Ask Me Anything with Alexander Osterwalder - The Invincible Company - Part 2

I guess New York. Yeah. Dharam Sevilla. Okay. India too. Great. Great. Lisbon. Who views with a glass of wine to enjoy the Friday evening or even, you know, New York. Why not in the afternoon? Okay, let's get started. And Matt, you'll pay attention to Q and A, right?

Yeah, I'll take Q and A.

Okay. So I am just going to assume, and that might be wrong, but that's okay, that you're by now familiar with what I just posted here. You can see my screen, right? I think the portfolio map. No, I can't see anymore. Oh, good. Back here. So the portfolio map, which is kind of the heart of the new book, the Invincible Company. So I'm not going to go deeper into that. I explained it again last time. And you can just google it if you, you know, you're not yet familiar with it. This is what we use as a tool now to explore and manage the business at the same time. Meaning I'm managing the businesses that I have and exploit and I'm exploring new businesses in explore. I'm just going to start with maybe one question here that I didn't answer from last time. So somebody actually asked that. There was an interesting question. Gustavo. I don't know if Gustavo is here again today, but I'm a restaurateur, specialized in crep. We have our place close because of lockdown. We're delivering crepe to our clients. Any advice for restaurants on how to redesign value proposition, customer jobs, et cetera, in this Covid scenario. And from Colombia, Cartagena. So great place. Very simple, right? I mean, start to understand. I would look at two things. One is look at your business model and look at the strengths of what you have. Look on the other hand side at the jobs, pains and gains of customers. So it's almost like making this dual kind of connection. Here you have your business model before the crisis and here you have the customer profile. And maybe here your value proposition before the crisis. But once you really understand your customer, the jobs, okay, the pains, the gains, and you look at, maybe just start looking at the backstage of your business model, the strengths here, and ask yourself, is there anything you could do to help address these jobs, pains and gains? Now the obvious thing that a lot of restaurants are doing is, okay, one value proposition here is I could do food delivery. The challenge of course, is when everybody does food delivery, it's hard to stand out. But Kavi from the Strategizer team, who's based in Australia, shared an interesting story with me yesterday when we were talking about this in a different context. So one of his friends who owns a restaurant said, hey, here in the backstage with the partners, they have a very strong relationship with suppliers, farmers who, you know, wholesale farmers who give them the food, and usually they would turn that into dishes. So instead of just delivering dishes to customers, they said, well, what if we actually acted as an intermediary bringing fresh fruit and fresh vegetables, you know, to distribute for the wholesalers. So they were adding, you know, a new value proposition, which they're probably going to take away again, maybe after the crisis, but based on the strength some of the things that they're already doing in their business model. So obviously, the core thing in COVID 19 is you have to be creative and offer new things and don't just look around you and see what everybody else is doing. Build it on your strengths. The second aspect I would really emphasize related to that, but related to a couple of other questions, is when you have a new idea, many of you seen me draw this, and you want to go to a business, let's say this is a 10 million or $10,000 business. Doesn't matter, right? Could be. Let's just call it a $10 million business. You have this idea. It doesn't mean because of COVID 19, you should just bet on big ideas and not test. Right? So what you still want to do is accept that ideas are uncertain. So uncertainty and risk is very high when you have a new idea and you need to test and reduce the risk and uncertainty by testing first. Start with small tests, like talking to customers, and then bigger tests. Right? That doesn't mean, because we're in this crisis, that we shouldn't search and test. Okay, like we do in the explore portfolio. You just have to do it 10 times faster. So an example is when we launched our virtual masterclass, we actually said, well, we don't know if people are interested. We don't even know if you know what price they would pay. So we sent out an email to a thousand people or 900, something like that. 300 people got an email with the first price is something like 1,300. The second 300 got the price of 1600. And the third group here got an email with the price of 1,900. And we could look at, number one, would they open the email? Open rate. But we could also see which price point performed best. So going from seeing the price towards clicking on a button or purchasing. So what was really surprising to see is that the best performing price was actually the highest one. So people were willing to pay more. And we only learned that because we did the experiment. Took us only a week to do the entire thing. So it doesn't mean because you have new ideas and you have to go fast that you shouldn't test anything. So emphasize that the testing is important. So now we actually offer the virtual masterclass at a price of $1800 and the early bird rate is 1600. Make it a bit more accessible. Now we did make. I'll be very transparent