Simone Cicero 

Hello everybody and welcome back to the Boundaryless Conversations Podcast. On this podcast, we explore the future of business models, organizations, markets and society in our rapidly changing world. And today I’m joined by my usual co-host Shruthi from Jakarta.

 

Shruthi Prakash 

Hello everybody.

 

Simone Cicero 

Thank you, Shruthi. And we are so excited to welcome our guest, a unique strategic thinker who has helped countless leaders shape how they approach competition and growth. Roger Martin. Roger is one of the world’s most influential business thinkers, renowned for his contribution to strategy, design thinking, business management. He’s the author of widely acclaimed books, one of them called Play to Win is a framework that has been adopted by organizations across industries to navigate strategic decision making. Roger is also the former Dean of the Rotman School of Management and has been trusted advisor to major companies helping them find their path, let’s say, to winning strategies. 

 

Hello, Roger. It’s tremendous to have you here. We are super happy.

 

Roger Martin 

Well, I’m always super happy to talk with interested and interesting people about the world of strategy and management and like. So I’m looking forward to Simone and Shruthi to a fun conversation.

 

Simone Cicero 

Thank you so much. Thank you so much. OK, so today we want to explore your perspective on the state of strategy and especially in an age of massive decentralization of power, rise of technologies like LLMs and AI, which have the potential to, I would say, significantly extend the strategy playbook. 

 

But to kick off our conversation, I would like to ask you where your work stands today versus how it was maybe 20 years ago, couple of decades ago, because the last two decades have changed the business landscape so deeply and strongly, mainly by introducing democratization, uncertainty and change. So how has your work changed in the last couple of decades?

 

Roger Martin 

Yeah, well, it’s a big sort of a big question, but it’s an apt one in part because as you know, I’m sort of somewhat known and famous, partially because I wrote the book with A.G. Lafley, the Plane to Win book. I released his his time as CEO started a little over 20 years ago, 25 years ago. And so to think back, that’s a nice marker for me for what’s been happening. 

 

I think one thing on the issue of decentralization, one thing that’s happened is that companies have gotten so big, the biggest companies have gotten so big that it really is a challenge to manage them with sort of techniques that would have been used widely in say the 20 years before that. 

 

If we say what’s the 25 years since 2000 versus the 20 or 25 years before it – you would have had a like a GE model where you had a 750 person strategy department at the corporate level that essentially told all the businesses what their strategy should be and gave them a plan that they’re supposed to go and kind of execute. And where did that get GE? I I think it got them to a very diminished form of itself. 

 

But I think that was maybe a precursor to a world in which you can’t say strategy comes exclusively from the top, decisions come exclusively from the top, and then people are told what to do. It infantilizes managers. It creates rigidities and bureaucracies. So I think the business world in some sense has struggled with the idea of how do you have a combination of enough guidance from on top, but enough kind of flexibility and independent decision making pushed down in the organization, right? 

 

And I know you’re Haier fans and do lots of work with Haier. And there would be an example of a company that has rather radically shifted the paradigm to to balance. Some people think of it as sort of completely decentralized. I don’t myself and I’ve done some kind of work in conjunction with them, which is I think they’ve very carefully centralized a few things, right, and decentralized a whole lot more. So anybody who says be centralized or decentralized, I think is sort of missing the point. 

 

So, Haier has very centralized and controlled ways of interacting with its many micro enterprises with it. So that’s actually controlling and centralized. But what they do and how they manage is highly decentralized. 

 

And so I think what’s happened is to manage in the size and scope and global scale of the modern large company, you have to figure out really carefully what you attempt to centralize and centrally control. And if the answer is a lot, chances are bad things are gonna happen to you. But if your answer is a little, but a few important things, and we’re gonna decentralize whole lot else, then I think you’ve got a chance for success. And I think you didn’t have to, if you ask what’s different, I don’t think 25 years ago you had to pay as much attention at that and get that as right as you have to get it today. You could be a little more like, well, you know, we’re sort of in charge and, you know, we’ll grow up in and yeah, they sort of get to do some stuff. Like you could be a little more vague about it. Now I think you’ve got to be a lot more precise or you’re going to kind of offside in a bad place faster. That would be my best description, I think, of what’s changed the most.

 

Simone Cicero

So it’s interesting because you started by saying companies have gotten so big, right?

 

And on the other hand, you also talked about another dynamic, which is the dynamic of decentralization of certain responsibilities in the organization. So on the one hand, we have companies that become bigger because of consolidation and certain other dynamics. And on the other hand, we have this massive power shift from the from the center to the edge. Right. Because, you know, the small a small team today can achieve almost anything. You know, we have especially in digital, we have this narrative now of the one person unicorns. So in this dynamic, and you mentioned Haier earlier that we are very much connected with, I want to make a reflection and a question for you. 

 

You said something needs to be centralized, something needs to be decentralized in that kind of organizations. in the past when we had once Kevin Nolan, the CEO of GE Appliances, which is a company controlled by Haier, he mentioned that, yes, he mentioned that when I asked about strategies at the,

 

Roger Martin 

Yes? Yep, now bought by and turned around by Haier. Yeah.

 

Simone Cicero 

We don’t have a strategy, the micro enterprises have a strategy. So my perception is that in this decentralization strategy is one of the things that have to be massively decentralized. So everybody needs to be in charge of its own strategy to some extent, everybody that runs a profit and loss, a micro enterprise, a product, whatever. 

