This summary and review of the book, Competing for the Future, was prepared by Meghan Hosch while a finance student in the College of Business at Southeastern Louisiana University.

Cover of Competing for the Future

Executive Summary 

In Competing for the Future, by Gary Hamel and C.K. Prahalad, the authors focus on techniques and production of strategic planning.  The main point of the book was in order for a company to succeed into the future, they have to stop looking at the past and start focusing on future plans for the company, and stop being a follower and start being a leader.  The authors focus for a few chapters on reinvention and how the corporate need it. 

Read more in Non-fiction«   Summary and Review of Purple Cow: Transform Your Business by Being Remarkable by Seth GodinSummary and Review of You are What You Choose: The Habits of Mind That Really Determine How We Make Decisions by Scott De Marchi and James T. Hamilton   »

            According to the authors, through experience and discovery, many companies have fallen flat because of their lack of regeneration.  They encourage top management to hire outside the norm; this may bring a nice, fresh change to the work environment.  Every employee brings a different quality to the work environment.  In order to get to the future, a company must first define it.  In defining the future, Hamel and Prahalad suggest assembling “the best possible assumption base about the future.”  A company’s vision changes due to the information collected.

The authors also discuss how to get to the future before your competition.  Shares how to amplify tomorrow’s corporate world.  Corporate visions “does not guarantee competitive success.”  In order for a company to be fully functional and successful, its foresight should be foreseen by continuous leverage of core competencies.  And in order for top management to create a successful vision of the future, a business needs dedicated top management that can look outside the box of what the norm is and create an idea that no one has thought of yet.  Too often competitors are observed by their resources and not enough by their resourcefulness. 

They talk about several reasons it makes sense to conceive of competition for competence as inter-corporate competition.  The first reason is that core competencies are not product-specific.  They contribute to the competitiveness of a variety of products or services.  The second reason is that a core competence contributes to the competitiveness of a range of products or services.  The third reason is because the investment, risk-taking, and time frame required to achieve core competence leadership often exceeds the resources and patience of a single business unit.  And lastly, only by building and nurturing core competencies can top management ensure the continuance of the enterprise.

The book discusses the terms strategic intent, defining it as the dream that energizes a company is often something more sophisticated, and more positive, and strategic architecture, defining it as a high-level blueprint for the deployment of new functionalities, the acquisition of new competencies or the migration of existing competencies, and for the reconfiguring of the interface with customers.    “Strategic intent is strategic architecture’s capstone.  A strategic architecture may point out the way to the future, but it’s an ambitious and compelling strategic intent that provides the emotional and intellectual energy for the journey.  Strategic architecture is the brain; strategic intent is the heart.”           

 

The Ten Things Managers Need to Know from Competing for the Future

1.            Any company that succeeds at restructuring and re-engineering, but fails to create the markets of the future, will find itself on a treadmill, trying to keep one step ahead of the steadily declining margins and profits of yesterday’s business.

2.            It is not enough for a company to get smaller, better, and faster, as important as these tasks may be, a company must also be capable of fundamentally forming itself, of regenerating its core strategies, and of reinventing its industry.

3.            To compete successfully for the future, senior or top managers must first understand just how competition for the future is different from competition for the present.  Competing for the future requires not only a redefinition of strategy, but also a redefinition of top management’s role in creating strategy.

4.            The deeply encoded lessons of the past that are passed from one generation of managers to another pose two dangers for any organization.  First, individuals may, over time, forget why they believe what they believe.  Second, managers may come to believe that what they don’t know isn’t worth knowing.

5.            Intellectual capital steadily depreciates.  Customer needs have changed, technological progress has been made, and competitors have advanced their plans.

6.            To create the future, a company must unlearn at least some of its past.  The more successful a company has been, the flatter it’s forgetting curve.

7.            The basic rules of corporate vitality: To be a challenger once, it is enough to challenge the orthodoxies of the incumbents; to be a challenger twice, a firm must be capable of challenging its own orthodoxies.

8.            Any vision that is simply an extension of the CEO’s ego is dangerous.  On the other hand, it is equally simplistic and dangerous to reject the very notion of foresight simply because some corporate leaders can’t distinguish between vanity and vision.

