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Ten Years Hence: Innovation, Part 5: Why Well-Run Companies Will Continue to Fail

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Episode Topic: Why Well-Run Companies Will Continue to Fail

Join Alex Slawsby, Chief Growth Officer at InnoLead in Boston MA, for a discussion about why employees' fear of speaking up is the single greatest obstacle to success when companies innovate.

Featured Speakers:

  • Alex Slawsby, InnoLead

Read this episode's recap over on the University of Notre Dame's open online learning community platform, ThinkND: https://go.nd.edu/1ec602.

This podcast is a part of the ThinkND Series titled Ten Years Hence: Innovation. 

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Introduction and Speaker Background

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good morning. Welcome back. This is 10 years, hence the last session of this semester. Our focus news this morning from innovation in community medicine to why well run companies will continue to fail. Our speaker this morning is Alex Sby, who comes to us from Boston, Massachusetts, where he serves as Chief Growth Officer of Inno Lead. An organization that creates content, events, and tools to help the world's largest network work of corporate strategy, innovation and r and d leaders drive change for successfully. Alex's dedicated more than 20 years to researching. And leading corporate innovation, strategy development, capability building, and new business incubation. Prior to joining NL eight, Alex was director of innovation for Embraer X, the new growth group of Ember Air, the Brazilian aerospace company at third largest producer of civil aircraft in the world. Alex also worked for 10 years as an innovation consultant, including seven years working for Innosight Clayton Christianson's disruptive innovation consultancy. I was privileged to be a student of his in a seminar on discussion leadership. He's pretty good at that. Yeah. Alex has a Bachelor of Arts degree in Political Science from Brown University, an MBA from the MIT Sloan School. Ladies and gentlemen, please help me welcome Alex Lspi.

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Thank you, Jim, and thanks to all of you for coming. I will add a little note. I actually did not come here on Wednesday wearing this boot. My wife and they come in, graduated here in 2007. Very excited to come back to campus with me. We wanted, we went over to the rec center and I was very excited to be able to tell our five daughters that shot hoops at Notre Dame. And I was shooting hoops very effectively for me, which meant I hit one out of every 20 shots. layoffs were a little bit better, three pointers. and then towards the end I decided to go for a half quart shot. And my, Achilles did not like that. So I'm doing great other than this, which of course makes me even taller when I say it on it. It'll be fine. I've got a great story. but I have another, souvenir to bring back.

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So

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anyway, thank you all for coming. Really excited to be here with you. It takes some time to tell some stories, from my experience. and there is my beautiful wife, by the way. I'm alum class of 2007

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plus 2007. Not a daughter in that class. Oh. So the question is, where'd you live? Harley. Okay. Kathleen, escaped. Farley, Kathleen, Kirk Merrick. Kathleen O'Rourke. Yeah. She lived in Liar. Oh, okay.

Evolution of Mobile Devices

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So anyway, just, again, we'll leave with this great souvenir. So, as you mentioned, I'm gonna talk through, a number of stories from my experience, thinking about this very problem. And I will share towards the end my belief about why this is going to happen. Even though over the last 20 years we've learned a lot about why well run companies fail, I've always been fascinated by the fact that they're just gonna continue failing. So. Kind of know why they fail, why is it gonna continue to happen? so briefly, just as Jim mentioned, I started my career actually as a wireless analyst working for IDC, which is a technology industry analyst firm outside of Boston. And I was fortunate to get selected to learn about disruptive innovation from Clay Christensen, a professor of Harvard Business School. Sadly, he passed away a few years ago, but he really was, he was about six, eight. He really was a giant, literally, but also, figuratively when it came to thinking about these very problems we're talking about today. And I wrote a research report called Disruption in the Palm of Your Hand, looking at the old mobile device market in the early two thousands. I'll talk about that. I then went to MIT wrote, a thesis, during my, MBA experience there on again, corporate innovation and democratizing innovation in big companies. I worked for Clay's firm for seven years. This is one of the books he wrote, kind of a classic innovator's dilemma that laid out disruptive innovation theory. I then, as Jim mentioned, I went to work for Embryo, the Brazilian Aerospace Company, leading a new growth outpost group in Boston. I'll talk a little bit about that experience. I then spent a couple years developing my own innovation de-risking methodology. I'll draw on that. And then finally, I joined in a lead about three and a half years ago. Again, the largest community of corporate strategy, innovation and r and d leaders, in the world. mainly focused on the US and North America. And as you mentioned, we create content, tools and events, not a consultancy, it's a membership organization. And we've done things with the Ideas Center in the past, which is in part why, I'm here. So again, thank you so much for that. there's a picture of Clay, and I'm gonna build out a quote that was in the Innovator's Dilemma book that I think really encapsulates the core of this challenge. So he said, precisely because firms listen to their customers. Invested aggressively in new technologies that would provide those customers what they wanted. Carefully studied market trends, systematically allocated capital to innovations that provided the best returns. They lost the positions of leadership. And so when part of this conversation would always comes up is how you had leaders who went to great business, schools like this one did this, which traditionally is considered to be the right thing that leaders should do. And their companies went into the ground. They made mistakes by doing this. So again, when I first learned about it, I just found it fascinating because it's very counterintuitive. Very smart people got a great school, did very well at those schools, doing what those schools taught. And yet it's the wrong thing. So I was fascinated by that. This is a very important stat and as I said earlier, a key consideration here. Is that for decades we've gone deep into this idea of why do well run companies fail, why does this actually happen? And we've got really good insights into it, yet it keeps happening, which again, is the core of this. And so I just grabbed a couple examples. Since 2020, those are all s and p 500 companies that are no longer in the s and p 500 probably recognize a whole bunch of the names. Now, the companies at the bottom, some of them disrupted those. Some of the companies at the top failed for other reasons, but all the ones at the bottom, which are largely digitally, DNA companies, whereas the ones above or less so were beneficiaries. So again, we had leadership teams very smart with great degrees running all those companies at the top, and those companies are no longer part of the s and p, which is fascinating to. So what I'm gonna do is I'm gonna, sort of lace all of this through four stories and I'll show you some things that sort of illustrate my journey, to get these insights and figure out what we're talking about. So we're gonna start with my time at IDC and I quote this off and then I cover my eyes because everybody laughs. I was early on my career at IDC probably just a couple months in, and my boss and his boss were meeting and a call came in from Fox News and they said, we want somebody to talk about the PDA market palm pilot market. At the time, this was in 2000. Now nobody cares. But then people actually cared. And so I thought, well, what the heck I'm gonna go. And I went home and I grabbed a jacket in this terrible tie and zoomed off to the satellite studio in Boston, and I was on nationwide with Neil Cavuto talking about palm pilots. And I want to do many things before I look at that video. Because one I sent was just insanely wrong. I don't know what I was talking about, but it was a great experience, of actually being. So this is where it all started. Now the key consideration here is that back in these days, so this was really 2000, 2005, there were mobile devices that were loved by many people. And this was one of them, this Nokia phone, very basic phone, really small. They called it a candy bar phone. You could play snake on it. You could do some basic messaging, but that was it. This was one of my first cell phones. Really small, really portable. It was a grace device. Now, the business set like this was a Blackberry 9 57. So again, you had the keypad. It enabled you to pound out text messages and early emails. Really well, very basic screen, but long, long battery life. So that was something that the business community loved. And then maybe the business enthusiast community. Like this is, a m tungsten tea, PDA with a stylus on top. And you would write on the screen, you'd actually write down below in this area here. The handwriting recognition was absolutely terrible, but it had early app. This was still a black and white screen. and it was something that you'd find in all kinds of fashion publications as this very cool sort of techie device. So we had all these devices. Of course, the mobile phone market was absolutely king, right? There were just, you know, hundreds of millions of bees sold and many fewer of those. But they all had purposes that at times people wanted in one device, because why do you want to carry three different devices to get that functionality? And so back at the time you had these dominant companies that said, we know the answer, we know the answers to that. And so research in motion, who made that? Blackberry Knife 57 came out with this device. This was the first Blackberry with voice. You could actually make calls with This looks very much like the 9 57 I just showed you. I think it's called the 58 10. But what they did was to enable it to, have voice communication to make calls, they put a headphone jack on the top. Now the problem with that is if you actually wanna make a phone call, you gotta plug in an earbud. So if you're wearing this on your hip and a call comes in, you can't just say hello, you gotta find an earbud, which probably isn't hanging behind you, sticking your ear and talk. So while you could replace your cell phone and your blackberry with one of these, it was pretty poor as a combination of those. But they said, Hey, you know, this is what the world wants. This is gonna be the next big thing. Now, Hewlett Packard working with Microsoft said, we've got another idea. And they took their PDA, which was called a pocket PC at the time, and they added voice to it. So this has a nice color screen. You still use a stylus on it. You had these early Microsoft apps on it as well. You could hold this up to your head and talk on it that had that benefit. The problem was the battery light was terrible. This was expensive, and it wasn't the coolest thing to hold next to your head. So it really had limited appeal. The operating system was pretty cool.

