When you read about entrepreneurship, you can get the sense that there is only one type of company. Invent some new technology, get hundred million users and IPO. The theme was echoed by the always thought-provoking Steven Black in his fireside chat on Startup Hacking. (link). During the presentation he caveats his point by outlining four types of entrepreneurs and suggest that there are other kinds of entrepreneurship that might be different from a classic Silicon Valley Startup;
– Lifestyle entrepreneurs, like a surfer that take a few students to help her finance her passion.
– Mum & Pop entrepreneurs, like corner shops and small family businesses
– Tech entrepreneurs, like the founders of Facebook and Google
– Feature entrepreneurs, people who make features or technology that then get bought by bigger tech companies.
I find it to be a refreshing thought that there are different types of entrepreneurship and that founders should build the kind of company that fit their temperament, skills and region. Especially because, I as a non-Silicon Valley founder, often find the advice and methodology provided by many in the startup community to be very specific for the type of tech startups that Silicon Valley create so well. What seem to be especially lacking (and sometimes even looked down upon) is what we can call the ‘Old School Startup’. New companies that are not enablers of new technology but powered by it. Startups that might not create a whole new behavior or industry but are replacing or expanding an existing one. Companies like Warby Parker, Vice Media and JustEat. I realize that for a VC, a perfect home run is a new tech startup where the returns are incredible. However, I suggest that there is a host of big innovative startups that are being built that use a different methodology than what is best practice in Silicon Valley. Theses companies might never become as valuable as Uber, Google or Facebook — but they, not small Mum & Pop shows either. A few properties that make them different;
– The are powered by technology not an enabler of a new one
– They are most often disrupting an existing industry that have been dormant or not innovated in their product, business model or service layer
– The founders are often not engineers
– They often have a business model in place from day one and can scale their business while they expand their user base (vs. focusing on getting a big user base and then figuring out the business model)
– They are often made by creating fresh brands — and using web tools to make products/services/experiences better and cheaper.
There are several other types of entrepreneurship (agencies and service startups comes to mind), but in our fascination of companies like Facebook that grow from nothing to 100B in a few years, we seem to be forgetting that the world is filled with these other amazing companies. Now the world is not binary, and there are certainly startups that are a hybrid between ‘Old School Startups’ and Tech Startups. (e.g. Uber), but as we talk about startups in general, we should become more aware that there are different types — and methods that work for growing one type — might not work for others.
Everyone has heard “desktop is dead” and “mobile is eating the world” a million times, but what does that actually mean? And, more specifically, what does it mean for you?
For starters, it means that 900 million people — almost 1 in 7 people on the PLANET — use Facebook on their phone every day. It means that over 3 billion videos are viewed on Snapchat, and 5 billion more on Youtube, every single day. And I don’t think I’d be far off in saying that you probably check your phone well over 100 times a day. In fact, I’d be surprised if you weren’t reading THIS on your phone.
So, what “desktop is dead” means is that mobile should not be part of your strategy. Mobile should BE your strategy. Whether you’re B2C or B2B, being customer-centric means living, working, and breathing mobile. Below is a handful of short, to-the-point, and directly actionable insights on mobile based on trends the team here sees that you should be thinking about as you head into 2016:
1. Video: vertical and… soundless?
Have you ever held your phone horizontally to type a text? Do you check your news apps or Facebook in horizontal mode? Thought not. But you probably engage in the all-too-familiar video-watching battle every day… You hit play on a video in your feed, and it starts to roll, but it looks small and distorted, so you turn your phone to the side, which makes the video pause or skip, so you have to rewind or flip the phone back to vertical… meanwhile, you’re frantically hitting the “volume up” button with one hand whilst trying to disentangle your earbuds with the other…
All of which is to say, we all need to rethink how video is made for mobile. Video viewing on Instagram is square, but we’re seeing more and more vertically rectangular video across content platforms. And a muted auto-start — which Facebook does — will have people deciding if they want to watch the video without the audio playing. So video content needs to capture your audience without audio and should probably be made in the way people use their phones: vertically.
2. App-less apps.
Texting is the native mobile interface. It’s universally easy, natural, and quick. In the past year, we’ve seen an influx of apps capitalizing on this interaction framework — apps that aren’t really apps at all, but deliver a service or a product via the text interface. These “hidden” apps — like Alfred and Magic — have tended to deliver luxury experiences, but we predict that hidden apps will start to cross over into middle-market products and services. Listen to more thoughts on chat-based interfaces here, on the Prehype podcast.
3. Platform agnostic content marketing
Yes, Facebook has 1.5 billion users, and you should be optimizing your content for Facebook. But Instagram has 300 millions users, Snapchat has 200 million users, Pinterest has 100 million users, and Reddit has 40 million users. Medium now has nearly 1 million. Outside of Facebook, where does your audience lie, and how can you optimize your content marketing strategy to span these platforms? At BarkBox, we’ve built an influencer community that spans all of these networks, and we run campaigns and contests that work fluently across the board. Think less about your content as a destination — and more as bite-sized part of the wider web.
4. Hey… you still reading this?
Okay, so maybe (hopefully) you are, but there’s a good chance you’ve clicked away or switched back and forth through other apps over the course of reading this. This is because mobile consumption is distracted consumption. Say goodbye to the traditional story arc of beginning, middle, end — content needs to be continuously engaging. Stories should be made up of smaller sound bites, and the format in which you publish your stories (text, video, audio) needs reflect that.
5. Your customers are on their phones — why isn’t your team?
Customers browse your products on their phones. They read your content on their phones. They chat with your customer service team on their phones. They make recommendations to friends about your products on their phones. If they are waiting for their car to get fixed, their doctor to see them, or for a friend at the bar — they are on their phones. However, I bet that all the presentations you see at work are on a computer, from the screenshots of your new website to the email campaign. Start making the mobile change today by demanding that products are presented in meetings in the same way that your customers see them — on mobile. A mobile future calls for a mobile now, in all aspects of business-as-usual.
6. The landing page is dying.
The traditional path for app discovery is getting turned on its head. We tend to think that people download apps because they see an ad, click through to a landing page and learn about the app, decide they like it, and then go to the app store. But this model is changing. What we see is, instead of turning to landing pages for information, people jump from the ad straight to the app store to download and test out the app. This means that the real discovery process takes place within the app, through users actually interacting with it, not on a site dedicated to explaining what it could do for them. The problem is, most app UXes don’t account for these totally unindoctrinated users. In lieu of landing pages for apps, apps themselves must offer introductory experiences, which also means apps must be optimized for conversion.
… Thoughts? Questions? Just want to say hi? Would love to hear from you.
PS. If you’re curious about what we have been up to lately at Prehype… here’s a few things that kept us busy this year…
Prehype partners continue to launch great homegrown startups … AndCo and Amberjack have launched in 2015.
In 2015 to date, we have co-created around 6 ventures with corporate partners like LEO Pharma, Dow Jones, and RBS, with more to come.
We have moved into secondhome for our London office, it has plants, entrepreneurs and other startups. Come by.
Ahh, and another shameless plug; we’ve launched Prehype’s podcast earlier this year, where we discuss everything from health tech to social engineering and architecture. Would love to hear what you think about it, and would always appreciate any topic suggestions.
The other week I was lucky enough to have Aaron Harris, partner at Y Combinator, take time away from reading applications to have a chat about… mobile stuff. Our conversation turned into an enlightening exploration of what is now not so much a trend but the way the world is (mobile-first), what’s coming next in mobile, and how he personally deals with the fact that, yes, mobile is eating the world.d.”
It’s safe to say we’re undergoing an overwhelmingly rapid transition to a mobile-first world. Mobile-first evangelists (myself included) tout the imperative of making mobile not part of your strategy but the foundation of everything you do. In the mobile-first onslaught, however, sometimes we risk losing sight of the fundamental objective: to solve a problem.
Talking with Harris served as a useful reminder to this obvious point, which nonetheless sometimes get buried. “Ultimately a computing platform is being built and that software has to be accessible wherever your users happen to be and in whatever mode they want to interact,” said Aaron. “The goal of creating software that solves a problem must remain on the forefront.”
Of course, that said, more and more, those interactions are happening on mobile devices; in five or ten years, I would be surprised if 99% of digital interactions happen on mobile. As we chatted more about this, a few themes popped up around what Harris sees as the next big shifts in mobile.
One was increasing simplicity — in terms of function and design. The great thing about phones is that real estate is small, naturally forcing simplicity upon app developers. Or so you would think — too often, users face an unintuitive jumble of buttons, interfaces, and controls. The best apps those with clear applications and clear UIs. Uber, vaunted prince of Silicon Valley, is a simple app. It’s function is simple — get a car to drive you from point A to point B — and users can achieve that goal in maybe three actions, if that.
But simplicity, Harris acknowledged, goes well beyond clear use cases and good design. One of the next mobile progressions he’s most excited about actually, is preemptive applications — apps that remove all friction points but not requiring anything of the user at all. Instead of even having to open the Uber app when you land at the airport or walk out of the subway station, your phone will have already figured out that you need a car and will have ordered it for you. There’s a lot of work being done on preemptive applications right now, but there’s a long way to go. Harris mentioned being particularly excited about what Google Now on Android has cooking..
After dissecting the mobile world for an hour, Harris brought up a curveball — something I did not expect from someone who is so utterly immersed in tech. Harris, it turns out, observes a technology Sabbath.. That’s right — no phone, no email, no Snapping selfies — every single Saturday. “It’s these 24 hours a week where I don’t have a computer, I don’t have a phone, I don’t have any of that stuff. I actually have to think.” Finding moments, let alone hours, that are truly unplugged is becoming increasingly difficult, yet, (remarkably given the demands on him) Aaron has found ways to give his brain room to breathe. Aside from the Sabbath, he recently started to only answer email for an hour in the morning. Periodically, throughout the day, he will check to see if there are any emergencies, but he has broken the habit of constantly monitoring his inbox.
Quite a feat — one we should all probably take inspiration from. Read on for more insights from this enlightened individual below, or scroll further for the full transcript.
You can also listen to the podcast on SoundCloud and subscribe on iTunes.
On the need to constrain problems:
“Constraints on a problem are some of the best things that you could possibly have and that applies to thinking about a new business or thinking about a new startup or tackling a new problem. Actually, constraining that problem is critical to creating something that’s useful. Otherwise, you just end up with hodgepodge.”
On the progression of technology:
“And then — it got personalized. You had to give the computer less and less information at any given time to accomplish the end goal. And when you jump towards things, if you follow that progression forward, you get to this idea that people really want technology to do something for them, right? And really interface is, in some ways, a barrier to that.”
On his hopes for Microsoft and healthy competition:
“…maybe Microsoft becomes the next integrated hardware/software maker, for the PC side. I can see it happening. Microsoft spends more on R&D than any other company or something like that. And there are still brilliant people there and they are capable of doing really incredible things. And I don’t know that necessarily, by the way, that Microsoft is making the best stuff or will, but I think competition on this is great.”
Transcript of podcast here:
A: Hi, my name is Aaron Harris. I’m a partner at Y Combinator where we work with lots of startups and I’m a longtime fan of Henrik Werdelin, one of my personal role models both in terms of hair styling and thinking.
H: I’m actually a pretty big fan of yours
A: Well, thank you.
H: So now this is awkward.
A: This is really awkward.
H: Aaron, tell me a little bit…what does a partner at Y Combinator do?
A: We’re basically responsible for finding new startups for YC to work with and invest in, whether that means going out and recruiting companies by meeting with great people wherever they are and talking to them, or sorting through the applications that we get twice a year for YC itself.
And then once we’ve actually selected those companies, we work with them for the three months that they’re actually in California with us. We spend quite a bit of time with them then, but also for the lifetime of the company — and even beyond. We help founders try to build great businesses and help in any way that we can.
H: We can honestly talk about many things, because you know about a lot of different stuff when it comes to startups and building different companies.
The thing that I was hoping to talk about today was I would say a little bit of a paradigm change in mobile occasions and how the interface of mobile and the avocations of it being done. I think it’s being referred to as hidden interfaces.
I think for people who are tuning into this podcast that would probably be most of the stuff that we’ll be talking about. Is there anything else that you feel we all need to know about?
A: You know, we might happen across some things at some point, but that’s the topic that you and I have talked about a little bit already. And I actually think the scale at which mobile devices have penetrated our lives is really, really interesting and so much larger than anyone anticipated.
And the platform itself is so new that I don’t think we’ve really hit what the right paradigm is for how we interact with computers in our pockets that are always on and always know where we are.
So, you know, there’s massive businesses yet to be built and that’s going to take a lot of iteration and a lot of different attempts at how those actually work.
H: I was sitting at a board presentation of a large PG company a few weeks back and I think it dawned on them — and actually it hadn’t even really dawned on me before then — how incredible this mobile movement really has become.
We’ve all been talking about it for a while…mobile is coming, mobile is coming, but where I am in my mind now is pretty much — there are no desktops.
Like even talking about mobile first is almost too dated because you should really just be thinking about mobile. Then, later you might be able to do a desktop application. Do you think that’s a fair assessment or is that just too extreme and dramatic?
A: You know, I think it’s a little too extreme because it depends on what kind of business you’re building. If you’re building something targeted towards consumers, then for a large, large portion of the companies I think that’s right. Though, what I would say is that mobile first feels a little dated, but I don’t think that it’s mobile not desktop.
It’s just the idea that you’re building for computing platforms, right? You’re building software and that software has to be accessible wherever your users happen to be and in whatever mode they want to interact. So that’s how you have to think about it.
H: In many ways building for a platform first is the wrong way of trying to solve a problem, right? Often you should identify a problem that you want to solve that customers at large have. Then, you should use technology to solve that problem and because people are spending a lot of time with their mobile, then, by design, it will probably be a mobile-first application.
But, it doesn’t have to be a mobile application: it has to be an application that solves a problem and then it has to be mobile.
A: Right, that’s exactly right.
H: The nice thing that we’ve noticed as we try to build these is that real estate in mobile applications is so limited and so everybody is trying to create minimum viable products. That term is starting to be used in a lot of different contexts.
And even if people try to make something that’s a minimum viable product, they still make the scope of what they’re trying to test very large.
So one of the things I like about mobile is that simply by there not being a lot of real estate it kind of gives you some limitations of how much you can shove into the stream. That actually forces you to be a little more specific about what you’re trying to achieve.
A: I think that’s totally right. Constraints on a problem are some of the best things that you could possibly have and that applies to thinking about a new business or thinking about a new startup or tackling a new problem.
Actually, constraining that problem is critical to creating something that’s useful. Otherwise, you just end up with hodgepodge.
And I think that extends to what you’re talking about which is: if you’re using a mobile device are you building for a mobile device?
When you say real estate, you’re talking about screen real estate, right? You can only show someone so much at any given time, which sort of drives you toward absolute simplicity or the least amount of interaction from the user required to accomplish a given purpose.
H: Over the last six to 12 months, I’ve definitely noticed an increase in the consigner’s apps. They are the text-only hidden apps or whatever you want to call them, that don’t really have a lot of functionality in the interface layout of the mobile itself. It has functionality in the back end and that’s exposed to the user by a kind of normal chat module.
First, do you think that’s true? And second, if it is true, why do you think that it’s happening?
A: I’ve definitely noticed the same thing and I’ve found it pretty fascinating because for a while everyone was talking about how important beautiful design was, right? Beautiful design is the differentiator, if your app is pretty and feels great, that’s the differentiator.
But if you look back at the progression of technology in terms of how we use things, each piece of technology is essentially trying to accomplish a given purpose, right? And the UI and the UX are really just ways to accomplish that goal.
And so, going back a few years, if you wanted to do X on a desktop, well the way things work, because the computer didn’t know very much about you and didn’t remember things you had to trigger each set of filters, categories and options every time you used it. And then, over time, that went away because computers can now remember the state from last time, remember who you are.
And then — it got personalized. You had to give the computer less and less information at any given time to accomplish the end goal. And when you jump towards things, if you follow that progression forward, you get to this idea that people really want technology to do something for them, right? And really interface is, in some ways, a barrier to that.
That’s kind of a weird way to think about things. Even the most beautiful interface is a barrier to accomplishing a goal when it comes to consumer services.
If you could eliminate that and basically just say to your phone: “Hey, do this thing for me.” And, you knew that it would come back with the right answer or the right solution, that’s kind of the ultimate in technology, right? That’s perfect. It does the thing that you want it to do without you having to do very much.
H: So there could be different thesis of why this is happening now, right? One thesis could be people are pretty used to complicated actions that a computer could do for it. But, the mobile screen real estate doesn’t really allow you to do that very well.
