The Invincible Company - Rita McGrath & Alexander Osterwalder Friday Fireside Chat

[Music] that's salutely delighted to welcome everyone my name is Rita McGrath and I'm a professor at Columbia Business School among many other things and a dear friend of Alex Osterwalder and his co-author eke tenure and today we're here to talk about their new book the invincible company which launches officially April 14th but like so many other things that are happening in our world right now we have no idea what it's actually going to find its way into the world a few housekeeping things this webinar is being recorded so just bear that in mind as you think about anything you might want to say I'll be doing my best to keep up with the chat and with the Q&A will preserve those so if you have questions we can't get to during the webinar we'll try to capture them after after we close there's the active chat room and you can easily ask us questions make comments we're very flexible the format for today is quite informal we don't have formal presentation we might have some visual illustrations bit of mystery we'll see about that so I think that's all we need to do in the way of setup so the the book the invincible company is one of a series of books that Alex and Eve and their colleagues have been putting together beginning of course with the very famous business model book which really sort of kicked off this whole motion towards visual books and visual clarity and I guess my first question for you Alex C would be when you embarked on that book which was as I understood a crowdsourced product with you know lots of input from lots of different places did you have any inkling that it might create such an impression oh absolutely we knew exactly of course not so you know I remember I remember when Eve and I were sitting at the University of Lausanne having lunch and we sketched out we said we're gonna write down a number you know what would success look like and the number we put down as we said 50,000 books and we didn't know back then that even 50,000 books is really really hard right in in publishing business books so that was kind of our hope and then you know what happened afterwards obviously big surprise we knew our tools were good but you can't imagine that something will spread at that fast rate yeah yeah and but you can now turn it into a series no because you were talking about this series and definitely you know once we saw the success we asked ourselves what worked and it was the visual aspect the tools aspect the very practical aspect so we started writing more books always based on the problem so you would see in the field right so we would learn something is not working and we try to fix it so even I you know you've often calls it's the plumber's of business when we say see a problem we try to fix it so can you say a little bit about your process I see you've got the wall behind you kind of layout so the book is that what that is so the book takes form visually in your space yeah I'll talk a little bit about behind the book the book wall behind me and then maybe even share one or two anecdotes because I always embark him on things and he always he always joins the journey he knows it's gonna be crazy we're gonna go all over the place but so behind me you can see the spreads of the book so every time we we craft a book I wouldn't even say write a book because we don't really write we we look at double pages we look at the concepts we want to put on a page and then we you know iterate through that so we put the concept first then we would look at the case that we want to put there and then we start working on the design so every one of these pages behind me when through maybe 10 15 20 iterations not just the visual part not just the design but the concept so we like to look at books as a you know something that has a user interface and a user experience so for us every page and then obviously the entire book should be a great user experience and you know our way of creating stuff and there's that's not the only way but our way of creating stuff is very visual very practical and because it you know from the beginning it kind of worked for us when even I started with first book the idea was let's create a book that we would buy and because we were self-publishing first we could do whatever we wanted maybe if you can tell you can talk about the journey of the the beginning do you remember and how we embarked on this one and we started in a small Swiss village in the Swiss house we took I think three days and we tried to sketch out the first idea of the business model portfolio and some ID for the content of the future book it was more than two years ago I think maybe turkey months it was a long process and when Alex explained you that it's a lot of iterations the iteration is not only for the writing for the concept but also for the design and also because we try to get feedback from people during the writing so it means that based on the feedback we can collect we also are ready to change and to iterate started Rita you know where the book started in in a valley that you actually know Val de Haan Lesage above that's a we wrote the first book as well that's lovely that we used to holiday there absolutely so um did you kind of move on to the content of the book and and before doing that you know we've gotten some questions those of us that write books and you know my book is pretty recent and a lot of my colleagues regretfully are kind of doing books this month and we get asked well is that really you know what we should be focusing on right now and I actually think it is because you know solid ideas are going to survive what is hopefully a temporary crisis and I don't you know I don't know how temporary it temporary could be longer than temporary normally is but but I think really to think about issues like resilience and building for the future and how do you kind of get above the immediate day-to-day and really focus on what's important for the long term I think those are eternal topics so I I encourage people to bring their ideas into the world good isn't need fewer good ideas so the book um it has three things and perhaps you could go into each at a high level and then we'll dig into some more depth yeah so I mean you know we asked the same questions to herself should we should we launch a book now and I put out a Twitter poll and asked people you know is this is this appropriate or is it inappropriate to to launch a book now with the title invincible company and within you know about 20 hours we had thousand five hundred votes and eighty five percent 85 or 86 percent said yes you have to put it out there because they were interested in in the in the content and many said you know the world is not going to stop it's going to change indeed but these topics of resilience of change if you know you know how do you build a company that can survive this kind of atomic bomb scenario those are all very relevant topics and people want actually more contents I can only encourage everybody to share during this period because it's also a period of reflection