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Ton. You ever heard of a fellow at the University of Colorado called Jim Massey? He offered a line one time. I didn't know what it meant at the time, but I do now. He said, you are what you were when, meaning that if you started life as a PDA manufacturer, Uhhuh, that's what you're gonna be. Uhhuh. I bought a Palm Trail 600. Yep. And it could not make a phone call to say the church.

The Rise of the iPhone and Market Shifts

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Yeah. Yep. Well, you're actually getting ahead because I got one of those, right. but this is, no, this is exactly it. Right. So this is where I'm getting to with this story here, which is, so I'll show you the final two and now I'll sort of get there. Well, Nokia. By far the dominant mobile device manufacturer in the world with Motorola at the time, I'll shake the market share in a minute. They said, well, hey, we need to create our own smart device. And they did not have strengths and software. They did not. And they leveraged this, they created this symbian operating system and they said, this is gonna be great and we're gonna create a device that business users are gonna want carry the 92 90, which was this really large phone that you could actually open and use as a computer. Essentially. You had a key, you had a keypad in there and you could do your business activities. Now this was extremely expensive, probably. And back then for these types of devices, this was at least a thousand dollars, without any sort of subsidies to it. And it, battery light wasn't great. And also again, it's a really large brick like phone. It actually was like a brick. So you know, this device was something that they really believed in and the world didn't really look. And then to Jim's point, here's a palm trio. Handspring was the company that created this, and it sort of folded into Palm. I used to call it a trio. And they got mad'cause they said it's three devices in one or tree devices in one, A trio, a handspring trio, or a palm trio. And so this was their view. So you've got the keypad of the blackberry, basically you've got a keypad that's good for messaging. You had a color screen, the form factor was smaller. So this actually wasn't terrible for the time, but again, it wasn't as great as that little Nokia phone right here in terms of the size. Right. This was just still very cool. And there was the Motorola eraser, the original flip phone, you know, so all of those sorts of things. So, it to, to Jim's point, you have these companies with these very smart leaders and they recognize to some extent that people wanted convergence. They wanted to carry one device that did many things, but it makes a ton of sense that they said, well, given our capabilities, what can we do? So you nailed it. We research in motion, we make blackberries. People want voice, let's create a voice enabled blackberry. They don't sit there and clean sheet and say, Hey, let's build new capabilities. Let's start from scratch. They rightly say, we've got these assets, what's the return on assets? Let's just do it. Right? So this is what's sort of fascinating about it. So if we look at the data back then let's see how this plays out. And I think you all pretty much know how it goes, right? So back in 1993, Motorola actually dominated the market. Noia just behind that was the market. Okay? So I'll build this up a bit and as we get out here, Samsung gets involved here in 1997, and starts to sort of build out its business. And when we get around here, you see research in motion coming in. and so actually the green is palm. So you've got research in motion, you've got palm coming into play. you've got a little bit there at the top. So sort of you've got palm at the top. You've got research in motion below at Samsung, Motorola, and Nokia. So you can see all the entrance. And there's a bunch of others in the gray bar above. Look at Palm's building market share, and research in motion's. Got some decent share seeing sort of a fragmentation of the space. I'll build it out a little more. You can see. So this is around the time where I finished covering mobile devices and I went to get my MBA. So look at the share that Palm had. It taught in the green research in motion in the purple, Samsung. Below that, Motorola and Nokia. And then the iPhone. The iPhone comes into glue, right? And the thing that Steve Jobs saw was that people wanted to create an experience for themselves. People wanted different things. Some people wanted, you know, a messaging or social communication centric experience. Others wanted entertainment, others wanted productivity. Well, how did you do that? You didn't do it through heart. You did it by creating an experience that allowed you to customize and personalize. And there was the App store and iTunes, and he created whole ecosystem. Well, you can see what happened. So Palm is now gone at this point. Research in Motion has decent share, but you can see the compression down below. And look at Motorola, that little orange slice, kind of little orange block. Look at Nokia and I'll build it all the way out. And we know what happened, right? It's a market of Apple, it's a market of Samsung. Motorola is actually in there in a tiny little bit, and then Nokia resurrected with Microsoft. But you just see that transformation. So, so to Jim, I mean, this is Jim's point. This is exactly the point Steve Jobs saw. He understood what people wanted to get done, and he figured out how to give it to them. Having seen the market for what it was and recognizing how it should be better Nokia and Motorola said, well, we know how to do it, but they couldn't clean sheet it. They couldn't come in with the right type of perspective. And that's of course why they're no longer in business. and you know, apple is a dominant player here along with Samsung, which of course lined up with Google and the Android operating system. So what we use today are mobile experiences that are highly customizable. You can personalize them, you can download apps, you can download music, you can do all of these things. Yes, the hardware has to be compelling, but Motorola, it made really compelling hardware with the Razor and the operating system and experience is tarone and it sold, but then certainly didn't sell. So that's this mobile device story. I'm gonna show you one more and I'm gonna build out this video, which is a great one that I saw online, and I don't have to say much about it, but let's see what happened when you've got a market of film cameras, then a market of digital cameras, and I think you all know what happened from there. So let's take a

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look. There's digital cameras,

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smartphones, and there go digital cameras and film cameras. And there's a classic story about Kodak, right, which is talked about in pretty much every single business school about how there were a number of folks within Kodak who recognized the power of digital photography, but Kodak's dominant business was. And so they said, how can we use digital to sell more film cameras, get people to make more prints

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on our stage? George Fisher, oh, CEO said, student asked him a question, what's going to happen to film? He said, silver Haylight is not going away. You know, somebody who owns, a photo mat, which is like the size of a British phone booth, you drive by and give me your phone. He said, we're gonna be around for a very long time. By which he meant about six weeks. Yeah.