Therefore, you need to find an interface form that users understand, but that still allow the users to get a lot of complexity with very few clicks.
Now on the mobile phone, you can’t have 8000 different dropdowns and other tools that we’ve previously done on desktops and so the easiest form that people kind of understand is kind of like a chat system. Do you think that is a driver?
A: Yeah, I definitely think that plays a role. Do you know what an interesting interim sort of step is in this progression is if you look at…let’s take Uber right? It’s an app everyone kind of knows about, everyone appreciates…well maybe not everyone. I think a lot of taxi drivers hate it, but it works incredibly well. And it does one thing right? It sends a car to wherever you are. And as a user the only piece of that I really interact with is I pull it up, I open it up, it GEO locates me and I push, pick me up or whatever it is.
It’s one button. It’s one click. I mean, okay, now over the years you can select UberX, UberXL, this, that, the other thing. But, fundamentally it’s one button and if you thought about that from the previous paragon, it would seem crazy. That’s all you have to do. It’s filling in all the other information by itself.
And if you think about it, okay that’s one step, what if I could just come out of the subway, right? Or you know, land at the airport and my phone already knew that I want a car? And so the car would show up.
H: We’ve talked about that, even when Quantified Self was the talk of the town, everybody was measuring everything, but the computers couldn’t really even use the data for much other than the pretty graphs, right?
Like it wasn’t that suddenly it was coming with different types of running techniques. We didn’t use the data for anything meaningful to change our behavior or make our lives better. We just gathered and displayed it.
Do you see any examples of what you’re talking about? This kind of preemptive behavior functionality where the computer makes your life easier by knowing what you’re about to do and then suggest that you do it for it? Foursquare talked about it at one point a long time ago, but have you seen anything?
A: You know, I haven’t really seen anything that has done it well. There are glimpses of it when you use Google Now on an Android phone, right? It’ll tell you: “Hey, you have to leave now in order to get to that meeting by this time given traffic.” That’s pretty amazing.
But, I don’t think anyone has really accomplished that yet. But, I think that there is this idea of a text-only interface or even…kind of a Siri thing. Siri is just a bad way to input instructions because it doesn’t work very well, but text, you know?
It’s basically saying: “Hey do this thing for me, you already know the thing that I want, right? So now I’m just telling you to go do it.”
H: I think that’s true. I think when you search Google it probably does some of the preemptive stuff that you don’t even notice or see. I guess one of the elegant things about having a lot of intelligence in the computer is that ideally you don’t notice it if it worked.
One of the things that people have been talking about with text interfaces is this emerging of AI or neural networking or whatever the proper term is these days. Do you think that AI or neural networking applications are around the corner?
A: I don’t know, it feels like we’re getting closer in some ways, right? Our phones, our computers are definitely smarter; they’re able to do more on the predictive side.
Certain implementations of artificial intelligence and machine learning are revolutionizing the way that certain tasks are done. But it still feels like we’re quite a long time away from the robot companion or the computer companion, right?
H: You’re not going to install the Her emotional operating system anytime soon?
A: I don’t think so, but, again, this stuff is kind of hard to predict in terms of when it’s going to happen.
H: I think you’re right in the sense of some of the applications we’ve been working on. One of the things we’re launching soon is called Anco which is basically a back office for freelancers. So, it’s your emotional-rating system for doing all of the boring tasks of your freelancers.
One of the things we’ve been talking a lot about there is that because humans require so much emotional intelligence to interact with, you can actually build quite powerful super admin control panels that would allow a human to interface with quite a lot of people and scale it in that way.
So instead of going straight to AI where the computer is talking directly to the human, you are almost putting a human in the middle and then you give them a very powerful tool that allows them to talk a lot of people at the same time.
And I think that might be the in-between step, right? You have somebody, like a concierge type of functionality, where they are very good at being personable, they are very good at understanding you, and then they are very good at using tools that would be way too advanced for us to ever put on our phone.
A: I’m trying to figure out where our phones are going versus where other computing platforms are going versus where the computation takes place. It feels like it’s kind of talking about all of these things that we don’t know…it’s so hard to predict the path of technology in that way.
H: But isn’t that one of the points is that while technology is very difficult to predict, humans are like the slowest evolving point of that equation now? So one of the things that we probably need to optimize increasingly is how slow the human thinks or interfaces with computers.
And so I think we’ve probably been in a world for a few years where we kind of allow the human to adapt their behavior to optimize for ease of use from the computer’s point of view, right?
So we use a mouse because then a computer can understand that. We use a keyboard because that’s an efficient way. We use dropdowns because that’s something we can turn into a database and inquire really easily.
And I think increasingly it seems like we’re getting so fast and quick at doing stuff from the computer side, but the humans really don’t understand all these dropdowns and things. It would be neat to go a little bit back to basic where that is normal dialogue.
And especially on a platform like mobile phones where I think for the first 10 years was really used just for the chat dialogue, right? We text each other and therefore that we have like muscle memory and that kind of form of interaction.
A: One of the things that I would disagree with in what you just said is that humans are the slowest moving piece of this problem or of this challenge in a lot of different ways.
There are still these sets of problems that people are far better at solving than computers are and it’s going to take a dramatic leap in technology to actually equal how people do certain things, just based on how our brains work.
But, you know the computers are evolving probably at a faster rate than we are, so that’s right. But we’re making them evolve in a lot of ways, but they are getting faster probably at a better rate than our brains are changing.
H: I think that’s fascinating. I guess that goes into the whole singularity and what’s going to happen with that. You know, obviously computers can beat people now in a chess match, but I read somewhere that if you take a computer and a person versus a computer, then the couple of a person and a computer together will win over the computer.
H: So it’s obviously fascinating when you reach Chris Ward and people like that. Like how far are we from having to kind of superpower ourselves with technology tools?
I guess we do that already. We have our phones in our pockets and that’s basically extending our body with GPS and an internet connection and a camera and a few other things like that.
A: Yeah, it’s the combination of the two that’s so powerful. Then, to take it back over to the point about chat, where does chat fit into this as an interface?
And I wonder if it really has anything to do with AI or the singularity stuff. I don’t actually think that it has very much to do with that yet because it’s mostly, like the other side of these chat applications right?
It’s mostly not super complicated computer things that are happening on the other side. It’s not like you’re interacting with a complete chat machine on the other side that caters to your every whim. You’re usually giving a fairly simple set of instructions.
H: Let’s change gear a little bit on the chat interface. So one thing is obviously that you can do something fairly complicated in chat in a pretty easy way, that would require a lot of actions if you had to build interface for it.
Sometimes you could build something much easier on an interface right? Like a map or your example with Uber, that would probably take longer time to write out, like please send me a car to this and this address would take longer time than just clicking one button when you open the Uber app.
On the flip side, you see these concierge apps that are kind of trying. They are almost taking a number of different on-demand services and combining them into one, right? You take Butler or Magic or some of these other things that can text us anything.
Do you see a world where some of these on-demand apps will have less importance because these chat-based apps will almost create an abstraction layer before these underlying apps?
A: Well, I think there are two things happening there. One — I think there are simply too many automan apps which accomplish the same thing for slightly different pricing and so you have this paradox in price situation, right? Where people just don’t know which of the five different car share options they should use and they don’t know which of the four different delivery things they should use?
And two — no one wants to download all those apps and check all those things, so it’s much easier to offload that to someone else. And so you could do that in one or two different ways. You could do that by having people, by building some sort of solution that actually ties all those things together, right?
You could have some sort of magical interface that checks them all against each other. But, it’s much easier and certainly faster to say: “Hey, text us for this thing and then we’re going to do everything.”
H: Do you think that’s going to be a business model going forward? There are definitely some big players trying to become the interface to the rest of the world, just via text life, so they do everything pretty much. Do you think that’s a business? Or do you think it’s almost just a step in between and that in this on-demand era you will have to download a lot of different apps to get something else?
A: Well I think it’s a step, but I think it’s a step where if someone pulls it off right, it will actually be the next piece, right? If you have the right technology, the right set of people executing on that problem, what you end up doing is actually creating this thing that everyone kind of wants. Which is — going back to what you were saying before — not necessarily the predictive side, but I just say to my phone or tell my phone anything I want and it accomplishes it for me, right?
It’s like the computer in Star Trek, right? Anywhere on the ship, anywhere on the Enterprise you just say computer do this and it does that thing.
H: It is kind of fascinating. I just got one of those Amazon Echoes, have you tried one of those?
H: And so I bought it and I kind of hooked it up to my smarthome, so I can now go: “Alexa, turn the lights off.” And the light goes off in my living room.
It’s very powerful and it’s funny how we’re almost becoming so lazy that the alternatives are obviously either to go over and press the button or to take my phone out, open the app and then press a button and turn off multiple lights at the same time.
H: But, just by saving like eight seconds, which is like saying to somebody out in the living room to turn off the light, it’s actually pretty useful. I know it’s a first-world problem but it’s incredible how you can build something that is actually just a little bit better, but it just becomes a little bit magical.
A: Yeah, you know it’s incredible how important convenience can be and how important speed is and how we get conditioned to want ever-faster things. And you see this on web, right? Like Google prioritizes your website, if it’s fast. And that bar just gets higher and higher and higher.
Because it’s true, you hate watching things load, even though when you think about what’s happening, like you’re sitting on a beach with a little thing in your pocket that broadcasts a signal from your computer up into the world that gets information from the other side of the planet, that comes back to you, right?
Like it happens in the fraction of a second, when you think about that it’s crazy that you should be upset. It’s crazy that that doesn’t take hours, right?
H: Did you ever see that Louis C.K. clip where he’s being interviewed and he’s like: “it’s going to space, will you give it a second!?”
A: Yeah, it’s about being on an airplane with airplane Wi-Fi and how we’re so angry that the Wi-Fi is slow.
Conan O’Brien: In the 21st century we take technology for granted.
Louis C.K.: Well, yeah because now we live in an amazing, amazing world and it’s wasted on the crappiest generation of just spoiled idiots that don’t care because this is what people are like now.
They’re got their phone and they’re like: “Oh, it won’t…” GIVE IT A SECOND! (laughter) It’s going to space; can you give it a second to get back from space? Is the speed of light too slow for some of you?
(laughter and applause)
Louis C.K.: I was on an airplane and there was internet, high-speed internet on the airplane. That’s the newest thing that I know exists. And I’m sitting on the plane and they go open up your laptop, you can go on the internet…it’s fast and I’m watching YouTube clips…it’s amazing, I’m in an airplane. And then it breaks down, and they apologize the internet is not working. The guy next to me goes: “pssss this is bullshit”. (audience laughing) Like how quickly the world owes him something he knew existed only 10 seconds ago.
H: Another thesis that I’ve been playing around with is text-based apps. I increasingly have a lot of meetings and a lot of people, so I often don’t have an hour to research a plane ticket but I definitely have six 10-minute slots throughout the day, when I’m sitting in the taxi or whatever.
So, one of the things that I notice is that I use a lot text-based apps. For example, I’m using something called Pana for travel. I break up what would normally be a real research project into bite size projects. So you know I’ll need to go to San Francisco but I need to stop in Columbus, Ohio on the way.
Normally if I had to do it myself on my phone, it would take a bit of time, it would be a bit complicated and then something will come up or somebody will ring or the session will timeout and then I’ll have to start from scratch. So I’m using all these micro-moments in time and I’m using one of the apps to fill up that time and to be productive in that time.
Do you think that’s one of the reasons why this is working?
A: I think you’re an unusually productive person, so I don’t know that it’s fair to generalize what you do out to why things are working overall.
I do think that a lot of us feel the need to always be doing something now, which is kind of sad.
H: I was thinking the other day as I was using this mindfulness app and I was thinking of the irony of me using an app to make me just sit and think and just look into thin air. I thought “god, I should have an app, which one is the best app, I wonder where I should research which is the best app for me to sit and do nothing for 10 minutes?” Or I could just really sit and do nothing for 10 minutes and I’d be fine.
A: I mean you and I have talked about the fact of why I am so grateful that I’m Sabbath observant, right? It’s these 25 hours a week where I don’t have a computer, I don’t have a phone, I don’t have any of that stuff. I actually have to think.
H: That’s really interesting. Do you think that changes your mood or does it make you come up with better ideas? Should all non-Jews incorporate a Sabbath, a digital Sabbath into their life?
A: You know, I’ve heard people talking about the digital Sabbath stuff, where you just volunteer to put your phone down for a few hours or even a day, and I think that’s great. I think it’s awesome for people to unplug for a little bit because it’s such a constant noise.
If you’re standing in line waiting for a coffee and everyone is on their phone — and I know a lot of people have said this, there’s nothing new to this idea — but I have to work so hard not to pull out my phone in that situation.
A: Because what am I going to get by looking at my phone in that situation? Check my email for the thousandth time? Nothing is that important.
H: Isn’t there quite a lot of research to show that basically you get some kind of endorphin rush when you do that? It’s a little bit like using a kind of drug.
A: It is. And it’s hard to break yourself from that situation. I used to do this thing when I got off the subway, coming back from my apartment at night. I would try not to look at my phone for the three blocks and it was so hard. (laughing) You laugh, but try it, right?
H: No, it’s true, it’s true. I have a little son now, as you know. He’s 20 months and he’s at the age where he mimics everything you do and it makes you very self-aware of what you’re doing.
So the other day I was sitting having dinner with my wife and we both had our phones lying next to us and we were both looking at it and I was like I do not want my son to mimic the behavior of his mom and dad just sitting looking at each other through a phone.
And so we made this little rule now that we’re not allowed to bring the mobile phone to the table. And to your point right, like it sounds almost obvious, what the hell is going to happen in that 45 minutes that you can’t miss. If something really dramatic really did happen, what people wouldn’t just call?
H: I’ve done another hack with that — I started to have my email clients only pull emails every 30 minutes because often you send an email and it is just boomeranged back, right? There’s a good chance that one out of four you’ll get a response on…and so basically the more you send out the more you’ll get back.
A: What I try and do by the way — — and I try, it’s not that successful yet — — is I basically try to do email once a day at this point. I only actually open emails in the morning. Like there’s an hour in the morning where I go through all my emails and I usually get up through the previous day and then I’m done.
You know if something urgent comes in, I’ll flip through things throughout the day, just to kind of see if there is anything urgent, but if there isn’t I just don’t respond.
H: And do you think that you are less productive because of that? Or do you think that people get upset with you because you don’t answer?
A: I don’t think so; I mean 12 hours isn’t a crazy amount of time to wait for a response on something. What kind of world are we creating that everyone expects a response inside of 12 hours?
H: What do you think is another kind of micro-trend when it comes to the mobile? We have the text message or the text interface as being something that seems to have a lot of mojo. Are there other things that are happening that you think are interesting?
Like obviously the new OS of Android is very elegant and I think is getting very close to the slickness of IOS and it might even have some advantages because the notification system on Android is so good. Do you see other things happening in mobile that you think are really fascinating?
A: So I’ve gone back and forth between the two types of devices. I think I was on Android for a year and a half and now I’m back on an IPhone for the last six months.
And I always felt that Android had a lot of features that are completely superior to IOS as an operating system. And like a way to live your life.
But, all the phone makers keep screwing it up, so unless you have something running just straight Android, you’re not getting the real experience.
But in terms of the other things happening — the thing that I want to happen, honestly, I would love for Microsoft to actually become a real player on the operating system wars.
H: How come?
A: Because, well Apple is this unified system right? Where you have the phone and then the hardware and the software so it works really well together.
Google, for the most part, honestly, is just software. They had their phone unit but then they got rid of it and still don’t have as tight of control on it.
Microsoft is starting to actually prove that they have the chops to create great hardware. It started with Xbox, but now if you read the reviews about the new Surface, like the Surface 4 or the Surface book, they’re doing incredible things with hardware. Look at what they’re doing with the HoloLens. If you ever play around with a Microsoft phone, it’s actually got some really cool interesting features.
H: It seems that Apple kind of won the war by not going against the PC, but by inventing computer systems around it, like the IPod and the TV and then the phone and then suddenly you kind of needed the Mac, you know seeing they changed the infrastructure of the IOS and it became very good.
It would be interesting if Microsoft did that right back to them, like they do the HoloLens. If they do the game platform and then suddenly you have all of these devices that are Microsoft based and then you’ll end up back on the PC.
A: It might happen, but it won’t be just generic PCs. Maybe Microsoft does it, right? Like maybe Microsoft becomes the next integrated hardware/software maker, for the PC side. I can see it happening. Microsoft spends more on R&D than any other company or something like that. And there are still brilliant people there and they are capable of doing really incredible things.