 

But at the same time, in our experience, a little bit of the strategy process needs to be – I don’t want to say centralized, but at least it needs to be socialized. Meaning that, for example, when you have two companies, two micro enterprises reaching the market that may be conflicting, that’s the point where you start to realize that you need a portfolio strategy, you need some, let’s say, coherence in how you reach the market. So in your experience, how much of the, if we focus on the strategy topic, how much and what needs to be decentralized and how much and what in strategy needs to stay centralized or at least achieved as a social process that involves everybody?

 

Roger Martin 

Yeah, well, I mean, I would start out by saying, unfortunately, he’s delusional, which is it is impossible to not have a strategy.

 

Because I define strategies what you do, not what you say. And most strategies are actually not what a company writes down as their strategy. Most of that is just garbage crap, stuff that sounds good, it’s platitudinous stuff. Your strategy is what you do. And you only do some things and not other things.

 

And so GE Appliances, Division of Haier, has a strategy. He may deny it, but it does. could come in and interview him for an hour and tell him what his strategy is. Because I would just ask him, what do you do? What don’t you do? Where’s the boundary of what you do and what you don’t do? So the way to think about strategy, in my view, is strategy happens at every level in the organization. In service organizations in particular, it happens right down to the front line worker. 

 

The bellhop at Four Seasons has to make decisions of what things to do and what not to do in real time. How do I treat this customer in front of me? And he or she makes decisions. And those decisions, if they’re crummy decisions, if the best guest at the Four Seasons, Jakarta, their absolutely best customers come racing up in his or her vehicle, tosses the key to the bell hops and say, could you take it out? I’m late for a meeting and the bell hop tosses it back, right? Then Four Seasons is gonna lose a customer and Four Seasons is gonna get a bad reputation, right? 

 

But if some 18 year old punk shows up and does the same thing. And he, and he goes and does exactly what they, what they want. And the guy actually wasn’t even going into the four seasons. He was going around the corner to his favorite, favorite bar. Then also four seasons is going to, is going to have, have, have trouble. Right. So you actually need that guy or gal, let’s say it’s a bellhop. It’s probably a guy that, that, that bellhop, saying, saying what’s my, where to play and what’s my, to win to do my job best. 

 

Now, if that kid is making all those decisions on their own, that’s not gonna work out well, even if they’re generally smarter rather than dumber decisions. He’s gotta do it in the context of the front of the house service kind of operations, right? The bellhop, the luggage people, the check-in people, the front, they have to have a strategy for here’s what we want the customer experience to be. Here’s the kind of things we’re going to do, and here’s how we’re going to do them. Now, if that’s completely made up on their own, you’ve got a problem. That’s got to be in the context of the integrated hotel strategy, which includes front office, back office, food and housekeeping, et cetera. And then the Jakarta Four Seasons is going to be part of probably, I don’t know how they’re organized exactly, but there’s probably a Southeast Asian regions or an Asia Pacific region. It’s got to be, we got to have Jakarta operating the way we want the rest of the region to operate. And then that has to operate in the context of Four Seasons. If you haven’t made clear strategic choices at each level, the folks at the next level lower won’t have a good context for making the smartest choices. If they don’t make the choices at the level below that won’t, et cetera. 

 

So, this is the tricky thing about being a big company. That’s a lot of strategy choices, right? There would be, let’s say, at a minimum, six or eight departments of a given hotel, the hotel in a given region, the region, that adds up to an enormous times of strategy. Where in the good old days, if you asked back to the first question, you asked me, if you say, well, what has changed in the last twenty twenty five years the conception was somebody sitting in toronto at Four Seasons headquarters makes the makes the strategic choices and everybody executes i do think it’s just an impossibility and now so what does that mean it means your people have to see themselves as important choice makers not executors not they’re just – Yes, sir. Yes, ma’am. 

 

I’ll do whatever you say. They have to say, I get it. This is what you’re trying to accomplish. Am I right? You’re trying to accomplish this? Okay. I will make choices that are consistent with what you want to accomplish. You can count on me. And if there’s any problem, I’ll get back to you and say, I’m trying to accomplish what you want to accomplish, but I’m not sure it’s accomplishable. Right? 

 

I don’t know if it’s doable given the way we’ve allocated our resources, you might want to rethink that so that you get a feedback. It’s not just a one direction flow from top to bottom. There’s a feedback back that says, you want me to try and do this, but like I can’t. That’s not working. Then you revisit it and you hone and refine it. So that’s to me strategy in the modern world. And that is, you could look at it two ways.

 

You could look at it as decentralized or centralized, right? You could look at it as decentralized. Lots of people have got to make choices, but you could look at it if you want it to as centralized. It’s all in a nest. It’s like a Russian, it’s a Matryoshka doll, right? Which is, all kind of cascades from one and it’s all unified. I think it’s kind of a mix. I think it’s a kind of a mix of both. 

 

That’s why I say I’m not into centralization or decentralization. I’m into, I’m into, you know, optimization. And, and in this case, optimizing is having a lot of people seeing themselves as important choice makers. And, and I’ll finish, but the, and this is very consistent with Peter Drucker, my hero, Peter Drucker, The Rise of the Knowledge Worker, right? That, that, you know, every person in the Four Seasons pretty much, except maybe the guys who slinging the suitcases is using the muscle between their ears more than any other muscle, their arms, their legs, their backs. And so the question is, how do you get the most out of their usage of that muscle? Well, you give them context for how to use that muscle, you give them the freedom to use that muscle, you give them a pat on the back when they use it well.

 

It’s those kind of things that you’ve got to be thinking about across the organization to have knowledge workers engaged, loving their job and doing it well.

