Webinars

BECOMING A TECH COMPANY
TO SURVIVE THE DIGITAL ERA

How Established Enterprises Can Rebuild Themselves
as Tech Companies for the 21st Century

Gregory Le Blanc Silicon Valley Innovation Center Interview Speaker

Gregory LaBlanc,
Distinguished Teaching Fellow,
Haas School of Business

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ABOUT THE WEBINAR

The real problem of digital transformation today is one of management, not technology. In a world where the latest technologies are more and more easily available, it is organizational structure which is the ultimate determinant of the success or failure of a business. In our current context, when the average lifespan of an S&P 500 company is about 15 years, it is the enterprises that fail to rebuild themselves fundamentally as tech companies that face the greatest challenge to survive.

Digital transformation also has a radical conceptual shift at its heart: product companies turn into service companies that have data at the center of all decisions. The firms that collect the most unique proprietary data and make best use of that data are almost certain to come out on top.

Join us for this webinar as Gregory LaBlanc, Distinguished Teaching Fellow at the Haas School of Business, explains how organizations can respond to the new demands being placed upon them by digital transformation. He offers a blueprint on how companies can best use data to motivate decision-making and transform themselves into tech companies for the 21st century.

YOU'LL LEARN

  • The key principles of organizational design for the digital era
  • How to turn a product company into a service company
  • Why data-driven discovery is fundamental to the learning enterprise of today

ABOUT OUR GUEST

Gregory Le Blanc Silicon Valley Innovation Center Interview Speaker

Gregory LaBlanc

Gregory La Blanc has been teaching at the Haas School of Business and Berkeley Law since 2005. His research interests lie at the intersection of law, finance, and psychology, in the areas of business strategy and risk management. He has been the recipient of numerous teaching awards at Berkeley, including the Earl F. Cheit Award for Outstanding Teaching (2009) and the Haas EWMBA Core Graduate Instructor of the Year (2004-2005). Gregory has been instrumental in developing and teaching innovative courses, such as Blockchain and the Future of Technology, Business, and Law, to keep Berkeley students on the cutting edge of the increasing complex and ever-changing business environment. Prior to his tenure at UC Berkeley, he held teaching positions at Wharton, Duke, and the University of Virginia. He has also worked outside of academia in the areas of competitive intelligence, litigation consulting, and advising consulting teams in finance, marketing, and strategy. Gregory received B.A. and B.S. degrees from the University of Pennsylvania before pursuing further graduate studies there as a University Scholar and graduate fellow. He later earned a J.D. from George Mason University and an LLM from Berkeley Law.

WEBINAR TRANSCRIPT

Rahim Rahemtulla:
Hello everyone. Welcome to this Silicon Valley Innovation Center webinar. I do apologize for the slight late running here of the program. A few technical difficulties, but here we are and ready to go now, I’m glad to say.
So here we are. I’m Rahim Rahemtulla, I’m your host today for the webinar. And, as I said, we have Gregory LaBlanc, Distinguished Teaching Fellow at the Haas School of Business, and also just a brilliant speaker, one of Silicon Valley’s finest thought leaders, I think, and I’m sure you’ll be convinced of that as well today, as we’re going to hear his presentation on becoming a tech company and on digital transformation, new business models, a really wide-ranging, interesting topic very, very relevant to what’s going on today, no doubt. So, Gregory, here we are. Thank you so much for for joining us today.


Gregory LaBlanc:
There are a couple of points that I’d love to make, and all of these points are ones that are worthy of much longer discussion. We have entire classes around digital transformation, we have entire classes around use of data, we have entire classes around becoming an innovative thinker, entire classes around how to incorporate technology into your organization. But some of the key points that I want to make are that what we’re seeing right now, what we’re going through right now is perhaps one of the most fundamental transformations that we’ve seen in the business world. And I’m a historian by training and so I think that having some context, having some historical context, understanding the magnitude of these changes and also how others have experienced changes in the past is really helpful to navigate the current circumstances.
There was once a group of innovators that were brought together by the Wall Street Journal about two years ago and they surveyed all of them and asked them what was the most important area of expertise to have if you wanted to navigate disruption. And the number one choice was history. Understanding how people have experienced things in the past helps you to understand how to navigate things going forward. And that’s sort of why we in Business School use the case method, because we think that, if you can put yourself in the position of people with incomplete information, put yourself in a position of people who are trying to figure out what the world is all about and get some practice with that kind of decision-making, it helps you going forward. So that’s really what we spent two years doing with our MBA students. It’s really kind of running through these simulations, running through these historical environments.

And so there’s a lot of talk of what we call the Fourth Industrial Revolution – this is a term that was popularized by the World Economic Forum – and, look, it doesn’t really matter whether it’s the Fourth or the Third or the Second or the 66th Industrial rEvolution. I think that the message that they’re trying to communicate is that they like to think of it as punctuated equilibrium and there are these moments where things move much, much faster.And the first Industrial Revolution took about a hundred years to fully realize itself and it took more than that to get from the Midlands of England all the way over to other parts of the world that are still experiencing it. So this Industrial Revolution, however, is taking that degree of change, that magnitude of change, and compressing it into a much shorter period. We all understand what’s driving it, we all understand the rapid decrease in the cost of data capture and the cost of data retrieval, the cost of data analytics and the cost of data storage. What we don’t understand as well is that this change, this dramatic change that enables us to utilize all this technology, requires a change in management. It requires a change in the way we organize our work, the way we organize production, the way we organize our services. In other words, we have to rethink our business models completely.

And so, when I talk to business people, they think, “Oh, well, there’s all this crazy technology I have to understand and I have to utilize.” And yes, but if you don’t organize your company in the right way, if you don’t change your management style, change your management structure, change your business model, then all of this technology is just going to be wasted. And I’ve seen countless companies spend a ton of money on data science initiatives, on digital initiatives and most of them fail. I think it was IBM that said 83% of all data science initiatives are failures, they fail to achieve the goals. And it’s not because the technology is flawed but because that the management is flawed.

