5 essential questions to craft a winning strategy | Roger Martin (author, advisor, speaker)

30:10And so they just had to say, we can't stop that. Not everybody's gonna do it, but a whole bunch of people are and there's nothing we can do to stop that. What I love is we're already diving into these five questions. So we've been mostly talking about how we will win. Basically, here's your options to win. Low cost provider or be differentiated or find a different place to win. Let me summarize the five again. What is our winning aspiration? Where will we play? How will we win? What capabilities must we have in place to win and what management systems are required to make sure the capabilities are in place?

30:44Right? You got it, that's cool. Quick study, my friends. I got some notes here. So coming back to the, how will we win? Because I think everyone's listening to this. Okay, cool. We got two ways to win. We're gonna be the cheapest or we're gonna differentiate. Okay. How do we differentiate? Do you have, is there like a taxonomy of options that you think about or tell people like, what are the ways and options for exploring? Here's how we will be different. It is mainly understanding customers kind of, as well as you can. And then, and then saying, is there a way to be distinctive against that? And there are lots of ways to do it, but it's tied very closely to the capabilities, right?

31:28Which is, if you have a way of winning, right? You say, you say, my way to play is, I'm gonna sell pet food on the internet. And my how to win is, I'm gonna, I'm gonna kind of be the best, but it turns out that anybody who can build a website can sell pet food on the internet. And in fact, 20 of them do it almost immediately and they all go bust. You don't have the capability. So you've gotta ask yourself the question, can I serve a particular customer need with a set of capabilities that are gonna be hard to replicate by my competitors. They either can't do it or they won't do it. And both are important questions because sometimes it's won't, right?

32:19Like, do you really think Walmart couldn't have built as good a website as Amazon and at massive scale? I think they could have, right? Yeah, probably. If they, they didn't. They said, I hope this online thing doesn't really take off because that would be a pisser because we've got 5 ,000 stores across America and we've got all that and that would be really, that would be a bummer. And so they don't do anything for 10 years, giving Amazon the scale. So the Amazon has this huge scale advantage kind of on this and network effects and voila. You've got a competitive advantage that you didn't necessarily kind of completely deserve.

33:09You needed the help of the player who stood to lose the most to hope that it wasn't going to happen. Same with Tesla. Tesla got a 10 year head start not because the OEMs couldn't, they could have. And of course GM did many, many years ago, right? Great, a fully functioning electric vehicle, but they couldn't, they couldn't figure out how the hell you make a box on it. And so they didn't, they didn't do it. Giving Tesla the ability to establish a brand that the people associate with that. Electric vehicle equals Tesla and get them, allow them to jump way ahead and then have the scale that is hard for others to match.

33:54You said something that's really interesting that I think is also really important, which is you said that just being the best or better is not a solution. You could have a better pet food. You implied that's not going to get you there. Can you talk a bit about that? Yeah, you have to answer a second question, I guess, which is, which is, here's the way I'm going to be better and here's the way somebody else isn't going to be able to simply replicate that quickly, right? Like one of my, one of my favorite businesses, because I was on the board of Thompson Reuters for 14 years, it was Thompson first and then he bought Reuters at Thompson Reuters, best business is a business called West Law.

34:31And it's the dominant provider of online legal searches. So if you're a litigator and you're trying to, you're getting ready for a case and you need to know what are the, what are the important precedents for this case? You go on to West Law and put in some search terms using a West Law keyword as a system to help with it and you get the five cases that really matter. You can Google it and do the same thing and you'll get the 500 cases that might matter, right? So how does West Law do that? Well, for now over 100 years, they've taken every case that's come out of the, the US legal system had a lawyer, a West Law lawyer, right ahead note that summarizes what's in the case using these keywords so that they are searchable.

35:33And today to do 2024, it takes 1 ,500 full -time lawyers, right? So if somebody else said, you know, it says West Law business is incredibly profitable and it keeps growing and it's, you know, it's awesome. I'd like to be in that business. All they'd have to do is hire 150 ,000 lawyers full -time and you'd have to create a numbering system and a keyword system that's different than West Laws and then you'd have to do what West Law has done for the past 50 years, which is give it free to law schools so that they teach their students before they even get out how to use West Law and all, you know, no probs, that'll be easy, right?

