June 26, 2019

Leadership Interviews


HTML | Text | Mobile

Become a Sponsor


Information on becoming a Sponsor for TotalPicture Radio podcasts is available on our FAQ page, or feel free to contact us with any questions or concerns.

Leadership Interviews

Marissa Mayer and the Fight to Save YAHOO! An Interview With Nicholas Carlson


There are not very many business books I would describe as page-turners -- but this one is.

Published on January 15 2015
Nicholas Carlson,Chief Correspondent, Inc., magazine interviewed by Peter Clayton -TotalPicture Radio Nicholas Carlson

Welcome to TotalPicture Radio. Today's Leadership Channel podcast - and vodcast with Nicholas Carlson, author of Marrissa Mayer and the Fight to Save Yahoo! is brought to you by Recruitifi. With RecruitiFi, you can easily connect with top recruiters and passive candidates interested in exploring new opportunities. Use the link on Nich's show page - and Recruitifi will waive the $50 listing fee for your first Jobcast.

In Contributing Editor to Inc magazine, Geoffery James, recent article titled 7 Books You Should Preorder Today, you'll find on the list Marissa Mayer and the Fight to Save YAHOO! written by our guest, Nicholas Carlson on this Leadership Channel edition of TotalPicture Radio. Actually no need to preorder as the book has just been published by 12 (Hachette Book Group). In his day job, Carlson is Business Insiders Chief Correspondent.

Watch the Video Version of the Interview with Nich Carlson:

Hi this is Peter Clayton. There are not very many business books I would describe as page-turners -- but this one is. Through exhaustive research and countless interviews, Carlson brings us the inside story of how Yahoo got into such awful shape in the first place - the backstory of the meteoric rise of Yahoo in the 90's, and near-implosion during the doc-com crash of 2000.

Nich's coverage of Yahoo won Digiday's award for "Best Editorial Achievement" of the year.

Over 12,000 Downloads!


WIN! How to Succeed in the New Game of Business


An in-depth conversation with international business leader, keynote speaker and author, Roger Harrop.

Published on December 15 2014
International keynote speaker, CEO adviser, and author Roger Harrop, interviewed by TotalPicture Radio Roger Harrop

According to our guest today, "These really are the most exciting of times for business! Nothing is a given any more. Technology is moving at an incredible speed and the winners are keeping it simple - because it is!"

"Business is simple. Somebody wants to buy. Somebody has something to sell. Maybe somebody has to make something. That's all business is... simple."

Welcome to a Leadership Channel podcast on TotalPicture Radio. This is Peter Clayton. Our special guest today is Roger Harrop, introduced to the show by David Dalka, who conducts our interview. David is a frequent contributor to TotalPicture Radio; he's a Business Transformation Consultant / Facilitator / Keynote Speaker. You'll find relevant links related to this podcast in the sidebar.

Although everyone will benefit from David's conversation with Roger, those of you who are involved in talent acquisition and HR will find his ideas especially relevant and useful. For instance, have you ever auditioned a job candidate, rather than just interviewing a candidate? I think you'll find this approach fascinating and worth exploring in your own organization. Roger's latest book is titled: Win! How to Succeed in the New Game of Business

Roger Harrop - TotalPicture Radio Transcript

Welcome to TotalPicture Radio. We produce cutting edge videos, webinars and podcast interviews with the focus on talent acquisition, recruiting, HR technology, leadership and innovation. Visit our conference and events page on totalpicture.com to learn about TotalPicture media's unique video and podcast offerings that many of them must attend conferences throughout the year.

According to our guest today, these really are the most exciting of times for business. Nothing is a given anymore. Technology is moving at an incredible speed and the winners are keeping it simple because it is. Business is simple. Somebody wants to buy, somebody has something to sell. Maybe somebody has to make something. That's all business is - Simple.

Welcome to our Leadership Channel podcast here on TotalPicture Radio. I'm Peter Clayton. Our special guest today is Roger Harrop who was introduced to the show by David Dalka who conducts this interview and is a frequent contributor to TPR. Although everyone will benefit from David's conversation with Roger; those of you who are involved in talent acquisition and HR will find his ideas especially relevant and useful. For instance, have you ever auditioned a job candidate rather than just interviewing a candidate? I think you'll find this approach fascinating and worth exploring in your own organization.

Roger has spent over 25 years leading international businesses including the PLC, which puts him in a unique position to deal with present day business challenges. Based in Oxford in the UK, he is an international business growth speaker who inspires and entertains audiences with his acclaimed Staying in the Helicopter programs which you'll hear about in David's interview today. Roger is also an author, business adviser, mentor, consultant and independent director. His latest book is titled Win! How to Succeed in the New Game of Business. You'll find a link to Roger's website on his show page in the Leadership Channel of TotalPicture Radio.

And now, here's David Dalka with his interview with Roger Harrop. Enjoy!

David: Thank you Peter for that great introduction. Roger, the book starts with a sentence, "Business is simple." Why did you decide to start the book with that sentence?

Roger: Well, that's a good question, David. I believe business is really simple but what I find is us, us human beings; us be people running business, spend all our time trying to make it too complex. At the end of the day, someone wants to buy something, someone has got to sell and maybe someone has to make something. That's all it is and the simpler we can make it, the easier it is to map out the root through to profitable growth.

David: So what prevents business leaders from getting back to those basics and seeing the big picture?

Roger: Well, everything conspires against this. We all get sucked in to the detail and I guess what I'm seeing these days is that more than ever before. All of us seem to expect to respond to emails immediately, to expect to respond to social network messages immediately. All of that is sucking us into the detail and getting this helicopter on the ground rather than up in the air where I'd like for it to be, looking over the horizon and mapping out the future of the business. Basically when you can get up there and look at the business from 30,000 feet as it were mountains become molehills. That's the way it works in my experience.

David: What role do large legacy leverage consulting firms play in creating the above problems?

Roger: Well, I'm amazed. Just the other day I was with a client and they had had a major consulting firm quoting them for some work and it still seems to be the case. The consultants, large consulting practices still have the mindset that the quality of what they're going to do depends upon the weight of the proposal they put forward. The document needs to be really big and very complex and using all kinds of words the client doesn't understand just to sort of justify the fee they're putting in. It's most unfortunate because it really doesn't need to be that complex.

David: So it's not just the proposal though then, is it? It's also the deliverable. So what's your ideal deliverable, Roger? What should people be asking their consultants for?

Roger: Results. I'm not trailing. I know all consultants are trained to trail their coat for more work and more work and more work but at the end of the day, surely for a consultant to be really giving a client what the client needs is giving them the tools, the simple tools to help them achieve whatever it is they're trying to achieve and be judged upon that achievement. Not forever coming in with more complexity, not forever suggesting they do more and more work.

Now, that might be counterintuitive to a lot of consultants but I really do believe that's how it should be. When I go into a business, I'm afraid I try very hard not to call myself a consultant. I call myself a business adviser and I say to them my job is to help you but to get out of your business as soon as possible so that you are moving forward and you're achieving the success you're looking for. I want to make myself redundant as fast as I can, and I really do think that's what all consultants ought to be doing.

David: I totally agree. So we live in this time of great change where people need to hire new skill sets, bring on new generations of people. Frequently, that creates challenges. What are the challenges in hiring people and why is that such a problem area for companies globally?

Roger: I have to say that business leaders at all levels, as a big generalization, I don't think they're prepared to put enough time and effort into that. They either subcontract it to HR or to somebody else to do; whereas if you really want to get a round peg in a round hole, if you really want to have talent and all the research is showing there is going to be a shortage of talent between now and 2030 worldwide - if you really want talent, you've got to invest the time and the effort into getting the right talent into your business.

It's been shown that if you recruit the wrong person and they're gone within six months either you get rid of them or they choose to leave, the cost to the business is a minimum of 5 times their annual salary. That is a significant amount of money.

The other piece of research that's been done is that if you use traditional methods of recruiting, two interviews and you recruit and then you'll... sorry, you interview and then your boss interviews, you'll only get it right two times out of five. Now that's a 66% failure rate and I would challenge every business leader where else in your organization would you accept that level of failure? It's not good enough.

David: Well, some do it in customer service but that's a different topic. ☺

Asian geography population trends also play a large role in the future of business and hiring with global workflow shifts going across borders now. What opportunities do you see to improve the way that companies that are global handle this?

Roger: There's a basic thing I would say which is no matter who you're recruiting, no matter what level you're recruiting at, you need to audition as well as interview. Ask yourself the question, if you were setting up a restaurant or you had a restaurant anywhere in the world and you wanted to recruit a chef, how would you find out if they're any good at what they do? What you do is to get them cook. So why not do the same when you're recruiting a salesperson? Why not do the same when you're recruiting a finance person? And most particularly when you're talking cross cultures, you really want to see them in action.

The other great thing about auditioning, you know, I'm a great believer in one day assessment centers but smaller businesses, they don't have the time or maybe even the finance to do that but even so, they can still set up a scenario where you get each of the short list of candidates to present to you how they would deal with that situation. The great thing is if you are presented to rather than interviewing, all the stress comes off you. Whether you like it or not when you're interviewing you're in charge and you are, to some extent, stressed and you're not listening as well as you might otherwise. Turn that on its head and audition, you could have two or three people in the room - not just you - where this person is presenting to you and you're listening. You're looking at body language. You're looking at all kinds of things that you don't otherwise look at in terms of making an assessment of that person not just how he or she is going to be able to do the job, but how he or she might fit into your culture, because that also is a very important ingredient.

David: Tell me a little bit more about how somebody... that's a concept that doesn't happen too much here in the United States. Tell me a little bit more about how somebody would set up one of those auditions and make that a palatable idea to somebody who's never thought of it before.

