IML Insights

Note - this section includes in-depth treatises of the subjects and topics summarized in the sections IML Principles and Essential Change-To Compete-Better Capabilities (Compete Skills).  If you have not reviewed these pages yet, please do so now, before reading this material.

Continual Abandonment - Organizations today must be prepared, continuously, to abandon virtually everything they are doing. No one has made this case better than Peter Drucker, who in his classic 1992 Harvard Business Review article, The New Society of Organizations noted,

"The modern organization must be organized for the systematic abandonment of whatever is established, customary, familiar and comfortable, whether that is a product, service, or process; a set of skills, human and social relationships; or the organization itself. In short, it must be organized for constant change."

The New Society of Organizations, by Peter F. Drucker

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Taking Control of Change - In a strategic sense, while top management often feels more than challenged, it is essential for top management to take control of the challenging process itself. With the intense pressures being experienced by almost every senior executive these days, achieving this takes discipline.

We often relate what Bob Crandall does at American Airlines that shocks many executives - or they may believe his approach is a luxury that can be realized only in large companies. We disagree.

The last time we checked, Bob Crandall and his new CEO, Don Carty, take the better part of every Monday with their top management team addressing that single question, How do we need to change the way we are doing business to compete more effectively? They devote that meeting entirely to that single question and leave out any operational "hire-and-fire" type issues. We first heard that story during a strategic management study we conducted in the late 80's and early 90's. We liked it's power, simplicity, and incisive clarity so much that we adopted it as one of our fundamental beliefs.

Bob Crandall's belief is that the stockholders are paying him to focus on the future of the company. He contends that if he does not organize a process that will insure he does that, it most likely will not happen. We submit that this assessment holds for most every company.

The issue is not that every company should duplicate what American Airlines is doing. The issue is that every company needs to regularly discipline itself in some way - ideally involving all employees - to get at the compete-better question on an on-going basis.

Once the habit is established, the next task is to regularly (annually is ideal) review the challenge process itself to see how it too can be changed and improved to yield fresh new insights. This may mean new kinds of teams, new members on the same teams, new consultants, new outside experts, or even entirely new processes. As Drucker has noted, constantly be prepared to abandon everything you are doing.

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Use Non-Traditional Challenge Resources - To effectively challenge themselves top management needs to regularly organize, and reorganize, the non-traditional intellectual resources both inside and outside the company.

This does not mean hiring a consultant to facilitate a top management retreat. That can help, but in that scenario, the people around the table are the same people that put the game plan together in the first instance. If this group is to be challenged, others must do it.

To find those who are respected by top management and who are ready, willing and able to take up the challenge work, there are two sources - first the inside talent, and then the best and brightest from outside the company such as customers, suppliers and other experts. We help our clients organize that process in a number of ways, but we typically recommend starting out by forming and tasking teams of middle managers one or two levels below top management. It is always wise to to begin by better organizing and harnessing the firm's own in-house intellectual talent first.

Many top management teams believe they involve others deep inside their companies to participate in the development of their firms' strategic plans, and they do. However, typically these are either pyramid processes where the final plan is an accumulation of the tiers of plans below - or, the plan is in response to a series of specific directives or issues to which top management has asked lower level managers to respond.

What happens less often is for top management to seek to be challenged on the very issues they are grappling with themselves - i.e. are they the right issues - and in the right priority? It is our experience that for effective challenging to take place, lower level managers and employees must be asked to don their CEO/senior level manager hats and take up precisely the same issues that top management has been grappling with and to reassess whether the right issues are even on the table.

While some may doubt the experience and training of lower level managers to take up such a complex task involving issues around which lower level managers have no knowledge, we disagree. When organized into teams (see next section, "Using Teams") and when the right people are selected and appropriately tasked, top management can be challenged far beyond what they could accomplish on their own.

A landmark article on this subject appeared in the summer of 1996 in the Harvard Business Review. In Strategy as Revolution, the author, Gary Hamel convincingly argues that deep in every company there are strategy revolutionaries, and that every CEO needs to think more deeply about how to identify, organize and nurture these revolutionaries to become an integral part of their firms' strategic processes.