36:17You know, nobody's even tried. Why bother? Life's too short and that's the kind of, the kind of capabilities you need to be able to say will win by having the searches that make the lawyer's job the most effective. And if it saves them time, it saves them money, right? And you don't need a huge law library, like offer them these huge law libraries, right? You don't need one, you need a terminal where we're actually now, it's on everybody's PC and you don't need a bunch of librarians to go and find the cases that you need to pop up on your screen. That's a great case of competitive advantage. Today's episode is brought to you by Cycle, the AI -powered feedback platform for product teams.

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37:48What makes Cycle different is the way that it lets you close feedback loops in each release. Feedback is not used just as a way to prioritize what to build, but also as a tool that creates trust with all stakeholders. Sign up for a free Cycle trial today at Cycle .app slash Lenny. And put your feedback on autopilot. That's c -y -c -l -e .app slash Lenny. So essentially, we're talking about modes. What are some modes that you can create where people can't just copy what you're doing? Good, more in bucket likes that terminology, but that's what he says. He invests in modes. Yeah, yes. I'll find the code, we did in a recent podcast episode, but he's like, yeah, castles with modes.

38:30And maybe along those lines, is there a way you think about types of barriers to recreate capabilities? Is like, here's the options we have. Is it like essentially the seven powers, say, think talks about this? Yeah, I mean, that's why I kind of like Kilmer, not like because he categorizes them. And I've got to look into it some more. I mean, I haven't studied it to say whether I would concur that there are just seven, or there are more. My suspicion might be that there are more, but there may not be. They may be all clustered. There may be variants that cluster behind those. But I don't myself have a categorization scheme that says, here's how you search for the mode.

39:20Great. That would be nice. So here's the quote from Buffett, by the way, I look for economic castles protected by unbreachable modes. Yes. I like that. I like that. And he's smart. He's consistent. Though, everybody makes mistakes, right? And he did too, right? Stalin, brothers, US air. It's, you know, anybody who thinks they can be perfect on strategy is delusional. And so even the very, very best, like Warren Buffett, who's outstanding, arguable, genius is going to sort of think, I think this, I think this is a mode, and it's going to be ephemeral. But I, you know, any of us should be pleased to have a track record that would be anywhere close to that on really identifying modes because he has.

40:11We talked about the Hamilton Helmer that every start of deck has like, here's our modes, here's how we're going to have various entry and they're all delusional like rarely is there ever actual mode. At least, especially in early stages. Yes. Let's go back to the five questions again, because that's so core to the way you think about strategy. What do you think about using, say, this Vick Jam, is an example as a hypothetical, just to think through questions that they might ask to think about strategy. And I can describe what Vick Jam is. So you will be aware. Sure, sure. I do not know that product.

40:39It's basically a visual whiteboard collaboration tool where people can put in sticky notes and put a little mocks and kind of play around with our servers. And so it's like brainstorming and ideation and things like that and laying out concept. Gotcha. Okay, that would make sense for. For fun. Yeah, exactly. Yeah, right. Okay, so you asked the question, sort of, kind of what are we trying to accomplish? Right? Are we attempting to create something where nothing sort of digital exists? People do this in pen and paper or are we, and so we're trying to invent a category and then be transformative by making the user experience better?

41:24Is that what we're trying to do? Or are there players already doing this and they're just not doing it very well? You want to sort of say, well, what are we trying to accomplish? And I don't spend a whole lot of time on that because you got to toggle back and forth between those five questions. But you have to have a reason for searching in a given space for a way to play how to win. And so, so what do you think their reason for thinking Jam is worth investing in is? What do you think it is? Is it, is it, is it, is it white space or is it, is it crummy, crummy offerings in the market currently?

42:03Like if I had to get to it, I think it's there trying to expand their market and they have a stronghold in design tooling and there's this adjacent market for product teams broadly to be using Figma more and there are existing tools similar to that that are good. So I don't love it to start. I had to say more. So there's a big market over there. We'd like to get some as a terrible reason in my view. The reason should be customers are bereft customers are lacking something that we can provide. This is why I hate most and most entries by foreign companies into China. They get their faces shot off.

