Dan Martell - How To Innovate Against Your Competitors with Alex @ Strategyzer.com - Escape Velocity Show #21

00:00:00.000 Technology or not, every organization has a business model.

00:00:03.680 Some are conscious, some are not.

00:00:05.680 Some try to change this, some don't.

00:00:07.500 And some just compete on products,

00:00:09.340 whereas they could compete on superior business models.

00:00:12.040 So that idea of, hey, can we help companies rethink their business models,

00:00:17.340 be aware of it, and then...

00:00:18.760 It's just something I was interested in.

00:00:20.500 Ignition sequence start.

00:00:22.600 Three, two, one.

00:00:30.000 Alex Osterwalder, how's it going, man?

00:00:35.820 I'm so excited to have you on here.

00:00:37.280 It's a pleasure.

00:00:37.940 It's fun, because it's the first time we get to meet in person.

00:00:41.560 We're definitely Instagram friends,

00:00:42.900 and I had the privilege of working with you and Alan

00:00:45.380 at Strategizer.

00:00:48.120 I'm assuming everybody knows you as the guy that created

00:00:51.280 the Business Model Canvas.

00:00:52.460 That was the start. 0.98

00:00:53.480 Dude, crazy.

00:00:54.600 Is it nine years now the book came out?

00:00:56.840 So the book came out 2009, so it's actually 10 years.

00:01:01.840 We self-published first, because we

00:01:04.040 wanted to do something differently,

00:01:05.360 so we created an innovative business model.

00:01:07.220 And then we sold it to Wiley a year later.

00:01:09.960 So most people think it's nine years,

00:01:11.420 because that's when Wiley published.

00:01:12.640 10 years.

00:01:13.340 And then I first heard of it, Steve Blank.

00:01:16.100 Was that now, I don't know, outside of Steve and Lean

00:01:19.680 Startup, was it known in the business community prior,

00:01:25.260 and Steve brought a different audience to it?

00:01:27.560 Or maybe he had no impact whatsoever,

00:01:30.300 but just from my perception.

00:01:31.500 So I think he had an impact later on, for sure.

00:01:33.260 I mean, we were really good friends now.

00:01:35.260 It started out, we focused on the startup community.

00:01:38.140 So I did a PhD on the topic of business models

00:01:40.580 with my co-author Yves Pigneur.

00:01:42.540 And we were targeting startups, so that's how it all started.

00:01:46.400 But then later on, it was really large companies.

00:01:48.540 So I'd say in the startup community,

00:01:50.020 Steve really boosted it, brought it to another level.

00:01:52.660 In the corporate space, we were always international.

00:01:57.760 So the book just spread across the world.

00:02:00.200 We have a freemium model where we always

00:02:02.220 gave part of the book away.

00:02:03.320 So that's how it all started.

00:02:04.660 How does that work?

00:02:05.280 70 pages.

00:02:06.380 OK.

00:02:06.980 Yeah, our publisher freaked out.

00:02:08.500 They think Wiley gave you that even after the fact.

00:02:10.720 Well, you know, when we did the book,

00:02:12.960 we had four colors, landscape format.

00:02:15.520 We gave 70 pages away.

00:02:16.940 Because we were self-publishing, we could do what we wanted.

00:02:19.640 So later on, I asked Wiley, well, would you

00:02:21.520 have let us do this, if we had started publishing with you.

00:02:25.420 And our publisher said, not a chance.

00:02:27.160 You did everything wrong.

00:02:28.660 Yeah, he did the opposite.

00:02:30.040 We did the opposite of what you were supposed to do.

00:02:32.560 You know, the DNA of what you're teaching, right?

00:02:34.460 Like, look at it and.

00:02:35.920 So it started out that way.

00:02:37.560 We thought we can't write a book on business model innovation

00:02:40.060 and not do it.

00:02:41.240 So practice what you preach.

00:02:42.460 So we really, we self-published.

00:02:44.080 We got people to pay us to participate in the book.

00:02:47.320 So we have 470 people who paid us to be part of the book

00:02:50.980 This is like early Kickstarter.

00:02:52.860 This was before Kickstarter.

00:02:53.800 Yeah, that's what I mean.

00:02:54.640 This is really.

00:02:55.780 And then we asked them to, later on, the first ones joined.

00:02:58.840 We thought, it's probably too cheap.

00:03:00.100 So we doubled the price.

00:03:01.300 We doubled the price every couple of weeks

00:03:03.700 until we got to $250.

00:03:05.740 Wow, that's real money.

00:03:06.680 Because people would get their name into the book.

00:03:08.800 So that was fun.

00:03:09.480 We just played around.

00:03:10.180 That's real money, I guess, to have your name in the book.

00:03:12.240 Where did the love for business models come from?

00:03:15.300 So I was a student at the University of Lausanne

00:03:19.600 doing computer science, information systems.

00:03:23.200 And Yves Piner was one of my professors.

00:03:25.720 And he was looking for a PhD student.

00:03:27.340 And he said, I need somebody who's

00:03:28.660 going to work on business models.

00:03:30.460 And I was interested in a topic that

00:03:32.380 would look at business from a different angle,

00:03:34.980 would help me understand not marketing, operations, or finance,

00:03:38.320 but kind of across the board.

00:03:39.520 Like, what's the essence of a business?

00:03:41.000 Because I studied political science.

00:03:42.480 You question institutions.

00:03:44.380 So I thought, well, what is a business, really?

00:03:46.700 Oh, this topic of business models

00:03:48.080 would allow me to go a bit deeper.

00:03:49.880 So that's how it started out.

00:03:51.260 And that's how we thought about different business models.

00:03:54.580 How could we change things?

00:03:56.300 And we were lucky with the timing.

00:03:57.600 It was kind of the internet boom was just starting out.

00:04:00.960 But with Yves, we always believed

00:04:02.640 the topic of business models is for any company.

00:04:06.020 Technology or not, every organization has a business

00:04:09.040 model.

00:04:09.740 Some are conscious, some are not.

00:04:11.540 Some try to change it, some don't.

00:04:13.340 And some just compete on products,

00:04:15.520 whereas they could compete on superior business models.

00:04:17.840 So that idea of, hey, can we help companies

00:04:21.320 rethink their business models, come up with new stuff?

00:04:23.460 Be aware of it.

00:04:24.560 It was just something I was interested in.

00:04:26.120 And did Eve have the foundation of what

00:04:28.840 became the core components?

00:04:30.600 No, so his starting point was, what

00:04:33.660 if we could do, like architects, something

00:04:36.000 like computer-aided design for entrepreneurs?

00:04:38.580 That was the starting point.

00:04:40.200 And he was looking for a PhD student

00:04:42.000 to come up with the model.

00:04:44.200 And it was called the business model ontology.

00:04:46.260 this complicated word so you can get a PhD.

00:04:48.960 Just make the word complicated, you'll get a PhD.

00:04:51.120 Sounds fancy, yeah.

00:04:52.080 But the idea was, could we come up with a rigorous model

00:04:55.380 so we could build computer systems on top?

00:04:58.020 So that was complicated stuff, went really

00:04:59.820 in details and modeling.

00:05:01.640 And then later on, after I left academia and went into practice,

00:05:06.000 we took kind of the top layer.

00:05:07.380 And that became the business model canvas.

00:05:09.460 But what was below was rigorous academic research.

00:05:12.360 Was it like instruction?

00:05:13.680 Like, what was it like?

00:05:14.520 Just a way to essentially quantify each aspect?

00:05:17.240 It was just, you know, ontology means

00:05:19.380 you're going to come up with a very rigorous description

00:05:22.220 of a domain.

00:05:23.740 You create the language for that domain.

