charlie 0:00 Us, are there any questions from yesterday? So yesterday, we talked about value chain. We talked about the IBM value chain and the value chain decisions that they made, some of which were unfortunate for IBM. We talked about value chain dynamics, how value chains can change its structure from vertical, integral to horizontal, modular. We talked about the dynamics of how they change. We talked about the clock speed of the value chain drivers that drive things faster and slower in the value chain. And we talked about trying to target our innovation to places that will be high value parts of the value chain, all organizations have limited resources, so it's very important to invest the resources to places that will deliver high value, and that we want to both create value with our innovations, but also capture the value. And that was one of the lessons of IBM as well, that their personal computer product created a lot of value, but IBM didn't capture the value. The value is captured by other members, other values. So any questions or comments or or any thoughts that you would like to share related to yesterday's discussion before we start today's discussion. Okay, if not three months forward. So yesterday, much of the material that I shared was based from my book clock speed, which we which I showed you, and which, hopefully it's Michelle, can you confirm that we uploaded a digital copy of clock speed so it's available on the website in English? And one of yesterday, someone told me that you found a Chinese version of clock speed somewhere on the web that apparently translated, which is fine, access to the Chinese. So today I want to talk about another book that I'm working on. But this book is still a work in process, and it's about innovation and entrepreneur dynamics. So the book is called nail it, scale it, sale it, and it's not published yet. This is a draft copy, still working on it, but and we hope it will be available in about one month. So I can't give you a copy, unfortunately, but many of the slides you'll see the pictures from the book. And this book is written as a comic book. It's got illustrations and characters, and there's a story. And so the idea is to be informative and useful like a textbook, but to be entertaining and interesting comic book. So this is innovation experiment by myself and my co author to as a alternative way to present material that we want to teach in our classes. So you will see some of these pictures in the slides, and you'll get copies of the slides. Unfortunately, they don't have copies of this yet, just a few, because it's a draft, but very soon, we hope we'll have final published come. So the title of the book is called, nail it, scale it, sail it. And I will explain these terms in a moment. So I want to remind you that I'm going to share with you some more models, and I want to remind you that all of these models will be wrong. That is, they will not be precise descriptions of reality. They will be approximations, but hopefully some of these models will be useful. So remember this model from yesterday. So we said, sometimes innovation happens incrementally. We have small steps along the S curve. Sometimes we get a radical or disruptive innovation where we jump. So today, what I want to do is I want to go inside one of these S curves. So that is within the within the S curve, I want to go through, what are the stages that the organization goes to, that the product goes through, that the people go through as we move from the early stages of innovation, and we're going to call the early stages nail it. So nail it. This is sort of English slang, slang term. So we say in English, I nailed my project. That means I got it perfect. I got it right, or I I nailed the answer to that question. So I got the answer correctly. So, so it comes from when you have a nail and a hammer, you bag a nail with a hammer, you get perfectly straight and you nail it in. So it's a slang term in English that we nailed something. We got it right. Okay. So the idea here is, early in the innovation process, we want to get we want to figure out the right product, the right value proposition, the appropriate customers. And we say, we nailed the business model and we nailed the value proposition, but we found, when we successfully found a customer who wants the product, a product that we can design and know how to make a sales process that we understand a financial analysis that will say, this will be a profitable project. So when we say, when we're trying to build a new business, business opportunity around an innovation, first we need to nail nail the idea, all aspects of the value proposition, and I will expand on this in a moment. Then, if we successfully nail our new product and our new value proposition and our new business model, then we want to scale it. We want to grow it. We want to sell it to more people. We want to provide this product as a service to larger markets, maybe overseas markets, maybe more customer classes. So we want to scale up. We want to grow up. We successfully developed this new product and value proposition. Speaker 1 6:35 Now we want to be able to share it and deliver it to this larger market as interesting. So we call that scaling. So we nail it, then we scale it, and then sale. It implies that we're more on steady state. We're not growing anymore at a rapid rate because we've saturated our core markets. We scale up, but then we have to continually operate. We have to keep our customers satisfied. We need to keep our employees satisfied. We need to keep our production and our distribution and our sales. So we have to continue to operate the organization. So we use the term nail it, scale it, sale it over here in English, partly because it's in English. It's easy to remember because it rhymes. Nail scale sale probably doesn't rhyme in Chinese. I apologize for that, but if one of you is a very clever linguist, maybe you could come up with Chinese interpretations that rhyme. That would be very clever. So, so I will use the English nail at Salem. Any questions so far? Everybody? Okay, so this is a picture, so I go here 120 page textbook disguised as a comic book. So in the comic book, in the stories, in the book, we have people, and some of these people are nailers. They're the people who start the project, who start the company. They're the adventurers that we have the people who are the scalers, the people that scalers are the people who build up the company and build up the resources and scale it up. And then we have the sailors. And this this book is based on an academic paper written with two of my colleagues. And when you get a copy of these slides, this is a live link, so you can click on the link and get a copy of the paper. And what we want to do is understand, we call it underneath nail, we say the innovators. So we think of the innovation process as an odyssey, as a journey. What is the journey of the innovator from the very, very beginning, the nail it staged all the way through. That is the entire journey, all the way through and preparation for the next disruption. So one of the challenges here and we talked yesterday, sometimes when you're here, you're a big fat slow dinosaur. Remember we said big fat slow dinosaur here, and the dinosaurs sometimes are not prepared for the next disruption. So we want to talk about that. We want to understand, how can you be successful here, but also be ready for the next disruption? So you're not disruptive, but you can successfully transition. So that's the call that the innovator's Odyssey, or the journey. And so in the book, we have characters who go through this journey, and sometimes they hand off because different characters do nail it. Different characters do scale it. Different characters do sail because they have different skills and different capabilities. And one of the things that we propose is that sometimes very different skills and capabilities are needed at these different stages of the of the journey. So so we try to share in the book in the lecture this morning, what are some of the opportunities that across this journey? What are some of the pitfalls and risks? Who are the kinds of players and characters and skills? How can we see around corners? So yesterday, I was talking about, can we see around the corner? Can we predict a little bit about what the future will be, so that the organization be ready for the change, because change is going to happen. How do we be prepared? Where that and then, how do we help make good, good decisions? One thing I will say about these, these, these pictures, is they were all made by ai chatgpt, so I did not draw these pictures. I don't have the talent to draw pictures, but I have the talent to ask chatgpt, can you please draw me a picture? Okay, so I recommend, if you have access to a generative AI tool like chatgpt, you might experiment with this, ask it to make a picture for you, and makes very beautiful pictures, as you'll see in the slides. Any other questions so far? So the book uses metaphors. We have a translation for metaphor in Chinese thinking, right? So metaphor is an image. So the metaphor for nailing is a trek in a dense jungle. So one of the features of trying to hike through a dense jungle. One feature is you cannot see very far ahead. The bushes are very thick. They're there. We don't we don't have maybe, a map of the jungle. And when you're trying to nail it, when you're trying to be an innovator, when you're trying to start up we talked yesterday, requires a lot of experimentation. You don't know the answers, so you you try this trail. Well, maybe that's not such a good trail. We have to back up, and then we try this trail, and then we try this trail. So there's a lot of experimentation, a lot of trial and error, in an environment where we don't have a complete map or complete vision of where we're going. So there's a lot of learning going on, a lot of experimentation. So we use the metaphor of trying to find your way through a jungle to represent this idea of how do we nail the product and nail the value? Explain more about this shortly. The metaphor for scaling is a mountain expedition. Now the thing about the mountain expedition, we can see the pink. We can see all the way to the top. However, because in this stage, if we successfully nailed it, we found the product that we want, we found the customers that we want, we found the value problem. So now we have visibility. We understand at the end of nailing we get to the jungle, and now we have visibility. We can see, but what we see is to scale. We need resources. It's not so easy to have an expedition up a very large, steep mountain. So the characteristics of this journey are quite different, that we have more visibility and transparency, but we need many more resources in this environment, very often, the resources are quite poor, quite thin, that if you're a new startup company, maybe you have a little bit of money, you have a small team, you don't have a lot of resources, but you still have to find your way through the jungle. Once you're successfully at a nailing proposition, then you can show investors look, I have a successful product to successful customers. Now I need resources so I can scale up and and offer my product or my service to our people. So so the scaling expedition has more visibility and transparency but requires many more resources, and I will describe that in more detail, sure. So in this scaling, we are adding resources, adding new customers, adding new services. We're growing many aspects of our business. So the climbing the mountain represents that growing in the sailing part. Now we finished climbing. We don't want any more planning to do. We saturated the market. That is all the customers that we can reach. We've already reached, but now we have to service those customers. We have to continually make them happy. We have to give them upgrades to the product, or maybe new versions of the product. We have to provide them service. We have to keep them happy. Maybe we're growing a little bit, but we're not, excuse me, we're not growing steeply anymore. So we represent that now it's more flat. But even in the flat, there can be waves, there can be tsunami, storms, sharks, many, many risks still here, but, but our resource level is more stable now because we're a mature large company. So, so, so we use these metaphors to explain these ideas, and that's what I will share with you in the next the next. Okay, any questions so far. So we also suggest that different people are different, have a better fit or worse fit with these different stages. Some people are naturally nailers. I like the adventure of the unknown. I like I like low structure, high higher risk. So some some people, and I will give you a more full description of the personality, if you will, of the dealer. Other people are scalers. They like to add the resources. They like to develop processes, make things more systematic, make things function well, grow capabilities. And then some people are more like sailors. They want a mature, more stable environment. They stay, you do the same work every day. As opposed to, in these environments, you may do a different work every day. And then we also describe two others that we call the the organizer. The organizer, after this nailing process, sometimes the company is a little bit disorganized. We tried many things. We have many scraps on the floor, we have to clean up a bit in order to start scaling. So we call this the organizer, and then we call this the stabilizer that as we've been climbing like this, now we're going to be more stable. How do we what kind of capabilities do we need to stabilize the organization so that we can then operate in steady state and same? Okay? Any questions. So actually, before we go forward, let me ask you to have a short conversation at your tables, and we'll just focus on these three scalar extensions. Conversation I want you to have is to ask to talk about two things. First, my job, my most recent job, Was I being