Good Strategy, Bad Strategy | Richard Rumelt

[00:00] Don't call it a strategy. [00:02] Call it an action agenda. Huge numbers of people out there willing to sell you advice on mission and your vision and your values. All these things that have to be in place before you can have a strategy. [00:17] That's not true. We begin to try to identify the one or two key challenges that can actually be addressed. And what are we going to do about it? What are the... [00:26] coherent actions we are not due to [00:29] to take these. OK, we're going to we're going to go after this. And here's the action steps we're going to take to do that. [00:35] That's [00:36] essence of what you're doing when you're thinking strategically. Richard Ramelt: Today, my guest is Richard Ramelt. Richard is an absolute legend in the world of [00:48] It was such an honor to have him come on the podcast [00:50] He's the author of "Good Strategy, Bad Strategy", which I've gifted to countless people who wanted to become more strategic. [00:56] He's been mentioned so many times on this podcast, [00:59] He's also the author of The Crux, his most recent book, which some consider his best book, which delves even further into his advice on how to craft a winning strategy. Richard was a longtime professor at UCLA Anderson School of Management, was on the faculty of Harvard Business School, and he's consulted on strategy with companies like Microsoft, Apple, and Intel, and also with government organizations like the U.S. Army Special Ops Command and folks like Donald Rumsfeld.

[01:29] calling them action agendas rather than strategies, why every great strategy starts with a clear diagnosis of the biggest challenge that you face, also how to actually lay out a strategy, why organizational dynamics are often the biggest hindrance to winning strategies, and so much more. I could keep going, but let me just say we cover a lot of ground in this episode, and Richard shares incredibly thoughtful and deep answers to each question. I am excited to bring you Richard Remelt after a short word from our sponsors. [01:59] Command Bar. If you're like me and most users I've built product for, you'll probably find those little in-product pop-ups really annoying. Want to take a tour? Check out this new feature. And these pop-ups are becoming less and less effective since most users don't read what they say, they just want to close them as soon as possible. But every product builder knows that users need help to learn the ins and outs of your product. We use so many products every day and we can't possibly know the ins and outs of everyone. Command Bar is an AI-powered toolkit for product, [02:29] help users get the most out of your product without annoying them. They use AI to get closer to user intent, so they have search and chat products that let users describe what they're trying to do in their own words and then see personalized results like customer walkthroughs or actions. And they do pop-ups too, but their nudges are based on in-product behaviors like confusion or intent classification, which makes them much less annoying and much more impactful. This works for web apps,

[02:59] Gusto, Freshworks, HashiCorp, and LaunchDarkly. Over 15 million end users have interacted with CommandBar. To try out CommandBar, you can sign up at commandbar.com slash lenny, and you can unlock an extra 1,000 AI responses per month for any plan. That's commandbar.com slash lenny. This episode is brought to you by Miro. Do you ever feel like your projects aren't as organized [03:29] people on your team to find all the documents and files and context that they need for their project. Miro helps you streamline your workflows, organize information, and get your whole team on the same page. If you want to see what Miro can do for you, check out my Miro board that the Miro team helped me create, which includes all of my favorite plug-and-play templates like a user journey map, my favorite one-pager template, plus a brainstorming guide. My board also has a place for you to share [03:59] You can then take my Miro board and easily create your own to see how it feels. Make sure to check out some of my favorite features like the sticky notes, the inline comments and charts, and also the really cool diagramming tools. Check it out at miro.com slash lenny. Your first three Miro boards are free when you sign up today at miro.com slash lenny. Find simplicity in your most complex projects with Miro. [04:22] That's M-I-R-O dot com slash Lenny. [04:26] Richard, thank you so much for being here and welcome to the podcast. Thank you for having me, Lenny.

[04:34] It is such an honor to have you on this podcast. So many guests on the podcast have mentioned you and mentioned the book. [04:40] I probably bought your book [04:42] for, I don't know, dozens of people over the years. And it is just so cool to have you on and to get to delve into the stuff that you teach. [04:48] So thank you again for being here. [04:50] Thank you. I thought we'd start at the beginning and then work our way up and kind of see where the conversation goes. [04:56] What is the simplest way to understand a strategy? What is a strategy? And then what are the essential components of a good strategy? [05:04] Well, a strategy, [05:06] Is it design... [05:08] for overcoming a high stakes challenge. [05:11] It's a mixture of policy and action. [05:14] designed to deal with a challenge. A challenge could have an upside. It could be, oh, geez, we were fooling around in the back 40 and we discovered what we did. Or it could be negative. It could be that new innovation is driving us out of the market. But a challenge is just the hardest strategy. The work comes from strategos, which is Greek. [05:40] The Greeks elected 10 strategoi. [05:43] to serve as strategic leaders at Athens. And they were elected. And they dealt with the issues of the day. The Persians are invading. There's a plague in town. [05:57] We need money for a new temple. [05:59] and that's where the word comes to us from. But it isn't just a military military.

[06:06] It wasn't to doubt it. So strategy is always about dealing with... [06:13] An issue. [06:14] a challenge, a problem. What are we going to do about global warming? What are we going to do about China once to reunify with Taiwan? [06:23] you obviously have these very... [06:26] infamous, famous elements of a good strategy, something you call the kernel. Can you just talk through those pieces? Right, sure. So, [06:34] When I used to teach strategy, [06:37] for many years at Harvard and then at UCLA and other places. But I don't know. [06:44] there's lots of ways of looking at strategy. And so years and years ago, we thought that, uh, [06:49] the learning curve and the matrix and the five forces and all those kinds of analytical tools. [06:57] Thank you. [06:58] And it began to, don't want to let me, this isn't strategy. These are analytical tools for analyzing a problem, for thinking about things, for looking at competition. They're not strategy. Strategy is... [07:13] One, I started to write a book. [07:15] and the first chapter of the book was, the first part I wrote was David and Goliath, [07:22] strategy story. So, and my point in writing about David Collio was that [07:32] The surprise that David is able to beat this giant warrior.

[07:38] And that's a strategy story. Strategy story is about discovered strength. [07:43] It's about, oh, look at how they did that. [07:46] Look at how... [07:47] He got made in five moves. Look at how. That's a strategy story. Look at how Steve Jobs changed the world when people couldn't expect it. That's emotional. [07:57] What a strategy story is. So I want to write about strategy. [08:01] and my wife, Kate. [08:04] Asked me, well, do you define strategy? I said, oh, it's really hard on him. [08:09] Defying it. And she said, well, you can't write a book about it if you can't define it. [08:14] Thank you. [08:15] Because I have this other conceptual scheme in my head that all the teachers and writers had, which is that there's a bunch of analytical tools. [08:24] And, you know, this is back in 2005. [08:30] 2004. And I gradually came to the realization, all strategies problems are. It's a form of... [08:38] dealing with challenges. And that was a basic idea going ahead and a book. So if that's the core of it, [08:46] What's the basic activity? What are you doing when you create strategy? Well, you're... [08:50] You're diagnosing the situation. You're trying to figure out what's going on here. [08:54] What's the nature of reality that you deal with? [08:58] Now, humans can't understand. [09:01] Oh, for you out with Ignolo, Ken. [09:03] So part of what a diagnosis is, is a decision. [09:08] about what you're going to pay attention to.

[09:10] and a hypothesis, several hypotheses, about... [09:17] will work. What's going on? How do things connect together? [09:21] And that's... [09:23] beginning of the diagnosis. And so diagnosis is an understanding of the situation. [09:28] that you're it. [09:30] Thank you. [09:31] Well, that's not enough. [09:33] And you can use any of those tools that are famous for that, and you can try five forces, you can do. [09:39] any one of a number of things to try to comprehend the situation. [09:43] The world is more complicated than two by twos, unfortunately. [09:48] I was educated as an electrical engineer. [09:51] in my early years were spent designing spacecraft. [09:54] for NASA. [09:56] The end. [09:58] When I got into looking at business and business strategy stuff, I was always amazed at how [10:04] on intellectuals. [10:07] You know, you're struggling to master Z-transforms and multiple. And yet these people are looking at two by two single tie branch. Yeah. Oh, that's that's what the company's about. [10:22] So, [10:23] A rich diagnosis of the situation, but then a guiding policy. The guiding policy is what are we going to do? [10:32] Now, it's a simple thing to say, a guiding policy, and the guiding policy is sort of a strategy. It's the core of it. It's here's how we're dealing with it.

[10:45] the situation. [10:47] And yet when I say that, [10:50] It flies in the face of, as I was writing that, I had a client who had 17 priorities. [10:57] This is what we're doing. We have 17 priorities. [11:01] and [11:02] That's the opposite of a policy. That's a laundry list of all the things we wish would happen over the next year. [11:10] We're going to gain market share in China. We're going to cut our emissions. We're going to save energy. We're going to be safer. [11:18] We're going to cut costs for it. [11:20] All these different things. [11:22] Thank you. [11:23] and their own priorities. [11:25] Now, lots of people misuse the word priority when they're trying to do all that. You wouldn't want to be in... [11:36] the commercial airplane. And here are the [11:39] tower say to the pilot, I'm giving priority to the following three planes along runway five. [11:46] you know right what do you know there's something wrong well that's the word priority means the first [11:53] It doesn't mean the grab bag of everything that you can think of that might matter. [11:58] It means what's first? [12:00] And so the guiding policy is sort of at that level of what do we really have to do to it? How do we [12:08] What are we doing and what are we not doing to deal with the diagnosis that we create? And then the most important part of the strategy, the part that it's so easy to leave out because

[12:20] people. [12:21] I like to think of strategies as this. [12:24] high-level conceptual thing is the coherent action. You have to do something. [12:31] And what you do is, [12:34] It has to be coherent in several ways. The first way is it has to deal with the problem or the diagnosis and the guy in policy. It has to implement that. [12:44] It has to be coherent in that you shouldn't do things to fight each other. [12:50] You shouldn't say, oh, [12:53] We are going to... [12:56] burn less oil and at the same time we're going to import more oil. [13:00] Thank you. [13:01] It doesn't make any sense to do things that are self-contradictory. [13:06] Thank you. [13:07] And yeah. [13:08] People don't. [13:11] Most companies have strategic goals of increasing [13:15] Growth and increasing. [13:18] I'll profit. [13:21] Magically, that can happen in some cases. God, groat. [13:25] and profit are [13:26] They're bad in it, sure. [13:28] Let's say we define profit as return on equity. [13:32] Well, if you're going to increase growth and increase return on equity, how do you do that? Because you're... [13:38] You're basically going to invest less to get the return on equity. [13:42] Or you're going to grow and get your profit margin up. Well, how are you going to do that? You get your profit margin up and grow. [13:48] faster. [13:49] These are. This is baby talk.

