Apples are Square | Tom Kuczmarski | Talks at Google

Well, good afternoon and welcome to another one of our continuing series of authors at Google. Speakers at Google. We are very pleased and fortunate to have with us today this afternoon one of the world's really leading speakers and authors on the notion of innovation in business innovation. And that is of course Tom Kowsmarski. He is the founder and managing partner of Kuzmarsky and Associates, which is a highly respected and globally recognized management consulting firm that clients big and small, domestic and international, rely on and depend on to help supercharge innovation as a mission critical component of businesses globally. And given that our business depends on innovation and creativity, we thought that we would listen to some words from Tom today. Just a couple of bullets on his background. We could go on and on because he is such a deep expert in this area. But a few things that you should know is that he has written several books on the subject of innovation. One is Apples are Square, which you have in front of you here for those of you in Chicago. So please take the time to look through that. It is an excellent book, an excellent primer, and I would suggest a good plane reading. So for all of you guys who are traveling, pack it in your briefcases and bring it along with you. He originally was a brand manager at Quaker Oats, has consulting background from Booz Allen, and as I mentioned, has a terrific consulting firm here in town. So we are pleased to have our friend and partner, Tom with us today. And with that, I'll turn it over to you. Thank you very much for coming today.

Thank you. Well, I'm just super excited to be here with all of you today. Of course, then again, when one comes to a Google to talk about innovation, it's kind of like telling jokes to a clown, right? I mean, to some degree, given how wonderful you are as an innovation company. Is this mic okay? Is this okay? Okay, good. What I want to try to do this afternoon in our few minutes together.

Would you ask everybody to make sure that their remote mics are muted?

Or should I use this one? No, no, it's on the far side.

Just say, if you're dialing in, please make sure your mic is muted.

If you're dialing in, please make sure your mic is mute. Thank you very much. Perfect. I want to talk about two topics. And so, you know, any good speaker always says, no, no, no, you got to be focused and you got to just talk about one topic at a time. But I want to try to squeeze two of them in. And they're my two passionate topics. One is called innovation and the other is called leadership. And my angle on leadership is the one that my wife and I kind of recently developed with Apples or Square, Thinking differently about leadership, which we think takes an innovative approach to leadership. So actually that's where the two kind of connect with each other. Okay, before we start, I want to see and find out from you if there's anything in particular that you might want me to talk about on the topic of innovation or leadership, because I just love both topics. Is there anything you can think of that would relate to Google, relate to you, relate to your personal life, career life?

Can you routinize, processize innovation, or does it have to be original every time?

Terrific. Can you processize or routinize innovation, or does it have to be different and unique every time? Great, great question. Love to talk about that.

Being at Kellogg, how do your students respond to your discussions of innovation?

Are they excited about it? Engaged? And what kind of examples do you use? What kind of companies do you point to in terms of innovation? Great. Kevin's question is, how do some of my students at Kellogg feel about innovation and what examples do I give them in terms of innovative companies? One of them is Google, so. But I'll give you a few others, too. Anything else? Well, if something pops up, please just ask, because I'm not. I'm always kind of an informal type of guy. Please. I'm wondering how you make sure that what you innovate do is actually going to be demanded by the market ultimately. So creating something that obviously isn't there yet. But this is my shell. What was your name again? Kristen. Yeah, Kristin's my shell. Because I think the dimension of innovation that often people and companies forget about is that while we have to focus on the creative side of innovation, we also have to focus on how do we convert that into a successful business venture or new service or new product that ultimately will serve customers and. And will be profitable to us. And so how do we really do that? Is the question. And that's a great. Terrific. Well, those three questions alone I could spend the rest of the afternoon on. So we'll try to. Try to weave those into our discussion. Okay. Did you hear the news, though? What's your name? Tom. Tom, did you hear the news, though, that an innovation engineer just died a couple days ago? And I have the inside scoop that he was at The Pearly Gates, St. Peter was there and he's checking the roster and he says, you gotta go below. So he goes below. But he's so innovative, he transforms the place. So Hell has never been so good. He's putting in refrigeration systems and air conditioning units, and it's just great. But one day the devil gets a phone call from God. God calls him on the phone and says, you know that innovation engineer, we made a mistake. He doesn't belong down there. He belongs up in heaven with us. Devil says, no way. I'm not letting go of him. He's been the greatest thing we've had down here in a long time. God says, if you don't, I'm going to have to sue you. Devil says, yeah, as if you'll be able to find any attorneys up there. No, we love attorneys. We love attorneys. And they're part of the innovation process. They really are. But it's important for us to value the role that creativity can play in this process. To. When I get asked often, what is innovation? How do you define innovation? My answer is that it has to be able to do or it is about four things. The first thing that it's about is offering new benefits to customers, offering new benefits to consumers. If the innovation isn't able to do that, then in my view, it's not really an innovation. Secondly, it has to be able to be something that's different from competition. If it's the same me too type of thing, just. But now you've got your brand name on it or your company's name on it, then it's really not an innovation. So it's got to be differentiated. 3. Ultimately, it has to be valued by customers. So if the customer or the consumer recognize the benefit of this and value it, then I also say it may be a great new technology, but it's not an innovation unless the consumer or customer ultimately sees the value in it. And then lastly, it has to provide and create economic value for the firm or for the organization that is involved. Now, that economic value may be right over a long time period. It may be that your innovation may be unprofitable for many years. It may be that you're using your innovation strategically to attract a certain segment of consumers or achieve some other strategic role for the organization. But ultimately, ultimately it should provide economic value. But I also think that it has a lot to do with the internal mindset of an organization. And this is the aspect of innovation I've been wrestling with for a long, long time. It's the aspect of innovation that's the soft stuff, that's the people stuff, that's the culture stuff. So 15 years ago, sure. Can I get companies excited about a process oh, they all love processes because, you know, especially CEOs, they look at the process and they look at the boxes and they go, oh, yes, this is a linear process. I can go from A to X and I can get my innovation. Well, process is good. I'm not saying it isn't good, but it's just a piece of this whole creating this whole innovation mindset. A second key piece of creating an innovation mindset is having an innovation strategy at the top. Because if we don't know what it is that we're ultimately trying to achieve from our innovations, but rather if it is totally wide open, then I kind of say, well, how do we begin to know where to kind of invest a little more time, a little more resource, a little more focus. And then lastly, you got to build the culture and the culture has to be one. In my mindset, in my view, that goes like this. I like companies to throw failure parties. Why would you ever throw a failure party for an innovation failure? Some people think that's the goofiest idea they've ever heard. Why would you ever throw a failure party? Think of any reasons? Because no one ever talks about what you learn. And you can learn as much, right? We can learn as much from our failures as we can our successes. Why else? Oh yes, it makes it safe to do again. Exactly right? What's your name?