Strategy As Revolution by Gary Hamel

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Use of Teams - The use of teams, and for our work, strategic challenge teams, is essential. Everyone is using teams these days, and they should. Teams do marvelous work. Two McKinsey consultants, Jon Katzenbach and Douglas Smith have covered the reasons why in their excellent book, The Wisdom of Teams.

In many ways, the title of the book says it all. Teams of individuals coming from different disciplines and perspectives, if properly constituted and tasked, can exhibit a collective wisdom that is surely more than adequate to challenge top management on virtually any issue.

Still, not all teams are successful, and we have found some companies that have backed away from the use of teams, not necessarily because of poor performance, but because of a history of less than spectacular performance. Indeed, as the authors point out, truly high performance teams are in fact rare. Yet they go on to analyze what it is that makes teams succeed and fail, and what it takes to create an environment that will foster team excellence.

Two of the key factors in achieving high team performance are assigning teams what they consider to be a meaningful purpose and then assuring their goals are clear, simple and measurable. We find in our work, that few things inspire middle managers more than to assign them precisely the same issues with which top management is grappling - issues which are fundamental to the success of the company, and thus to their individual careers as well.

The Wisdom of Teams is a book that should be on the reading list of any executive who is committed to achieving excellence in team management.

The Wisdom of Teams, Jon R. Katzenbach and Douglas K. Smith

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Downward Communication Will Not Work - This is a Peter Drucker quote - a jewel buried in a treasured chapter titled Managerial Communications which lies in the middle of his historic work, Management Tasks, Responsibilities, Practices. The chapter, in inimitable Drucker style, lays out the last 100 years of research on organizational communication and concludes that - for organizations - downward communication does not work. Communication he describes is, by definition, a two-way affair. Yet for effective two-way organizational communication to occur, it must begin from the bottom.

Here is Drucker's classic quote which we have shared with many CEO's who have in turn used it in their speeches and otherwise endeavored to instill it into their organizations. We typically recommend that they make it a part of their soul:

"For Centuries we have attempted communication downward. This, however, cannot work, no matter how hard and how intelligently we try. It cannot work, first because it focuses on what we want to say. Communication is the act of the recipient. What we have been trying to do is to work on the emitter, specifically on the manager, the administrator, the commander, to make him capable of being a better communicator. But all one can communicate downward are commands, this is, prearranged signals. One cannot communicate downward anything connected with understanding, let alone motivation. This requires communication upward, from those who perceive to those who want to reach their perception.

Downward communications come after upward communications have been successfully established."

For our purposes, as strategic consultants, this thesis needs to be applied to strategic dialogue as well. The need for upward communication first has relevance in how any "change-to-compete better" team is tasked. One cannot task the teams to validate what top management has already decided to do and simply wants to communicate downward to get buy-in.

However, top management can, and should, lay on the table what they perceive to be the key competitive issues. Then the teams can be tasked to address - are these the right issues and what should the real priorities be?

Top management need not buy the teams' answers, but in the end, better answers and stronger organizational unity will develop by a strategic dialogue that begins upward. And this unity is the backbone for any corporation trying to achieve speed in responding to a fast-changing marketplace.

Management Tasks, Responsibilities, Practices is a huge book - over 800 pages, and thus is not recommended reading material. However as a reference work for the manager's library, there are few books to match it.

Management Tasks, Responsibilities, Practices, by Peter Drucker

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Outward Focus - Organizational thought must be directed outside the company. Whatever needs to be done inside the company should come as the result of an opportunity or threat outside the company. This seems obvious, but in most companies the employees - other than those in sales and marketing - seldom look outward for solutions. Most top managers want this to happen, but do not achieve it much as they would like, becauuse the solutions are not obvious, and successful case histories are few. We hope you will find the IML Insight treatise on Teams, as well as the practical examples and reference material discussed in the insights covering  Forces and Trends, and Organizing for the Customer to be both refreshing and practical.

