Customer Reviews

Competing for the Future

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Competing for the Future, by Gary Hamel and C. K. Prahalad focuses on new issues and techniques of strategic planning as discovered, articulated, and reported by the authors, both Professors of Business at the University of Michigan. The main message of the book reads as follows: in order for a company to be a success, the company must create its future instead of following other companies into the future.

By "creating the future" the authors understand defining and exploiting yet unknown future market opportunities. The opportunities do not have to be confined to the company's core competencies (although the book places significant emphasis on utilizing those). Instead, the company can choose to find alternate distribution channels, beneficial alliances, and other creative means of reinventing itself. The authors offer a wide array of management tools to successfully perform the corporate definition of future consumer needs.

The authors emphasize the corporate need for continuous innovation and reinvention. According to the book, many once-successful companies have failed because of their lack of regeneration and their erroneous belief in persistence of yesterday's business practices. Among the ways to successful corporate regeneration, the authors credit corporate diversity on the thinking level as successful means for breaking established corporate "myths" of the right way of doing business. The authors note that hiring personnel from outside industries can bring fresh and vital perspective on the present state of an enterprise.

In order to develop the future, a company must first define it. In defining the future today, Hamel and Prahalad suggest building "the best possible assumption base about the future." The "assumption base" is to indicate to management what changes in the company's products, competencies, and consumer interface are necessary in order to address future customer needs. The collective information about the changes of tomorrow comprises company's vision.

In order to create a successful vision of the future, a company needs dedicated senior management that "can escape the orthodoxies of the corporation's current `concept of self'", and can enlarge the window of today's possibilities as projected into the future. The authors stress that a corporation should stretch the boundaries surrounding its competitive position of today in order to include tomorrow's competition and changes in customer needs. The book defines a successful corporate vision as the one that demands more of the corporation than the corporation is capable of providing today. Such a "stretch" between today's capacities and tomorrow's vision ensures that the company innovates in order to achieve the set goals, whereas "perfect fit [would guarantee corporate] atrophy and stagnation".

The book underscores the importance of basing tomorrow's market vision on core competencies of the corporation rather than on acquisition of other businesses or "grass roots `intrapreneurship'". According to Hamel and Prahalad, core competencies represent "competitive strength" of an enterprise, defined and agreed upon by the company's general management. Building on the core competencies gives the company an immediate advantage over competition that needs to assemble similar competencies prior to entering the competitive race.

The authors note that corporate vision by itself "does not guarantee competitive success". In order for a company to be profitable, the company's foresight should be accompanied by a sufficient executional capacity. Executional capacity refers to continuous leverage of core competencies accompanied by healthy risk mitigation practices. The authors list several tools that can be used to leverage corporate core competencies in order to take hold of future market opportunities. One of the aforementioned tools is the process of aligning corporate operations based on core competencies rather than products and/or business functions. Operations focused on products and services fragment core competencies, and can subsequently truncate corporate opportunities for growth by disallowing deployment of core competencies when the need arises. Another crucial tool in successful execution of corporate vision is a regular review of core competencies together with competencies benchmarking against existing and potential competition in order to assure the company's market position.

In addition to the ideas cited in this paper, the authors describe myriad of ways to enhance tomorrow's competitiveness of an enterprise. Overall, the book is written in a motivational and comprehensive style. Peppered with real-life examples, the book offers thorough guidance to advance in the future marketplace.

Hamel and Prahalad brought two ideas to the forefront of management in the 1990s: Creating a strategic intent that dominates corporate thinking, and then understanding the core competencies that the organization requires to get there. Rather than create numerous 5 year plans, communicate the direction and insure you have the skills to get there.

The impact of this was felt across corporate Americas. As companies struggled in reacting to changing times, they would talk more of core competencies instead of certainy of the future. Well run companies could also articulate their vision and what they're good at. (Example GE: "We are #1 or #2 in every business we run. We get there by rigorous management and continuous improvement.") These ideas are here to stay.

Is it all so simple? In Consulting Demons, Lewis Pinault takes issue with Prahalad and his consulting practice at Gemini. He asserts that the ideas can be misapplied to fuel a consulting boom, and that Prahalad's missionary zeal was better for generating consulting fees than for corporate bottom lines.

Bottom line - the book is a good introduction to some important strategic concepts. Although it is no longer required reading at top consulting firms, it is still relevant and important. Just take the ideas (like all pop management ideas) with a grain of salt.

I am a corporate strategy consultant who works mostly with FORTUNE 200 companies, and I also write books and articles about strategy. Strategic thinking has gone in and out of fashion in such companies several times in the last 40 years. With this book, Hamel and Prahalad have raised the value of strategic thinking in the current context in an effective way. This book is clearly designed with the large company in mind, where the need to envision, communicate about, and organize for the future is most difficult. By breaking down strategic thinking into the elements described here, the authors make strategic thinking easier for those who have little experience. Interestingly enough, many companies have "banned" strategic thinking in favor of more tactically-oriented programs that produce near-term cost reductions. Our firm recently did a survey of the most successful CEOs, and they reported that they felt that better strategies had the most potential to most improve their companies. These same CEOs also reported that they understood little about how to create better strategies. In such companies, COMPETING FOR THE FUTURE can provide an excellent balance. A good book to read in conjunction with this one is Peter Drucker's, MANAGEMENT, which provides the intellectual heritage for many of these ideas. For people who need more detail than Drucker normally provides, COMPETING FOR THE FUTURE will be the more helpful book.

