Euan Pallister 00:13
Hello, and a very big welcome to everyone joining us today. A very special welcome to any newcomers too. We trust you all enjoy this event and we would encourage you to use the chatbox and the Q&A box to express your questions and thoughts throughout the session.
I am Euan Pallister, the commercial director here at Innovolo. Joining me today is one of the most cracking business coaches out there today. Mr. Dom Monkhouse! Dominic Monkhouse is a proven architect of business growth. As Managing Director he headed up teams that scaled two UK technology service funds from 0 to 30 million per annum in less than five years. Joining Dom in the speaker’s chair today, is my fellow colleague and brother, actually, Bradley Pallister. Brad is the Operations Director here at Innovolo. We will be handing it over to Dom in a minute.
However, before we start, for the benefit of all newcomers, I will just very briefly outline who Innovolo is. Putting it very simply, we are an organisation that facilitates the acceleration of your physical product development or new product development, or R&D, whatever you like to call it. Every single business-to-business company out there that professes to be innovating needs an R&D team in some shape or form, whether it’s in-house or outsourced or both. R&D can be a high investment but one way to get that cost down is to outsource elements of it all of it. By using our service, you can invest as much or as little as you wish into your R&D budget to speed up the delivery of your new product development, thereby creating a higher return on investment, maintain absolute control, and also have clear guidance on the best practice. We have just launched a new fixed-price monthly subscription service, which many of our clients are absolutely over the moon with. This is designed to suit well-established R&D teams, and also smaller companies that are just starting on this journey. We will touch on this further towards the end of this session.
So the subject for this event, is Why Best Selling Products Must Be Sabotaged For Long Term Results. I am going to hand it over to our guests, Dom now. Thanks for coming down, we appreciate having you.
Dom Monkhouse 02:42
No problem at all! Thank you for having me. And the reason I took you up on your offer to come in, come and chat about this today was – I see innovation as probably one of the key challenges that clients I work with face. And, that’s because businesses start, and often they start because somebody has some industry expertise in a particular field. And they go off on their own or they start a business and so there was knowledge around a product, there was knowledge around the customer and there was a match. They survived long enough to become a reasonable sized business. But to your point, they don’t often have any type of R&D in the business. If I take you back a little bit further back further upstream, the other thing I would say is that often when I speak with established businesses, they don’t know or they can’t clearly say who their core customer is. And if they can do that, they can’t tell you why their customers buy from them.
So if I look at most B2B businesses, their website, their sales team, their documentation is just a list of features and benefits. And there’s very little emotional pull for all decisions. Decisions are made emotionally, none of them are made on features and benefits. Nobody would say you have to buy a Louis Vuitton handbag, on the basis of features and benefits. Or a car, anything more expensive than four wheels that get you from A to B. Whenever you spend more than absolutely necessary on something you’ve gone up Maslow’s hierarchy of needs. And it’s an emotional decision. And so often those bits are completely missing from a business. And so I actually think that one of the challenges isn’t clients challenges around innovation, there’s almost a bit that comes before the “how do we do R&D? What I’m doing?”, When I’m working with an executive team, I think about a functional accountability ability chart. So rather than the org chart, which says who your boss is, which most people can work out, there’s a function in the company, and one of those functions is new product development, and I say who owns this? And often, everybody looks around, people say, “Well, we don’t have this in our business.” It’s like, Okay, well, how are you developing new products? And then they will look at each other? And they go, “well, we’re not.” And so okay, well, who handles product innovation? Like, how does the product evolve, and they all look each other and go, “maybe sales tell us that it’s broken? Or that it needs to be cheaper? Or that we need a new product?” And you’re like, Okay, and how’s that going for you? And it tends to be, if people are really lucky, it’s okay. It doesn’t sort of hold their boat below the waterline.
But I think they’ve just been lucky, I think there’s an amount of serendipity here about their success. And so, somebody somewhere will be looking to disintermediate their business. You know, if you look at FedEx business there’s a fantastic slide, that says, This is what FedEx do A to B. And then underneath that is about 3500 SAS businesses that are now trying to break apart FedEx’s complete business model. And one of those is now Amazon, right? And so any business needs to understand, often with clients, I take it back to the vision, you know, why? What’s our purpose? What are we going to be number one in the world at? And I know in the UK, that’s really hard. Or if you’re in Yorkshire, to think about being number one in the world and it’s coming from Yorkshire! But even in Barnsley, nobody goes to the third-best Indian restaurant in Barnsley on purpose, right? They only go there, because the number one and two are already full. Right? And it couldn’t get a booking. And so you have to say, What am I going to be number one in the world at? And what’s my niche? Who’s my core customer? What problem of theirs do I solve in a way that makes us money? And then understanding why your customers buy from you is absolutely key. And we did ourselves in our own business. I got somebody to go and interview our existing customers and say, What problem do you solve?
