Guy Raz on What Great Business Leaders Have in Common

AI is transforming the world. And it starts with the right compute. ARM is the AI compute platform trusted by global leaders. Proudly NASDAQ listed, Built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm kurt nickish. We love to celebrate entrepreneurship, we love to celebrate great business leadership. But for all that attention and oxygen, it's still kind of an enigma. You know it when you see it. But what are the necessary traits of a successful founder? What is the decision tree that a compelling organization organizational leader follows? On this show, we talk to researchers who study founders and executives. We talk to professors about their deep dive case studies. And we often talk to founders and CEOs directly. My guest today interviews entrepreneurs and leaders week in and week out. He's the host and co creator of the podcast How I Built this where company founders break down their journeys with him. And he hosts the podcast Wisdom from the Conversations with Leadership Experts and visionary Leaders. Our guest today is Guy Raz and he joins me now to talk about what he has learned from all these in depth conversations with remarkable business people. Hey, Guy.

Kurt. Hello. Thank you for having me on the show.

You've got hundreds of episodes of How I Built this. You know, where you spend a good three hours in a studio interviewing an entrepreneur, a founder. You also have dozens of conversations with leaders in Wisdom from the Top. Has out of all of that a pattern emerged or a template emerged for you? It's essentially kind of a large qualitative research project. What has come out of that?

I think that's exactly right. I mean, obviously I think of these as shows, but the other side of it is that it is a large data set. So We've got about 700 interviews with founders and CEOs in depth interviews about how they built their careers, the decisions they made, the mistakes they made, and what you find over that. You know, you find a lot of qualities, right? Some leaders are really warm and personable. Howard Schultz is a great example of this. He hugs people. He gets to know his employees really well. He really lives and breathes culture. And we hear about this, you know, we hear about leaders who are, you know, really good at feedback, leaders who are really good at transparency, leaders who are really great at, you know, rallying their teams, leaders who are really good at managing people and organizations. There's a huge variety of qualities. But when you sort of, if you were to sort of make like a word bubble, right, and you were to take all of these interviews and you start to build a venn diagram. What you would find is there are three qualities that all of them have or three things that they do in their businesses, their companies that I think are common to successful organizations. It doesn't mean that they're all doing everything right all the time, but what they all do and what they all have in comm are these qualities and these approaches that really help explain why some businesses become great and others don't. The first is they all create a culture of collaboration, all of these leaders, full stop. The second thing they do is they encourage risk taking. And then the opposite side of that coin, which is the third thing they do, which is they allow for failure.

All right, well, let's spend a little bit of time on each of these then, and let's do those in order. Let's start with collaboration. It seems like it's almost like a throwaway word nowadays to say you're collaborative, right. Or you're looking for people who are collaborative. When we dig into it or when you hear people talk about collaboration, what reveals itself then?

Yeah, well, let me give you an example. First of all, I would say that collaboration, you're right, it's one of these throwaway words that, you know, we sort of just assume that everybody is collaborative, but it's actually a very nuanced idea. Right. So there are some sectors where it's harder for leaders to encourage and create and facilitate a culture of collaboration. For example, the service industry, like law firms or finance firms, where, you know, people are judged on, you know, it's eat what you kill. And where people are judged by their individual sales or their P and ls. Right. And this does apply also to larger organizations where different units are competing against other units. Right. At the end of the year, you look at the P and LS and then you decide who's done the best and then they're compensated based on those P and ls. What I find is that companies that have a different model that actually incentivize collaboration tend to be more innovative. And you might hear this and think, okay, well, well, startups easy to be innovative. They're scrappy. There's less bureaucracy. They can break rules and do things that more established companies can't do.

Yeah, you might as well share ideas with each other because you're going to be out of business anyway.