asked more to be a nailer? Was I being asked to be a scaler? Was I asked to be a sailor? Well, so what was your job? And then what is your preferred job that is sometimes I find that people say I was asked to be a sailor, but I really prefer to be a nail, right? So and so, I want you to think both about what job you have done and what you were being asked to do, and then, what job do you think you would prefer in your ideal work situation, so please have that conversation at your tables, and then I will ask to share your thoughts. Please For all the members of the value chain, as it works for the customers. The customers like the value proposition. It works for the employees. The employees are able to produce this value proposition. It works for the investors, because they can see we can make money on this value proposition. It works for the distributors in the value chain who are going to distribute it works with a supplier. So to be to say that we successfully nailed it, we have to have this value proposition that is viable for all the participants in the value chain who will be contributing or benefiting from this value. If we don't have this, then we haven't successfully nailed it. In some startup companies, there is often pressure to quickly get revenue quickly. If you have a very small amount of investment, and you're using that investment to hire some people to help you nail it, and you feel pressure to get more money and to start selling some products. So sometimes a company will start to scale it before they've we have an idea. We think it's okay. Let's make some product and try to sell it. And even if it's not quite ready yet, we'll try to scale and start selling some product. Sometimes this can be a very bad decision, because you use all your resources to sell a product that's not really preferred by the customer. So for example, this is a new product that I am developing. I told you, this is a draft. It's not ready yet. Some of the pictures aren't right. The story is not perfect yet. The characters are not completely finished. So I could say I'm going to print it like this and sell it because I wanted to raise some money. But if the customers, they might say, well, this isn't that good. It's not finished yet. And then you get a bad reputation, right? That's not the product's not such a good product, right? So ideally, we finish the nail it before we start the scale. No, we don't start printing and selling our new product, but it's not really ready yet. We wait till it's ready. We wait till it's finished. We wait till we're we feel comfortable that we've accomplished this. Then we start to scale. But many companies feel pressure to start, and if you have to, you have to that is if I had no money left, and I desperately need more money to pay for finishing the product. Maybe I start to sell and they say, I will sell this at 50% price just to try to raise some money, and then I'll use that money to finish the product, or something like that. So sometimes a company will do that because they need to start generating money. So it's not this is the ideal state, but sometimes you start scaling before you're done daily. It's risky, and I'll say more about that in a little bit. So I want to share with you some of the metaphors that we use in the book to explain these ideas. So one of the metaphor I already described, Q is the jungle track, going through the jungle, not being able to see very far. This is a metaphor for danger, for risk, that when you're when you're starting out a new venture, there's more risk. You don't you don't know exactly where you're going. You don't know what products going to work. It takes risky proposition, and yesterday, we talked about the difference between failure and experimentation, right? So we experiment in the risky environment, we learn and we grow, but sometimes so imagine you're on your jungle track, you're hiking along, and then all of a sudden, you see we're tired. What? Do you do? You have to take a different route. You maybe can't go that way anymore. So so we, we this is a metaphor for the need to in English, we use the term Pivot. Pivot means to change direction, right? So sometimes we run into a problem, a situation, we have to change direction. We cannot walk over the snake. We have to find a different path to avoid this. Okay, so that's so so we use in the book, we show some snakes, some tigers, ideas. When you're you're going through the jungle, you can't see very far ahead, and then all of a sudden you see this, this bad outcome, dangerous situation up. We have to change, change paths. So we also another metaphor we use is a metaphor for tools. What kind of tools are available when we're on a jungle track? And so we use this machete, Machete is this knife you use to slash your way through the jungle, and what does it represent? It represents that we have to be frugal. We don't have a lot of money for fancy tools, for expensive tools, for a large number of tools, so we just have one simple tool to help us through the jungle and the and the analogy is, when we're starting a new business, we don't have a lot of money for a lot of different tools and a lot of different capabilities and a lot of power, if you will. We have to make do with fairly small teams, fairly low cost tools, and we have to start simply something. So, you know, typically a startup does not have the resources to have many, many powerful tools. So this is, again a metaphor for the kinds of tools available. So this is the custom so the custom metaphor for someone with very high expectations. So I am the customer, and I want everything to be perfect. And so my colleague, who my co author, Laura Donna, she drew many of these pictures on chat GPT, and she insisted we have a customer who looks very beautiful and demanding of beautiful, perfect things, right? So that so we want to think about the customer as very demanding, having very high requirements. So she is the metaphor for the customer. Then the campfire. The campfire is a metaphor for the available facilities available to us. So they do not have a big thing. They're having a meeting. Where do they have their meeting? Not in a big, expensive office building with air conditioning and sermons and tea and coffee and and rather, they only have, we just have to huddle around our fire and we have our little discussion. So we have a small team. We don't have a lot of resources. So this is, again, it's a, it's a metaphor for low resources, small team, intimate discussions. This is a metaphor for hard work, for struggle, for strain, for that, that finding our way through the jungle, finding our way to a successful startup, often takes a great deal of work, a great deal of effort, many, many hours of time. And so this is a metaphor for the hard work of accomplishing the nailing task. It's often, in many cases, not easy. It's not we can't see to the end. We have to experiment. We have to work hard. And so this is a metaphor for that situation. So again, we're trying to explain the challenges and the objectives of the nailing environment. let me now be less pictures, more words. What is the environment? What are the requirements? How do we think about the people? So I showed you the pictures. Now I want to show you the words so that we map the pictures. So for the environment, excuse me, I'm sorry. The environment is ambiguous. Ambiguous. We don't know the answers. There are many more questions than answers and uncertain. We don't know what's going to happen. We don't know the next part of the jungle trail. It's uncertain what the it's risky. There are many, we are many entrepreneurs. They take their their their own money, that they have their family's money. Sometimes you borrow from your family and your friends, you invest a lot of time, and you don't have a certain outcome, it may fail. So there's risk in in this venture, it requires iteration. Remember, we talked about experimentation. You You have hypothesis, you run experiment, you collect the data, you draw a conclusion. They have another hypothesis. So you have to iterate again and again and again. We try this, we try this, we try this. We try to find what's the right product, what's the right customer, what's the right value. We need tolerance for uncertainty. That is, we need to be able to be comfortable. It doesn't end up belongs in the people side, which I'll talk about. We need rapid problem solving. So when you're hiking in the jungle and all of a sudden you see a tiger, you can't say, oh, let's refer this problem to a committee, and the committee will give us a recommendation. The Tigers about to eat you. You have to react very quickly. What are we going to do about the tiger? We have to rapidly solve the problems. We don't have the time and luxury that, oh, we'll wait until we get a recommendation from the Committee on tigers, not a possibility in the jungle, right? I Okay? Flat organization structure. So in nailing environment, usually it's a small team. Everyone may be approximately equal in terms of their responsibility, their social stature. In the company, we don't have a strong hierarchy of one level, another level, another level. So it's much more flat. We need a lot of we're constantly talking with each other. Is this working? What's working? What's not working? We require trust amongst each other, that we're all interdependent on this trek together, and we have to own the problems. We can the problem comes along, there's no problem solving committee that we can refer to. We have to solve our own questions. Requirements, speed and agility. You have to act fast. We don't have so in a startup environment, usually there's time pressure that very often, maybe you have an investor, the investors give you a small amount of money, and you need to use this money to prove to me that you have a value proposition and you only have you don't have that much time, because this money will run out fairly quickly. So you feel pressure, so you need to be fast, and you need to be agile. You need to be flexible, you need to be frugal, you need to iterate, as I said, and I said all these are willingness to pivot. That is, you have to be prepared if we run into a problem we cannot solve. There's a tiger, there's a snake, there's a problem. We have to pivot, go in different directions so the customer doesn't like this product, we have to try a different product. Or this customer doesn't like it, we'll try a different customer, right? So we need to be prepared. And what kind of people, so people in this in the daily part, who are entrepreneurial, they are adventurous, they're willing to take risks, they're willing. They're leaders. They have to be risk tolerant, or even an environment where there's significant amount of risk, they have to be resourceful. You have a small number of people and a large number of problems. We have to be creative. How are we going to solve this problem? Not so easy. We need creativity and resourcefulness more often you need generalists. You don't have enough budget to hire hire a specialist for every different function. You have to have people who can do multiple functions, because you typically have a small team solutions, hackers. What is a hacker? So this is sort of a American English slang, a half a hack is a experimental, approximate solution to a problem, quick and dirty solution to a problem. So we say, the first time I find I have a problem that I run into, I never, I never ran into this problem before. So I don't have a process for it. There's no manual, there's no instructions, there's no other experts in the company, so I just have to do the best I can to solve this problem quickly, and then that's called a hack. So the first time you run into a problem, maybe you solve it with a hack. The second time, maybe you use a hack again. But if you run into the same problem five times, 10 times 20 times, you want to have a systematic process of, how do we deal with the problem? We've seen this problem many times before. Now we need a systematic process. So that's the scaling stage and the nailing stage. We solve our problems with the hack when they were scaling, we say, for every problem that we have to solve, we need a process. So in the scaling, we'll talk a lot about process development, systematic process and approaches to solving problems or delivering done. Oftentimes you need to be optimist that this trial and error in iteration, experimentation. Sometimes it can be discouraging, right? It didn't work. We tried this, the customers didn't like it. We tried this, it was too expensive. So you have to be optimistic. You have to say, I'm going to keep trying. I believe in my mission. I believe in what we're trying to do. And a nailer needs optimism, the ability to stay positive, even when the environment is very challenging, oftentimes mission driven. What? What is the My ultimate goal? What am I really trying to do? If many advisors say, if your only goal is to make money, then and you don't have a higher mission than just making money, you might give up very easily, because I'm not making any money. Let me go. But if my mission is I want to solve this problem. It's an important problem for society. It's important problem for certain kind of customers. It gives you also the strength to keep going. And the last point here says Rule Breakers, right? And I said sometimes when we have a new technology or new innovation, it breaks the traditions of the old ways of doing it. And so a nailer has to be able to think outside of the traditional ways that a business has operated or that customers have acted, and to be creative about which of these traditions or rules are obsolete, and we need to try to innovate to provide new solutions, but sometimes, but some rules are required, right? That you cannot break certain rules, but you can often break traditions. That is historical ways of doing this. So a nailer has to be someone who can think about what traditions are preventing this new innovation from being a successful Okay, so this is part of the characterization