How Leaders Become Strategists Conference Day 1 Dr Richard Rumelt

Welcome back, everybody. I hope you got a fantastic snack. I hope you got some movement, um, going, and I hope you are ready for a high-energy discussion We're going to be joined in a few seconds by Dr. Richard Rommel, who wrote the book The Crooks. It is described as a revolutionary framework to turn any leader into a strategist. And of course, this is why we are here in this 3-day conference. It's an amazing book that I am looking forward to continue reading. I'm looking forward to Francis sending me all sorts of nuggets that he has been doing, um, about this book. And, you know, one of the things that I'm going to do in a second is put a link, the Amazon link to this book, because I really would love everyone to, to get a hold of this book as soon as possible. We'll have that amazing opportunity to speak with Dr. Rommel in a few seconds. Um, I think I want to introduce him by starting out saying that while he encourages us to think about strategy, it's about diagnosing challenges as well. But he also guides us in this book and in his talk today about building coherent solutions and putting them into action. And I think that's, um, a really great way of summarizing who this extraordinary gentleman is. He is the Emeritus Professor at UCLA Anderson. He received his MCE from UC Berkeley and his doctorate from the Harvard Business School. He's an internationally known writer, speaker, and consultant on strategy and lives in Bend, Oregon. When not writing or speaking or consulting or hanging out with us on a Friday afternoon, he somehow in all of that finds time to ski, hike, kayak, and hang out with Jamie and read. An amazing individual here, and we are so happy to have him. Um, uh, Dr. Rummelt, are you on with me now? I think so, we're just waiting on the technology. Sometimes it takes a second or so to catch up. Everybody, I'm going to hand over right now to Dr. Richard Rommel, professor at UCLA. Thank you, Dr. Rommel, for being with us this afternoon.