00:05:25.840 And there was nobody who really defined business models.

00:05:28.860 We were not the first to talk about it.

00:05:31.000 But nobody had a really rigorous approach.

00:05:32.940 So we just looked at all the work there.

00:05:34.780 And like, you know, some people would make ontologies for birds.

00:05:38.200 We made an ontology for business models.

00:05:41.140 So that was kind of the starting point.

00:05:42.440 Is that your thesis, your PhD thesis?

00:05:44.300 Yeah, it was called The Business Model Ontology.

00:05:47.000 Wow.

00:05:48.140 The funny thing is, people started downloading that.

00:05:50.300 And that was like early indicators.

00:05:52.120 Hey, there's something there.

00:05:53.120 People want to know more.

00:05:55.340 And what's the timeline between that and the book

00:05:58.440 being self-published?

00:05:59.720 So I started my academic work in 2000.

00:06:02.900 So I had two job interviews in my life.

00:06:05.400 One was with McKinsey.

00:06:07.100 And I got steamrolled.

00:06:08.360 I was not ready for that.

00:06:09.460 They just destroyed me.

00:06:11.380 The other one was with Eve.

00:06:13.000 So I was super lucky to get killed by McKinsey.

00:06:16.140 And now we're working and we help them,

00:06:17.720 or we compete against them as a strategizer.

00:06:20.140 And then I finished my PhD in 2004.

00:06:23.620 Then I went out in the world, helped a not-for-profit kind

00:06:26.680 of scale, then became an entrepreneur more

00:06:29.140 in the consulting space.

00:06:31.740 And then at one point, I always got

00:06:33.620 requests on business models, because I had a blog.

00:06:36.400 And I thought, hey, it's time to write a book.

00:06:38.300 So I went back to EVE.

00:06:39.620 That was 2008.

00:06:42.740 And I asked them, hey, let's write this book

00:06:44.620 that we always wanted to write.

00:06:46.420 And we hired a designer.

00:06:47.720 At that time, we needed somebody to help us with the visuals.

00:06:51.580 That was Alan Smith, who's now my co-founder.

00:06:53.480 So that's how it started out.

00:06:54.560 I love it.

00:06:55.060 Yeah, yeah.

00:06:56.580 So Strategizer started at the same time then?

00:06:59.320 Or was that a spin out of?

00:07:00.900 No, that started later.

00:07:02.240 So after the book was published and it started to be a success,

00:07:06.540 I had to ask myself, well, what am I going to do with my life?

00:07:09.280 And the traditional path is you do consulting,

00:07:12.760 or you do training, or if you're not in academia.

00:07:15.720 I already left academia a while ago.

00:07:17.700 And I didn't want to do consulting.

00:07:19.300 I already did that.

00:07:20.340 And I just didn't think it was the fun thing

00:07:22.540 to do normal selling your hours.

00:07:25.140 So I talked to Alan and said, hey, what

00:07:27.180 if we started a software company?

00:07:29.840 Having no idea, never done it, just total ignorance. 0.99

00:07:34.020 Any entrepreneur who starts out is always ignorant. 0.99

00:07:36.420 Yeah. 0.94

00:07:37.160 And we started that with an iPad app.

00:07:38.920 So we said, we want to go into B2B,

00:07:41.580 but let's start with an iPad app.

00:07:43.700 So we created an iPad app, and that

00:07:45.660 sold a couple hundred thousand copies for $30.

00:07:48.180 That was the starting point.

00:07:50.040 And right now, what does the work you do look like?

00:07:54.340 Because I know you do a lot of workshops.

00:07:56.440 I follow you on Instagram, everybody should.

00:07:58.540 You're really good at documenting the behind the scenes

00:08:00.580 of the creative process.

00:08:03.960 What does your work look like day to day?

00:08:07.360 It's a mix.

00:08:08.260 So Strategizer, the company is still at the core.

00:08:12.280 And building a platform is still the core thing we want to do.

00:08:14.940 But one of the things we realized,

00:08:16.340 and it was an interesting experience in entrepreneurship,

00:08:19.020 was no real market for that type of software,

00:08:22.740 B2B, creating strategy software.

00:08:25.760 So that is still in the coming.

00:08:27.580 And we were getting a pretty good idea

00:08:29.320 and moving towards the right direction.

00:08:31.640 But it turned out that the thing that companies bought most

00:08:35.120 at the beginning while we're building this market

00:08:37.500 is actually online training.

00:08:39.040 So scalable, interactive online training

00:08:41.560 where on the one hand you have videos,

00:08:43.940 but on the other hand you have coaches

00:08:45.820 who can accompany people in corporations.

00:08:48.280 So we work with companies like Mastercard, Nestle, and so on.

00:08:52.500 And we help them scale these tools.

00:08:54.820 So that brings me to one of the parts

00:08:56.700 I'm most passionate about is building tools

00:08:59.340 for business people.

00:09:00.680 And I deliberately say business people,

00:09:02.220 because there are a lot of tasks that

00:09:03.560 are similar from the entrepreneur and startup,

00:09:06.560 even solo entrepreneurs, they have a business model,

00:09:09.100 all the way to companies the size of GE or Nestle.

00:09:12.560 Every company has a business model.

00:09:14.900 Now, what changes, of course, are the constraints.

00:09:17.120 If you're a solo entrepreneur, a VC-backed entrepreneur,

00:09:20.240 or if you're a corporation trying to invent new stuff,

00:09:23.180 the context is different.

00:09:24.800 So I'm passionate about building those tools

00:09:27.800 and helping people do a better job,

00:09:31.100 in terms of inventing new stuff, in terms

00:09:33.440 of managing their business, I think

00:09:35.320 we can get a lot better at that.

00:09:37.640 And what's an example of a tool?

00:09:39.300 So the Business Model Canvas was our first tool.

00:09:42.180 And I believe that innovators or managers

00:09:45.600 can be a little bit more like surgeons.

00:09:47.800 We always think, oh, we're going to make a business tool.

00:09:49.760 It should do everything.

00:09:51.100 No, it shouldn't.

00:09:51.760 It should do one job.

00:09:52.880 The Business Model Canvas does one thing.

00:09:54.920 It allows you to sketch out a business model.

00:09:57.380 new one or an existing one and then you can do other things with it right but a surgeon who will

00:10:02.660 never operate with a swiss army knife you know a tool that does everything should be the same in

00:10:07.380 business we should be like innovation surgeons or management surgeons where we use different

00:10:12.180 kinds of business tools like the business small canvas the value proposition canvas the culture

00:10:17.620 map or strategy maps are quite a few tools out there i don't think all of them are really as

00:10:24.020 as rigorous as I'd like them to be or as simple to use

00:10:28.220 as they should be to get to better adoption.

00:10:31.100 So there's a lot there, I think, that we can still

00:10:33.280 do as a community of thinkers, making better business tools

00:10:36.180 to help people do a better job.

00:10:37.600 How often do you create a tool framework and then revisit it?

00:10:42.660 Like, how does that, because I mean, it's, you know,

00:10:46.340 I like to take a lot of my thinking and draw a model,

00:10:49.280 but then it's like, it's going to evolve.

00:10:52.280 Like, how do you, what's your process for creation?

00:10:54.920 Yeah, good question.

00:10:55.820 It's something we're thinking about a lot at the moment.

00:10:58.460 Together with Eve, we're going to train

00:11:00.080 some of the top business thinkers at the Thinkers 50 event

00:11:02.660 to create better tools, because they have great concepts.

00:11:04.880 You're going to teach them how to create the tools.

00:11:06.800 Oh, cool.

00:11:07.500 So they have great concepts.

00:11:09.000 They do amazing research.

00:11:10.220 But maybe their tools could be a little bit better.