42:53And the reason is so rationale is it's big. We could get some of that. So I don't love it for starters. And I'm not saying that that will guarantee failure, but it's, it's, it's, somebody gave me review of the pitch deck for that. I would, I would not admit. Well, I imagine you can also frame it in other terms like our customers are demanding more ways to work within Figma with their teams and there's these. Yeah, that, that, that, so that would be, that would be a better one. And you're speculating, I've asked you to speculate. So we don't know, but I like that one better, right? Which is, which is, well, that's our aspiration is to satisfy core customers who love what we do, but think it's too narrow that that if we could broaden that for them into this market, our, our customers would be very happy.

43:47That is really cool. And so you want to frame it in the words of how customers would benefit essentially. I just think those are tend to be, tend to be stronger, strongest. If there's a link because remember, what is strategy about compelling desired customer action, right? So everything sort of ties back to that. So then the way to play would be, you just want to say, okay, what customers are we talking about or what parts of our current customers that we don't serve, are we, are we attempting to serve with that? And what, and with, kind of what product is it, you know, is it a finished product?

44:21Is it a component of, you know, kind of product through what distribution channel? Would, would we sell this? This is another self -serve type product, because I think Figma is mainly self -serve, right? Yeah. Yeah. And, and so you choose that where and then say, how can we solve before we get to that? Before we get to that where we, oh yeah, yeah, yeah, please. So the things you mentioned there is like, who specifically are the customers? So in this case it'd be like product managers, engineers and other functions. And then, yep, there's the distribution channels, like how we'd actually get to them.

44:55Get to them, yeah. And then what else was, what other questions are there within this where we would like? Is it sort of, to what extent is it a finished product or a component? Because sometimes it could be, you know, we'd like to supply this component that could be integrated into other people's products. I mean, that's what Apple apps are, right? Got it. We don't sell them an iPhone. We sell them a component within the iPhone. The customers iPhone is that what we're doing here, because then you have to ask questions about, oh well, how does it fit in with the rest? So the where also implies like where in the product it kind of lives, like where?

45:36What vertical stage is it, like, is it an integrated product where the whole thing from soup to nuts is it some upstream pieces that some people downstream do a take pieces from other people and assemblies. So we were the, where the integrator, those are all, those are all important where to play choices from my view, because those make kind of a big, a big difference. Like four seasons chose a four seasons hotel company, luxury hotel, I chose a completely different choice on the vertical stage where to play. Back in the 80s, they said, we're gonna get out of real estate development. So buying land and getting a zone for hotels, we're gonna get out of construction, building hotels, we're even gonna get out of the business of owning the land or the hotel, so that we can be awesome at hotel management.

46:35Rich people, like Michael Dail and David Thompson and Bill Gates will own the hotels as an investment, and they will be happy to have four seasons brand on their hotel and we will charge a management fee. That is a where to play choice, right? Even though somebody could say, well, you're just your luxury hotel, you're like the other luxury hotels who serve luxury customers at a high price. Oh no, no, no, no, they hit do it with a stack of this thick, we do it with a stack of this thin. So it's like a value chain question. Like we're in the value chain. We're gonna play. Yeah, we're in the value chain.

47:12That's exactly right. And everybody has value chain questions. Yeah, from the complaint after the fact, like all the apps complain about what cut Apple is taking, but they made a choice, a value chain choice. We are going to design something that will appear on an iPhone or Android device if it's that case, and then good luck to you. You can complain like crazy that they're taking so much of it and this is unfair and they've got a do -opily, yeah, but you guys, you guys cooperated 100 % in building that, 100%. Never complained about it until you wanted a bigger piece of the pie. That was a vertical stage of value chain stage that you chose willingly.

48:03Nobody forced you to do it. And Apple's not playing ball giving it back. To easily. Oh. And do I love just how controlling and everything Apple is, do I know? But what I would say, oh, those poor apps, right? We don't know. Get your own distribution channel, buddy. Cold -blooded. Yeah. OK, so we've talked about the winning aspirations. So for Fick Jam and B, satisfy customers that are trying to work with their team in these different ways and make sure they are staying, make sure they get what they need out of Figma, versus go maybe to other tools. And then where will we play? Let's say engineers, product managers, trying to target them distribution through the existing product.