There’s a fantastic YouTube video of Clayton Christensen talking about the same challenge that McDonald’s had. They didn’t know why they couldn’t sell more milkshakes. And they went and said, “Okay, well, when did they get purchased?” and they were half of them are being purchased before nine o’clock in the morning. Like, who has a milkshake for breakfast? And they didn’t know. So they went and they stopped people buying milkshakes before nine o’clock, and they asked them why they were buying them. And, the answer was, they had a long commute, and a milkshake- you couldn’t drink it in one go and it sort of served as a companion on their journey. So then it was like, “Okay, well, how did they want to buy?” Oh, well, they want to buy quickly, they don’t want to queue up. So drive-thru or self-service would work. And that was after already having done a whole load of other stuff like changing the flavour, change the price, change the consistency. What they weren’t doing- they weren’t focusing on who bought it, and what their needs were. And so often, that innovation is driven by that.
Or if I think about my own experience, in the two businesses that you mentioned, both Rackspace and Pier One, one of the things that we did as we scaled those businesses, is that we changed completely our average customer lifetime value. And we did that by not… the building blocks that we put together were like blocks of Lego houses, and we went from selling, a small house to really just a very, big thing with the same widgets. And we did that by introducing new products and services to customers that already trusted us because it’s much harder to find a new customer than it is to find an existing customer. An existing customer trusts you and so you say, look, this fits! They will often allow you to sell them a product to solve another problem than to go build something completely different and go and find a new market. And so, somebody who will be at your heels all the time, you will have competitors and unless you’re looking to see where your revenue comes from, and either replace it with something else or get further upstream with your clients or find larger customers where you can solve the same problem. And all of that internal innovation has to be driven by the business. It doesn’t happen by accident, you don’t end up building a great business and having long-standing clients and driving revenue up with them and driving up your average customer lifetime value by accident.
And so that I think is interesting because if I sit down with a prospect, I say to them, do you have a business plan? They will all say yes. And I say, Okay, what does it look like? And they respond to this Excel spreadsheet that somebody has done, which just says, How do we take this business and accelerated up at some percentage. So they’ve got this cash, they’ve got a revenue goal three years or five years from now? And I said, No, that’s the Excel spreadsheet. That’s the sort of draft budget, where’s the plan? And they said, What do you mean that we haven’t got a plan? So then we say, Okay, well, what’s the revenue stream three years from now that this number is made up from? Who are the customers? And what are they buying? And how much are they spending? And how much of that exists today? It’s almost none of it and not a lot of it. And you’ve got this, you’ve got this desire, you’ve got this sort of goal of growth, maybe double the business in the next three years. But at the minute, we don’t have a plan, we don’t have a business model. And I think that’s where the innovation comes in. It absolutely has to be part of the business plan. And if you don’t currently have a business with any ability to do innovation, then I think, coming and talking to people like Innovolo and saying, Okay, how can you help me with some or all of this? And it might be that customer insight piece? It might be, where do we get to be best in the world after going niche. And then it might be understanding what customer, what additional customer problems that we’ve got that we could solve. But that’s a business, that’s a business model. And then you need to iterate and visit the business model, and you’re not going to get it right. There’s going to be a load, and so quite often people sort of say, Oh, well, we’re going to launch this new product, and it’s going to be profitable. And it’s going to be generating profit in the first year. And I said, Well, why would we want to do that? They say what do you mean, we’re launching a new product to make profit? But what if we just didn’t make any money, but grew that product sales 10 times faster? What if we did that, and then they applied to sort of the business, the way they run their existing business, to launching new products, which is another one of the reasons it fails.
And so again, having a business model, if I think about McDonald’s, again, their business model- they know who their core customer is. And that profit per X is profit per customer visit, which is why go large for 50 cents makes sense. Because they’re selling you a bag of chips with almost no margin. But it’s incremental margin and that constraint was customer visit. And incidentally, in Jim Collins Good To Great, he talks about Walgreens, the chemists’ chain in the US. They took the McDonald’s hospitality business model, and they applied it to, their to their chemistry chain. And so they innovated with the business model level, but then that allowed them to innovate products because they now have the same business model, which is the profit per customer visit. And so there’s a whole series of these things that interlock together to get you to a business model entity side where the innovation needs to come in. So in summing up and handing it back to you, I think the big challenge for clients is, they don’t have a business model. And if they can get a business model, it should be really easy to see where in they come in the Innovation Challenge. You could plug somebody like the Innovolo guys in, but it’s a problem I see. Well, I don’t think any client that we’ve started working with has ever had a really clear business model.
Bradley Pallister 13:44
Thanks, Dom- some very good reminders. And to pick up on your point about trust, trust in the customer having trust in you.
Sales isn’t about selling anymore! Sales isn’t about selling! It’s now all about building that trust over a long period of time. So when you’re kind of prospecting for new business, most salespeople think that when they close a sale, that’s it, get the sale, move on get the next one well. Wrong! Let’s start adding loads of value in there, building those long-term relationships with those prospects and customers that you’ve already got on. You should never really think of selling as simply making a sale. Because if you want to build a long-term successful business, you do not close the sale. You need to open a relationship with that prospect or client and that takes time.
