Strategyzer Webinar: 11 Corporate Habits That Kill Your Company's Innovation Engine

The broadcast is now starting. All attendees are in listen only mode. Hi everybody. Welcome once again to another Strat Chat webinar session. We'll be starting the session slowly. While everyone's trickling into the room, why don't you take a moment just to ask yourself what you hope to learn from today's session. You can either share it in the questions box or you can tweet to us at Strategizer with the hashtag stratchat. We'll begin the session momentarily. Thanks. All right, everybody, let's get started. Good morning to those of you joining us from North America. Good afternoon to those of you joining from Europe and a very good night or early good morning if you're joining us in my end of the world of Asia Pacific. Welcome to another Strat Chat webinar session. Today's topic is 11 Corporate Habits that Kill youl Company's Innovation Engine. You might remember this title from a blog post we did last year, and that's the root of the the session that we're having today. As always, I'm your moderator Kavi Gupta. I help manage content and community here at Strategizer. And your host is Strategizer Co Founder Alex Osterwalder, also lead author of Best Selling Books, Business Model Generation and Value Proposition Design. If at any point throughout this session you want to share your thoughts, your comments, or any feedback, feel free to tweet us RateGizer and use the hashtag Stratchat so we can organize the conversation with on Twitter. You can also visit blog.stragizer.com to see more content around this topic and other elements related to Business Model Generation and Value Proposition Design. Throughout this session we might be mentioning tools, resources, canvases, templates, all sorts of different references and guides. You can head to our resource library@stragizer.com simply create an account and you get access to all those tools for free. Of course, the reason why we're doing some of these webinar sessions is to focus around some of our new course offerings that we offer to start small teams and individuals as well as enterprise companies. One of them being the Mastering Value Propositions course, an online course that will teach you how to better understand customers and create value propositions that sell. We've also coupled that course with our Mastering Business Models course, an online course that will teach you how to map, design, assess and test business models. What those courses do is extend beyond the proven methodology that's in our books, Business Model Generation and Value Proposition Design. But they also offer over 70 bite sized learning pieces across 13 lessons on six crucial topics. When you purchase one of these courses, you also get unlimited access to 50 videos and over 8 hours of learning content that doesn't expire and can help you improve or build upon the innovation and strategy thinking inside your organization. More importantly, you get a certificate of completion which differentiates yourself and to stand out as a top performer, we do have an exclusive offer for live attendees. If you're joining this webinar session, the first 100 attendees will get 15% off with the purchase of the Master's Bundle. So that's both the Mastering Business Models course and the Mastering Value Proposition Design course. Simply use the code August2017webinar to get that offer. I'll be passing that link along within the chat box throughout this session. If at any time you're not satisfied with what you experienced through the Strategizer program, we do have a 60 day money back guaranteed and that's it. Plain and simple. If you're looking for something bigger to share with enterprise teams inside a larger organization, we do have solutions to help global companies upskill teams, validate new ideas, expand existing business lines, or launch new growth engines. Just head over to strategizer.com enterprise to learn more about those offerings. Or you can get in touch with our sales team@salestrategizer.com I'm going to hand the reins over to Alex now, who's going to take on the presentation. Alex, while we set up, why don't you get started with telling us a bit about why this blog post was so important to us last year.

Okay, thanks Kavi. Can you see my screen? Just double check first.

Yep, we can see the title slide.