00:11:12.160 So we're trying to teach them.

00:11:13.580 Let's see how they react.

00:11:15.000 But so if you take the business model canvas,

00:11:17.420 that was the result of a PhD.

00:11:19.320 So very long, four years, going deep.

00:11:21.780 and then, but just taking the top layer.

00:11:23.780 If we take our second tool, the value proposition canvas,

00:11:27.060 it was a bit different.

00:11:28.020 You know, there was no academic research behind it,

00:11:30.660 but we do read all of the literature in that space.

00:11:34.220 Anybody write something on value propositions?

00:11:36.380 Is there anything good there already?

00:11:37.780 Is anything being adopted?

00:11:39.180 So we try to cover the basis, you know,

00:11:40.920 what's the knowledge there?

00:11:42.440 Yeah, what's the state of the art right now?

00:11:43.940 Based on that, we try to come up with some kind

00:11:47.160 of first concepts, and we immediately test it.

00:11:49.900 a unique aspect to it?

00:11:51.740 So we call it mutually exclusive, collectively exhaustive.

00:11:57.020 So trying to cover the problem space.

00:12:00.240 And we don't try to do everything.

00:12:01.840 So when we say value proposition, that's all we try to do.

00:12:05.400 And we're not going to look at competitors.

00:12:07.240 We're not going to look at the process like, OK,

00:12:09.020 how do you come up with new value propositions?

00:12:11.300 No, just how do I map a value proposition?

00:12:14.600 That's the only goal.

00:12:16.080 And everything we do is targeted at that

00:12:18.660 And then make it as simple as possible so people

00:12:21.680 will actually use it.

00:12:22.900 And then we test a lot.

00:12:23.940 And we change it.

00:12:24.480 In the workshops?

00:12:25.080 Yeah, definitely.

00:12:26.060 That's a cool way of doing that.

00:12:27.720 And then it might kind of change over a couple of weeks or so.

00:12:32.280 And then at one point, we're pretty sure

00:12:34.160 that's the mature version.

00:12:36.660 So with the value proposition canvas,

00:12:38.280 we even changed the shape of the thing

00:12:41.040 because we realized people were saying,

00:12:42.680 oh, that's just an evolution of the business small canvas.

00:12:45.020 No, it's not.

00:12:45.520 It's a plug-in.

00:12:47.040 As a business, you need great business models,

00:12:49.700 and you need a great value proposition.

00:12:51.500 They're not the same thing.

00:12:52.860 They're two different, I'd like to call it,

00:12:54.420 jobs to be done of a business person.

00:12:57.000 And then you need great implementation.

00:12:58.540 Again, that's a different job to be done,

00:13:00.780 where you'll use different tools.

00:13:03.020 So we really think in terms of what

00:13:04.980 are the most difficult jobs that business people are trying

00:13:08.200 to get done, and where don't they already have tools?

00:13:11.040 If there's something there that's great,

00:13:13.120 we're not going to reinvent it, we're going to use it.

00:13:15.420 But if we think it's either not good enough

00:13:17.460 or the adoption hasn't been good enough

00:13:19.600 and we can do something to change it,

00:13:22.140 we'll create something new.

00:13:22.980 So our last tool is the business portfolio map.

00:13:25.620 That's really at the decision maker level.

00:13:28.060 Not business models, but how do I allocate resources

00:13:31.060 in great products and business models

00:13:33.780 in order to reinvent my business all the time,

00:13:38.260 systematically.

00:13:39.420 And when you work with such incredible companies,

00:13:43.740 How do you communicate to them?

00:13:45.900 Because, I mean, it's easy for you

00:13:47.460 seeing the forest from the trees.

00:13:49.020 They're in it.

00:13:49.980 You know, sometimes it's consultants.

00:13:51.880 It's, you know, oh, change this and la-di-da-di. 0.99

00:13:54.020 And they're thinking of all this other complexity

00:13:55.820 around bonus structures and job stuff.

00:14:00.100 How do you communicate or influence change?

00:14:03.980 Like, what's your tool for doing that?

00:14:06.820 Because I feel like every leader has to.

00:14:08.880 Yeah.

00:14:09.640 And then, you know, there's so many, as you said,

00:14:11.600 so many consultants out there.

00:14:13.180 There's so much information.

00:14:15.040 What are we doing differently?

00:14:16.360 And I think one of the things that we always try to do with Strategizer, with EVE,

00:14:20.800 is to simplify things.

00:14:23.020 It's just what's the essence of what you want, what you need to know.

00:14:26.720 I think when it comes to innovation, which is the core topic that we work on most,

00:14:31.320 you know, we help large companies with that, there are a lot of myths.

00:14:34.640 One is innovation is expensive and it's risky.

00:14:38.320 Well, no, it's not.

00:14:39.240 It's only expensive and risky when you make big bets.

00:14:42.260 But in innovation, we now know we make small bets, many small bets, and we only invest in those projects that show some evidence, that promise.

00:14:52.060 So it's like venture capital investment.

00:14:54.400 So we try to show, there are two things I actually try to show senior leaders.

00:14:57.720 The first one is, in a business, you have two main goals, managing the existing and inventing the future.

00:15:05.320 For a very long time, it was sufficient to be world-class at execution, managing what you have.

00:15:10.020 Is that the portfolio stuff that you talked about?

00:15:12.260 Yeah, that's the existing portfolio, right?

00:15:14.480 And companies do that relatively well,

00:15:16.760 but it's not enough anymore.

00:15:17.960 More and more companies are getting disrupted.

00:15:19.640 Speed of change.

00:15:20.060 Yeah, and the classic example is Kodak.

00:15:22.220 They got disrupted.

00:15:23.540 And it's not that they didn't do innovation.

00:15:25.580 They actually invented the digital camera.

00:15:27.620 But that's innovation suicide, because they killed analog

00:15:30.920 film, right?

00:15:31.660 So they almost innovated themselves to death.

00:15:34.060 What they didn't do well enough is come up

00:15:37.340 with new business models that would prepare them

00:15:39.640 for the future.

00:15:40.740 They did a little bit, but they didn't take it seriously enough

00:15:43.160 because all of their assets were invested in factories, right?

00:15:46.280 But there's a counterexample.

00:15:47.740 That's why I like still using Kodak.

00:15:49.420 This is an example that everybody uses.

00:15:51.860 Fujifilm turned into a technology company

00:15:54.620 because early enough they realized,

00:15:56.700 hey, that business is being disrupted right now.

00:16:00.500 They saw it dying.

00:16:01.320 They saw it coming.

00:16:02.560 They were in the number two.

00:16:03.560 Maybe that's why they saw it coming.

00:16:04.980 They weren't arrogant.

00:16:06.280 So they created a portfolio of new things.

00:16:08.520 You know what the obvious thing is?

00:16:09.560 Do you know one of the first things they invested in?

00:16:11.720 No.

00:16:12.220 Cosmetics.

00:16:13.480 If you're in film, you go into cosmetics.

00:16:15.720 You know why?

00:16:16.220 I don't see the connection.

00:16:17.720 I'm like, it's not obvious to me.

00:16:19.480 I'm sorry.

00:16:20.500 It's like keeping film alive is like aging skin.

00:16:25.240 So it turns out the chemicals and the patents

00:16:27.860 and the knowledge you have in keeping film alive, analog

00:16:32.340 film, is very similar to keeping your skin nice.

00:16:36.900 So they could take the knowledge they had there.

00:16:39.080 and this is one of the first things they did, right?

00:16:41.400 So based on the technology they had, on the patents they had,

00:16:44.540 the knowledge and the production capabilities,

00:16:46.920 they said, what else could we do?

