Good Strategy, Bad Strategy | Richard Rumelt

32:41Is there any advice you could share about helping people figure out where their power might lie? Well, I thought that's a good question letting. So how do you, how do you figure it out? So I start, as I said earlier, with the symmetries. And what way is my company different than other companies? What way is my team different? What do we know that other people don't know? What are we obsessed and unpeople don't possess? So there has to be some symmetry to create a competitive power to ask to be something different. So time you have to redefine your space down, small enough that you can actually see it.

33:22Because you have a smaller company that doesn't have worldwide power. Has power in a certain marketplace or a certain set of customers, or sometimes it's not customer, sometimes the power isn't who you can bring in higher. So if you're a tuned Bennett chat GBG, you can bring in the smartest AI people for a year or two. Because every other one whole whole of smart AI people want to work at the cutting edge with the current winner. Then they'll start arguing each other and infighting no bills or to embarrassing personal things going on. And so what else can grab that position? It's not low managed.

34:10Business is exciting in that sense that it's not stable. It's not. It's not just, as it was what I was first studying, it was not just IBM and Sears and ATHG forever. There's a constant problem changing of the car. For better or worse? For bad. Because if you look at government, there is no changing of the car, they get stalled to buy. Makes sense. So in your book, yeah, if this whole list of types of power, I'll just read them real quick. Leverage, proximate objectives, chain link systems, design, focus, growth, advantages, dynamics, inertia, entropy. There's also the book obviously the seven powers that a lot of people are aware of.

34:56I guess how do you think about just like the spectrum of types of power you can have? Is it is this it? Are there others? Yeah, I started to make a list there in the book and I wrote a bit about chain link systems. And today, I mean, the power that new business models are exploiting is the power of the user base, what we called years ago, network effects, where the more users you have, the more useful product is. So the idea of network effects, first of all, is with the valve hold system, which the idea was that you don't want to be connected to a telephone system that only connects to a cell.

35:42All I use for that connect to the work to be useful. And my colleague, Marvin Lieberman, was taking the economics course at at Harvard University at the same time that Bill Gates was a student in that class, professor is going on a network effects. And of course, that's what cat Paul to him and his software MS -DOS at the time, not MS -DOS, he had something called the basic that the network effect was huge. He got angry about the network effect because he was going, paying the constituent and using the pretty simple everybody in the micro computer street hat, M -Base. Then we get the network effects from not just software, but user base is now the other effect.

36:36And so you get network effects, big social media, only once the view on a social media, it only through other people. So he's having a large network, Amazon, and get big fast because the old, the economics are amazing. So we used to say, well, in a department store, the economics are that you're saving people the cost of going out of the store, multi -dom, string to another store, for now it's all in one place. Supermarkets, the same thing. But look at a thing like Amazon, where they're the ease of shopping on Amazon keeps people from leaving and going to another website. Now other websites have got better, and some of that is less strong.

37:30It used to be, and this is constant, struggled with it. Nevertheless, the size of the user -bend store is an important sort of symmetry of power for the people to come out of their head and won that battle for this round, this five -year, ten -year, how long has it last before? Some other thing begins to take precedence. And now, we have two -sided markets, whether it's credit cards or places where both buyers and sellers get together. And so, to hear these big forces that companies are playing with right now are these network effects. And when the new January of AI, we have the possibility of stronger effects than we've ever seen before.

38:21But we don't know yet, but the suspicion is that the size of the data that you could put into the learning algorithm is going to make your AI better. And so, again, big is going to matter. Just think of Google and their ability to improve search based upon all the searches that go on on their base every day. It's very hard for being to catch on, because Bing doesn't have as much data to train on. And so, unless there's some new innovation there that isn't just the amount of data, the leader, again, has this asymmetry working for. Not the way you get around all that, it's like the specialized by holding a particular approach that isn't the market leaders for it.

39:27And it's always been that way in business. Our attention is often attracted by the giant. So, yeah, sources of power today, where we look at business models, or part of the fabric, are these network effects and things like that that are very, very strong. 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. There's been venture capital available to try those experiments. And some of them work and some of them don't. But that's this new age we're in now, where the speed of building a market position with network effects is a dominant gain in the tech space.

40:25I feel like Twitter is the ultimate example of the power of network effects, especially recently, where if you think about it, everything about Twitter has changed. And it still continues to run. Like you laid off 80 % of people at the company, they changed the name, they changed the domain, basically, the algorithms changed. Like, what is, I don't know what is still the same. I can lay out many different types of 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. Twitter is fast. I mean, I tune into it every couple of days and see what's going on.

41:01I'm, it is just an amazing ripple of opinions and statements. It's much more interesting than it was five years ago. There's a lot of diagnosing and not a lot of concrete actions. But anyway, I wanted to come back to the element about power. I think when people are thinking about power, it may not be clear where that plugs into the diagnosis, the guiding policy, and the coherent actions. Where should you be thinking and implementing this idea where my power is when you're playing out your strategy? To undertake a strategy that you think will work. You've got to have a reason that it makes sense.

