May 25, 2025 • 48 mins
Gary Hamel joins us to delve into part 2 of his book 'What Matters Now,' exploring the crucial role adaptability plays in the modern world. Gary discusses how rapid, multifaceted changes define our age and the stress it places on individuals and institutions. Using various industry examples, from mobile phones to airlines, he emphasizes the importance of continuous reinvention and the challenges businesses face, such as strategic decay and the need for innovation. Hamel also highlights the impact of human foibles on organizational success and the necessity for honesty and humility in leadership. This conversation provides valuable insights into thriving in a world characterized by relentless change.
00:00 Introduction and Welcome
00:10 Adaptability in a Rapidly Changing World
00:47 Historical Perspective on Change
01:35 Technological and Social Upheaval
02:31 Examples of Industry Disruption
04:12 The Challenge of Continuous Reinvention
06:08 The Role of Values and Habits
08:54 Understanding Strategy Decay
13:51 The Predictable Demise of Strategies
20:26 The Corrupting Nature of Success
24:12 Identifying Defensive Language in Organizations
25:14 The Importance of Humility and Adaptability
25:34 Lessons from Radiohead and Resourcefulness
26:58 The Impact of Market Shifts on Companies
27:32 Strategic Agility and Human Foibles
28:07 The Changing Landscape of Education
30:44 Fashion Industry Trends and Predictions
33:56 Encouraging Innovation and Risk-Taking
40:28 The Farmer vs. Rancher Analogy
46:11 Concluding Thoughts and Contact Information
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
We're gonna try and get throughthis today, part two of What
(00:03):
Matters now, we welcome theauthor of that book, Gary Hamel.
You're very welcome back.
Pleasure, Aiden.
Great to have you back with us again.
I'm gonna open up this next section,so we're on chapter three for those who
are reading along with us, and this isabout the idea that adaptability matters.
Now Gary starts this by saying, welive in a world that seems to be
(00:23):
all punctuation and no equilibrium,where the future is less and less.
An extrapolation of the pastchanges, multifaceted, relentless,
seditious, and occasionally shocking.
Over to you, Gary.
Yeah, well for sure that is the, maybethe defining characteristic of our time.
Aidan, you know, I argue in thisbook, and of course, you know, who
(00:45):
knows what's really gonna happen.
But if you think a hundred years or many,a hundred years from when people look back
at this age, the last 30, 40 years, theend of the 20th century, the beginning
of the 21st century, this new millennium,like what is gonna strike them?
Right?
We had the enlightenment, we had the darkages, we had the birth of Christianity.
There's a lot of amazinghistorical things, but what
will people look at this age?
And I think certainly part of it is gonnabe we had an infection point in the pace
(01:10):
of change, for most of human history,you assume that you're gonna live much
like your parents, your grandparents,and of course that started to change
for sure in the industrial revolution.
without a doubt, change has gonehypercritical in our lifetimes,
certainly there are a lot of thingsthat hit a significant inflection
point, over the last 20, 30 years.
we're both the authors and thevictims of all of that change.
(01:31):
it is, stressing us hugely as individuals.
technology is reshaping the way welive, and even our brains faster
than we can really think about.
is that a good thing or a bad thing?
how might we regulate this alittle bit better than we have?
But it also, it's just changing alot faster than our institutions can
change, let alone us as individuals.
(01:52):
And so, yeah, the definingcharacteristic of our age.
I sometimes call it the age of upheaval.
Where the future's less and lessand extrapolation of the past.
you know, how do we learn to thrive,survive in that kind of world is a lot
of what I talk about in what matters now.
But also, , you know, I come backto that theme, in later books
because I think it's the biggestchallenge most institutions face.
(02:16):
And as I say, it's not, it's not onlycorporations, it's governments, it's
religion, it's, uh, you know, it'ssocial structures like the family.
all of these things arekind of up for grab.
There's a beautiful littleparagraph you give here and it
really nails the thing home.
So you say, just reflect for a momenton the recent history of mobile phones
(02:36):
and how Motorola hatched the industryin 1983 with its brick shaped Dyna hack
phone, and then seemed invincible untila decade later when Nokia surprised
the industry you worked with them.
Let's remind our audience aswell with their candy bar phone.
And by the end of the century, Nokia'sfar fetching designs and torrid expansion
had given the Finnish company 40% shareof what was known an enormous market.
(03:00):
And then in 2002, Canadiancompany Rim research in motion
introduced the iconic blackberry.
And then in 2007, apple rockedthe industry once again,
four leaders in four decades.
And that's the reality of acompetition in a world where change
is shaken rather than stirred.
Yeah, and you see the same thing insocial media where you went from.
(03:24):
MySpace, to, Facebook,to, now TikTok, right?
Every few years.
Uh, and it, and it doesn't, you know,the important thing here is, you know,
often these changes, it doesn't mean thatthe old companies kind of die instantly.
They just kind of lose theirrelevance and their pace and,
shrink into the background.
there's certain industrieswhere the pace is much slower.
(03:46):
if you look at the airline industry,hugely capital intensive, highly
regulated, it is consolidatedsubstantially around the world.
you don't see quite that pace.
But there again, over the lastcouple of decades you saw Southwest
come and then kind of becomedominant, and maybe now less so.
Ryanair Air Asia.
and wherever you go in the world, yousee all of these new, super low cost
(04:09):
discount carriers taking market share.
So.
As we talk about this, Aidan, we'regonna kind of struggle to find exemplars.
'cause there's not many companiesthat have built this capacity
for continuous reinvention.
Uh, you know, I I, I, I remember oneCEO telling me, you know, Hey, my
company is growing like a rocket.
And I said, have you noticed thatrockets follow a parabolic curve?
(04:31):
And, uh, you know, the satellitesthey launch in the space ultimately
come back to earth in pieces.
So, the mark of success is not simplywhether you can grow a business, but
whether you can reinvent it over time.
um, you know, and that's, asI say, that's true, even, even
society's deepest institutions.
In the book, I talk about a reallyinteresting experience I had now,
maybe a couple of decades ago.
(04:52):
Where I was asked to talkto 7,000 church pastors.
And I can tell you that was aninteresting experience to be, uh,
like with 7,000 people who areprobably more virtuous than I am.
Uh, well probably not all of them,but, but most of them, you know, if
you look, uh, in Europe, if you lookin the United States and you see,
you know, kind of organized religion,slowly losing its place in society,
(05:16):
you know, my argument was , theproblem is not probably even religion.
It's the organized part of that.
And when you look at the data, peoplestill have an immense spiritual hunger.
Most people still believe in somekind of, divine power in the world.
But, churches have simply lost theirrelevance and the way we do church.
has changed very little in a,in a few generations maybe the
(05:39):
music gets a little better.
I don't know if thepreaching gets any better.
, And, you know, this is said in the fact,and I think we mentioned this before,
every generation is growing up in anew world that is shaping their values,
their beliefs, their experiences, theirrelationships in a way that makes it
super hard for older people to understand.
(06:00):
If you have a group of, older folksrunning an institution and you're trying
to make that relevant, super hard to do.
So I think, the starting point forme, and one of the starting points in
all of this is to be really carefulto distinguish between what are your
values and what are your habits.
and, what are some fundamental truth abouthuman beings or faith or about consumers?
(06:25):
what are those fundamental truthsversus what are mere tradition.
When you elevate the tradition intothat kind of, you know, give it primacy,
like you're just, you're gonna lose.
and I think particularly, administrators,bureaucrats, kind of professionally
trained managers, if you come intoa successful company, it is very
(06:46):
easy to mistake momentum for thrust.
So it feels like, you know, it's kind oflike, when you send a rocket into space,
you have this huge amount of thrust, andeven after you turn off the boosters, it
will continue to accelerate for some timeright before, it kind of runs out of that.
So you can feel like, hey, we'regrowing, we're winning new customers.
(07:08):
if you look at the currenttrajectory of success, you're
growing, maybe getting market share,bringing new things to market.
How long ago were thecritical decisions made?
That generated that thrust, thatgenerated that momentum, right?
often you find that those criticaldecisions were made 5, 10, 15 years ago.
(07:31):
are we doing anything right now toregenerate, that momentum versus
simply, sitting on the rocket and ridingin a space like, wow, what a ride.
we need to talk a little bit aboutthat and you develop a certain
kind of honesty where are we,how sustainable is this thing?
what's the imperative toreinvest and build the future?
(07:53):
Because , when all the indicators arein green, like it's easy to believe
like it's gonna be that way forever.
of the problems for me reading iswhen I'm reading, I go down all these
rabbit holes and I start writingan article here and there, and one
of them was inspired by this idea.
How does excellence expire?
And you talk about three forces at works.
The first is gravity wins, thesecond is the law of large numbers.
(08:17):
And then there's the law of averagesand the law of diminishing returns.
And I was thinkingabout how it's the same.
It's that whole Earnest Hemingwayquote, how did you go bankrupt first?
Slowly.
Then quickly, I thought about how doesa dad bod form on your body when I
had kids and it's like chicken nuggethere, little bit of chips there, and
(08:38):
the next thing you're like going,wow, my trousers don't fit me anymore.
And it's the exact same thingthat as you said, it's the habits.
And if you have a higher value thatcancels out those habits, you'll
adhere to the values, not the habits.
But I'd love you to take usthrough those three things.
Yeah.
And we can even go a littledeeper there because,
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you know, I've always been curious,Aiden, that senior executives and
among investors and analysts, wedon't have a very disciplined way of
thinking about strategy decay, right?
So if, if you believe, as I do that, youknow, every strategy has a life cycle.
You know, they don't last forever.
(09:20):
Some are longer, some are shorter.
how do you get early warning signs whena strategy, a business model is losing
its, dynamism it's surprising how oftenthe knot takes people by surprise, right?
I spent a lot of time as well as someof my colleagues thinking about why
is it that strategies run out of road?
(09:42):
and how do you become alert to that?
I think there's severalthings that we can talk about.
first of all, I thinkthere are three or four.
One is, as you said, gravity wins.
you can put an airplane up for awhile, but it's gonna run out of
fuel eventually, and gravity wins.
and that happens in several ways.
First, there's the law of large numbers.
as a business gets bigger, it just becomesharder to grow at the same rate, right?
(10:04):
It's much harder to grow a $40billion company by 10% than
a $4 million company by 10%.
It's kind of, you know, theplace where Apple is now,
you're so huge and so valuable.
Like, how do you keep growing?
There's also kind of the law of averagesthat, obviously in the long run there
are no high growth companies, right?