Okay, so this blog post was very successful because I think a lot of innovators in companies, you know, recognized some of these topics, if not all of the topics. And it's not very easy to innovate today in large companies. Kavi, maybe you can mute the so we don't hear the typing on your end. So I'm going to just get right into it and talk about these 11 corporate habits that you don't want to see and how to overcome them. And then we'll, we'll make sure that we have time for questions. I think it's very, very, very important that we address these because if we really want to create invincible companies, as we like to call them, companies that can innovate and are innovative and world class at execution at the same time, we need to overcome these Blockers. So these are really cultural obstacles and organizational obstacles that we need to overcome. So bad habit number one is just very straightforward, which is a good thing for execution, but a bad thing for innovation. So the current business model dominates the agenda. So what businesses are designed to do from an organizational perspective is once they found a successful business model, they're designed to scale and execute and improve that successful business model. And anything that looks different gets killed. We like to call this sometimes the antibodies of the successful business model that kill everything that looks differently. And that's okay if you just want to execute and scale. But nowadays it's a lot harder to survive with one business model or even a portfolio of business models, because business models expire faster than ever before. I like to say business models expire like a yogurt in the fridge. Then Eve Pinier, my co author, likes to say, well, yeah, that's true, Alex, but at least with yogurts you know the expiry date. With business models you don't. So you need to create that space so other ideas, other products, value propositions and business models can emerge. So the remedy here is plain and simple, that we need to create a protected space in the org chart, in the physical sense also, and in the cultural sense, with processes that are different, with people that are often different. So new ideas can start to grow first they can emerge and then they can start to grow. So if we don't have that protected space, and that is not just a physical space, it's often what companies like to do first. We're going to create an innovation building or an innovation room. You can put up sticky notes and yeah, this is the place where we do the pressure cooker thing. That's not enough, right? It's usually not just about the physical space, but it actually helps to have a space that maybe is even separate from the corporate headquarters, where ideas can be explored and tested and played with outside of the traditional structures. So in addition to the physical space, which is the easiest part, we really need to have a space where we have a different culture, where we have different processes. And that's why we need to create that space also in the org chart, right? If we don't like typically our teams, when we don't see innovation popping up high up in the org chart somewhere where power exists and budgets exist, we don't see it there. We know that this company is not taking innovation seriously. So that's bad habit number one, that the existing business model dominates everything else. So don't get me wrong, we need to remain great at executing existing business models in a company, but at the same time, we need to create that second space. So a lot of academics and thinkers like to call that now the dual operating system, the ambidextrous organization. Right? Two spaces, two cultures, two sets of processes. At the very least. The second bad habit is one size fits all decision making, because that really hurts speed and inventiveness. Now anybody who has tried to do innovation in a large corporation or a successful company knows that while the processes are geared to streamline the execution of an existing business model, and often we have all these checks and balances so people don't go off the rails, but that one size fits all decision making to execute a business model usually hurts the speed and inventiveness of what is required to explore, design, test and explore new business models, new value propositions, new product ideas. So the remedy there is that we clearly need to distinguish between different types of decisions. Now when you are a successful company, obviously you want to protect your brand, you want to protect your investments, you want to make sure that there is no negative legal impact on your company because, you know, a group of crazy innovators are out there testing different ideas. So what you really want to do, number one, is distinguish between non reversible decisions, like a big investment, a sunk cost in, you know, technology, prototyping and warehousing. Those decisions you want to really think about for a long time and better even, you know, test some of the assumptions behind that decision. The reversible decisions, like those that don't have a lasting impact, you don't lose money, there's no risk for the brand. You want to go really fast. And very often in the innovation space, innovators get pulled back and they get blocked because the company does not make a distinction between non reversible decisions and reversible decisions. This is actually a very big one. And I've heard a couple of companies that we work with with Strategize saying this was eye opening that, you know, we're now going extremely fast on reversible decisions because we realized, well, you know, the impact is, is very little. We don't lose a lot of money, we don't lose a lot of time. It's not very dangerous for our organization. Let's go fast. And you know, if we fail, it doesn't matter because we're going to learn. So when you can go fast, go fast. When you have to take a step back with non reversible decisions, take a step back. Don't just think when you innovate, ask yourself, what are the core assumptions here that we really need to test? And how many of these assumptions do we need to test before we can advance? So a good example here is a team I was working with years ago. They already had a budget to do technology prototyping