We're gonna try and get through this today, part two of What Matters now, we welcome the author 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 is about the idea that adaptability matters. Now Gary starts this by saying, we live in a world that seems to be all punctuation and no equilibrium, where the future is less and less.
An extrapolation of the past changes, multifaceted, relentless, seditious, and occasionally shocking. Over to you, Gary. Yeah, well for sure that is the, maybe the defining characteristic of our time. Aidan, you know, I argue in this book, and of course, you know, who 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, the end 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 dark ages, we had the birth of Christianity. There's a lot of amazing historical things, but what will people look at this age?
And I think certainly part of it is gonna be we had an infection point in the pace 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 gone hypercritical in our lifetimes, certainly there are a lot of things that hit a significant inflection point, over the last 20, 30 years.
we're both the authors and the victims of all of that change. it is, stressing us hugely as individuals. technology is reshaping the way we live, 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 a little bit better than we have? But it also, it's just changing a lot faster than our institutions can change, let alone us as individuals. And so, yeah, the defining characteristic of our age.
I sometimes call it the age of upheaval. Where the future's less and less and 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 back to that theme, in later books because I think it's the biggest challenge most institutions face. And as I say, it's not, it's not only corporations, it's governments, it's religion, it's, uh, you know, it's social structures like the family.
all of these things are kind of up for grab. There's a beautiful little paragraph you give here and it really nails the thing home. So you say, just reflect for a moment on the recent history of mobile phones and how Motorola hatched the industry in 1983 with its brick shaped Dyna hack phone, and then seemed invincible until a decade later when Nokia surprised the industry you worked with them. Let's remind our audience as well with their candy bar phone.
And by the end of the century, Nokia's far fetching designs and torrid expansion had given the Finnish company 40% share of what was known an enormous market. And then in 2002, Canadian company Rim research in motion introduced the iconic blackberry. And then in 2007, apple rocked the industry once again, four leaders in four decades. And that's the reality of a competition in a world where change is shaken rather than stirred.
Yeah, and you see the same thing in social media where you went from. 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 that the old companies kind of die instantly. They just kind of lose their relevance and their pace and, shrink into the background. there's certain industries where the pace is much slower.
if you look at the airline industry, hugely capital intensive, highly regulated, it is consolidated substantially around the world. you don't see quite that pace. But there again, over the last couple of decades you saw Southwest come and then kind of become dominant, and maybe now less so. Ryanair Air Asia. and wherever you go in the world, you see all of these new, super low cost discount carriers taking market share.
So. As we talk about this, Aidan, we're gonna kind of struggle to find exemplars. 'cause there's not many companies that have built this capacity for continuous reinvention. Uh, you know, I I, I, I remember one CEO telling me, you know, Hey, my company is growing like a rocket. And I said, have you noticed that rockets follow a parabolic curve? And, uh, you know, the satellites they launch in the space ultimately come back to earth in pieces.
So, the mark of success is not simply whether you can grow a business, but whether you can reinvent it over time. um, you know, and that's, as I say, that's true, even, even society's deepest institutions. In the book, I talk about a really interesting experience I had now, maybe a couple of decades ago. Where I was asked to talk to 7,000 church pastors. And I can tell you that was an interesting experience to be, uh, like with 7,000 people who are probably 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 look in the United States and you see, you know, kind of organized religion, slowly losing its place in society, you know, my argument was , the problem is not probably even religion. It's the organized part of that. And when you look at the data, people still have an immense spiritual hunger. Most people still believe in some kind of, divine power in the world.
But, churches have simply lost their relevance and the way we do church. has changed very little in a, in a few generations maybe the music gets a little better. I don't know if the preaching 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 a new world that is shaping their values, their beliefs, their experiences, their relationships in a way that makes it super hard for older people to understand.
If you have a group of, older folks running an institution and you're trying to make that relevant, super hard to do. So I think, the starting point for me, and one of the starting points in all of this is to be really careful to distinguish between what are your values and what are your habits. and, what are some fundamental truth about human beings or faith or about consumers? what are those fundamental truths versus what are mere tradition.
When you elevate the tradition into that 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 into a successful company, it is very easy to mistake momentum for thrust.
So it feels like, you know, it's kind of like, when you send a rocket into space, you have this huge amount of thrust, and even after you turn off the boosters, it will continue to accelerate for some time right before, it kind of runs out of that. So you can feel like, hey, we're growing, we're winning new customers. if you look at the current trajectory of success, you're growing, maybe getting market share, bringing new things to market. How long ago were the critical decisions made?