I think and I'm gonna hear wanna hear a couple of your ideas later as long absolutely happy to do that but I also think you know it's a time for people I know an awful lot of people who have this mantra you know oh I'll have time to sit down and read that pile of books when you know when I've got the next annual review donor when I get done with this tour or when I get done with it and you know and when never arrives I'm scored encourage people to really be thinking about maybe when has arrived and now is really the time to take some time to reflect and and and you know tend to those things that you know are important but just you know the busyness it hasn't really been able to happen so back to the three things so the the first theme is this whole idea of reinventing yourself while you're successful but this whole idea of portfolio management so how do you not just lean back and say oh you know we're doing great we're gonna get better and better at what we're already doing you know you need that culture of day one so that Jeff Bezos famously calls they're you know they're they're they're their culture a culture of day one you never relax you're obsessed by going out of business and you reinvent yourself and that's hard right when you're successful easy to kind of get so then the second one is really we're in you know there's a library of business small patterns in the book where we show how you can compete not just on product price and services but how do you compete on better business models superior business models so we really you know like it like a pattern library in architecture and design in general we try to show people this is these are better business models and you use them as inspiration and the in particular now you have to ask yourself oh you know how can we change our business model and you can already see that some business models are more resilient than others because now if you're just in a transactional model where you sell stuff that's a very tough time to survive but when you're in a you know a business model where you have more of a platform you have recurring revenues you're much safer today so that's the second theme and then the third theme is this whole idea of I think you can talk about this quite a lot right transcending industry boundaries so not competing in an industry anymore so not saying hey I'm a pharmaceutical company or I'm an airplane builder you have to think beyond that the the business you know the unit of analysis becomes the business model so do you think Amazon you can't put them into an industry anymore their business model does ecommerce for consumers and does infrastructure for companies at the same time these are not two separate companies it's not an old-school conglomerate it's one business model that does both well because the back end is the same so it's those kind of things you know that that start to make you invincible if you can reinvent yourself all the time if you compete on better business models and if you are able to transcend industry boundaries it's fascinating you know as a strategist fellow strategists and if I go back to the work of Edith Penrose you know back in da day in the fifties and she asked at the time of her fellow economists she said what is an industry you know we made that up and her study of growth fascinatingly I think is sort of a prease agent of what you found here in the book because what she said was entrepreneurial minded managers know deeply know the abilities of their companies and they look for places where those capabilities could be built out and that that is really the secret sauce behind the corporate growth phenomenon that she observed and you know of course on her work it was built resource based view of the firm and all these other wonderful concepts but I think it's so interesting that many of our public policies and many people that make decisions about sort of the structure of how we build our economies have not really don't really understand that you know so I think it's this is a really important moment because I think I think we're potentially on the brink of a great rewriting of a lot of the rules of how capitalist systems work and so I think books like yours based on that long tradition er are so um so informative so you know we've talked about portfolio management and it's a particularly a particular obsession of mine I know it's an obsession of yours but you know why why do companies by and large have such a dreadful record of doing a good job of managing both their exploration portfolios and their exploitation portfolios what do you think that is I can only assume right but you know what what we've seen is that reinvention hasn't been as important in the past where you could build competitive advantage and of course you know you talk about the end of competitive advantage you used to be able to compete on one business model for a very long time and the challenges that business models are expiring faster than ever before right like business miles expire like a yogurt in the fridge you can't live you can't even as a manager you can't live through the same business small you have to reinvent yourself because there's more competition there's disruption there's new technologies there's new opportunities as well and you know think of it this way today if Tesla hadn't disrupted the car industry the last decade probably they would be exactly in the same spot right and so it's this whole idea that you need some kind of external force disrupting you or changing you for you to even do that there are only few companies that have been able kind of to reinvent themselves now if you want to you can and my favorite example from the book is actually ping on I don't know how well you know ping on thank you very few people know and ping on a bit over seven years ago they were still a traditional banking and insurance conglomerate and then Peter Mao the founder decided no no this is not gonna work we're gonna die we need to become a technology company and they put in place a system that is remarkably similar to Amazon where they experiment a lot so from the beginning Peter Maass said we're not gonna get it right so he hired a co CEO Jessica Tong who was responsible for helping through this transition and it was all about experimentation and they failed a ton but they also built really big winners so here's what's interesting that goes back to your theme of arenas also ping on today has the in their portfolio has the biggest health platform of the planet with ping on good doctor over 300 million users now think of that it's not Novartis right it's not a GlaxoSmithKline it's a banking and and and and insurance conglomerate that does that but that requires this thinking and the entrepreneurial thinking we need to shift so there are a couple of things you know now there's external disruption but there's also this idea that you probably need a more entrepreneurial kind of senior leader for this even to happen because for a long time that was not the core skill it was to manage a company well to make it lean and now we're the other extreme we're making them to