Proximity: How Technology Brings Value right to your Door

Foreign hi, I'm Susan Drummond. Welcome to the Enlightened Executive, where your personal evolution sparks your leadership evolution. Each episode we feature groundbreaking techniques and strategies to help you get the edge in personal and leadership development. Are you curious about your own development path to enlightened leadership? Take our free 5 minute quiz@susandrum.com to discover your superpower and and the roadblocks that could get in your way of effective leadership. Today we are focusing on the power of proximity and I'm happy to introduce my guest, Rob Wolcott. Rob specializes in providing innovation strategy to global corporations and entrepreneurs and is an active angel investor and early stage investor. He's authored several books, including the most recent called Proximity How Coming Breakthroughs in Just in Time Transform Business, Society and Daily Life, co authored with my very dear friend, Kaihan Krippendorf. RAV is the co founder and chair of Twin Global, a community of over 3000 innovation leaders from over 30 countries across multiple sectors. He's an adjunct professor at Booth, as well as an adjunct professor at Kellogg. So welcome Rob.

Great. Thanks for having me, Susan.

Thank you. And I'm really curious to speak with you about this topic that you've called the there's what's coming is the Proximity Revolution. Or in fact it's here, the Proximity Revolution. So tell us about what that means.

Well, great. By the way, before I start, I love the title of your podcast, Enlightened Executive. We need more of those, so keep up the great work with respect to proximity. So if I give the quick backstory, I was at a Tech conference in 2014, that's a decade ago, and many of your listeners probably been to a lot of tech conferences. And it felt like I was watching the same speech, the same presentation for the 10th time. And I thought, you know, we must be able to do better about understanding where the future is going than how everything's going to be connected. Okay, so what? And so I asked a question there, stewing inside myself at this conference. I said, what is fundamentally different about digital compared to the industrial age? So that was the genesis question that became Proximity. And what we realized quickly was that digital allows us to compress capabilities into smaller and smaller packages and distribute them all over the economy ever closer to each moment in time and space. So that could certainly be AI or a mobile app, but it could also be 3D printing or rooftop solar power generation, distributed energy resources. So the list goes on and on. And so the implication of having all sorts of capabilities ever closer to the moment of demand is, and this is Proximity digital pushes the production and provision of value ever closer to the moment of demand in time and space. And so we started building this before COVID And honestly, Susan, most people thought I meant better supply chain management. We all love supply chains, but. But no, Kaihan and I are literally saying set up business models and technology platforms to incentivize us to procrastinate, to wait as long as possible before adding any value until you have a specific customer with a specific set of needs and then you produce and provide right there at that moment. And that's proximity.

Can you give us some examples of those that are doing that well?

Oh, wow. Well, lots. But just to give some context for how we tackle this question is we look at proximity generally, but then we break it into what we're calling realms of life. So how we work, how we eat, how we create and produce, how we prevent and cure, how we power and how we defend. And then in the final chapter, we look at the two horizons of the 21st century, which are space and virtual reality. We can come back to the crazy stuff later if you like. But to give some tangible examples, in December of 2022, in doing research for the book, I was in Dubai and I visited Bostonica, which was a partnership with Emirates Airlines. It's the largest vertical farm and operation in the world today. It's a few miles from the airport. First of all, the leafy greens I tried there was good as anything you get at a French farmer's market. And no offense to the French, it was really, really good. But here's the exciting part, Susan. The next day I got on my Emirates flight home to New York and the lettuce in my salad was picked in that facility the night before. Now compare the economics of the overall system on a unit basis. That lettuce is far more expensive to produce than growing it in Spain. But do the whole ecosystem equation, you grow it in Spain, you harvest it weeks in advance, you put it on a ship, you send it to a warehouse, and then you hope that it's edible by the time it gets salad. In this case, you grow only what you need, where and when you need it. And so the implications for sustainability and eliminating waste are truly profound. An interesting side note, Emirates Airlines purchased Bostonica in February of this year. So they are all in.

Oh, wow, that's interesting. So, and the, I mean, for me, the freshness side of it, wow, you know, what a, what a difference that that's gotta be because we realize a lot of this stuff is a week old by the time we're eating it. Yeah, but the transportation costs same. Right. And so, but you also mentioned, what's this concept of procrastination? This is sort of interesting.