You're going to be out of business. Exactly. But one of the most collaborative companies is also a company that some people might think of as a dinosaur. That's Procter and Gamble. This is a company that was founded before the Civil War. Right. And it's a company, I think they have 60 or so brands and I think 20, at least 20 of them, are worth over a billion dollars. So this is a massive multinational company. And what distinguishes Procter and Gamble from a lot of its competitors is that they do encourage cross collaboration. I went and visited P and G before the pandemic in December of 2019. One of the coolest stories that I came out of P and G with is a story of toothpaste. So back in the 90s, they own crest, that's one of their brands. And Crest was getting its butt handed to it, kicked by Colgate. Colgate was really doing very well in the marketplace. And Crest was trying to figure out how to build a new product. There was a guy at Crest at the time named Paul Sagal. He was a researcher there. He was working on teeth whitening products at the time. In the 90s, this is when people started to go to the dentist to get their teeth whitened. This was a huge trend that started. And he thought, well, could we bring this home? Could we get this product into people's homes and they could do it themselves? So he came up with a solution that you put on your teeth and it really worked great. The problem was he couldn't figure out how to get the solution onto teeth. He couldn't figure out an easy way to do it. Like, could you? You know, was it going to be a hard plastic sort of mouth guard? He couldn't figure it out. Anyway, he was having lunch with a co named Bob Dirksing who worked in another division of Proctor and Gamble. He was working on a plastic product at the time. Procter and Gamble was trying to compete with like, Glad and Saran Wrap to come up with a new plastic wrap. Anyway, Bob Dirksen was listening to Paul Sagal's Dilemma and he said, look, why don't you come down with me to plastics? We're working on this product. Let me see if I can cut a piece out and we can see if it'll work. So they cut a piece of this plastic wrap out, put the teeth whitening solution on it and wrapped it around their teeth. And it worked. It stayed. A couple weeks later, they took this prototype to the CMO and they said, hey, we've come up with something really cool that we think is really cool. Within six months, that product was on the shelves in stores in the US. It was called Crest Whitestrips. And in year one, that product generated $300 million in revenue for Procter and Gamble. It's the kind of example that shows you that when people from different parts of an organization come together, they can build incredible things because oftentimes you've got incredible specific expertise in one part of an organization and really great expertise in another part of an organization. And it's not as common as we think when those two parts of the organization come together and build something. But in organizations where you do find a culture of collaboration where people are rewarded and recognized for collaborating, they come up with great products.

Yeah. What have you heard from some of the leaders and founders that you've talked to? Just about competition in the workplace, having a healthy competition that's there, but also directing it all to so that it doesn't become kind of toxic competitiveness or I don't want to help that person because they're going to get the revenue and they get the bigger budget and I just end up losing in this whole situation by sharing information.

So one of the key things is to recognize collaboration and to really put a spotlight on it. There's a guy who used to run into it who I'm sure many of your listeners are familiar with. Brad Smith was a CEO, and back in the mid-2000s, he basically @ that point, Intuit had, in his view, and Scott Cook's view had become more of an established company with bureaucracies and many different divisions. And they were trying to recapture that startup sensibility. And so one of the things that Brad Smith came up with was 10% time. You basically were handed 10% of your time to do anything you wanted to do that that would help the company, help make you better at what you do, help make the experience better for customers. Now, at the time, their biggest product was TurboTax. And most people by the mid 2000s were using it on a desktop computer. And this was a massive generator of revenue for Intuit. But there was a guy at intuit named Amir Eft. Like many other people, he took this 10% time very seriously. In fact, at a certain point, there were about 1800 concurrent independent projects going on add into it because of this 10% time. And so what Amir Aftikari decided to do was to think about mobile. Now, that might not sound so radical today, right? But in 2005, 2006, that was kind of radical. I mean, this was still the era of blackberries, you know, and he. He was thinking, well, why can't you just take a photograph of your documents? For most people, taxes are fairly straightforward. Why can't you just take a photograph of your documents? And then Just upload them and make it really easy to do. And there was quite a lot of pushback internally on this idea because their bread and butter, the Golden Goose was TurboTax for desktops.

Anyway. The classic cannibalization.

Canoe. Exactly, exactly. And he really perseveres on that. This project with a colleague from another part of the company who was really focused on marketing. Her name was Carol Howe. The two of them really worked on this idea together and within a few years they came up with TurboTex Mobile, which completely transformed the company. Today, by far, far and away, it's the most profitable engine within Intuit TurboTex Mobile. And I think it's the most common, still the most widely used or one of the most widely used ways for Americans to file their taxes. Both Amir and Carol, who worked in this product were rewarded not just in terms of recognition, but I think they were given like close to a million dollars worth of shares. And so it's not only, of course, about recognizing what people do publicly and celebrating them. What you're finding with more and more leaders is they are giving their employees equity in the business. You know, they're giving them something to work towards. It's something that, you know, Hamdi Ulukaya of Chobani does, who was on how I built this a couple months ago, that is a huge part of how he incentivizes collaboration and teamwork is that everybody owns the company and everybody increasingly owns more of the company every year that they're.

There. Collaboration might be easier than risk taking. Right. Which is the second commonality that you identified. Risk taking is a little scarier.

Right? It.

Is. We all like to say we're collaborative. Not everybody likes to even say that they take risks. What have you heard then in your conversations about creating a culture for risk taking? That first of all, what kind of culture they have and then how do they actually create.