00:16:48.820 So, you know, innovation doesn't always start with the customer.

00:16:51.140 In that case, it started with knowledge and patents.

00:16:54.120 Inventory of their assets.

00:16:55.060 Yeah, but they were rigorous enough to explore,

00:16:57.860 to explore new business models.

00:16:59.120 So that's a great case of a company that did that well.

00:17:02.180 And I think today there's still not enough companies that do that well.

00:17:05.520 So I like to first position it as if you want to stay alive

00:17:09.360 another 10 years, another decade,

00:17:11.480 you need to not just manage the existing mergers

00:17:14.820 and acquisitions, not going to do it.

00:17:16.860 Cost cutting is not going to do it.

00:17:18.120 You're going to more efficiently die.

00:17:19.960 So you're going to get disrupted.

00:17:21.320 You need to create a portfolio of new opportunities.

00:17:25.280 OK.

00:17:25.700 Of which only few, only few will succeed.

00:17:28.960 Even that concept, I'm sure for managers out there of saying,

00:17:33.280 I'm probably going to be wrong is a foreign concept for that.

00:17:36.520 It doesn't exist.

00:17:37.720 And so you come in and tell them that.

00:17:39.280 And then what's your prescription to help them

00:17:41.460 innovate in regards to saying, well,

00:17:43.200 you don't have to make big bets.

00:17:45.160 Is there guidelines for how to properly allocate resources

00:17:48.780 and create a feedback cycle?

00:17:51.040 The first one is to really admit that you don't know,

00:17:55.180 to be very humble.

00:17:56.460 So you know what the ratio is to create one outlier,

00:17:59.040 one big success?

00:18:00.100 If you're an established company, you

00:18:01.840 you know how many projects you would have to invest in

00:18:04.420 to create one outlier?

00:18:06.160 Turns out it's 250 projects to get one outlier.

00:18:09.940 Now, where do I take those numbers from?

00:18:11.840 From early stage venture capital.

00:18:14.380 So 60% of all early stage investments,

00:18:17.820 they don't return capital.

00:18:19.300 So you lose money.

00:18:21.140 And there's only four out of 1,000, one out of 250,

00:18:27.360 that returns 50 times capital.

00:18:29.880 So if you want to get to that outlier,

00:18:31.560 Guess what you have to do?

00:18:32.640 You have to invest in many.

00:18:34.260 You will have a lot of failures.

00:18:36.220 And I talked to the CEO of Logitech just a couple of weeks

00:18:39.200 ago, Bracken Darrell, amazing person.

00:18:41.560 He said, Alex, don't call it killing projects.

00:18:43.980 It's negative.

00:18:44.960 Call it shelving projects.

00:18:46.860 It's like you read a book, you learn something,

00:18:49.320 you're going to put it away.

00:18:50.240 And maybe you'll actually take it out there again.

00:18:52.300 You read a lot of books to get to one really good one.

00:18:54.840 And it's the same in innovation.

00:18:57.280 You might invest in $250.

00:18:59.280 And then for six to eight weeks,

00:19:01.300 Yeah, they influence what you're going to get out there.

00:19:03.720 So after 6 to 12 weeks, let's say,

00:19:06.180 do this kind of innovation discovery screen.

00:19:07.640 That's the timeline, yeah.

00:19:08.800 That's the first timeline.

00:19:10.200 You only do follow-up investments in those that show evidence.

00:19:13.060 So you might weed out.

00:19:14.020 You might shelve 50% of the projects.

00:19:16.580 So see how the small bets?

00:19:18.760 Already after 12 weeks, you kind of know now, OK,

00:19:22.660 I'm going to weed out 50% because maybe the ideas were wrong. 0.98

00:19:26.660 The teams are not necessarily stupid. 0.95

00:19:28.300 They just worked on something. 0.99

00:19:29.540 It's not the moment.

00:19:30.680 But you'll also weed out the teams

00:19:32.360 that are not so entrepreneurial.

00:19:33.800 They're better maybe at execution.

00:19:35.240 That's what I was going to ask, because it sounds like this

00:19:37.220 is true entrepreneurship.

00:19:38.660 Yes.

00:19:40.040 And I'm assuming a leader could misallocate a resource,

00:19:43.400 a team member, to that team.

00:19:45.440 And you're saying that that's actually

00:19:46.880 one of the things you're looking at.

00:19:48.020 It's like, oh, they don't really have that.

00:19:50.300 Because you don't know.

00:19:51.000 So you can't pick the winners.

00:19:52.840 It's impossible.

00:19:53.500 Not even venture capitalists can pick the winner.

00:19:55.940 So a manager is not going to be able to do it either, right?

00:19:58.280 I mean, how could you? 0.97

00:19:59.420 Super arrogant. 0.72

00:20:00.720 Yeah, it's very arrogant.

00:20:01.920 So it's this funnel, this funnel that you create.

00:20:05.160 And the best ones will kind of bubble up.

00:20:07.500 What do you see that kind of dollar investment

00:20:09.440 to create that for large companies looking like?

00:20:11.900 So in terms of stages, so it always depends.

00:20:14.660 The more you want to get out of it.

00:20:16.080 So if you want a billion dollar return,

00:20:17.980 you're going to have to invest in many projects.

00:20:19.800 About 250-ish.

00:20:21.020 Yeah, something like that.

00:20:22.340 But we work with Bayer and Bosch.

00:20:24.920 And they have about 60 to 80 teams every year.

00:20:28.020 you already get some really good results.

00:20:29.600 You won't get a billion dollar business out of that,

00:20:31.520 but you will get some good returns, right?

00:20:33.740 So in the beginning stage, you know,

00:20:36.280 for the first eight to 12 weeks,

00:20:39.200 something like $10,000 is enough,

00:20:41.560 or maybe even $5,000 per team.

00:20:43.700 That's peanuts, right?

00:20:44.780 That's nothing.

00:20:46.000 And then at the next stage,

00:20:47.620 you will increase their time that they work on the project,

00:20:51.020 and you'll also give them a little bit more money

00:20:52.860 so they can do different types of experiments.

00:20:55.260 Interviews doesn't cost anything, right?

00:20:56.860 You can do that just with your time.

00:20:58.580 But then afterwards, you might start making some first kind

00:21:01.280 of proofs of concept, whatever industry you're in.

00:21:04.040 So there you might allocate $50,000.

00:21:07.040 But you already have less teams.

00:21:08.760 So the budget might actually stay the same per phase.

00:21:12.280 And then afterwards, after maybe four months,

00:21:14.980 you narrow it down again so you take away 50% of the teams,

00:21:19.340 and you might give them $500,000.

00:21:21.140 So it's the same process as in venture-backed startups.

00:21:25.520 It's very similar.

00:21:27.240 It's just that we don't really do this in corporations

00:21:29.640 as much as we should today.

00:21:31.080 We invest in startups, which is also good,

00:21:33.500 but it shouldn't be either or.

00:21:34.420 It's both.

00:21:35.000 And what's the, I mean, if you call them pods or teams,

00:21:37.700 what is the makeup of a good project innovator team?

00:21:43.700 It should be a mix.

00:21:44.720 So it really depends on the industry, right?

00:21:47.000 So if you're in pharma, you probably

00:21:48.900 want a lawyer as part of the team,

00:21:50.900 or at least the lawyer part of the cohort.

00:21:53.420 If you're in software, it always will be, you know, at the beginning, just a designer and a coder.

00:21:58.660 And the teams at the beginning should be very small.

00:22:01.400 I'd say one to three people max.

00:22:03.060 Max.

00:22:03.560 Because you'll over-invest.

00:22:05.220 And the problem is the more resources you put into a project at the early stage.

00:22:09.820 The more you're going to want it to work.

