Interview: Ram Charan Explains To Me How A Future-Back Approach Leads To The Attacker’s Advantage
I had the privilege of sitting down with renowned management guru and author Ram Charan when he was in Colombia for the WOBI World Leadership Forum. Ram shared his insights with me on several topics, from how Colombia can make the quantum leap from a resource based economy to a knowledge based economy, to digital disruption: a topic he addressed in his books Global Tilt and Attacker’s Advantage. It was a privilege for me. I hope you enjoy it:
Loren Moss: In your book Global Tilt, you talked about how the very things that make a business successful at changing, you challenge the reader to look past core competencies and to look outside in and future back. So, I have a pretty good understanding of what core competencies are, but what does it mean to look outside in, or future back?
Ram Charan: Yeah, yeah, so the competence is number one, that you create internal mechanisms to sense—use antennas, to sense what new trends are coming. You survey today: who is creating something new? Will that become the future? We don’t know, but you try to figure out who’s creating it, and that tells you “outside in.” That tells you if that particular new thing does become big, then you have future back so if you get my book, Attacker’s Advantage the first three chapters are on it.
Loren Moss: That’s interesting because we see—Yesterday it was announced that Intel who completely missed out, and they admit that they missed out on mobile phone technology; they didn’t take that seriously or make chipsets for that; now, with 5G coming they just announced an alliance with the Taiwanese maker MediaTek, and they are taking seriously the next 5G not so much in traditional cell phones but in devices because the idea now as you know with 5G is that there will be no more need for ethernet; every device is connected wirelessly rather than: there are mobile devices and there are desktop devices…and so it looks like where they may be missed an iteration of the future, of evolution, at least in their sector of technology, they have learned their lessons and they’re saying let’s not get caught behind like Blackberry did for example or Nokia did, and it sounds like what you’re saying is “make sure that your company is the disrupter not the disrupted…or is that different?
Ram Charan: No, no, this is very good, so I happen to know what you’re saying about Intel. Intel’s CEO was a non-technology guy.
We should open up here for the best companies who want to use this place to make it a global city.
Loren Moss: This is after Andy Grove. More recently.
Ram Charan: Andy Grove’s successor was a professor, manufacturer. His successor was an economist by background. He was an assistant to Andy Grove. He was not a technology guy. He missed it. Then came another one, and he had his personal problems, he got fired. Now you have Bob Swan, who was a CFO back then, and he took a year to see whether he wants that job and now he’s trying to catch up.
Loren Moss: Is that dangerous? Because Andy Grove and Gordon Moore, these guys were technology people, they were excellent at business when they came out of Fairchild, they knew the technology. You know Jobs, Steve Jobs is famous for not being an engineer, but he was technologically competent. A lot of people now have doubts about that current leadership saying that if that’s a company that stakes its claim on product leadership, there have been no new products since Jobs’ death. And…
Ram Charan: No, be careful. First, we should not dwell on degrees.
Loren Moss: Okay.
Ram Charan: Steve Jobs learned it.
Loren Moss: Right.
Ram Charan: You can learn that. I used to go in 1978 and coach these three geniuses: Andy Grove, Gordon Moore, and Bob Noyce. They were a $200 million-dollar small company. They learned it. They grew into it. And so it’s a leadership mindset to figure it out, but they can recruit the best people to help them, so in the case of Apple people don’t know this, it should be, that you have a trajectory of a product line, in this case I would say to you the iPhone. An iPhone and an iPad are very related.
Loren Moss: I have them both right here!
Ram Charan: At some point it becomes mature stage. Now, they will, I predict, convert that into “product-as-a-service, so you will be able to get this product with a zillion apps and be able to pay a monthly fee. It’s going to happen.
Loren Moss: Like a utility.
Ram Charan: No doubt.
Loren Moss: Wow.
Ram Charan: And the price of the phone will come down as a result, because 7 billion people will be willing to use it. And what people don’t know is that Apple has moved into health care, and I believe they have the best strategy, so Tim Cook has positioned Apple into the world’s largest market space.
Loren Moss: And that’s a growth space too, positioned for long-term growth.
Ram Charan: And they will use these devices. They now have devices that have been approved by FDA, and they are using data for it. The watch is a device we don’t need anything else, to be able to monitor and give you notice, and use the data the FDA approves..
Loren Moss: I think is amazing the combination of things like IoT (Internet of Things), with things like the artificial intelligence behind tools like Siri or Alexa, or now, Google has one as well. I know a company in Boston, Orbita Healthcare that is coming out with IoT devices that interact with the user to help in cases like Alzheimer’s…
Ram Charan: See, we are all used to text. Amazon figured out the next game is voice. Google figured out the next game is video. It is easier for people…But these are the next stages.
