Leading the Revolution

353 Pages·2000·15.59 MB·English

by  Gary Hamel

LEADING THE
REVOLUTION:
How to Thrive in
Turbulent Times by
Making Innovation a
Way of Life
Gary Hamel
Harvard Business School
PRAISE FOR GARY HAMEL’S LEADING THE REVOLUTION
“Hamel is no armchair revolutionary ... [He] makes a strong case
that bringing fresh thinking to the job can produce wealth as well
as satisfaction—and rekindle passion for the work, regardless of what
it is.”
—BusinessWeek
“Gary Hamel captures the moment with a no-holds-barred assessment
of the issues facing companies all around the world as they struggle to
catch up with the new economy.”
—Sir Richard Branson, Chairman, Virgin Group
“In Leading the Revolution, Hamel provides a blueprint for shaking
things up.”
—Newsday
“Gary Hamel is a sophisticated business thinker.”
—The New York Times
“Gary Hamel captures the new competitive business environment, one
in which dreams and reality merge. Leading the Revolution will inspire
innovation at all levels and provide insight into opportunities for
rewarding revolutionary thinking in new and bigger ways.”
—Arthur M. Blank, President & CEO,
The Home Depot, Inc.
Gary Hamel is a founder and chairman of Strategos, and Visiting Pro-
fessor of Strategic and International Management at the London Busi-
ness School. He is the coauthor of the international bestseller Competing
for the Future. He lives in Woodside, California.
Contact Gary Hamel via e-mail at [email protected] or
visit www.leadingtherevolution.com
“Hamel says tomorrow’s [business] winners will produce torrents of in-
novations, of which a few of the most radical will be successes. Out of
the torrents of business books published these days, Hamel’s is one of
those good, if radical, ideas.”
—Entrepreneur
“As venture capitalists, we like to finance swarms of start-ups that kick
the stuffing out of the established companies. So please put this book
down. Now slowly back away from the counter ... Because if you and
your company put Hamel’s revolutionary principles to work, it’s going
to be a lot harder for our start-ups to take your company by surprise.”
—Steve T. Jurvetson, Managing Director,
Draper Fisher Jurvetson
“Gary Hamel conveys his cutting-edge ideas with clearly crafted sen-
tences, using creative and often picturesque wording.”
—Fort Worth Star-Telegram
“A clarion call for the gray battalions of corporate America to rise up
from their trenches and break out of the constraints of conventional
management thinking.”
—Strategy + Business
Gary Hamel
LEADING THE
REVOLUTION
How to Thrive in Turbulent Times
by Making Innovation a Way of Life
This book is dedicated to Professor Paul Hamel.
There is no one who has taught me more.
There is no one I hold in higher regard.
It is my greatest fortune to be his son.
Copyright © Gary Hamel, 2000, 2002
All rights reserved
First hardcover edition, HBSPress 2000.
First paperback edition, Plume 2002.
This revised and updated hardcover edition is here reprinted by arrangement with
Plume, a member of Penguin, Putnam Inc.
The Library of Congress has catalogued the Harvard Business School Press edition as
follows:
Hamel, Gary
Leading the revolution/Gary Hamel.
p. cm.
Includes bibliographical references and index.
ISBN1-57851-189-5 (hc.)
ISBN0-452-28324-8 (pbk.)
1. Creative ability in business. 2. Strategic planning. I. Title.
HD53.H353 2000
658.4'012—dc21 00-038920
Printed in the United States of America
Without limiting the rights under copyright reserved above, no part of this publication
may be reproduced, stored in or introduced into a retrieval system, or transmitted, in
any form, or by any means (electronic, mechanical, photocopying, recording, or
otherwise), without the prior written permission of both the copyright owner and the
above publisher of this book.
The paper used in this publication meets the requirements of the American National
Standard for Permanence of Paper for Publications and Documents in Libraries and
Archives Z39.48-1992.
❍CONTENTS
Introduction vii
IFACING UP TO THE REVOLUTION
1THE END OF PROGRESS 1
2FACING UP TO STRATEGY DECAY 31
IIFINDING THE REVOLUTION
3BUSINESS CONCEPT INNOVATION 59
4BE YOUR OWN SEER 119
IIIIGNITING THE REVOLUTION
5CORPORATE REBELS 149
6GO AHEAD! REVOLT! 187
IVSUSTAINING THE REVOLUTION
7GRAY-HAIRED REVOLUTIONARIES 207
8DESIGN RULES FOR INNOVATION 251
9THE NEW INNOVATION SOLUTION 283
Notes 325
Index 327
About the Author 338
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❍ INTRODUCTION
In our newly sober, post-bubble economy, one thing should be clear—
there’s a difference between helium and oxygen. Dot-com fever was
helium. Instant messaging, to take one example, is oxygen—real inno-
vation, not hyperbole. There’s a difference between creative accounting
and creative business models. Creative accounting brought down Enron,
gutting a genuinely creative business model in the process—Enron’s
online market for energy—which was ultimately sold to UBS AG, Swit-
zerland’s largest bank. There’s a difference between stupid crazy and
smart crazy. Selling pet food on the Web was stupid crazy. Selling PCs
online, à la Dell, is smart crazy. There’s a difference between an illusory
“slash-and-burn” turnaround (remember Chainsaw Al Dunlap) and a
wholehearted attempt at renewal (what Steve Ballmer is hoping to bring
about with Microsoft.Net). There’s a difference between deal makers
(Tyco’s Dennis Kozlowski, to name just one), and visionaries who build
new business (like Sony’s Ken Kutaragi, who turned the PlayStation
into a knockout success). There’s a difference between self-serving ex-
ecutives (Enron’s Andrew Fastow springs to mind) and those who labor
tirelessly to advance a world-changing idea (Steve Jobs and the original
Macintosh). There’s a difference between a compelling “story” and a
rock-solid profit model. “Broadband” à la Global Crossing, Williams
Companies, et al. was a story; satellite TV is a profit model. There’s a
difference between doing your job (you’d rather be anywhere else)
and having a cause (there’s nothing you’d rather be doing). Most of all,
there’s a difference between bland incrementalism and rock-the-industry
