How was the book?

What is the core competence of Amazon? One day delivery, vast inventory of products, hardware like Alexa or Kindle, people endorsing and commenting the products available etc. The answer is according to Gary Hamel and C.K. Prahalad that it is all of these features. A core competence is a bundle of skills and technologies and a core competence is a source of competitive advantage. The core competence can tested be with three questions:

1. Does it have a huge contribution to customer perceived value?
2. Is it competitively unique?
3. Can it extend from a product to the entire market?

What are the key learnings?

The goal of the book is ”to help managers imagine future and, having imagined it, create it.” ”The book is also about how to build and apply that new view of strategy as it is about how to get to the future first.” The primary challenge is to become the author of industry transformation.

Gary Hamel and C.K. Prahalad premise is that ”a company can control its own destiny only if it understands how to control the destiny of its industry. A threat to the future is a denominator manager who sees business as an extension to asset productivity. Their line of business is downsizing which is equivalent to corporate anorexia.

What does it take to get to the future first?

1. An understanding of how competition for the future is different.
2. A process for finding and gaining insight into tomorrow’s opportunities.
3. An ability to energize the company from top-bottom for what may be a long and arduous journey toward the future.
4. The capacity to outrun competitors and get to the future first, without taking undue risks.

Insight of tomorrow’s opportunities without foresight of the tomorrow’s market is nothing. You should get both and also acquire a strategic architecture which provides a blueprint for building the competencies needed to dominate future markets. Core competencies are built from product leadership and portfolio of competencies, according Hamel and Prahalad. 

Future competition is different from current and to understand what are the differences is the key to success in future. To evaluate the company’s portfolio of competencies one must ask that ”what opportunities are we uniquely positioned to exploit?” Where is the future? It can be found from the intersection of changes. The changes can occur everywhere from geopolitics to technology. Competition of the future happens in different in two ways – It often takes place in unstructured arenas and it is more like a triathlon than a 100-meter sprint.

Getting to the future first is a question of map and the map of past is not the map of future. The competition in the future happens for tomorrow’s industry structure and within today’s industry structure. Race to the future occurs in three different stages:

1. Competition for Industry Foresight and Intellectual Leadership
2. Competition to Foreshorten Migration Paths
3. Competition for Market Position and Market Share.

What is foresight made out of?

• The company must be able imagine that what kind of customer benefits one can provide in five to fifteen years?
• What kind of competencies the company needs to build in order to fulfill the customer benefits?
• How should the customer interface be reconfigured?

Managers must be able to clearly articulate five to six fundamental industry trends that most threaten its firm’s success. Otherwise they are not in charge of the destiny. To create the future it’s the job entire company, not just geeks or top management. Creating future rests on imagination and prediction as well as Wisdom of Crowds.

Strategic architecture plays a big role in the thinking of Hamel and Prahalad. They see that the new benefits or functionalities are the key to strategic architecture and thereafter comes the understanding that what kind of core competencies are needed in order to create the new benefits. Strategic architecture is a high-level blueprint for the deployment of new benefits. It can be also called as ”a high-level map of interstate highways, not a detailed map of city.” But the strategic architecture doesn’t last for ever. Be agile about the the map.

The ultimate test is a question for a random sample of 25 senior managers that ”how will the future of your industry be different?” While analyzing the results look for these five topics:

1. How far is the future?
2. How encompassing is its view of the future?
3. How competitively unique is its view of the future?
4. Is there a consensus about how different is the future?
5. Can they reflect the future into short-term actions?

”Future first” or ”get to the future first” could be the key slogans for Hamel and Prahalad. In many occasions the emphasis the timing. Obviously that is one of the most difficult tasks – to get the timing right, but without it the company will be investing too little too late or vice versa.

Why to compete on shaping the future? Because it can give the company ”a virtual monopoly.” Next question would be that how to get to the future first? The recipe about 20 years ago was:

• Create alliances with leading-edge customers.
• Perform prototype market testing.
• Undertake joint development with potential competitors.
• Study competing technologies etc.

Coalitions are something that Hamel and Prahalad are talking a lot, but today it is a reality in our networked economy. In a sense the writers were seeing the future.

The fuel to future is emotional and intellectual energy of you people, your resourcefulness. Not war cry nor piles of cash. Strategic architecture needs strategic intent to help people to go that extra mile. Your people need to know where they are going. Strategic intent is the command that enegizes your people. The aspirational goal or goals must not be multiple and competing, but focus is ”not an excuse to ignore everything else.” Don’t be a company that is overmanaged and underled.

How should we change according to the book?

Build your strategy on competencies that will deeply contribute to future customer value. For example circular or sharing economy. How will the trends affect to the customer value and what are the consequences after customer value has shifted to circular and sharing economy.

Nowadays we are talking a lot about artificial intelligence, digitalization, urbanisation etc trends. Which of these opportunities will be oversold and which of the risks are undermanaged? Of the strategy itself Hamel and Prahalad are expecting to see:

• Long-term point of view about industry evolution
• Ambition and aspiration that is derisked through the tools of resource leverage.
• An intellectual and emotional commitment that ensures consistency and constancy.

Last is a test with twenty questions about the future. It is in the end of the book. Why would you not do your test about the future? Even before you start the strategic planning.

What should I personally do?

I got curious about this book, because the Ringtone book by Wilson and Doz told that the framework by Hamel and Prahalad was key tool for Nokia leadership. They saw that the idea about core competencies was a great fir for Nokia. Thinking differently is about getting the leadership team debating about future. What happens to the company and where does the company have to be in five and ten years. These questions were seen valuable in the Nokia leadership team.

The book builds a great insight into core competencies, but time has done it job. The book is also very focused on products. It does not undermine the customer value, but still the greatest emphasis is on products. In today’s leadership agenda big emphasis merely on products would have demoralizing effect, because we have just learned ways to work with customers and their needs. Competing for the future is pro experiments and cultural change, but main emphasis is on products.

What should I do? Remember that pre-emptive action towards the competition happens via you strategy and execution plan.

Summary

Six words – “Failure is the child of unrealistic expectations and managerial incompetence.”