with the mit and they were smart enough to say, well, this is a non reversible decision. We start using that budget and we go down the wrong path. With this technology prototyping, you can lose millions very quickly or invest millions very quickly. We better test our assumptions. Which aspects of the technology, which features should we start experimenting with? So what they did is a three month, what we like to call innovation Sprint, where they would talk to customers, create landing pages where people would even click on buy buttons so they would have a better understanding of which areas they should explore in technology. So that non reversible decision of investing in technology prototyping became a lot more focused and they knew they wouldn't waste money. Big thing, big idea, bad habit number three. And I have to watch out that I don't get too chatty. So we still have time for questions. Insisting on untested and detailed business plans. Now I like to say that business plans maximize the risk of failure. People say, how can that be? And I talk to executives who still really ask for business plans in existing corporations. And the business plan per se is not the enemy. What is the enemy is that we make a refined document and we spend a lot of time thinking about it. Make spreadsheets and, and slide decks, et cetera, about an untested idea. And we make it so good and look so good that we can sell it to executives and say, hey look, this is a huge market opportunity. Look at the numbers in my spreadsheet and we can unlock a big budget, million, 10 million, 100 million, whatever the project is. And then the decision makers buy it. They buy the execution plan, they buy the product, they buy the business model, they buy the pricing that you promised them in the business plan. And you're locked in to something you made up over, you know, a week playing around and locked in a room in an ivory tower drinking some wine when, you know, working 24 hours. And it's a fantasy. So you are locked in to execute a fantasy. And then when you figure out and you talk to customers that it's not going to work, it's not that easy to pivot, as you know, we like to say nowadays because you sold the decision maker something else. So what's the remedy here that yes, we can use business plans, but we only use business plans for execution challenges. So typically, when a company wants to build a new production site in an area that they know, where it's mainly about scaling, ramping up production, or a new sales team. You can write business plans because you're operating in a known environment with known variables. You know the customers, you know the production technology. Business plans are great in that space. When it comes to new ideas, business plans are really, really a bad thing because you will refine a fantasy and an idea and you'll sell it to decision makers and you'll execute a pure fantasy so it actually maximizes the risk of failure because you're not going to be able to pivot, you're not going to be able to test because you went to execution too quickly. So let's not do business plans at the early stages of innovation. We can start writing business plans once we have enough validation, enough evidence that our idea is going to work. Sometimes people then say, well, Alex, you're getting this completely wrong. I did a business plan and helped me think through our ideas. I'm not saying do anything and don't think through your ideas. Don't think through the business model, your sales strategy, and your product and your features. Of course not. But you need to work with low fidelity models. Something rough, something that you can do fast. So work with a business model canvas. Work with a value proposition canvas that you can throw away. Work with three business model canvases. Oh, what if I gave away my product for free? What if I licensed it to, you know, a million customers? So you can't play ideas and test ideas if you're locked into a business plan. So use low fidelity models like the value proposition canvas, like the business model canvas, like napkin sketches at the early stages when you still test. Okay, bad habit number four. Opinions and past experience matter more than evidence. Who has ever been in a meeting where they presented an idea and some executive says, we've already done that and you know, this is not going to work and ideas are killed just purely based on opinion. And a couple of years ago, I learned this term the hippo, the highest paid, opinionated individual in the room, or something like that. If those ideas, those opinions trump evidence, you are never going to minimize the risk of failing big. You're never going to minimize the risk of wasting tons of money in innovation because. Because you're going to follow through and execute ideas that nobody cares about, that no customers care about. And that's why we have this crazy statistics from Simon Kutcher the biggest pricing firm in the world, that over 70% of all new product and service launches in the world fail to deliver on expectations. That is not because people are stupid. Right? Why would anybody work on an idea that doesn't matter and that customers don't care about? It's because we have the wrong processes. And I'm sure we have a couple of hundred people out there who are listening, who have, you know, right now working on product ideas or business models that they already know are going to fail. Right. Think of it. And that's not because they think it's the right thing to do. It's because the Hippo's opinion, you know, trump evidence. So we really like to say that evidence should trump opinion. Okay, so the remedy here is that you need to educate leaders just as much about prototyping and testing business models and value propositions, and that the evidence coming out of this experiment should lead us into the right direction, not the opinion. We need to train leaders to think like that. And thinking back to one of the anecdotes here, one of the stories that I went through in my career was when we had a team. I actually had three teams presenting to the cmo, the chief marketing officer, and the chief technology officer of a leading global consumer brand. And the teams came into the room and the senior leaders said, oh, so this