Well, so I say that a little bit to be provocative, but we actually mean this. So the more you can avoid adding value to a particular product, service experience, until you know exactly what the customer wants, the less you have to worry about something like demand planning. So for instance, right now in most industries for physical products, and by the way, proximity is equally potent for physical products as it is for digital products. You have to do your demand planning and figure out what you think people in all markets for your company worldwide are going to want next year. And then you do a contract and you order a million copies from China or wherever, or Mexico or wherever and then you put it in warehouses and hope you did great demand planning. Now contrast that with a situation where I have a 3D printer sitting there. I now know that Susan needs that exact metal fork to match the other forks that I don't know, I guess you collect metal forks and we make one copy to order. Now you don't really care that it's a little more expensive for that one because you want a custom fork. In fact, you know, I want a fork with a picture of my kids on it. And guess what? We can do that now economically and give me what I want. And here's an exciting part. There was no scenario before in the old model where Rob could get a picture of his kids on his fork. No one was sitting around doing demand planning for how many pictures of Rob's kids on forks forks do we want to order for next year? So these technologies allow us to do things we could never have done before. And the more you can wait until you know exactly what you need, the less waste, the more responsive and over time. In some cases it's not ready yet, in some cases it's not economical yet. We mentioned vertical farming a lot of places in the world. It's not economical. But the key to distributed proximate agriculture will be proximate sustainable available power. And once we solve that problem, then sustainable proximate agriculture can be everywhere. We can eliminate food deserts, we can, we can create things that are custom to that area, that, that maybe even individual chefs own the intellectual property and only they are allowed to create that kind of say, lab grown meat. I saw this last, early last year in Israel at a company called Aleph Farms that makes lab grown meats. So in any case, this is how dramatically different the proximate future will be.

Yes. Well, can you give us some examples of who's doing this? Who else is doing this really well now where it's that people might recognize. Right. I mean, I do think, obviously the best example I know of, and I'm sure there's much better, is Amazon. Like I order the thing, it comes, shows up the next day, sometimes even the same day. I mean, it's transform like the number of Amazon boxes I'm now getting, you know.

Yeah. Well, Susan, I'm glad you mentioned Amazon. We mention Amazon in the book, but we don't dwell on it because it's so ever present and it's so dominant in so many ways, we almost don't even notice it now because they have done such a masterful job of driving this. And if you look at the history of the company and what Jeff Bezos was saying in the early days when they were just sending books out, he's been thinking proximity since the very beginning. He didn't call it that. But he's always said we need to maniacally give customers what they want faster and better than anybody else. And this is a watchword for the company and they organize all their activity around it. In fact, there's a great example. You might recall sometime before COVID when the news came out that Amazon was experimenting with drones for delivery.

Yes. Yeah.

Now we know that that's not a joke today, but at the time, most people in the media said, oh, isn't that funny? They're doing this nice little thing with drones. Amazon didn't think it was funny. Amazon was doing it on purpose. Now you might say so I'm sitting here in suburban New York and New Jersey at home, I'm not seeing any drones dropping boxes off. But there are places in the world where it is happening. Some here in the U.S. but in particular, early this year I was in Rwanda with a group from the World Innovation Network and we were visiting business and government and seeing this really dramatic miracle happening in Rwanda. And they have systems in the country now using drones to deliver blood and medical supplies anywhere in the country within a matter of hours. Now, that would have been wholly impossible before without billions of dollars of infrastructure investment. But Rwanda has leapfrogged us and is using drones for precisely this proximity objective. So it's happening all over the place. And Amazon is a great example because they live it every day. But there are many others.

What would be one that we, that, that maybe we take for granted or similar that we're, that is using proximity in a way we didn't really think about before.

One example that we all know that has been driving proximity to the consumer for years is Domino's Pizza. And if you're not familiar with all the, they're like a digital company that happens to make pizza. And if you look at their share price over the past decade, for most cuts of that decade, if you'd invested your money in Domino's compared to Google, you'd have been better off investing in Domino's Pizza. And that's compared to many of their, most of their competitors who haven't come close. And they like Amazon, they made their watch Word. We not only want to get it to you faster, but also, but also with more transparency. So part of the proximity play for Domino's wasn't just having a digitalized approach to bringing pizza to their consumers, but also the ability for consumers to track. Where the heck is my pizza? What's going on right now? Well, they're making it, they're, they're putting it in the, in the, in the delivery car, the fellows, almost to your house, that sort of thing. So this is an example of informational proximity that gives people greater transparency and by the way, offers Domino's tons more data about their own performance and the happiness of their consumers so that they can radically improve that service over time. And they've been doing it for a decade. So there are lots of incumbent examples like that. But of course, there are tons of startups we talk about in the book Proximity that are doing things that you would think, oh my gosh, I had no idea that was even possible.