 

Shruthi Prakash

If I can, yeah, if I can probe on that a bit, right? Like when you open up strategy to that degree where there are so many participants who are involved, does it one make strategy sort of fragmented and can you avoid that? And I think you sort of touched upon this as well, that there are so many decisions to be made there. And so inherently I presume there will be more cognitive load in terms of decision making.

 

And therefore is it necessary to draw a boundary somewhere in the sense of how we approach decision making despite it being open? Because I also read your points on like constructive tension, right? When there is so much, let’s say tension in that constructive feedback loop and so on, how do you go about approaching that? Can it be non-fragmented therein?

 

Roger Martin

Yep. No, your question, Shruthi, goes right to the very heart of the core skill of a manager in the modern world, right? So it becomes fragmented and unworkable if a manager says, these are my choices, and let’s say you work for me, Shruthi, I’m your direct boss – Shruthi, these are my choices. Go get them.

 

I promise you it’ll become fragmented and you are going to probably be a little bit freaked out because I’ve set no boundaries for you at all. And you guys talk with enough designers to know a good designer wants to have some boundaries so that they can be clever within the boundaries. So a modern management skill is what I call strategic choice chartering. So I say instead, Shruthi?

 

Here’s the choices I’ve made. Here’s my where to play, how to win, my capabilities management. This is what I’m trying to accomplish. Now, you, Shruthi, are responsible for this area. And you need to make a set of choices that are consistent with my set of choices. The kind of things I hope you consider are – are you gonna serve everybody? Are you gonna serve some? And how are you gonna serve them. I don’t know what the answers to any of those are, Shruthi, because guess what? You’re closer to those choices than I am. 

 

But you need to make some choices in that that are consistent with mine. If, while doing that, you have any problems or difficulties or you’re a little bit confused by what I’ve said, just come back and I’m happy to assist you in making the choices. But they’re your choices and you gotta make them and I’m confident of you making them the core skill – in strategy in a modern executive. Because then, Shruthi, you’ll go off and say, OK, I understand what Roger wants to accomplish. And he has told me the important things that he wants me to consider in my choice make sense to me. And he said, you make it, not me. Wow, that’s cool. He’s not telling me what to do. He’s telling me what to think about. 

 

And he’s even, you know help me not get potentially frustrated or lost, because I didn’t really, when I got into it, I didn’t really understand what he meant by X. He said, just come on back, come back, come back, back, we’ll talk about it. If you do that, strategy will be anything but fragmented. It will be integrated, right? Because you will come back with choices that are consistent with, but that are an expression of the knowledge in your head about your specific area of expertise. 

 

You might have been my director of HR or you might have been my operator of the southern region or whatever, but in that domain, you know more than I do and you have expertise that I want to have brought to bear.

 

Shruthi Prakash 

I was just thinking about how, let’s say you can foster that sense of accountability and ownership, but not from a directive sort of point of view.

 

Roger Martin

Yeah, well, it would be to say it’s your choice, Shruthi, it’s your choice. And then you would come back and say, Roger, here’s the choices I make, and I think they’re the best choices for my group. And I’ll probably ask you, and what would constitute good performance under that Shruthi? And you’d say, well, you said you want to build share in the southern region. I’m going to head to the southern region.

 

This will enable us to grow 10 % a year rather than a top line or whatever, rather than the 3 % we’re doing now. And I’ll say, OK, 10 % it is. And then Shruthi knows she’s accountable for that. And I’ll be watching for it. But I would set those in conjunction with you. Because I don’t want ever to set, like setting goals that the person on the receiving end of the goal doesn’t believe is a fair goal is so counterproductive. It creates all sorts of death and destruction.

 

Simone Cicero

This is largely, for example, how OKRs work, right? So this idea of cascading OKR’s with the teens, you So that’s been, I argue OKRs maybe have been the first attempt from large organizations, notably they have been coming from Google, right? 

 

So the idea that the organization becomes larger, you need to managed by accountability as Shruti said and so the OKRs make a good process for people to negotiate their accountability with the leadership but the point that I wanted to raise is…

 

Roger Martin

Can I just say though on OKRs and my most inflammatory and disagreed with medium post of the 200 plus I’ve written was on OKRs. It’s because my observation, I do lots of work in Silicon Valley and the tech sector and it’s a religion there and it is widely substituted for strategy. So the notion is that somebody can say on high, this is your objective and this is the key result. They imagine, I mean, it is delusion. It’s so delusional. They imagine that because they said so, it’s more likely to happen. It is not.

 

And that’s why there’s this hue and cry about execution. I gave the  and they didn’t do it. Well, you didn’t have a strategy that’s worth shaking a stick at. Your strategy was stupid, right? And it didn’t happen. And again, this is one where, guess what? OKRs come from Google, right? The company that has a core product, the best, the most valuable product that has ever been designed in the history of humanity, “search”, paying for search words is the best product, the highest margin, biggest product in the history of the planet. And so somehow it was OKRs that is responsible for their success, not having two guys design the best product in the history of the universe. And then anybody who works at Google is supposedly a genius. And I’ve watched lots of them go to other places and fall flat on their face, absolutely flat on their face because no, there were two geniuses. There were. They came up with the best product in the history of the world. And that doesn’t mean everybody else who happens to work there is great or that your measurement systems are great. No, you have an awesome product. And let’s look at the OKRs for all but search. How that worked out.

 

All that the rest of Google does other than search is lose a small enough portion of the money that they make in search to not be embarrassed. That’s it. There’s two things. Search makes more money than God and everything else is a decrement.

 

Simone Cicero

I mean, probably they make some money also with Android or, still through search, you’re right, because search is the way they make money through Android.