That generated that thrust, that generated that momentum, right? often you find that those critical decisions were made 5, 10, 15 years ago. are we doing anything right now to regenerate, that momentum versus simply, sitting on the rocket and riding in a space like, wow, what a ride. we need to talk a little bit about that and you develop a certain kind of honesty where are we, how sustainable is this thing? what's the imperative to reinvest and build the future?
Because , when all the indicators are in green, like it's easy to believe like it's gonna be that way forever. of the problems for me reading is when I'm reading, I go down all these rabbit holes and I start writing an 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, the second is the law of large numbers. And then there's the law of averages and the law of diminishing returns.
And I was thinking about how it's the same. It's that whole Earnest Hemingway quote, how did you go bankrupt first? Slowly. Then quickly, I thought about how does a dad bod form on your body when I had kids and it's like chicken nugget here, little bit of chips there, and the next thing you're like going, wow, my trousers don't fit me anymore. And it's the exact same thing that as you said, it's the habits.
And if you have a higher value that cancels out those habits, you'll adhere to the values, not the habits. But I'd love you to take us through those three things. Yeah. And we can even go a little deeper there because, you know, I've always been curious, Aiden, that senior executives and among investors and analysts, we don't have a very disciplined way of thinking about strategy decay, right? So if, if you believe, as I do that, you know, every strategy has a life cycle.
You know, they don't last forever. Some are longer, some are shorter. how do you get early warning signs when a strategy, a business model is losing its, dynamism it's surprising how often the knot takes people by surprise, right? I spent a lot of time as well as some of my colleagues thinking about why is it that strategies run out of road? and how do you become alert to that? I think there's several things that we can talk about. first of all, I think there are three or four.
One is, as you said, gravity wins. you can put an airplane up for a while, 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 becomes harder to grow at the same rate, right? It's much harder to grow a $40 billion company by 10% than a $4 million company by 10%. It's kind of, you know, the place 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 averages that, obviously in the long run there are no high growth companies, right? If there was, a super growing company, over the long run it becomes the whole economy. So we just know that over time, things revert to the mean. and then you have the law of diminishing returns where, , whatever strategy you have, it's gonna lose its effectiveness over time.
And what that means practically is you'll have to put more and more resources, into achieving smaller and smaller gains Like you have to spend more and more to acquire, another customer, for example, or like in the case of semiconductors. Like every time we have the size of the device that we go from, 20 nanometers to 10, to five to three, like, you've got an exponential rise in the cost of that.
So, these things you can't really reverse these, but there are ways you can deal with them by, breaking big units into small units. I think of a Vinci, the French infrastructure 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 into smaller units where those smaller units maybe have more upside and can imagine where else I can grow.
I think you ensure that Every unit has a very challenging growth target. Jack Welch did this at ge. He asked every business unit to redefine their served markets. So they had less than 10% market share. So that's, I think, a good, , 'cause it forces you to kind of extend your horizon and think bigger.
hire does the same thing with their leading targets where, they challenge businesses to grow at three or four, 10 times, industry growth rates, getting a lot better at reallocating resources from slower growing to faster growing things. So you don't overinvest in legacy, 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 then said that's a mature business.
and ensuring that you never conceptually 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 he does big seminars and stuff like that. he has a great story and essentially what it boils down to is that gold crushes ants, and the whole idea that if you give the ants a piece of gold, it'll crush it.
If you try to throw money at it, it often can kill it because it makes you devoid of imagination or the struggle. And in the struggle is where you actually find things. And this is something that's often overlooked with innovation, that you need people hungry. You need them to think outside the box. Yeah, I think, poverty in some sense is a spur for innovation, right?
I mean, you look at people who overcome, enormous poverty and, that poverty, can either just accept it or it can be a spur to get an education to strive and to work hard and so on. And there's sometimes obviously when there's nothing you can do to overcome your situation. But certainly. kind of wealth is not a spur for creativity or innovation as we've argued before. You know, innovation is always born in this gap between aspirations and resources.