48:51And so it's like a feature of the existing product. Yep. And then it's how will we win? How do you think about that? Yeah. Yeah. Well, it asks the question, how can we solve? Well, how can we either solve that problem at a much lower cost so we can always be a sharper price point than them. So if there are solutions, but they cost 50 ,000 a user because there are costs or 30 ,000 a user, we can do this for 15 bucks a user. And so we can charge 100 bucks per seat and absolutely annihilate the competitor by figuring out a less costly way to do it. Or there are other selections, but they make the user do all these things and it's porn virus and it takes a long time.

49:42We have shortcuts. We use AI to, you just say a few words into it and they say, oh, yeah, I know what you mean. And here it goes in the workflow or we're more integrated. Like Thompson Writers, the company I was on the board of, our advantage with we were better integrated into the workflow. You didn't have to sort of get out of your workflow to go use this product and then you get back in, and we just said, what's your workflow? Oh, we'll integrate it. Is it better integrated into their workflow that makes their life easier? It would be questions, you know, possibilities like that that I would be asking.

50:26Essentially, you've got to have a theory there of how you're gonna be better or lower cost. On the lower cost front, I think generally the advice is you don't want to go that route. That's a very difficult route. Do you, what's your thinking of just like when to go that route that you might actually win at lower cost? That's not advice I give. Right? I think they're both completely legitimate strategies. They have implications, right? So if you want to be the cost leader, it is rare that you can be the cost leader without having dominant scale in the territory in which you're operating. So if you want to be a niche cost leader, good luck to you, that's almost never gonna happen.

51:14So Vanguard had to make a race to, we're gonna do indexing mutual funds and it doesn't exist now, we're gonna do it and we're gonna get gigantic and we can't let anybody get close to us in size because we wanna have the lowest cost position. And so they are the world's biggest mutual fund company and you sort of have to do that and same with Southwest to really make that model work that I keep expanding and expanding to get bigger. Eminem Mars, it takes an enormous amount of commitment to say we're gonna go and we're just gonna keep charging ahead on this, whereas in differentiation I think you can differentiate sometimes at lower scale and build yourself slowly towards higher scale.

52:06But the world, the business world is just getting so much more scale sensitive. Like when you think about the costs of differentiation, it's often spending on branding, spending on R &D, R &D sort of innovation. Those two are of the most scale sensitive elements of anybody's cost structure. And so being a niche differentiator is getting harder and harder in my view. I think it's also important to say, either path is very hard. Like it's very hard to build a business that makes money and is profitable and survives. Just broad. Yes. I'm not gonna have to form you love. How to win, okay, we got it, we got a big business.

52:48I agree, I agree. And that's why, if I looked at a hundred strategies, of major companies, I'd say I didn't like 90 of them. Very much. And then like the other nine at a 10 probably look good, but also don't work out. Yes, yeah. Oh, that's true. There's lots of spaghetti thrown at lots of walls in the world of business. Yeah, capitalism. Yes. Okay, so now we're at the capability step of trying to figure out what capabilities you need to win. Can you talk about, say with FIGG Gem, what are the sorts of things you think about here? Well, I guess I'd ask myself a question kind of like, do is there kind of a learning curve to this where we could have better capabilities because we started earlier than anybody else, right?

53:44And have more essentially cumulative experience. Is there kind of a way that we've figured out how to serve customers that make them feel tended to better by us? So we've got help line. We figured out how to do sort of the help line because if it sort of self serve and that's how they get the product, didn't then they got issues with how to use it, they feel that we're just better. We're the best of all their providers at that. How to win is a theory of how customers are going to perceive us better for a different sheet. And then it's what capabilities would have to, would we have to have to make that theory come true rather than just be kind of a wish?

54:36So if we want them to feel like we're the easiest to deal with, we have to have capabilities to do that. That's just like again, four seasons said, the reason they're there by far in a way the most successful profitable, best in all front luxury hotel chain in the world, biggest, most profitable, best employee ranking, best guest rankings, all of those. Well, there how to win was they said, people, if you talk to people who are in luxury hotels, they'd rather not be there, you'd say, wow, they're in the lap of luxury, why would that be? Where do you think they'd prefer to be, Lenny, at home? Yeah, dominantly at home, for their segment, which was high -end business travelers, they've traveled, they've stayed in one luxury hotel too many 20 years ago.

