welcome everyone to this good leadership podcast my name is Charles good your host and the president of the institute for management studies this podcast is designed to provide you with actionable insights and tools that you can use from discussing the research stories and background from recognized experts and practitioners to accelerate your impact in your current role well welcome to this episode of the good leadership podcast today I'm delighted to be joined by Dr Lise Kelly who is a professor of management and Leadership at the University of lever she is a nationally recognized expert on strategy and Leadership and has a passion for helping people and organizations unleash their management leadership and Innovation potential she publishes widely and has authored five books including a dictionary strategy entrepreneurial women a new leadership and management models and the psychologist manager as well as existential systems approach to managing organizations welcome to the program Louise I'm thrilled to be here Charles great to have this discussion well always like to start out each episode with our listeners learning more about you so if you to provide us some background information on you and really what got you interested on this topic I did my doctorate in Montreal seems like eons ago and it was a joint program with for University of Consortium and there was a famous strategy thinker Henry minsberg you might have heard of him and he really influenced my thinking on strategic management and you'll see a lot of the ideas that I that I have today are come from that sort of a more emergent view of strategy and that really really made sense to me and I you know my undergrad was in economics so kind of that big picture very macro and then I found strategy was a way to integrate that with the management part so that's how I got into this business and I've been doing it ever since well we're very happy to have you on the podcast and let's get into it and let's first identify or talk about the difference between strategic thinking and strategic planning because a lot of leaders from my experience don't really know the difference I think it's an important distinction and and strategic thinking is sort of a more modern view of things but they're both necessaries not either or so you know we've all been in those meetings where we have you know the fiveyear plan and the 10-year vision and you know you seem to be getting lost in a see a spreadsheets so how do you kind of break it down let's look at the analogy of like a GPS right and you set your GPS for strategic planning and it's going to give you the precise directions you know the turn by turn that we're all quite famili with but you can't let's say it's a foggy night and you're driving and you can't really see beyond your headlights so what's what's going on is your strategic planning approach is not letting you know the details of the road what's happening right in front of you and by sticking to that plan you're missing that real time information so I I would say strategic thinking is more like a topographical map right where you have like the texture of of the landscape and you're seeing what's going on and you're seeing The Valleys you're seeing the shortcuts you're like hey maybe we could take this over here this looks like uh or or let's say Charles you come up up on a you know a roadblock and that we see that happening all the time we saw that happening with the supply chain some people look at AI as a roadblock there's a lot going on out there so how do you navigate around that and when you're sticking with that strategic planning approach it's not really giving you that information so I would say you know it's not an either or and and if you wanted to like break it down in in a kind of a general sense I would say that strategic planning is the what you know what is it that you're trying to do here but I think the Strategic thinking really gets into that how that why the why is very motivating for people uh where are you going to make this happen what's it going to look like you can make an analogy for example like let's say you say wellow I need a boat to get across the river that's what I need to do I got a lot of these Geographic it's like The Art of War they're always talking about the terrain so okay you need a boat to get across the river that's the sort of strategy planning approach but then strategic thinking is like okay so should I build it should I buy it should I borrow it from a friend what does that look like and these are strategic decisions right like if you're going to start a product from scratch that's a huge investment right are you going to do a strategic Alliance well that's that makes it a little bit more manageable you can get to Market quicker so these are the kind of questions that strategic thinking allows you to adapt more I would say what would you say when I've seen it with leaders that a lot of senior leaders really their space is around strategic planning because they believe the future is predictable formulation and implementation can be divided but with strategic thinking it really can impact leaders at all levels they can take part in that they can be be a part of maybe not the plan but the planning of it do you find that from your work and from the companies that you've dealt with oh a absolutely and you know I I would like make the analogy uh that you know strategic planning is almost more like the flip phone right that we used to have and the smartphones are more what I would think the Strategic thinking is where it's giving you that realtime information and I think one of the words that I would want to highlight Charles is adaptability is that ability to adapt to changing circumstances so you don't always have the Precision that your strategic plan wanted you know to map that all out for you and and and you definitely do need that big vision and the strategic planning can help with that but it's that adaptability where you're able to change in in real time I think that's becoming more and more important and so you know what I have found working with Executives it is a transition to kind of go oh okay so the strategic planning is not just a sea Suite we want to see this at all levels in the organization and I think of some companies you know one company that was a real AE of the curve on this well originally GE back in the day but a more recent example is Home Depot and Home Depot had was known for require I mean it was a tough atmosphere to be a manager but because they were known for requiring operational efficiency and Effectiveness and all that right in terms of the plans of the manag but they also wanted strategic plans from middle managers and that was that was really a GameChanger in industry and GE had started it with their GE University right cro on Hudson so they' started that and I think Home Depot ran with it and you know the thing is Charles like you look at a lot of the managers from Home Depot what did they go and do they went and became CEOs of their own company because they had been forced to do that strategic planning so I think it is