9.            To get to the future first, top management must either see opportunities not seen by other top teams or must be able to exploit opportunities, by virtue of preemptive and consistent capability-building, that other companies can’t.

10.            Foresight and strategic architecture provide the map, and stretch and leverage provide the fuel.

Image via Wikipedia

 

Full Summary of Competing for the Future

·      Chapter 1: Getting Off the Treadmill

o   There are three questions that often get asked of senior or top managers. 

§  What percentage of your time is spent on external, rather than internal, issues-understanding the implications of a particular new technology vs. debating corporate overhead allocations? 

§  Of this time spent looking outward, how much of it is spent considering how the world could be different in five or ten years, as opposed to worrying about winning the next big contract or how to respond to a competitor’s pricing move? 

§  Of the time devoted to looking outward and forward, how much of it is spent in consultation with colleagues, where the objective is to build a deeply shared, well tested view of the future, as opposed to a personal and idiosyncratic view?

o   There are two things that is occupying top management’s attention.  Restructuring and re-engineering.  Neither is an alternate for imagining and creating the future.  “Any company that succeeds at restructuring and re-engineering, but fails to create the markets of the future, will find itself on a treadmill, trying to keep one step ahead of the steadily declining margins and profits of yesterday’s businesses.”

·      Chapter 2: How Competition for the Future Is Different

o   “A nation that can do little more than protect the industries of the past will lose its economic standing to countries that help create the industries of the future.”

o   To compete successfully for the future, the first thing top or senior managers need to do is first understand just how competition for the future is different from competition for the present.

o   Competing for the future requires not only a redefinition of strategy, but also a redefinition of top management’s role in creating strategy.

o   A major question asked of every company is given our current skills, or competencies, what share of future opportunities are we likely to capture?

o   Maximizing market share is just as important as opportunity share.  Top management needs to be just as concerned about one as it is about the other.

o   Another way competing to get to the future differs from the present is the time.  “Today speed is of the essence.  Product life cycles are getting shorter, development times are getting tighter, and customers expect almost instantaneous service.  Yet the relevant time-frame for exploring and conquering a new opportunity arena may be ten years, twenty years, or even longer.”

o   The two most important ways that competing for the future is different from competing for the present are:

§  “It often takes place in unstructured arenas where the rules of the competition have yet to be written.

§  It is more like a triathlon than a 100-meter sprint.”

·      Chapter 3: Learning to Forget

o   The process of learning to forget is known as unlearning.

o   Some ways that top management try to introduce some cultural variety into the work place is to bring in new members who will mix well with the old.

o   The deeply encoded lessons of the past that are passed from one generation of managers to another pose two dangers for any organization.

§  1. Individuals may, over time, forget why they believe what they believe.

§  2. Managers may come to believe that what they don’t know isn’t worth knowing.

o   Whole industries become vulnerable to new rules when all the incumbents accept, more or less, the same industry conventions.  An industry full of clones is an opportunity for any company that isn’t locked into the dominant managerial frame.

o   Every manager must face a cold hard fact: Intellectual capital steadily depreciates.

o   As the competitive environment becomes more complex, the need for greater genetic variety grows apace.

o   A way to introduce more genetic variety into a population is to bring in new members who cross-breed with the old.  This means to hire managers from outside.

o   Example is bringing in a new CEO or raiding a competitor for a key divisional vice president.

o   The things a company can do to change its genetic coding.

o   It should be careful not to over tighten the bolts that hold the managerial frame together.

o   In practice, this may mean leaving a bit of play in administrative procedures.

o   It may mean being a bit more reluctant to use to use the lessons of the past to train employees for the future.

·      Chapter 4: Competing for Industry Foresight

o   The goal of competition for industry foresight is, at one level, simple: to build the best possible assumption base about the future and thereby develop the prescience needed to proactively shape industry evolution.

o   Industry foresight helps managers answer three questions.

§  What new types of customer benefits should we seek to provide in five, ten, or even twenty years?

§  What new competencies will we need to build or acquire to offer those benefits to customers?

§  How will we need to reconfigure the customer interface over the next several years?

o   To get to the future first, top or senior managers must either see opportunities not seen by other top teams or must be able to exploit opportunities.

o   They must also be capable of enlarging its opportunity horizon.  This requires top management to conceive of the company as a portfolio of core competencies rather than a portfolio of individual business units.