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Well, I get, it's another thing I'll talk about towards extent, you know,

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but as a leadership

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decision. Yeah, of course. and hubris and pride. And again, when you're a senior leader, you need to project confidence. You can't say, oh gosh. You know, gr you'd be like, Hey, yeah, we're gonna be around forever. Right. But again, this is, I mean, we know like the pride and the fall. I mean, we know all these things, right? So, we'll kind of, I don't wanna, I don't wanna get too far, ahead of, but we'll together. Okay. Now I've been looking forward to doing,

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whoa. You need help? No, I'm okay. I promise Jim, I wouldn't put a hole in the nice desks here is gonna, I'm not sure this has ever been done into those.

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Another souvenir. Put one hole in this wood.

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Not lose myself putting lots of wood because it's. There's a famous quote, from a professor at Harvard Business School years ago named Ted Levi. My mom actually worked with him, when she was at, at Harvard Business School Publishing. this is a very important lesson. Okay? Here's what matters. The whole is the outcome I'm seeking to achieve. I wanna put a hole in a piece of wood. So I go ahead and I select the thing that's gonna help me put a hole in that piece of wood most effectively. So classically, I might pick a drill like that one and put the hole in the piece of wood. And if you think about that experience, it just made some noise. I had to carry this drill. Gotta make sure it's charged, made some noise. I got shavings. Most are in here. I'll clean those up later. But made shavings, right? and you know, the hole was pretty good. There's some dust around it. If you look at the experience of this hole and what was created, you know, you can sort of pull it apart into different characteristics and you say, well, I gotta drill. And I made. Well, what if I'm actually not so enthusiastic about the sound? What if I'm not so enthusiastic about carrying the drill and charging it, the shavings, all that stuff. And what if somebody comes along with a dropper of liquid? Let's say I put a little maybe template on it, I put the liquid on it and it eats right through the wood and creates a perfect hole. No sound, no shavings, no, no danger. And the hole is perfect, right? You can see it's a little rough on this side. Let's say it's perfect. Well, given the characteristics of the ideal solution to me, I might say, wow, this is exactly what I've been waiting for. And now I go, and maybe a bunch of you go and we start getting this liquid off Amazon and making our holes. Well, what do you think happens these folks? Any idea, disappear. So what are these folks thinking about the folks that believe these companies? What are they paying attention to?

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Threats

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the drill and what kind of threats are they looking for?

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Better drills.

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So they're looking at other drill companies and they're saying, well, wait a minute. You know, this has got a good locking mechanism, et cetera, and wow, that one's coming along and it's in red. Battery is bigger, it charges faster, it, whatever. Right? And so they're focused on that and they're gonna one up their competition. Back to my quote early on that Clay said, that's one of the things you might teach at a school like this, which is, hey, focus on the competition. You know, see at least what they're doing, see how it's resonating with consumers or customers, and make sure that you're on the path that's gonna beat them. Say,

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and before famously said, if I asked a customer what he wanted,

Jobs to Be Done Framework

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faster parts, he would say a faster horse. Right. I'm, you're so ahead of me, because I'm getting to that a little bit later. That's exactly right. Okay. this is disruptive innovation, you know, in, in a nutshell. Okay? So those leaders are looking at other drills, something comes along, they're not paying attention to it. It makes the hole better than the drill for us. We go and buy that liquid, we stop buying drills, drill sales start going down. They don't know why.'cause it's not like other drill companies, market share is growing. They realize what's happening. They can't do anything about it. I mean, in theory, if they're really, wow, do we go and buy the liquid company? Like, how do we do that? Classically, they don't.'cause by the time they realize it, or even if they saw it early and they dismiss joke, oh, on the work site, they'll never use that hubris, right? They'll never use that liquid on that jog site. And then it happens, right? So this is a very classic challenge, and this is a great example of it. So I'm gonna briefly talk about this concept called Joss to be done. Which Clay developed, and is really instructive as we go through the rest of the story. So the job to be done is the hole. And when I say a functional job, it's, I wanna create a hole. It's creating a hole, quenching my thirst, keeping my leg somewhat immobilized. These are functional jobs to be done, right? Very sort of, mechanistic is a task. This thing I need to accomplish. Well, social jobs to be done are how I want to be seen. and when we talk about this, when I did early on is you're putting green'cause it's re energy. It's like how you want to be seen. So you want to get that functional job done, put in the hole. But how do you want to be seen when doing it? For example, you could argue that if you went on a job site and you needed to put in a hole and you used a drop rope of liquid, you may get made fun of on the job site. So it may not be how you wanna be seen, but there's social jobs to be done. How I want to be seen and emotional, that sort like fire, anger. How do I wanna feel? So what's the task to accomplish? How do I want to be seen? How do I wanna feel? Okay, this is really kind of core stuff. And so again, back to the drill. Functionally, I want to create the hole, but how do I wanna be seen when doing it? How do I wanna feel when doing it? Classic quote, you never got fired for buying IBM.'cause back in the day, it was the pinnacle of enterprise technology. And if you were a leader who brought in IBM or you were somebody selling it, nobody would say, well, who the heck is that? And why would you bring them in? IBM got the job done. People probably would think you made a good decision and you could sleep well at night.'cause it was solid technology, all three jobs. So for some fun. Now let's take another example. Let's look at traces. I'd never heard of this until yesterday. This is 19 crimes. Red wine. Maybe I'm a latecomer to it, but it's pretty cool and edgy, but I'd never heard of it. Okay. So this is 19 Crimes Red Wine. I'm actually gonna put it right there. Okay. I'm not even gonna take my Nalgene bottle. I'll put it right there as well. Sorry, I'm sticking it all in front of the That's okay. In front of Jim, giving him a range of beverages. Celsius. I never heard of this one until yesterday as well. apparently it was illegal or it is and kills people, but it's called for loco

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and it's,

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I guess your loco if you drink it.

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Jim, is that what you, I dunno, it's the alcohol content. So it's 14%. Yeah.

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yeah, we could see the issue with it. I think it may have had caffeine at one point too, which is really nice. And then you've got five hour energy, and boy, if you mix all these together, wow. you need the brace would be the least of your, and then I couldn't find this last one. It's amazing. Liquid Death said, here's the story here, right? let's think about this. I'm in this presentation. You're in a business meeting and your functional job to be done is quench your thirst. You're thirsted, okay? Think about what it would say, what the experience it would create if I drank from the ING bottle. If I'd pulled out a bottle of 19 crimes, if I'm right here in front of this. Wow, you guys are a tough audience drinking the wine, right? Or any of these other ones. Just taking a five hour energy shot. You can think about Monster, which is again, sort of monster beverage from one, get full of caffeine that, that gamer's this is a great story to consider around jobs to be done. They all quench my thirst some way or another, but then they accomplish other things, right? Some will give you energy, some keep you up. Others will help you have more fun at parties or in presentations. They may give you vitamins, hydration, those sorts of things, but then they say a lot about you. So again, how would you perceive me if I, again, the 19 cry? Wow. You know, so, so these are really important characteristics of solutions. So when it came to those mold devices, I showed you, well, you know, functionally you could make phone calls, you could do text messaging on all of them. But there's a question again, if you took that big iPad and, or let's just say the communicator and you held this up to your ear and no, he, by the way, may not remember, they created device called the nng Engage with a gaming phone, Tony Hawk Pro Skater, this whole thing. and it looked like a game controller, a little keypad and a little multi-directional

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switch.