Wow. Yeah. So then what would you say the mindset shift needs to be for leaders who are navigating this future world of the power proximity?

Great. So that's a fantastic question. There are lots of answers. But where I would start is recognizing that the way most of us see the world is enabled by and also constrained by the existing paradigm, whatever the existing business model or ecosystem structure or whatever. In my industry, I have degrees of freedom within it, but I tend to limit my thinking and vision within that rubric. And here's the thing. When you have technologies that allow you to do things you could never have done before, then that means that somebody's going to figure out how to solve those problems or solve new problems in ways you can't even think about. So I'll give you an example. Electric vehicles. And I love this one. I've been following electric vehicles since 2010. That, by the way, Susan, is when everybody knew Tesla was definitely going to fail. You can look that up 2010 every. Well, I don't know when they're going to fail, but they're going to fail. Well, how's that gone for you in any case? So watching the trajectory of electric vehicles and for so many years people would say to me, professor, I will be happy to buy an electric vehicle when there is infrastructure. And what they're thinking is charging stations all over the place, just like gas stations. Now this feels right, but it is completely wrong. Why is that? Well, how many people have a garage? Can you plug stuff in in your garage? So my wife's plugged in. Yeah, exactly, yeah. So my wife Ada and I have had a Tesla since 2016 and we just, we don't even have a supercharger at home. Of course. Yeah, we have an appliance outlet and we plug the car in the morning it's full.

Yeah.

Now how many of us can fill up our petrol based cars in our garage?

Nobody.

Right. Furthermore, electric vehicles today are getting four, some arguably four to 500 miles on a charge. By the year 2030 will be able to get upwards of a thousand miles on one charge. Oh, now who cares about charging stations?

Yes.

So what's going on here? People take the new thing and they cram it into the old paradigm.

Right.

And we do it over and over again and it costs us a lot of money. So if you look at so many companies are promoting charging station infrastructure and you can make money with charging station infrastructure and charging technologies. You can, but you got to do it the right way. So if you look at a company like ChargePoint, their share prices collapsed. It should have collapsed. It was a stupid model. Let's put charging stations all over the place and people will plug it in at the office. Tesla supercharger network. That makes sense. Why? Because Tesla selected locations for long distance drives. Yes, that's when I need charging station access. Not at every grocery store and office building.

Right, for sure, for sure. And that is, you know, and the functionality of you just program in your trip and it'll tell you where you need to stop, where to stop. You don't have to think about it, you know, and I think that, that, that I can imagine before people couldn't fathom that. And it seems so complicated and the fear of running out of charge, like.

Oh, we call it range anxiety even.

It's the reality of it. Yes, yes, for sure, for sure.

By the way, Susan, we're finding that the only people that have range anxiety are people that don't own electric vehicles.

I know, I know. Once you have it, it's so easy, the old paradigm. Can you give an example of what is something that you think leaders just don't quite get about proximity? When I talk about that, you know, it's like changing the water you swim in. So there's gotta be things that people just maybe, and we talked about this earlier, maybe dismiss about the concept that they don't get, that it's actually a paradigm shift.

