Ramzi Yakob: How Companies Grow

Ramzi, can you kind of talk us through sort of your background, like how you've got to now, your role at Howden, and kind of what you're most interested in?

For sure. So I spent the first sort of 12 or 13 years of my career working in various digital agencies in London. I started in media as a media planner and buyer and moved very quickly, realized the only kind of career progression available in media planning back in 2006-ish was to go into account management. That was your career progression. You were a planner and then somehow became a client services person. I was like, wait, that's sort of not what I'm into this for. So swam upstream from a strategy point of view into, if you like, more strategic and creative side of industries. I worked in a digital creative and strategy agency for a few years. And then moved closer into tech. So following both strategy and digital up its stream into more technology, into a consultancy, a business strategy or digital strategy and build consultancy doing product development work, building things like mobile apps and customer portals and all sorts of things there for a few years. And I think came to the same realization a lot of agency people do in terms of work-life balance. And what does life look like at 40 if you still work in agencies? And why are there no 40-year-olds in this agency that I work at? I was like, this doesn't seem like the greatest of long-term prospects for me. And I left the industry and find myself very luckily at Aviva. Where I was at for just over 3 years as their head of strategy and digital customer experience. And then did some contracting. I worked at a fintech startup for a year with some ex-colleagues from Aviva, which ran out of money after a year. But in that one year, we had an amazing time, went through Techstars, we were accepted into Techstars cohort. And Founders Factory, I spent all of my money in that year of working at a startup, earning no money, and then went back into financial services, unsurprisingly, in the corporate side of things soon after. So I'm now at Howden, and Howden is the UK's largest specialty insurance broker. We're about 16,000 people in however many markets, 30, 40 markets around the world. Helping clients insure things that are fundamentally hard to insure. And that's kind of what specialty insurance is. It's insurance for things that are difficult to insure. And so I work as the head of product for a digital business unit at Howden called Xtrade. And I guess those are the 2 recurring themes of my career, digital and technology. And I would say probably over the last sort of 7 years with a much, much stronger leaning towards product. product thinking, product development, working with engineers, designers, and building things that people use and want to use because they're useful. So yeah, I fell out of love with marketing, I would say probably a good 7 or 8 years ago, if not a bit longer. My mind, yeah, my memories escaped me. I've been doing this for too long, I think.

Yeah, you and me both. I was also in agencies a long, long time ago and forget about what life looks like at 40. What does it look like at 6 PM was like the bigger question. Yeah. So, so, so a few months ago I posted on LinkedIn about different ways that companies should think about growth, and we can kind of get into that later and what, what I thought about that. But Ramsey, you commented on that post and said that you had, I guess, like a mental model, maybe more than a mental model, that you use for thinking about how companies grow, and that despite most modern execs being sort of up to their waist, if not neck, in, like, dense PowerPoint slides from big consulting, that there are actually only 3 ways that a company can grow. And it was one of the simplest, most brilliantly articulated pieces that I've read amongst mountains of self-promoting sort of LinkedIn guff.

That's very kind.

But before we get into the model and kind of break that down, can you tell us I guess why you think companies tie themselves in knots over this question of growth and overcomplicate it.

Um, wow, there's so many ways to answer that. So one is every incredibly impressive business leader I've ever encountered, uh, disregards all of that nonsense, right? I've never met a very senior, very successful business leader who thrives on 100-page PowerPoint decks from McKinsey. And actually, when you speak to them, they speak in incredibly simple terms that are very easy to understand and which their employee base can all understand. So if you think about the chief exec or somewhere like Costco, you know, when he or she is articulating their business strategy for all their employees, they're the type of person that does so in such a way that they want every employee from the person who sweeps the floor at Costco up to their boardroom to understand. And in my opinion, you know, in my experience, most very successful, very good senior business leaders actually think in those terms and operate in those terms and actually enforce a level of simplicity in terms of how they operate. But talent at scale is hard. Uh, perhaps there aren't enough, um, people with the experience and confidence and intelligence to all lead in exactly the same fashion. And, uh, and I also think it comes down to org structures as well and, um, delegation of responsibility and, um, whether or not, you know, a huge mega corporate can already be led by, you know, an individual or a handful of individuals, or if you know, responsibility really needs to be federated from a strategy perspective, specifically whether or not responsibility can and should be federated to an org structure of, you know, 12 C-level people who all might have conflicting opinions about what the right thing to do is. So I suspect it comes down to unicorns are hard to find in terms of people. But also, from a level of comfort perspective, I find that corporate environments tend to federate responsibility as a way of gaining comfort in absence of very, very strong leadership. And that's not to say that any company that does have a big corporate org structure is failing. It's just saying that, you know, it's very, very, very hard to do. And it's not a repeatable, scalable process when that, uh, when, um, it depends on, you know, one very, very visionary individual who's able to articulate themselves incredibly clearly.

