Transcription
Why are so many people bad at strategy? What's taught now in Business Schools generally sucks. People aren't prepared educationally. Then they sure don't get prepared for it in companies. It's intellectually challenging and it's emotionally intimidating.
You have something you call the Strategy Choice Cascade. You have to have answers to five questions: What's your winning aspiration? Where to play? How can you win? What capabilities do you have to have that your competitors don't? And then what enabling Management Systems have to put in place?
For the most part, in the leading Business Schools, it's illegal to teach that. Playing to win, you talked about there's kind of these two routes. You have to be either differentiated or low cost. There's no way to protect yourself if you're not one of those two.
Is there anything else you wanted to just leave listeners with? I have never met this mythical beast called a great natural strategist. Great strategists have all one thing in common: they just [Music] practice.
Today, my guest is Roger Martin. Roger is one of the world's most trusted strategy advisers. He's Professor Emeritus at the Rotman School of Management at the University of Toronto, where he served as Dean for 5 years. In 2013, he was named Global Dean of the Year, and in 2017, he was named the world's number one management thinker by Thinkers 50. He's also the author of what many listeners consider their favorite book on strategy, called Playing to Win.
I've gotten a lot of requests to get Roger on this podcast, and I can now see why. This is the most tactical and fascinating conversation I've had on this podcast about developing a strategy, and that is a really high bar. We delve into the five questions that you need to answer to help you craft your strategy. How Hamilton Helmer, Michael Porter, and Richard Rumelt work into his framework and worldview. What people most often get wrong when they're developing their own strategy. The two options you have for how to win with your strategy. A very tactical and simple trick for getting started thinking through your strategy, and so much more.
This episode is for anyone who is trying to build their strategic thinking muscle. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes, and it helps the podcast tremendously. With that, I bring you Roger Martin.
Roger, thank you so much for being here and welcome to the podcast.
It's great to be here, Lenny. Thanks for having me.
What I want to try to do with our time together is to help people that are on the ground at a company, say like the product manager, designer, engineer, data scientist folks, that aren't necessarily the COO or the founder executive of a company, get better at product strategy, at crafting a strategy, validating a strategy, developing a strategy. Because it feels like there's always tons of advice for, like, the leaders of a company, but less for people on the ground doing the thing. And I feel like, luckily, your stuff applies to everyone. Um, so how does that sound as the lens for that?
Sounds great. And can I tell a little story to that end? So recently, there was a, uh, a newspaper article saying that, uh, pointing out that 10% of the S&P 500 CEOs, 10% are ex-Procter & Gamble people. It's an amazing number, like a stunningly high, high number. Why would that possibly be? I believe it's because at Procter & Gamble, there is a view that people weigh down the organization. Like, let's just say the Head & Shoulders brand franchise leader, right, who reports to the head of shampoos and conditioners, who reports to the head of beauty care, who reports to the CEO. So at least four levels down in the organization, in the guts of the organization, Procter understands that that individual, not the CEO, not the global president of beauty care, not the, uh, head of of hair care, not the head of shampoos and conditioners, the brand manager makes super important strategic choices. And if they don't make them well, the brand does terribly. Uh, and so, so I believe, and not many companies have enough of that attitude. So I'm a big believer that people down the organization have to make really important strategic choices, or bad things are going to happen. Uh, if they make really great ones, good things are going to happen, and they get trained to be a CEO, uh, someday. So I'm with your, I'm with your, your, uh, your thesis. But yours is counter, what I would say is normal. What is most normal is people at the top do strategy, and people down below do something, and it's usually called execution. And I hate that. I hate that term of art, for what it's worth. Uh, and so I think you and I are singing from a bit of the same, uh, songbook, even if it's a minority songbook.
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I just want to ask this broad question about strategy. Why, why is strategy so hard? Why are so many people bad at strategy?
Perhaps the thing that makes it sort of intellectually hardest is that it is an integrative activity. You've got to have answers to a bunch of questions that have to fit together and reinforce one another. So that just makes it a little more complicated. It's not like saying, kind of, Lenny, what do you want for lunch? It's, it's saying, Lenny, what kind of diet do you want that'll keep you healthy? And that includes breakfast, lunch, dinners, snacks, a whole bunch of other other things that you've got to kind of fit together. So, so it makes it harder to do intellectually.
Another aspect of it is it is intimidating. Strategy involves making choices to do some things and not other things. And it is often intimidating to say, you know, oh dear, I have to, I, I have to cut these things off and not do them and actually make a decision that I'll that I'll be held accountable for, potentially, or I'll even hold myself accountable for. So, so that's a second thing. It's harder sort of emotionally, not harder, uh, uh, intellectually.
And then there's sort of the training aspect of it, the knowledge aspect of it, which is, which is what's taught now in strategy in, uh, Business Schools generally sucks. It's gone on a, on a crazy theoretical bent. The strategy academy, as a whole, has fallen in love with a theory called the resource-based theory of the firm, that is that is silly and nobody uses it out in the world. And so students are no longer trained on youthful, uh, strategy. And the other feeder into people learning strategy are the strategy consulting firms. But the strategy consulting firms, the so-called strategy consulting firms, do almost no strategy anymore because it's a little business compared to post-merger integration, digital transformation, and a bunch of other other, uh, other things. So people aren't prepared educationally for it. And if they're not prepared educationally for it, then they sure don't get prepared for it in companies. It's intellectually challenging, and it's emotionally, uh, intimidating.
On this point you made about how, uh, schools are teaching strategy wrong, how do you describe the wrong approach?
