Business Transformation - Drive Change and Create a Culture of Innovation
by MARK C THOMPSON
Mark is an expert on executive leadership, business strategy, and innovation who has spent over 25 years leading teams and building companies from the ground up. He delivers actionable, valuable and practical advice for leaders at all levels of an organization.
Currently a highly sought after executive coach and venture investor, Forbes called Mark one of America’s Top Venture Investors with the ‘Midas Touch’. Mark was recently featured as one of the “World’s Top Executive Coaches” by the American Management Association and #1 Thought Leader on Innovation and Engagement. He was named one of the “Top 30 Communications Professionals for 2015” by Global Gurus. Mark advises top leaders in Fortune 500 and Global Fortune 1000 companies as well as the executive teams who are leading high growth startup companies in Silicon Valley today.
Female Voice: Mark is an expert on executive leadership, business strategy, and innovation who has been over 25 years leading teams and building companies from the ground up. He delivers actionable, valuable, and practical advice for leaders at all levels of an organization. Currently, a highly sought-after executive coach and venture investor. Forbes called Mark one of America's top venture investors with the Midas touch.
Mark was recently featured as one of the world's top executive coaches by the American Management Association, and number one thought leader on innovation and engagement. He was named one of the top 30 Communications Professionals for 2015 by Global Gurus. Mark advises top leaders in Fortune 500 and Global Fortune 1000 companies, as well as executive teams who are leading high growth startup companies in Silicon Valley today. And now, please welcome to Elevate 2015, Mark C. Thompson.
Mark: How do we train people in our organizations? That's the soft stuff, that's the hard stuff. And it turns out we did some interesting research that I want to share with you. We looked at 27,000 companies, public companies, and we looked at their financial data. We looked at their return on investment. What we were looking are the three differentiators that you'll find as a leader. I mean, you guys are the top 1%, you've got what it takes. How do we infect our team with the three differences?
We've looked at this data, we found 36 elements of success. But three had a high correlation coefficient with winning and losing. And I'm going to name some names in terms of companies that have been able to implement this. We looked at 110 nations. We wanted both emerging markets and mature markets. We want to be in a position to look at those organizations that have been continuing to perform for 20 years or more. We want no one-hit wonders. We want long-term success stories.
And here's what we learned. The first trait was this, they redefine winning. Now, one of the people who has redefined winning over and over again is this fellow. I met him in high school, I knew him quite well. He went to Homestead high school. My mom was a secretary at Homestead in Cupertino. I was a freshman, he was a junior. I was over at Prospect High School nearby, was in the principal's office all the time. I can't tell you why. I was doing mimeographing. This is kind of dating me here, photocopy machines. I still have the blue ink underneath my fingernails, even today.
That's what I'd have to do, and he signed up for that job as well, he was trying to save some money. But I got to know him professionally in April of 2000. And here's what happened, had to do with this little company. But what they did is something very cool, they popularized the MP3 player. And what they did in the course of doing that, they sold 250,000 of these. And at the time, I was CEO of schwab.com that Charles Schwab, and I was asked to become an outside director of this company. It's kind of exciting because it was hot.
This was a very controversial period. The year 2000, Apple would not come out with an iPod for another year. And Steve Jobs then came to the front of the room. This guy, probably the first and last time I ever saw him in a tie, and he said something profound to me that kind of changed the course of my career. He said, "Mark..." You know what people forget about Apples, they were to hell and back in the 1990s. Steve lost the company, they had great challenges.
You know the rest of the story there. He says, "Here's what I learned, and Mark you're so arrogant I know you'd miss the point." So here's the lesson. He says, "Mark, you got to get out of your silo. There's never just one business model. There're going to be early adopters that you are already attracting. You have 250,000 of them right now, they might go to 2.5 million, but it will still be a fraction of the business. That you need to be thinking about how this is not about technology. This is about the ability to reach many, many new types of markets."