Best Selling Products must be sabotaged for long-term results. And that’s kind of the point that we want to make here for this webinar – it’s somewhat counterintuitive. You’ve got this best-selling product out there and what we’re saying is you need to sabotage it and disrupt it. Well, we’re talking about the difference between long-term and short-term results here. Now I’ve been in business for a little while. A lot of people on the call today would be a lot further on but I’ve seen what does work and what doesn’t, and I can tell you what doesn’t work. And that is what is known as strategic myopia. That’s kind of, in other words, putting short-term prosperity before long-term value. And if you’re a business owner, or you’re just starting out in business, you’ve got to be in it for the long haul. And, this is one of the first lessons I learned here when I started and helped found the team here at Innovolo. It’s about doing those things that didn’t produce a successful result straightaway. But in the long term it would add value, and really help build up those relationships. You know, there are so many things I wanted to kind of tinker with and change. I’ve got this what I call Magpie Syndrome, or shiny object thing where you know what you want to tinker with it and change this and change that. But I’ve had to really hold back because you know if we’re going to change everything now, it’s going to really negatively impact our long-term strategic goals.
So why is that? Well, I’ll tell you using three points. So the first one will be about amounting disquiet in a sea of noise. I know that sounds kind of out there but I’ll go into it in a minute. Then the second point, we’ll look at transparency leading to transparency. And then finally, a little game of cat and mouse. So first point amounting disquiet in a sea of noise. Well, a lack of innovating, as Dom was just saying, lack of innovating on your products will ultimately kill your business. Yes, you’ve established the business or you’re still making market research on the business you want to delve into. Just keep in mind that you’re probably be overloaded with information, because there will seem a lot to know. Your ability to maintain clarity in a world deluge with irrelevant information will help you kind of pick out the noise and really gain clarity in this kind of noisy world out there. Now you can look at your best selling products through different coloured lenses. So you need to find a cure for this strategic myopia and avoid this nearsightedness. Like I say just earlier, new research points to this strategic myopia caused by bosses putting short-term prosperity before long-term value. The inevitable consequence of this is that executives with impending vested in equity would always load the cards in their favour by cutting discretionary spending, such as R&D. So I just want to raise that question: should R&D be viewed as discretionary or mandatory? I’ll leave that with you just to think about.
If you look at COVID, researchers found that bosses were cutting back on R&D advertising, other capital investments flat out. Absolutely insane because cutting back on R&D, especially at a time like COVID lockdown any crises like that, cutting back on our day is like killing the golden goose that lays the golden egg. These days to succeed in business, you don’t always have to create something really new, as this can be costly and inefficient. But moving away from the creation of new knowledge towards the commercial application and protection of existing knowledge is the new innovation, the New Black, if you will. Make the most of what you have already and build on that. So, how do you do that? Well, Dom’s already told us: get near to your customers, get near to the users. So just kind of bang out a bit of evidence. I’ve got here a couple of stats on some of the companies that spend the most on R&D. So you got Amazon, who spent about 22.6 billion US dollars on R&D in 2018, and then you got Alphabet, VW, Samsung, and Intel- they’re all the next top five. Now you’d wonder why they stand tall among the biggest companies in the world by market capitalization.
So again, I ask that question, should R&D be viewed as discretionary or mandatory, if you’re going to be in this for the long haul?
The last point was around playing a game of cat and mouse. And this really is around the more corporate suite more than the SME’s. But many bosses manipulate earnings to artificially raise the stock price, but it’s not a true reflection of their fundamental values. Why is that? Well, it’s just a bid to make money. The intention? To boost the short-term share price. And, again, it goes back to how short-sighted that is because research shows that they’re often more unsuccessful than not. So a lot of the audience here today would know about the GameStop short squeeze in which top investors bet against the stock but were unsuccessful as this did not go unnoticed. And the share price basically ended up spiraling in an upward motion. But another question to ask is this if the market knows what’s going on, does it undoubtedly mean that the board also knows what’s going on? And if the board knows, is this not counterproductive? Because taking sizable cash flow has not been invested and then gambling it away for the short term at the cost of developing new ways to be innovative and executing strategy is very, very short-sighted.
So in summary, R&D investment is a strategic cornerstone of modern-day companies, those that want to compete, grow, and thrive. And I would just thoroughly recommend everyone on this call today to really look at and critically look at your best-selling products through a different coloured set of lenses. And really, look at what your users are wanting. What are they needing right now? And the second point is, just getting near to those customers and as Doms saying about really asking you got asking those users. What do they need? Dom gave that great point about McDonald’s. It seems a bit of a strange story. I never really thought about having a milkshake that time of the morning to be fair, still normally getting my Weetabix out of my teeth! You can, without getting really close to your users, there’s a lot of things that we just take for granted. And without actually asking them those questions you’re going to be missing a lot of really, really valuable insights. So just remember, sales is not about selling anymore. It’s about building trust over a long period of time. And that includes really getting into the users’ shoes.
Can you add to that, Dom?
Dom Monkhouse 25:21
Well, I’ve spent a bit of time, either hiring sales teams myself, or helping some clients hire sales teams. And there’s a great piece in the Harvard Business Review 2016, I think, which is the anatomy of a high-performing salesperson. And one of the things they talk about is that the best salespeople think about their quota as their business. This is new business salespeople, and the best people take 11 months to ramp up. And what it takes them 11 months to do is it takes them 11 months to learn the vocabulary of their target customer, because they probably have come in not knowing the language. And they make long-term bets themselves. The average sales guys were ramping up quicker, they were ramping up into the seven, I think seven or eight months, but then their performance plateaued. And so it was a plea to not think about sales. So I guess in a similar vein, that that you’re saying that, CEOs and executive teams are taking short term decisions when they’ve had stock options put in as part of their remuneration.