If there was, a super growingcompany, over the long run
(10:25):
it becomes the whole economy.
So we just know that over time,things revert to the mean.
and then you have the law ofdiminishing returns where, , whatever
strategy you have, it's gonnalose its effectiveness over time.
And what that means practically is you'llhave to put more and more resources,
into achieving smaller and smaller gainsLike you have to spend more and more to
(10:49):
acquire, another customer, for example,or like in the case of semiconductors.
Like every time we have the size of thedevice that we go from, 20 nanometers to
10, to five to three, like, you've gotan exponential rise in the cost of that.
So, these things you can't reallyreverse these, but there are
ways you can deal with them by,breaking big units into small units.
(11:10):
I think of a Vinci, the Frenchinfrastructure company that has thousands
of small, kind of micro businesses,very entrepreneurial and , because
monolithic things just don't grow fast.
That's true in nature.
you kind of break big units intosmaller units where those smaller
units maybe have more upside andcan imagine where else I can grow.
(11:31):
I think you ensure that Every unithas a very challenging growth target.
Jack Welch did this at ge.
He asked every business unit toredefine their served markets.
So they had less than 10% market share.
So that's, I think, a good, , 'causeit forces you to kind of extend
your horizon and think bigger.
hire does the same thing with theirleading targets where, they challenge
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businesses to grow at three or four, 10times, industry growth rates, getting a
lot better at reallocating resources fromslower growing to faster growing things.
So you don't overinvest inlegacy, having the courage to
abandon slower growth businesses.
This what IBM did, many years ago.
they got out of the PC business,they invented that basically, but
(12:15):
then said that's a mature business.
and ensuring that you neverconceptually tie your to one business
model there's things you can do,to kind of, keep stay in flight,
even though gravity is omnipresent.
You know, the Indian guru, sad guru,you know, the guy, , he does all talks.
He's like an influencer online and hedoes big seminars and stuff like that.
(12:39):
he has a great story and essentially whatit boils down to is that gold crushes
ants, and the whole idea that if you givethe ants a piece of gold, it'll crush it.
If you try to throw money at it, itoften can kill it because it makes you
devoid of imagination or the struggle.
And in the struggle is whereyou actually find things.
(13:00):
And this is something that'soften overlooked with innovation,
that you need people hungry.
You need them to think outside the box.
Yeah, I think, poverty in some senseis a spur for innovation, right?
I mean, you look at people whoovercome, enormous poverty and, that
poverty, can either just accept it orit can be a spur to get an education
(13:22):
to strive and to work hard and so on.
And there's sometimes obviouslywhen there's nothing you can
do to overcome your situation.
But certainly.
kind of wealth is not a spurfor creativity or innovation
as we've argued before.
You know, innovation is alwaysborn in this gap between
aspirations and resources.
So I think the second thing, Aiden,so first, like, gravity wins and
(13:43):
you can kind of, you know, lookat any business and kind of think
about where are we with that?
what could we do?
I suggested some of thethings you could do.
I think the second thing, as I say, isjust recognizing that strategies die.
And not only do they die, theydie in very predictable ways.
if you look at how human beings, youknow, how we die, think if you go through
that list, it's probably heart diseasenumber one, cancer number two, stroke
(14:07):
number three, whatever those thingsare, but it's not like a surprise.
there are things you can do arounddiet and anti-inflammation and so on.
So, same thing.
I talk in the book about.
The four primary waysin which strategies die.
if there's another one, I'd love forone of our viewers to maybe think about
that and say, Hey, there's somethingelse I think you might be missing.
(14:28):
But one of those is, over timestrategies get replicated.
Like people watching go like,well that's a good idea.
let's do that.
In fact, let's even do thatslightly better than you did it.
So I think about, you know, in the ukthere are now like any number of big,
coffee chains, Costa coffee, cafe,Nero, Gregg's, and I dunno whether
(14:49):
Starbucks was a late comer in the UKor not, but clearly Starbucks is not at
all unique in terms of, having a niceplace to get a coffee or you think of
how quickly Samsung and then later, youknow, Xiaomi, me and Huawei and so on,
how quickly they replicated the iPhone.
like amazing breakthrough withcompletely different form factor
(15:09):
and touch sensitive screen.
And I think it was probably withintwo years, three at max that Samsung
had a very, very similar device.
American Airlines inventsthe, customer loyalty program.
Now everybody has those.
So there's just a diffusionprocess that you can look at.
And so like new ideas just don'tstay new for very long anymore.
and I think, the followers are catchup a lot quicker than they used to.
(15:33):
this is the idea of disruptiveinnovation, but secondly, good strategies
get superseded by better strategies.
So you have somebody who looks at aparticular functionality, particular
customer benefits, and say, I thinkwe can deliver that in a new way.
most of us now, could justwatch the slow decline of
international, phone call revenues.
Because we were all usingvoiceover ip, right?
(15:55):
We were all using some other way.
I was, talking to my friends in the UKyesterday, and of course they call me over
WhatsApp or you look at how home theatershave decimated the cinema business.
somebody's gonna say, Hey, there'sa simpler, better way of doing this.
I think also strategies overtime just get exhausted.
This is a little bit thatidea of diminishing returns.
(16:16):
they just kind of reachedtheir natural limits.
you started out by talkingabout the mobile phone business.
the mobile phone businessis a mature business.
if you look over the lastdecade at Apple's market share,
it's hardly changed at all.
And so maybe you can go for sometime by raising the price, but
there's probably a limit to that.
So they just kind of reachedtheir, natural limits.
(16:36):
I look at what's happened in luxury goods.
We can come back 'cause it's quitean interesting story actually.
But, you know, they just raised theirprices way faster than inflation.
a Chanel bag is maybe two times inflationadjusted what it was a decade ago.
And you go like, okay, howlong can you guys do that?
then finally, strategies get eviscerated.
(16:59):
often by customers who justhollow out your profits, they
get better information, they, canbecome, smarter buyers and so on.
So, what do you do about all of that?
I think, you have to be alert tostrategy decay, and that means
avoid the tendency to explain awaythings that are not going so well.
(17:21):
So when you see slowing revenue growth,declining margins, a growing number
of new entrants, declining assetproductivity, shrinking PE ratio,
greater customer churn, you know,rather than going like, well, you know,
that's temporary or whatever, like.
Go behind that and really like, think hardand, and ask, you know, which of these
(17:42):
things, you know, are people copying us?
are there just better ways of doing this?
are we losing our pricingpower to powerful customers?
just be honest about it.
but I think strategy shouldnever be a surprise, ever.
there's always indicators and yet,you know, , the capacity for denial
(18:02):
often means that, it takes a changein leadership before somebody says,
alright, let's just admit the truth.
I think we talked about, Microsoft,, when Satya Nadella took over, was
it 2013 something around then?
was it that long ago?
I think it was, you know, took, tookover he finally was able to admit that
we can't be the PC company anymore.
the world's just moved on.
(18:24):
my earlier point about being willingto spin off or downgrade legacy
businesses when, when Senator Adelaoffend, essentially blew up the Windows
business as it was then, he said,that's just not our future anymore.
it's hard, to imagine, theprior leadership doing that.
and yet, you have to havethe courage to do it.
otherwise have the legacy as an anchor.
(18:45):
no excuse, But um, stillinteresting how often, it seems
to take companies by surprise.
I'm sure like many of our listenersI lived, I worked through that.
And as you say, it's so predictableand you have, what's so annoying
is you have like, a chicken littlesaying, the sky's falling down.
That's how I used to kind ofsee myself and, and, but you're
(19:07):
incredulous to the denial around you.
And then what's worse is someof the people who are actually,
where the power lies, have avested interest in the status quo.
They start to use some of yourlingo or your new way of thinking.
And then they try to erode it andbring it in under their cover and
actually cannibalize the future foryou right in front of your eyes.
(19:28):
And you're just looking aroundgoing, where's the candid camera?
And it's so annoying when this happens.
And you know, you talkedabout strategic decay.
There's so many people inside companieswho can see it clearly, but they have
no voice or they have no power becausethey're usually in charge of a budding
new revenue stream that isn't yetimportant enough, and therefore they
(19:49):
get killed or they leave frustrated.
Yeah.
those exactly right, Aidan, thetraditional power structures give a
disproportionate share of voice and powerto people who are vested in the past.
let, we can come back and talkabout how you change that.
But let, Let me give you a third way,you know, 'cause again, what do you
(20:12):
wanna do in any institution, whetheryou're running a university or a
public utility or a small business.
You really wanna be, you know, you wannabe alert to the way excellence expires.
And I think there's a couplemore ways that are so, you
know, gravity wins for sure.
But I think there's anotherone that like success corrupts.
And, you know, I often used tosay like, either, like, success
(20:34):
is a self-correcting phenomenon.
And, you know, nothingfails, like success.
And when you kind of dig into that andyou go like, well, why should that happen?
Like, why does success so oftenseem to be, this brief, period in
between mediocrity or in betweenfailure, and you look at it closely
and there and you see several things.
I mean, first of all, as the businessgrows and maybe the leaders, the
(20:58):
builders kind of leave and you get anew generation in, you kind of shift
from playing offense to playing defense.
and you get big enough, and I don'tthink this is primarily a problem of
investors, by the way, but you get bigenough or you're successful enough where
you start to feel you have more to lose.
From challenging the status quo,then from actually challenging it.
(21:19):
And so you kind of, the gestalt shiftsfrom being builders to being custodians.
So that's one, I think number two in thequest to kind of optimize what you have.
And, you become kind of overoptimized and it can make it super,
super difficult to change things.
And so again, this is moreconceptual than may be practical.
(21:41):
I'm not sure I could tell you howto translate in this practice.
I think oftentimes you'll see abusiness making decisions for the
sake of efficiency where they'retrading away units of adaptability.
let me give you kind of a currentexample I've seen this for the last 15
years, but now it seems to have finallystruck home, the fact that Apple was so
(22:03):
dependent on China for its manufacturing.
it was easy to be in that partnershipwith Fox, God, whoever it is that
they worked with there to put moreand more of their assets in China.
It's already there.
We understand that we have goodpartners and so on, but you're also
trading away units of adaptabilityif something happens to the Chinese
economy or political and so on.
(22:26):
Apple is saying, how do wemove, production elsewhere to
India or wherever it may be.
when you make decisions for thesake of efficiency or short term,
team needs to ask itself, are wemaking ourselves less flexible?
Are we surrendering flexibilityhere or units of flexibility?
