CK Prahalad Archives - Management Pocketbooks

What is the meaning of corporate strategy? Is it about getting to the front of the queue, keeping your place in the queue, or is it something different. Gary Hamel, once considered by Forbes Magazine to be ‘the world’s leading expert on business strategy’ might argue it is starting the next queue.

Very Short Biography

There are very few biographical details about Gary Hamel available. He was born in 1954, attended Andrews University. His first job was in hospital administration, but he soon started a PhD at the University of Michigan. There he met long-term collaborator, CK Prahalad. In 1983, Hamel joined the faculty of the London Business School, where he has remained to this day.

However, in 1993, we transferred from a full-time to a visiting professorship and moved to Silicon Valley, co-founding a consultancy firm, Strategos, a couple of years later, with Prahalad. This timing was clearly linked to the publication of their landmark Harvard Business Review (HBR) article, Competing for the Future in July/August 1994. It was followed later that year by the book of the same name, Competing for the Future, which became a massive seller.

This set Hamel up for a string of high-selling books, prominent HBR articles, prestigious consulting assignments, and eye watering fees on the conference circuit.

Following the sale of Strategos in 2008, Hamel founded the Management Innovation Exchange. This is an online community dedicated to innovation and disruptive thinking, that very much chimes with Hamel’s approach to strategy as disruptive. He remains influential and sought after and, as a relatively young man, seems likely to continue to influence strategic thinking for a number of years.

Hamel’s Big Ideas

What are the ‘Big Ideas’ that managers need to be aware of? And, in particular, how can we separate out Hamel’s ideas from those of long-term collaborator, CK Prahalad, whom Pocketblog has already covered?

Here, I’d like to focus on the flavour of the ideas that seem more to arise from Hamel’s thinking. But I must emphasise that I have no insight into how the two work together andI am aware I may be misinterpreting, so welcome comments.

Core Competencies

The first big idea that Prahalad and Hamel put forward was that of core competencies. Corporations need to stop focusing on what industry thy are in, and start looking at what they can do well, as their source of competitive advantage. Hamel is fond of citing examples like Amazon and Apple, who are in the retail and consumer electronics industries respectively… or were.

Now, Amazon is a dominant player in provision of web servers, cloud storage, and data processing, whilst Apple makes much of its money today as a music vendor and software marketplace provider. It was the asset bases and the skill-sets of their people that allowed each business to grow into new markets and achieve a dominance there.

It seems to me that these examples illustrate Hamel’s particular contribution – he favours taking contrarian lines and looking for the surprising, disruptive directions of thought.

Strategic Intent

Prahalad and Hamel charted a shift in corporate strategy from the 1960s and the focus on portfolios and selecting winning product sets, to the 1980s and the focus on efficiency, continuous improvement, cost-cutting and re-engineering, and Total Quality Management (TQM) – all as means of tweaking the corporation to ever better incremental performance levels.

In the 200s, the focus needed to shift again, and in 1994, they foresaw this, under pressures of globalisation, technology shifts, changes in customer expectations, deregulation, and new entrants into markets. Corporations would increasingly need to answer long term questions about where they will be in the future. And if they don’t have the answers, then someone would surely displace them.

Companies, Hamel and Prahalad said, should no longer seek to optimise their position within a fixed market, but should rather either change the rules of their industry altogether, or go and find new markets to conquer.

Hamel distinguishes between:

Rule Makers
These are the founders of their industries, who built dominance by an audacious and concerted move into a new or emerging space. Henry Ford, whom we covered two weeks ago is a great example.
Rule Takers
These are the fast followers – companies that copied successful Rule Makers and also built a strong presence in the same market, largely by taking an established formula, and applying it well. Some would never catch up their rule maker. Others would find substantial improvements or deploy sufficient hunger, to overtake the incumbent leader.
Rule Breakers
These are businesses that disrupted the rules by which the incumbents play. They do things sufficiently differently to rock the market and change it forever. Some have been driven by technological advances, but others have been equally radical by simply applying new thinking. Virgin Airlines and then EasyJet each disrupt the British Airways near-monopoly n the UK, for example.

Strategy as Revolution

Nowhere is this clearer than in Hamel’s 1996 solo HBR article, ‘Strategy as Revolution‘. It seems to me that this article really set the scene for ten years later when Hamel co-founded the Management Innovation Exchange (MIX). Here, he put forward ten principles to consider, if you want to create a truly innovative strategy. I’ll pick out four:

Distinguish between ritualised, calendar-driven strategic planning from the true practice of challenge and investigation that leads to real strategy.
Harness revolutionary ideas throughout the company, because many of the staunchest defenders of old and comfortable orthodoxies are at the top of the organisation.
Don’t worry about making change. Instead, focus on engagement with the people who can make the change happen.
Embrace surprise: you don’t need to plan the whole route or even be sure of the ultimate destination. The direction is the strategy.