I think the same thing is true of salespeople, I don’t think you should pay salespeople commission. I think if you’ve got a good product, if you can be the best in the world at what you do, you’re doing people a favour by speaking to them. I also think that the definition of sales is wrong. So I think if I’m selling something to somebody, it’s because I have a skill in sales. Now I know people on the call will no doubt be laughing and saying, look, if you can walk and chew gum, surely you have all the skill, you need to be in sales. But believe me, that’s not true. Salespeople who are experts at their art will persuade somebody to do something, they will persuade somebody that it’s in their best interest to do something that they weren’t planning to do this morning. If you think sales “is let’s go and find somebody with a budget, and somebody with a desire to do what it is that we do”, that’s not selling, they were already going to do that you’re just not taking an order from them. Or you’re competing with somebody else. They’ve already gotten 85% through the sales cycle at that stage, and they’re now trying to pick a vendor. Selling is going early. I think you’re absolutely right.
The context for me of sales is the relationship and any interaction with a prospect that builds a relationship is a quality sales call. And so I don’t think you have to use remuneration either at the board level over in a sales team level to drive the right behaviour. In fact, if you paid software developers per line of code, immediately you’d go “hang on a second, well, they might write shorter lines, or they might write crap code, and there’ll be an incentive to do poor work”. Or if you paid you paid call center operatives, based on closing calls, well, they’ll just randomly hang up on people, because that’s what you’ve paid them to do. And then when you say to salespeople, hang on, we’re gonna pay you to close the deal. And then they close deals with customers who aren’t a great fit for a product that either the company or the customer doesn’t want. So, of course they have because we paid them to do that.
And I think Commission is the tax you pay salespeople for having a crappy product.
Honestly, if you’re passionate about it, and you’re the best in the world at it, you can attract the best in the world salespeople. And you don’t have to pay them a commission. And you can build a relationship with customers. I mean, just some examples, one of the clients that we work with tripled their business in two years, because instead of selling managed services to everybody, “how are you different? we’re not, we sell everything to everybody”, they said we sell managed services to accountants, IT managed services to accountants. In fact, they’re now the number one supplier of managed services to the accountancy market, and they’ve picked up some really, really massive clients, like they won a top 10 accountancy firm to do their IT, that they would never have got that size client if they were just doing the same thing to everybody. But what they had to do is they had to do innovation to have the conversation with the right person. So the senior partner in the accountancy firm wants to talk about robotic process automation, how can I use it to help my best people doing less admin or to do this job more cost-effectively? That’s the conversation the CEO has with a senior partner of an accountancy firm. That was the innovation but it was built around, we’re gonna go after a niche. What do we need to do to open the door? Because if we bring them up and say, “Would you like IT like I’ve got IT and somebody else manages it might not be very good. But I don’t need that.” You have to have a different conversation.
At Pier One, we wanted to do something… it was like taking over a sort of Third Division football team that had been mid-table, like for forever, right. I mean, there was never been a star in the team, like there was no prospect of getting to the Premiership. And so one of the things we did was product innovation is we got the staff on the customer base to believe that when there was a future, so we launched GPU hosting. Now we thought people would buy that by the hour, but they didn’t. So from that perspective, total failure. But then there was a company, not Spotify, that tells you what you’re listening to on your phone, the music you’re listening to on your phone- can’t remember the name. We went from selling us our typical product and typical customer was $249 a month that was our best-selling product. And people might buy one to five of them. Shazam! Thank you, Ross. And so Shazam became a client and Shazam became a million dollar a month client. Right and so $249 to $1 million a month, and the company didn’t really changed and the product mix didn’t change. We just had that little thing that opened the door. And we could do GPU, but the rest of the data center and network architecture, almost all of that was exactly the same. But we found somebody that would trust us to do something different. And then that gave hope to the clients and the customers that we were on a business with momentum. So sometimes I don’t think the product needs to necessarily always be the next massive revenue thing. I think actually some of it can be around positioning your business in the marketplace, giving the salespeople something to talk about. And I think you know, that is the innovation unlocks the opportunity to sell lots of what you already do to people who otherwise wouldn’t talk to you.
Euan Pallister 32:09
Absolutely awesome. Thanks. But really insightful content being shared here. I’ve just been watching the Q&A box, actually, we’ve been speaking down, there’s loads of questions piling in. So we want to be able to get around to answering all of them live today. We’ll ensure we answer as many as we can menu, and any we don’t answer live, we will do after the event. And if the time runs over, please feel free to jump off at any stage- a recording will be made available to all after the event. So, let’s make a start on these questions. So we got a couple here. Which one should we go for? Where do we start? Yeah, probably one for you here Dom? “One of the most pertinent points here is focus. Dom puts this across incredibly well.” Credit to you Dom!