It's a theory that's sort of taken over called the resource-based view of the firm. That was, you know, like in the world of academics, is a weird place, uh, where the number one emotion is jealousy. And people were massively jealous of Mike Porter, who sort of created many of the most important, uh, concepts of strategy when he wrote a book, Competitive Strategy, in 1980. And so they needed to sort of counter him because they just didn't like the fact that he was so prominent. And they decided they would say he was about positioning. So they called his the positioning school. That, and they caricatured what he said, which he never did, but they said he said it's all about finding a place that is structurally attractive and then milking it for everything you can. We, at the resource-based view of the firm, think that that strategy is all about building resources. Uh, and if you build resources, it's almost like if you build it, they will come. And that's what you should pay attention to. Now, the problem is, any resource, right, that may be useful somewhere, is not necessarily useful elsewhere. So it sort of begs the question, um, how would you think through what resources to invest in building? What would be a way of doing that? Investing here versus here versus here? It's silent on that because it's kind of a dumb theory, and it doesn't have anything useful to say, in my, in my, uh, in my view, about that. And so when the students go out and say that they, their company, I'm going to do a VRIO analysis or a VRIO something, people just roll their eyes at them, and so it doesn't get used. I've only seen it used. Been in consulting companies for 42 years, and I've seen it used once. And the truth, as is usually the case, is that it's, it's both and. And that's that's why the model I use for for strategies says, it says a lot about where you play is important. That's one of the key questions, and your capabilities are important, and you've got to link those things together. Um, but that's, for the most part, in the leading Business Schools, it's illegal to teach that.
Illegal to teach your approach?
Yes. I couldn't teach my approach at my own business school. So when I was Dean, the most powerful person, but the, the, uh, departments or areas, as we call it, like strategic management is an area. They have 100% control over what's taught in strategic management, finance in finance, etc. The Dean may be the most powerful person in the school, and I was, I happen to be a super successful Dean, so if anything, I was a super powerful, uh, powerful Dean. Uh, and students would beg me. They'd say, you know, Roger, you're this, you have this, you know, 20 years of experience, you're sort of a famous consultant in strategy, uh, and you've got these theories, please teach a course in it. Nope. I did, I did do extracurricular stuff where I did, I had practice of, you know, one Saturday a year teaching everything I knew to anybody who wanted to show up. But for credit, I was not allowed. And if you don't, if you try to get a job at any business, the only exception might be Harvard Business School, maybe. But if you took the, the 49 other top business schools in America, and if asked the question, do you swear allegiance to the resource-based view of the firm? If you don't answer an enthusiastic yes, you have no chance of being hired. Zero.
Wow. This academia drama. I had no idea. The loyalty test. This is unreal. Makes me even more excited to dive into your world and your ways of seeing things. Before we do that, just, we've had a few other strategy people on the podcast. It might be helpful to frame where they fit in the spectrum that you're describing. So, okay, I may know, I may not know all of them. But do you give me, I imagine you do. So we've had Hamilton Helmer on the podcast. Yes. And then, uh, Richard Rumelt on the podcast. How do they relate, just for people to get to your stuff versus this dogma?
One of them is, one of them is sort of an academic, and one of them isn't. Is a, is a quasi-academic or non-academic, like me. Like, I was a tenured professor for many years, but don't consider myself an academic. I don't think Hamilton does, though I've never asked him. Yeah. So he's written a very, I think, useful book that would, in some sense, fit into my "how to win" box. Right? I say, I say strategy is about where to play, how to win, and he has a category, what I call a categorical model. Here are categories of things that you should think about if you're trying to win. Here are seven ways of winning. Uh, and I categorize him as a, as a non-academic, practical strategy guy.
Richard Rumelt is, um, a now retired Tuck professor. And he has a kind of this hypercompetition thing that, that, uh, that he does. He, he also is of the, of the, "I'm jealous of Mike Porter" kind of thing. So I've got to say, Mike Porter is wrong, and here's how I am so right. And competition doesn't take place in the way Mike says, where it's really stable and whatever. It's really hypercompetition. Mike Porter never, in his entire life, has said competition is stable. He's repeatedly said the opposite. But in order to say, "I'm not like Mike Porter," and, and in fact, I distinguish myself by saying, "He's wrong, and I'm right." And so, so I don't know. He seems like a fine, a fine guy. Um, I don't think that he, like most business academics, knows much about business. Right? Like he hasn't gone out and practiced a lot. He came to our school and gave a lecture because people loved hypercompetition because he, because he would blast Mike Porter. And he gave an example of Procter & Gamble. I've been consulting at Procter & Gamble and know everything about Procter & Gamble, basically. Uh, and what he said about Procter & Gamble had zero to do with reality. Like, zero. It was just completely, utterly, absolutely wrong. And I sort of asked him afterwards to sort of like, why did you say that? And he said, "Well, I think that's the way it worked." Are you kidding me? So I'm, I'm not, I'm not a fan of that piece of work. I would say it's, it doesn't fit nicely into resource-based view of the firm versus versus Mike Porter. It's sort of like, here's another, here's another lens to take on the world. And, um, I'm going to take that lens. Everything's hypercompetitive, and here's how you think about hypercompetition.
This is fascinating. I love that we're spending some time on this. This is really helpful to hear the landscape of of strategy minds. Okay, let's dive into into your worldview. And maybe the simplest way is just like, how do you define strategy? What is a strategy?
