll get surprised.
That thing about resources.

(24:23):
I, I found this, we, we were talking,Gary has run events in the past, and
I'm running events now, but the thingI noticed was the importance of hunger.
And if you're small and you'restarting off, you're really involved.
The founders really involvedhunting things, going after things,
being involved in everything.
And then as you grow bigger and bigger,that becomes diluted and that energy

(24:45):
that comes from you and then youhiring people and of course they're
not gonna care as much as you care.
And, it's such a hard thing to not lethappen as you get bigger and bigger.
Minnows a Komatsu at the start comparedto a Caterpillar or they were in some
ways like the way Ford looked at Tata forexample, and kind of snuffed at them and

(25:06):
laughed at them, and then they came andactually bought Land Rover, et cetera.
That, that the hunger is what goesand often like a family company like
Ford, generation after generation,that gets diluted as well.
And it's just incredibly hardto keep that energy going.
And one of the things you said on ourlast episode of, leading the Revolution,

(25:26):
one of the, the penultimate episode,you were saying that it's just so
few companies a actually make it.
They don't reinvent time and timeagain because it's just so hard to do.
So.
Yeah.
And you know, and part of that, youcan argue, and people have had this,
you know, they say, Gary, why do wecare whether are resilient or not?

(25:46):
Why do we care aboutinstitutional longevity?
Creative destruction comes, youknow, the old guard gets washed
away, the new players come.
This is a healthy thing.
and in one sense, I forsure agree with that.
I do not think we want more uponcompanies propped up by the state.
Nor do we want them, using marketpower and killer acquisitions to

(26:08):
kind of hold on to lost glory.
so yeah, for sure.
I mean, I'm happy for startups.
I'm happy for the youngsters andthe insurgents who will come along
and hold the geezers to account.
One, companies are getting betterand better at holding off the
newcomers for a variety of strategies.
and even, large institutionsdo not die, easily.
I think General Motors has probably beenlosing market share for 40 years or 50

(26:34):
years, and it's still there, and yet theycan waste a lot of society's resources,
use their political clout and so on.
GM got bailed out.
So, we do have to worry about theresilience of these organizations.
The other thing is you know, a lotof these large organizations have
lots of employment when they fail,there's a large, large cost to society.

(26:55):
So I kind of have the view bothlike, Hey, I don't wanna no org.
We should, we should neverprotect an organization from
its own stupidity, right?
Like, that's not the job ofthe state or anybody else.
Having said that, we do have an incentive.
In ensuring that these large organizationsor new organizations that has size
and employees and whatever, like theyhave the best chance at reinventing
themselves because that, that isbetter for society than just letting

(27:20):
them slowly die or become moribund.
So, you know, you can, you can believeboth of those things simultaneously
that, don't bail them out, but don'twrite them off prematurely either.
That was such a valuable point thatI learned from you, that idea that we
need them in countries, we actuallyneed these, and there's a moral
obligation on governments to keep themalive because if, and to also save

(27:43):
them from themselves in some case.
places like Ireland, weneed that a lot over here.
I wanted to just go into a couple of thecharacteristic of strategic events here.
So you give a list ofthese characteristics.
I'll have to jog your memory alittle bit here, so I'll give you
a little excerpt from each of them.
The first was that strategic intent.
Once you establish what that isfor you, like for example, you

(28:04):
say Coca-Cola was to have a Cokewithin arm's reach of everybody.
It's stable over time.
So that was the first one.
Strategic intent provides consistencyto short term action while
leaving room for reinterpretation.
As new opportunities emerge at Komatsuencircling, caterpillar encompassed
a succession of medium term programsaimed at exploiting specific

(28:27):
weaknesses in Caterpillar or buildingparticular competitive advantages.
When Caterpillar threatened Komatsuin Japan, for example, Komatsu
responded by first improving quality,then driving costs down, then
cultivating export markets, and thenunderwriting new product development.
There's so much in there that can belearned by organizations for their own

(28:49):
version of Komatsu versus Caterpillar.
Well, I think one of the things there,is, is being able to look at strategy
in, in maybe three time, time timeframes.
there's, you know, the next 90days, what are we going to do,
and what do we do differently?
Are, do we make some new acquisitions?

