All language subtitles for Harvard i-lab Startup Secrets Part 5 Wrap Up Michael Skok and Geoffrey Moore [English (auto-generated)] [DownloadYoutubeSubtitles.com]

[Music]

well good morning everybody and welcome

it's great to have you here i must say i

couldn't be more overjoyed to have a

chance to finally summarize after five

great workshops it's great to be at a

place where we can actually put all the

pieces back together again

before i do that i don't want to

disappoint you so i'll just tell you we

have to set this expectation you can't

summarize

five workshops which had two hours of

great participation by the students

without having the students here which

of course many of them are not because

of the fact they've got their exams and

so forth

and even the videos and the slides that

are up on the site now that's gone live

today it's official you can go find all

the materials up there don't capture the

true spirit which we witnessed over the

last uh six months or so and that is

obviously the engagement of the students

but if you'll bear with me i'm going to

try to at least give you a sense of what

did we cover and a taste of some of the

interactions with some embedded videos

so without our agenda this morning is to

cover those highlights and people said

to me as i was going through these

workshops a number of different things

that sort of really touched me one was

that the soft stuff is really the hard

stuff and what they meant by that was

starting a company and finding the right

team and figuring out how to really put

that together with a kind of culture

that made it possible to build a real

company is actually really hard and so

i've heard that so many times now i'm

going to make a little bit more emphasis

on that piece the other thing i hear is

that obviously when you take your

product to market all the things you

hope for such as everybody beating a

path to your door because you've got the

best mousetrap don't really pan out that

way and so go to market scenario that

people really want help with too and

that's why it's so great to have jeffrey

here today

as you all know because i've talked

about it so many times i'm a student of

his and i've really enjoyed learning

from him so it's fun to be

having him come up today and talk about

that but i'll cover some of those pieces

again in a little bit of depth today

we did actually have our awards ceremony

but i just wanted to recognize at least

a couple of people are here uh so we'll

do that at some point and then i need to

have a few moments to thank everybody so

you have to bear with me at that and

then obviously it's on to jeffrey so

about 45 minutes we'll have jeffrey and

i should say that although this was

entitled the wrap-up for jeffrey moore

it's really the warm-up for jeffrey

moore as you'll see when he comes on

well we started out with a very simple

thought which is you can't start a

company unless you have a value

proposition so everybody has to figure

out you know what their idea is and how

to put it together and so the first

workshop was focused around what problem

is it that you really want to solve and

then i wanted people to have in the

notion of teaching people to fish and

evaluation for their problem and so we

developed this gain pain ratio over the

i guess couple of decades in my various

different companies to try to help that

and so we talked a little bit about that

and then out of that came people's value

prop it was very exciting in the

workshops to see how many people came up

with things that really refined both

their thinking and also made us all pay

attention so there was certainly some

great energy that came out of it

so let me tell you how we got that some

of the highlights we picked out and i

want to thank adam barry adam are you

here today

yep uh adam helped me with some of this

i always think about things in very

black and white terms and so he came up

with this um moniker which was the idea

of really finding a problem that is

blatant and critical as opposed to

latent and aspirational now if you're a

consumer marketer you might actually

need to go into this bottom left but i'm

mostly focused on b2b as i've explained

to many of you because that's my

experience

and we look for blatant critical

problems where people can really focus

on what pain and need is just so urgent

that you have to address it so we talked

a little bit about that and we said look

if you're going to solve a really

fundamentally worthwhile problem there

really are at least four use that we

could think of

first of all is it really unworkable i

mean it's something just fundamentally

broken so that when you go in there

you're fixing something that ultimately

delivers value right from the get-go

better still is it unavoidable so i know

in the audience today is one of our

companies that was a case study reval

they are in the business of actually

providing derivatives accounting and it

turns out to be totally unavoidable

because of the sec and actually totally

unworkable on spreadsheets because it's

got so complicated and by the way it has

a very urgent need because if you get

caught out as a few companies like ge

did it cost you hundreds of millions if

not billions of dollars of market cap

so

the last piece became a whole subject in

itself in the go to market which is how

do you find underserved markets and how

do you segment them we'll talk a little

bit about that later on

we then went on to talk about what kind

of solution can you come up with that's

going to make a real impact and we

talked about this in some of the ways

that i think people already know you

obviously want a discontinuous

innovation something marginal isn't

going to cut it

you also want something that ultimately

becomes defensible and that is

disruptive as a business model too

so the disruptive business model piece

actually became a whole topic of itself

and is the subject of a workshop so we

didn't cover too much at this stage but

what i was trying to point out to people

is that actually this troika can make a

big impact and it's not just about

technology but so often when we're

dealing with entrepreneurs and trying to

help them get going we find they always

think about technology first but in fact

early on if you can think about the

business model and how to interweave it

with your technology can make such a big

impact i read an article in case you're

interested in a bit more depth on that

that's up on venturebeat that talks a

little bit about why that's important to

think about right from the get-go

and then as i said what we try to do is

give people a sense of what is the way

they can evaluate their own idea

in the notion that if you can think

about it in a way that actually brings

it to life for the customer then you're

probably going to be the voice of the

customer and your own best critic

and i pointed out something that is

obvious which is obviously you want gain

for the customer but you've also got

pain that they have to go through in

many instances to actually deal with

implementing that solution and many

people forget this they think well you

know if i've got an incredible product

the customers just implement it they'll

take it on right away and the reality is

there are a lot of things customers have

to do to even find you if you're a small

startup that are painful they take time

and energy and everything else but the

big one i find people ignore and

actually catch them out so many times is

the inertia and it comes from the fact

that as a startup unfortunately you

don't carry any credibility you very

rarely even carry any brand at all maybe

you have some personally and so this

inertia is a big part of what we try to

talk about how do you overcome the do

nothing alternative

or if you're going to display something

how do you make it incredibly clear why

the gain of displacing you is worth the

pain of taking that existing solution

out of play so i would encourage

everybody here who gets a chance to

contribute back because there was a lot

of uh this was all about us learning as

much as we could to contribute back as

the future generations obviously

of entrepreneurs come out and i've

learned a lot by listening to the the

workshop so one of the things i heard

time and time again from the students

who were going through the gain pain

evaluation is that they have a hard time

actually putting this into numeric form

into you know a scorecard as it were so

we talked a lot about that i won't go

into it today about how do you score

this how do you really get to a basis

for evaluating but in the end i think we

all agreed something which probably

won't surprise anybody here which is in

many instances unless you have at least

an order of magnitude impact

on your potential customer you probably

won't get over that inertia you won't

get over that risk that so many of them

feel uh is inherent in taking a startup

into their organization

so i'm delighted to say that i wasn't

doing all the talking in fact really all

i was was a shell to get the case

studies in play and we had some great

case studies and i want to thank

appearing uh some of whom are here in

the audience carlos and alan and and

reinhardt thank you

who shared with us their own gain pain

evaluation and as an investor i saw it

first hand and i'll just tell you the

pain to start off with and then you'll

hear the gain when we first invested

they had a product which is going to

sound obvious which was an enterprise

app store

and it turns out that enterprises don't

want to put their apps on the itunes

store because they don't want everybody

to have to go up there use a credit card

to buy them especially if the procter

and gamble have tens of thousands of

users or one of our customers cisco's

that have 60 000 users they just want

them rolled out to the sales force

securely etc so there's a real

need that they had very fundamental but

they were having a problem with the pain

that the customer was experiencing and

implementing them because they had to go

through apple get credentials then they

had to install the thing it would

typically take about 10 days

and that pain was so great for the

customer to go through we just weren't

getting the adoption that people wanted

we were hand holding them through it

and they literally sat down as a team to

their credit and said you know what

we're getting nothing other than focus

on live in five building a product that

you could literally go to on the web and

in five minutes have your

app store up and running and enable

companies to instantly not only upload

but then manage the entire lifecycle of

their applications for the ipads and

ipods or android devices and their

business took off probably no surprise

to you but it was entirely because of

them doing their own evaluation of this

gay and pain equation and they gave a

great case study of how estee lauder is

actually getting 40 uplift at all of

their stores 17 000 of them around the

world by having this application for

guiding people through what makeup they

should buy turns out people trust ipads

more than they trust humans

go figure uh

so uh and you know great bottom line

savings and they were able to actually

show those you know get those from the

customers so i again i encourage you to

participate as we get into this in the

future and bring your case studies

forward because we all learn from and

thank you appearance for sharing yours

now i have to tell you i learned a ton

too this was our blackboard that very

bored uh after the first

session after everybody gone off and

done their workshops and what i learned

was something that i never expected

because you know i'm obviously a

different generation to those that are

coming up in this always-on world and it

is that community is having more impact

than anything else in this new world of

you know evaluating products so i

learned how important it is to think

about you know who are the influences in

your community and we've all got used to

now things like social reviews ratings

and so forth uh but it's obviously

becoming an important part of the

landscape as people think about you know

how do they change the buyer behavior so

thank you everybody who shared that uh

i'll incorporate it in future workshops

and it was a lot of fun

so we then went on finally to

uh company formation obviously those who

had an idea had come forward and there

were actually 10 teams who started out

quite intensely

going after their ideas and many who

couldn't even you know we couldn't even

get to so again i thank you all for

stepping forward for that and as i say

this was the softer piece that turned

out to be harder for people to grasp so

i'm going to spend a little bit more

time on and bring a few examples to play

and what we were talking about here was

a framework for how do you build an

enduring company

and people came forward with the obvious

thing which is you know okay so you've

told us what the value proposition is

what are some of the steps we need to

think about along the way to realizing

our vision of going and owning and

dominating a marketplace and of course i

said the obvious which is well it's

certainly not going to get done in four

workshops and it could be as simple as

hire the right people who know how to

execute because execution counts for so

much in this so all the theory that i

might share with you i will say it does

come down more than anything else to

hiring the right people and really

having the conviction passion

persistence and everything else to go

after pursuing that vision with the kind

of execution that it takes to become a

leader but having said that obviously it

starts with people

so we talked about what is it that helps

you get the right kind of people and i'm

a big fan now of not only jefferies who

helped me with sort of first ideas of

how do you iterate things but now people

like eric reese have come up with the

idea of pivoting which jeffrey and i

were just talking about is is classic

change in lingo but it's really the same

theory coming over again but there's one

area that i really firmly believe you

don't pivot

and those who are in the audience before

will probably know can anybody tell me

what you wouldn't pivot in your startup

if you could keep it constant it would

really make a big difference

anybody

yeah

founder co-founder would be great

change

okay anybody else

change is is a is i would say something

that is a constant so in that regard

yeah

anybody else

yes that's the answer i was looking for

i'm not saying it's the only answer all

of these might be right but the reason i

feel that that's such an important piece

is that it's really really hard for

people to join a company if they don't

understand what the culture of the

company is and what it stands for and so

if they do join it and it changes guess

what they're probably going to leave

it's kind of like deciding that you're

going to be a red sox fan and finding

that the red sox will decide they want

to play basketball ah probably not going

to be great at it for starters and it's

going to be a little difficult for you

to follow them

so we really think that cultural

consistency and we see it in our

startups like for example the company we

just took public last quarter demandware

it had the same culture from day one it

was very focused on making the customer

successful they even built it into their

business model with a shared revenue

model and they really focused on it so i

was at that conference just yesterday

hundreds of customers and partners there

and that's the one thing you'd pick up

if you went and talked to any of them is

they know they have a shared success

with us and that cultural consistency

went through everything hiring execution

vision how they defined where they went

with their products the business model

and everything so

i think it's a very big deal

and uh now to make a little bit of fun

out of it i did ask in the audience i

made the mistake of saying so culture

starts with the word cult so the

question is have you had anything to do

with any cults

and uh we'll see what you hear you hear

it's okay it could be could be a simple

cult doesn't have to be a

religious sect that got you into

difficulty

right your picture shows rocky horror

picture shows can you say one time yeah

i was to go at midnight uh in san

francisco uh with the ring a group of

people and

you'd celebrate by dressing up and

throwing rice and squirting squirt guns

how the hell did i hide you

too late now

so tom is in the audience thank you for

sharing it so uh

openly but i really believe that culture

has that kind of conviction behind it

obviously i remember the rocky horror

picture shows at midnight too i just

wouldn't admit it

but it takes somebody of strength and

character like tom to be able to do that

but that is one of the things i think we

took away from this workshop is that if

it's genuine it really makes a big

difference

now why is it important we talked about

this some of the softer things are

harder to measure so i tried to bring

some research to bear and actually

there's a lot out there but i just

brought some of the top places to work

for from the fortune tech survey these

are the top five tech companies out of

the top 100 places to work for and if

you go and read this particular article

or any other you will find that these

companies have distinct cultures

google's culture is very distinct it's

very different for example the sas's

culture

which is you know owner run and owner

managed it's also very distinct to

zappos which is very execution focused

but the point is they all have a single

culture they don't have 10 cultures

running around that company and one of

the points i wanted to make here was

that it does make a top bottom line or

in fact genuine value impact you can see

these companies outperform their peers

by 300 percent so this might be soft

stuff but it makes a big difference and

so as much time as we get in the future

to devote to it i'm happy to spend on it

because it makes

a big impact

i'm not going to give aqua a chance to

recover from tom um because they

actually went to the trouble of putting

a video together to share with us what

is their culture and so let me share

that with you now and you'll have a

little bit of fun

[Music]