And so if we try to understand even the first Industrial Revolution, we like to focus on things like the steam engine, but it turns out that the steam engine was sort of an afterthought, it kicked in only after the introduction of what we call the “factory system”. And the factory system was a new organization of work. We moved from craft production toward this factory system and the real insight was that, if we took the production process and we broke it down into ever smaller bits and then reassembled it using modularity, then we could increase our productivity dramatically and then the technology facilitates that. And what’s happening right now in the Fourth Industrial Revolution is that companies are taking the production process and they’re breaking it down into increasingly small bits and then evaluating each of those individual stages of production, whether or not it makes sense to do it internally or externally, whether it makes sense to make it part of your strategic competency or whether it makes sense to acquire it from some some third party. And so I call this the “Amazonification of business”, because Amazon has taken this business model to its utmost, which is they organize everything they do in a modular way.

Now, in order to do this, it requires an understanding of APIs. Now, APIs work and the reason why is because every company now is fundamentally a software company. I remember 20 years ago, when I was teaching strategy, we would do all these case studies, we would look at Walmart, we would look at American Airlines, we would look at UPS, and all of the companies that were successful had one thing in common: they were all becoming technology companies. In other words, yes, of course Walmart is a retailer. Yes, of course American Airlines is an airline company. Yes, of course Kaiser Permanente is a healthcare company. But, at their heart, is a grasping of the idea that technology is what their organization has to be all about. I love when I talk to my students, “Oh, what are you doing?” and they’re like, “I’m going to work for a tech company, I’m going to tech” and also, “I’m going to finance.” “Wait, hold on a second. You’re going to a tech company? That just means that you’re not going to be making pickles in Brooklyn, right?” I mean, even there, I’m sure those guy have an app which delivers the pickles. Every company now has to think of itself as a technology company first and then they apply it in some other way.

Now, Robert Crandall, who was the CEO of American Airlines, he said this back in 1990. I mean, 1990, think about that.

That was, how many years ago? I mean, that was a long time ago. It was before you were born, Rahim. This was a long time ago and this guy said, “We are a technology company. We’re a software company that just so happens to own planes. And if we could get rid of the planes we would but we need them to monetize our software.” And now it’s like, okay, big deal, everyone says this. I mean, you can’t open up a newspaper – or wait, do people open up newspapers? But you can’t watch a TV show – does anybody watch TV anymore? You cannot go through your newsfeed and not see some CEO standing up there and saying, “We’re a technology company that also delivers healthcare” or “We’re a technology company that also does media.” And, I’ll tell you, if your CEO is not saying that, you should fire your CEO, because they need to think that way. It’s technology first and foremost.

Now, that’s what I started saying 20 years ago, but 15 years ago I modified that because there are companies out there like Cisco, Intel and Juniper Networks and most of my students were coming from these companies here at Berkeley, they’re all coming from these hardware companies. And they’re like, “What going on?” It’s like, “You guys have to rethink your business because, at the end of the day, nowadays, every company has to be a software company. It’s not enough to be a technology company making really cool machinery – you have to fundamentally build your business around software.” Now, this is for a couple reasons. One is protectability; copyright is always better than patents. But more fundamentally because businesses are built around information and how you message this information throughout the organization.

So I like to think of organizations as having sensors, actuators and processes. I mean, this is how every process works, this is how every solution is developed. And, as a metaphor, it’s how every organization functions – sensors, processors, actuators. And so, as you build out your sensors and actuators, your processors are fundamentally going to be analyzing information, they’re making decisions based on data. And that’s a software issue, right? And that’s all about software. And that’s all about designing software interfaces with your customers, interfaces with your suppliers, interfaces with your employees, and then intersect them with each other. And so HR has to talk to Operations, which has to talk to Marketing, which has to talk to Finance and the way in which they’re communicating, if this is done with Post-it notes and memos and emails, you’ve got a problem – this has to be communicated through software. And that’s why I say every company is now a software company.

Now, we can go one step further and say that every company is a data company because your competitive advantage cannot be built on analytics. Analytics is a commodity now. So you get really good at processing. So what? Everyone else is really good at processing, everybody else will copy your thought process and everybody else will copy and hire away your best people and they’ll imitate what you’re doing. And so, at that level, the only thing that gives you a competitive advantage is the unique data that you’re able to access. And so then that gets back to, what sensors do I have out in the environment accumulating this data and ingesting this data? And how do I expand the reach of my data capture while at the same time creating modes and barriers that prevent other people from gathering that same data? So if I have a unique portfolio data, I can actually offer a unique product or service. If I do not have a unique data set, I don’t have anything. And so that’s why 10 years ago I started saying every company is a data company.

Now, five years ago – you’ve got to keep reinventing yourself – I started talking about APIs and really how every company has to be an API company. And, again, if I’ve lost anybody, if people don’t know what APIs are, I suggest that you go in and do some research, figure out what they are, because APIs are how companies talk to other companies, it’s how parts of companies talk to other parts of companies, it’s how individuals within the company talk to other individuals within their company. And if you don’t have an API strategy, you don’t have a strategy, because this really defines the boundaries of your firm and the internal organization of your firm.

So, given that every company now has its strategy as defined by its software, data, API strategies, is this actually done in a conscious way with strategic vision? Or is it kind of an accidental evolution? And, in strategy, we talk about how you need to understand what you’re doing and you can’t just be kind of drifting with the wind. And a lot of companies are kind of drifting with the wind and they’re patching and they’re solving problems and they’re addressing requests and addressing complaints rather than designing a strategy for how they’re going to be able to compete in this post-Fourth Industrial Revolution age. And so a lot of things that I spend time with executives about is like, “All right, fine, I understand new business models, I understand APIs, I understand strategy, but how do I change the way I make decisions within my organization? How do I change the way people think? How do I change the culture?” And I argue that you can’t change the culture if you don’t change the processes within the organization. It’s great to say, “We value rapid decision-making,” but then you effectively make it impossible for people to do rapid decision-making by failing to give them the right data, failing to reward them for taking risk, failure to give them the tools to execute after the decision is made. And so I believe that the processes which you put in place are the things that drive the culture. And what you need to have is an idea-driven culture and not a request- or complaint-driven culture.