[13:54] But CEO after CEO of Thano would say, well, we're going to grow and we're going to grow. [14:01] And so having a coherent [14:05] Actions that are dumped nulls on one another. [14:11] is an important part of strategy. These all three have to be there. You have to be an understanding of the situation. [14:17] There has to be a guiding policy. How are we going to deal with it? [14:22] Thank you. [14:22] And that can be a long-term sense of how we compete. You don't have to change your strategy every five minutes or every five years. If you're making Almond Joy candy bars or something, you don't really change your strategy. If you're in the tech business, of course, you're... [14:41] You have a short time horizon and then the coherence in action. [14:45] is critical. [14:47] And so these are the three what I call basic elements, the crony. [14:53] that [14:55] If... [14:56] 81 in three is missing something. [15:00] it's not really a strategy. It's something else. [15:04] Awesome. Okay. [15:06] Is there an example that you could give that kind of makes these even more concrete of just, I don't know, something that comes to mind that's kind of a quick example of a strategy that [15:13] It illustrates these three components. [15:15] You know, if you're Microsoft right now and you're trying to adapt to to AI, you have a diagnosis. Well, let's go ahead. Let me see.

[15:26] You see the challenge of how we adapt to it. You create a guiding policy that you're going to invest in. [15:34] one of the major leaders, and then you're going to begin to incorporate that into your search engine. [15:42] And then you have coherent actions. You know, you actually do some of these things and you know, it's not... [15:49] It's not rocket science. The difficulty is that companies don't do that. [15:55] There are companies that say, well, our future is, let's say, something that's not in a software business. That's industry portfolio. [16:04] We're investing in the future of... [16:09] robotics act. [16:12] and AI and, again, computer vision and all that. That's going to be our future. [16:18] And then you see what they're doing. They bought this company. [16:25] And that's it. [16:27] its strategic assembly without any synthesis. So I mean, strategy is not mysterious. [16:34] What's mysterious to me, what was mysterious to me and what remains mysterious to me is how [16:41] So many organizational leaders don't do it. [16:45] They... [16:46] They create. [16:48] Bad strategy. [16:50] They do something that they say is strategy and then it's not. You have a whole chapter on this and what is a bad strategy?

[16:58] Can we just touch on a few of the things you [17:00] see as signs that your strategy is bad, or maybe it doesn't even exist. [17:05] Sure. When I wrote good strategy, bad strategy, a lot of people resonated with the bad strategy. [17:13] perfect book [17:15] They wrote emails and say, oh, my God, thank goodness. Someone just finally said that these long and terminal meetings I sit through are not actually a strategy. [17:25] or these documents that [17:27] Company produces are not actually strategy. [17:31] And they're not. [17:34] Bad strategy, the standard bad strategy for a corporation is a set of profit goals. [17:40] or performance coach. [17:42] I should have called. [17:44] Now, goals... [17:46] or the engineering of how companies work to some extent. [17:51] but abstract high-level goals [17:57] They're down the stretch. There were [17:59] There's something else. They're ambitions. And ambitions are not a strategy. [18:03] Thank you. [18:04] A list of all the different things you wish would happen. [18:09] It is not a stretch. [18:11] I will... [18:14] Asked to help. [18:15] Thank you. [18:16] Thank you. [18:17] part of the U.S., [18:19] Department of Defense. [18:21] create a strategy for all its 17 different intelligence agencies. Wow. How cool. Yeah. There's 17 different intelligence agencies.

[18:32] And the strategy, basically, that... [18:36] These people had written. Yes. [18:38] said the 17 agencies should [18:41] work together. [18:43] More effective. So. [18:46] You don't have to be [18:48] a Russian spy to see that what they're really saying is these guys aren't working together effectively. It's a problem. [18:54] But they didn't check that. [18:56] They said the strategy is they're going to work together more effectively, just like [19:00] the RV in which comes out with our strategy is joining us, meaning, [19:05] We're having good trouble coordinating. [19:08] But then there's nothing there about that other than, [19:11] This is what should happen. There should be more effective coordination. [19:15] Thank you. [19:16] And oh, I have an office of court. I need to push it in charge of court. [19:21] But there's no sensible, why is it hard for me? [19:24] What are the barriers to this? This has been going on for 34 years now. What's holding it back? What is the problem we have to solve? [19:34] It's not there. [19:35] Thank you. [19:36] And so, [19:38] I was hired to do a foundry for a company [19:42] And they said, well, [19:44] Arr. [19:45] or diagnosis instead of not growing fast. [19:48] Thank you. [19:50] Okay. [19:52] Oh, no. [19:54] And let's get into that. [19:57] Because that's not a day. [20:00] That's a statement. It's a statement of values. You would like to grow faster than you are. I'd like to be taller than I am. I'd like to have more hair.

[20:10] Well, you ought to grow faster. Okay. So what's holding you back? [20:15] Thank you. [20:16] And from Chub Chung. [20:19] Bye. [20:20] saying, okay, we're going to grow. That's not a strategy. Bad strategy also is fluff. People will use fancy words to describe things. [20:30] their situation. Now, since I wrote that, you know, the term word salad has become [20:37] common. And told me, there's a lot of word salad writing that people try to use to describe [20:47] Their situation, it's more... [20:50] Abstract. [20:51] Perhaps more abstract, therefore, it's... [20:54] more strategic, incoherent stuff. [20:58] we're going to do A and we're going to do B and those two things. [21:04] obviously fight one another. [21:08] All those things are part of bad strategy. Bad strategy is a document or a set of intentions or a set of verbalizations where it's not a strategy. There's no diagnosis, all of them. [21:22] President Obama started out saying, we're in the United States is falling behind in education. [21:30] And he's looking at the PISA test scores of 15-year-olds around the world. And it's true. The United States is down on November 30th.

[21:41] Thank you. [21:42] countries in terms of the discourse of our [21:46] 15 year old in math and in general knowledge. [21:51] So, OK, correct statement. We're falling behind. [21:55] A real diagnosis would say because... [21:59] because we jumped immediately to, therefore, we're going to have more people go to college than any other country. [22:09] Well, having more people go to college doesn't solve the problem of 15 year olds not being able to do. [22:16] Go inventory man. [22:18] Hopefully it doesn't screw up colleges everywhere. So that kind of gap is there. [22:25] Call where you don't do the diagnosis. [22:27] Why do we have this? We argue over diagnosis is part of politics and part of organizational politics. That's what we do. And that's important. [22:37] To do a strategy, you have to resolve the argument. Why do we have a homeless explosion in Port or Seattle or Los Angeles? [22:48] Thank you. [22:48] And people argue about that. Some people say, oh, it's a stroke. It's an all-girl housing is too expensive. They're different diagnoses. [22:58] but to deal with the issue [23:03] You have to decide on the diamond. The politicians right now sort of decided for a few years that the problem is housing is too expensive. We're going to build housing at $1.

[23:14] $700,000 a unit and give it to the homespeed. [23:18] Okay. [23:21] Thank you. [23:22] Thank you. [23:23] If she build up, they don't come. [23:26] But then, you know, the next problem is, well, can't seem to build a housing. [23:32] And so, again, you need a new diagnosis. Why can't you build that? You're a rich, powerful country. Why can't you build some housing? [23:39] So, [23:40] Diagnosis is critical to understanding it and in public policy, we argue with the diagnosis. [23:47] And in organizations we are, too. [23:50] And unless you resolve it, [23:53] You can't. So lacking diagnosis is one. [23:58] Key reasons for bad strategy. [24:01] The other, the fluff and the incoherent actions are fun to describe, but they're less common. [24:08] The second major source of strategy is mistaking goals for strategy. These goals are. [24:15] are her strategy. [24:16] And that leaves out so many of the important aspects. [24:21] Amazing. [24:22] So just to summarize somewhat, [24:25] If you're missing a diagnosis trying to explain what exactly is wrong, it's a sign your strategy is incomplete or bad. [24:32] If you're missing concrete actions, it's a sign that your strategy is incomplete or bad. [24:37] There's also, I think, an element of coherence. The actions have to connect, and there have to be a few, very few of them. [24:42] I always like to think of three as a good number. Is that something you think about, like the rule of thirds for...

[24:47] actions you want to take or even the guiding policy? Or is there like a number that you think about just like no more than this? [24:53] A few. [24:54] Not too many. [24:56] not so itchy. It's hard. Number numbers is... [25:00] You know, we work best when we concentrate. [25:04] We're more effective when we concentrate on a few things, a few people, a few. [25:09] focus is the fundamental source of power and strategy. [25:14] Yeah, trying to do too many different things is defocusing. [25:18] I think there's this quote in your book that I think is, and this may be paraphrasing, each time you say yes, you risk turning a nascent good strategy into a bad strategy. [25:27] Yes, focus is... [25:30] When I was... [25:33] Nine years old. I was at summer camp and I had my... [25:38] Paris sent me a magnifying glass and I was out there. [25:41] Using the sun to train it. [25:44] Cook a piece of wood. [25:46] And I think I had a piece of... [25:49] cloth that I was trying to burn. [25:52] Wasn't having much luck. [25:54] and the magnifying glass focuses the sun rays sun rays on the spot [26:01] Counselor came over and he said, try this. He pulled out a black thread from his T-shirt, put it down. [26:08] And I focus this on raise heart, top toe. [26:12] So, [26:13] Stupid little story. [26:15] But... [26:17] Thank you.

[26:18] To burn that black thread, there has to be a source of power. [26:22] There has to be a focus. [26:27] That's the magnifying glass. [26:30] Focus the power. And it has to be a target. [26:33] that can be affected. [26:35] Yes, if you're black thread, not wind thread. [26:38] And that sequence is part of it. [26:43] strategic action. [26:46] You need a source of power. [26:48] Thank you. [26:49] I say power. I don't say advantage, efficiency. I say power because there are different ways in which power is exhibited. [26:58] And you have to focus on [27:00] the power [27:02] Or a target. [27:04] That can actually be [27:06] affected or achieved. [27:09] This is vicious. [27:10] Real simple logic, but... [27:13] It's a discipline. [27:15] to focus power. [27:17] or a target. [27:20] that you can affect. [27:23] To take American power, I'd say we're [27:26] We're going to change China's trajectory and Russia's trajectory. [27:31] and our own and, you know, and to name all the 30 countries around the world that we're trying to [27:37] We're diffusing our efforts because they're not the same. [27:40] They're going in different directions. [27:43] Aves. [27:44] When you say it, not so obvious as you live it because...

