Over coffee and toast at Brasserie Roux, IESE Professor Paddy Miller discusses strategy, innovation in India and “next practice” with one of the 20th century´s most influential management thinkers.

The power breakfast is an American invention. My dictionary says that it’s an “informal meeting relating to influential business or professional practice” – as in, met with a top academic at a power breakfast. It usually combines a lengthy but light meal that could sustain one for the rest of the day, together with an action-focused business discussion.

The academic is Professor C.K. Prahalad of the University of Michigan, but everyone calls him “C.K.” The breakfast venue is Brasserie Roux, St. James’s Place, close to the Mall in London. Our power breakfast achieves the opposite of its definition – it provides a forum for discussion that sustains one for weeks while, on the gastronomic front, we struggle to keep body and soul together.

We organize ourselves around a corner table, far from passing crowds and noise. We’re also far from the buffet breakfast on offer – surprisingly little different from hundreds of similar buffets being offered in London this morning. We imagined that this restaurant, a creation of M. Albert Roux (one of the famous Roux brothers), would somehow be more exciting.

I start to ask C.K. what he has been doing recently and he starts to talk about projects, teaching and in-company work. He constantly talks about pushing the limits of accepted knowledge. He has the unique ability to lead people to talk not about best practice, but about next practice. He will often return to this during the discussion: “It’s not about best practice, it’s about next practice.” He has spent the last decade and a half getting people to think laterally and to break their mental frameworks. Concepts such as core competence entered management lexicon as a result of his book “Competing for the Future.” He questions norms, he questions assumptions and, most of all, he questions his own work. Everything is up for grabs. It is not surprising that C.K. has been rated by many as one of the most influential thinkers on management of the 20th century. His output of thought-provoking written material is prolific, from books to articles in the Harvard Business Review.

Inevitably, Brasserie Roux was going to have some of its assumptions questioned and some of its limits stretched. It depends on what you like about an English breakfast, but for C.K., it must be served to you. A self-service buffet is out. You get that at the Holiday Inn. But after some jostling for service at the table we find that the only thing Monsieur Roux serves at the table is fried eggs – and then with no bcon. “You get that at the buffet, sir.”

Finally, we get the basics of breakfast sorted out and we get down to business. We’re both from the old British colonies. We both love South Africa, its wildlife and good wines. We both love India for its diversity and immense cultural richness. The conversation flows.

“Since you started in the 1970s, strategy has changed quite a bit,” I say. “What is it all about today?”
“Strategy is about folding the future into the present,” says C.K.

“There are no generic strategies – executives are constantly searching for new sources of competitive advantage. Strategies have to be unique. They have to invent new rules and new games. It’s all about discovering and creating wealth.” Clearly, he feels that often executives are locked into a mindset that does not break through routine strategic thinking.

A lot of that routine has evolved out of the 1970s, when strategy was conceived as being a “fit” between management’s aspirations and the resources available to them. Resource allocation seemed to be the name of the game. But a revolution was afoot. Sector incumbents such as Xerox, General Motors, Sears and NBC all found themselves challenged by new arrivals who thought differently about strategy. Suddenly, companies such as Toyota, CNN, Canon and Wal-Mart were reshaping the strategic discussion to one of “stretch” rather than “fit.” Having higher aspirations prodded management to discover ways of leveraging resources. Understanding one’s core competencies and products became essential.

M. Roux has not served the toast at our table yet and C.K.’s breakfast is getting cold. “If you look at the waiter,” he says, “he is absolutely charming and keeps smiling all the time. But what’s the point? If there is no efficiency in the system you are just creating unhappy customers.” In our case, there is no fit between M. Roux’s strategy and our desire for breakfast.

The waiter also happens to be of Indian descent. This gives us an opportunity to wander off the history of corporate strategic development and onto the challenges of Asia, China and India in particular. The day before, HSBC had announced the closure of its call centers in the United Kingdom and the opening of new ones in India.

“The problem of the discussion here in the UK,” confides C.K., “is that the implicit assumption is that this decision is only about cost, low labor costs. It’s not. The Indians have understood the call center business and are giving a much higher level of service than any local U.K. center can give. It’s not only the information they provide, the accent of the person who takes the call, the ability of that person to relate to the exact town or village where the call originates. It’s all about service quality.”

“The difference between India and China?” he continues, “It’s quite simple. China is basically copying Western technologies and supplying products that have already been identified as satisfying Western needs. India is also doing that, but it has the ability to identify and create new markets in the West for entirely new products. India is less and less likely to follow the Chinese trend. India will start to lead innovation; China doesn’t have that ability.”

Our smiling waiter returns with the toast. But the butter has not arrived. The waiter has also failed to bring milk for C.K.’s coffee. I have tea with lemon which avoids the milk problem, provided the lemon arrives.

We agree that the problem is not that the waiter doesn’t want to provide good service. The real problem is that the restaurant has a rigid bureaucratic system that is getting in the way.

On the subject of bureaucracy, C.K. suddenly says, “The university is like that. Take my new course on innovation. I wanted to demonstrate that innovation is not the sole right of companies in Silicon Valley, or California, or the States or even Europe. I wanted to show the extent of innovation that can be found in poor countries.”

“The concept was to send out 10 teams to gather material in poorer countries. The material would be used in a course we called ‘X,’ for lack of a better name. I had seen that a lot of innovation taking place in poor countries is often way ahead of that in the West. For example, prosthesis. The average artificial limb costs about $7,000 in the States. Yet in India, they are fitting limbs with more sophisticated technology for $30! How are they doing this? We have got a lot to learn.”

“But the problem is that university bureaucracy starts to get in the way,” he says. “It has difficulty with this type of project. Within days of airing the concept, we had 500 comments on problems we would encounter. At least 500! Not least of all, the budget was going to be prohibitive. But you know, once we started to improvise and operate outside of the system, we completed the whole thing for $15,000 compared to the university’s $200,000. And we’re turning out a book as well!”

Ten teams writing 10 case histories in 10 different Third World countries. Histories of real innovation. Exciting. The thing about C.K. is that he gives the aura of an in-depth understanding of what managers really face in having to implement a strategy, regardless of country. He combines being well-travelled with a deep insight into how companies operate. He speaks with authority on his favorite turnaround countries such as India, China and Brazil.

“The reality of it is, you can take one of these three countries or all three and if you can bring about change there you will have a major impact on how people live,” he says. “People say, ‘Yes, but what about Somalia?’ What about Somalia? It has 4 million people and focusing our attention there will not change anything in the world!”

As so the conversation proceeds. C.K. is not someone who sits still for a moment. His interests range far, wide and in-depth. He speaks with commitment and passion on many things. You start to feel that he is committed to unravelling complacency in his science: “I tell faculty, just because you wrote up a good theory doesn’t mean it will remain forever. A good thesis must always be questioned.”

He combines academic rigor with a passion to help company managers with their problems. He talks about flying every week to Philips in the Netherlands to try to understand how their business operates and how best to manage it. It’s all about (you guessed it) not best practice, but next practice. Looking for that next source of competitive advantage.

He speaks with a passion about students: “I teach on the MBA and my sessions there are sacrosanct, nothing comes between me and my MBA students. We use what we call the co-creating community – from session to session there is a dynamism based on what people have learned or need to learn after the last session. It calls for dexterity on the part of the professor and lots of humility as well. You suddenly find out how bright your students really are.”

As we stand up to leave, the restaurant manager races over to ask us if everything was okay.