And so I spend a lot of time talking about culture and how you build a culture, and if you want to build a culture that’s responsive to the environment, if you want to build a culture that is continually reinventing itself, you’ve got to get the processes right. And the bottleneck in most organizations is IT. And so for a lot of companies what I recommend is, “You take your IT department, you put them on an ice floe and you ship them out into the Arctic and never see them again” – because they really are the are the ones standing in the way. And that’s why so many companies are creating Chief Digital Officers, because the marketing departments go off and do their thing and HR departments go off and do their thing and then all of a sudden everything is fragmented again. And so you need a Chief Digital Officer to rope it all back in because if these different parts the organization aren’t talking to one another, you can’t make good decisions.

So I spend a lot of time with CIOs and CTOs who are struggling and they’re like, “Well, how do I maintain my relevance?” It’s like, “Well, you need to scrap your old way of thinking about how technology works and how systems work and forget about your servers and stop thinking about responding to helpdesk requests and start thinking about how do you get out into the field and figure out what the heck your company needs. So every functional area, whether it’s HR, whether it’s marketing, whether it’s IT, they’re all being transformed. And they’re all struggling and they’re all transforming themselves independently because most of the companies don’t have that digital strategy and they don’t have a digital strategist and they don’t have a CEO or an executive team that understands the need for a coherent strategy. And that current strategy has to be built on modularity so that you can accelerate the development cycles within the organization.

So I have a whole other talk on rapid decision-making, accelerating development, moving from waterfall to agile and a lot of these things that you hear, if you’re outside of Silicon Valley, if you hear buzzwords, you’re like, “Wow. Agile? That’s cool” or “Design thinking. Oh, yeah, that’s cool.” And “APIs? Oh, yes, that’s cool.” And we think of them all as separate things. They’re all part and parcel of the same thing, which I call “digital strategy”. Digital strategy is not just about the IT, it’s about culture, it’s about the decision making, it’s about the people, it’s about the acceleration of development cycles, of decisioning, of execution, it’s about receptiveness to new ideas, the willingness to prototype, experiment, fail, iterate, learn, and progress. And all of this goes back to the Industrial Revolution, which is reducing inventory, creating modularity, breaking production up into smaller and smaller bits, learning how to respond to data as it comes in.

So these are some themes, these are some ideas that excite me, that I like to talk about, and the hard part is, right now, it just sounds like a string of bullet points and a string of sound bites and buzzwords. And this is what gives business professors a bad name, that everybody wants us to take what we do and put it into 20 takeaways. And if I went through it and gave you the 20 takeaways about the move from NPV to a VC way of thinking, move from HiPPO principle to A/B testing and experimentation, move from hardware to software, move from product to service, move from waterfall to agile, you can string together all those bullet points and then go off to “Oh, I’ve got my bullet points. What do I do?” That’s not going to work. You need to actually immerse yourself in these ideas, you need to figure out ways to understand these ideas and internalize them. And a lot of it comes from case studies, a lot of it comes from examples, a lot of it comes from frameworks, a lot of comes from deductive and inductive thought processes.

And that’s one of the things you guys do at SVIC, which is, “Let’s get people out of their comfort zone, throw them into some new environment for a week, bombard them with all this stuff until they can’t take it anymore and then they’re like, ‘Oh, okay, I see that this really is a different way of looking at the world.’” And then making sure that they go back and they don’t just go back to a stack of emails and resume their normal life, but rather understand that the key thing that they have to do is set aside time for strategic thinking so they can actually execute on the urgency that exists in the business world now. So it’s great to have a half hour here, but what I love is when we have students here for two years. You guys, you’ve got them for a week, right? Sometimes you get them for a week. But I’m teaching my executive MBAs this afternoon and we have an executive MBA program at Berkeley, which I think is probably the best in the country – I’m biased – and the fact of the matter is, when I teach strategy – and I’m gonna be teaching strategy this afternoon – it’s not a comfortable experience, it’s not like going to the spa. It is like going to personal training. People are not comfortable, they’re pushed out of their zone because they realize that they can’t go back and do what they were doing, it’s not going to work. You cannot take the skills that you learnt 20 years ago and apply them. Even in academia, where I can’t be fired, I can’t be fired but I can be totally irrelevant. If I try to teach what I taught last year, it’s not going to work. So anyway, that’s some ideas and thoughts and I’d love to take some questions. Is that what you have in mind, Rahim?

Rahim Rahemtulla:
Gregory, that’s wonderful, of course. Of course, no need to ask. Tell us, how do you keep current? Like you said, you have to reinvent yourself every five years, at least, so where does that come from? You’re in Silicon Valley. That helps, doesn’t it?

Gregory LaBlanc:
Yeah. So now I have the luxury of not having to be putting out fires all the time. So the way I think about it is a typical business person has four ways to spend their time. First is putting out fires, crises, burning platforms. “Oh my God, this guy is quitting.” “Oh my God, this customer is upset.” “Oh my God, I’m getting sued.” So they’ve got all that stuff. Or if you’re IT, it’s like, “Boom, servers don’t work” or “Software crashed.” Second thing is your routine day-to-day, where you have your meetings and you have this and you do that, you’ve got to review these documents, you’ve got to proof these, you’ve got to make these decisions and so forth. So that’s routine work. Then you have the third thing, which is, “How do I improve my day-to-day? How do I improve my processes? How do I eliminate some of these burning platforms?” And so I think of that as incremental operational improvements. When we talk about continuous improvement, operational excellence, that sort of thing, that is the third way you can spend your time. And then Six Sigma, all that stuff falls into that.