41:48And that reason is, it's, it's, it's, it's, it's dry from, from some source of power, some source through the bank. Ultimately, your power or your advantage is, is, is something based in history that has the feel of reputation or institutional skill.

42:18Or it's some kind of symmetry or knowledge that you have that others don't have. So it's a resource that you can use. That your competitors or others don't have equal access to. Because it's, because you've either mastered it or you own it or you've inherited from the past. All those things are sources of, oh, I'd love it. How are you used to make it not in even back? So when you walk into a casino, you're, you're, you're, you're, well, maybe if you play poker with skill, you can expect to make somebody, but the general casino, the games, you're, you're going to expect to lose. And business, statistically, if you come to me and you say, I'm going to open a new restaurant, which is my strategy, my answer would be don't open a restaurant, invest in the S &P 500 because the statistics card that new restaurants failed.

43:31So what makes you think is then you can succeed. Oh, I really want to succeed. Not good enough. I trained under a chef, who's been very successful. Oh, that's interesting. Don't you want? So there it there. Where's the symmetry here? Where's the source of power that where you go from the odds, the standard odds in this game are against people. Where do you think the odds are in your favor?

44:06That's, that's a source of power looking for, looking for this, this information, this skill, this, this thing in the field, the, the way the resources are arranged that's going to get you this edge. And some of that is it's sort of part of the situation and some of it's how you, how you shape and focus your action. The strategy tends to be surprising when we see it, when we see it work and surprising because we go expect, we expect people to bumble around, we expect Arby's to bumble around, we expect nation -states to bumble around, we don't expect them to execute coherent strategies. United States went to an Afghanistan and wanted to catch some of them in London, but at the same time they didn't want to put an army in the field to actually catch them because it would be a embarrassing to have that many Americans in the field.

45:11That's what happened in Toribura. The Secretary of Defense said no, we don't want to make it look like we're taking over the country. They didn't try to catch him as hard as they could and we want to have the educational women and we want to have the democracy and we want to have a health. A long list that we would have no no hope in production, but at the same time our allies are the opioid producers. It was a Taliban that got rid of the Americans couldn't do it. So we had all these different objectives and it doesn't work. You need to have a focus on something achievable. What's achievable on your nation building is hard stuff.

46:07It takes a century. Afghanistan, I'm often a teenager here without getting a stand, but it's a really interesting subject. Afghanistan was a warlord society. A bunch of different warlords running the place. Oh well looked at what the warlord society was to ignore for an out. Well, it could scowl in 1650. You're going to look at France in 1300. You're going to look at Japan. Oh, before the modern era. These are warlords of science. Well, how did they go from bad to being of coherent government that maybe wasn't democratic? Still, there was a government instead of just much warlord. It took some of the conqueror on the rest and then it took a long time for them to put it in the structure itself.

47:07Oh, government, none may have even became in large. You may be not, but that's the process. It's not like you just go in there and say, you're now no longer a warlord society, because we've decreed it. Hello. I don't know. You're going to have to leave more questions about what it is people should know and how do you get these sorts of power? How do you get these insights? I'm a big fan of history. I'm a big fan of knowing things about what happened. Business history, biographies, worrying history. I'm like, you don't have access to other times and other places and other things that have happened.

47:49It's very hard to think strategically about the situation you're in because there isn't a science of strategy. It's not like physics. It's not like engineering where we can write down the equations of stress on a beam and say, how thick does the beam have to be? And so on, it's a lot of it is based on analogy to previous human experience. That doesn't have an amazing insight. Is there anything you find most rich and valuable in terms of history, periods, empires, stories that you find most connects as an analogy? Is there anything you find consistently as useful or as it just read as much as you can and you'll often find something in there?

48:35Yeah, the sort of the back we go in history, the leaner is less rich. The best histories are written by the people at the moment. It's happening. We're very soon after. History books and things like that are someone's opinion. Our only history here in the United States is pretty good documentation about what went on in the Indian War. Why have we had these big cycles of economic growth and then depression? We had depression in 1940 and then in 18, after the Civil War and there was another huge panic depression in 1890s. I don't know, a lot of people don't even know if these things happened. How did they happen?

49:31And of course, everybody knows about the great depression in the 1930s. But go back and how did that happen? Why didn't they? And you'll hear professors opine about why it happened. But there's no agreement. The biggest economic fact of the last 150 ,000 dollar away happened. Go back and and then you can go online and look at the Wall Street Journal of the New York Times from that era and start in September of 1928. Just look at the front page every day, which is up. And you can see it. I'm a fool. And it's a surprise. Everyone. They're going through. Well, for just laid off the people, but it's separate.

50:26They'll hire them back. This economist says, well, it's a temperate and it will come back. And it gradually gets worse and worse and there's no understanding of it. There's not a lot of analysis. And so you got no treatment saying, although it's monetary, they didn't use enough. The money supply. You got other people say things, but put yourself back at that moment in time and see what people saw. They realize that no one understood what was happening. And to form your own opinions, that's the diagnosis skill. Or that's the that's the feeling. Now, let's depends. Follow the book. You're on the cruise ship and you follow and you're you're now in the ocean.