here. We did make a couple of mistakes in the testing process. Even us, the experts, because we went fast. Some of the people who got the price point of 1300 said, well, that's kind of weird because now you're asking me for more right here. So we didn't deal 100% in the best way with the communication. What we should have done is immediately after showing them the price point of 1300 and they show their interest, we should have told them, hey, this is an experiment. These are the three price points we tested. And here is the price point that we're gonna, you know, use later on. And then you can always give people a little goodie. So, so you relate, you manage the relationship well. So those are the kind of things you really need to do in your explore portfolio. So we just zoomed into a very granular level. And the reason I wanted to show this also with the story of the. Is that this is not just something for big business, it's for all businesses. Okay, so put a thumbs up maybe in the chat if you like that, those kind of stories because I have little visual feedback. So I don't see you folks. Okay, so here had another couple of questions marked out. This was an important one, I believe. Crizania, I think from Italy I've seen was asking, do you have any case studies or suggestions to apply the invincible company to not for profit or government? Particularly the concept of return when considering the portfolio map. So interesting enough, funny thing is when we tested this the very first time, we did it with a group of indeed large international corporations and we saw it would really work. But when I did it in a larger meeting with about 50 people, it was actually the international intelligence community at Steve Blank's ranch. We had an event and we were sharing, you know, how to do these things in a. This is not the typical not for profit, but you know, it wasn't about profit, it was about impact, how do we save lives, etc. Etc. So, so what you want to look at here is this axis that we call return or expected Return. The only thing you need to do is replace it by impact. Okay, so you don't talk about return, you talk about impact. And then you define what impact means for you. In this case, it could be about saving lives. It was the Department of Defense also involves other kind of things, right? Money was never the issue because the money is there for important topics of national security. So you can replace that with impact. And in many areas now in the Department of Defense in the US and different kinds of communities and intelligence communities, some of this even public case studies. That's why I can talk about it. This is something that is used now. Now what I find very interesting is I'll take this one back here, take the impact back and in the book for those of you who already have it. So maybe you can put in the, in the chat window who already has the book. Okay, Those of you who have it, you can look at the page of the case study with Unilever. So we clearly wanted to have a couple of case studies where it was not just about profit, but also about profit and growth. And Unilever, where we show they have this corporate identity where they really are talking about sustainable living. So when Paul Polman took over as a CEO, he's now retired, he said we want to focus on long term sustainability as an organization, one of the biggest food companies in the world, but not at the expense of profit, but in harmony with profit and growth. Right. So they didn't change this one, but they added what I would call a constraint. A constraint. Here we call this corporate identity, a constraint for their entire portfolio. So they would never here explore something that sustainable and they would start to divest companies that were not sustainable enough and didn't fit their portfolio. So very interesting, you know that even corporations are moving beyond pure for profit now. One more thing just to finish, maybe that topic of NGOs, nonprofit organizations. When you have a business small canvas, there's a very simple way to bring this back in. I showed you with at Unilever, how this looks for the entire portfolio. But here you have money coming in, money going out, and at the end of the day, every business model needs to make more money than it spends. Even a not for profit somehow needs to keep that balance. But in a not for profit, you have an additional aspect which is the type of impact you want to have. Sustainability, poverty alleviation, impact on your community. So you want to put design constraints on your business models. Okay, so it's not just about money here, but it's also about the design Constraints that are very important for you. So if I am, you know, the UNDP United Nations Development Program, I would still have a business model and I have donors, kind of gaming company, government giving me money. But the design constraint would be that I'm working on poverty alleviation. So I will never explore a business model that doesn't have an impact on poverty alleviation. So that's also a way of looking at it. And then even I explore another couple of ways of how we could do this, maybe with more with layers, but I think that's an interesting topic to emphasize. Any, Matt, any comments that you know, related to what I was just presenting that we might want to jump into.

Just in relation to. You mentioned testing the masterclass pricing. Gustavo is asking in the Q and A how to get access to email lists if you're an early stage startup without followers or social presence. Yeah, so.

