Leading the Revolutionby Gary Hamel
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One of the world's preeminent business thinkers and co-author of the bestseller, Competing for the Future, Gary Hamel helped set the management agenda for the 1990s. He now brings us into the twenty-first century with Leading the Revolution, which spent time on The New York Times, The Wall Street Journal, USA Today, and Business Week bestseller lists, among others. In his new book, Gary Hamel lays out an innovative action plan for any company or individual intent on becoming-and staying-an industry revolutionary, for years to come. By drawing on the success of "gray haired revolutionaries" like Charles Schwab, Virgin, and GE Capital-companies who are always thinking ahead of the game and growing in new directions-and profiling individuals such as Ken Kutaragi, one of the pioneers of Sony Playstation, Hamel explains how companies can continue to grow, innovate, and achieve success, even in a chaotic world market. With insight culled from years of experience, Hamel:
Packed with practical advice, Leading the Revolution is an accessible read, perfect for both businesses and individuals that don't want to get caught in the slow lane in the race for success in the twenty-first century.
What followed was a remarkable guerrilla campaign to transform one of the world's largest companies. With the help of a sympathetic senior executive named John Patrick, as well as an underground network of far-flung Net-freaks throughout the IBM empire, Grossman overcame the odds and succeeded, helping to turn around IBM through his iconoclastic efforts.
Gary Hamel wants you to do the same thing. He doesn't care if you work for Cisco Systems in Silicon Valley or a Rust Belt widget maker in Youngstown, Ohio. If your work seems dumb, if your company seems brain-dead, if most of your waking hours aren't filled with the ardent pursuit of radical innovation, Hamel wants you to start fomenting revolutionary change to save your employer from the long, grim twilight of obsolescence. He wants you to think big thoughts, take chances and, most of all, care passionately about how it all turns out.
Hamel's new book, Leading the Revolution, purports to be a kind of Rules for Radicals, a once-fashionable work by the late Saul Alinsky. But instead of empowering society's downtrodden, Hamel wants to convince you that you already have the power to pursue "business concept innovation" of the kind that turns industries - and possibly even societies - upside down.
At this point sensitive readers may feel as if they've wandered into Charles Saxon's famous 1972 New Yorker cartoon about a party. "Steer clear of that one," one woman cautions another about a man across the room. "Every day is always the first day of the rest of his life."
Corporations, after all, do not typically welcome borderline insubordinate campaigns by low-level employees to radically alter the direction of their business. Media critic Ben Bagdikian might have been talking about the difficulty of drastic, bottom-up innovation at most large companies when he said: "Trying to be a first-rate reporter on the average American newspaper is like trying to play Bach's St. Matthew Passion on a ukulele."
Aside from the inherent improbability of his argument, Hamel has a couple of other things going against him. For instance, he's annoyingly impressed with himself, as is evident from the book's self-dramatizing preface. And he's a management guru by profession (his last book was Competing for the Future), which to some readers will make him seem something of a charlatan by definition. Full disclosure: As a species, these guys drive me up a wall. If they really know so much, why haven't they started a few multibillion-dollar companies instead of preying on the insecurity of executives willing to drop a few bucks on the latest management fad? These guys are always full of noisy brio as they lay bare the gross stupidity of corporate America, yet somehow the same corporate idiots who are staples of every consultant's books and videotapes have managed to create the largest, richest, most innovative economy in the history of the world. What an amazing paradox!
All that said, I've got to confess that I liked this book, and you probably will, too. I liked it for the same reason I like churches and synagogues: Because it's not that often, in this indulgent and therapeutic culture of ours, that we are called upon to be better than ourselves, and with admirable fervor this is precisely what Hamel does. Indeed, the single best thing about Leading the Revolution is its radical argument that work should be engaging, meaningful and passionately performed, and that the way to accomplish this is not by taking pride in some minute increase in efficiency but by coming up with radical innovation - in other words, by being really, really creative.
Fortunately, Hamel goes beyond mere exhortation to offer a blueprint for how to revolutionize your company, even if it means cannibalizing an existing business.
First you need an idea, and some of his suggestions for developing these are obvious: Read new magazines, meet new people, visit new places. Yet it's equally obvious how few people follow them. The point is to find and exploit giant social discontinuities, such as the refusal of baby boomers to grow old (which has created markets for oversize tennis rackets, parabolic skis and other never-say-die products). Hamel emphasizes both direct experience and deep study: Go and see how other people live, but make sure you get beyond first impressions. And distinguish form from function: Banking, for instance, may be essential, but banks aren't.
