David B. Yoffie is the Max and Doris Starr Professor of International Business Administration at Harvard Business School. A member of the HBS faculty since 1981, he received his Bachelor’s degree summa cum laude and Phi Beta Kappa from Brandeis University and his Master’s and Ph.D. degrees from Stanford. Over the last two decades, Yoffie has chaired the HBS Strategy department, the Advanced Management Program, Harvard’s Young Presidents’ Organization program, and now chairs Harvard’s World Presidents’ Organization program. Yoffie has served as lead independent director of Intel, and on the boards of numerous companies, including HTC, TiVo, and Financial Engines. Professor Yoffie has also lectured and consulted in more than 30 countries around the world. In addition, he has served as a member of the U.S. Department of Justice’s commission on international anti-trust.
Yoffie is the author or editor of nine books, including his latest, Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs (HarperBusiness 2015, co-authored with MIT Professor Michael Cusumano. His prior book, Judo Strategy (Harvard Business School Press, 2001), was co-authored with Mary Kwak. Judo Strategy has been translated into ten languages and explores strategic techniques for turning your competitors’ strengths to your advantage. His other books include Competing in the Age of Digital Convergence (Harvard Business School Press, 1997), and Competing on Internet Time: Lessons from Netscape and Its Battle with Microsoft (Free Press, 1998, also co-authored with MIT Professor Michael Cusumano). Yoffie has written extensively for the New York Times, the Wall Street Journal, and the Harvard Business Review, as well as numerous scholarly and managerial articles on international trade, firm strategy, and global competition in high technology industries.
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Morris: When and why did you decide to write Strategy Rules and do so in collaboration with Michael Cusumano?
Yoffie: I had been studying Apple, Intel and Microsoft for more than 25 years. In fact, I had written more than a dozen cases on all three companies, including some of the most popular cases sold through Harvard. I was also lucky to meet Andy Grove in 1987, and work closely with Andy for the next 17 years. I was fortunate that Andy introduced me to Steve Jobs and Bill Gates in 1990.
Around 2009, I came up with the idea for the book. My hope was to explore why some CEOs became great strategists. By focusing on Gates, Grove and Jobs, I thought that I could offer unique personal insights developed over two decades about the most successful firms in the world. However, I wanted to wait until Steve Jobs retired from Apple. The idea was to have a beginning, middle, and end to the careers of Gates, Grove and Jobs, which would allow us to evaluate their strategies with objectivity.
Michael Cusumano and I generally had lunch once or twice a year, and I mentioned the idea for the book about a month after Steve Jobs died in 2011. Since Michael had also written extensively on all three companies and the three CEOs, he got very excited about the project. By early 2012, we launched the book project together.
Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?
Yoffie: The original title of the book was Masters of Strategy, which the publisher did not like. We spent months debating titles. The biggest changes were probably Chapter 5, “Shape the Organization around Your Personal Anchor,” and the last chapter, “Lessons for the Next Generation.” Trying to understand what enabled Gates, Grove, and Jobs to execute their strategies so effectively was difficult to nail down. We spent months debating different ideas. The last chapter also required diving into new research to demonstrate that the new “superstar” CEOs in the tech world, such as Larry Page, Mark Zuckerberg, and Jeff Bezos, employed the same strategic principles.
Morris: In your opinion, what are the defining characteristics of a superior strategy?
Yoffie: The theory of the book is that great strategists do several things in common, which we call strategy rules. First, to develop a superior strategy, a manager, entrepreneur or CEO has to “look forward” several steps into the future, then “reason back” to develop an action plan for today; second, they have to be willing to make big bets, but without betting the company. Third, they need to develop platform and ecosystems, not just products. Fourth, they have to master tactics, especially what we call ‘judo’ and ‘sumo’ tactics. And finally, they have to execute by shaping the company around their personal anchors. Great strategies will vary from company to company, and industry to industry. But the approach to developing and executing a strategy can and should be similar across organizations.
Morris: For those who have not as yet read your brilliant book, you focus on three “strategy masters.” What are the defining characteristics of each as a CEO? First, Bill Gates
Yoffie: Our focus is largely on their commonalities, rather than their uniqueness. Of course, each CEO has a unique story. Gates’s origins and “personal anchor” was a deep knowledge of software. He was a hacker at heart. But Gates was also a natural strategist. He understood from the creation of Microsoft how to build an entirely new industry (packaged software), and perhaps most important, how to develop a software “platform.” Gates had an intuitive understanding about creating “network effects,” long before the academic community or press popularized the concept.
Morris: Next, Andy Grove
Yoffie: Andy Grove was an engineer’s engineer. Unlike Gates, he was not a natural strategist. He started in R&D, moved into operations, and ultimately took over the top job. In the process, he learned how to exploit his considerable intellect to resolve new and bigger problems. Grove’s personal anchor was his ability to bring an engineering discipline to a complex manufacturing organization. While Gates got into the weeds of writing code, Grove created a discipline for highly structured management processes.
Morris: Finally, Steve Jobs
Yoffie: Jobs’s career as a strategist has to be divided into two periods: the early Steve Jobs, when Apple was first formed; and the later Steve Jobs, when he returned to Apple in 1997. The early Steve Jobs was impatient, impertinent, and immature. His personal anchor was his great sense of design and usability. However, his drive for perfection along those lines nearly bankrupted the company in the mid-1980s. The later Steve Jobs developed a maturity, which enabled him to bring perspective and a stronger team to the company.
Morris: You suggest that, however different the three of them may be in most respects, they “take a shared approach to the essentials of strategy and execution. You identify five “rules” or core concepts to describe this framework.