So that's a question. I get a lot and say, Alex, for you, it's easy. You have followers. Well, I think these days it's very easy to generate traffic. Of course you need to have a little bit of money. You can do Google Ads, you can do Facebook ads, you can do Instagram ads. So it will cost you some money. Or you can do the heavy lifting and go to all of the forums you can imagine related to the topics you have and you post topics there. Here's the thing. If you can't generate traffic with a little bit of money or a lot of effort, then probably there's nothing there, right? So if you can't even, in quotes, generate traffic, well then there's probably a challenge with your idea. Now of course, to create a lot of traffic and to scale things, that's a different ballgame. But to start, all you need is a little bit of social marketing or some search engine advertising. And again, if you can't generate traffic, there's probably a problem with your idea. So in the book Testing Business Ideas, we actually show how Google Ads can be a great way to test jobs, pains and gains. Even before you test value propositions. If you can't generate traffic, you probably have to pivot already. Okay, so Matt, anything else there? Otherwise I'll go in the questions that we got by email.

Yeah, I'll actually just point one out from Claudio in the chat. He says one of the challenges of a business is to balance innovation with the generation of profit for shareholders. Another challenge is to communicate that to shareholders. How can we represent shareholders on the business model of canvas?

Okay, so a lot of people ask how Could I add another block to the business model canvas? And what they're actually looking for is a Swiss army knife. And nothing against Swiss army knives, since I'm Swiss, I love them. But you wouldn't use a Swiss army knife to do surgery. So the point is not to add a building block to the business model canvas because it does just fine what it was designed to do, which is to map out business models. What you really want to think about is, okay, this is a different topic, maybe there's a different tool, right? So in our case, we look at it differently. We want a series of tools that work together well so I can become an innovation surgeon. Imagine if your surgeon showed up with a Swiss army knife and said, hey, I did a workshop, you know, two days, I'm going to snip it around on you. You would run, right? So we need to become innovation surgeons who use the best tools together. So in this particular case, there were a couple of questions there that you were talking about. So first one is how do you balance long term and short term? So my guess would be that you don't have the invincible company yet, because that's what the whole book is about, is to balance, exploit, execution and management and explore which is the future. And you don't do that in the business model Canvas. That's why we created another tool that's a level up. So if I look at the picture here that you have in front of you all you have business models in here. So business models can. The business model canvas is a perfect tool to map out the business model. But when you have a collection of business models, the business model canvas is the wrong tool. Now as soon as you have more than one product or service, as soon as you have several business units, you have to look at your portfolio. So here we have our portfolio of existing businesses that is relative short term. That's the stuff I have and that's the stuff I have to improve here. I do efficiency, innovation and I need to deliver short term and medium term results. But at the same time, while some of these businesses are going to get disrupted, I need to create my portfolio of exploration business models. This is the long term here. I'm looking at what is my future and I need to invest in many ideas to get one that will make it up to here. Now what you need to communicate to shareholders is that you're doing something here and you're doing something here. And if we think of, go back to Paul Polman, which is an interesting story, is the first thing that Paul Polman did when he took over as CEO at Unilever. He abolished quarterly reports. And he told shareholders, if you invest with us, you're in it for the long term because we don't just want to focus on short term fixes. We're focusing on a portfolio of sustainable business models and that will give you impact and growth at the same time. So that's where you start to look at. And in the book we write that clearly corporate identity, which is not a concept that comes from us. So I referenced that in the book, the corporate identity that is going to drive your portfolio and which is something that you can also communicate to shareholders. And typically, if you look at the shareholder letters, I'd give that to you as homework. Maybe you can, if you want to gain extra points and show off that you're an innovation pro. In the chat, you can type. If you've ever read any of Amazon's letters to shareholders by Jeff Bezos, because there he clearly explains that they focus on the long term. In most interviews he gives, if you hear somebody asking him, oh, you had great quarterly results, how did you do that? He will say, oh yeah, we love our quarterly results. They were made five to 10 years ago. And what he obviously means with that is investing in the long term. That will give you the short term results five to ten years later. So he explains how they have a long term focus throughout all of those shareholder letters. It's exactly what Paul Polman did at Unilever. So educating your shareholders, educating your stakeholders is extremely important if you want to focus on the long term. So while a lot of CEOs say, no, no, I can't do this because the stock market, my shareholders, they want short term results. Well, that is true and that's a lot of pressure. But the really good CEOs they know it's about the long term and they fight for it. And again, I'm not trying to make this simple. I've been in a meeting with a couple of banking CEOs just before COVID 19 and I'm not managing a $500 billion business. So it's easy for me to say, but they understood very clearly. And what is going to be a sea change is the more companies we see investing in the long term, the more others are going to follow. It's just that today it's very few And I guess COVID 19 is giving us the last worst behavior of companies that like the six biggest US Airlines who bought back shares to kind of pimp the share price. But now they're there with their shorts down because they don't have any money and they're asking the government for bailout. That is very short term thinking, if you want. They didn't invest in export exploration, they didn't invest in the long term and now they should be paying the price. The challenge is a bit, and here I'm getting political, is that the government is bailing them out. So what's his name again? Scott Galloway. The professor from NYU likes to say that today in the US we have capitalism when everything goes well. But all of a sudden the capitalists start to become socialists and ask the government for money when they, you know, when everything is bad. And that's exactly what the airlines did. So a little bit of a political statement here, but I do think it shows that not that many companies really, really invested in the long term, you know, like Amazon would do. And again, there's other things to criticize or ping an which is one of our favorite examples. Okay, so sorry for going into blah blah, blah and getting a little bit political, but I think it's a big issue. Which one do we pick next? Matt, should I take one from the list?

