410 Ram Charan on Leading When Uncertainty Is Permanent: Strategy, Execution, and AI as the New Business Model

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Mahan: [00:00:00] Ram Charan welcome back to Partnering Leadership. I am absolutely thrilled to have you back with me.

Ram Charan: Thank you, Mahan. It's an honor to be on your show, but more importantly, you ask the most incisive questions, brings the best out of me, and I hope the audience will benefit from our conversation.

Mahan: I have no doubt Ram the audience will benefit our last conversation, which was my episode 66, now I'm past 400, was on your book Rethinking Competitive Advantage. A lot has happened since then. That's still a brilliance episode where you shared your thoughts. But I'm glad to have you back to get some more of your in.

Sites on what's happening in the world now. But before we get to that ram, I am incredibly impressed with the fact that you continue churning [00:01:00] out cutting edge insights, whether it is on organizational leadership or ai, which will get to later on. , What continues to drive you. 

Ram Charan: There is a fundamental and a universal law.

And that is a learning must continue.  We must feed the brain and the mind with new knowledge and the mind integrates, it gets insight. And this is the foundation of all ai. So my mission personally is to learn as much as I can. And convert that into something useful. That's what I live for. 

Mahan: It shows with the clarity that you communicate messages, ram,

you are very clear and insightful in the way you share things. Now, one of the points that you have been emphasizing a [00:02:00] lot over the past few years is that this uncertainty is permanent.

Ram Charan: Absolutely. The key point is the question should would ask, , how do we catch the signals of uncertainty? Who creates it? How does it get created? Do I do a better job? Finding the signals, connecting the signals, predicting the signals and how they compose what's coming, the uncertainty. So there is another fundamental rule and universal truth, and there is the seeds of uncertainty, our embedded in the actions of today.

Find those today. . . Our mind does it. That's how the Bayesian [00:03:00] theory in AI was invented. Our mind is a born basin, and that's how in 1762, the inventor put that as a totally correct and violate. Mathematical equation. So we don't use the word Ian because it's a jargon, but we know that Southern Mind does.

Mahan: Ram. That is such a brilliant point when it comes to thinking about organizational strategy, and I want to spend a little more time on that before going to AI's Yeah. Implications.  . You are mentioning that the seeds of that uncertainty are there to today, so if you are willing. To look, you will see those seeds and therefore their impacts.

Along with that, you also focus on the [00:04:00] importance of building resilience into strategy, and I wonder with you advise top CEOs and have for decades around the globe, as they think about organizational strategy, how do you advise them to actually build that resilience into their  strategy and strategic thinking?

Ram Charan:  Mahan, you gotta have two things at the same time. Resilience and ability to adjust. They're called agility. I don't use that word, resilience, to be able to withstand shocks.

So we are gonna say, how are you prepared? To withstand shocks and at the same time, able to make adjustment change. There are some internal changes that can harmful, but let's stay with the external change. So now it's the ability inside to [00:05:00] do both. It's not one or the other. So it starts first is the, the culture at the top team, because does at the ground level.

If the top team have altogether, let us say 12 people. The CEO and 11 others, some have 10, excuse me, some have 12, some have 15, but let us keep it 12. I just picked up the number out of this team Prepare prepared to absorb shock. Prepared adjustments have to go to reassign people adjustments, to break old partnership and start new ones. They need [00:06:00] to do the rehearsals. They should think about what are the possible adversities and possible new opportunities they see. And then say, what is the rehearsal? We do all the sports that compete, do rehearsals. We now have China doing war games. America is doing war games. They're all prepared. They would both have resilience and adjustment. Why not? In business? You get the top 12 people to do that. Don't worry about the rest of the organization.

It'll happen. The problem is they need to do that. 

Does that make sense to you? 

Mahan: I Ram it's such a brilliant point, however, so infrequently practiced where over facilitated, I've observed lots of strategic [00:07:00] planning and strategic thinking. And it doesn't go to the level where you are talking about the practice of assuming the difference uh, disruptions that can happen, and therefore having the leadership team have to adjust in real time in the war in the playing four.

Uh, scenario planning in a way that actually makes it more real for them nimble. 

Ram Charan: my career, I have met one man. I know he does it. He turned forward around Alan Mulally. He built 7, 7, 7. Never heard any complaint. He practiced that art with his team, both at Boeing as well at Ford.

He is my model, my idol ideal, [00:08:00] who actually has done it and shown results, and that's what the future leaders They need to learn how to do that. They need to have humility. They need to have power. They need to select the right team because the only answer for uncertainty is looking and opportunities and adjusting.