(29:10):
do we reve resources in some way?
Do we hire new people?
There's a kind of yearto three year timeframe.
and then there's themaybe three year plus.
I think in many organizations it's thatone to three years that is the real focus.
So there's no broader, ambitiousgoal that has challenged you to
reinvent who you are that haschallenged you to REVE and redirect.

(29:34):
And in the short run, they are very,tightly wired, very stuck, and can't
move and have very little agility.
And so I think the way I used to describethis, and I may struggle to describe
this for a moment, is if you look atthese ambitious companies, they have a
lot of clarity around the goal and a lotof flexibility around the means, right?

(29:57):
Co like Gorilla aren't constantlywilling to rethink kind of the opposite
into it in many organizations, right?
You are very vague and have very littleclarity around the long-term goal and
are very orthodox in the short run.
It's like means more of the same.
Well, who's gonna outmaneuver whoin that, you know, in that scenario.

(30:17):
so, you know, there's a generalperception today that in a world of
so much, turbulence, it's impossibleto have a longer term goal.
I think that's completely wrong.
I mean, obviously the goal cannot beoverly specific, when I think about
Roche and whether this goal willsurvive, over time, I don't know.
But, you know, their goal of creatingthree times the patient impact at

(30:38):
half the cost, which requires youto think very differently about
everything in your organization.
You know, in most organizations,no one has the courage to set
that kind of a goal because,
you know,
question everybody asks youis like, how is it worthwhile?
Like, wouldn't that be fantastic?
What do you find in allthese organizations?
You work backwards from the future,not forward from the present.

(30:59):
You work backwards from the future,and then you ask, all right, if that
was our goal, what does the potentialpath, what are those intermediate goals?
I just think in most organizations,complete lack of clarity, ambition in
the long term, hell of a lot of orthodoxyand incrementalism in the short term.
that's a definition forslow death and stasis.

(31:19):
but
reason I think we've got there is that,executives, a lot of executives lack
the courage, maybe the imagination,but lack the courage to stake their
colors to the wall and say, we'regonna try to do something bold.
And it may take a whileand it may not work.
but you, surrender the future to peoplehave more ambition and more agility.

(31:44):
And to link it back to what we talkedabout, so few leaders certainly I've
worked with are learners until youlearn, you don't know the value of
that learning because it literallymakes you think differently or
rewires your brain differently.
It's like different lenses to seethe same thing as somebody else
and see it totally different.
And I think that.
It's one of the reasons I starteddoing the show was to learn more

(32:07):
and to learn what witnesses.
That's kinda the way I think about theshow, but the value of that for a leader,
because then that makes you think biggerand have a bigger strategic intent.
And then combined with the next one, whichis strategic intent sets a target that
deserves personal effort and commitment.
And the way you frame this oneis ask the CEOs of many American

(32:29):
corporations how they measure theircontributions to their company's success.
And you're likely to get ananswer expressed in terms of
shareholder wealth in a companythat possesses a strategic intent.
However, top management is more likely totalk in terms of global market leadership.
Market share leadership typicallyyields shareholder wealth to be sure,

(32:49):
but the two goals do not have thesame motivational impact, especially
on people down the organization,they're not gonna wake up and go.
Today's gonna be the day I'mgonna improve shareholder wealth.
But if it's something like, for example,you say, let's beat Mercedes-Benz
as a Japanese auto producer.
That's strategic intent.
Yeah.
And, you know, a strategic intent.