00:22:11.240 The less you can actually kill it. 0.69

00:22:12.700 It's even worse than that. 0.73

00:22:13.740 That's it.

00:22:13.980 Because then teams are going to say, we invested so much time and energy, we can't turn around.

00:22:18.540 And then all of a sudden, this project is really big.

00:22:21.120 Nobody dares to kill it anymore.

00:22:22.460 So these things grow, whereas they should be shelved, let's call it that way.

00:22:27.600 So really having a rigorous process where after a couple of weeks, a couple of months,

00:22:31.780 you always check who's showing most evidence.

00:22:34.800 It's the evidence that should allow a team to move from one stage to another, not the idea.

00:22:40.380 Ideas are easy.

00:22:41.200 It's the evidence.

00:22:42.120 When you sit down with big companies or any company, I'm assuming,

00:22:45.380 because you're so passionate about the business model concept,

00:22:48.680 up, do you like map it out in your head?

00:22:52.600 Like if you're sitting next to a guy on a plane,

00:22:55.340 and he's like, yeah, I run this 100 million-a-year company,

00:22:57.900 what are kind of the questions you're asking him

00:22:59.980 to kind of reverse engineer?

00:23:02.400 And I don't know, do you do that?

00:23:04.100 Oh, for sure.

00:23:05.040 So immediately, in my head, in my glasses,

00:23:08.280 maybe you can't see it, there's a business small canvas in there.

00:23:11.440 So I really think it through because I do believe today

00:23:15.420 There's still room for improvement for what questions people ask, leaders ask.

00:23:20.440 They're very focused on product and segment, maybe pricing, and that's okay.

00:23:24.420 But that's just the foundation.

00:23:26.140 I start to really ask about the business model.

00:23:29.260 So a typical question I would ask is, okay, is the customer locked in?

00:23:33.900 Are there switching costs?

00:23:35.380 If it's easy for a customer to switch, well, guess what?

00:23:38.660 The business model is not that good.

00:23:40.300 So I remember, take GoPro as an example.

00:23:42.880 gopro was hyped by stock market analysts and yeah they had a great product my kids love it

00:23:48.580 i think it's pretty cool but their business model was a disaster like there was no lock-in there

00:23:54.080 was no proprietary technology so it was all branding and branding can't always keep you

00:23:59.680 ahead for very long it's very it's getting very competitive out there so they tried to change the

00:24:04.980 business model become more of a media company but they had no lock-in so that's the one fundamental

00:24:09.360 The first thing you're asking is just like,

00:24:11.160 can the customer easily switch?

00:24:12.600 Yeah, those kind of questions get you to understand.

00:24:15.660 Or are you earning transactional revenues

00:24:18.740 or recurring revenues?

00:24:20.040 So when you're in SaaS, it's easy, right?

00:24:21.540 It's recurring revenues.

00:24:23.040 But in many industries, people don't

00:24:24.720 question the difference between transactional revenues, which

00:24:28.480 are hard, cost of sales, again and again and again.

00:24:30.600 Success fees or performance-based.

00:24:32.700 Recurring revenues, sometimes you

00:24:34.340 can bring them into an industry that didn't have that.

00:24:36.960 So that's what Nespresso did to coffee.

00:24:39.040 crazy and that's an old example but still you know amazing how they changed the business model of an

00:24:45.040 industry they created recurring revenues and lock-in where it didn't exist yeah so the question

00:24:50.560 you know i always try to ask is how could you change the business model in your industry

00:24:55.520 and most companies don't because they don't even question the business model they focus so much on

00:25:01.120 product and and target customer segments that they forget well maybe you could change the

00:25:06.800 business model great example is hilti the tool maker what they did is they moved from selling

00:25:12.320 products transactionally to a service model they became a logistics company managing a fleet of

00:25:18.800 tools for their customers that was a problem that needed to get done yeah but nobody looked at it

00:25:24.080 that way because you know while it seems easy to say it like this it's a big change from a

00:25:29.360 production company from their core business they pivoted yeah yeah but i think so that's what's

00:25:35.440 It's interesting.

00:25:36.100 I'm seeing more and more companies not just coming up

00:25:38.500 with new business models, but also pivoting the old ones.

00:25:41.560 We call that business model shifts.

00:25:43.120 Shifts.

00:25:44.420 And I mean, people ask and debate how many different types

00:25:48.280 of businesses there are.

00:25:49.480 And I mean, it's tough, because a business model canvas,

00:25:52.180 you've got those components.

00:25:53.380 So if you change it, it's a factor of whatever.

00:25:55.780 It's unlimited.

00:25:56.540 Unlimited.

00:25:57.220 And that's what I would think.

00:25:58.920 There's no right or wrong business model.

00:26:00.640 There's a better business model for a certain moment.

00:26:03.320 And you don't know which one is going to work.

00:26:04.960 So all you can do is experiment.

00:26:06.720 So what we're working on with our new book

00:26:08.520 called The Invincible Company, very arrogant, right?

00:26:10.820 The Invincible Company.

00:26:11.560 Yeah, I saw that, yeah.

00:26:12.400 But it's a patterned library where you can go and look,

00:26:16.460 OK, this and this business model, could I use it?

00:26:18.920 Like in software, a pattern.

00:26:20.340 Pattern library, yeah, just like design patterns.

00:26:21.520 Bring it in, exactly, design patterns and architecture.

00:26:24.200 Bring it in, then still, you can create a better business

00:26:27.200 model design.

00:26:28.200 You still need to test it.

00:26:29.200 Yeah, but it'll get you there faster.

00:26:30.640 Yeah, and I think companies are so

00:26:32.920 focus on just aspects of the business model that they forget,

00:26:36.580 well, let's work on the business model itself.

00:26:39.220 That's a design aspect, a business design aspect.

00:26:42.700 And in particular, the more you're

00:26:43.880 in an engineering-driven culture, the less people really

00:26:46.900 think through the business model.

00:26:47.980 You can really ask some fundamental questions.

00:26:50.800 Could we do this or could we do that?

00:26:52.780 But you need to unlearn.

00:26:54.340 You actually need to forget which business model you're

00:26:57.100 in today and ask what could be.

00:27:00.340 Like an architect or industrial designer,

00:27:02.740 They ask, what could be?

00:27:03.920 And they imagine possibilities.

00:27:05.920 And then try to figure out if it's the physics.

00:27:07.680 If they could work.

00:27:08.760 If it could work.

00:27:08.980 Exactly.

00:27:09.560 If you could make it work.

00:27:10.700 If you had to design a business, Alex, what is your favorite business?

00:27:15.980 You know what I mean?

00:27:16.700 From a model point of view, people like reoccurring because it's

00:27:20.120 predictable, I get it.

00:27:21.060 But from your point of view, what model?

00:27:22.940 I have a favorite pattern, which is getting others to do the work.

00:27:26.300 Of course.

00:27:26.880 How did that work?

00:27:27.680 How did that work?

00:27:28.320 I mean, think of it.

00:27:29.420 Facebook gets 2 billion people to work for them for free.

00:27:34.280 The value of Facebook comes from the content

00:27:37.240 that 2 billion people create.

00:27:39.360 I mean, that's my favorite thing.

00:27:41.060 Then I mentioned that to Fortune 50 companies and say,

00:27:43.760 yeah, but that's digital.

00:27:44.840 That's Facebook.

00:27:45.500 They can do that.

00:27:46.100 We can't do that.

00:27:47.000 But then think Ikea.

00:27:49.280 People used to buy furniture.

00:27:51.120 I definitely work for Ikea when I buy Ikea.

00:27:53.920 There you go.