[27:48] Like, [27:49] Any organization, like any big organization, the U.S. government has different interests. They're pursuing different. [27:56] interest funded for different purposes with different clientele. And so this graduated a huge [28:03] of effort. [28:05] One of the big issues in strategy is simply the organization. [28:11] It did. [28:12] Complex organizations particularly... [28:15] You have a hard time focusing energy. [28:18] Because of all the different interests. [28:20] Yeah, I actually want to talk about both those things, so I'm glad that you teed them up. [28:25] Let's talk about power. What is this idea of power and how does that play into strategy? Why is it so important? And then what are some examples of power? [28:33] that people can think about when they're trying to think about implementing and adding a power to their strategy. [28:39] Well, in a competitive situation, [28:43] The fundamental... [28:45] aspect of power. [28:49] is, [28:50] Something that's going to give you [28:53] Some sort of advantage. Usually it's in a symmetry of some kind. If two fighters are equally balanced or two horses are equally fast or two armies are equally balanced, [29:08] And they meet in competition. [29:12] It's 50-50. Who knows what will happen? For a strategy, you need to exploit an asymmetry of some kind.

[29:19] You're a little faster over there alone. [29:23] Something has to be. [29:25] different between the sort of things. So that's the beginning of power. [29:30] is a symmetry. [29:31] We can think of it as leverage. [29:35] So, guys, being first. [29:39] is a source of power. [29:41] Thank you. [29:42] being first to recognize something. [29:45] can be a source of power. [29:47] having a reputation of a certain kind. [29:50] Give you. [29:52] some power that someone doesn't have that reputation. [29:55] doesn't have. [29:57] On the other hand, having a well-established reputation of a certain type, [30:02] can be. [30:03] the opposite power. [30:05] Because, [30:06] People don't expect you to be able to do something new. They expect you to be able to do this. [30:12] But not that. [30:13] Having relationships can be a source of power. [30:18] When Gertzner took over IBM, as it was failing in the face of the microprocession revolution, [30:26] He recognized that there was, [30:30] primary asset, their source of power was that they were respected and they had [30:36] They had auction into every large corporation on the planet. [30:40] No, we have said that. [30:42] Sure. [30:44] as an actual producing company. [30:46] Thank you. [30:47] And so he said, we're going to embrace our customers. Bear hung up questions. You're going to.

[30:54] Server customers. [30:57] Because that's our source of our power. [31:01] That's our leverage. That's the asymmetry. [31:04] Yeah, the world begins to change. [31:07] and computing. [31:08] begins to move to the cloud. [31:12] And IBM's customers, the largest companies in the world, are the most hesitant. [31:18] should you do that? [31:19] Thank you. [31:20] Because they've got the big IT departments that don't want to go too close. [31:25] So small companies move to cloud. And the big companies are, you know, it's insecure in the cloud. We'd have to lay off people and we have these big machines we'd like to run. [31:36] And so IBM, [31:40] then becomes disadvantaged. [31:43] in the new world because [31:46] It inherits this... [31:49] big company orientation. [31:51] And that lighting line. So power... [31:55] The opposite side of power is this. [31:58] what you inherit. [32:00] From the penance can be the wrong thing. [32:03] And so a source of power is that source of power can be an invention. A source of power can be a particular customer base that you have identified and [32:15] It doesn't last forever, Power. [32:18] But all the different sources of advantage that are sometimes transitory and sometimes permanent.

[32:26] are sources of power that a company has to use [32:32] to compete and survive. [32:34] I imagine people listening are just like, "Oh man, I've got to figure out the power, the advantage that I have with my business." [32:41] Is there any advice you could share about helping people figure out where their power might lie? Oh, that's a good question, Lenny. So how do you figure it out? So I start, as I said earlier, with the symmetries. And what way... [32:56] Is my company different? [32:58] than other companies? In what way is my team different? What do we know that other people don't know? What do we possess that other people don't possess? So there has to be some asymmetry. [33:10] to to create [33:12] competitive power. There has to be something different. [33:16] So sometimes you have to redefine your space down small enough that you can actually see it. [33:22] Because particularly a smaller company that doesn't have worldwide technology, [33:27] Power has power in a certain marketplace or certain set of customers or sometimes it's not customers. Sometimes the power isn't who you can bring in and hire. [33:39] So if you've invented chat GBT, you can bring in the smartest AI people for a year or two. [33:47] Bye. [33:49] Because everybody won't hold a smart AI if you want to work at the cutting edge. [33:54] with the current winner

[33:57] Thank you. [33:57] Then they'll start arguing with each other and infight. There'll be all sorts of embarrassing personnel things going on. And so what else can grab? [34:05] that position if it's not well managed. [34:08] Oh. [34:10] Thank you. [34:10] Business is exciting in that sense that it's not stable. [34:16] It's not. It's not just as it was what I would... [34:21] First study, it is not just IBM and Sears and AT&T forever. [34:26] Thank you. [34:27] There's a constant, Carla, changing of the guard. [34:30] For better or worse. [34:32] For bed, because if you look at government, there is no changing of the guard. They get stultified. [34:37] Makes sense. [34:39] So in your book, yeah, I have this whole list of types of power. I'll just read them real quick. [34:43] leverage, proximate objectives, chain link systems, design, focus, growth, advantages, [34:49] dynamics, inertia, entropy. [34:52] There's also the book, obviously, The Seven Powers that a lot of people are aware of. [34:56] I guess, how do you think about just like the spectrum of types of power you can have? Is this it? Are there others... [35:02] I started to make a list there in the book and I wrote a bit about chain link systems and I don't know. [35:09] Thank you. [35:10] Today, I mean, the power that new business models are exploiting. [35:15] is the power of the user base. [35:19] what we called years ago, network effects, where the more users you have, the more useful a product is. So the idea of network effects first arose with the telephone system.

[35:31] which the idea was [35:36] that [35:37] You don't want to be... [35:38] Connected to a telephone system that only connects to a sound. All that useful. How to connect to the work. [35:45] to be useful. [35:47] And, uh, my, my colleague, Marvin Lieberman was taking the economics course at, uh, [35:52] at Harvard University, [35:54] at the same time that Bill Gates was a student in that classroom. [35:57] professors going on a network effects. And of course, that's what catapulted. [36:03] And. [36:05] His software, MS-DOS at the time, not MS-DOS. He had something called BASIC. But the network effect was huge. He got angry about the network effect because people wouldn't pay him. They kept stealing it and using it to presume everybody in the microcomputer industry had M-BASIC. [36:26] Then we get the network effects from not just software, [36:31] Thank you. [36:32] Bye. [36:33] The universe is now with the Earth. [36:36] And so, [36:38] You get network effects, big social media. No one wants to be on a social medium. Only three other people are on the social media. So you've got having a large network. [36:50] Amazon, get big fast because... [36:54] the [36:56] The old, the economics are amazing. So we used to say, well, in an apartment store,

[37:02] Economics are dead. [37:04] you're [37:05] You're saving people the cost of going out of the store, mostly downstream to another store. For now, it's all in one place. [37:12] Supermarkets, the same thing. [37:16] But I look at a thing like Amazon where they're the ease of shopping on Amazon keeps people from leaving it and going to another website. [37:26] Now, other websites have got better and bigger, and some of that is less strong than it used to be, and this is constant. [37:32] struggled with it. Nevertheless, the size of the user bench there [37:36] is an important source of symmetry and power for the people who've come out ahead and won that battle for this round, this... [37:46] Just [37:46] Five years, 10 years, how long does it last before some other thing begins to take precedence? [37:52] And now we have two-sided markets, whether it's credit cards or credit cards. [37:58] places where both buyers and sellers get together. [38:01] And so here are these big forces that companies are playing with right now. [38:06] are these network effects. [38:08] Thank you. [38:08] Thank you. [38:09] Thank you. [38:10] And when the new genre of AI... [38:14] we have the possibility of stronger effects than we've ever seen before. [38:21] But we don't know yet. [38:22] But the suspicion is, [38:26] Their sizes wouldn't matter. [38:28] that the size of the data that you could put into the learning algorithm

[38:35] is going to make [38:36] your [38:37] Yeah, that... [38:39] and so again, uh, big is going to matter. Just think of Google and, uh, [38:46] their ability to [38:49] It proves surge based upon all the searches that go on on their base every day. [38:56] It's very hard for Bing to catch up. [38:59] because Bing doesn't have as much data to train on. [39:03] And so... [39:05] unless there's some [39:06] new innovation there that isn't just the amount of data. [39:12] The leader, again, has this asymmetry working for them. [39:16] Now, the way you get around all that is by being specialized, by owning a particular approach that isn't the market leader's approach. [39:27] And it's always been that way in business. [39:29] our attention is often attracted by the giant. So yeah, sources of power [39:36] Today, when we look at them, there are no business models. They're... [39:40] or part of the fabric are these network effects and things like that. [39:47] that are very strong. [39:48] And people are trying to get those in startups and in small firms within a certain market space and build it as best as possible to get ahead of others. [40:01] There's been venture capital available to try those experiments.

[40:06] And some of them work and some of them don't. [40:08] But that's this new... [40:12] H for it now. [40:14] where [40:16] The speed of building a market position with network effects is a dominant game in the tech space. [40:25] I feel like Twitter is the ultimate example of the power of network effects, especially recently, where if you think about it, [40:31] Everything about Twitter has changed. [40:34] and it still continues to run. He laid off 80% of people at the company. They changed the name, [40:41] The algorithms changed. I don't know what is still the same. How can you lay out that even sort of the people that it still runs? I mean, you got to wonder. I love Twitter. I'm on there all the time. I feel like it's never been better, which is kind of wild. [40:54] Twitter is fascinating. I mean, I tune into it every couple of days and see what's going on. [41:00] It is just an amazing rumble of... [41:06] opinions and statements. [41:08] It's much more interesting than it was five years ago. [41:10] There's a lot of diagnosing and not a lot of concrete actions. [41:14] But anyway... [41:15] I wanted to come back to the... [41:16] element about power, [41:18] I think when people are thinking about power, [41:20] it may not be clear where that plugs into the diagnosis [41:25] the guiding policy and the coherent actions. [41:27] Where should you be thinking in [41:29] implementing this idea of where my power is. [41:32] when you're laying out your strategy. [41:34] to undertake a strategy.

[41:37] that [41:39] you think will work. [41:41] You've got to have a reason. [41:44] That makes sense. [41:46] and that [41:50] that reason. [41:51] is derived from some source of power. [41:56] Some sort of revenge. [41:58] Ultimately, your power or your advantage is something based in history. [42:05] that has the feel of reputation. [42:08] or institutional. [42:11] Skill. [42:13] Thank you. [42:13] you [42:16] or [42:19] It's some kind of... [42:23] the symmetry or knowledge that you have that others don't have. So it's a resource that you can use. [42:32] that your competitors or others don't have equal access to. [42:37] Because you either have mastered it or you own it, inherited from the past. [42:45] All those things are sources of the power that you used to make it not an even bet. [42:53] So when you walk into a [42:56] A casino. [42:59] Thank you. [42:59] There's no news stories. [43:01] Well, maybe if you play poker with skill, [43:04] You can expect to make some money, but the general casino games, you're going to expect to lose.