Roger: Let me give you an example actually in the US. I was recruiting a president at my US operation when I was in the corporate world, and we chose to do a one-day assessment center. This was not far from you, David, near Chicago; and we had the final six candidates and throughout the day we had a series of things. We had some scenarios we put forward that were individual but we also had group where all six candidates, all the final shortlist candidates were together. I'll just give you one example that sort of proves the point.

As I recall it, we had the six around a table. There were four of us assessors sitting in the corner just quietly watching and in this particular case I think they were given a list of maybe 20 or 30 of the stages of a project plan, if you like, but they were all in the wrong order. Very simply the request to them was firstly, for 10 minutes on their own please put those in the order they think are right for a project and then when that was finished, they then had 20 minutes jointly to discuss and agree the order that they all agreed around the table. And that was it. Nothing else. We just sat and watched, and it's fascinating by the way; it always is fascinating. But there was one guy there who said nothing. Absolutely nothing. And we're thinking, this is a bit strange. How does he think he's going to get the job by saying nothing?

We then did another group exercise later in the morning and the same thing, he didn't say anything. So at the lunch break, we had him in and we said 'look, Chuck, you've said nothing all morning. What's going on?' And he said, yeah, he said. 'I don't like people and when I'm working I never come out of my office and I never talk to anyone.' And you know there is no other way we would have found that out, in my opinion. No other way at all. This guy's CV was magnificent and before the event, he's the guy I would have selected. No question. I would have selected him. If I had done an interview, I still would have selected him probably, but this we would never picked up any other way. So there's so much to be gained, I think, from investing that time in recruiting and being able to particularly to look at people.

Back to your question, let's talk about a smaller organization let's say where they really can't invest in a whole day assessment center; what I would do there is write a scenario. So I was looking for a client of mine looking for a vice president of finance for a small business. What we did in that case is the final two or three candidates I sent them a set of accounts a week before the event, just a short set of accounts, and I said okay when you come next Monday you will have 15 minutes to present to three people in the room - which is going to be me, the owner of the business and his sales director I think it was - and what I'd like you to do is based upon the set of accounts we've sent you, would you please tell us something about the health of the business, number one and number two please tell us your recommendations for the future. That was it. Nothing else.

It was really interesting, David, because the guy we recruited he joined us and some time later he said to me, he said, you know what he said, 'in my entire career I have never been asked to do that before. It is the most stressful thing I have ever had to do but it is absolutely right and I'm going to do that every single time I recruit in the future.'

So it doesn't matter what kind of business you are, what size you are, if you could invest some time in auditioning as well as interviewing it just seems to me it gets that success rate up from 2 out of 5 to maybe 4 out of 5 and that's worth an awful lot to you as a business.

David: In that earlier answer to the first question there you talked about culture. One of the things is that Peter and I see a lot when we're at events and different things is that companies have something in their culture that isn't right. It's either not customer focused enough, or it's not congenial enough, it's not cordial enough... there's something fundamentally flawed wrong. This whole thing of hiring with the group thing has a problem where if you need to correct that, it's really hard. How do you suggest to executive teams that they... what do they have to do to actually get over that?

Roger: Well, I guess really in a way you've sort of answered the question yourself, David, which is you've got to get that problem sorted out before you start recruiting otherwise you're going to recruit people who come in class people, talented people, and they're going to stay after 10 minutes and say 'I don't like this culture. I'm off. I'm going somewhere else.' So just sort of turn that on its head I think; the message that I am spending a lot of time these days passing on to chief executives, saying to chief executives is the world has changed. It started with the Millennial generation but it's much more universal than that now, which is people will not work for a company unless they share their values. Those values need to be clear.

When you are interviewing these days talented people they're as likely to interview you and they will say 'please, can you tell me what are the values of this organization because I don't get them off the website,' and you can't answer they won't work for you. In fact, they'd rather be unemployed than work for you. If you can't answer the next question will be, please tell us how you walk the talk of those values; and if you can't answer that they won't work for you.

So if you like, the message has got to get through right to the top of organizations that they have really got to have some values, that they walk the talk of these days because it's a new world we're in. Again, there was some research that I saw I think it was PricewaterhouseCoopers did which is to say, that isn't just the Millennials anymore, that is much more universal. Talented people of any age, any background, any experience anywhere in the world these days increasingly they will not work for companies, they will not work for organizations whose values they don't share.

David: Culture can be then clearly be used as a differentiation piece. You state that differentiation is everything and one of the chapters in the book and talked about that in detail. Why are so many businesses trying to differentiate themselves and implement new technology sometimes when the core business is not yet in order as we've just discussed.

Roger: That's a really good question. I don't have an answer for you. I think the easiest answer for me to give would be to go back to the beginning which is they just are not getting up in that helicopter.

One of the first things I do with any organization I work with, firstly, I always work with the top team and the very first thing I ask is, what's the purpose of this business? What's the purpose of this organization? I don't mean mission or vision. I mean hiring this helicopter of mine than that. What's the business here for? What does success look like? And you would think that people would be able to answer that immediately but they just don't. That is a big question sometimes I find I might have to have four, five or even six meetings with the top team before we really nail that because what I try and do is to get that to a sentence and then get it to half a sentence. Because if you can really nail that purpose of the business, everything else flows from that. Every strategic decision you take in the business after that gets easier including recruiting, including culture everything else flows from what's the business here for.

David: Did any stories stand out in that?

Roger: Yeah, sure.

David: That you can share maybe.

Roger: Absolutely. I'll give you one. I'll give you two actually. A major corporation in Dubai that I worked with for a number of years and they were half owned by the Dubai government and half owned by the Abu Dhabi government.

So what I do as I say when I go in and work with the top teams, I'll just stand at the flip chart, I'll give them a little presentation around purpose just to get them stimulated and I said, okay, so what's the purpose of this business? I just write up on the flip chart whatever I'm told.

So in this particular case, one of the VP's or the director said, I guess it's return on equity. So I said, okay, how much? I don't know probably... I don't know 40%? And somebody else said, no, I wouldn't have thought so. It would probably 30%. And then somebody else said no, no, no, that's absolutely wrong. Our purpose is to employ Emirates. That's what we're here for.

And then the chief exec stopped me and he said, 'Roger, you're absolutely right. We don't know. We don't know why the shareholders own us. I will find out.' And I went there once a quarter for something like 18 months, David, and it got to the point by the end as I walked in the door the chief executive would say to me, 'Roger, I still don't know and that's why we're in a mess, isn't it?' And I say, yup, that's right.

The only people who can tell you what the purpose of the business is are the shareholders. Nobody else. The owners. What does success look like? And when you think about it if you're running a business for somebody else, how on earth are you going to get there unless you know where it is you're trying to get to? It's all sort of pretty basic stuff but so many of us don't do it.

Another one for you and in a way when I have this sort of conversation in somewhere like Hong Kong or Singapore, it's a very short conversation because they say, well, we're here to make money and that's it. But in the West, I find it in particular that gets muddied. I worked with a firm of architects a little while back in London. Slightly unusual, only a small business. There were six shareholders, four were on the board and two weren't, and one was the lady who did the internal administration.

So same story, I said what's the purpose of the business and I stood at the flip chart and I got all kinds of stuff, David. I got save the planet, be the best architects in the world. It went on and on and on. I'm on to the third page and I'm thinking, where are we going to go with this? And then finally this little voice and it was a little voice, this lady who did the inside admin, she said, 'I'm a shareholder in this business and I'd quite like a return that's better than putting my money in the bank.' And there was total silence and believe it or believe it not, the CEO said, 'wow, we never thought of that before.'

It's in the front of my mind, because he rang me up the other day and he said, 'Roger, I just wanted to let you know that was a turning point for the practice.' Too damn right it was a turning point for the practice! Suddenly, they knew what it was they were there to achieve which was to make money, and everything else sort of flows from that. The way it works is the more money you make, the more you can invest in the business, the more you can grow and the more you can be successful,. That's sort of the way it works but it often gets muddied.

Just yesterday, I worked with 50 not for profit organizations, charities and it can get even more muddied there even though they're charities and they have a clear purpose which relates to their beneficiaries, the way almost all of them have to grow is to generate bottom line profit that they re-invest in their case 100% they re-invest. It's not for profit distribution. That's what they are. But it's the same point; the owners, the people running the business have got to nail that really before anything else.

David: Even if they go through that exercise right and they have good stated values at one point in time, you and I both know that frequently those actual actions a decade or two later don't match that plaque on the wall, don't match that page on the website. Why does that happen? I mean, we went through all that work, we got that, we communicated it to everybody. What happened?

Roger: You know what, they don't talk t each other. Firstly, I find particularly family businesses; yeah they may go through that exercise but then they never talk to each other again. They never say, you know what is this business here for? The business goes through the generations maybe. Even when you've got two or three partners who set up a business... I don't know, 10 years ago, maybe when they set it up they're crystal clear about the purpose but as time goes on, they diverge and they never talk about it. And for me, you know, there is a big role, there's a massive role here for independent directors.

The independent directors part of their job needs to be up in this helicopter of mine and asking those fundamental questions and making sure that the directors, the owners actually answer that question and say yeah, okay, that's what we said the purpose was three or four years ago; it's now changed but we agree it's now this and that's the way we're going. Life gets so much easier if you could do that. But as I say, I think independent directors, non-executive directors are really important for businesses at all levels.

David: I really love your chapter on customer prospect. As a matter of fact, I was at an event last night. I was at a holiday party and this lawyer who's a partner in a medium-size law firm and I said, what's your biggest problem in 2015? He says, we have no idea how to market and sell ourselves. We're always competing on price.. blah, blah, blah. We don't have enough leads or we found out about deals after they happen. How do you personally do your prospecting in your business and how do you in consulting and speaking and advising as you prefer to say it, how do you go about that? How should professional services firms look at this issue? How should any B2B business service to be thinking about this because it's a challenging area.