My second hero is the CEO of General Atlantic Bill Ford. He has done it. I've seen him do it, and he's very quiet. You will never see him in the press. And General Electric, the private equity firm, I believe it's a brilliant firm,

so I've known two CEOs who practice this art. You see, it's not just resilience, it's not just. The, the, the, [00:09:00] the adjustment. It is seizing new opportunities that required adjustment too. 

Mahan: Now, R Ram, why do you think you are operating at a very high level with a lot of these top CEOs and executives? which is where lots of organizations, uh, still fall how do you see it as helping transform organizations? 

Ram Charan: Yeah. Let Putting them in effect. And how do you do that now in the exponential growth? Today, the legacy companies have no choice, but learn how to have AI as a part of the strategy.

AI first, people don't understand it. Second, there And third, [00:10:00] there is no training they're getting where somebody take 'em through with illustrations that how AI embedment causes exponential growth, both in margin and in revenue. At the same time, you have a differentiation because AI enables you to be really, really creating a better experience for the customers, or people call it customer centric personalization to a customer, and measuring the experience of the customer, engaging the customer in dialogue, gathering the data.

Creating a repeat purchase. Increasing the revenue at lower cost cannot be done without ai. Every business has a customer. No customer, no business [00:11:00] Ute.

These are exact steps. When I was in the shoe shop at the Local town. I would take four pair of shoes on the bicycle, go to people's homes, fit them in, get them one to buy, take three back. Knew their names, knew the size of their feet. As you know, in my days in India, families, ladies that didn't come to the shops, we have to go to the homes. It was personalization. Today have technology that can do that.

Mahan: That's going to be so transformative. Now, one of the is that this is exactly one of the things I know my execution, which I think is one of the best books ever written out there.

As I've mentioned, so [00:12:00] many it and immersing yourself into in it, you are not riding the intelligence and the insights you had even five years ago, let alone 10 20. As relevant as they still are, you on staying on the cutting edge.

Ram Charan: We have to learn, we have to see, and again, look at the seeds in the present. That gives you a hint what's coming. Same thing about ai. It's moving very fast. There are so many people in the world are engaged to take it forward faster and we need to learn. I'm behind because the people who are doing are fast and they come up, they, they publicize that how open ai, how Gen 

Mahan: go on that offense, you continue to emphasize the importance of talent, and I think you're mentioning Ram, that talent [00:13:00] now is even more important, including to that AI success for organizations than before.

You say no talent, no numbers. That's right. 

Ram Charan: Absolutely right. Nothing overcomes the wrong fit between the talent and the job. Unless you change the job, you weren't going to change the talent.

Now you look at it, 12 people, the top, that's the engine. You have one critical person wrong. The whole team will suffer.

Sports football, you have one person wrong. The whole team suffers [00:14:00] baseball, basketball. These are century old sports. Why not in business? 

Mahan: So why is the drum? I find so many organizations, including boards of directors, as they contract out with some of the top global search firms in the world, they interview top candidates to personality profiling all kinds of testing.

They end up selecting the wrong people. To become the CEOI. I do want to mention you've spent a lot of time with corporate boards in 2024. Among your many honors that you've received over the years, you received the greatest impact on corporate boards award? 

Ram Charan: I did. Yeah. 

Mahan: Thank you. So you, you know, a thing or two about corporate [00:15:00] boards, but why is it that these smart people. End up such horrible decisions in picking the one talent. Every talent. Every role is important, but the one person that has the most impact and influence on the organization's success. 

Ram Charan: Absolutely. 

Sii until about, say seven, eight years ago, the boards really did not pick the CEO, the CEO basically.

Figured out a way who should be the successor. I've gone through those personally and, and the boards go along because the boards in the publicly held companies, they meet four times a year, six year. It's not the boards people need to understand this is two directors, maximum three, who carry the ball.

The rest of the board does not. [00:16:00] They're trying to do their best, which between is, and so that's why they rely heavily on these search firms. Search firms, many of them are good. They develop experience over time. The search firms have the disadvantage of not knowing the intricacies of the context of the company at the time.

It's very high level. It's not a specific, and that's why decisions, because the, the, the, the, question they ask give us the best is the wrong question. They produce a job description in three pages. It's the wrong thing. Nobody can meet all the three pages. So here in the job description, you gotta say, [00:17:00] other than the normal things, character, honesty, et cetera, energy, et cetera, what is it that this company needs now, and will the person be able to do that or shape it?

Do it. That part is missing. The second part about that, the get the best person. It is getting the best fit. So, and I've done CEO selection, many countries, I'm able to show to the candidate this job is not for you, right in front of him. And he thanks you. I said, you are the CEO candidate.

But in this job. You decide, I give you the facts, would you love it? He said, hell no.

So wrong question. [00:18:00] Wrong answer. So we have had many examples where a gross guy went to a company that was struggling and he couldn't do it, and the company went bankrupt. It was no fit. He went to a different industry.