is something like Shark Tank, right? You know, this TV show where four opinionated people comment on business ideas and they kind of judge them based on their opinion. Now, I love Shark Tank. And sometimes it's not just about opinions about evidence, but that kind of attitude. When the CMO and the CTO said, I pushed back, since nobody needs to like me and rehire me, I can say what I think. So I was telling them, well, you, you know, your opinion doesn't matter. And I was obviously more Swiss and diplomatic than that. But I said what these teams did over the last three months was test ideas, things that they thought were good. They had an opinion, but they tested them with customers, they tested them with supply chain partners. They tested, you know, desirability, feasibility, and viability. Could this actually work? And they collected a lot of evidence. And what we're going to see, I told the CMO and the cto, is three teams presenting their journey from idea to a validated business case. And then the CMO and the CTO said, aha. Okay, sounds very interesting. They didn't really know what I was talking about, but they got it that it's not about opinion. And frankly, after the time we sat together, the CMO and the CTO were blown away. They've never seen such an informed case presented to them after such a short time, after three months. So you need to educate leaders the same way we educate now teams in innovation. Otherwise you'll get a disconnect. It's very important that leaders understand that their opinion actually doesn't matter that much or if we frame it in a different way, they should give design critique. How can they help the teams make better prototypes, test in a better way, get more evidence. So it's less about saying I like this or I don't like this. But you know, did you explore with this, show me that number? I think that market is too small. Can you show me the evidence? I don't think that senior executive has the budget. Can you show me how you tested that with those customer segments? So educate leaders, not just doers, because otherwise you will get a disconnect. Big, big thing. I'll go to bad habit number five caveat and then maybe we can take one or two questions just to break the rhythm a little bit. Okay. Bad habit number five is a big one actually. In particular in very successful companies, they outsource customer discovery and testing. So you know that, you know Steve Blank, the inventor of the, of the lean startup movement and the customer development process, the first stage of his process is customer discovery, getting out of the building and talking to customers. He has a very, very strong opinion that in startups, the entrepreneur and in companies, the senior leaders, if we're talking about reinventing a business unit or some type of intrapreneur, has to get out of the building and talk to customers. Not just talk to customers, but also do online tests, online surveys and online schedul calls. But you know, really seeing how people react. And the reason is very simple. When you outsource customer discovery, what is an agency going to do that you just hired to talk to customers? They're going to stick to a large scale study and trying to get a lot of data. But that's not the entrepreneurial approach. That's not about changing your ideas and your hypothesis and your business model and your value proposition based on customer insights. That's asking just for a lot of data when you don't actually need a lot of data yet. Entrepreneurship and innovation is about, yes, talking to customers, testing with customers, learning, but it's also about decision making. It's not just about learning, it's about doing so you need to understand, decide, change, fail, understand what you did wrong and change again. It's this iterative process that's very important and an agency can't do that for you. You need to do it yourself. Because as an innovator in a company, hopefully you have the decision making power to make decisions regarding the value proposition and business model. Otherwise you shouldn't be doing it in the first place. You need to do that based on customer evidence. The things that you learn, right. The decision makers need to be involved. So remedy, remedy here is for new ideas. You should really fire outside agency. You need to roll up your sleeves. You need to do this yourselves. And small anecdote here, which is won't mention the company name, but it's a very successful materials company. I remember when I was doing my first meeting with them talking about, hey, bringing three business units through this process, what we call Innovation Sprint. They were saying, well, the senior leaders of these business units were saying, well, Alex, are you saying we should do the testing? Should we do that work? We're running businesses, we're not startups. We have a business to run. The innovator senior leader at that company who was running the innovation initiatives at the time said, well, guys, if inventing the future is not your job, what is your job? To continue to execute businesses that we know are not doing that well, that are going to change drastically. And they got it and they changed their attitude and they made the time. Of course, they worked with a team that would support them and they had others who had more time who could help with the testing. But they really rolled up their sleeves. Once they started with that, they actually got hooked. They got hooked to talking to customers, to learning to seeing these insights on their own and then being able to make the decision. So that was a really fun experiment where we got three senior leaders of business units to go through this. And from that particular company, seven business units went through the Innovation Sprint and six of them took the time, made the time and worked rolling up their sleeves, talking to customers and testing. And those six had real results and the Sevens had less because they didn't take the time for this. And one thing you need is time to actually do it. You need to invest time and energy, less money. Money is not the most important thing at the beginning of innovation. Okay, so those were the first couple of bad habits. Kavi, why don't we take one or two questions? What do you think? Sure.