something that people are kind of like wait a minute you know can I really sort of let go of the reins and and let other people in on this conversation and the answer is not only can you you have to because if you're not doing that you're missing that intimacy with the customer that people in the in the lower levels of the organization have I mean sure when you're on top management you can see some big picture stuff that other folks aren't seeing because of where you are in your organization but then there's that kind of intimate knowledge of the customer the preferences and kind of toggling back and forth between those two like some people use the analogy of like bifocals or some people have Tri focals whatever that looks like but you know so you're seeing you know one picture here and then you're looking down and getting some more detail and that's what you can get by including uh your middle managers and the other thing is PRS you and I know I mean you've been working with organizations a long time I mean half the battle is the Buy in and it's actually more than half the battle I would say 30% of the success would be you know your strategic planning Etc 70% is implementation and that involves the real time strategic thinking so you got to get by in too and when you include people in the process that can make a big difference I just want to say one last thing is that including people in the process that it takes time to learn that skill so you got to be patient with people to sort of get into a new area let's move into some of those myths of strategic thinking one of the big ones that I have seen as strategic thinking is about thinking of Big Ideas if you could just speak to that and then if there's another one that you've seen throughout your work that is um prevalent yeah so things about the Big Ideas absolutely that is what strategy is about but when you think about like a big idea that is getting implemented like I don't know Tesla dominating in in the EV industry or you know coming up with that new vision of what a car is sure that's a big idea right you do need those but then you got someone like Elon Musk you know sleeping on the factory floor because there are you know 300 decisions that are needed to be made to support that and that's where you really get the in Innovation is in that granular you know set of decisions that you want to be making them not like you're on a roller coaster just going up and down and sort of reactive mode you want to be making them with that big picture but also with that strategic thinking how can we take advantage of this you know I I always think that Jeff bezos's decision with Amazon when he went into what we know now called Amazon web service I would have loved to be at that board meeting when Jeff came in and said okay you know we've been selling books and shoes and furniture and all this now we're gonna be sell selling cloud computing and people are like what but what he was looking at he he's looking at here's my expense item right which there's no way you get through the Christmas rush without huge computing power and so you know he had the big idea of Amazon and customer service but in the implementation he's like hey I'm paying a lot of money for this and we only use it once a year for you know at its maximum capacity I'm I'm going to sell that to other people turning an expense into a revenue item wow right but that comes from running the business and making those decisions so it's not just the one big idea it's those two 300 ideas that support that and make it happen I think that's very important yeah we spoke about this earlier but another myth that I see is being strategic is only required for those at the top so hopefully we've dispelled that myth already yeah I mean this is this is a major misconception that the Strategic thinking strategic planning is only for the sea Suite you are so missing out if you're not involving people throughout the organization and and I think that you know when I do my Consulting and working uh with companies that's kind of been my trademark from the beginning is creating a more inclusive you want to have diverse opinions right like you look at the generational diversity right we know there's just totally different ways of thinking out there you look at you know ethnic diversity you look at the way people think differently you want to draw them all into the conversation so you know I think you should think of strategies more like a Swiss army knife right like something that you can tackle everyday challenges I got to open this bottle I got to do this you have that tool and you can apply that and you and I have talked about some of the tools that we really love like you know Porters 5 forces that's that's a tool you can kind of bring that out okay what are we doing here with the supply chain let's take a look at the you know the forces underlying it and that's that kind of Swiss army knife so it shouldn't be like this oh it's just for the boardroom that is a real misconception about strategy so you don't need a corner office to think strategically uh although it may get you to the corner office if if you jump in and start start doing that very well said let's look at the attributes of strategic thinkers you have listed a few is there anyone that is most important to start with of those attributes that you list okay well I think we have to start with the vision you've got to have some kind of vision of the future so you can't just manage the data- day tasks get operational efficiency you've got to have that GPS set to success and have some idea of what that's going to look like so I think Number One Vision another thing that I think is crucial is embracing ambiguity you know Charles I do this uh assessment with my students it's like a three minute assessment it's called scarf and it it talks about your motivators right and it's like status certainty and agreeableness a bunch of stuff well I find my students rate very high on certainty you know what it's not a perfect fit with strategy you you can't have that certainty it's ambiguous and and if you can Embrace that ambiguity and and of course you need data you need to find that data but you never get you know you might have 70% of the data that you need and then you have to kind of go with it another thing that's really important for strategy is you got to be a decision maker you gota you got to actually make that those decisions there's a famous story of do you remember the story of Andy Grove at Intel as all going way back and he he really agonized over the decision about whether to get out of the memory chip Market he spent two years on it Charles and then you know one day I mean the guy was a brilliant guy and then one day he did a thought experiment and he said okay let's imagine I'm advising myself I'm not Andy Grill but I'm and so he kind of went put himself as a thought exercise outside answer came to immediately get rid of the memory chip and when he did it he thought oh it's 50% of our Revenue how are we going to do this when he did it the uh supply chain folks are like why did it take you so long you got to