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Back then, and this was again in the early two thousands way before stuff really went viral. People created videos of folks holding things to their heads. because you had to talk about it, you had to talk to it. So you actually had to hold it out like this, huh? Because they put the earpiece in the microphone on the side. So people took toasters, I'm sure they took drills and they called it side talking and they made all kinds of fun, right? So, hey, look, maybe it gave you gaming, maybe it gave you voice, it gave you text. A lot of people felt it looked ridiculous. But Noia was focused on creating a great gaming experience. They made it look like a game controller. Okay? So socially, how do you want to be seen? At times, if you had a Blackberry, you might be seen as a real serious business person, but if you had to take a phone call and you pulled out that ear button, you had a Blackberry, folks might go, what the heck are you doing? and this, so now we're sort of drawing together a couple of these other dimensions, and my wife and I had a great conversation about this. Notre Dame is a value proposition. It is a solution. So life when we make decisions, when we take actions, when we. As sometimes it's described when we hire products and services. When I take the drill to get to the hole, we don't care about the thing. I don't care about that drill. As a consumer, I care about the hole it made for me, and I wanna create the best hole I can in the way I want it. Maybe people collect drills, but arguably even being a drill collector is not the outcome because it does something for you. How does it make you feel? So everything around what we wear, what we do, Notre Dame Mendoza, they're all value propositions. And so it may be it's apocryphal, but to say none of us care about, I don't wanna say none of us care about Notre Dame or Mendoza. We care about what it does for us and it does different things for each of us. But you can think about the education, setting yourself up well for the rest of your life, the social connections that you make, but the school pride, which is the best anywhere, right? How you feel being a part of this community. So ultimately, it's what it does for us. And dear, you're all sitting here for what this does for you. And I'm a valued proposition. You're not for paying me, but technically you've hired me to give you an experience that hopefully you enjoy. And so it's incumbent on me to do that. And I'm here because it's getting my jobs done. This is fun for me and hopefully it's helpful to you and that's my benefit. But in the end, you don't care about me, you care about the experience I'm creating. I don't care about this brace. I sort of do, but I really care about what it's doing for me. Okay? So I'm happy again to pause and take any questions about it, but this is absolutely critical to understand. There's another great quote, which was, the customer rarely buys, or the company thinks it's scout. So a big failure point through this whole story is the company says, we make great devices. They like our devices. No they don't. They like what those devices do for them. And the moment something else comes along and does it better. Unless you create switching costs, some of those other great things where now it's hard to do it, hard to switch, you can lock'em in. But generally speaking, right, that's the big challenge. Let me pause. Any questions about this so far? Drops to be done.'cause again, it's a really important, so far, so good. Okay. So I started off, I showed all those statistics. I showed you the mobile devices. That was part of my experience trying to figure out how these well-run companies are failing, well run, but how these mobile device companies can be at the pinnacle. And then fairly quickly be at the bottom

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how that company,

Challenges in Corporate Innovation

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so then we take a change of view and we come over here to the mobile devices, over to jobs to be done. And we say, okay, well maybe one of the ways that they're failing is because the leaders are not understanding that their solutions don't matter. The leaders don't understand jobs to be done. They're not focused on. This stuff has been around now for decades. Jobs to be done has been around for 20 years. This is not new stuff. Okay? So back to my point at the beginning. Well, we know, you know, very smart leaders and leadership teams drive companies in the ground despite being really smart and well meaning. And we know that people don't buy drills, they buy, but the companies are still fail. So let's go a little bit deeper. So now I'm gonna talk about my experience at Embraer, and a story I think which again, helps further illustrate the core of this problem. So I'm gonna build up a few things here and then ask for all of you two ways. So these are all definitions, five definitions up better. Now, if I pulled all of you, if I pulled all of you individually without asking you to raise your hand, it's highly likely you all will not pick the same one to be the definition that you believe to be the correct one. And some of you indeed may look up there and go, ah, there's a six. That's the correct one. And it's not even there. But what frequently happens when you've not aligned on things is in a room of say, 50 people. And you say, we need more innovation. 10 might think one 10, might think two 10, might think three on, on, and on and so forth. And if you all don't align outwardly and everybody says, okay, this is the definition we're gonna follow, everybody goes, yes, more innovation. And they all go off and they do different things. So language, basic communication about this stuff is crucial because these words are nebulous. What is

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innovation?

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No one ever said, we have enough innovation. There's no one who's ever said, oh, innovation isn't important. We don't need more of it. Everybody says, yeah, of course, innovation, we want more. But what kind and what matters and when, right? That stuff within big companies is rarely clear. It's rarely aligned upon. All right, I'm gonna pull one more thing. So let's look at these as obstacles. Innovation. So one is resistance to change preference for the status quo. Number two would be bureaucracy, stalling progress. Number three would be, again, a lack of resources or time. we gotta keep the likes on. We gotta hit those quarterly numbers. We don't have time to do big and different things. there's your short term focus. and then finally a question about the strategy. Well, they say innovation, but let's say number one, who thinks number one is the biggest challenge?

4

Yeah, that's sort of a John Cotter problem. John would say Todd at Harvard for many years in the leadership, but he wrote a lot about change and he said leaders are either unable or unwilling to properly identify threats or opportunities. Hence they've fatal to change. and an agent of change is seen as a threat.

12

Yeah, a hundred percent. So we're now getting to a different part of the problem, which is not about the market, it's about the organization and its people. What is innovation? What is the definition that we should be using within our organization? There are many types of innovation. There are many definitions of innovation. I think it was Deloitte Lin who had 10 or 15 types of innovation. There's tons. There's disruptive innovation. There's business model innovation, transformational innovation, core adjacent innovation. McKinsey came up with horizons one, two, and three, which we can debate all day long. They don't work. But anyway, these are all different concepts all under the banner of innovation. So number one, if an organization isn't aligned around the definition, if you've got a leadership team. They say a leadership team of a drill company or a mobile device company, and they said, okay, innovation, we gotta spend more time and money on innovation. Go innovate. And everybody goes in different directions. You have organizational dysfunction and no ROI on innovation, but now these are obstacles. So obviously it's a bit of a trick question. We can spend some time on say, who likes number two? Who likes number three? These are all problems, right? These are all obstacles to innovation. So now I'm getting us to this part of the story, moving away from the market, moving away from what the B2C and B2B buyer and seller experience is like to what's happening inside the company. I'm now gonna talk about my, experience.

1

Okay, go ahead. Yeah, I think there's a, for me, there's a six. So I was at Microsoft in the Pocket BC Windows Mobile days. Oh, nice. And the huge fear within the company was that it was gonna disrupt the Windows business. Oh yeah. Right. Which was the leather and, you know, the cash cow slash out, it didn't get the resources it needed. It didn't, they didn't, weren't gonna do the hardware because they're worried about windows. And so There was lots of great stuff going on in the company that died because they were worried about

Johnson & Johnson's Wellness Services Dilemma

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what was gonna the windows. A hundred percent. Yeah. That's another great example. There's a, I dunno, the list is somewhat endless of this, right? And so they're all obstacles to innovation. That's a great one. Real concerns about what it's gonna do to the business cannibalization. big concern too. Right. and, actually early in my career when I was working for Clay, I worked with Johnson and Johnson consumer to help'em come up with a new, wellness business. A wellness services business. So Johnson, it's not a services company, right? They make things we take and. But they do not make services that you subscribe to. But j and j has a phenomenal employee wellness program, right? It's part of their credo. They take great care of their employees and their families. And so back then the conversation was, well, if we do all this great work for our families, why don't we do it for others? And so the conceptualization was, let's go do this for businesses. Let's sell this sort of j and j, you know, wellness services business. And so we did a whole lot of work with it. But what kept happening is you get to moments where there were senior leadership conversations at j and you had the head of the Tylenol business unit, I mean billions and billions for the company. And the conversation that was happening at that level was, well, this little wellness services business, you know, we need to talk about it. It needs some resources. And the head of Tylenol, I was going, what the heck are we do it? You give me a little more people time and money, I'm gonna make you predictable returns. Why are we spending time and money on this stupid thing? So in that case it wasn't cannibalization, but it was corporate priorities and fiefdoms and all the so a hundred percent, but there,