That? Yeah, I mean, this is one of the most. Both risk taking and a willingness to fail are two sides of the same coin. It's one of the hardest things to do, but one of the most important things to do because. And it almost sounds intuitive, right? Like self evident that you have to innovate, you have to take risks and you have to make mistakes in order to innovate. Like, we all know that intellectually, but we are all mostly risk averse to a certain extent because huge swings for the fences are scary. Right. And so one of my favorite stories is the story of James Dyson. He is a, you know, just kind of a born Entrepreneur, but, but also a huge risk taker. He had a product that he came out with initially called the Ballbarrow. And it was supposed to be, it was a wheelbarrow that was going to change the way people garden and work and even on construction sites because it was designed to have a low center of gravity. Imagine like a big yoga ball in front of a wheelbarrow instead of the, like the, you know, the single wheel. It was a giant ball, didn't sink in the mud and it was a great product. But the product never sold and he was kicked out of the company that he founded. He brought in a bunch of investors, they actually took over the ip, he lost it and he was out of, out of work, you know, in his mid-30s. But what he saw during that process, during the creation of the ballbarrow was he noticed that when they were powder coating the ballbarrows with paint, when they cleaned up the paint factory, at the end of the day they had these huge suctions, these huge like turbine fans that would suck out all of the particles from the air. He just thought to himself for a moment, like, why don't we have vacuum cleaners that are that good, like home vacuum cleaners that can suction things that way? He had no idea why. So he started to investigate this and he discovered that it was because vacuum cleaners depended on bags. And when the bags, when the pores of the bags got, got full, the suction of the vacuum was no longer effective. So he set out, he's a self trained engineer, he set out to create a vacuum cleaner without a bag. It would take him seven years of experimenting on his own. He went through something like 5,000 prototypes before he landed on one that eventually worked. And he took that vacuum cleaner to a small sort of mid sized retailer in Britain called John Lewis and they agreed to carry it in one store. But it was such a weird product. It was so quirky and so interesting and then that it caught the attention of people who then started using it. And word of mouth really propelled the growth of that product. Of course it's the Dyson vacuum cleaner, by the way. He was broke when he was 42. He was totally bankrupt, over leveraged, mortgaged his house. I think he's like the 12th or 13th richest person in Britain today. He's in his late 70s. What he did with that product has carried into the DNA of the company. They are constantly coming up with ideas that they don't actually put out into the marketplace or things that they do put out into the Marketplace, but that they'll pull quickly if they don't work. They make great products because they also make products that fail spectacularly. So it allows them to really push the.

Boundaries. Yeah. Now for the third commonality that has come out of these interviews. You find that founders and the leaders you talk to, they really have an appetite for failure. They essentially allow people to take risks that will fail, and they're also willing to fail themselves. It's funny, I notice on your show, it's almost like you talk about you're speaking to successful founders, for instance, but it's almost like you talk about failure more than you do.

Success. Yeah, we do, because I think we learn more from the failures of founders than we do from their successes. Like, if you're on How I Built this. Right. Or Idea Test, or Wisdom from the Top, we know you've succeeded. It's not a secret. And just talking to somebody about their successes is fine. I mean, you can still learn things from it, but I think you can learn a lot more from the decisions they made that didn't work out and why. One of the ways I think about it is that there are no shortcuts in starting a business or running a business. Like, it's really hard work. You know, there isn't a single founder or leader I've interviewed who's lazy or who just rolls out of bed every day and fleets from success to success, you know, without any obstacles. It's just not true. But if there is any shortcut, it's that if you can figure out or if you can understand the mistakes that other people have made, it might help you prevent making the same mistake. And so risk taking is hugely important. And there are risks that can be failures, but almost always pay off in some other way. There's almost always something that comes out of it in some other way. I mean, the example of the ballbarrow leading to the Dyson vacuum cleaner. You know, one of my favorite stories is a company called Spin Master, and it's a toy company started by a guy named Ronan Harari. And back in. At the beginning, they started out with a product called the Earth Buddy. And the Earth Buddy was basically a, you know, a nylon pantyhose, sort of pantyhose material stuffed with soil and grass seed. And you can imagine what would happen when you put water on it and they. They pasted googly eyes on it and eventually grow, you know, a head of hair, of grass hair. And it was called the Earth Buddy. That was their first product, and it was a Minor hit. But what you discover when you run a toy company is that kids, children are probably the most fickle consumers on the planet. They might like a toy for six months or a year, and then it's dead. So what Renan Harari did was he began to reflect on why things, certain things work and certain things didn't. And what he decided that he really needed to do was to build a multi generational brand. Now, this is one of the hardest things to do in kids toys. Like, if you think of a multi generational kids brand, it's easy, right? Mickey Mouse, Bugs Bunny, Spider man. Right, The Marvel characters. But it's really hard to build a character that lasts that long. I mean, think about the cartoons you watched when you were a kid. Very few of them are still resonant today, right? It's so hard. But if you can do it, it's like the holy of kids content. So what he decided to do was go to the smartest people he knew, you know, in different sectors, like people who were experts in video and animation and games, in apparel and publishing. And he asked them a bunch of questions like, what works? What colors work? What themes work? What characters work? Just a bunch of different questions. And he got some common answers. And the answers were dinosaurs, space animals, puppies and pandas, in particular, trucks, rescue workers like firefighters and police officers and so on. So we took in all this data. They decided to start with products first. Lunchboxes, action figures, and really build that out first. And then focus on television, cartoons, films. So the concept that they landed on was anthropomorphic puppies who happened to be emergency rescue workers. Okay, I think you probably know where I'm going with this. It was called Paw Patrol. That brand was introduced in 2014. It hasn't been out that long. And yet to date, that brand has generated about $10 billion in global revenue. It is among the most enduring multi generational, multi platform children's brands in the past two decades. It's in like 40 languages. It's everywhere. And that was the result of watching things fail and then assessing why they failed and coming up with a plan to really figure out in this very deliberate, intentional way what might stick. And it.