51:26It's terrible and it's confusing. And there's weights and there's water. And you don't want to drown. And you look around and you see up here's a floating piece of wood and grab it. I have that feel a little hot better. That's how it feels when you look at a confusing situation. And the first idea of how to understand it comes to mind. Oh, yeah, I've got this piece of wood. Now I'm not drowning.

52:00But it's right. The most important intellectual tool we have is to think again. To say, okay, I came up with this diagnosis because I thought this and I thought this is there another way to look at the situation? Is there a bigger piece of wood over there when I can journal? That's the hard thing. What I looked at the Great Depression on what I saw is the automobile. So if you look at capital go, well capital go, that the public buy, the adoption curve goes up like this, it peaks and declines. And then it comes back up again. Yeah, because it comes to point where everybody who can afford water is out.

52:57And then the new sales drop off. And my mind, that's what I saw by key 20. Now that everybody go to four car, had a car and the auto industry began. First science, the Great Depression on the auto industry. So that was my plank the hybrid. Now I won't see anybody else writing about that.

53:22But that's the exercise and exercise you mind about trying to understand complex situations. It's best to go back. You don't have to quit the Great Depression. But you can go and try to find situations that other people have to do with and look at as much data as you can. And the practice that that's what education should be in a business school. That's not they teach theories now because it's so much easier to teach a theory than intellectual structure. It's also a lot more work reading a lot of books in history and studying and thinking. A colleague at UCLA who was signed a book to MBA students and they went to the dean and to force a book.

54:12It wasn't to read a book. No, man. Sounds like you have another book in you writing about the Great Depression and what really happened there. Maybe. No, man, exciting. This episode is brought to you by Vanta helping you streamline your security compliance to accelerate your growth. Thousands of fast growing companies like Gusto, Com, Cora and modern treasury trust vanta to help build, scale manage and demonstrate their security and compliance programs and get ready for audits in weeks, not months. By offering the most in demand security and privacy frameworks such as SOC 2, ISO 27001, GDPR, HIPAA 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.

55:02Over 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 vanna .com slash Lenny to learn more and to claim your discounts. Get started today. I wanted to zoom back in on something very tactical. 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 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.

55:41And say they have a general idea of what they want to do. Do you have any advice for just like how to lay out the strategy as you talk? I think if there's a section diagnosis, section, getting principle, section actions and then there's power in there in the guiding policy. Does that allow you to lay it out? Do you have any advice for how to write this out? I wrote the crux because I felt that that kernel was not sufficiently sharpened. For peak. And even in the crux, I could rewrite the crux book. I would maybe write it a little differently today. A whole couple of things I would change. First, it's really important to understand the challenge, the problem.

56:31Diagnosis is not newly understanding the world. It's understanding the challenge you face. What makes it hard? So the question I asked client is exactly that. What makes it hard? Client will tell me, oh, we want to open up business in Australia or even some market we haven't had. And I'll say, okay, so why are you and I talking about that? You're the CEO to 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 if you push, she'll tell you why it's hard. But that understanding hasn't been percolated into a strategy. Part of the problem is that the concept of strategy has been so beaten up by thousands, hundreds of books and thousands of Web site that people have a hard time trying to figure out how to create a strategy because they're drawn up down left -right.

57:54So my two pieces of advice anybody is actually trying to do this is A, state the problem. And B, don't call it a strategy. Call it an action agenda. That you're not creating a strategy. You're creating an action agenda. Where are we going to do about this problem? That's essence of what you're doing when you're thinking strategically. You're recognizing the problem. And you have an action agenda to do it. It's not five years out, ten years out. It's not your general mission to build a better world. None of that. All of that is a different literature form. It's huge numbers of people up there willing to sell you advice or hide admission, add your vision, add your values, add your all these things that have to be placed before you can have a strategy.

59:04And that's not true. It's a different model. I started out with ambitions because people want to put ambitions in place. They get anger with me. I don't allow them to talk about their ambitions. So we start with ambitions. And okay, you have all these ambitions. And I write in the crux that when I was 25, I wanted to be a top business school professor. I wanted to be on four to directors. And I wanted to drive a Morgan drop head plus four. I went into climbing the great mountains of the world. I learned to learn to fly an aircraft. I wanted to marry a beautiful woman and have successful children.

59:55I wanted to have a townhouse on the Yosanna, we in Paris, and I don't know. I have a lot of ambitions. That's not strategy. We all have ambitions. And every company should have ambitions. We look at all those ambitions. And let's say I'm 25 years old. Well, what's keeping me from reaching them all? Well, I'm not ready to join Bortjir directors. I'm not experienced. I'll teach you like, put that over here. I can't afford to tell you how we cut it over here. How about the ambitions that you have any chance of making progress? So now, well, beautiful woman. Yeah, I don't know any women. Maybe out of me if you can do something about that.

1:00:53So which of your ambitions can you begin to make progress towards reaching? And what's holding you back? What are the barriers? What are the problems? I approach the question of the pruning now through the filter of the Anderson. That these ambitions, five, let's accept them all. And which one can you actually make some progress on today? And what's making that car more than what are the challenges?

