Competing for the Future

GARY HAMEL AND C. K. PRAHALAD

Reviewed by Todd

Most executives think the competitive fight takes place in the present. Look at how leaders spend the majority of their time—approving yearly budgets, taking global trips to important customers, waiting for the sales number at quarter’s close. Gary Hamel and C. K. Prahalad write that the battle, or the war itself, is already lost if business leaders spend all their time on the issues of today. Competing for the Future is a fiery rebuke of conventional strategic wisdom, challenging short-term incrementalism as the answer to company growth.

Writing this book in 1994, Hamel and Prahalad were revolting against the vogue of reengineering and “denominator managers” who chose to slash investment and workforce to improve a company’s return on investment rather than focus on generating more income with the return they had in hand. At this same time, the authors were seeing a handful of companies redefining their markets with fundamentally new strategies: Wal-Mart, Honda, Canon, Schwab. Getting smaller or better was not the strategy for these mavericks; it was about being different.

Creating strategic differences requires foresight. “If a top management team cannot clearly articulate the five or six fundamental industry trends that most threaten its firm’s continued success, it is not in control of the firm’s destiny.” And the authors say understanding these market forces creates the foresight that allows a company to get to the future first. For those who arrive first, the rewards are plentiful: investment recouped ahead of their foes, early adopters pining for the new with their open checkbooks, and the rule book waiting to be written.

Predicting the exact nature of an industry five or ten years from now is not the end goal, but understanding the forces at play and making an educated guess about direction creates foresight. Hamel and Prahalad’s example of the future of a record store illustrates that exact challenge. They write about the advantages of a retail store’s knowledgeable staff, immediately available product, and reasonable proximity. However, despite these positives, they go on to describe a future (remember, this was 1994) that sounds eerily like today’s iTunes: “10,000 pieces of music,” “listen to a 90-second sample,” “selections downloaded onto a digital recording device.” While it is amazingly accurate in one aspect, completely missing from the description is the emergence of the MP3 format, the role of piracy in distribution, or other Web retailers simply selling a wider selection of product than is possible in a physical outlet. What the authors did predict would have been enough to give any record store a look into the future and time to strategize to fight against the new trend. Thus, a complete picture isn’t necessary; awareness is.

A directional sense for trends sketches a picture of the skills a company will need to compete in the future. The term “core competency” was coined by Hamel and Prahalad to describe the broad basket of skills a company needs to compete. Decisions about which core competencies to pursue dictate the markets a company can compete in, and the long-time horizon for competency development can put a company in the right (or wrong) place at the right (or wrong) time. Honda has concentrated its core competencies on engine and power-train development, and this has allowed it to enter markets ranging from motorcycles to small jet aircraft. JVC started investing in the competencies needed to build video cassette recorders twenty years before the product became a mainstream consumer device, and benefited handsomely when that time came.

“[S]eeing the future first may be more about having a wide-angle lens than a crystal ball.”

Each chapter in Competing for the Future has the thought density of a Harvard Business Review article, with the tone of a Sunday fire-and-brimstone sermon. Hamel and Prahalad are preaching the same thing you might hear in the pew on Sundays: consider the choices you make today, for they are the seeds of tomorrow’s success. TS

Competing for the Future, Harvard Business School Press, Paperback 1996, ISBN 9780875847160

WHERE TO NEXT? Here for the ideology the authors oppose Here for the realities of market leadership Here for exercising your wide-angle lens | EVEN MORE: The Art of the Long View by Peter Schwartz; Fortune at the Bottom of the Pyramid by C. K. Prahalad; The Mind of the Strategist by Kenichi Ohmae