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And if so, is this really worth it?
You just continue to optimize andoptimize without thinking about where am
I creating a lock in or, a lack of exitability a third thing, and how success
grows that we've talked about a lot.
it fossilizes our thinking andit kind of inflates our egos.
Like, Hey, I'm so smart.
We saw this thing, we did it.
that must make us geniuses.
No, maybe you were just lucky youwere right place at wrong time, but
(23:08):
that's never gonna be the explanation.
No, we had brilliant foresight.
We're so smart, we understand this.
I think we also talked about a fourthway that success corrupts, which
is, as you accumulate resources,there's a danger that resources
start to substitute for creativity.
just spend more on r and d or we can spendmore on marketing or whatever it may be.
but that's a really dangerous thing when.
(23:30):
The thing is we can win simplyby outspending the other guy.
Well, yeah.
Maybe for a while.
you have to look at thosethings and kind of be honest.
Like, do we really feel likewe're, are we more on defense?
Are, are, is our instinctto protect what we have?
are we trading away our flexibility?
do, do I find myself defendingrather than challenging old thinking?
(23:52):
you gotta be, again, I think the secretaided is just like, don't personalize
this, this, these are just realitiesof, of what success does to us.
Right?
it makes us a little arrogant.
It makes us a little dogmatic.
It tends to make us myopic it can make uskind of timid because so much at stake.
Like, just be honest about that.
Don't take that as a personal thing.
Say this is like.
You know, this is what successdoes to organizations and to
(24:14):
people, and therefore, like, youknow, what am I gonna do about it?
one of the things, there are acouple things you can do about it.
One is listen for language inyour organization where the
language evokes or illustratesthat kind of protective, defensive
dogmatic kind of way of thinking.
(24:35):
I give a bunch of examples.
So like, when somebody says, Hey, wecan't afford to screw it up, know,
you wanna say, yeah, but you can'tafford to play it safe either, right?
So like, what do we do?
Or when somebody says, Hey,our competitors wish they
had our resources, you know?
Yeah.
But they're probably gladthey don't have our overhead.
Right?
So that comes with it.
Or when somebody says like, thisis how our industry works, you
(24:56):
go like, yeah, until it doesn't,Or hey, we're the biggest.
Yeah, well, so is the Titanic.
So I think, be alert for things that getsaid that kind of are making us numb to
what's changing in the world or are makingus seem like invincible in some way.
And then as a leader at whatever level,
(25:20):
make sure that you're makingus safe for people to dissent.
And, you know, I think humility isan enormous competitive advantage.
if you have an abundance of that, youare not gonna be surprised by the future,
I know you live in the, you live part-timein the uk 'cause you lecture there
and, there's a great quote by the greatBritish band Radiohead, and they've
(25:43):
reinvented themselves time and time again,embraced the internet, gave the album
away for free, all this kind of thing.
But the lead singer, TomYorke, he, has a great saying.
He says, as soon as you have any type ofsuccess, you disappear up your own ars.
Like, tell it as it's Tom.
Tell it as it's, but you know, you,you made me think, and I want to
(26:03):
connect the dots for those peoplewho have been joining us all the way.
And so many have, because they've leftcomments here and there that they,
I, I'll say something at the end andthey'll connect the dots and they'll
say, I listened to all the way through.
But one of the great gifts you gaveme across the series was that idea of.
The lack of resource or the frugalityleading to brilliant invention.
(26:25):
Like I often think of in immigrantsin new countries, for example.
But you taught me about the idea of,well, Vietnam and how the Vietnamese
built those bridges just below river levelthat couldn't be seen because the gorilla
tactics, 'cause they had no choice.
And I thought that, just wanted tobring that back to people's mind.
You know, when somebody may get anew job and they're paid more and
(26:49):
then they overstretch, they buy a newhouse to buy a new car, it's on higher
purchase, they don't really own it.
All these kind of things.
And then the tide comes inand , they're caught naked.
And I think I, you see this with somany companies, we see it right now,
so many really successful companies.
they have a market share.
There's a shift in the environment.
Less of their products are desirable andthen they let go of swathes of people from
(27:12):
the organization that they've trained,people who know the culture, et cetera.
And then the market recovers a littlebit and then they try and hire them back.
And people are like going,Uhuh, I ain't joining you.
We saw it during COVID, for example.
But that mindset, I just don'tget how you can't be agile.
'cause you talked about theimportance of strategic agility.
(27:34):
Well, I think, at the bottom of allof this, as I was just saying, Aidan,
there are a set of human foibles asyou were kind of also saying there,
there's the arrogance that like, I'msmart and we know what we're doing.
And so you lose the humility.
There's the kind of dogma, and,there's only one way of doing this,
(27:55):
myopia over time.
I mean, I see this again and again.
when I'm in business school environments,university environments, the only
people they pay attention to are otheruniversities that look like them.
It's like, guys, the threatis not gonna come from that.
the threat is already coming.
you can see the demand foruniversity degrees is going down.
There's a lot of education online.
There are a lot of employers now who aremore interested in like, what can you
(28:16):
actually do and what are your skills thanlike, did you get some kind of a diploma?
But you're not gonna see thatif all your attention is on how
you're competing with a universitythat kind of looks like yours.
success narrows our vision.
But I also think, we underinvestin the time that is necessary to
understand what's changing in the world.
And, that's kind of the lastway that, strategies erode.
(28:38):
I talked about, , gravity wins,strategies, dies in particular ways.
Success corrupts, but alsolike shift happens, right?
I mean, that's where westarted the conversation.
we're in the world where there's justenormous and, external change can
erode success either quickly or slowly,but slowly is just as dangerous.
Maybe more dangerous because you geta trend that just is kind of creeping
(29:01):
along and goes unrecognized andpeople don't pay much attention to it.
let me give you an example.
If you look at the rise of DonaldTrump, , nobody could foresee.
You know, Trump as a particularindividual, but you could foresee
the likelihood that somebody mightcome with a populist point of view.
So if you look literally over thelast 20 or 30 years in the US and to
(29:25):
a lesser extent in Europe, what yousaw was greater wealth disparities.
You saw medium wages, stagnant.
you saw culture shifting in fast waysthat were making people very anxious.
somebody's gonna take advantage of that.
and so, in my own country herein the United States, people are
(29:47):
like, how did the Republican party,the party of business and so on,
and did they end up becoming thechampions of the working class?
And that's what polls show that workingclass people are more likely to see The
Republican party is kind of their ally.
These are all very slow things, right?
There was nothing surprising, going onthere, but the Democrat party largely
(30:10):
didn't pay attention to it, they're outon the stump talking about, the oligarchs.
The problem is not really theoligarchs, the problem is that
the bottom 50% just lost out.
and those changes are particularlydifficult to see when they're
challenging yourself definition.
So if you're the Democratic party andlike, we're supposed to be the party of
the working class and what you see is awhole set of things that are eroding, the
(30:34):
economic success of the working class.
hard things to get yourmind around and change.
like what can we actually do about that?
Let's just let it go.
I talked a few minutes ago evenabout the fashion industry.
It's been very interesting tosee what's happening there.
it's in quite deep crisis.
I think, some brands like LMH andBurberry and so on are way down.
There's a few that have hungon and done pretty well.
(30:56):
10 years ago I did a presentation.
I won't tell you for who, but I did apresentation for somebody in the fashion
and say, little Lily, this is 2015.
And I said, think aboutwhat may happen here.
Will increasing income disparitiesmake people less inclined to
broadcast their wealth through alltheir brands And that's happened.
(31:17):
we've had this move to, Quiet fashion orsubtle fashion, away from logos and so on.
is there likelihood that thedefinition of luxury changes.
It's no longer about heritage andcraftsmanship, but much more around
technology innovation, A brand or thefact that it has innovation and so on.
what might peer-to-peer markets do?
huge explosion in, used market forluxury handbags and other things.
(31:41):
That was clear that was gonna happen.
what will happen if millennialsand Gen Z put more attention
on experiences over products?
and what happens if, China goes XGgrowth and if the CPC cracks down on
conspicuous displays of wealth, or,the China property market, which is
(32:03):
creating a sense of prosperity collapses.
If you're paying attention, youunderstand, those are all potential
shifts, starting to bubble away.
They could be super threatening toyou I, and I would love to go back and
look at at these big companies, , GucciKering Group, LVMH, whatever they are,
and I asked like 10 years ago in theboardroom or an executive suite, were
(32:25):
you guys talking about these things?
Were you collecting data on thesethings where you go like, let's be
sure we're watching what's going on?
I doubt it.
So, you know, again, as I've argued inother broadcasts, it's usually not that
the future's entirely unpredictable,but it, often goes unnoticed.
To your point the board membersoften just sit there listening
(32:47):
to a scorecard instead of.
Using their expertise as board members.
They're usually very experienced.
They've run companies, hopefullyentrepreneurial in some way, and
they have a point of view, butoften they just receive a scorecard.
I always think the board should beused in a, what can you see that
we don't see type arrangement.
(33:09):
And, and oftentimes, you know, when,when some board member goes, Hey, I'm not
happy about the way the industry's going.
They mentioned some ofthe trends you saw there.
They'll get back a report, the nextboard, and it's just brushed under the
carpet and everything goes back to normal.
I couldn't agree more.
I think one of the primary valuesof the board is to speak truth,
(33:30):
to speak uncomfortable truths, andto be relentless at honing in on.
of, uh, vulnerabilities that arekind of on the periphery right now.
but yeah, I mean, I would agree.
It also means I think that you gottahave younger boards, if the average
age of your board is like late fifties,early sixties, that's already a problem.
(33:51):
unless they're quite exceptional people.
that's just not gonna be superhelpful to understanding some
of these emerging things.
we started talking about how doyou buy insurance against your
relevance if you like, or how doyou future proof an organization?
you take measures to, disaggregatethe organization and to slough off
the things that are slower growth.
you carefully track strategy K rates,Invest a lot of time in understanding,
(34:14):
what are these emerging trends andwhat vulnerabilities do they create?
And how do we offsetthose as early as we can?
or leverage them in some way.
And then, how are we honest aboutour own human proclivities and
how they can make us vulnerable?
if I'm a CEO I'd almost say Aidan,these should be posted the head of
(34:35):
every kind leader in their cubicle,their office, wherever they sit.
So anybody comes in to have a meetinglike these are behind the CEO and it's
like what the CEO needs to ask, right?
like, please tell me.