And I said, "Wait a minute, we're hundred pound gorilla. We're already having such success in this market place. What you talking about Steve? Then he went on and gave me another piece of advice. He would be, and he didn't admit this at the time, that he'd be coming out with the iPod in about a year. This is how our device looked, and he said before he came out with a more streamlined version there of that iPod, he said, "Mark, what you've developed there is an interesting idea, but it's a geeky piece of crap. And it's going to get crushed in the marketplace in about 12 months. I wouldn't mortgage your house to do this business."
Fortunately, I did not mortgage my house to invest in it [inaudible 00:04:40]. I didn't, of course, buy enough Apple stock, who did? But here's the interesting set of lessons that he provided that we've seen in our overall research. He was one of the first guys to start thinking about seamless collaboration among all of the devices, and with the customers. He was one of the people who were able to develop a higher level of profitability for doing that. He started focusing for the first time in consumer electronics on outcomes.
He knew that customers wanted fashion, passion, and profit. They wanted to pursue those three areas. And so he said that, "The defining opportunity in the marketplace right now, the defining opportunity in this market, and you're going to miss it Mark id you don't look for it, is that there're are many consumption models." I don't know if any this is sounding familiar to you. And he says, "If you think about these consumption models, 99% of the business you don't have a clue about right now, Mark. You're just obviously clueless about where the opportunity is."
He says, "What is going to make the difference between the winners and the losers is that they're going to see new consumption models as a threat. And the winners are going to see it as an opportunity to differentiate against the folks that don't have the intestinal fortitude to make the change. They're not going to be up to the task. You can be guaranteed they're not up to the task. We're going to have a very early advantage. And you've obviously been working at this for a long time, you're making sales. God bless you, you got the early adopters, maybe you'll owe them forever, and you'll be just a footnote that might not be remembered 10 years from now."
So, that's part of what I'm talking about with redefining winning. We saw this across, in 17 industries that we studied, we're seeing the same pattern of business models for the first time in technology being challenged. It used to be, it was almost as if we put new products on the shelf in B to B, or in B to C. Now, what we're seeing is a situation where you actually have to think about new business models. So, this is the first area to consider. The second is the idea of defining, and directing, and driving change.
I remember Andy Grove always talking about, "Only the paranoid survive." It's still a great book if you look at it. He wanted to make sure that we drove change, not just embrace change. That we've in fact did unto ourselves in the marketplace before the marketplace did unto us. So, what do I mean about driving change. You think about companies, think about Kodak. Here's the scary thing across the 17 industries that we study, it wasn't that they didn't get it. They actually saw the digital cameras purpose.
They entered that into the marketplace, and it was the biggest for a while. They saw the opportunity to be a part of people's memories, another was they saw social media. They started to even experiment with social channels as simple as when you go to a theme park, you'd see a Kodak photo spot. They got it, that it was about memories, and relationships, and exchanging that information with others. The scary thing about Kodak that we can all learn from, is that it isn't the fact that they didn't get it, it was the fact that they could not get it done.
They couldn't get it done. So, let's look at the company that actually can do it in a viciously price-sensitive market. What is the slogan from Nike that we all know in this room, "Just do it." They say most managers are paid to sabotage change. Now, how could that possibly be? Well, it ends up being three fundamental reasons. The first reason is biological. We as human beings have the brain center called the amygdala, which is our fight or flight center. When we see risk, we run from it. And in business, how much experimentation is actually really allowed?
What does innovation require? You have to experiment. Tell me what happens when you have to experiment. What happens in an experiment? Yeah, you have failures. So, how do the rest of us do this? Well, we take a little bit of a lesson from Charles Darwin. What do we learn from Darwin? Only the fittest and the fastest survive, but it's a little bit more than that. They're actually able and willing to take small bits, lots, and lots, and lots of small bits because, they don't want to risk it all.
But you can't wait or you will be overtaken by your competitors. But we see that the big winners take a huge number of small bits, tiny by comparison of the company. We're not going to risk everything on this, but we sure as hell we aren't going to wait in terms of the number of acquisitions that actually make the experiment work. Because they're able to tolerate some failure. Now, how clever is that? We can count on competitors not wanting to do that. The third area that's absolutely critical is being fanatic partners.