So I think the second thing, Aiden, so first, like, gravity wins and you can kind of, you know, look at any business and kind of think about where are we with that? what could we do? I suggested some of the things you could do. I think the second thing, as I say, is just recognizing that strategies die. And not only do they die, they die in very predictable ways.
if you look at how human beings, you know, how we die, think if you go through that list, it's probably heart disease number one, cancer number two, stroke number three, whatever those things are, but it's not like a surprise. there are things you can do around diet and anti-inflammation and so on. So, same thing. I talk in the book about. The four primary ways in which strategies die.
if there's another one, I'd love for one of our viewers to maybe think about that and say, Hey, there's something else I think you might be missing. But one of those is, over time strategies get replicated. Like people watching go like, well that's a good idea. let's do that. In fact, let's even do that slightly better than you did it.
So I think about, you know, in the uk there are now like any number of big, coffee chains, Costa coffee, cafe, Nero, Gregg's, and I dunno whether Starbucks was a late comer in the UK or not, but clearly Starbucks is not at all unique in terms of, having a nice place to get a coffee or you think of how quickly Samsung and then later, you know, Xiaomi, me and Huawei and so on, how quickly they replicated the iPhone.
like amazing breakthrough with completely different form factor and touch sensitive screen. And I think it was probably within two years, three at max that Samsung had a very, very similar device. American Airlines invents the, customer loyalty program. Now everybody has those. So there's just a diffusion process that you can look at. And so like new ideas just don't stay new for very long anymore. and I think, the followers are catch up a lot quicker than they used to.
this is the idea of disruptive innovation, but secondly, good strategies get superseded by better strategies. So you have somebody who looks at a particular functionality, particular customer benefits, and say, I think we can deliver that in a new way. most of us now, could just watch the slow decline of international, phone call revenues. Because we were all using voiceover ip, right? We were all using some other way.
I was, talking to my friends in the UK yesterday, and of course they call me over WhatsApp or you look at how home theaters have decimated the cinema business. somebody's gonna say, Hey, there's a simpler, better way of doing this. I think also strategies over time just get exhausted. This is a little bit that idea of diminishing returns. they just kind of reached their natural limits. you started out by talking about the mobile phone business. the mobile phone business is a mature business.
if you look over the last decade at Apple's market share, it's hardly changed at all. And so maybe you can go for some time by raising the price, but there's probably a limit to that. So they just kind of reached their, natural limits. I look at what's happened in luxury goods. We can come back 'cause it's quite an interesting story actually. But, you know, they just raised their prices way faster than inflation. a Chanel bag is maybe two times inflation adjusted what it was a decade ago.
And you go like, okay, how long can you guys do that? then finally, strategies get eviscerated. often by customers who just hollow out your profits, they get better information, they, can become, smarter buyers and so on. So, what do you do about all of that? I think, you have to be alert to strategy decay, and that means avoid the tendency to explain away things that are not going so well.
So when you see slowing revenue growth, declining margins, a growing number of new entrants, declining asset productivity, 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 hard and, and ask, you know, which of these things, you know, are people copying us? are there just better ways of doing this? are we losing our pricing power to powerful customers? just be honest about it.
but I think strategy should never be a surprise, ever. there's always indicators and yet, you know, , the capacity for denial often means that, it takes a change in 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, took over he finally was able to admit that we can't be the PC company anymore. the world's just moved on.
my earlier point about being willing to spin off or downgrade legacy businesses when, when Senator Adela offend, essentially blew up the Windows business as it was then, he said, that's just not our future anymore. it's hard, to imagine, the prior leadership doing that. and yet, you have to have the courage to do it. otherwise have the legacy as an anchor. no excuse, But um, still interesting how often, it seems to take companies by surprise.
I'm sure like many of our listeners I lived, I worked through that. And as you say, it's so predictable and you have, what's so annoying is you have like, a chicken little saying, the sky's falling down. That's how I used to kind of see myself and, and, but you're incredulous to the denial around you. And then what's worse is some of the people who are actually, where the power lies, have a vested interest in the status quo. They start to use some of your lingo or your new way of thinking.
And then they try to erode it and bring it in under their cover and actually cannibalize the future for you right in front of your eyes. And you're just looking around going, where's the candid camera? And it's so annoying when this happens. And you know, you talked about strategic decay.
There's so many people inside companies who can see it clearly, but they have no voice or they have no power because they're usually in charge of a budding new revenue stream that isn't yet important enough, and therefore they get killed or they leave frustrated. Yeah. those exactly right, Aidan, the traditional power structures give a disproportionate share of voice and power to people who are vested in the past. let, we can come back and talk about how you change that.
