Strategyzer Webinar with Rita McGrath: 8 Practices That Help You See Around Corners

Hi, everybody.

Welcome to another Strap Chat webinar session. We're just getting started. In the meantime, as you're logging into the session, why don't you take a moment to think about what you hope to learn from today's chat with co founder Alex Osterwalder and our guest, Rita McGrath. We'll be starting in just a moment. You can share in the chat box in Zoom or in the question box, or you can tweet to us Rategizer with the hashtag Strat Chat. We'll be just starting in a minute as everyone's getting settled into the room.

Hi, Kathy. Hi, Rita.

We're just getting started with the session. I'm just doing the intro and then we'll be over to you and Alex soon.

Lovely.

Okay, let's get started. Welcome, everyone. Like I said, good morning, good afternoon, good evening, wherever you are in the world. Welcome to another Strat Chat webinar session. Today's session is about eight practices that help you see around corners. And it's a very particular statement that has been brought to us by our special guest today and a good friend and collaborator. And we're going to dig into that more in a little bit, but just to go through some of the housekeeping rules, as always, I'm your moderator, Kavi Gupta. I manage content and community at Strategizer. Our host is co founder of Strategizer, Alex Osterwalder, also co author of Best Selling Business Books, Business Model Generation and Value Proposition Design. Our guest is a frequent friend, frequent Strat Chat guest, and a renowned world thinker and professor, Rita McGrath. And as always, we actually now have back in the fold, our friend Holger, who will be facilitating the session from a visual illustration standpoint. So you'll get to see the conversation with drawn out as both Alex and Rita are having a chat about this topic. If at any point you want to mention a comment, you have feedback or just a question, you can stick it into the Zoom questions box. I'll be monitoring them and we will hopefully have a chance to do Q and A in this webinar session. But if you also want to send us other comments about this topic, tweet us at Strategizer with the hashtag Stratchat. And I also encourage you to go to blog.stragizer.com to to read more or to get access to more resources that are associated with the topic we're talking about today, as well as other areas of innovation in value proposition design and business model innovation. So with that I'm just going to also point out that the next book that we're working on is called the Invincible Company. I believe it's a working title. Alex, you might have to jump in at some point and let me know if that's not the case. However, it's the third book. It's a sequel to both business model generation and value proposition design. It's currently in process. You can go to the website. I will send the link during the webinar to point you to the sign up so you can get notified on the updates. Essentially, the book is about how game changers and visionaries continuously reinvent business models. And the hands on book contains several practical and essential tools including the business portfolio map, innovation metrics, the culture map, and a series of illustrated business model mechanics. Alex and the content team have been hard at work on this next release, hopefully coming out within the next. Within this year. And like I said, I will pass the link during the session and in the follow up email to all attendees so they can sign up and get notified on the book. With that, I'm going to pass it over. Holger's already got the reins, so Alex, why don't you take a moment to just tell us why it was so important to have Rita for this talk again and why the contents of her new book are so important to the business world.

So first of all, welcome Rita.

It's a pleasure to be here.

And the reason why we bring on Rita as much as we can in the Strat chats is very simple because she has probably some of the world's leading knowledge around how to help establish companies, reinvent themselves and is very practical. And it is always a pleasure to have a chat with Rita. And if we can do this publicly, even better. Time usually flies. And there's a special reason right now because Rita is publishing or, you know, gonna launch a new book pretty soon. So with that, let me immediately get started. Rita, we're in the process of writing a book. You finished a book? When is it coming out?

The official publication date is September 3rd and I'm actually going to be in Europe on that date. So in a bit of a twist for American authors, we're actually launching the book in Europe.

Excellent, excellent. And as we know, you have a global impact. Anyways, it's good to have you launch this and kick this off in Europe. Tell us a little bit about the book. It's about these eight practices that help you see around corners, right? What motivated you to write this new book? You have a Couple of bestsellers already out there. What's really the core and what was the motivation for this book?

Well, as you know, Alex, my last book was called the End of Competitive Advantage. And the thesis of that book was, was that this idea that we had had in strategy for a long time of sustainable competitive advantage can actually be something of a trap. It causes people to go into defensive mode. It blocks them from really seeing the challenges that their business truly faces, and it doesn't allow them to think proactively about their future. In many cases, you're so obsessed with defending an existing advantage, then you're not really out there looking for new ones. And. And that idea got very pretty well accepted and together with a lot of your work on innovation, one of the core pillars of that book was that innovation proficiency is not optional when you're in a world where competitive advantages change a lot. Right. So that then leads to the obvious question of, well, how do I know when? And people were asking me about that and that I noodled on that for a while, and that got me started looking at strategic inflection points. And as many of your listeners will know, this was a topic that Andy Grove was writing about back in the 90s, and he was really thinking about intel and the challenges it faced in its business model. And his book was famously called Only the Paranoid Survive. But there really hasn't been a whole lot done on the topic of strategic inflection points since then. And so it kind of lurked around in the back of my mind for a while, and then it crystallized with the observation that these things don't happen overnight. If you look at most things that we feel as a dramatic strategic inflection point, either in business or in our lives, if you really go back and look, you can see that they've been brewing for quite some time and that, you know, if you had the processes in place to pick up the early warnings, you could have perhaps made a move much earlier than if you just waited for it to be obvious to everyone. So the real motivation behind the book was how do we pick up these really early warnings? How do we then decide what to do about them? And how do we bring the organization with us?