55:32And so we're going to have luxury defined as not grand architecture and decor and up sequence service, but rather we're going to define it as a service that makes up for what you left at home or at the office, because people would rather be, if they have to not be at home, they'd rather be at the office than in a hotel, because they can be more productive. So we need capabilities, we need staff that can deliver on that capability. What's the problem for that? The problem is turnover in the hotel industry globally is 80 % a year, which means that the average person you meet, the average staff person you meet in the average hotel is on their way to a 16 month career at that hotel chain.

56:16So how do you deliver that really cool, special kind of service with that? The answer is an amount skipping ahead to enabling management systems. You have to have a different way of cruting a different way of onboarding, a different way of career development. And if you do all of those things, you end up with a 10 % turnover rate, so that your people are there 10 years on average, and you can then get them trained up to deliver that kind of service. So that's the capability that you build and the people to be able to take more decision -making at a lower level and treat the guests in a customized way that makes them feel that this wasn't by the book, some rule book, that this person just said, no, this is a good solution for my guess.

57:01It's interesting that these capabilities and even the management systems, which is step by, relate them your mode, which is sometimes the thing you need to achieve, also ideally is the thing that other people get hard for them to do. So you're exactly right. You can call if you want how to win mode, right? Definition of your mode. And so capabilities and management systems are what both build and maintain the mode, right? And the maintaining is an important part because if you are the most successful, people are gonna say, I wanna do that too. But here's where there is this modern, sort of unfortunately bullshit thing that says, oh, competitive advantage is fleeting in this modern hyper competitive world and you can't have long -term advantage anymore.

57:48And I just say, oh, I see so four seasons. I guess, yeah, I guess that isn't very long -term. That has only been 45 years now. Since they, no, 35 years, I should say, don't make that great, since they went to that straight. Oh, and tied. So 77 years isn't a long time, I guess, either because they've been the number one detergent for 77 consecutive years. I guess you're right, it's fleeting. It's not. But what makes it fleeting is when you have one thing and one thing only. So let's say you build the biggest polyethylene plant in the world near a good feedstock source and you have the low cost position.

58:32What somebody else gonna do when they see how much money you make doing that? Build a, build a polyethylene plant beside yours, twice the size. And then your toast, why? Because the competitive advantage was too simple. But at four seasons, you gotta sell off all your hotels. You gotta fire all the people involved in hotel development and everything and actually the people in the business like doing that. You have to essentially get rid of your entire staff, start from scratch, paying them more than you do now by far, giving them more career security, giving them more training, giving them better uniforms whatever, spending 10 times as much hiring them with the hopes that maybe someday you'll be able to produce the kind of services four seasons does.

59:25Competitors basically say life's too short. Do they give up and die? No, there are other great changes, mandarin oriental. My wife like loves staying in mandarin oriental even more than four seasons often. And but they've not said we will replicate four seasons. They've said, we'll pick a different wear and a different how. And that's in the end what you want. Is rather than complete overlap, right? Where you've got concentric circles of people picking the same wear, you convince people to pick different wear. That's why people sort of say, Roger, how to win. That's so in in in politics, you know, because that you're producing losers and then there's victims and the you know, all that.

1:00:14There's no presser and a presser. It fits in the modern dialogue. And I say, no, what I want to do is encourage them to find some place else to prosper, rather than smack on top of us. And so if you have completely different management, capabilities and management systems, it'll encourage people to choose a different where to play how to win. If your capabilities and management systems are very similar to your competitors and you're succeeding with your chosen where to play how to win, what are they going to do? They're going to drive straight to your where to play and try to win exactly the same place and and wreck your market for both for both of you.

1:00:55That's what you don't want. And the more sort of complicated in some sense, not how I shouldn't use complicated. The more nuanced that your and and and multifaceted your capabilities and management systems are, the more likely they're going to say lights too short. Right, that's what everybody says about Southwest. So if you're the only airline in the United States that's earning its cost of capital for 50 years, wouldn't you kind of say, gee, I love to be like that. But what does it mean? Well, it means selling off most of your aircraft so that you can have only one kind of aircraft, 737s, tearing up your entire root structure, your entire hub and spoke structure and make it point to point, kind of changing your complete labor relations strategy from fighting the unions to paying them, paying them a lot as long as they're highly flexible, people think Southwest is non -union, it's not as unionized as it, but they do different, you have to essentially fire all your travel agents and convince your customers to book online by themselves to save more money.

