You are on page 1of 10

COMPETING FOR THE FUTURE

BY: C.K. PRAHALAD & GARY HAMEL

Hamel and Prahalad provoke todays managers to look towards the future and ponder on their companys ability to shape the future and regenerate success again and again in the years and decades to come. Market leadership today doesnt equal market leadership in the future. A company can only control its destiny if it understands how to control the destiny of its industry. Organisational transformation is a secondary challenge. The primary challenge is to become the author of industry transformation. 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 tomorrows opportunities 3. An ability to energise the company from top to bottom for what may be a long and arduous journey toward the future 4. The capacity to outrun competitors and to get to the future first without taking undue risks Competition for the Future is Different

Competition for the future is competition for opportunity share rather than for market share. Market research will not be much help when the market does not yet exist. Competition for the future is competition between companies, not between products or business units. Competition for the future is more about persistence than about speed Competition for the future often takes place in unstructured arenas, where the rules of competition have yet to be written. E.g., the digital industry is a collection of industries that are simultaneously converging and disintegrating

Learning to Forget Corporate genetics can make a company extinct, much like the dinosaurs, which were unable to change fast enough to changing conditions. To escape the gravitational pull of the past, managers must be convinced that future success is less than inevitable if top management cannot clearly articulate the 5 or 6 fundamental industry trends that most threaten the firms continued existence, and then they are not in control of their destiny Restructuring and Re-engineering neither is a substitute for imagining and creating the future. Neither will ensure continued success if a company fails to regenerate its core strategies. Restructuring seldom results in fundamental improvement in business. At best it buys time THE NEW STRATEGY PARADIGM Not Only But Also The Competitive Challenge Reengineering processes Organizational transformation Competing for market share share regenerating strategies Industry Transformation competing for opportunity

Finding the Future Strategy as learning Strategy as positioning Strategic plans Mobilizing for the Future Strategy as fit Strategy as resource allocation Strategy as Stretch Strategy as resource Accumulation and leverage Getting to the Future First Competing within an existing industry structure Competing for product leadership competing to shape future industry structure competing for core competence Leadership Competing as a single entity Maximizing the ratio of new product Hits Minimizing time-to-market competing as a coalition maximizing the rate of new market learning Minimizing time to global Preemption Strategy as forgetting Strategy as foresight Strategic architecture

Competing for Industry Foresight this is essentially competition to establish your company as the intellectual leader in terms of influence over the direction and shape of industry transformation. Foresight allows a company to control its own destiny. Industry foresight helps managers ask and answer 3 critical questions: 1. What new types of customer benefit should we seek to provide in 5, 10 or 15 years? 2. What new competencies will we need to build or acquire to offer those benefits to customers? 3. How will we need to reconfigure our customer interface to do this?

Crafting Strategic Architecture Strategic architecture is basically a high-level blueprint for the deployment of new functionalities, the acquisition of new competencies or the migration of existing competencies, and the reconfiguring of the interface with customers. Strategy as Stretch A company needs a strategic intent (an animating dream). If strategic architecture is the brain, strategic intent is the heart. It should convey a sense of stretch current resources and capabilities are not sufficient for the task. A strategic intent should:

1. Be a view of the future conveying a unifying and personalising sense of direction 2. Be differentiated conveying a sense of discovery 3. Have an emotional edge to it conveying a sense of destiny Strategy as Leverage Stretch and leverage are relations in order to achieve stretch, available resources will have to be leveraged to the maximum. For example the Japanese motor vehicle industry had to achieve more with less to take on the might of the US carmakers. Resource leverage can be achieved in 5 fundamental ways: 1) By more effectively concentrating resources on key strategic goals a) By converging resources on the same goal rather than by diverging of goals and hence resources b) By focusing resources rather than by trying to do too much at once c) By targeting to make sure that focus is on the RIGHT things 2) By more efficiently accumulating resources a) By mining, e.g., for ideas and innovation b) By borrowing from others 3) By complementing resources of one type with those of another to create a higher-order value a) By blending different resources

b) By balancing 4) By conserving resources wherever possible a) By recycling, especially ideas b) By co-opting c) By protecting 5) By rapidly recovering resources by minimising time between expenditure and payback Money is not a substitute. You can set up a VC arm to spread some investments or even buy in the missing breakthroughs. Strategy is not IP. Strategy is an intellectual perspective carried in the heads of every manager in the firm. You can buy a new factory. But you can't buy a 180 degree revision of your company's self-understanding. You don't hedge your bets across ideas; you develop a view and you work toward it. Home runs are instructive. CNN beats CBS News, Canon beats Xerox, Toyota beats GM, Komatsu beat Caterpillar, Sony beats RCA...Japan beats USA. All through forward-thinking, wily, blue sky strategies that shocked incumbents out of their slumber. Competing to Shape the Future a close second to the future may not be enough to secure market share or dominance. It may not be possible to overtake the leader, which could result in handing them the future. Building Gateways to the Future Any company that wants to capture a disproportionate share of profits from

tomorrows markets must build the competencies that will make a disproportionate contribution to future value. A key challenge in competing for the future is to pre-emptively build the competencies that provide gateways to tomorrows opportunities, as well as to find novel applications of current core competencies. A core competence is a bundle of skills and technologies that enables a company to provide a particular benefit to customers. Competition for competence is between corporations, not between products or businesses. Embedding the Core Competence Perspective

Competence, not customers, not products. Companies traditionally think of themselves as producers of a portfolio of products. This is a mistake. Products get outdated. Then companies think of their customers and try to imagine ways of keeping them. This is a mistake also. Customers vanish, or have surprising alternate personalities. Instead, what are intrinsic to your business are your core competencies. (These guys invented this idea.) Companies should think about what they are good at, and focus on that. This may mean outsourcing or eliminating what you are bad at. Why should the marketers at Virgin build their own physical network? Or it may mean thinking about your competences as opportunities for the future. Canon thought about its skills in optics and imaging to move from photography into copiers (it became #1).

A company focused only on end products may fail to invest adequately in new core competencies. New entrants with new core competencies may surprise older companies.

Companies insensitive to core competence may unwittingly lose valuable skills when they divest an under-performing division or business. A core competency should not be confused with a firm's distinctive competence, a descriptive phrase coined several decades ago that specifies what a firm does unusually well. A distinctive competence usually involves only one functional area, such as marketing or R&D. In contrast, a core competency typically includes several different skills often housed in different functional areas. A core competency thus represents learning across skill sets and organizational units. Examples include the ability to respond quickly to customer requirements, proficiency in product development, and superior inventory management skills. Because core competencies are capabilities rather than assets, they do not show up on a firm's balance sheet. How does a company go about developing core competencies and using them to get to the future? The key is to preemptively identify and build the competencies that provide gateways to future opportunities and to find more applications of existing core competencies. Sony's decision to specialize in the miniaturization of electronic devices is a good example of a firm selecting a core competency for development. This decision was made years before the Walkman, the portable CD player, and portable television sets became popular consumer products. As the Sony example illustrates, selection of a core competency usually precedes competition for product leadership. Securing the Future as the future comes into view, the key is to learn faster than competitors about where the heart of future demand actually lies (expeditionary marketing). To do this, a company must have created a pre-existing share of mind among customers, a strong distribution presence, and a capacity to quickly roll out the new product or service.