October 26, 1999

Gary Hamel's Genome Strategy

Pronking and Surviving in the Age of Gazelles


Report by Michael Finley

The three images to the right, signifying the transition to an information economy -- elephant, Shamu, gazelle -- are vintage Hamel. For the past decade Gary's wit and clarity have inspired thousands of leaders to expand their view of view strategy, to see it as everyone's business, and a point of view about the future as the first element of success.

 

 

 

 

He peppered his October 26 talk with throwaway metaphors that other speakers would kill for:

  • He talked about "corporate pravda" -- the duplicitous language of big-company communications.
  • He talked about Bill Gates having a "Viagra moment" upon hearing another business declare itself invulnerable.
  • And he coined the invaluable term "dead scratch," denoting a company that has done so well on paper for so long for no good reason, that you just know it's due to be someone else's dinner.

 

 

 

 

 

 

Set 'em up,
knock 'em down

(Just click on the links to learn more about previous masters Forum sessions.)

One of the delights of Gary Hamel is the cheerful way he puts daylight between himself and the other great minds on the strategic scene. Fellow strategy gurus Michael Porter and Adrian Slywotzky came into Hamel's crosshairs for supporting innovation but not (in Hamel's view) knowing whence innovation springs.

 

 

 

 

 

Francis Fukuyama ("We stand at the end of human history in the sense that the great conflict of our time -- capitalism versus collectivism -- has been resolved") likewsie served as a pivot point for Hamel. We're npot atthe end of history, he said -- but we have the unprecedented power to interrupt or override history any time we like.

 

 

 

The phrase "nonlinear innovation" sound vaguely familiar? Compare it with Clay Christensen's theory of "disruptive technologies" -- ideas that no one anticipates, that wreck conventional industries.

 

 

 

Tom Peters and upcoming speaker Jim Collins (Built to Last) came under fire for pinpoint best past practices that have no relevancy for today's business world.

Tip: Collins is hip to the charge: his new book will stake out a position closer to Hamel's arguing not for best past practices, but what companies can do in the here and now to advance from good to great.

 

 

 

 

Whatever you do, don't say to Hamel, "But we're a mature company. It's not possible for an organizational at our stage of the growth cycle to overhaul itself. Our industry has nowhere to go."

He will cast a cold eye, and say to you, "If it is possible to create a $2 billion market for something as commoditized as washed, cut lettuce, there is no excuse for you being unable to innovate."

 

 

 

But Hamel saves his deepest scorn for our worship of the Big Brands heroes of our day -- the Jack Welches, Larry Bossidys, Lou Gerstners, and the folks behind this year's big mergers -- whose efforts to keep their large companies successful only obscure the inevitable demise of these hulking beasts.

These are the companies still putting beach balls on Shamu's nose, long after the aquarium show is over.

"What do they think, that dinosaurs can survive extinction if they just get a little bit bigger?"

 

 

 

  • Click here to order book
  • Click here to see text presentation
  • Click here to download MS Word file

 

 

 

 

 

 

 

 

The Masters Forum Series 2000

Geoffrey Moore
"The Fault Line"
February 8

Sam Hill
"Radical Marketing"
March 21

Bran Ferren
"Innovation, Creativity & Story Telling"
May 2

Robert Quinn
"Deep Change"
June 13

EXECUTIVE TOOLBOX:
Aug. 1
David Allen
"Real Time Management"
Sheila Heen & Doug Stone
"Difficult Conversations"

Adrian Slywotzky
"The Profit Zone"
Sept. 12

James Collins
"Getting from Good to Great"
Oct. 24

RENEWAL DAY:
Dec. 5
Jim Loehr
"Mental Toughness"
Benjamin Zander
"Living on One Buttock"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To order Gary Hamel's book, Competing for the Future, click on the book cover.

Or visit Hamel's web site at STRATEGOS.