of the nailing part of the journey. So there are many books available that help describe the nailing process. So along with that, is written by an MIT professor, Bill ollette, the book is called Disciplined Entrepreneurship, and he gives a 24 step process for the structure of the dealing process. And he says, it's it's not, even though he has 24 steps, it's not linear, because sometimes you have to go back. You go to one step, and then you say, well, we have to pivot and go back and try again. We have to pivot back and try again. So he says, all of these 24 steps are important, but sometimes you have to repeat them, or repeat the sequence as you go forward. So he gives a process for the nailing part of the journey. Another book that's very famous is called the lead startup. And the lead startup is focused on this experiment process that you that you have a hypothesis, you test hypothesis, you collect the data, you revise your hypothesis, and it's the learning, the learning process. So that book describes that in detail. Then yesterday, we talked about the business model canvas as another book and another model for how to do this. And then there's this book, nail it, that scale it, which is mostly about nailing and we borrowed their words here. Each of these is a model. And as I said, all models are wrong. Some models are used right, so they're not. And none of them is perfect, if you will, but each of them helps us think about how to be effective in the nailing the nailing processing gives us tools, gives us guidance, gives us directions. He focuses on identifying a customer for your for your product. So who is my customer? What? What value can I provide to my customer? How will my customer acquire my product. How will I make money from this customer? How will I design and build the product, and how do I scale the business so he he's very customer focused, and I want to share a little drawing. I'm all very good artists. Chat GPT to draw this picture for me, but you recognize this? So yin yang, yeah, so I said I told you yesterday I spent seven years living in Malaysia, so I tried to study Asian culture. And so this is one component of Asian culture. It's more more an Asian concept than a western concept. But my understanding of this concept is that it's about finding balance between competing forces. You have one force pushing this way. One force pushing this way. How do we find the balance? How do we find the harmony of these forces? Yep, so I like to think about when you're when you're when you're trying to develop a new product or a new innovation. We have the yin yang of what we might call technology push and customer pull. So what do I mean by this? So technology push is the new innovation. The nailer, the daily organization, has a new technology. We have something new that nobody has has been provided before, and we're going to push it into the market. We're going to tell the market, we have a great new product. We're going to give it, we're going to sell it to you, and you're going to love it. Okay, without asking the customers, do they really want it, just saying, We love so sometimes people fall in love with their technology, or they fall in love with their product. So for example, this is my product. I fall in love with this product, and I'm pushing it to you. I didn't ask you, do you want to look at this. I'm doing technology push, if you will. Here it is, here's the product, right? So that's one way that sometimes they have an idea, they have a product, they have technology, and they push it into the market. Another way is to say, I'm not going to start with the technology. I'm going to start with the customer. I want to find a customer who has a problem that needs to be solved. Okay, so suppose you have your target customer are new young parents, and they need to find a babysitter, right? They have their they have a new baby, the mother works and the father works. They need a babysitter. So I have a customer with a problem. Need to find a babysitter. So now customer pull you say, what are all the How can I help this customer? How can I help these parents find a babysitter? Well, maybe there's daycare opportunities. Maybe we can hire someone. Can I provide a service to help you? You're the customer. You come to my service and I say, options for you for how to find a babysitter. So my job, I'm trying to solve your problem. The customer saying I have a problem, and my startup is trying to solve your problem. I don't. I don't have a technology idea or I what I want first, I want to deeply understand the customer's problem and then help the customer solve their problem. So some startups are more customer poll oriented. They start with, I want to solve a customer problem. Some startups are more technology push oriented. I have technology I want to push it into the market. My view is that we need to find the balance here, that that you need to both be thinking about the customer, understanding customers problem, and we need to be thinking about the solutions that that we might have and we can be innovative here. We need to be for this. We need to be good listeners and good learners. As we have to be able to listen to the customer, learn about the customer problem, and understand the customer and empathize with the customer very well so that we can come up with a solution that's appropriate to the customer. For this, we need to be innovative. We need to be able to think of new ideas, new solutions, new technologies that maybe don't currently exist in the marketplace. So a good entrepreneur, in my view, a good nailer, finds the balance here, both able to Okay, there are many examples where companies have a great technology, but they don't talk to the customers at all. They just put the customer on their product into the market, then the customers don't like it. So, yeah, it's a great technology, but it doesn't solve my problem. I this the customer. The thinking here is solve a customer's problem, the way to get happy customers is solve their problem, make their life easier. And so we need to understand customers. The reason I bring this up is because this book is much more focused on this side, much more focusing. So you notice the first four points. Who is your customer? What can you do for your customer? How does your customer so he's very focused, first on the customer, then down here, how do we make the product? So he's more customer pull oriented. And I personally believe we need this balance between customer call new technology. Any questions about Unknown Speaker 45:05 this? This is his model. I'm not going to talk about Speaker 1 45:09 the business model canvas, because Bill spent time yesterday, but I think this is also a very useful tool help us think about all the different aspects, the customer side, the supply side, the financial side, value proposition, very, very helpful. Unknown Speaker 45:26 And this Speaker 1 45:29 focuses on the learning cycle. How do we how do we do this process? And here's a picture from his book where he shows you you have an idea, you build a prototype product and a sample that you want to show to the customer, let the company try it out, so you have the product here. So we use the term MVP for minimum viable product. What we want? We want to have a product that we show the customer, just to get an idea if they like it, right? So, so, actually, before this version, I had a very short version just to show it to people. Do you like this idea? Do you think this is good? Just that was a minute. It wasn't that final product. That was a first, first draft, if you will. So So you have your minimum product, you share with customers, you measure their responses. Don't they like you, you collect data about that, you learn from that, and then you get new ideas and you do it again. You do it again and again, the learning cycle, experimentation. Unknown Speaker 46:48 So this diagram is a little complex, Speaker 1 46:53 but it's called the double diamond right two, diamond shaped, diamond shape. This is more focused on the customer pull. So there's another book. This book, Steve Blank, Four Steps to the Epiphany. I don't know if it's available in Chinese, maybe, but he's also very focused on custom report. And he says the following. He says, if you look in Silicon Valley and the history over the last several decades, Silicon Valley innovation companies were very much focused on technology push, that Silicon Valley in California is a technological Haven, place where many technologies develop, and many of the entrepreneurs from there were more focused on technology push. And so he worked with many startups in Silicon Valley this time. And he saw many, many failures. Very large fractions of these startups, even though they had very interesting technologies, they failed. And he said, I he said, My contribution is, I want to bring balance. I want to I want to emphasize, particularly to the people I work with and Silicon Valley. I want to emphasize this to balance the technology push so, so, so he says, he's he he says the tradition to new products is something called new product development. You develop a product, he said. He says, No, first, we have to do customer development, then we do new product development. Okay, that's his view. So how do you do this? So there's two stages, customer discovery and solution validation. So this is just about the customer then this is about the solution. The solution might be new technology, a new process, a new idea, but he says, he says, First, do the customer, then do the solution, which is similar to what Professor golola says so, and then for each stage. Now I'm combining this with another set of ideas called design thinking, I guess here, design thinking is a concept developed also in Silicon Valley by another innovator named Dave Kelly. These ideas say we have a stage that we call divergence and then a stage that we call convergence. Divergence is collecting a large amount of data. So if we let's suppose we want to help new parents with their babysitting, we go out and collect lots of data. We talk to young parents, we talk to older parents, and we ask them, How did you solve your babysitting problems when you were when you were young? We talked to other babysitting services. We try to collect as much customer information as possible. So this is a large data collection process, and then we try to converge on one hypothesis, one hypothesis of the most important customer problem is what having someone buy your home when you're at work or having a place you can buy whatever it might be so so you want to conquer you want to collect all this data. You want to process that data. Think about it, talk to many, many customers. And then you come to a description of the problem. You're not, not a description of the solution, description of the problem. And then you diverge again. You collect many, many ideas about possible solutions. You know, you don't settle on one. You say, I'm going to collect a lot of data, create lots of ideas, and gather up all those ideas, and then you work, given all these ideas, can we converge to one possible solution, idea, which you call the minimum viable product? And that's our first sample that we show the customer. Messages. We do like this, then we collect the data, and then we do this process, right? We do it again and again and again, this double diamond, again and again. So, so we diverge on the case, converge to a well defined customer need. Then we diverge on possible solutions. We converge to one proposed solution, we test it, and then we cycle again and begin. Okay, so this is an attempt to be very systematic about the mailing process, questions, comments, okay. Speaker 2 51:59 So I want to say a little bit more about the customer and customer intimacy. So Speaker 1 52:06 the advocates of this view say it's very important, very, very important to understand the customer deeply, right? So what is it? So sometimes the customer is an individual, sometimes the customer is a corporation, right? So B to B, your customer might be a corporation. B to C, your customer. In either case you want to understand, well, what's what? How does that customer think about what they're trying to accomplish? What are their objectives? What are the needs of the customer? What are the pain points? What are the things that really are fine? Chat the customer finds challenging. What does the customer like? What don't they like? What are their demographics, their demographics, their age, their gender, their social standing, their income, where they live, also, psychographic. Psychographics is how they think, what they what, what are their passions? What? What are their hobbies? What are the what are the things that make them happy? And how is their how does their mind work? Their economics? What is their financial situation? What is your timeline? How, when do they want to solve the problem? And are there any relevant politics related to their customers? So? So the idea is, you want to deeply understand your customer. Customer is very demanding. She says, Don't ignore me you have to pay attention to my needs and and you want to understand deeply. So the recommendation is you have you interview many customers. There's a book in this area. I didn't write it out here, but I'll write it here. The book is called the Mom Test, Unknown Speaker 54:02 right? So mom is the mother, right? So Speaker 1 54:05 imagine you have a great, an idea for a new product, and you go home to your mom, to your mother, and you say, Mom, I want to tell you about my new product. What do you think? What does the typical mom say? You are my child. I love you very much. Unknown Speaker 54:21 You're very smart. Speaker 1 54:23 You have a very good profit, right? That's what mom says. Is that useful customer feedback? Unknown Speaker 54:30 No, right? Speaker 1 54:31 Never out, right. So what's the point of the Mom Test? You have to, you have to ask people in a way that you don't pre bias the answer, right? You don't ask your best friend, and you don't