[43:11] And in business, [43:14] Statistically, if you come to me and you say, I'm going to open a new restaurant, [43:19] which is my strategy, Petey. [43:22] My answer would be don't open a restaurant, invest in the S&P 500 because the statistics are that new restaurants fail. [43:32] So what makes you think? [43:34] then you can succeed. [43:36] Oh, I really want to succeed. [43:39] Not good enough. [43:41] Thank you. [43:42] I trained under a chef who's been very successful. Oh, that's interesting. Tell me more. [43:47] I [43:48] So there it is. Where's the symmetry here? Where's the source of power where you go from the odds, the standard odds in this game against people? [44:00] where you think the odds are in your favor. [44:03] Uh-huh. [44:05] that's the source of power we're looking for. [44:09] We're looking for this. [44:11] This information, this skill, this... [44:15] Yes. [44:16] thing in the field, the way the resources are arranged that's going to get you [44:21] This edge. [44:24] And some of that is sort of part of the situation and some of it's how you live. [44:29] how you shape and focus your actions. [44:33] Strategy tends to be surprising when we see it. [44:37] when you see it work and surprising because we don't expect it. [44:41] We expect people to buy more out.

[44:44] We expect armies to bundle around. We expect nation states to bundle around. We don't expect them. [44:51] to execute. [44:53] coherent strategies. [44:55] The United States went to Afghanistan. [45:00] And it wanted to [45:02] catch Osama bin Laden, but at the same time, they didn't want to put an army in the field to actually catch him because it would be embarrassing to have that many Americans in the field. That's what happened in Tora Bora. [45:13] The Secretary of Defense said, "No." [45:16] We don't want to make it look like we're taking over the country. [45:19] They didn't try to catch him as hard as they could. And we want to have the education of women. [45:25] And we want to have a democracy and we want to have. [45:31] A long list that would have no, no will be in production. [45:35] But at the same time, our allies are the opiate producers. [45:39] Thank you. [45:40] It was a Taliban that got rid of opium. [45:43] Americans didn't do it. So we had all these different objectives. [45:48] Amen. [45:51] It doesn't work. [45:54] You need to have a focus on something cheap. [45:58] What's achievable? [46:00] Thank you. [46:00] Thank you. [46:02] On y'all. [46:03] Thank you. [46:05] Nation building is hard stuff. Takes a century. [46:09] You know, Afghanistan, I'm often a tangent here with Afghanistan, but it's a really interesting subject.

[46:15] Afghanistan was a warlord society. [46:19] a bunch of different warlords running the place. [46:24] Oh, well, what's a word with society? Where else do we look for an ouch? [46:28] Wow. [46:29] And we could scabble. [46:31] In. [46:32] 1650. [46:34] You look at France. [46:36] and 1300 you can look at japan [46:40] before the modern era. [46:43] These are warlord societies. [46:45] Well, how did they go from that to being a coherent person? [46:50] Government. [46:52] That maybe wasn't democratic, but still, there was a government instead of just as much more. It took. [46:57] took some gear to conquer all the rest. [47:02] And then enter. [47:03] a long time for them to put in the structures of government. And then maybe it became a democracy, maybe not. But that's the process. It's not like you just go in there and say, [47:16] You're now no longer a world with society because we've decreed it. [47:19] Home. [47:21] Thank you. [47:22] I don't know. You're going to ask me more questions about what it is people should know and how do you get these sources of power? How do you get these insights? [47:30] Thank you. [47:30] I'm a big fan of history. I'm a big fan of knowing things about what happened. [47:36] Business history. [47:37] biographies. [47:39] We're in Church Street. [47:41] And if you don't have access to...

[47:46] Other times and other places and other things that have happened. [47:50] It's very hard to think strategically about the situation you're in. [47:55] Because there isn't a science of strategy. It's not like physics. [47:59] It's not like engineering where we can write down the equations of stress on a beam. [48:04] and say, how thick does the beam have to be? It's not like that. A lot of it is based on analogy to previous human experience. [48:16] That is an amazing insight. [48:17] Is there anything you find most rich and valuable in terms of history, [48:23] periods, empires, stories that you find most [48:27] connects and as an analogy is it like is there anything you find consistently as useful or is it just read as much as you can and you'll often find something in there yeah the the the the [48:37] Further back we go in history, the leaner, [48:41] is less rich. [48:44] The best histories are written by the people at the moment it's happening. [48:51] or very soon after. You know, history books and things like that are... [48:56] Someone's opinion. [48:58] Uh, but, but, you know, like our role in history here in the United States, we have pretty good documentation about what went on in the Indian War, why we had these big, uh, [49:10] cycles of economic growth and then depression. [49:14] You had depressions in 18.

[49:16] 40 and then they're cheating after the Civil War. And there was another huge panic depression in 1890s. [49:25] I don't know. You're worried. A lot of people don't even know that these things happen. How do they happen? [49:30] And of course, everybody knows about the Great Depression IT. [49:35] 29 30s. [49:38] Bye. [49:39] Go back and ask, how did that happen? [49:42] Why ain't there? [49:43] Thank you. [49:44] And you'll hear professors opine about why it happened. [49:49] But there's no agreement. [49:50] The biggest economic fact is [49:53] of the last... [49:54] Cut it to tears. We don't know why I land it. [49:57] go back and you can go online and look at the Wall Street Journal, the New York Times from that era and start getting – [50:07] September of 1928. [50:09] Just look at the front page every day, which I thought, and you can see it unfold. [50:17] Bye. [50:18] It's a surprise to everyone. [50:21] They're going to swell. [50:23] For just laid off some people, but it's temporary, they'll hire them back. This economist says, well, it's a temporary this, it'll come back. [50:32] And it gradually gets worse and worse and worse. And there's no understanding of it. [50:39] there's not a lot of [50:43] An ounce. [50:44] And so you got treatment saying, oh, it's monetary. They didn't loosen up the money supply. You got other people saying things.

[50:53] But... [50:54] Put yourself back at that moment in time and see what people saw and realize that, [51:01] That no one understood what was happening. [51:05] and to form your own opinions. [51:08] That's the diagnosis skill. That's the feeling skill. [51:15] Now, let's defend the ball above your own creature and you fall. [51:24] And you're now in the ocean. [51:26] It's terrible. [51:28] And it's confusing. And there's weights and there's water in here. [51:33] I don't want to drink. [51:34] And you look around and you see up here's a floating piece of wood and grab it. [51:40] Wow, that feels a lot better. [51:42] That's how it feels when you look at a confusing situation. [51:48] And the first idea of how to understand it comes to mind. [51:53] Oh, yeah, I've got this piece of wood. Now I'm not drowning. [51:59] But... [52:01] This is right. [52:02] Thank you. [52:04] The most important intellectual tool we have is to think again. [52:12] to say, okay, [52:14] I came up with this diagnosis because I thought this and I thought this. [52:19] Is there another way to look at this situation? [52:23] Is there a bigger piece of wood over there than I can grab onto? That's the hard thing.

[52:29] for the time. [52:29] When I looked at the Great Depression, what I saw, [52:34] is the horrible bit. [52:37] So if you look at capital goods, [52:40] most capital goods that the public buys, the adoption curve goes up like this, [52:47] It peaks. [52:49] And it declines and then it comes back up again. [52:52] Thank you. [52:53] Because it comes a point where everybody who can afford water is got one. [52:58] and then the new sales drop off. [53:01] And my mind, that's what I saw. I teach one and everybody could afford a car, had a car. [53:07] and the auto industry. [53:09] began the first signs of the Great Depression were in the auto industry. [53:14] So that was my plank that I wrecked. Now, I don't see anybody else writing about that. [53:21] Bye. [53:22] That's the exercise. And to exercise your mind about trying to understand complex situations, it's best to go back. [53:33] You don't have to go to the Great Depression, but you can go and try to find situations that other people have to deal with. Yeah. [53:42] And look at as much data as you can. And to practice that, that's what education should be in a business school. It's not. They teach theirs now. [53:50] Because it's so much easier to teach a theory than intellectual law. [53:56] structure. [53:58] It's also a lot more work reading a lot of books and history and studying and thinking. I had a colleague at UCLA who assigned a book to MBA students and they went to the dean.

[54:09] I didn't get out of the course. A book. He wants to read a book. [54:15] No, man. [54:18] Sounds like you have another book in you writing about the Great Depression and what really happened there. [54:21] Maybe. [54:51] and many more, Vanta helps companies obtain the reports they need to accelerate growth, build efficient compliance processes, mitigate risks to their businesses, and build trust with external stakeholders. Over 5,000 fast-growing companies use Vanta to automate up to 90% of the work involved with SOC 2 and these other frameworks. For a limited time, Lenny's podcast listeners get $1,000 off Vanta. Go to vanta.com slash lenny. That's V-A-N-T-A dot com slash lenny to learn [55:21] Get started today! [55:23] I wanted to zoom back in on something very tactical. [55:26] So say you're a product manager listening to this that is thinking about writing or has to write a strategy for their team. Say it's like... [55:34] They're working on the onboarding experience of their product, and they're about to sit down and start to write out the strategy for their team.

[55:41] and say they have like a general idea of what they want to do do you have any advice for just like how to lay out [55:46] As you talk, I think if there's a section, diagnosis section, guiding principle section, [55:51] actions, and then there's power in there in the guiding policy. Is that how you lay it out? Do you have any advice for how to write this out? [55:58] So I wrote the crux because I felt that that, [56:04] Colonel is not sufficiently. [56:06] Sharpen up. [56:07] Repeat. [56:09] And even in the crux, [56:12] I could if I can rewrite the crugs book [56:16] I would maybe write it a little differently today. [56:19] a whole couple of things I would change. [56:23] First, [56:24] It's really important. [56:26] To understand the challenge. The problem. [56:31] Diagnosis is not nearly perfect. [56:33] understanding the world. [56:36] It's understanding the challenge you face. [56:39] What makes it hard? [56:41] So the question I asked client, [56:44] is exactly that. [56:47] What makes it hard? [56:49] Client will tell me. [56:53] Oh, we want to... [56:55] opened up business in Australia. It's a market we haven't had. [56:59] And I'll say, [57:00] Okay, so why are you and I talking about that? You're the CEO. Just tell somebody to do it. What makes it hard? Oh, well, we don't know anybody in Australia and they kick us out. They'll tell me.

[57:15] If you push, he'll tell you why it's hard. But that understanding hasn't been changed. [57:22] percolated into... [57:25] a strategy. [57:26] Part of the problem is, [57:29] is that the concept of strategy has been [57:34] So beaten up by. [57:37] Thousand. [57:39] hundreds of books and thousands of women or websites that are, [57:44] People have a hard time. [57:46] trying to figure out how to create a strategy because they're drawn, [57:52] Up, down, left, right. [57:55] Thank you. [57:56] My two pieces of advice, anybody that's actually trying to do this. [58:02] Is a state the problem. [58:05] And B, don't call it a strategy. [58:09] Call it an action agenda. [58:12] Thank you. [58:14] that you're not creating a strategy. [58:17] you're creating an action agenda. [58:21] What are we going to do about this problem? That's essence of what you're doing when you're thinking strategically. [58:28] You're recognizing the problem. [58:31] and you have an action agenda to deal with. [58:34] It's not five years out, 10 years out. It's not your general mission to build a better world. It's none of that. [58:42] Thank you. [58:42] All of that is a different...