Yeah, that's interesting. I mean, nobody has really dismissed it, but if they don't think far enough, they think that what Kaihan and I are saying is just you gotta be more responsive to customers, you know, and everybody's been saying that that's the goal of a business, to be more responsive, but we're not saying that. We're actually saying building technology platforms and business models that encourage you to procrastinate, to hold off on adding value until you know exactly what the customer wants. And that's a very different, a dramatically different model. And the reality is if you just take most industries, most situations as they are today, and make small changes to them, you'll actually never get here. The good news is there are lots of companies, some incumbents like Amazon and Domino's, but many startups, entrepreneurs who are pushing that envelope to transform the model and build the new platforms. And I'll give you an example. And this actually came from a little bit of my own skepticism early on in the Proximity project. Try and understand how this might be rolling out. I looked for counter examples. So I was looking for places. Where is a place in the world or an industry a context where proximity is not going to happen? It's just not going to happen, maybe for decades, maybe never, I don't know. And one of those places, I thought, you know what pharmaceutical drugs, because it's a life or death thing, if you get it wrong, somebody goes to jail, maybe somebody dies. So we need big clients, plants centralized with process control and regulatory oversight. So it's just not going to happen for drugs. Well, guess what? It already happened. A couple years after that, I Met this fellow, Dr. Jeffrey Ling, retired now, Military Doctor. He spent six tours of duty in the Middle east, practices at Johns Hopkins. And he said we kept running out of generic drugs in the war zone. Now that's not a shocker because you're in a war zone. But what shocked me, I didn't know this. Susan. We have generic drug shortages at hospitals and clinics all over the United States every day. All of our generics are made overseas and There are lots of reasons why, lots of issues to that. So Dr. Ling, in the middle of the war zone in Iraq and Afghanistan, said, you know, this is ridiculous. If I had the right equipment, I could make the drugs right here myself. I mean, organic drugs are made of carbon, hydrogen and oxygen. So if I had a chemistry set, I'll make the drugs myself. So he came back to the United States, he got a big grant from darpa, Defense Advanced Research Projects Agency and worked with a team from MIT and they did it. Today it's called On Demand Pharmaceuticals. You can look it up. The equipment produces whatever drug you want on demand and it sits there with carbon, hydrogen and oxygen. Now for all your listeners who are pharma industry fans, okay, there are APIs and some other things, but basically it's carbon, hydrogen and oxygen. And it sits there doing nothing until you type in, I need a thousand doses of atropine. And a couple hours later outcome, a thousand doses of atropine. I need 300 doses of ciprofloxin. Out comes 300 doses of ciprofl toxin, exactly the same as you would get at the pharmacy. And the FDA has confirmed the drugs are exactly the same. Now here's what's incredibly exciting. It's being used by military a little bit right now, but it now has its first commercial application in Tupelo, Mississippi. It's a very underserved health system in a low income area. And they've had chronic stockouts of injectables for years. From the moment they switched on On Demand system in January to today, they've had zero stockouts in those drugs. And that's the first time in the history of that hospital system. So what did Dr. Ling do? He said, well, let's not worry about all that supply chain stuff. Let's create a system that sits there ready to go and whatever drug we need, we can produce and provide right there in that moment. And it's dramatically more effective and dramatically less expensive.

So that's a really great example. That helps, I think, crystallize it a bit more about what's possible. Because one of the things I was going to ask you is you said wait till the very end to add value. And I'm like, well, what do you mean by add value? Do you mean like customization? Yeah, but maybe tell me if this analogy works. As I, as I was listening to you, I was thinking this analogy of like a chef, you know, if you run a restaurant, you do all the prep of all the ingredient, the main building blocks of the ingredients early in the day. And then as people come in, you put the ingredients together and you bake your pizza or you put your. And it's essentially. Is that a good analogy for what you're suggesting that leaders need to think about how they're offering their products and services to customers?

Yeah, that is a good analogy. And note, Susan Kion and I are not proposing that scale manufacturing at a distance is going to go away. I mean, in 30 years we'll still have massive plants in China and Mexico and US and Germany, of course, where it makes economic sense. But we'll have smaller footprint plants closer to demand, enabled by automation and AI and robotics. We're already seeing that with reshoring, for instance, and what some people call deglobalization. We'll see production of certain products in urban areas right downtown where it makes sense and eventually on your counter at home. Now what again we're saying is, is that that the traditional model is still useful. And there'll be an evolutionary phase of the next few decades where we start to discover that scale ain't what it used to be. It's still important, but it ain't what it used to be. So just to give a tangible example. So I'll give me an example of apparel. Levi Strauss. So Levi Strauss has a laser finishing technology for making jeans look stonewashed or cuts and rips in specific places. I mean, people pay more for these things. I mean, I'm an, I'm an old guy. I guess I don't understand why more to have ripped jeans. But you're right, they do. So. So in the olden days, actually, the way it still is in most places, you have to do your demand planning and Decide we need 10,000 copies of this pant with this cut, with these kinds of rips and stonewash. And we need another 10,000 of this other kind of. Well, with this new laser finishing technology, what Levi Strauss can do is make thousands of copies of exactly the same basic pan and send them into the supply chain and even into stores. And wait until Rob comes in and says, I want this specific kind of look. And they throw it in to the system and 90 seconds later they have a completely finished pant customized for me. And so what you see in this M.O. this example is you still have your scale manufacturing making thousands and thousands of copies of the same pan, but then you do the value added finishing closer to that actual moment. And we're going to see more and more examples of this. Not only will it become far more efficient to do so It'll dramatically decrease waste, which is exciting from a sustainability perspective. And this is really neat. Susan, for the first time since the Industrial Revolution, proximity is allowing us to break the trade offs between customization and efficiency, or customization and scale. So we'll be able to do far more customization, far more economically, all over the place.