Maybe for those listeners that are a little bit less familiar with the concept of strategic inflection points, before we go into the content of your next book, tell us a little bit about the concept of strategic inflection points.

Sure. So Grove's definition was that a strategic inflection point represents a change in the assumptions that you make about your business. So I would deepen that definition a little bit further as follows. Every business has a set of constraints that it operates under, which are born basically of what was available to you at the time the business was founded. And as your business matures, you develop sets of key metrics, you develop key assumptions, you develop ways of looking at the world. And over time, those come to represent reality in your mind. So an inflection point is something that fundamentally shifts the constraints that your business operates under. And that could be positive, you know, it can open up vast new opportunities, or it can be negative, you can miss it, and it can take your business into decline. So a strategic inflection point is a set of processes or activities that change the fundamental assumptions your business operates under.

Wonderful. So these eight practices that help you see round corners is helping you kind of address this further. So I'm pretty sure a lot of people are now curious, should we dive into those eight practices?

Sure. This is actually the first chapter of the book. It's called Snow Melts from the Edges. And the reason I like to use that phrase is it's a real encouragement to people that, you know, inflection points and the early warnings don't present themselves neatly on the conference table in your corporate headquarters. They're out at the edges. They're where, you know, there were weird things are being said about your company or there's a strange new technology that's making things shift, or there's, you know, there's something going on out there. But a lot of times executives miss them because they're so involved in the day to day. And I see that a lot. People say, oh, I'm too busy to do that, you know, and what are they busy doing? They're busy, you know, driving their business off a cliff because they're not paying attention.

So a quick one. Do you think companies feel this urgency more to act? Of course, all of the leadership, the CEOs and leaders and boards know that these changes are happening faster. But it almost seems to me sometimes like they're not acting. Are you seeing a change in that, that they're actually taking these big challenges on, or is it okay, we can survive long enough until we've done our job and then the next people are. The next leaders are going to have to suffer the impact. Do you see a change in behavior?

The minority of companies are really prepared to face these challenges boldly. And I think, unfortunately, Alex, very often it's this. Well, I can see clear the next two, three years. It's not going to take me out now, so I'll just cling on there until my time is done and then let the next person worry about it. I think that's unfortunately far more prevalent. I was just yesterday I was at the Innovation Roundtable conference which was held at W.L. gore's headquarters here in the US and was talking to someone from a very, very well regarded science based company and he basically said to me that they decided to disband their R and D operations. Can you believe that? I was speechless. And you know me, Alex, I'm seldom speechless. I was speechless. I could not believe my ears. I said, you're doing what? He said, we're disbanding our R and D operations. I said, well, what, what are you going to do? You know, what's, that's the whole basis for your reason for being. And he said, well, you know, we invested all this money in R and D in the past and it hasn't paid off. And I said, well, you know, that's probably not because of your R and D. That's probably because of something else about the way your company is being managed. And yet the leadership has taken that as a signal that there's no point investing in rd. So I just don't know what to tell you. So unfortunately, I think all too much right now. We've got this economic short termism, we've got shortened time horizons and people really aren't making the investments that would create the future for all of us. It's a, it's a grave concern of mine.

So they seem to be seeing this coming, right, but they're not acting enough. Let's play this through maybe with an example that happened in the past and how companies might have better reacted. So if we take an older example, when Skype disrupted or in general voice over IP disrupted the voice part of telecommunications, it was pretty interesting to see that the telecom operators didn't believe that free could actually be a real thing. Right, because they were looking at Skype through the lens of their business model. What could telecom operators have done at the time to react to this threat or maybe even as you say, react earlier, before it was too late. What could they have done?

Well, I think the starting point for all of this is you really have to go to the customer and ask yourself what's the job that customer is trying to get done? So that's a concept Clay Christensen invented, which I think is incredibly powerful. And he argues that, you know, we don't actually buy products and services what we do is we hire them to get jobs done in our lives. And when you look at what people wanted right from, from telecommunications, there was a huge pent up demand because back in the day, you know, long distance was ferociously expensive and prohibitively expensive. So if you wanted to, you know, connect with friends and family that were far flung, you really didn't have a whole lot of options. And so what I refer to that situation is you've got hostages, you don't have customers. They're not doing business with you because they want to, they're doing business with you because they have no choice. So as a telecom operator, I think the smarter thing to do would have been to go back and ask the question not how can we make as much money as possible because we are the only game in town, we're a monopoly. And instead think about how could we get paid, you know, by actually doing something customers want that we're aligning ourselves with what our customers want. So prior to Skype, right, you could have come up conceivably with special packages that would leverage your, your technology that would create more of a constellation of services, say that customers would buy from you that Skype couldn't easily copy. You could have made it financially less attractive for an organization like Skype to come in. You could have figured out, you know, what are the things customers want aside from raw connectivity and would they come to us as the provider of choice rather than hanging onto that monopoly for as long as we possibly can and then sort of grudgingly give way once the cat's out of the bag. So, you know, my big encouragement would be, you know, stop looking at your business model to use your work as something that you're going to maximize to the, to the distrust and dislike of your customers and start to think of yourself as being allied with the interests of your customers. And I think, you know, telecom had a long history of monopoly and so a lot of the people making decisions in those companies never really thought of it from customers point of view. They only thought of it from, you know, how do we make the most possible money on international calls?