Strategy is an integrated set of choices that compels desired customer action. So the way I think about it is, there's a whole bunch of things a company controls, right? How many factories to build, how much R&D to do in what areas, and how much advertising to do, how many people to hire, what to pay them, blah, blah, blah. Those are all the things under our control. What, Lenny, is the thing we have almost no control over? What if we're a company? Customers do. Yeah, like we would like them to take some of these out of their pocket and give them to us. Can we make them? No, we can't. So essentially, the job of strategy, right, is to make decisions on the things we do control that will compel, right? We can't force, but it'll compel them. It'll, they'll say, "Gosh, I should take my hard-earned cash," and whether it's a company or an individual, "I should take my hard-earned cash and give it to you rather than give it to nobody if there's no product now, or give it to a competitive product." So the important pieces of it are, is integrated, right? It's the whole set of choices that has that one outcome that it compels desired customer action.
Amazing. Okay. And to help people define their strategy, you have something you call the Strategy Choice Cascade, which is basically five questions that you need to answer to help you think their strategy. Can you talk through this?
Yeah, and and this is, yeah, this is sort of the fruits of many, many years of doing strategy work and trying to figure out like, like, how do you do this thing? Because the fun thing was, I was in the era, like I started in the in strategy, uh, in 1981, and that was early in the era. It strategy was born in 1963 with the founding of Boston Consulting Group by Bruce Henderson, who was the father of strategy, in my view, of practical commercial strategy. Uh, so it was still in the early days, and, you know, Bruce Henderson had a theory of how strategy should, what result it should produce for you. Mike Porter then came along in 1980. So '63, Bruce Henderson, and '80, Porter, the two most important figures in the history of strategy came along and said, a strategy has to look like this, right? It has to have this as its output. But neither of them was very good on, because again, it was early, they can't do everything right away, of, well, how would you get one of those? So Mike Porter says, you have to be either differentiated or low cost. Good. And if you, if you look through Competitive Strategy, his landmark seminal book, to say how would you do that, there is no answer, right? And so, so, and because Monitor Company, the firm I was one of the leaders of for a decade and a half, was founded essentially to commercialize Mike Porter's work, customers would ask us, they'd say, "Well, we like Mike Porter, and we'd like to have one of those. You know, we can look at ourselves under his framework and we can say we're stuck in the middle." And he said that's bad. And he said, "Good is this or this. How do we think through creating one of those?" We didn't actually have an answer. Uh, and it turned out, because I was sort of the most, I don't know, intellectually engaged on this and didn't mind the hard work of product development, from about 1987, when we sort of discovered we really didn't know that and clients really wanted us to tell them that, between 1987 and 1995, I did all this work on, well, how, how, how could you develop a process for getting yourself one of those, right? One of those excellent strategies? And I came to the view that you have to have answers to the five questions. You have to have an answer to the question of what your winning aspiration is, like what are you trying to accomplish? Because it'll help contextualize the kinds of choices you could make. Then there's a where to play, on what playing field, or if you're like military stuff, battlefield, are you going to plop yourself down on? You're not going to play everywhere in every product, at every vertical stage, around the world. You're going to pick some place. And in that place, how can you be either better than competitors in terms of creating customer value or lower cost than those competitors to win there where you've chosen to play to meet your winning aspirations? What capabilities do you have to have that your competitors don't that would enable you to win that way? And then what Management Systems, enabling Management Systems, you have to put in place to make sure you build and maintain those must-have capabilities to win where you've chosen to play to meet your winning aspiration? And so I came to the conclusion, actually, it was in 1995, the end of an eight-year journey. I, I came to the conclusion those were the five, and you had to do them together. And that is the essence of producing a strategy that compels desired customer action.
I want to go through an example of a company. But before we do that, something I think that's important to talk about is your book is called Playing to Win. You talked about this idea, if you need to play to win, and you kind of argue that a lot of people are just playing to play. They're playing to play the game. I'm guessing most people listening and most people developing a strategy don't think they're doing that. They don't think they're just playing to play the game. They think they're playing to win. I'm curious, what are signs that you're just not, you're not actually playing to win?
It would be mainly signs given to you by customers. So if you say, "We're the most innovative company in our industry," and customers, and let's say the industry distributes through a given channel, and customers come into that channel, and they look at the two products and say, "I could flip a coin on this one." You're not effectively playing to win. Maybe you thought you were winning, but customers don't think you're better. Or if your competitor lowers their price compared to your price, and you say to yourself, "Oh my God, if we lowered our price, we would make no money," but your competitor keeps on pricing there. You may think you have the low-cost position, but they do. And you have to give them whatever share they desire at that lower price because you can't compete there. So you'll know you're playing to play if you're not aiming to and accomplishing having either an offer where Lenny walks into the store, whatever kind of store it is, and says to the person in the store, "I want that brand." This example: Lego. One of the companies I worked with for a long time, great company. It turns out that if you do market research on kids, a store that purports to be a toy store, but that doesn't have Lego, is not a toy store. They would define it as not a toy. "Mom, why are we here? I wanted to go to a toy store." And she'd said, "But this, this, it says toys on here." And the kid say, "Uh-uh. That's an insane brand. That's an insane, insane, insane brand." And, you know, it has a price premium for anything over any of its competitors by by a long shot. It keeps growing. It actually, for most years in the last decade, it has had 80 or 90% of the entire category growth is Lego. And so they're playing to win to be distinctive in the minds of consumers. But, you know, Vanguard, you know, has got $9 trillion of assets under management, last time I last time I checked. Does it do anything distinctive? Not really. The customer, but do they have the lowest cost position so they can charge the lowest AUM? Absolutely. Uh, and so there's different kinds of ways. But, you know, you'd know by the actions that customers take.