innovation. Cup holders are nice. One hundred channels of mostly
commercial-free radio in your car is to die for. (Thanks, XM Radio!)
This book is all about these differences—it’s about distinguishing
rule-busting, profit-producing innovation from more-of-the-same
improvement programs dressed up in revolutionary rhetoric. It’s
about understanding the difference between getting better and getting
different—and then learning how to get different in ways that will stun
competitors and thrill customers. It’s about differentiating between
catching up and breaking out, and then moving beyond best practice
to invent new practice. It’s about distinguishing between innovation as
a buzzword and innovation as a deeply embedded, corporation-wide
capability. It’s about the difference between being a corporate serf and
being a corporate citizen, between accepting your lot and changing
your world. The ability to recognize and act on these differences will
be, I believe, the distinguishing characteristic of companies that thrive
in the turbulent times ahead.
In the wake of the dot-com fizzle, various accounting scandals and a
suddenly unforgiving business environment, it’s easy to be cynical.
This is a book about innovation, about the quest to escape the old and
embrace the new. But, you may ask, is that really what the world needs
right now? Is innovation what my company needs? Didn’t the new
economy falter because there was too much innovation? What about
Enron—it was named America’s most innovative company for five
years running by Fortunemagazine—what kind of an advertisement for
innovation is that? In tough times, retrenchment seems like a safer bet
than bold forays into untested market territory. And, you might add,
this isn’t exactly the best time to be raising one’s head above the cor-
porate parapet. OK, fair enough, but remember—overhyped, over-
funded dot-com business models were to real innovation what phone
sex is to true love—a shallow surrogate for something deep and lasting.
Enron’s mistake wasn’t that it innovated, but that it tried to be as in-
ventive with its balance sheet as it had been in its core business—that,
and the fact that it rushed pell-mell over the line that separates ambi-
tion from hubris. And as for retrenchment—it’s a perfectly understand-
able response to an unexpectedly severe downturn of the sort that
recently wreaked havoc in the semiconductor industry—but retrench-
ment is completely inadequate if your goal is to flourish in a world of
disorderly, never-ending change. Retrenchment buys you time, but it
won’t buy you opportunity. It won’t buy you growth and it won’t buy
you a future.
Sowhat is the case for innovation upon which this book rests? Why,
given all the above, should you devote a good chunk of your time to
mastering the disciplines of radical innovation? Because, quite simply,
you have no alternative. Yes, the dot-com bubble burst, as anyone who
understands the principles of competitive advantage knew it would.
Yes, chastened CFOs have sworn an oath to tell the truth, the whole
truth and nothing but the truth. Yes, all those venture funds and cor-
porate incubators were a sideshow—a junk-food substitute for the
meat-and-potatoes work of building solid new businesses while si-
viii introduction
multaneously renewing the core. And yes, “back to basics” is once again
in fashion. But it would be a profound mistake to believe that nothing
has changed—that the new millennium is distinguished from the old
bynothing more than a few numbers on the calendar.
Something has changed. Something is different. The signs are all
around you. CEOs have been losing their jobs at a record pace. New-
comers have been capturing a growing share of the market value in a
host of industries. Customers have been growing more restless, demand-
ing and fickle. Web-enabled connectivity has been reshaping value
chains. New technologies have been undermining old business models—
from publishing to radio to pharmaceuticals. Traditional strategies for
pumping up profits and the share price—incremental cost cutting, mega-
mergers, share buybacks, outsourcing and financial engineering—have
been losing their punch. Something isgoing on here.
Yes, the “long boom” of the 1990s was an aberration, not to be re-
peated anytime soon. But the 1990s and all that “new economy” blather
were more than some kind of weird anomaly in the otherwise steady
course of economic history. The 1990s were a time when investors,
companies and consumers struggled to make sense of a world in which
change no longer ambled, nor even ran, but lurched spasmodically in
new directions. What is different and what will remain different is
change itself. We have reached a tipping point, a point where the cu-
mulative impact of social, geopolitical, technological, organizational
and biological discontinuities has changed change itself. We are about
to find out which organizations are truly resilient and which are not.
In recent years, many companies got a boost from the “irrational
exuberance” of investors, a polite term for the temporary insanity that
decoupled share prices from earnings. Investors may be less exuberant,
but they’re still demanding and more impatient than ever. In this envi-
ronment, any company that hopes to do better than its dull-as-
dishwater peers will need to be capable of innovating in ways its
competitors can’t or won’t. This is the challenge of industry revolution. In-
novation is the only cure for the debilitating hypercompetition that
drives margins ever downward. Yet it is not enough to innovate with
respect to one’s industry, one must be capable of innovating with re-
spect to one’s past, as well. There are dozens, maybe hundreds, of indus-
try revolutionaries who’ve never led a second revolution. Yesterday’s
insurgents are today’s incumbents. Hence a second challenge—that of
corporate renewal. Renewal is the capacity to reinvent not only processes
and systems but purpose and mission as well. Revolution and renewal—
these are the twin themes of this book, and they are imperatives for
any organization and any individual who hope to stay relevant in a
introduction ix