Yeah, that articulation point is really, really interesting, and the importance, I guess, of kind of senior leaders to be able to connect with employees from around the org using very clear language just helps to bring people along on the journey to whatever the vision, the vision is. I think that's a really, really interesting point. I think that we see, you know, a lot of clients spending, I guess, kind of 90% of their time kind of wondering where to get started with, with, with growth, um, and probably 90% of the budget as well. And then about 10% of their time thinking about like what they should actually build in terms of kind of new ventures, products, services. So obviously it's in everyone's interest to kind of, you know, rebalance that and, and kind of flip that sort of time and sort of resource allocation. So can you give us an overview as to how you've been thinking about this? You know, in your view, what, what are the 3 ways that, that companies can grow and, and kind of what, what is the model?

For sure. So the first piece of the puzzle was almost ridiculously simple, and it was a straight line, a straight line that connects need to use. And my first sort of bit of thinking was around how in the world of consultancy and agencies, everything from strategy consultancy all the way down to, you know, build and design and marketing agencies all exist on somewhere on that spectrum, on that line of connecting need to use. And the type of work that you did sort of indicated where on that line you, you were. So all the way down from identifying what needs should we be catering towards, how should we do so in a way that would make us successful, all the way down to closer towards use where you're getting closer to the implementation side of things, which is who is your paid search, what is your paid search strategy, What is, you know, how are you organizing your Scrum teams to deliver software in the most efficient and agile way possible? And I felt, I don't know, I sort of chuckled to myself a little bit looking at it going, this is stupid, isn't it? This must be stupid. It's too simple. And it was only when I started adding, I guess, some layers on top of it that it felt a bit more robust. So. When I think about how businesses can grow, and I use that sort of that spectrum of from need to use, that line from need to use as an anchor for it. I think, well, one way you grow is that you increase the usage of your existing product or service, i.e., more people are using it or they're using it more often because, you know, it depends on your financial model. But Typically, value exchange is somewhere, somehow linked to use, unless of course you work in an industry that relies on people to be irrational. So, you know, gyms make a lot of money from people not going to the gym, which is great, but I think that's almost a bit of an outlier or an exception to the rule that proves the rule. But for most, for the most part, people using more consumers using your product more often is a way to grow. And that's largely in my mind, you know, a marketing challenge, number one. So one is that's what marketing exists to do, get more people to use the thing that we already have to sell. And number two, thinking about it from a product development perspective is really, if you think about like the startup lifecycle, that's what you're doing when you're trying to achieve product market fit. You're trying to get to a point where your product finally clicks with a user group of some description that goes, yes, this does a thing that I need it to do in a way that gives me some kind of tangible benefit. So it's, you know, number one is increasing usage of products. So more people more often. Number 2 is increasing the value derived from every instance of use, i.e., a higher price. As we've all been subjected to in the UK and in many parts of the world where a packet of biscuits probably costs about 40p more than it did a year ago. And that's probably the simplest one. There's no more really to it than that, although there is probably some interesting conversation about how premium brands break that trend and can sell more while charging a higher price. And then number 3 is increasing the utility of your business by serving a larger number of needs over time, i.e., how do you attract a bigger share of consumer wallet, right? Through diversification of the number of needs that you're catering for with products and/or services. And that's it. And every time I've tried to tackle this and think about this through different lenses going, well, there must be a different way in which a business can grow, I keep coming up short because I'm like, actually, that's a version of number 1, that's a version of number 2, and that's a version of number 3. And I've not yet encountered, and that's not to say there isn't, but I've not yet encountered an example of business growth that can be attributed to a fundamentally different mechanism.

And is it fair to say that out of those 3 ways that there's actually only really one way, because I guess increasing usage is like an incremental kind of marketing question. To your point, that's a marketing function to get more people to use it kind of more often.

Yeah.

I guess you'll always reach a saturation point. Whether you're satisfied with saturation, I guess, is kind of largely dependent on ambition. I guess on deriving more value per use of products, i.e., charging more for that product means that you'll eventually reach some sort of equilibrium where you simply cannot charge more per use. And so, in my mind, that only really leaves serving new needs with new products and services. Is that, is that fair?