working at aqua it's very fast-paced

it's very entrepreneurial it's

challenging and it's a lot of fun

working at awkward is probably the one

of the greatest jobs i've ever had in my

life aqueous founding changed my life in

a pretty big way helping to build one of

the you know fastest growing startups in

boston i came to acquia because i saw

an opportunity that i hadn't seen since

i got into this industry you know the

opportunity of getting involved with a

platform as

significant as drupal as open as it was

with such a passionate developer

community working with the open source

project drupal is great it is it's

really the highlight of the job just

felt like the right place right time

amazing opportunity i looked at the

vision for drupal and i said this is the

future and and i want to be part of that

so we're hiring like crazy and it's a

real challenge the challenge of growing

is is making sure that we continue to

communicate we continue to find new

great people i think the important thing

when you're hiring people though is to

look not so much for raw experience what

does the resume show but instead look at

who they are as a person i think good

people like to work with good people

instinctive drive to accomplish

something in the world that passion and

the smarts to go with it i'm being with

people that i like to be with who share

those common interests and that makes it

a heck of a lot of fun we're a company

that has a very very bright and

promising future we're enabling a lot of

um individuals and companies to do

things that that um you know they've

never really been able to do before so

it's very exciting it's it's a once in a

lifetime chance i mean we we're we're on

a company that is just a rocket ship

it's really a tidal wave that i'm happy

to be riding

[Music]

so thank you to the acqua team who put

that together we really appreciate it

and i think however they did it it was

what they wanted it was what they wanted

to show and so again that's an example

of a company doing something very

specific to say this is our culture

now for some of the harder stuff again

it's soft but it's hard

and it's extremely important i always

hear from students you know we hear that

people want to hire a players what does

an a player look like

and i'm always astounded because we see

this happen over and over again people

hire

on one a which is ability and i'm fine

with that there's nothing wrong with

getting a players who are off the charts

in ability but i'll tell you in my own

experience there are at least two other

a's that are just as important in some

cases more important one is aptitude

because it's so critical that people

have the aptitude for what you're giving

them an opportunity to do why because by

the very nature of what you're doing as

a startup you are changing things you're

making breakthroughs or you should be

and when you change and break through

things you're going to unknowns and so

when you're in the unknown i don't care

what anybody's abilities were in the

past what are they going to do when

they're dealing with the unknown they

better have the aptitude and then the

third a the attitude to deal with that

and so to me the three a's are those

three and we talked a lot about that and

i then talked about you know this new

thing that's i want a plus players it's

like okay there's always a plus even

google's got one now so what are the

pluses

the pluses for me were three as well

really authentic you know we talked

about how many times people get foiled

by sales people sales people are good at

selling themselves so guess what in an

interview you probably will find out

nothing of the truth about them unless

you ask a basic question like so what

are your hobbies

get them outside of what they can sell

about and get them to tell you something

and we had some great examples that come

up in the workshops in fact one of the

guys said hey the guy came through with

a job interview for a job interview and

he read the specs so well he sold me the

whole spec and then i asked him a basic

question and said why does he think he's

a fit for it that was a great question

of course the whole interview changed at

that point

so authentic but awareness to me is the

next key one and in particular

self-awareness if i observe one thing

about the great entrepreneurs and i

would pull this category of

self-awareness after having learned all

the mistakes of trying to think i knew

too much and realizing how little i know

in fact older i get the more i realize

how little i know and how much i have to

learn it's that if you really are open

about that if you can say look i love

doing these things i'm passionate about

doing x y and z but why am i lousy at a

b and c and i need some help there well

guess what you then open everybody

around you to being able to team with

you to fill in those attributes that can

make you successful but it starts with

you being self-aware if you don't know

what your strengths and weaknesses are

that's okay but i would encourage you to

go figure them out and start with

something basic like what are you

passionate about because that tends to

drive to you know what you enjoy and

what you do well therefore and then the

last one was was around this what we

talked about cq if you get to the

workshop online you'll see more about it

which is really people like us

uh the plus there being literally the

acronym for it in other words are people

going to be additive to your culture or

diluted to it and obviously if they're

additive to it and they can really help

reinforce it and drive it forward for

you that's a fundamental basis on which

to you know help getting the company's

uh focus of energy but if it's it's

dilutive as we often see people hire for

example i've seen it too many times

great engineers into the organization

early on who are off the charts in some

dimension or other but they have no

interest in participating in the team

and they're diluted with the culture

because they don't want to deal with

change because they think they know all

the answers you then end up with more

problems than you can possibly get from

the value of just their abilities so

this is an area that will spend more

time on the future based on people's

feedback at least hopefully that's a

taste of it

so what were our learnings

well we had some great thoughts um in

particular the audience gave us this

feedback of hey you guys

does this apply to you know hiring

everybody and i didn't really understand

the question start off with but what

came out of it was a learning for me

which is absolutely right you actually

should hire all your stakeholders early

on you should hire the first customers

in the same way really be careful about

who they are get the same uh you know

out of your partners because there are

many instances gonna have to be aligned

to in your supply chain or or literally

in supporting you in your

you know breakthroughs and even your own

stakeholders and so uh it's a little

self-promotional i'll admit but uh david

gave us this uh little cue after that

came out so

we had about seven different term sheets

and so it really came down to us

deciding who we wanted to to work with

the deal process was really what gave us

that confidence in terms of northbridge

in fact we even took a lower valuation

to get you guys

so i didn't know he took a low

evaluation but thank you david wherever

you are um

in the front row very good

maybe you're going to claim it back

later so i'm sure we'll get you'll get

your own piece of this

but in any event uh we tried to help

people boil it down to so where should

you start we came up with a bunch of

interview questions and then i revealed

one of my favorites which is sometimes

in an interview if i really know i've

only got a little bit of time i'll only

ask one question and i'll keep asking it

until i get to the depths of it which is

what are you passionate about because as

i talked about earlier that will so

often signal people's real aptitudes and

intentions as well as obviously what

they've got conviction to go after and

pursue so uh it was a lot of fun

watching people ask that question

i certainly remember one which i

purposely did not put on film which was

a young lady being asked what her

passion was and sharing it in a much

more graphic detail than i think it was

intended to be but it lent it led to a

date i'm happily to say

[Laughter]