Dom Monkhouse 33:15
Hahaha, I think that so often I’ve done business, I’ve been in businesses where I’ve been in the leadership team, and we focused on really… one of the things that I do with clients is: What is the one thing we need to do in the next 90 days? And like, how will we measure success, like, what’s the one number? And most of the time, what I’m trying to do is I’m trying to get people from thinking about running their business as a 12-month thing with this sort of five-year wish, and saying, Okay, let’s run this business as a 90-day thing, and bringing, I guess, bringing some of the thinking from Agile software development to business. And one of those things is that then about prioritising and I think it was, I read something the other day where like, priority wasn’t that wasn’t the plural until there was a point in time where priority actually meant one thing, and then somehow priorities became a plural. And so there was this switch and it’s like you just wish that priority was still that singular thing. Because what can you be the best in the world? And who are your core customers? And then what is their problem? And all of those things are singular for me. Like, you might have a couple of different core customers but really the one that you generate the most profit from. There’ll be one, the customer that you wish you could clone or type of customer that you wish you could clone. And then that makes it really easy because otherwise when somebody comes along and says, Well if you do everything for everybody, what you’re going to do next? It’s like well, that’s a really difficult conversation to have. You know, I couldn’t even dream of coming to Innovolo to say can you build me this or can you help me construct this product or service? Because I just wouldn’t have a clue. And so that whole, what is your business model? I think if people go back and think, what is your business model? And who’s your core customer? What are you going to be the best in the world at? Then they can say, Okay, well, in that case, the innovation we need for this to be true is this. And then the whole conversation becomes much more different. I also think, though, that it has to be the CEO. I don’t think anybody gets to allocate resources in the business other than the CEO. I was talking to Steve Blank the other day, the guy who invented lean startup, who wrote four steps to the Epiphany, right? And he said, “Look if it’s a SaaS business, and the CEO can’t… if it’s a software business, and the CEO can’t demo the product”, he said, “run a mile”. You know that’s not a company you would want to invest in, or even buy a product from. And so you know, there’s focus there around people but there’s also a focus again, what’s our niche? And at Rackspace, we used to call it an inch- so we’re an inch wide and a mile deep. You know, and we absolutely knew what we wanted to do. We said, we want to be the John Lewis of IT services, or the Ritz Carlton of IT services, we’re going to compete on service. And that meant we got to say no to about 99.9%, of things.
Euan Pallister 36:26
That’s very important to be able to say no isn’t it? And I think one of the points you made is the fact that you need to develop products for your customers not go and find customers for your product- is really crucial here. That’s where you keep the focus, you actually develop the products for your customers.
Dom Monkhouse 36:49
I think what you get into is like, Where is the constraint in your business model? So and if you’ve read Goal by Ed Goldratt, you know, one of the things he says is to look inside the business, that will be a constraint, and you need to maximise the throughput of the thing, which is your constraint in the business. But ultimately, the constraint should be the marketplace. And, if you look at it and you say okay with this evolution of the business model, even, right, Bic razors, they make disposable razors. They have no relationship with their customers, its profit per razor. Then Gillette came along and said, “Hey, look there might be an emotional level to this, some people might be mad enough to pay 15 bucks for a razor, right? Okay, well, let’s go and sell that to them. So we have to do a load of marketing”. You’ll never see Bic razors advertised on TV, you see Gillette all the time. And then Dollar Shave Club come along and say actually, “we’re going to capture the customer value stream here, you’d be able to get a razor, which is good as Gillette with no marketing for half the price, but you have to sign up to a subscription”. And we’re still in the razor business, but we’ve segmented the customer base. And our business model is different. We’ve innovated at a business model level, and that forces you to have a different product as well. Because it’s the business model and the product and the customer is the whole offering.
Euan Pallister 38:15
Very helpful. Have you got any comments on that Brad before we move on?
Bradley Pallister 38:18
Euan Pallister 38:20
We have got another one here for you Dom if you have a suggestion. What percentage of total staff would be dedicated to R&D or innovation, whether that’s the business model or any part of it? And how can this be ring-fenced, which actually works?
Dom Monkhouse 38:33
So I posted in the chat, a link to an article from blossom street ventures that I saw the other day, which I shared with one of our clients. And these are software, SAS businesses, but they’re spending on average 30% on R&D, and product development, and 40% on sales and marketing. And so it depends, you’ve got to always start with the end in mind. Right? And so often you can sort of work backward from what you’re trying todo. I have a 50 million pound business and I want to add a product that is a million pounds a year. Okay, well, we could probably work out what we should be prepared to spend on developing that product. Or, you know, when people say I want to grow the top line revenue by 25%. I did some work with a client recently. And there was no connection between the Excel spreadsheets saying 25% and the sales team was physically incapable of delivering the plan. But nobody had checked to see whether there was actually a connection. So I think that how many people are in R&D and how do you ring-fence it- it sort of depends on what you’re trying to do. Some clients would put 10% or 20% of revenue, and they’ll say to you about long-term results. They’ll say we’re gonna do this. And it’s just sort of attacks on the future. And we’re not going to say it has to deliver anything in the first year or the second year of the third year, or in fact, ever.