13

this is more of an observation. Yeah. I see number three as really being kind of the startup problem, because that is their problem. Number four is the corporate problem. because they cannot fall outta line or your shareholders are just gonna kick out. Yeah. The leadership. Yeah. But one, two, and five I think are interrelated. because it's a leadership problem. because think about it. resistance to change means you haven't communicated the expectation of being an employee bureaucracy and slow decision making. You haven't changed the process in the organization to facilitate the speed or the focus needed. And then the last one, the unclear innovation strategy. Clearly you haven't hired the right people, so I don't know, just more of an observation. And I've never worked for a company that hasn't had innovation in their mission. That's personally one of the things. I just can't do it. And so, you know, I've worked in Fortune 500, I've worked for a five person startup, and now I work for the government whole different level. but you know, at the end of the day, I do think the reason that everybody would have a different answer is it is highly dependent on where you sit with organization and people, which is what your thesis was a

12

hundred

13

percent.

The Struggle with Corporate Culture

The Reality of Corporate Innovation

Lessons from Ford vs. Ferrari

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and a thread through all of this is there's change. So a definition that, I frequently use for innovation to, to sort of pull out of what was on the previous slide, is doing something different that creates value. You can argue that doing something different can be invention, but creating and capturing value is the critical piece for innovation, right? Because you gotta get value from it. Doing something different is change, it's changing things and change creates winners and losers'cause you're changing from here to there. And frequently the losers are those in power if you're trying to change large organizations. So I'm in the senior leadership team of any big company and that's, that company is really successful. Well, I rose to my senior leadership level having made the company successful in part for some of it. And so now if the answer is, well wait a minute, we're a hardware company and we need to build software, and I'm a hardware company. I now begin to run into some questions about what I'm gonna support, right? Am I gonna stay in power, am I not? So I'm gonna bring this to the experience I had at Ember. So, I've always been a big aviation guy. my wife knows I'm crazy about planes, looking up at planes, taking student pictures of planes, looking at the plane apps, all that sort of stuff. And it was a dream to go work for Embr. It was really exciting to work for in aerospace and do innovation there. And one of the cool experiences I got to spend time here in Boston, I gotta spend time with JetBlue on the tarmac with the mechanics, like going, doing plane runoffs. Like it was really neat. I got to be where, when I was a kid, I looked through the window down at those people and I got to be on there. So that was really neat. But my responsibility was to be in Boston and open a grow outpost, basically to scout for new opportunities for Embr. What's coming out of MIT again, where I went, any of the labs up there. What are people doing? Startups that could really help create competitive advantage for what Embr was doing today or for in the future. And so this was exciting and when they hired me, they say, we think Clay is great. We'd love this disruption stuff. We wanna do it right, great to get, you know, they wanna do it correctly. And so I started my journey there and I was excited to help them do exactly what should be done, which is incredibly hard. And if you're in power, you probably don't actually want to do, which is amazing. And in incre amazing from the outside if you're trying to solve this problem. Incredibly frustrating if you're inside a company trying to drive change. So I showed them slides, I told them stories, I took them through all kinds of exercises to help them see. I said, for example, here's something that's really important. The vast majority of innovation initiatives, particularly if they're far from the core business, if they're new and different things we've never done, maybe for new customers we've never served before with new capabilities, new ways of making money, we're gonna be wrong. You might be completely wrong with our assumptions. We're gonna have to go experiment, do stuff in new ways. And you know, something, the most crucial thing is to get to wrong as quickly and cheaply as possible so we can stop it and go in a different direction. And so, a, you know, great and again, love hate relationship, but it's this concept of failing fast. And boy, there's, I mean, the number of companies where you say fail and they don't want you to say that word, it's just'cause failure is bad, you know, in, in every company. But you gotta have an honest conversation about it. And when I was an ember, if you can think about it, in the core business building, commercial airliners. Building executive jets, building some military aircraft. They have signs in the factories that say, 2000 days since the last failure and innovation, you wanted to say 10 minutes, right? I mean, you know, and again, it needs to be a smart failure. If it costs a lot of money, people time, and then is destructive from a brand standpoint, from God forbid people get injured, all of that's really unintelligent. That's sort of stupid failure, right? The smart failure is quick experiments, learning you're wrong, and then making decisions, you know, when it comes to it. So, so this is sort of the conflict we start to have in, in, in the company. And so I begin to realize that they paid lip service to the core principles, but didn't actually want to do anything about them. And that was incredibly frustrating because they said we wanna do it right? And then they actually didn't wanna, and so one of the things I did, apologies a little bit small, you can see it here, is they said, well, we need to get into this team building, the forming, storming, norming, performing thing. We need to connect as a team and have an honest conversation about these things. Okay? And so I had this activity, we did this activity called confidence line. So here's what we did. We had a big, it was a big room in Ember facility in Melbourne, Florida. And I put pieces of tape, pieces, tape on the floor spaced equally apart. One piece of tape said 0%, and to the last piece of tape that said a hundred percent. And so what I did was, and they're actually the facilitator, so it wasn't me. So they set a statement like this, I am blank percent confident that we all define success for this year in the same way. And then the goal was, and everybody, it was set up so people didn't injure themselves. Everybody with their eyes closed something over, went to the piece of tape that represented their confidence level and then opened their eyes to see where they were. And then we started doing it with just, you know, eyes not closed, eyes open to see. In almost every single occasion, the head of art group was at a hundred percent, and everyone on the team went that way. And so for all of these, and I looked at all of these, and I'm thinking to myself, I'm at like zero, maybe 25, but I have seen so many companies, so many teams screw this up. And it's not that I want us to screw it up, it's that I want us to get great outcome. And that means being honest about this stuff. So as I watch this and I see everything that's, everything that's happening, I go to the other end and I'm like, I'm gonna go s faster than I'm going over here. And everybody went over there. Now keep in mind, there really wasn't, I studied a little bit of Portuguese. As a Brazilian company, I was not gonna be good at Portuguese. I was not moving to Brazil. There was an unclear career path for me. So, and because of everything I had done, I just can't do the thing that everybody does. I have to do this the right way. We have to be honest about it. So I knew there was, it may not be great for me, but I felt it was really important to create air cover. So I went down to the end, they're all over here, and I start feeling like defensive. I start feeling like I have to explain and I say, listen, everybody, just'cause I'm down here, it doesn't mean I'm not on board with this. It doesn't mean that I don't want us to be successful. It means that I know how this stuff goes wrong all the time. And it starts with misalignment in the team. And it starts with teams being prideful. It starts with hubris. It starts with believing that we know all the answers. So we went through all of this. I feel comfortable speaking candidly with my team members. Oh my God. I went right into the heart of this stuff and I'm down here and it just was not great, but it was like, we have to talk about this stuff. And again, keeping it, another thing, and I'm not, gonna get deep into it, but power distance is an incredible concept, which is again, how flat a kind of social hierarchy is from those with power and those who do not have, right? And so when you have cultures with like high power distance, there's tons of deference. And when the power distance is low, you can be honest with your, you know, people at a higher level. In Brazil, it's very high power distance. So, so you revere people who've been there before. you revere leaders, you don't maybe question them. And so now we're getting into cultural conflict and language barriers talk about saying innovation and people thinking different things. So what happens when the language people don't really, English isn't their first language and you're speaking it. And you say innovation, they nod.'cause they're very nice. So this thing is like problematic all over the place. So I went down to that end and I had to say, guys, I'm on board with this. no, I want us to be successful but we've gotta be, oh yeah, they all nod. This is not, so here's where it went. When I joined this group, emrex, there were two projects, two innovation initiatives that were identified by the organization and were at highest level as being so new and so different that they needed a different group. And that's one of the classic things Clay and others have