Roger: Yes it is, indeed. Interesting you picked on lawyers. I have to say the so-called professions, lawyers in particular, are the worse in terms of prospecting. The rule of thumb should be whoever is responsible for selling in your organization and maybe in your case David and mine, it's us. Whoever is responsible for selling, you should be spending a minimum of 20% of your time prospecting. My definition of prospecting is talking to people who have never bought from you or let's say not bought from you in the last three years.

Now, 20% of your time is a day a week. Have a look at your salespeople; do any of them actually spend a day a week metaphorically knocking on doors? Because if they're not, your business is probably going to be in trouble.

I used to have a rule in all the businesses, all the business sales I ran of every size which related to the percentage of sales in any one year that came from clients who had never bought from us before. We had metrics for that. I can remember one particular business we set that as 25%. That was a key performance indicator that was on page one of the monthly reporting pack what percentage of sales this year is coming from clients who didn't exist 12 months ago, two years ago.

I think that's an attitude of mine, frankly, we all need to have because if you want to grow as well and particularly these days where there is not the loyalty they're used to be, there is not the longevity there used to be, you've got to assume some of your customers and some of your biggest customers are going to disappears for whatever reason. They're going to move to China. They're going to go bust... whatever. So not only do you need to replace them but if you're going to grow you need more. Of course something that's always worth bearing in mind in this simple world of business of mine is there is a golden rule.

The more properly pre-qualified leads you have, the more business you get. Because it's a ratio. It's a ratio a lot of us measure. What percentage of leads turn into business? If that percentage is basically fixed for your business, if you double the number of leads, you will double the size of your business. That is the way it works. So a fundamental for absolutely everyone. Whether you're a lawyer, whether you're whatever it is that you're doing, if you can really get that pipeline of yours full, if you can double the number of properly pre-qualified leads, you will double your revenues. It is that simple.

Back to your question, how do I do it? As you know, I'm a professional speaker and I'm a consultant and I'm a non-exec director, and I'm a business adviser, as a professional speaker very simply I believe that people are much more likely to buy a professional speaker if they've seen him speak. So I do showcases, and a showcase for me is where I am speaking for no fee maybe just expenses, maybe an honorarium but I'm speaking to people who are people who might then book me at my fee. So that's me showcasing. I work very hard at doing that. I have now spoken in 40 countries around the world and the way I've developed each country is by doing just what I've described, by showcasing and then working hard at that, doing all the homework first, doing all the work afterwards.

My website is something that I put a lot of effort into so that I put a lot of thought into the kinds of people who are looking to book me as a speaker. To be honest, it goes from one extreme which would be a highly professional event planner, event architect who's got a few nanoseconds to make a decision and therefore the moment they get onto my site, straight in front of them are video clips of me speaking. No nonsense beforehand, no music, no introduction, no nothing. Just clips of me speaking so they could decide whether they want to go further and look at me.

The other end of the scale is I don't know, a medium-sized business where it's probably the PA to the managing director owner where he said to her (it's usually that way around) let's have a conference. I want to have a top speaker who's talking about business growth. You organize it. And she probably knows nothing about organizing event, nothing about booking a speaker. So what I've put into my website is a massive knowledge zone and it's not just about speakers; it's about how to set up an event. There's videos, there's PDFs, there's white papers. There's all kinds of free information there which will help her put that event together but also how... that I've put videos in there. How do you select a speaker? How do you go about doing that? And all the other stuff.

So that's what I've done and then I track and the proof of the pudding is that the second most viewed part of my site is that knowledge zone. That's where an awful lot of people go. I do that. I use Google Ad Words but more importantly perhaps I use YouTube Ad Words. There's YouTube clips of me speaking and that works really well for me. I used LinkedIn pay-per-click which only started 12 months ago. A LinkedIn pay-per-click works well for me because it's targeted at the people I'm talking about. I write articles. I Twitter. I put comments on LinkedIn. I use social networking an awful lot. Those are generally the sort of things that I do and as you know, I've recently written my second book and of course I'm doing an awful lot around that and that in itself helps in terms of my prospecting.

A long answer to you but that's the way I do it for me.

David: You also talked about later in the book many people have used on pricing these days that are all about cost cutting. That's my opinion. That's not what you said. You have the opposite viewpoint. Please explain your viewpoint and why you believe it's so critical of businesses who have to price themselves fully.

Roger: Okay. So it sort of goes like this, my observation is everywhere I go is the particularly post 2008, pretty well no one is mediocre anymore. If your product, if your service is mediocre, you're dead. You've disappeared or you're in the process of disappearing. What that means is you're probably pretty good at what you do; in fact, you're probably outstandingly good at what you do and if you are, you deserve higher prices. I always have to say this two to three times when I say it because it's got to get through the grey matter and it's got to counter all that nonsense that you're talking about, David, of discounting and all that stuff we've had over the last few years.

If you're in the commodity business, fine. If you're in the commodity business, you have to sell on price and if you're selling on price then you have to set up your entire business to have the lowest cost of every operation you do. But the vast majority of us aren't in that world; we're in the business of selling perceived added value and we require people to pay for that perceived added value and that's all around not discounting. The moment you discount, if you think about it, the psychology is you are saying to people we are not worth the value we thought we were. Is that really the message you want to get across?

I've had my salespeople come to me in the past and say, you know, boss we should have the lowest prices, and I always responded to them in the same way and I said, well, I don't understand that because if we had the lowest prices we wouldn't need you. You wouldn't, would you? It is nonsense. I used to write into my sales guys contract, their employment contracts very first item and they hated it by the way - the very first item was your job is to ensure in the list of reasons why customers buy our product prices below number three. That's their job. Never ever give salespeople price discretion. They'll give it away. It's too easy. Their job is to sell at a higher price. Sell that perceived added value.

Look at Apple. I bought a MacBook Air 18 months ago; it costs me what, four or five times what I could have bought a PC for? It's ridiculous. It's illogical. But all of us buy illogically. I'm as happy as Larry with it -- I love the thing but that's a ridiculous price but I'm paying for that perceived added value of everything. In marketing terms its called products around that Apple represents.

Same with a BMW. In Germany last year, a German test house did a definitive piece of work. They compared a BMW 1 series with a Ford Focus on 87 different points. Absolutely everything. On all 87 the Ford Focus won but the BMW was 32% - 32% more expensive and it's selling like it's going out of fashion. We do not buy logically. We buy irrationally. Our job and the job of our salespeople is to tap into that.

Even having said all of those things, the real acid test I always ask people is just ask yourself the question, if you put up your prices 1% - just 1% - 9 o'clock tomorrow morning, would you lose any customers? And you know what, at least 99 out of 100 is probably 999 out of 1000 the answer is no, in which case why don't you do it. Because there's something about price that does not apply to anything else. It goes straight on the bottom line to re-invest in the growth of your business. Just do it.

Running business is about taking risks. That's the way it works. I think the risk of sticking 1% or 2% on your prices is actually pretty low and it is the right and the responsible thing to do.

Back to this awful word discount... by the way, I say to people, you know the reason why an Apple Mac is more expensive than any other PC is because if you type in the word discount it blows up. Your PC should be the same.

But back to this discounting thing, if you are really, really under pressure to do something, don't drop your trousers. Don't discount. Give stuff. Give stuff that has a high perceived value to your client but will cost you very little or nothing.

I worked with a group of 40 recruitment consultants recently and I would have thought they had much opportunity to do that but again, we just spent 20 minutes on a flip chart, and we ended up with three pages of things; things that they could give rather than discount, things they could give that would cost them very little or nothing but preserved that price of theirs and that perceived value that they've worked so hard to achieve.

David: So before I urge people to buy the book, Roger, is there anything that we didn't talk about that's on the top of your mind that you're just dying to get out there?

Roger: Well, we touched a bit on it but there is a whole chapter in the book which is all around moving further on from this values things of employees, you know, it's got to be a great place to work. A very interesting piece of work that was done by Harvard, they asked employees what are the eight things that you want from your employer in order of priority. I quote all these in the book; and in fact, in the book, there's an app that goes with the book where you can actually complete this and mark yourself and do a business health check, but these eight things, the important thing to say, the first important thing to say is money is not amongst them. In those top eight, money is not included. So that's the first big message. It is not all about throwing money at people but one of them - let me just tell you one of them - is discipline. It's the second in the order of priority. What they're saying is we want to see our co-workers disciplined. If our co-workers step out of line, we want to see them disciplined. We don't want soft management. It's unfair.

When I go around companies, again, all over the world I get them to complete a questionnaire on this, that is often the one where they mark themselves very low. Yeah, we're a bit soft, we really aren't as good as we ought to be in making sure that we have 10 out of 10 people everywhere and we don't have any passengers. It's simply not good enough, and that's the employees telling us that's not good enough.

So I think that's some really interesting thing all around it's got to be a great place to work.

David: The book is called Win! How to Succeed in the New Game of Business. Roger, on behalf of Peter Clayton and myself, thank you so much for joining us here on TotalPicture Radio.

Roger: I loved it. Thank you very much indeed, David and Peter. Best of luck to you. Thank you.

You can connect with Roger on Twitter @TheCEOexpert. You'll find links to his website and YouTube channel on his show page in the Leadership Channel of TotalPicture Radio, that's totalpicture.com. This is Peter Clayton. Thanks for tuning in.

Over 10,000 Downloads!


Aligning Strategy and Sales


The Choices, Systems, and Behaviors that Drive Effective Selling. A conversation with Harvard Business School professor and author Frank Cespedes

Published on December 11 2014
Harvard Business School professor and author Frank Cespedes, interviewed by Peter Clayton -TotalPicture Radio Frank Cespedes

In the preface to Aligning Strategy and Sales, Frank Cespedes writes; "Selling is, by far, the most expensive part of implementation for most firms... The amount invested in sales forces (including salaries, benefits, and other components of SG&A -- selling, general and administrative expenses) is about $900 billion annually. This is more than five times the $170 billion spent on all media advertising in 2012 and more than twenty times the $40 billion spent on all online advertising and marketing in 2013."