"On the road to the future, who will be the windshield, and who will be the bug?" - Gary Hamel

To be competitive in today's world, you must focus not only on the here and now, but also focus on creating the future because "Nothing is more liberating than becoming the author of one's on destiny."

Hamel and Prahalad deeply understand the very core of competition, and provide the reader with an understanding of how to build a great company.

Chapter 1: Getting Off the Treadmill
In addition to paying attention to their position in the current market, companies must focus more on creating the future of the industry and their stake in it.

Chapter 2: How Competition for the Future is Different
Competition for the future is competition to maximize the share of future opportunities.

Chapter 3: Learning to Forget
Unless a company wishes to meet the fate of the dinosaurs, it must stop looking in the rear view mirror.

Chapter 4: Competing for Industry Foresight
Industry foresight allows companies to envision ways of meeting unarticulated needs. Foresight arises from wanting to make a difference in people's lives.

Chapter 5: Crafting Strategic Architecture
"Not only must the future be imagined ... it must be built."
Strategic architecture is a set of plans on how to turn your dream into reality.

Chapter 6: Strategy as Stretch
"It is not cash that fuels the journey to the future, but the emotional and intellectual energy of every employee." Strategy must be built upon the juncture of where the firm is and where it wants to be.

Chapter 7: Strategy as Leverage
The real issue for many struggling managers is not a lack of resources, but too many priorities, too little stretch, and too little creative thinking about how to leverage resources.

Chapter 8: Competing to Shape the Future
Getting to the future first may empower a company to establish the rules by which other companies will have to compete.

Chapter 9: Building Gateways to the Future
Every top management team is competing not only to protect the firm's position within existing markets, but to position the firm to succeed in new markets.

Chapter 10: Embedding the Core Competence Perspective
All too often, opportunity that falls between the cracks of existing market and departmental definitions, gets overlooked.

Chapter 11: Securing the Future
What counts most is not hitting a bulls' eye the first time, but how quickly one can improve one's aim and get another arrow on the way to the target.

Chapter 12: Thinking Differently
"To ultimately 'be' different, a company must first 'think' differently." To share in the future, a company must learn as much about thinking differently as it does about what to do.


Competing for the Future is a lively study in how to transform today's dreams into tomorrow's reality. Don't read this book at your own peril. Competing today, without regard to tomorrow's possibilities will certainly stack the odds in your competitor's favor.

Michael Davis, President - Brencom Strategic Business Consulting

Although I'm no longer completely convinced that the "core competencies" approach is always the right approach to stategic planning, Hamel and Prahalad's work is important reading. Every organization should understand its core competencies and take them into account in their strategic planning process. Having said that, however, I personally prefer the "Key Strategic Driver" concept laid out by Mike Robert in his book "Strategy Pure and Simple". When working with my clients on strategic planning activities, we often discuss core competencies as a prelude to exploring the company's "driving force" or "strategic heartbeat". Adam Lefton

The book was very interesting. Hamel and Prahalad focused on the three most important areas that can determine a company's success: core competencies, resources and capabilities. The question is how do you get the old guard to grow the company by focusing on these areas instead of through cost cutting, which is easier to do?

This perennial favorite is now ten years old. While some of its specific examples have aged and its basic message around core competencies and numerator growth rather than denominator reduction have passed into common business parlance, it is still a solid read that has much to offer. Every businessperson has to decide what his or her company is going to do, how it is going to do it, and what its future course will be. This is a surprisingly complex task and it is all too easy to make the wrong steps simply because they seem safe, pragmatic, and obvious.

Hamel and Prahalad help clarify how to think about what is at the core of your business and how to build on that while changing and shedding everything that distracts from that. Do not be fooled, however. Simply because the book reads well, and its thoughts are clearly presented, applying them in the real world is shockingly hard.

Some of the specific examples of this or that company doing this or that have aged. Not all the companies that were up in 1994 have continued their success. Nor have all their chosen paths led to continued prosperity. This is to be expected and does not diminish the message.

The key is to think hard about what the authors are saying, gather the things that can help you move forward, and then work to avoid complacency and distractions from what your business is about with every bit of energy you can bring to bear to support your chosen strategy.