If you’re a VC, they’ll probably tell you that one in 10 of their things comes off, but it’s probably more like one in 20. And so these are guys who picked startups for a living, and they’re so good at it, they get it right one time in 20. And you’re a company that’s about to launch a new product, and you think you’re going to get it right straight out the gate, and you’ve never done it before. I think your chances are slim to zero for that happening. Unless you find somebody who’s already done it hire, some people who have already done it, give it some resource.
Look, you start a bathroom project at home that costs twice as much and takes twice as long. And you can get your head around refit in your bathroom. I mean this is a thing with so many more moving parts that you’ve got to not get despondent, and it’s going to take longer and cost you more money. But you should also have a view about what return might look like over time.
Euan Pallister 41:13
We have got some input here, actually Dom, which you might have some comments on. This participant saying, “innovation can be hard to achieve. Your team may be endlessly discussing ideas and not following through with action. You just don’t generate enough quality ideas. Just the fact that you’re using level 10 meetings, you’re forcing innovation to happen a lot more than if you didn’t”.
Dom Monkhouse 41:37
Look, I think sort of the EOS level 10 meeting framework is a really good one. You know, often when people aren’t having great meetings and aren’t giving that meeting the 10, we talk about what’s happening. And often people aren’t bringing, sort of each individual to the meeting isn’t bringing two or three things that they think are issues that need solving. But the other thing that we’ve started using recently is Patrick Lencioni, of “Five Dysfunctions Of A Team: A Leadership Fable” fame, the table group, they developed a new tool during COVID called a working genius. And I use Gallup’s strengths as well. But working genius we can get a lot of insight around the team dynamic. And so in there, all of us have two working geniuses, and two working competencies, and two working frustrations, basically the things we’re crap at. And we won’t do the things that were working frustrations. And so there are six parts of the team. Somebody has to wonder like, what if? Somebody has to come up with some ideas or some innovation, there has to be some discernment. Are they good ideas? There’s some enablement. Let’s get the work done or sort of galvanise, let’s get people excited about the ideas that are good, enable, let’s get the work done. And then tenacity, get it over the line. I mean, often people say the last 5% of a software project takes the same time as the previous 95%. Because we forgot about training, and documentation and sales and all that other stuff, and so quite often, when I’m working with clients, now we’ll do that working genius tool with everybody. And we’ll see where the team is. And I was working with a client recently whose marketing director has no eye. Right? So they haven’t, they won’t generate any good ideas themselves, it’s just not there. So somebody in the team is gonna have to help them come up with ideas that they can go execute. And so take the test, see what the team is. And one of the interesting things, linking it back to sales is so often sales is an execution challenge. And so we hire a sales director or VP of sales, and they come in and they get the sales team buzzing. Now we need to change something in sales. And this sales leader has no eye. They couldn’t innovate their way out of a wet paper bag. Like they couldn’t innovate if the hair was on fire. But because they’ve got a job title, which says Sales Director, they feel embarrassed to say “can’t do this innovation thing. I can’t come up with ideas and decide if they’re good. I’m on the execution side of the house help me”. And so trying to get people can’t come up with good ideas to come up with good ideas. It’s just doomed to failure. So knowing where people’s strengths and weaknesses are and playing to them. And being open about them, I think can be really, really helpful. Look, I can’t make anything happen. But I can give you 1000 ideas tomorrow. That’s my strength.
Euan Pallister 44:34
Now that’s brilliant. That’s often where getting a team that’s maybe not directly involved in the company to get involved in your ideation actually start coming up with those ideas and forming a plan on how to deliver that can actually be very powerful and kind of takes away from relying on your kind of in the box thinking if you like. Specially like as you illustrated with the sales director, that can be very much a kind of a blockage can’t it.
Dom Monkhouse 45:05
Absolutely. And I think one of the things is people’s ego, right? Like, you’re now asking me to innovate, because you feel as though I should be able to because I’ve got this top job, and I’ve worked in multiple places. But actually one of the things I often see is a contextual success. Like people who can build a process from scratch. Often, that’s new product development, and people who can go out and kick the doors down and sell a thing. And so that’s why sales often don’t drive any innovation, because what they’re very good at is, we’ve got a very good intelligence story. And we penalise people who go off-script, or go off-piste, or sell a thing that we don’t sell. And so to me, this is the sort of the internal organisational challenge of innovation is, creating the organisational structure and the team structure to succeed at the challenge that we have in the next 90 days.
Euan Pallister 46:03
That’s very helpful. We got a question here, which actually, is quite present and very much related to the title of this webinar. If you have only one main product in a very niche market, sabotaging it could be dangerous? Dom, could you help us on that?