And I don’t know that necessarily, by the way, that Microsoft is making the best stuff or will, but I think competition on this is great.
H: Wow, so you on tape are basically betting on Microsoft?
A: Ahhh, you know, I just love the idea of there being more options and competition amongst the major players. And startups are going to provide a lot of that and I think startups are going to create the next great companies, but these incumbents still have juice in them. And I’d love to see what they could do on a level playing field.
H: That’s very true. Okay, a few things here at the end. Do you have an app on anything that you’ve installed recently that more people should use that or that you’re excited about? It could just be a service online.
A: Let me take a look.
H: What’s on your home screen?
A: Yeah, what’s on my home screen?
H: I actually have a few…how many text-based apps do you have on your home screen?
A: The truth is, I don’t use many apps. Maybe I’m not supposed to admit this, but I have things that I kind of use on like a one-off basis.
H: I don’t really believe in the internet. (laughing)
A: The what now? The thing that I end up using the most are email and maps.
A: And then I try other stuff and all of the other stuff kind of comes and goes over time.
H: That’s fascinating. What do you think is the subject matter that people are not talking enough about?
A: Well, I think that there is a difference. I think that founders are talking about lots of things that maybe the press isn’t.
I think there’s a big problem with how the press talks about startups, where it’s kind of all about funding, which is fundamentally not the most important part, or the most interesting part, but it’s the easiest thing to write about.
H: I agree with that. I think that is incredible when you’ve done a few startups and you’ve done some that have done really well and sometimes you’ve even done some that go so well that you don’t need funding.
And then people think that it’s not going well because you haven’t been around raising capital and then you see companies that have raised all this capital and they’re going nowhere, but they raised a lot of capital.
A: Yeah it’s a crazy thing and it’s a crazy distortion. Things that people aren’t talking about though, I’m not sure. I’m really not sure. I’m also in the middle of like reading applications for the next YC batch so I’m seeing kind of a million different things so my brain is definitely a little frazzled.
H: Is there a trend in the new batch? Can you talk about it?
A: I’m seeing a lot of logistics companies in other countries, which is kind of cool.
H: And what kind of stuff? Like Uber type stuff or more like I need to get a product from A to B?
A: Yeah, more commercial stuff.
H: Oh, interesting. Do you think that the whole kind of the web app based world is going for enterprise now?
A: I think a lot of people are going after enterprise, which I think is good. I think there’s a lot to be done in enterprise, I think a lot of people who try it don’t realize quite how hard the sales cycle is, but I don’t agree that it’s like everyone is doing enterprise. I don’t think everyone is ever doing anything. There are rarely things that happen that tightly.
H: Aaron, you are an incredibly insightful person.
A: Thanks Henrik, I think the same of you.
H: Ah, thank you for spending all this time talking about mobile stuff. Is there anything that we forgot?
A: I don’t think so. I think that kind of covers everything kind of intelligent that I’ve been working on for the last month just to prepare for this.
When Michael Roderick went from being a high school English teacher to a Broadway producer in two years, he realized it was made possible by relationships. After stints both on and off Broadway, Michael founded his own company, Small Pond Enterprises. Small Pond Enterprises is a consulting firm focused on relationship design. Michael advises people on their professional relationships, providing guidance on where to invest time and energy.
In our recent conversation, he acknowledges the negative connotation often associated with networking, which he blames on “people who don’t do what it is that they say they’re going to do.” Notably, Michael differentiates networkers from connectors. While both parties focus on professional relationships, networkers, stereotypically, are focused on their own advances, while connectors are more focused on the success of others.
Michael offers a simple step people can take to practice the traits of a connector: “I think if you are just taking even a couple of extra minutes a day to think about what the other people in your life actually want, what is actually important to them? If you do that, you can start to move toward being more of a connector.”
He also offers a useful way to categorize the various types of connections — his ABCD concept. In his own practice, after a meeting, Michael notes what category the person falls into at that moment. Below are the categories with brief descriptions:
Advocates: people who are supportive and thoughtful
Boomerangs: people who are focused on reciprocity
Clients and Celebrities: people who have let you know they want you to work for them and people that it is “fancy to know”
Drains: people who are needy at that particular moment
Michael clarifies “that everybody is a celebrity to somebody.” He offers the example that if if a connection is a CMO, that person would be a celebrity to a company seeking to hire a CMO. He also notes that these categories are fluid.
Michael strives to learn beyond just the professional side of new connections, seeking out the personal and inspirational aspects of their lives, as well. In conversation, he notes any references they make to their personal life (where they live, their family situation) and their inspirational life (what inspires and excites them). He explains: “those little things are things that you can remember that really add an additional layer.” By writing down these facts after the introduction, the next meeting already has some common ground and talking points.
He also offers practical advice for people striving to make connections, including the “double opt in,” originally derived from Fred Wilson’s blog. In his own life, Michael has made a point of utilizing the double opt in which consists of approaching both parties and asking if they actually want the introduction. The practice helps to ensure the introduction is both wanted and warranted.
On the crucial difference between networkers and connectors:
“Networkers are people who are very focused on themselves and when you’re a networker, you’re really thinking about things in regards to climbing a ladder, so your thought process is often like who can I meet, what can I do and how can I get the things that I need to get?
…If you’re a connector, you’re really more focused on the success of other people. You have your own things that you want to make happen, but you don’t put those at the forefront of all your conversations…You’re not thinking about it as a game that you can sort of fix for yourself.”
On a metaphor for people who do not organize and evaluate their connections:
“If you had a bucket of change, you could have $2 in that bucket or you could have $2000, but until you dump it out and actually see like how many quarters you have, how many pennies you have, you don’t really know. So with wherever you are in your business, you know which people are the power players, you know which people are normally pretty helpful in terms of the work that you’re doing. Just start by, at the very least, sorting that out.”
On simple, practical advice for introverts striving to network:
“If you’re an introvert, rather than being like I’m going to go to this 200-person, 300-person thing, think about five to six people that you really like… Maybe you just put together a breakfast or a dinner…One of the things that worked really well for me when I first got started was this idea of hosting. Because when you put yourself in the position of a host who invited everybody over, you really don’t have much of a choice. Like you can’t sit in the corner, because you’re the one that invited everybody. So it kind of pushes you a little bit, but it’s not so uncomfortable as going into a room where you don’t know anybody.”
You can listen to the podcast on SoundCloud and subscribe on iTunes. In his own words, Michael strives for listeners (and readers) “to learn to be more thoughtful about the access that they have in their lives and how they treat other people.” Below are a few selected highlights, as well as the full transcript of our conversation.
H: Let’s do it.
M: Okay, you got it.
H: Are you ready?
H: Okay, maybe if you don’t mind, just introducing yourself.
M: Sure, not a problem. My name is Michael Roderick. I’m the CEO of Small Pond Enterprises and I focus on relationship design. I help people take a look at their existing relationships and figure out where they should be investing their time, who they should be investing their time with, really thinking carefully about that.
I came to that having been a high school English teacher and moving from being a high school English teacher to a Broadway producer in under two years. So as a result of that, I decided to study the ways that we develop relationships and the ways that we build relationships and use these opportunities and connections to grow our own opportunities.
H: If people just listening to the first 30 seconds of this podcast, what do you think they will learn by the end of it?
M: I think they will learn to be more thoughtful about the access that they have in their lives and how they treat other people.
H: Hmm, fascinating. The reason why I was fascinated when we spoke the other day was because I think that people who network are often pretty annoying, right? So when somebody was like hey, here’s a guy who knows a lot about networking, I was like ohh, one of those guys. You made the difference between connectors and networking, because you think there is a subtle but important difference in the way people conduct themselves, but also what their objectives are.
H: Do you mind explaining a little about that?
M: Sure. Networkers are people who are very focused on themselves and when you’re a networker, you’re really thinking about things in regards to climbing a ladder, so your thought process is often like who can I meet, what can I do and how can I get the things that I need to get?
So you’re probably a little more savvy than people who are just sort of like bulls in china shops and just knocking down all doors. But for the most part, when you’re making introductions, you’re probably making introductions to people who are at the same level or lower and you are always trying to cut yourself in, in terms of that dynamic.
If you’re a connector, you’re really more focused on the success of other people. You have your own things that you want to make happen, but you don’t put those at the forefront of all your conversations, do you understand? There’s more of a balance, that some things will work out for you and some things will not. You will resonate with some people, other people you won’t. And you’re not thinking about it as a game that you can sort of fix for yourself.
The other thing that I think really distinguishes a connector, is that you’re willing to let somebody else leap frog you. So even if you know somebody that could make something pretty substantial happen for you, you will make the choice to introduce somebody slightly below you to that higher-level person that you know because you feel for that that person on that lower level. You’re almost like an agent and you’re saying: “I think that this person could be very, very helpful to this person at the higher level, even more so maybe than I could be.”
H: Do you think people can be a connector without that being almost their profession? It seems that most people — including the people listening to this — are actually interested in meeting and probably don’t see themselves as either a networker or a connector. How should people think about how they use their network? Can you be just a little bit of a connector?
M: Sure. I think so. I think if you are just taking even a couple of extra minutes a day to think about what the other people in your life actually want, what is actually important to them? If you do that, you can start to move toward being more of a connector. The other thing is that a lot of the time people don’t actually make introductions, even though they can see that there could be an opportunity there or people could be helpful. They just don’t take the time to think: “Okay, who in my life could actually really benefit from knowing somebody else in my life?”
So I think while you’re not going to be this major connector and doing all these things, just being a little bit more thoughtful on a daily basis of who are the people in your world and how might you be able to help and whom it might even be cool for them to know each other, even just once a week, being able to make one introduction can kind of change the dynamic of what you’re currently doing.
H: It’s such a subtle balance, right? Because I think a lot of people just like the idea of giving but at some point people also just need to think of their connections as being some of the value that they’ve got.
H: I read…have you read Influences? That book?
M: By Robert Cialdini?
M: Yeah, I loved that book.
H: It’s a really, really nice story about fear. I think it was originally monks who came up with the idea — they give flowers to people before they asked for a donation?
H: They basically will see the donations go up because of factor X.
H: Again, maybe it’s a little bit the same, there is actually a science that proves being good actually helps you.
M: Yeah, there is, I mean there is a psychological aspect of reciprocity, where if somebody gives us something, we are inclined to give something back. So if we’re in the supermarket and we get the free sample, there’s a good percentage of us that will buy the full product because they liked the free sample, right?
H: So one of the reasons why we got to talking was because the partnership that I have with the database with all their contacts…and we have 25,000 people, whatever.
And we’re constantly looking for good people to join the projects and stuff like that and at one point it dawned on me: “Hey we probably know all these people, we just forgot we knew them.” And so you’ve been helpful in trying to help us basically sort out how we should think about that.
What would be your advice to somebody who is into their career, and has a contact list, is there something that they should really just start doing tomorrow that will make it easier for them to act as a connector and then also generate value out of that?
M: Yeah, I think if they haven’t taken the time yet to put that somewhere where they can kind of categorize it, they should. For some people it’s a spreadsheet, for some people it’s a CRM, but if you just sort of have like this massive list of contacts, you have no idea what sort of value you have.
The metaphor I often use is that if you had a bucket of change, you could have $2 in that bucket or you could have $2000, but until you dump it out and actually see like how many quarters you have, how many pennies you have, you don’t really know. So with wherever you are in your business, you know which people are the power players, you know which people are normally pretty helpful in terms of the work that you’re doing. Just start by, at the very least, sorting that out.
So if you’re in the real estate world, you know who has sent you good opportunities and good business. So you can say: “Okay, it looks like these 10 people seem to send me a lot of business. I wonder what the commonality is between these 10 people? Oh my god, they’re all lawyers, oh that’s interesting. I wonder why this is the case?” And then you start to dig in and you start to figure out, why is it that this group of people seem to send me more opportunities than this other group of people?
H: When you’ve done that for yourself, have you figured out where the patent is?
M: Yeah, I would say that the biggest thing that I’ve noticed is that the people who…I like to refer to them as advocates…they are people who are very thoughtful, some of them are connectors, some of them are not, but they’re really thoughtful, they’re always asking you really good questions and they really take the time to figure out what is an actual referral versus a connection?
And I think a lot of the time people mistake the idea of a referral and a connection. So they’ll say: “Oh I sent you a referral.” But you get on the phone with the person and they have no idea that you have a service, no idea what your price point is and they’re almost flabbergasted that you’re going to talk to them about you know buying something or using a service.
Whereas if somebody takes the time to find out what is your price point, what type of service do you provide and then tells somebody, has that conversation ahead of time, they’re in essence handing you a warm lead. So what I’ve found is that my advocates are people who have taken the time to talk to me about what it is that I do, talk to me about who I serve and what my price point is and then actually send those people my way.
H: How do you change people from being referrals to connectors?
M: You have to have an honest conversation. I think a lot of the time we don’t want to have those uncomfortable conversations, so people will send us things that aren’t really useful for us and most of the time we’ll just kind of sweep it under the rug. Like well you know, that’s just who that person is, but you’ve got to go back and have that conversation.
You’ve got to go back to the person and say: “Listen, you know, I really appreciate you thinking of me. It means a lot that you think of me. Right now when I talked to this person, they had no idea what my service was, what I was actually doing. So would you be willing to, in the future, give them a little bit more color before making the introduction? Or have a conversation with me before making the introduction?”
And certain people are going to be like screw you, you’re way too specific, I hate you and go their way. And other people are going to be like thank you so much for the feedback, I really appreciate that. And they’re going to think about ways that they can do better.
H: I think that’s an interesting thing because I think we all have people who are very kind to refer people to you and sometimes the high-quality introductions happen because they need something from you. You talk a little bit about double opt in…
M: Yeah, double opt in. Yeah, it was originally introduced by Fred Wilson on his blog. The concept is you basically go to both parties and you ask them if they actually want the introduction. And I have made it a point to start doing this with all of my introductions, because you never know what is going on in somebody’s life.
And you may make introductions between two people, and think wow, these two people are fantastic, they’re going to love each other, but you just made an introduction at a time when somebody is about to launch a business. Or you just made an introduction at a time when somebody just lost a family member.
And now this person on the other side is thinking your friend is a jerk because they haven’t gotten back in touch and they have no idea what’s going on in that other person’s life. But, if you take the time to ask both parties, they’re going to give you an honest answer as to whether or not they even have the bandwidth right now to take that introduction. And, also to let you know whether that introduction really is warranted and really is useful and helpful.
H: It’s interesting because after we spoke, I started to ask people about it so sometimes now when I get these cold indirect directs and I email back and say: “Hey, it’s a really busy time, I’m traveling over the next two weeks and I don’t want you to look bad so would you mind sending me an email next time just kind of saying, ‘is it okay to make introductions?’” People seem to very open to that. Yeah, they seem to think it’s a good idea.
M: Yeah, it’s one of the things where a lot of the time we worry so much about how people are going to see us when we ask for something, especially when we ask them to clarify or help but very rarely does anybody come back in and just be like a total jerk.
I mean my attitude about that is if somebody comes back after I’ve politely asked them you know to help or solve a problem and they come back in and they’re just absolutely rude, then that’s what anybody I send their way is also going to experience, so I don’t want them in my network and in my world because that ultimately reflects back on me.
H: You have a framework for how you are talking about people, you mentioned one of them. Could you talk a little bit about the ABCD concept?
M: Sure, sure. So the ABCD concept is that your first serve top tier people are your advocates, which I spoke about. These people really support you, they’re really thoughtful, they’re really helpful. Your Bs are what I like to refer to as your boomerangs.
And your boomerangs are people who are very focused on the idea of reciprocity, so often you’ll encounter people in life who are brokers of some type and they will say if I do this for you, I get this percentage or you know, whatever the situation is. And very rarely do they send anything your way, unless something is sent their way. They’re very, very focused on what you are going to do for them and then they might send something back. It’s very transactional.
Then you have your Cs, which have two categories. Your clients and your celebrities. So clients are people who have let you know that they want to work with you. They’ve asked about your services, they’ve kind of broken it down, in some cases they’ve asked about your price point, etc.
And then your celebrities are people that it’s fancy to other people that you know this person. And that could be a Hollywood celebrity or it could be something as simple as a CMO of a particular organization. Because if you have a company that is obsessed with finding CMOs and that’s the most important thing to you, the fact that somebody else knows a CMO, for you that person is a celebrity, that CMO is a celebrity. And it’s really important when you’re thinking about this idea of a celebrity, that everybody is a celebrity to somebody, so really thinking through who you are connected with and what do people think of that particular individual.