Katrina.

Katrina. Katrina. It makes it safe to do again. And importantly, what you're signaling to the organization is that you're giving them permission to fail. Now, the objective of innovation is to not create tons and tons of failures, right? That's not our goal. It's to create more marketplace successes. But ultimately we have to have the mindset that says if I'm doing this in a logical way, I'm doing it in a thoughtful way where I'm getting input from consumers and customers, etc. Etc. Etc. And this team fails at that innovation. That's a. Okay. And we really do embrace it, adopt it, and say, this is part of innovation and we all have to accept it. And then the last part of the mindset is this one. And I get in trouble for this lots of times. I always like to get a little bit trouble. I say you have to change the compensation system. Most organizations pay people exactly the same way. Oh, your pay changes by level, right? So we have hate point systems and the like. So it changes its level and your bonus gets a little bit higher. And I go, but what happens if you just developed a hundred million dollar business? You think the people involved with that should get a little bit more some piece of it or invest in it or whatever. So I think that's the other piece of creating a culture and a mindset is also aligning rewards to goals in a way that's going to say, hey, innovation is a core business strategy for our company, our business, our organization. And we want to find a way to really instill that in the minds of people. Now, one of the things I strongly believe in is celebrating innovation success. Because if we're not celebrating it and if we're not making a big deal out of it, if we just kind of expect it from people and don't really signal that we value innovation, then I don't think that's going to help work in terms of the culture. So six years ago I started here in Chicago with D. Dan Miller of the Chicago Sun Times, something called the Chicago Innovation Awards. And at that time we pick. Each year we pick 10 organizations in terms of their products or their services that we feel have demonstrated or created a new category in the marketplace, provided some financial evidence of success, and most importantly, have created an impact or met a consumer or a customer need. When we first started six years ago, we had 75 people attend the first Chicago Innovation Awards. And I was so excited about that. It was just terrific. 75 folks come. And last October, and I know Kevin was there, Jim was there, and a few others, we had 760 people show up at the Goodman Theatre. And the thing I've loved about it is that we've been able to garner support and interest from government, from local, local and state government, from academia, as well as from businesses large and small throughout the Chicago area. So it's again just another, I think, important aspect of creating a culture of innovation. And that's the whole aspect of celebration. So these were this year's 10 winners. And in fact, the one in the middle there is from the City of Chicago Green Alley program. And last week it was featured in the New York Times. The thing that's so neat, I think about this innovation, is that it is a Green Alley program. What they do is instead of having asphalt, this is a type of asphalt that's made out of ground up tires. And so water permeates through as opposed to running off. So from an environmental standpoint, there's a big benefit. You're also using recycled tires as the material for. And in the summertime it absorbs heat instead of reflects heat. So I mean, it's got multifaceted aspects to it. And the goal is to get this in about Half of the alleyways throughout Chicago. Let me just share with you a couple of these that I think are also really neat. Besides that one, Ocean Tomo, I think Ocean Tomo was a new to the world. All of these, of course, are created all in Chicago and new to the world service. Here's what happens. So a company has trademarks or patents that they no longer have a use for, so they put them up for auction on Ocean Tomo. Some other company that may have a use for that biotech or for that it or for that intellectual property or whatever buys it at an auction or likewise, you know, if I'm a small company, I can't invest in R and D, then I would go to Ocean Tomo and see if I could either sell or trade my technology. So I think it's kind of an ebay right for intellectual property and trademarks. And it's only been around for two years. I put the one on the right hand side because I think you all know that little company, E Burner. But we identified them first as an innovative company and then Walgreens I love because they came up with the innovation of multilingual prescription labels. So if you're a Spanish speaking person, a French speaking person, a Polish speaking person, and now you go into Walgreens, you can get your prescription drugs printed in your own native language. What's the benefit that that solves for the consumer? Be able to take their medicines correctly. They'll be able to take their medicines correctly. Exactly. Which is actually the primary cause. Right. Of illness. That people don't take the right dosage. What's the benefit to Walgreens? A new consumer base. Okay, exactly right, Tom. So they're attracting a new segment of consumers. Okay. They protect themselves from lawsuits. You know what's interesting though? The opposite of that is true in this innovation. In fact, the key obstacle for Walgreens to move forward on this was the liability aspect of getting the prescription wrong. And that's one of the reasons why they won't execute this verbally. It has to only be they'll only accept prescriptions in written form from position physicians or from doctors to make sure that that doesn't happen. But you're right. It also offsets from a consumer standpoint the liability aspect. What's your name?