So one of the things you said that's interesting at the beginning, that innovation is at the edges. So Lauren from our content team, she asks, well, if innovation is at the edges, how do you actually change the company culture so you can bring it to the center? What do you do? Is it a metrics change or if I'm a CEO of a large established company, what do you tell me so I can focus on this problem? Hey, innovation is at the edges. I'm focused on my business model. I'm not sure what to do. What would your advice be?

Well, this gets back to the eight practices actually, because the better CEOs, in other words, the ones that to me are really interested in the long run history, long run success of their company, they're institutionalizing practices that make sure they don't get out of touch and to make sure they don't go into defensiveness. It becomes a culture of curiosity, a culture of let's really understand what's going on out there. And that gets backed up with practices, with metrics, with opportunities for people at the top level to come in contact with people who perhaps know things that they don't. And this relentless curiosity that leads people to feel, you know, I can bring uncomfortable information or news to my leadership and I won't, first of all, I won't get punished for it, but secondly, I'll actually be appreciated for it, you know, that they'll be glad I brought them something they weren't looking at or thinking about. And as you said, that's, that is a cultural thing. It's a mindset thing. You know, in a lot of companies the mindset is very much, you know, don't bring me, and it's not stated this way, right, but, but don't bring me information that's uncomfortable for me to hear. And a lot of otherwise good companies have missed things because people were too scared to tell their senior executives what was really going on.

So one of the things I see a lot is CEOs or leaders saying everybody needs to be an innovator. And then sometimes I think that's pretty dangerous. Right? You actually need some people focused on execution and you need some that really show that curiosity. Probably everybody needs to show the curiosity, but some can maybe go and explore. So often this term of ambidextrous organization that's world class at execution and world class at innovation comes up. How does that fit with the concepts you're writing about in your, in your next book?

Well, I think the everybody needs to be an innovator idea, I think that has a certain amount of validity, but that doesn't mean that's their full time job. Right. I mean, you know, I can be an innovative procurement person by perhaps I redesign my customer form so it's, you know, easier to do business with us than with our competitor. That's innovative, but it's not going out and creating the next Skype. But I think giving everybody permission to be innovative in the way that makes sense for them, I think, is what you want to go for. But you're absolutely right. The bulk of the organization at any given moment is going to be focused on getting on with the business of the day in terms of innovation being at the edges. I think the other thing that I think companies get wrong a lot is they impose the obligation to do something about an inflection point on the people that first see it. And they may be in no position to do anything about it. They may be able to see it, but they're not the decision makers. They don't have the resources, they don't have the teams. Maybe they don't even have the skill set. They may not know what to do at all. But what you want is them to be able to have a place to go to bring what they're seeing into the conversation. And that's, I think, the harder thing to manage, which is you don't look like, you know, I'm sure you've seen this, Alex, where, you know, in a company people say, oh, you know, be an innovator, do this. And then you say, well, I think there's a great opportunity to do something and I'll make this up, you know, Tunisia. And then they say, oh, congratulations, pack your suitcase, you're on your way to Tunisia. And that maybe not be what you want at all. Right, So I think you want the conversation, but not necessarily link that to who's going to take action on this.

Right, right. Who would you say, you know, beyond the usual suspects like Amazon that we all hold up as an example, and it's a great one, but I know you're working with a whole series of companies and probably most of them you can mention. But what would you point out? Which companies would you point out as? You know, really companies that are doing a pretty good job, maybe just emerging, you know, in terms of how they address innovation and showing this culture of curiosity, are there some out there beyond the usual suspects that you can hold up?

Well, it's fresh in my mind. I was just at the W.L. gore Innovation center and I know you've done a fair amount of work with them over the years. They would be an example of a company that I think really makes it a priority to have this pretty flat decision making structure to recognize when established practices that work for the existing business don't work for, for the new businesses. They are very empowering of their leadership in terms of being able to bring in new ideas and do new things. So I think Gore is a really interesting case. I would say, you know, company like Spanx, right, Which is a fabulous entrepreneurial success story. You know, I mean, they've been very interesting in terms of the. Just figuring out increasingly what it is that women really want today. You know, that that's different from what we may have wanted in the past. I think they've been quite innovative. So that's another interesting example.

Now, if I'm a CEO and I say, okay, look, I have this 1 million, I want to invest, and, you know, the scale of things, that's probably not a lot of money given that, you know, these larger companies, if they want to grow 2, 3, 5%, it actually means creating 5 billion of growth. But if I'm a CEO and I say, I have this 1 million, I want to invest well into innovation, can do a small thing, right? What would that be? What would you tell me to do with that million dollars.

As a. As a company, as a sort of generic proposition?

Yes, correct.