lean so they're not surviving the the the atomic bomb scenario of now right and you talk about that quite a bit well this is one of the fascinating things about the whole cohort of direct-to-consumer companies you know the Dollar Shave club's and all those and while some of them have broken through and created an enduring model an awful lot of them have found yeah it's really easy to start Casper would be an example of this you know so Casper paved the way for the mattress in a box business and now there are literally 172 mattress in a box companies so it's easy to start but very hard to scale what one example if Eve told me about an example and I think it was one day or two days ago that it's not so easy to do this pivot fast what was the example Eve that you mentioned of a company an established companies trying to pivot now remember oh is that the the bookstore by you I think how you yeah it's a it's a bookstore in Switzerland and they tried to pivot because of the crisis from libraries from bookstores to e-commerce and they try it a couple of days and they stopped because they were not able to put in place the processes to execute so the interesting thing is that if you never built up these capabilities to explore you can't do it overnight and that's what a lot of companies seem to be discovered yeah and also for that Alex mentioned they were also ready to fail on somewhere they're excited how did they I mean we know that a lot of times you know successful innovation is in many cases a numbers game right I mean you have to have so many things you're tying and I always like to say you know really fantastic ideas and really awful ideas look almost identical at birth it's very art it's that which is gonna be the one so how did it were there some specific things they did to overcome this fear of failure so the the big one is that you know and this is why established companies are so bad at it the important one is to understand that the world of execution is different from the world of search and exploration and the ratio that you just mentioned is the most important you need to accept that you can't pick the winner and you need to accept that you're gonna fail a lot and you know this whole Lean Startup movement actually did one dangerous thing people think they can pivot their self to success if I just pivot and search for long enough I'm gonna I'm gonna win but the reality is a little bit different you actually need to work more like a venture capitalist you need to invest in several projects and then kill them very quickly and only invest in those that succeed because as you said you did at the big they all look great right there's nobody in the company who's gonna you know pitch a stupid idea they all look great and you know what the ratio is for one outlier how many projects you need to invest in it's actually 250 to one so you would have to invest in at least 250 projects to get a 50x return now that doesn't probably doesn't even mean a multibillion-dollar revenue business so that ratio is probably even bigger so those numbers come from early-stage venture capital then the small companies say or the business units say yeah but we can't do 250 well if you do 10 you probably you know just produce 10 million or 50 million in revenue but if you want to create another multi-billion dollar business you need a large ratio and it's not about carrying 250 or 500 projects for long you actually need to kill them very quickly so a good example is Vash they invest in over three years it's a public example they invested in hundred and sixty nine projects hundred thousand euro 169 but after three months they killed 70 percent so they only invest in 30 percent and then from those 30 percent they go six months and then they only invest in again 30 percent so you weed out the projects that shouldn't get more money so today in Morton many companies we still have those zombies right walking around so they do that extremely well they do that extremely well so one of the things just by way of tools you know that can help companies with this is one of the dangerous things we've allowed to happen to many innovation conversations is we had all hung up on conventional business metrics like net present value just as an example and one of the dangerous assumptions that a net present value mindset creates is that you're going to carry every project you you start to its natural conclusion and instead what I would argue is you need to be looking at things in terms of option value and let's say you budgeted two and a half million dollars for a program and after and my colleague Ryan McManus and I read a lot about this and after you know three four checkpoints you said wait a minute we spend 120,000 but it's not it's the not the best use of our time and you stop oh my god you should be rewarded for that you know instead of going on and spending the rest of the two million you handed back to the company maybe you get a pat on the back and we all get to do something more productive I think it's very consistent with that that way of thinking let's talk about you know innovation for a bit and and you know the word has gotten to be very buzzy I think as executives sort of figure out that competitive advantages aren't going to carry them and just as an aside you know traditionally it is entirely possible to be an executive and never have touched innovation in your life you know you were raised you were promoted for being a great operator you know keep the wheels on the bus optimize all that stuff and now they're all sort of going oh but I see an awful lot of what Steve Blank calls innovation theater out there if you could sort of take three myths about innovation off the table well what would be your favorite targets I'll let you do the second one I'll do the first one my my favorite myth is that and it comes back to what we just discussed is that you need to make big bets for big returns and I like notes the important point and Vinod Khosla you know the the co-founder of Sun Microsystems famous investor he has a good point he says you know and he doesn't for the startup world but it's actually the same for corporate innovation he says the more money you give a company a start-up the less likely they are to succeed now that sounds very counterintuitive but the fact is if you give a company or project too much money what are they going to do they're going to build their fantasy they're gonna execute a business plan right and that's a huge huge mistake because what you really want to do is start small test immediately and then adapt your value proposition and business model and that's the big mistake that many large companies do they want to make a big return and they invest big rather than spreading their portfolio right and one of the other things I would observe is we're seeing the exact same disease in the heavily funded startups right I mean you know build a product market fit before you go invest in ping pong balls and come Gacha machines and whatever else the flavor of the day and I think it's having all that resource that they just they get sloppy they get sloppy so