Well, fanatic partnership has to do with this, that fanatic partnership isn't like any other that we've found among the number 1 out of the 15 competitors. What we've seen is organizations that are so inextricably combined with their partners. That it's hard sometimes even to define or differentiate the look and feel of their population short of their employment between the two companies.
I love this quote from Teddy Roosevelt, "They don't care how much you know until they know how much you really care." In other words, doesn't feel like survival. That partnership doesn't feel like you win together, and you lose together, and that's the only way you'll interact with each other. Let me give you an example of this. Chuck Schwab, had an opportunity early in my life, at the early part of my career to work with Chuck. He would just drill this into us. He said, "Take a look at this picture, the big problem. This is how our partners feel. This is how our customers feel."
He says, "They've got a lot to do, it's embarrassing. They need help. We need to be there for them side by side." I know there's a lot of discussion about how partnership is like family. And yes, unfortunately, sometimes it is like family, it's also dysfunctional. In this case, we want to be with you and together day after day working with that customer, working with that partner, and it really kept Chuck Schwab out of trouble. Because when we've heard of the last few market crashes... At Charles Schwab, they weren't part of the leaders of the game that had the high leverage, because they thought, "You know, I want to feel like I'm in the same business as my customer. We are sharing each other's wallet. If I came down and borrowed Edison's wallet right now, he'd trust anyone with his wallet, except for maybe Bruce. But imagine that every worker, every one of your people in your organization felt like they had a financial interest in your partnership, and they often do, would it change the game for them? That's what we're talking about.
Chuck developed this sensibility of partnership back when he was 15 and discovered that he had dyslexia. This cover that you see here comes from Fortune magazine just last year. They have some beloved CEOs who were dyslexic. John Chambers among those, my current boss. Richard Branson also another dyslexic. One of the interesting things about people with learning disabilities, we see this at the Stanford Venture Lab all the time, you see these brilliant kids come in and they know they can do it all.
There's nobody else smart enough to hire on their team, they can't keep any talent. A dyslexic feels the opposite. They know that they need to work with and through other people to get anything meaningful done. They know that they have a few skills, but they don't have all the skills that's necessarily. "How do you scale a life? How do you scale a business? It's through and with other people." This is a quote from Chuck Schwab. And by doing that, Chuck has been able to keep a discipline of hiring great people. He was able to scale that business very quickly.
He was able to take the position in the marketplace right through the last crash. He was able to increase his market share. And when we took the company public in 1987, this is how we looked. We honestly don't look that way anymore. 1987, and today last week, they hit 2 trillion in customer assets. Now, what I can't understand about this second picture is, "Why is it that he's the billionaire, and I've obviously lost all of my hair?" What is that about? He is a fanatic partner.
When you have fanatic partners who are living, and dying, and placing bets with you financially, and have everyone in the organization feel aligned that way, that's what we're talking about partnership. It's all about getting the right people in the right seats on the bus, as Jim Conlon said. You want to get people in alignment. In venture capital I'm constantly moving people around, on projects that couldn't get done in a month could get done in three days because you got the right person aligned with that passion.
Here's the first area, flow. Flow has to do with losing track of time. McGill Chosmaholy, the sociologist talked about how he would call experts from every field, and that he'd check in with him on what time it was. They could never tell, whether they're physician, or an artist, or a scientist, or technologist, you lose track of time. Flow. Secondly, it's something that you do the greatest of resilience. You could do it despite fatigue, despite failure, you get up the quickest when you're in a state of passion. Third, I'm talking about accountability.
This is the first thing you want to sign up for, if it's something you're passionate about. Notice this in the people on your team. Fourth now, I'm not suggesting that anyone ever do anything secretly for free, but the truth of the matter is when somebody's passionate about it, they're not watching the clock as much. This is worth noticing in your best talent. They want to get this done beautifully.