Conclusion

It’s too soon to write a conclusion on Hamel. His focus on disruption has helped many businesses change, but it is not clear whether he is riding the wave, or controlling the wave machine. If you want a constant stream of stimulation and challenge though, it is well worth checking out and even participating in his Management Innovation Exchange.

Short Biography

Coimbatore Krishnarao Prahalad was born in 1941 and grew up in Coimbatore, in the Southern Indian state of Tamil Nadu. He was an exceptional academic student, graduating high school three years early and gaining a BSc in Physics from Chenai’s Loyola College in 1960, at the age of 19. He joined Union Carbide, first as an intern and later was promoted to be its youngest manager. But he left in 1964, to join the first MBA class at the Indian Institute of Management (IIM), earning his MBA in 1966.

From there, he joined a manufacturing firm, Indian Pistons, which offered the stability to marry and start his family. But the call of the academy continued and in 1973, with his family, he went to the US and started his DBA research at Harvard – while his wife, Gayatri, started her master’s degree in education.

After Harvard, he took up a teaching post at IIM, and gradually acquired others, coming to base himself at the University of Michigan. There, he was recognised as the outstanding teacher in the business school. There too, he met doctoral student Gary Hamel. Together they built a combative rapport that generated the highly influential 1990 Harvard Business Review paper, ‘The Core Competence of the Corporation’.

They then developed these ideas into the best-selling book, ‘Competing for the Future‘. They continued to work together, and Prahalad also worked with other collaborators, perhaps most notably with marketing academic Venkat Ramaswami to produce ‘The Future of Competition: Co-Creating Unique Value With Customers‘, which looked at how some of the emerging big players on the internet were co-opting their customers to generate value for themselves and their peers.

Prahalad’s biggest idea was one that he worked on alone and only time will tell how successful it really is. Wondering how so many billions of people remain in poverty despite the apparent success of our best management and technological developments, he argued that the bottom 5 billion people by wealth still account for a potential market of over $10 trillion. He figured that addressing that market could equally benefit those people and the corporations that do so. His ideas and research were published in 2004, in ‘The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits‘.

Competitive Advantage

In throwing out existing data and process led theories of strategy formation, Prahalad and Hamel developed a simple model of how corporations can achieve competitive advantage. This simplification of their ideas is mine and any errors of interpretation I have introduced are mine too.

Step 1: Corporate Imagination

This is where corporate leaders visualise new markets and how to exploit them ahead of their competitors. They argued that to do this effectively, executives have to:

get away from their natural focus on existing markets
look for new product concepts
be prepared to challenge radically their old assumptions about pricing (this idea would recur in Prahalad’s thinking about how to create markets at the Bottom of the Pyramid)
lead customers by creating expectations, rather than follow them by meeting expectations

Hamel and Prahalad had little time for small scale intrapreneurial innovation. They advocated big, revolutionary changes in markets that would allow a corporation to dominate, such as:

adding wholly new functionality to your existing products
delivering your proven functionality through new products
using existing products to deliver functionality in new ways

To do this, they argue that an organisation must understand its ‘core competencies’ – the abilities it has to create and innovate by bringing together its skills, technologies, assets, and relationships in ways that dominate multiple markets by offering big benefits to customers in a way that competitors find hard to duplicate.

The threat of relying on core competencies, however, is two-fold. Firstly, it may cause market and product diversification into arenas where the corporation has insufficient depth of understanding or presence to be effective. This can lead to large failures. Alternatively, over-focus on core competency leads to a rigidity of thinking that is reinforced by a sense of comfortableness, and leads to a sense of complacency. Such circumstances lead to being replaced in your core markets by insurgent competitors.

Step 2: Implementation

Hamel and Prahalad’s focus on core competencies leads them to focus what they say about implementation on building up core competencies and their supporting infrastructures of assets, resources and technologies.

Step 3: Consolidate your Control of Emerging Markets

You do this through what they call ‘Expeditionary Marketing’ to understand how the parameters of feature-sets, performance, and pricing need to be balanced to penetrate, consolidate and dominate your market.

The Bottom of the Pyramid

How do you build a market among people who are too poor to buy your products? By re-thinking entirely how you deliver your products and the pricing model you use. Prahalad was able to find and research numerous case studies that show how corporations can do this successfully, to create:

Affordability – creating offerings that dramatically change what people need to pay and how they can pay for it
Accessibility – thinking carefully about the local context, rather than applying first-world distribution models
Availability – getting products to where they are needed, when they are needed, in a form that makes it possible for people to buy.

Hear Prahalad speaking about this and more…

Tag: CK Prahalad

Gary Hamel: New Strategist