According to Cespedes, that gap between your company's sales efforts and strategy? It's real-and a huge vulnerability. Addressing that gap, actionably and with attention to relevant research, is the focus of Aligning Strategy and Sales, published by Harvard Business Review Press.

Welcome to a Leadership Channel podcast on TotalPicture Radio, with Peter Clayton. Joining Peter for our interview with Harvard Business School professor and author Frank Cespedes is David Dalka, Business Transformation Consultant, Facilitator, and Keynote Speaker.

In Aligning Strategy and Sales, (Harvard Business School Press), Cespedes equips business leaders to link go-to-market initiatives with strategic goals. Cespedes offers a road map to articulate strategy in ways that people in the field can understand and that will fuel the behaviors required for profitable growth. Without that alignment, leaders will press for better execution when they need a better strategy, or change strategic direction with great cost and turmoil when they should focus on the basics of sales execution.

Cespedes shows how sales efforts affect all elements of value creation in a business, whether you're a start-up seeking to scale or an established firm looking to jump-start new growth. The book provides key insights to optimize your firm's customer management activities and so improve selling and strategy. Most sales books go on and on about tactics and techniques, what first got you interested in the vast disconnect between sales and strategy?

Frank Cespedes: TotalPicture Radio Transcript

Peter: In the preface to his new book Aligning Strategy and Sales, Frank Cespedes writes - Selling is, by far, the most expensive part of implementation for most firms. The amount invested in sales forces, including salaries, benefits and other components of SG&A which is selling, general and administrative expenses, is about 900 billion annually. This is more than 5 times the 170 billion spent on all media advertising in 2012, and more than 20 times the 40 billion spent on all online advertising and marketing in 2013.

Welcome to a leadership channel podcast on TotalPicture Radio. I'm Peter Clayton. Joining me for our interview with Harvard Business School professor and author of Frank Cespedes, frequent contributor to TotalPicture Radio David Dalka business transformation consultant, facilitator and keynote speaker.

Frank and David, welcome to TotalPicture Radio.

In reading your book Frank, I was thinking wouldn't it be interesting for an HR or a recruiting leader to shadow a sales manager for a day out in the field during a customer facing sales meeting. I bet they would come away with some really fresh approaches to hiring sales managers for their own organizations. Wouldn't you agree?

Frank: I do agree and I would go farther than that. I think it's not only a good idea; I think for a variety of reasons it's a very important thing to do. You've already sited, Peter, the magnitude of what we're talking about; $900 billion how much more money is spent by companies on their selling efforts and on the things we tend to hear more about - consumer advertising, social media, etcetera - that has ramifications throughout most companies, and in areas where HR managers frankly have expertise but it's often expertise that is either not tapped or is not allowed to be tapped. Let's think about hiring.

You'll see this data in my book as well. Across industries turnover in sales forces averages about somewhere between 25% and 30% annually. Now, what does that mean? What that means is that on average, there are many companies that have to change their entire sales organization about once every four years. That is where much of the hiring goes on. Right now, that hiring is for the most part done by sales managers and we've known these for years through research; sales managers tend to hire according to a classic cloning bias; in other words, this is what got me in this position to hire, this must be what good selling is about so they try to hire in their own image. HR people know a lot more about assessment tools, about hiring. Their expertise is important and you want to shadow that sales manager because what HR needs to do is learn more about what goes on there so they can become true partners with that area of the business where often the most money is being spent and where the people issues are fundamental.

Peter: That's really interesting. This whole conversation around advertising and social media and all of the attention that is being paid to that, I recently interviewed Tom Doctoroff who is the Asia Pacific CEO of J. Walter Thompson who has an interesting new book called Twitter Is Not A Strategy. I asked Tom I said, in the meetings that you're having with your advertising agency and the creative people and the marketing people within large organizations, do you ever bring HR people into these conversations or recruiters because employment branding is really important today, especially when you consider what's going on with social media and he said, you know, that's really interesting; I don't think we've ever had any HR people in our... {laughing}

Frank: But thank you for the suggestion. ☺

Peter: Yeah. Exactly.

Frank: I personally feel there's also a bigger issue around social media that involves not only HR but frankly, other folks in the organization. If I can make an informal prediction; I think you're going to see changes here.

In general, I think that what we've been doing for the last few years in most companies is we talk too much about social media and frankly, we expect too little in terms of business results.

Here's the data; a very good Gallup survey done earlier this year, 62% of US adults who do use social media regularly say it has absolutely no influence on their purchasing decisions. McKinsey did a very good survey, a very good study of how companies use social media and what they found in effect was that there is, for the most part, no business case that supports the investments in many companies and you may notice that it's agencies, ad agencies, in my opinion, are part of the culprits here. It's now become fashionable to say that social media tools are about connecting. They're not about promoting your products and services or selling. Now, isn't that convenient, right?

Peter: Right.

Frank: If it's about connecting and not selling it means, oh well, don't hold me to return on investment metrics. That's not sustainable. That's not sustainable. As the numbers increase, boards, investors, CEOs, marketers and others should and will demand more rigor in that area. I think you're exactly right; one of those areas is going to be what is it that we're doing in our use of social media for a variety of human resource, as well as marketing activities. Right now it's a free lunch.

Peter: Yeah, absolutely. You know, one other thing that's really interesting a week or so ago while there was an article in the Wall Street Journal that Nielsen is now going to start measuring what's going on with YouTube, with Hulu, and with a lot of these other online services serving up videos. That's a first and now all of a sudden, we're opening that can of worms of network television.

Frank: Yeah, imagine that. Measure what you get for what you spend. What a great idea.

Peter: Yeah. David, why don't you jump in here and I know you've got some questions keyed up for Frank.

David: Well, actually I want to just build on what you just talked about.

Peter: Okay.

David: I think from the earliest days of social media I said this is a customer service and innovation device. It's not a promotion device. And that's kind of what we did with BlackRock back in the day; we used phone messages to satisfy customers and innovate what we did as a company, and I think this entire paradigm has it wrong. I mean, what do you think, Frank?

Frank: You know, we have to set priorities. Business, this is what my book is about. Strategy is about choice. It's about tradeoffs and right now we're not making rigorous choices in this area. That's my point of view.

David: That's definitely the case. So anyways, I love this book because in so many sales books they're just about tactics and they go on and on and on about tactics and this individual and managing the individual, and you have this totally different viewpoint about combining it with something external that I call business strategy. Where did you first get interested in that and how did you make that research?

Frank: Well, my academic research always focused on go to market elements, including sales management. Then when I left academia and ran a business for 12 years, like most entrepreneurs I had to meet payroll and sell, and I saw how often sales and strategy were basically ships passing in the night. Then after getting lucky in business and returning to academia, I taught strategy for a few years here at Harvard and the reality is there is remarkably little research about how to link strategy with the nitty-gritty of field execution and especially sales efforts. In fact, if the gods of strategy even mention sales, it's typically advice from a fortune cookie... work as a team or reorganize. In other words, do good and avoid evil.

Conversely, there's obviously a vast literature about selling as you just mentioned, Dave. Much of it, in fact most of it is anecdotal. People in effect generalizing from N=1, but some of it is really grounded in good research but the sales advice is misleading in a different way. The consultants and trainers who make their living that way, they have an incentive and they act on their incentive to promote the universal applicability of a particular selling methodology and they also treat sales in isolation from strategy. The result, I think, is that much sales training has a perverse effect.

People may work harder but they don't necessarily work smarter. Again human resources, to Peter's point, can and should play a very important role in this process. HR managers know a lot about training, about development, about what works, about what doesn't. By its very nature human resources tends to work across functions. They have a perspective across silos in an organization and part of their role is to provide that line of site that's crucial for implementing any strategy. But in order to do that, HR needs to know more about sales. They need to know more about what goes on out there and what are the key elements, and I would like to think that my book might be able to help in that process.

David: You cited that Andris Zoltners survey were only 13% of the executive stated issues external to sales when asked about creating successful sales forces. What should executive teams do to alter the situation in your view?

Frank: Well, my whole research and books starts from a premise that I think is fairly undeniable if you're in a for profit business and that is, that in any business value is created or destroyed in the marketplace out there with customers. It's not created in planning meetings. It's not created in capital budgeting meetings. It's created out there.

So the first step is to have that mindset that says we've got to be doing things both in our strategy and our implementation in sales and other areas that are relevant to our market today and tomorrow. Not yesterday. There's frankly very little reward for nostalgia in business. Strategy is fundamentally about the future. Sales is about getting people to buy today, not yesterday. I think that's the start.

Andy Zoltners results about sales they're not that uncommon. I mean, if you look at other areas of the business they also for obvious reasons, reasons we all know, tend to be more inward focused than external focused; the need to get things done, etcetera, but the reality in any business is that value is what happens out there with customers and that's where sales lives and that's why results like that are not good. They're just not good.

David: At the beginning of this Peter talked about those dollar figures involving sales and involving marketing. Based on your experiences because you've written books on marketing too, which area has the most opportunity for improvement in the 21st century?

Frank: Well, you know, I say this not just because as a father you obviously when someone asks you which of your children do you like most, you know, but I say this because I think it is business reality. Both marketing and sales are obviously important. I think in improving either in both, the first thing to recognize however is that they are different jobs. They are fundamentally different jobs.

Marketers get paid to think in terms of aggregates, segments, markets. Sales gets paid to know everything there is to know about their assigned accounts or territory or customer. Now, both are important. If you're going to scale a business, if you're going to amortize your expenses, you do need to think in terms of segments.