Here’s my question: Which of the five seems to be the most difficult for C-level executives to master? Why?
Yoffie: Rule 1: Look Forward, Reason Back. The challenge for most CEOs is that they get caught up in solving today’s problems, and using history as their guide. To be a great strategist, you need to think several steps ahead, and not allow the urgent demands of today to overwhelm the uncertain problems of tomorrow. In addition, looking forward is hard, but reasoning back is harder. While many CEOs and entrepreneurs struggle to put their hands around a vision for the future, they find it even more difficult to make commitments today for results that will not be obvious for years to come.
Morris: Here’s a hypothetical question: With which of the three would you most enjoy working if hired to be his company’s chief of international management? Please explain.
Yoffie: To be honest, none of them. They were all difficult bosses: extremely demanding and occasionally unpleasant to their subordinates. Grove asked me to transition from a board member to a senior management position in the company early in my tenure at Intel. While I could have made much more money as a senior member of Grove’s team, I decided that I preferred to be Grove’s boss (as a board member) rather than his employee. At the same time, all three were inspiring CEOs. Most senior executives in Microsoft, Intel, and Apple found it a great thrill to work with such special people.
Morris: The United States will elect its next president in 2016. In your opinion, what is the single most important leadership strength that each of the three –- Gates, Grove, and Jobs — possesses would be of greatest value to the next president? Please explain.
Yoffie: Gates, Grove, and Jobs demanded the impossible from their teams, and the teams often delivered it. Perhaps their greatest skill, which a new President could bring to the U.S. government, was their ability to set high expectations and drive their organizations to meet or exceed those expectations.
Morris: With all due respect to their great successes, what was – in your opinion – the single biggest mistake that each made and what lessons can be learned from it?
Yoffie: Gates’s biggest mistake was probably being very late to the Internet. He had spent hundreds of millions of dollars building a proprietary online network (MSN), which was the wrong technology at the wrong time. For Grove, it was probably the debacle over the flaw discovered in the Pentium chip in 1994. He nearly destroyed the company by refusing to deal with the outcry from customers. For Jobs, his biggest mistake was not allowing the iPod to be available for Windows. If he had stuck to this position, Apple would have been a shadow of its current size and strength.
The lesson in each case is that despite making potentially catastrophic mistakes, each one figured out relatively quickly that they had erred, and they pivoted. Everyone makes big mistakes; the difference with great leaders and strategists is that they rapidly figure it out and they have the fortitude to change.
Morris: When discussing “the next generation of CEOs,” you focus on four. In your opinion, what is most significant about each? First, Larry Page
Yoffie: Larry Page, like Andy Grove, emerged from doctoral studies (at Stanford instead of Berkeley!). And Page has been especially adept at looking forward – especially seeing the emergence of cloud computing and mobile computing – and then reasoning back to make big bets in search, building data centers, YouTube, and Android.
Morris: Mark Zuckerberg
Yoffie: Zuckerberg, like Gates, was a Harvard graduate, with a hacker’s mentality. Also similar to Gates, he built Facebook into a force in the industry by creating the Facebook platform. While many were certain that MySpace or Friendster would be the winner, it was the Facebook platform that separated Zuckerberg from the crowd.
Morris: Jeff Bezos
Yoffie: Bezos, in many ways, came from the Steve Jobs tradition: like Jobs, Bezos has had incredible focus on creating a great user experience, while also making big bets in new emerging technologies, such as Amazon Web Services.
Morris: Huateng (“Pony”) Ma
Yoffie: Pony Ma built Tencent in China in the image of other successful Internet companies around the world. He had the advantage of seeing what worked, and what didn’t, in the more advanced markets, and then built a powerful platform that took advantage of those lessons in the Chinese context.
Morris: I agree with you that that Steve Ballmer, Craig Barrett, and Tim Cook were “absolutely essential to the success that Gates, Grove, and Job enjoyed.” In your opinion, what must the successor of any great CEO do to differentiate themselves from their predecessor?
Yoffie: Successors do not need to differentiate themselves; they need to be themselves. The greatest failure of most successors is trying to imitate the great leader who came before them. The challenge is how to keep the innovation and drive going forward. To make that happen, a new leader must surround him or herself with their own team, which complement their own strengths and compensate for their weaknesses.
Morris: To what extent (if any) did writing this book change your thoughts about leadership and how you teach it? Please explain.
Yoffie: I have returned to the MBA program at Harvard in 2015 for the first time in almost a decade. I am teaching a course which I developed about 13 years ago called “Strategy & Technology.” To build a framework for the course, I have organized my teaching around the five timeless rules of Strategy Rules. We start by understanding network effects, and how they impact strategy. We then move to “Look Forward, Reason Back,” to help students develop tools on building a vision, anticipating competition and customer needs, and industry evolution. Next year, I will be adding new cases on “Making Big Bets, without Betting the Company.” The next module examines how to “Build Platforms and Ecosystems,” followed by a module on “Judo and Sumo” tactics. The final modules of the course explore the challenges of executing strategies in a variety of different contexts. In other words, the book has become my bible for teaching strategy.
Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Strategy Rules, which do you think will be of greatest value to leaders in small companies? Please explain.
Yoffie: All three of my CEOs started out as entrepreneurs, building companies from scratch. Each of the rules apply to companies small and large. Perhaps the only principle which doesn’t fit small firms is “sumo” strategy, where we examine how CEOs leverage their company’s size and strength to their advantage.
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David cordially invites you to check out the resources here.
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