ask directly. You explore, you try to understand their problem, understand their situation, and then you share the idea. Don't share the idea up front, because they're like, they say, Oh yeah, that's good ideas. They try to make you happy just by saying, that's a good idea, right? Just like your mom would do. So never ask your mom about the product, right? Ask someone who you want to get honest feedback, right? So I asked Bill for feedback on my book, he's like my dad, but he's going to give me honest feedback. Questions about this. Understand Unknown Speaker 55:25 it's very, very important that when you're doing this Speaker 1 55:28 research, you want to get unbiased answers you don't want to have so you don't want to ask your best friends, you don't ask your mom. You want to ask someone that will give you honesty. Speaker 2 55:48 So this is another metaphor in the book, right? The scary ones, Speaker 1 55:51 right? What is discovery said? So we call this the many headed dilemma, that when you're when you're in the jungle and you're you, you face many dilemmas, many, many difficult questions, many difficult problems. So here I put many dilemmas. So the dilemma is asking, you have to choose, do you want to be B to B or B to C. That's a dilemma you have to solve. What kind of customer do I want? Another dilemma? You have very limited budget. You want to hire a salesperson or a technology person, right? The salesperson is going to be more oriented to here, the technology person is going to be more oriented only can afford one person. I don't have a big budget. You have to choose. It's a dilemma. It's a challenge that the entrepreneur has to face. This one says, Choose pivot your product or your market. So you came up with a new MPP product, you put it into the you tried it with some test customers, and the customers didn't like it. Hey, we're not happy, right? So then I have to pivot. Do I pivot to a same product, but different market? You know, I'll try the market old people instead of young people, market of poor people instead of rich people, whatever. Or do I pivot the product? We say I'm comfortable that I have the right customer, but I have to try a different product idea with this customer, so that, again, you have to choose. It's a dilemma. So this one is about funding. If you have limited amount of money, so it says you borrow from your friends, or do you grow more slowly? Right? So I don't have very money, I want to hire more people. I want to test Unknown Speaker 57:37 more ideas. Speaker 1 57:38 How do I get the read? Maybe I borrow from my friends, and that's risky, because you don't want your friends to be angry at you, right? If it's not successful, or maybe you say, I don't want to borrow from my friends, I'll just grow more slowly. I just won't expend even though I want to. So again, a dilemma, how quickly can we grow? And how do we fund the growth? And this one says, listen to the downers or listen to your gun, right? So the most creative, innovative new venture people, oftentimes, many people say, You're crazy. That's a crazy idea. So, so I'll give you an example I mentioned very briefly yesterday the Apple iPad. When Steve Jobs first proposed the Apple iPad, people said that's a crazy idea. No one ever wants a phone the size of a screen and doesn't have a keyboard. Bad idea. So you listen to the doubters, or do you listen to, I have a belief this is going to be a good product. I'm going to I'm going to go forward, even though many people are telling me I'm crazy, or even Elon Musk. Elon Musk kind of a crazy inventor. He's had many wild ideas, and he listens to, he doesn't listen to the dollars. He says, I have the idea. I'm going to go forward. I'm going to listen to my god. On the other hand, the daughters, the people who express doubt, they're trying to be legitimate. They're trying to critique, give you helpful feedback. And so who do you listen to when you have multiple voices? So I just we put these as dilemmas and as challenges that the entrepreneur has to face, and we painted it as a as a monster, because it keeps it keeps the entrepreneur from sleeping. I can't sleep at night because I'm wrestling with these problems, these questions. Okay, questions, you like my monster? Yes. Unknown Speaker 59:39 That's good, Unknown Speaker 59:55 really. Unknown Speaker 1:00:06 Who? Speaker 2 1:00:17 Okay, so, so, very good question. So, so Speaker 1 1:00:20 it sounds like you are scaling, or maybe even sailing B to B, but you have to start nailing B to C, right? So, so you need two teams, right? You need a team that that continues to sail successfully your existing business, B. But you need a nailing team also to say, Okay, we're going to go, we know that B to C is going to be important. We need a team to work on that, like, like IBM, example, yesterday, right? So they had their mainframe business, which they were sailing, and they created a new team to do the personal computer for for nailing, right? So I think asking one team to do both is very difficult. You need a dedicated team for the nailing part and dedicated you need two teams, yes, so I Speaker 3 1:01:13 Charlie indicated that I read his book. I like it. We're going to talk about it at lunch. I'm going to tell him all the things I found in a conference in a couple of weeks where I'm running a panel on legacy thinking. Legacy thinking is the inertia based around old ideas that can make a change. And I've asked Charlie for permission to reproduce that very image to show different types of legacy thinking. I think the B to B, B to C distinction is was very valuable in the past is going to be less valuable in the future. And I think that it harness legacy thinking. We make an exception for B to B or B to C that no longer really exists. I think that the way we think about these things are converging and and I think that also, you know, like long term and short term, I think is legacy thinking we used to historically make a difference. It's time to struck me so that are harder to distinguish. So I think you should always be on the lookout for all categorizations. All you know, federal loan ballot. What would you which effect on this? If you don't challenge Unknown Speaker 1:02:48 any other questions or comments. Speaker 2 1:02:55 So I want to ask you to maybe have a little conversation Speaker 1 1:03:00 in your tables. What are your dilemmas, right? So I gave you some examples of these dilemmas. But every company, every organization, has different dilemmas, different challenges, different questions that are very difficult to find the answer. So maybe talk at your tables for maybe 561, minutes on one of the most important dilemmas that you are facing today, in your in your in your business. I know today you're all students and also in your companies, but in your companies, whether the ones that you face, okay, please have conversations. Do Speaker 4 1:03:51 Yeah, because I need to understand the problem. I need to understand all of these cases Speaker 1 1:03:57 to help solve the dilemma right to get more information and more accurate information as to what the opportunity is. Let me take one more volunteer, if I Then ask stable any guest, Ms Chen, do Now, Speaker 5 1:05:11 usually the anyone Speaker 2 1:05:31 does anyone have an easy problem for me to solve? Unknown Speaker 1:05:42 So thank you. Mr. Very challenging Speaker 2 1:05:45 problem in some sense, in English, we say you're being Speaker 1 1:05:48 asked to do more with do more but less resources, right? And how can we be innovative to serve the customer, get more revenue, but with less resources and less people? This problem cannot be solved in general. It can only be solved solved by digging deeply into the specifics of what are the processes that you use, what are the people capabilities? What are the custom problems you have to solve? So I don't think I can offer a general solution. Maybe at the brain we can talk more detail, and I can understand it better and maybe give you more specific solutions. Okay, so, Speaker 5 1:06:36 we're supposed to take a break at 1030. So before Speaker 1 1:06:39 I start this example then we should take the breakdown. So take till 1025 clock here. Please come back at 10 to 25. Speaker 1 0:00 This case was actually written in 2014, 10 years ago. 10 years ago, Tesla was not famous company who was not so well known in a small company, the CEO, Elon Musk, he's much more technology push. He didn't ask the customer if they want you just said, I'm going to make this car. So and the first car that they that they sold was called the Tesla Roadster, and it was a little sports car like this. And they only made a very small number, just it was a, it was an MVP minimum viable product. It was just, it was a nailing exercise. Can we, can we validate a value proposition that customers will want an electric vehicle? Because in 2014 there were no large companies selling electric vehicles. In fact, most of the major auto companies in the world believe that electric vehicles did not have a very good future, and there were two very large failures in the electric vehicle business before 2014 one of them General Motors invested over $1 billion in electric all electric vehicle called the GM impact, and it did not do well in the market. They canceled the whole project. There was another fairly famous company in the West called better place. They, they, they also had investment of over a million dollars. They made electric cars, and the company went bankrupt. So the belief in the industry was that there was not much promise for electric vehicles. So this was a risky venture. In that sense it was, it was not a proven market that people would want to buy all electric But Tesla decided, funded partly by Elon Musk, who was already wealthy from a previous startup, that they would would go forward. And they took a different strategy from the the other two failures that I mentioned. Their strategy was to go after to build an expensive car with this this car sold for almost 100,000 US dollars. That's a very high price car in the American market. And so their target, who is their target customer? So remember, I show you the picture of the customer, and think about the customer so, so what customer were they interested in? They said, We want a customer who is wealthy, who can afford an expensive car. We want a customer who wants to drive fast, because one of the features of electric powertrains is fast acceleration, an electric car will accelerate much more quickly than a internal combustion car. So I want someone who's wealthy who wants to drive fast, but they care about the environment. Because if you buy a traditional sports car that drives fast, it burns a lot of petroleum and puts a lot of carbon into the atmosphere. So so the target customer, wealthy, wants to drive fast, but cares about the environment. So this car was designed for that customer and but they didn't do customer discovery. They just said, we're going to put this car on the market. This is what we believe. They didn't do any customer research. So this, well, they didn't do it. They just did, let's put it on the market. So what was their manufacturing and supply chain strategy. So at that time, the most successful company in Silicon Valley in California. So Tesla is headquartered in Silicon Valley, California. Most of the high tech company was the most successful company is Apple. Apple on the back of each each product, it says, designed by Apple in California, assembled in China. This is representative of a certain manufacturing and supply chain strategy. So our strategy is, we're going to design it in California, but we're going to use manufacturing in China. So this was a recipe for great success for Apple. So the people at Tesla, their mental model, their thinking was, we want to be like a high tech California. Are different. We don't we think of their belief was the traditional automotive companies did not think like high tech. They did not understand the benefits of high tech, and they were dinosaurs. The Tesla said, we want to be very different from the dinosaurs. We want to be high tech company, and this should be our strategy. So they said, we will. We hired design engineers in California. They hired very talented people. They aimed for the highest people who graduated from places like MIT and Stanford. They tried to hire very capable people, but they said, We will outsource all manufacturing subs in Asia. And so they they sent a team of people who traveled around in China and other parts of Asia, trying to find manufacturers who were willing to help with the manufacturing for this product. And they were not that successful. They wanted to find, for example, a company that would make batteries in high volume, because this is electric car, it needs a lot of batteries. But at that time and years ago, there weren't a lot of companies that had that experience of high volume and kind of battery that they wanted. They actually talked to most of the largest, 20 largest auto companies in the world, the big ones, and each one, they said, Will you make the body for us. We didn't make the chassis because we're just they were interested mostly in the powertrain, the power electronics and the batteries, and no one wanted to do it. So they ended up with their manufacturing supply chain. There were three important supply chain decisions that they made in the end, the body was manufactured by Lotus in England. So lotus is a company small volume of making sports cars, the battery packs. They ended up with a company called excellent in Thailand. And this company had never made battery packs before. It was not experienced and in the power electronics, so the electric motor and the other electronics, they found a company in Taiwan to do that. So, so, so they, they didn't end up exactly with the Apple strategy, but they outsourced all the manufacturing. They only did design and they had and so the supply chain, the supply chain, looked like this. They did design here in California, they had the power electronics