And then the fourth way you can spend your time is through reflection, through strategic thinking, through brainstorming, through real long-term perspective gaining. Now, what I find is that most business people I talk to, the fourth thing almost goes immediately. Like, they’ll wake up on a Monday morning, say, “Let’s spend some time doing number four” and then boom, somebody sends them emails that says, “One of our products just blew up in Kansas” – so that just gets lost. And then even the third thing, which is operational excellence, that gets squeezed out because you’ve got meetings, and then you’ve got another meeting, and you’ve got another meeting, and you’ve got another meeting, and then boom, boom, boom, and then you’ve got do this conference call and blah, blah, blah – and then that’s gone. And so then everybody is just kind of doing their thing. So when I look at companies, like the famous examples of Blockbuster and Toys”R”Us and Kodak, the problem there was not that they were poorly managed. It’s not that they didn’t maximize their potential within their business model. Actually, they did quite a good job. They had shelf optimization, dynamic pricing. Everything that you could take out about running a business, well, they’d got that down. The Toys”R”Us people were super, super smart, private equity, but they didn’t have enough time to spend on number four.

And so, as an academic, it would be very easy for me to get caught up in a lot of rinse-wash-repeat stuff, but luckily I forced myself to spend an awful lot of time reading and so I read a lot, I read an awful amount of stuff. And you have to be super efficient about it, so I manage my news feed – whether it’s Facebook or LinkedIn – the news feed is very, very well managed. I go down all sorts of rabbit holes pursuing things, following footnotes, following recommendations. Sometimes I just start out Googling a topic and then I just spend the whole day just reading up on that topic, figuring out who are the experts that I need to read, what books I need to read. My Amazon budget is more than my food budget and so I read an awful lot. But then the other thing is I’ll pick a new topic. So two years ago I was like, “I’m going to teach a blockchain class at Berkeley.” So I convinced them to let me teach the blockchain course and I was like, “All right, now I’ve got to figure out blockchain. What is it? I’ve got to figure this out.” And so you’ve got to set yourself those kinds of challenges.

Now, the other thing is Silicon Valley is all about networking and is all about spending time with people. So we have an amazing universe of conferences, of colloquia, of events which is nonstop. If you’re interested in, say, even in FinTech, there is probably a FinTech event going on every single day that you can show up to. And so the other thing is meeting people. My network is, if I want to learn about something, I just contact one of my alums and I say, “Let’s get together and talk,” so I have thousands of alums that I talk to. And then, my students. My students who come in, they’re coming straight out of the workforce and so they know exactly what’s going on. So you’ve got to cultivate relationships and if you allow your circle to shrink and so you are just surrounded by people who think like you, that’s a real problem.

Rahim Rahemtulla:
There’s a minor audio clean up there, I think, on Gregory’s side. He’s taken care of that. You’ve muted yourself, Gregory. Is that for the background noise, I assume?

Gregory LaBlanc:
Okay.

Rahim Rahemtulla:
There you go.

Gregory LaBlanc:
All right. Okay. So yes, I think you have to be consistently curious and you have to be asking questions all the time and never satisfied with your understanding of the world. So I tell my students, “If all your all your friends agree with you, get new friends. And if all your ideas seem like good ones, then you need new ideas. 90% of your ideas should be bad, 90% your ideas should be losers. And if that’s not the case, then you’re not thinking broadly enough. You need to be throwing up ideas every day and most of them have to get shut down.”

And we talk about failing fast and being comfortable with failure. And what that means is that you have to be prepared to be wrong and you have to be prepared to have somebody show you that you’re wrong and you have to be prepared to endure the embarrassment and the humiliation of being wrong because most ideas are wrong.

Rahim Rahemtulla:
Sure. And where would the execs, CEOs find that person? Or how would they go about doing that? Who’s going to tell them that?

Gregory LaBlanc:
Well, okay, so most executives, what they do is they surround themselves with people who are supportive and agreeable and then that creates consensus and that creates a culture of harmony, which is comfortable, is nice, helps you to move faster and so forth. But I think that’s a huge problem. So Sloan, who was the CEO of General Motors back in 1920s, when he would ever go to a meeting and everybody would agree, he would say, “I’m leaving. I’ll come back when you guys figure out a way to disagree.” And it’s important that the leader take that position. And so one way to really discourage that is to have what I call a “complaint culture”, where every idea is perceived as a complaint. Like, if somebody has a lot of ideas, the leader is like, “Why are you such a downer?” Someone says, “Hey, we can improve this, we can prove that, we can improve that.” It’s just like you. If I go up to you and I say, “Hey, you could do a better job,” there’s two ways you could interpret that. One is like, “Hey, how dare you criticize me? Why are you being so hard on me?” The other one is, “Really? Tell me. Give it to me. Tell me what I need. What do I need to know?” And so that’s inside your head. It’s up to you to decide whether you want to listen to feedback or not, whether you want to listen to it and see it as advice or see it as criticism. It’s totally up to you and it’s not up to the other people in the organization. So when someone comes up to you and says, “You suck.” You have to be like, “Really? Tell me. Come on, give it to me. I want to know.” And if the leader does that, then it percolates all the way down.

You know, I just saw Antony and Cleopatra last night, the Shakespeare play. And Shakespeare had this all the time, where someone shows up with a message and they’ll say, “Tell me good news, I’ll give you gold. Tell me bad news and I’ll throw you at the alligators.” Guess what? Guess what kind of news you get? It’s not a mystery why CEOs are out of touch. It’s pretty simple.

Rahim Rahemtulla:
It’s quite difficult, I think, though, to put that into practice. A lot of companies, execs, will probably pay lip service to that idea and it’s very fashionable one too, of course, that feedback is a powerful thing. And, of course, we talk about data collection that’s all about getting feedback and then acting on that feedback. And, in that domain, it seems to be very much the thing to do. But when it comes to processes, management, and so on and so forth, I think putting that thinking into practice and actually being mentally ready to take that feedback and actually expect it in the way that you say, where it’s actually an opportunity to say, “Yes, tell me, let’s, build on this,” it’s a difficult thing, isn’t it?