Few companies that began the 1980s as industry leaders ended the decade with their leadership in tact and undiminished. Many household name companies saw their success eroded or destroyed by tides of technological, demographic and regulatory change and order-of-magnitude productivity gains made by nontraditional competitors. "Do you really have a global strategy", the first HBR article by Hamel and Prahalad, developed the theme that small companies could prevail against larger, richer companies by inventing new ways of doing more with less. Differences in resource effectiveness could not be explained by efficiency, labor or capital, but by amazingly ambitious goals that stretched beyond typical strategic plans, raising the question how such incredible goals could get past the credibility test and be made tangible and real to employees? Frequently the small challengers rewrote the rules of engagement; flexibility and speed were built atop supplier-management advantage, built atop quality advantages. Companies made commitments to particular skill areas a decade in advance of specific end-product markets. How did executives select which capabilities to build for the future? Some managers were foresightful, others imagined and gave birth to entirely new products and services. These managers created new competitive space while laggard companies protected the past rather than creating the future. Existing theory throws little light on what it takes to fundamentally reshape an industry and the gap provoked this book in which the goal is to enlarge the concept of the industry and not just the organization. Being incrementally better is not enough because a company that cannot imagine the future won't be around to enjoy it. This book is about strategy and how to think by drawing on the experience of companies that have overcome resource disadvantages to build positions of global leadership. It is about companies that escaped the curse of success to rebuild industry leadership a second or third time. It has been written for companies that believe that the best way to win is to rewrite the rules; it is for those who are not afraid to challenge orthodoxy, for those who prefer to build rather than cut, for those committed to making a difference and staking out the future first.

We need to ask ourselves eight questions:
- does senior management have a clear and broadly shared understanding of how the industry may be different in ten years time? Is management's view of the future clearly reflected in short-term priorities?
- How influential is my company in setting the new rules of competition within the industry? Is it regularly defining new ways of doing business and setting new standards of customer satisfaction?
- Is senior management fully alert to the dangers posed by new, unconventional rivals? Are potential threats to the current business model widely understood? Do senior executives possess a keen sense of urgency about the need to reinvent the current business model?
- Is my company pursuing growth and new business development with as much passion as it is pursuing operational efficiency and downsizing? Do we have a clear view of where the next revenue growth will come from?
- What percentage of our improvement efforts focuses on creating advantages new to the industry, and what percentage focuses on merely catching up to our competitors? Are competitors as eager to benchmark us, as we are to benchmark them?
- What is driving our improvement and transformation agenda - our own view of future opportunities or the actions of our competitors? Is our transformation agenda mostly offensive or defensive?
- Am I more of a maintenance engineer keeping today's business humming along or an architect imagining tomorrow's businesses? Do I devote more energy to prolonging the past than I do to creating the future?
- What is the balance between hope and anxiety in my company; between confidence in our ability to find and exploit opportunities for growth and new business development and concern about our ability to maintain competitiveness in our traditional businesses; between a sense of opportunity and a sense of vulnerability, both corporate and personal?

These are not rhetorical questions. We are told to get a pencil and rate our company because these questions go unanswered in many cases. Such questions challenge the assumption that top management is in control or even that their knowledge and experience may be irrelevant or wrong-headed for the future. The urgent drives out the important and the future goes largely unexplored; the capacity to act is considered to be more important than the capacity to imagine. A capacity to invent new industries and to reinvent old ones is a prerequisite for getting to the future first and a precondition for staying out in front. Gaining an understanding of how to accomplish this most difficult task is the central mission of this book.

What must we do to ensure that the industry evolves in a way that is maximally advantageous for us? What skills and capabilities must we begin building now if we are to occupy the industry high ground in the future? How should we organize for opportunities that may not fit neatly within the boundaries of current business units and divisions? The answers are to be found in this book. Armed with this information, a company can create a pro-active agenda for organizational transformation and can control its own destiny by controlling the destiny of its own industry. No company can escape the need to reskill its people, reshape its product portfolio, redesign its processes, and redirect its resources. There is not one future but hundreds; there can be as many prizes as runners; imagination is the only limiting factor. In no way does the success of one preordain the failure of another. What distinguishes leaders from laggards, and greatness form mediocrity is the ability to imagine what could be. If your senior management did not do well on the eight questions, then your company may not be around a decade from now. There are few who would not profit from reading this book.

Gary Hamel, an advocate of the Resource-based Theory of Firm, has created an impotant source together with Prahalad. If you know resouce-based firm theory well enough, you will not be surprised when you read this book. I think, it is a classical work for this theory.

This book was developed clearly and supported with cases strongly. Basically, this work was based on distinctive competences of firms and on how to develop these. From this perspective, firms are thought as active entities, not only working to adapt to environment in a passive way, but also creating an environment conducive to the company in a proactive way. The spiritual aspect of Strategy is clearly stressed in this book.

A good source in Firm-based theory, but needs more research.. Highly reccommended...

This is an excellent book that expands on two important ideas that these authors adapted to the business environment, core organizational competencies and strategic intent. Both of these ideas can be found in von Clausewitz, but this adaptation (originally propounded in two Harvard Business Review articles, both of which won annual McKinsey Awards for best article) clarifies how these notions work in the business environment. Required reading for students, observers and practitioners of business strategy.