And then the last one…the last category are the Ds, which I refer to as the drains. And it’s really important to understand that this is not that drains are bad people, it’s that drains are people that are significantly more needy in life, at this point in their life than others.
Which means that you, as somebody that can help or support, you only have so much energy to deal with people who cannot even comprehend being able to support or help back because they’re in such a state of need or pain.
So it’s important to understand the people who are draining you of your time and your resources and not necessarily to always say like you know there’s folks that I don’t want in my life, but to understand that I can’t give three hours of my time to this person who is not going to ask me anything about me and basically spend the entire meeting or conversation trying to get as much as they possibly can.
H: And so you categorize people as A, B, C, D…do you actually write that down or do you just think about it?
M: Yes. I always document it. So when I finish a meeting, I write down what my first impression is and that can change over time. People can start out as advocates for you and over time they start to become more boomerang-ish, where it’s much more trading. Or some people you may meet and at the very early stages of their career and maybe two, three years down the line…they’re a celebrity. You never know where people are going to end up.
H: Why do you think that networking and connecting has such a bad rap? I would imagine most people either feel neutral or cringe slightly.
M: I think because there are people who are out there who don’t walk their walk. And I have this saying that it’s very unfortunate in life that many times your heroes are only your heroes until you meet them face to face.
And there are lots of people who will present this idea of networking, connecting, helping each other, and supporting each other and then you’ll get on the phone with them or you’ll meet them and they will basically treat you like crap because you were not at the level of whoever they want to meet or whoever they want to connect with.
So I think that one of the main reasons that networking, connecting ends up having a bad name is that there are a lot of people who got to a certain place as a result of being sort of savvy and smart about networking and connecting, and maybe they’ve even started to teach other people sort of this process. But then when those same people come to them and try to use those principles or get to know them, they’re still treating them like second-class citizens.
So when you have that many people who get burned by the experience, what happens is then there’s sort of this hubbub of like networking is BS or connecting is like ewww. So all of a sudden you’ve got this murmuring amongst the crowd, I think that’s what happens. I think that people get introduced to these concepts but then there are a lot of people who don’t do what it is that they say they’re going to do.
H: Do you have any good advice for people who might be more on the introvert side? Networking seems to be an extrovert’s game.
M: Yeah. I’m very introverted myself, though, every once in awhile I’ll have extroverted tendencies, but I love one-on-one conversations and I actually get very drained if I’m in a large crowd for any long period of time.
So I think that if you were an introvert, the very first thing is you don’t have to go to a gathering of 200 or 300 people. You do not have to go to that. If you want to go as a way to stretch yourself, fantastic. But you don’t have to do that to build relationships. If you’re an introvert, you need to make it on your own terms.
So if you’re an introvert, rather than being like I’m going to go to this 200-person, 300-person thing, think about five to six people that you really like and maybe you could find somebody that might be a co-host. Maybe you just put together a breakfast or a dinner, or some sort of gathering where you get a bunch of people together but you’re the one hosting.
One of the things that worked really well for me when I first got started was this idea of hosting. Because when you put yourself in the position of a host who invited everybody over, you really don’t have much of a choice. Like you can’t sit in the corner, because you’re the one that invited everybody. So it kind of pushes you a little bit, but it’s not so uncomfortable as going into a room where you don’t know anybody.
The other thing that I would say specifically for introverts who get stuck…I have this concept of when you’re in a crowded room, it’s sort of like the ocean and within that ocean there are a couple of archetypes.
So you have your sharks, who are the people who are like running around handing out business cards, dominating conversations, right? You have your dolphins who are the people who are clustered together and won’t let you into their circle, right?
You’re at this event and the dolphins just want to stay with each other and you’re like hovering on the outside and you kind of feel awkward, right? And then there are those who are drowning. And these are the people who are like sitting at the bar, they’re like standing with their phone or they’re hovering outside of a conversation and they’re feeling very uncomfortable.
The last group are the lifeguards and the lifeguards are the people that basically look around and say: “Who is feeling uncomfortable and why don’t I go up to them and have a conversation?”
I would say if you’re an introvert and you’re freaked out, one of the best things that you can do in social situations where you’re really worried is to be a lifeguard, because very, very rarely will you go up to someone who is feeling uncomfortable and miserable, say hello and have them be like get the hell away from me. They’re going to be like “thank you so much for talking to me.”
H: So you coach the person standing looking awkward at phone…what would you open with?
M: I might just ask them: “So what brought you here?” Or something very, very simple, like, “did you see the most recent speaker?” Just something to get the conversation going? Heck, if they’re on their phone, it might even be the new iPhone, and that can be a conversation starter, too.
Just something to make them feel less uncomfortable. Because I know that was something that I struggled with — going to an event where I didn’t know anybody and then having to sort out who I should talk to. And many times the people who I ended up building the best relationships with were the people that came up to me while I was standing there sort of awkwardly and said: “Hi, I’m so and so. What are you doing here? How are things going?”
H: I like that…be a lifeguard.
M: Yeah, it’s so, so useful…it’s so, so useful.
H: If you are just starting to think about your contact list and this idea of putting it into associate and taking long notes after one sounds kind of daunting.
What do you do to get things going without committing too early?
M: Yeah. I think it’s one of those things where the how do you eat an elephant, one bite at a time kind of scenario fits. What is something really simple that you can do to just make it a little more expensive for yourself?
So maybe you start by taking a notebook with you to meetings and after the meeting, you jot down the things you remember. Maybe you’re not sitting there voraciously taking notes, right?
Maybe you have a great conversation and at the end of that conversation, the person leaves and you take a couple of minutes to say: “Okay, they told me they loved dogs, they told me that their wife is a doctor, and they live in Brooklyn.” And now you’ve got three points of conversation, that then you can sort of add that knowledge into the mix and you know more about them.? You remember those pieces. So I think something just that simple can really help that process.
H: When do you see connecting go really wrong?
M: Oooh. Definitely when people don’t ask. When people don’t ask, they don’t do the double opt in and there are circumstances that we just don’t know about. I’ve seen instances where somebody’s like I think these two would really enjoy meeting each other and they make the introduction and they’re competitors. Or the other person dated this guy or this girl, and it was a horrible experience for them.
I’ve seen instances where people have made an introduction and please don’t ever do this: If someone makes an introduction and you’re interested in dating the other person, don’t use a professional introduction from somebody else to ask somebody else out on a date. It’s just awkward. I had somebody come back to me one time, and be like what the hell? Why did you put me in touch with this person? They just asked me for a date. And I’m like ohhh, ewww, I thought that they wanted to talk to you about business, I guess not.
H: You mentioned a framework for what to ask about when you are in meetings with people, which I thought was pretty interesting. Most of us, ask what they do, what kind of a transaction and maybe there might be some kind of a personal kind of an introduction as you’re leaving.
But you’re trying to get a much more realistic picture of people when you’re talking to them because you think you can…I hate to use the word “use” but let’s say a good piece of information for creating rapport in relationships going forward.
M: Exactly, it helps sort of deepen the relationship if you’re able to touch on more than just the professionals.
H: So what would those be?
M: The first one, as I said is the professional, where you sort of get a sense business-wise, of where things fall. The second one, is the personal, where even if it is something as simple as finding out where somebody lives or if somebody just lets you know that they’re married or that they have kids…just the little things like that. Sometimes they’ll talk about the type of things they like. If you’re offered coffee, sometimes they’ll talk about the type of coffee they like.
You know, those little things are things that you can remember that really add an additional layer. In addition to the professional, I also like to look at the idea of inspirational. So what is it that inspires this person and why does this person like to do what they do? Because sometimes you can connect people around inspiration.
Sometimes, even though professionally they’re not doing the same type of thing, they’re both inspired by similar concepts and similar ideas, so you can kind of put them together, which is a really interesting dynamic when you start to look at what is it that excites this person, right?
So if somebody is a really great connector or loves being a connector or loves geeking out about connecting, their industry may be completely different from somebody else, but they’d be willing to meet each other because they both geek out about connecting.
H: When you have a person who wants an introduction to somebody else and it’s kind of more in the favor of one person than the other, but you’d still like to make it. Do you have a trick or method for doing that? Or do you just right straight up when you do the double introduction say: “Hey you might not be able to get a lot of stuff out of this person, but please be nice to them because they’re a nice person or I owe you one.”
M: Yeah, I try to. If I think that they have the potential to do something or help in some way, I will try to sell that to the other individual. And in some cases it could be who they worked with before, what types of things that they have worked on or it could be you know, I met this person and they’re just a phenomenal person, I’m not sure where this could go, I’m not sure how much you guys would be able to help each other, you may be able to help them a lot more, but I can tell you that this person is a great person.
H: Are you ever worried that you kind of caught by the intro? Sometimes when I know a founder who has a job opening and somebody emails me and asks for an introduction, I feel caught.
H: I sort of feel that way. I might know them from social events or stuff like that. But, I sometimes feel, that if they hire them and it doesn’t work out, then I feel on the hook because I made the intro. And so now increasingly I do a little bit too much of explaining: “Hey, I know this person, they seem to be super nice, I’ve never worked with them, but you know, they seem to be a perfectly good candidate for this opening you have and so do you want an intro?”
H: Do you think it’s worth it? It’s obviously a gift back to the original intro, but it’s also…it could be like a big gift and the downside could be pretty big because if they suddenly are a horrible person…
M: Yeah, I think what you’re talking about is so important because what you’re letting the person know is that you don’t have a very solid connection with this person. You are letting them know that you don’t know them that well. And you’re like, from their qualifications it seems like they’d be a good fit.
So when that person has that poor experience, what are they going to do? They’re going to go back and look at what you wrote, right? If you wrote, I don’t really know them that well, I think they have these qualifications, then, if it’s a bad experience, well it was a bad experience, but Henrik never knew, so that’s the thing.
A lot of times when somebody comes to me and they want an introduction, I’m always going to ask them what it is that they want to talk to the other person about. Especially if they’re coming sort of randomly, and what’s interesting about that, and this can work really well if you’re in a position where a lot of people come to you for introductions. Many times, just going back to the person and asking them why will tell you immediately what kind of person you’re dealing with.
Because people who are just trying to get something very, very quickly won’t even take the extra effort to explain to you why they want the introduction. They’ll just ignore you and sort of go on…
H: Or they’ll just ask for a meeting. And then you’re up against your back and wondering what they want to meet about?
M: Yep, exactly.
H: I’ve done that a few times. If I’ve been traveling and I don’t have time for coffee, I’ll email back and say: “Hey, I’m on the road but maybe you can list down a few things where I might be able to tell you whether or not I can help you over email.”
And you’re right, there is definitely a big drop-off rate of people that just can’t be bothered.
M: Right, where they just won’t give you that information. And I think anytime you’re thinking about making an intro for somebody, where it could be for a job opportunity, you definitely want to ask them why they want a job at that place. What is it that they’re actually interested in? Because if somebody is interested just because it’s a job, they’re probably not going to be the best fit for that organization.
But if they’re like: “I read about them. I really like what they do.I really respect what they do. This is a company that I’m really interested in.” That is a different dynamic than somebody who’s just like, oh my god, I need a job.
I really think that serendipity is a really good way of solving problems, right? If you know somebody that you really respect and like and think do great stuff, then chances are high that when you go through them you’re going to get good people. And that definitely works on the inbound. When somebody that you really like introduces you to someone they like, there’s a pretty good chance that you’ll like them, too.
H: Do you ever use that in a reverse way? For example, if I have a problem to solve and I actually don’t know if this specific person will be able to solve it, but I’m sure that if I asked them and they know somebody who could solve the problem, I would like them. So I email somebody I really like and say: “Hey, I’m trying to find a person for this or I’m trying to find a good solution for that or for something else.”
H: Do you ever do that? Is that part of the framework?
M: Oh yeah, all the time. There was a study done by Mark Granovetter that was referenced in Gladwell’s Tipping Point. It was known as “The Strength of Weak Ties.”
Basically, they took two groups of college students. One group asked their close friends and family for jobs and the second group asked people that they kind of barely knew or maybe met like once or twice in their lives for jobs.
And the second group outperformed the first. So, if our strongest results come from our weakest connections, then it would make sense that if we reach out to people who really like us, those people have access to people that we have no idea that they have access to. And, they don’t even know that they have access to those people until we ask them to solve a problem.
I notice that some founders do this really well. They will send investor updates and then at the end of it, they’ll say here’s three things you can do to help. And they’re like we’re looking for this person, we’re looking for this person and then they…I find often that it’s a pretty useful way to solve those problems, because that’s such a good point. I suddenly look at it and to choose somebody that they didn’t know themselves and yet that was useful for that problem.
H: Do you have any like tools that you can recommend to me? Like do you have a new app or is there a new service online that you just recently just discovered that people should just know that this exists?
M: Yeah, there’s one that’s in beta right now. I imagine right now you’d probably have to just like put your email address in and maybe it will get to you kind of thing. But it’s called Brief and it’s an algorithm type of thing. Basically you put your info in and every day it reminds you of three people that you just haven’t touched base with. And it’s very, very short. It’s connected to your Twitter and your email.
It will send three things every day and it basically says you haven’t talked to so and so in 11 months, retweet their post to let them know that like you know they still exist. Or you have not answered so and so’s email and it’s been like seven weeks or something like that. I think that where this app is doing something different from a lot of the other apps that are out there is it’s brief, right? It’s three things, so it’s easy for you to do. Just three reminders or three sort of ideas for you to take care of.
H: That sounds cool.
M: Yeah, it’s been cool. I’ve definitely been finding like oh wow, I didn’t realize that I hadn’t touched base with that person in a while.
H: You also introduced me to Contactually?
M: Contactually, yeah. Contactually is incredible because it gives you this ability to do your curating and research in your emails. You can tag people and take notes about them while you’re sending your email. You can put them into buckets and all these different types of things, so it’s much easier than if you were sort of sitting down trying to sort all of it.
I sort of live in my spreadsheets, but it’s a very useful tool to be able to just sort of tag people within your email and have that information. And Contactually has a similar feature of reminding you when you haven’t been in touch with certain people, but you can set it. So unlike Brief, which is sort of random, with Contactual you can say, you know I want to make sure that every 30 days I reach out to Henrik, then it’s there and you know it. I like the fact that they do that.
H: If there is something to leave people with that you think is important or if they want to learn more, is there kind of a go to resource or…
M: It’s interesting; it’s sort of a collection of resources that you can go to. I mean I think that if there are people listening to this, this is kind of your first step. It’s kind of the benchmark of understanding psychology, like psychology 101. They want to figure out why people say yes to things and why they say no to things. I think that at the core is a really solid starting place, but you know there have been a lot of books that have started to tackle this concept, of how to win friends and influence people.
H: Switch I think is really good.
M: Yeah, Switch is incredible; it is incredible because it gets you thinking about why we make these decisions, why we make these choices. Another one that I really enjoyed was Smartcuts, by Shane Snow. What he did in that book was take a look at all these different people, who in essence, kind of skipped the line. Like, they started in one place and all of a sudden they were like way the heck up here and he starts to identify these very specific principles as to how they did it. He gives some very, very specific subject matter, ideas, and concepts and I like that because there’s not a lot of stuff out there that does that.
H: That’s cool. I’ll leave a link to it in the notes. Thank you so much for spending time talking with me.
M: Thank you, it was a blast.
H: It was really, really enjoyable.
Many large organizations are now looking at how they can generate new growth by launching new adjacent startups or business units. Skunkworks teams, corp incubators, and product development agencies are buzzing — trying to disrupt themselves before being disrupted.
However, all startups are not born equal nor have the same objectives.
At prehype, we built startups with big companies. While not very public, we are one of the most active ’startup-as-a-service’ firms across US and Europe having worked on startups for companies ranging from NewsCorp over LEGO and Royal Bank Of Scotland to Verizon and Danone. We are also building our own startups, you might know of BarkBox, ManagedByQ orAmberJack. What we are learning is that while we use many of the same methods, building with a big company as a partner makes the startup different. We call them Fat Startups. (teaser, more on this is in a blog post soon)
There are in general many embedded dynamics that make these ventures unlike what you might see amongst more traditional startups. Here are a four tips on areas to consider if you are building a startup associated with a big company:
Finally, get going! Venture creation is risky and filled with mostly unknowns. In a corporate environment, those are traits that nobody enjoys. However, if you are the one tasked with innovation you should take responsibility for getting started. Doing nothing is worse than doing something wrong.