 

Roger Martin 

Right, right, right. They, they, they, they gave Android away. So last time I checked, they don’t make any money on Android. They get it by generating, generating more search. It’s a great, like it’s a great company, but the mythology out of, out of, that company is just, it’s just beyond my, comprehension. 

 

I mean, Google now, Alphabet is going to be the, the first company in the history of the world to piss a half a trillion dollars down the toilet on crazy ass ideas that have no, there’s no strategic soundness to them kind of whatsoever. And that’s because they’re an OKR place. They’re not a strategy place. They’re an OKR place.

 

Simone Cicero

I mean, again, it’s not to make OKRs, but the point that I wanted to make is that you need a way to cascade this accountability, as well as a strategic mindset. You’re right. If you just cascade accountability and you tell people these are the objectives, or even if you include into defining the objectives, they don’t have the strategic capabilities, the other pieces doesn’t happen. You’re totally right. The point that I was…

 

Roger Martin

Yes, I agree. If you use OKRs as a complement to strategy, I have no quarrel with them whatsoever and there’s an established methodology. It’s just that they are, I swear to God Simone, they are used more as a substitute for strategy than a complement to strategy in the world, the true usage. And that’s why I’m not a fan of OKRs kind of overall.

 

Simone Cicero 

Exactly. Yeah.

 

Simone Cicero

The point is interesting because in our experience, what we are seeing is that increasingly to create this accountability, companies are using profit and loss and they are using entrepreneurship. 

 

For example, if I look at your five key elements of the strategic, let’s say, stack, know, winning aspiration, where to play, how to win core capabilities and management systems. If I think about Haier, for example, in general, the this idea of the platform organization where you have micro entrepreneurial units and the organization moves more into allocating capital than dictating objectives, you know, so more like, you know, you come with a good idea, the company, you know, negotiates a contract with you for you to obtain certain results and in exchange you have a lot of skin in the game. I think this is a massive improvement versus just cascading OKRs like we said. 

 

So how do you see that unfolding? So if I think about the five things, the winning aspiration probably needs to be somewhat centralized because otherwise you end up with a company that doesn’t know where to work, wants to achieve. Then the where to play it, how to win look very much distributed. And also it’s pretty much the challenge of the entrepreneur, the meek entrepreneur to find their strategy in the market, to achieve their results.

 

Roger Martin 

Yeah, but I mean, is Haier in specialty chemicals? Is it in forestry? Is it in airline transportation?

 

Simone Cicero 

Yeah, I mean, that’s a good point. Haier is fairly, in our experience, is fairly open in terms of where to invest money. But they have this, what they call these industry platforms, which are a little bit like sectorial investment vehicles, let’s say.

 

Roger Martin

Yeah, exactly. That’s their where to play. Right? So that’s a corporate where to play. If you come in and say, if you come in and say, I’m a micro enterprise and I’d like to, I’d like to buy some, eucalyptus kind of forest in Brazil and, and build a pulp mill and get into making market pulp. Would Haier say, that’s a great idea. It’s a, we don’t know. We don’t know a damn thing about that and I’m not sure why we’d want to the requisite $12 billion a year to get to buy the land and build a pulp mill. So with their platforms, their sectoral platforms, they’ve defined where to play at the corporate level. 

 

We’re open for business in these platforms and they have a how to win – whether it’s implicit or explicit, is partially, we’re gonna win with these EMCs, these entrepreneurial micro enterprises – so that’s part of our hard to win is this sort of vehicle. And we bring Haier expertise to these platforms and our capability is across everything is going to be kind of fast moving, highly accountable folks. 

 

Our management system is these micro enterprise contracts, where it’s highly, highly, highly structured contract that’s consistent across the whatever it is now – is it 40,000 micro enterprises? Whatever, it’s this gigantic number. Funnily enough, they all have a contract that looks remarkably similar. 

 

Well, that’s an enabling management system that keeps this sprawling global enterprise tightly enough control to not blow up. So it has a strategy. So I just, wouldn’t say that they’ve pushed strategy down. They have set a strategy that is appropriate for the higher level, that accomplishes what you need at the higher level to set the context, just like I did for Shruthi earlier in our made up thingy thing. Just like that, it sets the context for those folks at the next lower level to be able to do their thing.

 

Simone Cicero

And largely also trying to valorize their core capabilities because otherwise I think this is the most interesting topic nowadays because you know as the transaction cost goes so down you know it’s easier to do agreements and contracts in the market I think largely for organizations the challenge is to make a case for entrepreneurs to build inside versus building directly on the market, right? 

 

So if you created these enabling systems, as you said, that overcome this idea of a top-down managerial systems, you make a better case for entrepreneurial people to build valuable ventures inside an organization, which otherwise doesn’t make sense, know, otherwise doesn’t have a, yeah.

 

Roger Martin 

Absolutely. I couldn’t agree more because yeah, mean, like right now in many industries, they are like a village somewhere out in the foothills in Central Asia and the Mongol hordes are coming after them. And the Mongol hordes are a thousand VC backed startups in their space. If they’re like a big centralized bank, there are a thousand of them.

 

And, right, and if you read any Mongol horde history, right, the problem wasn’t that you couldn’t kill a lot of the Mongols, right? The problem was that only one had to breach the walls of your village, get inside, and you’re all dead, right? And that’s the problem facing big companies now is they just keep coming. It’s one after another, after another, after another, after another. And I agree with you entirely.

 

The only true strategy for defending against that is not to try and kill all the Mongol horde. It’s to build them inside. And the smartest companies, I think, are figuring out how to make a culture that does that. It’s hard though, right? 