They always have a standard that's even higher because they're passionate, not the way they feel about everything they do, but what they're passionate about gets done that way. This fifth area is really critically important. You bore people at cocktail parties when you're in a state of passion. They will ask you a question, and you will not shut up. You're looking at your watch, "How do I go on to the next person? It's kind of loud, I can't hear you." You become politically incorrect when you're passionate.
You're not so sensitive about what other people think. This is interesting to watch. Now, it's annoying to see in other people sometimes but notice it in your customer, notice it in the teammates that you have, what are they getting lost around? Have them do more of that. What's your teenager losing track of time on? The sense of being transformational. So, let me go a little deeper into this, because the sixth area is collaboration. If you want people to collaborate, they got to want to be together on the bus.
Your people know when you don't want to be with them. I'm sorry, you could fake it for a while, but it's just the way it is. It is visceral. They can feel it that they don't want you around, or you don't want them around. So, collaboration is irresistible. Think about it in any interaction you have. Richard Branson always says, "Before you flame somebody on email, think about what success means." Before any interaction with a person, before that phone call, get a definition of success, because it changes with the people that you interact with. It'll change in the moment depending on the context.
Yes, we have to have our MBO's and KPIs. But let's actually measure what victory really means in this interaction. It keeps you profoundly on task when you have to change quickly, and you have to embrace other people. So, I'm a little bit of a geek. I'm not an industrial psychologist. I'm a guy who's a venture capitalist. I wanted to really look into what were the definitions of success that the entire cohort had of the top 500 people. And it ended up being easily defined this way, "The three Ps." I didn't want 36, I wanted 3, purpose, passion, and performance.
Often discussed as the same thing but they're very different things. Purpose in this case has to do with getting a close communication and collaboration with your most valuable people. When I say MVPs, I'm talking obviously about the customer, I'm talking about your team. Who is the MVP on your team? How are you treating them? Who are the MVPs at home who help enable your success? We found that the most successful people, the people who'd had impact and stayed in a position to win year after year were looking after that sense of cause with all of their MVPs, thinking of them as MVPs can be helpful.
The secondary is performance. No point having a cause if we don't deliver the goods. We've to deliver this week. We've to deliver this month, and this quarter. So those are the MBOs and KPIs. And the third area is the fuzzy one, passion. It's the soft stuff that drives the hard stuff. And I put a picture here of Warren Buffett, because Warren... He's now 82 years old, he was one of the people that we met. He has 230 companies. There's no way that you manage 238 companies, you have to hire great people. You have to seek experts who are cause driven.
And so, you can't get a job with Warren Buffett's empire unless you pass the three Ps. And the passion ends up being the hardest one he says. Plenty of people who are focused on goals, that's essential. There's a larger group that actually understands that there's more than one group of MVPs. And the third is this idea of having a sense of passion. Now, you look at Warren, he's 82. He has thick mop of hair, he's got thick glasses, looks a little menacing, but he's actually a sweetheart.
And I talked to him about this, and he says, "Mark, I couldn't believe how many people come to me with a business plan, but no passion." He says, "This is X-factor." He says, "People will put off passion to the weekend, or the evening. Now, are you working 20 hours a week, or 30 hours a week, or 40 hours a week? No, it's much more than that. What's going to keep you going is passion." He says, "Putting off your passions for later is like saving up sex for old-age. It's a really bad idea. We have to be charged up with all our sensibilities here and now in the context of how we're applying it to our life."
I'm talking about why you should give a damn about what you do so profoundly. It's very few times in a person's life, or in any time in your life, that you actually might be able to be a part of something in your job where you actually have a profound impact on the lives of others. How often does that really happen? You're the most admired people in this business. You're the top 1%. Who better than you to lead us into this new world that's already transforming lives. I know it, I feel it. What you do from here matters more than any other point in human history. I want to thank you for having the opportunity to bring me along for this journey. And I really admire where you can take this tomorrow.