Latest / The Innovation Show / Corporate Innovation Strategy: Return Maps, Managing Up & Forecasting with Chuck House

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Corporate Innovation Strategy: Return Maps, Managing Up & Forecasting with Chuck House · The Innovation Show

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Rita McGrath's in there, Paul Sangeet Choudary is in there,
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and a plethora of other brilliant guests that have been on the show.
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Reflecting on his innovation projects, our guest couldn't shake the notion
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that he was cast in a repetitive movie.
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The cycles were blurring growing together into a spiral of activity,
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lacking clear cut endpoints.
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Each project.
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Each program even was beginning to lack definitional, meaning every piece of work
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in a company has a lifecycle, a project, one specific idea or product, a program, a
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group of related projects, and a strategy, the long-term direction of the company.
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These three levels only work well when there's, when they're clearly connected.
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A project should never be run in isolation.
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It should make sense inside a program, and that program should clearly
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support the company's strategy.
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. Teams that see and manage those connections tend to make far
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better long-term decisions.
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And the intrapreneurs that understand this manage the game of snakes and ladders.
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That is corporate innovation.
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It is a pleasure to welcome back the Odysseus who managed to make his way
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through the maze, avoiding Medusa of what the corporate entity can be like.
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The intrapreneur himself.
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Chuck House.
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Welcome back to the show.
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Thank you.
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That's quite an intro.
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I'm expecting you to pull up Medusa's head with all the snakes at some stage.
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it.
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It I believe that the project is part of a program.
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The program is part of the strategy.
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The strategy itself may be to renew a corporation.
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A real quick example when jobs came back to Apple he'd been
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fired because the Macintosh didn't sell all that well, A story that
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doesn't usually make the rounds.
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And but he get, he, his company was acquired like a dozen years later.
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His company then was called Next.
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He brought the next operating system, put that into the Apple computer system.
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While it was more effective they were stalled out.
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They sold computers, but there was no upside They tried color
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boxes, they tried a lot of things, and then jobs tried music.
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And everybody said, music, you're a computer company.
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And he tried it.
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And the first one was modestly successful.
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Hit about one third of what he predicted.
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People tried to get him out of it.
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He persisted.
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And the second one sold about half of what he forecast.
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The third ones meandered along.
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The fourth one blew the doors out.
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And Before you knew it music was half of apple's total sales.
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And then he thought if we could do music, how about an iPhone?
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And we know that story.
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So that's a good example of a new strategy laid into an old one, where
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every product works to build a program and the program builds the strategy.
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So for Jobs on Apple until the iPod Nano came along, which was like the fifth of
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the music things, nothing really worked.
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But, he persevered.
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And I think that's the message I would give is there's some traits we
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all talk about but we don't 'em and say, these traits are fundamental.
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One trade is curiosity.
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Why can't you get free music?
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Or why can't you get cheap music just like you get free computing
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with his computers, right?
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So he built iTunes which changed the entire model for music
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around the world in terms of how, artists got paid and so forth.
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He was ridiculed for a long time about that.
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. That's curiosity.
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The second one is, really perspective.
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You have to be able to back, I think you used a giraffe looking down on the
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top of a model and he's drawing the
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Hat because that's what he sees.
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Everybody else is seeing the model and how do you
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I'll share it on the screen.
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How can you.
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Think about something in a way that is a novel way to think about it.
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Crucial.
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Yeah.
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Here he is drawing the hat and all of us are looking at the model.
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How do you gain more perspective?
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How do you make a wider perspective?
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How can you look at things from someone else's point of view?
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Those are critical elements.
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The third one I would put in there is resilience.
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And you mentioned it in the opening, you've gotta be able if you get dealt
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lemons, you've gotta, you've gotta figure out lemonade is what we can do here.
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I wasn't allowed to do the programmable scopes.
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Here's this display thing.
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Doesn't even have a channel.
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And I, we made it into a great program.
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I mentioned Pisces in the last session.
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Pisces was forced on me.
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and you can complain, you can do a number of things, but if you're resilient,
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you say what's this new opportunity?