Yeah, I've got one from the list. So someone shared one by email. So Juan was asking how to better manage the tensions between business as usual versus change.

Excellent, excellent. So very good, very good question. And the important thing here is that sometimes I hear CEOs say, or I hear people say we need to change everything. Everybody needs to be an innovator. And I think that's the worst recipe, the best way to end up with disaster. So already there are different types of innovation and different types of change. And I might have mentioned that last time two days ago. There's efficiency innovation, which is all about, you know, making your existing business models better. That's change that everybody should be involved in. We should all, you know, strive for making our businesses better. And then there's sustaining innovation about new value propositions. That's maybe a smaller group and they have a different kind of focus. And there, you know, the things, the processes change and then there's kind of breakthrough, transformative innovation. Here is where the biggest change happens. Now again, not everybody should be working on that kind of change. So the first lesson I think it's important is distinguish between exploit and explore. Here you do efficiency innovation. Not everything changes. That's why it's so easy to implement. And that's why probably 95% of every innovation efficient, any, every innovation project is in efficiency innovation. And what does that Mean, companies are getting better at what they're doing, their existing business models, and they're more efficiently dying with their dying business models. So how do we kind of work on this disruptive change is by creating an entire new space. Not something that replaces the execution engine, but a new place that has its own rules in terms of culture, in terms of metrics, etc. So you need to establish that and you need to give it power. And that's what we kind of explained in our book launch webinars. Now that is extremely important. But now how do you pacify these two worlds because they do clash today very often. Well, we came up with a job title here which we call the Chief internal Ambassador, the CIA who makes peace between these two worlds. And that should be somebody who is very established at the corporation, who has a long term history, who has a great reputation, maybe at the end of his or her career and knows everybody and is really, really admired for, for what he or she has done. And that person creates with his or her team a bridge between the execution engine and the innovation engine, between exploit and explore. Because often the explorer needs access to resources from execution, like the brand, like customers, like the supply chain, to produce something so that the chief internal ambassador can make that piece or, or the other way around. Maybe the business units want to explore something, then the chief internal ambassador can make the connection with the projects that are going on on the left hand side in explore. Right. So creating this balance and peace between the two is incredibly important. That's why somebody in the company needs to take care of making that piece and making those connections between the two sides. And the worst thing I think is when innovators call themselves pirates. Okay. Or rebels. I think that's pure stupidity because what do we do historically with pirates and rebels? We kill them. Right. So you don't want to be a pirate or a rebel. So my colleague Tendaiviki, one of the smartest people I know, he likes to say, well, then there's pirates in the Navy, those who have a legitimate role, right? So that's already getting closer to what we want the pirates who were engaged back in the day by the Crown to actually do what they were doing legitimately. So I think that's very important, that we give innovation power, that we give it legitimacy, and that we have a person who builds bridges between exploit and explore. That was a very long explanation. I think we have space for one more question.