·      Chapter 5: Crafting Strategic Architecture

o   Not only must a future be imagined, it must be built.

o   Every company has:

§  Information architecture

§  Social architecture

§  Financial architecture

§  Strategic architecture

o   Strategic architecture is not a detailed plan.  It identifies the major capabilities to be built, but doesn’t specify exactly how they are to be built. 

o   It identifies “what we must be doing right now” to intercept the future.

·      Chapter 6: Strategy as Stretch

o   Too often competitors are judged in terms of their resources and not their resourcefulness.

o   Strategic intent is strategic architecture’s capstone.  A strategic architecture may point the way to the future, but it’s an ambitious and compelling strategic intent that provides the emotional and intellectual energy for the journey.  Strategic architecture is the brain and strategic intent is the heart.

o   Most companies are over managed and under-led.  It is fair to say that in most corporate headquarters; far more effort goes into the exercise of control than into the provision of direction.

o   The goal to simply be the biggest or to reach a certain size is unlikely to capture the imagination of employees.

o   Strategic intent must be personalized for every employee.  The first task in personalizing strategic intent is to set clear corporate challenges that focus everyone’s attention on the next key advantage or capability to be built.

·      Chapter 7: Strategy as Leverage

o   Although an abundance of resources enables a firm to be strategic in an investment sense, it does nothing to enhance the wisdom of strategic decisions. 

o   Stretch means the fact that ambition forever outpaces resources.  Stretch fuels the engine of advance creation.

o   Stretch gives birth to the motive for resource leverage.  TLC and feeding is required to transform the new desire into a full-grown capability for resource leverage.

o   Resource leverage can be achieved in five different ways:

§  By more effectively concentrating resources on key strategic goals

§  By more efficiently accumulating resources.

§  By complementing resources of one type with those of another to create high-order value.

§  By conserving resources wherever possible.

§  By rapidly recovering resources by minimizing the time between expenditure and payback.

·      Chapter 8: Competing to Shape the Future

o   Getting to the future first may enable a company to be the first to establish a virtual monopoly in a particular new product category and may also enable a company to establish the rules by which other companies have to compete.

o   Companies that fail to get to the future first may end up as followers or dependant of the companies that got there first.

o   Overall, the goal is not to get there first, but to be the first with the product that finally unlocks the emerging mega-markets.

o   A company’s share of influence and share of future profits is determined by four factors:

§  Its capability to build and manage coalitions.

§  Its success in building core competencies central to the provision of customer value in new opportunity arenas.

§  Its ability to rapidly accumulate market learning.

§  Its global “share of mind” and distribution capacity.

o   Competing for the future usually takes place between coalitions as well as between individual firms.

o   Assembling and managing coalitions aimed at creating new markets often takes a broad range of subtle political skills.  One must develop great insight into the motives of all the involved players.

·      Chapter 9: Building Gateways to the Future

o   Core competencies are the gateways to future opportunities.  Leadership in a core competence represents a potentiality that is released when imaginative new ways of exploiting that core competence are envisioned.

o   A core competence is a group of skills and technologies that enables a company to provide a particular benefit to customers.

o   There are several reasons it makes sense to conceive a competition for competence as inter-corporate competition.

§  Core competencies are not product-specific.  They contribute to the competitiveness of a range of products or services.

§  Because a core competence contributes to the competitiveness of a range of products or services, winning or losing the battle for competence leadership can have a profound impact on a company’s potential for growth and competitive differentiation.

§  Because the investment, risk-taking, and time frame required to achieve core competence leadership often exceeds the resources and patience of a single business unit.

§  Only by building and nurturing core competencies can top management ensure the continuance of the enterprise.

·      Chapter 10: Embedding the Core Competence Perspective

o   The core competence perspective is not a natural one in most companies.  Typically, the most basic sense of corporate identity is built around market-focused entities.

o   There are several dangers that await a company that can’t conceive of itself and its competitors in core competence terms.

§  The risk that opportunities for growth will be needlessly truncated.