now

giving chalmer a chance to redeem

himself at this point uh he wanted to

talk about what it meant for acquia so

here's a little snippet of that

and it's something we look for in every

candidate who ohio is hired in the

company and starts with passion p for

passion and we want people who are

really you know

love it i i had a conversation with one

of our people on our engineering team

last week and i asked him he's been with

us a year i said how's work going he

said work i looked him kind of funny he

said yeah work he said i don't work he

said i come here because i love it

and that's what it's really all about

none of us should feel like it's a

single day of work we've really got the

true passion around it now it doesn't

always work out that way we all know

that there's parts of life that are the

reality check but guess what they become

trivial compared to what you're doing if

you really have the passion around your

full-time job

and aqua has been recognized for it many

times

but you'll now know that i switched from

being you know an entrepreneur to a vc

so i became a skeptic so whenever i see

awards go up i start worrying it's kind

of like you know when people start

buying buildings you start worrying

about that too uh so i cold called

somebody in the true style of you know

harvard decided it was important that we

actually you know cold call somebody

from the acquired team and figure out

what they would say

and you see whether they ended up

reflecting what tom wanted as a culture

here and

acquia has by far exceeded my

expectations because not only can you

learn but you're expected to and if i

want to test something out if i want to

try something new i'm empowered and

encouraged to do that and i love that

so i would say that's a great aspect to

the culture that tom probably would talk

about now which is it's a learning

culture

but we hadn't talked about it up to that

point and learning cultures are usually

a great basis for people to feel good

too because nobody wants to stand still

in their career everybody wants to learn

and evolve and grow

so it was great that she brought that

out it was a fun piece of the cold

calling i promise if you join my

workshops i won't do that to you too

often but we had a lot of fun with that

and thank you for the accurate team for

bringing so much energy to it

then we moved on to the

more tricky subject of business model

this tends to be something that people

say oh you vcs get all hung up on

business model i didn't want to get into

the details of the business model in

that regard i didn't want to turn it

into a financial discussion

but i did want to turn it into something

of an agenda where people could

understand how it could be something

that made an impact in their startup

finding something that could be

disruptive finding something that could

leverage as jeffrey would say the core

rather than the context

and that would bring some real truth to

how you get advantage from it from what

i'd call multipliers and levers

so we talked about it in the context of

what's the perfect startup storm

obviously if you've got a disruptive

technology and you can bring a

breakthrough business model to it too

and then get really clearly defined uh

on a really focused on a segment where

you can uniquely serve it you'll

probably be in a great spot

and i challenge people and i was very

pleased in the workshop to see how many

people came up with different business

models so a lot of people who started

out with technology business models came

back and said you know what we really

have a data business model so one of the

peer-to-peer companies for example was

developing a model around learning

actually realized that what their real

value was was data and we talked about

some examples in the real world of how

these companies have changed the idea of

what the value of of their real

product or services and and we'll see

for example how that gets valued

tomorrow with probably one of the

largest ipos we've ever seen in the

industry and it certainly isn't based

around the idea of software

which is obviously you know how you

might first experience it or encounter

it it's really based around a number of

different things such as the network and

the power of the data that's producing

so i think that was a fun discussion

but it still turned out to be something

that people had hard time with so we

talked about

you know some examples we try to bring

it to life with some examples about how

could your core where you really can

gain competitive advantage give you a

basis to monetize your business and

indeed where is it that you'll be able

to you know out compete people

i dated myself

so uh it just so happened that the week

i was building this workshop i got

invited the symantec 20-year reunion for

the people who'd been there for the

first 10 years so if you do the math

that's 30 years it's kind of ugly

but it was fun

and i had my own first experience and in

fact john bruce who's in the audience

today gosh we're both dating ourselves

that we know that uh will have

experienced this first hand with me on

the team that built this so we were

starting a business in the uk that at

the time i think we had 16 or 17

products across everything from mac to

pc languages to databases it was a tough

business we had a really hard time

figuring out how to get above the noise

and then one of our sales guys

uh started to really kill it and we

found out all he was doing was selling

one product and it was semantic

antivirus for the macintosh because he

realized guess what that was where the

easy money was people actually didn't

want to lose their data and it became a

whole data security campaign and we did

great with it but we still hadn't really

changed the game and we still had a lot

of competitors

and the thing that really changed the

game was stopping selling software

what we actually did and i can take no

credit for it because it was a actually

that same sales guy in the team who came

up with this

was he said why don't we give the

software away because when the pc

version came out viruses did this

and in fact the real challenge became

how do you keep up with the virus

definitions

so this really was just a platform to

get the virus definitions out there the

software was irrelevant the really

valuable thing was that subscription

service and if you look back at

symantec's business

you will see the inflection point at

when that company took off was around

this product and that change in business

model when we started selling antivirus

subscriptions the company took off like

a rocket we went public we blew through

a few hundred million dollars in fact it

seemed like we just jumped to a billion

dollars

so i'm a huge believer that this makes a

difference and that is not a unique

example

we then talked about some fun cases

where you could actually bring down to

earth in the startup world uh a real

understanding of what would be the

multipliers and levels around your core

and i won't go into this in too much

detail again it's up on the site if you

want it we talked about how can you get

multipliers that increase your reach get

to greater coverage in the in the base

and also

multiply your revenue what kinds of

levers could you employ that would

reduce the time for you to take uh

products to market your costs associated

with supporting them and the resources

behind them

and we came to a place where we said we

need some examples of how those both

could come together and i brought up one

of my favorite ones which again i'd like

to credit jeffrey for because we had one

of our first discussions uh in our

conference room where he looked at our

product which was in the analytics space

we did real-time inline analytics but

analytics is a tough space it turns out

you know it's a bit like an iceberg we

do that and we do it incredibly well we

were unique in doing it in the sense

that we could build it in line and we

could do it real time while everybody

else was doing reporting but the problem

is getting the data there in the first

place and organizing it in such a way

that we could do it was a whole industry

it was etl and olap and all sorts of

other things and jeffrey helped me

realize that and helped me realize how

important it is to create the whole

product model and in fact if we did it

we could just slip into a partnership

and very quickly become at the core

exactly what would change the game and

that's what we did and we got some

fabulous multipliers and levers out of

it uh in fact we ended up being able to

increase increase our revenue as part of

a bigger solution initially with

hyperion and then later with with

ibm

by the way the end of that story is ibm

ended up acquiring us we got it reached

through their sales force and their

channels and we of course reduced our

time to market too because we weren't

developing the entire stack we were only

developing the core piece that we did so

well so again thank you jeffrey and it

was a great example for the class they

all seemed to glom onto it and we had

some great case studies that came out of

it

but i got posed the question which is

okay but how do i do that without giving

away my whole value for example if i do

an oem deal etc

and so that make a little bit more

lively we came up with this

notion of what we call russian dole

packaging which is there's lots of ways

you can do this you can actually build

different versions of your product for

different channels you can also build

them in what i call progressive

disclosure so that users can have a

first experience small taste that then

they take more of more bytes of as they

want to but in the end this idea of a

russian doll packaging model i believe

is hugely powerful for startups trying

to build everything right from the

get-go in an indigestible huge product

doesn't work and in fact it's not

effective in going to market and it's

difficult in business models

so there's plenty of that on the site

too

and then other fun acronym by this stage

people beginning to realize what i will

now confess again which is i was a

horrible learner at school

i had to create acronyms for everything

so mine for taking the friction out of

products going to market was slippery

and as you'll see from this there's

there'll be a another post in more

detail on it the idea here was to come

up with ways to make your product really

easy for people to install adopt and

integrate with other things and use so

that it was obviously valuable and made

customers just say why can't i have this

not why can i have this or why wouldn't

i have this

we brought a case study into play at

that point uh demandware was

unfortunately on the roadshow so jameis

could show very little uh we were in

that lock-up period uh but he did share

how important it was that demandware

created their own whole product so for

those who don't know demandware was the

first company to create an e-commerce

platform on demand in other words as a

service so that people didn't have as

retailers to take on all the pain of

creating the infrastructure they could

get straight to working on what they do

best which is merchandising and

marketing and then using multi-channel

which is becoming the whole challenge

for them and they're not technologists

they're merchandisers so that made a

huge impact to them but what we quickly

found out was that unfortunately that

means different things to different

people in fact some people find it

incredibly important that you involve

things like power reviews down here for

example or you have analytics for things

like omniture and that there were all

sorts of these systems that are out

there and in the back office there were

things like obviously how you dealt with

tax and logistics and everything else so

even though we thought we had an

incredibly complete platform the

ecosystem around us did not think that

and to their credit the team responded

very quickly to that and i'll give you a

chance to hear in their own words how

that played out for them

the early going it was one of those you

know very shallow curves and then all of

a sudden once you start to prove the

value it spiked quickly and because of

our disruptive business model of

on-demand and shared success another

multiplier is the fact that because all

of these technologies are revenue

generating technologies it actually

boosts another

aspect up for the customers

and yesterday as i mentioned i was at

that conference there were actually over

100 partners that were there and they

actually were all bidding for sports to

be at the conference paying us money now

after years of you know us having to do

this to be part of this platform because

it had reached critical mass so it's

really turned out to be a win-win in

particular for the customer too so again

just more examples of the whole product

why that's so important and uh for those

of you who haven't read it in geoffrey's

book you'll find it in my well dog

marked well bookmarked uh piece here and

there's a really good discus description

of it there

now i always wanted to position myself

with one simple statement and that was

giving my entrepreneurs unfair

competitive advantage and so here's one

of the things that i learned the hard

way which is it's great to have

disruptive innovations but if it's

really disruptive to the point where

customers have a hard time adopting it

that's actually a problem that comes

back to the pain question and so i

wanted to find an example of a company

that actually had come up with

disruptive innovation but had made it

non-disruptive to adopt

and in the bigger world i think the best

one i have is vmware who really found a

way to take utilization on servers from

a few you know

into the teens up into you know the 80

90 percent but without changing the

applications by just virtualizing them

and of course there's some disruption

involved in that but it was minimal and

it's to me become one of the most

valuable examples of this kind of

innovation

in the startup world though i was

challenged to find it and the keeban

provided it

so david who had talked a little bit

earlier as in the front row shared his

example of how they've been able to

build one to two orders of magnitude

import

performance improvement for their

customers without them changing a line

of code in the application

that's a big deal if you think about it

and they brought it right to life by

talking about one of their customers

named media who has literally you know

got this challenge in spades because

people were literally dropping out of

the purchasing process as they went to

buy domain names because it was taking

too long to query whether they were

unique or not and now they've got it to

fractions of a millisecond their

revenues doubled now that is a

non-disruptive

and very uh non-disruptive adoption

curve but obviously a very disruptive

output so we thought it was a great

example thank you david for sharing it

and i hope there'll be many others i'd

love people to bring these forward this

is what this is all about is learning

from those

and we brought that right down to the

thing that people spend most time on now

which is actually

measuring cost of acquiring customers

and and figuring out whether they're

really in balance with

the life cycle value that they get out

of it we talked about it's not just

lifetime value because in almost all

companies that i'm involved with at

least it turns out it's important to

keep your customers engaged and the

re-engagement needs to be built into the

process in fact i will tell you right

now that having just been through three

sas ipos this year one is in

registration that turns out the most

single effective

point of leverage in the financial model

is upsell

two percent increase in upsell in your

model will generate about a 28 increase

in your market cap

so this piece that i introduced to

people isn't just

fun to talk about it makes a huge impact

and if you've got a sas model and you've

got customers locked in and you can find

a way to re-engage them cheaply which

should obviously be much easier than

buying them in the first place or

acquiring them in the first place you

can have a huge impact on your bottom

line so we talked a little bit about

that and we talked about therefore

adjusting the this to being a life cycle

value of customer and the cost of

acquiring and re-engaging or reacquiring

customers and how important it is to

look at both of those things

now i have a company that is probably

by their own admission in a relatively

boring space they're in the middleware

space you might say well how do you make

middleware easy to acquire and i really

have to give them a lot of credit so

this was an example shared by active

endpoints of

how they sell middleware in a slippery

fashion and reduce the cost of customer

acquisition so in their words uh let me

let them share that with you plymouth

rock energy down in the new york city

area traditionally had been an old mine

supplier of coal and oil to large

facilities that business isn't such a

great business anymore so they

transformed themselves into a broker of

energy including electricity natural gas

and they use salesforce.com for all of

their new customer signups so they had

to customize salesforce.com tremendously

when you sign up a new customer as an

energy broker you have to specify the

supplier who the distribution channel is

going to be whether they're going to pay

a premium for green energy sources

and it turned out for the salesforce.com

users the sales reps signing up a new

customer it was a very complex process

they had to go through the salesforce

screens so we met a gentleman down at a

salesforce.com

event in new york city on wednesday the

following monday we gave him a demo via

a go to meeting via a web meeting

he was able to get on our cloud-hosted

product started building his little

process wizard the next day that his

sales reps could use

to go through this complex process of

onboarding a new customer

by the end of the week he had it working

and the following month he placed the

order with us so you know going back to

some of the points you can probably map

what happened there into these points

but installs easily he was able to sign

up on the web he could prove value in

just a couple of days by creating a

wizard that walked their users through

these complex processes and what else do

i want to take plays well with others

having the salesforce.com

integration has been tremendously

valuable to us mike i would call it both

a lever because it reduces our marketing

cost tremendously we know who our market

is and we're able to get to them through

salesforce and it's a multiplier because

uh we're able to uh increase revenue by

so many users

so i think a great example of a very

tough space and by the way this is a

company that's generated

not six but seven figure deals over the

phone no external sales reps selling

very complex middleware software so

they've actually cracked it and it was

through real focus on some of the

concepts that we talked about in the

workshop so again i hope some of you get

to bring these examples forward and

experience what these guys did

we then moved on to to me one of the

more interesting uh areas for startups

which is thinking ahead of time about

their go to market strategy go to

market's such a big area that i was very

open up front we wouldn't cover anything

in the in the full extent of it but we

talked about how you have to break down

your initial cycle from awareness all

the way through to purchase we talked

about what some of the strategies and

tactics are how inbound is now becoming

popular whether that's appropriate or

not

and indeed what channels you might use

to reach your audience and indeed how

you might segment and target your

audience and just share some highlights

from that

i was lucky enough to have adam berry as

our eir here and he gave a very

passionate speech

on the essence of brand it's tough to uh

cut him to a few seconds but i think

you'll catch it in an essence here it's

a single core idea that unifies

everything you do

now if you know adam that could have

gone on

but he did a fantastic job and i thank

him for it uh and it was really very

passionately shared and he did a

fantastic job afterwards too of helping

people think about what do they want to

represent themselves as we got some

great feedback from people again people

realized that suddenly brand wasn't just

something that should be you know

written down as a single statement but

instead could really flow through things

so a single tidbit i'll share with you

that was a learning that we discussed

actually had it many times myself too a

lot of people had a product that was

called one thing and that a company was

called another that's tough as a startup

now you've got two things you've got to

promote if you can find one that lines

right up from the get-go it's an easy

thing to do you've now got one brand to

promote so there was an example of a

learning that came out there people had

a lot of fun discussing it

now a fun harvard uh case study um you

know what's the two by two you can map

yourself on and we talked about this

everybody has a positioning statement

everybody wants to be in the top right

and find some white space etc but what

came out of the learning which was

really much more fun was to define axes

that really cause barriers so usually

what we see is wrong with the charts

that come in it's not that they're not

beautifully diagrammed like this

it's that it becomes very easy for

somebody to say well i'm faster

or i'm cheaper or better

that's really easy for somebody to then

break through and ultimately compete

with you especially as in many startups

you don't have the resources to compete

with larger players so they can easily

just catch up with you so we had a lot

of fun talking about what would be

examples of barriers that you just

couldn't cross we talked about well you

know in this day and age for example

cloud computing if somebody's constantly