Thank you, Danielle, and it's a pleasure to be here at your conference in the Caribbean. Um, you know, happy to talk to you. And the group about strategy, and in particular about The Crux. I'm looking to share a screen right now. The Crux is the second in a series of books about, about strategy that I've managed to, to write at the end of sort of a research career as a, as a research professor and increasingly involved with working with companies. And I wrote this book, Good Strategy, Bad Strategy, oh geez, 11 years ago. And a lot of people appreciated the fact that I called out this thing called bad strategy, uh, a bunch of fluff and and things that aren't strategy. But there's also a clamor for, well, how do you actually do strategy? How do you, how do you create a good strategy? And in some sense, the crux is, is, is my attempt to answer that, that question. Let me see if I can get my system here to work properly. Here's a strategy. This is a company called Dean Foods. Dean Foods was the largest milk distributor in the United States for many years. They had bought up local dairy processors, not the farms, but the milk processors all over the country and were the leading supplier of fresh milk to supermarkets, Walmart, all those kinds of stores. And their strategy says, we have a vision. We want to be admired and trusted, and we have wholesome, great-tasting dairy products for every occasion. And we're going to provide unmatched products, and we're going to drive significant cost advantage by lowest input costs and best-in-class production, and we're going to establish cost and margin predictability. Now, the milk industry is subsidized by the government. Farmers are paid to produce milk, and when there's a surplus, as there is every other year, they pour the excess into ditches around the edges of farms. Back in the mid-1990s, '90s, China cut its import of milk, the EU lifted its production quotas, Russia banned imports. There was a growing glut of milk and Dean Foods couldn't make any money. Their primary challenge was that they're dealing with a market that didn't work. The price mechanism didn't work. They went bankrupt in 2019. Their strategy doesn't say anything about these problems they face. It's a wish list. It's a set of ambitions. They wish they had the lowest costs. They wish they could reduce unpredictability in margins and supply. They didn't know how and they didn't do it. They didn't have any brands like— well, they bought Friendly's Ice Cream, which is just another foamy ice cream. It went down with them. In 2016, I was asked to work with a company I'll call Royal Field, and I was at a strategy meeting. There was about 25 senior executives there. The chief financial officer started off the meeting with using videos of Marvel's Thor character to illustrate where they've been in the last 3 or 4 years financially and where he hoped they would go. Basically, the analysis was we're doing sort of okay, but we could certainly do better. Then the CEO came to the stage. The CEO reminded everybody about what he called their strategic commitment, which came out of a merger they'd done 3 years before. And the strategic commitment is to provide customers with the most effective solutions to their needs. It's hard to argue with that. It's fine. And then he presented what he called the success scorecard. And when he put it up, it looked like kind of the report card you get at school. And the success scorecard said, what we want is 15% profit growth and 15% return on equity. And if we achieve those, that's success. And then there were reports from the 4 different geographical division managers about their, their activities and how they were going to add to this success scorecard. Over dinner, I talked to the CEO and said, look, you know, you've got some issues that I'm sensitive You're geographically organized when the industry is global. The technology that you're exploiting and riding has reached a plateau, and there are other things coming along that are more advanced. So maybe it's time to switch to a faster horse. And he put up his hand like this to me and said, Don't mention any of that to the team. I want them focused on achieving the goals. So that strategy meeting wasn't strategy. It was bad strategy. And it's the kind of thing I see in almost a third of the companies that I visit, which is they're setting financial performance goals and maybe some market share goals. And calling it a strategy. That's not a strategy, that's ambitions. Setting goals for next year or the year after or 5 years out are ambitions, they're not strategies. So people are misusing the concept, they're misusing the words. A strategy, the word comes to us from the Greek from 500 BC. This is a picture of me trying to look serious, and I'm standing in what used to be the Strategion, the little building in the Agora of Athens where the 10 strategoi met to discuss strategy. Strategy was, you know, how do we handle an attack from Sparta? How do we deal with the Persians? How do we deal with a plague in town, how do we deal with things? It's been that forever. A strategy is a coherent mix of policy and action designed to surmount a high-stakes challenge. And so whether it's on the chessboard or in the military or politics or business, a strategy is this— is your attempt to solve a problem, to deal with a difficulty or challenge. That's what it is. And if you don't identify the difficulty, you can't solve it, you can't surround it, you don't have a strategy, probably. So working with challenges is the basis for doing strategy well. You have to work with challenges and actions and put goals in the back burner a little bit. You have to diagnose those challenges. You have to find the most critical challenge which can actually be overcome. You have to design a coherent set of specified actions and rinse and repeat. You do this over and over again. Strategy is a journey. It's not a long-term vision about where we're going to be way in the future. It's about what you're doing now, and some of the things you're doing now will have long-term consequences. The title of the book, The Crux, comes from bouldering. This picture is of a boulder in the forest of Fontainebleau, outside of Fontainebleau, which is where the school of management called INSEAD rests. And this particular rock is the Toit du Col du Chêne, which means the roof of the dog's ass. It's a sandstone outcropping. And you can see the problem. Here's a climber heading up toward this, this overhanging roof, which is substantial. How do you get up over that overhang? The crux is the hardest part of the climb, whether it's on a boulder or a mountain. It's, it's the move or the pitch or the part that's the hardest. In general terms, the crux is what makes a challenge difficult. The crux principle is don't accept the challenge, don't climb a mountain unless you can handle the crux. Now that doesn't mean you can't practice the crux, but you've got to be able to handle the crux to get to the top. You've got to be able to handle the crux to solve a challenge. And too often people accept challenges where they have no idea how to deal with the crux, the hard part of the challenge. The second principle is focus on that challenge, which is the most important, where you can handle the crux. There's many challenges everybody faces in life and in business. We can't accept them all. We'll spread our resources too thin. We'll have conflicting policies. Focus on the most important challenge where you're actually able to handle the crux. Here's this climber in Fontainebleau. I'm videoing it right now. There's a little bit of audio here, but you can barely hear it. He's a Frenchman. Oh, he's blowing his arms out now, so he's not going to make it. Here's Asya Greka. She's, uh, she's actually born in Siberia but grew up in the USA and is now a doctoral student at the Sorbonne in Paris. She's attempting the same boat. There's no sound on this. Now that's the crux right there for her. If she pulls straight up, their chest will hit the rock and she'll fall off, so she can't pull straight up. I always marvel at these boulders and climbers. They're, they're doing things that seem impossible to ordinary people, and they're doing it without advertising or bonuses or coaches or any of the paraphernalia that surround the professional sports world. They just do it for the joy of doing it. Elon Musk built a company called SpaceX around a crux idea. He wanted to buy a rocket to send a payload to Mars, a small symbolic payload, because he wanted to advertise Mars as a destination. And he went to Russia to buy a used rocket— or not, there's no such thing as a used rocket, excuse me— a rocket from them. And he didn't like the bargaining that went on. They first— there was $1 million, then it went to $2 million, and then it went to $3 million. And he walked away disgusted, but he began to wonder, why does it cost so much to put a small payload into orbit. Why is it so expensive? Here's the cost into low Earth orbit in 2018 dollars or a pound. And the space shuttle, uh, it cost $28,000 a pound. Uh, the Ariane rocket out of the EU was more like $6,000 a pound. The little red line at the bottom is interesting. That's the— that was the cost that was sold to Congress. To justify the space shuttle was $125 a pound, but it turned out not to be $125, it turned out to be $28,000 a pound. That's a long story, but basically it says don't let the government do things like this. Musk looked at this and he said, you know, the problem is re-entry, the problem is rockets are not reusable. One rocket, one payload, that's it. And there's got to be a way to reuse the rockets. And the Space Shuttle tried to do it with thermal tiles, and it didn't work. And he said, you know, what about the old science fiction movies where the rocket