(33:09):
It doesn't have to befocused on a competitor.
I think those are someof the examples we use.
It can be focused on, bringinga particular benefit to market
or solving particular problems.
the other benefit of having that greaterambition is that hopefully it frees you
from, or reduces the chance that youdefine your identity as a particular

(33:31):
business model I think of the battle,between Amazon and Walmart over the years.
the moment you define Walmartas like, we run Supercenters or
hypermarkets or these big stores.
Then you live or die bythat particular paradigm.
If instead you say we wanna bringaffordable, goods to anybody who needs
them through whatever means, that'sgonna be, then that opens you up.

(33:53):
And so I think, having an ambition thatchallenges you, it should challenge you,
to look beyond whatever's the currentbusiness model, the current whatever.
You know, we had this conversationabout education, right?
And, if you're a business school deanand you say, Hey, why aren't we reaching
10,000 students a year instead of athousand okay, you're not gonna do
that with bricks and mortar So I thinkwithout ambition, you're very likely.

(34:17):
I mean, somebody, you describe this tome once, I thought it was a nice analogy.
They said, strategic intentlike the sun that is bringing
the shoots outta the ground.
and so it should be somethingthat is compelling enough.
I say it needs to be both noble and,ambitious, but compelling enough that

(34:37):
it gives you a reason for moving outsideof your comfort zone and for challenging
kind of the status quo and recognizingwhere there limits and we're not gonna
get there if we still are stuck here.
But again, investors are part of theproblem here too, because they'll,
immediately ask like, well, how, and, oneof the risks, 'cause I've seen the other
side of this, Aidan, is you can get acompany with a very ambitious goal, that

(35:02):
tries to accomplish it in an unreasonabletimeframe says like, well, let's pour
all of our resources and go hard at this.
And as you said, example of James Cameron.
the technology may not be ready.
You could have spent, when he was makingwhatever Terminator One, you could have
had the biggest budget in the world,but there's certain things you can't do.
and I've seen this, over and over againwhere companies get very excited about

(35:22):
something they actually overinvestand then, have to write that off and
then that creates a deep skepticismabout that op well that was stupid.
Why do we do that?
And then you go sit on the sidelinesand you know, nothing happens.
So it's you, you have to, and I, andagain, I have, I used to have kind of
ways of helping companies score all this.
I dunno where even how to find thatanymore, , but you do have to think

(35:45):
really hard about feasibility.
And, you know, is this gonnarequire fundamentally new science?
Does it just require some new technology?
who is likely to push back on this?
Are we gonna face regulatory hurdles?
you know, how quickly are ourcompetitors, likely to react?
how much investment will thisrequire and how can we offload that?
I mean, there's a whole set ofquestions you have to go through.

(36:06):
So you pace it, right?
you want a lot of ambition, butyou also don't want your spending
to get ahead of what's possibleor, or what you actually know.
'cause that's called risk and failure.
it's a combination of audacity andprudence at the same time, which is,
you know, often one predominates at theexpense of the other, which is not good.

(36:27):
And just for anybody wonderingwhere to find that, you can find
that in competing for the future.
So there's a load of tools in there aswell, and in leading the revolution.
So you can go back and youcan get those books still.
So no excuse.
They're out there andstill as valuable as ever.
I wanna just move on to acouple of the other things.
one of the huge things is, and this iswhere the education comes in, is that yes,

(36:49):
even if you're an MBA or you have a PhD,sometimes you don't know the difference
between strategic planning and strategicintent So many companies I've worked in
that there was a bias towards action.
And what many people saw as strategy wasjust being given a to-do list and a goal,
a smart goal that has to be done by acertain time, and that was the strategy.

(37:12):
There was no magnetic gravitationalpull to a bigger mission.
And that is so rare in so many companies.
So many people listen to the show.
Yeah, my company doesn't have that.
All this makes such a difference toyour, what your purpose is and what
you, how you show up in the world.
And we should talk a little bit aboutwhere this intent comes from because,

(37:33):
you know, in some cases it just may comefrom a brilliant CEO that's like great.
I mean, um, I dunno who is leading,, Komatsu and where that came from.
But often, you know, that's not the case.
So, you know, when we've tried tohelp organizations create this, we
do it with an open strategy processwhere, we're getting hundreds of
people together, generating thousandsof potential strategic ideas.