Have plenty of those examples both ways. The idea here is don't say best candidate. First. Define in the context the company is. What is the non-negotiable thing? This person has to carry it out. And then this person, what is the right fit? 

Mahan: It is incredible that advice that you give is essential in all roles. Most especially in the CEO role. A lot of times people don't look at the fit of the [00:19:00] individual within the dynamics of the team. Or the organization. But the other thing that you mentioned that I also see quite often is that there's a lot of focus, primarily on past performance.

Therefore, the board and the search firms are looking for someone who's past performance. I, they might be successful in this role. You advocate looking at it slightly differently because past performance could have come from a more established world. Would love to understand. If you are not looking at past performance, then what 

Ram Charan: when you're recruiting from somebody else, the thing is that. He or she in the other company has been molded by the context of that company.[00:20:00] 

And if he is great, why would that company let him out in the first place? So I had an incident about six months ago in India. I was invited by a very big man. They were having a 500 meeting people meeting this big theater private, in the second row right in front within 20 feet, finance minister is going to sit.

There is an aisle. On my left is the billionaire who built Flipkart, and then on his left there's an empty chair and then there is aisle. So a tall fellow came, sat down in the empty chair. He saw me, came towards me, Very, Very, nice things. came to company a 20 years ago and I learned a lot from you. Then he went to company B. [00:21:00] came there too. And I learned a lot more. He told me things and he said, I'm now a CEO of one of the largest companies in India. So I thanked him and all that. Then I reflected and I said, why did the first company let him out? Why did they not see it? Look for what it could do. He could do, she could do. Now, the first company, CEO, founder, is still my friend. He didn't, he didn't even Second company had gone bad times. All the three are different industries. So you recognize talent early, what could they do? So now when I'm doing some work in companies and I meet people, I say, this is good what you've done, tell me. What love to do in the future, what could you do? [00:22:00] What is it your capacity not using it?

Andy. Jesse in, uh, in, uh, Amazon does that, and that's how they upgrade the people. 

Mahan: Now, see on that? 

Ram Charan: I see the, the key point is. How AI expands your capacity and capability. It's not automation. Yes, it does. it expand my imagination? Do I know how to use it for my imagination? We will have AI that will have logical reasoning built into ai, into cell phone, logical reasoning, [00:23:00] beyond three variables. Most human beings cannot do so now with more data. More judgment from our side outside your They will all get processed and they give you options you never thought about.

That is exponentially increasing your capability to make decisions. That's what AI ought to be. Some people do that. Very few of them, they're not yet. Trained or keen about this.

Mahan: It becomes such an incredible lever for humanity and for the individuals who know how to augment and how to think [00:24:00] creatively with it. Have you seen any organizations ram that, in your view, get it with respect to AI and talent and are leading the way on that? 

Ram Charan: Well, it's well known, uh, native companies like Meta. He is doing that. He is running a business. He's changing it. I think Andy, Jesse is doing that. He is native to it even though they sell hard stuff. I see changes in Uber. Data is doing that is shifting the company. I see portions and Walmart beginning to happen. I think Doug Len gets it, but he's building people around him who have come from native companies. His HR person came from Adobe. He just got a new guy last week from Instacart. He's [00:25:00] building this stuff around who have come from native AI companies.

Their starts changing Walmart. I think Krish, IBM gets it.

Uh, I think, uh, Bob and Amgen gets it. 

Mahan: These are, These are, These are, outstanding examples and I appreciate you sharing those. Ram. You mentioned Anan Krishna at um, IBM. I do have one sidetrack question. By the 

Ram Charan: way. Let me interrupt. India, Madani gets it. He is a high school drop. And a big, bold thinker and So those who want to, they can do it.

A high school dropout. Think about that for a minute. S. Why not? [00:26:00] That was then, but he is learning, driving, investing tons of money and succeeding. He gets it. 

Mahan: So these CEOs get it on the ai Um, the side question from my perspective has been, I've been, fascinated over past half a dozen years or so about the fact that quite a few of the very successful CEOs disproportionately to the number of some of these top companies are. Indian born Indian Americans.

Whether you look you a whole list of other companies, Googles of the world, do you think there are just by A bunch of these top CEOs disproportionately have an Indian [00:27:00] origin or education. 

Ram Charan: So Mohan Goba to the sixties, seventies Indians, same origin, did not get there.

These guys are the third generation I think, that earned their way to get there.

There were cultural impediments. Their ego, we know the answers you don't. You speak too fast. Not understood, high ego, but they knew the answers better than others. All that has changed. These people came through the lower ranks. Understood it. They got farted out who couldn't change. Those who could change and say we work differently in the leadership jobs, [00:28:00] almost all of them were the cream of India competing gold medalist number one in the class.