Betsy.

Betsy, okay, thanks. Any other benefits you can think of for Walgreens? Customer loyalty. Customer loyalty, sure. Not only do you attract that new segment. Right. You've also kind of hooked them in in a way because you're going to instill Loyalty. And oh, by the way, where is that prescription place in the store when you go into a Walgreens? It's way in the back, so maybe you have to walk through and you might pick up some other incremental and incremental revenues might accrue as a result of that. So it's been very successful. And what I love about it, again, is that here's a, you know, you think about it, what's the big deal? It's just putting, you know, foreign languages on prescription labels. They've had this now for six years and nobody else has entered the marketplace with the same type of service. And it's had a very positive impact on their business. And this one I love was invented by a guy by the name of Matt Youngel, and he went to the University of Madison and he used to wait in line for beer. And he said, this is ridiculous. I don't want to be waiting this long for beer. So he invented this thing called the TurboTap. And the TurboTap dispenses beer in six seconds instead of the normal 22 seconds without foam. I know you're thinking to yourself, yeah, but there's going to be a ton of foam now. But that's the whole benefit of the technology, right? Of TurboTap. What's the benefit to the consumer? We can drink more beer faster, right? So that's a clear benefit. High value in that innovation. What about to the food service operator? Sell more beer faster. What was it? Faster rate, faster rate, right? Not have long lines. Not have long lines. Higher customer satisfaction, more throughput, higher productivity, lower labor costs. I mean, it's like it's a win win. And he invented this about four years ago. He's in over 5,000 stadiums today, and it's growing now and expanding internationally and the like. And Matt, I'd just love to tell this little side of the story for those of us that are hard working, as all of us are. Matt this year at the age of 32, is spending the year on the island of Tartola with his wife. And he's just thinking and creating. I asked him if he needed a smart professor to go along with him. He said, no.

We'll put one of those in here.

Yeah, okay. Okay, good. That's a good idea. I'll get you a deal on a turbotab. Sometimes it's hard for me to convince CEOs on why they need to pay attention to innovation. But a number of years ago, I finally found the magic formula. And the formula was stock price appreciation. Why would CEOs be interested in stock price appreciation? It's what, it's kind of like how they're paid, right? And stock options. And why else? Because ultimately that's what their customer base is, right? The shareholders. So whether their stock is going up or not really is a factor that shows and proves whether or not the company is performing well. So what I did is took a look at a number of industries in terms of over a five year time period. What's the stock price appreciation of different companies? You know, without a doubt, what it shows loudly and clearly is companies that are innovative have a significantly higher compound annual growth rate in terms of stock price appreciation year after year than any other index. You want to look at S and P, Dow, any vanity funds or the like. And so if over the last five years, from November of 2002 to November of 2007, you were to invest in the S and P, you would have generated on average each year a 10% return on your investment. Okay, that's not bad. However, if you'd invested in these companies up here, you would have ended up with a 30%, 40%, 80% return on your investment. Netflix, who's familiar with Netflix? Everybody. Okay, I just love this example because this is a totally different business model. I think in many ways, just like Google, what were the problems with Blockbuster? What were the things that consumers didn't like about Blockbusters? Late fees, selection. You have to drive there, right? Limited selection. Okay, so three key consumer problems. Netflix said we're going to fix those problems. No late fees. We're going to eliminate you schlepping this to and back to the retail store. And we're going to make the selection inventory almost unlimited. Do you know how big they are today? Netflix? $700 million in revenues and profitable. And what do you now see outside Blockbuster stores? Well, some cases you see for lease signs, but besides that, what do you see?

Late fees.