not get into the analysis paralysis you know it's important to have those discussions sense making but you know pushing off decisions that's when you become an also ran company is is when you look at that I think one of the most important things that I've heard from leaders during their strategic thinking strategic planning session is you got to ask the right questions that's so critical it's not about having the right answers it's about asking the right questions so you can develop a strategy that works I I couldn't agree more you know when Tim Cook came on as CEO of Apple and you know of course you got Steve Jobs as your predecessor is pretty hard act to follow right but you know he'd been working for years with the company and uh super smart guy in fact he's created more value than Steve Jobs in a way since he's been running it but you know that was one of the things Charles about him is that people got a little unnerved when they start to be in meetings with Tim Cook because why he'd be asking a lot of questions and at first people thought oh it's like a gotcha question you know he's just trying to put me on the spot and then they realized you know this kind of quiet demeanor it's not a gotcha these are just thoughtful questions that we all need to be thinking about and he kind of modeled that behavior and like you said you don't always have to know the answers it's sometimes you have to live with well we don't know the answer to this question but let's ask it because that's one of the things Charles people only want to ask the questions they haven't answer to but that's not being strategic you got to ask the questions that you don't know the answer but you're willing and that again goes to the ambiguity you're willing to sit with that discomfort you know I also like to think of strategists as being like a little bit like Sherlock Holmes you know like following the data following the clues and like you're saying you know what are the past Trends but how's that what are the discont continuities with the future right like we're living in a in a situation right now or a moment with the AI being a complete Game Changer I mean this is like inventing the internet again right it's like whoa where where are we going with this and and point of fact nobody really knows right but you got to be willing to delve in and say okay what would it look like for my business to adopt that so I think uh that detective looking at the past Trends looking at the future and really connecting those dots and and one of the things with connecting the dots is like there's not one way to do it right like somebody else could tell a story you and I were talking about story lines earlier it's like how do you make sense of that data what is the kind of storyline that is kind of jumping out at you and another Bezos example is he used to ban PowerPoint from presentations because he wanted to hear the story and where does the story come it comes from asking those questions and trying to understand what has been happening and what that's going to look like in the future why don't we move to the tools now and let's unpack the one type of strategy that's common in today's uh competitive landscape it's kind of the ideal strategy that everyone's trying to look for and that's the Blue Ocean strategy it's a famous based off a famous book on two researchers give us some insights into what this strategy really is Louise and then we're going to work through it uh with an example what is the basic idea of blue ocean and you're right it's really been taking industry by storm this this this tool it's been a it's been a blockbuster success I would say so think about the visual Charles it's like a vast Open Sea like anybody thinking of a blue ocean all of a sudden you're relaxed this is great and it's untapped opportunities right sailing into that sea it's a great metaphor right and what the blue ocean is really about is creating these new market spaces where there's no competition the competition is relevant because they're not there right and they kind of contrast that with the red ocean which just imagine that metaphor and I love that they use metaphors it's a great way to learn strategy is the metaphor so the red ocean is where you know the sharks are swimming right and it's kind of bloody from from getting torn out so that's the idea of uh a Blue Ocean strategy is it's those getting in those uncontested spaces and just think of that relaxation that's where you want to be but how do you get there and and the thing I love about the blue ocean chars and we we can't break it all down today we can talk about some of the details but it really is a bit of a method methodology it's like it's not like okay you got to be Elon Musk to come up this blue ocean no no no here's here's some ways to get there here's some questions you need to ask you're right and it has different parts of it one part that I really enjoy is the eliminate reduce raise or create phase where companies are advised to analyze their existing products and services and make strategic decision decisions regarding of what to eliminate reduce raise their investment on or create to deliver more value to their customers and that's something everyone can do regardless of the role they're in in that strategic thinking process so why don't we now look at this Blue Ocean strategy because it's really tough to create many it's the ideal many companies would like to say that they're getting closer to it but very few in my opinion have succeeded in creating it one of those I think it's that has is cir SLE which is the Canadian entertainment company founded in 1984 it gained Global recognition for its unique blend of circus acts and theater if you go to Las Vegas I think the majority of not all of the shows are now cir day solay shows the success of it can be attributed to its effective implementation of the Blue Ocean strategy which allowed it to create a new market space and differentiate itself from traditional circuses so provide us some more detail on this company and how it's really utilized the Blue Ocean strategy yeah no I love this of course it's my hometown Montreal is uh where this started and you know it's really interesting they combined elements of different Industries and that's where you create a new industry when you're taking a bit from this industry and a about bit from that and cobbling it together so basically I would say they really combined the circus atmosphere right the circus that elements elements of circus not everything and then theater right and then theater has more this connotation of like the big themes maybe the costumes the sort of more artistic side right and the circus has more that kind of wow factor and getting you you know out of your everyday life into seeing you know tricks and seeing people you know take some you know leaps on the traes and all that kind of thing and putting those two together nobody had done it before and you know when you talk about that reduce and eliminate model and then the create which is really important they eliminated for example animals right and of course we know what happened