well Carol thank you so much one thing though she didn't mention it was exciting to see Martha last night wasn't it you know I love entrepreneurs and I've got this kind of sandy blonde hair and glasses and so what a lot of folks don't know is I'm actually the secret love child of both Bill Gates and Martha Stewart and I think you're gonna be able to see it right there so we all have our secrets that we keep that's mine you know here's why we're here to talk about it it's interesting statistic 11,000 startups every hour in the world so we're not hurting for new companies the real challenge is how do we get these ones to scale up and I think it's not really an issue of industry do a lot to make a lot of fun of how the the automobile would displace the horse yet I find it interesting the equina industry is alive and well at over 300 billion around the planet we just kind of transferred from transportation to entertainment it's a little bit like the movie theaters we're supposed to go out of business with Netflix and so I don't think it's an industry problem that any of you have in here it's always a leadership problem and so that's really what we want to talk about here for a few minutes there is the actual value I love this photo by the way I think that's how man and machine and ultimately working together as well and it was interesting I'm gonna come back to Scott Scott was one of her early clients he's the new Unicorn down in Australia he and his partner took at lassie in public for 4.2 billion they still held 70% of the company when they went public they didn't give it all the way as a tech firm and I just checked last night here 24 months later they're at 15 billion in market caps so they've pretty much done a 4x and what they were clear when they were going through our tools is that's ultimately what it takes is both discipline and focus which is part of what I want to talk about here but also I think's interesting not only did scott and his partner get stinking filthy rich but they really had an opportunity to make an impact on today about 2,300 employees they've consistently been named one of the very best places to work in australia and now that they've got a significant work force here in United States they've been in the top five list consistently here as well so I think what's neat is we can do well financially and we can also do well by our employees along the way here's the latest unicorn there in the UK Splash Damage and our coach was walking up to Paul wedge woods car and he saw there in the back of a copy of my book and so if you've got to take nothing else from the presentation I want you to equate scaling up equals Ferrari all right so that that's where we're headed and this is what I want to talk about the topic that we decided were what are the real barriers to scaling up and they're really three you know first it's right between our ears number two it's how do we handle this kind of a scalable infrastructure we need to put in place the second bigot issue between companies ten million to a billion according to Tom Stewart at the middle Market Center at Ohio State is the digitization of our firms and I want to kind of come back to that and then number three is really marketing effectiveness and I want to I want to start there I just want to be really practical the fundamental barrier to scaling from a functional perspective is marketing separate from sales that a really quick question how many of you have what you feel is a robust marketing department separate from sales I do want to see a show of hands good and it also involves some very practical which is a one-hour marketing meeting separate from sales now what are we going to be working on during that well I really have been a fan of Ogilvy's kind of pivot away from what are the four PS of marketing product price place and promotion and look my view is marketing strategy equals strategy and I'll he goes by accident the late Steve Jobs the only function Steve headed up was the marketing function Tim Cook handled everything else and he ran a three hour marketing meeting every Wednesday afternoon now instead of these though four p's would oh the leaves done has updated them to these four E's and we saw for instance one of the things that that Steve obsessed on was it wasn't just the product or service but it was the entire experience look they obsessed even about the Bob being a great experience for the customer we've got a client Dwight Cooper that really obsessed about making sure that the the invoice was a great experience for the payables clerk so the 150 hospitals that were holding his cast hot his cash hostage would take that invoice from the bottom of the pile and put it to the top of the pile never represented about two million in just additional cash flow because he made every touchpoint within his company a great experience but what I want to do is I want to focus on one area that I feel we are absolutely ignoring as leaders and that is the area of price it's interesting between World War two and 2007 the Great Recession there was absolutely more demand than there was supply and so I don't take anything away from your companies but if you could just show up and deliver you got the business and we all spent time running around the planet in managing our supply chain could we just do it better faster cheaper the pivot occurred in 2007 mainly because of the internet and what's happened with the middle class exploding around the planet we now for the first time in 50 years have more supply than demand in every single industry think about it u.s. is now in that exporter of energy and as a result we as leaders have got to make the most significant pivot we've ever had to make in business and that is for spending 80 percent of our week on the supply side of our business our head into if you would the cost side and now we need to be spending 80% of it on the price side and real quick show hands how many you've actually taken a course read a book on strategic pricing good because that's where the future is just just think about Amazon we've got the second wealthiest individual on the planet Jeff Bezos next to President Putin and that's a joke but not really and how often first let's start here how often does price change on Amazon all the time yet the retailer's competing with them are setting a price with a sticker and the only time they make that change is when they want to try to give it away there was a head of one of the major airlines look that industry has been absolutely devastated from proper perspective for decades has had a record for years and as one of the heads of a CEO of one of the major companies said look if I've got 1500 people between two routes and I've only had 1200 different prices we've screwed up 300 times this executive program which I'll be teaching in tomorrow up at MIT we had the reunion class last year and one of the CEOs came in his business of business since look we have this piece of software