So essentially, Tim, you're back, what you're saying is to win, there's kind of these two routes. You talk about one is you're the lowest cost option. The second is you're differentiated. You have a differentiated brand where it's not a coin flip. It's like, "Oh, I really need that for this reason."
Yes. Yeah, you got it. And if you don't, can't do that, then the advice you share is, go find a different playing field.
Well, or get out of business, or whatever. Like, you know, it's only a matter of time till you're dead, right? Is the, is the sad kind of truth of the matter, which is, which is the competitors in your industry who are either low-cost or different can essentially jerk you around as much as they want. It's like Southwest Airlines, right? Like Southwest Airlines was just a tiny little airline that flew Austin, Houston, Dallas, and now it's number one in passenger seat miles, uh, in in America, and the only airline that's earned its cost of capital over the last half century. All the rest are losing money for their shareholders over over time. They have good cycles and bad cycles. How did that happen? Well, it's just the other airlines had to step aside whenever Southwest came into a route. The other airlines just had to say, "Well, I guess you're going to get your 30 share or 35 share of passengers on this route. Welcome to town." That's all they can do. They just have to seed position. And that's what happens if you play to play. You will end up just being, I mean, it's literally like having a bully who can just, you know, you, you shut you, and you take one step back, then they shove you, and you take another step back, and they shove you, and you take another step back. There's no way to protect yourself if you're not one of those two. You cannot bully Vanguard. You cannot bully Southwest. You cannot bully Procter & Gamble. You cannot bully Lego. That's that's the way the business world works. And in the case of Southwest, the reason they couldn't be bullied is they were the low-cost provider, and the other airlines couldn't meet their prices. So they're like, "All right, there's nothing we can do." Yeah. Yeah. Awesome. Right. So when, so, so they, while I was in living in Boston, they entered the Boston to Chicago route, which was a duopoly of American and United at the time. And the price was about, in those days, like a thousand bucks for a round trip because it was a nice duopoly. Would Southwest come in? They say, "We're going to fly Providence to Midway, not Logan to O'Hare, and it's going to be $200." And they had great advertising. I always loved the advertising that they had when they entered. They did maps of Boston and said, "If you live in either any of these places, kind of the South, the west of Boston, it takes you less time to get from your house to the gate than it does to go to Logan." Because at Logan, right, you've got to park in a parking garage and then walk a half an hour, and then when you get through security, you still have to walk 20 minutes, 20 minutes, blah, blah, blah. And at Providence, if you've ever flown out of Providence, you can park about 100 yards from the gates. And so they just had to say, "We can't stop that." Not everybody's going to 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?
You've got it. You're a very quick, quick study, my friend.
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 going to be the cheapest, or we're going to differentiate. Okay, okay. How do we differentiate? Do 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, uh, against that? And there are, there are lots of ways, uh, uh, to do it, but it's tied very closely to the capabilities, right? Which is, which is if you have a way of winning, right? You say, you say, "My where to play is, I'm going to sell pet food on the internet." And my how to win is, I'm going to, I'm going to kind of be the best. But it turns out that anybody who can build a website can sell pet food on the internet. Uh, and in fact, you know, 20 of them do it almost immediately, and they all go, they all go bust. Uh, you don't have the capability. So you've got to ask yourself the question, can I serve a particular customer need with a set of capabilities that are going to be hard to replicate, uh, by my, by my competitors? They either can't do it, or they won't do it. And both are important questions. Because sometimes, this won't, like, do you really think Walmart couldn't have built as good a website as Amazon? And at massive scale? I, I think they could have, right? Yeah. Probably did. 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, why would be a bummer? And so they don't do anything for 10 years, giving Amazon the scale so that Amazon then has this huge scale advantage, kind of on this, and network effects, and voila, you've, you know, you've got a competitive advantage that you, that you didn't necessarily kind of completely deserve. You 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, fully functioning electric vehicle. But they couldn't, they couldn't figure out how the hell you make make a buck on it. And so they didn't, they didn't do it, giving Tesla the ability to establish a brand that people associate with that electric vehicle equals Tesla, and get them, you know, allow them to jump way ahead and then have the scale that is hard for others to match.
You 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 imply 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, I was on the board of Thomson Reuters for 14 years. It was Thomson first, and then he bought Reuters. So Thomson Reuters. Best business is a business called Westlaw, uh, and 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 important precedents for this case, you go on to Westlaw and, uh, and, and put in some search terms using a Westlaw keyword system to help help with. And you, uh, 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 Westlaw do that? Well, for now over 100 years, they've taken every case that's come out of the US legal system, had a lawyer, a Westlaw lawyer, write a headnote that summarizes what's in the case using these keywords so that they are searchable. And today, to do 2024, takes 1,500 full-time lawyers. Right? So if somebody else said, "You know, this Westlaw 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 Westlaw's. And then you'd have to do what Westlaw 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 Westlaw. And all you know, no problems, that'll be easy, right? You 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, "Well, 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 law firms used to have these huge law libraries. Right? You don't need one. You need a terminal, or actually now it's on everybody's PC. And you don't need a bunch of librarians to go and find the cases that that you need. They pop up on your screen. That's a great case of competitive advantage.
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So essentially, we're talking about moats. What are some moats that you can create where people can't just copy what you're doing? Warren Buffett likes that terminology, right? That's what he says. He invests in moats. Yeah. I'll find the quote. We, we, we did in a podcast episode. But he's like, "Yeah, castles with moats." And maybe along those lines, is there, is there kind of a way you think about types of barriers to recreate capabilities? Is it like, essentially the seven powers? I think talks about this.