with the Ringling Brothers and the elephants and all that like Society moved on and we didn't want to see animals treated that way but it's it's even bigger than that it creates a whole Logistics problem it locks you into a certain thing they're like we're not going there we're just not going to do it now now that Charles is probably the hardest thing to do is say we're just not doing that and companies are afraid to do that because they're like well that's a necessary bar for competition you know that sort of benchmarking approach like here's the Benchmark of the industry but if you want to do blue ocean you have to be willing to let go of things and and you know there's a cognitive bias that we talk about which is loss aversion I don't know if you ever heard of it but this whole long list of our bies and they're worth studying when you do strategy because you you know you can be subject to them quite easily and so loss aversion is people don't want to give up something they have right so let's say I give you a cup and it's worth a dollar and I say Charles give me back that cup I'll give you $5 right so logically you could get five cups you know with that five bucks but you're like nope I got this because that's loss of verion once you have something so Industries don't want to give something up because they think well that's necessary and the Blue Ocean strategy you're really willing to do that but you're you're willing to add stuff right and that's so the money and the time that you take away and the things that you're reducing and eliminating allows you to spend that money time energy on the new stuff and so this completely new form of entertainment I mean you could call you know it's like a Picasso of the entertainment world right Cirus La it's like a wild factor and and you know you mentioned Vegas I mean Vegas is always looking for something that's gonna get people to pay that high pck ticket price but people feel like they're getting the value out of Cirus SL because it's so original so I think you know they eliminated things like you know concessions comedians clowns you know the animals but then they added you know the themes the artistic themes you know each show has its own theme and they just ran with that now like any company they ran into some problems just before the pandemic and dur obviously during the pandemic but they have come out of that again and they're sticking to that uh Blue Ocean strategy and it's working well for them when strategy is really about trade and it's and it's choosing what not to do so I love that approach with what are you going to eliminate and reduce CU you can't do it all effectively and you're right they eliminated animals they reduced the Reliance on Star performers creating a more collaborative Ensemble based show so that they could raise the stakes and create something brand new the production value of the shows took it to unprecedented levels created a new market Space by combining elements of theater circus arts and L live entertainment and and they really captured a lot more of the market or a new market for that because they they took advantage of merchandise sales licensing agreements and Resident shows in major cities since it wasn't in a t that got moved from City to City it was in a permanent venue so a lot of great things in what they did but just really emphasizing that point that a lot of strategies about tradeoffs and agreeing not to do certain things yeah and you know what I say when you look at that Blue Ocean strategy you really want to think about Innovation not imitation so it's not about imitating what you know the big boys and girls in the industry are doing it's about really innovating and that's what they did and you know I think if you ask anybody who's been to a circus Sal show they don't forget that experience it's a very memorable experience which is why people are willing to pay the you know the big bucks when they go to Vegas to see those you're right I've seen many myself so I can personally attest to that let's let's move into another strategic thinking tool that's commonly used and that's the porters five forces model and that's really used to analyze industry structure so walk us through that model and then we're going to use it to analyze a company the five forces like the name implies you know we're talking about five different forces that determine the landscape of the industry so this doesn't tell you what your strategy needs to be but it gives you the lay of the land and you know where's the danger points where's the stress points and gives you some insight then you can make your strategic decisions based on that and Michael Porter I mean brilliant strategy Professor from Harvard and you know Harvard's famous for the case study approach and he started giving his students notes and included the five forces and the other professors were like no you can't do that you know that's that's not the case method right the pure case method and he's like you know what they need something to break this down and I think it's a wonderful tool to get your your feet wet so let's let's look at the different elements of that so the first force is I like to look at is the threaded new entrance okay so it's the idea that how do you build a fortress how do you build a castle uh a moat to keep out those new entrance what does that look like and you want to have those High barriers to entry for new competitors and typically those will be things like brand name right so you really I mean do we see a lot of competitors to Starbucks in the coffee space right you got one or two but you not seen a lot of new entrance there theyve they've got that strong barrier to entry with that brand name there can be other barriers to entry sometimes it's Capital costs or unique technology the second one is supplier power so this is where you know what are the ingredients to make your product the w product that you want it to be so you're dependent on suppliers for these raw materials and what happens here is if you have some very special supply for example like back in the day when intel was calling the shots in the PC industry you had to have an Intel and it's like well what did that mean Intel got to call the shots got to say this is how much you have to pay and by the way you have to advertise our product on your PCS so there's an example of fantas itic supplier power then you take another and that's not good for the companies right the stronger the forces are the more problematic it is for companies so when you have higher supplier power that makes the industry less attractive it doesn't mean you can't find your way through it but uh how are you going to position yourself a good example uh with supplier power a couple that come to mind if you think of Walmart and their supply chain well they're famous for being extremely tough right well what does it mean if you're tough it means you call the shots you say well here's the price point here's the quality I want packaging this size because they have such huge Market power right as Walmart you know 90 customers a month in in the US so that is gives Walmart