1:02:06Lights too short. Lights just too short. So they try things like continental light or TED that do half the things that Southwest does. And then you're what? A crappy Southwest. So to be that's the ultimate. The ultimate is it's like the ultimate weapon is the one you never use. The ultimate way to compete the win is to never actually be forced to compete. And wow, that's a great quote. This story about Southwest makes me think about Hamilton Helmer's power of accountur positioning. I don't know if you've heard that term, but basically you position yourself in a way where the competitor can't do the thing that you're doing because of the way their business's already structured.

1:02:57And that sounds right, the can't. Yeah, the can't thing. And Mike Porter, any probably he may quote, Mike on that was very big on that. He said it's fault lines. You're trying to find fault line where it is so painful for your competitor to come across that fault line into your side. And so a great example of that would be Olay when what a PNG it's in the book when we did the repositioning of that, the competitor that could have killed us, absolutely killed us was estate -later with Clinique. If they would have brought Clinique into the mass channel, because we were doing a Clinique kind of thing in the mass channels rather than the prestige.

1:03:47Pristige is like the first four of the department stores, which is all, which I'll or Sephora are all to, if Estee Lauder would have taken their Clinique brand and brought it into mass, they would have killed what we were doing. Simple as that. And in fact Clinique was the biggest brand in all of skincare. We became the biggest brand in all of skincare. And they didn't do it. Why? Are they idiots? No, they're not. Estee Lauder's super smart. But Estee Lauder also has Bobby Brown and Mac and the Estee Lauder, it's a brand and a half a dozen more all in Pristige. And the prestige channel, if they'd have taken Clinique and taken it over into mass would have done what?

1:04:40Shot them in the face, killed them. Right? They would have been just apoplectic. And so Estee Lauder had to stay, if that's counter -positioning by Helmer's terms. They had to stay there. Was that stupid? No, they're still, they're still with all of their brands combined, the biggest in skincare. But Clinique has lost leadership to our brand that they would have considered kind of nothing. Or go, well, they became Ole Prove, a regeneration of these higher price products than they could ever imagine being sold in the mass channel. But our biggest friend was, in some sense, their distribution channel, which would have killed them if we were literally, they would have just punished them so, so, so bad that they didn't do it.

1:05:38I love that I'm learning all this in for me, all this strategic thinking about makeup and skincare. I also love just the idea of you leading strategy for skincare and makeup, put brands. Yeah, I know. I got Fractured Amel into a Cold or Cosminute, so funny, I would love that. I don't know if you're following the AI Google stuff that's happening where there's search engines, competing with Google by just answering the question versus giving you a bunch of blue links. And there's this question of will Google shift because people seem to like it versus, they're making trillions of dollars running ads when they share blue links.

1:06:10And it's this super innovators dilemma position they're in. Yeah, no, no, I'm very interested in what's going on in AI and I'm writing some stuff on that. But I mean, it's hard. Like I've seen the inside of this for many of my clients. It is super hard when the guts of how you make money is under threat. And you just don't want that thing to go away. You know, the big auto OEMs make money selling cars with ice engines. That's simple as that. And there's no surprise. They've been doing it for 100 years or way down the learning curve. They have scale, blah, blah, blah, blah, blah. And so these damn electric vehicles are kind of no fun.

1:06:57And so the Google situation you've described, I think is similar. But my general advice is always the same, which is, you know, it can take a while. But in the end, the customers will triumph. And A .G. laughly, my friend who I co -wrote the book with, great, great CEO was very good on this. And one of his big customers, big -ass customers came to him and said, if you don't stop cooperating with Amazon, we're going to de -list all your products. Big threat, right? Big threat. And A .G. just said, if customers want to shop there, we can't, we just can't not be where our customers want to shop. And so if you feel you need to do that, you're going to have to because customers want to shop there and we're not doing that.

1:08:01But what are you offended by that we're doing there? And they said, well, you're allowing them to ship products to their customers from your distribution centers. And A .G. just said, do you want to too? And they were like, and he just said, we don't do anything special for them that we wouldn't do for you. They ask for things that you don't ask for because of their business model. But we're, you know, if you come to us with ideas of how we can help you serve our joint customers better, we're all in, but we're not boycotting a place that customers have shown they want to shop. That's long as sort of an honest, like, you know, Amazon was sleazy and dishonest or whatever.