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And then the last one I'll just mention before we go to the drawings is the
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ability to be comfortable with data.
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I, believe in in this whole notion of big data and, using
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data-driven decision making.
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And what I find so common is that people have trouble understanding
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how to gather data, how to validate it and how to use it.
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And so I spend a lot of time on those kinds of concepts, and we
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can do that with multiple ways.
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But I think the best way to talk about using data to your advantage would
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be to talk about the return maps.
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That I think is really today's session,
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absolutely.
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And Chuck, the, what you're sharing here is so much gold.
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I've seen so many people fail, myself included, as an intrapreneur.
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And it's not because the ideas weren't right.
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You did.
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You had the perseverance, you had the right mindset.
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It's just a lack of these tools and the understanding that you mentioned there.
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For example, resilience and perseverance and stuff like that, and curiosity.
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We have those in abundance, but we don't have the more left side of the brain,
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the more logical toolkits, the maps, the data, the understanding that actually
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one of the biggest challenges is that you have to navigate the corporate
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politics, and we're not wired that way.
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And I just, before we got into the toolkit I'd love to share, it's
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something we didn't I was going through over the episodes in preparation
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for today and I was like, and we didn't really call out the navigating
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the Politik of an organization.
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A lot of people manage down their team loves 'em they pay attention.
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Some people manage up we sometimes call that brown nosing or
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there's a lot of terms for it.
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you really have to do both.
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And If you wanna take your team somewhere, it really helps if you've
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built them as a cohesive team.
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And they, not only understand you, they trust you.
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They believe in where you're trying to go.
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You've got a credibility that can't be challenged.
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So that comes from really managing downward.
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And that's a lot of what the idea of the intrapreneurial
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manager's playbook is about how to build that trust for your team.
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if you remember the intrapreneurs roles number seven, may the most
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important honor your bosses.
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The way Gifford Pinchot said it was, honor your sponsors.
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The sponsors are one thing, but your bosses generally
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speaking aren't your sponsors.
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They're your enemy in many respects.
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And, a lot of intrapreneurs misunderstand that and choose
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to battle with their superiors.
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I'd say you can attract a bear a lot easier with honey
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than you can a bear trap.
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so my feeling is you've got to know how to.
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wouldn't call it play up, but you've gotta know how to work with and be
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able to persuade your superiors to let you do the things you've gotta do.
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And that's, a a skill we don't hardly ever focus on.
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Absolutely.
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And, one last thing on that, Chuck, was, you see this quite
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a lot is you're an intrapreneur.
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You, know the way you can get things.
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Things done that nobody else inside the organization can do.
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You can leverage relationships, you can trade favors, and you can
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get people in a room that normally wouldn't get in a room together, and
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that's a skill of an intrapreneur.
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But one of the things that can happen is you haven't kept a
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record of all those things you've done and then comes a meeting and
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your boss is what have you done?
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What have you actually achieved?
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And you see that time and time again.
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And, so many intrapreneurs are lost for words in those cases.
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And it's easy to get rid of them because it's you haven't
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done anything, so on your bike,
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so you were describing that you're busy, you're doing a lot of this
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work and you're meeting with people and you're rounding up people to
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help you and all that kind of stuff.
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I had a new boss.
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I was, I had moved to Palo Alto.
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I've been running corporate engineering for five years.
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And we turned that over and I opened up HP's first software engineering division.
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Okay.
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And I and, HP was a hardware company, not a software company.
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And so I'm busy and I, was a hardware guy.
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Here I am.
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I've got this new challenge to build software tools.
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And and I met with my new boss who later his name was Lou Platt.
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He later became president of HP for seven years later, was CEO at Boeing.
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And had a tremendous career.
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and he, we met and he liked what I had to say.
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And then we met about six or eight months later and he
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said what have you been doing?
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I don't see any progress.
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And I drew this diagram for him and I said this vision forming piece
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the pressures of the changing world?
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We're going from hardware to software.