But let, Let me give you a third way, you know, 'cause again, what do you wanna do in any institution, whether you're running a university or a public utility or a small business. You really wanna be, you know, you wanna be alert to the way excellence expires. And I think there's a couple more ways that are so, you know, gravity wins for sure. But I think there's another one that like success corrupts.
And, you know, I often used to say like, either, like, success is a self-correcting phenomenon. And, you know, nothing fails, like success. And when you kind of dig into that and you go like, well, why should that happen? Like, why does success so often seem to be, this brief, period in between mediocrity or in between failure, and you look at it closely and there and you see several things.
I mean, first of all, as the business grows and maybe the leaders, the builders kind of leave and you get a new generation in, you kind of shift from playing offense to playing defense. and you get big enough, and I don't think this is primarily a problem of investors, by the way, but you get big enough 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.
And so you kind of, the gestalt shifts from being builders to being custodians. So that's one, I think number two in the quest to kind of optimize what you have. And, you become kind of over optimized and it can make it super, super difficult to change things. And so again, this is more conceptual than may be practical. I'm not sure I could tell you how to translate in this practice.
I think oftentimes you'll see a business making decisions for the sake of efficiency where they're trading away units of adaptability. let me give you kind of a current example I've seen this for the last 15 years, but now it seems to have finally struck home, the fact that Apple was so dependent on China for its manufacturing. it was easy to be in that partnership with Fox, God, whoever it is that they worked with there to put more and more of their assets in China. It's already there.
We understand that we have good partners and so on, but you're also trading away units of adaptability if something happens to the Chinese economy or political and so on. Apple is saying, how do we move, production elsewhere to India or wherever it may be. when you make decisions for the sake of efficiency or short term, team needs to ask itself, are we making ourselves less flexible? Are we surrendering flexibility here or units of flexibility? And if so, is this really worth it?
You just continue to optimize and optimize without thinking about where am I creating a lock in or, a lack of exit ability a third thing, and how success grows that we've talked about a lot. it fossilizes our thinking and it 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 you were right place at wrong time, but 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 fourth way 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 spend more on marketing or whatever it may be. but that's a really dangerous thing when. The thing is we can win simply by outspending the other guy. Well, yeah. Maybe for a while. you have to look at those things and kind of be honest.
Like, do we really feel like we're, are we more on defense? Are, are, is our instinct to protect what we have? are we trading away our flexibility? do, do I find myself defending rather than challenging old thinking? you gotta be, again, I think the secret aided is just like, don't personalize this, this, these are just realities of, 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 us kind 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 success does to organizations and to people, and therefore, like, you know, what am I gonna do about it? one of the things, there are a couple things you can do about it.
One is listen for language in your organization where the language evokes or illustrates that kind of protective, defensive dogmatic kind of way of thinking. I give a bunch of examples. So like, when somebody says, Hey, we can't afford to screw it up, know, you wanna say, yeah, but you can't afford 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 glad they don't have our overhead.
Right? So that comes with it. Or when somebody says like, this is how our industry works, you 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 get said that kind of are making us numb to what's changing in the world or are making us seem like invincible in some way. And then as a leader at whatever level, make sure that you're making us safe for people to dissent.
And, you know, I think humility is an enormous competitive advantage. if you have an abundance of that, you are not gonna be surprised by the future, I know you live in the, you live part-time in the uk 'cause you lecture there and, there's a great quote by the great British band Radiohead, and they've reinvented themselves time and time again, embraced the internet, gave the album away for free, all this kind of thing. But the lead singer, Tom Yorke, he, has a great saying.
He says, as soon as you have any type of success, 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 connect the dots for those people who have been joining us all the way. And so many have, because they've left comments here and there that they, I, I'll say something at the end and they'll connect the dots and they'll say, I listened to all the way through.
But one of the great gifts you gave me across the series was that idea of. The lack of resource or the frugality leading to brilliant invention. Like I often think of in immigrants in new countries, for example. But you taught me about the idea of, well, Vietnam and how the Vietnamese built those bridges just below river level that couldn't be seen because the gorilla tactics, 'cause they had no choice. And I thought that, just wanted to bring that back to people's mind.
You know, when somebody may get a new job and they're paid more and then they overstretch, they buy a new house 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 in and , they're caught naked. And I think I, you see this with so many 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 and then they let go of swathes of people from the organization that they've trained, people who know the culture, et cetera. And then the market recovers a little bit 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't get how you can't be agile. 'cause you talked about the importance of strategic agility.