So I would agree based on the ambition and time horizon of the organization, if that makes sense. So in current capitalist society where infinite growth is the only model, um, that will satisfy shareholders for growth stock anyway, I think that can be true. So let me put it another way, is that there are some markets that are so huge that you could spend multiple lifetimes reaching your usage cap of an existing product or service, right? But equally, there are some that are heavily constrained. If I sell cat food, there is only a certain number of cat pet owners or cat owners in the world. And even if I sold to all of them, you know, cats only need to eat a certain amount of calories a day. There is a natural threshold, a natural limit of what I can achieve. But it can be really big. And like I say, it can be many lifetimes of efforts to achieve that first ceiling, Right. In terms of increasing or growing through increasing the derived value from each instance of use, you're right. In my opinion, there's a natural equilibrium, which is for every percentage point that you increase the price, you'll lose an equivalent number of customers who won't bear that additional price to the point where any price increase you make will be countered by a drop in customer numbers. And therefore you're not growing, you're standing still. You might get more profitable because it's cheaper to serve a fewer number of customers and maintain your revenue. So you might improve your profit, which is fine if that's what you wanna do, but it's not growth. So number 3 is ultimately the only sustainable mechanism for growth in, in my mind. And actually we've seen that play out, I would say, Time and time again over our recent history, if you look at companies like Amazon and, you know, the FAANG companies in general, but let's say Amazon is particularly adept at increasing the number of needs it caters to over time, from producing cloud infrastructure to being the most reliable way of getting a package delivered in a day.

Yes.

which are quite diverse, let's say. But also, you know, it's the standard model for things like P&G and Unilever, right? They have hundreds and hundreds of products from nappies to stock cubes. And the reason they have hundreds of products is because as organizations, their job is to capture more share of consumer wallets over time. So like, I think it's a very well understood model by many. That's basically what a conglomerate exists to be, is to swallow more and more proportion of customer wallet over time. And it's a very hard thing to do, I think. But absolutely, in terms of ongoing sustainable growth, as far as I can tell, it's the only mechanism that doesn't have, or let's say has the highest ceiling in terms of potential.

And so step one is about making sort of products or services that are, as you call them, sort of useful and used. And then you also talked about like making money and, and data in step 2. Can you kind of talk us through, through that step?

Right, yeah, no, for sure. So as part of the model connecting need to use, um, you need to think about, um, I guess what's the— what exhaust is created at point of use And exhaust is, you know, the byproduct is money. So you get money, you're paid for them to, you know, buy consumers to use your products or services. But importantly, you generate data at point of use. You're generating data whether you're a software, you know, platform like Facebook, you're collecting, harvesting huge amounts of customer data as they're using it. Or even if you're, you know, let's say a gym owner, you're creating huge amounts of data as your customers, you know, check in, use your systems, you know, use your treadmills. You have data on which treadmill is used in which, you know, which, so you're creating data. Now, you need both of these things for sustained growth. So you need money, to be able to invest in innovation and R&D as a way to knock into that third way of, you know, growth. So I need enough money to pay my operating expenses, to satisfy my shareholders if I have them, and to invest strategically for the future, for future growth, which is innovation and R&D, trying to cater to more needs over time. Or it could be in fact inorganic growth, which is mergers and acquisitions where I'm buying another entity that services needs that I don't currently do today. You know, it's the same pool of money that I have to invest in the future. I can do it through M&A or I could innovate, you know, whichever choice you take. And then data is a really interesting thing because when you are innovating, your ability to innovate depends on lots of different Attributes. One is how much money do you have to innovate with? What's your risk tolerance? How many bets can you make? How big can you make your bets? And then on what basis are you making your bets? So what, what is the thing that is driving my decision-making, your decision-making around what you innovate in, how hard you innovate in that area? And also to even discover the needs in the first place. How do I even understand what it is that people in 2024 need? that they didn't need a year ago? What are the emerging or nascent needs that have not been tapped into yet that, you know, I wanna be, you know, so if you think about back when YouTube was launched and people was like, it's never really gonna take off, that is it. You know, there's always one person who sticks their hand out first around their belief or an insight in around an emerging set of nascent needs and opportunities and capitalizes it. On it first by achieving some kind of product market fit in a way that no one else has done before or catering in a way. And data is how you do that. Data, you know, is a meaningless term, right? But it's information. That's what it is. It's information about what is it people are doing? What do they want? What are they thinking? What are their claims behaviors? What are their actual behaviors? How are they using my product? What are the issues What are the issues? So if I'm thinking about a software product, what are the gaps? What data in my application is giving me an indication about something a customer needs that I'm not doing for them yet, right? And data is traded, as we all know, right? So, you know, it's, you can buy data on an exchange. I need some consumer data about, you know, what they spend money on. You can buy open banking data. Right? I can literally buy data about how people spend their money. Great. But the problem with data that is, let's say, tradable or exchangeable is that it's in the public, it's publicly available. So what gives you competitive advantage? It's what information do I have to create decisions based on? And what is my capability to act on my decisions and to act on that data? Those are 2 parts of the puzzle. So if you're using publicly available data, even if it's purchasable, so I'm buying open banking data from a source and, and ad tracking data from a source, whatever the case may be, you and however many other people are buying that, right? So immediately it's no longer a competitive advantage, that data, because it's not just yours. So the only thing that you've got that's unique potentially is your ability to act on that information in some kind of novel or interesting way. So the other aspect of thinking about data is what proprietary data do you have? So from my existing products and services, if I'm thinking about innovating next year, next 5 years, next 10 years, what information can I gather that is unique to me? Because that information that's unique to me is a competitive advantage insofar as it is a unique window into customer needs that no one else has. And therefore, even if I'm not very good at being able to act upon it, at least the opportunity is mine alone until, until someone else is able to capture the same type of behavioral data or the same type of information. So in terms of increasing usage of existing products or service, Great, more money and more data, because more usage equals more data. Increasing the value derived from each instance of use because of that equilibrium we talked about where it can improve your profit, but it might end up, you know, reducing operating costs because you're serving a lower number of customers. It's the most short-sighted way of growing a business because you're actively reducing the amount of proprietary data that your business is generating. So you have less opportunity to innovate because you have less proprietary or unique data about customers. And therefore, you know, your ability to innovate and understand and gather insight about what users might— what users, sorry, what people might want next or what might be an underserved need is diminishing over time.