00:27:54.620 So now what they did is they outsourced part

00:27:58.420 their value chain right their supply chain so you can do it anywhere or think credit card company

00:28:04.740 who does the work for the credit card banks issuing banks the issuing banks but also the

00:28:10.580 the merchants and the people you know who buy who go to the restaurants so there are a lot of

00:28:15.540 other stakeholders who actually do the work for you so you want to ask yourself how can you get

00:28:21.700 others to create value in your business model it's a very interesting question right and the

00:28:26.100 And the more you get others to create value in your business

00:28:28.320 model, the higher the value.

00:28:30.180 Or think Apple when they launched the App Store.

00:28:33.340 Who does the work in the App Store?

00:28:34.780 All the developers.

00:28:35.600 There you go.

00:28:36.380 So there's so many ways of getting others

00:28:38.700 to create value for your business model.

00:28:41.980 And it's not just for digital companies like Facebook.

00:28:44.280 You really can ask that question.

00:28:45.580 That's one pattern that I really like because it's fun.

00:28:48.720 And you increase the barriers of entry

00:28:51.020 as well at the same time.

00:28:52.020 Because you have an army of people innovating for you.

00:28:54.380 And that's hard to copy.

00:28:55.500 So take the iPhone.

00:28:56.940 The technology is easier to copy.

00:28:58.860 All the phones kind of look the same these days.

00:29:01.180 What you can't copy overnight is the App Store or Google Play.

00:29:04.900 Those two bastions are impossible to copy overnight.

00:29:09.520 It's practically impossible.

00:29:10.640 And that's why you have two operating systems today.

00:29:13.140 And that's why Windows died.

00:29:14.480 They could never build up that army of developers.

00:29:17.440 That's why you have two platforms.

00:29:19.000 I love that question.

00:29:20.400 Is there other questions?

00:29:21.820 Like one question I like to ask is, if somebody buy you tomorrow,

00:29:24.960 What's the first thing they would change?

00:29:26.800 If they bought our company.

00:29:28.280 Any company.

00:29:28.780 It's just a really good way to get rid of your biases.

00:29:31.240 And Andy Grove came up with that question from Intel.

00:29:34.320 Is there any other questions that you

00:29:36.260 like to ask to help leaders get clear about strategy

00:29:41.200 or priorities and stuff like that?

00:29:42.960 The biggest one is, what's the evidence?

00:29:45.020 So I think leaders today, they rely a lot on opinion

00:29:48.960 or past experience.

00:29:50.760 But the fundamental thing you want to ask these days

00:29:53.340 is what needs to be true for this idea to work?

00:29:56.540 I find that an incredibly powerful question.

00:29:59.740 I think the framing of it came from Roger Martin,

00:30:02.020 number one business thinker in the world.

00:30:03.400 And it's really powerful because that will always give you

00:30:06.280 the underlying assumptions.

00:30:08.100 Or you could call them hypothesis, to use a fancy word.

00:30:10.860 What needs to be true for this idea to work?

00:30:13.780 And then based on that, you'll figure out some assumptions.

00:30:16.440 Which is, in some ways, first principles to the idea.

00:30:20.100 Yeah.

00:30:20.900 But people don't question their assumptions.

00:30:23.220 They just believed them.

00:30:24.060 You just gave me like this flashback.

00:30:25.900 I had these kids that were building a gym, like a park,

00:30:30.260 like a play park.

00:30:31.520 And the idea was, their business idea,

00:30:33.300 they won the award to build an energy generating play park.

00:30:38.240 What needs to be true?

00:30:39.280 Well, that the amount of energy being produced

00:30:42.220 is actually materialistic enough to, you know what I mean?

00:30:45.700 Or the cost to produce the equipment.

00:30:48.520 It was like these first principles.

00:30:50.240 I'm like, you did not talk to anybody that knows any good.

00:30:52.580 And it's such a good question of just like, OK.

00:30:55.900 It's like Uber.

00:30:56.520 It's like, for this to work, what needs to be true?

00:30:58.520 OK, let's go see if we can validate those assumptions.

00:31:03.060 And then do you ever see yourself getting bored

00:31:07.100 around just digging and scratching around the business

00:31:09.640 model stuff?

00:31:10.580 So we're way beyond the business model stuff.

00:31:14.540 So we still don't see enough adoption of business model

00:31:17.700 thinking, so we still push that.

00:31:19.180 So when I don't see people, you know, doing something that I believe, you know, could be important, you need to ask yourself, are you hallucinating or is it something that you're doing wrong and how you're getting into the market?

00:31:33.100 So there's some of that still, but we didn't get stuck with the business small stuff.

00:31:37.140 So we, you know, and I say we, Strategizer and Eve and so on, we always ask ourselves, why do established companies, our target market, why don't they innovate yet?

00:31:48.260 Yeah.

00:31:48.760 And as long as they don't innovate, well,

00:31:50.900 we didn't have the right answers. 1.00

00:31:52.340 So it's easy to say, well, they're stupid. 1.00

00:31:54.500 No, they're not. 1.00

00:31:55.180 We're not doing our job.

00:31:56.380 So we need to help them.

00:31:57.500 So you had to figure out the question to ask yourself.

00:31:59.500 Yeah.

00:32:00.080 It's almost like one level up first.

00:32:02.180 So we go one thing after the other.

00:32:04.040 So at the beginning, it was the business model.

00:32:05.600 Then it was the value proposition.

00:32:06.440 Now we have a language to talk about this.

00:32:07.860 Yeah, exactly.

00:32:08.360 Why are they not innovating?

00:32:09.480 Exactly.

00:32:10.020 So we came to the culture.

00:32:11.340 Well, then we came to culture.

00:32:12.620 So together with a guy called Dave Gray,

00:32:14.540 we created the culture map.

00:32:15.820 So OK, we started that.

00:32:17.600 But then the big thing for me was,

00:32:19.640 the more I was able to talk to leaders,

00:32:22.100 the more I realized there's still

00:32:23.600 a lot of myths out there about innovation.

00:32:25.720 They're just not true.

00:32:27.200 So with Eve, we sat down and we asked,

00:32:29.360 what language can we create for leaders?

00:32:31.400 So with the Business Model Canvas,

00:32:32.680 we created something for doers.

00:32:34.700 But at the top level of Nestle or GE or whatever,

00:32:38.340 you don't think business models.

00:32:39.680 You think allocation of resources

00:32:42.020 to different business units or business models.

00:32:44.520 So what's the language we could create at that level?

00:32:46.700 What's the tool we could create?

00:32:47.940 So we came up with the portfolio map.

00:32:49.960 So that's how we kind of just go from one problem to the other.

00:32:52.940 Shizzle away from one problem to the next.

00:32:53.980 As long as we haven't solved it, I'm not going to get bored.

00:32:56.320 The moment we solve it, maybe, but we'll find something else.

00:32:59.200 Yeah, it'll uncover the next step.

00:33:01.000 So the new book is around that.

00:33:03.140 And what are some of the high-level concepts in the book

00:33:06.260 that you feel the market have resonated with?

00:33:09.240 So the big one is the business portfolio map.

00:33:11.680 So it's this whole idea that in an established company,

00:33:15.140 And that could be a 30-person company.

00:33:17.600 You need to manage the existing, and you

00:33:19.700 need to invent the new.

00:33:21.780 And that's what, for a long time, we

00:33:23.520 call this the ambidextrous organization.

00:33:26.300 So the term has been around.

00:33:27.680 A lot of books have been written about it.

00:33:29.340 But nobody's really done it.

00:33:30.680 So we try to create practical tools

00:33:32.840 to get companies to become ambidextrous.

00:33:35.740 And the portfolio map is one of those tools.

00:33:37.860 So that's a big one that really got traction with leaders.