1:01:27So you're choosing a challenge. You're choosing of the possible challenges you could face up to. 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 and it has to be achieved. Yeah, it has to be something that you're going to address. It has to be an addressable challenge. And so the search for an action agenda, not calling it a strategy, is this balance between problems that are important because they're close to your ambition and problems that you actually address and do something about. And that that overlap then becomes the choice you make.

1:02:18Okay, we're going to go after this and here's the action steps we're going to take to do that. And it's a big company. They have to step snake, extend over two or three years, smaller company to completing in six months, three years. And this things we're going to do, not goals or energy. These are things we're going to do action steps. That's sort of the way I put it together today, which is slightly different than the way to put together in the Crocs. Yeah, I love this advice. That's such a simpler way of thinking about strategy. It's an action agenda. Here's the things we're actually going to do.

1:02:55And then it starts with the challenge. And just to talk about the Crocs briefly, the Crocs is named after this concept and mountain climbing of the hardest point of the mountain climb where people, if they get past that, it's all 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. These ambitions you're describing is that roughly the way to think about it? Yeah, yeah. And the idea comes from a design. And it comes from climbing because I used to be a climber, a rock climber, and a snow climber. And the Crocs and a climb is the hardest part.

1:03:38The hardest pitch or a pitch, the hardest move is the Crocs, so that piece. And then the basic advice to a climber is if you can't do the Crocs, don't do the climb, because you're going to fall off there. Now, that's not exactly true, because you can try over over again to get it. But in general, particularly if you're looking at an helpline climb, you better not take it on a climb where you can't handle the Crocs. That's why people go boar and the builders still up to him. Crocs. And so that's what the concept of the Crocs comes from. Now, in business, the Crocs is the hardest part of the problem.

1:04:20And from the design point of view, whether they're an engineer or an architect, well, there's usually a challenge to problem.

1:04:37I in pay was hired to take a look at the loof in Paris. And they have Dusty Parking Law in the center of this giant palace that had become a museum. And they ward an entrance to the loof there. And the problem is they didn't want to, they didn't want like a new building, no obscure blue, blue itself, building itself as part of the storage part of the scene. And you have at the same time they needed to have an entrance, because the entrance at that time was well from the side or side wall. And you looked at the situation and the competing needs and the promboats. And you had an insight into, well, build a transparent building, build a building out of glass so that you see through to the loof doesn't obscure.

1:05:48And of course, in Bill Loot, rectangular building out of glass that top will get to so Bill Loot, sure made up glass. Now, that design insight is something that software engineers, hardware engineers, mechanical engineers, based science engineers, like others experienced. Well, we look at the Olemma and we try to focus on what makes this hard. And then by focusing on the difficulty, we see a wearer under. He on must focus on, well, why is it so hard to reuse a rocket? And so hard because as it comes back into the planet at 18 ,000 miles an hour, it burns up in the atmosphere or we have to spend a lot of money on each use.

1:06:48And it's some instant he said to himself, why not like science fiction just turn it around and have a land when it's right. All sound of fuel. Well, why don't we carry more fuel? Space X. There was designing, I was a concept from designer, but machine became voyager. And wow, past planets into interstellar space where it's floating around right now. Well, one of the problems is how do you know where Jupiter is? There it is right there. Okay, but how do you know where it is? What's the mine or so? And you know exactly where it is. When we set the emission to Mars, we were off by 500 miles. So Jupiter, that we know exactly where it is.

1:07:48Because we can look at it through a telescope, look at it from the right side of our orbit and all that side of our orbit, but still there's a a couple thousand miles there in that. That's too much. And then studying that problem, the simple solution suddenly flashed. I wish I could clean this mine. It wasn't which is, oh, pick a picture of it once we're halfway there. We'll send that picture back and we'll see it against the distant stars. And now without a traglish, think, let where it is. So designers experience this sense of focusing on the crux of the pedal, the heart chord and then seeing a way through.

1:08:36And that's strategy. Strategy is a picky, strategy out of a list of common strategies. It's looking at the problem, what makes that problem hard and seeing a way to solve it. Now it's called insight and insight is scary. It's scary because it's not guaranteed to happen. We want to innovate, but we're scared of insight. We want to be the first, but we'd like to pick our strategy over list of common strategies for being first. We want to think to market, but we don't want to study. A nut to have an insight. So insight is critical. Insight is not magical. It calls from immersing yourself in the nature of the problem.

1:09:29And you will have at some point in it's about how to deal with it. It doesn't always come when we want it. It can come while you're driving the car. It can come the next day. It could come in the channel. Charles Dorray reports that his insight into the nature revolution came as he stepped off on a carriage into the village trade somewhere. Suddenly he said, oh yeah, I'm not telling this. It's like how we raise out. Read the strongest. Why was that so hard for me to say? So I think one of the big takeaways here is that if you want to get better at strategy or be more successful with how you think about strategy, spend a lot more time on diagnosing the problem and finding the biggest challenge that is keeping you from what you're trying to achieve.

1:10:28And your insight might come the more you're immersed. And call an action agent. Here's what we're going to do. Not here's all the things we wish would have. I love it. You mentioned this point that some of the biggest challenges to executing a strategy is organizational dynamics and politics is a part of that. Is there anything you could share for folks to help them through that? You talked about one of the biggest challenges. People just want to keep adding more priorities. There's all these needs. Everyone wants to include their thing in the strategy. Is there anything people can do to improve how this works?