and then I want to hear from you your biggest think one enough another myth is that it's possible to manage an invent an invention or exploration project as an execution project so it means that you have an IDE you fix everything you have a plan to read this one you accomplish this plan and you are quite sure that you will reach the objective yeah that you initiative six I think exploration the culture is completely different you need to be ready to experiment to test and to go back and to have this process which is much similar to the startup process and I think it's one of the big myth for especially for voluntary CEOs and executive that we will do it absolutely so my biggest that interest you I think my biggest myth that I think gets in the way is this notion that you know to innovate effectively you have to be some sort of you know you have to be born it has to be a genius you know you have to be you know Steve Jobs and you appear on a clamshell in the middle of the night you know the earth opens and I mean yes of course you know talent and and creativity and those flashes of insight are all part of the mix but you could say that about any form of human endeavor so what what I would argue is you know the vast part of innovation is is well understood we know how to do this we know what some of the ingredients are and the the unwillingness I think to sort of even step a toe in the water until you're convinced you have this genius is a big problem on the flip side there are an awful lot of would-be innovation geniuses who really are not Steve Jobs or not one of those and yet they sort of built this cult of personality around them you see that's a fair bit in the well-funded startup world you know where you've got these people who are you know very talented but but they don't have that bad vision perhaps that the jobs or someone like that had one of the things can I build on what you just said because I think that's really important to to emphasize that even more so one of the things you know with all our books and with the one behind me you know what we try to do is push kind of the boundaries we frankly believe that innovation is almost like a profession it's starting to get boring because we know how it works right so it's almost getting closer to accounting than anything else but that also means you don't learn it over a weekend you know at a workshop or Startup Weekend or so it's something that's that's hard to learn and you need to learn it more like a like a doctor you don't just learn the theory but you have to learn the theory right and that to me physiology at the same time you need the practice so it's back and forth it's not one or the other because I don't like it when people say ah startup you just have to do it no there is it's it's actually a profession and then they're those things now you can teach it yes you can but you also need to practice so most successful entrepreneurs is not the first time there's this myth of the first time founder you know 20 years old the statistics show you something else it's actually after 4045 where founders are most successful and the same will go inside the corporations and then that may be one myth to add because we're talking about create you know innovation kind of skills or talent I think there is that aspect so often CEOs think we need to bring in the talent I've never seen a large company that didn't have brilliant people who could come up with new ventures it's more assistance problem you need to take down the barriers that's that's that's you know that are blocking them from actually living up to their potential and the idea is to live up to the potential it's never a talent problem very seldom very seldom it sometimes is a resources problem or an access problem or whatever I talk a lot about organizational Sherpas and these are those people who are in their 40s and 50s they know the organization you know they know where all the bodies are buried they've got favors they can trade and those are often the people that are these just in you know essential to an innovation project going forth because you know the last thing a little startup needs is to be told oh I'm from corporate I'd love to learn how you do things you know actually no I've got a job to do and it's not educating you so one of the questions that's come up in the chat is do you have any examples of publicly traded companies that you would say kind of get this right now could I also say one thing that is a particular Bugaboo of mine as a business school professor and and so forth you know we studied by definition we study companies who are made up of imperfect human beings who know get everything exactly right who occasionally screw up in a big way but I think it's really important for people to remember you can have a great well thought through process with everything going right bro no virus happens you know and all your well laid plans and terrific processes are thrown out the window and you got to sort of start from scratch and you can be terrible horrible I'm thinking you know staggering the blind and be in the right place at the right time so one of the big problems I see with strategy in general is we tend to confuse the outcome with how good the strategy was and my friend Phil rosensweig calls this the halo effect he says because we know the outcome obviously everything that company did was received wisdom but that doesn't mean we can't learn from the ones that maybe didn't succeed or the ones that didn't move forward you know one of the most interesting stories that I've been following recently is the story of general magic remember of general magic I mean they invented pretty much everything that today has become part of our lives in the modern cellphone but they were way ahead of their time you know which doesn't negate anything that they did so I think that's that's kind of an important thing to remember so back to the the question of how do you differentiate between how do you find an organization or two that are pretty good at this so I am going to steal one of the things you say all the time okay a very brilliant tactic actually in the field as I get people asking me you know how do I know if my company is really taking innovation seriously and I use I call it now the Rita McGrath test thank you I have a test named to me that's my 15 minutes of fame right there basically you know what you said I found that extremely powerful and I use this literally as a test now I asked you know how much time does your CEO spend on innovation every week and you know looking into the agenda and you know seeing the what are the concrete things how much time does the CEO spend with you know future not you know clients who are not yet clients but are completely out there spend with the teams with the innovation lead et cetera etc if for me if it's not 50 percent 40 to 50 percent of his or her time this you know this company is never gonna innovate and I'm not talking R&D you know you can have our D and not innovate it we've seen that in a couple of companies so for me that's the number one test that shows the seriousness and you