[58:45] literature form. [58:48] Thank you. [58:49] Huge numbers of people out there willing to sell you advice on mission and your vision and your values and your. [58:59] All these things that have to be in place before you can have a strategy. [59:04] And... [59:06] That's not true. [59:08] Thank you. [59:09] It's a different model. [59:12] Thank you. [59:13] I start now with ambition because people want to put ambitions in place. They get anger with me. [59:20] I don't allow them to talk about their ambitions. [59:24] So we start with ambitions. And, okay, you have all these ambitions. [59:30] And I write in the crux that when I was 25, I wanted to be a top. [59:36] business school professor. I wanted to be on Fortune Directors. I wanted to drive a Morgan drop head plus four. I wanted to climb the great mountains of the world. I wanted to go [59:48] Learn to fly an aircraft. I wanted to marry a beautiful woman and have successful children. I wanted to have a townhouse on the Il Sandoly in Paris. I don't know. I had a lot of issues. [1:00:04] Thank you. [1:00:05] That's not Scottish. [1:00:07] We all have ambitions and every company should have ambitions. [1:00:11] If we look at all those ambition and let's say I'm 25 years old.

[1:00:17] Well, what's keeping me from reaching them all? [1:00:23] Well, [1:00:25] I'm not ready to join board to directors. I'm not experienced. Okay, so I put that over here. I can't afford the 10. So, okay, over here. How about the ambitions? Did you have any chance of making progress on now? [1:00:43] Thank you. [1:00:44] Well, beautiful woman. Yeah. I don't know any woman from Leviatomy. If you can do something about that. So. [1:00:53] Which of your ambitions are [1:00:56] Can you begin to make progress towards... [1:01:00] reaching [1:01:02] And what's holding you back? What are the barriers? What are the problems? So I approach the question of the problem. [1:01:09] Now, through the filter of the ambition. [1:01:12] that these are ambitions, fine, let's accept them all. [1:01:15] And which one can you actually make some progress on? [1:01:20] today and what's making that hard? What are the challenges? [1:01:26] So you're choosing a challenge. [1:01:30] You're choosing... [1:01:32] of the possible challenges you could face. [1:01:35] up to. [1:01:36] You can't do them all. So, there's a focus thing. You're choosing which challenge to focus on, and that challenge has to be A, important, [1:01:45] And B, it has to be achievable. It has to be something that you can address. It has to be an addressable challenge.

[1:01:52] And so the search for an action agenda... [1:01:58] not calling it a strategy, is this balance between... [1:02:04] problems that are important. [1:02:06] Because they're close to your ambition. [1:02:08] and problems that you can actually address and do something about. [1:02:14] And that overlap then becomes... [1:02:17] The choice you make. Okay, we're going to go after this. [1:02:21] And here's the action steps we're going to take to do that. [1:02:25] And if it's a big company, the action steps may extend over two or three years. Smaller company took a plane in six months, three years. [1:02:34] These are things we're going to do, not goals we're going to achieve. These are things we're going to do, action steps. [1:02:41] Thank you. [1:02:42] And that's sort of the way I put it together today, which is slightly different than the way it's put together in the Crocs. [1:02:48] Yeah, I love this advice. That's such a simpler way of thinking about strategy. It's an action agenda. [1:02:54] Here's the things we're actually going to do. And then it starts with, [1:02:57] the challenge and just to talk about the crux briefly [1:03:00] The Crux is named after this concept in Mount... [1:03:02] climbing of the hardest [1:03:05] point of the mountain climb where people, if they get past that, it's all [1:03:08] downhill. And I think basically the point there is focus on the most challenging, like the biggest challenge that you need to overcome to achieve. [1:03:16] these ambitions you're describing. Is that roughly the way to think about it? [1:03:20] Yeah, and the idea comes from...

[1:03:23] A design. [1:03:26] And it comes from climbing. I used to be a climber. [1:03:30] A rut climber. [1:03:32] and a snow climber. [1:03:34] And a crux and a climb is the hardest part. [1:03:37] PARK. [1:03:38] the hardest pitch or a pitch, the hardest move. [1:03:41] is the crux of that. [1:03:44] And then the basic advice to a climber is if you can't do the crux, don't do the climb. Because you're going to fall off there. Now, that's not exactly true because you can try it over and over again until you get it. [1:03:57] But in general, particularly if you're looking at an alpine claw, I mean, better not. [1:04:01] take it on a climb where you can't handle the crutch. That's why people go boulder. The builder's still up to handle the crutch. [1:04:10] and so that's [1:04:12] That's what the concept of the crash comes from. Now, in business... [1:04:17] The crutch is the hardest part of the problem. [1:04:20] And from the design point of view, skilled designers, [1:04:26] Whether they're an engineer or an architect or someone else, there's usually... [1:04:32] A challenge, a problem. [1:04:33] Thank you. [1:04:34] Thank you. [1:04:35] Oh, oh. [1:04:37] I can pay... [1:04:39] was hired to take a look at the Louvre in Paris. [1:04:45] And they have dusty parking lot in the center of [1:04:50] of this. [1:04:51] giant power that had become a museum.

[1:04:56] And they warned me. [1:04:57] and in trips to live there. [1:05:00] Thank you. [1:05:01] And the problem is they didn't want, he didn't want it. They didn't want like a new building that would obscure blue because the lube itself. [1:05:10] The building itself is part of the storage, part of the scene. [1:05:14] And yet at the same time, they needed to have an entrance because the entrance at that time was all from the side on a sidewalk. [1:05:23] And, you know, [1:05:26] You looked at the situation and the competing needs and the problems. [1:05:32] Thank you. [1:05:33] And he had an insight into, well, build a transparent building, build a building out of glass, right? [1:05:41] so that [1:05:43] You see through to blue doesn't obscure. [1:05:47] And, of course, you can build a rectangular building out of glass at Cockle Ditter. [1:05:52] So below. [1:05:54] Surely not for us. [1:05:57] - Yeah. [1:05:59] That design insight... [1:06:01] is something that [1:06:04] Software engineers, hardware engineers, mechanical engineers, space science engineers like I was. [1:06:11] experience where we look at a dilemma, [1:06:15] Thank you. [1:06:16] And we try to focus on what makes this hard and anything. [1:06:21] And then [1:06:22] by focusing on the difficulty, [1:06:25] We see a way around it.

[1:06:29] Elon Musk. [1:06:32] Focused on, well, why is it so hard? [1:06:35] going to use a rocket. And it's so hard because as it comes back into the planet at 18,000 miles an hour, it's [1:06:43] burns up in the atmosphere or we have to spend a lot of money on heat shields. [1:06:47] and at some instant he said to himself, why not like science fiction, just turn it around and have it land. Yeah. [1:06:54] on its rock. [1:06:56] I'm not sure. [1:06:57] Well, why don't we carry more fuel? [1:07:01] So, SpaceX. [1:07:04] When we was designing. [1:07:08] I was a conceptual designer of a machine that became Voyager. [1:07:12] And went out past the planets into interstellar space where it [1:07:18] It's floating around right now. [1:07:22] Well, one of the problems is... [1:07:25] How do you know where Jupiter is? [1:07:28] Thank you. [1:07:29] It's right there. Okay. How do you know where it is? Plus or minus 100 miles? [1:07:35] You know exactly where it is. [1:07:38] When we sent a mission to Mars, we were off by 500 miles. [1:07:43] Thank you. [1:07:43] So Jupiter, we know exactly where it is. [1:07:47] Thank you. [1:07:48] Because we can look at it through our telescopes, so we can look at it from the right side of our orbit and the other side of our orbit, but still things are... [1:07:55] A couple thousand miles there. [1:07:57] And I... [1:07:58] That's too much.

[1:08:01] Thank you. [1:08:01] Hello. [1:08:02] Studying that problem, the simple solution suddenly flashed. I wish I could claim it was mine. I wasn't. [1:08:09] Which is? [1:08:10] Oh, take a picture of it once we're halfway there. [1:08:14] We'll send that picture back and we'll see it against the distant stars. And now we'll have a triangulation. [1:08:22] They love where it is. [1:08:25] So, [1:08:26] designers experience this sense of [1:08:29] Focusing on the crux of the problem, the hard part. [1:08:33] Thank you. [1:08:34] And then seeing a way through. [1:08:36] And that's strategy. [1:08:39] Strategy isn't picking strategy out of a list of common strategies. [1:08:44] It's looking at [1:08:46] The problem. [1:08:48] What makes that problem hard? [1:08:50] and seeing a way to solve it. [1:08:54] Now it's called insight and insight is scary. [1:08:57] It's scary because it's not guaranteed to happen. [1:09:01] Thank you. [1:09:02] We want to innovate. [1:09:04] but we're scared of insight. [1:09:06] We want to be the first, but we'd like to pick our strategy over a list of common strategies for being first. [1:09:13] We want to beat the market. [1:09:15] but we don't want to study. [1:09:18] and not to have an insight. [1:09:20] So insight is critical. [1:09:23] Insight is not magical. [1:09:25] It comes from [1:09:26] immersing yourself in the nature of the problem and you will have a

[1:09:31] At some point, it's about how to deal with it. [1:09:35] Thank you. [1:09:36] Oh, it doesn't always come when we want it to. [1:09:40] It can come while you're driving the car. It can come the next day. It can come in the show. [1:09:46] Charles Daubering reports that his insight into the [1:09:50] Nature revolution came as he stepped off. [1:09:54] I don't want the cabbage. [1:09:56] into the village grave somewhere. So suddenly he said, oh, yeah, I thought it's obvious. [1:10:01] It's like how we raise animals. We... [1:10:04] Read the strongest. [1:10:09] Sure. Why was that so hard for me to see? [1:10:13] Thank you. [1:10:14] So I think one of the big takeaways here is that if you want to get better at strategy or [1:10:18] be more successful with how you think about strategies, spend a lot more time on [1:10:22] diagnosing the problem and finding the biggest challenge [1:10:25] that is keeping you from what you're trying to achieve. And your insight might come the more you're merciful. And call it an action agenda. Here's what we're going to do. [1:10:36] Not here's all the things we wish would happen. [1:10:39] I love it. [1:10:41] You mentioned this point that some of the biggest challenges to executing a strategy is organizational dynamics and politics is a part of that. [1:10:50] Is there anything you could share for folks to help them through that? [1:10:53] You talked about one of the biggest challenges. People just want to keep adding more priorities. [1:10:56] There's all these needs everyone wants to... [1:10:58] include their thing in the strategy? Is there anything people can do to improve how this works?