1:11:04Typically, hopefully, typically we need hierarchy of power. Because there has to be some mechanism for deciding what we're going to do. And there's people with different interests and different private interests and public interests. And somehow there has to be a choice about putting some of these aside into doing this. Then you can't say our strategy is to do everything that everybody wants to do. That's what happens when you form a committee in a sit. And you say, once 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 on this.

1:11:48We're going to have a lot of stuff of everything they're going to do with that. And anybody who raised it and says, well, what about the Burmish? Can we hold that into? That doesn't go anywhere. So, we, inside organizations, people have different opinions. So that's part.

1:12:15They have interests that they may not stay clearly. I interviewed Secretary Defense Rumsville while we were invading Iraq second time. And I was actually interviewing who have budget matters. But he asked me, well, what do you do for a future? He didn't mind to lie to you. He strategy. And he said, well, strategy, that's a hard subject. He said, I've got people here in the defense department who have an expert on anything. You want to know the client structure in Iraq. We've got people to know. We want to know the weather. We have people to know. We want to know how many sort of teams we can fly in 24 hours.

1:13:07People know. I got anything you want to know. We got someone who knows that. But they all have to scream. And each other don't thrive at a gender. They have a contract they want to get. They have a company they want to work here. Conceptual idea they want to push. So every little bit of information comes with an agenda sometimes. Obviously, sometimes it. And how do you put all this up together? Come up with strategy. Do you academics have a solution to this? And I said, no, we don't. We don't know much more than, you know, what you would two, three past years ago, which is what five to eight smart people in a room.

1:13:54And you'd tell them to come up with something. But his question is at the heart, what I call a founder, which is how do you get a group of people to coalesce around an action agenda? And what process would you go? How do you do that? Let's a different question than what should our strategy be? The question is, well, how should you go about creating a strategy? Should you ask the product manager to write a town? Oh, should you ask the CEO to come up with it? Higher consultant. Where do you cut your do this? My experience working with companies is that the senior executives have to do this. And my experience is that the senior executives know pretty much everything you need to know to do this.

1:14:51That you don't need consulting firms to come in and analyze everything and to do. 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. It's not mischiefs. They know all that stuff. But they disagree about the importance of different things. And more importantly, they occupy positions of power that if we go this way, this is going to be hurt. And if we go this way, they're voting for more money for that. And so they're not, they're interests are not all I which is part of what?

1:15:43So referring to the problem of strategy inside an organization is diversity of interest and fear of action. Because action when you do something in a organization of any size involves people changing what they do. It involves changing power relationships in some way. That someone who's been the alpha maybe is not the alpha anymore. Someone else is the alpha. This is heavy stuff. And then this is why we have a hierarchy. Because someone in the end has to say it's going to be this way. And that's it. People were hesitant to do that. CEOs are hesitant to do that. And more so today than when I was a young man, it's become hard for people to do this.

1:16:45If you go to the bookstore and look at the management section in bookstore, most of it's about leadership.

1:16:55And the leadership is mostly about perfecting yourself. It's not about, well, getting anybody, the theory is that if you perfect yourself, that somehow raise your head and people will fall in because you're so magnetic and you're so perfect and you're so wonderful and you're so insightful at that. People will, oh, you will ever have to say, figures, do that. And so embarrassing to tell somebody what to do. And so this is the world we've been today where one of the problems in doing strategy is that it's somehow been displaced by this literary form about mission. And management is being displaced by leadership.

1:17:42Which is the idea that the leader has a vision and people, it happened in the eights. There's a whole literature there about transformational leadership that is percolated through the system. And those, I'm not gonna get this leadership, but 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 of this aspect and Jones going to be in charge of that aspect. And there's a hesitancy to do to make those choices because that's part of the action agenda. So the takeaway there is essentially have a decider. It makes me think of actually, if George Bush you talked about Roomsfeld, but George Bush is famous quote, I'm the decider.

1:18:30I don't know if you remember that. Yeah, that's true. One of the things we see in government, particularly is presidents of a hard time getting advice because they surround ourselves with people who want please them number one. We rarely, you know, it used to be, I remember during the Woodrow Wilson's administration when he decided to take some hard action. The most detainee is I can you have to do something these are the journey. And the Secretary of State disagreed and quit. That was that quick. I disagree. Bob, don't see that so much anymore. All the people, organizations get frozen because of the difficulty of changing positions of interest and power in China.

1:19:30Humans are complicated. Well, if you look at Nokia, you know, one of the big examples of strategic error or Nokia was the leading smart as foe maker in the world. And somehow I lost it to building compete. Interesting question. It's big fair amount of research on this. How did that happen? One way it happened was they replaced the engineers who used to run the company with lawyers and accounts. Nothing wrong with lawyers and accounts, but they didn't have a feel for this hardware software set of issues. And another was they put in a matrix organization that so diffused power inside the organization that nobody was actually in charge of the particular.