Actually, one great one that I have that just came in around the kind of fifth habit that you went through is we're talking a lot about what these companies need to do, which Companies do you see, Alex, are succeeding in this area and what characteristics they have in common?

Yeah. So unfortunately, a couple of those companies that are very well known from the brand perspective, they. They don't allow us to talk about what we've been doing with them, not even the process, because they just don't like putting their brand out there. But there are a couple who are very happy to share, and one of them is W.L. gore, the materials company that. Is known for Gore Tex. So we're working with a couple of engineering materials companies, B2B companies that actually work very well there. And one of the things that in these technology, materials and science companies that we see common attitude, maybe it's lucky that we were able to work with those customers. Gore is one example of that, is that they really realized that over time, the more successful they were, the more removed they were from customers. So they actually admit that they are extremely good, just like 3M, you know, extremely good at product innovation, new features, and less so, you know, in terms of customer perspective, understanding the jobs, pains and gains, and even less so from less experience with business model innovation. So it's just the subset that I can talk about. Those are the companies I've worked with and that strategizers work with. So that's a subset of all companies. We have seen a willingness to actually start to explore. Number one, they realized they were a bit removed from the customer, and they realized that even more when they started doing this. And they realized that their industry is changing and they need to do something beyond the quick fixes, beyond new products, because they're already good at that and they see that it's not enough anymore. That's a very common characteristic. And in the case of Gore, the real commitment of leaders of drivers to make this happen. So in their case, they work on what they call H1, H2, H3, the horizon model by McKinsey. They reinvent existing businesses and they work on inventing new businesses. So I think that what we're seeing, where we're really seeing something happening in impact is when the top. It seems like, okay, that's trivial. But we don't see that many companies where the top is really invested, not just lip service. Yeah, we're doing innovation. Yeah, we have an incubator. Come on. That's what Steve Blank and I like to call innovation theater. You have all of these initiatives going on, but if you look at the org chart or if you look at the CEO's agenda, you can see immediately that they're not investing the time and innovation to really make this happen. So that's a common characteristic. The projects or portfolios that we've seen having success is often when we have a person in charge who has a real clout in the company. That doesn't mean, you know, it's, it's the highest paid individual or it's, you know, somebody with a crazy title, but it's somebody who has business clout. You know, they've achieved something. They built a business unit, they built a brand, they're respected. Where we see a lot more struggling is when we have the in quotes, you know, the young and crazy ones. I think sometimes we, it's this myth that, you know, only the young and crazy ones can come up with innovative and crazy ideas. You want those in your team for sure, but you're going to make it harder for innovation projects to succeed if you put people in charge of who don't have enough or don't get enough respect from the rest of the company. Because these teams can only succeed if they have enough room to maneuver and they have access to customers, they have access to brand, they have access to people. Because an innovation team is composed of a couple of core people who might be 50% or 100%, at least 100% person, I'd like to call that person the entrepreneur. And then a lot of people who come and go, you need this expertise, you need to test with this and this thing you pull in people. Oh, you need to have access to customers. Well, let's work with some of the key account managers who are open to doing this. So that's a very, very strong indicator. If you have a person in charge of innovation, of innovation projects who has built respectability to a certain extent in another area, then you'll get success. Okay, long answers. Right. I'll try to keep them short. Maybe one more cave and then I'll take the other couple of points.