[1:11:04] Typically, [1:11:05] I'll say typically we need hierarchy of color. [1:11:09] because there has to be some mechanism. [1:11:13] We're deciding what we're going to do. [1:11:15] And there's people with different interests and different interests. [1:11:20] private interest and [1:11:22] public interest, and somehow there has to be [1:11:26] a choice. [1:11:28] by putting some of these aside and doing this. [1:11:32] That you can't say our strategy is to do everything that everybody wants to do. [1:11:38] That's what happens when you form a committee in a city and you say, what's our city strategy? They say, oh, we're going to paint the park bridges. We're going to clean up the grass. We're going to build a new business. We're going to have a lot of that stuff, everything they're going to do with that. [1:11:52] and anybody who raised their hand and says, well, what about the burners? Can we, you know, oh, yeah, let's put that in, too. [1:11:59] Bye. [1:12:01] doesn't go anywhere. [1:12:03] So, [1:12:05] We... [1:12:06] inside organizations people have. [1:12:10] Different opinions. So that's part of it. [1:12:13] Thank you. [1:12:15] They have interests. [1:12:18] that they may not. [1:12:20] Stay clearly. [1:12:23] Thank you. [1:12:24] I interviewed Secretary of Defense Donald Rumsfeld while we were in the [1:12:29] invading a rock. [1:12:31] Second time.

[1:12:34] And I was actually interviewing, well, budget matters, but. [1:12:40] He asked me, well, what do you do? [1:12:41] professor. And I said, well, I do strategy. And he said, well, strategy, that's a hard subject. He said, you know, I've got [1:12:52] people here in the Defense Department who... [1:12:55] Thank you. [1:12:56] I'm an expert on anything. You want to know the clan structure in Iraq. We've got people that know. You want to know the weather. We have people that know. You want to know how many sort of teams we can fly in 24 hours. People know. I got anything you want to know. We got someone who knows that. But they all disagree. [1:13:14] Thank you. [1:13:14] and each other on private agenda. [1:13:17] They have a contract they want to get. They have a company they want to support. They have a... [1:13:21] conceptual idea. They weren't pushed. [1:13:25] So every little bit of information comes with an agenda, sometimes obvious, sometimes hidden. [1:13:33] And how do you put all this stuff together to come up with strategy? Do you academics have a solution to this? [1:13:40] And I said, no, we don't. We don't know much more than, you know, what. [1:13:48] You would do three best years ago, which you should put five to eight smart people in a room and you tell them to come up with something. [1:13:56] But his question. [1:13:58] is at the heart of what I call a foundry. [1:14:02] which is how do you get...

[1:14:05] a group of people to coalesce around. [1:14:08] An action agenda. [1:14:10] And what process would you use? How do you do that? So it's a different question than what should our strategy be? [1:14:19] The question is, well, how should you go about creating a strategy? Should you ask the product manager to write it down? [1:14:27] Thank you. [1:14:28] Oh, should you ask the CEO to come up with this? Hire a consultant? How do you? [1:14:32] Where do you, how do you do this? [1:14:34] In my experience, working with companies, [1:14:38] is that the senior executives have to do this. [1:14:42] Thank you. [1:14:43] And my experience is that the senior executives know [1:14:47] pretty much everything you need to know to do this. [1:14:51] But you don't need... [1:14:53] Yeah. [1:14:55] consulting firms to come in and analyze everything and to do [1:14:59] Yes, you'll gain some insight if they come in and do a competitive analysis and a customer analysis and all of that. But the basic issues, the challenges you're facing, they know that. [1:15:12] It's not mysterious. They know all that stuff, but they disagree. [1:15:18] about the importance of different things. [1:15:21] And more importantly, they occupy positions of power that if we go this way, [1:15:28] this is going to be hurt. [1:15:32] And if we go this way, they're going to bring more money.

[1:15:35] for that. And so they're not, their interests are not a lie. [1:15:41] Which is part of what? [1:15:43] Phil was referring to. And so that the problem of strategy inside an organization is, [1:15:50] It's diversity of interest. [1:15:53] and fear of action. [1:15:56] Because action, when you do something, [1:15:59] Thank you. [1:16:00] in an organization of any size. [1:16:03] It involves people changing what they do. [1:16:06] It involves changing power relationships among humans in some way. [1:16:12] That someone who's been the alpha maybe is not the alpha anymore. Someone else is the alpha. [1:16:17] this is heavy stuff [1:16:21] And this is why... [1:16:24] Thank you. [1:16:24] We have a hierarchy because someone in the end has to say, [1:16:28] It's going to be this way. [1:16:31] And people were hesitant to do that. [1:16:35] CEOs are hesitant to do that, more so today than when I was a young man. [1:16:41] it's become hard. [1:16:43] for people to do this. [1:16:45] If you go to the bookstore and look at the management section in the bookstore, [1:16:50] Most of it's about leadership. [1:16:52] Thank you. [1:16:54] and the leadership [1:16:57] is mostly about perfecting yourself. [1:17:00] It's not about leading anybody. The theory is that if you perfect yourself,

[1:17:06] that somehow rays come out of your head and people will follow you because you're so magnetic and you're so perfect and you're so wonderful and you're so insightful on that. People will follow you. You won't ever have to say anything. [1:17:19] Vegas, do that. [1:17:21] It's so embarrassing to tell somebody what to do. [1:17:24] And so this is the world we live in today, where [1:17:29] One of the problems in doing strategy is that it's somehow been displaced by this literary form about mission. And and. [1:17:40] Management is being displaced by leadership, which is the idea that [1:17:44] The leader has a vision and people, it happened in the 80s. There's a whole literature there about transformational leadership that [1:17:54] It's percolated through the system. [1:17:56] kid. [1:17:57] Don't. I'm not against leadership, but. [1:18:03] You have to tell people at some point we're going to do this and we're going to do it this way. And Bob's going to be in charge. [1:18:10] of this aspect and Joan's going to be in charge of that aspect. [1:18:16] There's a hesitancy to make those choices because that's part of the action agenda. [1:18:22] Thank you. [1:18:23] So the takeaway there is essentially have [1:18:25] A decider. It makes me think of actually of George Bush. He talked about Rumsfeld, but George Bush's famous quote, I'm the decider. [1:18:31] I don't know if you remember that. [1:18:32] Yeah, that's true. One of the things we see in government particularly is,

[1:18:38] Presidents have a hard time getting advice because they don't. [1:18:42] They surround themselves with people who... [1:18:45] more please them, number one. [1:18:47] We rarely, you know, it used to be, I remember during Woodrow Wilson's administration when he decided to, [1:18:54] take some hard action. The most spontaneous side, can you have to do something vis-a-vis Germany? [1:19:01] And the Secretary of State disagreed and quit. [1:19:04] That was it. Quick. I disagree. I don't see that so much anymore. [1:19:11] Thank you. [1:19:12] along. [1:19:13] The, uh... [1:19:15] people, [1:19:19] Organizations get frozen. [1:19:21] Because... [1:19:22] of the difficulty of [1:19:25] changing positions of interest and power in China. [1:19:30] Humans are complicated. [1:19:32] Well, if you look at Nokia, one of the big examples of strategic [1:19:39] errors. [1:19:40] Nokia was the leading smart phone maker in the world. [1:19:45] And then somehow I lost the ability to compete. [1:19:49] And, you know, interesting questions. Big fair amount of research on this is how did that happen? [1:19:55] One way it happened, [1:19:56] Thank you. [1:19:57] was they replaced the engineers who used to run the company with lawyers and accounts. [1:20:03] Not that they were all in large accounts, but they didn't have a feel for this hardware software set of issues.

[1:20:10] Thank you. [1:20:11] And another was they put in a matrix organization. [1:20:15] that so diffused power. [1:20:18] inside the organization that nobody was actually in charge of it in particular. I'm exaggerating, but [1:20:26] You know, the CEO kept pounding the desk and saying, you know, Apple's coming out with this smartphone and you have a touch screen and somebody here should make one of those. [1:20:35] but [1:20:36] There was no one. [1:20:37] an authority to do such a thing. Maybe a final question on the other end of the spectrum from Nokia from a startup founder's perspective. [1:20:46] What is a strategy and what should a strategy look like if you're just a founder, pre-product market fit, just trying to figure out where you want to go? [1:20:53] What should a strategy look like there? Do you even need a strategy? [1:20:56] Well, you're dealing with a lot of uncertainty. [1:21:00] When you're a founder and a startup, you're making a bet. [1:21:06] You're making a bet. Like a oil well wildcatter would say, I bet there's oil under this ground. We're going to drill. We're going to find it. There's a certain amount of bet that's going on. [1:21:16] And you should be clear. [1:21:18] about the nature of the bed. [1:21:21] The reality is going to be revealed to you in bits and pieces as time passes. [1:21:27] whether a certain approach is going to work or not. [1:21:31] What we find doing research on startups, Silicon Valley startups, is, [1:21:38] is they start out typically.

[1:21:41] aiming at a particular product market solution. You know, and the idea that you have in your head is there's a set of customers who want a, [1:21:52] would like to have A, or being denied A, but... [1:21:55] we have a way of giving them it. [1:21:58] Something, product or service. [1:22:01] Now, some people, they aren't that even advanced. They basically say, I know how to make something and I'm going to try to sell it. [1:22:09] He'll last drop. [1:22:11] if you're [1:22:13] If you have any chance of succeeding, you have a target market and you have a solution to the target market. It's probably not. [1:22:21] And now you're going to go after it. And the research that we have done on these startups is that [1:22:29] Jeremy does all. [1:22:33] But the ones that survive and prosper. [1:22:36] Switch. [1:22:38] I said, well, it isn't that customer, it's a different customer. [1:22:40] You go after that customer. Oh, and that customer wants to select either product. [1:22:45] And they... [1:22:46] They switch over a period of a year or two, three years. [1:22:50] Back, back, until something begins to click and they begin to grow and they begin to add. [1:22:55] Valkyriems. [1:22:57] And now since. [1:22:58] So there's a search. [1:23:00] There's a search like a truffle hound, searching with a truffle. [1:23:04] that's going on. And you've got to be, I think, you've got to be at two minds. [1:23:10] Like so many things in business when you're doing this, you've got to be two lines. You've got to be convinced of the certainty that you're going to win.