Gregory LaBlanc:
Yeah, I think it’s extremely difficult because it’s hardwired into our psychology. When someone pays you a compliment, the activity in your brain is actually the same as orgasm. You know that? And when someone disagrees with you, it actually activates your amygdala and it’s like a fight-or-flight response and so you immediately put up your defenses. And so you actually have to, through force of will or a system to thinking, you have to actually practice the muscle which overrides that impulse as a leader. And then you have to encourage that in everyone else within the organization. So I have this model where I talk about, remember, sensors, processors, actuators. In an organization, you have idea generation, idea valuation, idea execution. And a lot of CEOs come to me, and they say, “I don’t understand. My people have no ideas. They don’t have any ideas at all. They’re just like dull and dismal and dreary people that don’t have any ideas.”

And I’m like, “Hey, no. Every single person in that organization has ideas or they had ideas. And if those ideas have dried up, it’s your fault because what you’ve done is you have failed to act on the ideas you evaluated and then that leads to a backlog in the evaluation of ideas and so then people stop generating. Because if I’ve a to-do list that’s this big, I have to do this, I have to do this, and someone goes “Hey, I have an idea for you,” it’s like, “Hey, why are you giving me another idea? Can’t you see my to-do list?” Even if the idea is how to shorten your to-do list, it gets blocked out because people are going into a fight-or-flight mode where they’re like, “I’ve got too much on my plate, don’t come to me with innovation ideas.”

And then the organization has what I call “idea constipation” because I go to other organizations that are like, “We’ve got so many ideas we don’t even know what to do with them. It’s like, ‘Stop, no more ideas.’” I say, “No, you need to prioritize. You basically need a ranking algorithm that allows you to rank order these ideas from the ones that are actionable and have a highest ROI to the ones that are save for later. And if you don’t do that as an organization, if you don’t do that as a leader, then you’re toast.” Jeff Bezos said his job is to basically make three or four decisions a week because what he’s done is he’s put in place a structure. You know, if you think about your body, when I touch a hot stove, that information doesn’t make it all the way to the brain, tt actually makes it to the spinal column and the spinal column says, “Just remove that. We don’t have time to process it. Let’s not deal with that later.” So you’ve got different levels of decision-making within the organization.

And you have to be responsive to real-time data. Maybe people are browsing on the website and then you alter what it is that you show them. Okay, that’s fine. But then you have to be thinking about the landscape and how it’s changing and where you want to be in 5 or 10 years – and that’s really the CEO’s responsibility. So if the CEO is trying to think about, “Oh, yeah, how do we adjust our pricing based on the shift in demand?” then he or she has just got a bad team and a bad set of processes. So fundamental rules of strategy don’t change but the types of decisions you have to make do change.

Rahim Rahemtulla:
I think it was Eric Ries, possibly, the author of The Lean Startup, he might have said his recommendation is something like, In every company, you need to have some kind of process in place where you can evaluate ideas quickly.

Gregory LaBlanc:
Yes.

Rahim Rahemtulla:
So if someone has a idea, you need to have a process where it can be evaluated and accepted or rejected. And if you have that, you’re winning.

Gregory LaBlanc:
Yeah. And there are a lot of platforms that are kind of vote up/down Reddit-style idea, software platform, A lot of companies have adopted these. And I think that’s a moving in the right direction, but I really think that the perfect platform has not yet been developed because what you really need is like a routing switchboard. You need to have the ideas routed to the right people.

Look, I worked in a restaurant when I was a teenager and I’ve yet to work for an organization that was ran as well as that restaurant. Restaurants are extremely competitive and so they have to really be good at decision-making to stay alive. And what I remember was that, at the end of every night, at the end of the shift, all the waiters and busboys and the maître d’ would all get together, have a drink and say, “Okay, what did you learn today? Anybody come up with any new ideas? Anybody have any observations about processes? Like, how do we make sure the customer gets better service? Or have you found any shortcuts for achieving the goals?” and so forth. And what happened was, if anybody said, “Yeah, I’ve figured out that if you go around and refill the water in this way, then…” what happened is that it immediately gets diffused, so everyone else who worked that night in that shift – it went out to them. And that maître d’ would then, next night, different set of waiters say, “Okay, here’s what the people last night learnt” and it got immediately diffused. And so there was this process for stimulating the generation of ideas, evaluating them and testing them – you’d test them out the next night and people would go, “It didn’t work,” okay, boom – and then just executing on then. And most organizations struggle with that.

One of the problems that a lot of organizations have, especially public-sector organizations, is that they confuse voice and vote. They think, “We want to crowdsource all these insights” but you don’t want to give ownership necessarily to everybody. Because if you have 100 people and you need 100 people to approve a decision, it’s never going to happen. So what you want is the broadest possible source of information, but then you want a very, very narrow set of decision makers who can process and execute on that information. So in the government we call it “notice and comment”. So the notice and comment means anybody who has access to the internet can submit. Dodd-Frank comes out and every Tom, Dick and Harry is like, “Oh, I don’t I don’t know about this and I don’t know about that and blah blah blah.” And then you suck in all that commentary and then evaluate it and then incorporate it, but then you still have like a congressional subcommittee that makes the decision.

Rahim Rahemtulla:
Right, yes.

Gregory LaBlanc:
That’s kind of what you want.

Rahim Rahemtulla:
And that’s the trick of it: getting all this huge data, which is how there, if we draw the analogy, 100 votes, decision-makers and getting all that and processing it into this small little decision point that comes out at the end.

Gregory LaBlanc:
It used to be that you could be on the Fortune 500 for 60 years. That was the life expectancy back in the 50s and 60s. Now it’s 12 years, so that requires a different organizational architecture.

Rahim Rahemtulla:
Yes.

Gregory LaBlanc:
If you’re really, really good at one thing, guess what? You’re not going to survive very long.