power over their suppliers because it's like well if you're not going to sell Walmart then good luck you know yeah enjoy trying to find customers another example is a lot of folks criticize door kind of actually laughed at Elon Musk when he started doing some vertical integration for the batteries and they're like oh no you can't you know lock yourself in here comes the pandemic nobody can get those supplies and you know that vertical integration and and that's a good example industries were moving away from vertical integration because they're like hey we need to be as as flexible as possible absolutely you do but now we're seeing how vertical integration can get give you a leg up on on competitors the next one is buyer power and and that's where you're like let's say for example in the pharmaceutical industry who are the buyers well it's the insurance companies and the health care providers right they're the ones writing the script and they can in fact negotiate for lower prices you see the federal governments negotiating I think it's 10 of the drug prices for for Medicare right so them the buyer power when you have a big like Medicare is a big buyer when you you saw the insurance companies getting bigger you know like Kaiser here in California that gives you buyer power sometimes when you're talking about individual buyers like all of us out there it could be information that can give you uh buyer power so if you think Charles what it's like to buy a car now versus you know 10 15 years ago I mean whatever car you want you'll know exactly how much it cost in the factories to make it you'll know how many in the color you want are in California that is an example of buyer power where as consumers we have a lot more information and I will say one trend line that we we see across all Industries with buyer power is it's going up the power of the buyer is is is getting more powerful and of course the more power the buyers have the harder it is to make a profit so again every time those forces are stronger it it doesn't mean that defines your strategy but it means you got to be you know nimble in relationship to that that brings me to the fourth one threat of substitutes and and pharmaceutical is a good example uh in that industry so when you have the kind of the moat The Fortress of your you know new drug that's very successful and then a suddenly a generic version comes along when you know after the patent has run out okay this is the ultimate substitute products because you've got something that's got the same efficacy or more or less you know and then it's uh generic it you know it could be half the price or more or or less so a substitute product is something that can meet that um need and sometimes it comes from a totally different industry when going through the pandemic we all got into the zoom world right uh heavily into zoom and you know business travel it's still there it's still significant but people are thinking about it differently because they see zoom and other conferencing as a substitute is a lot cheaper in terms of time and energy to have those meetings that way is it a perfect substitute absolutely not you know the face-to-face interaction is so much more powerful so threat of substitute products are they're a lower price point and they're meeting a significant part of what the original product I mean you could even say like a smartphone ended up being a bit of a substitute for some of the PCS people could run their whole business you know just on their smartphone oh oh competitive rivalry I forgot the most important one okay so that is uh that It All Leads into that that's the five forces all those four other forces right lead into the competitive rivalry and that's really where you're talking about the fierce competition and jocking for position that's when you're getting into the ring and you know some people are going to make it some are not the more intense the Rivalry than the more narrow the profit margin is is going to be so it's like okay do you have a lot of competitors that's one set of problems do you have evenly matched competitors you know the Coke Pepsi the beer Wars that kind of thing so when you have like let's say one or two big companies dominating the industry which we often see right then they have to pour enormous amount of money into advertising the celebrity endorsements and all that because it's just they're going head-to-head there's no blue ocean there when you've got that kind of rivalry going on so the analogy that I would offer for the poris 5 forces which is a classic tool but still very powerful it's like an x-ray machine it gives you insight into the underlying forces in the industry and shows you where the pressure points are shows you where the opportunities are and you know strategy is all about that that two things I would say you know macro point of view like you're looking at the big picture the big landscape but it's also drilling down to those basic assumptions what are the basic underlying Dynamics who has the power here in this industry and by the way you can one of the kind of if you're having trouble figuring out your portify forces you know like supplier power just look at the profit margins if you see the profit margins of the suppliers outpacing you know who they're supplying then you know I mean if you look at the movie exhibition industry it's taking a beating they're not you know the profit margins are so slim that's because they don't have power in the industry it's really the streaming companies that have that power now so wanted to ask you a question because I because I hear this a lot too that they use aort 5 forces and they use SWAT analysis so what are the differences between the two for our listeners and when should they use each one I am not the biggest fan of SWAT but I know a lot of people love it the problem I have sometimes with SWAT is that strengths weaknesses opportunities threats is that you it becomes a laundry list right where it's like okay here's our strong points here's our weak points and then how do you kind of put it together I think SWAT can be made more Dynamic when you use something which they often call toes you know the sort of opposite way of the acronym where you take a strength and you pair it with an opportunity and you have to come up with a strategy so that's where I like the SWAT is when you you kind mix it up like remember we talked about ingredients right so you're seeing a lot of cooking you see a lot of uh Fusion cooking right we so with Korean Mexican and how do you put that together so like the toes is like mixing up the internal analysis with external analysis then coming up with the strategy so that that's to me the best way of looking at the SWAT or the toes analysis I think the big difference with the ptisi forces is it's really very much industry based what's going on with the competitors and with the SWAT sometimes you're really not getting into that competitive Dynamic at the same level you should be and you know I find with Executives with managers there's sort of a goldfish Bowl effect where you're kind of looking at each other in