[1:23:19] And you've got to be willing to shift. [1:23:22] when pigs aren't working. [1:23:25] Thank you. [1:23:25] And that's a double-jointed exercise that some people can do and some people can't. It's also a human skill. [1:23:33] to both commit [1:23:35] And to be willing to move. [1:23:38] Put it to bet. You should be clear in your own mind about the nature of this situation, the technology that you're betting on. [1:23:49] Thank you. [1:23:50] Oh, sometimes it's evolving so fast. [1:23:54] like generative AI age right now, [1:23:59] that you can't be sure. [1:24:04] Yeah, you're going to... [1:24:05] take a position [1:24:07] where you think things are going to be in a year. [1:24:12] And... [1:24:15] Thank you. [1:24:16] That's very, very entrepreneurial, very edgy stuff. [1:24:20] Uh-oh. [1:24:22] What a child. [1:24:24] Go back and read about the beginnings of the electrical industry or the beginnings of aviation or beginnings of motorized this beginnings of cars. I mean, [1:24:34] Thank you. [1:24:35] People had to bet about what this industry would look like. The first cars were electric cars. [1:24:41] Drift cars sold in quantity now in states for electric delivery vehicles used downtown in cities. [1:24:47] Delivering that much brain produce. They were like, we're out of batteries.

[1:24:52] that was the bet [1:24:54] Thank you. [1:24:56] All that changed with the First World War. The United States built... [1:25:00] Thousands and thousands of gasoline-powered trucks to go to Europe, rustled through the mud. And people came back knowing how to fix those engines. And those trucks got sold off as wholesale to farmers. It gives them all their fields. And we had the gasoline to take off like a rocket. [1:25:16] So you cannot predict the future. [1:25:22] There's an Arab saying that I like. [1:25:24] It says, he who forecasts the future lies even if he tells the truth. [1:25:30] Thank you. [1:25:32] We're making bets. [1:25:33] That's what business is. Remake you bad. [1:25:37] And... [1:25:38] If we're a rich company... [1:25:42] We could make a bed and a fork to you all. [1:25:44] You'd love it for a startup? [1:25:47] We have to be fast. We have to adapt as the information comes in. [1:25:54] And that's the nature of the story. The action agenda has to be quick adaptation to... [1:26:01] to changing conditions. [1:26:04] Thank you. [1:26:05] I feel like you have another book here where you could adapt a lot of this [1:26:09] wisdom to startups. I'm looking at my notes from what we were talking about earlier, and you had this point of when you're trying to write out a [1:26:16] You call it an action agenda, not a strategy. You're basically on the hunt for a big problem. [1:26:21] and an important problem and an achievable problem.

[1:26:24] And essentially you can boil that down to that is the job of a founder to find an important problem, an achievable problem, and then solve it for a lot of people. [1:26:31] Yeah, yeah, I like that. I like the other exercise I used to take my students through. [1:26:38] Wards up. [1:26:41] what I called, uh, [1:26:43] Value denied. [1:26:46] Now what is it that [1:26:49] You should be able to buy, but you can't. [1:26:52] Hmm. You know, and as a time I taught this stuff, [1:26:57] I was upset because I lose my baggage on a nonstop flight from Los Angeles to Paris. [1:27:04] So I'd like to buy baggage. Sure. So I'd like to buy a state. How do you get your baggage not to be lost now with security systems in place? It's less. Let's call it. Can I find someone to help me remodel my home? It's going to be on time and I'll put you. [1:27:23] with me. [1:27:24] Not available. Can't buy it in price. [1:27:27] If I live in Hong Kong and I'm going to the airport, I can drop my luggage off downtown. [1:27:34] And it arrives at the airport, checked in. [1:27:37] I don't have to let you. Why can't I do that in the U.S.? [1:27:41] value that I and then [1:27:45] Thank you. [1:27:46] Engineering, you know, thinking about... [1:27:49] How something ought to be. [1:27:52] You know, it's all...

[1:27:54] Salesforce. [1:27:55] dot com got started was well how should this be it shouldn't be a computer it should be a web page [1:28:04] It should be [1:28:06] Like I was in books. [1:28:11] And so that was the beginning of Salesforce.com. [1:28:14] I asked a group of students wants to think about the perfect window. [1:28:21] Because it's physical, something we could think about in the classroom without doing a lot of research. [1:28:26] Oh, what's a perfect window? Oh, perfect window should be transparent. Should let the sun in. All right. So it's just let in the light. [1:28:34] But not all the time. Sometimes you want to watch the toilet. So it should also darken. [1:28:40] Drapes for four shades. Okay. It should let in the air. Good. [1:28:47] but not the bugs. It's great. It should let in the air, but not the noise. That's a little harder. [1:28:56] Yeah, so you go down the list of things that a window should do. It should let in light, but not light. It should let in air, but not the noise. It should not let in air. We don't want it. It should not let in the box. [1:29:07] It should maybe have shutters or not shutters. And so I said, well, how could you design the perfect window? What would it look like? [1:29:15] And, [1:29:16] There's some kids at MIT that had developed this thing that lets in here but keeps out the noise. These little water...

[1:29:24] auditory filters. [1:29:27] Keep out noises and certain frequencies. Well, we don't have a perfect one. [1:29:32] But... [1:29:34] Think about it. [1:29:35] Windows could be better than they are. [1:29:37] and that's a real simple device that we're all familiar with. [1:29:41] Thank you. [1:29:42] and look around you, look at everything you've got and say, well, [1:29:47] How should it be? [1:29:49] And there's opportunities there. Now, a lot of the times the opportunities are blocked by the lack of certain materials, regulation. [1:30:00] Regulators have decided that you can't sell a corn in the United States unless it goes through a deal. [1:30:08] Thank you. [1:30:08] So that... [1:30:11] that holds back innovation in that business. [1:30:15] Thank you. [1:30:15] And so. [1:30:16] plumbing. How should plumbing actually work? Well, [1:30:21] There's a whole search of rules about how plumbing works and electrical things work. You can't innovate there very easily because of the underwriters labs and the unions and a lot of the stuff that's done in home construction is there to create jobs, not to reduce costs. [1:30:40] So, [1:30:41] How do you get around that? [1:30:43] Yes, you have to look at places where it's possible, first of all. [1:30:47] But yeah, the idea of how do you make something better? How do you make it perfect? What would the perfect lightswitch you like? And so on. [1:30:54] These are real simple, silly questions, but they lead to new businesses, new firms, if you pursue them.

[1:31:02] I love how full of startup ideas you are. I also think we came up with at least two new books that you can write. I think you're going to have a lot of work to do after this. [1:31:09] conversation. [1:31:11] Final question, is there anything you want to leave listeners with or take away? Is there a final nugget you just want to share for folks? I want to share with you that strategy is not mysterious. [1:31:22] That... [1:31:23] I've spent my life studying strategy, pursuing it, consulting on it, writing about it. It's not mysterious. It's about solving problems. It's about solving the most important problem you're facing that you actually do something about. [1:31:37] Thank you. [1:31:38] You don't have to be [1:31:40] Some to the call for the strategy. [1:31:43] Thank you. [1:31:44] But you need to be focused on something doable and be consistent with it. [1:31:49] Thank you. [1:31:50] Huh. [1:31:51] I have a long list of things not to do. There's a fourth book where I'm thinking about writing called Don't Do That. I would read that. I love that title. [1:32:01] Can I tell you a story? Absolutely. [1:32:04] Thank you. [1:32:05] My wife, Kate, took up skiing when we got married. [1:32:08] 24, 25 years ago. And, uh, [1:32:12] Shed his step. [1:32:14] that she couldn't get rid of. [1:32:15] When you make a turn, you know, turn like that, you put the ski out and snap. [1:32:22] Right. [1:32:23] Me or she on one ski. I did all sorts of things. She couldn't she couldn't fix it. [1:32:30] And finally, we signed up with that.

[1:32:33] illustrious [1:32:34] ski teacher in Aspen. [1:32:36] Three-day intense program. Guaranteed. [1:32:40] that you would lose your staff exceedable. [1:32:44] And so we went there and [1:32:47] On the second day, I followed behind the instructor and her to see what was going on. [1:32:53] Uh, [1:32:54] They had been through some exercises on day one, but on day two, they were focusing on this. And she would put out her ski like that. And you yell at her. He's like, don't do that. [1:33:03] And after a day of being yelled at, don't do that, she didn't do it anymore. She was fixed. So the secret technique. [1:33:12] that they have in this program for curing your time with the yellow dude and telling you don't do that. [1:33:18] And so I'm thinking about a book called Back to the... [1:33:22] about a business thing where, [1:33:25] I'm not sure it makes sense, but... [1:33:29] You have to noodle these things for a while before they begin to gel. [1:33:33] Yeah, I love this idea. Reminds me, one of my friends as a therapist. [1:33:37] And there's this video by Bob Newhart, [1:33:39] where he's [1:33:39] A therapist. [1:33:41] And someone comes to him and they've got all these problems. I get really sad when I think about my mom and I have this chronic pain and his advice, just stop it. [1:33:50] Just stop it. Don't do that. Stop clicking retro wall. Just stop it. [1:33:54] That's the advice. [1:33:55] And so... [1:33:56] I feel like there's a lot of synergy there. [1:33:58] All right, well... [1:33:59] With that, we've reached our very exciting lightning round. Are you ready?

[1:34:04] I guess so. [1:34:06] Heh. [1:34:07] First question, what are two or three books you've recommended most to other people? I feel like this is going to be a challenging question, but what comes to mind? It sort of is. Yeah, I mean, the books, I'm taking questions and stuff about the innovator's dilemma. [1:34:21] is always solid. [1:34:23] Books on strategy that I recommend to other people. [1:34:27] I'm [1:34:28] There aren't that many. [1:34:30] So I like playing to win. [1:34:33] by Roger Martin. [1:34:36] I really recommend... [1:34:39] Other kinds of books, strategy books. I mean, it's easy to get a list of strategy books. [1:34:45] But I think you should read biographies and histories. [1:34:49] I think, you know, the book about Steve Jobs is brilliant. [1:34:54] I like books about... [1:34:58] business leaders. I'd recommend Andy Grof's book. [1:35:03] Only the paranoid survive. [1:35:07] Oh. [1:35:08] and a few others, but I recommend that people read more broadly. [1:35:14] about people, Rockefeller's history is fantastic. Now, the guy and then the stuff about Rockefeller and how he put together [1:35:25] I mean, Rockefeller was a robber baron and he built an empire and all that. You learn that in school. But what you don't learn in school is he dropped the cost of a gallon of curacy from a dollar to ten cents.

[1:35:39] Okay, that's the labor error. [1:35:43] And he made kerosene so inexpensive. [1:35:46] Then he drove full of little mom and pop for buyers out of business, which is why they hated it. [1:35:53] So... [1:35:56] You know, he was he was so vicious competitor. [1:36:01] Bye. [1:36:03] He dropped the price of something by an order of baggage. [1:36:10] Fascinating. [1:36:11] So, yeah, I mean, it's important to understand that. [1:36:14] Stories. [1:36:16] Not just curious. [1:36:18] but stories. [1:36:21] Yeah, I love how this always comes back to just being steeped in history and the specific point about biographies is really interesting. [1:36:28] And we'll link to all these books that you're mentioning in the show notes. [1:36:31] Is there a favorite recent movie or TV show that you've really enjoyed? [1:36:35] Oh, yeah, sure. Well, I like Yellowstone like everybody else fascinated by it. [1:36:41] Recent movies other than y'all's? I'm not sure. [1:36:45] I don't have a TV in the house right now. So I'm sure not connected. [1:36:51] That's amazing. [1:36:52] That's the dream. [1:36:54] I wish I could do that. [1:36:55] Yeah. [1:36:57] There will be a TV, but that room has been remodeled. Okay, I see. [1:37:03] Just a matter of time. [1:37:04] Okay. [1:37:05] Is there a favorite interview question you like to ask people you interview, maybe specifically around helping you get a sense of are they good at it?