Rahim Rahemtulla:
Gregory, I wonder if you could share your thoughts, because a lot of what you talked about there – about organizational processes and organizational structure and talking about CEOs and executives who are willing to listen to feedback and use it effectively – one way, perhaps, you could describe that is teamwork, or being a team player, or being able to work effectively with groups of people in teams. But one criticism I’ve read about MBA programs and executive education programs like that – and I wonder if this is the case with your program – is that the environments that those are run in tend to emphasize the individual and it’s quite a competitive environment and that executives are taught to be strong individuals who are good decision making. But, in fact, in the environments that businesses now run in, just like you’re describing, that’s not necessarily the attitude you need.

Gregory LaBlanc:
Yeah.

Rahim Rahemtulla:
You need to be able to listen to people a lot more, take feedback and be able to work with it. Is there a tension there for you?

Gregory LaBlanc:
Absolutely, absolutely. Business schools are supposed to be teaching teamwork and we want everybody to do everything in groups. We want cases in groups, we want them to drink in groups, we want them to go to the bathroom in groups – we want them to have their legs tied together like a three-legged race. That’s one of the biggest parts of business school. I find that there’s a worrisome trend that I’ve noticed in the last 10 years. And I’m always very wary of talking about trends, because I’m a historian and I know that there’s blips and so forth. But what I have found in the last 10 years, especially among the younger MBAs, is that people are so concerned about consensus, they’re so concerned about not offending anybody or hurting anybody’s feelings, that they’ve lost the ability to engage in constructive disagreement. So we have to work really hard to say, “No, disagreeing is necessary, you have to disagree. Even if you agree, pretend to disagree. You need to test ideas. They need to be rigorously examined.”

And so when I was teaching my full-time MBAs recently, we’d assign these group cases with four people in a group and they’re supposed to all work on this case together. And so we discovered that they were actually parceling it out, like, “You do case one, you do case two, you do case three.” And I was like, “What’s going on?” And it turns out that when they would all get together to work together, they would just all agree to disagree. One person would be like, “Yeah, well, I think they should do this” and another was like, “Well, I think they should do that.” They go, “Mmm, okay. Well, yeah, okay. Well, you’ve got your feelings, I’ve got my feelings.”

Rahim Rahemtulla:
Everyone’s entitled to their opinion.

Gregory LaBlanc:
“No! No. Argue it out!” And so what you have to teach people is – and I think Facebook has all these signs and feedback is a gift and so forth and Intel used to talk about constructive conflict – you need to teach people that if someone disagrees with your idea, they’re not questioning your value as a human being or your fundamental values. In fact, most of these disagreements can be adjudicated through empirical means.

Rahim Rahemtulla:
Right.

Gregory LaBlanc:
If you talk long enough, you’ll figure out, “Okay, if you’re right, then when we do this experiment, it would turn out this way. And if I’m right and we do this experiment in that way…” And then all of a sudden you get your ego out of it. And so we used to talk about moving on from the HiPPO principle toward experimentation. Now it’s not about the HiPPO principle; you can have two people that are equally matched but they fear conflict and that’s just not gonna work. Because if I go out on Sunday to play a play a football game and there’s no tackling practice, yeah, I’m not going to know what hit me. And so business schools now are struggling with this: how do we get people to constructively disagree?

Rahim Rahemtulla:
That’s interesting. It seems like a very tricky balance to strike for the executives, for the CEOs, to know how to do that effectively, to disagree but, at the same time, not be overly confrontational and yet listen. It’s a balancing act.

Gregory LaBlanc:
Yeah, if somebody consistently throws up ideas that ultimately get shot down, what do you do? You say, “This person is full of bad ideas, let’s get rid of them”? No, because you need those people. 90% of all startups fail and you need to invest in 10 to get that one. I talked about venture capitals and this is another thing we like to talk about, how venture capitalists think vs. CFOs. Venture capitalists, you don’t need to prove to them ahead of time that your idea is a good one, you don’t have to prove ahead of time you have positive NPV. In fact, most likely you don’t. Instead, what you do is you say, “Okay, I need you to fund this experiment which will validate whether or not you should fund my second experiment.” That’s how venture capitalists think. And what they’re able to do then is truncate the distribution of their investments by killing bad ideas early. So the idea is not to say, “Prove to me it’s a good idea before I even listen to you,” but rather, “Let’s entertain all these ideas and come up with a process of identifying the bad ideas early on, so we’re not afraid to take them on.” A typical CFO is like, “I don’t want invest a billion dollars and then discover that this drug doesn’t work.” Whereas venture capitals are like, “Yeah, I’ll invest 10 million and, if you get promising results, then I’ll give you another 10 million and then, if we get promising results…” And then, ultimately, worst-case scenario, you lose 20 million instead of a billion.

I would just say, here’s another thing, not only do you get rid of your IT department, but you get rid of your CFO or you segregate out the parts of the business that are for the CFO and the parts of the business where you basically need an internal VC or an M&A or somebody like that who knows how to evaluate new prospective ideas as opposed to maintaining the existing ideas. Just like in an investment bank, you have people who analyze bonds and people who analyze stock. They’re different people and they have different ways to do things and they have different mentalities. You need that in the organization.

Rahim Rahemtulla:
Sure. Great, so Gregory, on that note, we’ve had a question come in from the audience on that topic of evaluating ideas. Maybe you can talk and give us a concrete example, perhaps. How would you suggest that you should go about that process of valuing, evaluating ideas before you decide how much more time and resources, money, you want to be putting into it?

Gregory LaBlanc:
So, in general, at the high level, there’s a couple different frameworks that companies can use. Some companies have Chief Innovation Officers and their job is to effectively be the idea generators or at least supervise the idea generation process. Some companies have actually established these innovation labs, like outposts over in Silicon Valley – you’re very familiar with these. And some of them are actually quite effective, some of them are disastrous and it really depends on whether or not they’re using people that have the ability to influence, politically, the people in the main part of the organization. The third way is to set up a venture arm and the venture arm will then explore all sorts of outside opportunities. The fourth way is to take that venture arm concept and move it inside. And so, internally, you basically take your R&D group and you modify it and turn it into like a VC group. So a colleague of mine, Andre Marquis, has been working with with Bosch for the last couple years, changing their R&D group into essentially like an internal VC group, so the ideas get evaluated. And he says – I can’t know the number – but he thinks it saves like hundreds of millions of dollars by identifying bad projects early on.