(37:54):
and then looking across thosefor the themes and the threads.
And often the intent kind of emerges outtathat almost by accident you're going like,
wow, if we took all of this seriously,or if we moved in this direction,
what does the future look like for us?
who are we becoming?
And then that will get crystallizedin a kind of simple, provocative way.
So in a way it's, I don't thinkit's largely a wordsmith exercise.

(38:15):
It's not like, Hey, let's take thesenior team to an offsite and come
back with a strategic content in a day.
It has to come out of alot of deep thinking about
what's changing in the world.
What do we wanna be ableto say about ourselves?
How high is, What's an ambition thatwould justify the work that we're
gonna put into this organizationand the lives of our people that are
being spent in this organization.
What would justify that?
So, when we've worked to createthis, it's a much more extended

(38:37):
conversation, built out of a lot of data.
What's going on in the world?
What are our capabilities?
What can we do next?
but all the time sayinglike, how big could this be?
How high is that?
You know, I remember talking to avery, famous, venture capitalist,
Steve J said, who funded Hotmail anda bunch of other stuff, and he said,
I never look at a business plan.
I never like, becausethey're all bullshit.

(38:58):
Anyway, the only question I wanna asksomebody is like, how high is that?
How big can this thing go?
and paint me that picture andtell me that story and tell me
broadly how you're gonna get there.
But again, not a conversation thatwe have in most organizations.
You know, I can, yeah.
I mean, it's just not, andthere's, never a conversation about

(39:23):
the kind of 10 x goal, right.
And, incrementalism and people are boredat work and, intellectually turned off
and you get surprised by the future.
again, it's not that this work isso hard that it's hard to come up
with an ambition, but it's just likeare so caught up in pragmatism and
rationality and short-termism thateven the conversations don't occur.

(39:48):
The way you put it.
It was brilliant that a strategyis created in conjunction with some
consultants, with just the few anointedones, and then like Moses and the tablets,
they come down, they go here, do this.
Essentially, there's a speaker we'rebrought in maybe to speak at these events.
There's nice pastries and teaand everybody's happy, and then.

(40:09):
They're not happy 'cause theyhave to execute this strategy.
And you say in this Silicon Valleyapproach to innovation, the only role
for top managers is to retrofit theircorporate strategy to the entrepreneurial
successes that emerge from below.
And here the value added oftop management is low indeed.
That is such a key thing.
And this is the important thing,and this is the James Cameron thing

(40:31):
again, strategic intent implies asizable stretch for an organization.
Current capabilities andresources will not suffice.
And this forces the organizationto be more inventive, to make
the most of limited resources.
Whereas the traditional view ofstrategy focuses on the degree
of fit between existing resourcesand current opportunities.

(40:52):
Strategic intent creates an extrememisfit between resources and ambitions.
And top management then challengesthe organization to close the gap by
systemically building new advantages.
And once again, I thought backto some of our previous episodes
how the US struggled in Vietnam.
That whole idea of the bridges below thewater, that that was driven by necessity.

(41:16):
Yeah, I think once you have an ambition,then you start to say, okay, what are
the big challenges we're going to have?
that can be appealing toa new sort of customer.
It could be a technical challenge.
Then you put that challengeout to the whole organization,
like, this is what we're up to.
Like what are the ideas?
How are we gonna do this?
you know, back to roast for a momentin their planning processes, at
least the way it worked, when it wasdescribed to me, they will every year

(41:39):
against this broader goal of kindof reinventing the farm and so on.
they identified two or threereally key challenges every year.
and it's not like, okay, we're gonnagive you an implementation plan.
They ask, dozens of countriesaround the world, dozens of product
groups, Hey, if we really wannamake progress, tell us what you're
going to do in the next 90 days.
I just wanna know 90 days, what do weneed to do to make progress on this?