What is something then that you think for our listeners that they need to start thinking about or doing tomorrow, like I'm always about, what action steps can we as leaders take to prepare ourselves for this new way of doing business?

Ah, great. So I always go back to the fundamental purpose of business, which is to serve customers. And it's a platitude, but it's so correct we miss it sometimes, which is what do your customers actually value about your product, services or experiences? And I don't mean the product and its features and functions and all those wonderful things. I mean, what do they really value from buying your product or your service? Because if somebody else can do that better, eventually they're going to leave you. So checking and rechecking. Why do customers do business with us? And how could we do that even better? Because someone else is out there trying to figure it out as well. Susan, this is, this is related to what the late great Clayton Christensen used to say, which is what are the jobs people buy your products for? Why are they really buying that product? We think we know what it is, but often we discover we were wrong or that those demands and desires change and we've got to stay ahead of that. So I'll give you one example, and that was from a colleague at Kellogg years ago, he's since retired and he used to be at a med devices company. And there were, there were four companies in this small oligopoly. The company he worked for had the best technology, everybody agreed, but the worst customer satisfaction. And so a new CEO came in and said, this is ridiculous. We need to be number one in customer satisfaction. So every time we get a call or service of our med device, I want a technician on site within 24 hours. And if they get there, they get a bonus. And if they don't, they get dinged. Well, you know, look, as Nikita Khrushchev said, people do what I pay them for. So bang, they're showing up really fast, on time, all over the place, right? A year and a half later, they're looking at the cust SAT survey results and they've moved up, but they're still a distant number two in customer satisfaction to the number one. And the CEO said This is unacceptable. How could this be? We're far outperforming them. And then they did some research, by the way, Susan, they probably should have done this research before coming up with that objective. They did some research and they discovered something really profound. Their devices are in places like hospitals and clinics. And it turns out, who would have known there's other stuff going on in hospitals and clinics, like people are getting operated on, gunshot wounds, whatever. Right. And so the users didn't want the technicians showing up really fast necessarily. They might have been rather that the technician comes a week later at a prescribed time that is more convenient for them. Now, that's so obvious. But you know what happened that the leader immediately converged on a solution and said, oh, I know what the solution is, let's do it. And then found out later it was the wrong challenge. So I think we have to shift our mindset to always go back to what are the customers really valuing and check and recheck over and over again and why that's doubly important. Now, even more than the past, digital technologies enable us to do things we, we could never have done before. And that's the one of the core points of proximity.

Yes. It sounds like it's both sides. Right. It's both understanding what does the customer really want and when do they want it.

Yeah.

And then what technology will now enable us to service that, that in the past we could not have done?

Yes. A different way to say that, Susan, is technology is the art of the possible. What could we possibly do? But a lot of the things that are possible aren't valuable. So marketing, and I don't mean the function of marketing, I mean the mindset, I mean the tool set. Marketing is the art of the valuable. And when we can put both value and capability together, that's where we have power.

Well, fantastic. Thank you so much for joining us, Rob. This has been a really intriguing discussion and it is taking the thought of innovation. You know, a lot of leaders talk about innovation, innovation, but you're sort of really narrowing in what does that actually mean and how do we put it.

In place as leaders and frankly giving us foresight as to where every industry is going to go the rest of our careers now that when people see proximity, they see it all over the place.

Yep, absolutely. Where can people learn more about you and your work?

Well, first of all, Susan, I'm always on LinkedIn, happy to receive an invite, but please mention that we met on Susan Drum's show because obviously I can't see you here. So reach out to me on LinkedIn also proximitybook.net and find out about proximity and twinglobal.org all right, thank you so much.

And if you like this episode, you're not going to want to miss my interview with Joan Hibden, who teaches leaders the art of mastering feedback. Let's all lead the way. Hope you enjoyed today's episode, and I'd like to point you to the next important step. Hit the subscribe button and the bell to get notified when we release new content. I'll see you on the next episode of the Enlightened Executive. It.