 

 

Care to comment on Hamel's talk? We've created a special Gary Hamel bulletin board for you to post remarks:

 

 

Webmaster/Reporter:
Michael Finley
SESSION SUMMARY
NOTE: Gary Hamel apologized for not having overheads to pass out at his October 26 session, and promised to put the slides up at his web site. They will be available no later than Wednesday, November 17, at this link . The password to access these notes is revolution.
There have been three stages of organizational development in the past century, said Gary Hamel:

In the era of Big Science (1900-1950), science was like a big elephant dragging a log through a jungle in Thailand. Good results were achieved when science did the heavy work to crack the code.

In the era that followed, the era of Big Brands, brands were like the trainer at Sea World, training Shamu to balance a ball on the end of its nose. Good results were achieved through coaxing and conditioning.

In the era just beginning, the era of Big Ideas, ideas are like the gazelles you see in wildlife videos, pronking through the tall grass of the Serengeti, getting a fresh glimpse of its surroundings with every leap.

Never mind what Francis Fukuyama said to us several years ago at the second Tomorrowday. We are not standing at the end of history, said Gary Hamel. The contest between ideas will go on. Indeed, ferocious competition is bearing down on us right now. Only a very bind or very foolish organization sees smooth sailing for the future.

Hamel used the metaphor of roast pig. At some point in history, a pig wandered into a hut, started a fire, and was found roasted in the ruins. This was a nonlinear innovation, requiring genius on the pig's part and on the part of the person who tasted it. But luck played an important role. Incremental, linear innovations -- like using an oven instead of burning your house down every time you had a hankering for bacon -- came later.

Diminishing Returns

There never has been a better time to be a newcomer, Hamel said, or a worse time to be an oldcomer. Incumbency, the last refuge of old-line dinosaur companies, is worth less today than ever. And the new competition is coming from weird corners.

The new battlelines are no longer geographic. Anyone anywhere can do anything. The two sides may not even be in the same industry.

Who would have thought that the big new threat in the grocery business would be a San Francisco-based construction company? Bechtel is the muscle behind the new WebVan groceries-by-net firm.

The division is between revolutionaries and the oligarchy, insurgents and the establishment.

Someone is forging a bullet with your company's name on it, right now, Hamel said. Unless you move right this instant, you're dead.

And the battle has intensified. In the old days your enemies came and took away your customers. Then they came and took away your best people -- smart people with the scent of wealth in their nostrils, pulled to places where new ideas have a chance of succeeding.

Now they are coming to take away your assets. Examples: eBay buying the conventional auction house Butterfield & Butterfield, and Global Crossing buying undersea cable from Cable & Wireless.

"The barbarans aren't just at the gate," Hamel said. "They're in the house, eating off your best china."

Nonlinear Innovation

"Whatever you shoot is dead for a while before it starts to stink," Hamel said. "The same goes for same with strategies. How many organization carry this dead thing around with them, unaware of its irrelevancy until it is too late?"

Change itself has changed, Hamel insisted -- the pace of it is exponentially faster than it was in the Big Brands era. Motorola missed the shift to wireless technology by only a year, but in so doing lost a strategic war to Nokia.

He told how Marz & Spencer, a UK food company, once walked away from the ready-to-eat sandwich market, which is huge in Britain, on account of sandwich-making being too labor-intensive. But a nonlinear innovation occurred -- the discovery that you could apply butter and condiments using a silkscreen machine. Out-of-loaf thinking -- can you do it?

You can catch up with nonlinear competition, if you start catching up the moment you realize you are falling behind. To dawdle is to die.

Strategy Convergence

Hamel's remarks on strategic convergence harked back to his thoughts five years ago about "genetic diversity" within an organization.

A poll of executives showed that newcomers took the most advantage of changes within their industry. How did they succeed in the game? By taking charge and changing the rules by which it was played.

While the newcomers rewrite the rules, the oldtimers attend to the same conferences, read the same literature, and benchmark the same (last year's) companies.

We used to demand an improvement on last year's performance. Then we demanded that our stock beat the S&P 500. Then we insisted our companies lead their industry. Then we undertook benchmarking our best peers. Most recently we turned to EVA, as if the cost of capital constituted a revolutionary new metric to people.