A new type of investor is emerging — one who uses venture investments to push innovation internally. These new investors use investment as a tool for:
As it turns out, using investment can be a cost effective way to solve innovation and marketing problems. And, if done right, it can also be of great benefit to the startups receiving this investment. While strategic investing is not new, it seems that a new breed of investor is emerging. These teams are often not measured on financial return on investment — and the teams are staffed not with traditional investors but with entrepreneurial marketers and innovation managers. Emmanuel Seuge is the Senior VP of Content in North America for Coca-Cola, and one of the pioneers of Venture Partnerships. Emmanuel and his team, in collaboration with other departments within Coke, have used meaningful investments to create long-term relationships with startups that help them.
In our podcast, we discuss Coke’s relationship with various startups from their inception to their current state, as well as the mutually beneficial relationship startups and large companies have the capacity to create. Emmanuel also shares how an apparent meeting-gone-wrong transformed into a remarkable collaboration. You can listen to the podcast onSoundCloud and subscribe on iTunes. Below are a few selected highlights, as well as the full transcript of our conversation. (Disclaimer: prehype has worked with Coca-Cola on some of the deals mentioned in the podcast. We also run similar venture marketing programs for various companies in the PCG and Toy industry.)
Emmanuelle Seurge on the potential conflict between Marketing Venture and existing investment teams in a corporation:
“One of our chairmen in the 1920’s, Asa Candler, had this phrase that we use a lot at Coke today. It is: “staying permanently and constructively discontent.” This idea of staying permanently and constructively discontent is a responsibility we all have. It’s not about going around anyone, it’s about working very tightly with the finance team, with the M&A team, with the legal team and building those business models together. When we meet those startups for the first time, often the finance and M&A teams are with us in the meeting to ask the questions that we, as marketers, might not think of. Actually, the result of what we have done, is because of a great partnership with our M&A and finance team.”
On betting on founders vs startups:
“The reason we have started to embrace startups is actually because we believe that entrepreneurs — especially today because of the democratization of technology, because of the democratization of information — are able to bring so much speed, nimbleness, creativity and agility that it causes us to think about our business in a more innovative way.”
On being respectful of the founder’s time:
“As a team, we are paranoid of not living up to the expectations of the first meeting. We want to show excitement when we meet a startup. We know that when that entrepreneur goes back to his company, he’ll say he had a great meeting with Coke. Our biggest fear is not living up to that promise and that excitement. The only way to live up to it is to be choiceful, to dedicate the right amount of resources behind it and to learn how to be patient. Patience isn’t in the DNA of large organizations. We want results fast. It’s a small industry and if you burn yourself with one entrepreneur, you’ve burned yourself with a lot of them. You’ve got to be very careful.”
H: We’re at a conference and I’m sitting here with Emmanuel Seuge. Could you just give a little bit of an introduction explaining who you are and what you do?
E: My name is Emmanuel Seuge. I work at the Coca-Cola Company and I lead our content effort for North America. By, content, what we mean is the intersection of three dimensions. The creative work and all the work we do from an advertising perspective — social and digital. The entertainment work and all the partnerships we build with the entertainment industry — music, gaming and film. And then the third bucket, is all the content we build with our startup partners. We call that marketing ventures which is basically equity and marketing partners that we build with young entrepreneurs who work in an industry or in a business that relates to some of our business needs.
H: Obviously the thing that we worked on, and that I’m mostly fascinated with, is this idea — that I think in many ways you guys have pioneered — of using the marketing team and investments into companies to create long-term relationships with startups. Can you talk a little bit about how the marketing ventures idea emerged and maybe an example of something you guys have done that worked for you?
E: Yeah, I’ll give you an example. One of the very first startups we partnered with, actually you were involved in this, was in the sports-platform world. We were looking for Parade to engage on a more frequent basis — I’m almost tempted to say on a daily basis — with everyday athletes. And with Parade, on a global scale, we were very active around the World Cup and the Olympics, those tent-poles events, but we were lacking the tools to engage with that audience in-between those events.
So we were looking for a platform that would help us achieve that. We met a lot of startups in that field and then we met Endomondo. At the time, they probably had six or seven employees based out of Denmark. They were growing very fast and had several million users already. But, everyday, those users utilized that platform as a way to track their sports activity. So, we thought that if we could build a sustainable partnership to help them grow and bring some of our marketing leverage to them, it would allow us to connect with their audience.
Interestingly enough, in that first meeting we asked them: “What would be the one thing that you would love to do at Coca-Cola?” Their response was that for a sports platform, the ultimate place is the Olympics. They said they would love for Endomondo to be embedded in what Coca-Cola did for the Olympics.
We met them for the first time in December of 2011. At the Olympic Games in London, in the Olympic Village, where the athletes go after their competitions, we set up an Endomondo booth where all of the olympians could go and get their count and track their activity. It was a great example that showed us what we could bring to a startup. And, at the same time, they taught us to operate more nimbly, quicker and creatively.
H: How do you see yourself working with startups?
E: About three years ago we started to look at our business and how we interact and engage with consumers. We were trying to find additional innovative solutions on how to do that. We started to talk with entrepreneurs and startups and looked at how they had disrupted some industries and brought innovation inside certain companies. We began thinking about how we could engage with entrepreneurs in a different way to address some of our needs.
It started with a very simple brief around music and our growing need for music content. As you know, buying and acquiring music can be a complicated process. We met an organization called Music Dealers who streamlines that process by going to an independent music creator and providing music solutions for almost any kind of content that you could be looking for as a brand or as a broadcaster.
We partnered with them and, as we partnered with them, they were at a stage where they were trying to build a more strategic, meaningful and sustainable partnership with us. That’s when we joined their venture by taking equity and ultimately, a more meaningful and long-term partnership. That triggered our thinking around venture marketing. That is: building partnerships with startups in a way that is meaningful and important and relevant for them, but also meaningful and relevant for us. At the core of that is sharing similar objectives.
H: You work on a sponsorship team. When we talk about venture and investing, that’s normally something that is in the CFO’s office. How did you get around that structure?
E: As we look at our 128-year-old business, it is at the place it is today because there has been constant innovation, constant disruption and constant thinking about how we can better ourselves. That is true for everyone — the marketing team, the finance team, the legal team. All of us who are holders and inheritors of the brand who are trying to leave it in a better place for the next generation of brand holders. We have the responsibility to continue to innovate.
One of our chairman in the 1920’s, Asa Candler, had this phrase that we use a lot at Coke today. It is: “staying permanently and constructively discontent.” This idea of staying permanently and constructively discontent is a responsibility we all have. It’s not about going around anyone, it’s about working very tightly with the finance team, with the M&A team, with the legal team and building those business models together. When we meet those startups for the first time, often the finance and M&A teams are with us in the meeting to ask the questions that we, as marketers, might not think of. Actually, the result of what we have done, is because of a great partnership with our M&A and finance team.
H: One of the things that I think is very unique is this idea of using venture and investment as a tool for innovation, rather than seeing it is a tool for financial return. I think most corporate venture teams very much think of investing in a company, looking at a ROI and focusing on making their money back. But, obviously, if you’re an incredibly good venture capitalist in the startup space, you might return hundreds of millions of dollars, but that doesn’t necessarily matter with an organization like Coke. What you guys did is use classic investment tools to get a lot of other things out of partnership that aren’t necessarily financial returns. You got partnerships with the startups and you aligned your interests — how did you convince people internally that this was a good idea?
E: I think it was a couple of things. One is that we’re very focused as an organization as to what kind of business we’re in — we’re in the business of beverages, we’re in the business of refreshing people. We’re staying very focused with our priorities. Which means the partnerships that we build are here to feed our core business and allow us to engage with consumers in a better, more meaningful, quicker, or creative way, depending on the type of partnership that we build. The reason we have started to embrace startups is actually because we believe that entrepreneurs — especially today because of the democratization of technology, because of the democratization of information — are able to bring so much speed, nimbleness, creativity and agility that it causes us to think about our business in a more innovative way.
Why do we take equity? Well, because it positions those partnerships in a more sustainable, long term and meaningful way. It shows our commitment to the startup. There is even more responsibility for us to be successful and to meet the promise that we give to the startups than the other way around. It is easy for Coca-Cola, or a big brand, to appeal to a startup or to a young entrepreneur. We have the skills, brand, history and the people. So, that puts even more responsibility on our shoulders to make sure that we live up the the promise of that first meeting.
Now, going back to not getting distracted, we always remember the reason that we exist as an organization, what drives our bottom line, is selling beverages. Even some of the startups we have partnered with have grown tremendously since the time we initially invested in them. But, the financial upside that we could potentially make will be minimal compared to the business that we make every single day, every single hour, selling our beverages. So it is very important that we stay focused in that respect.
H: That’s refreshing in a lot of ways. We work with a number of organizations and some have different views than you. Some people say they would like to find a way to make their existing business better. I think that’s similar to what you do. How do we deliver our marketing message better? How do we engage with customers in new ways? I think there are some who are saying that they want to use cost reductions and use a startup to accomplish that. I think the third category we work with are people who are looking for their next growth engines, especially companies that are in industries with flattening growth lines.
When you are doing these deals, how do you measure success? Do you literally look at how many more sodas you are selling? How do you measure internally if you’ve accomplished something?
E: It varies by startups. All of those partnerships we build start with a common thing which is a clear business need or a business reality that we have as an organization. The example I gave you earlier, of finding the right music for our needs at the right price and at the right pace is a business need. That is a business need we have today, we had three years ago and that we knew we were going to continue to face, three, five, 10 years from now. Because we have more brands and those brands have more needs for music. Music remains a very important part of our marketing mix and we know 10 years from now we will continue to live with music.
H: Do you think that it was easier to make that partnership because it’s a “not such a sexy-type of business?” Music rights is a little bit of a nerdy thing.
E: I have to be very honest. A lot of it happened through the test and learn. We didn’t know we were going to start marketing ventures when we did that first partnership. We wanted to create more meaningful partnerships andMusic Dealers wanted to raise more equity and were looking for a partner. We believed in their business and wanted to take a risk with them. That triggered it and we learned from it.
So, back to your question about measurement. The measurement we do on the program is tied to the particular objective of that program. The partnership with Music Dealers was measured by how much music we sourced, the productivity driven by sourcing it through them instead of sourcing it through other forms and the number of projects we do. We have celebrated over 250 projects with them in two years around that world. It doesn’t all come from the United States; 50 percent of the projects are from places like Russia, South Africa, Asia, Latin America and Europe. That’s one way to measure it. Other startups we will look at how much we increased brand affinity or brand preference, with a certain target group. Each of them is very different, but it’s not too scientific. It is thought through, but when you work with entrepreneurs, you are forced to be agile and flexible. You have no choice. You partner with some of those startups and six months later the business that they are in looks very different than what they were in six months earlier. We have to adapt to that.
H: One thing I have been very impressed with when I’ve worked with you guys is this very respectful way you interact with entrepreneurs. I guess, as an entrepreneur and somebody who works in the space between big companies and startups, it can be a little weird to parade startups in front of corporations. The startups might have a skeptical attitude because they have been burned before. A lot of companies make very big programs offering money and then have startups parade in front of their people. You have chosen a different path. You work with people who have access to proper entrepreneurs and then spend real time with them. Obviously, I’m a fan of that kind of a approach. It’s an approach that doesn’t get a lot of credit. Why do you think it was important for you to do it in that kind of way?
E: As a team, we are paranoid of not living up to the expectations of the first meeting. We want to show excitement when we meet a startup. We know that when that entrepreneur goes back to his company, he’ll say he had a great meeting with Coke. Our biggest fear is not living up to that promise and that excitement. The only way to live up to it is to be choiceful, to dedicate the right amount of resources behind it and to learn how to be patient. Patience isn’t in the DNA of large organizations. We want results fast. It’s a small industry and if you burn yourself with one entrepreneur, you’ve burned yourself with a lot of them. You’ve got to be very careful.
H: I think a lot of companies are looking to partner more in this space. If you’re someone who sits in a brand and has either an innovation or marketing role and you want to get entrepreneurship much closer into your DNA, how do you go about that? You seemed to have used some of your sponsorship budget. What’s your trick to move things ahead?
E: I don’t think there is a trick. Today, it’s part of the ecosystem of doing business and bringing innovation into an organization and thinking innovatively. Working with entrepreneurs is not the same as working with other large organizations, working with Sonny Vo at Misfit, is not the same as working with the International Olympic Committee or FIFA. Those are different sized organizations; they don’t have the same history.
We need to be as good of a partner with FIFA and the IOC as we are with Sonny at Misfit, or Jeff at Spotify, or Eric at Music Dealers. Internally, that requires us to structure ourselves with a different skillset. You want people who are going to be great at working with large organizations and we want different people who are going to be great at working with entrepreneurs. At the core, what those two people need to share is that they need to work well inside Coke. They need to remind themselves that we’re working for Coke and ultimately we are here to engage with consumers and sell more beverages in the right way, at the right time, for the right occasion, for the right consumer.
H: This might sound like a bit of a weird question, but you’re based in Atlanta, which has some cool startups but isn’t necessarily the hub of the startup community. How do you practically engage? Do you travel a lot? Do you invite a lot of people over?
E: First of all, I would say that Atlanta is getting more and more dynamic. I would say also, there used to be the Valley and nothing else. Today, you have all these hubs around the world — New York or LA or Tel Aviv or Berlin or Paris or Sydney. When we were looking to find a partner in the wearable field who gives people the tools to be more active and monitor their activity and balance, we met a lot of organizations and startups. It was two days of back-to-back meetings with all of them. The last meeting of the two days was a meeting with Misfit. We had just seen an Indiegogo video they had done. We were all a bit tired and jetlagged. I wondered if we even needed to do the last meeting, but Basir told me we should go. We drove to southern San Francisco and the address that we had was a small suburban house. It didn’t really sound like the HQ of an up-and-coming startup.
Anyway, we rang the bell and the guy that opened the door had a dog barking next to him. The guy was wearing a complete basketball outfit — long shorts, a jersey, a cap. I told him that we were with Coca-Cola and were there to meet with Sonny. Sonny wasn’t there and he directed us to the basement of the house where there was an old-fashioned table with three chairs and three cans of empty competitive sodas on the table. It’s like it was staged. We were wondering if it was a setup. We waited for 20 minutes and then the guy who answered the door came back and said Sonny wasn’t coming in, that there was probably a misunderstanding about the meeting time. But, he put Sonny on the phone. We spoke with him for two minutes on the phone and he tried to understand why we were interested in talking. We ended up meeting at South by Southwest in Austin two weeks later. We spent three hours with him and that was it. Then we sealed the deal. If Basir hadn’t pushed me to go and if we didn’t pursue it, those things wouldn’t have happened.
H: It seems like you’ve also been very focused on the founder and the core team. I remember when we worked with Endomondo, you really liked the founder team and those were the people you were backing.
E: Totally. We have a philosophy that looks at three things. We call it the three P’s — the people, the product and the promise. What we mean by that is who are the founders? Are they people we’re going to want to spend time with and share values with? Is the product not only something we believe in, but does it work with our brands? And then, the promise, is where does this company want to go? What is their long-term plan? For example, we investigated digital music streaming companies to find a better way to connect with the younger generation since digital streaming is the number one way they consume music. We met all these companies and they were all fascinating and great.
But, the reason we picked Spotify is one, the people, Jeff, the chief business officer and Daniel. Not only did we believe in them, but they spoke about Coke and why they believed in a partnership with us. They believed in the partnership with us as much as we believed in the partnership with them. One of the main differentiations of Spotify at the time is that it was social at heart, it was all about sharing music. Using music to bring people together is what we like our product to do. It was the only one of the companies we met that said they wanted to expand internationally and transform music into a global, accessible and affordable currency around the world. That democratic approach and international growth were very important to us. So, while we look at those three criteria, it starts with the people.
H: You’ve done things in music rights, you’ve done streaming, you’ve done activity, you’ve done measurement. What are some of the spaces you are fascinated by these days?
H: You’ve been in gaming for a while, right?
E: Yeah, we just hired a head of gaming. We’re doing a lot of things. We started a partnership with eSports two years ago. We’re learning a lot and testing a lot.
H: What is it about gaming? It’s one of those things that everyone has seemed to be talking about for forever. You don’t really know how many people are gaming, but everyone says a lot of people are gaming. It’s never really been a thing that a lot of brands have integrated with.
E: It’s the fastest growing entertainment industry right now. It’s double the size of the film and music industry combined. There are more people watching the final game of League of Legend online than people watching the NBA finals. What is interesting and fascinating about gaming right now is that it’s not only about gaming or playing the game, but it’s about watching people play the game. Twitch was bought for just under a billion dollars by Amazon. Gaming is the second currency on YouTube after music. So, people are playing, people are watching and now people are attending. People are buying tickets. My immersion into this world was two years ago at the packed Staples Center with 30,000 or 40,000 other people who paid an average ticket price of $55 to watch other people play a game.