written about. IBM did this really well. They have the group building, mainframe and they said we're gonna build many computers over here'cause they're very different. And then desktops over here and laptops, because again, they're very different businesses. You may need different skill sets, different cultures to set them separately apart. So they believe that we have two initiatives. The first one was electric vertical takeoff and landing vehicles, air taxis, like flying cars basically, but flying taxis. and then the second one over on the side was basically Uber for aviation out station main. So what that means is, JetBlue, a lot of the regional airlines, JetBlue, has a lot of ember aircraft. A lot of the regional airlines that fly under American United Delta, they fly ember aircraft, 1 91, 9 5, 1 70, 1 75. Some of those aircraft go to a destination once a week. So it may fly to some rural location, and it's there it goes once or twice a week. Well, at times you have AOGs aircraft on ground experiences, which basically means there's a ma there's an issue with the aircraft, and the determination is you shouldn't just fly that aircraft again. So let's say that aircraft is in some. Location where it's there once in a while. You don't have a maintenance base, you don't have mechanics all there with all the capabilities. It's a big issue. And so frequently what you need to do is put mechanics and parts on planes and fly them. I mean, it's a whole thing, right? So what the idea was let, and they love these network business models like Uber, like we're gonna be the next Uber. I guess the idea was, well you probably have mechanics in the environs of wherever this airport is, and you probably have some that actually are aviation qualified that have the right qualification. Maybe it's a hundred miles away or something, but you probably have, and so the idea was let's create an app that would basically allow you to call for mechanics. You'd put out a call kind of like we do with Uber. I need a car over here. Be like, well we need somebody to fix this aircraft over here. We'll fly in the, you know, FedEx in the park and the mechanics could look at the app and they'd have to be, their certification would have to be proven. So they'd have to be validated that they were certified to do this in the app. To be in the app, but they would say, okay, I'm gonna go and maybe, I think it was, maybe they would even bid on it. I'll be there in this time for this money. So let's create a network model for bringing these. So we had these two projects, the electric vertical takeoff and landing vehicles, the air taxi season, and the one on the left, these flying taxis, there was momentum there, there was clear understanding of demand and there was broad belief that this was going to be something at some point. And you had a lot of the major, aircraft manufacturers, but a lot of the startups getting involved. Job B, you had all these startup companies, well funded, by Google, all sorts of other things. And they we're building these air taxis or starting the process. And this was years ago. And they're still working through regulations and certification and urban air traffic management had to have all these things flying all around without getting dishes. Embr was the few.'cause I don't think, Boeing or Airbus had different views there. Embr was really the lead at the time, and Embraer knew how to certify new aircraft, which is incredibly difficult. So Embraer actually was in a very well good position to do this. I was assigned to this other project, this Uber for mechanic, basically aircraft mechanics project. And I, I mean, I just came into it with immediate skepticism.'cause again, the safest thing to do is assume these big and different innovation issues are gonna fail and then be really pleasantly surprised. But boy, that goes against corporate culture. So I came in and I'm looking at this stuff and frequently, so, so there's a concept, I'll sort of run through it, but basically, human-centered design, like design thinking. There's a con. There's certainly concepts of desirability, viability, and feasibility. Simply what desirability is. Does the customer have a job to be done or an outcome they're seeking or a problem to solve? Do I have a solution for that? Do I have I proven that they will pay for it? That there's demand for it? Feasibility, can I make it, can I actually deliver the value to market and viability? Can I make money? Ably, viability, feasibility. You wanna get all of those. if a company is doing a pretty good job of being human centered, they're gonna overindex on desirability. They're gonna fall in love with focus groups and ethno and brainstorming and sticky notes and prototypes and MVPs, and they're gonna just spend all this time going, wow, let's just get deep into the customer and the problem. And a lot of companies don't even do that, but the ones that have gone on this bandwagon and do that, and so frequently when it comes to innovation activities, it's not so hard to get a case where the customer goes, I want that. And if you're really good, you can actually get them to go. I will pay for that. And you can run experiments that actually have them putting up money or really trying to prove that it's not just what they say, it's what they do. Viability and usability are almost always the problem because those are the business model and the capabilities and if something breaks the business model or breaks the capability model, the antibodies show up. That's where the salespeople go, I'm not gonna sell that stupid thing. That's where the company goes, we're not gonna make money in this way. Ads like these things are really structurally problematic. So I didn't doubt that. The regional airlines who are great partners, BR said, this is great. Well of course they said, this is great. And I immediately go into that with skepticism because I can. I could run any kind of focus group and I get everybody in the focus group to say they love the thing. Even if they'll never pay a dime for it. It's easy to lead the witness, right? So I immediately go to viability and feasibility. Well, and something unsuccessfully tried to get us to line on is what do our new ventures have to be? For us to actually say, these are gonna be the businesses that will generate the growth and brand needs. Are we building billion dollar businesses? Do we have to believe it's gonna be a hundred million dollars in revenue? what is that measuring stick? And I think I got them to nod to a billion dollars point. So I'm looking at this thing and I'm going, I mean, we all head nodded that we're here to build big, you know, needle moving businesses. And I'm looking at the spreadsheet and there was that moment I remember looking at it and I'm like, God, this formula is wrong. Like the decimal was in the wrong place. And, back to my IDC days, whatever, a company would show up with a device that was just, they were so passionate about and were like, oh my God, it's a disaster. my boss, who's actually the president of IDC right now, Crawford, he would say, oh my gosh, hundreds of people will want that. Hundreds, 50, 30 people want. And of course, depending on who they were, they'd go, really? Wow. You know, big success. And he is oh my God, this is terrible. I looked at the numbers and I was like, oh, this is you know, thousands of doll. I mean, this was maybe a million dollar business, whatever it was, but it was not a billion dollar business. And I'm looking at this and I'm like, we should have this conversation because we should be doing other things if one of our initiatives is not gonna get to be what we need to be. And they look at me and they go, well, you just don't. And again, there's a cultural issue. This is a largely Brazilian LED team, but they looked at me and they go, oh, but you don't understand. no. There's more to it. Show it to me. And we get into it and there isn't anything more to, and I'm getting really concerned'cause I'm saying, are we just paying lip service to these ideas? Are we actually gonna execute on them? And so I start getting more and more vocal because I'm like, what the hell are we doing here? And I start getting more and more vocal. And then I get into a back and forth with my Brazilian colleague in front of sort of our boss. My Brazilian colleague says, you know, you've been coming to the meetings at the, digital consultancy we're using to build the app. Maybe just, you don't need to come anymore. I was like, I don't come anymore. I said to my boss, I'm like, you know, honest exchange of ideas, et cetera. And it became, I went from another funeral. I became, you know, maybe you shouldn't, you know, just don't worry about it. Okay. and then long story short, they were kinda like, eh, maybe don't be in this job anymore. And this was pre COVID and then everything. So they were just like, you know, something, thanks, but no thanks. And so I was laid off. I that job just right before, COVID and it was nuts. They did it. So they were like, come on down, fly down here. Because I thought, oh wow, they're gonna put me in this new position, whatever. Now they're like, so I fool all the way to Orlando from Boston, you know? But in the end, millions of dollars wasted. People got fired and it went nowhere. Now do I like it? So vindication, but it was, you know, it was really hard. So they said it, but they didn't want to do it. The air taxi thing went public through a spac. It's called Eve and it's making, the thing that I did not fully grasp was that the head of innovation said to the ember of CX O team, we have these new ideas, is new ventures. They're gonna be the basis for this new group. And when they're successful, we will have established why we should be building these new and different ventures. They were too big to fail. They could not fail. So I didn't realize that, but I was in a situation where they said all the right things about killing things that should be killed. They didn't want to, and this would've been incredibly embarrassing to the senior leader if we shut this thing down. Now, subsequently, he retired and left the company, you know, and the whole thing has folded back into the services group. So whatever. But now we're kind of getting to the core of all of this, which is. Why I believe well run companies will continue to fail and I'm gonna play this, which I'm a big fan of.