And it would be like, wherewas I wrong in the past?
what do you think I'm missing here?
what other options, do you see, whatwould our fiercest, critics say?
(34:59):
What would you do if this was yourbusiness ? what would we do if we add
a clean sheet of paper and No, legacy.
What if risk was no object?
And so you have to be very purposefulabout asking these que because, you
know, Aidan, we've talked about this,you know, with those power asymmetries,
people are super nervous to be honestabout concerns and vulnerabilities
(35:25):
and what's going wrong, right?
you're super reluctant tokind of, upset the apple cart.
So as a leader, I haveto go way out of my way.
To de-risk honesty, to de-risk criticism.
in many organizations people learn fairlyearly on that there are few rewards
(35:50):
for challenging the assumptions, thebeliefs, of the people they report to.
You may remember this ad, I dunno ifit was on when you were in the UK and
it was probably 20 years ago or it wasan ad for Yoplait the yogurt company
and they had this brand called PettyFilous, this little taster brand.
Anyway, there's a King's taster andI always think of this as exactly
(36:13):
what happens in an organization.
He's tasting and he really.
Likes it.
, And the king's like going look andkind of going, can I have someone?
He goes, Hey mate, you have an apple.
And the king bites the apple and dies.
And I always think of what actuallyhappens in organizations is you
have that taster and it's like,oh, you can't bring that to Gary.
He won't like that.
And, and that's, again, this has happenedto me where some people have it in them.
(36:37):
Even if they know, they'll probablysuffer the, you know, the right,
the, the, they'll be shoot, they'llshoot the messenger at the end.
They'll know, they'll sufferfrom that problem, but they still
have to get it out of themselves.
But this has happens all the time.
You have this layer that protect theleader from the truth when the leader
as to your point, needs that so badly.
(37:00):
But these layers juststop it all the time.
And I, I never understand whythey're allowed to do that.
And surely the leader knows about that.
No, I think it's a super good point.
and I see this absolutely a lot.
I'll give you a recent example.
I'm gonna have to disguise it a littlebit, but, I was trying to talk somebody
in a university, a layer two down fromthe provost, the president and so on.
(37:23):
I was trying to talk them into doingsomething new and they said, well, we
need to find a precedent in our policiesor programs where we've done this before.
And I go that's useful.
maybe this is a place wherewe need to break it, but there
are implicit assumptions.
I can't propose anything is notanchored in some way in the past.
(37:44):
I'm not criticized that person becausetheir assumption is our leaders
just won't go for it right now.
Stuff may well be valid, right?
They've seen a lot of things shot down,but often they're wrong because often
a leader has a lot of pressure on them.
They need, they know they need toinnovate, they need to grow and whatever.
And the people below them are filteringout anything that's bold and radical
(38:06):
on the premise that like, okay,maybe our leaders won't like this.
And so, again, as a leader, Igotta tell those guys, I need
you to bring me the crazy shit.
I need you to bring me the stuff thatyou think is gonna make my head explode.
Right?
that is the real risk, that there arelayers and layers of filtering going on,
and that by the time I see something,it is so anodyne, so predictable, so
(38:29):
incremental that there's no chance thatit's going to make a real difference.
But yeah, at every level there's thatself filtering Now, of course, the
other way you deal with that is, youcreate, ways of starting experiments
and getting things done and buildingsome momentum before anything goes up.
You know, the pyramid, you know, certainlywhen, when, when we're like helping
(38:51):
companies innovation and we're creatingidea markets and trying to get a bunch
of new ideas out, in every case, I wantthe first review to be peer review.
So not people who are atthe top, but peer review.
and number two, I want that idea tohave the chance to have some degree
of experimentation and work on itbefore it gets exposed, Rather than
(39:15):
taking something, you know, it's, Ithink we talked maybe about into it.
this American kind of financialsoftware company has been
like, amazingly successful overa very long period of time.
the chairman, maybe now emeritus ChairmanScott Cook, he said, I do not want to see
PowerPoint slides or proformas or, plans.
I wanna see data out and trysomething and see if it works.
(39:38):
And then share what you're learning.
And what that ensures is thatsomebody has the time, the space to
try something before somebody elsesays, like, that'll never work.
Now there's some things thatyou can probably, you know, if a
bunch of people look at and saylike, that's never gonna work.
Okay, fine.
But, you know, oftentimes.
people just self-censor.
the number of times I've heard,people come and say, that's not us.
(40:01):
how do we understand why?
And maybe it should be you, butthere's this whole definition
of who we are and who we aren't.
And know, when you hear people saylike that again, like, be super,
super careful, Why are we just likepreemptively ruling that out of court?
There's a beautiful little pieceyou, you say here, I have to quote
(40:22):
it 'cause it's beautifully writtenand it's just a great mental model
for people to get their heads around.
It's your farmer versus rancher analogy.
So I'll give it a little quotehere and then you might want to.
Riff on it, maybe modernizeit , for today, managers too
often see themselves as farmers.
They've been given a plot of groundto cultivate a business or market
(40:43):
segment, and their goal is to growthe biggest possible crops of profits.
Over time though yields fall as the soilbecomes more saline, markets saturate,
or as vital nutrients are depleted.
Differentiation wanes.
By now, though, the VP.
He's in love with his 40 acres,so he responds by spending even
(41:06):
more on fertilizer marketing anddigs deeper and more expensive
wells raising capital investment.
Even as ROI declines, it would bebetter if managers saw themselves
as ranchers whose grass fedherds were always on the move.
A rancher's loyalty isn't to a pieceof ground or even a particular animal.
When a pasture gets grazed out, youmove on and you move the herd on.
(41:30):
When an animal falls behind,it gets culled, and over time
the entire herd gets replaced.
As older animals go off toslaughter and new calves get born,
Well, again, yeah, I thinkkind of the deeper truth there,
you know, and obviously even ourown bodies agent, like all of our
(41:50):
cells get replaced over time, right?
Like, are not at all who you wereseven years ago, like in any respect.
but there are things obviouslythat provide continuity.
So I think it's this sense that, it'sthis ability to think about a business
as this like dynamic kind of living,ever changing thing rather than static.
And I think practicallyare two elements to that.
(42:12):
I think there are two thingsthat up like kind of getting
a business marooned, right?
one of those is that you just don'thave enough new strategic options.
So if you do not, when you look atthe future, if you see the future
as more threat than opportunity,you'll be defensive, right?
(42:34):
You'll hang on to what you have.
But if you've had a process, if you havea way of constantly generating hundreds or
I would argue thousands of new strategicoptions, then the future is always, you
know, doing something new is always moreexciting and potentially more profitable
than hanging onto the status quo.
I think Clay Christians and some otherpeople, you know, the innovator's dilemma.
(42:57):
I think in some senses it was wrong.
I mean, in some senses it was, right.
Yes, companies are slow to embracenew things, but I don't think
it's correct to say that the newthings are always cannibalistic.
They're not, you know, oftenthese new markets are bigger
than the ones that they replace.
And so it's not like it, you know, it'sa matter of when we start to move and
whether we can be positioned for that.
But if you don't see those newopportunities, and I think I used this
(43:18):
analogy before, it's the bird in thehand versus all the birds in the bush.
So if the bush is empty and all I haveis this poor dying little thing in my
hand, and the feathers are coming offright, but damnit, this is my bird.
Like, I'm never gonna give up this bird.
I think you have to have a process iscreating a portfolio of opportunities.
(43:42):
So the future and change isalways more enticing status quo.
Now that doesn't mean you giveup all of the status quo, right?
This is not about just like, youknow, let's abandon stuff that works.
But it's understandingwhere you need to do that.
I think the second thing,most companies lack.
Portfolio of new options.
(44:02):
They have a very linear planning process.
It's all about just financialplanning and incremental.
They do not have a process for generatingcompelling new strategic options.
second thing is politically in manyorganizations is very difficult to
shift resources from old things tonew things because resource allocation
(44:25):
process is dominated by the big peoplewho are running the legacy businesses.
And they're always gonna tell you, andrightfully so, they're gonna tell you,
Hey, the best way of using a marginal,you know, pound dollar euro is to invest
it in something we're already doing.
That's the lowest risk for sure.
it's just not the biggest upside.
(44:45):
Right.
you kind of overinvest it in whatis the expense of what could be.
You see another problem in that, that inmost companies, if you have a new idea,
there's only one place to go for funding,and that's up the chain of command.
And so if you have to go for four or fivelevels, and at each level somebody can say
no without consequence, what's the chance?
(45:06):
Anything new is evergoing to be done, right?
So you have to, you know, you have tochange that resource allocation process.
But there's a strategic challenge,which is creating enough new ideas.
And then there's a, and I would argueit's primarily a political challenge,
is taking resources from the havesand giving them to the have nots.
if you think about what governmentdoes, the heart of politics is making
(45:28):
choices about where resources go, right?
The tax and money, thepriorities and so on.
in governments, often.
You have these legacyprograms, not very effective.
They go after year, after year, afteryear because there's a constituency
behind them and they're connectedpolitically and nobody really knows.
This is what Doge has been tryingto do in the United States.
Nobody's evaluating their effectivenessand like they just run because they
(45:49):
have constituents and powerful friends.
so, you know, building a resilientorganization, you gotta deal with the
cognitive challenge, the strategicchallenge, and then the political
challenge of, reallocating resourcesand, and not letting those, that that
process be controlled people whose primaryimpetus is to protect what they have.
(46:10):
Beautiful, beautiful.
Gary, I think we'll leave it there
There's a very little small book Ihighly recommend, a little tiny book.
It's, it's, uh, also available as aHBR article, actually, it's called
Strategic Intent, and it was writtenby Gary with his friend, CK Prahalad.
May Rest in Peace, and I thought we'dcover that, if that's all right with you
next, and then we'll move to Humanocracy.
But there's a piece I love at the veryend and I think it's why I do this work.
(46:35):
I love sharing work like this becauseI read about this Bill Gore and you
talked about it in the book thatyou were interviewing Terry Kelly.
He was the CEO of Gore at the time.
And she shared that Bill Gore spent alot of time thinking about the human
element of business, and he was influencedhugely by Douglas Lewis McGregor's
book, the Human Side of Enterprise.
And that changed how he did business.
(46:58):
And I thought about in the world thatwe live in today, with so many people,
time poor in a knowledge economy, thatif somebody listens to this and or
reads it and just changes it a littlebit, changes a lens that they can
have a huge change in their business.
And I ho I hope that is the case.
And, and I'm very grateful for you forgiving up your time for people to do that.