00:33:40.280 Because every leader has to do that.

00:33:42.360 Yes.

00:33:42.860 and also push the innovation.

00:33:46.820 So in the SaaS space, a Slack, a Dropbox,

00:33:50.520 if you're looking at Dropbox, what is the thing

00:33:54.320 that they need to manage versus how do you see them doing that?

00:33:58.800 What's the right way to think about it?

00:34:00.400 I think the right way to think about it

00:34:02.200 is just to create this space where people, and when I say

00:34:05.480 space, I don't mean the physical space,

00:34:07.100 but the cultural space and the metrics and so on,

00:34:11.300 just to try out new stuff.

00:34:13.440 And I don't know Dropbox from the inside well enough,

00:34:15.840 but you take a company like Amazon,

00:34:17.480 or you take Ping An in China, a finance company

00:34:20.300 that became a tech company, they demystify failure.

00:34:25.460 And it's popular these days to say, yeah,

00:34:28.160 you need to let people fail.

00:34:29.520 But how many companies actually do that?

00:34:31.760 How does Amazon do that?

00:34:33.080 Amazon, well, from the top down, the CEO says,

00:34:36.240 failure and success, innovation, invention, failure,

00:34:39.860 are inseparable twins.

00:34:42.000 And to investors, he says, he wrote this in an investor

00:34:45.080 letter 2016 for the 2015 annual report.

00:34:48.380 He said, Amazon is the best place in the world to fail,

00:34:51.920 period.

00:34:53.140 How many CEOs do you hear saying that?

00:34:56.100 It turns out Ping An in China has the same approach.

00:35:00.400 So if at the very top you really allow failure to happen,

00:35:05.040 for innovation, I'm not talking about build a new warehouse,

00:35:07.400 you're not going to fail at Amazon.

00:35:08.740 You're not going to last for very long.

00:35:10.640 But they really experiment.

00:35:12.940 They ask, why not?

00:35:14.680 And they have tons of failure.

00:35:16.720 Amazon fire.

00:35:17.780 Yeah, you bet.

00:35:19.060 And they're proud of it.

00:35:20.380 So teams don't get fired for failing if it's an experiment.

00:35:25.000 They celebrate because they know that they need to fail a lot

00:35:29.080 to create that one outlier.

00:35:30.340 Remember the numbers?

00:35:31.300 250 to 1.

00:35:32.620 You're not going to get that outlier.

00:35:34.580 So if you want to produce a billion-dollar business,

00:35:36.500 it's not going to come from 10 projects.

00:35:38.320 impossible and and companies who do innovation well and amazon is still at the very top there

00:35:43.520 and add some like pinyan in china there and maybe tencent alibaba they really have this culture of

00:35:49.840 experimentation why not but not just in their core business beyond imagine a book retailer

00:35:56.400 launches amazon web services who would have ever thought that you know the biggest competitor in

00:36:02.560 cloud comes from a retailer because they said why not they had to you know sell this service

00:36:09.680 internally from the networking team to the software team and they said well why shouldn't

00:36:14.880 we do this for internet companies and then all of a sudden was banks pharmaceutical companies

00:36:19.360 it's a why not culture and we don't have that enough in established companies again from small

00:36:25.280 to big the more success you have the more risk averse you get yeah it's a paradox and then you

00:36:31.040 You should actually reinvent yourself while you're successful.

00:36:34.580 So did a lot of that come from the culture work you did,

00:36:37.580 and then you use a portfolio map?

00:36:39.100 Yeah, we were just seeing this in companies,

00:36:41.120 and we tried to find little answers to go next step,

00:36:44.180 next step, next step.

00:36:45.500 I think the big one that we just kind of finalized now

00:36:48.960 is innovation metrics.

00:36:50.600 How do you measure the reduction of risk and uncertainty?

00:36:53.300 Because that's what managers fear.

00:36:54.840 So if we can measure it, we can take away some of that fear.

00:36:57.540 So that's one thing.

00:36:58.460 Another one of these concepts.

00:37:00.200 Well, you measure risk and uncertainty.

00:37:02.400 So you say, this project, this level, based on the evidence,

00:37:06.360 is 100% uncertainty.

00:37:07.720 We have no evidence.

00:37:09.560 It's just an opinion.

00:37:10.440 Looks great on paper, but there's no evidence.

00:37:13.240 The slide deck looks great.

00:37:14.620 The spreadsheet looks great.

00:37:15.860 So the metrics is probability?

00:37:18.080 Like, what do you measure?

00:37:19.840 You actually measure for each.

00:37:22.060 So they're basically about four.

00:37:24.300 We narrow it down to four risk areas.

00:37:27.540 Desirability, do people want it?

00:37:29.660 feasibility can we actually build it can we get the ip and so on and then viability can we make

00:37:35.020 more money from it than we spend then we add a fourth one so these three are pretty popular

00:37:39.180 we add a fourth one called adaptability is it the right timing and you know can our technology etc

00:37:44.620 survive for the next five ten years yeah those are four risk categories so you need to show me

00:37:49.660 for all of those four risk categories the evidence that you're on the right track did you do some

00:37:55.820 pricing experiments okay we talked to 10 customers oh that's pretty weak evidence show me stronger

00:38:01.100 evidence it's qualitative at that point at that point it's qualitative but then you do stronger

00:38:05.900 experiments yeah so it's only with the stronger experiments that you reduce risk yeah if you have

00:38:11.180 pre-sales great and if you have simulated sales even better because that's the real thing yeah

00:38:17.100 so that's how you will prove that you could actually scale this and you can do simulated

00:38:21.820 sales before you build anything it's another one of these myths you need to build something to test

00:38:26.780 you don't kickstarters proof of that and even before a kickstarter right you just you know

00:38:31.260 you put a data sheet in front of your b2b customers and you can have a great conversation

00:38:37.180 you could even put a brochure in front of b2b customers almost get to the sales conversation

00:38:42.460 get very very strong feedback do they have the budget will they be willing to pay so i think

00:38:46.380 I think we're not sophisticated enough in how we test.

00:38:49.880 So we wrote a book together with David Bland

00:38:52.860 called Testing Business Ideas.

00:38:54.800 It's a library of 44 experiments.

00:38:57.260 It's going to come up in November.

00:38:59.280 So that is really to help people get more sophisticated

00:39:02.240 in how they test and how they reduce risk and uncertainty.

00:39:05.700 And you can measure that based on the evidence.

00:39:07.600 Alex, you have made the transition,

00:39:10.360 which I think a lot of people in academia

00:39:12.860 hope to entrepreneurship and building this really

00:39:16.700 incredible consulting or product company.

00:39:21.260 How did you do that?

00:39:22.560 Who are the people that you look to maybe in their career

00:39:26.140 or that inspired you?

00:39:28.520 What model of, you know what I mean?

00:39:30.920 How did that just, or was it just every year

00:39:33.140 you just kept plugging away at?

00:39:34.260 But I mean, it's really remarkable.

00:39:35.660 Just following my passion.

00:39:36.960 You know something about that, right?

00:39:38.540 Just doing what I enjoy most.

00:39:40.400 And then things fall, you know, into place.

00:39:42.800 And then getting very lucky with the people I meet, going in the right direction, meeting, you know, Eve, Steve Blank, Alan, is really just following my passion.

00:39:52.140 So I'd say the biggest inspirations were probably Prince, the musician, because he never really cared what people think.

00:40:00.360 I don't care what people think.

00:40:01.800 I'm going to follow my passion and try to do great work.

00:40:05.460 That's as basic as it gets.

00:40:07.500 Do great work.

00:40:08.080 And then based on that, you know, just follow my path.

00:40:10.280 And in academia, I found there was too much rigor.