14

Give me one reason why I don't fire everyone associated with this abomination starting with you.

15

Well, certain I was thinking about that red questions set out there. As I sat there, I wash that little red trailer right there. Go through four pairs of hands before it got to course. I've been included the 22 or so other four employees. Probably packed out for man as well. Took the 19th floor I respect. So gang by committee, we one man in charge. Now the good news, as I see it was a lift extra. We still managed to put on Mr. Ferraro exactly where we wanted.

6

Did we

11

had a corner yet?

15

Stay on the ground and a lot of stuff broke. We felt the only thing that didn't break wasn't base hell that Now we don't even know if, I think Jo lost the whole 24 hours, but I lost lot. We drive 218 miles an hour down the Nissan Strait. Now in all his years of racing. Ain't never seen anything move that fast. And now he knows without a doubt we're faster than he is

11

even with the wind hour and our committees. And that's what he's thinking about. I was sitting,

15

man is scared of death that this year we actually are not gonna be smart enough to start trusting me. So yeah, I'd say we exactly what we.

5

So it's

12

a great clip of any of you ever seen Fort versus Ferrari? Yeah, it's a great movie. It's a great movie. There's actually a whole, air, the Michael Jordan movie, the Nike movie with Ben Affleck is a great one as well. There are these movies that have just incredible stories of innovation organizations, how they work, how they don't, and this is a great one. right here. I'm gonna try something.

5

Let's see if this works. So. It's

12

a good question. Would this actually work if you went into the office of the senior executive and did what Matt Dam, Carol Shelby did? I'm gonna ask Chad.

5

Pt. That's, Hey Chad, pt, can you hear me?

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Lap and clear. What's up?

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Are you familiar with the scene in Ford versus Ferrari, the red folder scene?

16

Oh yeah. That scene is pretty iconic. It's when Carol Shelby gives Ken Miles a red folder with all the race data and strategy for the 24 hours of. It's a pivotal moment showing how much trust and respect they have for each other. It also highlights the meticulous planning that goes into such a legendary race.

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So what would happen in real life if a corporate leader walked into his boss's office with all that confidence, but without, credibility really pushing that senior leader to support them? How might that turn out

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in real life? That could go a lot of ways. If the leader has a strong track record and trust built up, that confidence might persuade the senior leader to take a chance. But if they lack credibility or haven't proven themselves, that bold approach could backfire.

Advice for Future Innovators

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Stop it there. But, basically, and again, if you haven't used chat TPD voice mode, it's pretty cool. You use it in the car and you ask it all kinds of stuff. But it could turned out a bunch of ways. But honestly, kind of like my Embraer experience, it would not turn out well. Because even Carol Shelby in this example was right on the edge of basically getting fired, but he had tremendous credibility in Henry Ford ii. Got it. and continued. And of course the way the story goes is it was, it was a huge success for Ford. this is a cartoon I had created for the venture. I working on the de-risking venture. This is where I start to end up on all of this. How frequently is it in life that we don't say what we think? And it happens all the time in companies, right? The hippo, the highest paid person in the room at the front there goes, Hey, we're all gonna do this is amazing. And people are going, oh my God, that's terrible. But what's your incentive to speak of? What's your incentive to say anything about it? I did got can for doing it. Because it was really important for, I was like, no, I gotta stay true to this.'cause if we're not doing it the right way, I don't want to do it. But in most calculations it just makes sense to, I don't know, like just say that's great. Senior leader. Right? Be really focused. So, you know, this is where I come out, you know, at the end here, and this is why I believe why well run companies will continue to fit. We know everything I've shown you up here, leaders know it. This stuff is taught in business schools. I mean, people know that all these device companies fail. They know the s and p 500 stats. They know what jobs to be done on our, it was actually, it's funny, there's a gentleman, niche who's part of the business school here, and he teaches marketing and we just chat upstairs in the, in the teacher's, lounge. And I was explaining, he was asking what I was doing and he is yeah, there was that like Ted Levitt quote about the drill in the hole. And I'm like, yes. Right. I mean, we know all this stuff. We know why well run companies fail, at least when it comes to the company, the market, the capabilities, the resources side. But this is why I believe they will just continue to fail. And even with Gen ai, they're gonna fail even faster because it's easy to create startups and disruptors more quickly and cheaper than ever before. Boy, if you're in a company and you're sitting there at that table and you're thinking, this is a stupid idea, your role in that company, your livelihood, everything you do, it gets into all these green things. I got my job. It's helping me get shelter, security, employment, resources, help. I mean, all of this stuff. Family connections in the company, my friendships, recognition, freedom, all of these sorts of things for a lot of people, their corporate life, it's all of this. And so in the end, and when there's a senior leader, right? All of these sorts of things, your golden parachute, your retirement, all these things. So how frequently are you as an employee? Are you as the leader going to make the decision that's right for the company, but may be wrong for you? And this is frequently the crux of the issue. Even if the leadership teams saw the dropper of Woode liquid understood jobs to be done, all of that stuff, different types of innovation, all of those things. Let's say they understood everything about it and they had it front and center right? They're gonna find themselves inevitably if they're really trying to drive change in transformation. Faced with this problem, my boss, AB at Ember, absolutely had to the line because if that project that I said should be shut down, if that was shut down, he would look really bad because he had convinced the leadership team that this was gonna win and be big. So even if he knew I was right. No, I mean, I'm expendable, right? But he and his career and the idea was not even if, then later on it turned out to be a huge disappointment. So I'm gonna wrap it here and sort of get to the questions, but I think this is extremely hard to fix. And at one point when I was working for Clay, we'd theorize some kind of prize where you would, if somebody did the incredibly hard thing and drove towards the outcome that was best for the company and not for them, could they win a prize? Could they get a bunch of money? You know, could something be given to them that would help make this less painful for them? And of course, nothing like that ever happen. I'm just not sure we can solve this. I think in the end, self-interest is gonna win. And when it comes to change, transforming companies, what's best for the people who wanna drive the change frequently is not what's best for the company.

10

So some of us here are engaged in a executive in residence program where we're meeting with students one-on-one to tell our career stories and to answer their questions about careers and, companies and so on. And technology's moving so rapidly now. I read an article about people who went to school to learn coding and they wanna do coding when they come out. And the coding's being done by AI now and their job has been reduced to checking ai, which Yep. Part of our is Yeah. Given over to

4

hire people to teach coding. You know, if you can see a block and a half down the street, you can, you just recoup that money.