So they earned it. Yes, there are cultural things. A number of these people are better in the connecting the dots regarding numbers. I don't use a calculator ever or computer in the boardrooms and I'm a chairman here and there. I do all that in the head. We are trained that way. They come from gura, from up. from their early childhood that they can connect numbers better than most people on planet. They're very good at it,

and business [00:29:00] is numbers

Mahan: in addition to numbers. Rah, you connect. Concepts, you connect realities better than others, which is part of what helps when you are the voice of what's happening in leadership and where it's headed. So we'd love to know when you are looking at leadership right now in organizations. What is something that gives you hope about where we are headed with respect to leadership?

And what do you think still needs to change for our leaders, CEOs, executives, in order for us to be able to tap into the potential ahead? You see, 

Ram Charan: Mohan, the future does not come from future leaders. Shape the future. [00:30:00] So leadership of a corporation is shaping the future.

Those who cannot, they won't survive. So that mission has never changed.

Future of the company, future of the industry, even future of the nation is Steve Jobs was one who shaped the future of the world. He may not have known at that time,

and people through classical description. Will never call him. A CEO will never call him a leader 'cause he [00:31:00] doesn't fit before his success. If he said it to, to the search firms, I don't think he'll make it. Is Jeff Bezos. I don't think he'll make it. So it is the native, it is It is looking forward and say, as a CEO, we shape the future of a company, of a industry, of a nation.

Right or wrong, president Trump is reshaping the global order. It's in response to President. She's ahead of time shaping the future order, [00:32:00] and there is a contest. I will be writing report. Uh, people have not yet captured it. Certain things have happened this and now Trump's, I'll show you, has shown the brilliance in India strategy going forward, watch, huge growth coming. All the pieces are in place. They have not been together. Totally brilliant. FDR did in depression. Trump has figured out and moving ahead against a very, very, uh, um, contestant from China. Now, species are in place and they're being executed, become more clear to the people in about six months. [00:33:00] Shaping that future is real. He is done it had write papers, negotiate the state department security, so on and so on.

There are five people who done it, a strong team of five people in time. He comes because America was in a great financial difficulty. This is all going to be our out. He got it right.

Mahan: And you have mentioned. The uh, relationship with China and China's future in some of your writing Ram would love your thoughts to, for you to complete, you mentioned the US order. How will US China relationship, uh, [00:34:00] matter in this situation? Yeah, 

Ram Charan: so Mohan book is in November. I'm just completing it. The title is China Assault. It stop, its March. Trump has figured out, it's moving. if you put yourself in Chinese shoes, president Xi has a brilliant strategy, a very clear goal, and that is destroying. The industrial capability of the West. He has done that for 10 industries. Next 10 are under targets. designed that way. I believe Mr. Trump understands that and is taking actions about it.

It's much more than that, that, the destruction of the west. The invest capability to fight has been systematically destroyed. [00:35:00] Now all what Trump is doing is going to restore it. Pieces are in place and he has flexibility. If the other counterparty does not implement, he will be able to get them to do it. Everybody, PPO, tariff, they don't understand they were living in the past. Tariff is the only way so far anybody can figure out to remove the currency disparity we have suffered where all, every single country has devalued their currency.

China, late nineties, four 50 to a dollar. Seven 30. Now, there is no way you can compete unless you bring that party together. Trump figured that out.

Economists have not. All the previous presidents [00:36:00] have not, state Department has not any pushing his way through and got getting there. Japan 2012, which used to be 78, it went to 160. It's 140. It put 15% so that 140 goes again to 120. You can now play the game that's happening right now. 

Mahan: What a brilliant breakdown of what is happening and. wait along with the audience to read your book when it comes out. There is one thing you said about leaders, that they shape the future. 

Ram Charan: Yes. 

Mahan: I can say on behalf of myself and countless others, whether it is the CEO you ran into. [00:37:00] In the conference or in the small meeting, 500 people auditorium in India. The many listeners of podcasts including mine, the people that have read your 30 plus outstanding books and the many articles. You shape and through their thinking you shape the future. So, so appreciative of the insights you have so selflessly shared for so many years. Ram the example that you, with your own ongoing learning and. Your humility, which can serve as an example for all of us. What an absolute incredible joy Ram Charan to continue learning from you. Thank you so very much for joining me in [00:38:00] this partnering leadership conversation. 

Ram Charan: Mahan, thank you. I'm honored to be with you and you reinforce my mission. I continue to learn. Thank you. 

Mahan: Thank you Ram Ram before I hang up. That's the end of the podcast conversation. Absolutely an incredible joy. Interestingly, as a side note, we do live in the US in sort of a divided world where people don't have the cognitive flexibility