 

And this may be a slightly too American perspective, but, but, and I’ve written, written about this, which is East coast versus West coast capital, right? The biggest pool of capital in America is centered on the East coast because all the big money managers, whether it’s Fidelity, Black Rock, State Street, et cetera, plus most of the pension funds, they’re disproportionately East of of the Mississippi, their East coast capital.

 

And most of the big private equity companies, which are bigger than the VC companies are in New York or Boston or Miami. And all of that East Coast money basically says to their companies, I would like you to grow faster than GDP, faster than your industry, grow bottom line faster than top line. And please don’t take risks. Please. Right? We’re not into risk. And of course, that formula is impossible. You cannot grow faster than GDP, faster than your industry, top line faster than bottom line, without taking risk. 

 

Then there’s another pool of capital that’s all based on the West Coast. That’s all the venture capital money. It’s all in the same place. Some is in LA. That’s not all in San Francisco. Some’s in Seattle, but it’s all it’s all within a stone’s throw of the Pacific Ocean. And they all say, grow like crazy. Grow absolutely like crazy. If you’re not growing like crazy, we’re not interested. And a whole bunch of you are going to go belly up. So risk, we laugh at risk. We just, we’ll take lots of it as long as you grow like crazy. 

 

So unfortunately, the capital holders of all those companies who should be building this kind of entrepreneurial activity inside, their capital providers say, don’t do that. That’s risky. And that gives free rein for the pool of capital that’s based on the West Coast to have like almost like, know, sort of 100 % ownership control over these folks with entrepreneurial ideas who are willing to put their life against it. 

 

Because nine out of 10 of them expire worthless and the time is largely wasted by the person. Although there’s a culture on the West Coast that says if you have a few failures under your belt that makes you better. On the East Coast, if you have a few failures under your belt, you should go and be a dog catcher – you shouldn’t be a business person.

 

Simone Cicero 

So we can say that now this perspective of risk is predominantly and strongly entering also the corporate space. The corporate space cannot hold anymore this tide of the necessity of entrepreneurship and risk anymore.

 

Roger Martin 

Yeah, so what boards of directors of East Coast Capital-financed companies would rather say is, let’s wait and let’s buy that startup for 50 billion after it’s succeeded, rather than let’s put 5 million, right? 10 million, like three orders of magnitude less capital in and take a shot 

 

And maybe how’s about this rather than buying one successful one for 50 billion why don’t we spend five million each kind of on a hundred startups that’s 500 million not even five billion that’s that’s two orders of magnitude less to have a hundred shots at it  – no no no well wait we’ve got the balance sheet to buy them for 50 billion dollars so that’s what’s happening. 

 

If you buy a successful company for an extraordinarily high percentage of value, even though 70 % of such acquisitions are shareholder value destroying, we’d rather do that than engage in this risky activity called backing an early stage company.

 

It’s two kinds of capital. mean, it’s just two kinds of capital.

 

Shruthi Prakash 

It might be a bit of a tangent, but we were speaking about, let’s say, the sense of competition increasing both internally and externally, right, essentially, and the availability of the amount of resources, the access to the resources and so on that we have. I think at Boundaryless we speak often about platform business, and one of the core, let’s say, principles is looking at coordination rather than competition, so maybe let’s say collaboration versus competition and so on. 

 

So do you also see that sort of taking a forefront now? Is there scope for the strategy to sort of enable space for collaboration, especially in a high-resource environment?

 

Roger Martin 

Yeah, sort of a yes and no, Shruthi. Like if we start to say, well, in the platform world, in the high tech world, there’s going to be all this collaboration. And then you ask about the behavior of Apple, Google, Meta, Amazon. Have you ever seen more vicious competitors in your life, Shruthi, than those vicious? vicious? 

 

All have established kill zones. They all do. They have firm internal memos. They kill zones where if anybody gets into the zone, we will kill them dead, right? We’ll buy them whatever. But it’s paradoxical, Shruthi. It’s not like you’re wrong. It’s like they have figured out that they have to work with other companies. I don’t necessarily use the term collaboration because collaboration connotes a certain friendliness.

 

I think of it as frenemies. They understand the concept of frenemies. can hate, like Apple, can hate Samsung, but I’ll still buy some components for our phone from the company that sues the hell out of us and we sue the hell out of them when it makes sense. And I’ll make deals with Google on things about the iPhone, even though Google gives free the operating system that my iPhones compete against. 

 

So I think you’re right. You have to think of, if you have this principle, which is Google is our enemy, if it’s Apple, Google is our enemy and Samsung is our enemy, that means we will never do anything with them. That I think would have been perfectly fine 25 years ago. I think that kind of thing. I think it is value-destroying now.

 

But I would, and maybe this is just me being stupidly semantic, but I just can’t bear to call it collaboration because they despise each other with a burning passion.

 

Simone Cicero 

I think the point that we were making between us is more that, you know, of course you make a great point into these large behemoths kind of being frenemies between them. But I think we had the idea that we had in mind is that increasingly when you build products and strategies, therefore in a market that is hyper-connected like it is today, you have a plethora of integrations and extensions that your products need to plug into. more, you know, I think it is also introduced quite a lot of new mindsets and challenges in how you develop your strategy in a way that your products will touch niches that maybe you don’t, you cannot plan ahead.

 

Roger Martin

Absolutely. Absolutely.

 

No, exactly. I mean, if you’re going to be an app developer and you say, hate Apple, good luck to you, right? Unless you get on the iPhone, you’re chopped, you know, you’ve chopped off your foot. So I agree. Like, I agree with the core, the core premise. I would just say it’s not, it’s not a friendlier era. Like some people make it out to be a friendlier era where there’s all this cooperation and everything. 