turned around and fired its engine and landed on its tail? That's— they're not going 18,000 miles an hour as they come down. What if I built a rocket that carried more fuel. Fuel is cheaper than rocket, so let's carry extra fuel, and then when we get to orbit, we'll turn it around and we'll start firing the rocket engine to slow ourselves down as we come back to the ground. And that was his idea for handling this crux problem, the problem of how do we do this. This is a short video. Of a Falcon rocket, Falcon 9, taking off. I've shortened this and chopped this way down to less than a minute, and it gets into orbit, and then it fires its rocket, and here it is coming back down. That's the 8th time for that particular booster, and that, that reduced the cost of going into orbit down to around $1,500 a pound. It's basically 28 times cheaper than the old space shuttle, and then the Falcon Heavy cut that cost in half. Those are remarkable for a physical system to see that kind of cost reduction. And it's because Musk, who's a squirrely guy but also an engineering genius, he focused on the problem. He didn't focus on the goal. You know, you can focus on the goal, how do we get the cost down? But he focused on the problem, which was reentry. He focused on what made it hard, what made it difficult, and he saw a way through it. Now, we don't all have that engineering brilliance. The bad strategy we see comes because people start with goals. It comes from social herding, which is we do what we see other people do. It comes from the statements doctrine. Statements doctrine is that, oh, what you should do is you should write a mission statement, and then you should write a vision statement, and then you should write a value statement, and then you should write a goal statement, and then an objective statement, and finally a strategy statement. And, you know, the governments of the world tend to employ lots of people writing piles and piles of these statements. And it doesn't work. You can't deduce a strategy from a mission. It's not a deductive process. It can't be done. Here's Nokia's millions of units being sold. Nokia at one time, of course, was the largest cell phone manufacturer in the world, and it was up until 2011 the leading producer of cell phones, and it even came out with a smartphone somewhere here around 2011. But why does Nokia collapse here? And you can say, well, it's Apple. Well, Samsung didn't collapse. Samsung took off. Nokia's mission at that moment in time was to empower every person and every organization on the planet to achieve more. And their, their vision was to help people and businesses throughout the world realize their full potential. Now, does that help deal with the fact— not so much of Apple— what was really going on is the technology was changing from hardware to software, that Nokia had been a master at making chips into little tiny boards and putting them in phones. And they had an operating system called Symbian that they had to re-engineer every time they changed the chip. And that tied up older engineers constantly with this stuff. They knew Apple was making the iPhone. They knew it. They had spies inside Apple. And the CEO of Nokia at every single meeting said, "I— we need a touch—" Finger-touch phone, we need something like what Apple's coming out. But it never got produced. It never got produced because they didn't have a strategy. They had management by objectives. They had 100 different product managers, each being held to quarterly results on sales and earnings. Jobs came along and changed the industry. But the writing was on the wall about software versus hardware. Management by objectives was invented by Peter Drucker back in the 1950s. And this is a picture of Robert McNamara in 1966 talking to a bunch of Harvard students. Look at them, they're all in suits. Amazing. And I was there when he gave a speech that day, and he said something. He was in the middle of ramping up the Vietnam War, and he said, and I'm quoting him now, he said, as a technology, management has rapidly developed in the last 30 years. We now know how to manage anything. The Ford Motor Company, the Catholic Church, the Department of Defense. You break the overall objective into parts which can be measured. You put someone in charge of each part and you measure their progress, holding them accountable for results. That's how we managed the Vietnam War. That's how he lost it. That's what that manager at Royal Field was doing with his success scorecard. That's what too many companies are doing. They're setting goals and holding people responsible for meeting them and calling that strategy. It's not. It's management by objectives. Strategy is when you have to do something different because you have a challenge. In 1999, Marvel was a comic book company and it had 4,700 characters. It licensed 2 of them to the movies. It licensed Spider-Man to Sony and it licensed X-Men to Fox, and it didn't get much money for those licenses. None of these characters had the history of Superman and Batman and all of that. They were basically unknown outside the comic book crowd. The question for Marvel was, how do we make some money off all of these characters we've got? We'd like to turn them into feature films but Hollywood isn't interested. The president, Kevin Feige, had two ideas. The first was to do an end run around Hollywood. He went directly to Wall Street and got some money from Merrill Lynch to make a movie about Iron Man. They tried 30 different writers and everyone turned them down. Iron Man character was just too uninteresting. Look at him there, he looks like the Tin Man from The Wizard of Oz. But they proceeded and they brought him up to date, and the Iron Man movie was a big success. But that isn't enough, he's got 4,697 other characters to worry about. And what Feige did then is he created something called the Marvel Universe, which is— it's a fictional place, a fictional universe where all these characters inhabit it. And when he made a movie from then on, it typically didn't have just Iron Man in it or just Thor in it. There was the Black Panther, the Winter Soldier, Captain America, Iron Man, Hawkeye, Vision, and many more. And this idea of this alternative universe allowed him to take many, many, many of his characters and package them, uh, for the cinema. And it was very, very successful. Went to the crux of the problem, which was sneaking around Hollywood and their desire to license just one at a time. Marvel was acquired by Disney in 2009, and they continued to to push the Marvel Universe. I met with Secretary of Defense Ronald Donald Rumsfeld in 2005. He was dealing with the insurgency in Iraq, and he asked me about, well, you know, how do you do strategy? He says, I know, I know what a strategy is, but I don't— he says, as a Secretary of Defense, I have access to just about any expertise you can imagine. You want to know how many sorties we can fly in 24 hours? We know, I have experts that know that. You want to know who in Turkey is blocking the northern route? I have experts that know that. You want to know about the weather in Iraq? We have people that know. You want to know about, uh, the family connections between various groups in Iraq, we have people that know. He says the problem is that every morsel of expertise comes with a hidden agenda, a budget, a career, a perspective, a company to push, something, you know, everybody's got a reason for talking to me other than the question at hand. How do you put all this together? And I was sort of embarrassed because I didn't have an answer. I'm a strategy professor and we talk about strategy as if it's a thing. We don't talk about it so much as a process. And I said, well, it pays to look at the challenges, what makes it difficult, but beyond that We don't know much more than what the ancient Egyptians did, which is you put a few smart people in a room at home, hope they come up with something. Um, today I do something called a foundry. I get together with hopefully no more than 7 or 8 senior people at a company. We organize around 2 to 5 days of off-site intense meetings. I do confidential interviews with each participant, as well as maybe some other members of the organization, where they tell me what they really think, and I keep it confidential. And we discuss their ambitions, successes in the past, failures in the past. What's changed? What are their forecasts? But mostly, we— I then get them after they're loosened up with all the standard strategy stuff. What are your challenges? What are the challenges you face? What makes that hard? What makes it difficult? How can we get around those difficulties? And in getting around those difficulties and in discussing challenges, you automatically begin to think about Action. What do we have to do to get around that challenge? We automatically also see how cluttered the space is. We see that there's too many challenges, that we can't possibly attack them all at once, and then we have to winnow the field down. We have to decide for each challenge what is the crux, if we can identify it, and then for all the challenges, what's the overall crux? What is the most important challenge where we can actually handle the crux and what actions are required to do that. Now, I've never had a client actually boil it down to one challenge. They always want two or three, and I can't stop them. But that's, that should be it. You need, you need coherent actions aimed at the most important important challenge, and if you're a big organization, maybe 2 or 3. Not a list of all the things that everybody thinks is important, and not a list of goals, but the actual actions you're taking now to solve those challenges. So that's challenge-based strategy, and that's the crux. And I appreciate your attention. I'm open for questions.