1:09:01But you know, an honest, upstanding place where customers can get our products. And so I'm, that's where I'm at, which is, which is you may have to scramble like hell. You may have to suffer from kind of economic downturn. But if you think you can, you can, like, I always think of it, like we, I don't know if you did this as a kid, Lenny, but when we went to the beach on family trips, you know, we would, four brothers, we would build, plus then a baby girl later, but we would build sandcastles and try to try to hold back the tide. Like this being Florida or California would try and hold back the tide and we come the next morning to see if our castle is, and it was always gone.

1:09:48Like, it's like gone, but we keep trying doing it. And it's sort of like, you can't hold back the tide. Maybe it can for a while, but you can't, you can't forever. So, so you just have to figure out where are the customers going? And if they're going someplace and Vanguard did this, right? Jack Bogel, the late Jack Bogel, he died now a couple of years ago now. He did not like ETFs. He said ETFs are not as good for customers as mutual funds. And he had all sorts of good reasons for that. But the index ETF business started to kind of grow like crazy and Jack had a relent and say, I don't think it's good for them, but they wanted.

1:10:35And so, you know, they went whole hog into it and are the leading index ETF provider as well as the index mutual fund provider. But for a while, they weren't, but he realized it was the tide. And he was attempting to hold back the tide. So good luck. Good luck to you on that. So, to me, as Google thinks they can, because of their power and the fact they're going to multi -trillion dollar market cap and they've got a near monopoly position on something they can hold back the tide. You see, the water finds a way to flow, right? Like, think about Microsoft and its monopoly on PC operating systems or its near monopoly on PC operating systems.

1:11:24And I would argue that they abuse that kind of monopoly, right? Like I often ask people, when's the last Windows update that got you as a customer excited? Yeah. Windows 95? Yeah, I think it's really clear. Windows 95. Right? Because that's when they took the graphical user interface that he bought the rights to receive jobs and put it on. So you didn't have to do backslash, backslash, you know, you could actually point and click. That's a long time ago. Last time I checked, that's now almost 30 years. Right. And so they just abused their customers. Is their share of PC operating systems much lower than it was then?

1:12:09No. But that's not the right measure of share. The right measure of share, in my view, in that industry, is your share of minutes spend staring at a smart screen. Right? Like that. That's what the share of operating systems that you should care about. And so what kind of smart screens do people now stare at? Most? Right. Most. And what other one do they do? A lot of people stare at who really like them. Pads. Right. And so if you added up all those, and said, what do you think? So what's their share of smartphone operating systems? Microsoft. Last time I checked, it was 0 .4 of 1%. Yeah. So effectively zero.

1:13:00How about pads? Apparently it's 4 % there. So their share of people staring at a smart screen has plummeted. Plummeted. Why? Because water finds its own level. People said there are these other ways of getting around this. And I'm going to take those, take those ways. And I think the degree to which people use their smartphone for more things as a function of that smartphone is advanced so much faster. Then your PC operating system. Because more people are using it. So that's what I'd say to Google. I don't care how painful it is. Water flows downhill. The tide comes in. And you know, you cannot stop that.

1:13:55Even if you're one of the most powerful three firms on the face of the planet. And it may take time, but eventually, the customer tide pulls. That's I think that's really important. Yeah, but start now. Yeah. Right. If you don't start now, it's too late. Yeah. I want to end with one very tactical question. For people that may feel overwhelmed. They're like, oh my god, I don't know what we're going to do. This is so hard. All strategy stuff. You have this really cool idea of called betterment. I think you wrote a media post about it. Thinking betterment over perfection. And it gives you kind of like a first step of like, okay, here's the way to move forward.

1:14:31Can you just talk about that approach? So for me strategy, this thing called strategy with, yeah, with people, oh my god, oh my god, I can do strategy, whatever. I just think about as a problem solving tool, right? And what problem should you attempt to solve? You should attempt to solve something where your current outcomes that you're getting are lower than the outcomes you wish you were getting. That's what I call a gap. There's a gap between those two. And you should just conceptualize it as your current outcomes are a natural result of all the choices you've made interacting with the competitive environment.