and the battery packs made in Asia. They were shipped all the way to England, where they were put into the body and the chassis that was made by Lotus, and then they were shipped the cars were shipped all the way back to California, where the engineers did the final testing before they would go for sale. So that was the supply chain that they designed based on the manufacturing strategy of outsourcing. Now what what do you think happened with this supply chain? And consider the following, no company in the world had previously made high volume, customer focused electric vehicle. This is a new market, new technology, and with a new market and new technology, new product, oftentimes remember our S curves, S curve, worse before better, right? Okay, Speaker 1 9:11 so here's Tesla down here, right? They're trying to nail it with a very new innovation. Remember, worse before better when you first start out lots of problems to solve lots of debugging, right? So, so they they have been designed for their car, but they have manufacturing here, manufacturing there, manufacturing there, the final product is shipped to California. What happens with the first batch of products? Has problems, has some challenges. We have to fix them. We have to debug so they said, Oh, we have to make this change and that change. We have to do this engineering change. We. However, when that first batch of product arrived, this is about 10 weeks of time, 10 weeks of time travel all around here. So you get the first batch that arrives, there's another 10 weeks of inventory in transit. What do we know about that inventory? It's all defective. It all has the problems that they discovered. So look how much defective problems. Defective product we made before we discovered there's a problem. So the manufacturing team told Elon Musk CEO, we have a problem. We have we found problems here. We have to make some changes. We have to fix we have all this effective product coming. And his reaction was, you are all fired. He fired the entire team of manufacturing supply chain. He said this was a very bad design, bad supply chain design. We have all this defective product. We need a shorter supply chain. Now, for many startup companies, this would have meant bankruptcy, because this is a very, very expensive stake, and startup companies often cannot afford expenses. Elon Musk, wealthy man, and he had wealthy friends, so he raised some more capital, and he said, we're going to change the supply chain. So this is, I did this picture, Tesla Roadster stuck in the jungle, right? So here they are trying to nail it, and they get stuck. They have a problem. They can't go. So they changed the supply chain. They said, We're going to do a final sorry, we're going to do final assembly here in California. No more battery assembly in Thailand. They're not doing a very good job just buy electronic components here. We'll have Lotus make the body. We'll ship it together. We'll do final assembly. We'll do tests. Much shorter supply chain, much faster feedback on the debugging, much more effective. Okay, so they started to scale before they nailed substance, right? They didn't really nail the product in business model of the supply chain, and was very costly. They had to get raise new financing because of that mistake. They had to hire on a whole new team because Elon Musk fired the team. But they redesigned the supply chain, redesigned the way that they solved their problems. And then they were able to scale the Roadster, which was their nailing product, right that they they wanted to prove there is a market for electric vehicles, and we can successfully make it delivered electric vehicles. And you were able to do that after this change. Questions about this, comments. So formal lessons is in the nailing stage, in the early stage when you're making prototypes, speed is more important than this, right? Why did, why did they want to outsource manufacturing to China, to Asia? Because they wanted lower cost labor, because there's a lot of labor that goes into making these boundary packs or making these electronics. So they said, We want to save money on labor, but they save money on labor, but the cost of slowness, the cost of that very slow world supply chain, was much more, had much more impact than saving money on labor costs, right? Because the time, time was the most important factor here, rather than the labor costs. And that was a general lesson the people at Tesla emphasized to us when we were writing the case. They said, We focus on speed, but the most important feature for us is speed. Remember the cycle of learning, experiment, learn, experiment, learn, we have to do this fast. We focus on on being fast. And that, I think, is a general feature. And let me also say Tesla was enormously successful, unexpectedly, so. So in 2015 we had a Executive Education course here at MIT for Porsche. Porsche is a German sports car, very, very high capability sports car, very expensive sports car. And so we have many Porsche engineers here in the classroom, and they asked them, and this is 2015 This is when the Model S. This is the Model S. That was the next car. So this just came out in 2014 so I asked the Porsche engineers, what do you think of the Model S? Do you think they. That we are very impressed. Now let me tell you, German engineers have a very high ego, very high view of themselves. They think we are the best engineers in the world. The German engineer and Porsche is the most prestigious car in Germany. So these Porsche engineers very, very capable, very smart, very, very high self image. But when I asked them, what do they think about this, they said we were very impressed. They said we were shocked by how good this car was. We were shocked at how the quality of the engineering that went into this car so so Tesla had very, very capable engineering, very capable technologists, and they had a lead of the Porsche people said they are at least five years ahead of us. And we were shocked. So I thought that was a quite an interesting comment, because the Porsche had great respect for the Porsche engineer. So after the after they nailed it with the with the Roadster, then they started to scale the models. Model S is their first high volume vehicle. They did more vertical integration of the manufacturing. So they they bought a manufacturing plant in California. So instead of making the cars in England, now they're making the cars in California. They're assembling all the electronics in California much more vertically. They went to a vertical integral structure, when we talked yesterday about vertical integral structure, and they were able to scale up. And in 2013 they got a very high rating from this is the magazine that rates cars in the United States, and they also Mercedes S and BMW seven, which is two luxury vehicles in us. So they were very, very successful beginning in 2013 and have been successful since, actually, I'll say that although they were very, very good at engineering and design of the car, they the speed in setting up their manufacturing led to a number of quality problems, and Tesla has been a little bit famous for having defects in their cars, even though the engineering is great, the execution not ideal, because they focus on speed rather than focusing on precision, if you will. And when we asked them about that, they said, Our customers love our cars. They have an emotional relationship with our cars, and they're very forgiving. That is because our Speaker 1 17:50 the analogy that they use was the iPhone. So before iPhone, most people who had an expensive phone, they either had a Nokia phone or a Blackberry phone, at least in US are the two high end brands, if you will. And when the iPhone came, people looked at the iPhone, and they tried the iPhone, they said, This is a completely different customer experience. And people fell in love with the customer experience of the iPhone compared to the Nokia Blackbird. People had the same reaction from the Tesla. The first time you get in a Tesla back in 20 Model S, 2014 it was, it was like driving an iPhone. It was a very, very different customer experience. And some people fell in love with that customer experience, and they didn't care if there's a few defense and the Tesla people said, our customers don't care about this. They love the experience. They're willing to put up with these problems. Now that's maybe okay in the nailing stage, but I don't think it's okay in the scaling stage, right? That when you start scaling up, and you start, instead of having hundreds of customers, you have 1000s of customers, or millions of customers, if ever, if all the products have these little defects, the customers are going to start getting it. They're not going to be happy. So I think the culture in the mailing environment was about speed. Doesn't have to be perfect, but we have to do it quickly. We have to learn quickly the culture and the scaling environment. It has to be a box. We need the cars to be excellent. So you look at Toyota, look at BMW, you look at Porsche, they they emphasize the precision, the excellence of every aspect of manufacturing and so different culture between the nailing and the scales. Okay, any questions about Unknown Speaker 19:49 the testing case? Speaker 1 19:54 So now let's talk about scaling. Okay, so scaling, so now we can see the top of the mountain is where. Up there. But we have, we need many people. We need a lot of resources. We're gonna go off this. So there are a couple interesting quotes here. The mountains have a way of dealing with overconfidence, right? You might think, Oh, I can easily scale this. I already nailed it. Not so it's always further than it looks, it's always taller than it looks, it's always hard, right? So, so these are quotes to emphasize. Scaling stage is not necessarily easier than nailing it's different, but it's also challenging. So here's my definition of scale. It grow in parallel your market size and your production and deliverable delivery capability, so in parallel, meaning that we wrote my author, and I wrote a number of cases about different companies in nailing and scaling, and some of the cases, we found the market exploded and the delivery capability was slow. So they had a product. The product was very popular. Many people wanted the product, and then they realized we don't have enough capacity and capability to make and deliver the product, and they missed the opportunity to sell because they couldn't deliver. We also saw a problem the other that the company built up a good capability to make it deliver the product, but then the demand wasn't so, so high, so they so there was an imbalance between supply and demand. So to scale. We have to grow our market size, and we have to grow our production delivery. We have to do that roughly evenly, pace. Okay, printer. So I want to kind I want to talk now about tools. So remember, in the nailing, we said the tool was like the machete, very simple tool. You have to go through the jungle, cut the cut the bushes as they go. Whereas in scaling, we think we need many tools. I'm going to expand on this, but think about so we use the term naked scaling, you try to climb a mountain without appropriate tools. So this is the same way you want to climb a mountain. You have an expedition. You have to have the proper tools. Don't do it like this. So if in needling, we have only one tool scaling. We need many tools, right? So this is the metaphor of the tools for scaling. We need many, many different tools to be able to scale. Unknown Speaker 22:57 Them both. Speaker 1 22:58 So let me tell you about the tools. Okay, so here's our metaphor for the tools. I have 10 tools here that we introduce as tools for scaling. So the first one we call processification, making processes. So I said earlier, the first time you solve a problem, you do it with a hack. Second time another hack you solve the same problem again and again and again, you need a systematic process for this problem. So part of the one of the things you need to do in scaling is develop processes for all the different functions in the organization. This is a skill that some people are good at and some people are not good at, and it relates to the second line. So the second tool I have here is professionalization. So remember, I said in the nailing stage, we often have general people who can do many different jobs, because we can't afford a large team when we're scaling, we need professionals. We need a professional finance person, professional marketing person, professional procurement person, professional supply chain person, so you need the professionalization. You need to if you're going to scale, you need all these different professions to work with. So let me share you my personal experience. So I told you, for seven years, I served as a dean of the Asia School of businesses in Malaysia, and I was employee number one, and I had to hire the whole staff, the faculty, the staff. And so I and the strategy of the school was to bring the culture and the curriculum of MIT, but teach it in a school or business for emerging focus on emerging economies, growing economies in Asia. So I needed professionals. I needed someone to focus on admissions, someone to focus on executive education. Education, so I'm gonna focus on MBA program management. So for those three jobs, I hired people who used to work here at MIT in the Sloan School. So they were professionals. They each one of them had worked for a long time, respectively, in admissions, in executive education, in MBA program management, all three were failures in when I hired them to age school distance. Why? So they were professionals in a mature organization. They were they were professionals in a sailing organization. They they learned their craft. So take, say admissions. For example. Admissions is this function where you you have to help market the program. You talk to the potential candidates, you interview them, you decide who to admit, you convince them to come. So it's a marketing sales position in