Oh, I'm not on yet. Oh, here we go. Dr. Rommel. Yes, Francis. Ah, well, you— I just asked my first question. I have many, um, but let me just pop it onto the screen. And I see Ami has a question too. Question: after you do the confidential interviews, do you have a standard group process that you follow after? Like, I get everybody could tell you anything they want behind doors, but you're—

well, there's— Francis, there's 3 chapters in the book about the founders. So I describe one in detail, how I went through it, and I talk about some of the general things that I do. Um, but I, I wouldn't say there's a standard process, but there's certainly some steps. I mean, the first morning is an unfreezing time. Basically, people have to get used to talking about these things, and they have to become more open with each other, and like that. And we really don't get to challenges until the afternoon of the first day. You need to talk about successes and ambitions and hopes and things like that to get that out. Um, and existing programs, and why are you doing these programs. So sometimes people don't verbalize what a challenge is right away, but they say, we're doing this, we're doing this, and then I will say, well, why are you doing that? And then if that doesn't yield insight, I'll say, well, why is that difficult? Why are we spending strategy time on it? If opening up an office in Australia is what you're doing, why is that strategic? Is it hard or is it easy? If it's easy, let's skip on to something hard. So I, you know, I go through this process of trying to get them to focus on the barriers to them being more successful. Rather than just the ordinary work. Strategy, in a sense— I spent some time in the book on power, which is a difficult subject for a lot of people nowadays. Ever since the mid-'80s and transformational leadership came along, people think that they just have to exude, like, raise from their head certain kinds of leadership attitude, and everybody will do what they need to do, and they won't have to tell anybody what to do, right? And that's— it's not true. Uh, but, but most organizations— let's suppose we have an organization that's reasonably successful. People come to work every day, they do stuff, they go home, and they come to work the next day and they do more stuff and they go home. And they will keep doing that all year long without senior management saying much of anything. Mm-hmm. Strategy is when you intrude on that and say, let's do something different. And normally that means changing work relationships, changing power relationships, changing who's in charge of something. It's in some ways either instrumentally or verbally telling people what to do. You have to do that. The strategy means a focus of resources on something different. My career thrives. It needs to be changed. You don't need to have a strategy retreat, right?