But in the history of business since the Phoenicians, a market segment has never bought a thing. Only customers buy. Only individual accounts buy. So both are important but they're different jobs and from an HR point of view, I think one of the biggest and most recurring mistakes that I see in companies and usually they do this under the banner of "teamwork" or "customer focus" or some other slogan, but I think one of the more destructive things I've seen in my career is basically trying to turn an excellent marketer into a mediocre salesperson or vice versa. Different jobs, different skills. The relationship between marketing and sales in most companies has always been fraught. I have a previous book that I think documents this but it's also under more pressure to improve these days for a couple of reasons and the reasons related to some of the earlier questions, David, that you and Peter raised.

Online media of various sorts not just social media, but online media various sorts makes any marketing and sales gap in companies simply more visible to customers. Companies are more transparent these days, but also more tools for lead generation and outbound marketing are, frankly, productively blurring longstanding distinctions between marketing and sales responsibilities in many firms.

And then finally due to the data revolution, selling itself is a much more analytical activity in many businesses. It's very fashionable these days to talk about the so-called big data. If you really want to understand to date the most specific applications of big data, talk to people who work in sales for consumer package good firms that have to sell to the Wal-Marts and Targets of the world. They're dealing with data that far surpasses the number of likes and tweets that marketers tend to deal with and frankly, they're dealing with more real-time data about consumer behavior than many of the brand managers in their firms are.

So for all of these reasons, the marketing and sales relationship, which has always been a sort of tense relationship is, under more pressure to improve and that's a process and a human resource issue.

David: You mentioned a book in that answer. So that we save Peter from getting a bunch of emails asking what that is, go ahead and plug it.

Frank: There's nothing to plug. It's about 15 years old. You can buy it for a penny on Amazon.

David: That's fine. What's the name of it?

Frank: The book is called Concurrent Marketing and it's about exactly the issue you were raising, Dave.

David: Okay. Great. You suggest that once executive teams become aware of the opportunity to change this external environment that they need to manage sales so it can be strategic, organizationally focused long term and cross functional. What are the barriers to making that a reality?

Frank: Well, whether the sales force needs to be long term or not, whether the relative importance of cross functions, the point is it's going to depend on the strategy and the sales task. I think the most important part to my book, I think, are the following.

First, now what I'm about to say once I say it may sound obvious but all I can tell you in 30 years of working with a lot of companies around the world and getting paid nicely to do it, I have found that this statement even the best companies and best executives periodically need reminding about this. There is no such thing as effective selling if it's not linked to the company strategy and its goals, both quantitative and qualitative goals. In addition, effective selling is an outcome. It's an outcome of what the organization is doing to align those goals with a number of different areas. It's not only an outcome of the individual heroic efforts in the field by salespeople, although obviously those are always welcome.

The basic idea in my book is this; again, in any business, value is created or destroyed in the market with customers. The market includes the industry that you, your company competes in, the customer segments where you choose to play and the buying processes that those customers that you sell and service. If a company has a strategy as opposed to a slogan or an aphorism or a mission statement that is often confused with a strategy, those factors should inform the strategy and as a result the required sales task. In other words, what salespeople have to be good at to deliver value and implement your strategy effectively. Not the tasks in a generic selling methodology or the tasks that another company faces because they've made different strategic choices.

Then assuming strategy the issue is aligning selling behaviors with those tasks, business is a performance art. Business is ultimately about behavior. It's not about good ideas, not about aspirations, not about hopes, wishes or fears. Business is ultimately about performance. Managers basically have three levers to do that, to link the behavior of their salespeople with the tasks. The first is always is people. How do we hire? Who are our salespeople? What do we know? What do we do with them once we hire them? How do we develop their skills?

The other is what I call the control systems; the performance management practices in the firm, including sales compensation and the metrics used to measure effectiveness. I've got colleagues in my university and you'll hear other people say this; they will say that compensation and incentives are way overrated. It's all or primarily about intrinsic rewards. All I can say to that and you'll see the data in the book that is not the planet I have lived on for the last 55 years. These things matter but you've got to think about comp and incentives and sales as a hygiene factor as HR people would say, a necessary but not sufficient cause of getting the behavior you want.

The third lever is what I call the sales environment, that wider company context in which sales initiatives do or don't get executed. How communication works or doesn't work across functions. How sales managers, not just reps, are selected and developed and very, very important how performance reviews are conducted. Performance reviews, not just in sales but in other areas of companies are, in my experience, the most underutilized lever for affecting behavior in organizations.

Now notice the levers I'm talking about and notice what HR brings to so many of those levers. Higher compensation, performance reviews. I ran a business for 12 years. There is, this is a trainable skill. I and my equity partners were horrendous at that when we started but we got better and I thank our HR manager for that. So there are so many areas here where the value added from folks that, the good folks in HR, the value added can be enormous but again, it depends on a partnership with those very, very busy people in the field.

Peter: You know, there's something that I think is contributing a lot to what you were just talking about right now and the improving economy retention now is of course a huge issue with many companies and many HR leaders and now that the things are picking up, there are more opportunities out there and they're terrified that these people that they've been treating badly for the last 7 years are just going to bail at the first opportunity.

Frank: First, I think you're right and the data in sales supports exactly what you're saying, Peter. As I mentioned earlier, on average, you find that turnover in sales organization runs from about 25-30% but obviously in a long-sustained deep recession, turnover after the cuts tends to go down but you can see what happens when people become more marketable. Now, how do you deal with that? Obviously there's the basic supply and demand of compensation, but the other ways you deal with that are understanding who is really important, who is it that we want to go out of our way to keep. In addition, the other things besides compensation and being treated well that tend to promote employee loyalty in sales and in other areas and one of the big ones and what a recession does is simply accelerate this; people saying, look, if I stay here, I'm going to learn things, I'm going to get things that frankly develop me and make me more marketable even if I decide to leave in 3 to 5 years. That's where training comes in.

Training is vital. Somebody once told me early in my career that many companies maintain their equipment better than they develop their people and unfortunately, that has a large element of truth.

Peter: Right.

Frank: Again, that's an area especially in sales where good salespeople develop relationships and very often can take those relationships with them if they choose to leave. There is a demonstrable return on investment there and one where HR can and in many companies does help tremendously.

Peter: Right. The interesting thing about that, the whole training function, is during a downturn or a recession, what's the first thing most companies cut? Training programs, right?

Frank: That's exactly right. The status of training and development is frankly the same status as in advertising. To use the accounting jargon, it gets managed according to so called LIFO principles - Last In First Out.

Peter: Right.

Frank: When do companies increase their advertising budget? When sales are good. When do they decrease it? When sales are bad. So does advertising drive sales or does sales drive advertising? The same is true in training in many companies and as a result, it feeds on itself. It becomes difficult for many C-level executives to actually figure out and measure what they're getting from that investment but to use a wonderful American phrase, you're never going to figure that out if you continue to fund those activities in a bas-ackwards fashion.

David: I love what you said an answer or two ago about business is about the changing of behavior. It's a very refreshing thing to hear people talk about that instead of pie in the sky ideas like you mentioned. What are some of the biggest stereotypes in business? If it involves sales or salespeople, what are the things there that drive you insane that you'd love to see change?

Frank: Let's look at sales because you're raising a really important issue in sales because it is full of stereotypes and it is full of stereotypes in the popular culture as well as in many companies. Now, here's what the research tells us and it's not as though there hasn't been research about what is an effective salesperson for 100 years. Companies have been interested in selling way before anybody could spell MBA. This research goes back a long time.

What the research tells you - and again, your listeners, I hope, will obviously I hope they buy the book and read it, but selling is arguably the most contextually determined set of skills in a company. What I mean is what works there does not necessarily work here. The reason is because of what I said earlier; sales tasks are going to be determined by your strategy, assuming you have one, and what that strategy implies for who is and who is not your customer, their buying processes, etcetera. As I said, there's now over a century of research about salespeople and that research does not support all these glib generalizations about what's a salesperson. A salesperson is extroverted personality, has a limitless fund of stories and jokes, etcetera, etcetera.

Sales talent comes in all shapes and sizes because selling jobs vary hugely in the kind of product or service being sold, the price points, the customers, a rep is responsible for and so on. But the stereotypes about sales personalities still dominate the field. Why is that? The novelist Saul Bellow when he was in a bad mood, Saul Bellow used to say, "Do you know what the difference between ignorance and indifference is? I don't know and I don't care." ☺

Many executives and sales managers first don't know about this research. I hope HR managers do, but many of them simply don't know about this research, so that's the I don't know explanation. Again, as I said earlier, many sales managers have a classic cloning bias; they hire in their own image. Conversely many sales trainers and consultants don't care. They have a hammer, a particular methodology and everything looks like a nail.

Now in my experience, these generalizations are actually destructive and not just abstractions because what they do is encourage quick fix approaches that substitute for more fundamental sales and strategy issues confronting firms. Now, those approaches may be quick but they are very rarely a fix. I think the stereotypes also blind managers to the interactions between strategy, sales task and selling requirements that ultimately they are paid to manage.

It's an excellent question David, and it continues but I think we know the reasons why they continue.

David: So there's one more aspect of that which is you sometimes see salespeople be hired that have never done sales before in their lives and they're superstars yet, the majority of job ads will say must have 10 years sales experience in this industry space knowing all the jargon and this other stuff. What do you think about that dogma? What do you think about those stereotypes?

Frank: I think you're asking two excellent questions there. Let me start with the first part because you're exactly right. I don't want to say it's common, but it's certainly not uncommon for the novice to come in and hit the ball out of the park in sales, as we say. Think about startups; how often that happens in successful startups. Why does that happen?

The reason it happens is because there's a good fit between that person's personality and characteristics and those particular sales tasks. That's the reason it happens.