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Forces and Trends - In the context of looking outward, most companies today acknowledge the need to focus better on their customers. This is an important topic that will be the subject of a separate IML Insight. The purpose of this Insight is to stress the need to focus on the often more neglected topic of the forces and trends that may, or will, impact on your industry.

Unfortunately, trying to detect these forces and trends from customers typically doesn't work, since most of the important forces that eventually impact an industry typically start outside that industry. They don't appear on customers' view screens.

Since the concept of  force assessment is less concrete and even more difficult for employees to grasp than meeting customers' needs, we would like to relate how one CEO organized not just his top management, but his entire firm to tackle the force assessment. The CEO's tasking was brilliantly structured so that every individual in the company took up a small part of his or her time, but in total the end product was an assessment process that even the CIA would admire. Here is how he did it:

Everyone in the company had to regularly scan ten publications that they normally would not read. Their objective was to surface any event or emerging trend that might in some way, someday, affect the company - either positively or negatively. The company was divided into teams so that those scanning a particular area, such as technology or competition, could share their findings. This sharing was done via email, and then the teams would meet regularly to reach consensus on their conclusions. Finally, quarterly the teams would assemble and present their conclusions and recommendations to top management. This, to us, represents breakthrough excellence in organization, simplicity, and practicality of approach.

For sometime we have stressed that our clients adopt a similar approach. However, now with the information that is available on the Internet, and with the search technologies that are emerging to scan, detect, select and retrieve only the pertinent information needed, we are also recommending that companies assign a significant part of their force analysis work to individuals and teams who know how to use this technology. This is an area that today no company can afford to neglect.

The classic work on force analysis, the need for it and how to go about it is covered in the recent book, Competing for the Future, by the prominent authors Gary Hamel and C. K. Prahalad. Their focus is more on how top management should organize their force analysis work, and is excellent.

The practical, organization-wide example noted above, came from the best selling book, Flight of the Buffalo, an immensely important work that we have treated separately under our Organize for the Customer section. The Buffalo is principally a book about how to let employees lead in delivering great performance to the customer, but we list it here as well because if its outstanding force-related chapter titled "Reading the Tea Leaves."

Competing for the Future, Gary Hamel and C. K. Prahalad

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Flight of the Buffalo, by James Belasco and Ralph Stayer

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Organizing for the Customer - If getting your employees to lead the way in delivering breakthrough performance to your customers is high on your agenda, reading Flight of the Buffalo is your next action item.

This is a landmark text. It is the most successful book by far that we have ever shared with CEO's. Comments like, "best management book I have read," and "if I were to write a management book, that is the book I would write," are not uncommon.

The thesis is that in most organizations the employees behave like a buffalo herd. If the chief buffalo runs off a cliff, the employees follow. If he lies down to sleep, they do the same. Now contrast that with the flight of the Canadian geese, all airborne with a common sense of destination, and trading off the lead to get there. So there you have it. How do you make a buffalo fly?

While this is a descriptive title, a major strength of the Buffalo is the practicality of how it tackles two subjects - empowerment (without ever using the term) and developing a customer focused organization that consistently delivers breakthrough performance to the customer.

Another strength is the power of the Buffalo, if shared with employees, to transform an organization's thought and culture. As consultants we find these employee empowerment and customer focus issues intriguing, as they represent concepts that both management and employees want to make happen. Yet when we walk into most companies, they are not executing either well. Why?

Our assessment is that there are two reasons. First, both are in reality, simply not easy to realize and execute. Second, finger pointing. Typically top management is trying to "fix" the employees. Employees sense it, don't like it, and in return feel that it is top management that really needs to be fixed.

The Buffalo attacks both of these issues head on. In the first 100 pages the author reflects on his own degree of Buffaloness and how much he had to change. Every CEO, vice president, department head and superintendent who reads it does the same, and this is the first step toward breaking down the finger pointing. Introspection. We all have some Buffalo blood in us.