know one of the companies we like and maybe if can talk about that a bit where that is the case is Logitech with cracking Darrell at the hell yes I think Bracken Darrell spent maybe 70% of his time for exploration and in a strategy he decided to took 70 percent of the profit of the execution machine for exploration which is huge for a medium company if you want very interesting so questions come up on the chat about so you've got these publicly traded companies they're highly leveraged they say they're having to drive the organization for the benefit of their shareholders and I certainly have a point of view on this but I'd be very interested to see to listen to what your point of view is on these kind of questions so to be honest for a very long time I wasn't sure that I did hear CEO saying you know I was working with CEOs hearing them say it's very hard you know the the financial markets and so and I wasn't quite sure you know is this impossible given the constraints but it turns out you know there are a couple of CEOs who really did it and not you know Jeb esos easy right because he has the power to do it he doesn't have to listen to the stock market that much but take em Unilever with Paul Polman when he you know started and had this vision of a we're gonna do long-term and we're gonna do sustainability not at the expense of profit and growth but you know in harmony but the first thing he did was abolished quarterly you know reporting Wow and so it can be done so it's easy to say it's excuses when when when CEOs don't do it it's hard and they're you know they're probably not even they don't even have an all of the power it's the board and it's the stock market the owners but it can be done so it's a lot harder to do something that not you know the majority doesn't do but it can be done so I'd be curious to see to hear from you maybe if you see more CEOs starting to take that step because it is a hard one right I mean we have to be very realistic it's not easy well so if I go back to Penrose just for a minute you know those 1950s companies she studied had a really different philosophy of what gave a company a mandate to be you know and that was what now people are calling stakeholder capitalism right so they were invested in their employees they invested in their communities they invested in long-term capability building and one of the things that resulted and again this is not I'm not saying the 50s was a perfect time what I'm saying is there was far more of a balance in how we allocated corporate resources then I think we've seen since perhaps the 80s and I think right now we are so out of balance where the bulk of corporate resources are you know basically being used for financial means rather than being invested is retained earnings in penrose herself said you know a company built for the long term is going to fund most of its growth from its own retained earnings they're not going to look to investors to come in and bring them their growth so so that's one observation I would make which is we've been sort of lulled into this you know maximizing shareholder value it's an ideology I mean we've been sort of persuaded by that I geology that that that the best thing to do is sort of extract resources from companies but a lot of times what happens is you you know you're really weakening the fabric of what's left behind and and I don't think we pay enough attention to the damage that that does on a whole lot number of different dimensions and so things like and William lisanna from the University of Massachusetts writes about this and says things like a very minority activist shareholder being able to kind of wag the tail of a large company with many other stakeholders you know why do we let that happen the way that it does so there and again I think this setback is an opportunity to really start to kind of almost scratch and rethink because we're we're reading the economies of the world even as we speak second thing a little more sort of tactically is my colleague and I have my colleague Alex Van Putten and I have developed a method that we're calling the imagination premium and just at high level what you can do is you can break apart the market capitalization of a public publicly run company into what shareholders think they should they deserve for its operations so value of operations versus what shareholders are willing to invest in because they think this company has great growth prospects and what we've seen and we call it the tip the the imagination premium and what we've interesting ly seen is you don't want to be too low because that signals weakness signals for example if you're doing a ton of stock buybacks and no investment in innovation and people don't trust your claims about what's gonna be innovative that you're sort of takeover bait or an activist is gonna come in or whatever but off if it's too high it's very fragile at that point you you have to hit everything perfectly or people are going to suddenly freak out Tesla would be an example you know Elon Musk has one bad press conference that he loses six billion dollars in market cap by that afternoon so what we want is some we're kind of in the middle where you've got that balance that you talked about in the book between exploration exploitation and we're developing this concept now as a way of saying can we measure that you know can we measure that for publicly traded companies where we basically give a CEO a bit of a weapon to say to the board look our imagination premium is not where it needs to be you know shareholders are not happy about that and that's one way we can invest to improve our market cap and guess what if you get it right your market cap goes up your shareholder goes up and it can be a win-win for everybody so that's us a second approach that I've kind of taken taken for that so so could you could you cut it elaborate on this notion that most of your investments when you're in this sort of options two hundred and fifty to get one that might be a big bet how do you keep people focused on the fact that what we're after here is a contained investment we're kind of a massive opportunity of return and the very few opportunities are gonna really pass through the judgment so it's again the portfolio approach right so we really need to make sure that the leadership is not looking at a project per se but is looking at the return on portfolio that's an important point and and that's not obvious right because in as you've said in the execution side on the execution side you give money for a project and the project needs to succeed otherwise you fail and you fail your career now over here it's actually you know take the pharmaceutical industry there are a lot of scientists who never find a molecule right but they're part of the success because if they don't search you're not gonna have that and the ratio is a lot bigger they're right you won't have that one success so you need to look at the return on the portfolio and have a very good system to weed out so really you know at every stage you know how you're gonna kill projects and if you do that well and and this