Well, I think, at the bottom of all of this, as I was just saying, Aidan, there are a set of human foibles as you were kind of also saying there, there's the arrogance that like, I'm smart 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, 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 other universities that look like them. It's like, guys, the threat is not gonna come from that. the threat is already coming. you can see the demand for university degrees is going down. There's a lot of education online. There are a lot of employers now who are more interested in like, what can you actually do and what are your skills than like, did you get some kind of a diploma?
But you're not gonna see that if all your attention is on how you're competing with a university that kind of looks like yours. success narrows our vision. But I also think, we underinvest in the time that is necessary to understand what's changing in the world. And, that's kind of the last way that, strategies erode. I talked about, , gravity wins, strategies, dies in particular ways. Success corrupts, but also like shift happens, right? I mean, that's where we started the conversation.
we're in the world where there's just enormous and, external change can erode success either quickly or slowly, but slowly is just as dangerous. Maybe more dangerous because you get a trend that just is kind of creeping along and goes unrecognized and people don't pay much attention to it. let me give you an example. If you look at the rise of Donald Trump, , nobody could foresee.
You know, Trump as a particular individual, but you could foresee the likelihood that somebody might come with a populist point of view. So if you look literally over the last 20 or 30 years in the US and to a lesser extent in Europe, what you saw was greater wealth disparities. You saw medium wages, stagnant. you saw culture shifting in fast ways that were making people very anxious. somebody's gonna take advantage of that.
and so, in my own country here in the United States, people are like, how did the Republican party, the party of business and so on, and did they end up becoming the champions of the working class? And that's what polls show that working class 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 on there, but the Democrat party largely didn't pay attention to it, they're out on the stump talking about, the oligarchs. The problem is not really the oligarchs, the problem is that the bottom 50% just lost out. and those changes are particularly difficult to see when they're challenging yourself definition.
So if you're the Democratic party and like, we're supposed to be the party of the working class and what you see is a whole set of things that are eroding, the economic success of the working class. hard things to get your mind around and change. like what can we actually do about that? Let's just let it go. I talked a few minutes ago even about the fashion industry. It's been very interesting to see what's happening there. it's in quite deep crisis.
I think, some brands like LMH and Burberry and so on are way down. There's a few that have hung on and done pretty well. 10 years ago I did a presentation. I won't tell you for who, but I did a presentation for somebody in the fashion and say, little Lily, this is 2015. And I said, think about what may happen here. Will increasing income disparities make people less inclined to broadcast their wealth through all their brands And that's happened.
we've had this move to, Quiet fashion or subtle fashion, away from logos and so on. is there likelihood that the definition of luxury changes. It's no longer about heritage and craftsmanship, but much more around technology innovation, A brand or the fact that it has innovation and so on. what might peer-to-peer markets do? huge explosion in, used market for luxury handbags and other things. That was clear that was gonna happen.
what will happen if millennials and Gen Z put more attention on experiences over products? and what happens if, China goes XG growth and if the CPC cracks down on conspicuous displays of wealth, or, the China property market, which is creating a sense of prosperity collapses. If you're paying attention, you understand, those are all potential shifts, starting to bubble away.
They could be super threatening to you I, and I would love to go back and look at at these big companies, , Gucci Kering Group, LVMH, whatever they are, and I asked like 10 years ago in the boardroom or an executive suite, were you guys talking about these things? Were you collecting data on these things 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 in other broadcasts, it's usually not that the future's entirely unpredictable, but it, often goes unnoticed. To your point the board members often just sit there listening to a scorecard instead of. Using their expertise as board members. They're usually very experienced. They've run companies, hopefully entrepreneurial in some way, and they have a point of view, but often they just receive a scorecard.
I always think the board should be used in a, what can you see that we don't see type arrangement. 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 of the trends you saw there. They'll get back a report, the next board, 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 values of the board is to speak truth, to speak uncomfortable truths, and to be relentless at honing in on. of, uh, vulnerabilities that are kind of on the periphery right now. but yeah, I mean, I would agree. It also means I think that you gotta have younger boards, if the average age of your board is like late fifties, early sixties, that's already a problem. unless they're quite exceptional people.
that's just not gonna be super helpful to understanding some of these emerging things. we started talking about how do you buy insurance against your relevance if you like, or how do you future proof an organization? you take measures to, disaggregate the organization and to slough off the things that are slower growth. you carefully track strategy K rates, Invest a lot of time in understanding, what are these emerging trends and what vulnerabilities do they create?