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The boundary conditions are that there are software companies in the valley, people
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like Oracle and even Apple the problems we're trying to deal with are, and we need
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to examine that from multiple viewpoints.
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This is the multiple perspective thing, right?
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So I said, I did all of that, and that's what I've been doing the last six months.
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And he said, really?
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And I said, yeah, and what I'm in process of doing, and it's gonna
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take us another six months is we're trying to form conclusions and do some
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prototyping on small audiences, right?
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That's the vision testing and strategy forming page.
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That'll take us another six months.
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And then, and only then will you see any.
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And he just sag back in his chair.
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He says, oh my God.
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He said, this is a lot harder problem than I thought.
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I said that's why you got me to run it.
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And then he said, what happens after that?
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I filled in the, you widen the test you get some people to
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really assess it, you validate it.
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And now for the first time, and this is probably 18 months in,
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depending on how these things go.
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But if it's a big problem, it takes a while.
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Finally, you're ready to begin to build your first thing.
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He said, oh my God, I had no idea.
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It takes that kind.
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And then I said, and then each of these phases is like a three year phase.
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So this cycle is a decade long cycle, and you're expecting me to grab the
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whole thing in six months and be done.
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he said, you've gotta write that down and you've gotta show that,
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and essentially that diagram and the need to show him that and get his
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understanding was the first time that I'd really worked with top management
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at HP about why this stuff happens this way as opposed to how it happens.
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your point there about the length of the project, remember you were talking
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about the I, know you don't know.
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So the known unknowns, all that stuff, the tacit knowledge that this, and
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we have to look in the mirror here with ourselves as intrapreneurs.
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We know that, but they don't know that because they run everything
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that's already established and all they're doing is optimizing it.
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And you're coming up with the breakthrough idea and you know it needs
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to go through this to do it right.
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But they don't know that because they've never done it.
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And they may have seen a keynote, but they have never actually done it.
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And it's just a totally different way of seeing the world.
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Exactly.
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To your point about the giraffe.
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If they're seeing one thing and you're seeing a different thing and,
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that lack of communication is often the breakdown, and that's where I
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think the tools are so beneficial.
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I'll just give you a quick segue here.
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He wanted some examples I said and, this was 19, when the hell was it?
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1987 or so, 88.
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And I said let me give you one for hp.
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HP has been in the instrument business forever.
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And we built the oscilloscopes, we built bolt meters oscillators,
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spectrum analyzers, all the things that electrical engineers know about.
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and then one day we decided to be in medical products,
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and I said, who decided that?
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it wasn't a guy building bolt meters.
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Someone had the idea that maybe we could go in this other field
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and bring our talents to bear.
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And I said, as a matter of fact, Lou, you ran the medical group.
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Where did you get the idea to do it?
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He said, that had already been decided.
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I don't know who decided.
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My job was just to build more of 'em.
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And I said that's the que. So it was the same question with jobs,
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who decided that music would save Apple computer or the phone?
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These were, at the time, they were ridiculed by all the outside pundits.
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How could a computer company decide music is where the future is?
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Huh?
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And 450 million iPods later they'd done a pretty nice job.
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So,
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your point that people that haven't been down that path don't understand
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it is partly because no one ever explained to 'em what it takes.
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And so in a kind of an indirect way, that's why I wrote this book, was
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to try and outline the processes by which these things happen.
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not, I wasn't trying to extol what I did.
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You know what?
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I'm proud of what I did.
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I think we built some important things.
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They changed the world in some small ways, but that isn't the crux of the book.
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The book is how this works opposed to what I did.
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Absolutely.
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And that comes true loud and clear.
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Chuck, by the way, just from, for me reading it with that lens, I totally
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got that, but I just, I actually you've sent me down a different pathway here.
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People are going, I thought you guys were gonna give us the toolkits.
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We were gonna do that in episode one we're.
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On episode four, bear with us.
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But there was a piece here you wrote that various Palo Alto folk would
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show up often at a divisional review.
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So this is how it worked with projects.