the management team or you know other departments and you're getting into that kind of overly focused on your world right like the company's world and I think that the ptisi forces get you into the competitors what's going on out there because it's really the competitors who could end up eating your lunch right and those who understand the forces in the industry before the others do are in a much better position and I think you know in strategy we have you know I was using the word toggle back and forth right so you think of like a focus where you're focusing in and then you're zooming out like a new iPhone right but when they gave you those automatic Focus buttons right so you can go zoom in or you can take that big kind of landscape and I think that the the beauty of of the five forces is by zooming in and getting and breaking it down like we just did you you got to remember to zoom back out and look at okay now what do we do with this I just find that the poris five forces creates more Dynamic conversation about competitors and strategy than SWAT but there definitely is a place for both and I I would say that the opportunities threats part of SWAT is the industry part and the strengths and weaknesses is obviously the internal part of the company so there we go I guess I'm a I guess I'm a Portis 5 forces fan more than more than then thing but of course blue ocean is is a game changer as well let's move into analyzing a company because I love to give them the tools but I also more importantly like to show them how to use those tools let's use a porter 5 forces analysis to evaluate the competitive forces within the technology of consumer electronics Industry which is where Apple resides so I'll go through each one setting it up a little bit and then perhaps you can speak in a little more depth to each one of these forces it's really impacting Apple the first one is the threat of new entrance that is low there's economies of scale that's going on that Apple benefits from there's brand loyalty that Apple really um enjoys a very strong amount of and high Capital requirements by other companies to get in the space yeah and I think you know so if you're talking about uh thread a new entrance you're absolutely right about it's it is low and I think one of the things that you see with apple that has allowed them to minimize that threat is the ecosystem integration so once once you get into the Apple world you know many of us have the watch and then we have the I mean look if they come out of an Apple car I don't know already got an EV I'll probably have to get it right because that integration the idea of that seamless getting into my car and it's going to know my schedule and it's going to know all that so these things seamlessly working together this creates what we call High switching costs so going from the Apple ecosystem into now sure the Android is is out there and it's doing well and those are the two big rivals clearly right but you're not seeing anyone else getting into the space because it's that that's been kind of carved up so I would say that the ecosystem integration really acts as a barrier to new entrance absolutely how about for bargaining power of suppliers um I would say that it's moderate and I've seen Apple use a very diverse supplier base so reducing its dependence on any single supplier I think they have done a masterful job in Supply Chain management and and again that's Tim Cook you know he's kind of a quiet guy and not you know not as flashy as maybe his predecessor but but what where Apple really excels I mean they excel in many areas but is the Supply Chain management so you see they have a control over their supply chain from the manufacturing all the way to distribution they have to do that because just like we were saying you know like let's say uh the analogies like you're running a restaurant and you know you have this star chef and they start you know buying the most expensive ingredients that that are out there that's going to change your whole cost structure right so they have to minimize their costs but as we know Apple has its a differentiation strategy based on quality so they can't minimize the cost but be subject to low quality so that's where they have to have a tight control they're quick to react to problems in in their supply chain so they basically kind of own the whole supply chain not literally own it but own it through their management process of how they interact with their suppliers which a lot of them are in China now right now you'll see apple is a diversifying outside of China we're seeing a lot of problems in China whether that be geopolitical you know the employment base lot of stuff going on in China right now and Apple's realizing hey that's been our supply chain basically right so now we we have to look at at some other develop some other supplier relationships so I think that's very key and also Apple keeps their inventory management very low that reduces their costs as well so I think they're really Excel I mean you look at a company like Walmart and you look at Apple they are like the king and queen of Supply Chain management in my view well moving now to bargaining power of buyers you say it's going up across the board and I would argue that in this industry it's moderate to high consumers have a lot of choices and the premium pricing of Apple really forces them to deliver something of quality because there's a plethora of competition in great products that's waiting to take its place yeah you know I think one of the things that really uh protects apple and look they've understood the sensitivity to price and they did come out with a lower uh price version of the iPhone but I really think they're competing on design excellence and that really sets them apart and I think what's happening is you know Apple has always been it's not just about the gadget that's in your hand it's about your lifestyle it's about your aesthetic I I I would say that the design element you know we were talking about Cirus LA and and what they did with designing the theater Apple's like that too this is a work work of art this is not just a device this is really a work of art and it makes a statement about who you are as as a person and if you look at you know the 1 billion Apple users and I iOS uh folks these people have the most money in the world to spend this is the most sought-after consumer and I think that Apple locks them in with the design Excellence also other things like customer service they're pretty Cutting Edge on that too if I don't know you feel like you have a coner service you phone up you know the Apple support you got a two three minute wait and then people are willing to delve into things I think that's huge today I mean who's not feeling overwhelmed with their passwords and they you know getting in there so you have that kind of concierge service so um it's really for the like they've always put positioned themselves as hey we're for the creators you know we're for the people the creative types and I think in the economy that we're in people want to be identified with that kind of brand name so