that absolutely solves this major problem for a large company we charge 30 grand for and we can't sell one of them so he said I went out and talked to the customers and I said look you guys have this major problem they go yeah we have this elegant solution it looks like that why aren't you buying it they said because it's only 30,000 there's no way that we trust that you're gonna be here to support it for something that this mission-critical when we've got 10x that budgeted so what did he do very simply 10x the price and now he can hardly support as fast as he's selling this solution why are we such idiots when it comes to pricing why is it because we're selling to people and there was this guy Richard Thaler who just won a Nobel Prize of all things in economics for discovering that human beings are not rational so the father of Influence robert sheldon he just looked at a really fun experiment let's take a restaurant they got a list of why's they typically move from low price to high price and all they did was switch the order of the wines from highest to low didn't change the price didn't change a wine and they generated 25 26 % more revenue then they anchored it with a really really expensive bottle of wine and they drove up revenue 250 percent it's not rational and that's why we mess it up so I just want to recommend a quick book this is the Guru he's a German his consultancy is the largest in the world and the pricing space he finally wrote a book called confessions of the pricy man what I want you to do is I want you to go in there and read about the London Olympic case study what's interesting Rio lost two billion plus dollars London four years earlier generated more revenue than the previous three Olympics combined and a big part of it was their unique pricing strategy what I want you to realize is if you want to be different but you're pricing the same as everyone else you're not different and so upping our game in this particular space as a component of marketing I think's one of the most important decisions you in this room need to get become a part of and spending a lot more time on number two scalable infrastructure this is how this is what crushes you complexity as you arithmetically add human beings you geometrically increase the complexity one of the things that we know is that the average size of an effective team is about four point six it's five there's a reason why our Special Forces teams are limited to four to five troops not eight or nine it's one of the things we also understand in nature through this program that I co-chair and Panama called Geo versity and so here's the here's the second significant pivot we're needing to make form and function mere each other see last century we did back work we did muscle work and so it made sense that we built organizational structures that mirrored our skeletal system upon which we put our muscles it's fun I think we've got some alternative organizational structures if any of you guys recognize some of these challenges with human beings the secret resentment well some of this isn't quite appropriate I love this one chief idea killer director of analysis paralysis look manager new growth ideas that's absolutely vacant over there we've even seen that it's always been personality driven one of my favorite charts from Silicon Valley but the reality is this we have moved from our backs to our brains and if our organizational structure doesn't Muir that that's what's gonna get you stuck scaling in the 21st century and so this is how it starts you guys remember the early days right it was a team of you in a room and then all of a sudden sales wanted their own office and the county needed quiet and then you needed to open up space so you're close to customers and then you begin to organize around product groups and other things and you saw Martha talk about it last night and some of the other changes and that interesting enough is the organizational chart of the 21st century and what is it mirror it mirrors our brain so what we've got to do is we've got a pivot from a skeletal like traditional structure to one that is much more agile now is this just theory so I want to recommend a couple of resources this is a Belgian this book reinventing organizations I think it's the most important book written this century so far skip the forward it's absolutely terrible part one will bore you to tears but part two I want you to go there and read it first and you're gonna read about companies like Spotify that have organized around teams as opposed to traditional structure and I want you to read about this health care organization named boots arm that's now come to the United States started ten years ago they have 14,000 nurses today and growing they have some of the highest patient satisfaction nurse satisfaction and the entire organization of 14,000 nurses has 15 people at HQ at headquarters no middle-management whatsoever and just eighteen coaches they kind of travel around to make sure that these teams of nurses structured like that are able to do their job just report it out this Chinese can't do this in the east this is one of the largest Chinese white good manufacturers in the world they just made a significant decision with their 74,000 employees they just eliminated all 10,000 middle managers nobody once managed in the 21st century anyway but they do need coached and what they've done is they've organized those 74,000 employees into four thousand teams micro-enterprise errs moving forward by the way what does that lair cost you about 30% of your revenue and this is where you've got a real opportunity to gain margin out in the marketplace and so one of the guys that I entered I invited here on I think you asked a question you want to stand up Ron loved it Ron just came out with an outstanding book most CEOs that write books honestly they're really not that good and so Ron's been begging me to read it and so over holiday last weekend in Barcelona I took a look at it and Ron did just this he built out a Canada a private security firm of 1,500 employees became one of the best in the industry for the movie industry and all of those and Ron he got rid of all the middle managers you were able then to take and take that compensation and up it for the folks at the front line and many of the other kind of things that we're talking about in terms of a modern organization he was able to put into place and so I would encourage you if there's only one book you can read coming out of my particular presentation its grabbed Ron's new book outrageous empowerment again stand up Ron make sure they catch you at break and he sold the thing in an industry that sells for three to five times earnings for twenty four times earnings because of the give him a hand because of the kind of culture that he was actually able to build one of the other things he did is he outlawed as I had suggested to my trends article a year ago it's time to literally get rid of the word