Dom Monkhouse 46:25
Okay. That might be true, you might be the number one supplier of nun’s habits or something, and nobody else wants your market. I mean it does feel to me, that I’m sure there are some examples of things that people do. And that there is, they own the market, and there’s no incentive for anybody else to get into the market. But also, I suspect that if that’s the case that that company hasn’t got any growth aspirations because that market probably isn’t growing. And so it’s not sabotage it for the sake of it for the fun of it. I mean, Clayton Christensen, his famous book, the Innovator’s Dilemma is this. There you are. And what happens is, it gets sabotaged from the inside anyway, because there’s sort of this organisational Whitesell, you know, and, and AT&T invented the fax machine, not the Japanese, but they thought they would reduce the number of voice calls, so they didn’t sell it. And the same thing with voicemail, they wanted people to make more calls, so they didn’t push. So all these things got invented by people who then thought, well, that’s not a good idea that will impact on my customers and my revenue. It might do in the short term, but you know what, somebody else came along and launched the fax machine and launched voicemail! Or, you know, you just look at Steve Jobs, his idea for the mouse and the graphical user interface was going and visiting another company’s research development team, who’d already developed this thing, but then, the idea got stolen by somebody else. Or Kodak invented digital photography. And that it’s almost why if it’s a challenge to the business model, you have to probably put in another company, or give it as a completely separate team. I mean, at Rackspace, what we came up with, we were originally a Linux hosting business, and we were the world’s number one host of Linux. And then we realised that to grow, we needed to be in the windows space. So we took 100 people, and we put them in a separate building. And we said, You guys go and build a Windows hosting business. Because if we left them here, that would have been this turf war about Linux windows, who’s the best? That would have been all this tension around- What do we really need to change the tooling? Isn’t it good enough? Which then means that the thing you sell is just a bit rubbish. Whereas if you take 100 smart people and put them in another room and give them a budget, and go and solve a problem, they go and do it? So? Yep, I think that could be that niche. But I do think in that case, then that business is probably of a particular size and doesn’t have the scale. So it depends on what you want to do with your business. You might be very, very happy. Might never need to sell anything! I mean, I met a guy the other day. It’s two employees turning over 6 million quid. I said, “What’s not to like about that”? They said, “Well, we’ve got to hire some people. We want to prove we can manage it, people”. Okay great!
Bradley Pallister 49:30
But yes, picking up again on that question is if you’re really in that much of a niche market and only offer one main product, the reality is that you’re putting your business in danger. You don’t know what competitors are going to come along. What if something happens to that product? Well, then? What happens then? Obviously, there’s a lot of focus,, the power of focus! And in having one main product, you really focus on making it a good one, but actually not having a second product to fall back on could spell a death sentence for that business couldn’t it? So as a suggestion to answer that question: maybe it’s best to build up a second product screen first, before sabotaging your current main single product?
Euan Pallister 50:39
I think we have got plenty of value out of that. That’s brilliant. We have got another quite an interesting take on this. How do you know when the time is right to drop everything else in favour of a single direction for focused growth ahead? Probably one for you there Dom.
Dom Monkhouse 50:56
Look, I’ve never sat down with a client who isn’t busy. Who doesn’t have everybody in the company fully busy, and you say, so where’s the slack? Nobody has any slack. You know, everybody wants more people on their team. And, I often I’m in businesses, and I asked the employees, some questions about working. Two things that never, that never failed to get the same answer. One is, do you get praised too much here for doing a good job? Nobody ever, ever complains that the management praise them for doing a good job too much. And the other one is, nobody ever says, You know what we’re so focused here. We never start anything that we don’t finish. We’re always complete. Nobody ever says that either. Right? So what’s happening is people are watching the management team in an organisation. And nobody has focused enough. It’s about saying no to stuff. And so that’s why I like that when I’m working with clients, we say, okay, in the next quarter, what’s the one number that we need to move. Or I introduced, I interviewed on the podcast, jack stack from the great game of business. And he said, one of the things that they do with their management teams is every 12 months, they say, what’s the most broken thing in the financial statements, or what’s the weakest link in our financial statements? And they focus on that for the next 12 months. And so you can use various tools to look at what’s the focus, but I think, you know, whether it’s 90 days, 12 months, having one number to measure. It’s like the Blue Peter totalizer, or the village church Roof Repair fund, you know, it’s like pick a thing, measure every day, share that information every day, then when we’ve done it, celebrate success. And instead of, you know, in software development, if working progress goes up too much, what happens is a 10% increase in WIP, doubles the time it takes to get anything out the door. And so that’s true in anything we do in business. If you can do fewer things, you will get them done quicker. And what will happen is, the world won’t change whilst you’re doing it. Right? Because what happens is all too often is people start so many projects, and they’re just busy. And then the world changes and so the project doesn’t need to be done or assumptions now wrong. And it’s just frustrating for everybody because there’s no sense of accomplishment and success.
Bradley Pallister 53:29
Then, just picking on the wording of the question about when’s the time, right to drop everything in favour of a single direction for focussed? Well, I would suggest you don’t drop everything. Because innovation is a strategic component, as I see it, in your growth strategy. And if you want to expedite that then, fine, we’re happy to help facilitate that. But don’t drop everything! There are ways of getting focus without dropping it all!
Euan Pallister 54:07
That’s good, we will probably just cover off one more. The question is How to respond to competitors’ false claims of having the best product?