My career thrives and yours doesn't, basically. I have a question then. Yes, when you have these initial conversations, people start to, to get a whiff of, hang on, he's talking about my budget being cut and that guy over there, his budget's going to get more. So they sense that you're, you're for real and you're having these conversations because you're peeling back onions, you're getting to the truth of something that they usually don't talk about because it's easier not to talk about them. When people sense that, they see where this is going and they don't like where it's going and you're having those initial conversations on that, those are sort of joint, they call it. They start to feel a bit of pressure and they're like, why is my nose— and the egos start to kick in. Oh, and then they start to tell you why their unit, their division is doing so well and why the new technology that's going to save the company is going to come through their research lab. So they start, you know, they start ego tripping and then they all start ego tripping because they all kind of catch on that hold on, if I don't do this dog and pony show really well, I'm going to be out of a job and my people are going to be laid off and it's going to be a disaster. How do you, um, bring them together when those egos start?

There's basically 3 things. The first is that I don't do a foundry unless the CEO has agreed to a challenge-based Secondly, we— I try to disconnect the Foundry from budgeting. We make sure it doesn't happen just before a budgeting cycle, and it shouldn't happen any multiple of 3 or 4 months. Should happen every 7 months or 11 months or 15 months, something where you're not harmonious with the budget cycle. Third, you have to let people say all that until they get to saying it again the second round, everybody gets tired of hearing it. People are going to say those things and you can't stop them. And then, but at some point, you know, most executives are pretty smart people and they get sensitive to each other's reactions and they realize Okay, they've heard me on this before and they're now looking away. Third, fourth, uh, that's part of the reason for the confidential interviews, because if, if they can't let go of that stuff, I use information that I gathered from the interviews. I put it up on little slides, one sentence on the slide, and I'll pick through and put something up. I'll say, well, someone in this company said 'Project Y is a complete waste of time for the following reason.' And I said, 'I can't say who said that, but somebody said that, and, you know, I think we should think about that.' And the first time I do that, it's a certain amount of— but, you know, I have this arsenal of things that people have said that I use. It's the key tool really that I use to intrude on their conversation. And, you know, I put up and I say, someone said that this company has lost its competitive advantage, it doesn't have it anymore. Someone else said that you can't get two divisions here to cooperate on ordering paper clips. And You know, these things fall like a lead weight, but my job is to bring those things up, not to win a popularity contest. That's why you have an outsider do this. You have an outsider do it because it's suicide for an insider.

It's suicide.

And you know, they have to want to actually do strategy. If they just want to do budgeting, I can't fix that. You know, they're going to do what they want to do, right? Um, and sometimes the whole thing is a, is a funny dance that falls apart occasionally. It just, it doesn't work. I had a client a year Europe where they spent the first day talking about ethereal challenges, challenges that are odd stuff about the environment. And I can't be specific because I can't tell you what the company was, but, you know, I finally, the next day, I had to put up charts and say, look, your profits have gone boom, boom, boom, and they're negative now. You're losing money. No one's mentioned that. How come nobody's mentioned the fact that you're losing money? Well, we're losing money because we've got competition. Oh yeah, okay. And because our prices, uh, the salespeople can't seem to push our prices through. And I said, well, why can't they? Well, you know, they're not very well trained. Well, why don't you train them? And, you know, so we go through sort of like there's a smoke and mirrors thing about who we are and how we present ourselves. This is a division of a bigger company, how we present ourselves to senior management, and it's, it's fake. You— they didn't ask me back, but we did get to what are the pro— what are your actual challenges and what should you do about them. It was embarrassing for them though. So once in a while that happens. Most of the time people are pretty— they're happy about getting an actual action plan to address an important challenge. They recognize the value of that. Where they get a little hung up is on the public face. What are we going to tell the board? What are we going to tell investors on Investor's Day? We can't tell them, oh, we have this big problem and now we're gonna try to solve it. We can't tell them that we have to— I say tell them whatever you want. You know, if you're, if you're gonna land troops in Afghanistan, you don't have to tell them what your strategy is. You tell them what you hope to achieve, just like everybody else does. But actually having a strategy might help.

Great. Let's, let's take a— I could monopolize your attention for a few hours. Well, I'm gonna warn you about that with me. But I'm gonna take another question from a couple. Oh, it's a lot. Okay, let's take one from, from Kelly McIntosh.

