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“You Have To Walk The Talk”: Hiro Takeuchi

The Harvard professor riffs on why your belief system is fundamental to your business.

“You Have To Walk The Talk”: Hiro Takeuchi
Harvard Business School [Photo: Brent Lewin, Bloomberg, Getty Images]

Listening to Hiro Takeuchi talk, it’s like talking to a voice from the future. “The world is in flux,” he says, “and the only constant is the drastic change that is coming.” Takeuchi is a professor at Harvard Business School, though during our conversation he is in Japan, on a summer hiatus. “We live in an era where discontinuity is the only constant,” he says. “The good old days are gone.”

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Takeuchi teaches an HBS course focused on what he calls “knowledge based strategy,” a topic he and research partner Jiro Nonaka at Hitotsubashi University will address in a book due out next year. Their theories focus on the human element in business, and the contextual importance of mission, values, and vision.

“Why do firms differ” Takeuchi asks. “My experience is that they envision different futures.” And those futures are imagined by the distinct individuals who lead those enterprises. “What kind of future do you want to create?” he asks. “That to a large extent relies on your belief system. I use the term ‘tacit knowledge,’ to refer to this. It includes instinct and intuition. When you ask yourself, why does my firm exist, you are envisioning the society you want to create, 10 years from now, 20 years from now. A lot of entrepreneurs have very different visions in mind. It is not just Grameen Bank engaging in bottom-of-the-pyramid investments. You can look at Whole Foods, certainly not serving the bottom of the pyramid, but they see a future that they want to create. It is very idealistic but at the same time very practical.”

Hiro Takeuchi

“There is nothing mushy about this. It is pure strategy. Traditional approaches often stress an outside-in approach to strategy: you look at the industry, the competition, the marketplace environment to decide what your competitive advantage should be. But you can also put your mission, your values at the core and approach strategy as an inside-out process. The beliefs and ideals of management become the core strategy. Consultants can argue that strategy comes from big data and information, but for entrepreneurs, it really comes from the heart. Steve Jobs relied on his intuition and passion. These things are critical.”

Takeuchi’s perspective is nothing less than an assault on longstanding business assumptions, but it is a perspective that is increasingly evident in the business world. “The problem with tacit knowledge at the center of your firm,” he says, “is that it is very difficult to articulate. A lot of firms use metaphor or tell stories, rather than rely on a fixed set of words. If you have bland mission statement, it doesn’t resonate.” (He points to Walt Disney’s original mission as a perfect embodiment: to create universal, timeless family entertainment.)

“Some statements are like a page long. It has to come from deep convictions.”

There’s a difference, he notes, between mission and values. “A mission statement is fundamental. Values are something you build over a long period of time. You either practice those values every day, or you don’t. You have to walk the talk. Some firms bring in consultants to come up with catchy words, but don’t practice that.”

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Takeuchi is a believer in the virtues of phroensis, as originally laid out by Aristotle. “You’ve got to do things for the common good, and make judgments for the here and now.” He talks about rugby as an analogy, the idea of the scrum–taken up by software developers in recent years as a metaphor for the unscripted nature of business today. “Rugby is not a straightforward, linear game. The ball bounces back and forth and you never know where it’s going to go.”

“I’m a firm believer in serendipity,” he says. “This is very different from what Michael Porter used to say, that continuity in strategy is key, stability is key.” He notes the example of 7-Eleven’s operations in Japan, where local outlets make judgments about what items to stock and promote based on what’s going on in their area. “They make the judgment call about whether it’s going to rain or there’s an event in a park nearby. You can’t feed that into a computer.”

As for the topic of pivoting–the in-vogue Silicon Valley phrase for radically altering a business plan–“the reality is that sometimes firms have to change mission. There is nothing stronger to believe in than reality. The problem with a lot of economists is when they see a gap between reality and theory, they think there’s a problem with reality. People get blinded to the reality of a situation. That’s why people in the front lines often make better judgment calls. The front line is ever changing. You have to have goals, big picture aspirations of the future, and then match that with reality. It is a dialectic world. Paradox is a way of life. How do you manage opposites? There are no fixed ways. If you see opposite extremes, you don’t compromise in the middle, you find a synthesis at a higher level.”

About the author

Robert Safian is editor and managing director of the award-winning monthly business magazine Fast Company. He oversees all editorial operations, in print and online, and plays a key role in guiding the magazine's advertising, marketing, and circulation efforts.

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