Yeah, we're getting a lot of questions.

The other bad habits, we're getting a.

Lot of questions around senior leadership. And the common one is how do you educate senior leaders without ending up on the street? I'm going to add a little bit to this one, Alex. What mechanisms do you think the audience can use to connect with leaders and to convert them from being opinion based into being more evidence based?

So what I like to use a lot is other reference companies that are insanely good at innovation and that I would almost call invincible companies. And I like to use Amazon as an example. So then people, you know, well, I can't Use Amazon because that's specific, it's a technology company and so on. But you don't have to say, well, this is the company you need to copy. It's the culture you need to copy. And it turns out, yes, Amazon is a technology company, but they come from a low margin business. So this is not a company like Google, who had billions to put into moonshots. No, they created a culture where people can experiment. And the reason I like to use Amazon is because it's a good reference model. Since they put this culture in place, they have a portfolio of successful business models and new business model initiatives. New initiatives of which many, many failed. Actually, that's the one aspect. But then what makes Amazon very interesting is that Jeff Bezos is very, very transparent about the culture they put in place to make this happen. So I would recommend for those of you who want to convince senior leaders, take the last two letters to shareholders from Jeff Bezos in the annual report, 2015 and 2016, and give those letters to the CEO, because Bezos clearly explains why they are so successful. Why is Amazon the company that grew fastest from zero to hundred billion dollars in revenues? Why was Amazon in a decade able to build a $12 billion cloud business? Well, one of the reasons is that they actually allow failure to happen because you can't innovate without failure. They know that they can't make home runs without hitting European, I shouldn't even talk about baseball. Right. But they, they have these home runs because they have a lot of failures and they transparently talk about them. They don't try to hide them, they show them. I think that's a very, very important one. And then in the last letter to shareholders in 2016, Jeff Bezos says, We keep a culture of day one. Even buildings are called day one. So that is a very, very strong way to show how some senior leaders, in this case an entrepreneurial senior leader, but of a company that's, you know, at the stock market, it's a public company, has been able to do it. Now, will that prevent you from being fired? That I do not know. So you can do it in a Swiss and diplomatic way. I think the last thing that works is being, you know, dogmatic or religious about it. I also shy away sometimes from, from using the terminology lean startup, because as soon as I say startup, you know, the shutters go down. I use the language that senior leaders care about. So I would use risk and say, hey, there's a couple of myths in innovation, which is it's expensive and it's risky. Well, that's true. When you do it wrong, what you really need to do is actually decrease the risk of innovation. So let me use this to just this point, see if this actually works. Can you see my screen?

Yep, we can see your iPad.

Okay, so here's the drawing I make to. And some of you have been in other webinars you've seen me draw this. Here's a drawing I make to convince senior leaders, you know, that this is a, this is a topic that's actually relatively easy to address. So, you know, when we go from idea to a, let's say, you know, one billion dollar business, it could be also a ten million, hundred million or five million, whatever is appropriate in the context of your company. When we try to go from idea to business, the one thing we need to admit is that what is at its maximum is uncertainty. And risk. So when we start out something new, we need to admit that we do not know if it's going to work. Because if we're honest, we haven't been in the future, there's a new product going to work with a new business model in a new area that we as a company haven't explored. We don't know. And a business plan is not going to de risk that it's not going to reduce the uncertainty just because I put a couple of nice numbers into a spreadsheet. Basically what we want to do as a company that innovates or an innovation team that wants to try something new, our task is to decrease the risk of innovation. Now how do you do that? You do that by gradually spending more on testing. So typically I say, well, how much does it cost to talk to ten hundred thousand customers? Depends on what market you're in. And, you know, learn if you're on the right track. Well, probably or not. In particular, when you're trying something revolutionary, you're going to learn that you're wrong. But it will actually decrease the risk of pursuing an idea that nobody cares about. And then, you know, at one point you can say, okay, we go to execution. So this drawing is one of the most powerful drawings that I like to draw, showing that innovation is not risky and it's not expensive if done right. It gets expensive when you scale, when you are executing. But the good news is you've already validated your idea sufficiently. Now, will this process give you a home run every time? Absolutely not. So you need 10 projects to go through this process, and two will make it big. What you can guarantee is that of these 10 projects, none of them will waste millions of dollars. Because the whole lean startup process, or what I drew up here on the iPad, completely eliminates the risk of wasting millions of dollars on something that customers are not interested in. You can't execute and is financially not viable. So you still need 10 ideas to make a home run because you can't guarantee success, but you can guarantee that you're not going to waste money. So you still need a portfolio of new initiatives. Okay, so I'm going to switch back to see if I can do this. Okay. Can you see my slides again?

Oh, we just see your desktop right now. We see the slides. All good.