10

Yeah. So people are, you know, the students are wondering about their career choices, their industry choices, and their company choices. And what advice would you have for them to look forward and hopefully, Their, of making a good choice. What a great question. And I

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wish I had the perfect answer. So we have five daughters. the oldest is 16, then 13 and a half, and then three, three little ones. And my 13 and a half year old, the 13 and a half year old, is going down a computer science path. She's passionate about technology. Oh, that's great. And I helped her through Udemy, get a Python course to learn Python. And I literally text her almost every other day as I,'cause I'm on, on XA lot, just seeing people's postings about gen AI and what, you know, all, what's happening. And almost like once a day or every couple days, I'm texting her with something that suggests maybe her path should be a little bit different because I want her. So there's a great, another great quote, skate to where the puck will be. That was the whole Wayne Gretzky thing. Skate to where the puck will be. Right? Well, the problem is we don't know where the puck's gonna be and every week it could be in a different place. And so it was Okay. All right. I said to her, you're gonna be. Part of a generation that is growing up with generative AI as a given, as a force multiplier for software development, right? Microsoft said, Hey, front end developers who just do the beautiful user interfaces, they can now be full stack. They can code all of it leveraging gen Ag, which is a tremendous transformation.'cause it used to be you have, you know, backend, both front end went in full stack. Developers were really unique, right? So I look at this and I say, you're gonna be part of this generation and you can learn how to code and you're gonna have this army of JI to help you, right? And then you start reading about it, it's well I don't know if we need coders anymore. I wanna achieve and then I think about these great universities and I go, these computer science programs are certainly not keeping up. So what do you do? And so now it's okay, focus on how you manage AI systems and build AI systems. And so, you know, I continue to sort of keep encouraging her and I then the target's moving right? So I think in the end, I mean, gen AI is here to stay. I mean, anybody who goes, that's another technology. no. It's completely transformational. The fact that I could do what I just did there is nuts. I could asked, did anything, Hey, that's opine about Mendoza, and how's Notre Dame? Great. Hey, tell me where to go on campus. Where should I eat food? give into history. Let's talk about Rudy. Like it would just gimme everything, right? And then I could say, teach me about particle physics. It would do that too. And I would say, teach it to me like I'm a first grader. Teach it to me like I'm a fan of Notre Dame football, and it would use analogies if you haven't used it. It's just my boy. This is not like blockchain, right? So when I come back is Gen AI is here to stay. it's just ridiculous. I always stop short of the whole, we all become power sources for our gen AI overlords because at some point it's nothing we, I don't wanna go that far. But I think assuming humans are still like in control somehow, then it's gonna be about working with these systems, managing'em, using the right ones, ensuring it's not garbage in, garbage out. Critical thinking is crucial because of the DeepFakes, because of the inability to know the difference between what's real and what isn't. So I'm gonna encourage her to, you know, continue to develop these skills, but to be really in on gen AI and LLMs and all, like the capabilities in that'cause it's here to stay. And then critical think, and then ultimately how you tie the human and organizational piece in. I think that's where humans end up.'cause everything else starts becoming automated.

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The thing I've said to my students really sort of acknowledges all of that and it's gonna change at a ferocious rate. And so I tell them, think less about what you wanna do and more about who you wanna be when you get older. Because I will tell you, I worked hard on skills. Worthless. I was a damn good video tape editor. I get a lot of calls. so think more less about what you wanna do and more about who you wanna be. You know, I've worked for a fellow who ran for president and I miss him to this day, but he was, he was fond quoting ESUs and others, but his favorite poet was an Irishman, George Bernard Shaw. And Shaw said, some men see things as they are and ask why. Other men see things that never were. Yeah. And ask why not to. So in terms of innovation, that's sort of my motivation. I try to think about what never was and then ask, well, what prevented us from doing that?

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And you're spot on. Once again, Andy Jassy, who's a CEO of Amazon, just released his annual letter, Jeff Bezo, to do it. His whole letter is about we are the why company and we are, we need to, so many things Amazon has done. It's done because people said, why not? Okay, so you should read that ar the letter. And he goes on to all these examples. And Jim, you're exactly right. So there's this key piece of, and there's whole thing called the inventor, DNA and questioning is a huge piece. Asking the questions. Asking the questions. Other people don't ask, asking the questions. Other people are too afraid to ask. That's absolutely where innovation comes from. It's huh, you see it in a new way. So critical thinking, like all that's kind of the best I go because we don't know, right? I mean, clay years ago projected that, higher ed would get disrupted. Colleges would start failing, you know, massively. colleges are an independent school. They are starting to fail, right? Grade schools like this one are gonna live for a long time, but these things are starting to happen. So the question is, what's gonna survive and where do you want to be and where will the value be? Yeah. Other questions?

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You know? Mind that it's very easy to get disrupted out of existence for a company and you're in the innovation advisory. My question to you is how do you innovate how to assess a diagnose and come up with a treatment plan for these companies? And, and I know you had a bad experience with br, but let's just take Milwaukee or the walk. Sure. I love their drills. Yeah. Okay. What would you tell them to do differently and what do they have to do? Do they have to organize differently than what we've been taught?

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So, in a lead which I help lead, it's a membership community where corporate leaders drive to it and we've got sponsors. We, we don't do consulting or have consulting projects. And that is a key here because when I did consulting years ago, when you're in a consulting firm, particularly as you rise to be a partner, you need to bring in business, you have to hit your numbers as a partner, right? One, a clash of incentives. Because if you are brought in and you're working with a team and you see all this and you go, this is gonna be bad, you have a strong incentive to say, no, we can fix this. We can do this even if, you know, it's gonna be real problematic. And that's back to one's personal values, right? So again, get back there. So I, I'm not in a consulting company because I can't deal with that conflict of you gotta, you don't wanna do the work at all costs, right? Because it's not the right thing to do. I did independent consulting for a little while, and so I didn't have a whole pyramid of an organization to support. And I would talk like I'm talking to you and when I am in a lead, when I talk to companies and sort of, I do coach teams and provide the input and I'm just like, wow, you know, if you have a leader who gets this stuff, you have a slight chance of being successful and if you don't, it's over. So what I would say to them, so me per, so you might have consulting firms who go, oh yeah, we'll do that for 10 million bucks and we'll do all these things. I mean, if it's me, I do all this and I go, I'm gonna be honest with you, this is incredibly hard. Can we get that senior leadership team to sit through this and can I go right at it and go, let's not waste time here. You guys wanna do this? All you guys wanna do all this innovation stuff. sign a chart, sign a charter. Like we gotta be real straight. We don't have to waste approach. You know, and so whenever it always starts with language, are we saying the same thing? Are we on the same page and can we be honest with each other? Transparency, A radical, honesty, transparent, that is human stuff. If you don't have it, there's no chance. If you're trying to, if you're trying to make the blue thing green, it's one thing if you're trying to launch a services business from a hardware company. So I guess that's where I

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there many of companies that you've worked

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with that have done as well. Yeah, so what I would say is when I use the term like digitally dna, so companies that grow up digital because they are making digital things like services in particular, if you don't have all the capital expenditure of factories, plants, equipment, that stuff creates rigidity.'cause once you have it, like all those mobile device companies, you wanna use it. You have very little incentive to say, and it's all wrong. Let's start fresh. But digital companies, and again, you can look at the Magnificent seven and of course these days they're not doing very well in the market. But you can look at, you know, Netflix and Google and Amazon and Microsoft. They're making ones and zeroes, bits, right? And it is much easier to still, not easy, but it is much easier to change course.