H: That’s incredible.
E: The multi-faceted dimension of gaming and how the gaming industry is reinventing itself is fascinating.
H: I used to run MTV games outside the U.S. and one of the things that was complicated was that you had a lot of cool kids at MTV and then you had a lot of pretty nerdy kids in the gaming space. The culture of those two was always an interesting thing to try to fit. Do you think sometimes it is hard as a marketer to understand the subculture of gaming? Is that one of the reasons you invest?
E: It’s very hard, but what we do is bring in gaming experts to our team. Matt Wolf, our head of gaming, has worked in the gaming industry for 25 years. He has brought inside our organization, the knowledge, the network and the understanding of what would be the right way for us to engage with gaming. Matt hired on his team, to work especially on eSports, a guy who is an eSports anchor in regional events in Georgia. On the weekends, he is the anchor of the League of Legends event in Georgia, and during the week, he works for us. He is bringing a ton of knowledge inside the building. So, when it comes to those specific passion points, we believe music is the same, we bring in expertise inside the building, rather than trying to do it ourselves.
H: That’s really fascinating. What do you think a startup who thinks they have something to offer you guys should do? You’ve been going out and finding them so far? Are there people who come to you?
E: Yeah, there are. Sometimes they work, sometimes they don’t. I would say the key is a good understanding of our business problems. If a startup has an answer to some of the problems we are facing business-wise, then they have a higher chance of engaging in a positive conversation with us then if they’re in a business that is fascinating and growing, but is not connected to our core business. Earlier this morning we met a young entrepreneur with amazing energy who is working in a very interesting industry, but there is no way that we can connect it to the beverage industry or the business of consumer engagement. So, it’s not necessarily the right fit for us. That’s why it’s important to not get distracted and to stay focused and remind ourselves why we are doing those partnerships.
H: I’ve got a bit of a nerdy question that I always ask. I think a lot of us who are interested in entrepreneurship are also interested in life hacking and making stuff more efficient. Do you have an app or service you’ve discovered recently that is actually really cool and you’ve started to use?
E: There is this app that I started using two days ago that I’m really intrigued about. It’s called Plague. It shows you, through a very simple mechanism, how content you’re watching is spreading around you. Depending on whether you browse the content up or down once you watch it, it’s going to spread in one direction or the other. It shows real time the virality of a piece of content based on where you’re located. I’m not sure I completely understand it yet. We have a 24-year-old guy in our team who does analytics of real-time marketing and he told me about it, so I downloaded it. I’m really intrigued about it. Everyone talks about the virality of content, and all of a sudden I have it here. I can track it, I can see it.
H: I’ll try that.
H: Final question. I started to do this Prehype podcast and I guess I’m learning as I go along. Is there a subject you think that people are not talking about. Something you’re passionate about that isn’t being talked about in the entrepreneurship marketing scene, but it’s an area that someone should talk a little bit more about. Beth Comstock from GE was talking about philosophy, a guy who is very integrated in the Quantified Self movement was talking about what happens after we die — do you have an area that you think would be interesting for us to explore that no one is really talking about?
E: It’s cooler today for a smart kid to work at a startup than to work at a large organization. The model has flipped upside down. So, I’m fascinated and intrigued by what that means.
H: How do you attract people? How do you get that entrepreneurial spirit inside the organization?
E: We try to create an open culture where hierarchy isn’t really relevant and where everybody has a say at the table.
H: I think the coolest thing about being an entrepreneur is that you get to work with people you like on problems you think are worth solving. I think you still have that in some organizations and you can still offer that promise. Then, if you give entrepreneurs or young people tools to allow them to be a little bit independent, they can actually be pretty entrepreneurial within big organizations.
E: Totally, absolutely.
H: I think that’s a good end.
E: Thank you for having me.
H: Appreciate it.
More info on:
Henrik: twitter.com/werdelin and hellohenrik.com
One of the most respected big company CMOs in the startup industry is Beth Comstock. Beth is GE’s chief marketing officer and the leader of the company’s newly formed business innovation unit. She is tasked with making a corporation of 300,000 more entrepreneurial. Her passion and devotion to startups runs deep, which is probably one of the reasons why you might find at random bars hanging out with startup founders in NY’s Lower East Side. I had the chance to discuss startups and their increasingly important role within large corporations.
Here are a few excerpted highlights. You can listen to the podcast on SoundCloud – you can also subscribe at iTunes and read the conversation in its entirety below.
“I’m a market discoverer. I feel like you can’t read a report, you can’t have a consultant tell you, you have to be out there. When I was in college, I majored in biology and minored in anthropology. I think at heart I’m an anthropologist. I believe that’s what good marketing is. You’re not really trying to sell someone, you are understanding a need. How do you understand what entrepreneurs are thinking unless you go hang out with them?” – Beth
“Part of the reason you enter into a partnership is that you want to share risk and reward and you want outcomes faster. Sharing risk and reward means sometimes you win and sometimes you lose. You have to have that mindset. Not every venture you do is going to be successful. It is a portfolio.” – Beth
“I would say just start. That’s a mantra for me. We can analyze everything to death and do all the ROIs, but at some point, you have to just start. Start small, try a partnership. If you’re a startup, oftentimes you expect the gloryland immediately. But, you need to do the same thing. You need to take a bet on a company, you need to start small, pick one project, be patient and not put your whole business plan on one company. I think both sides – big companies and startups – have to just start.” – Beth
“I’m a market discoverer. I feel like you can’t read a report, you can’t have a consultant tell you, you have to be out there. When I was in college, I majored in biology and minored in anthropology. I think at heart I’m an anthropologist. I believe that’s what good marketing is. You’re not really trying to sell someone, you are understanding a need. How do you understand what entrepreneurs are thinking unless you go hang out with them?” – Beth
“Part of the reason you enter into a partnership is that you want to share risk and reward and you want outcomes faster. Sharing risk and reward means sometimes you win and sometimes you lose. You have to have that mindset. Not every venture you do is going to be successful. It is a portfolio.” – Beth
“I would say just start. That’s a mantra for me. We can analyze everything to death and do all the ROIs, but at some point, you have to just start. Start small, try a partnership. If you’re a startup, oftentimes you expect the gloryland immediately. But, you need to do the same thing. You need to take a bet on a company, you need to start small, pick one project, be patient and not put your whole business plan on one company. I think both sides – big companies and startups – have to just start.” – Beth
H: Okay, Beth, let’s do this. So, first, who are you?
B: I’m Beth Comstock. I work at GE. I lead our business innovation group and I’m also our chief marketing officer.
H: It’s somewhat unconventional that a lot of the venture stuff fits into the marketing team. How did that come about?
B: Well, it came about for a couple of reasons. I think if you really believe passionately in marketing, you believe marketing’s role is to help the company go where the markets are going and to be about what’s next. If you believe that, it takes you to hanging out with startups and figuring out how to partner with them and how to have a mutually beneficial relationship. What can they offer you? What can you offer them. Pretty soon, you start to think about investing, maybe you can help them commercially, maybe they can help us. So, it was really just a natural progression, saying where is the world going, how do you develop markets, and who are the partners that can get you there. Increasingly, startups are the ones who can get you there faster. So, if you follow that chain, it puts ventures in the marketing area.
H: A lot of companies seem to have a very tough time becoming more entrepreneurial. Why do you think that is?
B: Sometimes companies forget they were once a startup. You lose sight when you go to scale. There is a value in scale. Scale is about doing things well in a big way. Sometimes we forgot that is also important. You fail to focus. I think oftentimes companies try to do too many things. My colleagues hate when I say this, but in companies, frankly, we spend more money than we need to on these things. I think that’s what you learn from startups. In startups, you have a very limited amount of capital and resources, huge passion, aspiration and vision. I think we need to be more stringent in terms of how we fund ideas and get them to a healthier scale. We put money in before it’s ready, so it’s premature scaling. It’s a common issue. We just keep throwing money at it, when really what is needed are the right people and time. Often companies don’t want to give the time and patience that some of these ideas need.
H: I think that’s very true. Very often, when someone has a must-win area, they get 20 people in a room, have a brainstorming session and come up with 800 ideas. They invent these portals that take 18 months and 10 million dollars to develop, but by the time you are two-thirds through with developing them, the world has moved around, off to somewhere else and you’re stuck with this monster project.
B: They should have funded two and they funded five, because they don’t want to choose.
H: Or they should just fund one at the time.
B: No one wants to be accused of being an idiot because they let an idea go, but you have to pick.
H: When you work in a company like GE with 300,000 people and you really start to buy into this lean startup methodology, how do you get your head around the concept that you can’t always do the billion dollar thing that will change the world but you have to start with something small that could grow into something big?
B: That is a challenge in companies. Sometimes there are ideas that are just too small for us to take on. That’s sad if you’re the one that has that idea. That’s why you partner with startups, that’s why you fund ideas outside yourself. If you are a company at scale you have to have some sort of path to achieve scale, or it has to be part of a family of ideas, or it has to be opening a whole new market space that you believe in. But, also if you’re running a big company, and you’re an innovation junkie and a believer in innovation, you have to have a portfolio. And you have to know that there are going to be some ideas that you’re investing in that aren’t scaling now, that you believe are going to scale at some point. That’s why you have to give them room and you create space for them. That’s why we have incubation in our venture teams. You have to create a protected class of ideas. That’s something I believe passionately about. You have to fund them, you have to care for them, you have to say it’s okay when you don’t make your numbers for a quarter. You have different metrics, different toll gates and different expectations. But, there comes a time when you have to have accountability, because you have to have a customer at some point.
H: One of the things we do in the startup space, is that the accountability is having a limited amount of cash. If we spent $250K in our seat round and we haven’t created traction, then it’s game over. Traction can come in a variety of forms – users love it, or users pay for it, or a lot of new users join. In many ways, you often link time and budgets, but you could just link it to budget. You have $250K and if you haven’t reached certain milestones, then it’s game over.
B: We’ve tried to adopt that growth-funding method to incubating internally and that has helped a lot. But, you do have to create room for those things. I often say to my colleagues inside GE that they have a different risk profile. That’s why you came to work here, first of all. You don’t know what it’s like to go home and tell your partner I can’t help pay our mortgage or rent. Most people who work in big companies don’t have that personal anxiety of putting it on the line every single day. Starting up is hard.
H: As you know, I’m a big fan of they way you work with startups because I think it’s very generous. I don’t say that just because you’re sitting here, but at Prehype we interact with startups and the big companies. Often I find it’s very much on the corporation’s terms. They say come to our place, tell us what you do, and we might throw you some money. But, one of the things you seem to do is interact with the startup community. I went to this dive bar on the Lower East Side with 12 entrepreneurs, and suddenly you popped up. I was surprised to see you. Why do you spend the time doing that?
B: Two things. One is our company has been on a journey to partner more. Historically, in a company like mine, what happened is a partnership meant let’s do it our way. At best, you were 50/50 partners but you always had to fight for controlling interest. The world just doesn’t work that way anymore. I think companies like mine have become very humbled. We have had to admit that we don’t have all the answers, and we can’t do it all ourselves. When you go through that process, you become a better partner.
The second thing is, that’s just the way I’m wired. I’m a market discoverer. I feel like you can’t read a report, you can’t have a consultant tell you, you have to be out there. When I was in college, I majored in biology and minored in anthropology. I think at heart I’m an anthropologist. I believe that’s what good marketing is. You’re not really trying to sell someone, you are understanding a need. How do you understand what entrepreneurs are thinking unless you go hang out with them? So that’s really why you saw me hanging out on the Lower East Side. It has been my job to go where things are happening and understand them. Then I bring it back to the company and translate it in a way that makes sense.
H: GE is such a big organization and I’d imagine your to-do list is very long. Yet, you consistently show up at industry startup events, you organize dinners for entrepreneurs, you seem to spend so much time on it – do you feel you have to justify that internally?
B: Yeah, sometimes. I recently had someone at another company ask me how I managed to get my job to where I have no operating responsibilities. First of all, I have huge operating responsibilities and expectations. My neck is on the line for a lot. Fundamentally, it’s partly my job to say where the world is going and who is making it happen. Secondly, I think you make time for what is important to you. Discovering, connecting and hearing what is on the mind of Henrik at Prehype, for example, is important to me. I need to understand it; that’s just the way my brain is wired. I spend a lot of what would be my personal time out doing that.
I’m able to devote the time I need to doing the important things my company expects of me, but I have also been able to prove that this is also important. I’m able to connect with people who might not think of GE as a partner. If my company, my colleagues and my boss, Jeff Immelt, hadn’t seen the results from my work, they might wonder what I’m doing. But, I think they have seen enough results and interesting mashups, that they value it. At least I hope so. Well, I’m still there, so I hope so.
H: It seems like you get a lot of personal enjoyment out of being embedded in the startup scene. What do you think you take back to GE? I’m sure the partnership with Quirky came out of your involvement. It is very visible and considered a big success. Can you talk about the tangibles of these partnerships?
B: I personally get a lot of energy out of it. You are mostly learning a lot. The company I work for is big on development – they expect you to develop yourself and to develop the company. It’s the kind of place where you wake up every day and say: “What are we here for? We’re here to get better.” I believe that. That’s my ethos. If you believe that, you are constantly looking for people who can help you get better.
While we have dozens of others, Quirky has been a very visible partner. My colleagues and I in the marketing and development space are all about big experiments. There is no guarantee that any of these are going to work, but hopefully there is enough good that comes from them. What has Quirky helped GE do? When we first aligned with Quirky it was with our appliance and consumer business. They helped us learn speed to market in product development. Most recently, together we launched a connected light bulb. It took Quirky three months to help us do that. We were working on it for three years and didn’t get there. Already people can start to see tangible results. It was designed in a beautiful way; the community of Quirky helped make it better. As for other results, I can tell you that I got a product to market faster and we have a new customer relationship that is much stronger – all of those kinds of benefits are just huge for a company. Then there is the cultural piece of having Ben Kaufman, the founder and CEO of Quirky, come in and agitate a little bit. To say to people: “Why are you doing it that way? There is a different way to do it.” And I think we have been helpful to the Ben Kaufmans of the world.
H: Is that tough to manage sometimes? We see that when we build something very quickly with a big company, it slightly pisses off people within the organization. Is that just something you need to do – to create a little bit of tension sometimes to make people move a little bit quicker?
B: I think you hit on a really important point. The more I work, the more I’m convinced that tension is essential for creativity. Timing is also a big issue. A lot of what we set up is tension between the technical innovation and the market innovation. Sometimes technology creates opportunities that you never thought possible. Sometimes you can take existing technology and create new benefits just from combinations and business models. We try to create that tension a lot to encourage better innovation. I think tension is key.
And, yeah, sometimes we use our entrepreneur partners to create that tension. I’ll give you a good example. I’m not sure I helped Ben Kaufman much, but he helped us a lot. We brought him to a big leadership conference. He had just gotten back from one of our divisions where he toured the manufacturing floor. I asked him what his impressions were from the tour. He said, “I was really impressed that you guys are going to have new hinges in three years.” Well, he was being very blunt and the reaction from the room was interesting. It was a filter and a test. I goaded him to say it. There will people who hated that he said it, who were really annoyed and thought he was putting them down. And then there were people who said they needed to be around people who think like that. It became a filter. It was amazing the people who came forward and said they wanted to work with him. It was also a for us chance to say, “Hey Ben, it’s easy for you to think like that, but do you know what it’s like to do tooling at scale, do you know what it’s like to have this type of factory automation at this kind of output?” I think he was able to learn something, too. There is a real opportunity to take some of these disruptive models and challenge yourself by questioning if you really know everything.
H: But is there also benefit in failing with a partner? Let’s say a relationship with some partner doesn’t work out, you don’t get the numbers. For example, another company you work with that I really like is PolicyMic or mic.com. If you do a content marketing experiment with them and if it doesn’t work, then it doesn’t really matter because it’s just a partnership. Is that something you think about? That partnerships are a good playground for experimentation? Or is it just because you can get talent externally that you can’t get internally?