(47:20):
So, with that, Gary, where's thebest place for people to find you
if they wanna reach out, if they'reinterested in keynotes in work, as a
consultant, where's the best place?
LinkedIn is a good place to find me,and I check that fairly regularly.
anybody can write me an email.
It's really simple.
gary@garyhamel.com, wetried to respond, to those.
I'm on, X at Prof Hamel, so yeah,and then website, gary hamel.com.
(47:44):
There's ways to get to me there, so Itry to be superintendent if people who
have questions wanna know more, need moreresources, this is, not my profession.
This is my passion.
So yeah, I'd encourage peopleto reach out if they so desire.
And I can vouch for him becausethat's how I found him as well.
Gary Hamel, thank you for joining us.
A pleasure, Aiden, as always
We're gonna try and get throughthis today, part two of What
(00:03):
Matters now, we welcome theauthor of that book, Gary Hamel.
You're very welcome back.
Pleasure, Aiden.
Great to have you back with us again.
I'm gonna open up this next section,so we're on chapter three for those who
are reading along with us, and this isabout the idea that adaptability matters.
Now Gary starts this by saying, welive in a world that seems to be
(00:23):
all punctuation and no equilibrium,where the future is less and less.
An extrapolation of the pastchanges, multifaceted, relentless,
seditious, and occasionally shocking.
Over to you, Gary.
Yeah, well for sure that is the, maybethe defining characteristic of our time.
Aidan, you know, I argue in thisbook, and of course, you know, who
(00:45):
knows what's really gonna happen.
But if you think a hundred years or many,a hundred years from when people look back
at this age, the last 30, 40 years, theend of the 20th century, the beginning
of the 21st century, this new millennium,like what is gonna strike them?
Right?
We had the enlightenment, we had the darkages, we had the birth of Christianity.
There's a lot of amazinghistorical things, but what
will people look at this age?
And I think certainly part of it is gonnabe we had an infection point in the pace
(01:10):
of change, for most of human history,you assume that you're gonna live much
like your parents, your grandparents,and of course that started to change
for sure in the industrial revolution.
without a doubt, change has gonehypercritical in our lifetimes,
certainly there are a lot of thingsthat hit a significant inflection
point, over the last 20, 30 years.
we're both the authors and thevictims of all of that change.
(01:31):
it is, stressing us hugely as individuals.
technology is reshaping the way welive, and even our brains faster
than we can really think about.
is that a good thing or a bad thing?
how might we regulate this alittle bit better than we have?
But it also, it's just changing alot faster than our institutions can
change, let alone us as individuals.
(01:52):
And so, yeah, the definingcharacteristic of our age.
I sometimes call it the age of upheaval.
Where the future's less and lessand extrapolation of the past.
you know, how do we learn to thrive,survive in that kind of world is a lot
of what I talk about in what matters now.
But also, , you know, I come backto that theme, in later books
because I think it's the biggestchallenge most institutions face.
(02:16):
And as I say, it's not, it's not onlycorporations, it's governments, it's
religion, it's, uh, you know, it'ssocial structures like the family.
all of these things arekind of up for grab.
There's a beautiful littleparagraph you give here and it
really nails the thing home.
So you say, just reflect for a momenton the recent history of mobile phones
(02:36):
and how Motorola hatched the industryin 1983 with its brick shaped Dyna hack
phone, and then seemed invincible untila decade later when Nokia surprised
the industry you worked with them.
Let's remind our audience aswell with their candy bar phone.
And by the end of the century, Nokia'sfar fetching designs and torrid expansion
had given the Finnish company 40% shareof what was known an enormous market.
(03:00):
And then in 2002, Canadiancompany Rim research in motion
introduced the iconic blackberry.
And then in 2007, apple rockedthe industry once again,
four leaders in four decades.
And that's the reality of acompetition in a world where change
is shaken rather than stirred.
Yeah, and you see the same thing insocial media where you went from.
(03:24):
MySpace, to, Facebook,to, now TikTok, right?
Every few years.
Uh, and it, and it doesn't, you know,the important thing here is, you know,
often these changes, it doesn't mean thatthe old companies kind of die instantly.
They just kind of lose theirrelevance and their pace and,
shrink into the background.
there's certain industrieswhere the pace is much slower.
(03:46):
if you look at the airline industry,hugely capital intensive, highly
regulated, it is consolidatedsubstantially around the world.
you don't see quite that pace.
But there again, over the lastcouple of decades you saw Southwest
come and then kind of becomedominant, and maybe now less so.
Ryanair Air Asia.
and wherever you go in the world, yousee all of these new, super low cost
(04:09):
discount carriers taking market share.
So.
As we talk about this, Aidan, we'regonna kind of struggle to find exemplars.
'cause there's not many companiesthat have built this capacity
for continuous reinvention.
Uh, you know, I I, I, I remember oneCEO telling me, you know, Hey, my
company is growing like a rocket.
And I said, have you noticed thatrockets follow a parabolic curve?
(04:31):
And, uh, you know, the satellitesthey launch in the space ultimately
come back to earth in pieces.
So, the mark of success is not simplywhether you can grow a business, but
whether you can reinvent it over time.
um, you know, and that's, asI say, that's true, even, even
society's deepest institutions.
In the book, I talk about a reallyinteresting experience I had now,
maybe a couple of decades ago.
(04:52):
Where I was asked to talkto 7,000 church pastors.
And I can tell you that was aninteresting experience to be, uh,
like with 7,000 people who areprobably more virtuous than I am.
Uh, well probably not all of them,but, but most of them, you know, if
you look, uh, in Europe, if you lookin the United States and you see,
you know, kind of organized religion,slowly losing its place in society,
(05:16):
you know, my argument was , theproblem is not probably even religion.
It's the organized part of that.
And when you look at the data, peoplestill have an immense spiritual hunger.
Most people still believe in somekind of, divine power in the world.
But, churches have simply lost theirrelevance and the way we do church.
has changed very little in a,in a few generations maybe the
(05:39):
music gets a little better.
I don't know if thepreaching gets any better.
, And, you know, this is said in the fact,and I think we mentioned this before,
every generation is growing up in anew world that is shaping their values,
their beliefs, their experiences, theirrelationships in a way that makes it
super hard for older people to understand.
(06:00):
If you have a group of, older folksrunning an institution and you're trying
to make that relevant, super hard to do.
So I think, the starting point forme, and one of the starting points in
all of this is to be really carefulto distinguish between what are your
values and what are your habits.
and, what are some fundamental truth abouthuman beings or faith or about consumers?
(06:25):
what are those fundamental truthsversus what are mere tradition.
When you elevate the tradition intothat kind of, you know, give it primacy,
like you're just, you're gonna lose.
and I think particularly, administrators,bureaucrats, kind of professionally
trained managers, if you come intoa successful company, it is very
(06:46):
easy to mistake momentum for thrust.
So it feels like, you know, it's kind oflike, when you send a rocket into space,
you have this huge amount of thrust, andeven after you turn off the boosters, it
will continue to accelerate for some timeright before, it kind of runs out of that.
So you can feel like, hey, we'regrowing, we're winning new customers.
(07:08):
if you look at the currenttrajectory of success, you're
growing, maybe getting market share,bringing new things to market.
How long ago were thecritical decisions made?
That generated that thrust, thatgenerated that momentum, right?
often you find that those criticaldecisions were made 5, 10, 15 years ago.
(07:31):
are we doing anything right now toregenerate, that momentum versus
simply, sitting on the rocket and ridingin a space like, wow, what a ride.
we need to talk a little bit aboutthat and you develop a certain
kind of honesty where are we,how sustainable is this thing?
what's the imperative toreinvest and build the future?
(07:53):
Because , when all the indicators arein green, like it's easy to believe
like it's gonna be that way forever.
of the problems for me reading iswhen I'm reading, I go down all these
rabbit holes and I start writingan article here and there, and one
of them was inspired by this idea.
How does excellence expire?
And you talk about three forces at works.
The first is gravity wins, thesecond is the law of large numbers.
(08:17):
And then there's the law of averagesand the law of diminishing returns.
And I was thinkingabout how it's the same.
It's that whole Earnest Hemingwayquote, how did you go bankrupt first?
Slowly.
Then quickly, I thought about how doesa dad bod form on your body when I
had kids and it's like chicken nuggethere, little bit of chips there, and
(08:38):
the next thing you're like going,wow, my trousers don't fit me anymore.
And it's the exact same thingthat as you said, it's the habits.
And if you have a higher value thatcancels out those habits, you'll
adhere to the values, not the habits.
But I'd love you to take usthrough those three things.
Yeah.
And we can even go a littledeeper there because,
(09:00):
you know, I've always been curious,Aiden, that senior executives and
among investors and analysts, wedon't have a very disciplined way of
thinking about strategy decay, right?
So if, if you believe, as I do that, youknow, every strategy has a life cycle.
You know, they don't last forever.
(09:20):
Some are longer, some are shorter.
how do you get early warning signs whena strategy, a business model is losing
its, dynamism it's surprising how oftenthe knot takes people by surprise, right?
I spent a lot of time as well as someof my colleagues thinking about why
is it that strategies run out of road?
(09:42):
and how do you become alert to that?
I think there's severalthings that we can talk about.
first of all, I thinkthere are three or four.
One is, as you said, gravity wins.
you can put an airplane up for awhile, but it's gonna run out of
fuel eventually, and gravity wins.
and that happens in several ways.
First, there's the law of large numbers.
as a business gets bigger, it just becomesharder to grow at the same rate, right?
(10:04):
It's much harder to grow a $40billion company by 10% than
a $4 million company by 10%.
It's kind of, you know, theplace where Apple is now,
you're so huge and so valuable.
Like, how do you keep growing?
There's also kind of the law of averagesthat, obviously in the long run there
are no high growth companies, right?
If there was, a super growingcompany, over the long run
(10:25):
it becomes the whole economy.
So we just know that over time,things revert to the mean.
and then you have the law ofdiminishing returns where, , whatever
strategy you have, it's gonnalose its effectiveness over time.
And what that means practically is you'llhave to put more and more resources,
into achieving smaller and smaller gainsLike you have to spend more and more to
(10:49):
acquire, another customer, for example,or like in the case of semiconductors.
Like every time we have the size of thedevice that we go from, 20 nanometers to
10, to five to three, like, you've gotan exponential rise in the cost of that.
So, these things you can't reallyreverse these, but there are
ways you can deal with them by,breaking big units into small units.