I would say figure out 10 to 15 small bets that you would like to seed and then figure out a way of getting people to work on those. So a couple of examples here that I think are worth mentioning to your audience. So the first one is the Adobe Kickbo. I don't know if you've run across that, but Adobe, by the way, is another company that I would. I would put in that pantheon, you know, of companies that just are continually reinventing themselves. So the kickbox is a red box, and inside the box is a Starbucks card and a candy bar, because all good innovation is fueled with caffeine and sugar, right? It's also got a workbook. It's got a colorful workbook full of instructions. And the most critical thing it has is a gift card with $1,000 value on it. And you as an employee can request a kickbox. Very few questions asked, very few requirements, and no sort of particular screening or vetting on what you do with that thousand dollars. But the only requirement is that you have to give some input back to the kickbox system in terms of, you know, what you tried, what you learned, what are some possible lessons that someone else could build on. And over the time, Adobe's given away about a thousand of these. So that would be about your million dollars, right? And yet, think about it. For that million, you've now got a thousand ideas right at the edges, as we've talked about. Most of which are going to be dumb ideas, right? Most of which are not going to work, but you don't need them all to work, right? You need a small fraction of them. So let's say you've got, I don't know, 100 out of that, or 50 out of that thousand that actually are onto something. And moreover, you've got lots of different people looking at lots of different angles of this. So let's say there's three or four or five ideas that are connected in some way. So now you can start to say, well, here's some critical mass around a concept. And what Adobe does, I'm told, is if there's enough attractiveness that comes out of the kickbox phase that you move on to get a blue box. And nobody will tell me what's in the blue box. But my suspicion is that it's the mechanics of beginning to actually get a venture or an idea to become more considerable. So that would be an example of a very simple system. It's not all complicated and heavy and lots of approvals and lots of documents to fill out. So very simple system that gives the empowerment of having a bit of resource right out there at the edges for your people to take advantage of.

I love that because it's one of the core messages that we're trying to get across with strategizers that you can't actually pick the winners. So you need to seed many ideas, give a little bit of money and then do follow up investments based on what works. And you do this maybe in two or three rounds. We like to call this sprints, innovation sprints and have more of a venture capital approach for these new ideas because otherwise you're not going to discover those that could really work because they come from the edges. But this is very hard to kind of get across in companies because it's very different from the execution logic where you invest in one project and then you expect a return. Are you seeing leadership starting to understand that the investment logic of execution projects and the investment logic that you just explained really well with the Adobe kickboxing, are they starting to understand this or is this still one of the things that you know at the leadership level and not because they're stupid. Right. But because maybe nobody told them in a very simple way that this is not rocket science. Are you seeing that awareness now that these are different worlds and we need different kinds of investments?

Oh, Alex, I have been trying to talk about this since 1995. Right. This is one of my lifestyles works. You know, I do see greater awareness, I think if you think about the time that's passed since then. Right. We've got certainly your thinking. We've got Steve Blank, we've got the whole lean startup design thinking, you know, that whole. There's lots of different pillars now. They're starting to emerge of what this other world looks like and what, what's different about it. Right. And we're starting to see it come together in a bit more of a culture, coherent form. And so I do think that we have, I do think we have more awareness now. It's not universal, it's still kind of patchy. And honestly, you know, a lot of people that run very large organizations today have never been exposed to any of this. You know, they got where they were by executing really well against very complex, challenging business conditions. And so they have no personal experience with innovation. So I think we're not really going to get to nirvana on this front unless having at some point had a personal lived experience of innovation becomes a requirement to get to the C suite. Until that happens, I think we're still going to have this disconnect.

Yeah, right. So you've been talking about this for a long time and you pointed out, right, that it's almost like we're at an inflection point, right, that more of this, there are more methods, there are more people talking about it. You were one of the really early ones and you were a great inspiration for our work here. So what do you think changed? That this is becoming more important, There are more people talking about it. Maybe not yet more large organizations, established ones, actually acting, but something seemed to have changed that. This is more of a topic, it's more at the center. What do you think that is, that this is, is really getting a bit, a bit more visibility, even if it's not getting the required action yet.

Well, I think if you go back to the world of sustainable competitive advantage, right, where you had an advantage and then you got to exploit it for a long, long time. To be perfectly blunt, you didn't need innovation that much. I mean, if you were an American company making tires in 1957, you were pretty much going to sell all the ones you made. And so the innovations were really around operational and technical things. And, you know, so dupont would invent nylon, you know, and then they would sell nylon for 60 years. And so I think, you know, as advantages have become shorter, the pace of things has gotten faster. And I think the people are beginning to realize that they've got nothing to offer. You know, so the toolkit is bare, the cupboard is empty, and you know, oh my God, what are we going to do if this isn't our Core business. And I think that is now touching more and more people. And the causes are pretty easy to identify. Right? I mean, back in the day, you did not have global competition. You had the US Maybe a little bit of Europe. India was closed, China was closed. You didn't have container ships, shipping stuff cheaply across the ocean. You didn't have global trade. You didn't have digitization, which is a hugely disruptive influence on many, many industries. You didn't have this sort of global market for talent, global market for services. So it was a very different world in terms of stability and what you could expect. And I think that shift has really got a lot of people uneasy. And where I see people sort of landing at the moment is we know things have changed. We know things are different. We know the old rules don't work anymore, but we really don't know what's replacing them. And that, I think, has created a real interest in, you might call it innovation, but certainly what's next in terms of strategy.

So in our chat, a lot of people are saying, alex, Alex, ask Rita if we're gonna get a couple of those eight practices. So I'm forced to ask, should we go into a couple of these?

Of course, of course. I know you and I could just Babylon all day.

We could talk for 24 hours. Right? So let's get to some of those ideas.

We should do that sometime. You know, we should have, like, a binge talk.

I'm up for that. I'm up for that.

