How far can an organization go beyond its original resource in determining its strategy?

Strategy guru Gary Hamel

-Chairman of the international consulting firm Strategos

Reliance on resources can easily become too cautious.

Hamel sees existing resources and markets as liable to trap organisations into a fatal Conservatism
The sheer fact of already being in a market, is increasingly worthless.

Hamel urges instead the importance of strategic revolutions, creating new markets and new business models.
Survival in the contemporary world of rapid technological change, shifting markets and global competition demands constant revolutionary innovation. Such innovation rarely comes from traditional strategy processes emphasising the fit of resources to markets. emphasises stretch over fit, and now revolutionaries over planners.

EXAMPLE OF IMPORTANCE OF INNOVATION

eBay
Pierre Omidyar, founder in 1995 of what rapidly became the worlds premier internet auction site, eBay. Omidyars starting point was not the fit of resources to markets, but a desire to help his fiance with her collection of Pez sweet dispensers. Starting on his own while retaining his day job, Omidyar had none of the resources of a traditional auction house. Far from fitting a market, he was creating a new kind of market. Traditional strategy processes would never have allowed eBay to happen.

Example of importance of resources

Enron
Enron is applauded for its revolutionary capacity to create and trade in markets for gas, electricity, broadband and commodities. But it was inadequacies in unique and hard-to-imitate resources that contributed to Enrons ultimate failure. In the competitive markets that Enron created and traded in, Enron had few sources of sustainable advantage. The result was losses that led to the largest bankruptcy in corporate history at that time. Here resources did

matter.

Nestl and Starbucks

in the late 1980s and early 1990s

http://www.scribd.com/doc/7293348/Lea ding-the-Revolution-Gary-Hamel

Starbucks has become Americas premier coffee brand and has the most loyal clientele of any retailer in the United States. The aver- age Starbucks customer visits a store 18 times a month! So picture those brand managers sitting at Nestl headquarters in Vevey, Switzerland, plotting a course for Nescaf, the best-selling coffee in the world. Do you think they ever wondered how they could entice bus drivers and schoolteachers to line up ve deep to pay three bucks for a latte? No? Whatwere they worrying about? What color cans to put on supermarket shelves? Their supermarket endcap displays? How to beat Procter & Gamble? Industry

Other new revolutionaries: qwest, SAP, softbank, dellthe gap, amazon.com, southwest airlines Im not sure that Starbucks coffee is better than what I can get in any gour met food shop, but its served up inside a very different business model. Many also view

Business Concept Innovation

Industry revolutionaries take the entire business concept, rather than a product or service, as the starting point for innovation. Revolutionaries recognize that competition is no longer between products or services, its between competing business concepts. A few examples: Internet telephony is an entirely different business concept than dedicated voice networks. Buying books via the Internet is a radically different business model than going to a physical bookstore. These are examples of business concept innovation in that they are radical and systemic. They stomp all over the traditional rules of competi- tion. Industry revolutionaries dont tinker at the margins; they blow up old business models and create new ones. Yet there are few individuals in most organizations who think holistically about entirely new business concepts or radical adjustments to existing business concepts. In most companies, a call for more innovation is interpreted as a plea for new products or new features on old productsbut that is not business concept innovationit is incremental innovation focused on a singlecomponent of the business model.

Im not sure that Starbucks coffee is better than what I can get in any gourmet food shop, but its served up inside a very different business model. Many also view innovation as essentially technology-led, and it frequently is. Yet business concept innovation often has little to do with new technologythink of IKEA, The Gap, Virgin Atlantic, and many other innovators that are not technology pioneersTechnology, especially information technology, is available to all. The question is whether you can apply that technology in a unique way. Most of this investment will be focused on Web-enabling old business models, rather than on using the Internet to create radical new business models. Like Wal-Mart or FedEx in the 80s and 90s, there will be a few companies that will use the new technology to realize dramatically new business concepts, but for every Dell Computer or Amazon.com there will be hun- dreds of others that will spend millions playing an endless game of catch- up. To turn information technology into a secret weapon, you have to be able to conceive of hip, new business modelsa skill possessed by few CIOs. If technology is going to become anything other than a great level- er, CIOs will have to become Chief Imagination Ofcers. CEOs, CIOs, and efciency-besotted consultants

. Initiatives aimed at sup- ply chain integration, process reengineering, enterprise resource plan- ning, and customer relationship management demolished functional chimneys and crisscrossed organizational boundaries. Yet they were sel-

visionary companies seldom live beyond their rst strategy

Well then, perhaps revolutionary strategies come from visionaries like Bill Gates (Microsoft), Ted Turner (CNN), Anita Roddick (The Body Shop), Rupert Murdoch (News Corp), Andy Grove (Intel), Jeff Bezos (Amazom.com), Howard Schwartz (Starbucks), Mickey Drexler (The Gap), Michael Dell (Dell Computer), and other far-sighted industrialists

Q1

I NDUSTRY S NAPSHOT Beginning in the early 1990s, small and large coffee roasters enjoyed strong markets. Coffee consumption also was brisk, with coffee shops maintaining their presence throughout the country. Thus companies like Star-bucks achieved positive growth and other players entered the specialty coffee market. For example, in the mid-1990s, Procter & Gamble acquired Millstone Coffee, a privately held firm that roasts and distributes gourmet, whole-bean coffee products to supermarkets.