No late fees. Delivery. So they're just playing the me too copy now, trying to catch up. Netflix reinvented and recreated that whole experience in a way that solved consumer problems and developed a new business model. One other one, Samex. Samex is a company in Mexico. They are a cement company. That's a commodity if I ever heard of one.

Right.

It's totally sold based on price. Well, the president of Samex said, I don't want to continue to compete this way. So what they created in effect was the domino pizzas of the cement business in Mexico. They have roving trucks with drivers that have cell Phones. So if now I'm a foreman and I need my cement to be delivered at one o' clock in the afternoon, I can call two hours ahead of time and have that, I call that in one of the roving trucks nearest my location, then will deliver it within a two hour time frame. Oh, guess what though, it is more expensive, it's higher price, higher margins, but again for the consumer it's worth it because cement is perishable. So I can't order a delivery of cement to be here at 9 o' clock tomorrow morning and my foundation is ready because then I have no use. So they've really been able to recreate that whole industry and they're really now the most profitable cement company in the world. Well, I think it's clear that innovation does pay for itself. This was a study that we did that looked at 11,000 new products and new services that were launched over a five year time period. And what we did is that we took those companies, companies that we said were the best, and that would be those that were generating at least 20% of their revenues from new business models, services, processes or products that were also dropping at least 10% to the bottom line. And we called those people, those companies, the best. We then put all the other companies into the category of the rest and we looked at the types of innovations that they were launching and here's what we found with the best. 39% or almost 40% of the types of innovations that they were launching into the marketplace were either new to the world or new to the company. In contrast, only 23% were the rest. About each had about a third that were kind of the line extensions, upgrades, enhancements and improvements. But look at this, only 18% of the best were improvements versus 42% for the rest. What conclusions could you draw from this as it relates to innovation? So the best innovate well, so they're not spending a lot of time right. On improvements and fix it. And let's make sure we get it right once we've launched it. They get it right kind of to start with. That's a great observation. What else looks like the rest is kind of milking something that they've already done. Yeah, that's a great point.

What's your name?

Spencer. Spencer, what was yours? Kelly. Kelly and Betsy. I don't want to forget Betsy. Okay. And Spencer, the thing that. Exactly right. Okay. So the rest of the kind of want to milk what they've got. Why do you think they want to do that though? It's safer Right. It's definitely lower risk, and that's one of the reasons why only 23% were new to the world or new to the company. So the real key point on this is that companies that do innovation well, they understand and they look at this as a portfolio. You can still remember back to Those late, late 1990 days when some of us would be trying to find the 1 IPO stock to invest in. You all found the 1 stock to invest in, but others of us didn't. Right. Likewise, you can't just look for one innovation. It's all about a portfolio. And a portfolio that consists of different types, new to the world, new to the company, things that will get us into new countries, into new markets, into new segments, and at the same time, innovations that will help defend and support and grow our existing portfolio of services and businesses that we have. So it's really a combination of the two. And that's what I continue to find best practice companies doing. Tom, I have a question. So what about industries that don't innovate? So, for example, like the advertising agency, like the insurance industry.

Yeah. Like they just don't innovate because it's.

Comfortable, it works for them. They're fat and happy, but then everyone around them innovates. I mean, that's. How can that be? How can that be entire industry not innovating? Here's my answer. And Ted, I think it's. I think it's. I wish I could tell you it's a more positive answer than what I'll give you, but here's my real world answer. Until there is a crisis within the company, until a major competitor or a brand new competitor emerges and creates a real competitive threat for the business, or until some other factor that's kind of negative occurs. I think what you said is exactly right. Lots of companies and lots of industries are just kind of happy to kind of just stay where they are and not necessarily do all that much thinking about what's coming next. I'll never forget when I was presenting at an insurance company in St. Paul, Minnesota, called the St. Paul Travelers, and I was doing a little session like this on innovation, and the head of HR said it was going to be really important to get the CEO in front of this group to convey his commitment to innovation. And so what he did is that he came, he came to this session and somebody in media relations must have talked to him about, you know, your hands, you have to make sure you do something with your hands. So the chairman came in and he stood. I'm not exaggerating, stood like this with his two hands around his coffee cup like this to make sure that he had a place for his hands. And then he said, he said, now, we're very excited to have Tom here today to talk about the topic of innovation. I just want to start by saying one thing. You have to all remember that we cannot have any failures in our business. So at that point, I said, okay, this is going to be great fun. But that's the reason, right? If the mindset is such that I'm kind of happy and content the way I'm going, then it's only going to be when some other competitor comes along. And I'll give you an example that you guys are doing. I was just jumping for joy to hear this. You got three guys out there that are making telephones these days. And while I love Motorola, I love them. And Nokia is doing a lot of great things. But the challenge is, or the problem is, they're not really thinking differently about the whole consumer experience, in my view. They're thinking about products. And so until somebody else comes along with a different business model or begins to change that whole competitive set, that's often when people, I think, will jump into shape and we'll play the game differently. That's one of the reasons why I espouse and talk so much about all the great things I see from an outsider's perspective about what you've created and are creating and evolving within Google. And I just think it's utterly fantastic. And I endorse it and I embrace it, and you should all keep it a secret so that other people don't begin to know. You shouldn't, you shouldn't. You should share. And of course you should, because it's always unique to every single company. So that's what I think. What do you think? I think it's because people are scared.