having to install their software uh to

update it then they're going to have

tough time keep keeping up with you and

so we talked about companies where well

where are the industries that have such

fast-moving change for example in

regulations that you have to have

continuous innovation to keep companies

up to speed and therefore if you have a

cloud solution versus

an on-premise solution you're going to

have a barrier to anybody else chasing

you

and those are the kinds of things we

were looking for we had some great

examples from the students

in fact one of the companies came up

with a brilliant idea which was how to

use downtime uh from some of the the

suppliers that

were in their industry as a means to

actually capture capacity and get scale

for a startup that would enable them to

compete with larger players and then

they talked about how they'd create a

barrier by locking up the agreements to

the key players that would enable it be

would make it impossible for anybody

else to to come in and play with them so

just some great examples and i learned a

lot from that

next thing we talked about segmentation

and um segmentation's a whole science

center of itself too but um there were

at least three people who wanted to do

mobile apps uh actually i think there

were a lot more than that and so i try

to bring an example to life not to be

brutal but just to be brutally honest

about why that's a tough business

and especially in the b2b space but

probably even more so in the b2c i just

that's not my particular area

and one of the people asked me to share

an example of what might make a

compelling mobile app so what we did was

we said well instead of just saying i've

got a generic app that's interesting to

uh anybody's got a mobile phone what if

you said well it's for mobile

professionals actually field workers no

in services oh and by the way

specifically medical equipment that's

sold to hospitals that needs to be

serviced so it saves lives well now i

think you've got to a place it's pretty

well defined and it's mission critical

and you might have some value there

turns out by the way that is a real case

study for one of our companies called

antenna

which didn't get it right to start off

with but is now you know the the giant

in that industry and along the way by

the way they consolidated 117 million

dollars worth of venture capital from

seven other companies sorry six other

companies today um there'll be a seventh

uh that

went to waste for the companies that had

generic mobile platforms in the first

era and we bought them for by the way 12

million so tells you what happens when

you get it wrong real examples of why

segmentation is important and then i

shared something that i learned from

geoffrey a long time ago which is

you shouldn't be afraid to focus jeffrey

brings it to to life in his book around

building beach heads but it's still a

struggle for me when we listen to

startups all along and in fact more so

as i've come on to being a vc is

realizing people want to do too much

i would just ask you one question which

would you rather build on success or

downsize and contract on failure

i'll tell you unfortunately we see the

latter happening much much more often

than the former and so if you could just

start on one thing and get it absolutely

right and target it in such a way that

it can be something of a success even if

it's in the narrowest segment of one

person and build on it so much the

better as jeffrey will share with you

it's usually in many instances better if

you can do that in an area where it can

be referenceable and then build on

itself through that referencing so we

talked a little bit about that and

brought up the demandware case study

and again uh i'll let them uh jameis the

head of marketing to share with you how

he thought about it uh and actually a

little bit of context here so demandware

was in a in an it's early stage

struggling with something that everybody

struggles with which is okay you have an

e-commerce platform now who do you sell

it to do you sell it b to c or do you

sell it b to b to c okay which kinds of

retailers do you go after do you go out

to branded manufacturers do you go off

to brands you know it was a big

challenge

and i would say a big part of why we

were successful at one point was through

james's segmentation

how do we really focus in on a place

where we can win we thought about uh not

just even verticalized segments but

segments within segments within segments

and the particular segment by the way

that really became so successful was was

really high fashion brands because guess

what they all love to talk to each other

they're very competitive they will for

example you go down to new york you can

even geographically cluster them and

they have in many instances multiple

brands like if you took jones the jones

group for example they have many brands

within that and so it became a

multiplier in our business model when he

segmented it that well

now here's another thing i find startups

really struggle with so we got into this

in a little bit of detail too which is

in this funnel people make the the

assumption that you're selling to one

customer and that's very rarely true

the guy who at the top is buying as a

visionary is very rarely the same guy

who's actually writing the check for you

he probably has a lot of people to go

through and along the way you'll come

across people who are technocrats who

are perhaps the devops people who have

to implement this in the back office uh

the influences for political reasons and

ultimately people that obviously make

the decisions so we talked about how do

you actually get the persona of those

people into your buying cycle because i

can tell you sitting in the boardroom

the number one issue that i'm always

dealing with is the pipeline stuck we

can have that discussion in tremendous

detail but this will be one of the top

reasons that will come up is that people

haven't really thought about who they're

selling to and at what stage they are on

the cycle and what the value proposition

is that's moving them from one step to

the next so it was a fun discussion

and then i brought out the truth which

is unfortunately you don't control a lot

of this and so the model i've shared

with people was uh it's really like

driving except the bad news is all you

own is the gears

the customers own the accelerator the

brake and the clutch

and the reality is that is very much how

it's true and we talked about what are

some of those abc's that celebrate

accelerated brakes and clutches that the

customer owns and what are some of the

gears that you have that can change the

momentum when the customer gives you the

opportunity

puts the clutch in and you can change it

so it was a fun discussion um what came

out of it for me is that's a whole topic

we definitely you know need to expand on

that

and it'll be fun to do because there are

lots of things to learn from it

one of the things i learned in the last

decade and i'm sure everybody's seen the

change is the web changes everything and

it changes everything in such a dramatic

way in fact it makes everything very

much a closed loop you can actually

measure everything and you can close the

loop and see what the impact is of what

you're doing in campaigns so we brought

up

one of one of my companies unidesk

to talk about this and actually they

gave a whole guerrilla marketing pitch

in my opinion which was great because

they talked about even before they

launched their product how they started

to create influence and uh get awareness

for their solution before they even had

a product and by the way it was nine

months before

so let me again let them share a little

bit of uh you know their own voice here

as to what they did there the cool thing

that about unidesk is that we have very

passionate customers who want to tell

their story about their success it gives

the customers confidence that gee if i

go with unidesk i'm going to be part of

this growing community you know listing

of all the partners ranking them

identifying who we wanted to target how

we wanted to message to them how they

performed with vmware what our unique

value was going to be you needed to be

crisp you had to have your buyer

personas baked i mean all of those

things needed to be aligned

so it was it was great fun doing that

and then we again boiled it down to

reality which is if you can't measure it

you can't manage it and the new world to

me it's about results-oriented metrics

driven execution and this is something

that's becoming more and more a part of

the challenge in marketing in fact we

ended up having an innovators and

entrepreneurs dinner around just the

subject with a whole bunch of people

from uh the boston area to talk about

what is the new challenge for cmos and

what we heard at that dinner was

something really interesting which is

cmos these days are having to become

almost data scientists as well as you

know uh people who architect their own

platforms for measurement and there's a

whole set of challenges now that just

didn't exist so i think this will be an

interesting subject as it continues to

emerge too but unidesk brought forward

this incredibly detailed spreadsheet

which just went to the point of showing

how much they measured and again in

their own words i'll let them share with

you what they think at the end of this

all is measure everything everything you

do you got to refine it you got to

measure it so we've got spreadsheets we

track everything we do to refine that

funnel then when you think you've

measured enough

go a level deeper

believe me that is exactly right and the

number of times we've learned how we've

got a sticking point somewhere because

we actually didn't

measure it somewhere else and actually

you know if you move it one place during

the final you've got to figure out where

the next blockage comes but if you

measure it everywhere you can get to

that place so it was a lot of fun and we

ended that on high uh with a number of

great presentations from people about

how they take their companies to market

which ultimately came forward in the

next session and that's the pitch

session

so as i bring this to a near conclusion

i do want to stop for a second and say

thank you because there were so many

people who brought so many great

learnings back both for me and for the

audience as a whole and that

participation was really what this was

all about it was really about the

workshops so if i have any criticism of

myself and i'd like lots from you it was

that i'd probably cut the content in

half next time

and start the workshops with twice as

much time

and maybe just you know do more of them

in uh you know in the set in the

coverage of the various different pieces

if people want them

but love your feedback on that and again

thank you for participation i want to

thank also

all the companies uh from my portfolio

and one who outside of it from the

materials group mc10 that came in to

help um to pitch their own experience it

was incredibly valuable

frankly for me it was what the value was

i also want to thank

all the mentors and coaches who are

involved uh too too numerous to mention

actually all the others that could be on

this list because a lot of people came

in uh on the evening and and just jumped

in

but i particularly want to say

that one of the things that touched me

here was that i didn't ask these people

formally for that time they kept

volunteering it and they kept engaging

month after month and in many instances

helped and coached behind the scenes as

people started to put their pictures

together

and i also want to thank the judges who

came in again many ceos and one of my

partners i decided we had to have a one

at least vc on there uh he was quietly

overruled many times which was good um

and uh i loved the feedback actually i

thought i will tell you that the

entrepreneurs were much more brutal

about themselves than we would be and so

i kind of learned wow i think we should

get more entrepreneurs into our partners

meetings

i was learning a bunch of things there

it was great fun so with that let me

share a few minutes of video it's about

five minutes of video because we

couldn't obviously have the pitch

competition today here for you to hear

the pitches and the judges and then

we'll be wrapping up

just what is it that you want to do

we want to be free

we want to be free to to do what we want

to do and for us this core knowledge

base that we're building up around user

experience is going to give us important

information on the multiplier side and

drive engagement on the lever side

really challenge yourself to think about

what is 10 times better

i think an excellent pitch from sarah

[Music]

so sarah you raised sixteen thousand

dollars congratulations

my research at the school of public

health is focused on infectious diseases

and how they're transmitted among people

i think the value proposition business

model part on the health agency part was

very clear it was how you define the

white space

because that

it

it seemed it really made sense

but i do think that there's an

opportunity for you to to package that

information up

and slice it and dice it in a way that's

meaningful to the potential customer

next regina you raised 48 000

and with a cold imagine what you can do

when you're healthy fantastic job

when you look around today in this room

and you look and you ask what's the most

amazing technology in the room i think

the answer is right in front of us

it's biology

because these are the most advanced

machines that exist in the world

it certainly seemed to me like the idea

was compelling in terms of value

delivered to society as a whole

where i had trouble figuring out is how

does that value accrual breakdown of

different segments i mean first of all

that was great and certainly um uh you

might have cornered the big idea market

here today so

definitely i love the fact that the

second round is 25 million that's one

for northbridge eric kelsey

eric you raised 39 000 congratulations

[Music]

and to that question you raised may you

find a way to answer it it's quite

inspiring so i'm catherine wolf and i'll

be sharing with you organjet

uh just to tell you in one sentence what

we do

so organ jet helps patients um get organ

transplants faster

that saves lives uh saves money

increases uh improves efficiency by

increasing the supply of transplants

through the creation of a profitable

business i thought you did an excellent

job there there was no question in my

mind what the problem that you're

solving is

this team and again you oriented us very

well with the team this is the team

that's a credible team to solve this

problem

there were a lot of really detailed

slides in the problem statement i bought

into right away i didn't need the extra

six slides to go through the problem

statement i'll be really impatient while

you're going through the six slides

telling me the problem over and over

again as opposed to getting into these

questions so of course i'm more patient

than abc

our team of katherine and cecilia

you raised 58 000 congratulations you

guys

may one day that be real money and be

saving real lives

so to analyze the market

we found that the market opportunity

there is less than 10 percent of grants

get funded in the scientific community

the second thing there are around 40

percent of scientists time spent

submitting these grants so there's a lot

of wasting time for the scientists

trying to do that so the way we envision

poster for is creating a forced channel

for the researcher to crowdfund their

ideas through the public it was

beautifully presented

really tremendous ways that the service

that you're talking about could gain

significant revenue traction

and provide a tremendous service for

researchers in getting their projects

funded more swiftly so far uh you know

we've seen someone with a new

uh

you know desktop or info worker

productivity tool we've seen uh social

media community health

data play

we've seen something that had to do with

bioengineering

and now we're on to crowdsourcing

our winner this evening ahmed

69 000

come on up

and three tickets

may the red sox thrash the yankees in

your honor congratulations

[Music]

so congratulations to all of you and

thank you very much

so now we have at least a couple of our

uh winners here so sarah i'd love you to

come up and receive your book from

jeffrey and he'll get a chance to sign

you a note a little later on

and regina are you still here

congratulations regina

[Applause]

so unfortunately we don't have our other

winners here as uh somebody showed up

ahmed's here oh fantastic sorry one more

ahmed please come on up as the ultimate

winner too

i have one question for you

did the red sox win

dangerous to ask questions like that on

the fly

okay

next year

i'll get you another seat

so uh as we wrap up here i i do want to

say one thing that's very personal to me

there was no workshop without you and um

i hope in some small way that each of

you takes away something that inspires

you to help

be an entrepreneur or help other

entrepreneurs because what happens here

is always a very simple thing

people make things happen

and the great entrepreneurs find what

their passion is they pursue it with the

kind of conviction that it takes to make

something really impactful in the world

and in my experience no amount of

sharing or learning or anything else

makes any more difference than you

finding out what that is and so thank

you for the opportunity to do it thank

you for the people who inspired me

who came up time and time again and

shared their thoughts brought their own

passion and conviction

also were very personal about it and

indeed brought a lot of fun it was great

fun thank you all very much

so while jeffrey you come up and get

settled here um i want to say just one

last thank you because they often get

forgotten and gotten in the scene and i

don't want them to be the ilab made this

all possible so a big thank you to jody

to neil and to gordon for enabling this

jeffrey really needs no introduction but

i just want to share it to you in a

personal way he i think is officially an

author and an advisor but he's actually

behind the scenes an all-around great

human being he's uh somebody who

actually started as an english lit major

i believe is that right yeah and you can

tell that in his writing but he's one of

those people who when he got into for

example regis mckenna and worked with so

many startups realized there was a

fundamental problem why startups weren't

making it to the promised land instead

of just watching that he did something

about it and i have greatest admiration

for the fact that he not only did

something about it but he put in a

framework that has made the impact that

it has on so many people so jeffrey

thank you it's a great pleasure to have

you here thank you very much thanks

great

um

so i kind of feel like you've already

gotten your money's worth i mean like

you know maybe five minutes won't be

done uh what michael was doing and

what's so important about about the

startup world is frameworks really

really count

because at the beginning you have that's

all you got

there's no data there's no history

there's no there's no inertial momentum

there's only projections into the future

and using frameworks to create common

vocabulary is the way you navigate in a

startup

and what i want to do is share with you

and by the way that's what makes

people who love startups they love that

act of mind

that active mind begins to be

selected against

as

organizations get larger and larger and

larger and that creates a new set of

problems which are kind of reflected in

the title this book that i've been

working on so for the first 10 years of

my career i worked almost entirely with

startups entirely around disruptive

innovation got to know clay christensen

innovators dilemma that was what it was

about those we call it the 90s

particularly the late 90s we call the

time of the great happiness

it was just it was just great and then

the bubble popped and when the bubble

popped one of the things that happened

was the companies that were left

standing were the established large

enterprises

and we begin part

and we begin and we begin working with

them and and what i want to share with

you is that is that

the books that michael was referring to

crossing the chasm inside the tornado

that was from from the point of view of

taking the first your first

enterprise kind of all the way through

the life cycle

what with the later books about what

this book is about is more about

a new tech challenge

and the old tech challenge was sort of

you know leveraging disruptive

innovations breaking into developed

markets navigating the life cycle

crossing the chasm and a lot of it is

emotional i mean i thought what was

really cool about what michael did for

the last hour is

it's your life right i mean it's it

comes as much from here as it comes from

anyplace else

looking at the new challenge it's a

different situation and it's it's not

it's harder to have that personal energy

if you're in a company of 10 000 people

it's just it's a very very different

beast right it's just and but society

needs these companies it's not like we

can say well you know we'll just all be

startups it doesn't work okay the world

wants to sum things to scale and but if

you're going to scale and if the

innovations that you're bringing to

market as an entrepreneur are going to

have the biggest impact they must scale

then we have to figure out a new set of

issues and i kind of want to share some

of the learnings that have come out of

that so the the challenge now is how do

you leverage established enterprises and

how do they break out of not break into

we were breaking and entering in the 90s

now we're trying to actually break out

escape the kind of the inertial pull or

the gravitational field of your past

right and and solve for this thing that

clay called the innovator's dilemma he

wrote that book in 1997.