And I guess what's really interesting about it, I'm just gonna share my screen because we're talking about different lines and I'm conscious that we haven't showed people what those lines look like, but it doesn't get any more complex than this, essentially. So yeah, these are the lines connecting usage to need, and then using money to fuel the discovery of new needs and the development of new uses, and then data to do the same as well. Ramsey, you wrote this piece in 2016. I guess now we would call that a flywheel, right?

Yeah, yeah, that's right. It's certainly a flywheel. And just, Jake, from a technical perspective, that picture is not coming through for me very well. It's sort of quite— not able to see any of the text. I don't know if it looks the same for you.

We'll share it out after.

Share it out. It's all good. It certainly is a flywheel. And unfortunately, I was not probably at the time well-read enough to understand that that concept probably wasn't new or particularly unique at the time.

Yeah, I didn't hear it then. I think, yeah, maybe this is one of like the earliest flywheels potentially. So who do you think, I know you kind of touched on sort of Amazon and maybe Amazon kind of is the example, but who do you think does a really good job of increasing utility by serving new needs? Like, what sort of companies can you look at and say, you know, demonstrably, like, that's, that's how they're, that's how they're growing?

No, for sure. Um, so, um, like I say, the classic examples are the likes of P&G and Unilever, Mondelez, who are, you know, pumping out new consumer goods month after month, innovating in that space, trying to grow share of wallet to the point where 80% of your shopping basket in the grocery store is from one of them. But I think Amazon is always gonna strike me as the most interesting example. And I think it's because their thought process is, their thought process has this in mind, has this route to growth in mind and everything that they do. So if you think about Amazon Basics, right? It's one of the most beautifully executed examples of this I can imagine, which is I have a shop that serves millions of people every day. I have the most perfect set of data about what customers are buying. I know what price point they're buying it at, at which volume. So I can see the more expensive is bought at less volume. And this is the sweet spot here, right here, this price point for this type of good is exactly here. I can see what level of star rating will dissuade a customer from buying. So is it 3.2 or is it 3.4 that I need to achieve in terms of customer review? I can put that all together and create a brief for any category of product that I sell on my shop and go, look, AA batteries, I have 300 data points about what drives people, about what people are buying today with regards to AA batteries. So I can write the most perfect brief from a, you know, a product development point of view. I can go find any manufacturer and go, I need you to make me a battery that's this good, this reliable, that lasts for this long and will cost this much. And then I can apply a multiplier to it because of the Amazon brand and my ability to juice my own rankings on my search results page. And I, and, and before I've done any of it, I would be very, very surprised if they're not able to model with an exceptionally high level of confidence exactly how much revenue per year they will generate from a new product before they've even lifted a finger to do it. Right? So Amazon Basics is, is one of those wonderful examples of it happening because they're cheating. They're not, you know, they're not really cheating, but it feels like cheating. It's so dastardly, it feels like cheating.

Yeah, certainly playing the game in easy, easy mode. Yeah.