B: It’s all of those things. Part of the reason you enter into a partnership is that you want to share risk and reward and you want outcomes faster. Sharing risk and reward means sometimes you win and sometimes you lose. You have to have that mindset. Not every venture you do is going to be successful. It is a portfolio. You have to have other things that you are getting out of it. This was a bit of a sell at GE to say we aren’t just doing this for financial returns. There may be a project that financially isn’t a big success, but culturally, or speedwise, it achieved things that weren’t possible before. Strategically, it keeps us from making a mistake. You have to have a really interesting scorecard. It has taken us awhile to get everyone comfortable with the idea that the scorecard isn’t just financial returns. Yeah, you want some of that. You have to have earnings to keep doing inventions, right? It’s like that old Thomas Edison line, “I make money so I can keep inventing.” We are not a nonprofit. But, we are at the size of scale where you can take risks and look for other kinds of returns, that aren’t purely monetary.
H: Do you see yourself as an internal marketer? I would imagine a lot of people share your vision but feel they are restricted internally. They might have a CFO that’s very powerful, or a risk-compliance team, or tech team, or brand police that are often compensated to make sure tomorrow looks like today. How do you navigate those types of obstacles internally?
B: That’s a great question and leads to another benefit of doing these partnerships. It creates role models and examples. We recently completed a partnership focused on drones with the team at Airware. We are working together to figure out how to bring drones into the service arena. The ability to light people’s imagination by allowing them to have a partner and try new ideas without getting 500 approvals is crucial. I’ll tell you a couple things. In companies – big, medium and even small – innovation is often a journey into yourself. It’s easy to say you can’t do something because the CFO won’t let you or because you have restrictions. Yes, they exist. Yes, there are processes. But, sometimes people need to be given a little bit of permission and they need to give themselves permission. They need to say, “If this guy can do it, then I can do it.”
H: I was talking to somebody the other day about the idea that negative emotions and energy are actually very useful when you’re an entrepreneur. For example, you go out, you tell your partner that this time is going to be less hard, you tell your investors that you have everything figured out, you tell your staff that they should leave their good jobs and come and work for you because it’s going to be worth a lot. Then you have all of this anxiety build up. But, that is one of the things that keeps you sharp. What do you think are some of the negative elements of entrepreneurship that would actually be useful to have more of in big companies?
B: I actually think it’s too easy for an entrepreneur to get money these days and I actually don’t think that’s a good thing. There is venture capital everywhere. I like to see an entrepreneur who can actually make some money. I think the real test should be: Is your idea working? Can you actually generate revenue from it? Sometimes entrepreneurs underestimate the value of scale, access to markets and other things established companies have. They tend to look at an established company and think they are boring and slow. I don’t think we’re boring. Yes, sometimes we are slow, but we also know how to do things at scale and how to do them repeatedly. We have processes that may not be very exciting, but they help reach goals. If entrepreneurs are open to adopting some of these methods, I think it makes them go faster in the long run.
H: I think a lot of entrepreneurs have had some negative experiences working with big companies, either because the decision-making process is so slow or whatever else it may be. Do you think that is changing because big companies are becoming increasingly willing to work with startups and even a little bit more on their terms?
B: They have had to. For one, it has become a little bit trendy for big companies to work with startups. We went through a startup-envy phase. Everyone wanted to be a startup, but, then big companies have to pause and realize they have some good things.
H: Also, I don’t want my plane engine to be done by a startup. I want that to be done by GE.
B: Right, the business model around it might be okay, but there are certain things that big companies do really well. For partnerships to work, companies, like mine and others, have to dedicate partner resources. If you show up from Prehype with one of your companies, you want GE to make it fast. You want a partner who is going to help you navigate GE, not throw up roadblocks. Historically, companies got a bad rap because it had to be on their terms. Now, you have relationship managers who help the startup navigate the company and help the company navigate the startup. You are invested in making the startup succeed. You need a shared vision. I’m not sure every company is there yet, but more and more I think companies are realizing it’s important.
H: You guys have done a lot with startup methodologies internally. How do you attract entrepreneurs to work with you as partners but also to say with your organization?
B: Getting them to work as partners is easier because they can keep their own identity. They can grow their business and can hopefully choose the best of what GE has to offer. But, not everyone is going to be a successful entrepreneur. I think the success rate for founders is like .4%.
H: It’s very low. I heard somewhere that entrepreneur is just French for being stupid.
B: There is a high failure rate.
H: It’s not for everyone. Everyone watched “The Social Network” and saw it as the promised land because you are your own boss. There are a lot of downsides to being an entrepreneur. Obviously, I’ve chosen it.
B: It is really hard.
H: To spin on that point, I also work with a bunch of intrepreneurs who sit internally in an organization. They tend to have all the same properties of people I’ve met in the entrepreneurial space who are incredible. But, intrepreneurs just really understand how to navigate the political system and they get a lot done. Interestingly enough, I don’t think they get a lot of credit. Especially the people who bet on entrepreneurs. Some of the breaks I’ve gotten are when people, like yourself, have taken a gamble because they like the vision. Is that something you guys encourage? Or is there a way to encourage that?
B: It’s hard because you have processes. I’d say a couple things. In order to get entrepreneurs to come work for GE, you have to create the right mechanisms. We are hiring entrepreneurs and residents to help us incubate and telling them if they like it, to go run it. You have to set up different incentive compensations and different mechanisms not tethered to some of the metrics we talked about earlier. You also need to allow them access to all the goodness of the company. It means you have to do a lot of work to make them succeed and want to grow there.
Internal entrepreneurs don’t need a lot. They just need to be left alone and told it’s okay. They need to be given some air cover and some resources. Often, the best thing a leader can do is to identify those people and give them the courage and then have their back if they fail. That goes a long way. I think you’re right, companies need more people that recognize it is essential. Not everyone in the company can be that kind of risk taker, but you need a few of them.
H: I think GE is considered to be on the forefront of doing these partnerships and embracing entrepreneurial culture. What would be your advice to people who feel that is something their company should do more of but don’t know how to start?
B: I would say just start. That’s a mantra for me. We can analyze everything to death and do all the ROIs, but at some point, you have to just start. Start small, try a partnership. If you’re a startup, oftentimes you expect the gloryland immediately. But, you need to do the same thing. You need to take a bet on a company, you need to start small, pick one project, be patient and not put your whole business plan on one company. I think both sides – big companies and startups – have to just start.
You need a good leader at the top of the company who believes it’s important. Who is willing to try and fail and to allocate resources. It doesn’t have to be a lot, but it shows it is an important idea. Symbolism really matters. You have to allow people to fail and make them heroes. You need to acknowledge that it didn’t work but you still learned and took something away from it. Sometimes you have to take those failures and turn them into wins.
Companies don’t always think this through. They expect to go to Silicon Valley, find a partner and get an incredible outcome. But, it’s really hard. What are you trying to do? If you are trying to just get return, then set up an equity fund. If you’re trying to move your culture, there is a different kind of path. If you’re trying to get strategic insights to the market, there is another way. You first have to decide why you want to partner with startups. Look, we have made a lot of progress, but we have also made so many mistakes. There are going to be so many failures in our portfolio.
H: That’s such a good point to determine what you are trying to achieve and then decide what tool is needed to achieve it. We see people who don’t know if they want to make their existing business better, or if they want to extend into new platforms, or if they want to create a new adjacent business, or if they want to have culture change. They need to just pick one and then find the tool that fits. What are some of the things that you haven’t managed to do yet that you would like to do?
B: I don’t think we’ve spread it as far and wide across the company as we should. I worry sometimes that these things become trendy and then people move on to the next thing. These things take time. Some of our hardest startup partnerships have gone through times when they are not doing well. You have to believe that you are going to get there. So, there are ups and downs. There is tension. We haven’t cultivated it as much in the system. I think about how you incentivise people. You have to start to say to people within your organization, “Do you believe so much in that idea that you would bet some of your salary on it?”
H: When Mike Volpi, who is now a partner at Index Ventures, was at Cisco he used to tell employees that he couldn’t finance it internally, but he told them to leave, set up their own company with the idea and then if it worked, Cisco would invest in the idea. It might not work, and then they would be out of a job. But, the reality is that a lot of these companies then spun out, made amazing stuff and then Cisco bought them back. Cisco made a lot of entrepreneurs very rich because they basically said, “Put your money where your mouth is and we’ll pay really good money if you succeed.”
B: We have gone so far as to assign Eric Ries and David Kidder as coaches for executives, engineers and sales and marketing people. The points we want to make is that it’s important, they have to make time for it, and we will have someone would hold their hand through the process.
H: That’s funny. We were talking to the McKenzie guys about the idea that a lot of senior executives shouldn’t be mentoring startups, but they should have a young, smart entrepreneur, mentor them.
B: It goes both ways. I think both learn from that pairing. You’re absolutely right.
H: If you’re a startup and want to work with a company, what’s the way in? It seems like people from the outside are protecting the access to someone like you.
B: I see this a lot. I will meet an entrepreneur who thinks they are set because they met the CEO or CMO of some company. I wouldn’t put all your eggs in one basket of any company. Oftentimes the CEO can give you an introduction, but if the people you are introduced to aren’t champions, then forget it. The first thing you need to do is find a champion. You have to do your homework. You have to understand what a pain point is in the company and how you can help solve it. It really is a sales job: “You have a problem, I can solve it. I have a need, you can solve it. Let’s get together.”
More and more companies, like ours, as well as CitiGroup, Walmart and Samsung, are setting up partnership teams. It’s a place for startups to begin. They have filters. First, you have to make sure you are aligned. What you are offering might not be of interest to the company. If I’m a startup, I would ask for clear, crisp communication. Ask if your pitch is good. Ask them to be honest, not just nice. Too often companies are just nice and lead startups on forever. You have to be very clear with a company about your time window. Tell them the deadlines and feedback you need.
There has to be a real honest discussion and not too much magical thinking. Your future is not going to be determined by just one company. I see that a lot, too. Startups often put all their efforts into one company. Instead, head your beats and go to a few different companies. Then, a final comment, in regard to the marketing and brand type of companies. I always say that while our brand team at GE, might not have the biggest budget, we are a really good development partner. So come to us, we want to be creative together. Out of that, you will have a blueprint that you can sell other places. Sometimes it may not be for big bucks, but it is for huge intellectual property that you can go scale. Be clear with what you can get out of the company.
H: I think that makes a lot of sense. A question I always like to ask at the end is: Have you discovered an app or service lately that will make your home screen or that you wish other people knew about?
B: I really like an app called Random that I’ve had for maybe six months. It does a random curation of content. It’s sort of an anti-movement. Also, I’m constantly in search of productivity apps. I’m a lifehacker from way back, so I’m always trying out new calendars and new to-do lists. I haven’t found anything yet, so if anyone has one, let me know.
H: I found one the other day called Captio. It sends an email to yourself. So, instead of opening an email client and having to write your own email address, it does that for you, saving you maybe eight seconds a day.
B: That’s a good one.
H: Final question: As we are beginning this Prehype podcast we are asking people what would be an interesting podcast they haven’t heard yet. What’s a subject matter that isn’t being discussed or somebody who is interesting that isn’t being heard and would make an interesting podcast? Do you have an area that doesn’t get enough air time?
B: Yes, one. I’ve actually started a dinner group and we get together every now and then and discuss philosophy. We look at how ancient wisdom applies to modern life. I think we are all looking for a better way. I’m finding there are a lot of digital entrepreneurs startups that are intrigued by ancient wisdom and philosophy. How do you life a better life? I think that’s a subject that never gets old.
H: And with that, thank you so much for taking the time to hang out.
B: Great questions, thank you.
H: Thank you so much, Beth.
I recently sat down with Thomas Wedell, author of “Innovation as Usual” and a partner at the advisory firm The Innovation Architects. We talked about tricks for becoming more creative, on how much risk to take, tips for selling ideas to your boss and the dangers of the Hawaii shirt syndrome. Thomas has experience working with managers from around the globe and has observed innovation at a vast variety of organizations. The focus of their in-depth conversation was how to innovate within the constraints of a rigid corporate structure.
Below are excerpted highlights (full transcript is below):
Listen to the interview here: https://soundcloud.com/prehype/prehype-podcast-how-to-make-new-ideas-happen-in-a-big-company or on itunes: https://itunes.apple.com/us/podcast/prehype/id983443923?mt=2
Thomas’ preferred definition for innovation:
“Innovation is about creating results by doing something new. And you have to focus on the results part. If it’s creative, great, but if you don’t make an impact in the real world, it doesn’t matter. And that’s where I think people can go wrong by focusing too much on the creative part, rather than the bottom line.”
Henrik’s qualities of an entrepreneur and their greatest adversary:
“If you want to be an innovator, if you want to be considered entrepreneurial, it is your job to move the ball forward. Often that means painting a very good picture of what the future might be, or by using charm or trickery, to get things done. It’s very easy to say things are difficult and might not work, and therefore people default to not doing anything. I think the biggest risk for innovators and innovation in general is not that you do something wrong, but that you do nothing at all.”
Thomas’ advice for getting traction within a large organization for an innovative idea:
“One of the first steps is to get a sponsor on board. With a sponsor, I mean something very specific. A lot of people think innovation is about selling your idea; that’s wrong. It’s about selling yourself. So, the first question you have to ask is: who in this organization, a little bit higher up than me, can help me in some way? Who trusts me, who knows that I’m not going to create a mess or do something bad for their career if I take a few risks here and there? That’s the person who can be your sponsor and who you can approach with your idea and get advice. From the very first step, you start thinking about the political landscape.”
Henrik’s observation of a common fault present within innovation teams:
“We meet a lot of innovation teams that just started and a lot of them don’t seem to be in much of a hurry. They might have three years, so first they want to do a lot of research and discovery and play around, too. I don’t know why that is. Lately, I’ve been thinking that we’ve been talking too much about it being okay to fail. That basically gives everyone a carte blanche, that as long as they’ve learned something, it’s fine. I think that’s a little bit of BS. This is not a game, this is about inventing the future for a business and therefore, you have to really mean it.”
Thomas’ discussion of the often-underestimated value of less-disruptive innovation:
“I think we’re sometimes so blinded by the light of really big ambitious projects, those that we read about on the front page of Wired, that we miss out on the fact that there is a lot less risk and a lot more value to gain from stepping a little bit down with the ambition.”
Henrik’s emphasis on not giving up hope that small projects can succeed in big ways:
“Often, it’s very difficult to predict which one of these projects will turn out to be very big. Sometimes just building a small thing is better than building nothing at all, because, often these small things can turn into something big, if you’re lucky.”
H: Today I’m joined by Thomas Wedell, a friend of Prehype’s but also a pretty extraordinary gentleman and scholar.
T: Mostly scholar, really.
H: Today we are going to talk about how to convince your boss to let you work more as an entrepreneur. What are some of the tricks you can deploy to really get to do some of the stuff that you think you need to do, but there might be an environment or there might be structures that prevent you from doing those things you want or need to do. Joining me is Thomas, I’ll let him introduce himself.
T: I’m an author with Harvard Business Press. I came out with a book called “Innovation as Usual” two years ago. I worked a lot with corporate innovation, trying to figure out, not so much at the CEO level, but further down, how do you actually make this work. And what attracted me, and what is happening at Prehype, is the focus on implementation.
H: You spent the last 10 years or so touring around the globe, working with different companies, studying the art form of innovation, its structures and its tools.
T: Basically, whenever I ran into people who had either really failed or really succeeded, I went in and looked at what they had done. The question that really interested me was: where are our mental models about innovation wrong? We have this idea that innovation should be a free-flowing, Hawaii shirt exercise, but in reality, you have to focus on the corporate environment, you have to consider that your biggest obstacles are not necessarily the customer, or getting the product right, but if you work in a big company, how do you manage that space? And that’s something that I found not a lot of people had focused on.
H: The word innovation is one that is being used for a thousand different things — do you have a definition of innovation?
T: Yes, I love to use a very simple one. Innovation is about creating results by doing something new. And you have to focus on the results part. If it’s creative, great, but if you don’t make an impact in the real world, it doesn’t matter. And that’s where I think people can go wrong by focusing too much on the creative part, rather than the bottom line.
H: So it becomes art if it’s too creative?
T: Because the corporate paradigm of creativity came from the art world, like Alex Osborn back in the 1960s, we got this whole idea of creativity being very artsy and I think that’s a problem if we work in a normal company. I call it the “Hawaii shirt syndrome.” If you’re going to put a Hawaii shirt on in one of your meetings, is that going to further your career, or are you going to look like an idiot? And I think that’s the tension. We’ve inherited a lot of bad ideas about creativity from the art and advertising world.
H: But, let’s go back to innovation and doing something new. A framework that we talk about often is Vijay Govindarajan’s Three Boxes of Innovation.