is where boss you can to mention one comic example is pretty impressive because the teams themselves know that they shouldn't get follow-up investments own 90% 90% overlap between what the team thinks should we get follow-up investment and with the leadership thinks 90 percent overlap because they know exactly what evidence do they need to have at each stage so it's really interesting the metrics completely change that's a big challenge so with even a couple of corporations we we had this consortium where we looked at innovation metrics now how do innovation metrics or reducing risk and uncertainty the return on the portfolio etc how does that change compared to the execution it at metrics and that's where I also like your imagination premium if we can't put a value on the portfolio of exploration that a company has we're always just going to look at the execution part there's almost like we need to analyze the two parts of the company today the analysts they're only looking at one part of the company and that's why it's much easier for companies today to just acquire because nobody's valuing their innovation portfolio it's actually one of the biggest concerns of many CEOs they say you know firfer for acquisitions I have a checklist I have lawyers and the stock market knows exactly how to deal with that over here on the Left I have a black box nobody really knows how it works in my management team and the stock market doesn't know how to value that so I can only get it wrong so obviously you're going to hedge your bets so until we figure out how to really look at that part more systematically you know nobody's ever gonna really value it and only the very courageous CEOs are gonna push on to actually build something like that so one question in that and that I get a lot from especially from my economist friends is you know if the company is gonna get old and be a dinosaur and it's entrenched in its bureaucratic you know why should we worry about it like why don't we just take our capital pull it out of that company let them collapse and put the money into you know buzzy startup ventures or something new or somebody that's got the actor better and I again have a good view about this but I'd be very interested in your perspective I'd be interested in Eve's perspective as well I'll start with this in the sense that you know for me you know I'm asking my self this question quite often with our company strategize or you know why are we helping big large companies innovate is it to help them grow more to have a better return to please their shareholders know I actually it's almost a moral obligation in the sense that if we can help establish companies reinvent themselves they're not going to get disrupted because the social cost of a company that needs to layoff 10,000th or you know fifty thousand hundred thousand people like is happening now the social cost is so high that if they can reinvent themselves you know they won't have they won't have that cost the society won't have to carry that cost so it's easy to say you know oh you know I mean my beautiful office and I'm saying oh I know startups are gonna disrupt this and that's just natural life well the human cost behind it is is enormous so I think that's the part you know that should motivate us also to help these large corporations to continue to innovate and then the second piece of that for me is is not just about innovation to create more products you know that great value for society but it's also to create better workplaces because at the end of the day you know seven out of ten people they don't want to work where they where they are they don't enjoy work they're not engaged they actually want to change jobs so great that means seven out of ten people are not enjoying eight hours at work or however a number of hours you are so that's just not good so I think there's that there's an opportunity to improve companies to help them get better so we can help you know create a better society so that's very idealistic you know and Japan rose again if you if you look at these combinations of scarce and valuable resources that are part of the big company asset base right and you know it's human beings with idiosyncratic unique skills and abilities it's communities that have coalesced around a particular we you know category of capabilities and all those things as you said and I guess I wouldn't focus so much on the social cost when I look at them but but you know there is this sort of enormous loss of societal capability and I love the startups I think startups are fantastic but but you know startups in many cases don't scale startups can't afford the kind of traditional investments in personal development and the creation of great workspaces and you know things like you know diversity thought--and and lifting people out of poverty and that kind of thing I mean it's they can do some of that and some of them succeed remarkably but the vast majority don't I mean the vast majority of small businesses you know stay small and and so to get scale to get scope to have the kind of you know returns that allow those longer-term investments I think is hard and that brings me to my second kind of concern when you say oh well it's just these companies are just disposable they are among the few actors in society that women properly managed can actually take a longer-term perspective so one of the companies I've been drawn to is Corning and Carney's strategy very explicitly is we need to be 5 to 10 years ahead of where our clients are where our customers are going to be and they have a set of procedures that the policies that fit into that so it is still possible to join Corning and have a 40-year career there it is possible to have very strongly held beliefs but be willing to change your mind about those strongly held beliefs when the new evidence comes in and I was chatting to their CEO some months back and and I said well how do you make these decisions like what data do you use whatever any stuff what we do is over many years of trial and error and effort and experimentation we develop judgment so this isn't a spreadsheet this isn't a you know PowerPoint this isn't dancing Bologna zone or whatever it's it's judgment it's it's that that pattern recognition in that sense of what could be a big win now and so I think I think I would make the case for the mature company now not all mature companies some of them are you know bhisma abysmally abusive places that should be put out of their misery and I'm fine with those going away but but they're you know a lot of companies have gems so a question that came up is about the nature of ecosystems and I know that's one of the business models you talk about a lot and I'd love to hear your thoughts and perhaps Eve as well on you know what's changed I mean ecosystems today is kind of like innovation is those buzzy words everybody's talking about and then platform business strategies and and what in your view has really made those things possible and you know are they more attractive than we perhaps thought of them historically so what are your thoughts on how we should