00:40:13.900 So you publish to publish in journals that nobody reads.

00:40:17.920 I couldn't get passionate about that.

00:40:19.940 So I went out.

00:40:20.860 And actually, one of the reasons also that I left academia is I tried.

00:40:25.780 Nobody wanted to hire me.

00:40:27.140 Now they bring me back for a lot of money to give a talk.

00:40:29.820 Isn't that funny?

00:40:30.580 Go to Stanford and Berkeley and so on.

00:40:32.560 So it's just kind of funny.

00:40:33.680 I tried out stuff.

00:40:34.880 Some of it worked.

00:40:35.560 Some of it didn't.

00:40:36.180 But most important for me, the fact was always, what am I passionate about?

00:40:39.160 What do I really want to do?

00:40:40.400 What do I want to spend time with?

00:40:42.420 And then if you don't like it, just move on.

00:40:45.100 How do you juggle the entrepreneurial stuff

00:40:47.620 with the family stuff?

00:40:48.960 That's a very good question.

00:40:50.560 So it's up and down.

00:40:51.460 And probably now three or four years ago,

00:40:54.280 for me it was a big eye opener.

00:40:55.400 I was spending way too much time at work.

00:40:57.660 And I had to recalibrate.

00:40:59.340 And I actually had to recalibrate

00:41:00.940 my definition of success.

00:41:03.060 Success is not just fame and wallet.

00:41:05.880 Success is, well, individual.

00:41:09.020 You have to ask yourself, what do you want to achieve in life?

00:41:11.780 What's important to you?

00:41:13.260 And I had to just recalibrate and say, well, important for me is my family.

00:41:18.460 It's my kids.

00:41:19.260 My wife is number one. 0.60

00:41:22.100 And two is really that was core.

00:41:24.420 And then give business a bit less space.

00:41:26.900 I mean, today we've seen a talk here at Business of Software where somebody said,

00:41:31.580 oh, you can only get three out of five.

00:41:33.660 No, you can't.

00:41:34.380 That's a question of choice, right?

00:41:36.100 But then it's hard to actually say, well, you're disciplined.

00:41:40.480 Do I have to go from zero to 50 million in revenues in X years?

00:41:46.840 What's the difference?

00:41:47.720 What is it going to make as a difference?

00:41:49.420 In some industry, yes, because you might get killed.

00:41:51.900 But in some industries, it doesn't matter.

00:41:54.300 It's just a burden you put on yourself, and you'll pay the price.

00:41:58.020 Are you happy with the price?

00:41:59.360 Do it.

00:42:00.180 If you're not, don't.

00:42:01.400 And for me, family is important.

00:42:02.500 Be aware.

00:42:02.800 So you essentially fast-forwarded it and said, hey,

00:42:06.340 if I continue, yeah.

00:42:08.440 And since I'm a bit obsessed by modeling,

00:42:10.580 of course I sat down and made some circles.

00:42:13.420 Yeah, it took my personal offset.

00:42:15.640 It took two days and just started putting up sticky notes,

00:42:18.880 drawing, and just asked, what do I really want from life?

00:42:21.160 Do you think that type of content will ever

00:42:23.140 show up in your professional work?

00:42:24.760 I think so, yeah.

00:42:25.600 So already now in the company, so I really

00:42:28.840 believe that we want to create a workspace where everybody

00:42:32.780 does, number one, does their best work,

00:42:34.640 and they only work on stuff they really want to work on.

00:42:37.280 That's pretty hard, but I think you can do it.

00:42:39.460 And then if somebody leaves because they don't have

00:42:41.200 a problem to solve it, strategize it, excites them,

00:42:44.100 that's fine.

00:42:44.600 That's OK.

00:42:45.480 But people should never leave for any other reason

00:42:48.040 other than starting a new company

00:42:50.060 or working on something else that they're passionate about.

00:42:52.280 They won't find with us.

00:42:53.280 That you won't find in strategizing.

00:42:54.260 So in that sense, it's already showing up today in the work.

00:42:58.260 And then later on, so I don't just

00:42:59.600 believe in innovation for financial growth.

00:43:02.520 That's one thing.

00:43:03.780 But I believe in innovation for a better workplace.

00:43:06.900 So what are the tools that will help us

00:43:09.000 create a better workplace?

00:43:10.280 And that's where the culture map is already a start.

00:43:12.240 We use it for innovation at the moment.

00:43:14.160 But at the end of the day, you know.

00:43:15.580 A better place to work.

00:43:16.200 Yeah, and I think that's where a lot of companies

00:43:18.520 could have a huge impact on the world immediately.

00:43:21.120 All the employers, if they focused on that,

00:43:24.660 the world would change overnight.

00:43:26.880 We just say, oh, business is business.

00:43:28.860 That's different.

00:43:29.700 No, it's not.

00:43:30.420 You're still a human being.

00:43:32.280 So the role of business, I think, is changing.

00:43:34.920 The great leaders like Paul Pullman at Unilever,

00:43:37.640 they're changing their mindset.

00:43:38.960 In that case, it's sustainability.

00:43:41.200 You have Patagonia, but you have a lot of companies.

00:43:44.100 Or here, HubSpot, they really put people at the center now.

00:43:48.120 And I think less and less people are

00:43:50.640 going to accept the crappy workspaces or workplaces

00:43:53.360 that we have, and they're just going to vote with their feet.

00:43:55.900 So it's a great thing to do.

00:43:58.060 One question I'd like to ask Alex as we wrap up.

00:44:01.340 Obviously, you've had a lot of success as an entrepreneur,

00:44:04.980 but who did you need to become to be the CEO you are today?

00:44:08.840 When you look back at the Alex.

00:44:12.340 Well, I think just constantly questioning yourself.

00:44:15.980 So I have a great coach, Shani Ospina.

00:44:18.720 I had the opportunity to work with Marshall Goldsmith,

00:44:21.020 number one leadership coach in the world.

00:44:23.340 It's just always questioning, am I doing the right thing?

00:44:26.360 Always trying to get to the next level in terms of how I work.

00:44:29.900 so i think i got better at what i'm doing because i was never happy with i always wanted a better

00:44:37.520 version of myself which is terrifying and maybe sometimes you also need to say hey just relax

00:44:42.000 you know you're a human being and but that you know i think gets everybody to improve and i was

00:44:46.500 lucky enough to find some great coaches so that was pure luck but that helped me get to a different

00:44:51.720 level look at things differently and i do think um 10 years ago you know if i look at who i was

00:44:58.020 10 years ago, I'm embarrassed, right?

00:45:00.180 Two different people.

00:45:01.060 Oh my goodness, yeah.

00:45:02.280 And that's what it should be, right?

00:45:03.880 Alain de Botton, the philosopher, says,

00:45:05.680 if you look back and you're not terrified by the person you

00:45:09.340 were, you probably didn't make enough progress.

00:45:12.540 So I like that way of looking at things.

00:45:14.340 Alex, where do people find you online?

00:45:16.320 So just at strategizer, blog.strategizer.com.

00:45:19.580 That's where we share a lot of our ideas for free.

00:45:21.780 That's awesome.

00:45:22.580 Thanks so much for coming on.

00:45:23.380 Thanks for having me.

00:45:23.940 This was great.

00:45:25.000 I appreciate it.

00:45:25.620 Thanks.

00:45:26.320 Thanks for watching this episode of Escape Velocity.

00:45:29.460 Be sure to like and subscribe and leave a comment

00:45:32.340 with your biggest insight from our conversation.

00:45:34.960 Be sure to check out the next episode.

Dan Martell - February 13, 2020

How To Innovate Against Your Competitors with Alex @ Strategyzer.com - Escape Velocity Show #21

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