(11:10):
I think of a Vinci, the Frenchinfrastructure company that has thousands
of small, kind of micro businesses,very entrepreneurial and , because
monolithic things just don't grow fast.
That's true in nature.
you kind of break big units intosmaller units where those smaller
units maybe have more upside andcan imagine where else I can grow.
(11:31):
I think you ensure that Every unithas a very challenging growth target.
Jack Welch did this at ge.
He asked every business unit toredefine their served markets.
So they had less than 10% market share.
So that's, I think, a good, , 'causeit forces you to kind of extend
your horizon and think bigger.
hire does the same thing with theirleading targets where, they challenge
(11:53):
businesses to grow at three or four, 10times, industry growth rates, getting a
lot better at reallocating resources fromslower growing to faster growing things.
So you don't overinvest inlegacy, having the courage to
abandon slower growth businesses.
This what IBM did, many years ago.
they got out of the PC business,they invented that basically, but
(12:15):
then said that's a mature business.
and ensuring that you neverconceptually tie your to one business
model there's things you can do,to kind of, keep stay in flight,
even though gravity is omnipresent.
You know, the Indian guru, sad guru,you know, the guy, , he does all talks.
He's like an influencer online and hedoes big seminars and stuff like that.
(12:39):
he has a great story and essentially whatit boils down to is that gold crushes
ants, and the whole idea that if you givethe ants a piece of gold, it'll crush it.
If you try to throw money at it, itoften can kill it because it makes you
devoid of imagination or the struggle.
And in the struggle is whereyou actually find things.
(13:00):
And this is something that'soften overlooked with innovation,
that you need people hungry.
You need them to think outside the box.
Yeah, I think, poverty in some senseis a spur for innovation, right?
I mean, you look at people whoovercome, enormous poverty and, that
poverty, can either just accept it orit can be a spur to get an education
(13:22):
to strive and to work hard and so on.
And there's sometimes obviouslywhen there's nothing you can
do to overcome your situation.
But certainly.
kind of wealth is not a spurfor creativity or innovation
as we've argued before.
You know, innovation is alwaysborn in this gap between
aspirations and resources.
So I think the second thing, Aiden,so first, like, gravity wins and
(13:43):
you can kind of, you know, lookat any business and kind of think
about where are we with that?
what could we do?
I suggested some of thethings you could do.
I think the second thing, as I say, isjust recognizing that strategies die.
And not only do they die, theydie in very predictable ways.
if you look at how human beings, youknow, how we die, think if you go through
that list, it's probably heart diseasenumber one, cancer number two, stroke
(14:07):
number three, whatever those thingsare, but it's not like a surprise.
there are things you can do arounddiet and anti-inflammation and so on.
So, same thing.
I talk in the book about.
The four primary waysin which strategies die.
if there's another one, I'd love forone of our viewers to maybe think about
that and say, Hey, there's somethingelse I think you might be missing.
(14:28):
But one of those is, over timestrategies get replicated.
Like people watching go like,well that's a good idea.
let's do that.
In fact, let's even do thatslightly better than you did it.
So I think about, you know, in the ukthere are now like any number of big,
coffee chains, Costa coffee, cafe,Nero, Gregg's, and I dunno whether
(14:49):
Starbucks was a late comer in the UKor not, but clearly Starbucks is not at
all unique in terms of, having a niceplace to get a coffee or you think of
how quickly Samsung and then later, youknow, Xiaomi, me and Huawei and so on,
how quickly they replicated the iPhone.
like amazing breakthrough withcompletely different form factor
(15:09):
and touch sensitive screen.
And I think it was probably withintwo years, three at max that Samsung
had a very, very similar device.
American Airlines inventsthe, customer loyalty program.
Now everybody has those.
So there's just a diffusionprocess that you can look at.
And so like new ideas just don'tstay new for very long anymore.
and I think, the followers are catchup a lot quicker than they used to.
(15:33):
this is the idea of disruptiveinnovation, but secondly, good strategies
get superseded by better strategies.
So you have somebody who looks at aparticular functionality, particular
customer benefits, and say, I thinkwe can deliver that in a new way.
most of us now, could justwatch the slow decline of
international, phone call revenues.
Because we were all usingvoiceover ip, right?
(15:55):
We were all using some other way.
I was, talking to my friends in the UKyesterday, and of course they call me over
WhatsApp or you look at how home theatershave decimated the cinema business.
somebody's gonna say, Hey, there'sa simpler, better way of doing this.
I think also strategies overtime just get exhausted.
This is a little bit thatidea of diminishing returns.
(16:16):
they just kind of reachedtheir natural limits.
you started out by talkingabout the mobile phone business.
the mobile phone businessis a mature business.
if you look over the lastdecade at Apple's market share,
it's hardly changed at all.
And so maybe you can go for sometime by raising the price, but
there's probably a limit to that.
So they just kind of reachedtheir, natural limits.
(16:36):
I look at what's happened in luxury goods.
We can come back 'cause it's quitean interesting story actually.
But, you know, they just raised theirprices way faster than inflation.
a Chanel bag is maybe two times inflationadjusted what it was a decade ago.
And you go like, okay, howlong can you guys do that?
then finally, strategies get eviscerated.
(16:59):
often by customers who justhollow out your profits, they
get better information, they, canbecome, smarter buyers and so on.
So, what do you do about all of that?
I think, you have to be alert tostrategy decay, and that means
avoid the tendency to explain awaythings that are not going so well.
(17:21):
So when you see slowing revenue growth,declining margins, a growing number
of new entrants, declining assetproductivity, shrinking PE ratio,
greater customer churn, you know,rather than going like, well, you know,
that's temporary or whatever, like.
Go behind that and really like, think hardand, and ask, you know, which of these
(17:42):
things, you know, are people copying us?
are there just better ways of doing this?
are we losing our pricingpower to powerful customers?
just be honest about it.
but I think strategy shouldnever be a surprise, ever.
there's always indicators and yet,you know, , the capacity for denial
(18:02):
often means that, it takes a changein leadership before somebody says,
alright, let's just admit the truth.
I think we talked about, Microsoft,, when Satya Nadella took over, was
it 2013 something around then?
was it that long ago?
I think it was, you know, took, tookover he finally was able to admit that
we can't be the PC company anymore.
the world's just moved on.
(18:24):
my earlier point about being willingto spin off or downgrade legacy
businesses when, when Senator Adelaoffend, essentially blew up the Windows
business as it was then, he said,that's just not our future anymore.
it's hard, to imagine, theprior leadership doing that.
and yet, you have to havethe courage to do it.
otherwise have the legacy as an anchor.
(18:45):
no excuse, But um, stillinteresting how often, it seems
to take companies by surprise.
I'm sure like many of our listenersI lived, I worked through that.
And as you say, it's so predictableand you have, what's so annoying
is you have like, a chicken littlesaying, the sky's falling down.
That's how I used to kind ofsee myself and, and, but you're
(19:07):
incredulous to the denial around you.
And then what's worse is someof the people who are actually,
where the power lies, have avested interest in the status quo.
They start to use some of yourlingo or your new way of thinking.
And then they try to erode it andbring it in under their cover and
actually cannibalize the future foryou right in front of your eyes.
(19:28):
And you're just looking aroundgoing, where's the candid camera?
And it's so annoying when this happens.
And you know, you talkedabout strategic decay.
There's so many people inside companieswho can see it clearly, but they have
no voice or they have no power becausethey're usually in charge of a budding
new revenue stream that isn't yetimportant enough, and therefore they
(19:49):
get killed or they leave frustrated.
Yeah.
those exactly right, Aidan, thetraditional power structures give a
disproportionate share of voice and powerto people who are vested in the past.
let, we can come back and talkabout how you change that.
But let, Let me give you a third way,you know, 'cause again, what do you
(20:12):
wanna do in any institution, whetheryou're running a university or a
public utility or a small business.
You really wanna be, you know, you wannabe alert to the way excellence expires.
And I think there's a couplemore ways that are so, you
know, gravity wins for sure.
But I think there's anotherone that like success corrupts.
And, you know, I often used tosay like, either, like, success
(20:34):
is a self-correcting phenomenon.
And, you know, nothingfails, like success.
And when you kind of dig into that andyou go like, well, why should that happen?
Like, why does success so oftenseem to be, this brief, period in
between mediocrity or in betweenfailure, and you look at it closely
and there and you see several things.
I mean, first of all, as the businessgrows and maybe the leaders, the
(20:58):
builders kind of leave and you get anew generation in, you kind of shift
from playing offense to playing defense.
and you get big enough, and I don'tthink this is primarily a problem of
investors, by the way, but you get bigenough or you're successful enough where
you start to feel you have more to lose.
From challenging the status quo,then from actually challenging it.
(21:19):
And so you kind of, the gestalt shiftsfrom being builders to being custodians.
So that's one, I think number two in thequest to kind of optimize what you have.
And, you become kind of overoptimized and it can make it super,
super difficult to change things.
And so again, this is moreconceptual than may be practical.
(21:41):
I'm not sure I could tell you howto translate in this practice.
I think oftentimes you'll see abusiness making decisions for the
sake of efficiency where they'retrading away units of adaptability.
let me give you kind of a currentexample I've seen this for the last 15
years, but now it seems to have finallystruck home, the fact that Apple was so
(22:03):
dependent on China for its manufacturing.
it was easy to be in that partnershipwith Fox, God, whoever it is that
they worked with there to put moreand more of their assets in China.
It's already there.
We understand that we have goodpartners and so on, but you're also
trading away units of adaptabilityif something happens to the Chinese
economy or political and so on.
(22:26):
Apple is saying, how do wemove, production elsewhere to
India or wherever it may be.
when you make decisions for thesake of efficiency or short term,
team needs to ask itself, are wemaking ourselves less flexible?
Are we surrendering flexibilityhere or units of flexibility?
(22:46):
And if so, is this really worth it?
You just continue to optimize andoptimize without thinking about where am
I creating a lock in or, a lack of exitability a third thing, and how success
grows that we've talked about a lot.
it fossilizes our thinking andit kind of inflates our egos.
Like, Hey, I'm so smart.
We saw this thing, we did it.
that must make us geniuses.
No, maybe you were just lucky youwere right place at wrong time, but
(23:08):
that's never gonna be the explanation.
No, we had brilliant foresight.
We're so smart, we understand this.
I think we also talked about a fourthway that success corrupts, which
is, as you accumulate resources,there's a danger that resources
start to substitute for creativity.
just spend more on r and d or we can spendmore on marketing or whatever it may be.
but that's a really dangerous thing when.