Okay, so eight practices. So the first one is, and I'll do this in the form of questions. So are you prepared to learn from the edges? So the first question is, are you positioning yourself to come into direct contact with the edges of your organization? And as you get more senior, the challenges of doing that become more substantial. So let me illustrate. A few months ago, there was a news report about the effort by certain US Retailers, namely the Gap, to provide their workers with more stable hours. So workers in retail stores give them more stable hours. And this newspaper reporter from the New York Times wanted to know why it was so difficult. Like, what made it so hard to give their workers stability? And the store manager replied with two things that I thought were pretty telling from a point of view of a leader. The first was, oh, corporate. He said, well, you know, we get these requirements from corporate that they're going to do a national promotion for skinny jeans, you know, and all the skinny jeans now have to go from the back of the store to the promotional aisle. And that takes Time because you know, that's an extra demand. And so we've got to do that by Thursday because the promotion is going to be rolled out on Friday and I've got to have everybody in the store moving the skinny jeans around. So that was the first problem. Second problem was even worse. He said, ah, second issue is corporate visit, executive visits. I said, you know, just last week I had an executive in here and it took us three touch, three complete shifts of people working overtime to get ready. Now let that sink in for a minute. Right. So you know, the executive's trying to do the right thing, get out to the edges, see what customers are experiencing. But the store that you and I are in is not the store that executive. The store the executive is seeing is a store with, you know, three times the labor hours in it. So this idea of how do you get to directly confront what's actually going on in your company? So unannounced visits, go out and try to sit on your call center, talk to customers who are actually trying to purchase, go stand in the lunch line next to people that are buying. So that notion of direct contact is just irreplaceable.

I think that's important just to quickly build on that. Sometimes when we coach teams and the leaders say, okay, who's actually now going to talk to customers? We say, well, you better roll up your sleeves because you are the people who are making decisions. You need to get in touch because otherwise no decisions are going to happen. It seems such a trivial thing, but it seems that established companies have a very hard time to get in touch with, with the edges, with what's really going on.

Exactly. And I think part of it is how we frame leaders work. Right. I mean, if you think about it, is there a task in your company that's actually more important than finding out what's going on in your customers minds? I don't think there is. And yet we're running around having board meetings and dealing with email and talking about analysts and you know, we're really not having the customer front and center of everything that's we do. And that creates these incredible blind spots. Right.

And it's such a simple concept. Right. But we still actually seems that the more successful the business model, the further we move away from the customer because we just kind of take for granted that our initial assumptions were the right ones. And as you pointed out, right. There's strategic inflection points where our initial customer assumptions might be completely wrong and we need to get in touch again.

Or you were right. For a while, and now there's a challenge. So let me share an example that is going on right now. And I'm writing about this, by the way, in my current monthly newsletter, which is about changes in the hospitality business. So take something like Airbnb, right? Phenomenally disruptive company showed us there was this pent up demand for a different kind of lodging experience than we've had opened up the opportunity for people to make some money off real estate they already owned, yada, yada, yada. So that was great, right? And a lot of us were completely enthusiastic about Airbnb when it first started. So fast forward and we've got a couple of things that I think could really undermine their business model. The first thing is what I'll call the professionalization of Airbnb. So you've now got people who said, hey, there's money to be made here in essentially running unregulated hotels without the hotel taxes. So I'm going to buy buildings now and I'm going to basically turn them into hotels. And in cities all over the world, this is now becoming a big problem, right? Which is this sort of cute Airbnb model, which is supposed to be, you know, Aunt Minnie in her spare bedroom, is now been replaced by actual operators who are capitalizing on the fact that this is, you know, that regulations haven't caught up with this model. So that's the first big change. Second big change is the existing providers have now figured out that people have a demand for this. So there's a company called booking.com which is the parent company behind Priceline and OpenTable and a bunch of these other like hotels.com. well, if you go to booking.com what you will find is they now list 1.4 million private homes as well as hotels, cruises, you know, whatever else you might need. So if you think about it from the point of view of the customer, so I want to travel to Paris so I can go to the hotel site and see what hotels would offer me and then I can go to Airbnb and research what Airbnb would offer me, then go back to the hotels and see if they're still available and go back to Airbnb. Well, nobody's going to do that, right? So I am highly likely to go to the one site where I'll get as much information as I need, make the decision, make it more conveniently and move on. Now, there's no way Airbnb, I don't think, is going to start listing hotel rooms on their site. They don't have the infrastructure. So, you know, talk about getting to the edges. Right. It worked fine. It was a great model for a long period of time, but I think it's changing. And are the people that are running that still operating on the assumption that, oh, we've got this niche we've just opened up and that's still going to be ours to own? Maybe not. Right.

And what's interesting is that disruptors like Airbnb have to think about, once their business model becomes established, how are they going to think about the next wave? They're at the same risk once the business model works, you focus on that so much. And I do think they are doing a couple of things, but that's crucial. Right. You can't just, you know, be happy with your. With your success. Okay, let's see if we can get to another. Sorry for. Because I'm getting this pressure from our chat group. They want to hear another couple of those practices.