And people aren't willing to. And I think we run into this with a lot of clients that we.

Go out to present to. It's like, oh, put all your money into search and YouTube and this and that. What we always understand is that in a lot of ways, we're asking them to kind of bet the farm. And a lot of CEOs aren't willing to bet the farm because they can't fail, because the shareholders get upset.

The board of trustees kicks them out.

And the board of directors kicks them out.

So I think it's just this.

I'm not going to risk my job or my company, and we're going to Keep going down the same path. It's easy. Sure. And that's why I think the whole idea of creating an innovation portfolio was so key. Because if you're doing innovation and you're creating a portfolio, you're not putting all of your bets in one area because you're spreading your risk, you're diversifying your risk by pursuing a lot of different types of innovations in a lot of different areas. And ultimately, that's what I think is important also for a CEO to be able to see and feel greater comfort on. Now, I have great respect for your. Actually, I have great respect for your Chief Innovation Officer as well as your Chief Information Officer, Marissa and Doug. But Marissa has nine guidelines for innovation. You all know those, so I'm not going to show you those. So I thought I'd share my 10 guidelines for innovation success. And for those of you that don't know, this is parchment paper. See, this goes way, way. Actually, just I gotta tell you this little story, this quick story, then I gotta move because I gotta get to Applesau Square fast. But literally, I have three boys, ages 24, 22 and 17. And the one who's now 24, when he was about 4 years old, actually he started using computers when he was 2, but about 4 years old, 5 years old, or 6 years old, something like that. I brought out one day this lp, this big LP album. And he said, dad, I said, yeah, John, I said, this is a, you know, this is. He says, no, no, no, I know what it is, but it must have a million songs on it. So I, I still remember what parchment paper was like. So here's my top 10 list of innovation best practices for organizations. The first is set some expectations. Now, don't think of this in terms of defining expectations with great precision and total accuracy, but we've got to be able to identify strategically, somewhat broadly, financially, something that relates to our, our business strategy, the roles that we want innovation to play within our organization. The second thing that is important for companies to do that want to be innovative is to listen for consumer problems and needs and then focus on solutions. Now, this is just one I might throw out to all of you to think about. Do you really feel that you have a good grade grasp on your consumer and your customer's broader set of business process needs? You may know what they need in terms of you're trying to sell them, right? So you know what it takes to sell them your service and your business, but what's the broader context of what they might have as a need and that's what I think often can drive innovation too, is looking at ways that we can use technology and looking at ways that we can use our expertise, our capabilities to help solve those solutions. And so lots of times I'll ask people, how many people here are creative? In fact, let me ask you, how many people here are creative? Raise your hand. See, but this group blows it for me, because this is a very creative group. But lots of times I'll get how many people here are creative? I'll get two or three hands. Then I'll ask, how many people here are good at problem solving? How many people here are good at problem solving? Raise your hands. That's just about everybody. And so that, I think, often is what can also provide people with a sense of confidence that that is what innovation is often supposed to be about. Because we're solving problems, we're doing it in unique ways and we're doing it creatively, but that's what ultimately innovation is about. And then the last best practices for companies are all the ones that relate to culture. And I think playing in teams, in my view, innovation is a team sport. You can't go sit in a cubicle, sit in your office, sit in a chair and go forth each day by yourself and be innovative. It takes interaction, it takes playing, it takes participation, it takes listening, it takes talking. It takes the ability for us to view this and spark this in a way that's going to generate different angles, perspectives, solutions, ideas and the like. I think another best practice is that we've got to keep score. Why would we want to keep score? Why wouldn't that stifle innovation? If we start keeping score in some way, why wouldn't that be like the death knell? It's like, ugh, you don't want to keep score, why might you? Compensation. That's one reason why you might. It creates competition. If you keep score, is that good? Is that bad? I'd agree with you. It's got to be keeping score. The keeping score, though, has to be done from a champion standpoint, as opposed to being a policeman standpoint, because then it's not good. So if we're going to be, then that's not the right type, but otherwise I would agree with you. Any other reason to keep score? You want to know if you won or not. Exactly right. You're exactly right. See, you know, the idea itself may be 50% of the innovation, but the other 50% that counts is how has this team transformed this idea into a successful, meaningful and valued innovation in the Marketplace. And so we want to know, we innovators want to know how well we've done in that thing. And that's why keeping score ultimately is important. We also want to reward lavishly. Oh, I don't. I get in trouble for that one too. But I go, why not? And so let me just throw out this crazy idea. So let's say the five of us tonight go home to our self friend or spouse. We take $10,000 out of the bank, we come in tomorrow morning and we give it to. Don't you, you manage it. Don't you manage the Chicago office? Some days. Some days. Some days. So the five of us now will hand over our $50,000 to Jim. Right. That goes into Google's corporate coffers. And what do we own? We now own 2% of the future earnings stream of any new innovations that we develop over the next five years. What's that mean? That means we go home in five years from now and we say to ourselves, friend like spouse. Ah, we didn't need that money anyway because what we got was zero. Or we each go home with a check for $350,000 because that represents 2% of those future earnings of new innovations that we had developed. Now, please keep in mind, Jim also keeps 98% right. Of those earnings. So it's not like it's way out of whack here, but it simulates more of an entrepreneurial environment. Now, I don't want to come here and cause trouble. I don't want to get anybody in trouble. But rewarding lavishly, I think is part of innovation success, along with encouraging fearlessness. And encouraging fearlessness, I think is a key attribute for companies that create a culture of innovation. Squash hierarchy. Let me just say one little thing about this. Right now, actually, I'm working. I love the company. It's a great company. It's the third largest company in Mexico called Alpha, and they're highly diversified, but they've got lots of hierarchy. What's the problem with hierarchy as it relates to innovation?