So does setting good strategy complete with the innovation process, and should it? asks Kelly. Um, yes, yes. Um, it depends on, on what industry you're in and where you are in the industry life cycle and things like that. You know, there's, there's places where innovation is just absolutely critical and it's happening all the time and you have to do it. And then strategy is fundamentally about getting ahead of that curve. Lots of times companies I deal with are behind the curve. They're used to doing things in a certain way and they don't really want to innovate because it upsets their processes. Basically, you know, there's an old, old thing called the product lifecycle, which says products go through a growth period and then a mature period, then a decline line. And you can't really time that exactly, but it always happens. And as, as you approach maturity, your strategy should be to figure out, as I said in the first case I gave, you know, there's a faster horse out there. Maybe we ought to be getting on a faster horse at this point because what we're doing is mature. Now, innovation is One thing, change is another. I mean, what about change? The world is changing right now. Uh, there's a certain amount of deglobalization going on. The supply chains for energy are reshifting all over the world. Uh, future is not going to be like the past. And so there's strategy there that isn't necessarily innovation, but adaptation. But sure, innovation is part of strategy, but not the whole thing. I mean, if an innovation is— look at Musk's innovation, it was 30, 40 years before someone solved that problem. The solution actually wasn't all that tricky, but you had to have adaptive control systems to make it work. But, uh, Innovation. Look at Zoom. Zoom came along because Teams or whatever people were using didn't work very well, and so there was an innovation. And the innovation— it was a lot of engineering behind the innovation, but actually on the face of it, it looks pretty simple. To make things usable is hugely innovative in today's world, to make things simpler, easier, smoother, faster. I know, yeah, so good strategy and innovation, sure. I mean, you get advantage, you make profits by successful innovation. Not just innovation by itself doesn't do anything, but it has to be— it has to be valued by the marketplace and it has to work.

Like the iPhone, the iPhone screen.

Well, you know, like right now we have a desperate need for non-fossil fuel power, which we invented back in the '50s. I mean, we have atomic power, but we've let it lie for so long there aren't any engineers that know how to design it and there aren't any workers that know how to build it. So it's a huge challenge for the society. Okay, great.

All right, there's a kind of a two part question almost, or a follow-up question. How do you specifically get people out of the habit of vision, mission, and financial goal-setting mindset into challenge thinking?

So, so my wife Kate wasn't a skier when she married me. And I don't know if you guys down in the Caribbean ski. But one of the things you don't want to do when you're skiing is stem your turns. You stem your turn, you put the ski out like that, and you— she was a stem turn skier. So we went to a clinic in Aspen, Colorado, where they promised for a very high price that they could cure anybody of their stem headache. So I was wondering about what the technology was, and they had a a talented instructor who skied behind her down the hill, and every time she put her ski out like that, he yelled, "Don't do that!" So that's one approach to getting people into challenge-based thinking when they start doing the vision, mission, goal setting. I lecture I talk, I consult, but I'm just one guy, and, uh, there's an opportunity here for, for many of you to, to consult with firms on getting their thinking straightened out. I spent some time with McKinsey and PricewaterhouseCoopers on, you know, would they like to learn how to do foundries, and they looked at my plan for a foundry and they said one guy for 3 to 5 days? No, we don't want to do that. We want 10 guys for a year.

No, no big profits in that.

There's no money. There's not enough money in that. That's okay. This is an opportunity for, for individual facilitators to come in and work with small groups of executives on telling them about goals and vision. Don't do that. Do this instead. I wish I had a better answer, but you know, what I'm doing is writing books and running foundries and speaking.

So we need to do our part, basically. You're doing your part, we need to step up and do ours. So here's another question related to that one that's just about as challenging, basically.

Cheryl, how do you develop a strategic thinking mindset habit? Um, The strategic thinking mindset is diagnosis. You have to figure out, you know, what's going on and why are things difficult and what are the difficulties that you can actually do something about. You know, when I look at the world around me, I see hundreds, thousands of difficulties. I see tens of 20s to 30s that I can figure something out about, whether it's homelessness in San Francisco or trade with China or the problems of a couple clients I'm worried about right now. A lot of their challenges, I don't have a clue how to deal with that challenge, and they don't either. And a strategic mindset is Put those to the side. Work on what you could accomplish. Fight the battle you can win. Because after the battle, your troops will be stronger. They'll trust you more. They'll be more experienced. You'll be more experienced. You'll have more confidence. And then you can take on the next challenge. Don't get bogged down in things you can't do. Curb your ambitions. You have— you— everybody has ambitions. I write about it in the book, and I say, look, when I was 25, I wanted to climb the great mountains of the world, and I wanted to be a professor at Harvard. I wanted to teach statistical decision theory, and I wanted to be on the boards of big companies, and I wanted to ski in the mountains. And I wanted to marry a beautiful woman and have lovely successful children. I wanted to drive a Morgan Drophead Plus Four, and I wanted to make enough money to buy a townhouse on the Île Saint-Louis. And I had a bunch of other ambitions too, and there's no crime in having ambitions, but you can't achieve them all. What happens is at any moment in time you can work on one of them. And so the strategic thinking is about this focus on what is both important and what is achievable.