And how do we offset those as early as we can? or leverage them in some way. And then, how are we honest about our 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 every kind leader in their cubicle, their office, wherever they sit. So anybody comes in to have a meeting like 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, where was I wrong in the past? what do you think I'm missing here? what other options, do you see, what would our fiercest, critics say? What would you do if this was your business ? 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 purposeful about asking these que because, you know, Aidan, we've talked about this, you know, with those power asymmetries, people are super nervous to be honest about concerns and vulnerabilities and what's going wrong, right? you're super reluctant to kind of, upset the apple cart. So as a leader, I have to go way out of my way. To de-risk honesty, to de-risk criticism.
in many organizations people learn fairly early on that there are few rewards for challenging the assumptions, the beliefs, of the people they report to. You may remember this ad, I dunno if it was on when you were in the UK and it was probably 20 years ago or it was an ad for Yoplait the yogurt company and they had this brand called Petty Filous, this little taster brand. Anyway, there's a King's taster and I always think of this as exactly what happens in an organization.
He's tasting and he really. Likes it. , And the king's like going look and kind 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 actually happens 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 happened to me where some people have it in them.
Even if they know, they'll probably suffer the, you know, the right, the, the, they'll be shoot, they'll shoot the messenger at the end. They'll know, they'll suffer from 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 the leader from the truth when the leader as to your point, needs that so badly. But these layers just stop it all the time. And I, I never understand why they'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 little bit, but, I was trying to talk somebody in a university, a layer two down from the provost, the president and so on. I was trying to talk them into doing something new and they said, well, we need to find a precedent in our policies or programs where we've done this before. And I go that's useful.
maybe this is a place where we need to break it, but there are implicit assumptions. I can't propose anything is not anchored in some way in the past. I'm not criticized that person because their 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 to innovate, they need to grow and whatever.
And the people below them are filtering out anything that's bold and radical on the premise that like, okay, maybe our leaders won't like this. And so, again, as a leader, I gotta tell those guys, I need you to bring me the crazy shit. I need you to bring me the stuff that you think is gonna make my head explode. Right?
that is the real risk, that there are layers and layers of filtering going on, and that by the time I see something, it is so anodyne, so predictable, so incremental that there's no chance that it's going to make a real difference. But yeah, at every level there's that self filtering Now, of course, the other way you deal with that is, you create, ways of starting experiments and getting things done and building some momentum before anything goes up.
You know, the pyramid, you know, certainly when, when, when we're like helping companies innovation and we're creating idea markets and trying to get a bunch of new ideas out, in every case, I want the first review to be peer review. So not people who are at the top, but peer review. and number two, I want that idea to have the chance to have some degree of experimentation and work on it before it gets exposed, Rather than taking something, you know, it's, I think we talked maybe about into it.
this American kind of financial software company has been like, amazingly successful over a very long period of time. the chairman, maybe now emeritus Chairman Scott Cook, he said, I do not want to see PowerPoint slides or proformas or, plans. I wanna see data out and try something and see if it works. And then share what you're learning. And what that ensures is that somebody has the time, the space to try something before somebody else says, like, that'll never work.
Now there's some things that you can probably, you know, if a bunch of people look at and say like, 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. how do we understand why? And maybe it should be you, but there's this whole definition of who we are and who we aren't.
And know, when you hear people say like that again, like, be super, super careful, Why are we just like preemptively ruling that out of court? There's a beautiful little piece you, you say here, I have to quote it 'cause it's beautifully written and 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 quote here and then you might want to.
Riff on it, maybe modernize it , for today, managers too often see themselves as farmers. They've been given a plot of ground to cultivate a business or market segment, and their goal is to grow the biggest possible crops of profits. Over time though yields fall as the soil becomes 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 more on fertilizer marketing and digs deeper and more expensive wells raising capital investment. Even as ROI declines, it would be better if managers saw themselves as ranchers whose grass fed herds were always on the move. A rancher's loyalty isn't to a piece of ground or even a particular animal. When a pasture gets grazed out, you move on and you move the herd on.