1:20:24I'm exaggerating, but you know, the CEO kept pounding the glass and saying, you know, Apple's coming out with this smart phone and you have a touch screen and somebody here should make one of those. There was no one in the party to do such. Maybe a final question on the other end of the spectrum from Nokia from a startup founders perspective. 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? What should a strategy look like there? Do you even need a strategy? Well, it's it's you're dealing with a lot of uncertainty when you're a founder and a startup, you're making a bet.

1:21:06You're making a bet. Like a world well well, well, cater would say, I bet there's a world with this ground, we're going to drill, we're going to find a, there's a certain amount of bet that's going on. And you should be clear about the nature of the bet. The reality is going to be revealed to you in bits and pieces as time passes, whether a certain approach is going to work or not. What we find doing research on startups, Silicon Valley startups is they start out typically 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, would like to have a or being denied a, but we have a way of giving them something product or share it.

1:22:01Now 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. You know, last track of it. Well, if you're, if you have any chance of succeeding, you have in sense, you have a target market, you have a solution to target market problem and buy. And now you're going to, you're going to go after and the research that we have done on these startups is that, generally it does well.

1:22:33But the ones that survive and prosper switch. They say, well, it isn't that customer, it's a different customer. You can walk from that customer. Oh, and their customer wants to select you to improv and they, and they, they switch over periods of a year or two for you back, back, and Joe, something begins to click and then we get a grow and we get to add functions and assets. So there's a search. There's a search like a Truffle held, searching with a trouble that's going on and you've got to be, I think, you've got to be at two minds like so many things in business when you're doing this, you've got to be at two lines, you've got to be convinced of the certainty that you're going to win and you've got to be willing to shift when things aren't working.

1:23:26And that's, that's, that's a double joint exercise that some people can do and some people can't. It's more than a human skill to, to both commit and to be willing. But it's a bet. You should be clear in your own mind about the nature of the situation, the technology that you're bearing on. Oh, now sometimes it's evolving so fast like a generative AI edge right now that you can't be sure.

1:24:04That you're going to take a position where you think things are going to be in a year.

1:24:16And that's very, very entrepreneurial, very edgy stuff. But it's not. Then go back and read about the beginnings of the electrical industry or the beginnings of the industry. The beginnings of the industry would look like the first cars were electric cars. The first cars were electric cars. The first cars sold in quantity down in the states were electric delivery vehicles. It was downtown in the cities. It's delivering out to the owners. They were electric, ran over batteries. That was the bet. Well, that changed when the first war in the United States built thousands and thousands of gasoline power trucks to go to Europe and rustle through the mud.

1:25:05And people came back knowing how to fix those engines and those trucks got sold off its wholesale to farmers against them on here. Fields and we had the gas will need to take off like a rocket. So you cannot predict the future. There's an Arab saying that I like it says he who forecasts the future lies even until the truth. We're making bets. That's what business is. We're making a bet. And if we're a rich company, we can make a bet and a fork to go wrong. We love a foreshadow. We have to be shlass. We have to adapt as the information comes in. That's the nature and story. The action agenda has to be quick adaptation to changing conditions.

1:26:05I feel like you have another book here where you could adapt a lot of this wisdom to startups. I'm looking at my notes from when we were talking about earlier and you have this point of when you're trying to write out a you call an action agenda, not a strategy. You're basically on the hunt for a big problem and an important problem and an achievable problem. And essentially you can boil that down to that as the job of a founder to find an important problem and an achievable problem and then solve it for a lot of people. Yeah, yeah, I like that. I like the other exercise I used to take my students through what I called value denies.

1:26:47What is it that you should be able to buy a bet you can't? You know, by the end of the time I taught this stuff, I was upset because I lose my baggage, I don't stop flight from what's dangerous to Paris. So I'd like to buy a bag of sugar. So I'd like to buy a state like that. How did you get your baggage? Not to be lost. Now with with security systems and places, let's comment. I can't I can't find someone to help me remodel my home. It's going to be on time and I'll put you in. Not a very implying price. Well, if I live in Hong Kong and I'm going to the airport, I can drop my luggage off downtown and it arrives at the airport check.

1:27:36I don't have to let it. Why can't I do that in the US? I'm valued that I'm. And then engineer, you know, thinking about how something ought to be. You know, a child salesworth .com got started. Well, how should this be? It shouldn't be a computer. It should be a webpage. It should be like AdWism, very hard to book. And so that was beginning of salesworth .com. I asked a group of students wants to think about the perfect window. There's just physical something we could think about in the classroom without doing a lot of research. It's all what the perfect window. All the perfect window should be transparent.

1:28:30I should let the sun in. All right, so it should lead in the light, but not all the time. Sometimes you want to want to tell it. So it should also dark. All right, drapes for four shade is okay. It should lead in the air. Good, but not the books. Oh, it's great. It should lead in the air, but not the noise. That's a little harder. Yeah, so you go down the list of things that a window should do. It should lead in light, but not light. It should lead in the air, but not the noise. It should not lead in every doubt want. It should lead not lead in the books. It should maybe have showers or not showers.