Dom Monkhouse 54:19
Ha Ha Ha, that came in on email last week, and I was chuckling about that because I just think, you just have to be in a position that it doesn’t bother you. It just has to not bother you. You’ve got to obviously if people are making false claims about your product, and they’re winning as a result, then I’d be nervous. But, you know, it feels to me that that’s a feature and benefit claim. And I don’t actually think people make the purchase decisions on features and benefits. If you are the leader in your space, you know, I was talking with a client this morning. They are number one in outsourcing for real estate agents in Australia. And I said to him, but it doesn’t say that on your website? And he said, Oh, no, you’re probably right. It doesn’t. And, so then, you know, there’s a thing there, which there’s some social proof. There’s a thing there about a niche, this thing about expertise, there’s a thing about thought leadership that they could do. But instead, they were talking about widgets. And whether your widget is better than my widget or not. Like, let’s have Windows 10, Windows 11, WordPerfect, 5.6. I mean, you just don’t want to be in those games. The reason that Microsoft won was that people more people wanted to buy Microsoft, not because it actually had a better product. Right? So if you can create, if you have a better brand, and more people want to do business with you, then you don’t even need to have the best product. And so if your competitors are slagging you off or not, I think you just, you’ve got to go to the market and sell and market your way out of that. So book recommendations from product managers in a growth stage startup.
So I think Lean Startup is great, the Business Model Canvas is great, like anything by Alex Osterwalder. And anything by Steve Blank. So after we’ve done sort of “Four Steps to the Epiphany: Successful Strategies for Products that Win”, later on, he wrote the startup owners manual, and there’s a whole load of stuff in there about you know, how to run innovation, how to manage innovation, how to measure success, and how to take a product to market you know, how do you know whether you’ve got MVP? What does that mean? So that’s great. If you’re a product manager in a bigger business, then one of the strategizer guys wrote a book called “Pirates in the Navy: How Innovators Leads Transformation”. But I can’t remember his name off the top of my head (Tendayi Viki). And so they’re two great books about innovation. Or even Three Box Thinking. I like that as well, that sort of linear innovation is in the company and exponential innovation has to be outside the company.
And then there are two blocks, which is what is it that we already do that we should sell, and that’s a strategic decision to sell an existing product. One of our clients is in the process of trying to sell the product which is 95% of their revenue. So that’s a big strategic shift for them. So I think that answers that. And then Karl said, so the key is to launch new products and symbols survive and make the grade. Yes, Karl that’s right.
Bradley Pallister 55:08
What Dom is saying is really, product aside, you need to have some form of industry authority. Whether that be in creative marketing, your proposition needs to be over and above, solely your product. I think that’s basically what you’re saying isn’t it Dom?
Dom Monkhouse 56:59
Pepsi did the Pepsi challenge, and when blindfold, everybody takes Pepsi over Coke, and then they go to Costco, and they buy a slab of coke. I mean, they’re actually saying our product is better. And it’s true. And it still doesn’t matter to the people who buy Coke, they don’t care. So as long as enough people who love your product, love what you do. Doesn’t matter. You don’t even have to have the best product whatever people say about it.
Bradley Pallister 57:27
Yeah, it’s good, I don’t know the background to this question. So there’s got to be to two things that that attendee or whoever sent that question in, can do. Firstly, as we’ve just talked about, start establishing your market authority, and really analyse your branding. Is it actually setting you apart from what you’re calling your competition? And then the second part, if it’s really is a major issue, then you might want to take a bit of bit of legal action. But obviously, that is kind of bit outside the topic of this webinar. But I’m happy to go into more depth on that separately, if that helps.
Dom Monkhouse 58:28
There’s a couple of questions in the chat. Do you want me to answer them?
Euan Pallister 58:30
Yeah go for it Dom! We’ve gone a bit over time already, so we probably ought to wrap up. And I’ve really enjoyed it pretty much the cracker really. So just really quickly, before we wrap up, firstly, thanks to the top speakers, and certainly to all the attendees, we really appreciate your attendance.
Just before we finish, I did say we’re gonna mention our new subscription service we’ve just rolled out and clients absolutely love this, it’s only fair to share with you as well. And as you would know, new product development typically comes with a host of different tasks to get through. Normally lots of risky investment actually into people and facilities. And there are always some exciting shiny tasks there. And also some seriously mundane, annoying tasks that really make you feel like you’re going around in circles. I can tell you now that we can tie these tasks and risky investment off your plate and leave your team undistracted to do what they do best in their R&D. And so what we’re doing is we’re offering you a chance to check as many tasks as possible at us as you’d like, for a fixed amount per month, we’ll work our way through these tasks as quickly as possible for you. And there’s no risk whatsoever, we offer a 30 day money back guarantee. And there’s no fixed contracts. That’s a really, really nice easy way just to kind of get some of those tasks, kind of clogging up your R&D department if you like just kind of get them cleared out, shifted it off, and just you can really get on and properly innovate within your R&D team.
So yeah, with that we’d like to thank Dom and Brad very much for your time and the insight today, Trust there has been some valuable key takeaways for everyone. There’s another event coming up in March. So look out for the invites. And thank you all very much for your time and contribution and feedback. We’d like to wish you all the very best for the future. Any closing comments Dom?
Dom Monkhouse 1:02:13
No, I’ve really enjoyed the conversation with you. Thanks for having me on. It’s been a pleasure.
Euan Pallister 1:02:18
Thank you. Goodbye!