The goal is "not to speculate on what might happen, but to imagine what you can make happen," and along these lines Hamel offers a section called "How to Build an Insurrection." First you need a point of view, the equivalent of an ideology, but it must be "credible, coherent, compelling and commercial." Then write a manifesto, create a coalition, pick your shots, co-opt and neutralize opposition, find a "translator" to bridge the gap between revolutionaries and establishment, start building small victories, and stay underground long enough to build critical mass - but then be sure to infiltrate (rather than overthrow) the highest levels of the organization to win the resources you'll need to realize your vision. (If you're in senior management, don't feel left out; Hamel suggests ways to make your company revolution-ready.)
Leading the Revolution offers a wealth of stories along the way about people and companies who managed to create the kinds of revolution the author is calling for. And although he gives too little credit to the people in white lab coats, he's basically right that a lot of wealth has been created by the Gap, General Electric, Starbucks, Wal-Mart and other companies whose earth-shaking innovations--people will pay $4 for a cup of coffee!--did not require an engineering degree. In one of his best examples, the brainstorm of a twentysomething Enron employee in England quickly led the company in a whole new direction. "Enron went live in November 1999 with one of the first online markets for all forms of energy," Hamel writes. "Just months after its launch, EnronOnline was doing a dollar volume far greater than Internet stars like Dell Computer, Cisco or ..."
Or consider Ken Kutaragi, an obscure Sony researcher who almost single-handedly got his company to come out with a videogame system in 1994. "Less than five years later," Hamel writes, "the PlayStation business had grown to comprise 12 percent of Sony's $57 billion in total revenues, and an incredible 40 percent of its $3 billion in operating profits."
Hamel's examples show that, when the planets are aligned right, it really is possible to bring about revolution inside a company. That doesn't mean it's possible for all of us, or even most of us. But I agree that in the absence of passion and creativity, work is mere drudgery, and Hamel makes a strong case that bringing fresh thinking to the job can produce wealth as well as satisfaction - no surprise to those directly involved in the Internet revolution.
Perhaps, though, the ultimate message of Hamel's book is that in business the phrase "after the revolution" no longer has meaning, ironic or otherwise, since the revolution he's talking about is one without end.
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Chapter 2: Rising Expectations, Diminishing ReturnsMaybe you're in one of those hot, young companies with millions in revenue and billions in market cap. That's cool, but you'd be foolish to mistake Internet investment fever for a rock-solid business concept. Sure the new economy demands some new math-companies can grow more quickly than ever before because they are less constrained by physical capital than ever before. But sooner or later you company's earnings performance will have to match its valuation, so you'd better be damn sure your company has a business concept that will live up to that implicit promise. If it doesn't, I'd hold off on pledging those stock options as collateral on a multi-million-dollar house.
If you're under 30, you may not remember that the personal computer industry spawned dozens of "hot" companies-Osborn, Kaypro, Commodore, and AST Research to name a few. But only one, Dell, was a wealth-creating superstar throughout the '90s, and even its share price sat on a plateau for most of 1999. So is your company going to be Kaypro or Dell? Are you going to join the ranks of Yahoo!, AOL, and Amazon.com, or get washed down the drain of companies that were unable to recognize and change a decaying business concept? Let me be clear: there are even more poorly conceived, ultimately uneconomic, me-too business concepts in the new economy than there are in the old. And even the best ones decay rapidly in the fetid environment of the Internet. If you're not extraordinarily adept at perpetual innovation, that e-business wave of hype your company is riding on right now is going to crash.
The Revolution of RisingExpectations
Every year investors raise the bar. Read an annual report from a decade ago, and you're likely to find a company chairman bragging about exceeding the prior year's performance. Back then you just had to beat yourself. Then investors began demanding more: "We don't care how you did against yourself. We want to know how you performed against your bestin-class peers." So the bar went up a few feet. Every diversified industrial company was pressed to meet the standards set by General Electric. Every retailer was expected to match the returns achieved by Wal-Mart. And every software company was measured by Microsoft's yardstick. Navel gazing was out; financial benchmarking was in.
Then the bar went up again. Investors said, "Wait a minute. You may be doing okay when compared to your peers, but what about the absolute standard of 'economic value added'? Are you actually earning more than your cost of capital?" Amazingly enough, the idea that a business should earn its cost of capital struck many executives as a new thought. Clearly more than a few had slept through Finance 101. So diligent executives across the planet began weeding out projects that couldn't promise a positive net present value. J. C. Penney, Toys "R" Us, Siemens, and dozens of other companies signed up for the EVA diet. Investors said, "Make those assets sweat".