1. How do you make your existing business better?
2. How do you extend it or create something new on the back of that?
3. How do you create complete and new adjacent businesses?
It seems to me like there are different tools for these different boxes. If you just want to make your existing business better, you need to deploy tools to basically empower your staff to think and do something in a new way. If you want to create something new, a new incubation business line, than you need some different tools. People mix all these different ones. If we start from the left, how do you improve your existing business better, and we try to introduce this concept that you’ve been writing about called stillstorming. First, can you describe what that is and then how it works in the context of being an employee of a big organization with something you want to improve.
T: We coined the word stillstorming to position it differently from brainstorming. The whole brainstorming approach is based on this very visible, very creative process that is seeking buy-in for ideas. If you’re working in Box 1, you’re in the corporate environment, not at some startup in Silicon Valley. And basically, you have to accept that your corporate culture is what it is. You cannot change a corporate culture, so those are the working conditions. And I became really interested in people that succeeded in that space.
I wrote about a guy called Jordan Wechsler sitting inside Pfizer. Pfizer is a really big, super bureaucratic company. The way he dealt with these challenges is by not being very visible, by staying under the radar. He gathered resources on the sly, tested out staff, and used his existing network to get buy-in. I came out with an article about your MTV initiative where you did something similar. You started a thing inside MTV called Top Selection, that was very under the radar. What did you do? Why did that succeed?
H: Well, I think at the time I was young and slightly stupid. It wasn’t thought through that much. The issue I had was that I had an idea to launch a new show, and the gatekeepers, who were the technology team, didn’t really want to use the type of technology that I thought would work really well. I built it on my own dime and brought it to my boss who thought it was kind of cool. But, we met all these people who didn’t want us to do it. So it ended up with me going live at two or three in the morning without getting permission and hijacking the channel that way. It sounds very rock and roll, but now you would probably get fired and escorted from the building. But, at the time, that type of thing was kind of okay. And, so we launched it and it worked very well. I think it was only by taking the risk and doing it under the radar, that it worked.
T: Can you talk more about risk? I know this is one of your philosophies at Prehype. How do you view the prospect of risk? Should the company take it on? Risk is a big thing with innovation and it’s a bad thing.
H: If you want to be an innovator, if you want to be considered entrepreneurial, it is your job to move the ball forward. Often that means painting a very good picture of what the future might be, or by using charm or trickery, to get things done. It’s very easy to say things are difficult and might not work, and therefore people default to not doing anything. I think the biggest risk for innovators and innovation in general is not that you do something wrong, but that you do nothing at all. When it comes to risk, I think organizations need to take balanced risk. For example, make it cheap to fail, so the organization doesn’t lose a lot of money if it doesn’t work. And then try it a lot of times, rather than making it very safe and expensive.
T: In my time, I’ve seen some companies that were so risk-averse that they delayed the collision with reality until the last possible moment at which point it was a huge collision.
H: I think that’s very common. I think people sit in a board room and think they’re very smart as they come up with ideas. They might try to validate it by doing user testing but the user testing is hiring an agency that is basically paid to agree with you. So, you test it, but you don’t really test it. I think what we advocate at Prehype, not just the corporations, but also with our own projects, is that we just launch stuff and see how users really react. It’s a very humbling exercise. Quite often you’ll do something that doesn’t work at all and you thought it was a very good idea.
T: I saw a fun example, well not so fun for the company. Carlsberg, the Danish beer company, decided to use a different bottle design that was a little taller, meaning the crates had to be a little taller too. They launched this nation-wide in Denmark and then realized that the shelves in bars are a specific height and the taller crates didn’t fit. So a lot of bartenders just put the crates in the back, and their unit sales literally dropped 20 to 25 percent overnight. That happened because they didn’t reality test it faster. What I’m curious about is: why doesn’t that happen? We, as an innovation industry, the experts, have been telling companies this message a lot — you have to fail, you have to test things early. Why do you think that doesn’t happen?
H: That’s a good question. I think many people are inherently lazy and like to think and talk. When you actually have to do this, it’s a lot of grind work. It’s not very fun. Most people have the idea of X, but don’t realize that idea X, actually involves endless amounts of laborious work.
T: I tried to do a startup once, but that suffered an ignominious fate. The interesting thing to me personally was that before doing the startup, I took a class on entrepreneurship. That worked against me because I thought I had it all figured out in my mind. It wasn’t until I got in the trenches and figured out that it wasn’t a logical thing, it’s something you have to go through.
H: So let’s go back to the original question. You belong to a big organization, you have an idea, something you want to do. What are the concrete steps of stillstorming, or is there such a thing?
T: One of the first steps is to get a sponsor on board. With a sponsor, I mean something very specific. A lot of people think innovation is about selling your idea; that’s wrong. It’s about selling yourself. So, the first question you have to ask is: who in this organization, a little bit higher up than me, can help me in some way? Who trusts me, who knows that I’m not going to create a mess or do something bad for their career if I take a few risks here and there? That’s the person who can be your sponsor and who you can approach with your idea and get advice. From the very first step, you start thinking about the political landscape.
H: There’s this joke in the venture community that if you ask for advice, you get money. And if you ask for money, you get advice. Maybe that’s the same thing in the corporate landscape. If you go to someone with an idea, they probably give you free range to do it. If you say, I don’t need money to do this, they’ll probably say you shouldn’t be doing it.
T: Most people like giving advice, most people don’t like to be asked for help. Help is something different, but if they like your idea, they’re going to help you with it anyway. The second thing, then, is: how do we find ways of testing this that are so cheap that we can keep it off the radar? There is such a thing as a corporate radar, and once you’re on that, people will be asking for results and five-year plans. Typically, the less power you have, the better off you are keeping it under the radar as much as possible until you have a little bit of proof of concept. Like, what you did with MTV, you broadcasted it, there were good reactions and then you could go in and say, “Look, it worked.” One thing I love that you work with is this idea of clear cost of closure. Do you want to quickly explain how you work with that?
H: It is a little bit boring. But, I guess one of our main points is the best way to reduce the risk of innovation is to make it cheaper. A lot of corporate innovation teams hire a lot of full-time headcounts to work on a project. And almost, by design, then if you realize it doesn’t work, it’s very difficult to close down, because a bunch of people are trying to come up with new ideas to keep their jobs. We create structures that isolate projects with project teams. If they don’t hit their various milestones, we default close them down, rather than default make them continue.
T: I thought it was interesting because that was one very tangible way of dealing with that question: what is the risk here if this doesn’t work out? I work with Samsung’s European Innovation team and they discovered a few things about how to best sell in various places. For example, they discovered that people in Korea are afraid of losing their jobs at Samsung. It’s a big, big deal there. But, basically, one thing they found out is that they should never present their idea in isolation. They learned to always pitch a high-risk project along with it, that wouldn’t be accepted but would increase the gatekeeper’s appetite, for the less-crazy project, which is the one they wanted to get done anyway.
H: Have you ever seen that backfire, when it really just didn’t work?
T: That happens, definitely. One company, whose name I cannot mention, launched a big innovation initiative and got sign-off from everybody on it, up to the top level. They thought they had covered their backs, but then it failed, and most of them got fired.
H: I’ve noticed that especially if you’re running a business line already and you try to innovate within that, I very seldom see people get penalized for it. If you do stuff and it doesn’t damage the company too much, I think most people are just excited that you tried something new. It’s interesting though, because if you take an innovation job, you very much put yourself where if there is nothing tangible that comes out quickly, then people wonder what you’re doing. Ironically, we’ve talked about Boxes 1, 2 and 3. Box 1 is how do you make your existing business better, I think you can actually do quite a lot within that framework. The more that you do Box 3, create a new adjacent business, then it’s very visible when you don’t succeed.
T: It is a high-risk position to step into an innovation team exactly for that reason. One interesting thing I saw was done by a guy called Luke Mansfield who ran Samsung’s innovation team. From the beginning, he went and negotiated a deal with his bosses in Korea and said he needed three years. In his case, he got it. But, what also happened, is that a year and a half in, they started asking anyway.
H: We meet a lot of innovation teams that just started and a lot of them don’t seem to be in much of a hurry. They might have three years, so first they want to do a lot of research and discovery and play around, too. I don’t know why that is. Lately, I’ve been thinking that we’ve been talking too much about it being okay to fail. That basically gives everyone a carte blanche, that as long as they’ve learned something, it’s fine. I think that’s a little bit of BS. This is not a game, this is about inventing the future for a business and therefore, you have to really mean it. I think a lot of innovation teams just start out really slow. They always seem to be scrutinized much earlier than they think they will. To your point, most of them know they have three years, but even six months in, their senior management is looking for the billion dollar outcome. As an innovation manager, you have to manage to that. You need to have different projects running in your portfolio — some long-term plays but some have to be a little more shiny. You have to manage your own role within the ecosystem of your company.
T: It’s very difficult, especially to be a highly disruptive team aimed at that because they tend to take more time. But, if you don’t have something that’s a little less disruptive and gets results or at least visibility, then you can get axed. There is an interesting example from Samsung. They were approaching their three-year limit and they hadn’t generated the results. And then there is this project where they decided to take a big risk. They had come up with a better way of syncing data between competitor’s phones and Samsung’s phones. Only, Korea said they didn’t want to launch it because they had a team working on it. But the team in London had a solution that worked, so they launched anyway. Luke Mansfield, who made that decision, launched it and then didn’t pick up his phone for two weeks until they had gotten enough traction with it. It’s a very clear example of someone taking a personal risk, but also because they were under pressure of a deadline.
H: I think you have to create kill-switches for yourself. I think you have such a bias for falling in love with your own ideas. You have to create structures to make yourself do the right thing because your mind will trick yourself. I think that’s important. Even for the stuff I do on my own and the homegrown business we do for Prehype, we very much have kill-switches and structures that keeps ourselves honest, for ourselves.
T: This goes back to the 100-day point. What I like about that is that it influences your selection of projects so you don’t end up picking very ambitious projects, that we know from research have a very high failure rate.
H: At Prehype we do a lot of different things that I wouldn’t say are counterintuitive, but, for example, we have unit economics and business models built into our businesses. That probably caps us off from making a $10 billion Instagram business because we like to have more clarity about what is on both sides of the equations, what are the unit economics that will allow us to scale this business even if we have 30 or 50 thousand accounts.
T: A lot of the research bears this out. One of the points I like to make is that we underestimate the impact of less-than-super-disruptive innovation. This is a bit tragic, but I compare this to data from 9/11. After 9/11 occurred, a lot of people chose to drive, instead of fly, because they were afraid of the visible risk. There is a German economist who figured out in the year following 9/11, an additional 1,500 people were killed in traffic, because it is actually more risky to drive cars. In the same way, I think we’re sometimes so blinded by the light of really big ambitious projects, those that we read about on the front page of Wired, that we miss out on the fact that there is a lot less risk and a lot more value to gain from stepping a little bit down with the ambition.
H: I think that’s super interesting, because if I look at the projects that I’ve been involved with that have been successful, a lot of them were somewhat unambitious when we started them. We didn’t know that BarkBox was a huge industry that hadn’t been disrupted, we just thought it was a cool little idea.
T: I remember when you started it, I wondered what the knock-down effect on the economy of happy rottweilers was and the reality is that it’s pretty big, as it turned out.
H: That comes back to advice and tricks for people who sit in roles where they would like to do new projects. Often, it’s very difficult to predict which one of these projects will turn out to be very big. Sometimes just building a small thing is better than building nothing at all, because, often these small things can turn into something big, if you’re lucky. I have a few standard questions that I always ask. If you were to give tangible advice, from your position as an innovation expert, what is an easy trait to apply to everyday life or to everyday work life?
T: I’d probably say two things. One is to focus much more on building trust networks. It’s not so much about ideas, but the ability to work with different people across an organization. That’s what I’ve seen that unites all of the people I’ve worked with. Secondly, always aim for impact. There are many teams that fall into the trap of focusing on the wrong metrics, like generating 500 ideas. You have to force yourself to be measured on real-world stuff like did we create money for the company or extra income or increase customer satisfaction, or whatever you’re going for. And I said two things, but I’m going to say three. I’m not always good at applying this in my own life, but this whole idea of working with structures and becoming an innovation architect, which is different than being an innovator. The idea of going in and working with the architecture and personal structures that are in your own life and using those to get better at what you want to get done. If you want to get better at meeting new people, create a Monday lunch routine where you sit at a different table at the company. You create structures for yourself to get things done.
H: Last question. We are obviously pretty new at making these podcasts and we’re pretty happy that a few people seem to be enjoying the first one and I hope enjoy the second one. I hope people share it and send ideas of what we should talk about. If you had a subject matter you think we should talk about in this podcast, what would it be? Last week, Steven Dean was talking about how we never talk about what is going to happen after we die. It’s a pretty interesting subject matter. What’s an area that you think is really interesting and under discussed?
T: Before you said under discussed, I was about to say the behavior design field, but I feel like a lot of people are actually discussing that. How do you getter better at engineering people’s behavior — your own, customers, coworkers and so on? I feel that there has been a shift from focusing on values and mindsets and getting more tangible. If I had to pick something more unusual, I’d say narratives. Narratives are something I’ve always taken an interest in and it plays such a huge role in how we sell things and how we tell our own stories. I work as a keynote speaker, so from that perspective, how do you get better at actually conveying ideas in a way that really works? A lot of people are afraid of public speaking. There are a lot of courses out there that focus on the presentation, like how to move your hands, but that’s not it. The point you have to focus on, is how you develop your content. And, once you have really strong content, it’s actually okay if you’re not the world’s greatest orator. Content is just more authentic.
And there is a third thing, problem diagnosis. Across every business I’ve worked with, there are people who are very good at solving problems, but really bad at taking the time to diagnose what the problem they are trying to solve is. The consequence is that very often you see these huge, ambitious projects that are just fundamentally barking up the wrong tree. That particular skill, of upgrading the world’s ability to solve problems, is what I’m working on at the moment.
H: Have you written about that already or is that for a new book?
T: I’ve written a little bit about it in my first book “Innovation as Usual.” It’s buried somewhere in chapter three or four. But, a book is not a great vehicle for changing behavior, because it requires you to read 220 pages. So, I’m trying to build a toolkit around teaching people to develop this one specific skill. That could also be an interesting topic to discuss at some point.
H: Thomas, you are a gentleman and a scholar. Always interesting to talk to you.
T: Likewise, Henrik.
Turning cost centers into profit opportunities
Typically, when companies offer new products or services, they do so either as a defensive play, to protect existing business, or as an opportunity for growth. However, one area of opportunity is to take a product development view on creating new revenue out of an area of your business that traditionally is just a cost center. The idea of turning cost centers into revenue opportunities is something we have been exploring at Bark & Co. Several of our teams, ranging from content marketing for promotional events to customer service, are now running as independent business units with their own P&L. This allows us to scale the teams faster, compensate the staff better, and build better tools for our core business. Our promotional events team at BarkBox.com has been turned into BarkLive, a set of paid-for dating events for dogs and their parents. Another example is what in other firms would be called a traditional content marketing team. At Bark & Co., our content marketing team has morphed into BarkPost.com. This is now a very fast growing media property, which not only provides value to our core business, BarkShop.com, but also sells sponsorships to external established advertisers, ranging from Sony to Roomba to Tito’s vodka.
Larger companies should explore this type of innovation too, turning their domain specific tools and processes into new products that can be sold to the industry at large or offered to their existing customers. This method is, if nothing else, a very effective way to reduce costs. The approach is not necessarily new; several tech companies have been doing this kind of innovation and have stumbled into opportunities that turned out to be much bigger than their original core businesses. There are several famous examples of this. The photo sharing service Flickr was originally a simple productized version of a tool that was used in a computer game, while PayPal was developed as a tool to showcase Palm Pilot Payment. In both cases, the marketing site ended up being a much bigger business than the original product.
The latest example (outside Prehype and Bark & Co.) that I have seen is what Jeff Bezos is doing with the Washington Post. According to the Financial Times, the Post plans to sell its back-end content-management system (CMS) to local and regional newspapers.
Why is this so interesting?
Because it shows that you can turn what is usually a cost (buying/building software) into a revenue opportunity. New revenue can be extracted not just by monetizing content (the traditional core offering for the WP), but also by productizing the process or tools used to generate content.
Making these core tools a profit opportunity will allow Bezos to allocate more resources (talent and capital) towards those tools, which will make them better and result in the development of better content for the Washington Post.
So the question is, what other cost center’s could larger companies turn into profit makers (events, research, financial reporting tools)? At Prehype, where we co-create new ventures with large companies, we will certainly be looking more at this area in 2015 and will try to find opportunities not just in an organization’s core offering but throughout the whole value chain.
More on this can be found http://twitter.com/werdelin