Did. That's a great decision making story. I wonder what other insights you have into decision making. You talk to founders who are fighting an uphill battle, and executives have to make strategic choices all the time. What takeaways are there from how people think through decisions or work through their.

Decisions? One of my favorite CEOs I've ever interviewed is a guy named Mark King, who he ran TaylorMade Golf. He was the North America CEO of Adidas, and now he runs Taco Bell. Mark King said something very, very simple. He's like, my job as the CEO is not to have the answers. My job is to. My talent is to find the people who have the answers. And I think that's such a simple and clear insight. In any business, in any company, there is no such thing as a lone genius. We all know that, right? There are teams that build things out, and companies that can really create an environment where collaboration is not just valued, but celebrated are companies that succeed. How do you do that? There are a number of ways to do it. I mean, the first and easiest way to do it is to enable people to throw out radical ideas, to put radical ideas out, Ideas that may not be actionable or may not generate a new product, but might spark a conversation. I'll often be asked by team leaders who might oversee a smaller group of people, like 25 people or 50 people. They'll say, well, how do I do that in my team? And I'll say, well, you know what happens when you're sitting in a boardroom and you've got a team meeting and there's an open discussion? What percentage of the people in that room dominate the discussion? And it's usually 5 to 10% of the people in that room usually carry about 90% of that conversation. And one of the reasons why is because most of the people or many of the people in the room are just afraid of being judged for having weird ideas or silly ideas or maybe ideas that they might even think are stupid. But if you force people to throw out their worst ideas, their stupidest ideas, their silliest ideas, it's not necessarily to, you know, to force them to come up with something. It's more about creating an environment where conversations can be.

Sparked. It's kind of like the same way a singer can hit a high note solidly. It's by sort of stretching and hitting higher notes first and going lower, of expanding the zone before you settle in on the note you want to.

Hit. Exactly. I mean, you know, that documentary on the Beatles that came out last year was a great example of this because so many. You see Lennon McCartney working out songs, and so many of the songs that we know today that are these incredible, powerful, profound songs began as just gibberish, right? Just meaningless words or even meaningless riffs. Right. That. That over time, were refined. One of my favorite examples of a company that really has figured this out is ideo, which is a design firm. Their job is to go and help companies figure out how to be the best versions of themselves and their approach. And they really pioneered this approach of design thinking, which is to approach any problem with a mindset of empathy and optimism and a willingness to experiment. And they really do push this idea of creating an environment where people feel comfortable and safe to throw out radical ideas. You have to have a space that enables people to feel totally uninhibited, to throw out really weird ideas, because weird ideas ultimately connect to creative ideas which ultimately connect to innovative companies and brands. And so I think that, to me, is the key. It's building a culture of collaboration. It's not easy. It doesn't happen overnight, but it's very possible. It's very doable. And there are some really simple things that small organizations and even bigger organizations can do to start to do.

That. Well, Guy, thanks so much for taking the time to kind of bring us into the knowledge base that you've built, talking to all these people and sharing some of the biggest.

Takeaways. Thanks so much.

Kurt. That's Guy Raz. He hosts the podcast How I Built this and Wisdom from the Top. And HBR has more podcasts to help you manage your team, manage organizations, and manage your career. Find them at hbr.org podcasts or search HBR in Apple Podcasts, Spotify, or wherever you listen. This episode was produced by Mary Dew. We get technical help from Rob Eckhart. Our audio product manager is Ian Fox, and Hannah Bates is our audio production assistant. Thanks for listening to the HBR IdeaCast. We'll be back with a new episode on Tuesday. I'm Kurt.