More people to say no.

More people to say no. Exactly right. And what's the easiest thing to do when we're talking about innovation? I don't think it's gonna work. Or, or, you know, Tom, really, it's a good idea. But we've tried that before and it did just in. So hierarchy tends to make the job of saying no easier. And so the more we can flatten and have shared leadership, the more chances we have for innovation success. Nine is instilling self confidence in people and 10 is what I want to talk about now. Leaving different. So I just gave you in 37 minutes what will take me three days that kill off to do with senior executives. But I know that this group is so darn bright you got it all. Anyway, hey, in 1995 my wife and I and married partner now for 31 years and my best friend still Susan Smith Kosmarsky. Thank you. I feel the same way in 1995 except she's the brains of the fan. She got her doctorate at Columbia and I'm just, I'm the face guy. And she and I wrote this book in 1995 called Values Based Leadership. Well, if you can Remember, back in 1995, one of the key values was kind of greed and how can we get invested? So we would go to CEOs talking back then about values based leadership and they would say often to us, oh well, we've got values on based up on the wall. Or they'd say, oh well, go talk to the HR person because he or she handles values. So I guess after four or five years of that, we got maybe a little bit discouraged. That was back in 1995, maybe 99, 2000. And then lo and behold, if you go to Amazon now, over the last three years, we've sold more copies of Values Based Leadership in the last three years than we did the previous seven years. And so it seems as if this corny thing called values may indeed be coming in vogue. And so five years ago, we embarked on a different venture. And that was to say this. We're not so sure leadership is doing all that well. So we kind of looked at the leaders in government and leaders in business and leaders in academia. We kind of said there might be something missing here. So what we did is we went out and looked at 125 different leaders. We asked kind of two questions. What's the impact of this person's leadership on the organization? And to what extent has this person been able to stimulate an environment that enhances people's innate talents and skills? But that list of 125 got down to about 35, which in and of itself we thought we were starting with a pretty good list to start with. And what came out of this were 25 leaders that we profiled in this book, Apples are Square. And these 25 people, in our view, represent the types of leaders in our humble opinion that has to drive the 21st century forward. And here's the major, major theme of this whole construct of leadership. The old boy Construct of control and compete is dead. And so while some great leaders in the past, like Larry Bossadine, Jack Welch, and lots of other folks that did a great job today going forward, that's not the leadership style going to work. And the reason why it's not going to work is that people's values have changed and people no longer are willing to work blindly without value, without leaders that understand and really believe and embrace the fact that this isn't about leadership. It's about a term we call in this people ship. That's what leaders should be focused on are the people within the organization and how do we serve them better? So talking from these 25 folks, here's what we discovered. They all shared six common values. Six common values that they all kind of embraced. And we went, holy moly. There might be something here, but those values in no way represent what we stereotypically think as the leader who's in control, who's at the top, who's telling us what to do and how to do it and what not to do. Because these leaders have these values. They have humility, they're humble, they're open, they're vulnerable. Compassion. They understand that relationship building and the fact that we all work together on a daily basis, day after day, week after week. We have to know who we're dealing with. I need to know what turns Ted on. I need to be able to know what turns Kristen off. I need to know what Tom's real objectives and personal goals are. I need to know what Betsy's afraid of. She's fearless, I know, but there's something out there. She is. So as leaders, we need to embrace and understand compassion, transparency. You know, in lots of organizations, people kind of wear armor. And leaders in particular. Oh, don't show emotion. It was one of my first performance review many, many years ago I had Tom does this. He's blah, blah, blah, blah under my development areas. And my performance review was, Tom needs to show less emotion. He needs to. I think leaders in the future are people that understand that being open and being vulnerable and transparent is what leadership is all about. They ultimately have to make decisions. But in my view, they make decisions, and in Susan's view and our view, they make decisions based on values, not based on the next 90 day forecast, nor based on what the financial analysts want people, nor based on even changing this quarterly review to make sure it looks better for the next time around, but based on the values that they want to make sure the organization continues to live and breathe inclusiveness as opposed to exclusivity. And this in some ways I think we've made headway in terms of understanding that we, we as leaders need to embrace an organization that is highly diverse. But I gotta tell you this one, for example, it really bugs me and bothers me deeply. In 1985 I made a forecast at Kellogg publicly. So don't go out and buy stocks on anything. I'm cnl. Because this doesn't tell you how good of a forecaster I am. In 1985 there were eight female forecasts Fortune 500 CEOs. I predicted that from 1985 that by the year 2000 that would go to 20% or we'd go from eight Fortune 500 female CEOs to 100. Right, 20%. 