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They'd busily convert the static numbers on r and d project sheets into dynamic I
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or internal rate of return and prod the hapless project manager about whether
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his or her project was worth continuing.
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Here is the line that never goes away, and this line, I was like, oh my God.
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We've seen this movie before.
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Such tactics took a heavy toll on riskier projects such as our logic
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projects where marketing folk had no clue about the potential sales rate.
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Headquarters.
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Interference of this type drove me.
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This is you at the time, drove me nuts.
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It is one thing to lamb based ex extant procedures, but quite another
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to suggest meaningful change.
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And it reminded me of the old quote by Buckminster fuller.
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There's nothing in a caterpillar that tells you it's gonna be a
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butterfly because they kill these ideas when they're just on the
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verge of becoming something new.
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So with that, I just wanted to share that quote 'cause I thought it was key.
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And then that's why you wrote the book.
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That's why you gave us these tools, is like going, I don't
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want this to happen to you.
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This is how I got around it.
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The tools they were using to assess them are three.
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What's the cost of the project?
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How soon is it gonna be done, and what'll it sell?
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Or what profit will it return is the underlying point there.
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so when they came out for a project review the, hapless engineer I
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mentioned hasn't got a clue how it's gonna sell His or her job is to simply
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build the product get the features right, and get 'em done to a schedule.
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That's it.
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And so they had a metric, we called it the Brunnergram, that allowed
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them to see the progress rate.
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These are basically along the X axis.
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You did the in initial phase, the development phase, the
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production prototype phase, and then released to production.
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That's what IDPR mean across the bottom.
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So that's a time axis.
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And you would you would show the dot.
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And then you would say, it's gonna cost me in this case 300 grand to
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get to the investigation phase.
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Finished for a million dollars.
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I will get the development phase finished for 2 million.
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I'll get it to production prototype or production release.
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And at two and a half million, it's ready for sales release.
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That's what these dots so you draw this you'd put the dots in then
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you'd go downstream and and you're six months downstream and you say
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we draw that first little box.
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We met the cost target, we met the scheduled target.
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Then you slipped a month down here on the development phase.
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So you bump that out a little bit, cost a little more to do that.
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So that all bumps out.
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But you've got this little trajectory here of the, your progress.
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This one on the left, you can see that we only lost one month
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on schedule the whole time.
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And we only went over budget maybe 20% or not 20%.
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We went over by $200,000 on two and a half million.
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We went over by 8%, so we're 8% long.
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On schedule.
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We're 8% long on expense, not bad.
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one on the right, on the other hand things started slipping right off the bat.
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We couldn't even get the investment phase done.
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Cost us twice as much to get it done, and almost twice as long.
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Okay, then we said, we predicted then what it's gonna be for these others.
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So you put in these new dots and then shit, it took more than twice as long
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to get the the development product done.
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And again, twice as much money.
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So you look at the one on the right and you said this team isn't
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performing as well as the other team.
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The point of my discussion is these were the tools we had,
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they were very effective.
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You could put this up for five projects and you could tell at
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a glance how the five are doing.
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And you could say, group A, Hey, we're gonna give you stock options
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this year, group B, we're gonna ding you group C clearly you need
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somebody as a new leader and so forth.
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But it's, an engineering perspective, not a corporate perspective.
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It's not a strategic look.
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It's a time and feature cost look.
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and the graph had been done by , the previous corporate engineering
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director 15 years before, and it was in use all over HP actually,
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there's nothing as good as that, generally speaking today in the field.
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A number of consultants at the time picked it up and touted how great it
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was, and my feeling was it's terrible.
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It shows those elements very well, but that's not the crux of
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what you're trying to accomplish.
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You're trying to get a finished product that sells, that makes money.
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And so what you want is a graph
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that can illustrate that, and that led me to what I call the return map.
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the point about the Brunnergram is, it is great, but from one perspective
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of the giraffe, again, you're only seeing one angle of what's going on.
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Think
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about how HP
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was structured.
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First of all, it was an engineering company.
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whether people were in manufacturing or quality or legal or human resources,
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everybody had an engineering degree.