 

And I think it’s, I think it’s if I went back again 25 years, it’s a much less friendly era. It’s a vicious era. And some of it is viciously anti-competitive and should be attacked under Sherman and Clayton antitrust violations, willful monopolization of markets, that kind of thing. 

 

But, it is just, it is more complex than it is. You’ve got to figure out who you’ve got to do alliances with. I mean, it’s like the good old days of Italy. It’s like when Italy was a whole bunch of, you know, city states and you had to figure out which city states I’m going to be friends with. I hate them, but I’ll be friends with them because we got to be together when that city state comes after us. It’s sort of more like a you know whatever fifteen sixteenth century Italy then then than it is like some kind of a you know friendly benign world.

 

Simone Cicero 

I mean, that’s fascinating because my impression, our impression is that we continue to edge and I would say rebound in terms of strategy and management from a perspective of radical collaborations. So for example, if you look at what happened with Blockchains and Web3, this promise of a new technology that magically made possible to build infrastructure that everybody can invest into and become this level of better playing fields that everybody can use so that at the end of the day, parts of the industry can be really collaborative. 

 

But we still see that this is not happening. The standards keep emerging. Nobody wants to agree without nobody else. So I think we still see that humanity and the markets are kind of refusing to find ways to collaborate so the value can be pushed into new levels. 

 

So what is your impression? Even, for example, if you think about the efforts that are emerging in digital public infrastructure, so is there a potential for you to, according to your thinking, that these kind of standardized battlefields emerge for companies to look into new levels of value based on shared level.

 

Roger Martin

Yeah. Well, I mean, I think the sad thing, you know, I don’t know what you could look it up, when Thomas Friedman published The World is Flat, you know, everything is flattening out, and it was his thesis, and the truth is that like he was 180 degrees wrong. The world is getting spikier. Everybody thought, the internet, it’s going to flatten everything. Everybody can get it. Now there’s a couple of companies that like own the internet and are trillion dollar market cap companies for having taken control of big swaths of it.

 

Unfortunately, the world is getting spikier and income inequality is one manifestation of that. Incomes aren’t getting spread out more. They’re getting spikier. Concentration, industrial concentration in the vast majority of industries is increasing, not decreasing, as all the internet people were saying, it’ll allow a little ball-bearing manufacturer and kind of Scranton to serve a worldwide market because you can order on the internet. No, no, it hasn’t. It’s done the opposite because there are gatekeepers who decide what page you’re on unless you can buy your way onto the first page. Good luck, you’re never going to be found. 

 

So I don’t see, unfortunately, anything blockchain included, that is going to be a leveler. What I see is powerful new technologies that somebody figures out how to do well with leverage and then that entity gets the scale economies to invest like crazy in protecting its position and ensconcing its position – and it’s sort of like kind of a land grab and if you go fastest you can get control, you can get big enough to have control and then it ends up.

 

Simone Cicero

Yeah, that’s what we had a conversation with Sangeet Choudhary last year when he spoke about sandwich economics, this idea that this player sandwiched the value chain.

 

Roger Martin 

Yeah. Yeah. No, he would be all over that. Yeah. And so, like I, you know, and I wrote a book in 2020 called One More Is Not Better that sort of said what’s happening is that we’ve historically seen the world as sort of its resting case is, or its default case is a normal distribution. And it’s because many things are – height of males, height of females, IQ, kind of all of these things are normally distributed. And so we sort of say, well, yeah, life is kind of normally distributed, right? And many things are becoming Pareto distributed, right? Whereas 80 % are clustered down here and there’s a super long tail. It’s happening with income. It’s happening with market share. It’s happening with market caps. It happens with Instagram followers.

 

They’re all Pareto distributed and it turns out that there is research that’s not really applied so much to business, I do, which says when you increase pressure on a system and you decrease costs of connections in that system, it goes Pareto.

 

And so the increasing competitiveness that you guys talked about early on, more competitive activity and the lowering of transactions costs in many, many fields. Like the internet has lowered lots of transactions and connection costs. Like if you just take fame in the good old days, fame, you’d have to go to some magazines to figure out who’s famous lawyers, who’s a famous singer, who’s a famous rock roller who’s a famous tennis player now so the costs the transaction cost of even figuring that out were were high so if you say I want to I want to align myself with a famous person how hard is that now?

 

What are the greatest number of internet followers? Taylor Swift or Ronaldo. I’m going to follow him or her. So what’s happened to distribution of Instagram followers? Completely Pareto distributed. The average person has 75 followers. Last time I checked, it may be 100 now. Average is 75. And last time I checked, Ronaldo had 700 million.

 

That’s a Pareto distribution. So that’s modern life as Pareto distributed things. you know, the only thing that’s remaining that’s not Pareto distributed, democracy. We still say, you’ve got to get 51% of the vote, although in some other countries like Italy, it’s more fragmented parties. But you’ve got to get the most in Italy. You’ve got to get the most. It’s, think, almost never 50 anymore. But you’ve to get the most.

 

That’s at odds with the way the economy is going, is my argument. There’s going to be bad things are going to happen on the basis of that. That’s why you have so much of many populaces saying, we’re not optimistic about the future. Things are getting worse, not better. They’re observing the Pareto distribution.

 

Shruthi Prakash 

Yeah, I mean, I was just telling Simone in the background, it feels like you have to make a choice between what way of capitalism you want to go in. it’s like, yeah, I mean, towards the, let’s say, closing end, we have to ask the inevitable sort of question of what role AI plays in all of this. A couple of weeks back, we had Philip De Ridder, who joined our podcast as well.