(42:01):
So it's a long-term aspiration with alot of very short-term, high velocity
steps and, but that intermediate kind ofplanning thing of the year to three year
horizon in some of these organizationsthat doesn't even exist anymore.
This doesn't create any value.
you know, it's basicallya budgeting exercise.
So.
Um, yeah, I mean, again, I, I'msometimes a little pessimistic.

(42:25):
I wrote that a long time ago.
I think it won the McKinsey Prize,that article for the best article
of the year put in a little book.
but if you say today, how manyorganizations have a genuine
aspiration widely understood, thatgoes beyond, the next 24 months?
I don't think it'd be a big number.
I can be pessimistic too on thisbecause it's one of the reasons I
do show is to try and make into adifferent media for people to be

(42:50):
able to absorb in a different way.
Maybe they're driving intraffic and they can't read.
They have young kids, whatever, maybesandwich generation have to mind
their parents or their grandparents.
But there's so much wisdom in thesebooks, and if you just put it into action,
you're gonna be so far of competitors.
There's a couple of things you say here.
So once you have your strategic intent,you gotta, as you just said there, create

(43:13):
a sense of urgency or a quasi crisis.
The second thing is develop a competitor.
Focus at every level throughwidespread use of market or
competitive in intelligence.
The next is provide employeeswith the skills they need to work
effectively, which is rarely done.
Give the organization time to digestone challenge before launching another.

(43:34):
Establish clear milestones and reviewmechanisms to track progress and
ensure that internal recognition andrewards reinforce desired behavior.
One of the ones, pick on any you wishthere, Gary, but the idea that give
the organization time to digest onechallenge before launching another.
That's a key one because peoplehave change fatigue or, maybe

(43:57):
it's it's implementation fatigueof too many things at once.
Yeah, I think there's a temptationalways, just as people are reluctant
to set a goal, a goal that liesoutside the range of planning, right?
A goal that you cannot lay it all out.
And so there's a reluctance to ever, dothose more ambitious, longer term things.
There's also reluctance to give achallenge to the organization without

(44:19):
already telling 'em exactly what'sgonna be required to get there, right?
and here's the means and here's howwe're gonna hold you accountable and
here's the 23 KPIs we're gonna look at.
so, you know, if, if you try to oversspecify the how, initially you close
off a lot of innovation, people havecome up with more creative ideas for
how we might get from here to there.

(44:39):
And so, yeah, I mean, I haveto respect the organization's
capacity to find the path.
I cannot predetermine and tellthem like, this is, the way we're
gonna do it exactly like this.
And again, that makes leadersuncomfortable because hey,
we're supposed to tell them.
And, you know, and so what they doat Rose, they give these challenges.

(45:00):
You have all countries kind ofsetting their own 90 day, what
they call outcome based planning.
Okay, here's what we're gonnado over the next 90 days.
They just make that process transparentto everybody so everybody can see all
of those goals across the organization.
And then they work hard toconnect those teams together.
Like, Hey, you're working on this exactlyHow do we share expertise and so on?
Or I look at my goal and say, thoseover there make more sense to me.

(45:20):
That's more likely tohelp us make progress.
Maybe we should be doing that.
So you will get the consistency overtime and you'll get the coherence without
having to predetermine all the means.
But that's the instinct.
Like, let's tell peopleexactly how to do this.
And that's the enemy oflearning and improvisation.
I just wanna remind people again,it's hard to read the label

(45:41):
when you're inside the jar, so.
This could be you and see that throughthese examples that Gary gives.
So there's great examples inthis small paper, and I'll share
the link to that paper as wellfor people who wanna read it.
In the 1960s, Japanese producers reliedon labor and capital cost advantages.
As western manufacturers began tomove production offshore, Japanese

(46:02):
companies accelerated their investmentin process technology and created
scale and quality advantages.
Then as their US and Europeancompetitors rationalized manufacturing,
the Japanese added another strengthof their bow by accelerating
the rate of product development.
Then they built global brands, then theyde-skilled competitors through alliances

(46:22):
and outsourcing deals and the moral.
An organization's capacity toimprove existing skills and learn
new ones is the most defensiblecompetitive advantage of all yet.
So few organizations consistentlyinvest in their competitive
advantage of those skills.
And how, how poignant, how relevantis that for what we're seeing today?