§  Even if someone in the organization spots a new opportunity, if the competencies that are needed to respond to that opportunity lie in another business unit, there may be no way to redeploy the people who carry those competencies into new opportunity arenas.

§  As a company divisionalizes and fractures into ever-smaller business units, competencies may become fragmented and weakened.

§  The lack of a core competence perspective can also desensitize a company to its growing dependence on outside suppliers of core products.

§  A company focused only on end products may fail to invest adequately in new core competencies that can propel growth in the future.

§  A company that fails to understand the core competence basis for competition in its industry may be surprised by new entrants who rely on competencies developed in other end markets.

§  Companies insensitive to the issue of core competence may unwittingly relinquish valuable skills when they divest an under-performing business.

o   Chapter 11: Securing the Future

§  Expeditionary marketing does not imply launching products that are manifestly unready or inappropriate to the needs of potential customers.

§  Cost is just as crucial as speed.

§  If the opportunity is oversold and risks are under-managed, failure and premature abandonment of the opportunity are almost guaranteed.

§  Managers have given much attention to the very important task of reducing product development cycle times. 

§  Speedy product development is an important component of the capacity to preempt competitors.

o   Chapter 12: Thinking Differently

§  The real competitiveness problem is not that America’s too-clever trading partners have tilted the playing field to their advantage.  The real problem is that too many large U.S. companies failed to anticipate, much less invent, the new rules of competition in their industry.

§  Large companies are essential to the wealth creation process for a number of reasons.

·      Having a capacity to match the resources and global; distribution of large competitors brings advantages.

·      Large companies also tend to devote a disproportionate share of their resources to training and education.

·      Opening the door to many of tomorrow’s mega-opportunities will require significant resources.

·      They are significant employers.

Personal Insights

·      Why I think the author is one of the most brilliant people around…or is full of $%&#, because:

The authors of this book were very insightful in the area of teaching senior and top management skills and qualities that need to be possessed to be a successful company.  The questions that are asked in the book of senior management are key questions for companies that are competing for the future.  Hamel and Prahalad give excellent examples of how many companies have reached the top.

·      If I were the author of the book, I would have done this differently:

1.      The examples in the book were very helpful in understanding the material but there were more examples than information in some chapters. 

·      Reading this book made me think differently about the topic in these ways:

1.      Reading this book opened my eyes to the idea that management is not an easy task.  It encouraged me these ask questions of top management at my business.

2.      I have learned how to correctly get my company and my employees to the top with few to no problems.

3.      After finishing this book, I realized that there are so many different components in making a company or organization succeed.

·      I’ll apply what I’ve learned in this book in my career by:

1.      I will encourage my co-workers to be capable of dreaming of things that have not yet been thought of. 

2.      I will try to teach either my employees or co-workers that it is not cash that fuels the journey to the future, but the emotional and intellectual energy of every employee.  An employee being in a happy work environment makes for a happy and hardworking employee.

3.      A major component to a business succeeding is customer satisfaction and loyalty.

·      Here is a sampling of what others have said about the book and its author:

 

“What others have said about the book and its author?”

Winning in business today is not about being number one–it’s about who “gets to the future first,” write management consultants Gary Hamel and C.K. Prahalad. In Competing for the Future, they urge companies to create their own futures, envision new markets, and reinvent themselves. Hamel and Prahalad caution that complacent managers who get too comfortable in doing things the way they’ve always done will see their companies fall behind. For instance, the authors consider the battle between IBM and Apple in the 1970s. Entrenched as the leading mainframe-computer maker, IBM failed to see the potential market for personal computers. That left the door wide open for Apple, which envisioned a computer for every man, woman, and child. The authors write, “At worst, laggards follow the path of greatest familiarity. Challengers, on the other hand, follow the path of greatest opportunity, wherever it leads.” They argue that business leaders need to be more than “maintenance engineers,” worrying only about budget cutting, streamlining, re-engineering, and other old tactics. Definitely not for dilettantes, Competing for the Future is for managers who are serious getting their companies in front. – Dan Ring

Gary Hamel Speaking on Management:

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Contact Info: To contact the author of this “Summary and Review of Competing for the Future,” please email Meghan.hosch@selu.edu.  

David C. Wyld (dwyld@selu.edu) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/.

 

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Cover of Competing for the Future