UNIVERSITY OF JYVÄSKYLÄ
School of Business and Economics
Department of Management and Leadership

Essay

Gary Hamel, C.K. Prahalad: ”Competing For The Future”;
Harvard Business School Press; Boston, Massachusetts 1994

Course: YJOC10 Competitive Strategies

André Berndt

Place, date: Jyväskylä, 30.04.2003

Table of Contents

1. Summary of the book  3
1.1. Getting Off the Treadmill  3
1.2. How Competition for the Future is Different  4
1.3. Learning to Forget  5
1.4. Competing for Industry Foresight  5
1.5. Crafting Strategic Architecture  6
1.6. Strategy as Stretch  7
1.7. Strategy as Leverage  8
1.8. Competing to Shape the Future  8
1.9. Building Gateways to the Future  9
1.10. Embedding the Core Competence Perspective  10
1.11. Securing the Future  11
1.12. Thinking Differently  11

2. Opinion about the book  12

3. Personal example of the books idea  14

1. Summary of the book

The book “Competing for the Future” by Gary Hamel and C.K. Prahalad deals mainly with issues what companies respective managers have to do today if they want create the markets of the future and/or revolutionise their industries. The authors describe their book as a guide for managers who are willing to focus on the long-term and not only short-term success of the corporation a guide to imagine the future and afterwards to create it. Like the authors state in the end of the book, it is not only about making a difference to managers but also about making a difference to customers as well as employees. The book is divided into 12 chapters, which I am succeeding going to summarise.

1.1. Getting Off the Treadmill

Hamel and Prahalad start with an explanatory statement why restructuring and reengineering are not sufficient if a company wants to keep one step ahead of the steadily declining margins and profits of yesterday’s business. The main reason is in their opinion the accelerating pace of industry change especially regarding technological, demographic and regulatory issues. The increasing pace of industry change led to discrepancies between the pace of change in the industry environment and the pace of change within the companies themselves concerning structure, values and skills. Hamel and Prahalad argue, that as reasons for restructuring are often lacks in efficiency and productivity mentioned, which are often measured in ratios like Return On Investment. The author’s state, that restructuring is basically driven by the reduction of the denominator of the ratio, wherefore only a red pencil is needed. Numerator management (for example raising net income) however is in their opinion likely harder and more time consuming. Therefore it is key management task to go beyond the “harvest strategy” of aggressive denominator reduction (restructuring) in order to ensure the long-term competitiveness of the company.

Hamel and Prahalad understand reengineering (“21-century Taylorism”) as a higher level than restructuring – whereas they regard restructuring as never more than a necessary thing, reengineering can be a good thing. Reengineering aims to focus every process in the company in the direction of customer satisfaction, reduced cycle time and total quality, but is probably not the right tool to root out sources of future competitive advantages. Rather proactive than reactive organisational transformation is needed. The authors plead furthermore for a new view of strategy that focuses not only on becoming smaller, better and faster but also on becoming different, what means being capable of fundamentally reconceive oneself, regenerate ones core strategies as well as being capable of reinvent ones industry. This implies a view of strategy that recognises the need to unlearn and develop great foresight as well as the need to construct a strategic architecture and better resource leverage. Hamel and Prahalad suggest three ways how companies can create markets for the future in order to be (also) in the future an industry leader: (1) change fundamentally the rules of engagement in established industries, (2) redraw the boundaries between industries and/or (3) create entirely new industries.

Those primary challenges of becoming the initiator of industry transformation have to be followed by a secondary challenge of organisational transformation. Thereby the goal of both transformation processes is that the result is revolutionary whereas the execution is evolutionary (“bloodless revolution”). The end of the transformation process is not clear without ambiguity, because there is not one future but hundreds. In this respect the authors call business as the ability to uniquely imagine what could be – the art that distinguishes leaders from laggards.

1.2. How Competition for the Future is Different

Hamel and Prahalad consider competition for the future not as an extrapolation of the past, because new industrial structures will supersede old ones. That means existing industries will be profoundly transformed and entirely new industries will be born. These opportunities are inherently global whereby for example global distribution, forming of alliances and assembling of competencies will be necessary. Insofar competition for the future requires not only a redefinition of strategy, but also a redefinition of top management’s role in creating strategy – they have to imagine the future in order to create it and profit from it. The authors state that there are at least six issues concerning which future competition is different from today’s competition:

[....]