it's been 15 years you might think we

might actually solve for it right

somebody's just well no it's

it's a problem we'll just live with it

it's like no no and so that's what

escape velocity is kind of focused on so

just to give you a feeling of this you

know i've been around michael's been

around for 20 years i've been around

longer but i just this is a kind of a

credit list

of companies that did not escape

many of whom were headquartered within

probably 50 miles of where we're

standing right now

and you look at that list of companies

and the drill here is these were not bad

companies this this was the best of the

best this was us right

so you think whoa

okay so maybe maybe it's a little more

serious than i thought however to be

fair when i would put up that list a lot

of people would say to me jeff wrong

century dude come on come on 21st

century come on wake up wake up wake up

so what i want to do with you now i'm

going to share with you just six slides

that are comparing

10-year histories in this century

of major established companies to the

nasdaq okay

so that you you may not be able to read

but this is microsoft intel and sap the

orange line in every case is the nasdaq

and the other line the blue line is the

company now you can't you really can't

see but must see but just look at the

orange number at the top that tells you

how high does this access go so this is

a hundred percent access so what this

thing says is over the over the first

last 10 years the nasdaq's gone up about

60 percent microsoft's gone up about

looks like about maybe four to eight

maybe nine percent

intel's actually gone down a little bit

and sap is tracked almost exactly to the

nasdaq okay

so those are three kind of okay pretty

close the next one's 150 thing and again

you know so uh the nasdaq's outperformed

cisco uh at least

recently ibm has outperformed the nasdaq

recently nokia took a kind of a header

with with the ender and with the iphone

coming into the world uh adobe's kind of

had a good run this kind of come back we

call it regression to the mean or coming

back to the norm you look at the next

ones you say okay uh this is hp the sort

of the the herd moments where they got

had quite good stock volatility came

right back oracle has kind of have a

sustained i think their whole

consolidation pitch i think people are

saying wow that that's real new added

value mc with emc and

netapp with storage i think the

categories are helping them a lot

this is now 400 variability google

obviously is still kind of on their

first run

way to go

uh autodesk i made i think a significant

change in in their world getting more

into in design and the consumer world

ebay big run kind of came down you got

to hand it to john he served doing some

good things there

citrix quite quite an interesting

company

of recently uh yahoo

more trials more tribulations kind of

kind of tough

uh and intuit interestingly maybe coming

into a new world with with this new sas

uh and smb world and then there are two

other stocks

there's amazon

and there's our friends at apple and the

one at apple by the way goes to 5 000

okay

now you look at that and you think

okay

what

what's going on i mean

what is and i think the conventional

wisdom here and what

what i've heard all my life is well

the winners outperform the losers right

or their peers

well if outperformed means the line went

higher yes

well what is what does outperform mean

and i don't believe this

i don't believe i know the companies

that quote

did not outperform the nasdaq i got to

tell you those are some of the most

remarkable performance cultures you will

ever see

so these i mean there's a couple of

exceptions of places but in general

these companies performed unbelievably

well for the last 10 years i was very

close to cisco for the last 10 years and

very close to to sap and there's a lot

there's just really really strong

performance capabilities

my belief is that this is not about

performance

which is a little bit anathema since i'm

on the board of directors and

shareholders really believe in

performance and i'm probably going to

get fired but the deal here is

that if the delta in stock price is not

about performance

what is it about

i think it's about power

and what i mean by power is

i mean the reason i think changes in

power affect changes in stock price is

because investors care about your future

performance

and they actually value a share of stock

as a share of the future earnings of

your company not the past earnings

so what they want to know is do i think

if i buy your stock today you will

outperform your past going forward

when microsoft is dead flat that doesn't

mean microsoft isn't performing it means

microsoft is not outperforming its own

past

okay

it is captured in the gravitational

field of its own past

and so i think the p

in power is the p and p e ratio

and that when these companies change

their stock prices what happens is it's

not that they've changed their

performance it's that people see them

having

much more power and so for example

if you think about apples with this five

thousand percent

why do you believe why is apple worth 50

times more now than it was 10 years ago

well dude

the ipod itunes iphone ipad where you

been jeff okay so the point is they had

three net new earnings engines

added to a fourth one which has become

revitalized by the other three

so they've now got four

massive earnings engines where 10 years

ago arguably they had none or

15 years ago when steve came back in 97

arguably they had not okay

so this issue around power what i think

this means to me is what i want to spend

time with uh with larger companies and

this is a conversation that that

investors always have with small

companies and startups in a startup

there is only power

there is no performance on a startup

right there's powerpoints but that's

pretty much it right right so so so so

if you invest in startups you're only

investing in power that's the only thing

that there is to invest in now you want

to translate that power into performance

but what's interesting about large

established companies is that things

gotten reversed and it's gotten reversed

to the point that that people look at at

quarterly returns which is which is

their version which is in fact the

classic metrics of performance are built

around quarterly financial returns

and they start trying to play

they're trying to guide the future of

their company and make management

decisions

based on quarterly returns which are

performance metrics and i will tell you

if you don't perform you need to pay

attention to them

but so it's not that they are that they

are unnecessary but they are

insufficient

and in fact i think what's happened is

that the performance dialogue has become

so articulate and the mba curriculums

have become so effective at managing

performance were wildly out of balance

and what we need to say is look it's not

anything about performance is wrong

because it's a yin-yang right you create

power in order to consume it through

performance in order to create returns

to invest in more power

let me say so it's a yin and yang right

so so but the game there has got to be

we got to talk more articulately about

power when we come to talk about power

in large corporations and i'm a strategy

consultant so that's kind of what we

talk about

the conversation goes from like

post-graduate to third grade okay it

just sucks

so the intent of this book and the

intent of the work for the last five

years is

we need to have a more articulate

conversation so it's back to frameworks

and just like michael will put up i

don't actually use quite as many uh uh

uh

acronyms or slipperies and flips and

cubes and roams and you know all that

kind of cool i just five but but but the

frameworks are are the key here because

again when you're talking about the

future you're talking about stuff there

is no data from the future okay there's

kind of a basic rule so therefore you

have to have frameworks to project into

the future so this framework says when

you're talking about business power

you need to sub segment that

into five kinds of power

and that a lot of the conversations

about strategy that are bad happen

because the vice president of sales is

thinking about you know about market

power the engineering guys thinking

about offer power the you know company

power the cfo thing about company power

you know some vice president of business

development's thing about canada and

they're all talking past each other so

here's how it works

the first and i by the way this is the

order of importance i think the most

determinative

predictor of your future returns i

believe is what category you're in

this is sort of like pretty much

investor 101. you know do you want to be

invested you know if you could be in in

printing right

or you could be in search

or you could be in storage you sort of

think or you could be in desktop pcs

it's like okay you know you could be the

best house in a bad neighborhood

or you could be kind of a mediocre house

in a great neighborhood and the first

predictor of your of your future for the

next few years is going to be what

category are you in so if you're a large

company the challenge is could we get

into a new category

could we i mean obviously because

because basically we're getting credit

for all the categories we're in already

could we get into a category because

category moves a whole bunch of money

into a new place could we do that could

we do that so that's a pretty important

question for companies to ask themselves

every year many years the answer is no

sometimes the answer is yes if

and of course part of what we're going

to talk about today is large companies

are spectacular at not being able to do

this

like just world class at not achieving

this objective okay and they spend a

fortune against it so it's a big deal

but what we've got to do here is like

damn it clay told us that 1997 we have

to solve for this we can't just we can't

just shake our heads and feel superior

okay

company power

company power is

are you the go-to company in your

category do people do the partners in

your ecosystem bring the business to you

first

then you've got company power if they

don't you've got a challenge now you're

swimming uphill all the time you're

trying to earn a thing that actually

will get you into market power which is

okay if i can't be the gorilla

if i'm playing a chimp game i got to

have some place where they like chimps

my chance the fact that apple was around

to do the five thousand percent was

because it had a set of incredibly loyal

customers that carried it through a very

very very tough patch

so markup and

when you're small and when you're

crossing the chasm and when you're an

entrepreneur the whole key there is i

need to find some market that will be a

home where i can grow my company and

that the market itself will protect me

my customers will defend me against my

competitors because they're that loyal

to me why because i made such a deep

commitment to a problem that respects

especially unique to them that pain gain

thing that michael was talking about i

made a whole product commitment that

nobody else is willing to make i'm so

little it looked big to me

right but all the big guys it just

looked like sand in their shoe so they

wouldn't do it okay and then there's

offer power which is you know the thing

itself the price the performance the 10x

effect that michael was talking about

that's offer power and it's great but

you got to understand offers are

ephemeral right so offers come and go

but they are the only thing on this list

that customers can buy so they're pretty

darn important but you got to realize

they can move and then finally execution

power and you think well jeff i thought

performance and execution the same thing

for most of the time it is the place

where i don't think it is is in this

thing here which i'm going to talk to

you uh i want to talk a little bit about

execution in terms of strict anything

that is a strategic initiative which

requires you to cross a tipping point

it's a subset of execution problems the

claim i'm making is that for most

classes of execution problems large

corporations are extremely good at doing

them particularly if they've done them

before

but in the class of problems where you

have to actually change state and pass a

tipping point

large corporations are very bad at it

and that's

that's a huge huge problem for them

so so the whole book just this book here

this red book it's organized around

those five there's a chapter on each of

the five powers and sort of

how would you play it and it's told from

the point of view

of a larger company of a large company

who's trying to do this

there's two reasons for the

entrepreneurs in this room to maybe

still say

well why would i even open this thing

the first is you might get acquired by

one of these guys okay and then you'll

learn about a phrase called an earn out

okay

so there it will be a period and further

when you marry off your only child to

someone you you actually care about the

future of that child so you're so if

your company goes and gets acquired by a

larger company you're going to care

you're going to care

so hopefully there's some things to play

there and also the second thing is

particularly in this next section i'm

going to talk a little bit about the

learning around execution power and i'm

going to close with a little bit of

learning around the category

not going to try to do the ones in the

middle but but the ones at the beginning

this execution power there's something

in here which i think will be fun for

those of you who are not b to b

but who are in fact either b to c or b

to b to c one of the things we learned

about crossing the chasm as michael uh

championed it it is a b to b book it's a

b to b book about b to b problems the

last 10 years has been a whole lot of

b2c stuff going on crossing the chasm is

nowhere near as important as inside the

tornado and the way you play the tornado

is very different so i'm going to

actually show you a companion model to

the crossing the chasm model for b2c

stuff which i think will be kind of

interesting and but i want to make the

point in this context it's about

crossing both cases about getting past a

tipping point

the tipping point that an entrepreneur

has to get back for past is at the

margin do i have a persistent company

what an accountant will call a going

concern

and until you've crossed the chasm you

do not

meaning if you withdraw your personal

energy your company will go away okay if

you don't get the next round of funding

your company will go away there's a

point at which you cross a tipping point

and if you go away and the funding goes

away the company still persists it has

enough of a flywheel of market reality

customer commitment partner commitment

working capital et cetera et cetera it

is a going concern

that's the fundamental tipping point

that entrepreneurs worry about the

tipping point that established companies

have to worry about is is it possible

for us to onboard a net new earnings

engine in this enterprise or not

and if you can't

then you cannot then using stock

performance is going to be a very very

very unhappy compensation

uh uh mechanism for you for decades to

come as it has been at microsoft as it

has been at cisco as it has been at sap

because it's damn it the stock doesn't

move

and what does it take to move the stock

and the claim is it takes a net new

earnings engine to move the stock

okay that's the idea and so that is a

kind of an entrepreneurial idea as well

okay so the execution thing so this is

transitioning to scale growth born from

reaching tipping points both think about

this both as an entrepreneur who's at

northbridge or mdv or some other

incredibly high-class vc firm i don't

know if there are any others but there's

those two

i'm a venture partner at more davidow

uh where we funded michael at that time

anyway um execution so you might be

there or you might be you've just been

bought by

ibm cisco microsoft google whomever

so the arc of execution where in the

execution life cycle are you so when you

look at execution you have this thing

okay we're inventing it

and at some point we're going to deploy

this thing at scale

and eventually if it's out in the world

long enough we're actually going to

worry about how to optimize this thing

and the scalability is is the key thing

that i'm going to be focused on there's

a subsequent transition around

profitability

the consulting ideas about deploying and

optimizing

are about 30 to 45 years old they're