It also strikes me that if you— it's not just a matter of picking the lowest hanging fruit, but you're still looking for the crux, right?

That's not the lowest hanging fruit, it's the most— you can— highest hanging fruit you can actually reach, right?

Right. And it also strikes me that if you take that approach and you actually move the needle, then maybe the whole problem might change because you've moved the needle. So you're relying on that, you know, if you do this thing over here, the whole thing might become an easier problem to solve because you don't understand all of the cause and effect relationships.

If you, if you succeed in solving problem A, typically now you're stronger and you have more resources and you're going attack problem B, right? And it's not— B strategy is a journey. It's a journey through a sequence of challenges that you, you try to— and, and the challenges that are facing you are, are several, and you choose which one to some extent, right? Sometimes it's thrown at you, you don't get to choose, but even within a challenge, there's sub-challenges, and you still get to choose.

Okay, here's a question from me. Managing by objectives and strategy don't seem to be comparable concepts. Yeah. When organization doesn't identify a solution to the crux of the issue, why not execute it through MBO?

Yeah, because when you're creating a strategy that's a mixture of policy and action, you're going to manage by action, not by objectives. If you say, look, what we have to do is we have to get closer to our customers in Southeast Asia, and to do that we have to set up a research facility somewhere in Southeast Asia and begin to solve some of their problems with our with their technology. Okay, I'm just making something up, but it's related to a client I had. Then you have to manage by making that happen. You have to set up the facility in Southeast Asia and you have to hire people to be there. That's not— you could set that up as an MBO thing, but typically management by objectives is going to be end product measures. It's going to be sales. And profit and turnover, numbers like that. And when you're managing by action, your strategy is not an objective, financial objective, it's your market share objective. It's a set of actions that people then carry out and do. You know, you're saying, well, why is this hard? Well, it's hard because we don't know anybody in Asia. There's another question that was asked that I want I want to go back and reflect on, which is, well, what about the budget? You started with that, Francis, you know, and part of the answer is you've got to have a strategy budget. You know, if you've got a regular budget about people's normal operations, you know, here's how we run Dean Foods and the dairy thing and everything else, and you've got a strategy then to do something new and different, you've got to be able to allocate funds to that action to whatever it is. That's, that's sort of ex-budget. It's over top of the operating budget. It's separate. And this isn't all that impossible, although people have bought into all these accounting tools that make it hard to do anything new and different. But yeah, you need a, you need a budget for the strategic actions that you're saying are extra or different and new. It's an overlay and not business as usual. Is there any use for vision, mission, values, etc.? Does it serve a purpose? Well, it keeps people employed. Personally, I don't think so. I recommend to my clients that they don't do that, that instead they have a motto. A motto is typically a a one sentence or a phrase like "ever upward" or "always stronger" or stuff like that. The Spetsnaz in Russia have a motto, "any mission, any time," and so on. "So that others may live" is a military motto on the US Para Force and so on. It's a company here in Bend, Oregon whose motto— it's a roofing company and their motto is, "We keep you covered." So a motto expresses sort of a certain exuberance without pinning you down to what you're actually doing very much. And that's fine. The vision, mission, value stuff, uh, values may be important. But I don't see how a value statement does that. Values are expressed by leadership in how they behave. Everybody studies leadership. What do they do? You study every word, every action, every parking place, every person they meet is studied. And so your values are expressed by your life, by your actions, not by statements. Hmm, but that's my— you can do what you want.

Um, let me bring— I'm going to bring Daniel up on stage to ask this last question. Daniel, you're not— how come you're not on stage? You should be on stage. Show on stage. Okay, that's my bad. Daniel, ask this last question and then we'll—

do we also look at challenges within our industry? Um, sure, why not. Uh, you look at— so what Steve Jobs was doing with his iPhone, he was looking at challenges faced by customers. Customers wanted to have a web browser in their pocket and didn't have it. So you look at challenges that customers face, you look at challenges that your competitors face, you look at challenges your industry faces, not out of intellectual interest, but but if you can figure out a way of meeting them, then there's probably something you can do to advance your own interests. There's a concept that I teach called value denials. It's really expressed in the first book, Good Strategy, Bad Strategy, and a value denial is something that should be for sale but isn't. And then you begin to ask yourself, Well, why isn't it? Why can't we check our baggage in downtown and have it delivered to the airport? Why, why do we have to drag it there? Uh, and so on, you know, what, what, that's a simple example, but you know, value denials are things that should be for sale that aren't. So within our industry, what are our value denials? Why, why is the remodeling in this You can't ever get somebody to do it on budget, on time. What's wrong with that industry?