But that’s all at the big top corporate level. I think it’s really more like, if you’ve got a janitor and the janitor discovers that certain parts of the building are not getting cleaned, who does that person talk to? If I’m walking around the building and I see there’s garbage in the loading dock, who do I talk to? Sometimes it’s just as simple as, Does everyone in the organization know who to talk to when they see an opportunity for improvement? And so, does your webpage have a recommendations button or feedback plug? It’s that simple. Do the customers have a way of saying it?

And I’ll never forget this. I remember I was one of Amazon’s first 1000 customers. And I buy a lot of books. I mean, I buy a lot of books. So I used to have a paper list of all the books I was interested in, I would take it to the bookstores, to go shopping, see if I spotted them. And so I would put things in my Amazon basket and then, at the end of the day, they would empty my basket. And I was like, “That’s ridiculous. They would sell so many more books if I could just keep my books in this basket.” And so Amazon had a feedback page – this is back in like 1995 or 1996 – and so I clicked on the feedback page, and I said, “Hey, you guys should let people leave their books in the basket. It can be like their shopping list.” And I got an email back that said, “Great idea.” And like, two days later, the books stayed in my basket.

Rahim Rahemtulla:
That’s amazing.

Gregory LaBlanc:
And I was like, “This is freaking amazing.” Now, look, I’m not saying, was it me? I don’t know, probably not. There were probably 100 people coming in with that same suggestion, there were probably people internally that were saying it, I don’t know. But when you’re like, “Oh, man, I think Facebook’s gotta change their interface like this” and then the next day it’s changed without even telling them, that’s good, too.

Rahim Rahemtulla:
Yeah.

Gregory LaBlanc:
But what that means is that there has to be a portal somewhere, some person or some email address or some website where you can input things. And it also has to be recognized. I remember here at Haas I told the IT guys, “Look, you’ve got all these sockets under the desk and I saw an 80-year-old professor under his desk trying to plug in his laptop. You should put the sockets on top of the desk.” No response, no nothing. But six months later, I saw sockets on top of desks. Now, if I’d got an email back saying, “Great idea, great suggestion” and then I saw them later, I’m gonna keep sending new ones. But if it doesn’t even get acknowledged, if I get the sense, “Well, this would have happened with or without my suggestion,” then I’m not going to bother because I’ve got other things to do. Giving people advice is time out of my day and I’m not going to give people advice if they don’t want it. So every single person has to say, “Do I have time to give somebody advice? If somebody going to bite my head off when I give then advice, I have better things to do.”

And you should try it in your organization. Go around and ask people, “Hey, I’ve got an idea for you.” If they say, “Tell me more,” you’re in a great place. If they’re like, “Don’t bother me, screw you,” then switch jobs. That’s my advice.

Rahim Rahemtulla:
Yeah. And, isn’t it interesting, you sent that email to Amazon and the whole thing is not just that they had the email address but behind that email address someone picked it up and relayed the message. I mean, presuming it was your message which did it, they relayed the message, it went through, it got to the developers, the developers made the change, the whole chain there worked, the whole feedback loop went full circle and there you were, the next day, a couple days later, and you saw it happen and it all just went through. That’s quite remarkable, I think.

Gregory LaBlanc:
I teach a course on the workplace and workplace satisfaction, engagement comes from a feeling of autonomy and control. These are some of the things that we want. And what that means is that people want to feel like they can make an impact and people actually want their companies to do better and they want to help. And if you reward the people who help – and you don’t have to give them a monetary reward you just have to give them a thank you – if you reward the people who help the organization improve, you’ll get more improvements. If you punish them, if you chop off their heads, if you say, “Stop bothering us and stop hassling us and stop being a complainer and an a negative Nancy” and that kind of thing, guess what? No more recommendations.

Rahim Rahemtulla:
Yeah. And Gregory, we’ve done a small poll here among our attendees, we’ve asked them what are the challenges they’re facing with digital transformation. And I think this, of course, relates to what you’re saying because what people have replied, we gave them a few options and one of them, they say – and this will probably be familiar to you, I’m sure – is A) a lack of knowledge about innovation and secondly – and I think this is what you were speaking to – is B) gaining internal support. They’re not able to do that.

Gregory LaBlanc:
Yeah. When I was teaching at Duke, undergrads in Finance would ask me, “Your finance class conflicts with the golf class, what should I take? And I would say–

Rahim Rahemtulla:
Golf.

Gregory LaBlanc:
Golf. Right? “Because if you want to be a banker” – that was back in the 90s.

Rahim Rahemtulla:
For the networking.

Gregory LaBlanc:
Yeah, exactly. “Nobody cares if you can do a DCF on a fixed-income instrument, they just care if you can work the phones.” Now, nowadays, I think, if you had to choose between a class on data science – which I teach – and a class on power and politics – which my colleague Cameron Anderson teaches – I would say, “Take power and politics.” Like Tim Cook said, “The reason why so many big organizations make bad decisions is because the decisions are based on PowerPoint persuasion as opposed to experimentation.” So if you’re going to work for one of these organizations, it doesn’t matter if you know data science, it doesn’t matter if you understand innovation, it doesn’t matter if you understand new business models – because you’re not gonna make any headway with these people. Then you are just going to have to start your own company or go work for a company that’s more receptive. But if you really want to fundamentally change an organization or if you want to work in an organization where politics is big factor – which is the vast majority organizations out there – then you need to study power and politics and you need to understand that. Because even though I tell people to suppress these instincts, most people don’t.

