Hamilton Helmer: evaluation

Transcript context

…I want to close one thread on a power that you mentioned that is often a pitfall, which is around process power and basically execution. A lot of people think so in a lot of decks it's like, oh, we have the most amazing team, we move the fastest, we're earliest. You mentioned how rarely is that actually a power actually being able to execute and create a process that is an actual barrier? Can you just talk a bit more about that to help people understand okay, it's probably not our power? One of the great thinkers in strategy was this Harvard professor Michael Porter, and he in probably 40 years ago, made the very controversial statement that operational excellence is not strategy. He got a lot of people of the Harvard Business School faculty really mad at him because that's what their careers were about and it sounded like he was dissing them. But the point he was making was when you get to this end state, if you already have power that things that drive operational excellence can be mimicked because you can hire a consulting firm who has best practices, knowledges that come in and get you up to snuff. You can hire people from your competitors who know how to do it better. And that's true, but it's also true in this takeoff phase in a business that we talked about before, when you're trying to attain competitive position, operational excellence is everything. And so if you think of strategy, not statically endpoints like Professor Porter was, but if you look at dynamically how you get there, operational excellence is essential for a strategy. So think of those things I mentioned before about Netflix, about their UI and recommendation engine and so on, or international rollout, all those things. They were in a battle to get more subscribers than other people and those were critical for that. But in themselves, they're critical in attaining competitive position, but in themselves, they're not sources of power typically, unless there's some very tight considerations here or very demanding considerations for the... Unless if they have to be material, but they also have to be opaque or some way people can't easily imitate them. Either they don't understand what's going on or they might be opaque. So for example, think of TSMC. So when they put up the latest fab and get that operational, are there a lot of steps in doing that? They know how to do with their staff is trained to do it, but it's not documented necessarily and you can't imitate it. Then maybe they have it. I don't know if they have process power or not, but it takes that level of complexity. In my book, I use the example of Toyota and a car manufacturing is complex enough that you can have this opacity in terms of material steps, but it's not common. So if you're in a stability phase of business, you're stuck with this funny thing, which is most of your day is on those issues and it should be because if you don't do it, a competitor can and they can end up better than you. And so you're on a treadmill and that's the way business is. That's fine. And if you stop running that treadmill, you get creamed. So you got to do it, it's most of your day, but it's not power. And there are those rare cases where it's so material and so inimitable that it can be power, but they're rare. I like the heuristic that if you haven't written it down or you can't describe it, that might be a sign that maybe process power is a power of yours.…

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