As compared to the material typically encountered in the business press, the remainder of the book lays out the sorely needed practical ways one company actually made this happen. The key tenet of this text builds around another Drucker maxim, "If you can't measure it, forget it." Whatever program is launched, the employees need to conceive it, and there needs to be a measurement system to track their progress.

Whenever we have helped our clients organize teams of cross-functional employees to read the Buffalo and apply it to their companies, that typically has marked a major turning point in their building their culture and support systems to in fact deliver breakthrough performance to their customers.

Flight of the Buffalo, by James Belasco and Ralph Stayer

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Opportunity Focus - "Starve the problems and feed the opportunities" is a classic Peter Drucker quote that can serve as a rallying cry to stimulate organizational thought outward. Most employees and most teams, if not properly tasked, will lapse into what is foremost in their thinking - the frustrations and problems they are coping with on a daily basis. We find that even chief executive officers, especially chief executives who do not have a chief operating officer, typically spend far too much time grappling with inside issues. We believe that adherence to the previous eight principles we have outlined, and especially the next and last principle, stimulating corporate thought to better replicate your successes, will firmly anchor your company where it needs to be - in the market place.

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Replicate Successes - Discipline organizational thought to better identify, crystallize, prioritize and then replicate - your successes. This is a variant of another Drucker maxim that first appeared in one of his recent Wall Street Journal articles, titled A Turnaround Primer. Even a troubled business has "islands of strength" he notes. But we believe this is a principle to be followed by even the soundest of businesses. It not only makes good business sense. It also helps to inspire and clarify thought on what many employees, especially inside employees, can otherwise find a difficult task - identifying the outside opportunities. Again, the subsets of skills needed here are identification, crystallization, and prioritization. Teams that are setup up to attack success replication need to be coached to be certain they identify among the team, which members are best at each of these skills, and then task and draw upon these members' skill sets accordingly.

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Vision, Not Mission, the Key. Important to distinguish between the two, but it is a continually evolving vision that will power your firm. We no longer concentrate our marketing efforts around vision/mission work primarily because most firms have already tried to deal with the issue, have had only mediocre results, and generally aren't interested in trying again. However, having a clear, compelling, well understood vision is vital for every firm, and in many, if not most cases, they should try again.

In part this is because a firm's vision, like one's personal vision is something that can, and should, continue to evolve. Yet this hints at the crux of the problem - definitions. Most firms, and business literature in general, tend to confuse, and fail to differentiate between, vision, mission and values. All three are important, and every firm should have a distinct corporate pronouncement for each.

The classic work on this subject lies within Peter Senge's book, The Fifth Discipline - The Art & Practice of The Learning Organization. There, in a chapter titled "Shared Visions", lies the best discussion we have ever seen on the different roles of vision, mission and values, and the questions that need to be asked to clarify them. Mission and values, as Senge notes, are concepts that are rock-solid and endure over time. Vision, on the other hand, should continue to evolve. These three concepts answer these questions:

    Vision - What do we want to create?
    Mission - What is our purpose?
    Values - What are our beliefs?

Building a vision and answering the What do we want to create? question should be thought of as creating a vivid painting. The more powerful and clear the images, the better the result. As the chapter's title, "Shared Vision", implies, the remaining pages discuss how a firm should go about building a collective, shared vision - i.e. as opposed to one that is the product of a top management retreat. Visions form on high can be compelling, and they can work, but nothing creates more power and momentum than developing a shared vision.

This is landmark chapter in a landmark book and should be on every executives bookshelf.

The Fifth Discipline by Peter M. Senge

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Commitment to New Processes. An irrepressible commitment to continually get better answers to the question, How do we need to change the way we are doing business to compete more effectively? As we have noted elsewhere in these insights, the nature of the commitment required is a desire to actually take control of grappling with this question with an identified process. Without process, it won't happen.