Now, the dogma about hiring for experience first of all, you are empirically correct; there's a lot of data about this and you'll see it again sited in the book. When sales managers are asked what are the most important criteria you use for hiring, consistently at the top of the list is experience, right? Now, two things to be said about that, first, notice what goes on in an industry in hiring. What that means is that both you and your competitors are looking at each other's stars, not the laggers, in trying to hire. It's a little bit - to use a timely reference to a Chicago Cubs fan - it's a little bit like the free agent market.

The second thing is that experience in sales is an inherently multi-dimensional variable. This is important and again, HR people know this, many sales managers either don't know or don't care. What does it mean to say I hire for experience in sales? What does that experience mean? Is it simply selling experience? So it doesn't matter whether this person has been selling real estate and I'm now selling software as a service? Is it experience with a given customer group? They weren't selling my product but they were selling into my market. This is very common in healthcare, and it very often makes sense in healthcare because firms across various sectors many of them still have to sell to hospitals and doctors. Is it experience with a particular product?

Now, the important thing I think if you're going to hire that way is to force the people doing the hiring to clarify what they mean by experience, because sometimes these managers know it when they see it and very often they don't. The HR literature about interviews and hiring is very definitive. This literature has been replicated for 40 years. There's a less than 20% correlation between the scores people get in their interviews and their actual job performance. So that rationale and you're exactly right, that rationale is not irrelevant but it needs to be operationalized and again, HR can and very often does help tremendously with this.

David: There's so much more we could talk about but we need to leave something for people to read the book. So the book is Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling by our good friends over at Harvard Business Review Press.

Frank, thank you so much for joining us.

Frank: Peter, David, I thank you sincerely for the opportunity. Thank you.

Peter: Thank you very much.

This is Peter Clayton. Thanks for tuning in to TotalPicture Radio. See you next time.


Twitter is Not a Strategy


A conversation with Tom Doctoroff, the CEO of J Walter Thompson in Asia Pacific

Published on December 02 2014
Tom Doctoroff,CEO of J Walter Thompson in Asia Pacific  -TotalPicture Radio interviewTom Doctoroff

In a cultural climate saturated by technology, HR and talent acquisition professionals have focused their energies on creating newer and more digital methods of promoting their employer brands, with the fear that if they don't embrace "Big Data," they will fade into obscurity.

Tom Doctoroff, Asia Pacific CEO for J. Walter Thompson, argues that this frenzy over digital media has created a schism in the marketing world that is hindering brands from attaining their true business potential. The tension between traditional branding and the seemingly unlimited possibilities presented by the advent of "digital" branding leads companies to abandon the tried and true aspects of marketing for the flash of the new. Welcome to a Leadership Channel Podcast on TotalPicture Radio, this is Peter Clayton reporting.

In his new book, Twitter is Not a Strategy, Doctoroff argues a strategy that truly integrates the two ideas is the best way for a brand to move into the future. Using some of the biggest brand names in the world as examples, such as Coca-Cola, Nike, and Apple, he breaks down the framework of marketing to explain how digital marketing can't stand without the traditional foundation.


Karan Girotra: The Risk Driven Business Model


Four Questions That Will Define Your Company. An Interview with INSEAD Professor Karan Girotra

Premiers on July 29 2014
Karan Girotra, Professor of Technology and Operations Management INSEADKaran Girotra

At a time when business model innovation is flourishing as never before, The Risk-Driven Business Model (Harvard Business Review Press) by INSEAD professors Karan Girotra and Serguei Netessine reveals how new startups and large established companies alike are designing or redesigning their business models to better tolerate risk and outpace competitors. In our interview, Karan sites real-world examples of how business model innovation has impacted corporat growth far more than product innovation, and why most companies focus their attention and dollars on product innovation.

According to the authors, the key to creating an innovative business model is to ask these four essential questions:

WHAT key decisions get made in a business;
WHEN these decisions are made;
WHO is empowered to make decisions, and
WHY those individuals make the decisions they do.
By changing a company's approach to these choices, we can fundamentally alter the risks involved and invent new, superior business models.

Welcome to a Leadership Channel podcast on TotalPicture Radio with guest host David Dalka, business transformation consultant, facilitator and keynote speaker reporting. While most companies focus their innovation efforts on new products, companies like Amazon and Netflix are disrupting industries with business model innovation - a different kind of innovation that is cheaper, easier, and more powerful.

TotalPicture Radio Transcript: Karan Girotra

Welcome to TotalPicture Radio. Today's leadership podcast with INSEAD professor Karan Girotra is brought to you by Recruitify. As we all know, recruiting quality candidates for in demand positions is a time consuming, expensive and painstaking process. What if you could easily ask top recruiters specialized in sourcing candidates for the exact position that you're looking to fill to immediately present you with vetted, qualified and interested candidates. Now, imagine doing this in almost no time for less than half the normal fee and without the hassle of negotiating contracts or terms. With Recruitify, you can do just that. Use the link on Karan's show page on TotalPicture Radio and receive $50 off on your first Recruitify job cast. Recruitify, the next generation in recruiting.

And now, here's our interview with Karan Girotra.

Peter: Welcome to a Leadership Channel podcast here on TotalPicture Radio. This is Peter Clayton reporting with guest host David Dalka. While most companies focus their innovation efforts on new products, companies like Amazon, Netflix, Airbnb and Uber are disrupting industries with business model innovation, a different kind of innovation that is cheaper, easier, and more powerful. Joining us is Karan Girotra co-author of the Risk-Driven Business Model recently published by Harvard Business Review Press.

David, welcome back to TotalPicture Radio and Karan, thanks for joining us today.

Karan, I'd like to lead off today's discussion with this question, if business model innovation impacts corporate growth far more than product innovation, why do most companies and, quite frankly, the press focus their attention and dollars on product innovation? You look at a company like Apple, it's all about the next iPhone. It's never about their supply chain or about the latest iTunes or iOS innovation.

Karan: Right. That's a great question. I think a couple of reasons that drive that first is perhaps the most simple reason is, it is just a lack of awareness. So I think while business model innovation for people who have been able to pull it off works very well but there's a lot of folks who just don't know about it, who just don't consciously think about it, and that is related to how the media covers innovation too.

I think from the media side it is again, business model innovation might particularly for the larger readership, a new iPhone is a sexy product to cover. It is something that the consumers directly see.

Business model innovation pretty much by definition is not really about changing the product for the consumer. It's really about changing how you get the product to the consumer, how do you really make it happen, and that is something that is often not even directly visible to the outside so many people in media can't see it until it already is a huge success, and also I think from a consumer point of view it attracts a little less interest.

We've thought of this question carefully, we've tried looking at many industries, and we found if we had to give the top reasons, it would be lack of awareness; if I may say for general consumers a lack of sexiness in this kind of things that happen with it and finally, I think business model innovation is also while very rewarding for everyone who can master it, it does require a certain competency, a certain organizational maturity to be able to pull it off mostly because this is not... when you come up with a new iPhone, the roles of folks at Apple don't really change. It is pretty much the same engineers who produce the next product.

On the other hand, if you think of a radical business model change, for instance, IBM moving from selling products to services; that kind of a change really changes people's jobs. So you're a marketing manager at IBM and we're changing from selling products to services. You're not going to servers or computer products; you're going to now sell a service. That requires a very different marketing organization and that creates kind of this internal constituency against business model innovation and it requires a fairly enlightened and smart leadership to be able to pull that off. I think that's why sometimes some organizations shirk from doing it even though the benefits might be very large and generally at lower risk than regular innovation, than product or technology innovation.

David: You mentioned in there organizational maturity. What exactly are the attributes required for an organization to be ready to do this properly?

Karan: Right. Again, great question. So I think the first attribute again like with my last comment, it really is about awareness. Awareness on two dimensions. One, that changing the business model is not about changing people's roles or anything like that. It's about innovation. It is about creating a disruptive company. So because folks thinks disruption and game changing differences and advantages over competition or over incumbents can really come through new technology and products. They tend to view business model innovation as not a worth enterprise sometimes. So the first kind of organization maturity that is needed is awareness, that thinking about your business model can be game changing.

I think the second thing you need is systems, systems to make that happen, and these systems go all across the full range of systems. They start with a systematic process of doing this of identifying what are potential business model innovation opportunities. That is really what our book The Risk Business Model describes; a systematic process to help organizations do it.

I think the second thing you need is even if you have come up with great business model innovations, you need a certain strength, consistency in the leadership to really be able to take these goals through. Mostly again because I said these involve a fairly radical change to the organization so there will always been internal constituency against doing this. Folks who are afraid of their jobs, to put it very simply. There are ways in which the leadership needs to manage it perhaps by having generating small pilot experiments to convince folks with data rather than making it into a political enterprise and should we do this, should we not.

So things like that are certain systems which are needed to really make business model innovation happen to summarize an awareness that you need to do it and once you know how to, that you need to do it, a certain system organization and discipline to make it happen.

David: Your original background in being a professor was in operations management. How did those experiences lead to your interest and passion in this topic and the book we see before us?

Karan: Operations management put simply is just the science of doing things. Now, too often it is thought of as a tactical tool to just help us check the boxes and make sure the products are on the shelves. Not really the strategic differentiator. I was, like you said, a professor of operations and I was also actually teaching some innovation but these were almost two different sides of my professional personality - almost schizophrenic and I used to like to say that.

One thing I realized is when I was talking about operations, a lot of folks were thinking about it tactically but then if you looked at business history, there were many, many companies who had taken and the most kind of historical and relevant example is a folk person like Henry Ford who really retaught the operations of making cars and created an industry around it. There are hundreds of examples like that in business history. If you look at that, you see that many of these companies, many industries, for instance the automobile industry, even the digital music industry that was mentioned, really caught on not because of new technology but only when somebody came up with a business model to make it happen.