Absolutely. So the second one is making sure that as you're making decisions that you want to encourage, you want to obligate diversity of perspectives. And when I say diversity of perspectives, I don't mean the politically correct version. Right. I mean people who are really coming at the problem from a very different place than you might be coming at it from. Because one of the greatest ways to create a blind spot is to just have people that are just like you thinking about it. So I'll give an example. There in New York City, there was a small team of very talented young people that had this great idea. It was to take all the payphone booths that were basically no longer used because people. Very few people use payphones anymore and turn them into communication kiosks. It was a thing called Lync nyc. And the original idea was right there on the street. You'd have unlimited Internet access. You'd have a plug to charge up your phone. You'd have, like, a directory to local sites and so forth, and you could get information. And then this was going to be great, right? And it was all going to be paid for by advertising that would show on the outside of the kiosk. So the city of New York wouldn't have to dig into its pocket to build this. So this was all great. So these things go up all over the city of New York, and within 24 hours, homeless people are setting up living rooms around these kiosks and watching unlimited YouTube videos. You've got. You've got guys, like, in tourist areas watching porn.

So much unexpected, Right?

Well, my point is had they had someone on that design team who actually understood what goes on in the streets of the city of New York, you know, they would have done this whole thing really differently. And it was a public relations disaster, right? So they had to completely disable the Internet functionality. And even today there's a huge debate because a lot of homeless people are actually camping up by these things and using the plugs and the electricity and you know, the mindset of the people building this. And I'm not being critical of them, I just think this is a very classic mistake you make when you've got a homogenous point of view. They assumed people that would use these things would use them the way they would. They would never conceive of sitting there all day long plugged in.

And it points to a really big, big issue, right, that people don't question their assumptions. They don't accept that when you're doing something new that there's uncertainty. They just believe because they're smart and they have experience, right? And they go and they look at it as execution. So the diversity seems to help, right, with questioning the assumptions.

The third edge kind of thing is do you really have small teams that are empowered to do exploratory things, so they're entitled to go off and look at something for a bit and then come back and let you know what they found, or better yet, even take action on what they found. So empowering small and diverse teams. So I'll give an example from a company I worked with which was we were trying to teach them entrepreneurial leadership. So these were people who were high potential people, so young people, they were say 30ish would be their age. But in the context of this course, what they were encouraged to do was form teams and go and look at some issue or problem that the company hadn't really considered and that when, you know, when they came back, there would be sort of an upvoting system and the ideas that got the most votes, the company committed to implement them. So that's, you know, that's a way of saying, you know, we're not going to give you the shop to run because they're constraints that we're operating under. But we are going to empower you to go out and tell us, you know, a few things that we really ought to be taking some action on and notice of. So that's an example of empowering small teams to bring back information that might be of value to them. Another great example of this is the CEO of eBay was considering making a Change to the website, right? And I mean, that's a big, big issue for ebay because, you know, you know, people don't like it when you rearrange the living room, right? So, you know, his young chief technology officer sort of said, here's what I think we might want to do. And the CEO said, okay, well, you know, come back to me with some kind of proposal. Well, this guy didn't just do that. What he did was he went around the company, found 12 of what he considered to be the very best developers, said, okay, guys, we're leaving tomorrow for Australia. Which, you know, when you consider ebay's headquarters is in San Francisco, is about as far as you can get. And took the team away for two weeks. They did a massive sprint, the way that you would advise, and they came back with a pretty prototype built. And at the time, this eBay CEO guy named John Donahue was just blown away. He said, you know, had I asked my typical team to do this, it would have been eight months and 400 PowerPoint slides and, you know, 55 analyst reports. These guys just went away and built something. And, okay, it's not perfect, but it's. It's 80% of what we need. And they just did it. You know, they didn't ask permission, they just did it. And that's another, I think, great example of empowering these teams. Right?

And it's. So this concept, you know, sometimes people might say, oh, pretty obvious, but we don't see that in practice. Right. And the empowerment word there is the big one, right. Small and empowered. And one of the things that I'm wondering if you see this as well is that people want to have a big impact, you know, big return. So they think they need to invest in big teams and taking the execution approach. But it's quite the contrary. Right. Do you see this empowerment happening a little bit more? That we're starting to trust smaller teams to go make decisions and, you know.

With different processes, you know, it's all over the map. I'd say it's very uneven. A lot of companies still have faith in the sort of marching army approach, and usually that's a mistake. Well, it's always a mistake when things are really uncertain. I mean, I know very few cases with under high uncertainty where that approach makes any sense. Instead, what you want to do. And I think here you can take a traditional page out of NASA's book, you know, that when they decided they wanted to go to the moon, like, I have this mental image of John, John f. Kennedy saying, you know, in 10 years, we're gonna put a guy on the moon and bring him back alive. And, you know, I have this mental image of all these guys in Houston looking at each and going, what did he say? But what they did. But what they did. And this, you know, this obviously, is a massive project. It's massive investment, massive discovery needed. I mean, a huge, huge, huge project. But they didn't treat it like a huge project. They said, okay, well, before we can get a man to the moon, the first thing we have to do is to be able to get a rocket out of Earth's orbit. You know, so how, you know, get a rocket off the ground? Let's say, well, let's take a small group and think about how we do that first thing, right? And. And once they'd successfully managed that, then they did the next step and the next step and so on. And eventually, as we know, they did get a man to the moon and bring them back successfully alive. But. But it didn't happen as a big, huge we know all the answers program. It happened step by step.

I like that because it shows. I mean, it's a brilliant example, but it shows that you want to take a big thing and break it down into smaller assumptions.

Right.

And you. You try to work on one after the other rather than trying to solve the big thing. Again, you know, seems almost like common sense, but it's actually not common practice at all. Right. Breaking down these ideas. Okay, good. We're at three. Let's see if we can get to halfway through to the fourth.