part. And the person that I hired had worked in Admissions here at MIT for a long time, and she was an expert at doing the processes for admissions at MIT. When she came to Malaysia today, Asia School of Business, we didn't have any processes. We had. We were starting from new and so she's she didn't know how to design process. Surely knew how to execute processes that someone else had created. But now the this new environment of Malaysia, it was a different situation. I mean, we also have an MBA degree, but admissions for this school is very different from admissions to MIT, and so we needed someone to create new processes for how we do admissions. She didn't know how to create processes. She knew how to execute processes. So she was a professional in admissions, but she didn't know how to do she didn't know how to do processification. We need a professional who understand their field and understand how to make frost. Give me a second example. I hired a marketing person who was a Malaysian who had worked at Mercedes Benz for 10 years. So she lived in Germany, and she worked at Mercedes Benz in marketing, but she had grown up in Malaysia, so she knew Malaysia, so she knew the global market, somewhat, and she also knew the local market. And she was a marketing professional. And you say Mercedes is a luxury product cost, my MBA program costs $100,000 so it was also a luxury product. Okay? So I thought maybe this is a good hire for us. It was terrible. Why? Same reason she she had worked in a mature organization with mature processes. She understood marketing as a professional but she didn't understand how to make new processes in a new organization to leverage those skills. So so it's not so easy to hire to do this professionalization, you have to find the people who have professional skills and know how to do the scaling, but also understand startup environment, understand process design as well as process execution. So so my learning, it was a painful learning as an entrepreneur, is that process design and process execution are very, very different skills. Just because you know how to do process execution well doesn't mean you know how to do process design and processification is designing these processes that enable us to scale. Okay, understand, I me, part of the way that you train these professionals is what we call culturalization. You have to say, Okay, you came from MIT or you came from Mercedes Benz, but now we have to share with you the culture of our organization. It's different from an old organization. You have to understand our problems, the way we think, the way we work, the way we face our challenges. And so when you scale often, you add many, many new people. So I was working with a company last year. They went, in a few years, they went from 5000 people to 10,000 people. When you go from 5000 people to 10,000 people in a short time, you have a lot of culturalization challenges. How do you teach all these new people culture so that they can fit in and work together and be comfortable with everyone else? It's a challenge. So how do we bring new people into our organization culture and help them understand how we work, how we want to work, what our mission is, etc. So that is part of if you bring many, many people, and everyone has their own culture, you lose the cohesion, you lose the teamwork. You lose the. Ability to execute in high quality way. So culturalization also important. Then there's automation, right? So when you're first in a startup organization, you do everything by hand. You don't have a lot of expensive tools. As we said, You do things manually, also paperwork, kind of things, as well as physical things. But as you grow, as you scale up, you want to automate everything. You want to automate all the paperwork, all the office work. You also want to automate manufacturing work. Automation is important challenge. Yesterday, we talked a little bit about ERP systems, which is the automation of the business processes and paperwork. So if you automate too soon, you can lock in two processes that you need to change later on, and that relates to the next segmentation. So let me talk to that. When you first start your new business. Often you pick one market segment. So we mentioned that Tesla rose, their market segment was wealthy people who want to drive fast, who are environmentally sensitive. That's one market segment. But if you want to grow in scaling, you have to find other market segments. You have to find other sets of people. So older people, younger people, males, females, children, people who live in the city, people who live in the country, right? So there's many different market segments. How do we need to adjust our product so that we can, we can find a product that's appropriate to each different market segment. So, so as we do segmentation, there's going to be more requirements on the organization. You have to have a special team or a special set of processes for this segment versus this segment versus this segment. If we did a lot of automation just for the first segment, then when we had the second segment, we may have to undo that automation. I made that mistake also that the Asia School of Business in Malaysia, our first segment was full time MBA. We set up a bunch of processes for full time MBA, we automated them in an ERP system, and then we started a part time MBA. And all the processes for the full time MBA were not relevant, we had to start over again. Automation. Any questions. This makes sense, not getting a lot of feedback. At least you're awake, it's too fast. Am I going too fast? Yeah. Okay, Speaker 1 32:51 so let's slow down. Thank you for that feedback. So she said going too fast. There's a lot to digest, so apologize for that. So let's just take these first five processes, professionals, culturalization, segmentation, platform, segmentation, just fine. Okay, so let me ask you, maybe to talk to your tables for a few minutes. Do you have experience with any of these? Or you have questions about any right? So I want to slow down. Let you think about just these first five that I mentioned, hiring professionals, bringing people, adapting to the culture, creating automation, and then create different market segments. Each of these is important for scaling. If you want to scale up, you have to be able to do these things. So talk me in your tables for a few minutes about either experience you've had with these five steps, or questions you have about these five steps take five minutes, and then we'll have a discussion. So we slow down. Thank you. Please have a little discussion. charlie 34:16 We have to sell, right? So we, we designed this, in my case, this MBA program. So we have that as a product, and our output is paying customers, right? We want students who come to the school and enjoy the benefits of the program. So what are all the steps we have to take in order to return start with a product and end up with paying customers? Well, we have to develop brochures. We have to develop a targeting strategy who we're going to go after. We need communication strategy. We need engagement strategy. We. we're going to first attract people and then narrow down the people that are are going to actually be our paid customers, right? So there are many, many design along the way, somebody who lived in a mature organization, and these steps are already designed for them, specific to that organization. They might not have the creativity or the comprehension to develop all these steps. So that was my experience, at least. Maybe I had bad luck. I just hired among people, or maybe I was a bad manager. I didn't manage them properly. But what I found is that it was not automatic. Just because you were very experienced executing processes in one organization in your profession doesn't mean you could easily set it up. That was what I Unknown Speaker 35:56 any Other questions Unknown Speaker 36:08 or comments? Yeah, Speaker 2 36:44 Our opinion Now, Unknown Speaker 37:11 a Church. Meeting, how Unknown Speaker 37:51 So back for Unknown Speaker 38:10 up description of those different components. Thank you. Unknown Speaker 38:14 I want to add a little more to the Speaker 1 38:16 culturalization that you mentioned is very critical, and I'll share again, my own experience. So when we started the school in Malaysia, the objective was to bring MIT education and MIT culture to the Asian market. We recall the Asia business, not the Malaysia school business. And the idea was to attract students from all over Asia. And we did. We had some from China, some from India, some from Indonesia, from Ireland, from Vietnam, from many Asian countries, Korea and so, so we so we did, what was the culture of our new school? Well, it was not Malaysian culture. It was not MIT culture. It was we created a new culture, which was a combination of these, the features of MIT culture, some of the features of Asian culture, Malaysian culture, and we had a different culture. And when someone from Malaysia would walk to our campus and be on our campus for a little while, they would say, I don't feel like I'm in Malaysia anymore, because culturally, it just felt different to be on our campus and in our environment. So how do we build and strengthen the culture? So we decided, firstly, we had a very, very distinct mission statement. So I think the mission statement was very important for the culture. Our mission statement had three points to it. First, it said, build a premier school. School of Management. So we were told so when, in 2015, when we started the school, there were already 10,000 business schools in Asia, 10,000 many of them in India and China, many of them small. But people would ask me, we already have 10,000 business schools in Asia. Why do we need another one, right? So we were told you should aim to be premiers, right amongst the top schools. Second, we should focus on emerging economies. That is, don't focus on the advanced economies of the West. Focus on how do we? We want to develop talented people who can be contribute to building the developing economy. And third, it should be a transformative education. What I mean by transformative so the visionary who funded our school was the governor of the Central Bank of Malaysia. She had been the governor for over 15 years, and she was Malaysian, but she had done her PhD degree in America. She said, when I came to America and did my PhD degree, that was transformational for me, in the sense that I was a different person. When I finished, my whole world was changed. So she said, I want you to build premier schools focus on emerging economies be transformation. So that was a very distinct mission, and it affected our culture. The other thing that affected our culture strongly was we, after the school was about one year old, we had an off site meeting of all the staff to talk about some of our objectives with school. Out of that came what we Unknown Speaker 41:43 ended up calling the school's Speaker 1 41:44 values. What are our values? And so we ended up with five values, respect for people, continuous learning, excellence, well being and team. And I won't go into these five values, but once we have those five values and once we have the mission, every single time I would make a presentation to our students, to our faculty, to our corporate partners, to a marketing meeting, I always started with, here's our mission and here's our values, because that was a communication of our culture so and whenever we hired a new person, I would give them the speech, here's our mission and here's our values. And every time we have any kind of a public meeting, I would present, here's our mission, here's our values. So that's how I did culturalization. As I we have very distinct description of the culture and these components, and then to say them again and again and again to all the new people who come in, and so that everyone in the organization knew them in their head and they could easily say them as well. That to me, was a way to do this culturalization. And I agree with you, it's challenging, it's hard, and it takes a lot of effort, but I think it paid dividends that we had a very unified organization, that everyone was on the same page. Everyone believed in the mission, and if you don't believe in the mission, don't join the pool, whether a student or faculty or staff. If you don't believe in the mission and the culture, which we're going to be very clear about, then you'll know I'm not a good fit. So that it helps a strong culture, not only helps the people inside stick together, but it tells outsiders whether they're going to be a good fit or I'm not going to be a good fit. Here, it's good that I realize this culture is not for me. I don't want to be in this organization, and you don't want someone in your organization who doesn't want to be there, right? So having a strong culture was very, very important for our growth. Sorry, that was a long speech, but it is stimulated by your competence. Thank you for listening. Anyone else Unknown Speaker 44:00 comments I'm going to go on so, so there are Speaker 1 44:02 more slides that explain these in more detail, but I'm not going to do that now, because maybe it's too much, too much. Speaker 3 44:17 Let me talk about some of the dilemmas of scale. Okay, Speaker 1 44:20 so we talked about the nailing dilemmas. What are the scaling dilemmas? Okay, so I put five of them here. The first one here says, Do you want flexibility or efficiency? That is, efficiency is one process for everybody. Flexibility is we want to be able to customize solutions for different customer segments, right? So if you, if you have flexibility, you can always change. You can. Obviously adapt to customer needs, but that's more expensive, requires greater skill. If you want efficiency, just do one simple process for many different applications, and there are trade offs either way. So it's a dilemma, how much flexibility versus how much efficiency. Second one, individuality or conformance? That is, Do you want an organization where