 

You know, he was speaking a lot about how AI and LLM is playing a big role in strategic decision making, knowledge work and so on. how do you see that sort of growing? How are organizations operationalizing this? And what do you think is the future of that?

 

Roger Martin

Well, a couple things. One, the idea that AI will somehow democratize or flatten anything is absolutely far-fetched. It’s going to, if anything, create more peakinesses. But anyway, it’s going to make lots of money for open AI and the like.

 

The thing that I don’t think that the penny has dropped for people on AI is they don’t sort of ask kind of what actually is the mechanism. Because I know there’s all sorts of kinds of AI, but what has caused people to now think AI is the beyond end all versus two years ago? It’s LLMs. So it’s that form, right? That’s what everybody is talking about. That is what OpenAI is. That’s what Claude is. That’s whatever the hell Amazon one is. 

 

So what they don’t quite understand about LLMs is how they function, right? And when you query an LLM, what it does is take a large billions of words, right? And phrases and whatever, and ask the question. The algorithm asks a very simple question, right? Is what is modal? Right? What is most often found in that five billion words as the next word or the next phrase, the next whatever? or drawing that’s the most like what you described, right? 

 

So it is a mean-seeking device or a mode-seeking, mean-mode-median, whichever word you wanna use. It’s really actually modal, what occurs the most often. So it is a fantasy for people to say AI will come up with something unique, something special.

 

It’s designed to come up with the opposite of special. Is that a terrible thing? Is that stupid or whatever? No, hell no. Right. mean, there’s real value in getting way faster to the mode than you as a human could ever do maybe you could do it in a thousand years and they can do it in a, the LLM can do it in fractions of a second. You’ll sometimes get it wrong. They won’t ever, right? So it’ll be fast. It’ll be correct right? And it’s like, what? What is not to like about that? 

 

And so for many, many, many uses, getting to the mode accurately and quickly is going to be of enormous value. And so people will use AI. It will destroy many, many, many jobs. But don’t be confused into thinking that somehow AI is going to get you great stuff. It can’t. it’s not set up. There may be another form of AI right, that is not large language model based, that is sentient in some way and it’s trainable in some way to say this is everything that’s out there, this is all knowledge, create some new ones, create some new knowledge.

 

Simone Cicero

I mean to make justice also to what Philip said and also because you’re saying something similar I think when you say it’s faster and exact and correct in getting you to the mode I think it’s great because for example he was referring to using AI as a way to make synthetic customer interviews, right? That’s a perfect use case because from customer interviews you want to get to the mode and you can use AI to get there faster, right? So if I repurpose the question a little bit for you, do you see already useful practical ways that you can use LLMs as a complement in the strategy process? 

 

So for example, I don’t know, making scenarios or thinking about what your competitors will do, how the market will react. Are there useful things that in your playing with AI you have already identified that LLMs can provide to the strategic process?

 

Roger Martin 

Yeah, mean, it can get you faster analysis of almost anything you want to analyze. So that’s good. can synthesize, as you say, it can synthesize more quickly what customers want. I mean, it’s now more sophisticated form of sort of, like if you had 10 years ago, you would have scraping the internet for the kind of phrases associated with this product or that product. And you’d get that and process it now. You can scrape it and do it and come up with it quickly.

 

For me, none of that is in the high value part of strategy though. 

 

Like it’s all the stuff that you know, if you were McKinsey or Bain or BCG, you farm it out to the junior people to go collect that stuff and write me presentation. And then somebody would work with the client to say, what does this mean for us? What could we do based on that? 

 

So the high value added part of strategy, it has, at least from my perspective, and I have a client, an AI client, we’re doing all sorts of interesting work with them. It’s not as though I don’t believe it’s important or not. But for the part of strategy that I’m involved in with companies, it is nothing but a sort of a… 

 

Simone Cicero 

is still out of reach for LLMs.

 

Roger Martin

Yeah, but it’s not unlike in the good old days when somebody would bring in a system to do receivables processing for you, automating receivables or payables or whatever, it’s stupid not to do it because you can replace a whole bunch of people and have a machine do it. You can replace a bunch of junior consultants or, I mean, I’m sort of sad for the, like McKinsey and Bain and BCG, a vast array of people in India at low wages doing all sorts of analytical stuff. They’ll be gone, just gone, completely gone. So it’ll change the economics of the strategy consulting firms. 

 

Simone Cicero 

That’s a good point.

 

Roger Martin 

The essence of strategy, which is to come up with what? A unique set of choices that compels customer action. Unique. LLMs cannot do unique. That’s not how the algorithms are written. They might in the future, right? But the current crop of LLMs aren’t trying to do, they aren’t even trying to do the thing that is the valuable part of strategy. And then the other most valuable part of strategy, there’s two most valuable part of strategy. One is interacting with the people in the business, right? And if you would have asked what’s different for me 25 years later than that is I used to think that I was in the providing clever answers business, right? Hire a strategy consultant to provide you a clever answer. 

 

I realize I’m not in that business at all. I’m in the business of getting clients to reflect on their beliefs now, question those beliefs to the extent that they’re not producing what they wish, and convince themselves, not me convincing them, they convince themselves to follow another path and commit to another path. That is the act of providing strategy advice. And none of that is, none of that is helped at all by.

 

Simone Cicero

So maybe the LLMs are more likely to substitute the strategy advisor than the actual customer doing the strategy, am I right?

 

Roger Martin 

Yeah. Like, you’re going at the inputs right now. LLMs are going at the inputs, and I wouldn’t be surprised.