manager and he pivoted those folks into coaches within the organization and so that's the model I think for all of us in this particular room and it was the same thing that Stanley McChrystal had to do in order to get us turned around in the Iraqi war is get rid of the middle and empower the frontline teams of 6,000 in order to be able to get on top of an enemy that was driven today by really no centralized leadership and social media which is precisely who every one of us is competing against here in the 21st century that's why I come back to it Lassie why is Scots stock gone from 4.2 billion to 15 billion in about 30 months because they build the technology that allows us to create the corporate wiki look the reality is if any of us get sick we go to dr. Google first and what they did at Boots Argus create dr. Google across there 14,000 nurses so the 24/7 if I've got a particular question flaw to me question I can go to that internal Wikipedia the collective intelligence of everybody in that organization and get the answer in nanoseconds not worry about finding an expert someplace who might be busy this weekend and so it's a technological change that must occur with this organizational change and Google has been doing a lot of the research around how to make this effective last is leadership development as we wrap up here with three minutes in my second book I featured what I thought was one of the greatest business decisions one that Bill Gates made and that was to institute what he called us think week I want you to I want you to ponder that this is a technology company 42 years old that is still one of the top five market cap companies on the planet up against the youngins the Amazons the googles and the Facebook's and the key is that they have focused on one thing how do we as leaders remain relevant and how do we keep our companies relevant and so one of the things Bill did because he had the same pile I've just piled on and he had his Tower of guilt as he would take a week twice a year and for 18 hours a day seven days straight his record a hundred and twelve books manuscripts PhD theses and white papers because he knows that nothing creative can come out of this operating system you don't put in first and so he piled it in a habit that Mark Zuckerberg is now copying Eric Schmidt when we interviewed him on stage as he was trying to help because he was helping the Google boy scale he said what was the key we asked him what was the key and he said to shut his BlackBerry off every weekend I read a book or two we hosted Mark Cuban I've known mark since his early days as an IT guy in Dallas early involved in ACE and white yeah I didn't realize though till I read his book that scent age 20 his critical habit is three hours of reading every day and all he's looking for is one idea to help one of the hundred and fifty plus companies he's invested in her own moving forward Mark Zuckerberg obviously started the same habit as Bill Gates bill reads about 50 books a year he publishes them every year marks about half that and he puts the list out as well but I thought this was interesting on the 50th anniversary we were talking about Warren last night and this morning on the 50th anniversary of Bookshare Hathaway they asked this partner Charlie Munger all right come on be straight with us how's Warren done it how's he beat the market by a factor of 10 for 50 years and Charlie didn't hesitate he said it's Warren's first first priority to reserve much time for quiet reading and thinking even with this advanced age that he's in he is about 5,500 pages of morning and so our view is if you want a 10x your company's it's fairly simple formula you've got a 10x to the knowledge and you heard that from McKinsey and others about how we've really got to begin to develop our people if you're not literally focused on 10 xìng the knowledge of everyone else in your organization that's gonna be the constraint moving up and so I want to kind of finish I had a really tough decision to make my first book Tom Peters the guy who created the genre business books that we read today dear friend of mine was kind enough to endorse my first book Jim Collins wrote foreword for the second book one of the other icons of business and a dear friend so who was I gonna put on the cover of my latest book and I chose one of my early students he went to Poland and opened up the very first Pizza Hut when the wall came down the Iron Curtain came down and let's before today the 25th anniversary of his company this year I just saw him at a Russia University a few weeks ago still a major client of ours 38,000 employees over 1,600 restaurants 16 countries he's now the largest European owner of restaurants in the world from Russia to China to Spain where I just hung eight years and what's interesting just finished a 12-year study and in terms of performance his crushed number two by almost a factor of two across all the other restaurant owners across the European continent and it was interesting when we hosted Henry in front of his thousand restaurant plus managers at their at their anniversary said some very profound profound I thought we're more a training company than a restaurant company and that's why we've done what we've done with this kind of front line workforce not the kind we're looking at the googles Facebook's and elsewhere and so I wrap with this this final thought you know Steve and I had the privilege to host his first public speech when he was fired from Apple and I've obviously followed his career since rest his soul and was interesting in the wilderness years he learned focus you know when is that Pixar he found the power of having just one thing which was Toy Story and so when he got back to Apple he got him out of a whole bunch of other stuff and said we're gonna do the same thing one hit every two years so he did the iPod than he did the iPhone than they did the iPad and look there was no fooling Steve he knew he was dying and he had to choose his final 24 month project what are you gonna choose to focus on if you want to make sure that your baby not only survives but thrives when you're gone and what was that final project that he spent his time on but Apple University and he really understood that it's not just Tim Cook that's gonna make sure that the company moves forward now the largest market cap company on the planet by over a factor three since he passed away but it was going to require everyone all 250,000 plus employees to be able to do that and so there it is the three barriers first thank you for being here this is why this is put on and so we can continue to fill you up between your ears and give you that idea that you might be able to use today or 10 years from now number two it's a revolution is upon us it requires technology to drive these new organizational structures and number three get serious about marketing particularly price there's the book thank you so much for the opportunity to share [Applause]