think about ecosystems strategically I'll let you go first like that you know the hard question this is how we work together a hard question they always go to Eve wait a minute I need time I think this idea of ecosystem the concept of ecosystem has different meaning I think for different people and we have seen that at the last rotor forum I think everything seems to be no ACO system for us I think ecosystem is a way to analyze different business models working maybe in the same direction but with keeping the independency to act maybe trying to read the same goal which is not so clear but we agree on it so I think this kind of things of collaboration going in the same direction together seems to be meaningful maybe a little bit more than before because of this social value also ecological or environmental things and so I think it's interesting I and we need I think we still need to come with new concept to help people to establish those kind of ecosystem I think the tool that we have seen so far are maybe not so well appropriate yeah so I'll share with you something I'm working on right now which is a concept I'll call ecosystem maturity and so if you look at the response of entities to a strategic inflection point or something that's a big change right one of the things I've seen is that there's a lot of energy and excitement when these things first begin to make themselves felt and a lot of investment often over in this but the ecosystem isn't mature enough yet to really be in the world yet so if I think about autonomous vehicles I'll just use that as an example the technology part is not the hard part the technology's kind of here and now and we can see it at you said it's not perfect but it's good enough for a lot of applications but we don't know the ownership regime we don't have the risk regime we don't have the institutional regime we don't even know what the business models are yet for a lot of those things and so you've got an ecosystem that needs to be there as you're saying that that needs the parties all moving in a common direction but it's almost like there's no unifying principle yet and what we see and now I think if you look at the big big tech companies today they were very fortunate I mean they were very skillful very smart but they were also very fortunate to come into an environment where all the different elements of the ecosystem were in place I mean if you go back to Google just to take one example of a fabulously smart really common great company but there was a time the company was on its knees they were trying to sell themselves for something like a million dollars and and then the thing that sort of brought it all together was the monetization ability represented by selling ads but before that they had all these other pieces but they didn't have the business model piece and it wasn't until that fell into place that they as an individual company could be successful that what I would add to the ecosystem discussion is you know again like you've said they're different we use the word for many different things but there's one question that came up here by Victor and this explore portfolio that you create is also an ecosystem right you as a senior leader what you put in place is a ecosystem that allows the best ideas to emerge and the best teams to emerge so the winner comes out there's an ecosystem where you connect with the universities you connect with the internal skills with the customers you need to make those connections so that in itself is also an ecosystem that you need to enable as a senior leader now the question that came up here is okay well now given this crisis we're seeing a lot of you know companies cutting the costs and as we know for those out there who are listening and who are an innovation is always one of the first things that are cut in the companies that don't understand kind of the deep value of that because the problem with innovation so far is you know it's not an institutionalized budget rnd is an institutionalized budget but again innovation is not Rd Rd is products and technology and science innovation is creating value for customers and business malls that can scale now there is no institutionalized budget for that so it's always the first thing that will fall but again those companies that really figured it out they institutionalize their innovation practices they institutionalize their innovation ecosystem and it won't be at risk in a crisis like this and I think and I'm throwing this question back to you readin and Eve either is do you see some companies but because they created those ecosystems and made them robust that they're better at responding in today's environment again it's a very extreme environments a black swan nobody prepared for it but do you see both of you and if you see companies that are better prepared for this than others because they maybe had you know already that exploratory attitude I can start or Eve did you want to start so I mean I think so let's go back to and I know you're a recovering academic Alex so at one point you lived in the world of theory right so if you go back go to the theory of what makes any system resilient right and I think one of our problems with the way we've constructed economies today is we've allowed ourselves to forget that you can't just optimize for the perfect setting you need to you need to also build resilience into your systems that's why airplanes have 400 million parts I keep that going for there's redundancy right even so you need redundancy you need variety you need to diversity of input and you need to scale you need slack resources and so I think the companies that have set themselves up to do better have not run totally lean you know they've they've allowed themselves to have pockets of resource that they can then mobilize and redirect and I would also add you know if I looked at many great companies that have gotten themselves into horrible financial situations and dug their way out of it one of the things you'll see is that that they they have not forgotten about innovation so the textbook case here would be Alan Mulally at Ford who basically said well you know we had to borrow a little money due to some house renovation that's kind of how you framed having to restart the innovation engine at Ford even though they were in financial distress he said you know eventually we will no longer be in financial distress and by the time we get out the other end we really want to have you know a very robust portfolio of innovations going forward so Eve any thoughts on that and then we'll have about five minutes for more encouraging or general device for our our losers you know in some small companies like in the agriculture which is not AI tech at all we have seen here on some companies which are able to switch quite quickly because they had some reserved for some additional we saw that they didn't explore so far so I think it's still possible it's very difficult to say at this date because we are in this crisis since maybe two three weeks so we will see in a couple of months which kind of company could emerge and and will be