The Timeless Strategic Value of Unrealistic Goals

November 1, 2012 Editor 0

Gary Hamel and C.K. Prahalad’s 1989 HBR article “Strategic Intent” brought about a discontinuous shift in my career — from a professor of accounting to a researcher on strategy and innovation. As an idea, strategic intent is about setting a bold and ambitious goal, out of all proportion to a firm’s current resources and capabilities. Strategic intent takes the long view: the act of such intent is to operate from the future backward, disregarding the resource scarcity of the present.

In the early 1970s, for instance, an upstart company called Canon set out a bold intent: “Beat Xerox.” Xerox at that time was the undisputed leader of the copier industry, leasing a wide range of copiers to corporate copy centers through a huge sales force. Canon standardized copy machines and components to reduce costs and sold its offerings through office-product dealers, appealing to people who wanted to own the machines outright. By developing very different capabilities than Xerox’s, Canon created a new recipe for success, and in the process short-circuited Xerox’s ability to retaliate quickly.

There are two views on strategy. The conventional view is that the firm should assess its resources and match resources with opportunities. If Canon had followed that advice in the early 1970s, it would have never taken on Xerox. Hamel and Prahalad have an entirely different point of view. According to them, the firm should expand its resource base to meet its ambition. This latter view has strongly influenced my work. I did my chartered accountancy degree in India (the equivalent of a CPA), got my doctorate in accounting at HBS, and was teaching financial and managerial accounting at Dartmouth’s Tuck School of Business when I read the “Strategic Intent” article. In accounting, we always argued that “realistic” goals are the best, since they are achievable and as such are better motivators. I’ve even contributed to this literature on goal setting. But according to Prahalad and Hamel, firms should set unrealistic goals, not realistic goals.

At first, I found their view completely counterintuitive. But the more I reflected on the article, the more it made sense. Realistic goals promote incremental moves; only unrealistic goals provoke breakthrough thinking.

Take, for instance, JFK’s audacious goal in the early 1960s when the U.S. fell behind the Soviet Union in the technology race: “this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth.” Why does a statement like this produce breakthrough innovation? Performance is a function of expectations, since we rarely exceed our expectations or outperform our ambition. As humans, we are drawn to a bold, challenging, and unrealistic goal. Deep inside, we feel uplifted by the thought of climbing a mountain in a way we are not by the idea of scaling a molehill. JFK’s intent produced many breakthrough technologies.

In a similar way, “Strategic Intent” inspired me to think about mountains and not molehills as I shaped my research agenda around breakthrough innovation. One result was my 2010 HBR blog (with Christian Sarkar) on The $300 House — a vision highly consistent with the theory of strategic intent.

As rare as it may be to find examples of strategic intent in business, history is replete with examples of greatness sowed by families. Without resources or sophisticated planning systems, families routinely focus their long-term intent on their children, even when they can ill afford even the basic necessities, and so are able to nurture greatness. Many of these children become CEOs, but the same people sometimes blame the need to deliver short-term results for their inability to think in the longer term. They have forgotten that their parents had to deliver the immediate present (pay monthly bills, take care of groceries, meet mortgage payments, and so on) and still managed to imagine the future (dream to send John or Kate to Harvard one day).

This is the time for leaders to step up their game — in business, in politics, and in the social sector. Leadership is tested during adversity. Post the 2008 financial crisis, the world has been reset.Today’s leadership challenge is about new growth norms in a slow growth world. More than ever, we need to set audacious goals during these austere times. Strategic intent is more critical today than when the article originally appeared.

Harvard Business Review stands for “ideas with impact.” Newspapers like The New York Times and magazines like Fortune publish current news, while HBR articles speak not to the fads and the flavors of the month but to insights that have enduring value. “Strategic Intent” is a classic example of the best of HBR. It’s an evergreen idea. It was valid in the past. It is valid today. And it will be valid in the future.
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Categories: HBR, Insights

Tags: Hamel, Prahalad, strategic intent, unrealistic goal