So to me it seemed and even more specific than a business model, it was very much how someone changed operations to establish an industry because before that it was a hobby and esoteric thing. For instance with automobiles, the German about 120 years or so back, the German engineers had designed great engines and great fossil fuel based vehicles but these were novelty items. It is only when Henry Ford came up with a different operational system, a different way of doing things that the automobile industry started. With digital music, part of Apple's ability to really open up that digital content space now about 12 or 13 years back was really about creating the iTunes platform where folks could buy a song a piece and bringing publishers and consumers on to that platform. Really a new business model for selling music rather than the store based physical format.

So from the operations side, it seemed that operations could do more. It wasn't just a tactical thing to make the wheels spin right. It was actually something which could be game changing.

On the other hand when I would talk to folks who are talking about innovation, we talk to top CEOs and what would happen is everyone would say innovation is one of my top priorities. The next question I would ask is how are you really going about making it happen since you say innovation is your top three priorities in the next five years. Typically they'd say, oh yeah, we have an R&D group and they think about it and then they tell me what's good or bad. That seemed kind of very hands off and for a priority for a top leadership which is one of their three properties it didn't really seem... in most cases, it was something which was great to say in mission statements and somewhat okay to mention too but in the end in practice, it really was just something given to a small group of people who in some industries were not even very empowered. Particularly I think while this kind of R&D based innovation was great in pharma, in tech but the vast majority of other kind of CEOs we would meet in commodities, in energy, in say cement, in steel, they really didn't have any innovation going on even though they were talking a lot about it.

So again from the innovation point of view, we saw a huge demand for an innovation which applies to beyond the three sectors out there today and then we again saw an opportunity on putting the two things together operations and operations thinking used as innovation and then really bringing an innovation which can apply to a far broader set of industries than traditional product innovation. And that's the somewhat long journey from operations to business model innovation.

David: So the qualifier in the book in the front, risk driven with my background in the investment industry, I'm very familiar with risk and its implications for the enterprise, yet most executives go a whole career without exposure to serious deep dives into risk concepts. What do you mean exactly by risk driven and what do leaders need to do differently to incorporate that?

Karan: That's a good question. When it comes to examining a business model or examining any organization's performance, you're systematically used to looking at revenue numbers or cost numbers. That is great if you improve your revenues, decrease your costs, business does do better. But it turns out there is a third dimension of really evaluating and thinking about business models, and that dimension is risk. What I mean by that is the same business model perhaps with the same revenue structures, same cost structure, if you somehow decrease the risk in that business model, that could be a superior business model. At the very least give you those revenues and cost in a more consistent basis, for instance.

So the central thesis of our book is that the cost and revenues are great ways of creating new business models but perhaps they've been done to the core. Most companies have cut costs very aggressively, so those are going to get your improvement 2%, 3%, 4%, or 5% but not game changing disruption or innovations.

On the other hand, few companies and entrepreneurs have thought of industries and from the perspective of not just cost and revenues, but really from the perspective of risk in the business model. So once folks start thinking about the risk in their business model and how could they change the risk could decrease the risk while keeping their revenues and cost the same. In fact, many times, they could just decrease the risk while increasing their costs. Increasing their costs and it could turn out to be a better model.

For instance, this is what happened in the apparel industry. Zara really changed the industry. Zara the Spanish retailer and now of course globally very successful and really has come up in the last 20 years in an industry which had had no innovation pretty much for almost 100 years. Zara comes in and shakes up the industry largely by a different business model which involves a much higher cost structure, so more costs, because they produce most of their clothing in Southern Europe and now perhaps parts of Africa and Eastern Europe all of which are far more expensive than East Asia, be it China, maybe now Bangladesh, Vietnam. So the cost structure is a lot higher but it turns out that if you produce clothes in Europe to sell to Europe or the US, you can have clothes from the designers table to the store in about 3 weeks, whereas if you produce them in Asia, you get them in 3 months. Producing clothes 3 weeks in advance is a lot less risky often enterprise than producing clothes 3 months in advance. Why? Because you have better idea of what styles are doing well. You have a better idea on what fashion trends are catching on. You have a better idea on what colors are good.

So as a whole, that really is a new business model which even though it might have higher cost, it actually has much lower risk and that really is what we mean by risk driven business model; a model design keeping in mind the risk considerations also of the industry.

David: Thank you for walking us through that. One of the things that I love about this book is it talked about a ton of obscure previous unknown examples and stories. Walk us through another one or two of those that you really thought get the point across that you just made.

Karan: Another, I think, example of a slightly different kind of risk, so in the example of Zara, this really was not the risk that the business model faces is not knowing what the big fashion trends are going to be and they made their risk exposure a little bit smaller. Another kind of risk that often organizations have is of individuals not acting in the interest of the larger organization or individuals having different interests than what you'd like them to have perhaps.

So company perhaps a little bit obscure to some of our listeners is an Israeli company called Netafim. This company makes irrigation equipment, drip irrigation equipment. Now, this equipment is as far more efficient in irrigating a plot of land than perhaps traditional irrigation methods. Particularly useful in drier climates. Right now actually it's a very successful product in California because of the weather we've had there in the last few years. So this is a very high tech equipment which gives exactly the right amount of water to the plants on the basis of the weather forecast, on the basis of the different properties of the soil composed of many sensors and real time information system increases crop yields by an order of magnitude.

Now this company made this great product and it was trying to sell it, did well in the US and Europe but then it identified that one of the biggest markets for this product is actually dry parts of Afghanistan and Pakistan. Remember, this is an Israeli company and they're trying to go in and try to sell this product there. They go in there and it turns out that most farmers are like sounds good but it's an expensive product and on top of it, I have no reason to believe all that you're saying that okay it will improve yields by 50%, 100%. That's really going to materialize. I have to pay you up front and then this may or may not give me the returns that you're promising and put simply, I don't trust you.

So now this company had a quandary because it was not really only a business enterprise to break into these regions, it really was a social enterprise. Because in these parts if one could increase the productivity of agriculture, one could argue that it can solve a lot of other problems, other socioeconomic problems in the region. Now, this company is trying to make this happen and then they really change the business model around selling of this product. They try to make it a little more different model for selling. The offer now is they go to the farmers and say we will install this equipment for you. Not only will we install it, we will maintain it and actually do the day-to-day running of this equipment which would involve making sure it is downloading the latest weather data, so on and so forth. They're like, we will take care of all of it and we will do it all for free. Rather than sell the product for a certain amount of money, we'll help you. You have to share with us perhaps 50-50 or in some proportion. Now suddenly from the farmer's point of view, it's a no brainer. You pay nothing and if you have a yield you lose; okay you have to share some of it but only if you have something.

On the other hand, from the company' point of view this is also a great idea because before that they were selling nothing. Now at least the farmers are there and because they know their technology works, they're willing to take the bet and typically this 50% of the crop yields increase could be significantly more than cost of the price of the system, so they make even more money this way even if they had sold. So this really brings this new technology to a place where it wouldn't have; again, not by improving the technology in anyway but by really changing the business model around it. In this case, the risk that they reduce is what one might call an incentive alignment risk that the farmer when he was purchasing his incentives or the company's incentive to design a good system are better aligned with the farmers in this new model than in the older model.

So that's another example of a company helping create a new business model. The best part I find about this is, is business model innovation applies across the board. So this was on the sales side. We have multiple other examples on different dimensions on the people management side perhaps on many other dimensions.

David: That brings up a great point that it goes across multiple organization including what we talked a lot about here on TotalPicture Radio all the time which is hiring and hiring managers. When we met the other day for lunch, you discussed that you have an example of a company that was hiring people without actual job interviews. Tell us more about that.

Karan: So a company, I think, many of our listeners might have heard of the company is Wordpress.com. They're a hosted service for Wordpress. The company is Automatic which really owns wordpress.com. They've been a big success. A large fraction of blogs online majority of them are hosted on the wordpress platform and many of them on wordpress.com. This company has covered an excellent and a very interesting way of hiring people.

Traditional job interviews are a classic example of an information risk. In the same way as Zara doesn't know what trends will be good and what clothes will catch on; in the same way, when we're hiring an individual, there is very poor information on two things. One, the person's capabilities. Will he fit in? Will he not fit in? And not just the hard capabilities but the soft capabilities of cultural fit and so on and so forth, and also of what the organizations needs would be in the kind of people they need. Do you need a specialist in X or specialist in Y? So that is a challenge all hiring managers face. If we would be honest to ourselves, I think most hiring managers would admit that it is in the end an article of faith. Even the best designed interviewing systems really can't test real life performance. They're best and inaccurate signal of what might happen in a bit.

So Automatic comes up with this new kind of "job interview." They don't really call you in for interview, they don't do an HR interview followed by different rounds. What they do is they bring in people and it's a very simple test, you have to work in one of the teams at Automatic for 3 weeks and for that they will offer you some compensation. By the end of the 3 weeks, we all will sit together and decide if you want to work here or not. So this is not a formal interview. It is a 3-week one might say pre-job kind of an internship without an interviews, and it really makes it - Automatic also, I must add, has a very unique cultural challenge.

Automatic is a company which allows most of its employees to be based anywhere. They don't really have a physical location. They're a fairly big and very successful internet company but the vast majority of their employees work remotely. So they don't even get to see each other. So cultural fit is really important because you bring in a person even though these employees don't see each other, they work collaboratively to develop new products, new services very closely. So they might be talking to each other 50 times a day even though they might not be face-to-face. It's really getting the right people into the system is very important because otherwise it will break and the best way to test that they found and this far out performed any interview, any database selection schemes that they had applied. So now they really just do no interviews at all and simply just bring in people, test them for three weeks and take it from there.