As investors became more demanding, and less patient, CEOs felt the heat. John Akers (IBM), Kay Whitmore (Kodak), Roger Smith (General Motors), Bob Allen (AT&T), Gil Amelio (Apple Computer), Eckhard Pfeiffer (Compaq), Doug Ivester (Coca-Cola), and dozens more got the boot or slunk off into early retirement as investors grew weary of empty promises. The message of this bloodletting wasn't lost on the survivors: deliver or else.
Today's investors have an unquenchable thirst for ever higher returns. Cisco, Charles Schwab, AOL, Lucent, Amazon.com, Gap, Yahoo!, Dell, and Microsoft. None of these companies is more than a generation old. Yet their collective market cap at the beginning of 2000 was nearly $1.5 trillion, or close to 10 percent of the total market cap of all publicly listed companies in America. These companies were the stock market stars of the 1990s. But the bar is going up get again. There's a new crop of wealth creators whose eye-popping returns are once again resetting the gauge of investor expectations: CMGI, Terra Networks, Akamai, Ariba, Conexant, COLT Telecom Group plc, Sycamore Networks, and Scoot.com plc are just a few of the come-from-nowhere chart busters that started the new century with $20 billion-plus market caps. Sure, some of these companies will crash and burn, but their stratospheric returns, however temporary, have further fueled investor passions.
There are no more widows and orphans. With a new economy aborning and billions of dollars of potential wealth up for grabs, every investor wants a piece of the action. Forget the high jump, investors expect you to pole vault. No longer are they fretting over whether or not you're earning your cost of capital. Nor do they care how you're performing against your equally underwhelming peers. Instead, they're asking whether you're likely to join the pantheon of wealth-creating superstars. Perched atop their IRA and 401(k) nest eggs, millions of investors are obsessed with beating the market. If you can deliver outstanding shareholder returns, you're a god. If you can't, you're a bum.
I can already hear you making excuses. "That's fine for Amazon.com or Cisco," you say, "but we're in a mature industry. We're not a start-up. We're not some Internet comet." I don't buy it. Wealth creators come in all sizes, can be found in all kinds of industries, and must often overcome the inertia of tradition and precedent. Scan the list of companies that delivered record-breaking returns during the 1990s, and you'll see companies such as Gap, Harley-Davidson, SunAmerica, Clear Channel, The Home Depot, Progressive Insurance, and Merrill Lynch hardly high-tech shooting stars.
It's not easy to become a stock market supernova, and it's even harder to stay one. At the same time that petulant investors have been demanding edge-of-the-atmosphere returns, the percentage of companies that have been delivering better-than-average returns has been steadily declining. In 1999 only 30.8 percent of the S&P 500 companies outperformed the S&P average-in terms of total return to shareholders. That was down from 58 percent in 1992, and the second lowest percentage in more than a decade. (In 1998, 27.6 percent of the S&P 500 did better than average.) Put simply, 7 out of 10 companies underperformed the market in 1999. By definition 50 percent of the S&P 500 outperformed the median, but fewer than 1 in 3 outperformed the mean. The discrepancy between the mean and the median is evidence that a few outstanding performers are simply outdistancing the rest of the field.
The brutal truth is this: there is an ever-growing population of mediocre companies and an ever-diminishing population of truly great performers. The explanation for the performance gap is simple. Companies that spent the past decade trying to wring the last ounce of efficiency out of tired, old business models have now reached the point of diminishing returns. Their strategies have become virtually indistinguishable from their competitors'. And with top management's attention focused internally on process and systems, they've left themselves wide open to unorthodox innovators. Only a few companies have escaped this writhing mass of mediocrity. Only a few companies have been successful in inventing entirely new business models, or in profoundly reinventing existing business models. These are the companies up there in investor heaven.
It is impossible to meet the rising expectations of shareholders without actually creating new wealth. To create new wealth you must innovate-in ways that competitors are not or cannot. You can't buy your innovation "off the shelf" from the same tired, old consulting companies your competitors are using. Cisco, The Home Depot, Pfizer, Charles Schwab, Yahoo!,...
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Meet the Author
Gary Hamel is a Founder and the Chairman of Strategos, a Visiting Professor of Strategic and International Management at the London Business School, and the Thomas S. Murphy Distinguished Research Fellow at Harvard Business School. He lives in Woodside, California.