So I like to use the analogy of the immune system. When it comes to ideas, we have a thalamus gland, which helps us to develop the ability to distinguish us and not us. Your immune system doesn’t attack your own cells, it just attacks other foreign proteins. And so we have the same thing. “If it’s my idea, great idea. Somebody else’s idea, not interested.” And so what I tell people is, “Hey, if you don’t like unsolicited ideas, solicit them before they become unsolicited. But if you’re in an organization where people don’t solicit your ideas and they don’t want your ideas, then the only way you can make an impact is to convince people that it was their ideas.” And that requires a lot of persuasive ability, it’s a very subtle thing.

And so I’ve got people who come into my class and we talk about, “surround the castle”: by the time the CEO hears from you, the CEO has already internalized the idea because everyone’s been seeding it around him or her. So that means forget about getting credit. You’re not going to get credit, you’ve got to make somebody else think it’s their idea and that’s the only way to get it through. And then you have a trade off: do you want to make an impact or do you want to get credit? And some organizations, you have to just forget about getting credit, at least in the short run.

Rahim Rahemtulla:
Well, Gregory, that’s extremely interesting and, yeah, I think it could take us into very interesting territory, no doubt, but I think we’ll probably have to draw things to a close. I guess we are just coming up to our final minutes.

Gregory LaBlanc:
And you guys at SVIC should offer, you said, like change management classes, too.

Rahim Rahemtulla:
Sure. We could have you speak on them, no doubt. But Gregory, I wanted to ask, just as a final question here. You mentioned before how you, as we can see behind you, you have a lot of books, do a lot of reading, and we were talking earlier about the intellectual challenges that come with being a CEO and how to keep up to date with what’s going on. Are there any books that you can recommend for digital leaders who are getting started and trying to implement their digital strategy?

Gregory LaBlanc:
That’s a really good question. I don’t think there’s any one book, there’s lots and lots of different books. I think that the textbook I use for my data science class, which is Data Science for Business is really, really good. It’s now a couple years old, but it’s still really good, so definitely check that out if you’re interested in data science. In terms of digital transformation, I don’t think there’s a single book. I mean, I could give a laundry list of books, like Machine, Platform, Crowd. By the MIT guys, there’s Leading Digital. There HBS books. There’s tons of them. I think it’s actually easier and better to just read MIT Technology Review, read Harvard Business Review, keep up with TechCrunch and Business Insider and CB Insights and that kind of stuff, they are all helpful. And then just allow yourself to go down various rabbit holes. I’m very aggressive about managing my newsfeed, so I don’t have to read 50 different magazines and periodicals every month, I let Facebook sort through that for me.

Rahim Rahemtulla:
Yeah, and so basically just make time for that sort of thing. Individuals who are in leadership roles do need to stop putting out fires and they need to take this as a priority, take it seriously as something that they should be doing.

Gregory LaBlanc:
Yeah, indeed. I was at a conference and there was a novelist there, a very famous novelist, and she said, “If you want to be a writer, you have to create a sacred space that’s absolutely inviolable. You’re going to work from 9 to 12 every morning on your book and it doesn’t matter what’s going on in your life. Baby screaming, write the book.” You need to do that also for your new skill development, your innovation practice. You have to really dedicate time not only doing reading and research, but also talking to people going to events, going to conferences, brainstorming with your team – you have to set aside that time. Without that time, you’re not going to get results.

Rahim Rahemtulla:
Wonderful. Well, Gregory, thank you so much. I think that’s a great point to end on, that sort of advice. We were talking earlier about reducing these things to key takeaways. Well, I think that’s one which is truly useful and truly doable, that is something that people can take away. They can say, “Yes, I really do need to devote time to those activities.”

Gregory LaBlanc:
And I don’t think any company is immune. I mean, look at Microsoft. Microsoft is a tech company, is a software company, is a data company and yet, they just went through a digital transformation. Their CEO forced the entire organization to change its culture, its processes, its decision-making, everything. And then, look at the results. Microsoft used to be the company I’d beat up on in class all the time and now it’s a company that I’m like, “Hey, these guys, they’ve got it going on.”

Rahim Rahemtulla:
That’s great. It just shows that even a big, established company like Microsoft can do it, they can turn things around. And there’s no reason others shouldn’t also be able to follow that example.

Gregory LaBlanc:
Thank you, Rahim.

Rahim Rahemtulla:
It’s been a pleasure, Gregory. Thank you, thank you so much. And to our listeners and viewers, thank you as well for participating, for sending in your questions and for really giving us a lively debate and conversation here today.

I just want to say that if you’ve enjoyed our talk today with Gregory, I’d like to recommend that you check out our website, the Silicon Valley Innovation Center website, which is siliconvalley.center, and you can see the details on the screen now as well about how to get in touch with us. We do a program there called Leading Digital Transformation and it really does touch upon everything Gregory has talked about today. And he mentioned how what we do there is we bring executives down Silicon Valley for a week and we really get them immersed in the kind of thinking and the kind of culture which goes on there. And Gregory has been a speaker on that program on many occasions and believe me, if you find him engaging here just by video, in person he’s even more electrifying, I would say.

Gregory LaBlanc:
Yeah, and if you saw this and you want to connect on LinkedIn, feel free. Just make sure you say, “Hey, I saw you on this thing,” so that I know we’ve met.

Rahim Rahemtulla:
Fantastic. Yeah, absolutely. So do take advantage of that, of Gregory, of course, if you would like to learn more. So I think that’s where we’ll have to wrap up today, unfortunately, because we could go on. It’s been wonderful having you with us. And Gregory as well, thank you most of all, we owe you a debt of gratitude for taking the time today to share your ideas. Hope you’ve enjoyed it and hope to see you again soon.

Gregory LaBlanc:
All right, thank you, Rahim.

Rahim Rahemtulla:
Thank you. And from everyone here at SVIC, from me, from Gregory LaBlanc, we will see you again very soon. Bye bye.

info@svicenter.com 1-650-274-0214
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