1:29:10And so I said, well, how could you design the perfect window? What would it look like? And there's some kids at MIT that had developed this thing that let's in here, but keeps out the noise. There's these little auditory filters. Keep out noises and certain frequencies. Well, we don't have a perfect window, but think about it. Windows could be better than they are. And that's a real simple device that we're all familiar with. And look around you, look at everything you've got and say, well, how should be? And there's opportunities there. Now, a lot of the times the opportunities are blocked by the lack of certain materials, regulation.

1:30:00Regulators have decided that you can't sell a car in the United States unless it goes through a deeper.

1:30:09So that holds back innovation in that business. And so, you're plumbing. How should plumbing actually work? Well, there's little search of rules about how plumbing works and electrical things work. You can't innovate there, but you 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 be good jobs. So how do you get around that? You have to look at places where it's possible to innovate and be comfortable. But yeah, the idea of how do you make something better? How do you make it perfect? What would the perfect life switch you'd like and so on?

1:30:54These are real simple, silly questions, but they lead to no businesses and they're first. If you pursue them. 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 conversation. 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. That I've spent my life studying strategy, pursuing it, consulting on it, writing about it. It's not mysterious.

1:31:30It's about solving problems. It's about solving. The most important problem you're facing that you actually do something about. You don't have to be some two to call the strategy, but you need to be focused on something doable and be consistent with it. I have a long list of things not to do. There's a fork or a pry. I'm thinking about writing called don't do that. I would read that. I love that title. Do I tell you a story? Yeah, absolutely. My wife Kate took up skiing when we were married 24 or 25 years ago. She had this stamp that she couldn't get rid of. When you make a turn, you know, turn like that, the ski out of the stamp.

1:32:22Right. Meater ski on one ski. I did also took things to her back.

1:32:32She was a ski teacher and asked them three day tens program, guaranteeing that she would lose your stamp. And so we went there on the second day, I finaled behind the instructor and her to see what was going on. They had been through some exercises on day one. But on day two, they were focusing on such a good hours. She liked that. And he yelled at her and said, don't do that. And after a day of being yelled at, don't do that. She didn't do it anymore. She was fixed. It's so the secret technique that they had in this program for Curing or Shnown was to yell at you and tell you don't do that. It's on thinking about a book called about you, about business things where I'm not sure it makes sense.

1:33:27But you have to noodle these things for a while before they begin to gel. Yeah, I love this idea. It reminds me of one of my friends as a therapist. And there's this video by Bob Newhart where he's a therapist. And someone comes to him and they've got all these problems. Like I get really sad when I think about my mom and I have this chronic pain and his advice. Just stop it. Just stop it. Stop it. Just stop it. That's the advice. Yeah. And so I feel like there's a lot of synergy there. All right. Well, with that, we reached our very exciting lightning round. Are you ready? I guess so. First question.

1:34:08What 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? What it is. I mean, the books I'm playing Christians in the stuff about the animators, Dolan, is always solid. Books on strategy that I recommend to other people aren't that many. So I like playing to win by Roger Martin. I really recommend other kinds of books. Strategy books. I mean, it's easy to get a list of strategy books. But I think you should read biographies and histories. I think the book about Steve Jobs is brilliant. I like books about business leaders.

1:35:00I recommend Andy Gross book. Only the Paranoid survive. I have a few others, but I recommend that people read monthly about people. Rockefeller's histories. Fantastic. The guy and then the stuff about Rockefeller and how he put together, 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, you drop the cost of a gallon of curacy from $1 .10.

1:35:40Okay, that's the laborer. He made curacy so inexpensive. Then he drove over the little llama pop requires out of business. Why did they hate it? So, you know, he was even still a vicious competitor, but he dropped the price of something by an order of magnitude. Fastly. So yeah, I mean, it's important to understand stories. Not just curious, but stories. Yeah, I love how this always comes back to just being steeped in history and the specific point about biographies is really interesting. And we'll link to all these books that you're mentioning in the show notes. Is there a favorite recent movie or TV show that you've really enjoyed?

1:36:36Oh, yeah, sure. Well, I like the whole stone. Like everybody else. Vastinade via recent movies other than Yoltson, I know I love sure. I don't have a TV in the house right now. So I'm sure I'm not connected. That's amazing. That's the dream. I wish I could do that. There will be a TV, but that room is very mouthful. Okay, I see. Just a matter of time. Okay. Is there a favorite interview question you like to ask people you interview us maybe specifically around helping you get a sense of are they good at strategic thinking? Yeah, I like to ask people about what have you done that was hard that you proud of?

1:37:25What have you done that that was difficult? And what was it? And why was it difficult? How did you how did you get it done? I like to ask people about what they think was an interesting strategy from any time in the past they want to they want to call out depending on the person's background. But I might ask what about a particular company or situation that say you know why do you think this worked or why I didn't it worked? So I don't tend to ask questions about theory. I don't have questions about things that happened. And partly of the looking to you know this person have any knowledge about the world or are they just they just know what Professor said last year.

