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COPYRIGHT 2004 FDCH e-media
Original Source: THE CHARLIE ROSE SHOW
CHARLIE ROSE, HOST: Welcome to the broadcast. Tonight we begin a series of conversations from the Harvard Business School. Conversations about management and leadership, maximization of resources, all of the subjects that happens to everybody who`s involved in leadership and in the institution. We begin with Michael Porter, a professor at the business school.
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MICHAEL PORTER, HARVARD BUSINESS SCHOOL: When I started working on strategy, I -- I mean, I never thought about government. I never thought about nations. I never thought about location at all. I was just focusing on what products, what markets, what customers, what value chain configuration.
But the more I studied and was exposed to competition, I started seeing that, yes, the company has a lot of influence over its success, it has a lot of scope to position itself, but actually the company depends a lot on that business environment. If the company can`t hire the right people, it can`t have a certain strategy. If the company can`t get access to the right technology, it`s not going to be very innovative.
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CHARLIE ROSE: Conversations from the Harvard Business School. Tonight, Michael Porter, next.
(COMMERCIAL BREAK)
CHARLIE ROSE: We`re at the Harvard Business School for a conversation with Michael Porter. He is a university professor, which is the most distinguished position you can have as an academic at this institution, a teaching academic. He has written more than 16 books; 17 will be coming out soon. He has advised nations and corporations and institutions. He has ideas about competition and strategy, ideas about the inner city. He has advised this country about competition and productivity and many other issues. He teaches a must-do course here at the Harvard Business School about competition and strategy.
This conversation is the beginning of a series we`ll do here at the Harvard Business School with the students, talking about not management per se, not leadership per se, but the role of institutions in America and the kinds of leadership that is demanded, the kinds of issues that will affect their leadership. It is appropriate we begin with Michael Porter. Welcome.
MICHAEL PORTER: Thank you, Charlie. My pleasure.
CHARLIE ROSE: A quick background about you. Ann Arbor, Princeton, all-American tennis player.
MICHAEL PORTER: Golfer.
CHARLIE ROSE: Golfer. All-American golfer. Harvard Business School. You came here to teach, or you decided in the `80s to teach. How did you get to competition as your subject?
MICHAEL PORTER: Well, you know, it`s almost -- it`s almost embarrassing, but there was no strategy. There was...
CHARLIE ROSE: (UNINTELLIGIBLE).
(LAUGHTER)
MICHAEL PORTER: There was a series of kind of good incremental decisions in that particular case, you know. My defining characteristic growing up was as an athlete. I was a football player, a baseball player, a basketball player. Golf was my hobby. I took that up in college and competed at the college level in golf. So competition was my -- was my thing. And when I got to Harvard Business School as a student, which was a very last minute decision itself. I was going to be an engineer. Then at the last minute I decided to come here. Of course this started exposing me to business competition, and then I had the various curious situation of one year studying here at the Harvard Business School, and the next year going across the river, as we say, to the other part of the university, and studying industrial economics. And it was really the juxtaposition of those two subjects that really ignited my interest in this field of competition, and it`s really been my path ever since.
CHARLIE ROSE: A notion about competitors. Do they share, those who practice the art of competition, at its highest levels, share qualities? The individuals who lead nations, companies, institutions?
MICHAEL PORTER: I think they share certain qualities, although there is tremendous variation. I mean, I think the most important quality of good competitive leaders is that they have a direction, they have a vision, they have a longer term perspective of where they want to be. They have a sense for how they`re different, how they want to be different, how they want to extend those differences over time. They`re not just trying to be better at what everybody else is doing. They really have a passion for being different. And that is to me the single defining characteristic.
CHARLIE ROSE: And a will to win? I mean, is there something about...
MICHAEL PORTER: And of course a will to win.
CHARLIE ROSE: ... a psychological thing?
MICHAEL PORTER: Yeah, but the will to win is not enough. You can try really, really hard.
CHARLIE ROSE: If you have no talent.
MICHAEL PORTER: But if you don`t have a direction, you are not going to be successful.
CHARLIE ROSE: And talent.
MICHAEL PORTER: And talent.
CHARLIE ROSE: Yeah. What did you find out when you looked at competition? Beyond the qualities of an individual, that was necessary for all of us to understand whether we`re an individual, corporation, nation?
MICHAEL PORTER: Well, I think that...
CHARLIE ROSE: What`s the subject of all these books is sort of what...?
MICHAEL PORTER: Well, it`s a little bit of a hard question, Charlie, to answer in -- very concisely. But basically, I found that we needed a structure to think about what were the underlying characteristics of competition. That was what was really missing.
You know, there`s endless management books about improving quality and enhancing your supply chain and defining your IT approach, and yet management is very fad-oriented. Managers -- there`s a flavor of the minute. It`s merging or it`s outsourcing or whatever.
But what was really lacking in the field and really continues to be a great challenge is really an underlying framework for what are the true underlying principles, the true underlying economics of competition. So -- and I think that there`s two or three of those that I would highlight here. I think, number one, you know, to compete successfully, you`ve got to have the appropriate goal. This is one of the biggest problems in America today. The businesses have the wrong goal. They`re trying to maximize shareholder value, but that`s actually wrong goal. That -- if you measure shareholder value by the stock price, that says that you are trying to please shareholders.
If you start out with a goal of trying to please shareholders, you will destroy your company. It`s 100 percent certain in my experience.
The right goal for any business is to achieve a superior return on investment. And so you`ve got to start with the right goal. You`ve got to start fundamentally with the principle that any true competitive success requires uniqueness, it requires you to be different, it requires you to create some different form of value than your competitors do. Yet so many companies today just mindlessly imitate their competitors. They try to replicate best practices. They follow the latest trend. And so I mean, again, we could go on, but those two simple insights, I think, are extraordinarily important in separating successful enterprises or non- profits or governments even from others.
CHARLIE ROSE: When you began to advise nations, is it different for a nation that wants to be competitive in a global economy than it is for a corporation, in terms of the principle? Have a goal. Secondly, make sure that you don`t make the wrong assumption about what it is you ought to be achieving.
MICHAEL PORTER: Yes. Well, at that level, yes, it`s basically the same. Although the goal for a nation is different than a goal for a company. The goal for a nation is, of course, the ultimate aim is to raise the standard of living. To raise the standard of living, we know that you have to raise productivity, you have to be able to produce more output per day of work. More output per dollar of capital investment. That`s the only way you can pay yourself more, you can be richer.
In order to be more, productive from a -- now is where the differences arise. From a business point of view, you want to get a competitive advantage, you want to create a distinctive value proposition versus your rivals. For a nation, you are really competing by creating the right platform or business environment that enables companies to be more and more and more productive.
So from a national strategy point of view, the focus is really on creating the right rules, creating the right business environment, creating the right enabling conditions. And it`s interesting that when I started working on strategy, I -- I mean, I never thought about government. I never thought about nations. I never thought about location at all. I was just focusing on what products, what markets, what customers, what value chain configuration.
But the more I studied and was exposed to competition, I started seeing that, yes, a...
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