everyone conforms precisely to the culture like I was just saying? Or do you want lots of individuality? Let people do their own do it their own way. Do their own thing. Sometimes you get more creativity. If you have more individuality, but you have less unity. So how strong Do you want the Unity versus the creativity and individuality? The third one says, Do Unknown Speaker 45:46 you want product variety, Unknown Speaker 45:47 which is really interesting. Do Speaker 3 45:52 you want to grow faster or have more ownership. This Speaker 1 45:55 is an interesting one. Is if, for if you're a startup entrepreneur, oftentimes, when you're ready to scale, you need more capital. You need capitalization. And that was one of those scales of capitalization, if you take a lot of as a founding team, you often give up control, right? That when you're small and you don't and you didn't take a lot of capital, you can do whatever you want, because you're you're the owners and you're the founders. If you want to grow more quickly, oftentimes you can grow more quickly if you take a lot of external capital from venture capitalists and investors, but then you give up control. All of a sudden, you now you have a boss, your investor, who tells you, I want you to do this and this and this. So that's a trade off. There's a there's a book by a professor named Noam Wasserman about about this dilemma, and he says, Do you want to be rich or you want to be the king? Right? In the following sense, if you take more money, you can grow faster and make more money, have a bigger pie, but you're no longer the king. You're no longer the ruler of your organization. You have a board of directors that tells you what to do. So it's a dilemma, do you want control? Or do you want more? Not always easy to decide. The last one says you want to Unknown Speaker 47:22 collaborate, have more collaboration partners, Speaker 1 47:24 or do you want to have more control over your value chain? So this is the from yesterday. We talked about vertical, integral versus horizontal, modular. Vertical does you want to be vertically integrated control all the parts of your value chain? You capture more of the value, but maybe grow more slowly because you don't have the help. Or do you want to have lots of partners? Supply chain, partner, assist, division partners. If you have more partners, maybe you can grow faster. But you have wants to share. They all have to make money. The distributors all want money. The suppliers all want money. So you have a trade off of, how much do we do inside versus outside? So another dilemma. So I put the dilemmas here just to point out that there are challenging questions at every stage of the organization that the organization has to address. There's no easy answers to any of these that depends on the individual strategy of the organization, what the opportunities are, etc. Case studies, some of the case studies that we could share illustrate. So I'm gonna, I'm not gonna ask you to talk about this, your own scaling. You want to talk about this? Your own scaling below this, Unknown Speaker 48:43 I'll keep going. This is your more homework yesterday. So now let's talk about sailing. Okay, Speaker 1 48:53 so they reach the top of the mountain, and now they look out over the ocean, and now we're going to sail. Okay, that's the metaphor. So what are the metaphors Unknown Speaker 49:07 in sailing? Speaker 1 49:11 So I'll start over here. Remember the campfire, group of people having a little discussion. Now many people, everybody has an opinion. Everybody has a comment. Everybody wants to tell you what. So you have a lot when you have a meeting, or you have a large collection of people, so very different environment with regard to how many opinions are, who wants to be in favor of what issues? Much more complicated environment here. So remember the machete and the nailing the Swiss Army within the scaling. This is the tool for sailing, right? Right now you have a large organization, lots of data to analyze, lots of inputs, right? So, so this is the metaphor of what the tool is for this sailing organization where you have the control panel, complex control panel for a large enterprise, which is our ship. So this is for for inside of the sailing organization, inside of the ship. You still need some mailers, right? So she's a nailer. She's in the jungle. She's inside the ship, which is the sailing what does that mean? Well, it's from the S curve, right? Speaker 3 50:39 We said, when we're sailing, we're up here, right? Speaker 1 50:42 So we have this large ship with this complex control panel and a large crew. Everything is at large scale, but we know there's some risk of disruption. There's some risk of the next S curve. So we need to have our we need to have some nailers still in the organization. We need to have some nails who are ready to do this, to attack this challenge, to be creative, because we don't want to be a big fat soul dinosaur, right? If we just have the ship and all the dealers are gone, we have more risk. We cannot react when there's a new disruptive innovation, new big change coming. So Unknown Speaker 51:30 a related image to that is this, that Speaker 1 51:33 we have our big ship, and we have lots of little chips that help us out, right? So these are the special forces. They go out and do special missions to try new one. Go explore this new market. Explore that new market. Explore this new product that that even when we're this large, giant company thing, remember yesterday, IBM mainframe computers, they still have to have a PC division, Unknown Speaker 51:55 small, Speaker 1 51:57 small operation that can explore new potential markets, right? So even though the sailing, the primary organization, large ship, large crew, large, complex control panel, lots of people, you still need to be able to do experimentation, do exploration, do trials, for for the possibility that there's another S curve coming, Unknown Speaker 52:32 questions or comments. I please. Unknown Speaker 52:40 Okay, so I want to say a few words about Speaker 1 52:43 so. It says here, saline is not simple. Need to be ambidextrous. So ambidextrous is a term coined by some Harvard professors, ambidextrous physiology is the ability to use both babies use my left hand and my left right hand ambidextrous. So when I use ambidextrous in management is you can both explore and exploit explore is these little ships and go out there, little ships and go out there and make explorers. It's the mailer inside here who looks at new markets. Exploit is take advantage of the money we create. So we have a mature market. We built it up, we scaled up to it, and now we want to continue to exploit that market, but at the same time, we want to be able to explore so I'm going to give you a couple of little mini case studies here, some of which we've already talked about, but one of the is, I could call it the incumbents lament lament is when you're crying over something it makes you sad. So I did some work with a large telecoms company in Europe, and that company, Unknown Speaker 54:09 I was talking to the Speaker 1 54:13 Chief of Staff to the chairman of the board of the company, senior level of the company, and he said the following, almost every day, someone comes into our office and says, there's a new, disruptive innovation that's going to put you out of business. You're in danger. You better react to this immediately, because there's a fast rate of innovation in communications and internet. So so he said, we know most of those potential innovations are not really going to end up threatening us, but we don't know which ones, which ones are truly. The threat and which ones are not. We talked yesterday that one of the threats to telecoms company was free long distance calling, right? So using FaceTime or WhatsApp or Wechat for talking to people around the world, that took all the money away from the telecom companies, right? So that was a real threat. But there, he said, every day, somebody comes in and tells us, there's a threat. How do we tell the difference between so you have to be able to explore and experiment. You have to, you have to, you have to have the capability to examine each of these potential threats at the same time that you have to continue to run your existing existing business. Unknown Speaker 55:42 We talked about IBM already. Unknown Speaker 55:44 We talked about Tesla. Let Unknown Speaker 55:49 me talk about electric, shooting, scaling. So Unknown Speaker 56:12 So Unknown Speaker 56:16 some companies, they do this. They're scaling, Unknown Speaker 56:21 they're in here, and then they use scaling Speaker 1 56:24 beyond where patients should have stopped. They overbuilt. So actually saw the two examples that I have some familiarity with are digital equipment corporations. So digital equipment, I mentioned them yesterday. They were the second biggest company in the US for many years, and they were grow. They were growing so fast that every year they were built two new factories every year. We two new factories just to add to the capacity. And what happened is that they kept building two new factories a year, and all of a sudden the demand slowed down, and then they had a lot of extra factories, and that caused a significant financial problem. So they overshot. So it says here, beware of overshoot. This also happened to Amazon during the pandemic. That Amazon during the pandemic in the US and I think in many places in the world, e commerce exploded, right? And people couldn't go to the store and shop because of the pandemic, so they ordered more things online. And so e commerce was exploding. And so, so what happened during the pandemic is Amazon was building many, many new distribution centers and adding many, many people in capacity. And then when the pandemic ended, the E commerce growth slowed down, but they don't. Now we have way too many people with too many distribution centers, and they overshot. Okay? So you can you can scale. You can scale too much, and that's kind of a risk. You have to know when to start sailing and stop scaling. Okay, it's not always, not always. Unknown Speaker 58:16 So some of the dilemmas Speaker 1 58:18 in sailing include disrupt your business or defend so this is the Kodak story, and I know you've got the Kodak story 100 times already, right? I'll give you one more Kodak story again. Unknown Speaker 58:35 So Kodak dominated Speaker 1 58:39 in the US, the photography market for paper and film. They made paper. They made film. It goes in the camera. They made the paper when you print the pictures. They were very, very profitable, very large, very successful. And in there, the Kodak r&d Labs was developed digital photography. So Kodak was the first company that developed digital photography, and the Kodak r&d team that developed digital photography, they presented, we have this new technology. Look how great it is. Digital Photography, better than better than our traditional photography, because you don't need film and you don't need paper for digital photography. And it was presented all the way to the board of directors of Kodak. We want to take go to the market with this new product, digital photography. And the board of directors said, we make our money on film and paper. If we introduce digital photography, we won't sell film, we won't sell paper. We don't have a profitable business model. That's a terrible idea. We don't want digital photography, right? So, so, so they said. We don't want to disrupt our business. We want we like our business the way it is. So they chose not to disrupt their business. They did not introduce digital photography. But eventually, others introduced digital photography. Eventually, Kodak went bankrupt. So you know this choice of in the short term, it's worse before better. Right in the beginning, we introduced digital photography, our profits might be lower because we don't have a good business model for digital photography, and we're going to lose our money on selling film and paper long term. If we don't disrupt ourselves, someone else will disrupt so that's the dilemma. Is the extent to which we disrupt ourselves or we defend our markets. I saw this similar situation with Nokia that I used to work with Nokia 20 years ago. They're growing very fast, and they they had a very strong feeling we want to defend our existing model. We don't. We don't want to be disrupted. We don't. We don't want this. We want the current system to stay as long as possible. We don't want to disruption to the system. And in the end, they lost. They lost their whole business. Nobody wanted no kid. The Speaker 3 1:01:09 next one says spin off your special units or risk Speaker 1 1:01:13 stifling, right? So, so here we have the main check. We're sailing, but we also have our special unit. So going out to explore new opportunities. So suppose one of these finds a new opportunity. There's a great new business opportunity here. Do we let make this a separate company and say, Okay, you be a separate company. You go off and do that business, or do we make that company part of the of the big show? So I want to give a couple examples about this, and one of the talk that much about Google yesterday, but I did say yesterday that Google as one sort of successful search, they added many other businesses, and they created a shell company called Alphabet. And alphabet was named rural company that has the search business, but it also has their healthcare business, mobile phone business or automotive business. So So Google has the main ship, which is search and ads, and then they have all these little small businesses, but they keep the ball under one yesterday that because they they were paying attention to these. They forgot to focus here and they and when OpenAI came up with chatgpt and AI Search, Google was surprised. So they spread their attention to thin. I'll give you a very different so I mentioned yesterday, General Motors, for a long time, was the largest, most powerful automotive company, large, large ship. Okay, they