500. Here we are in 2007. So that's 22 years later, we've gone from eight to 11 female Fortune 500 CEOs. Now I'm just saying that's a bad situation. That's a bad situation to have 489 guys running Fortune 500 CEO companies today. And that's a situation that needs to change. That's not a demonstration of inclusiveness. And as my wife and I also get into discussions with senior leaders about is this whole theme of, well, women can beat their own ducks. And our view is, uh, men need to change. And until some of those views and leadership styles and approaches change, then I'm not so sure this other situation will be enhanced. But that's so controversial. We better leave that one alone. I'm going to finish up here in just a couple minutes. Collaboration. This one's a no brainer because now just in the last four or five years, there's been a lot of research done. It's just proven collaboration and partnering will get you better results and higher performance than competition and competing against each other and going after each other. And there's no question about that. So what we did is looked at those six values and said, wow, there's really something here. And I think what's unique is the impact of those on innovation. So let me just give you two examples of a couple of the folks in our book. One is Mary Ellen Weber. She was the second youngest female astronaut to ever go in the space shuttle. And she went around twice. She went in the space shuttle twice, twice in the International Space Station. And she's an amazing woman, actually. It was so cool. She sent us an email from the space shuttle. So we got an email from Mary Ellen from the space shuttle. And I love this little story. She told. Because our shuttle mission commander discussed his own mistake. We were not afraid to make mistakes. Nobody was ever afraid to admit that they did not know something or that they needed help. It was a really productive environment. And her whole point was, here we are where every single protocol, she has to memorize 10,000 protocols before you can go up in the space station. So everything is so exact and so precise. And yet before they went up, it was her commander who talked about his failures in the past in order to provide. Right, a perspective for all of them to understand that failing is okay. I mean, but what's so rare about that, right, is that you would expect just the opposite from somebody where precision is so important. Randy Larimore. Randy Larimore is the former CEO of United Stationers. And United Stationers did fantastic from a profitability standpoint when he was there. But you know what stuff he thinks is so important as a leader, my motivation has to do a lot with truly caring. I send birthday cards to probably 50 people a month. I write notes to people. I send emails to people when I think they have done a good job. I try to go out of my way to do something personal for somebody. And he views that as his role as a leader. And see, it's no longer corny to think this way, because people that are, in my view, of your generation and of your experience and of your background are people that have values, that say, we really do need to change the way we think about leading organizations and working with each other. And I'll just leave you with this one little short story because. Because I think it's important to think about. There's a story of a little boy who's walking along a beach, and he's throwing starfish into the sea. And a man comes up to him and says, what are you doing? He says, well, I'm saving all the starfish in the sea. The man says, well, but you can't do that because there's millions and millions of starfish and you can't make a difference. And so the boy says, okay, I understand. And so the man feels great that he's now conveyed the reality of the world to the little boy. And so he walks away, and he turns back, and he sees the little boy pick up another starfish and throw it into the sea. And so the man goes back over to him and he says, but I thought I explained to you that you really can't make a difference. And the little boy said, but I sure made a difference in that starfish's life. And so I throw out the same idea to you because in my view, all. All of you are the people that will be leading organizations of this size and larger and smaller and different over the next 10 or 15 years. And I think each of you can make a difference on the way we think about innovation and the way we think about leadership. And I think you should. So thanks. I'd be happy to answer any other questions and also stay around if anybody wants to have me sign their book. I'd be glad to do that. It'll increase the value by at least 25 cents. Yeah, actually, you have a question. Can you use the mic so it'll go on to the PC? Sure, sure.

Talk about a innovatively challenged industry. Newspapers, I think, are under the microscope. They're getting lambasted from all angles these days. Have you ever met with them before? If not, would you please? I work specifically, you know, Google's getting into the offline world. I work with Google Print right now, and it's been interesting being Google, but entering into this traditional media space, and there's been a lot of inherent challenges with that, as you can imagine. What is your take on traditional media, specifically newspapers, for me, but then traditional media and what's happening out there with the advertising world in general?

I don't mean. Okay, you hang on. Let me give you a couple perspectives. I couldn't agree more. Let me take you back away. In the late 1990s, one of the two newspapers in this town hired us to figure out ways to increase customer value. It was the Chicago tribute.