(46:48):
Well, you know, as you've said, historydoes kind of repeat itself and you see,
what happened with Japanese competitorsand happened with Korean competitors
happened now at a completely differentscale with Chinese competitors.
and some of this is just inevitable.
Although the world moves up and youhave countries that had for historic
reasons, huge advantage, right?
There's a time when, you know, Britainand Germany dominated the industrial

(47:08):
world and the United States and so on.
So, you know, that's not necessarilya bad thing, but if you're a
particular institution and you wantto maintain your relevance, yeah, I
think, asking where are we gonna be?
Absolutely world class.
and being clear, we arenot gonna surrender that.
We're not gonna outsource it.
We're not gonna, you know, this iswhere we have to be world class,
but also asking what's the nextlayer of advantage that we built?

(47:29):
So that was the success of Japanesecompanies, you know, just layer
after layer after layer, rather thansaying, you know, and getting stuck.
At some point it was like, okay,what is the next advantage?
And of course, eventually a lot ofthose companies like did get stuck and
they, they, they surrender the future.
But yeah, I mean, I think ElonMusk put it, well, he said the
ultimate source of competitiveadvantage is the pace of innovation.

(47:51):
And that's not innovation,just in product terms.
it's innovation in, you know,every capability, every competence,
every part of your business.
And, , if you are moving fasterthan your competitors, you win.
It's as simple as that.
And, if you don't, you lose.
velocity is important, but again,velocity without direction is chaos.
It's brownie in motion.

(48:13):
that's the subtle challengein all of this, Aidan.
It's not simply let a thousand flowersbloom, you need focus, you need coherence.
You need to know that over time we'reworking to build these advantages.
We're working with this goal,so things are cumulative.
So we capture thoseadvantages of scale and scope.
I don't wanna recreate SiliconValley and have just a thousand
unrelated things all bubbling up.

(48:33):
but I do at the same time, haveto have a hell of a lot to focus
improvisation and not believethat I can plan for the future.
'cause you cannot.
that's, my solution to thischaotic world we live in . You
still need long-term goals.
They need to be broad enough tosurvive a lot of short-term change
and then you need to be like superflexible and improvisational in the

(48:55):
short term and, worry a lot lessabout probably the medium term.
So next up, Gary, you say fourapproaches to competitive innovation
are evident in the global expansionof these Japanese companies.
They are building layers of advantage.
We've talked about that.
I love this one.
Searching for loose bricks.
Changing the terms of engagement andthen competing through collaboration.

(49:18):
And then you go on to say the wider acompany's portfolio of advantages, the
last risk it faces in competitive battles.
New global competitors have builtsuch portfolios by steadily expanding
their arsenals of competitive weapons.
They have moved , inexorably fromless defensible advantages such as
low wage costs to more defensibleadvantages like global brands.

(49:41):
The Japanese color television industryillustrates this layering process.
By 1967, Japan had become thelargest producer of black and white
television sets, and by 1970 it wasclosing the gap in color televisions.
Yeah, I think, um.
I think that whole article probablyis a good tutorial for any company

(50:05):
that you feel like you're in a worldof giants and you're outgunned and
out resourced and like kind of,you know, where do you go next?
So it is definitely havingthat ambition, to start with.
It is using, you know, parlayingone advantage into another and not
getting stuck at one layer and sayinglike, well, we gotta rely on others.
We're never gonna get any better here.