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¿Leading the Revolution¿ is an excellent book for people who want to make a difference. The tone of the book keeps readers motivated, attentive and ready to accept challenges. The Author Gary Hamel is constantly using inspiring language to motivate the reader. This is not a bedtime book: it keeps you alert. You better have a notepad handy to write down some new ideas as well as the answers to interesting brain storming questions. The author makes an excellent job of analyzing complicated business concepts and explaining them in small well-organized paragraphs. Furthermore, the author continues describing the characteristics of today¿s competition model stating that it is no longer Japan versus USA or Company X versus company Y but rather it is between competing business concepts. The author excels in using an inspiring language to encourage all employees to explore their hidden ideas for improvement, encouraging readers to start thinking from their imagination backward instead of thinking from present forward to come up with ideas. The author shows readers a step-by-step guide on how to present their ideas and how to create a point of view, which readers can use to represent their ideas in a rather strategic and positive way. A disappointing characteristic is that the book is more inspiring and motivating than practical. Readers will feel more uplifted than really having a solid tool at hand. Rather, the book encourage readers to be more focused on positive side when presenting the wealth generation method in their revolutionary idea. Another drawback is that the book only has a few examples. Though they are good examples, having more real examples would have strengthened the credibility of the material. In conclusion, he book also introduces useful ways of non-linear thinking and presents steps to take to shake up your business and present your revolutionary point of view. The author has done an excellent job encouraging all levels of employees to speak up for their ideas and present them. The author made a convincing argument that employees owe it to themselves and to their colleagues to participate in the company¿s future, he quotes: ¿Your company is a vehicle for your dream¿. In spite of its lightweight material and the above drawbacks, the book is very interesting and full of useful ideas and supportive techniques. It is a `must read¿ for people who want to assume an active role in building the future.
Leading the Revolution is an important book of business scholarship. It proposes a higher standard for companies: Constantly establishing and superbly implementing improved business models for customer interfaces, core strategy, using strategic resources, and value networks. Further, it integrates the arguments of many leading thinkers about improvement methods into one set of procedures for making faster business progress. The book also makes an excellent case for this higher standard already being in operation in companies like Enron, GE Capital, Cisco Systems, Nokia and Charles Schwab. To those who have already are familiar with the literature of developing new business models (such as Digital Capital), little in this book will be new. For those who are very focused on gradual improvement, the arguments here will be foreign and puzzling. Because of Gary Hamel's stature, many will read this book and begin to grasp the changed nature of the leadership and management challenges of the 21st century. Because of ways the argument is articulated and illustrated, many more will miss the point. That's too bad. Basically, Hamel is arguing that the kinds of changes that most people think of as revolutionary need to become everyday occurrences. This observation is based on an accelerating rate of uncontrollable change and resulting opportunities for innovation; an economic environment where fewer companies prosper while more become mediocre or below average; more pressure for performance from investors; rapidly developing business skills in business process, product, market and model innovation; broad human potential to imagine more and make it happen; and potential for improved communication and application of innovation. As a strategist, he does an excellent job of outlining the key issues of these factors, and how to organize an enterprise to accomplish more with these opportunities. By providing an analytical context for understanding the phenomena, he helps others understand what he describing intellectually. For those who have not had these experiences, the descriptions will seem to be alien emotionally. The book is designed to be a clone of Tom Peters' more flamboyantly-conceived works like The Circle of Innovation. The language is extreme, often bordering on being vulgar, and will make many people uncomfortable. That appears to be Hamel's purpose. The pages are laid out in vivid colors, photographs and graphics making it seem unlike most business books you have read before. This will make the book seem even stranger to many. That also appears to be Hamel's purpose. The downside of this approach is that many will simply reject the message along with the way it is presented. That's a missed opportunity on Hamel's part and on the reader's part. The message is more important and serious than the presentation. On the other hand, I would like to give the editors at Harvard Business School Press credit for being flexible in working with Hamel to create the presentation of this book. The book's biggest weakness is in using Revolution as the metaphor. Any student of revolutions will quickly tell you that revolutions usually lead to counter revolutions after a period of maximum turmoil. That's not what Hamel is talking about, so his metaphor will confuse many while annoying others who do not want to turn their organizations into revolutionary bands. He doesn't seem to mean to invoke Revolution in either sense, but he never makes that point clear. The second biggest weakness is that he presents a new paradigm that is very complex and requires mastering vast quantities of new skills for most people. Many readers will be overwhelmed by the prospect. So if they hear Hamel as a herald, they may be discouraged about following the herald. The third biggest weakness is drawing major conclusions from very limited data. For example, he asserts that companies that master this new paradigm will eventually end up takin