extremely good they're based on using

data dramatically they're not based on

very much on frameworks but the stuff on

scaling has to be still based on

frameworks because again you're

inventing the future so in this model

that didn't work very well okay so in

this model

there's a tipping point

and the claim about this tipping point

is

prior to the tipping point

every day it is harder

you wake up and it's actually a harder

day than the previous day

what it's a little bit like bicycling

you know if you start bicycling and you

go over a hill

you're kind of going initially on the

flat your bike you're starting up you

know you got your bike going okay it's

going it's going pretty good pretty good

and then you start up the hill and

you're still pedaling pretty good and

then they're just like

okay there's some point in here in my

case sooner than your case but but but

you at this point and until you're going

to get to the top of the hill

every next 10 yards you're actually

performing

worse than you did the prior 10 yards

okay

so so if if i'm using performance

metrics

your performance is degrading

systematically as you go forward and

sooner or later if i'm using if i'm

looking at you through a performance

lens i'm going to say

jeff you're not much of a bicyclist are

you huh dude dude she'll like maybe

drive or walk you know get off the bike

we're not going to fund the bike any

longer okay

that's what happens to strategic

initiatives okay in other words they get

to that point and and

so the key concept here and it's a real

challenge is to say to people

until you've reached the tipping point

no performance metric matters unless

it's related to getting to the tipping

point past the tipping point

so return on invested capital return on

equity uh you know operating ratios cost

a cost to traffic revenue every

conceivable operating metric that the

corporation runs all of its annual

planning all of its investor relations

around

it's not that they're irrelevant they're

toxic

they're toxic okay that's why there is a

venture industry because venture you

know venture and what venture does

though to be fair to it it just takes it

completely out of that environment

and says we're just going to play in an

environment we've raised capital with

the understanding that operating metrics

aren't important until after the tipping

point that's the fundamental contract

with the limited partner that is not a

contract you have in a large corporation

it is not the contract with a public

shareholder

so understand if you're running a large

corporation you've got a real challenge

and by the way we can say well that's

their problem not our problem except we

live in a society that needs jobs

and large corporations have a lot of

jobs okay okay so why tipping points

this uh

michael was talking about this but this

notion that adoption is social people do

what they see other people doing that's

what creates a tipping point

junior high dance problem right boys on

one side of gym girls on the other side

of a gym right adoption is social right

i'm not going you go out there i'm not

going out there right and then at some

other point it's like everybody's out

there and oh my god i gotta get out

there right

it was very harder by the way in my day

because in my day a boy and a girl had

to dance in pairs right it's a little

easier now you just get out there go

ahead dance like a round like this

you'll look good you'll look good okay

it leads to two mirror image phenomena

which is the chasm which is i'm not

going out there and the tornado which is

i'm not standing i'm not stand back

right but both cases it's peer pressure

right it's peer pressure in both ways

uh pre-tipping point no progress is

sustainable

and post tipping point there's no going

back

i mean the the tipping point is

fundamental to this game and any

strategic initiative has a tipping point

idea behind it so

so managing to the tipping point became

a really powerful notion and i kept on

challenging managers i'd say you know do

you guys manage to the tipping point do

you even have any metrics about where

you think the tipping point is do you

have any do you have any

how do you know how will you know

finally one ceo said jeffrey stop

tipping points are really easy to see in

retrospect right

how do you see them looking the other

way

good question let me get back to you on

that right it's like okay how do you and

the issue is you so you have to start

using frameworks and you have to start

making guesses

and you may just arbitrarily invent it

and we say you know what we believe that

250 customers will have passed the

tipping point

you don't know that you you you you your

gut tells you something you say and in

addition to that if 80 if 18 of those

customers cross reference to another

customer or you know if i see you know a

a return to my site of you know more

than 30 percent of the customers come

back more than once a week and they'd

stay there more than six minutes who the

hell knows what it is right but you have

to have something to say let us drive to

that place and see if we got to the

tipping point

and

and and then

kind of playing playing it forward so

the tipping point in the b to b world

this is the one that that michael and i

spent all the time with the knights

it is a great b2b model it is not a b2c

model but it just said look

in this social adoption of things

there's got people that go really early

the innovators then the early adopters

the early majority the late majority the

laggards

the key thing that the crossing the

chasm was about was guys the first two

groups secede

from the bell curve and create something

we call the early market and that also

however the pragmatists will not the

pragmatists are hanging back now

and that created the chasm

and the whole idea behind this was if

you could find a subset of pragmatists a

very focused segment remember michael

took you through all those circles and

we got down to field service personnel

the medical equipment in critical care

conditions right right there

fine we called them pragmatists in pain

because private is in pain are more

likely to convert before pragmatists in

general but eventually you do get the

killer app for pragmatists in general

that's what creates the tornado that is

no longer a niche market phenomenon

that's now a mass-market phenomenon or

at least a horizontal phenomenon and

then you get to mainstream and the key

lesson of this model was when you start

an innovation you have to do it twice

the first one flames out so when you

think you've lit the fire you've lit the

pre-fire it's an important fire to light

that's what steve blank was trying to

tell us with four steps to epiphany

that's what eric reese is trying to tell

us with pivot they're actually doing

pre-chasm entrepreneurship

there's a lot of work you got to do to

get to the chasm okay but the point of

this model is you got to light the fire

twice and the way you light the fire the

second time is totally different from

the way you lit it the first time

so first time you you light the fire on

optimism second time you light the fire

on pessimism right the marketing of the

first one is look at all the wonderful

things this technology can do look

marketing for the second one look how

deep the soup is that you're standing in

okay and i can get you out

but totally different totally different

that's why the whole product became so

important to the second one i can get

you out of that quick stand i have rope

i have i have a place to tie it i have a

winch i got the whole thing right that

that was the promise okay

in that world we developed a whole set

of metrics this is the set of metrics

it's been around for a long time but at

every stage it would say to you

are we here and if we've done these

things are we going to move on to the

next to the next move and

the b2b world has had a chance to play

with that for a while the problem with

these metrics is

and it started happening about four or

five years ago i'd start getting these

kind of nice

sort of deflecting comments from

students saying

you know that crossing the chasm

that was a great book

did you say was yeah yeah was yeah

yeah no really but really jeff it was it

was a great book right oh thank you

so it's like

they said well well jeff i mean google

facebook youtube i mean instagram where

was the chasm in instagram he got a

billion dollars

what effing chasm is usually what

they're usually saying you know it's

like what are you talking about

you are so clueless it's embarrassing

okay so

and you know it's that's not bad if you

hang out in adventure for me at least

try to look close i mean you have a clue

you don't have to actually have a clue

but you have to look like you have a

clue you can't stand on stage being

clueless because it makes your partners

embarrassed

so we said okay we got to come up with a

different way to think about this

and so

spend some time with people who are

doing these kinds of projects

so what what do you do

how do you make these things work and we

came up with this concept that the

entrepreneur is like a like a starter

motor and you're trying to start one of

these things

we're trying to start a tornado what we

realized is there it wasn't a chasm

problem it was a tornado problem

and you say well how do you start a

tornado kind of because particularly on

the web

and so they said well

you got to acquire traffic somehow so

part of the thing is i'm going to run

some experiments to figure out how can i

acquire traffic hopefully at low cost

hope maybe at no cost

then i have to come up with some way to

engage

i've got to engage this traffic in a way

that that causes them to participate and

value me

then at some point i've got to figure

out how to monetize this now in a lot of

these models monetization comes very

late in the game but you have to figure

out eventually

and then i need to figure out how to

enlist people to help me acquire the

next traffic so so whether that's an

upsell of myself personally or whether

i'm referring a friend you cannot you

you have to have the community has to

help you enlist uh to to get the next

the next round of acquisition so think

about zynga and you know how getting

your friends to play farmville with you

that kind of an enlistment idea right so

engagement is you participating but

enlistment is when you actually get

other people to come uh play in the

community as well so you think about

about how this works um the the the the

uh

the guy in the middle the starter motor

what he's doing is he's running these

experiments so he or she acquisition

engagement

you know monetization enlistment we're

just we're just kind of how would this

work and then if the enlistment could

get some more acquisition okay well

could that get some more engagement or

could that get some you know

can we

and could we get a tornado

and the answer is

maybe

maybe

not not so often but this apparently is

state of the art

you know and by the way uh prior to most

of this you were in the dorm room and

your parents were paying for the dorm

room anyway so what the hell right i

mean you know it didn't cost that much

um but but that's kind of what was going

on so when we looked at this we started

to decode it and say okay so

what's going on and why does it matter

and we realized that two of these gears

were performance gears now they were

those are the gears that people were

measuring

comscore they were measuring them on you

know any way they could

and the monetization gear and these are

the two gears that anybody who had

investment in the company you know is it

how much traffic are you getting well

how much are they spending on you give

me all give me all your operating

metrics

we call them the performance gears then

we looked at the other two gears and we

said you know what they're the power

gears

they're the power gears and they're

actually the gears that are going to

determine the future performance

so how engaged

our people in this operation

the consumer and how enlisted are they

and enlisted by the way there's a really

interesting very simple enlistment

metric called the net promoter score you

know that i think nps where the the

question the fundamental question they

ask you is

how likely one to ten are you to refer

this

offer to a friend

it turns out if a person says nine or

ten

that means you have a viral a positive

virality

if they say seven to eight

you have a neutral virality and if you

have less than six or less you actually

have churn you have a negative a

negative virality okay

so we're looking at i say okay so gosh

so so that led to a pretty interesting

idea so here are the four things you

want to measure

and you do want them and by the way the

person who said measure and then measure

underneath and then measure underneath

these are the four places you want to

start and then you want to go into

how what is your rate of gaining new

traffic or new users if it's a retail

game new customers whatever it is

what is their kind of engagement whether

that's length depth frequency of user

engagement obviously in different

situations those are different things

how well is this thing monetizing one of

the knocks on zynga is like three

percent of their traffic monetize

ninety seven percent of their traffic

does not monetize say well that seems a

little bit concerning

uh and then and then enlistment who

helps and by the way if you look at

different

properties right now you say well let's

look at linkedin

linkedin acquisition off the top off the

charts

uh

enlistment you bet people tell you to

get on linkedin okay monetization

the recruiters alone can monetize the

hell out of that thing right

engagement that's their concern

we don't spend enough time on linkedin

right that's their words that's where

they're worried facebook you've heard of

facebook perhaps okay so facebook what's

their issue well about a billion hundred

billion because they have an issue yes

they can have an issue acquisition

900 million i think they got that one

pretty good okay no no i don't think

it's a big problem engagement you got to

be kidding me people live on facebook

okay not a problem

enlistment

if you're not in if you're in the family

and you're not on facebook your

relatives will tell you get on facebook

okay

monetization interesting

desktop

not so bad

mobile

a disaster waiting to happen okay

the mobile monetization mechanism for

facebook does not exist in any reason

and anything that would correspond to

the valuation that's going to be hit

this week it just doesn't now could it

yes does everybody want it to yes is it

just facebook's problem hell no

everybody has this issue of how are we

going to because

50 of facebook's traffic is on mobile

devices

50

so the point about this thing is

in different situations you will have

different metrics matter you should use

this as an analytical filter to look at

your b2c or even your b to b to c

where you're the first b helping the

second b look over that second b's

shoulders and look at their c situation

and figure out which of these four

metrics is the one that they've got to

fix hopefully with your help

and so we have this concept called the

slowest gear theory

just says look the thesis is prior to

the tornado at any given point in time

one of these gears is probably going to

be slower than the other three

and so the actions that we are

suggesting here are identify the slowest

gear focus everyone on speeding that one

up but

don't take your eye completely off the

other three gears i mean you can't just

like be a serial

this is where serial entrepreneur

doesn't work you have to keep all four

gears spinning right

repeat every quarter until the tornado

happens or you run out of gas okay

and that's sort of that's sort of the

the new model so i'm going to stop there

for a second and just i'd love to get

your so maybe your crap detector went

off or or or

you know

how would you react to this model or

what what do you see in this model a

comment or a question i'd love to just

get a little bit of

feedback yeah are you saying that this

like your other framework is just a b2b

model or it should it doesn't strike me

that there's

obviously speaking b2b and b2c in this

case um i think it i think it is the

distinction is this is i think a b2c

model in the sense that

it it involves large number of peoples

largely acting on their own

whereas b2b models you remember when

michael showed that huge set of

constituencies that you all have to get

aligned in order to get a sale

so that that's the kind of inertial

resistance where where the b to b model

works better but in this one i mean and