Yep, final one. We've got three minutes left. So we've got Michael, who is asking when testing your idea with Google AdWords, Facebook, etc. What are the best practices for refining your customer profile when you haven't quite narrowed it down yet?

Okay, so that is a very detailed question. And what I would suggest is you go and get, if you don't have it yet, testing business ideas. So I do have to kind of do a sales pitch here, you know, in our free, free ask me everything and also follow my co author's work, David Bland, who talks, you know, in depth about those things. I'll give you a very quick answer, very simple answer and be based on some of the mistakes I see that people do in testing. Right. So when we go from idea to business, the biggest mistake that people do is, okay, your risk is very high. They think one or two experiments is going to give you the truth and nothing is further from the truth. So when you go from idea to business, you have to do something like 10 to 15 experiments to really nail it. Okay. And what I mean with that is maybe at the very beginning you don't start with Google Ads because that's maybe the wrong thing to do. Maybe you do three to four interview series. So I'm involved in a kind of side projects right now where we're a team of four people in the space of sustainability. Each one of us is going to interview two potential customers, which gives us eight, but only to explore if our questions. All right, if we kind of, you know, got the customer profile right. So that's an exploratory interview, a discovery. Once we know that we might do another interview series where we start to understand the customer profile a bit more, then we might, you know, do a survey or we will go right away to Google Ads. Right. So this is what in testing business ideas we call a testing sequence. So most people who are not yet, I would say the real pros in this domain, they're happy with two to three experiments. And the worst ones, they just build something and then they think, okay, that's going to give it. No, you need to have a whole series of experiments. Okay, 15 is on the higher end. But you know, from validating customer jobs, pains and gains, to going to gain creators and pain relievers, to looking at, you know, viability, you need to do a whole series of experiments. Again, like the surgeon is not, you know, in a student project you might do two or three experiments, but when you're a professional, and now even students need to do more. When you're a professional, you'll have a whole testing sequence with one experiment after the Other lined up. So you need to start with discovery and say, I don't know, and that's fine. And you work yourself towards more and more evidence. So one of the question was about innovation metrics. So there are three, four Desirability, feasibility. Okay, viability and adaptability. So guess what, you already have four types of risk. So it's not with two experiments that you're going to be able to validate those four types of risks. Right? So you need to have a whole series after you identified all of your big and risky assumptions and hypothesis, so you can go out and start testing them. And then bit by bit, you're going to reduce this risk. And when you're in a corporation, you're going to do that systematically for your entire portfolio. And as I shared last time, I think, or at least in the webinar, you know, companies like Bosch, they do this, they start out with 200 projects and then they, you know, bit by bit, they kill 70 projects here, 70% of the projects and then 70% of the projects here. And sometimes you might actually, in your own project, if you're an entrepreneur, you might say, there's nothing here. Rest in peace. Bad idea, wrong timing. And you change, you go. And I wouldn't even call that pivot because maybe you just abandoned for two years and you start something else. And you shouldn't be disappointed about that because that, that's entrepreneurship. You won't get it right from the beginning. It's extremely rare. You learn, you adapt, and with the experience you gain from doing this, you get better and better. It's very rare that first time entrepreneurs succeed. And what always makes me very happy is that the statistics actually show that after the entrepreneurs who have the best success rate statistically is after 40 years. So that always makes me very happy. Matt, I'll let you wrap it up.

Yeah. Thank you very much, Alex. And thank you to everyone for all of your excellent questions. Unfortunately, we don't have time to get through all of them. So please carry this conversation offline and then I guess back online on our social media channels. So please use the hashtag InvincibleCompany. We'll be scanning our social media channels for that one. So thank you all for joining us today. Thank you, Alex, for all of your time this week in these sessions. Both the private webinars, which you can access on our website and the AMAs this week. It's been a really fun launch week.

Well, and those of you who haven't scored our session, we are open to feedback if you didn't like it. Give us zero if you liked it. Want more of this and would recommend it Gives us anywhere between 8, 9 and 10. We'll leave it open for a bit. Look at that. I like those scores. Too short. Five. Excellent. Cool.

Great. Thank you very much, everyone. Have an excellent weekend and see you all next week.

Thanks, Matt. Thanks everybody who joined. Take care.

Bye.

Sa.