a little bit better also I would like to have something about ecosystem I think this idea of circular economy was a way of encouraging if you want something because if you want to address a clear environment issue and trying to reduce co2 and Sun I think alone it will be very complicated and so I guess that this kind of thing could be also a leverage to explore new ways of collaborating inside some new kind of ecosystem I think it will be also a leverage for doing it thank you okay so we've got a few minutes left and so I thought we might close with with a couple of observations and the first is really to do with culture in the book you make a huge point about how important cultures I think it's mostly most of the last part of the book of just how building the right culture is it's just so critical and I think in this time of stress and our friend Tom cold it says this a lot he said if you want to be a leader in a dangerous or stressful situation you need to have money in the bank and what he means by that is you can't all of a sudden expect people to trust you you know when the crisis is upon you you have to have been trustworthy all along and so my question to you I guess would be so let's say you got a horrible culture it's just it's you know just not great it's bureaucratic or it's political or it's whatever and you want to make it a better culture what are some things you can do to get started yeah I think that you know years ago a friend of ours entrepreneur and and and writer Dave gray came to us and he said you know Alexeev I have these concepts around culture but I want a simple tool so we worked with him on creating a tool and as we are you know the plumbers of business and I think unhear that Alex so we made a tool with him called the culture man and you know culture sounds like such a fuzzy concept and everybody has a different definition but it turns out you can actually design culture and every time I tweet about that people say no Alex you're wrong you can't you know ken well you can't design culture like a car you can design culture like a garden right so you have to create the fertile ground so what do you work on you can't change the behavior of people overnight but you can work on the enablers and the blockers the enablers that allow a certain culture to emerge good or bad and the blockers that block a good or bad behavior that's the only thing you can work on and you can do that systematically and I think that's the challenge that people today in most companies don't yet think like that so when it comes to innovation that's why the last part of the book is all about culture we have all these tools we have all these processes we have the metrics we know exactly how it works well why isn't it happening you could say all leaders but you know it's not just the leaders it's what the organizational structures and everything they put in place in terms again of enablers and blockers so you can design culture and actually you have to design culture if you want something you know to emerge and I think most companies they let culture happen and that's a crime it's not they don't intentionally think about it and then maybe just one last point because when it comes to culture you know it's tricky to talk about because you could say Oh Apple right went under Steve Jobs that a great culture they could innovate well they came up with amazing stuff but it was a terrible culture so it always depends what you want like is it a culture of innovation but that exploits people or is it a culture of innovation that enables people at the same time that's hard right but we should we should really aspire to create a culture where people can do their best work they can create value for customers and we can create you know financial growth they don't have to be at the expense of each other there's these myths you know that they're they're all actually conflicting no they're not that's just how it is right now but we can fix that right so I think that the culture topic is probably one of the next big things you know management innovation the culture innovation is gonna happen well and I would add for those of you that are feeling just kind of frozen in the headlights by all that's going on right now we know from history that these kinds of moments are the moments when organizations societies become open to big changes because whatever got us to this stage you know clearly needs to be rethought and and I when I'm in my more optimistic moments I think this is a fantastic opportunity to you know rethink the rules of the road for capitalism rethink the way that corporations think about their stakeholders okay so to get to the commercial part of this webinar how do our listeners learn more how can we find out more about the book about you about what strategize or does let everybody know where they can get more of this great kind of conversation so very simple go to strategize or comm and you'll find actually 100 pages of the book for free see if you're interested if you preorder the book you'll get a couple of exclusive webinars pre book launch til April 14th you can benefit at those we'll talk a little bit about the stuff behind it you know how we did it etc and then you know if you are a corporation can work with strategize or we do pretty pretty fun stuff technology enabled services to put everything in place that we were just talking about innovation transformation growth and culture that's great thank you so much okay closing thoughts from any of us and I know there are questions in the chat that we can't get to now but we will get to later on if you leave us your name and we know who you are so if why don't you start with the last couple of comments very personal comment we started to work together 20 years ago with Alex and it's a great pleasure to having wrote those book and maybe animated some webinars or created content so I think it's one of the things that I retain from this big adventure I'll return that one because it's been 20 amazing years and I've learned so much and to be honest I'm always surprised that he you know follows on these adventures because he knows how messy these things are and that we're getting into some crazy stuff so returning Eva it's a great pleasure to work together for two decades so for our listeners this conversation has been recorded we'll make it available to you once we clean up all the stuff that is not very interesting to listen to and I would encourage all of you to use this time to do some reflection on what you would like to see come out of this shift beyond just getting over the immediate crisis and how you know this group of people and our ecosystem could be helpful to you so thank you all very much have a wonderful weekend wherever in the world you are and it's truly been a pleasure thank you for making the time Alex need and Thank You Rita Thank You buzz great thanks you [Music]

Channel: Rita McGrath

Views: 633

Rating: 5 out of 5

Keywords: The Invincible Company, Innovation, strategy, portfolio, failure, entrepreneurship

Id: cZEetroKI94

Length: 59min 47sec (3587 seconds)

Published: Thu Apr 02 2020