that's how I see them working with the buyer power moving on then to the threat of substitutes that's moderate you mentioned it before it's moderate only because of that ecosystem lock in because there's lots of substitute products but once you're invested in the ecosystem it's really hard to get out of it unless you want to lose a lot of those apps that you love and information that you have on that device yeah there's that and I think another thing is that that that protects Apple to some extent against you know the The Substitute products is is the product Innovation they're always coming up with something or two or three things that really can make you ahead of the curve right and people don't want to be left behind on that they're considered Cutting Edge and and the field is changing very rapidly I mean I'm I'm looking forward to some of the things that they'll probably be doing with wearables in the future we're getting more concerned with our you know monitoring our health data on a regular basis and you kind of know that Apple's going to be a at the Forefront and and I'll give you just an example you know when meta came out with those those glasses you know the Oculus kind of a flop right they don't have that design Excellence they don't have that reputation for being The Cutting Edge performance of their device but you know with apple they really haven't had that kind of flop they've had things that took a longer time like the Apple watch you know a lot of my friends were like ah what do I need it for eventually they came around they got it because you know you you do want have that interoperability so I would think their product Innovation protects them a lot from The Substitute products and then the final one is competitive rivalry which is really high very intense competition but really rapid technological changes are happening within this industry all the time and you also have to worry about Market saturation Because unless you can move into new markets you might have filled that void and there's not much growth that can happen in more mature markets yeah I think the competitive rivalry uh they do a great job with this and uh you know they they kind of own the road a little bit with these and I don't I think that's going to be broken down maybe with some antitrust stuff but in terms of the app store right because if you want to sell your product you got to go through Apple so that gives them an advantage 30% right off the top that they're they're making right there but terms of competitive rivalry one of the things that apple is famous for is their secrecy this is a company lives and dies by their secrecy and they're very secretive about their product development like nobody knows right now are they gonna make the car they're not going to make the car what's happening with that nobody really knows and that secrecy creates that sense of anticipation that sense of excitement this is really quite powerful Visa competitors and they stop people from copying their ideas too quickly I mean look at Samsung they're so on it and they can come so quickly I mean they really do a great job as a second mover but Apple makes sure they're not the first mover uh generally speaking I think the other thing that you see with apple they're uh they're a tech company I mean their patent portfolio is impressive they have a vast portfolio of patents now some of those are not even going to pursue they're just throwing off competitors with that but they really are making that investment in terms of innovation that's going to be long term so I think that puts them in a really good position with the competitive rivalry but you know what I'm sure Tim Cook's worried about it all the time because I mean look what Samsung has done and of course the classic example right going back to history whatever Nokia right used to have 80% in the market now you know they don't re even really exist in that market so I think everybody knows you you can't rest on your laurels and when Apple comes out with a new product it has to be a huge Money Maker for a company that size and um so they have to really put their resources and again if I make the contrast with meta and Zuckerberg he you know this is that 10 billion doll bet that t kind of with the Oculus that that fell on its face and you don't see apple doing that they want to protect themselves in that way so I I still put my money on Apple for uh winning the competitive rivalry I would say well thank you for providing those insights I think that was instructive to go through that process with the Porter's framework to analyze that industry and really give some insights into why Apple has been so successful for so long wanted to just cover in a little bit higher level of detail one more company in a different space and that's Costco and and really what's differentiated that company in once again a very competitive market it has to compete against Walmart you might say it's a more of a niche market Costco is occupying that warehouse membership club Market but let's briefly go through that process with Costco just to give our listeners once again some insight into what makes them so profitable and differentiates their brand in this very competitive market and whin let's start out with the threat of new entrance I would say is low because it's a membership model which means it creates a barrier to to entry new entrance we need to attract a substantial amount of customers to compete with a lowcost Costco membership fees yeah absolutely I think the membership model is brilliant you don't again you don't see it in the industry this is not typical but by acquiring that membership as as being able to you know shop in the store you got that loyal base like you were saying so they're you know we because probably a lot of our listeners are Costco members and worldwide they're doing strong you feel like you're kind of in a VIP Club right like you got this this membership and and other people can't access that and that gives you the access to the Great Deals right and and so I think that is a real that's a real moat I would say in in their indust indry so I think that's a great competitive strategy for threading new entrance absolutely about bargaining supplier um barting Power of suppliers moderate to low what I love about Costco is what Trader Joe's does as well they do a lot of private label Brands and they diversify their supplier base to minimize that supplier power yeah absolutely again like apple they're low inventory model that's one way of minimizing those costs they don't have uh storage costs right they and and so low inventory low storage they pass that on directly to the customer and so it's very much the efficiency of their supply chain they're like a well oiled machine and I you know you mentioned the the private labels like the Kirin signature what you've got is you've got high quality low price I mean that's an unbeatable combination right so that gives them by by having that private label the profit margins are a lot higher and that that's gives them a leg up in terms of the relative power of the suppliers because they will