"I'm not making this [stuff] up," Hamel said, shaking his head.

What good is all this linear knowledge? In Hamel's mind, it infects us with orthodoxies that our own eyes tell us are obsolete.

The Strategy Genome

Hamel spun out an elaborate dazzling metaphor for understanding organizations -- comparing organizational strategy work to human genetics.

  • All human variation, and all organizational growth is the product of genetic differentiation -- of internal diversity.
  • Human beings are 99% alike genetically. All that differentiates us is in that single innovative 1%.
  • The basic DNA of a person is immortal -- it long outlives the individual. "A chicken is how one egg produces another egg." -- Richard Dawkins, The Selfish Gene
  • Hypercompetition -- everyone selling the same thing made the same way -- is the organization equivalent of inbreeding, and reflects absence of variety.
  • Genes mutate. (As do ideas.)
  • There is good genetic variety and bad genetic variety. Having a strategy, even a very bold strategy, is no plus if it loses $250 million.
  • In natural selection, only good variety is retained. If your organization ends up with bad variety, your selection process was aberrant!

18 Organizational Genomes

Hamel studied hundreds of organization that have spawned certifiably good variety, and created the following list of traits.

  1. FRAGMENTED TO CONSOLIDATED. From a million scattered funeral homes to an industry dominated by Service Corp International.
  2. DEVERTICALIZATION. IBM thrived 25 years ago by dominating information technology at every level. Microsoft has done just fine by settling for one slice of the pie -- software.
  3. DISINTERMEDIATION/REINTERMEDIATION. Sam's Club eliminates the conventional store and inserts itself as a new kind of no-frills, lowest-cost retailer.
  4. CONVERGENCE. Check out the New York Times and CNN websites. Can you tell which is by a newspaper and which is by a TV network? You can't.
  5. ELITE TO UNIVERSAL. A color printer 10 years ago cost $10,000. Today they are nearly as disposable as Dixie cups.
  6. INDIVIDUALITY. Order a computer cafeteria-style, from Dell, or a Barbie Doll to suit your personal enigmatic moods. (Remember Don Tapscott's 7-Grain Bread?)
  7. DUMB TO SMART. Old UPC bar codes "knew" item number, shelf location, and price. The new ones will know everything there is to know about the product -- date of manufacture, lot number, ingredients, subcontractors, list of the maker's board of directors -- the sky's the limit!
  8. COMPONENTS TO SOLUTION. You used to have to buy twelve pieces of office equipment to have a home office. Now you go to Kinko's.
  9. EXPERIENCE. Starbucks knows that you can build customer devotion by offering them a great experience with their caffeine. Likewise, REI gives you a taste of the outdoors every time you visit.
  10. PHYSICAL TO VIRTUAL.Ultima
  11. MY TIME/MYPLACE. WebVan delivers your groceries to your door, at a time of your convenience.
  12. PUSH TO "SUCK." Forget Pull! Marketers like AllAdvatage and Cybergold pay you to do business with them.
  13. BIASED TO NEUTRAL. Zero-baloney online shopping guides like ValueStar are independent and autonomous. Now you can get comparative information about products, pick out the best, without wading through the makers' own murky advertising claims.
  14. AUCTION. It's a new way to deal with customers. MetalSite and Bid4Geeks are examples of online entities that put items up for bid and let consumers do their pricing for them.
  15. SEARCH ECONOMIES. MySimon will do all your shopping research for you, listing providers, features, and prices.
  16. WORD OF MOUSE. The web spreads information with intoxicating speed. Sites like Ain't It Cool News get the word out to millions the moment the word is uttered -- and sometimes months before.
  17. CONSUMER TO CONSUMER. Hotmail took off like a rocket -- free e-mail service that self-proselytizes to everyone you send mail to. The company doesn't need to sell -- it's product literally sells itself.
  18. MARKET SHARE TO CUSTOMER SHARE. CDNow is one online retailer that keeps track of who you are and what you like, and uses the knowledge to offer you deals that are hard to turn down.