Yeah, yeah. I mean, that's why I kind of like Helmer. I like because he categorizes them. And I've got, and I've got to look into, look into it, uh, some more because I, I mean, I haven't studied it to say whether I would, 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 all be clustered. They may be variants that cluster, uh, uh, behind those. But I don't myself have a categorization scheme that says, "Here's how you search for, uh, the, uh, the moat."
Great. That would be nice. So here's the quote from Buffett, by the way: "I look for economic castles protected by unbreachable moats." Yes. I like that. I like that. And he's smart. He's consistent. Though, you know, everybody makes mistakes, right? You know, and he, and he did too, right? Solomon Brothers, US Air. It's, you know, anybody who thinks they can be perfect on strategy is delusional. Uh, and so even the very, very best, like Warren Buffett, who's outstanding, arguably genius, is gonna, is gonna sort of think, "I think this, I think this is a moat," and it's going to be ephemeral. But I, I, you know, any of us should be pleased to have a track record that would be anywhere close to that on really identifying moats, because he, because he has.
We talked about that with Hamilton Helmer. That every startup deck has like, "Here's our moats. Here's how we're going to have barriers to entry." And they're all delusional. Like, rarely is there ever an actual moat, at least especially in early stages.
Yes.
Let's go back to the five, uh, questions again, because that's so core to the way you think about strategy. What do you think about using, say, this FigJam as an example, as a hypothetical, just to think through questions that they might ask? Think about strategy. And I can describe what FigJam is. So, sure, sure. I do not know that product. It's basically a visual whiteboard collaboration tool where people can put in sticky notes and put little mocks and kind of play around with little cursors. Okay. And sort of like brainstorming and ideation and things like that, and laying out concepts.
Gotcha. Okay. That would make sense for, yeah, exactly. Yeah. Right. Okay. So, so you'd ask the question, sort of, kind of, "What are we trying to accomplish?" Right? Are we, 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, you know, be transformative by making the user experience better? Is that, is that what we're trying to do? Or are there players already doing this, and they're just not doing it very well? You know, you'd want to sort of say, "Well, what are we trying to accomplish?" And, and I don't spend a whole lot of time on that because you have to toggle back and forth between between those those five questions. But you have to have a reason for searching in a given space for where to play, how to win. And so, so what do, what do you think their their reason for FigJam, for thinking FigJam is worth investing in is? Is it, is it, is it white space, or is it, is it crummy, crummy offerings in the in the market currently?
Like, if I had to get to it, I think it's they're 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 okay, good. So I don't love it to start.
Say more. So there's a, there's a big market over there. We'd like to get some. Is a terrible reason, uh, uh, in my, in my, 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, they get their faces shot off. Uh, and the reason is the rationale is, "It's big, we could get some of that." So, so I don't love it for, for, uh, for, uh, starters. I'm not saying that that will guarantee failure, but it's, it's, if somebody gave me review with a pitch deck for that, I would, I would not invest.
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, yeah.
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, "What's our aspiration is to satisfy core customers who love what we do, but think it's too narrow? That if we could broaden that for them into this market, our our customers would be very happy." That is really cool. And so you want to frame it in the words of how customers would benefit, essentially. I just think those tend to be, tend to be stronger, uh, uh, strongest. If, if there's a link, because remember, what is strategy about? Compelling desired customer action. Right? So everything sort of ties back, uh, to that.
So then the where to play would be, you just want to 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? Is it a component of, you know, kind of a product? Through what distribution channel would would we sell this? Is it another self-served type product? Because I think Figma is mainly self-served, right?" Yeah.
Um, and, uh, and so you choose, choose that where. And then say, "How can we solve?"
Before we get to that, before we get to that, real, oh, yeah, yeah, please.
So the things you mentioned there is like, who specifically are the customers? 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. Get to them. Yeah. And then else was, what other, uh, questions are there within this where we? Is it, is it sort of, "To what extent is it a finished product or a component?" Because sometimes it, it could be a, you know, "We'd like to supply this component that could be integrated into other other people's products." I mean, that's what Apple apps are, right? We don't sell them an iPhone, we sell them a component. Customers, iPhone. Is that, is that what we're doing here? Because then you have to ask questions about, well, how does it fit fit in with the, uh, the, the rest?
So the where also implies like, where in the product it kind of lives. Like, where at what vertical stage is it? Like, is it an integrated product where it's the whole thing from soup to nuts? Is it some upstream pieces that some people downstream do? We take pieces from other people and assemble them, so where the integrator? Those are all those are all important where to play choices from from, uh, from my view, because those, those make them, you know, kind of a big, uh, a big difference. Like Four Seasons chose, Four Seasons, the hotel company, luxury hotel, chose a completely different choice on the on the vertical stage where to play, back in the '80s. They said, "We're going to get out of real estate development," so buying land and getting it zoned for hotels. "We're going to get out of construction," building hotels. "We're even going to get out of the business of owning the land or the hotel." So that we can be awesome at hotel management. Rich people like, you know, Michael Dell and David Thompson and Bill Gates will own the hotels as an investment, and they will be happy to have the Four Seasons brand on their on their hotel, and we will charge a management fee. That is a where-to-play choice. Right? Even though somebody, somebody could say, "Well, you're just, you're a luxury hotel. You'd like other luxury hotels who serve luxury customers at a high, high price." Oh, no, no, no, no, no. They do it with a stack this thick. We do it with a stack this thin.