always have their own products that they can sell and of course they have have the um other suppliers but they always have something they can fall back on so that gives them some choices right absolutely bargaining power of buyers monitor to high once again Costco has a lowcost strategy so its customers are price sensitive any significant increase in prices could lead to reduced sales this is their model right this is the core of their model is that they have the No Frills store layout right where you're just you're kind of navigating your way it's almost like almost like a treasure hun in Costco you never know what you're going to find right it's always moved around different places so everything has its place having that simple organization principle for the store which is you know not spending a lot of time placing everything and product placement they can pass that that uh savings on to the customer and and that's very very important the other thing that they don't spend money on is advertising right so they're really very low on Advertising like if you were to compare them to Walmart they're really relying more on a word of mouth and that's how people people are always talking about Costco and what they found and you go to a dinner party and you're like oh where'd you get that SP of cheese oh well that was Costco so they use that word of mouth for the No Frills shopping experience and I think that keeps the low prices high quality which you know gives them some leg up versus the buyer power because people I mean especially with inflation people were you know making some wise choices and Costco just sailed right through that because of their their integrated strategy completely agree with you uh next threat of substitutes You could argue that it's moderate the membership benefits help to mitigate some of those threats of substitutes but not all the way yeah you know one of the things that often gets overlooked where C but they have a really generous rur policy and it's funny I was at uh chiropra the other day and he's always talking about air quality in our lungs and making sure that's all good and he says oh make sure you buy it at Costco because if it breaks down you can just return it I think that creates some some uh efficiency Visa other venues to get the same product because not efficiency that's not the right word but it attracts people that they feel reassured hey I can buy through Costco if it's not going to work out I know I can return it it gives you that sense of confidence that safety net and that will take you away from competitors where you're not able to do that so I think that's part of it visa substitutes and the final piece is competitive rivalry very high because it's competing against both traditional retailers like Walmart as well as online giants like Amazon one of the things I think about Costco is in terms of their competitive rivalry is the employee satisfaction you know satisfied happy employees who are engaged in their work can be a great competitive Advantage when it comes to that rivalry where do you want to go and spend your time shopping I think that Costco and Trader Joe they they have different strategies very different we talked about that one before but they both have a high level of employee satisfaction you've got happy employees what does that translate into you've got satisfied customers you enjoy being there it's a nice atmosphere for the people working there and they do that by you know they have uh holidays for their employees that other retailers don't honor they're generous and that translates into really caring about the shopping experience for so you're not having a great shopping experience in terms of this you know store layout it's kind of like a warehouse but you are having this treasure hunt experience you're also having you never know what you're going to find what Bargains you're going but you're also having a pleasant atmosphere with engaged employees and you know what Charles I think this is becoming more and more important as a competitive rivalry tool and so that's one thing that's strikes me in terms of their rivalry how they distinguish themselves from competitors great well thank you for going through that analysis with me as we're nearing the end of this episode always want to leave listeners with a call to action what would you recommend for our listeners to do first to improve or strengthen their strategic thinking muscle well I think one of the things that I would recommend is just jump right in jump right into strategy do not think well I've you know I'm not a senior executive therefore I should not be involved in a strategic thinking Jump Right In you it's a skill think of it like baseball you got to swing for the ball that's how uh you learn to be a good baseball player it is a skill you can develop this is not something that only a brilliant few have use the tools the tools the Blue Ocean strategy thinking innovating not not imitating the poris five forces how can I break down what's going on in the industry to get some ideas the other thing I would say is talk to people outside of your industry that is a great way to get new insights into your industry try to try to get out of the Goldfish bowl of your own business and everybody's got the same ideas have those conversations about strategy whether you're going a conference or going to a training uh like IMS offers that really gives you a chance to hear about hey how do they do it in other Industries and that could give you some real insight but the number one thing is Jump Right In and get started because it's like riding a bike you're going to be wobbly at first right but then you're going to get the hang of it and and then it's going to feel good you're like wait I can do a lot with this so that's what I'd recommend thank you Lise for joining me today on this episode remind our listeners how they can get in contact with you and learn more about your work I'm a profess professor at University of lever here in Los Angeles and I guess the good way to get in contact with me is how do we connect with because I you know obviously I've got my LinkedIn is a great place to start posting pretty regularly in there so if you want to connect with me on LinkedIn that would be a good way to start University leverne and then also um I'm involved in a lot of these podcasts and training so that's an opportunity to uh directly connect with me I also have an Amazon page page where I have I've written uh I got a bunch of the books right back there which is let's see I just finishing one number six in Europe mindfulness for authentic leadership and so Amazon has a author page so you can see what I'm doing there as well if you enjoyed this episode I encourage you to share with others and post about it on social media you can also go to our YouTube channel which has video recordings of all the episodes of this podcast along with bit sides segments F single servings that are designed to your most pressing leadership and management questions remember until next time it's not what you know that counts but what you do consistently that makes a difference