Dr. Amatwi, it's such an incredible afternoon or evening with you. Just before I close you out, just, Francis, if there are any more questions— I'm not seeing— oh, there's one that just came in from Hadley. Don't mission, vision, values statements provide a documented standard against which to evaluate leadership behaviors?

Yeah, you could say that. You could say that.

You could say that.

I have nothing against such statements. What my point is, I personally don't do that, and I think it's a bit of a waste of time. And secondly, you can't deduce a strategy from these statements, which is sort of the implication of the pyramid.

I think that's not true.

That's the problem.

I've seen it tried before.

The idea that these are the The things that we hold ourselves to, you know, I would love to see more of that. I'd like to see the universities that claim they're in favor of free speech to turn that into a legal document.

Wow, now that would be— there, we could hit a couple of those points.

I'd like to deny someone a platform.

Let's, um, introduce that concept to governments. Yes, that would be extraordinary. I have a question for Dr.

Robert, but it's not content related. Is there a possibility that you could stay around for a while with us through our networking session, which is going to start in about 15 minutes? I have maybe another 15 minutes, then I have to— it's just another 15. Okay, so Daniel, over to you still for the next 15 minutes.

Okay, no problem.

I'll wrap us up really fast. Dr. Ramat, that was truly a great way of spending a Friday evening. Um, I legitimately truly feel so inspired, um, by this, just as a business leader. Um, you know, everyone, we got to see a fresh and pragmatic approach to strategy. I, I, I cannot— I have not heard anything new in this space in so long. So I feel absolutely inspired by that. I have placed the Amazon link again to Dr. Ramon's book, and I truly do recommend it. Well, 5-star reviews are always welcome. And 5-star reviews. And there was a book before, Good Strategy, Bad Strategy. So I mean, talk about a long weekend ahead if you're a nerd like me. But, um, what stood out? A few things. We have to get to the crux of the problem. Um, don't accept a challenge unless you can handle the crooks. Now, I felt challenged by that statement, right? I, I kind of tuned out for a bit, like, maybe that's the problem. Maybe I've accepted challenges and I haven't been able to accept the— and handle the crooks of it. Um, market share and financial goals are just ambitions, they are not strategies. And I think if any of take that away to our CEOs in our companies and push hard at that, um, that, that would be transformative in our organization. Um, we see where the crux is the hardest part of the climb, and some of us run away from that, and in our strategy sessions may miss that important crux. Pardon the pun, it was literally. So, um, don't accept the challenge unless you can handle the crux of it. Strategy is doing something something different because you have a challenge. Now imagine if we started our strategic retreats with our clients and with our bosses and management team from that sentence alone. Then we start to look at what makes that challenge important and what makes them hard. A totally different strategic planning session ahead for many of us. We can't possibly win all challenges at once. How many of us have been in strategy sessions— or a few— And we have 15 challenges that we're going after in this next year. And the truth is, 20 of those carried from the year before. So, and the year before that, right? So, you know, just a few key takeaways, Dr. Lamont. We're so glad to have you with us. You know, to all our panelists for today, thank you for being with us. And for everybody who is still with us right now, we have quite a few people. What were your key takeaways from this session, but you know, also throughout the day? Join us now, we're going to move into our networking session, but before I close, I just wanted to quickly introduce tomorrow. We're going to be talking with Aldo Antonio and Mariano about good strategy versus bad strategy, meeting the demand for data-driven insights, lots happening. We're going to be hearing from JMMB about their 30-year vision and strategic plan. Um, very pragmatic conversation about to happen there, how to plan strategy in a world of economic chaos. A lot of great things happening tomorrow. We start promptly at 8:30. Francis, if I'm wrong, please correct me. Sorry, 8:30 Jamaica time. I have to remember we're in time zones, which is 9:30 Trinidad time. Am I correct? That's right. Yes, that's correct. So thank you for our host Framework Consulting and our sponsors Crestcom, Arbinger, Markrim Salary, the Bahamas Financial Services Board, which carried us through this evening, Caribbean Jobs, Hemsley Fraser, Business Beat, and Sophia Group Limited. Thank you for allowing me to guide you through this evening— this afternoon's proceedings. And of course, we look forward to seeing you tomorrow. It has been my blessing. Stick around to be in our networking session happening right now, I think. Yes, indeed.

Um, Dr. Romanta, little instructions for everybody actually. When, when we close out this session, we'll automatically— you'll see tables in front of you. Just hit the join button at a particular table and you'll be able to join that table and have a private chat with whoever else is at that table. So I'm going to invite Dr. Rommel to join Table 1 for the sake of ease, and I'm gonna— I won't monopolize this time, although I really want to, but I'll allow other folks to step in and have a chat with our expert. So thanks, Dr. Rommel. Thanks, Danielle. And folks, thanks for being here. See you tomorrow morning. 8:30 Jamaica time, right then. Thank you, Danielle and Francis.

Thank you. You're welcome.