 

Yeah, I mean, I’m making a reference to this idea of, and then I don’t want to go long because we have just a few minutes, but I’m making this reference to the idea of frameworks. You you always also speak about generalizing knowledge. And so maybe the framework, an AI can really democratize, you know, the strategic process that maybe now you need a strategic advisor to do something. And then tomorrow, maybe your teams can be helped in actually doing strategy by applying these generalized frameworks through an LLM, maybe that acts like an advisor more than actually doing the strategy.

 

Roger Martin 

Yeah, no, Well, and I’m playing with that now. So the company I’m been consulting to has gotten fascinated by how much I write and they’ve dumped, I’ve written a million or more words now and they’ve dumped a million of my words into an LLM. So there’s a RogerBot and they’re testing the RogerBot to see if we asked a question to RogerBot, how good is the answer? And it’s a different kind, like it’s a very different kind of LLM, right? only got my stuff in it. 

 

There’s a million of my words as opposed to Wikipedia, kind of like it’s a million or five billion of everybody’s words. And so they’re just playing with it to see. And so it’s in an experimental phase, but that would be interesting. Is it possible to take everything I’ve written over 40 years, and I’ve written a lot, and use it as a substitute for me?

 

And we’re trying to figure that out.

 

Simone Cicero

I mean, think would be nice for the people to have Roger Martin’s advice at hand. Maybe not for you because your books maybe will sell less or your services maybe. I mean, you know, yeah.

 

Roger Martin 

Hahaha

 

Roger Martin

Yes, I don’t care much. I’m just intrigued by the experiment. And it wasn’t actually my idea. It was a client. He was just sort of saying, you know, he was like sort of saying, you know, Roger, as I work with you, there’s, you know, I know you’ve written a bunch of things, but you keep saying the same sorts of things and framing things in a particular way and whatever. And so we said, let’s create a Roger.

 

Simone Cicero

Let’s distill your strategic advice.

 

Roger Martin 

And when I use the Roger bot, it sure as hell sounds like me. But how much value they can get out of that’s what they’re trying to figure out. Yes.

 

Simone Cicero 

It depends on them… Okay, you. Shruthi, go ahead.

 

Shruthi Prakash 

Yeah. Yeah, I mean, just one pointer that I had, right? Like it feels like we are trying to differentiate using a commoditized solution in that sense that LLMs are making, let’s say, solutions so homogenized. Okay, so towards the closing, Roger, we have a section called the breadcrumbs and where we ask our guests to share some of their inspirations which our listeners can gain from bead books, podcasts, music, nature, whatever that inspires you and could help our listeners as well.

 

Roger Martin 

Sure, so I like to read mainly in non-business. So kind of the writers that I have taken the most from are people, Aristotle’s my favorite philosopher of all time. There’s a book that isn’t taught in probably any course I know of and it’s hard to get a hold of, but it’s called Rhetoric by Aristotle.

 

I like John Dewey a lot, the American pragmatist philosopher, and art as experience is almost impossible to read. You have to read a paragraph and then reread it and reread it. It’s the most dense book you’ve ever had, but it sort of changed my life. I do like, so I mainly am inspired by people who think kind of broadly about a subject. So I like Sun Tzu, I like Von Clausewitz.

 

So somebody who’s thought sort of from a very conceptual foundational standpoint about a subject that doesn’t apply it to my field, but I can take the learnings and apply to my field. That’s what I do. That’s what I do more of. I’m very inspired by the structure of scientific revolutions. Love Karl Popper.

 

Yeah. So I would say there’s plenty of people listening to this podcast who will know what are the great business books and we’ll read them. And I’m all for that. But in addition to that, I would say, kind of read the foundational stuff. 

 

Because business is a very applied discipline. It’s a discipline that sits on top of more basic disciplines. Marketing sits on top of psychology, right? Strategy sits on top of economics. And I’m fearful that lots of people know the applied discipline and don’t actually know much about the discipline that lies below it. And for sure not the discipline that lies below that one, where its philosophy lies below psychology and sociology, for example. So what I’d encourage people to do is not stay, don’t stay at the level of marketing. Ask what are the disciplines that lay underneath those and what can you learn about the way the world works from that.

 

Simone Cicero 

So read books that have at least 100 years, possibly a couple of thousands. That would be fantastic.

 

Roger Martin

Yeah, yeah, no, well, I think there’s something to learn. Like if you ask, you ask – What books that I’ve read have been most influential to me? I think stuff that was written 2,500 years by Aristotle is probably still the most influential for me.

 

Simone Cicero 

Yeah, I can empathize. My most important book is probably the Tao Te Ching, which is as old as Aristotle, more or less. OK. We don’t want to take much more time out of you, because you’ve already been so kind to give us so much time. And I must say that it was a fantastic conversation, very, entertaining as well. And I hope you also enjoyed to talk, I mean, talking about something different than usual.

 

Roger Martin 

Very, very much so. Very much so. No, I think you guys have a really interesting perspective. So Simone and Shruthi, thank you. Thank you for spending the time with me. I learned something out of every conversation like this. so, and I hope you did and I hope your listeners do too.

 

Simone Cicero

Our listeners, yes, definitely will have enjoyed. Thank you, Shruthi, for the conversation.

 

Shruthi Prakash

Thank you. Thank you, Roger. Thanks, Simone.

 

Simone Cicero 

And for our listeners, as always, remember that if you go on the website Boundaryless.io/ resources/podcast, you will find Roger’s conversation with all the transcripts, the notes and all the references and the breakups. Until we speak again, remember to think Bondaryless.