 

Rules for Radicals

Having a radical tilt to your hat brim isn't enough, Hamel said. You have to be deep down radical in approaching innovation. How do you know if you're radical enough? Ask these questions?

  • Have we developed a coherent point of view about the future of our industry?
  • Have we written down a declaration of beliefs, a manifesto?
  • Have we created a coalition of allies?
  • Have we carefully picked the ramparts we intent to assail?
  • Have we coopted and neutalized the anti-change forces within our midst?
  • Have we found a translator who can put into motivating words for different constituencies the terms of the revolution?
  • Have we set achievable goals -- winning small, winning early, and winning often?
  • Have you curbed the Stalinist practice of corporate resource allocation, and replaced it with but resource attraction -- a critical distinction!

Beyond these things, an organization seeking to unleash its I-gene power needs to demand five things of itself:

It must reset its aspirations. Whatever your wildest vision is -- 20% annual growth, say, it still implies limits. No company outperforms its own aspirations. So set 'em high.

Its business definition must be expansive. A company on the move does not rely on last decade's cash cows. It creates new businesses, and lets the old ones die. Sometimes you expand by narrowing, as Disney did this past decade when it tuned into its core competencies -- stage sets, stories, characters -- and decided to go into the musical theater business.

It hews not to a business, but to a cause. Monsanto used to be just another chemical company. But it asked itself, "What purpose would be worthy of our lives?" It broke new ground as a company dedicated to ending world hunger. The new economy, Hamel envisioned, is not one of just hands and heads but also of hearts.

It harks to new voices. Anheuser Busch has a phantom executive team, made of people under 30, that reports to the board. Their input is the antidote to the over-30 thinking of the real executive team. Do not allow people whose life is in the past to plan your future!

Create an internal market for ideas. Imagine the flow of ideas in a company in which anyone can get any item on the agenda, in which every worker has the chairman's phone number. Killer question: Is the shortest route to success in your organization coming up with and vigorously pushing a risky new idea?

Create an internal market for talent. The best people want to work on the coolest stuff. Don't chase them away from your organization. Let resource attraction be the law of the land, not Soviet style resource allocation. The best ideas you will ever get are bubbling away three levels down in your company right now. Let the bubbles rise!

Make it safe to think. "De-risk" the act of exploring unfamiliar opportunities. It needn't cost an arm and a leg to explore. "But a popcorn stand," as GE puts it -- a low-cost pilot or beta test. A smart company can manage the downside of experimentation, while recouping those costs a hundredfold in business expansion.

Why?

The great remaining question, Hamel concluded, is Why should you care to go to all this effort? One could as easily quit one's current job and go innovate on one's own somewhere else. Hamel provided three compelling reasons for staying put and waging the revolution where you stand:

  • If you want to change anything major, you will have to do it with other people. Look around you -- other people -- the very thing you need.
  • The organization you work for is you, writ large. If it isn't the vehicle for your dreams, yes, somewhere else. But chances are that you had a hand in creating the culture you now find yourself in.
  • If no other reason, change your organization for the sake care of the other people around you, in the next cubicle. They may not have the courage to lead change, but you do.

Gary Hamel, in the end, is not about altering a company's operational model to make it work more efficiently.

Neither does he counsel us to change our business model, or even the mental model or culture or mindset lurking behind the business model.

Nope, he's a radical himself, a Mandela of business, and his goal is to fundamentally attack the political model that reigns over these other models like a fanged fat toad and constrains them.

Because you can't implement a free idea, conceive of a free plan, or even think freely if the people at the top refuse to let you. Alignment, held out by so many to be the key to smooth corporate functioning, represents an evil in Hamel's cosmology -- because alignment from the top is too often alignment of old ideas and disgraced approaches.

Yes, organizational revolution begins at the top -- sometimes with a kaboom.

So do it. Uncork a grenade and let it fly. Rethink and remake your organization in a new form. One that is fun, that has a spring in its step, and its eye on the prize of innovation!

 

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