But, but what you can't, you know, what you can't take away from them is the fact that operationally they've got to the place where, A, they're generating that data. So their first product worked, which is we are a shop that sells things really well. For us to be able to generate data at scale that allows us to make these bets, I need people to buy from Amazon everything from nappies to batteries. So product 1, if you could call it that, has to be absolutely outstanding at what it does, because that's what's gonna get me the data that allows me to produce batteries at 80% margin with 90% level of predictability about what revenue will add to my bottom line, my top line, sorry. Over the next 10 years. So you can't take away from the fact that they were very successful in the first way of achieving growth, which is that they've created a product that people use and use frequently and like. And they have, their approach to data has been mindful from the outset in this, in a way that many organizations aren't. So I'll give you some examples. How many times have you worked with massive corporates that sell millions of products at scale across the world, and you talk to them about their data and they're like, hmm, I think that's something our technology people do stuff with, maybe. And, and like the fundamental lack of engagement and interest with data at a C-suite level. And I don't mean this, that's unfair because they, they care a lot about data. So if, if McKinsey wrote them a report that was based on data, Very interesting. If you ask them about whether or not how many data scientists they employ to analyze their proprietary data, you're going to get a wildly different kind of reaction and level of engagement depending on the nature of the corporation. Obviously, over time, I would say we're getting more mature and the opportunity is becoming more evident and becoming more table stakes for more C-suites. But there's still a spectrum. There's still people who are probably better at it and more engaged and people at the other end who are like, This seems like a nerdy problem for technology people. I am a business leader. I'm here to make big strategic decisions, not worry about, uh, you know, uh, what kind of data warehouse I have.

Which is worrying, right? Because big strategic decisions, the foundation of those decisions should be data and evidence, right? Rather than—

Yes, but that's what I pay McKinsey for. McKinsey, I'm gonna give you 300 grand to go away. You look at the data and then give me a nice PowerPoint and tell me what to do with it later.

Yeah, yeah, yeah. Expensive way to analyze one's own data. Yeah, absolutely.

Yeah. So it's one of those things, I think, like I say, it's sort of baked into the culture and the mindset of a certain organization. Either you take your data incredibly seriously and make sure you're, you know, building your products and services in such a way that they actually even capture data in the right way to be useful. Because you can have, you can be selling millions of products, but like through missing a non-functional requirement as part of your tech, you can operate for 5 years and go, hey, have we got any information about how many of these things we sold? And be like, oh, sorry, that wasn't part of the requirements at the time. So like our last 5 years of transaction history, we have no meaningful data for except for like what the finance team deal with.

Yeah, yeah, huge gaps. So, so thinking about this like third bucket, yeah, there's really only one way to grow sort of consistently, increasing utility by serving kind of more, more needs. So I guess all of the work that we do here at Future Foundry is kind of focused on that third bucket because we're not in marketing, we're not really pricing consultants. Our job is to build new ventures, new products, new services. I guess under that heading, I suppose we would say that there are kind of 3 subways almost that kind of fall under that category. And that is to Figure out a way to decouple growth from production volume. So, you know, the most obvious sort of expression of that is maybe a shift from hardware into software. So, you know, Apple's shift from— if you look at the growth of service revenue over and above hardware revenue, I think it sort of illustrates that quite well.

I would add to that as an example, just for a point of making sure I am understanding it well, If you are a services business, right, the more customers you have, the more people you need to serve those customers. Let's say just from a customer service perspective. So you could say actually by innovating with AI and being able to, let's say, address 90% of consumer contacts automatically, you're decoupling your growth from your operational, like, cost base increasing linearly with it.

Yeah, yeah, that's a really good example. Yeah, and actually kind of moves beyond the analogy of like hardware to software where the product is ultimately service. Yeah. So that was kind of like, let's call that like 1A. 1B is let's figure out what underutilized or emerging sort of assets there are within this sort of client company and figure out a way to leverage those in sort of new, new ways. Again, I think Amazon is like a good example, right? When you think about AWS and the growth that they've had in their cloud computing business, and also the revenue that that's generated to fuel kind of new products and service development. Like, leverage— leveraging underutilized assets in new ways, I think, is interesting. And those assets could be— Could be data, right? Like, could be physical, could be less tangible sort of assets. And I guess the third is kind of new customer segments. So working with clients to figure out, well, have we exhausted the needs that our existing customer segments have got? And actually, do we need to find new customer segments with new needs that we don't necessarily serve today? So look at like Netflix's approach, I guess, sort of in-market kind of content creation. Is that a sort of helpful addition, those 3 sort of swim lanes, Ramzi, to your model? Again, I've kind of stress tested this and I can't see a venture product or service that we've built that doesn't fit into one of those 3 sort of subcategories.