in a sense you know a tornado is a

tornado in both ones but i think this

one's more about you don't have to get

that kind of institutional buy-in but

you got to get critical mass whatever

that whatever that means so that's the

only reason i would call it it might be

b to e if

in an employee it could be that okay uh

if you have an order of magnitude

improvement on the present state of the

art as mike was speaking earlier is it

possible to jump over the early adopters

and go directly to a main line you're

solving their core problem

and just go straight to the bottom yeah

but it's interesting you know going

the the the uh

yes the question is how discontinuous is

your innovation if you just make

gasoline

that that is twice as effective and

sells for half as much money

there's no adoption life cycle just put

up the station dude uh so so the issue

then is is how disruptive is it or who

has to change their form of behavior

if the consumer doesn't have to change

that gives you enormous leverage against

whoever does have to change to make them

change look at what apple did when they

essentially gave itunes to their folks

they could then make the entire music

industry which did not want to change

change because they had this incredible

power and they got that power because

from the user's point of view there was

no technology adoption just

go to itunes and get your songs i mean

you paid for them that was strange by

the way because remember we had netapp

i'm not uh we had napster yeah napster

so yeah there was 99 cents but but it

was it was there was a de minimis enough

change so i think i think in the b2c

model it's not about chasms and bowling

pins i really do think it's about going

straight to the tornado just straight to

the tornado

whereas i think in b2b it is about

chasms and bowling pins because there's

enough inertial resistance to anything

new that you've got to overcome

i think b2b is more predictable i think

b to seats when they win are

more lucrative

but b2cs are still to be somewhat

mystical i think the grin the gears i

think help

but i think you know you're still trying

to figure out what does it take to get a

date you know i spent my entire

adolescence trying to answer that

question

and i broke it down into frameworks and

it didn't help okay

yeah

what you would say about sustainability

you know a lot of the opportunities you

talk about are ones which you know

one person does another person do it

very quickly and you've got to do it

right and build a market or build a

credit card i think i think there's

something inherently

i think this is a fad business to a

large degree i look at the movie

business look at the music business look

at look at all the great consumer

businesses uh

there are some that have sustained

mcdonald's is a sustained consumer

franchise um

but but boy there are awful lot that

that you know

don't don't don't get there so it's it's

a

it's a different game now and you try to

institutionalize it like they made movie

studios we'll have dreamworks you know

dreamworks will always create hit movies

not so much you know

and so uh john carter yeah okay uh that

wasn't dreams that was disney i know uh

but uh but that would be the other half

of that there's a question in the back

or a comm in the back

that was basically my question but you

know kind of building on that so

it seems to me you know kind of thing

i'm not i don't know a lot about b2c but

you know just basically between b to b

and b to c

for b to c it just seems like a lot of

people who are just kind of spending

this goals in the link and it's kind of

i think you're like kind of like you're

solid stupid people you know like like

zynga is basically selling people like a

big time sink and stuff like that

is that kind of

you know good thing is that kind of what

our entrepreneur

i think if you were talking about

let me make it put more honor into this

system

all of human culture is going online and

is being consumed through digital

devices and i mean

all of human culture

i mean education i mean health care i

mean war and i mean love

and and i mean literature and i mean

film and i mean music and i mean art and

i mean sports and i mean news and i mean

being a citizen and i mean being a

criminal right it's all online

and and it's becoming more online so i

think

i think there's a i think zynga is a

good example of wasting time online

and i think all of us waste a certain

amount of time online because we're

usually standing in line at starbucks

and so therefore wasting time why not

waste

you know in a more interesting way

but but but but it's and i think and by

by the way and the economics isn't that

i'm buying stupid stuff as often as i'm

being advertised to one of the scary

things about this is the way that model

was monetized was is media advertising

right brand advertising media

advertising and the problem is we

haven't cracked the code on these small

i think on an ipad you're fine but on

anything smaller that's the spooky thing

yeah

i think when you say repeat every

quarter is way too slow

okay

i i i'm old so just bear with me but

yeah i think i think it probably is too

slow i think in a large company it's

probably not too slow uh because that

actually is light speed in some large

companies but you're right so what do

you think is a better is a more likely

cadence

weekly repeat every week

yeah yeah yeah yeah no no i'm with you i

think i i actually i buy that i think i

would do it weekly until if it maybe

after a while you'd say that maybe even

weekly is too little but i don't think

it is but maybe you'd go i think it's a

that's a good fix yes

first of all thank you for your

presentation yeah and i want to ask you

according to your framework for example

in the case of linkedin

when they went into japan they tried the

same formula and they have half a

million users in a country with a

so do you apply this framework in each

single market again because every single

new market it's a new revenue stream by

the end of the day so and i think it may

be a different gear it may be a

different gear so for example in japan

i'll bet you that the enlistment gear

runs at the speed of a glacier

just think about japanese culture you're

going to reach out to another business

person in japan and tell them to join

linkedin

not in any of the meetings i was in in

japan so so i do so i so i think i think

they're so i think you're right you have

to solve for different dynamics in

different places

maybe if they could get the engagement

gear to go faster in japan that would

give them some help but if they try to

work directly on the enlistment gear

directly well maybe i don't know but

you're right but but so they haven't

they have an engagement gear problem in

the us they i would argue have an

enlistment one in japan yeah is there a

bit of a timing issue and that

seems like you got to get enough of a

funnel cloud going before you focus on

the other ones if you're facebook and

you focus on the monetization

really hard really early doesn't work

i would argue for media models in

general and i would say that facebook is

a media property um you don't you

actually monetize it monetize very very

late we used to have a thing in the in

in the 90s which was called url stood

for ubiquity now revenue later

and and that that is the media model i

think so you would that would be example

you just set monetization aside google

didn't remember google had gone public

really before it really had a

a clear monetization model

and and and so yeah yeah how do you see

this model playing into this trend

towards the

sort of consumerization of enterprise

you look at apple and google as kind of

examples of that where consumers let

first enterprise adopt later and

facebook's kind of scary and then

who knows right now this is a this is

important it relates a little bit to the

question that came out of here so i i'm

sort of dining out on a speech i'm

giving these days about enterprise

i.t which says from systems of record to

systems of engagement so i think of this

consumerization thing as systems of

engagement and i think of the old

database oracle stuff as systems of

record so two things have to happen this

model would work for the employee side

of adoption so and in general what

people are doing because sometimes

people say well

it's just like facebook

and it's this dweeby thing that hr came

out with that just sucks right so it's

not just like okay so so there's still a

kind of a engagement problem you got to

get there

come to our corporate website and learn

about all the exciting things hr wants

you to learn about

even in starbucks i wouldn't do that

right

so okay so but then the other half of it

if it's like so now what is happening at

it is bring your own device so people

are saying you know bring anything bring

mac pc

android ipod whatever the hell ipad

whatever it is so that okay so now i've

got the b the e is already in there but

now that the cio is going hang on

i have a

boatload of very very very tough

problems to solve and i and i have a

restricted talent base and by the way

it's not fit for this purpose

so that's where the chasm problem is

happening so i would argue jive chatter

yammer

all that stuff i don't think it's across

the chasm i i think it's still on the

early side of the chasm because the

problem is the i.t guys are still trying

to balkanize it bucket it

keep it at some distance because there's

some very very real liability security

issues and and i know sometimes they use

security as a head fake but in this case

it probably is real yeah i hate the idea

of putting a hole in the framework

actually no you can't even know it helps

to put a hole yeah examples you bring it

seems like they didn't focus on

increasing the speed of their slowest

gears they instead looked at what gears

were spinning the fastest and helped

make those spin even faster and

capitalize on those and eventually that

compensated for whatever wow so

that should be that should be an

alternative game plan let's call that

game plan b

which is screw

the brakes let's just hit the

accelerator right or you know no but but

well but kind of you know you know kind

of so so this guy he thinks we have to

run on four wheels no we can we're a

unicycle

okay

you know i feel it feels like there's

some truth in that it really does so so

no man just spin the hell out of one of

those gears and see if they can't like

drag the other ones around with them i

think that's i think it's a totally

viable hypothesis and i think it would

be called like

action hypothesis number two yeah

uh just a couple quick thoughts one is

uh i i think that putting monetization

before enlistment i just feel like

enlistment comes way way earlier like

right after acquisition

in the way these things tend to work

when they're successful i think the

other thing is that um

engagement is a little bit of a it's a

little bit of a tricky thing because

like you use the zynga example and i

think people are very engaged in those

games they're in them all the time and

then you take google which is obviously

a much more effective monetization

effort and i think

you know the google folks will say our

goal is to get people off the page off

the serp page as fast as possible right

um and so it's almost i mean i think

there's another concept that is maybe

fits under engagement which has to do

with delight yeah which has to do with

like how it triggers pleasure yeah and

google triggers pleasure by getting you

out of here get get in get out and get

get on with your life

yeah yeah yeah yeah

very happy when this happens i think

that's true the other one by the way the

reason monetization is where it is well

part of it was because i couldn't redraw

the diagram let's be clear

but

but but uh

power no expense was spared on this

presentation because none was incurred i

i just

but but um but in a retail model in a

retail model it's where it belongs and

actually the last time i gave this talk

was to a online e-commerce situation

where you had to monetize early on and

so you had to put in there but i agree

with adam i think in the media game it's

totally correct the the monetization

gear comes forth and often comes very

late in the game and lightly and you

kind of like it's almost like a clutch

it's almost like not you know in it

don't don't slow it down too much you

know kind of i think just sorry of one

thing you're comparing the b2b and the

bbc models yeah and i think a lot of

startups have gotten obsessed with what

i think is a b2b model which is this

idea of minimally viable product yeah i

don't think it works in b2c i mean i

think viable sounds like you're still in

the icu and nobody wants to hang out

with people in the icu it's kind of like

it's kind of like yeah yeah no this is

like this is like valentine's day

minimally viable bouquet

probably not probably not the romance

winner you know if she sees the

cellophane around it you know and like

kroger's in the

i gave her flowers on valentine's day

for god's sake what did she expect right

well more than that more than that okay

yeah so it's okay yeah yeah delighting

that's a delighter issue yeah you bet so

you know why i want to push back a

little bit on the idea of the time frame

how long has it been

and i think a lot of the rhetoric now in

the like sort of methodology is that

it's when you're testing hypotheses

as a scientist so it's really a question

of statistical significance yeah where

if you have a large user funnel and you

get a lot of data and feedback there's

no reason why you can't iterate you know

five times in the same day if you

actually have a large pipe going in to

test certain hypotheses and you can do

these things in power so there's no

reason why you can't run five tests at

the same time right and pick the best

one i think if so fair enough so if you

could do design of experiments and

actually are smart enough to be able to

do multi-variant kind of regression

analysis yes and i think the point

that's coming out here that we all

should absorb is jeff it isn't a

specific cycle of time it's how fast can

we close the loop in in a reasonably and

expect to learn something and and then

move on and also obviously on the web

speed the faster this is such a fast

medium that the faster you can do it the

better you can do it without burning out

your company okay

i think one thing that might be subtly

missing but i'm not sure if the missing

gear just sort of behind the scenes is

that uh importance of

adoption support innovation from other

business partners

i think part of the reason why

monetization comes so late in media is

that the advertisers the advertising

agencies don't have a clue

at first how to use it right so it takes

a while for them to figure out what the

ad unit is what the interaction is and

with of itunes you know you could have

itunes but until you

until you bring the music industry right

yeah in the backlist yeah yeah

i think that's fair i think i think you

should be always looking for kind of

like the inherent inertial resistance to

the new phenomenon uh and and

in some cases like with with with zynga

i think they actually were able to spin

up pretty quickly because they used

virtual goods as their own thing but

that's their partner

and their partner was facebook fair

enough and and they got that kind of

going there okay

okay well that was that so that was some

of the stuff i wanted to share i just

want to close with one thing i've been

taking another place and then if we have

some time for talking about it or maybe

we'll talk about over lunch but

but this is the one

that has to do this is when i spending

time in boardrooms with ceos and

executive teams

making myself pretty thoroughly

unpopular

and here's kind of so it says look guys

we this is this category power idea you

know we've talked a lot about the

venture world where they are this is the

the great place for a big companies to

be in the b section of this thing no

adoption problems you just scale it the

c is where you have to actually worry

about optimizing margins you know the d

is where you start worrying about oh my

god if i stayed too long in this

category i will have a kodak moment and

that's

that's the kodak moment at the end okay

kind of thing well but yeah

that i would argue that kodak was one of

the five best brands in the world for

most of my life at least in the top ten

so so it i mean this is brutal right

uh so your choir power utilize power you

the best power and then and then the

idea what what what what you're trying

to do when you reinvent yourself you're

not trying to recross the chasm because