A few words about the word, process. In many ways we would prefer to use a more inspiring term, but as yet, we have not found one. Indeed we regularly caution our clients to beware of the annual process - i.e. the cycle where various steps are taken throughout the year, eventually leading to perhaps a strategic top management retreat, and finally a plan with set of numbers and objectives over the next several years. While all involved typically strive to come up with creative, out-of-the box solutions, this process inevitably leads to rut-like, incrementalist thinking.

Still, if not the annual process, then what? As the result of a landmark Strategic Management Study we conducted back in the late 80's and early 90's involving 35 prominent U.S. and European firms, we concluded that to gain speed in strategic decision-making, companies needed to improve their strategic processes in three ways:

1. Reduce emphasis on the annual planning cycle
2. Replace it with better year-around processes
3. Expand involvement deeper to include the entire company

Since then we have focused much of our practice around helping our clients build the second and third capabilities, and we attack both of these by focusing thought on the "How do we need to change to compete better?" question. A more in-depth discussion of these two capabilities is discussed in the next two IML Insights.

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Separate, Year-Around Processes.  A year-around identified process - separate from operating processes - is needed to address the compete-better question, top-to-bottom, in your organization. If a process is not established that is totally separate from content involving operating issues, there will be no way to measure or insure exactly how much time is being allocated to tackling the future. A disciplined, measurable commitment is needed.

Whether meetings called to address compete-better issues are daily, weekly, monthly, or quarterly - and there may need to be some of each - it is important for the participants to think of this as an on-going process. There is no one right answer on how to do it for every firm.

As a company moves away from reliance on the annual process and develops confidence in their on-going work they also begin to avoid the strategy vs. tactic trap. While it happens less often today, we still come across firms taking up a strategic discussion and getting into the "that's a tactic" vs. "that's a strategy" debate. This implies that short term issues are not worthy in a strategic discussion - a concept that is irrelevant in today's fast moving competitive environments.

One of the side benefits of continuous grappling with the "how-change-to-compete-better" question is that the strategy-tactic argument disappears. Everything is prioritized regardless of the time dimension. What is important is grappling with the priority of the competitive strength-building decisions that need to be made today - regardless of whether the impact will be realized over either the short or the long term.

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Deeper Involvement. Move the grappling with the "compete-better" question beyond top management to include the entire company. If a company is to gain speed in the marketplace, it must excel in getting vertical alignment with all employees fast. Unfortunately many CEO's and top management teams still see the answer to making this happen as more of a downward communication issue - i.e. set the direction, communicate it, and call "follow me." In other words, do better in inspiring and clarifying the message.

Unfortunately, this simply does not work well. The issue is not whether a CEO or top management team believes in empowerment when it comes to addressing strategic issues. We in fact do believe that harnessing and developing the employees' strategic skills dramatically improves the quality if the plan, but if only speed is the issue, a more finely-tuned plan may not be either relevant or desirable. The reason all employees need to be involved to gain speed is, as we have pointed out elsewhere in these Insights, that downward communication - even as a beginning for dialogue - does not work. For fast vertical alignment to occur in an organization, effective two-way communication must be established, and as Peter Drucker has noted, it must start from the bottom. This applies to all communication, but most especially to strategic communication, and the acceptance and implementation of strategic decisions..

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Re-examine process. A commitment not only to ask outside-the-box questions, but also to regularly rethink and re-examine the very process by which you ask them. This is a critical skill, as any process, if not revitalized, will eventually lead to stagnation and rut-like thinking. Yet this is a skill where we have yet to find a top management team excel. CEOs and top management teams are often good at stirring the pot in many ways, but we find the re-examining of year-around strategic processes - if there is a year-around strategic process - seldom occurs.

Our Home Page states that we believe the answers to most company's competitive problems lie within themselves. We believe that, and indeed all of the principles and skills discussed on this site can be taken up effectively by any management team. Still, we find that when it comes to process re-examination, top management teams typically do not address it well, if at all, and generally are better advised to call in the consultants.