Yeah, no, I, I, to me that sounds, that sounds logical. It sounds, um, yeah, no, that sounds right. Um, it's, it does feel like a good addition to be in, and each of those are like an interesting and different, very different set of challenges that require different skill sets. And it sort of comes back to what we were talking about earlier, is that one thing is having the information to act upon, and the other is having the capability to act upon it. And I guess what would be interesting is that depending on your route of one of those kind of swim lanes that you're discussing is that your capabilities, I would imagine, would look quite different in terms of the skills, processes, types of collaboration even, and even the type of data you would be using. So I guess it sort of adds to the choice complexity of a large organization about how it wants to grow is, do we want to be capable and competent at all 3 of these swim lanes?

Yeah.

Or are we going to double down and focus our investment in one that we feel that we have maybe some kind of unfair advantage in?

Well, I mean, let's talk about kind of capability then, because, because I guess if all that is needed to be done in order to, to grow— and I know that this is a gross kind of simplification, but it is to connect kind of need and use— why do you think so many I guess traditional, i.e., not FAANG companies struggle to make products and services that are useful and used on a consistent basis.

Yep. In my opinion, it's because that's not their core skill set. That's not their job. So imagine I'm a bank. I've been a bank for 200 years. I'm very good at being a bank. I've been very good at being a bank for a very long time. So at some point when my shareholders demand organic growth, but through diversification, I'm like, hmm, interesting. How do you do that? Because I'm a bank, I'm really good at that, but being good at innovating new stuff, not so good at. So what do you do? Well, you try to hire people, right? You hire people. I'll hire a head of digital transformation or a head of innovation, right? And this person will come in and be like, great. So I have a bank with money and is very good at being a bank, and I have no tools at my disposal and no understanding from my colleagues about how to grow. So even at the most basic level of, I need money, time, and resources to do this thing that you want me to do, they're like, great, we have shareholders. Can you give us some growth by next quarter? And you're like, hmm. So, so you've got, you've got, you've got the kind of context of you work in an organization that was designed to do a thing very well, and that thing was not to innovate versus companies that were born innovative or born digital in a way, right? Is that they were incepted from the ground up of trying to discover user needs and how to satisfy them efficiently. And successfully. And once you've done that once, the fact that I built a startup around, let's say, being an insurtech, right? My skills and the team of people around me have all been on a journey of understanding customer needs that we didn't understand before, working through the pain of building new technology or buying or sourcing technology if we're you know, not building it all from scratch, living through the pain of growing and, you know, getting from, you know, servicing one customer to 100 to 1,000+ customers. And we've been on that journey. And you know what, if you said, right, instead of insurance, do me a health tech, the subject matter is different, but me as an organization is largely the same thing. Like, great, you throw You know, what I'm good at as an organization is building new stuff and servicing needs. I'm not a subject matter, you know, it's not, it's not my job to be a bank. It's my job to, to innovate versus, you know, let's say companies that have existed for a very long time, their job was to do a thing. It was not to innovate. So when you take a wildly successful business with billions Uh, they not only, A, don't have the skills, uh, B, um, or experience necessarily, B, um, there may be, I would say, a level of native pushback from shareholders who will look at this and go, hmm, I'm not sure you're going to be great at this, and I'm worried that my dividend will suffer as a result of you spending a lot of money on R&D unsuccessfully. Would you not rather just do some more banky type things? Because we know you're good at that. So I feel like there's lots of different forces at play, but it really comes down to some types of companies were founded on the skills and capabilities required to innovate. And some were founded and were probably innovative at the time. So like, I may have been a successful bank because 150 years ago, I was the first one that had like branches open on a Saturday. I mean, so I was innovating within my space at the time, but like, You know, in terms of the type of innovation that's required today for ongoing sustained growth of catering to new and emerging user needs, they're just not the same thing.

That's a really interesting perspective about that. And it's not even like on— I get like it's part sort of entrepreneurship, I guess, but it's interesting that when a company gets to a certain age or ceases to be kind of founder-led or, you know, is beyond the tenure of that sort founding team that these sort of struggles emerge. Because, yeah, I guess they go beyond hiring sort of entrepreneurial doers and into hiring into a command and control structure that is designed to make things as sort of efficient and as effective as possible. And so maybe it's more to do with, like, yeah, maybe there's a spectrum of sort of age of of company or, you know, time since founding, that sort of thing that you probably do some pretty interesting, interesting, like, like analysis on.