1:38:24So that kind of thing. Is there a favorite product you recently discovered that you really like whether it's a gap some you bought some in the house some on the road? Well we got this new memory bone bed that we like pretty amazing innovation it's pretty I didn't think we liked that but we do I really am fascinated by and what about to pull the trigger on buying one of these new smart telescopes smart telescopes I haven't heard of that. We're all making smart. That's 12 -inch reflective telescope and it's too heavy to look around it's too difficult to sell. But there are some new smart telescopes that run battery and you can put them outside and the way they work is first of all they know where the years of the sky which has been around for a long time.

1:39:19Well the new thing is they they it's like Astrophotography they'll look at something for a minute two minutes ten minutes an hour and forming an image you don't look through the telescope you look at it in your phone or computer but you can see now the Nebula that maybe the webtelts could see and you can see it now you can see stuff out there all that you couldn't before and these renew thanks for eight thousand dollars two thousand dollars set that are remarkable in what they can do. Excellent choice. 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?

1:40:05I used to have a final lecture I give to my MBA students about Luke Jesus who wisdom. Things not to do. Things that offend people in other cultures junk do this if you're a turkey it means something else there. But I'd also say at some point your spouse or your partner will ask you do you still love me and there's only one correct answer to that question which is more than ever and my wedding ring shows that inside more than ever so I don't know if that's the truth King for but that's absolutely getting a wife then Jesus was to. That is really good advice gave me tingles I'm going to use that 100 % thank you for some marriage advice.

1:41:07Final question your daughter Cassandra is a writer as well in fiction she writes fiction is there anything that she taught you about writing that's helped you become a better writer? Yeah Cassandra is the oh my god she's got like 25 books on the earth trans best soloist for Jean -Prixie now. She started writing when she was 12 or 13. She had a talent for it.

1:41:39She's told she's told me about the tension that you have to create you know and she writes novels and that you know it's not interesting unless there's well she started talking about this when she was young she was 14 and she asked me about what is romance. Right then well romance is a barrier her wrenches where there's a difficulty back to Kabul and yeah there's some kind of she said oh like he's rich she's poor yeah that poor he comes from the north side of town she comes from the south I said like that yes and she said oh like he's a vampire and she's done yeah okay but so yeah yeah she has is alerted me and talked me about that that ways of creating that kind of tension in writing that it doesn't work as much in business writing as I'd like but and I tried to create this sense of that's good strategy back strategy is the sense of now there's a there's a tension between the right way wrong way or if now writing wrong way at least there's a tension between should we go left or should we go right it makes it interesting otherwise it's it doesn't catch creep up some emotional courts amazing Richard thank you so much for being here I think we're gonna help a lot more people face bigger challenges and face them head on and put together their action agendas and overcome this crux 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 how can listeners be useful to you I have a little website called the cruxbook .com there has information about me and then about the books so there or a goat right to me at UCLA and I don't pay attention to the UCLA website anymore but if you go to the cruxbook .com there's there's an email addresses where I can be reached I don't mind the company is called general imagine entry it's like journal moors for a lot smaller it's just me you're gonna reach me a richer that general imagine entry .com you know you can help me on all college stories stories about your experiences trying to create strategies particularly in psi organizations you know that out of the thousand work for you trying to get something done in psi organizations I'm happy to add more stories to my repertoire oh and icing wait say more on that what is it that people would hire you for at this point my life I do public speaking as begun strategy and growth and that just got back from career doing it I talk there I do a little bit of teaching not much many for the military believe if you want me to come in and do a day -on strategy and I do foundry foundry is where you commit to a problem oriented approach to strategy where the organizational leader the CEO usually plus another seven or eight people take two to three or four days off and we meet and we try to come up with in the end an actual agenda and yet so it's an interpersonal exercise I mean the facilitator I don't tell them what to do but I urge them to look more deeply and to understand what these problems actually are it's interesting to do a founding you get a focus on problems as I do at the beginning now I often get 25 different problems out of all the board or more close to votes around and when people look at that because they haven't ever done this before when they see the 25 different problems were challenges they realize you can't do them all and so they begin to get this sense allergies with better focus better focus on something we better do something about some of these until then we begin to you know go to this thing it goes out of which ones are really important in which ones are really addressable well sometimes we don't know if they're a customer or not all well is there anybody the organization does know so shone with the fly in here ask them perspective on this how do we so we begin to try to identify you know the one or two key challenges that can actually be addressed and what are we going to do about it what are the co -guarded actions we are up to to to take these off that's the exercise it's from time to time after the founders all say to me well where's this strategy where's the document with the mission vision all that nothing that's not what we took we're doing an action agenda and the the family is in this time consuming and a bit expensive to some extent but in most of the times we've had foundry say they really hope the company although gather its wits and its resources and do something which you know i'm very pleased with how the founders work it's not so easy to figure out how to take the founder concept and expand it i've talked to a couple consulting firms about well it dies like four hundred new founders and they say how does it work it's one guy for three days that's that's not what we do we do 10 guys for three years it's the fourth it's not a business model but that's a nice asymmetry for me because you know they're not gonna compete with me i love that i feel like you're about to get a flood of interest and requests for everyone else make sure to buy Richard's books i got them right here the crux gets strategy bad strategy Richard again thank you so much for being here Lenny thank you for a really pleasant time chatty is one thousand percent my pleasure 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