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Goal - Accelerate Decisions. A process with the end goal of accelerating the making of key change-to-compete better decisions. The concept is sound. No executive would challenge it. How to realize it is another matter, but it is a good beginning to establish accelerated decision making as a high-priority goal

There is no right way to achieve faster decision-making, but as one example, we found in our U.S.-European Strategic Management Study that Marriott had a unique approach. Unlike many of our smaller clients, Marriott had a strategic planning department. Still the concepts discussed here have nothing to do with size. They reflect principles. Here is how Marriott changed.

Previously Marriott thought it best to have the strategic planning department take up the role of both critic and evaluator of their divisions' annual strategic plans. Their purpose was to create a healthy debate and discussion in front of the CEO. To gain speed they decided to change. Instead the members of the strategic planning department became helpers and accelerators instead of adversaries and blockers. Their goal became to help the divisions accelerate the entire process of crystallizing their change-to-compete-better issues, prioritizing them, and making decisions - faster.

The central issue here is need for establishing the goal to accelerate decision-making, and then, of course, developing a system for measuring progress. But once the goal is set, the means, for your firm, will be found.

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50% on Forces. A process which focuses outward and allocates at least as much time on the forces and trends which may impact your company as it does time spent focusing on customers. The need for force analysis is discussed separately in these Insights, under Forces and Trends, along with an example of how one company masterfully organized everyone in the company to do it. If you have not yet read this section, you may want to do so now. Achieving excellence in assessing the impact of outside forces and events, especially those which may be developing outside your industry is a goal that every company needs to pursue. To bring this about, it must be set-up, organized, and tasked as a separate effort.

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Non-customer Focus. On the customer side, organizing a process which spends at least as much time gathering intelligence from your noncustomers as it does your customers. Most every company today emphasizes the importance of serving their customers, yet few allocate much time, thought and intelligence gathering effort for their noncustomers. Yet if a company is to expand its business, typically a significant part of this expansion must come from those who are not already customers.

We know of one consulting firm that has built a reputation in part on its practice of starting a new relationship by interviewing those firms (or consumers) who used to be customers, but now have gone elsewhere. This is an important technique. Equally important is the addressing and gathering of information and databases on those who have never been a customer.

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Customer Performance Measurement. Building a culture and a system by which you can definitively measure down to the individual employee level the degree to which you are delivering breakthrough performance to your customers. Since one of our Guiding Principles has been to share the book, Flight of the Buffalo, with every client or prospective client we can convince to read it, our IML Insight titled Organizing for the Customer fully covers this subject and the book itself. Again, the first 100 pages of the Buffalo excels in transforming organizational thought and lays the seeds for a cultural rebirth. The rest of the book covers the practicalities of setting up goals, systems and measurement criteria for each employee.

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Strategy Revolutionaries. The ability and commitment to seek out, and organize, the best and brightest strategy revolutionaries both outside and inside (but other than top management) your company. Our Strategic Management Study completed at the turn of the decade, has for over six years led us to stress the importance of taking the strategy development deeper into the organization. However, we had to admit that in his 1996 Harvard Business Review article, Strategy as Revolution, Gary Hamel had coined a marvelously descriptive, new phrase - strategy revolutionaries. Hamel argues, and we concur, that deep down inside every company there are strategy revolutionaries, and that CEOs' would be well advised to think more deeply about how to better identify, organize, and nurture these revolutionaries. An excellent article.

Strategy As Revolution, Gary Hamel

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New product development. The ability to launch multiple, low investment, low-risk incursions into the marketplace - fast - is essential. For some firms, such as, for example, Boeing, this is not a practical concept, but whenever it can be applied it should. The classic work on this subject appears in the Harvard Business Review article, Corporate Imagination and Expeditionary Marketing. Much of the contribution of this work is in the clarity of the images it presents as to what the goals of a high-speed product development process should be.

Such concepts as, "successive approximations," "shooting arrows into the mist," "recalibrating, reloading and firing again," and maximizing "the capacity for frequent low-risk market incursions," are easy to grasp. Again, once the vision and goals are set, better solutions for your firm will be found.

Corporate Imagination and Expeditionary Marketing,
by Gary Hamel and C. K. Prahalad

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