I think the, I think like the way that an org is designed, right, is generally around how it makes money. So like the org structure of a 200-year-old bank is built around how it makes money today. So the only way that would fundamentally change where innovation, let's say, isn't something that's so tokenistic that they have embarrassing hackathons over a weekend, right? Because that's, you know, and their innovation managers will point at it and go, look, we're innovating, give me a bonus. The only way it's not gonna be tangential to the core business is when the business become, you know, comes under existential threat.

Yeah.

Right? So you could be a 200-year-old bank and let's say for whatever reason, Monzo becomes so wildly successful as an example, over the next 10 years that, you know, the established banks are facing existential threat. Probably won't happen. Banking is not a great, uh, banking is not a great one for this because people are more likely to get divorced than they are to change their bank account, um, actually statistically. Um, so it's not the best industry to use as an example, but if we follow it along, when faced with existential threat, what is your board going to do, right? How can it react? One is, let's sell. Let's sell the business to someone who can do something more with it than we can, right? Let's strip it for parts. So let's divest big successful parts of our bank, return shareholder value as much as possible through share buybacks. And then maybe, you know, we'll sell the brand. We'll just break it up into pieces because actually the individual components of what make us good, are more value— are more valuable when you extract them apart than they are together as this entity. Or you fail, you run your business into the ground by being pigheaded about, no, we've done this, this is how we've always done things and we'll be successful staying the course. Or you might go, you know what, we're gonna react to an existential threat by going, we are going to design our operating system and our organization around how we survive and thrive in the future because what we're doing today will not get us there. So like you, you could imagine where large organizations achieve fundamental transformation that, that, that, that transforms that business from one thing to another. And I'm sure there are good examples, although I don't have them on top of my head. I'm sure there are good examples of big incumbent businesses that have dramatically changed what they do, how they operate, And they've gone on to be more successful, do greater and better things over time as a result of facing an existential challenge and then rising to that challenge and regearing their operation to innovate in a way that they had never done before.

I'm writing a case study about Weight Watchers at the moment, which I think is a business that people don't think about very much, probably, maybe in January, but probably not for the rest of the year. And I think Yeah, that's probably a pretty good case study, right? Moving from like Filofax and sort of in-person meetings into like online and fitness tracking and virtual and artificial intelligence kind of advisors and stuff. That's interesting. I think another thing that's interesting is like, if the point at which a company is likely to be disrupted is beyond the tenure of the incumbent CEO and board, why should they care as well, right? I guess is another sort of challenge, provided we can drive up share price enough over the next quarter or the next year to buy that place in the Hamptons or, um, chalet in Chamonix, then like—

I think that's right. If I, if I remember correctly, I believe the annual average tenure of a CEO is 3 years, if I, if I remember correctly. But it's not, you know, it's around that ballpark. So you're absolutely right, is that the incentive structure, uh, is not aligned to long-term growth, um, long-term sustainable growth, which is, I suspect— so if we take Amazon as the example, because we've used it all the way along, right? So Jeff Bezos has stepped down fairly recently. Um, let's see whether or not Amazon survives the loss of a visionary founder, uh, in the same capacity. Will they still be as innovative in 10 years? I'm sure they'll still be huge and make huge amounts of money, but is Amazon essentially the next incumbent, you know?

Yeah.

In, in 30 years' time, because without that single-minded focus and, and, and clarity of vision to, you know, so you're absolutely right. And having worked in agencies or consultancies, you would have felt this at a much more micro scale before, where an agency can be award-winning for 5 years in a row and they lose a single creative director. And then everything goes to hell, right? They stop producing good quality work, they stop winning awards, they lose clients, and the life cycle, you know, you can see the life cycle of agencies spin on a dime based on a single member of staff, right? It happens all the time.

No more Cannes lines and no more— Exactly.

So really what you want to do, like, in terms of sustainable growth is how can a founder who is in it for the long haul. So someone who's like, this is my mission. You think about people like Bill Gates and Jeff Bezos and others like them who, you know, I'm gonna do this for the next 40 years of my life plus, right? I want to do this for the next 40 years of my life. They're gonna operate in a very, very different way. And I guess if they were thinking about leaving a long-lasting legacy, what they would be doing for the last 5 to 10 years of their tenure is how do I design this organization to outlive me, right? How do I design this organization to be structurally sound in such a way that if I was to go tomorrow, it would be fine? But as you say, when the average CEO tenure is 3 years, like, you know, they probably have about a week to think about what's gonna happen after I'm gone.