frankly that that's too small you've got

to have something that's big enough to

scale pretty quickly what you really

like to do is kind of get into a new

category

kind of on the

on the right side of the chasm ideally

like right about there and and then kind

of scale that up going up that's what

you'd like to have happen

because what you're looking for is you

want growth

but you and that's what that and by the

way that means you need to acquire or

develop power but the issue is at some

size if you're a 10 billion dollar

company or 20 or 30 or 40 billion dollar

company just fig it's the law of large

numbers

you can't really change your stock price

until you have a new earnings engine

that's earning several billion dollars

so you're 100 million dollars like

you're a rounding error right so it's a

real problem if you think about that

and that's where the performance metric

so you have this real challenge you have

to have power and performance in order

to have this thing

move the needle in a large company

and so when you look at these a b c d's

they kind of go like that basically you

know the the early thing it's high

growth but it's not material revenues

you're going to try to get into the b

section of that curve which is going to

give you both high growth and material

revenues eventually you'll get into the

c section it'll become yet another

earnings engine it will be the 8086

architecture at intel or it will be

windows or it will be office at

microsoft or it will be you know the erp

suite at sap et cetera et cetera and

then and then the final one would be

would be d which is it's it's heading

toward e right so here's what you see in

in the world of large companies this is

a typical portfolio pattern in virtually

all companies that have those stock

prices which are close to the nasdaq

they're big franchises but they're not

growing very fast if you spend time in

them that's not visible in outside the

company but inside the company they have

way cool neat stuff but it's not

material in terms of the size of the

revenue and they've got some aging stuff

right

and the first question the board always

asks is why do we have more business in

quadrant two you know did you ever do

did you guys see quadrant two

how about quadrant two right

and so

you look at this problem and the way

this is this is how it happens so

it turns out the key to understanding a

large corporation is to understand that

there are three different

investment horizons that

interact with each other in a large

corporation that caused the dynamic

called the innovator's dilemma

the first horizon is if i spend money on

this i will make it back this year

i'll hire more salespeople my revenue

will go up okay it's a horizon one it's

all about operating expenses it's all

about getting things done you know what

large corporations are world-class of

this stuff

just really really really good

what we always say about large

corporations is you know what they can't

innovate for

for

some

soup right

uh yeah but anyway you know what not

true

totally untrue

the labs in large corporations have way

cool stuff venture would kill to get

that stuff and often does okay

so so i mean really i mean think about

xerox park it just like silicon valley

dined off of xerox park for like two

decades

it was really really cool stuff

the problem was when they tried to bring

it from horizon 3

which is i'm going to get a return on

this investment but not anytime soon and

by the way it comes out of a capex

budget more than the opex budget it's

kind of like the corporate tax that we

spend on the future

but when you try to get through horizon

2 which is a interesting horizon horizon

2 says we're going to spend money out of

our working capital budget this year

and we're actually not going to get

anything for it this year

we'll get something for it next year and

something really pretty exciting for it

the following year

and thank you for playing okay

so what what's going on here because

this is this is absolutely fatal to

innovation

so what's going on here horizon 3 coming

in horizon 2 is the one where i'm trying

to get from horizon three to horizon one

horizon one's the the all the where all

the material revenues are created

horizon zero if you want to worry about

is kind of where we're getting in danger

of running off the thing so performance

management is all about horizon one

we're really good at horizon one not a

problem horizon one manager is how do

you do that

how do you make your numbers quarter

after quarter after quarter you cheat

you lie and you steal and then you try

not to lie too much but you steal all

the time you hoard resources because you

can't get it done any other way there's

too much variability in the world so all

of a sudden h2 comes and the thing that

makes h2 different from h3 is h2 wants

the same resources that h1 uses and in

particular they want the same sales

resources the same go to market

resources marketing resources

professional service it's all the

customer facing stuff that really is is

in jeopardy here

and and and so

the h1 managers go ah

and you know and they by the way they

also cling they cling to the other

business they need more money but and

horizon 3 is not affected so the horizon

2 challenge is it's just it works like

this h1 during the annual planning

process gets first dibs at all the

resources by the time h2 gets to the

table there are no eight players left

right they're probably a few lingering

b's right i mean just because they

grabbed them all right

and so and so h3 by the way gets stars

but they're not stars that h1 wants

i mean they're weird people right but

but they're wonderfully weird but

they're not useful in h1 they're useful

as corporate entertainment right bring

your customer to corporate show them

it's like larry with whatever that weird

thing larry's doing

and then sell them some more storage

servers right you know come on okay so

it's a great relationship right

but h2 is like no dice h2 is now an

entrepreneurial business unit trying to

get a piece of my sales force a piece of

my marketing budget

it's like and no no so so and the

problem is in that model the h1 guy says

well i can support as many h2

initiatives you want i don't if you

don't want me to make my number

i mean it's black male it's pure and

utter black male but it's a black male

that works both ways because the ceo has

been pounding him to make his or her

number forever so this is not an r d

problem

this is a go to market problem okay

that's where this thing actually gets

killed and here was the big aha

innovation is not a funnel

it is an hourglass

that's that's that's the tweet that's

the tweetable remark for those who are

on hashtag you know startups whatever

because because

we can have as many things as you want

in h3 and as many things you want in h1

h2 is the problem statement so if you

look at that you say what's what's the

h2 challenge and then how do you solve

for it and then i'm uh that's all i want

to share with you the challenge is

pretty clear

if you were going to actually move those

stock chart things

you have to create a net new earnings

engine that i would argue is somewhere

between five and ten percent of total

revenues and looks like it's probably

going to go to 15 to 20 in the not too

distant future somewhere around here the

investors go whoo dude so it's

interesting so video at cisco hasn't

quite gotten there yet you think it

might

might but it hasn't sharepoint or xbox

at microsoft interesting not

i'm not not quite yet i don't don't feel

you're quite quite there yet because i

think still 85 of microsoft's net

revenue pretty much is office windows of

some variation thereof so you got to get

to a certain point but clearly clearly

ipod did it clearly i

phoned it clearly ipad did it clearly um

amazon web services has done it to

amazon so that's where they got that one

from okay so somewhere in there okay

right now when you start

you're if you're below somewhere between

one percent you don't even show you can

hide you can effectively be like a

horizon three

play

so if you think if you just sort of set

that as an order of magnitude move the

journey is i have to grow one order of

magnitude and the question is how much

time can a large public corporation give

you to do that

i will submit to you that they they'll

certainly give you one year and there's

no chance that you can do it one year

they will reluctantly give you two years

and there's probably no chance you can

do it in two years but if you make

enough progress they will grudgingly

give you the third year and if you don't

get it done in the third year i don't

think you get the fourth year

that would be my sort of order of

magnitude play here so that this means

when you take on this assignment you're

behind

probably somewhere between three and six

quarters right i mean it's brutal it's a

brutal assignment okay so horizon two is

not a stable state

you either get through it or you die and

by the way that that's the venture-like

thing here because venture capitals are

not stable institute you can't just say

i'll just raise more capital you know at

some point those nice friendly vcs

not so friendly right you know oh hi hi

no no no no no we're not funding no no

yeah okay that's not a stable state so

so so this is the issue inside the

corporation so then the question was

this is the last this is kind of the

money slide

so okay dude what would you do

differently how would you play this game

to actually win and and and and you know

don't fool around because you know

this is going to be painful we don't

want to do it twice

so the first thing is how many horizon 2

initiatives can you do at the same time

i this is the first place where i make

myself radically unpopular the answer is

one

only one and i don't care if you're 100

billion corporation the answer is

one

that sounds so wrong to so for so many

reasons to so many people that it almost

ends the conversation there except

they're too polite to kick me out of the

room because it's like that can't be

right it cannot be right look at the

odds of these things but my point is

this is a one-lane highway

if you put two cars onto a one-lane

highway

you've just guaranteed that neither of

them will get through right

so the only way to get this thing

through is one at a time now you could

have as many horizon 3 initiatives

waiting to get on the highway and you

can have as many horizon 1 businesses as

you want to run large corporations can

run many things in horizon 1 and they

can do many experiments in horizon 3 one

to get through the pipe second one

when do you plan and budget for this

initiative not with all the other

children

right you have to if you're going to

actually get the right resourcing for

this both in the field and in the

factory you have to plan do your annual

planning for your horizon two one

quarter before you do your annual

planning for everything else once the

annual planning the real annual planning

starts the knives are out it's a

zero-sum game there is zero chance the

horizon two guy is going to survive zero

okay that's number two three what kind

of a structure do you need you need a

venture-like structure the reason why

venture-backed companies can kick the

tail out of large corporations routinely

is because they have this fast cycle

time latency that we've been talking

about

and even in b2b really fast you're the

salesperson the engineering person oh my

god the customer said this doesn't work

you know i'll try to hack something

together can you give me a demo by

tuesday and then a large corporation it

was which tuesday

i'm booked for the next two tuesdays i

can get to it this month

but but the cycle time's completely

ruined so and by the way the sales force

is kind of slightly misdirected and the

services people are saying you know i'll

help you but you know my utilization

number is kind of

kind of low this month and i'm a little

bit worried about helping you too much

so you get all these messages back in

the corporation of you know

you're an irritant you know you just i

mean you're my friend but you're an

irritant right so that's number that's

you have to you have to be able to

organize this thing but you can't let it

persist at scale this business has to

melt back into the functional

organization of large corporation so

once you get to something

close to horizon one scale where the

business can survive then there's no

empire building the sales goes back to

the sales force the engineering goes

back to the engineering team the support

goes back to the support team but during

that that order of magnitude race it has

to report to a single entrepreneurial gm

who can move resources on a dime during

that during that period in order to

adapt and grow fast

fourth one metrics

tipping point metrics crossing the chasm

for b to b four gears for b to c and the

last one

this is the one where if i haven't been

kicked out now that's why i put it last

because this is almost always

so the compensation statement is

obviously you want to compensate the

general manager of the horizon 2

business unit with high variable

compensation on getting the material

size score got it

next who's the ultimate sponsor of this

initiative has to be the ceo

okay ceo step up

big part of your variable compensation

is did you get this horizon 2 initiative

to material socks okay that's number two

the painful one everybody who reports to

the ceo not the entrepreneurial gm this

is not in your business unit

all of your variable comp also is going

to ride on the success of this one

business unit that you did not fund and

that you do not believe in and you don't

even like the gm

you say you say this

you say that cannot be right that

violates every concept of compensation i

have no i can't do anything about this

it's all in his control or her control

what this is total this is totally wrong

and the only reply i have is well first

of all

we don't exactly have a very good

existence proof for doing it the other

way

but the other point is are you telling

me that if i told you that for the next

three years

your variable compensation program is

going to depend entirely on the

performance of this business unit

that you can do nothing to improve the

performance of this business unit

i mean how dumb are you

i'm sorry i don't believe that okay i

believe that if you really bite on that

bullet

that we'll take this thing through that

horizon two gap in record speed because

you're greedy individuals right and you

will think of way i can introduce them

to this customer i can get past this

objection i can tell that account guy

i'm sorry this comes first i can do a

million things

to make this thing happen i can make it

happen faster than venture i can kick

ventures ass

if i have the entire executive team

saying this is how i'm going to get

comped particularly in a

performance-driven culture so the point

about this exercise and leaders needless

to say that the ink is not even dry on

the slide

um it's a provocative controversial

pushing at it but but you know it's it's

saying well it's been 15 years since

clay threw down the gauntlet

somebody's got to pick it up so let's go

okay so that so that was it the the

concept here was just

the four things we're fighting against

the innovators to let me you know about

it's hard to take risk in big companies

annual planning gets all the good

resources for the for the existing

players and the con temporary financial

markets by the way there is a j curve

here which is just brutal and then your

stock price will get hammered they'll

get mad at you but but if that's what

another reason why you have to go fast

but here were the three the last slide

the three things it takes so it takes a

focus on power not performance the two

are together but the point about it is

we got to think much more

in a committed way about power and not

just keep on coming back to well now

let's get back to the numbers which is

the performance part of the equation the

second piece therefore is it puts more

pressure on leadership than management

it turns out management is the key to

performance

and leadership is the key to power

and there that's a yin yang it's a yin

yang sometimes you need more leadership

sometimes you need more management it's

not like one's better than the other but

you need both and then the third thing

is it's got to be about the tipping

point before the roi you just you have

to do this if we're going to get if

we're going to move the needle so

that was that was the last of that set

so first of all thank you very much for

letting me

[Music]

you