were sailing. And then when all the prices quadrupled, in comes Toyota, Honda, Nissan, begins to disrupt General Motors. What does General Motors do? General Motors created a small ship. That is, they created a new division. It was called the Saturn division. The Saturn division made small fuel efficient cars that were compatible, competitive. So. So here's the ship of General Motors. Here is Saturn, which became successful as a small company, competing directly with fariana and Honda and Nissan in this time, but the managers here were jealous of the success of the new company. They said, Why are you giving so much money to invest in this you should be investing in. And these managers killed they said, We want to take it. We want all that capital. And they convinced the board give us the capital. We can do with it. We can do better than they can do it. And so General Motors killed Saturn, even though Saturn was being successful, competing with, with the Japanese company. So, so an interesting dilemma about what you do? You make this a separate company and let them go off by themselves, or if you keep them as a part of as a part of the big company, again, heavily influenced by the big company, sometimes in negative, negative ways. Unknown Speaker 1:04:34 So I think of that as a as a dilemma. Speaker 1 1:04:38 So this next one is about bureaucracy. So as companies get, as we said yesterday, as they get, they get slow. And why are they slow? They're slow part. Partly because of bureaucracy that we have many layers in the organization. You want to make a decision, you have to get approval, and then another approval, and then another approval. And the bigger the organization, the more approvals, and that makes you slow the somebody down here wants to make a decision, but it takes long time for that decision to be approved. So Unknown Speaker 1:05:15 the dilemma is, do you accept that, or do you try to create a structure Speaker 1 1:05:18 where you have decentralized power, where you get a lot of power to down lower the organization, and have a organization, even though it's going to be very broad, because it's very big. Either one of those has its challenges, but I think of that as a dilemma is, how do you want to structure this large organization? Excellent, says, Choose customer intimacy or volume. I actually mentioned this yesterday my own personal experience with Emirates Airlines, I mentioned yesterday that early in my relationship with Emirates Airlines, I felt like there was customer intimacy, that they cared about me as a person. They took care of me as a person. As they got bigger and bigger, I was just a number. I was just and it relates to this, right? If the company is operating a large, complex, data, intensive organization, one little customer doesn't count for very much anymore. It's very hard to make every customer feel like brought you you're important. We're going to take care of your needs. But if you begin to ignore the customer, the customer is more likely to leave and go to somebody else. So the question is, how do you challenge the dilemma is, how do we achieve scale, so that we can serve millions of customers but still make every customer feel special, make every customer feel like I'm happy to be worked me by a customer of this company. It's a dilemma. It's not no easy. Unknown Speaker 1:07:05 The last one says the dilemma Speaker 1 1:07:08 of one culture or multiple cultures. So as I was describing my own experience with my startup in the school, it was the benefit of having a strong, unified culture. But as you grow and as you create these subunits, as you spread out, gr geographically, subcultures get developed, particularly when you become international as a company. So you have, you might have your headquarters and your main office is in China, but maybe you have a business in in Singapore and Japan and Korea and Germany and America, wherever and each you have an office and maybe even factory in each of these places, each one will develop its own culture to some degree, and those cultures sometimes can clash. It becomes more and more difficult to have one uniform culture. So do you want to push for the dilemma? Do we continue to try to push for one culture, or do we allow these separate cultures to to grow and be customized to their minimal accounts? Okay, so, so my point Unknown Speaker 1:08:19 here is that at every stage, Speaker 1 1:08:20 nail it, scale it, sail it. We have dilemmas. We have challenges that require significant management and skilled on people like yourselves. You're gonna, you go to go out, you're gonna advance these businesses, and you have important decisions to make with regard to these, these dilemmas. Unknown Speaker 1:08:42 Okay, so a bit of a summary. So three Speaker 1 1:08:45 stages, then we look at the nail stage. Excuse Unknown Speaker 1:08:52 me, scale, stage, scale Speaker 1 1:08:54 stage, sales, stage, each one. So now we're starting, we're exploring, we're building and we're growing. So we're spinning and exploiting, but also exploring. Now we have different characters at each stage, different features that the nailer has a different profile from the scaler was a different profile from the sailor. Each different characteristics that we understand, that we want to manage, that we want to when we're hiring people, are you hiring then they have certain characteristics, scale a job, certain characteristics. So you want to fit people to the to the job Unknown Speaker 1:09:41 requirements Speaker 1 1:09:42 to get copies a little bit. So this is my co author. This is me. She. Good deal 20 years ago. She made almost all the Unknown Speaker 1:09:53 pictures. I made most of the writing, but Speaker 1 1:09:58 let me just stop there, and so that's the final slide for this segment. So any more questions and comments? I Unknown Speaker 1:10:24 too much Unknown Speaker 1:10:28 reminder. Unknown Speaker 1:10:40 Oh, you mean, yeah, Unknown Speaker 1:10:45 not No, it's not simple, right? So let's Speaker 1 1:10:49 take amazon.com so Amazon very, very successful company in US and in the world. And the founder, CEO, Jeff Bezos, very, very smart, but, but he still made this mistake, I think. Why? I'm not sure why that is just because during the pandemic, things are going up like this. The pandemic is not going to last forever, right? And so I think if a little more thinking, they might have thought, gee, you know, right now it's going up like this, but when the pandemic ends, the growth rate on, on the on E commerce that might slow down. Why didn't they see that coming? I don't know. Same thing with digital equipment as I mentioned. And maybe this is true. I don't know the Chinese property market, but I think my understanding of Chinese residential property, this was over built, right? The growth, they kept building and building, even though there wasn't so much demand. So it's not easy to see these, these signals, but it's really important to be thinking about what's driving demand. I don't want to overshoot. How to be cautious. You want to take advantage of the market opportunities that are there, but being thoughtful about what might make things change? Right? As human beings, Unknown Speaker 1:12:15 I think we Speaker 1 1:12:16 tend to think first linearly, and whatever is happening, it's going to just continue on that trend. But in fact, the world is not linear. The world has all these curves in it, and the purpose of these models is to get you to think about the curves, looking around the corners. As I said, how things how, how change will happen, not just assuming that whatever's happening now is going to continue the way it was going. I know that doesn't give you a quantitative answer, but it tells you what to think about. Thank you for the Unknown Speaker 1:12:51 question I thank you. Pandemic contract, Speaker 3 1:13:21 long term contract. So now maybe Unknown Speaker 1:13:24 you need a short term contract. So long term contracts, right? So maybe some fraction and long term contracts, some fraction and short term so it's hedging your bets. Any other questions or comments? Yes, Sir, please. I city Speaker 3 1:13:57 to Unknown Speaker 1:14:29 like Napoli Unknown Speaker 1:14:39 so. Done. If Speaker 3 1:15:07 I understand the question correctly. It's first Speaker 1 1:15:11 you could say, I gave you the questions, but I didn't give you the answers right? I showed you all these dilemmas. I didn't tell you the answers. That's your main question. Tell me the answers right? And then you also said, I think some of these dilemmas, maybe they apply in multiple stages, not just in a scalar, but some of the are relevant in all stages that I understand that correctly. Unknown Speaker 1:15:50 Term, it's coming too fast. Unknown Speaker 1:16:00 So just so your first question is the is correct? Unknown Speaker 1:16:16 Yes, so you are Speaker 1 1:16:17 correct that each of these dilemmas can be relevant for all the stages. It was myth to say these are just daily dilemmas. These are just scaling, these are just sailing dilemmas, because all the dilemmas are you may have at every stage, so You're understanding that was the first question. Unknown Speaker 1:16:44 Second question, Unknown Speaker 1:16:50 eight, yeah, so I told you, this is a draft book we're still writing, Speaker 1 1:17:11 so I'm going to work on all the answers, and we will send you more information when we have all the answers figured out. Okay, perhaps it's not, it's it's frustrating to say there are hard questions that don't have easy answers. In some sense, I think that that's the reason that we call them dilemmas in the English language, dilemma means very difficult question and very difficult questions don't have easy answers. They require in depth analysis of the specific situation, so I don't think we can have a general answer that's always relevant for each question. You have to look at each individual company, understand that company's technology, their processes, their systems, their value chain, and only after we look at detail at the individual company, then we can begin to answer that question. There aren't general answers to these questions. They can only be specific when we apply them to a specific case study, Unknown Speaker 1:18:29 so maybe at lunch, after lunch, we can Unknown Speaker 1:18:34 talk about your problem. We go into specifics. Be more helpful to answer those questions, or you could even but I don't have General answers, because these are hard Questions that's Unknown Speaker 1:19:06 frustrating the Unknown Speaker 1:19:20 you see Unknown Speaker 1:19:35 country Speaker 4 1:19:45 woman. My battery died one moment. Speaker 3 1:20:01 Can you can you translate what she said, Yeah, I didn't know anything Speaker 2 1:20:15 that You said, Unknown Speaker 1:20:28 okay, so start Speaker 4 1:20:34 again. Start Unknown Speaker 1:20:47 again. Please keep Unknown Speaker 1:21:01 China. Speaker 2 1:21:09 This see since Unknown Speaker 1:21:26 Good point. Speaker 3 1:21:34 So, so So, first of all, yes, I think what Unknown Speaker 1:21:51 this is a little bit of a long answer, and Speaker 1 1:21:54 Diane is watching the clock because you only have 45 minutes for lunch. I'm going to share 2s curves so and Bill will contradict this this afternoon, I'm going to say here on this S curve performance over time. Okay, so the performance of the technology or the product has been shut so think about telephones. Okay, so we had. 100 years ago, we had the first wired telephones. The performance of those wired telephones was not so good, but over 100 years, wired telephones got better and better, and then about 30 years ago, 40 years ago, we got wireless telephones. In the beginning, wireless telephones were not as good as wired, but they got better and better. So that was performance. Now second S curve, Unknown Speaker 1:23:02 market penetration Unknown Speaker 1:23:07 over time, Unknown Speaker 1:23:09 different. This is performance, Speaker 1 1:23:11 this is market penetration. So this is quality, this is quantity. So new product, the beginning starts out like this, and then you get a high market penetration. So let's say, Take mobile phones. For example, my mobile phones came out 1980 whenever they were very low market penetration, just market share, no, not many people had them. 200% of people have mobile phones. But suppose the next generation of phone is implantation in your brain. Okay? So what happens the mobile phones? They're going to go down, right? And we're going to use these anymore. That's the end of the life cycle. And the new product comes in like that, right? So this is market penetration, first product, first generation product goes up and then goes down. New product goes up and then goes down. So the s, this S curve is quantity, right? So what percentage of the market this S curve is quality? What's the total capability, right? So, so they're somewhat aligned, that when, when this, when this one takes over, then this one is going to start going down, right? People aren't going to buy this product anymore, because they're going to buy a new product. So I call this the InVEST curve, and this the marketing S curve. And the difference is this has market. Penetration or quantity here, this has capability or performance or quality here. So they're aligned, and they think you're saying, what happens to the quantity? Well, you get end of life cycle, decline of the use of the old product, because some new product comes in. Does that answer the question? Unknown Speaker 1:25:12 Now I'm five minutes over. Speaker 1 1:25:15 I think I should, I should wrap up. So first, I want to thank you that it's very stimulating and enjoyable for me to have the opportunity to talk with you and share ideas and hear your thoughts. Our relationship with Fudan has been over many years. MIT and Fudan are good partners Unknown Speaker 1:25:37 in many ways, and so the opportunity to have you here, and it's my great pleasure to spend this time. So thank you very much. Hope that this was useful help.