Yeah, yeah, absolutely. Absolutely. And then something else that I know that kind of people watching will be interested in is, you know, 2023, 2024 have been quite tough economically, I think, for a lot of, for a lot of companies, you know, regardless of, um, sort of sector. Pretty much like inflation's been pretty like indiscriminate in, in that sense. Something else that you mentioned in your article was that, you know, efficiency hunting or Cost cutting, like, yes, it can impact margin, but that's not the same as growth. Now, that's really obvious to me and to you by the sounds of it. So why do you think that that's on the top of most companies' agendas right now?

So why is cost cutting the top of the agendas?

Yeah, if we know that we can't kind of cut our way to growth, what— why is— why is Why is growth activity cut, essentially, along with other sort of efficiencies that chief executives are hunting for?

So I think there's 2 parts to that. So, you know, there's people who are looking to operate more efficiently, and I'm always in favor of that because waste is waste regardless of where it occurs and how it occurs. And being wasteful is, um, is always something to be you know, um, scrutinized, right? So like, if you're generally operating inefficiently and you're wasting, A, my time, your time, B, shareholder money, shareholder value, because you should be operating slightly differently, fine, I get it. Like, you can cut costs by achieving efficiency, great, don't mind that. Cutting your costs in terms of what you're investing in the business and what you're investing both in tooling, you can't, you can't become more efficient without investing in some way because to achieve achieve efficiencies, you need to invest in a different approach, different type of operating model, right? So, so if you're not investing and you're not investing in R&D, so true innovation, not just operational efficiency, but actual innovation for new products and services and things like that, then you're signaling to the market that you're in defense, you're in defense, right? You're, you're in protection mode. You're going, I'm not gonna try to grow. Uh, my, my job right now is to build a war chest and make sure that we survive another 5 years because the future's uncertain. Why do they do it? The skeptic in me is because shareholders. The skeptic in me is that if I offload, let's say, an international business that I own, right, it reduces my operating complexity. It's a win for me, but more importantly, I'll be able to, you know, pay a special dividend to my shareholders so my share price won't suffer. which basically is the CEO, my remuneration is directly tied to in the most significant way, or it's because I can, let's say, please my shareholders in another way. So through share buybacks or something else, right? So I'm cutting costs and I will give all of that money away to my shareholders instead of investing in the business. You are signaling to the market that you exist to serve shareholders. You don't exist to achieve growth. And I think, I think that's fine depending on the type of company, right? Some companies you invest in to be a dividend stock. I want you every quarter to pay me a dividend that I can depend on. You're part of my retirement fund, right? I bank on that income versus, uh, like speculative investing of, I want to invest in you today because in 40 years' time I want you to give me a 4,000% ROI.

Yeah.

Very, very kind of different kind of mindset. And I would say that the ones that implement sharp cost cutting, Uh, tend to be, uh, quite focused on, um, their share price.

So this piece is, is pretty old now, so it's 8 years old. Yeah, 2016. Is there anything that you— and I know that you haven't like revisited it until like we had this sort of back and forth on sort of LinkedIn about it, and we'll share it with everyone, um, kind of on the call as well— but is there anything that you'd like add, revise, subtract based on what you've learned since 2016? Or is this such a sort of, um, you know, is it such a fundamental tenet that actually, like, this will stand the test of, of time, this model?

If I was going to add to it, I think it would be through smart conversations with people like yourself to add, let's say, meat to the bone and go, actually, here's 12 examples of this playing out in practice. Here's 12 company case studies that grow in this way, right? And you could evidence it in a way that makes it perhaps more relatable in some ways. But otherwise, no, I'd say I've been a bit of a traitor to my own career, if that makes sense, because At this time, I was very much working in strategy roles and thinking about business growth. You know, how do I achieve corporate-level growth over a medium-term time horizon? And I've got to say that my career has taken a slight turn as I've gotten more involved in product and product development. And I really, I would say, spend a great deal of my time in that first one, in how do I get more people to use my products and service more often? And I find that infinitely more rewarding in terms of having users who like using the thing that I'm making and who give me feedback that it's good. And could I have this next, please? Because it would be great. And I really like serving people. I really like the feedback loop of serving people. And personally, I found the world of strategy to be A, worthwhile, but B, personally not super satisfying because Often, especially as a consultant, you know, I'm not gonna be around in 4 years' time when you might be bearing fruit from the conversation we're having today. And, uh, my attention span, probably because of TikTok, uh, is now not long enough that I care about something for 4 years. I, I'm, I'm much happier working in the here and now of going, how, how can I serve you? What can I do better? How can I, how can I grow the number of people that I'm making happy day to day? So perhaps a slightly less strategic role in one sense, but, you know, still strategic, but, you know, focused with a very clear outcome.