David: Let's look at the other side of that. You talked about the companies not necessarily knowing their needs. Earlier you talked about sometimes hiring managers have a personal incentive to not always hire the best person if they feel threatened by a new skill or a concept that might be involved in a paradigm shift or business model involved in your work. Let's bring this elephant out in the middle of the room. What do you see there that CEOs and boards need to be thinking about so that they can actually empower their talent people to identify those situations and create the right situations involving new people.

Karan: So most often an interview process, an HR process for bringing in new folks would involve often the direct manager and the people who have to directly work with the individual in a fairly significant way. Now, that is clearly important and necessary because you want the people to be compatible but at the same time this very process can be one of these biggest barriers to change because if you really want to bring in a new person to change the business model or drive through some important fixes asking the incumbent leadership to evaluate candidates for that has the potential of having a slight incentive issue.

For instance, if I need to hire... again, let's go back to the IBM example. If you're going to move from selling products to services, a very important strategic shift and like I mentioned, that would really make the marketing managers who are used to selling products perhaps a little bit concerned about their roles; not all of them but there might be some in there. Generally, not a majority I might even add because most folks I found really do want to work in the interest of the organization, but then again, everybody has their individual incentives too.

Now, you need to build a new group of people who can sell this as a service. To make this happen, in the HR process, if you involve the current marketing organization, the marketing manager who has made his experience in selling products is the one who's truly proved the next generation which is going to transform into services. It really is like hiring someone who will make him redundant. And that does have the potential of certain incentive issues. And in these cases, when there is a radical shift that the organization needs, the need to bring in external, perhaps third parties to really mediate the hiring process to watch it more carefully so that someone who is more aware of the holistic needs for the organization to change can be part of this.

Peter: I want to interject something here. A recent study that was done by the Corporate Executive Board found that 74% of the respondents reported that their most recent hire had a personality "similar to mine." So it's not just a bias towards bringing in people that perhaps may not out-perform that hiring manager, it's a bias towards 'I want to hire people who are similar to me and who I feel comfortable with,' and that gets away from the whole issue of the importance of diversity in organizations today.

Karan: Exactly right. There are multiple studies that have found that in terms of hiring people and in evaluating employees, your culture familiarity with the individual ends up being a fairly important factor. That is terrible from not just a change management point of view, but two other point of views.

One that Peter mentioned which really is diversity, and diversity not just in race or other things but also diversity in intellectual grounding, background thinking. If we get all people who think the same way in the organization, we really aren't going to be able to change. If we get all people who think the same way in the organization, and therein I think comes the real rub, that is really, really bad for innovation.

I'm always amazed by companies which have debated a new product for months and they bring it out and it's a complete shock to everyone outside. Microsoft has announced a lot of recent changes. They've invested tons of money in a product, and when it comes out, people are almost surprised with some very basic factors that were overlooked in the product. The core problem in most of these places is group thing; it's the lack of independent thinking. And hiring practices, because of the reasons that Peter mentioned, reinforce that. Everyone hires people who think like them. It's not surprising that the organization will get into a group thing and that can be killer from a intellectual diversity point of view and from an innovation point of view.

Peter: I want to jump into something now real quick and you wrote a lot about in your book, and that's disruption. I recently interviewed Chip Conley who was the founder of Joie de Vivre boutique hotel chain based in California that was recently bought by one of the Pritzker families. He completely disrupted the hotel industry and now he's working with Airbnb - another huge disruptive force out there. And you look at companies like Uber and Lyft that are completely disrupting industries, so talk to us a little bit about that and some of the challenges.

Karan: Today, I think we're living in the golden age of new business models which are game changing. So if we look at Uber, Airbnb, these are all companies, first I'd like to stress, which are disrupting but not disrupting by any new technology. If you look at what Uber is doing, that is something a taxi company could have done 15 years back or 10 years back certainly since the smartphone became a substantial product. This was a product that the incumbent could have thought of, not just as a technology product but as a new business model of bringing their suppliers, the drivers and their customers together; really matching them using geolocation based platforms like Uber does, along with changing prices and so on and so forth.

So this is a new business model and it is disrupting industries. In the hotel industry, I think certain figures really highlight how disruptive an Airbnb can be. In a normal hotel chain, when Airbnb enters a new city, within months or weeks with very limited marketing or any other spend, they might bring in on the order of 10,000 or 15,000 rooms on to the market within a matter of a month or two. On the other hand, a regular hotel chain, probably adds that many numbers across the world in a year, not even in a month. So the kind of competitor that a hotel chain or a taxi company is facing today is a very different beast. It's a beast which is coming with a different business model.

Now, if you are one of those disruptors, if you are an entrepreneur and are thinking about how to change an industry, be it hiring, be it any industry, then I think the prescription for you is clear, think about new business models, try to make the change happen, perhaps even follow the systematic process of changing the business model that we talk about.

On the other hand, if you are the incumbent, that poses, it's not that promising a situation for you. My main recommendation there is it is always better to disrupt yourself before someone else disrupts you, and it turns out that you're often very well-positioned, you're probably the best person to disrupt yourself because people don't fully get that. So for sure, Uber a group of guys in San Francisco, came up with this app and are disrupting the taxi industry. But think about it, if the taxi industry was not so in love with their incumbent model, with their old model, they were far better positioned to make it happen than Uber. It was lying there in front of them, smartphones were out there, this is not a need that was not known, it is just that they were too much afraid of changing their own incumbent model. And so if you don't disrupt yourself, someone else will.

There's a positive side to it, you are often the best position because you know the industry, because the customers trust you. You are better positioned to change the industry in many ways than a new phone can be. What you need to do is deal with the internal barriers to change within your organization.

David: You talked a little bit about - when we talked the other day about Skunk Works, and that's potentially one of the best ways to do this. What are the best ways for companies in your view to actually do this and overcome some of the barriers that we've talked about here?

Karan: First off, again, I'll reiterate it is about developing the right systems to make it happen. Now, what could be these good systems? A few of these systems which we found to be very effective is, first up gradual piloting and testing in a separate Skunk Works organization. I like calling it a little bit more like running an internal insurgency or a guerrilla warfare type attack to the existing market. What do I mean by that?

We found that companies that come in and say the CEO comes in and says tomorrow we're going to have a different business model, let's make it happen. In this kind of style, even in the most respected experience senior leadership rarely works out, for a simple reason, because the internal constituency goes broad and deep for the existing model. By definition, people who are doing the best in the organization are the ones who have most to preserve in keeping the existing business model.

So that kind of coming in and saying let's change everything top down often doesn't work well. What does work well is if the senior leadership understands that this change needs to happen and then rather than going into everyone and showing them oh let's change it, tutorially, what works well is to create a small empowered group often separate from the main organization which is what a Skunk Works would mean. They'd often be sitting in one separate physical location and really give them some freehand to create an internal startup or an internal insurgency in a very limited way, perhaps in one market, perhaps with a small subset of customers, often not even the most important customers or markets.

So give them a little bit of freedom in a very separate, small organizational Skunk Works team who doesn't have to comply with the usual bureaucracy and the rules and let them run some experiments. And these are just experiments, nobody say you're going to change the organization or anything like that. You let them run some experiments which test out things on the basis of the results from those experiments. It will be one of two things; either you think it works really well. I think that's often rarely the case. Your first hypothesis is often proven wrong once you start doing it. But if it does work well, you take that data from that experiment to the organization and try to build a constituency on the basis of facts, on the basis of actual working pilots, rather than on the basis of hopes and dreams. And that is the case if the experiment works.

If it doesn't work, the recommendation is simple, you either kill the project or find out why it doesn't work and improve the experiment.

So in principle, I think and there's more science into how exactly one can design experiments to get the most important information early on. But as a whole, the idea is to not come in and say we're going to change the organization in one day, but really create an internal insurgency, a small empowered but not with all the resources of the organization - a small internal startup which can start creating some ordinate facts, some ultimate data to challenge the status quo. I find that data and real world instances and examples tend to be the best anecdote against organizational inertia, against politics, against people saying stuff to keep things the same.

David: So to close, people read this book in 2014 and five years from now, the world has adopted the methods and the thoughts in this book. What outcomes are the world going to see if they do that?

Karan: I think we'll see more disruption because I think disruption and game-changing innovation has been restricted because of our view of thinking of innovation only as products and technology in a very limited set of sectors right now. It is mostly tech, biotech perhaps and sectors like that. You're seeing a little bit of this already with Uber and Airbnb. You're seeing disruption happening in industries which people thought had been the same for a hundred years. Taxi hailing a ride services have been the same since the times of the horse and buggy. Really, we will see disruption happening in many more industries than people think of disruption coming from business models.

Also, I think and hope that this kind of disruption will extend beyond the corporate sector. So I think for companies, great, this will be more innovation, more money and more wealth, but some of my personal hopes is that this really also disrupts the way in which many times cities are run in many ways in which public systems work. I think that's one place where the business models have a whole host of conflicts of interest or incentive alignment risk or whole host of information risks, and we're improving those models you may call economic models, now perhaps now business models in the public sector. Be it in urban planning, be it in healthcare, I think we can have some really game-changing impacts if we rethought the way we do things and not just about the technology to make those things happen.

We are seeing it a little bit in urban transportation now, not just with Uber and Lyft but also with bike sharing systems, perhaps more in the public domain, a new business model of using bikes which is changing urban planning and many things. So we'll see more disruption in different sectors and I hope more and more in the public sector too.

David: Thank you for joining us, Karan. The book is called The Risk-Driven Business Model and it's on the Harvard Business Review Press, available now in the format of your choice. And, Karan, thank you so much for joining us today, we really enjoyed it.

Karan: Thanks for having me.

Over 10,000 Downloads


More Leadership Interviews Articles & Podcasts

Page 9 of 34
  • HRExaminer | Top 25 HR Digital Influencer
Subscribe To Our Newsletter
HTML | Text | Mobile

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our privacy policy.

I accept cookies from this site.
EU Cookie Directive plugin by www.channeldigital.co.uk