So the fourth one, I love listening.

To you, so I hesitate sometimes to get us to move on.

Oh, no, that's right. The fourth one is back to this idea of, are you giving people the opportunity to take little bets and, you know, to try small things? And the Adobe Kickbox would be a great example for that. Right. So do you have the resources, do you have the encouragement? Do you have the permission to make a little bet on something, learn what you need to learn, and then come, come back? So that's the fourth one. Okay. Then the fifth one is something Steve Blank says a lot, and I know you and I both agree with him. It's, you know, there are no answers in the building. So get out. You know, get out and get out of the building. See what's going on with your. With your customers, with. With your suppliers, with technology trends. So this would be practices like. And it's slightly different from the first one, which is direct contact with your customers, because this one is a more generic kind of are you positioning yourself to be exposed to things you don't normally get exposed to? So as an example, do you go to conferences that are not part of your own industry? You know, do you, do you have conversations regularly with people who have absolutely no idea what you do? Do you, do you, you know, as a matter of routine, do you read publications that aren't directed at people just like you? You know, do you, do you read, do you invest some time in learning? Right. Do you come to an executive education course? Do you develop, you know, things that are quite different from what you're normally doing? So this notion of get out of the building, I think is really valuable. And that's more of a general approach to your own development and your own perspective than the traditional kind of just get rewarded for getting your job done.

Comes back to the culture of curiosity, right? Going that extra length, being curious about and enjoying your job, not just executing to kind of get your promotion, but going that extra length to want to be world class. And again, how you framed it with the culture of curiosity is something that I don't see enough. Sometimes I'm surprised that, you know, people in particular industries don't know exactly what's going on in terms of, you know, disruptions at the edges. Very surprising.

It is, it is, yeah. And it's, it's, it's quite fascinating, right? And I, you know, these things are not like, by the way, nothing I'm saying here should come as a complete and total shock to anyone. And they're very simple practices and yet we don't do them. It's astonishing.

Exactly, exactly. So I like what Marshall Goldsmith, one of our common friends, likes to say, right? It's sometimes common sense, but not common practice. Right. So just need to repeat this again and again and, you know, hopefully leaders will move on and start to implement this in the organizational structure.

Right?

This is all about getting to start doing this. Okay, we're at five, let's see if we can get to those three.

Six is are you creating incentives for people to tell you the truth. And here, what I'd like to use as an example is a corporate tragedy that sort of unfolded in several acts. And the corporate tragedy is the tragedy of Kraft Heinz. So we had these two American iconic companies, Kraft and Heinz, that were traditional old line companies, right? They made good products for the middle class, they employed people with long tenure, and some would argue, well, they were just fat and happy. And others would say, well, no, they were run like good companies. Trying to do good things, they were good corporate citizens, etc. Etc. So this hedge fund, 3G from Brazil, which has bought a lot of different companies and their recipe is very much, you know, zero based budgeting down to the bare bones. You know, just absolutely run things for cost, cost, cost, cost, cost, right. So essentially what they started to do at Kraft Heinz was to make those numbers and to make that really hard nosed set of expectations on the part of their corporate overlords. They started to cut corners, right? They started to cut back on advertising. They started. They didn't invest in innovation, they didn't invest in their people. And to the point where there was a survey that was done by Glassdoor, you may know that employees can go there and talk about their jobs and they report on companies. Anyway, they did a survey of employees at Kraft Heinz and compared them to the other companies, sort of in their categories with the percent of respondents who would recommend their company to a friend. And as Of April, only 29% of the employees at Kraft Heinz would say they would Recommend Working there, versus 70% at Nestle, 75% at General Mills, which are quite comparable companies. So if you take a step back and ask yourself what's the incentive in Kraft Heinz for somebody to come up with an innovative idea or for somebody to say, hey, we're not doing this right, or for somebody to actually bring the truth that customers needs are changing to their corporate leaders? They're not. There's no incentive. You know, their incentive is all about do whatever it is you're doing, but do it for less and do it for cheap and cut corners and you know, blah, blah, blah. And so as we saw very dramatically recently that they, they missed their sales targets by a formidable amount. They lost, I forget what the number was. It was something like $15 billion in the quarter was below what they expected. They caused Warren Buffett one of his biggest single day losses ever in his entire career. And I would argue this is completely traceable to the fact that you're not being incented to tell the truth.

Yeah, Ray Dalio talks a lot about that. Right. That you want the best ideas to emerge in a company. You want people to speak up. Not something again, an idea that you say, of course, but not something we see implemented a lot. Right?

Absolutely. So the seventh topic is something I know near and dear to your heart, Alex, which is have we figured out how to get our senior team away from being in denial that there's a problem? And a classic story that you know as well as I do is our colleague Alan Mulally. When he first came into Ford, you know, Ford was set to lose something like $17 billion that year. You know, they were in deep, dark trouble. He assembled his senior leadership and they had their performance numbers for that week in front of them. And they were color coded, right? So green is good, red is problematic and I don't know how, and yellow is kind of, I've got a problem, but I know how to fix it. And he comes in day one and it's all green. Right, right.

I love that story. It's unbelievable, right? How can you put it on green with that?

