UK: Gary Hamel - The Gurus.

UK: Gary Hamel - The Gurus. - A leader in the new wave of thinking about strategy, Hamel is almost evangelical in his call for 'industry revolutionaries'.

by Anita van de Vliet.
Last Updated: 31 Aug 2010

A leader in the new wave of thinking about strategy, Hamel is almost evangelical in his call for 'industry revolutionaries'.

'Strategy is to the '90s as quality was to the '80s,' says Gary Hamel. 'It is the next fundamental advantage for companies.' In the '80s, if you weren't totally committed to quality, your company was doomed to extinction. Today, says Hamel, unless your company can renew itself through reinventing its core strategy, maybe even reinventing its industry, it should be prepared for a similar fate. Even Microsoft, he points out, one of the great success stories of recent times, was taken off guard by the extraordinary rise of the Internet, and has had to rethink its strategy or risk being displaced as industry leader by the likes of Netscape.

Hamel quotes Bill Gates's comment that 'Microsoft is always just two years away from failure' as a reminder to the complacent.

A dapper, mustachioed 42-year-old, Hamel is visiting professor of strategic and international management at the London Business School, and chairman of Strategos, the 'strategy services company' he and fellow academic turned consultant CK Prahalad set up two years ago. Former LBS students describe Hamel as an 'inspirational teacher', and he is in constant demand as a speaker in Europe and America. Interviewing him is rather like attending a lecture: any question evokes a lengthy disquisition so fluent, so logically ordered, complete with sub-headings and summings up, that at times Hamel actually pretends to be searching for the mot juste or the precise illustration of his point, just to reassure you that he is human. Or, perhaps, to reassure you that he hasn't said it all before, since perhaps inevitably much of what he unfolds in person has already appeared in print, in a series of influential essays in the Harvard Business Review and in Competing for the Future, the book he and Prahalad published in 1994.

This best-selling volume caught the mood of corporate America, ready to grow again after a decade of downsizing, and propelled its authors to 'superguru' status (in the words of The Economist), the leaders in the new wave of thinking about strategy. Unlike the centralised, top-down strategic planning of the '60s and '70s, which focused on competitive position and winning market share, the new strategy emphasises growth, transformation, imagination, breaking the rules and the democratisation of the strategic process. Hamel expounding on his theme is unremitting and 'passionate - almost evangelical', as one LBS colleague puts it in a tone of slight alarm. Thus, says Hamel, Strategos is a 'movement' rather than a consultancy. It publishes a 'manifesto' rather than a mission statement.

This 'manifesto' rather grandly exhorts its readers to become 'industry revolutionaries', 'authors of the new, and owners of the future', who will 'live deeply in that future while gaining the courage to act boldly in the present'.

Some non-American readers may find such fervour disconcerting, but the fact that Strategos now generates revenues of $20 million (£12.2 million), from companies including EDS, Motorola, Nokia, Ford and Dow Chemical, suggests that Hamel and his colleagues have rather more than slogans to offer their clients.

As a business professor and management thinker, meanwhile, Hamel says that the questions he is trying to answer are threefold. 'First, how can we preserve organisational vitality in the absence of crisis? In every organisation, the forces of entropy are at work; in any successful organisation, we can see the slow unwinding of meaning, energy and excitement. Typically, we only deal with this when we reach a crisis.' Second, 'How can you create a strategic point of view about the future in an increasingly indeterminate, complex, fluid world?' Previously, strategy was shaped within the context of your own industry; now, deregulation and digitalisation have made the old industry boundaries 'about as certain as the borders in the Balkans'. And third, 'How do we create competitiveness without destroying hope?' This is especially important for Continental Europe, he maintains, where business has yet to impose all the restructuring already undergone by British and American companies, and has to do so on top of unemployment already running at 11% or 12%.

In addition, there is the perennial question of how to make your shareholders rich. The only sustainable way is through revenue growth, Hamel believes: such wheezes as demergers or share buy-backs are one-off dividends, while tighter management of assets and headcounts, in the UK at any rate, are now yielding diminishing returns. 'But there are as many stupid ways to grow as stupid ways to cut ... What all our research suggests, is that if you want to grow, the secret is strategy innovation.'

What exactly does that mean in practice? Hamel replies by pointing to high-growth companies like AmGen, Home Depot, The Gap, Nike or Intel.

Some have rewritten the rules of their industries, he says - Nike, which has recently paid $200 million for the rights to the Brazilian football team, is in effect 'reinventing the sports industry' - but all have reinvented their own internal rules (fashion retailer The Gap used to be a pile 'em high, sell 'em cheap outfit, while Intel moved from making memory chips to microprocessors). Pointing to the range of industries spanned by the top growth companies, he adds that, 'The notion of high-growth industries is garbage ... Just as a footnote, between 1989 and 1996, the US market for pre-washed and packed lettuce grew from zero to $1.1 billion. If you can do that with lettuce, you can do it with anything.'

Where does such strategy innovation flourish? Well, says Hamel, strategy does not come from the centralised, annual planning process. 'That generates plans; it does not create wealth.' Nor, except in rare cases, will strategy issue forth from those at the top of the company: 'Most companies have a hierarchy of experience, not imagination: the bottleneck for new ideas is at the top.'

Instead, he maintains, companies should be creating the preconditions for strategy creation. First, they should be seeking to awake 'new passions' - people don't commit to arid, mechanistic plans. Next, managers should be listening to 'new voices' - the young, those at the geographic periphery of the organisation - and seeking to increase the genetic diversity of the strategy makers. At one Strategos client, a large US utility, for example, every single employee has been asked if he or she wants to participate in the dialogue on future strategy: 'We've set up PCs in cafeterias and loading docks, asking for ideas on where to go next. It's part of the democratisation of strategy.' Not that all ideas will be equally valid, but 'you need an in-built redundancy in the process'.

Companies also need 'new perspectives', reconceiving their customers, discovering new opportunities. 'The starting point here is the systematic deconstruction of your industry,' Hamel says. 'Find the orthodoxies or heterodoxy, and then turn the conventions on their heads.' By way of illustration he cites South West Airlines in the US, which sends its planes flying back and forth between pairs of cities instead of following the traditional US hub-and-spokes approach, so they spend more time in the air. The result?

South West is now the most profitable airline in the US.

Companies can gain new perspectives through redefining their 'core competencies' - a phrase which Hamel helped to coin and which has now, as he says, become 'part of the vernacular', although 'misused more often than not'. He makes this point in answer to critics of the concept which, he says, has not always been properly understood. Companies are often less than rigorous when trying to define their own core competencies, he claims. 'They lose sight of three clear criteria: that they make a substantial contribution to customer value or cost reduction; that they are skills hard to duplicate; and that you can imagine a way of leveraging them into new opportunities.' More subtly, he says, people have treated the problem of identifying core competencies in a mechanistic way: 'In my mind it is an essentially creative task: you're getting down to the very essence of who we are and what it is we're capable of.'

In short, says Hamel, those wishing to compete for the future, must realise it is shaped not by prophets but by 'heretics, seeing unconventionally into the present'.

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