So it's like a value chain question, like where in the value chain you're gonna play?
Yeah, where in the value chain. That's exactly right. And everybody has value chain, uh, questions. They often complain after after the fact, like all the apps complain about what cut Apple is taking. But they made a choice of value chain choice. We are going to design something that will appear on an iPhone or an Android, Android device, if it's that 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 to do IPO. Yeah, but you guys, you guys cooperated 100% in building that.
100% never complained about it until you wanted a bigger piece of the piece of the pie that was a vertical stage, a value-chained stage that you chose willingly. Nobody, nobody forced you to do it. And Apple's not, not playing, not playing ball, giving it back too, too easily. No. And, and do I love, love just how controlling and everything Apple is? Do I? No. No. But would I, would I say, "Oh, those poor apps"? Right? You know, get your own distribution channel, buddy. Cold-blooded. Yeah.
Okay, so we've talked about the winning aspiration. So for FigJam, be to satisfy customers that are trying to work with their team in these different ways and make sure they're staying, make sure they get what they need out of Figma. Or to go maybe to other tools. And then where will we play? Let's say engineers, product managers is trying to, uh, target them. Distribution through the existing product. And, and 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, you asked the question, how can we solve? Well, how can we either solve that problem at a, at a much lower cost so we can always be a sharper price point than, than them? So if the exist, there are solutions, but they cost $50,000 a user because their costs are $30,000 a user. We can do this for $15 bucks a user. And so we can, we can charge $100 bucks per seat and, and absolutely annihilate the competitor by figuring out a, a less costly way to do it. Or there are other selections, but they make the, the, the, the user do all these things, and it's ponderous, and it takes a long time. We 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, and, and here, here it goes in the, in the, in the workflow. Or, or we're more integrated. Like Thompson Writer, the, the company I was on the board of, you know, our advantage was 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 get back in. We just said, "What's your workflow?" Oh, we integrated. Is it better integrated into their workflow? That makes, makes their life, uh, easier. It would be, it would be questions, uh, you know, possibilities like, like that that I, that I would be, uh, asking. Essentially, you've got to have a theory there of how you're going to be, how you're going to 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 lowest, lower costs?
That's not advice I give. Right? I, I, I, I think they're both completely legitimate, uh, uh, strategies. They have implications, right? So, 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, you know, good luck to you. That's almost never going to happen. So Vanguard had to make a race to know, we're going to do index mutual funds. Uh, and it doesn't exist now. We're going to do it, and we're going to get gigantic, and we can't let anybody get close to us in size, because we want to have the lowest cost position. And so they are the, the world's biggest mutual fund, uh, uh, company. Um, and you sort of have to do that. And same with Southwest, to really make that model work there, to keep expanding and expanding to get, uh, bigger. M&M Mars, it takes an enormous amount of commitment to say, "We're going to go, and we're just going to keep charging ahead on, on this." Whereas in differentiation, I think you can differentiate sometimes at lower scale and build yourself slowly towards higher scale. But the world, the business world is just getting so much more scale-sensitive. Like when you, when you think about the costs of differentiation, it's often spending on branding, spending on R&D. R&D, sort of innovation, those, those two are of the most scale-sensitive elements of anybody's cost structure, right? You know, and, and so being a niche differentiator, uh, 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 broadly. Yes. Yes. You're not going to have a formula of like, "How to win." Okay, we got it. We got a big business. I agree. I agree. And, and, and that's why, you know, if, if I looked at a hundred strategies of major companies, I, I'd say I didn't like 90 of them very much. And then like the other nine out of 10 probably look good, but also don't work out. Yes. Yeah, no, that's true. There's lots of, 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 FigJam, how do you, what are the sorts of things you think about here?
Well, well, I, I guess I'd ask myself, uh, questions kind of like, do, is there, is there kind of a learning curve to this where we could have better capabilities because we started earlier than anybody else, right? And 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, by us? So we've got, we've got helpline. We've figured out how to do, sort of the helpline because if it's sort of self-serve, and, and that's how they get the product, and then they've got, they've got issues with how to use it, they feel that we're, that we're just better. We're the best of all their providers at, at, at that. How to win is a theory of how customers are going to perceive us better if we're a differentiator, uh, and then it's, what capabilities would have to, would we have to have to make that theory come true, rather than just be, just be a kind of a, a wish? So if we want them to feel like we're the easiest to deal with, we have to have capabilities, uh, to do that. And just like, again, for season said, the reason they, they're by far and away the most successful, profitable, best in all front luxury hotel chain in the world, biggest, best, most profitable, best employee, uh, ranking, best guest, uh, 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. And so we're going to have luxury defined as not grand architecture and decor and obsequious 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 could have to not be at home, they'd rather be at the office than in a hotel because they can be more productive. So, so we need capabilities. We need staff, right? That, that can deliver on that, uh, 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. So how do you deliver that really cool, special kind of service with that? The answer is an is amount, skipping ahead to enabling management systems, you have of a different way of recruiting, a different way of onboarding, a different way of career development. And if, 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 in the people to be able to take more decision-making at a lower level and treat the guests in a customized way that make them feel that this wasn't by the book, some rule book, uh, that this person just said, "No, this is a good solution for my, for my guest."