And so he says, well, you know people, is it our plan to lose $17 billion? Because if it is, we're right, right on track. And he has a phrase that I think should be like on the wall of every senior leader's office everywhere. And his phrase was, you can't manage a secret. If we can get the data out there and we can understand what's going on, we can do something about it. But if we don't even know there's a problem, we can't manage it. And moreover, if we do know there's a problem, there's probably enough talent and creativity and you know, ideas in the room to fix it. But if we're all being sensitive and we want to look good and we're afraid, you know, that we'll be punished if we bring up these uncomfortable facts, there's no way we can use that collective intelligence.

Amazing, right? I mean, it's all this about psychological safety and it does require a type of leadership. Right. Alan Mulally, you know, you know, despite having so much success, remained humble and got everybody to speak up because it's not this kind of violent top down management. Right. He likes to say you need to love him up. Right. You need to have a very good relationship with people. I love that. It's a great example.

And the last one, see, we are going to get to the last one is drawn from the science fiction writer William Gibson's observation that the future is already here. It's just not evenly distributed yet. And the argument I would make there is how often do people really think about where is the future showing up? That's not mainstream yet. So here's a, here's a statistical fact. If you want to understand how 20 year olds are going to be behaving in 10 years, you actually have the entire population of people who will be 20 in 10 years alive and working today. They are today as 10 year olds. So if you want to know how future, you know where the future is? Go talk to a 10 year old and you know, how are they consuming information? What do they look for in terms of who they trust? Now, I mean, it's not going to be a predictive, right, but it will give you some ideas about what could be happening. And so, you know, I go to, I go to a lot of conferences where people talk about cutting edge technology. So just last night I was at a conference at Columbia called the Digital Dozen Awards. And this is a conference that's convened by my friend, my colleague, Frank Rose. And his thesis is that any new communication technology takes about 20 years before we figure it out. So when moving pictures first started to be possible, right, we didn't know what a movie was, so what did we do? We staged plays and we filmed them. It wasn't for years until we figured out things like, well, you know, you don't have to film the movie in sequence. You can film scenes at different times, right. And then put them together afterwards. And I mean, simple things like that that are obvious to us now took a long time to happen. So what I try to do is position myself to where bits and pieces of the future are already showing up, even though they're not fully developed yet. So the way I would phrase that is go talk to the future.

I love that concept and I love these eight practices. Really. Were you able already? And again, I know you can't mention names of some clients. Are you able to start implementing these with some of the leadership teams out there? Maybe without mentioning names? What would they. Was one of the most surprising stories that you've seen in the last couple of months or years.

Well, I actually did this exercise with a group of business leaders from the Young Presidents Organization, the ypo. And what we did was we put them into small groups and gave them essentially a worksheet which said, hey, you know, go through all these and tell us what, tell us which of these you use. Tell us your best practices. Share among yourselves. And they came back and they. There was one guy who was absolutely ashen and he said, oh my God, I'm not doing any of this. And I could see this would be a big problem. So you have that moment of people really, really being confronted with the fact that if you look at how they're spending their time, they're not doing these things. So it's not all that surprising to get blindsided.

Unbelievable, right? So I can't believe time is already up. Time flies. You know, I could just go on for hours and asking questions and listening to you. But I'll let Kavi wrap it up. Just maybe before we hand over to Kavi. Can people already pre order the book?

They can, they can. We're just in the putting the finishing touches on it. But you're welcome to pre order it. If you go to my website, ritamograth.com and then backslash seeing around corners, you'll get the book webpage and you can put yourself on the list there. I should also mention, you know, I do run this weekly, sorry, monthly newsletter and what I do each month is, and this is one of my personal practices for seeing around corners, right. I take a different sector or industry each month and ask the question, well, what are some of the challenges? What are some of the inflection points that could face that industry? So the most recent one was about the hospitality business and Airbnb's challenges, you know, going forward. I've done them on food, I've done them on housing. I've done them on investments. I've done them on the power company. So if your readers are interested, if your listeners are interested, they can sign up. It's free. Just sign up for the newsletter list and that'll get them on. And, you know, I don't use the mailing list for anything else. It's really just people that are interested in this kind of thing and tapping into that resource.

And I can really recommend it. If you hadn't brought it up, I would have, I would call it mandatory reading for anybody who innovation and anybody who's doing business these days should, you know, start thinking about innovation. And you like to say, right, strategy and innovation is increasingly becoming a synonym. So please go and sign up for Rita's newsletter. It's brilliant. Now, Kavi, I'll let you wrap it up.

Thank you so much, guys. As always, it's always such an engaging conversation. Rita, a huge thank you again. You're always here to come and chat about all the things that you are working on, but also a good yarn, as we would say in Australia, with Alex, on all the things that you guys get excited about. Holger, a huge thank you to you again for coming in and facilitating visually the conversation. A stunning job in just capturing the conversation as it happens. And Alex, as always, once again, thank you for hosting. To everyone that's listening, you will get a recording of this session within the next 24 hours. And I will be sure to make sure that when you get this recording in your inbox, you're going to get a link to Rita's book, the landing page to her book, the chance to sign up, and also to get to her newsletter. You'll also get access to to a link that will take you to our new book at Strategizer, the Invincible Company. So you can sign up and be updated on that. Until then, everybody, we're gonna sign off now. Again, Alex, Rita Holger, thank you so much.

Thanks, everybody. Thank you.

Thank you.

Bye. Bye. Bye.