(23:30):
The thing is we can win simplyby outspending the other guy.
Well, yeah.
Maybe for a while.
you have to look at thosethings and kind of be honest.
Like, do we really feel likewe're, are we more on defense?
Are, are, is our instinctto protect what we have?
are we trading away our flexibility?
do, do I find myself defendingrather than challenging old thinking?
(23:52):
you gotta be, again, I think the secretaided is just like, don't personalize
this, this, these are just realitiesof, of what success does to us.
Right?
it makes us a little arrogant.
It makes us a little dogmatic.
It tends to make us myopic it can make uskind of timid because so much at stake.
Like, just be honest about that.
Don't take that as a personal thing.
Say this is like.
You know, this is what successdoes to organizations and to
(24:14):
people, and therefore, like, youknow, what am I gonna do about it?
one of the things, there are acouple things you can do about it.
One is listen for language inyour organization where the
language evokes or illustratesthat kind of protective, defensive
dogmatic kind of way of thinking.
(24:35):
I give a bunch of examples.
So like, when somebody says, Hey, wecan't afford to screw it up, know,
you wanna say, yeah, but you can'tafford to play it safe either, right?
So like, what do we do?
Or when somebody says, Hey,our competitors wish they
had our resources, you know?
Yeah.
But they're probably gladthey don't have our overhead.
Right?
So that comes with it.
Or when somebody says like, thisis how our industry works, you
(24:56):
go like, yeah, until it doesn't,Or hey, we're the biggest.
Yeah, well, so is the Titanic.
So I think, be alert for things that getsaid that kind of are making us numb to
what's changing in the world or are makingus seem like invincible in some way.
And then as a leader at whatever level,
(25:20):
make sure that you're makingus safe for people to dissent.
And, you know, I think humility isan enormous competitive advantage.
if you have an abundance of that, youare not gonna be surprised by the future,
I know you live in the, you live part-timein the uk 'cause you lecture there
and, there's a great quote by the greatBritish band Radiohead, and they've
(25:43):
reinvented themselves time and time again,embraced the internet, gave the album
away for free, all this kind of thing.
But the lead singer, TomYorke, he, has a great saying.
He says, as soon as you have any type ofsuccess, you disappear up your own ars.
Like, tell it as it's Tom.
Tell it as it's, but you know, you,you made me think, and I want to
(26:03):
connect the dots for those peoplewho have been joining us all the way.
And so many have, because they've leftcomments here and there that they,
I, I'll say something at the end andthey'll connect the dots and they'll
say, I listened to all the way through.
But one of the great gifts you gaveme across the series was that idea of.
The lack of resource or the frugalityleading to brilliant invention.
(26:25):
Like I often think of in immigrantsin new countries, for example.
But you taught me about the idea of,well, Vietnam and how the Vietnamese
built those bridges just below river levelthat couldn't be seen because the gorilla
tactics, 'cause they had no choice.
And I thought that, just wanted tobring that back to people's mind.
You know, when somebody may get anew job and they're paid more and
(26:49):
then they overstretch, they buy a newhouse to buy a new car, it's on higher
purchase, they don't really own it.
All these kind of things.
And then the tide comes inand , they're caught naked.
And I think I, you see this with somany companies, we see it right now,
so many really successful companies.
they have a market share.
There's a shift in the environment.
Less of their products are desirable andthen they let go of swathes of people from
(27:12):
the organization that they've trained,people who know the culture, et cetera.
And then the market recovers a littlebit and then they try and hire them back.
And people are like going,Uhuh, I ain't joining you.
We saw it during COVID, for example.
But that mindset, I just don'tget how you can't be agile.
'cause you talked about theimportance of strategic agility.
(27:34):
Well, I think, at the bottom of allof this, as I was just saying, Aidan,
there are a set of human foibles asyou were kind of also saying there,
there's the arrogance that like, I'msmart and we know what we're doing.
And so you lose the humility.
There's the kind of dogma, and,there's only one way of doing this,
(27:55):
myopia over time.
I mean, I see this again and again.
when I'm in business school environments,university environments, the only
people they pay attention to are otheruniversities that look like them.
It's like, guys, the threatis not gonna come from that.
the threat is already coming.
you can see the demand foruniversity degrees is going down.
There's a lot of education online.
There are a lot of employers now who aremore interested in like, what can you
(28:16):
actually do and what are your skills thanlike, did you get some kind of a diploma?
But you're not gonna see thatif all your attention is on how
you're competing with a universitythat kind of looks like yours.
success narrows our vision.
But I also think, we underinvestin the time that is necessary to
understand what's changing in the world.
And, that's kind of the lastway that, strategies erode.
(28:38):
I talked about, , gravity wins,strategies, dies in particular ways.
Success corrupts, but alsolike shift happens, right?
I mean, that's where westarted the conversation.
we're in the world where there's justenormous and, external change can
erode success either quickly or slowly,but slowly is just as dangerous.
Maybe more dangerous because you geta trend that just is kind of creeping
(29:01):
along and goes unrecognized andpeople don't pay much attention to it.
let me give you an example.
If you look at the rise of DonaldTrump, , nobody could foresee.
You know, Trump as a particularindividual, but you could foresee
the likelihood that somebody mightcome with a populist point of view.
So if you look literally over thelast 20 or 30 years in the US and to
(29:25):
a lesser extent in Europe, what yousaw was greater wealth disparities.
You saw medium wages, stagnant.
you saw culture shifting in fast waysthat were making people very anxious.
somebody's gonna take advantage of that.
and so, in my own country herein the United States, people are
(29:47):
like, how did the Republican party,the party of business and so on,
and did they end up becoming thechampions of the working class?
And that's what polls show that workingclass people are more likely to see The
Republican party is kind of their ally.
These are all very slow things, right?
There was nothing surprising, going onthere, but the Democrat party largely
(30:10):
didn't pay attention to it, they're outon the stump talking about, the oligarchs.
The problem is not really theoligarchs, the problem is that
the bottom 50% just lost out.
and those changes are particularlydifficult to see when they're
challenging yourself definition.
So if you're the Democratic party andlike, we're supposed to be the party of
the working class and what you see is awhole set of things that are eroding, the
(30:34):
economic success of the working class.
hard things to get yourmind around and change.
like what can we actually do about that?
Let's just let it go.
I talked a few minutes ago evenabout the fashion industry.
It's been very interesting tosee what's happening there.
it's in quite deep crisis.
I think, some brands like LMH andBurberry and so on are way down.
There's a few that have hungon and done pretty well.
(30:56):
10 years ago I did a presentation.
I won't tell you for who, but I did apresentation for somebody in the fashion
and say, little Lily, this is 2015.
And I said, think aboutwhat may happen here.
Will increasing income disparitiesmake people less inclined to
broadcast their wealth through alltheir brands And that's happened.
(31:17):
we've had this move to, Quiet fashion orsubtle fashion, away from logos and so on.
is there likelihood that thedefinition of luxury changes.
It's no longer about heritage andcraftsmanship, but much more around
technology innovation, A brand or thefact that it has innovation and so on.
what might peer-to-peer markets do?
huge explosion in, used market forluxury handbags and other things.
(31:41):
That was clear that was gonna happen.
what will happen if millennialsand Gen Z put more attention
on experiences over products?
and what happens if, China goes XGgrowth and if the CPC cracks down on
conspicuous displays of wealth, or,the China property market, which is
(32:03):
creating a sense of prosperity collapses.
If you're paying attention, youunderstand, those are all potential
shifts, starting to bubble away.
They could be super threatening toyou I, and I would love to go back and
look at at these big companies, , GucciKering Group, LVMH, whatever they are,
and I asked like 10 years ago in theboardroom or an executive suite, were
(32:25):
you guys talking about these things?
Were you collecting data on thesethings where you go like, let's be
sure we're watching what's going on?
I doubt it.
So, you know, again, as I've argued inother broadcasts, it's usually not that
the future's entirely unpredictable,but it, often goes unnoticed.
To your point the board membersoften just sit there listening
(32:47):
to a scorecard instead of.
Using their expertise as board members.
They're usually very experienced.
They've run companies, hopefullyentrepreneurial in some way, and
they have a point of view, butoften they just receive a scorecard.
I always think the board should beused in a, what can you see that
we don't see type arrangement.
(33:09):
And, and oftentimes, you know, when,when some board member goes, Hey, I'm not
happy about the way the industry's going.
They mentioned some ofthe trends you saw there.
They'll get back a report, the nextboard, and it's just brushed under the
carpet and everything goes back to normal.
I couldn't agree more.
I think one of the primary valuesof the board is to speak truth,
(33:30):
to speak uncomfortable truths, andto be relentless at honing in on.
of, uh, vulnerabilities that arekind of on the periphery right now.
but yeah, I mean, I would agree.
It also means I think that you gottahave younger boards, if the average
age of your board is like late fifties,early sixties, that's already a problem.
(33:51):
unless they're quite exceptional people.
that's just not gonna be superhelpful to understanding some
of these emerging things.
we started talking about how doyou buy insurance against your
relevance if you like, or how doyou future proof an organization?
you take measures to, disaggregatethe organization and to slough off
the things that are slower growth.
you carefully track strategy K rates,Invest a lot of time in understanding,
(34:14):
what are these emerging trends andwhat vulnerabilities do they create?
And how do we offsetthose as early as we can?
or leverage them in some way.
And then, how are we honest aboutour own human proclivities and
how they can make us vulnerable?
if I'm a CEO I'd almost say Aidan,these should be posted the head of
(34:35):
every kind leader in their cubicle,their office, wherever they sit.
So anybody comes in to have a meetinglike these are behind the CEO and it's
like what the CEO needs to ask, right?
like, please tell me.
And it would be like, wherewas I wrong in the past?
what do you think I'm missing here?
what other options, do you see, whatwould our fiercest, critics say?
(34:59):
What would you do if this was yourbusiness ? what would we do if we add
a clean sheet of paper and No, legacy.
What if risk was no object?
And so you have to be very purposefulabout asking these que because, you
know, Aidan, we've talked about this,you know, with those power asymmetries,
people are super nervous to be honestabout concerns and vulnerabilities
(35:25):
and what's going wrong, right?
you're super reluctant tokind of, upset the apple cart.
So as a leader, I haveto go way out of my way.
To de-risk honesty, to de-risk criticism.
in many organizations people learn fairlyearly on that there are few rewards
(35:50):
for challenging the assumptions, thebeliefs, of the people they report to.