It's interesting that these capabilities and even the management systems, which is step five, uh, relate to your moat, which is sometime is the thing you need to achieve, also ideally is the thing that other people, it'll make it hard for them to do. So that you're exactly right. You can call, if you want, "How to win moat." Definition of your moat. And so capabilities and management systems are what, what both build and maintain the moat, right? And, and the maintaining is an important part because if you are the most successful, people are going to say, "I want to do that too." But here's where there's this modern, sort of unfortunately bullshitty thing that says, "Oh, all competitive advantage is fleeting in this modern hyper-competitive world, and you can't have long-term advantage anymore." And I, and I just say, "Oh, oh, I see. So Four Seasons, I guess." Yeah, I guess that isn't very long-term. That is only been 45 years now since they, no, 35 years, I should say. Don't exaggerate. Since they went to that Str. 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, a good feed stock source, and you have a low-cost position. What's somebody else going to do when they see how much money you make doing that? Build a, build a polyethylene plant beside yours, twice the size, and then, then you're toast. Why? Because the competitive advantage was too simple. But at Four Seasons, you got to sell off all your hotels, uh, you got to 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, uh, giving them more career security, uh, giving them more training, giving them better uniforms, whatever, spending 10 times as much, uh, hiring them with the hopes that maybe someday you'll be able to produce the kind of services Four Seasons does. Competitors basically say, "Life's too short." Do they give up and die? No. There are other great chains. Mandarin Oriental, my wife, life 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 where 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 where, you you convince people to pick different wees. That's why people sort of say, "Roger, how to win?" That's so, so in, in politic, you know, because that you're producing losers, and then, and then there's victims, and be, you know, all that oppressor and oppressive. It, it fits in the, in the modern dialogue. And I say, "No, I, I, what I want to do is encourage them to find someplace else to prosper rather than smack on top of us." And so if you have completely different manage, uh, capabilities and management systems, it'll encourage people to choose a different where to play. How to win? If your capabilities of management systems are very similar to your competitors, and you're succeeding with your chosen where to play, out to win, what are they going to do? They're going to drive straight to your where to play and, and try to win exactly the same place and, and wreck your market for both, for both of you. That's what you, you don't want. And the more sort of complicated, in some sense, not, I shouldn't use complicated, the more nuanced that your, and, and multifaceted your capabilities and management systems are, the more likely they're going to say, "Life's 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, "GE, I'd 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, uh, book, uh, online by themselves to say, to save more money. Life's too short. Life's, it's just too short. So they try things like, uh, Continental Lite or Ted, that do half the things that, uh, that Southwest does. And then you're, what, a crappy Southwest? You know? So that's 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 to win is to never actually be forced to compete. Wow. That's a great quote.
This story about Southwest, uh, makes me think about, uh, Hamilton Helmer's, uh, power of counterposing. I don't know if you've heard that term, but basically, uh, you position yourself in a way where the competitor can't do the thing that you're doing because, because of the way their business is already structured. And that's, sounds right. That's the "can't, can't" thing. Awesome. Yeah. And, and Mike Porter, and he probably, he may quote Mike, Mike on that. Mike was very big on that. He said it's fault lines. You're trying to find fault lines where, where it is so painful for your competitor to come across that fault line into your, your side. And so a great example of that would be Olay. When, when at PNG, it's, and it's in the, in the book, when we did the repositioning of, of that, the competitor that could have killed us, absolutely killed us, was Estee Lauder with Clinique. If they would have brought Clinique into the mass channels, because we were doing a Clinique kind of thing in the mass channels, rather than the prestige. Prestige is like the first four of the department stores, right? Which is all, or Sephora, or Ulta. If, if Estee Lauder would have taken their Clinique brand and brought it into mass, they would have, 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 is super smart. But Estee Lauder also has Bobby Brown and MAC and, and the Estee Lauder, the brand, and a half a dozen more, all in prestige. And the prestige channel. If they would have taken Clinique and taken it over into mass, would have done what? Shot them in the face. Killed them, right? They would have been just apoplectic. Uh, and so Estee Lauder had to stay. If that's counterposing by, by Helmer's terms, they had to stay. Was that stupid? No, they're still, they're still with all of their brands combined, the biggest in skincare. But Clinique has, you know, lost leadership to, you know, our brand that they would have considered kind of nothing. Oil of Olay became Olay, Olay Pro-Regenerist, all of these higher price products than they could ever imagine being sold in the mass channel. But our biggest friend was some, in some sense, uh, their distribution channel, which would have killed them. If we, literally, they would have just punished them so, so bad, that they didn't do it.
I love that. I'm learning all this information, all this strategic thinking about makeup and skincare. I also love just the idea of you leading strategy for skincare, makeup brands. Yeah. I know. I got Proactiv into, uh, color cosmetics. So funny. Love that.
I don't know if you're following the AI Google stuff that's happening, where there's, uh, 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 really like it versus they're making trillions of dollars running ads when they share blue links. And it's this like super innovator's dilemma position they're in.