Okay, perfect. Okay. So bad habit number six, lack of senior leadership participation. So this one seems more explicit than what I said before. You know, you need senior leadership to participate in the efforts, rolling up their sleeves, you know, making the space, backing up the innovation teams. So what you really want to make sure here is that you distinguish between those who are running the execution engine and those who are running the innovation engine and getting out of the building. So similar point to what I already mentioned before. And senior leaders, by the way, I think are not always the biggest issue. What you really want to try to figure out is how can you get middle managers involved? Middle managers are often described as the enemy of innovation, but there's a reason for that. It's not like they're bad people, but they already have full plate and they need to make things happen. So you need to create that space. Bad habit number seven. I think this is a big one. In particular, established and large organizations obsession of competitors rather than customers. First thing people do. First thing people ask me when I talk about innovation is do our competitors do this? Can you show us what our competitors are doing? Can you show business models, innovative business models, innovative value propositions in our domain? That doesn't matter. Number one is that you understand what your customers care about. And there's this quote, I can't recall who it was I saw on Twitter where somebody was saying that if you focus too much on competitors, you just copy their mistakes and what they're doing wrong rather than what could be done right if you understood customers. And Jeff Bezos has this saying that he used to say this a long time ago, that when, if competitors focus on us while we're focusing on customers, we'll be just fine. And that is something that is very strong at Amazon is customer obsession. And we know that companies who, again, it's trivial, but we don't see this in the processes very often. Companies that really focus on customers. Very, very strongly focus on customers, in particular in the innovation process. They succeed, right? They won't have the statistics of 7 out of 10 project or new product innovations not delivering on expectations. So I think we really need to obsess over customers, and that will allow us to develop better value propositions and better business models. And ultimately that's what you need to have to create new growth engines. And, and it's interesting that these are basics, right? But when we look at innovation processes, they're rarely very customer focused. And of course, you need to test technology and you need to test the finances. How do you test if the business model is viable? Part of it is pricing tests, which you should do early on. Part of it is cost tests. How much is the technology going to cost? But you really need to obsess over customers because if you do that, you will understand if you should actually execute a project or not. Often we ask ourselves, can we do this? Can we manage this technology? Can we actually build this new gadget? But does it really matter? We should ask first. Should we build it? We really try to help to obsess companies, to obsess over customers. And from my experience, actually a lot of technology companies are now admitting that they have lost the contact, the connection with customers. Okay, so bad habit number eight, predominant focus on technology risk at the expense of other risks. So this is kind of going deeper on what I just told you, that we want to focus not just on competitors, definitely not just here, like on technology, but on customers. So what we would like to say is that we take this concept from ideo, make sure that you understand that there are different types of risks involved in innovation. Some risks related to desirability. Do customers want it? Do they desire to put money on the table? Right. I'm crazy that people put money that. Over 400,000 people put money on the table for the new Tesla before even, you know, having finished designs of it. People line up for the new iPhones, et cetera. Desirability, right? What is, what is the risk there? Will our customers want it then? Feasibility, you know, can we actually do it? Can we execute? Can we master the technology? That's one we focus on way too often, the technology risk. Can we do it? But we also want to really focus on viability. You know, can we earn more money from it than we will spend? So desirability, feasibility and viability is something we directly take from Ideo, and we like to overlay that with the business model canvas. So the front stage, part value Proposition, customer segments, channels, all of that is desirability. The backstage, resources, activities, partners is feasibility. And then the viability is making more money revenue streams than you spend. The adaptability is something we added to that together with eve. Meaning can our business model survive over time in the landscape of changing technologies, changing supply chains, changing customer needs? Adaptability, will this business model be, or this value proposition be outdated before it even comes to market? Not just in terms of competitors, but the technology, regulatory, etc. Landscape. So we look at the adaptability as well. So making the difference between these different types of risks and not just focusing on technology and technology innovation and technology risk. Bad habit number nine. Easy one to realize innovation is career suicide. In most organizations today, if you experiment and fail, you can often bury your career. And the great organizations who are great at innovation or are starting to become great at innovation, they reward failure systematically. But a specific type of failure, it's failure where people fail small, where people fail cheaply and quickly and they learn from it. And they take those learnings to make decisions, decisions regarding the next prototype, the next business model iteration, the next value proposition iteration, the next product iteration. Right? So we need to make innovation prestigious in companies again. Show how those, how those processes work, show the mentality, the culture behind it and that this is, you know, something where you place where you can fail and we