You may remember this ad, I dunno ifit was on when you were in the UK and
it was probably 20 years ago or it wasan ad for Yoplait the yogurt company
and they had this brand called PettyFilous, this little taster brand.
Anyway, there's a King's taster andI always think of this as exactly
(36:13):
what happens in an organization.
He's tasting and he really.
Likes it.
, And the king's like going look andkind of going, can I have someone?
He goes, Hey mate, you have an apple.
And the king bites the apple and dies.
And I always think of what actuallyhappens in organizations is you
have that taster and it's like,oh, you can't bring that to Gary.
He won't like that.
And, and that's, again, this has happenedto me where some people have it in them.
(36:37):
Even if they know, they'll probablysuffer the, you know, the right,
the, the, they'll be shoot, they'llshoot the messenger at the end.
They'll know, they'll sufferfrom that problem, but they still
have to get it out of themselves.
But this has happens all the time.
You have this layer that protect theleader from the truth when the leader
as to your point, needs that so badly.
(37:00):
But these layers juststop it all the time.
And I, I never understand whythey're allowed to do that.
And surely the leader knows about that.
No, I think it's a super good point.
and I see this absolutely a lot.
I'll give you a recent example.
I'm gonna have to disguise it a littlebit, but, I was trying to talk somebody
in a university, a layer two down fromthe provost, the president and so on.
(37:23):
I was trying to talk them into doingsomething new and they said, well, we
need to find a precedent in our policiesor programs where we've done this before.
And I go that's useful.
maybe this is a place wherewe need to break it, but there
are implicit assumptions.
I can't propose anything is notanchored in some way in the past.
(37:44):
I'm not criticized that person becausetheir assumption is our leaders
just won't go for it right now.
Stuff may well be valid, right?
They've seen a lot of things shot down,but often they're wrong because often
a leader has a lot of pressure on them.
They need, they know they need toinnovate, they need to grow and whatever.
And the people below them are filteringout anything that's bold and radical
(38:06):
on the premise that like, okay,maybe our leaders won't like this.
And so, again, as a leader, Igotta tell those guys, I need
you to bring me the crazy shit.
I need you to bring me the stuff thatyou think is gonna make my head explode.
Right?
that is the real risk, that there arelayers and layers of filtering going on,
and that by the time I see something,it is so anodyne, so predictable, so
(38:29):
incremental that there's no chance thatit's going to make a real difference.
But yeah, at every level there's thatself filtering Now, of course, the
other way you deal with that is, youcreate, ways of starting experiments
and getting things done and buildingsome momentum before anything goes up.
You know, the pyramid, you know, certainlywhen, when, when we're like helping
(38:51):
companies innovation and we're creatingidea markets and trying to get a bunch
of new ideas out, in every case, I wantthe first review to be peer review.
So not people who are atthe top, but peer review.
and number two, I want that idea tohave the chance to have some degree
of experimentation and work on itbefore it gets exposed, Rather than
(39:15):
taking something, you know, it's, Ithink we talked maybe about into it.
this American kind of financialsoftware company has been
like, amazingly successful overa very long period of time.
the chairman, maybe now emeritus ChairmanScott Cook, he said, I do not want to see
PowerPoint slides or proformas or, plans.
I wanna see data out and trysomething and see if it works.
(39:38):
And then share what you're learning.
And what that ensures is thatsomebody has the time, the space to
try something before somebody elsesays, like, that'll never work.
Now there's some things thatyou can probably, you know, if a
bunch of people look at and saylike, that's never gonna work.
Okay, fine.
But, you know, oftentimes.
people just self-censor.
the number of times I've heard,people come and say, that's not us.
(40:01):
how do we understand why?
And maybe it should be you, butthere's this whole definition
of who we are and who we aren't.
And know, when you hear people saylike that again, like, be super,
super careful, Why are we just likepreemptively ruling that out of court?
There's a beautiful little pieceyou, you say here, I have to quote
(40:22):
it 'cause it's beautifully writtenand it's just a great mental model
for people to get their heads around.
It's your farmer versus rancher analogy.
So I'll give it a little quotehere and then you might want to.
Riff on it, maybe modernizeit , for today, managers too
often see themselves as farmers.
They've been given a plot of groundto cultivate a business or market
(40:43):
segment, and their goal is to growthe biggest possible crops of profits.
Over time though yields fall as the soilbecomes more saline, markets saturate,
or as vital nutrients are depleted.
Differentiation wanes.
By now, though, the VP.
He's in love with his 40 acres,so he responds by spending even
(41:06):
more on fertilizer marketing anddigs deeper and more expensive
wells raising capital investment.
Even as ROI declines, it would bebetter if managers saw themselves
as ranchers whose grass fedherds were always on the move.
A rancher's loyalty isn't to a pieceof ground or even a particular animal.
When a pasture gets grazed out, youmove on and you move the herd on.
(41:30):
When an animal falls behind,it gets culled, and over time
the entire herd gets replaced.
As older animals go off toslaughter and new calves get born,
Well, again, yeah, I thinkkind of the deeper truth there,
you know, and obviously even ourown bodies agent, like all of our
(41:50):
cells get replaced over time, right?
Like, are not at all who you wereseven years ago, like in any respect.
but there are things obviouslythat provide continuity.
So I think it's this sense that, it'sthis ability to think about a business
as this like dynamic kind of living,ever changing thing rather than static.
And I think practicallyare two elements to that.
(42:12):
I think there are two thingsthat up like kind of getting
a business marooned, right?
one of those is that you just don'thave enough new strategic options.
So if you do not, when you look atthe future, if you see the future
as more threat than opportunity,you'll be defensive, right?
(42:34):
You'll hang on to what you have.
But if you've had a process, if you havea way of constantly generating hundreds or
I would argue thousands of new strategicoptions, then the future is always, you
know, doing something new is always moreexciting and potentially more profitable
than hanging onto the status quo.
I think Clay Christians and some otherpeople, you know, the innovator's dilemma.
(42:57):
I think in some senses it was wrong.
I mean, in some senses it was, right.
Yes, companies are slow to embracenew things, but I don't think
it's correct to say that the newthings are always cannibalistic.
They're not, you know, oftenthese new markets are bigger
than the ones that they replace.
And so it's not like it, you know, it'sa matter of when we start to move and
whether we can be positioned for that.
But if you don't see those newopportunities, and I think I used this
(43:18):
analogy before, it's the bird in thehand versus all the birds in the bush.
So if the bush is empty and all I haveis this poor dying little thing in my
hand, and the feathers are coming offright, but damnit, this is my bird.
Like, I'm never gonna give up this bird.
I think you have to have a process iscreating a portfolio of opportunities.
(43:42):
So the future and change isalways more enticing status quo.
Now that doesn't mean you giveup all of the status quo, right?
This is not about just like, youknow, let's abandon stuff that works.
But it's understandingwhere you need to do that.
I think the second thing,most companies lack.
Portfolio of new options.
(44:02):
They have a very linear planning process.
It's all about just financialplanning and incremental.
They do not have a process for generatingcompelling new strategic options.
second thing is politically in manyorganizations is very difficult to
shift resources from old things tonew things because resource allocation
(44:25):
process is dominated by the big peoplewho are running the legacy businesses.
And they're always gonna tell you, andrightfully so, they're gonna tell you,
Hey, the best way of using a marginal,you know, pound dollar euro is to invest
it in something we're already doing.
That's the lowest risk for sure.
it's just not the biggest upside.
(44:45):
Right.
you kind of overinvest it in whatis the expense of what could be.
You see another problem in that, that inmost companies, if you have a new idea,
there's only one place to go for funding,and that's up the chain of command.
And so if you have to go for four or fivelevels, and at each level somebody can say
no without consequence, what's the chance?
(45:06):
Anything new is evergoing to be done, right?
So you have to, you know, you have tochange that resource allocation process.
But there's a strategic challenge,which is creating enough new ideas.
And then there's a, and I would argueit's primarily a political challenge,
is taking resources from the havesand giving them to the have nots.
if you think about what governmentdoes, the heart of politics is making
(45:28):
choices about where resources go, right?
The tax and money, thepriorities and so on.
in governments, often.
You have these legacyprograms, not very effective.
They go after year, after year, afteryear because there's a constituency
behind them and they're connectedpolitically and nobody really knows.
This is what Doge has been tryingto do in the United States.
Nobody's evaluating their effectivenessand like they just run because they
(45:49):
have constituents and powerful friends.
so, you know, building a resilientorganization, you gotta deal with the
cognitive challenge, the strategicchallenge, and then the political
challenge of, reallocating resourcesand, and not letting those, that that
process be controlled people whose primaryimpetus is to protect what they have.
(46:10):
Beautiful, beautiful.
Gary, I think we'll leave it there
There's a very little small book Ihighly recommend, a little tiny book.
It's, it's, uh, also available as aHBR article, actually, it's called
Strategic Intent, and it was writtenby Gary with his friend, CK Prahalad.
May Rest in Peace, and I thought we'dcover that, if that's all right with you
next, and then we'll move to Humanocracy.
But there's a piece I love at the veryend and I think it's why I do this work.
(46:35):
I love sharing work like this becauseI read about this Bill Gore and you
talked about it in the book thatyou were interviewing Terry Kelly.
He was the CEO of Gore at the time.
And she shared that Bill Gore spent alot of time thinking about the human
element of business, and he was influencedhugely by Douglas Lewis McGregor's
book, the Human Side of Enterprise.
And that changed how he did business.
(46:58):
And I thought about in the world thatwe live in today, with so many people,
time poor in a knowledge economy, thatif somebody listens to this and or
reads it and just changes it a littlebit, changes a lens that they can
have a huge change in their business.
And I ho I hope that is the case.
And, and I'm very grateful for you forgiving up your time for people to do that.
(47:20):
So, with that, Gary, where's thebest place for people to find you
if they wanna reach out, if they'reinterested in keynotes in work, as a
consultant, where's the best place?
LinkedIn is a good place to find me,and I check that fairly regularly.
anybody can write me an email.
It's really simple.
gary@garyhamel.com, wetried to respond, to those.
I'm on, X at Prof Hamel, so yeah,and then website, gary hamel.com.
(47:44):
There's ways to get to me there, so Itry to be superintendent if people who
have questions wanna know more, need moreresources, this is, not my profession.
This is my passion.
So yeah, I'd encourage peopleto reach out if they so desire.
And I can vouch for him becausethat's how I found him as well.
Gary Hamel, thank you for joining us.
A pleasure, Aiden, as always
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