1:15:12And so you should reasonably assume that probably those outcomes aren't going to get a whole lot better because they are the way they are for a good reason. So you're going to need to make a different set of choices to make that gap go away. That's what I would work on. I would just ask the question, what is the single most painful gap currently that I'm facing? Customers used to do this and they're doing this. I can't find this kind of resources or distribution channel is abandoned us. Whatever is the most painful thing. And then just tackle that and say, what different choices could I make? And I'd say use my cast date.

1:15:56What could I change where I'm playing? Could I change how I'm winning? Could I change my capabilities? Could I change my management systems in order to achieve a different aspiration? And so don't try to solve the problems of the world or even all the problems of your company. That's perfection. Betterment is making that gap go away. And guess what happens if you make that gap go away? You can turn your attention to the next gap and the next gap. And the next gap. And if you do that all the time, right? You're always working on the next gap. The next they'll get smaller and smaller over time. I don't know if this is a great analogy, but I was a dean of a business school for 15 years.

1:16:44The guy who won the professor of the year award more times than anybody else. And did it sort of teaching tough courses often executive MBA courses and the like had a simple formula for doing it. Which is he taught secondary courses and secondary courses for having to be 13 to hour kind of lectures or sessions of one sort or another. He just pulled the students on what they thought of each session as they went along. And regardless of the reason, regardless of anything else, simply chopped number 13 every year. Because in some sense it's the biggest gap. The gap between what what the customers, students wished for and were getting.

1:17:37And he would just replace it with something. He would try something else and replace it with that. And you say, and that gets you like professor of the year and re year. And the answer is yes, betterment. Because if you're teaching for 25 years, right. Can you just keep doing that every year, every year. The course keeps getting better and better and better and better and better and better. So betterment, you know, it doesn't make purists feel awesome. But I'm not here to make pure purists feel awesome. I'm here to help help people get better. This makes me think about your water metaphor too.

1:18:23I've just water eventually finding a way through little bit of iterating. Yeah, yeah, yeah. Lots of what I think about in strategy is sort of natural, if you will. I try to ask, how does the world generally operate and is what we're doing kind of consistent with the way the world generally operates or not? Roger, this was so much fun. We covered everything I was hoping we'd get through. I think we're going to have a lot of people with the way they think about strategy. Is there anything else you wanted to just leave listeners with or say or before we wrap up and and let you go? And we did it. We covered a lot.

1:18:56So there may not be anything left. Well, on strategy, there's one piece of advice I'd say. People often ask me about people who are natural strategists. Or they say, I'm not naturally good at that. I'm more of an operational guy or gal. And what I tell them is I have never met this mythical beast called a great natural strategist. And they often throw back in my face, laughily. They say, look, laughily. He was known as a strategy genius. And I say, yeah. But when I interviewed him in depth about his background for a paper I was writing, what I discovered was when he was in the Navy as a whatever, I don't know, probably 25 -year -old in the Navy.

1:19:46He had a job where he had to think about strategy and was testing things out and doing things and the like. And then I realized that he had been practicing strategy for decades before he became the CEO decades. And so he just had more reps when he became CEO than almost anybody else that I've ever met. There's another guy here in Vick Dooster CEO or XCEO now he's gone on to a higher level Lego brand group would be similar. So great strategists that I have met have all one thing in common. They just practice. And anybody, there's no such thing as a person who is willing to practice strategy, who will end up saying, I'm kind of operational, I don't do strategy well.

1:20:44Which links to our last thing about betterment, just work on making different choices to solve problems. Not problems that I say, I'm not going to define your gap. It's one that you feel in your heart. I wish this were better work on it. If you do that, you'll be a great strategist. So be encouraged. Don't be discouraged. And the worst thing to do is to wait. People say, well, I've got all these operational concerns and right now and then I'll get the strategy later. You'll never amount to anything. Nobody who says that ever amounts to anything. Wow, I love this. I love how empowering it is. I love the real talk.

1:21:25Roger, you're awesome. Thank you so much for being here. You're most welcome. Thank you for making it a fun journey for me. I learned a ton and that's always a good sign and it was a lot of fun. Well, thanks Roger. All right, bye everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple podcasts, Spotify or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny's podcast .com. See you in the next episode.