(50:25):
I think the loose brick ideas, yeah.
where are these guys vulnerable?
Where are they paying attention?
Maybe a market, a customergroup, something else.
You know, for Aidas and Nike,it was women and so on that they
hadn't paid enough attention to.
So where are they vulnerable?
and yeah, I mean, I wrote a whole,doctoral thesis on alliances and what
you might call competitive collaboration.
So, you know, you outsource, you workwith, I mean, wonderful example of that

(50:49):
was Microsoft, you know, convincing,convincing IBM to put, uh, the Microsoft
os uh, windows inside of, you know, andIBM had this massive global presence.
Microsoft is a tiny little companyand now you've like inserted your
genome in this big beast and it'slike spreading it all over the world.
And then ultimately, youknow, Microsoft Parts company.

(51:11):
So yeah, I mean, being veryclever about how you leverage the
resources and the strengths ofthose that are larger than you.
You know, it's interesting and I'll getthe data maybe a little bit wrong 'cause
they don't have it right in front of me.
But Lilly over, just like the lastfive or six years now, about a third
of the molecules that big pharmacompanies are licensing in for
new drugs are coming outta China.

(51:33):
So you start to thinkagain, what's the velocity?
How do you go in space of threeor four years from really having
almost nothing to now, a third ofthese new molecules are coming out
of small Chinese biotech companies.
like what do I need tobe thinking about there?
So, you know, think about how you,rather than being afraid of these
organizations, much bigger, moreresistance, like how do you leverage them?

(51:55):
How do you use their size, right?
How do you, you partner with them butnever give up on your own independent
kind of aspirations and ambitions.
I can't remember what the fourththing was there on this list.
But yeah, it's, it's, you know, that'swhat really being strategic means, you
know, being ambitious, continuing tobuild layer after layer, looking for
vulnerabilities, leveraging the sizeof those around you, We reduce guided

(52:18):
strategy to this like annual completelyantiseptic, budgeting exercise.
I've said before like strategicplanning is an oxymoron.
Like there's no such thing.
There's planning and they're strategizing.
They have like literally nothingto do with each other except
at some point strategies haveto be, translated into action.
But even there, it's less abouthaving strategies, elaborate plans

(52:39):
and having strategies put into kindaa lot of short term improvisation
and, high velocity projects.
we took a very powerful idea strategyand we reduced it to like a completely
odine process of almost no value at all.
if people listening findany of this interesting.
The other thing they should read.
Which, is worthwhile is an HBRarticle I wrote a long time ago

(53:02):
called Strategies Revolution.
it basically makes the argument thatcore strategy is an innovation problem.
It is, you know, and it's not a planningproblem, it's not a positioning problem.
it's not an alignment problem.
It's an innovation problem, and I thinkthey maybe gain a few insights from that.
Uh oh.
We have another episode.
We'll have to cover that man as well.

(53:23):
But it's been, uh, beenan absolute pleasure.
Really highly recommend that.
Tiny little book.
It's only, what is it?
there's 90 pages, tiny littlepages in it, so you'll fly through
it, but don't fly through it.
Take a week on it and treat itlike you would treat another book
and then listen here as well.
I love the color you add to this,and it's such a privilege to go
through this with you and learnfrom you and, updated versions, the

(53:46):
rush, et cetera, all these examples.
It's an absolute pleasure, Gary, forpeople who want to find you, I'll
link to that article and to the otherarticle, where is the Best Place?
To answer questions that people wantto email me at gary@garyhamel.com.
you can find me on LinkedIn, easilyenough and always happy to engage there
on x prof, Hamel, if you wanna followme, and, website, gary Hamel.com.

(54:10):
So always happy to engage.
Author of Strategic Intent, alongwith his friend, CK Prahalad.
May Rest in peace, Gary Hamel.
Thank you for joining us.
Thank you Aidan

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Gary Hamel - Strategic Intent

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