I worked there for the past eight years.

Oh, good. Oh, great. And it's a great group of people. It is. But as politically correct as I can say it, I think there was a certain mindset that said that they thought that some big portion of the value of the newspaper came from the editorial page because it was the best editorial page newspaper. And that's the cornerstone of what newspapers are all about. Well, in going out and doing consumer research with consumers about customer value in the newspaper, what we found that they valued the most were, what do you think? What two or three things do you think they value the most? The what?

Obituaries.

Obituaries. There might have been actually four or five. But what do you think the top three things were? They valued sports coupons. Sales. Right, Sales, sports. And for people in the suburbs of Chicago, whether or not the newspaper was delivered on their doorstep versus the end of the driveway. And actually that was the sweet switching mechanism that if it was delivered too many times in the winter at the end of the driveway, they would change to the Daily Herald or the New York Times or the like. Right. So that's part of my answer is to answer your good question is we have to first understand what might be new sources of value for readers of newspapers. Right. So when I look at this market today, I say, but they can't compete with what all of you guys can do in terms of customizing the news the way I want it and when I want it and how I want it and all that. They can't do that. Right. So they have to find some other angle to make newspapers if they want to continue to make newspapers more meaningful. One little tiny idea that I've tried to throw out is they need to make people and columnists and personalities much bigger and better and greater and come to life. And they do that. Some of them do that with sports writers and columnists and then there's a few others in terms of. But I need to really make that a big part of that whole media focus. The sad part is I don't think newspapers are in the same position as, you know, when rental movies came out and everybody said, oh, movie theaters are going to go away. Right. Well, the reason why movie theaters haven't gone away is because it still provides an experience that's experiential. I'm not so sure that's the case with newspapers. So I think they're going to have to find new ways to add value or else they won't be around. What do you think?

I agree across the board. I think that so many of this was resonating because I still, for better, for worse, have a lot of the old reflexes coming from a stiff, conservative company, a great company in a lot of respects, but just the hierarchy and the structure and the red tape and the old boys network, it was just so stifling as an employee and it's so refreshing coming here. I mean, it's just night and day and trying to come back. There are some still some diamonds in the rough over there and people that are willing to listen and get it, but their voices are getting drowned out. But it is at a time to your point. Again, it really takes a dire moment or something tragic or some major instance, a major form of competition to come in to shake them up, to shake them up. And this Sam Zell thing and what's happening, who knows, it could happen here in Chicago with the Tribune. And I'm hopeful, but I. But I think what we're doing in the platform, how we're going to simplify the whole buying and execution process of all media for radio, television. I think that's one step definitely in the right direction. And the dashboard vision that Google has for placing all your media. But it's a bad time. But it's also a very interesting time to be affiliated with this. So a lot of your points resonated with me.

Terrific.

Thank you.

Thank you. Yes.

Do you think companies need to be taught how to fail? I mean, I think there's a certain part to that. And when I started on here, the highest levels of the company, the mantra was fail early and fail often. I think a lot of companies fail, but then that failure lasts a while, that the CEO realizes that there was a monetary detriment to doing so, and then they're hesitant to do it after the fact. I think also for a company for you to hear that there's a certain level of humility that goes at a corporate level when you hear that, you realize that when you work on a project and it fails, it really doesn't matter. Just fail quickly and move on to the next thing. And the only real failure, and this is, I think Douglas Merrill mentioned this to us in meeting. He basically said the only real failure is when you don't know why you fail. If you can figure that out, your next product will be better than the original.

Yep.

So are there companies out there? Are companies out there afraid to fail because it costs too much, or is it just not in their culture to have people thinking that way?

What's your name? Amir. What is it?

Amir.

Amir. Amir. I think that's such a great, great question. Should we be teaching organizations how to fail? And my answer to that is a resounding yes. A resounding yes. Because the biggest challenge, I think, is this one. What we're dealing with at the heart of this whole topic in question are people's internal self confidence. And I think humility is absolutely a key part of this. If I'm not confident in myself, I'm going to have a much higher propensity to cover up and to hide and to not be transparent. So ultimately, I believe that the answer to that question has to be built from the inside out. And what we really have to be focusing on are what are our real strengths and what are our real talents and how do we continue to be build and expand those? And how do I connect with Kristen in a way that's going to be able to make that happen? And how am I going to ensure that Ted's innate talents continue to grow and the like. Once that starts to build, then I think we're ready to talk to people about how they can fail because there's going to be enough right substance there that they can deal with it. But then we also have to teach senior level people people how to fail. And that goes right back to the whole topic of peopleship and it also goes back to the whole value of humility. And so I think you're right on.

Yeah, I mean I believe it should come from the top because if you're constantly trying to impress your boss and then his boss and his boss and you fail once you feel like hey, I'm going to get booted out of this company, meanwhile when it starts from the beginning and they say go ahead and fail, you, you know, continue to try and try and try.

Time's got to be up in Northwestern, not too distant. So thank you very much.