Yeah, no, no. I, I, yeah, I'm very interested in, in what's going on and, uh, in AI. And I'm writing some stuff on, on, on that. But I mean, it's hard. Like I've seen, I've seen the inside of this for many of my, my clients. It is super hard when the, the guts of how you make money is under, is under threat. Um, and you, you just don't want that thing to go away. You know, the big O, 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. They're way down the learning curve. They have scale, blah, blah, blah, blah, blah. And so these damn electric vehicles are no, kind of no fun. And so the, the Google situation you've described, I think is similar. But my general, 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 AG Lally, my friend who I co-wrote the book with, great, great CEO, was very good on this. And, and, uh, 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 delist all your products." Big threat, right? Big threat. And AG 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, you're going to have to, because customers want to shop there. And we're not, we're not doing that. But what are you offended by that we're doing there? And they, and they said, "Well, you're allowing them to ship products to their customers from your, from your distribution centers." And AG just said, "Yeah, do you want a to?" 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 their business model. But, 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, we're all in. But we're not, we're, we're not boycotting a place that customers have shown they want to shop, as long as it's sort of an honest, like, you know, you know, if Amazon was sleazy and dishonest or whatever, but, you know, an honest, upstanding place where customers can get our, our products." And so I'm, that's, that's where I'm at, which is, which is you, you may have to scramble like hell, uh, you may have to suffer, uh, from kind of economic downturn. But if you think you can, you can, uh, like, I, 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, there were four brothers, we would build, plus then a baby girl later, but we would build sand castles and try to, try to hold back the tide. Like this being Florida or California, we'd try and hold back the tide. And we'd come the next morning to see if our castle is, and it was always gone. Like it's 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? Right? And if they're going someplace, and Vanguard did this, right? Uh, Jack Bogle, the late Jack Bogle, he's dead. He died now a couple years ago now. He did not like ETFs. He said ETFs are not as good for customers as mutual funds. And he had, he had all sorts of good reasons, uh, uh, for that. But, but the index ETF business started to kind of grow like crazy. And, and, and Jack had to relent and say, "I don't think it's good for them, but they want it." And so, you know, they went whole hog into it and, 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. And so to me, if Google thinks they can, because of their, their power and the fact they got a multi-trillion dollar market cap, and they've got them near monopoly position on, on something, they can hold back the tide. You see the, the, 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. And I would argue that they abused that kind of monopoly, right? Like I, I often ask people, when's the last Windows update that got you as a customer excited? Yeah, Windows 95. The answer, I think, is really clear. Windows 95, right? Because that's when he took the graphical user interface that he bought rights to from Steve Jobs and put it on, so you didn't have to do backslash, backslash to, you know, you could actually point and click. That's a long, long time ago. Last time I checked, that's now almost 30 years, right? And so they just abused their, their custom. Is their, their share of PC operating systems much lower than it was then? No, but that's not the right measure of share. The right measure of share, in my view, in that, in that industry, is your share of minutes spent 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, right. Most. And what other one do they do a lot of people stare at who really like them? Pads. Right? Um, and so if you added up all those and said, what do you think? So what's their share of, of, uh, smartphone operating systems? Microsoft, last time I checked, it was 0.4 of 1%. Yeah. So effectively zero. How about pads? Apparently, it's 4%. Uh, 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, uh, uh, this, and I'm going to take those, uh, take those, uh, 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 than, than your PC operating system because more people are using it. So that's what I'd say to that's what I'd say to Google. I don't care how painful it is, is water, water flows downhill. The tide comes in, and, you know, you cannot stop that, even if you're one of the most powerful three firms on the face of the planet. And it may take time, but eventually customer tide pulls. That's a, think that's really important. Yeah, but start now. Yeah. Right. If you're, 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. There's like, oh my God, um, I don't know what we're going to do. This is so hard. All strategy stuff. Um, 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 a way to move forward. Can you just talk about that approach?
So for me, strategy, this thing called strategy, with, yeah, with people, oh my God, oh my God, how I can do strategy? Whatever. I, I, I just think of it 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, right? And so you should reasonably assume that probably those outcomes aren't going to get a whole lot better because they, they've sort of, they are the way they are for a good reason, right? 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. Uh, I can't find this kind of kind of resources. Distribution channel has abandoned us. And I, you know, whatever, 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 cascade. What, what 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, 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, 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 you know, I was a dean of a business school for 15 years. The 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, right? Which is, which is he, he taught second-year courses, and second-year courses happen to be 13 two-hour kind of lectures or sessions of one sort or another. He just polled the students, uh, 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, right? Because in some sense, it's the biggest gap, the gap between what, what, what, uh, the customers, students wished for and were getting. Um, and he would just replace it with something. He would try something else and replace it with that. And you'd say, and that gets you like Professor of the Year every year. And the answer is yes, betterment. Because if you're teaching for 25 years, right, and 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 purists feel awesome. I'm here to help, help people get better.
This makes me think about your water metaphor too, just water eventually finding a way through. A little bit iterating things better. Lots of what I think about in strategy is sort of natural, if you will. I, I, 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. Uh, we covered everything I was hoping we'd get through. I think we're going to help 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?
I did a, we covered a lot, so there may not be anything left. Well, on strategy, I'll, this is one piece of advice I'd say. People often ask me about, about, 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, laughly, they say, "But look, Laughy, he was he was known as a strategy genius, right?" And I say, "Yeah, um, but when I interviewed him in depth about his background for, for a paper I was, 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, he 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, that I've ever met. There's another guy, J. Vic, CEO or ex-CEO now, he's gone on to a higher level, Lego Brand Group, would be would be similar. So great strategists that I've 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, I don't do strategy well." Which links to our, our last thing about betterment. Just, just work on making different choices to solve problems. Not problems that I see. 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, don't be discouraged. And the worst thing to do is to wait. People say, "Well, I've got all these operational concerns right now, and then I'll get to strategy later." You'll never amount to anything. Nobody sets that ever amounts to anything.
Wow. I love this. I love how empowering it is. I love the real talk. Roger, you're awesome. Thank you so much for being here.
You're most welcome. Thank you for making it a, a fun journey for me. I learned a ton, and that's always a good sign. And it was a lot, a lot of fun.
Well, thanks, Roger. Good. 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 lennyspodcast.com. See you in the next episode.