[1:37:12] strategic thinking. [1:37:14] Yeah, I like to ask people about... [1:37:17] What have you done? [1:37:19] But... [1:37:21] Was hard that you're proud of? [1:37:24] Thank you. [1:37:25] What have you done that was difficult? And what was it? And why was it difficult? And how did you get it done? [1:37:35] I like to ask people about what they think. [1:37:40] was an interesting strategy from any time in the past they want to [1:37:46] They want to call out. [1:37:48] Depending on the person's background, I might ask about a particular company or situation. Why do you think [1:37:56] This worked or why didn't it work? [1:37:59] Thank you. [1:38:00] So I don't tend to ask questions. [1:38:03] questions about [1:38:05] Theory. [1:38:07] And ask questions about... [1:38:09] Things that happened. [1:38:10] And partly I'm looking to, you know, does this person have any knowledge? [1:38:16] about the world. [1:38:17] Or are they just... [1:38:19] They just know what the professor said last year. [1:38:23] All right. [1:38:24] So that kind of thing. [1:38:28] Is there a favorite product you've recently discovered that you really like, whether it's an app, some you bought, some in the house? [1:38:34] So I'm on the road. [1:38:36] Well, we've got this new memory foam bed that we like. It's pretty amazing. [1:38:40] Innovation is pretty...

[1:38:42] I didn't think we liked that, but we do. [1:38:45] Thank you. [1:38:46] I really am fascinated by him about him. [1:38:49] Pull the trigger on buying one of these new smart telescopes. Smart telescopes. I haven't heard of that. What makes them so smart? 12-inch. [1:38:58] Reflecting telescope. [1:39:00] And it's too heavy to look around. It's too difficult to set up. But there are some new smart telescopes. [1:39:08] that, [1:39:10] Run on a battery and you can put them outside. And the way they work is, first of all, they know where everything is in the sky. [1:39:16] which has been around for a long time. The new thing is they... [1:39:21] Bye. [1:39:22] It's like astrophotography. They'll look at something for a minute, two minutes, 10 minutes, an hour. [1:39:28] and form an image. You don't look through the telescope, you look at it on your phone or your computer, but you can see now the nebula. [1:39:37] that maybe the Webb telescope can see. And you can see it now. You can see stuff. [1:39:43] Out there. [1:39:45] that you couldn't before. These are new things for, you know, $1,000, $2,000 set. [1:39:51] that are remarkable in what they can do. [1:39:55] Excellent choice. [1:39:57] Next question. Do you have a favorite life motto that you often find yourself coming back to sharing with friends either in your work or in your life? [1:40:05] used to [1:40:06] I have a final lecture I give to my MBA students about. [1:40:10] little pieces of wisdom.

[1:40:14] Things not to do. [1:40:16] Mm. [1:40:18] things that offend people in other cultures. [1:40:21] Don't do this. If you're a turkey, it means something else there. [1:40:25] "Hang, I'm a man. [1:40:27] But I'd also say at some point, [1:40:31] Your spouse or your partner. [1:40:34] We'll ask you. [1:40:35] Do you still love me? [1:40:37] Thank you. [1:40:38] And there's only one correct answer to that question. [1:40:42] which is... [1:40:43] More than ever. [1:40:45] Amen. [1:40:46] And, you know, [1:40:48] my wedding ring shows that inside it more than ever. So, [1:40:54] I don't know if that's what you're looking for, but that's going to wipe that piece of wisdom. [1:40:59] That is really good advice. Give me tingles. I'm going to use that 100%. [1:41:04] Thank you for some marriage advice. [1:41:06] *laughs* [1:41:07] Final question. Your daughter, Cassandra, is a writer as well. [1:41:12] In fiction, she writes fiction. Is there anything that she taught you about writing that's helped you become a better writer? [1:41:18] Yeah, Cassandra is, oh my God, she's got like 25 books on the New York Times bestseller list for Teen Picture now. [1:41:26] She started writing when she was. [1:41:29] 12 or 13. She had a talent for it. [1:41:35] Paul [1:41:38] She's told me about the tension that you have to create, you know, and she writes novels.

[1:41:47] And that, you know, it's not interesting unless there's [1:41:51] you [1:41:51] Well, she started, we started talking about this when she was young. She was 14. And she asked me about what is romance? [1:41:57] All right. [1:42:01] I said, well, romance is a barrier. [1:42:05] where there's a difficulty. [1:42:07] Back to Kabul. And, you know, there's some kind of she said, oh, like he's rich. She's poor. [1:42:14] Yeah, back then. Or he comes from the north side of town and she comes from the south. I said, like that. [1:42:20] yes and she said oh like he's a vampire and she's not [1:42:25] Yeah, I said, oh. [1:42:26] Okay. But... [1:42:29] So, [1:42:30] Yeah, yeah, she has alerted me and talked me about that. [1:42:36] that ways of creating that kind of tension in writing. It doesn't work as much in business writing as I'd like, but I tried to create this sense of, uh, [1:42:49] That's good strategy, bad strategy. It's a sense of it. [1:42:53] Yeah, there's a... [1:42:55] tension between the right way and wrong way, or if not a right and wrong way, at least there's a tension between should we go left or should we go right? [1:43:03] It makes it interesting. Otherwise, it's... [1:43:08] Thank you. [1:43:09] It doesn't catch people's emotional. [1:43:12] core. [1:43:14] Amazing. [1:43:15] Richard, thank you so much for being here. I think we're going to help a lot more people.

[1:43:20] Face. [1:43:20] bigger challenges and face them head on. [1:43:23] and put together their action agendas and overcome this crux [1:43:28] Thank you so much for being here. Two final questions. Where can folks find you if they ever want to try to reach out or learn more about the work you're doing these days? And then [1:43:35] How can listeners be useful to you? [1:43:37] I have a little website called the cruxbook.com. [1:43:42] that has information about me and about the books [1:43:47] So there... [1:43:49] Or don't write to me at UCLA. I don't pay attention to the UCLA website anymore. But if you go to thecruxbook.com, there's... [1:43:58] There's some email addresses where I can be reached. My little company is called General Imagination. [1:44:05] It's like General Motors, but a lot smaller. It's just me. [1:44:09] Thank you. [1:44:09] And you can reach me at Richard at worldmanaging.com. [1:44:16] you know, you can help me out. [1:44:18] Oh, tell me stories. [1:44:20] Thank you. [1:44:21] stories about your experiences trying to create strategies, particularly inside organizations, you know, that, [1:44:29] Thank you. [1:44:30] How's it worked for you trying to get something done inside a organization? [1:44:35] um, [1:44:36] Fine. [1:44:37] I'm happy to. [1:44:38] to add more stories to my repertoire. [1:44:41] Mm. [1:44:43] Oh, and Iron Man. [1:44:45] Wait, say more on that. [1:44:48] What is it that people would hire you for?

[1:44:50] Yeah. [1:44:51] At this point in my life, I do public speaking. [1:44:54] has become strategy and growth. [1:44:57] And [1:44:58] that just got back from Korea doing a talk there [1:45:03] Bye. [1:45:05] do a little bit of teaching, [1:45:07] Not much. Maybe for the military people, if they want me to come in and [1:45:12] Do a day on strategy. [1:45:14] Thank you. [1:45:16] And, you know, [1:45:17] I do salaries. [1:45:20] Foundry is... [1:45:22] where [1:45:23] You commit to a problem-oriented approach to strategy. [1:45:29] where the organizational leader, the CEO usually, plus... [1:45:33] Another seven or eight people. [1:45:35] Okay. [1:45:36] two to three or four days off. [1:45:39] And we meet. [1:45:40] And we tried to come up with... [1:45:43] in the end, an actual agenda. [1:45:46] Allah. [1:45:47] And it's a [1:45:50] It's an interpersonal exercise. I mean, the facilitator. [1:45:53] I don't tell them what to do. [1:45:56] but I urge them to look more deeply. [1:46:00] and to understand what these problems actually are. It's interesting to do a family. You get quite focused on problems, as I do at the beginning. I often get 25, 30 problems out. [1:46:11] a hold of board or post-it notes around. [1:46:15] And when people look at that, [1:46:18] Because they haven't ever done this before.

[1:46:20] ... [1:46:21] when they see the 25 different problems or challenges. [1:46:26] They realize you can't do them all. [1:46:28] Thank you. [1:46:30] And so they begin to get this sense, well, geez, we better focus. [1:46:33] Better focus on something. [1:46:36] We better do something about some of these. [1:46:39] And so then we begin to go through this thing. I don't know which ones are really important. [1:46:44] and which ones are really addressable. [1:46:48] Well, sometimes we don't know if they're a customer or not. Oh, well, is there anybody in the organization who does know? Is there someone we could fly in here who has some perspective on this? How do we... [1:46:58] So we begin to try to identify the one or two key challenges that can actually be addressed. And what are we going to do about it? What are the challenges? [1:47:07] coherent actions we are up to to [1:47:10] to take these off. That's the answer. So, [1:47:14] God. [1:47:16] It's from time to time. [1:47:17] After the founders all say to me, well, where's the strategy? [1:47:22] Where's the document with the mission, vision, all that? [1:47:26] No, that's not what we do. We're doing an action agenda. [1:47:32] And, uh, [1:47:34] The foundry is time consuming and, uh, [1:47:40] A bit expensive to some extent, but most of the times we've had foundries, they really help the company. [1:47:50] Allah.

[1:47:52] Gather its wits and its resources and do something. [1:47:57] Thank you. [1:47:57] which [1:47:59] I'm very pleased with how the foundries work. [1:48:03] it's not so easy to figure out how to take the Foundry concept and expand it. [1:48:09] I've talked to a couple of consulting firms about, well, you guys like to learn how to do foundries and, [1:48:14] They say, "How does it work? It's one guy for three days." That's not what we do. We do 10 guys for three years. It's not a business model. [1:48:25] But that's a nice asymmetry for me because, you know, they're not going to compete with me. [1:48:31] I love that. I feel like you're about to get a flood of interest and requests. [1:48:35] For everyone else, make sure to buy Richard's books. I got them right here. The Crux Good Strategy, Bad Strategy. [1:48:41] Richard, again, thank you so much for being here. [1:48:45] Lenny, thank you for a really pleasant time. Ciao. [1:48:48] It was 1000% my pleasure. [1:48:51] Bye, everyone.