When an animal falls behind, it gets culled, and over time the entire herd gets replaced. As older animals go off to slaughter and new calves get born, Well, again, yeah, I think kind of the deeper truth there, you know, and obviously even our own bodies agent, like all of our cells get replaced over time, right? Like, are not at all who you were seven years ago, like in any respect. but there are things obviously that provide continuity.
So I think it's this sense that, it's this ability to think about a business as this like dynamic kind of living, ever changing thing rather than static. And I think practically are two elements to that. I think there are two things that up like kind of getting a business marooned, right? one of those is that you just don't have enough new strategic options. So if you do not, when you look at the future, if you see the future as more threat than opportunity, you'll be defensive, right?
You'll hang on to what you have. But if you've had a process, if you have a way of constantly generating hundreds or I would argue thousands of new strategic options, then the future is always, you know, doing something new is always more exciting and potentially more profitable than hanging onto the status quo. I think Clay Christians and some other people, you know, the innovator's dilemma. I think in some senses it was wrong. I mean, in some senses it was, right.
Yes, companies are slow to embrace new things, but I don't think it's correct to say that the new things are always cannibalistic. They're not, you know, often these new markets are bigger than the ones that they replace. And so it's not like it, you know, it's a matter of when we start to move and whether we can be positioned for that. But if you don't see those new opportunities, and I think I used this analogy before, it's the bird in the hand versus all the birds in the bush.
So if the bush is empty and all I have is this poor dying little thing in my hand, and the feathers are coming off right, but damnit, this is my bird. Like, I'm never gonna give up this bird. I think you have to have a process is creating a portfolio of opportunities. So the future and change is always more enticing status quo. Now that doesn't mean you give up all of the status quo, right? This is not about just like, you know, let's abandon stuff that works.
But it's understanding where you need to do that. I think the second thing, most companies lack. Portfolio of new options. They have a very linear planning process. It's all about just financial planning and incremental. They do not have a process for generating compelling new strategic options.
second thing is politically in many organizations is very difficult to shift resources from old things to new things because resource allocation process is dominated by the big people who are running the legacy businesses. And they're always gonna tell you, and rightfully 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. Right.
you kind of overinvest it in what is the expense of what could be. You see another problem in that, that in most 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 five levels, and at each level somebody can say no without consequence, what's the chance? Anything new is ever going to be done, right? So you have to, you know, you have to change that resource allocation process.
But there's a strategic challenge, which is creating enough new ideas. And then there's a, and I would argue it's primarily a political challenge, is taking resources from the haves and giving them to the have nots. if you think about what government does, the heart of politics is making choices about where resources go, right? The tax and money, the priorities and so on. in governments, often. You have these legacy programs, not very effective.
They go after year, after year, after year because there's a constituency behind them and they're connected politically and nobody really knows. This is what Doge has been trying to do in the United States. Nobody's evaluating their effectiveness and like they just run because they have constituents and powerful friends.
so, you know, building a resilient organization, you gotta deal with the cognitive challenge, the strategic challenge, and then the political challenge of, reallocating resources and, and not letting those, that that process be controlled people whose primary impetus is to protect what they have. Beautiful, beautiful. Gary, I think we'll leave it there There's a very little small book I highly recommend, a little tiny book.
It's, it's, uh, also available as a HBR article, actually, it's called Strategic Intent, and it was written by Gary with his friend, CK Prahalad. May Rest in Peace, and I thought we'd cover 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 very end and I think it's why I do this work. I love sharing work like this because I read about this Bill Gore and you talked about it in the book that you were interviewing Terry Kelly.
He was the CEO of Gore at the time. And she shared that Bill Gore spent a lot of time thinking about the human element of business, and he was influenced hugely by Douglas Lewis McGregor's book, the Human Side of Enterprise. And that changed how he did business.
And I thought about in the world that we live in today, with so many people, time poor in a knowledge economy, that if somebody listens to this and or reads it and just changes it a little bit, 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 for giving up your time for people to do that.
So, with that, Gary, where's the best place for people to find you if they wanna reach out, if they're interested 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. [email protected], we tried to respond, to those. I'm on, X at Prof Hamel, so yeah, and then website, gary hamel.com.
There's ways to get to me there, so I try to be superintendent if people who have questions wanna know more, need more resources, this is, not my profession. This is my passion. So yeah, I'd encourage people to reach out if they so desire. And I can vouch for him because that's how I found him as well. Gary Hamel, thank you for joining us. A pleasure, Aiden, as always