can play around. If we don't do that, we're not going to be able to retain talent. I see very, very great companies from the past with great brand names losing their best innovation talent. Why? Because innovation, you know, is often related to career suicide. Trying out new things that people don't think is going to work. Experimenting, right? What we need to do is show the best innovators out there that our companies are a home to innovators where they can really thrive. And that's prestigious, right? Entrepreneurship is very prestigious. But outside of large companies, people on cover of magazines, Elon Musk, etc. But today, inside companies, innovation is not a prestigious job. And funny enough, what gives you prestige in a company, it's budget and decision making power. Number of people you manage. Well, turns out that in innovation, in one project at least, you don't need a lot of money and you don't need a lot of people. It's just the drawing I did before. When you start with an idea, uncertainty and risk is high. You talk to 100 customers. You don't need a whole team of salespeople to do that. It's not very costly. So let's try to Figure out how we can make innovation prestigious again or make prestigious the first time so we can keep and retain the innovation talent. Okay, so almost through. I hope we can still see the positive side of this. These companies are changing. There are all of these bad habits, but the best companies are working hard on killing these bad habits. Bad habit number 10. The innovation engine is siloed from the execution engine. So if I can just quickly kind of go back to the iPad. This is a big one, right? This is a really big one where we like to draw it like this together with Eve and Cavi in our blog post that in companies you have, it's almost like you have two sides, right? You have the existing business model and here we can improve and we like to use the word exploit now. And then you have the new ideas. This is all about invent. Now on the invent side where people are exploring ideas if they don't have access to to anything else. From the left hand side, the execution engine, the existing business models, they don't have access to customers, they don't have access to test ideas, they don't have access to brand, they can't use the brand to test. They don't have access to IP or skills. Well, guess what, then there's just the startup in chains. They're just the startup in chains. You need to build this bridge between the innovation engine and, and the execution engine because if you don't do that, if you don't do that, well, guess what, you're going to have a startup in chains is going to fail and it's not going to be able to survive besides these very fast and nimble startups, right? So the remedy here is to create a culture where executors and innovators are true partners. They really understand the different roles. The execution engine is about ensuring that businesses humming that we're making money from our existing businesses. And the innovation engine is making sure that we are exploring the future, we don't get disrupted and that, you know, when our business models expire like a yogurt in the fridge, we're already on to the next one. It needs to be a partnership. Today it's not. Innovation is siloed. We often see innovators as pirates and I like to say, well, what do we do with pirates? You know, over history we try to kill them. So we need to create that partnership between the two and we need to put in place processes. Simple one, you know, key account managers, they won't let innovators talk to their customers. Why? Because they're afraid that their bonus is going to get screwed up for salespeople, right? What do we do? We just create a quota. You know, that 20% that DSM actually does, that's the Dutch chemicals for company. That 20% of all, you know, of the sales quota and of the bonus comes from new products. You know what happens? The salespeople will get the innovators to the table immediately because they're driven by the bonus, right? So do that. Bad habit number 11. Integrate new ideas into the execution engine too quickly. So very often ideas emerge, people think they're interesting, they, they go right away to that left hand side. And the old business model, the old products and services, value propositions swallow up that new idea and with the antibodies, transform it or kill it. So what we really need to do is protect new ideas for a long time. Give them cover, air cover. Bill Fisher, good friend of mine and professor faculty at imd, likes this to say ideas need air cover because otherwise they're going to get killed. Right. And a good example of that is, you know, Nestle with Nespresso. The whole Nespresso story would have ended in bankruptcy and disaster if Nespresso hadn't been outside of the headquarters and they had, you know, that room to innovate. It's an older story, but it's a good one. And there are a couple of those out there. So we need to give new ideas air cover. We need to accept that maybe 8 out of 10 won't be home runs. But if we give them air cover and we protect them, two will become huge and then we can take them over into the execution engine.

I just wanted to take the last couple of minutes to remind everybody in the session today that the offer is exclusive to the live attendees who have shown up for this broadcast. I have sent the link out to Everybody within the GoToWebinar chat panel and there will be an email that goes out with a reminder as well. Of course, the first 100 attendees will get 15% off a purchase of our Master's bundle. That's both the Mastering Value Propositions and Mastering Business Models online courses. You just have to use the code August2017webinar to redeem that offer. I want to thank everybody for joining the call today. Alex, of course, thank you for organizing the session and presenting. We will provide a recording as I had mentioned, and that'll be available within the first 24 to 48 hours of the broadcast. Until then, thank you very much for joining us for another Strat chat webinar and, of course, check your inboxes regularly for the next session. We do one of these once a month. We are signing off now. We hope you all have a very productive day or evening, wherever you are. Thank you very much. Thank you, Alex.

It was a pleasure.