Loren Moss: I think it’s a fascinating time and I want to ask how countries like Colombia can take advantage of these changes. 100 years ago, India was a colony and today India is a global power, you’ve got ArcelorMittal, you’ve got Tata Group, you’ve got Infosys. Tata has bought up all the iconic British brands, and so roles have reversed, haven’t they? And it’s also I think, different than their neighbor like China; is that India is known as a knowledge center, it has a knowledge economy. People might think of things being manufactured in China, but they think of India for IT Outsourcing. Colombia is trying to complete in that realm, obviously it’s much smaller, what can we learn—and you’ve seen it, the whole process—maybe not before when it was a colony but after.
How can a country like Colombia that was not a colony recently, they gained independence in 1825 I think. They’re growing, the country is a fairly modern country now, but 50 years ago, it was a closed economy, a tiny…it didn’t really matter on the global stage, but it is now the fifth largest in the Americas, even including the US and Canada; only behind Mexico and Brazil, but they’ve got a long way to go. They’ve come a long way in a very short time, what lessons can the country take and maybe the businesses within the country and not make some of the mistakes but then also maybe leapfrog like Africa did with going from no telephony to wireless and skipping over building out a land-line infrastructure.
Ram Charan: So we should look at this: What built China? Not Chinese. It was the American know-how. When I sit down with the Chinese, at their homes, they acknowledge that Americans through Hong Kong and Taiwan taught them how to run a company. Talking about India, the British built India. Colombia needs to get more foreign direct investment and know-how. Bring the people. They will teach you. Singapore in 1967 was nothing. They brought people in, technology in, investment in, and they trained the people, and now you see the results of that. We should open up here for the best companies who want to use this place to make it a global city.
Loren Moss: The good thing is that that has been the recent policy. In my opinion as a foreign person who now lives here and is doing business here, they are taking that seriously and that’s good to see. You look at the largest Colombian company and it is a petroleum company, but they are trying to invest heavily in the knowledge economy.
Ram Charan: I don’t know what you have in Colombia. I’m seeing in every single major city, training for IT, and you don’t need degrees for that. Bright high school students, you guys can fund it.
Loren Moss: Train them in Python and Frameworks and…
Ram Charan: I have clients in America using high school students. I’m not kidding.
Loren Moss: No, I believe it…I learned to program before high school. I learned Fortran in 7th grade.
Ram Charan: Why can’t we do that? Now they are beginning to show businesses what they can do.
Loren Moss: Companies ask me, foreign companies ask me often, they contact me and say “Loren, we are thinking about locating in Colombia,” and they don’t ask me—they do eventually ask about cost structure, this and that, but the first question they ask me is: “how is the talent?”
The neighbors two countries over: Guyana and Suriname have made huge oil finds. The countries are less than a million people (each). We look at some of the things that are happening: Elon Musk and his electric cars; Ford is coming out with an electric Mustang, and a lot of times I’ve talked to people and they’ve said “Ahh! Car companies don’t want electric cars. Oil companies don’t want alternative fuels. I disagree completely. The car companies are going to make the cars whether they run on electric or gas or orange juice! But I think that you still need a distribution point and as you know in the United States for example, the downstream petroleum, the gas stations don’t even really make their money on gas they make their money on…
Ram Charan: Merchandise
Loren Moss: Exactly! If you need charging you know, if you have an electric car, or a truck and you are going to go on a long trip, you are going to need to stop and charge it, and they are the obvious places that are going to do that. But my question is: How can…If we look at the giant petroleum companies, ConocoPhillips and ChevronTexaco and ExxonMobil, and BP, and Ecopetrol here in Colombia; if we look at even the countries: Colombia even though it’s trying to diversify its economy 53% of exports are still petroleum-based. Venezuela next door is 90%+ petroleum, as these countries diversify, it’s not like tomorrow we are going to turn off petroleum and leave our natural gas pipelines in our houses for heating and cooking, and so I’m wondering, if your company and you are in that industry, even if you’re not one of the major energy companies, but even if you’re allied and you’re in drilling services, refining—if I look and I see that things are changing and I see that the energy infrastructure no matter what happens regulatorily or in the markets, is going to look different 20, or 30, or 50 years from now. How do I position myself and what do I do to not just protect myself from that but to be part of the positive change that has to happen and do so profitably?
Ram Charan: The first thing is to face reality, will the oil consumption in 30 years have declined? And if it’s going to decline, and you can play an important part, you have go to say: “I have to prepare something else with it, that something else may not be related.
Loren Moss: Look outside the sector, don’t be myopic.
Ram Charan: There are those companies that are 200 years old, they change the portfolio.