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We, would not hire a personnel director who didn't have an engineering degree.
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We, we believe so much in engineering, so it was natural that we're
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taking the engineering perspective
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I found it really interesting your curiosity, how much you
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wanted to solve the problem.
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You're right that you became obsessed with finding a way to measure and to scope
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and you went back over historical data.
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So you averaged forecasts across 12 real r and d scope projects, and
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it wasn't pretty, you found out.
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Schedule slipped by about 80% of the time, costs overshot roughly 65% of the
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time, and then you went back even further into these 20 historic scope projects
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and you looked at the original sales ramp assumptions compared them to what actually
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happened 12 months after launch and only three landed within 30% of the forecast.
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Two beat expectations by about 50%.
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Four never sold a single unit, and the rest sat somewhere
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between 15 and 70% of plan.
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That gap between what we think will happen and does happen still plagues
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not only intrapreneurs, but VCs today.
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I mean that whole idea of spray and pray or a thousand flowers bloom.
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That's why I think these tools and the knowledge of these tools are so
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helpful to intrapreneurs because it just gives you a better margin for error.
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It's like Chuck, when I started off playing rugby, we were doing weights,
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but there was no real science behind it.
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So I ended up getting injured quite a lot and actually you got injured by
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doing the right thing, which is even more punishing because you're trying
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to work well towards something and you end up injuring yourself, and you
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would've been better off doing nothing.
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sure.
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So that's what I love about these.
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Do you wanna just say a word maybe on the deep research you did and what
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you uncovered from this research?
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Nobody had ever done postmortems, but we had all the data.
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And I never threw the damn data away.
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So I just thought you could mine this data and find out I'll tell
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a quick story along that line.
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I, became a newspaper boy when I was like 11 or 12.
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And one of the things that we were supposed to try and get subscriptions
24:15
by going door to door and saying that we had a, potential trip to Catalina if we
24:20
could get four new subscriptions tonight.
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And 99 out of a hundred doors would say something to the effect of beat it.
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some were more profane than others.
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But basically you got rejected.
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Everywhere.
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I thought, this is, I don't like rejection all that well.
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And so I wound up building a database of houses that were for sale and when they
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sold and the only places I would ever call was on the place a week after they moved
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in, I wound up making one 20th the number of calls and three times the kill rate.
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And so
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early I learned the value of data collection and data files.
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And so I just used that and went back and said how well have we been doing?
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And the answer is, these are wild guesses.
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And they never came very true.
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And so there's no more reason to think the next one will be
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any better than the last one.
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And my goal was to say, can't we put more assessment into this?
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How did we get such dumb answers before?
25:23
Can we, can't we do a more so the idea was instead of just swaging what sales will
25:29
be let's have five trip reports that give us at least some credence on this thing.
25:36
So that's what led to those kind of investigation.
25:38
I'd forgotten I'd put those numbers in, but yeah.
25:41
and the credibility gives you then with a more left brain manager.
25:45
It's that's the benefit of it is when you have no numbers.
25:49
Some numbers based on at least it's historic is beneficial because at
25:55
least it gets them you said about managing up, you're managing up then,
25:58
and yes, it's a pain to do it, it's an absolute pain to do those things.
26:03
But I, found it really interesting.
26:04
I'm a huge believer in, say when I do a workshop or work with a team,
26:09
I try and get them to get their findings on a wall where other people
26:13
in the organization will see it.
26:15
So somebody might stumble across and go I know a use for that idea or whatever, to
26:22
inspire people across the organization.
26:24
But when you posted your graphs on the office wall, designers became
26:28
more interested in the results of the work in the marketplace.
26:31
And I thought about how, remember before you said one of your colleagues
26:35
designed a great competition among salespeople to win the belt.
26:40
Remember the belt idea?
26:42
But you started to instigate some competition between the r and d guys
26:46
because they wanted to see how well their projects were doing in the field.
26:49
have you got the the maple tree thing?
26:52
? I do indeed.
26:53
Yeah.
26:53
Let me open it for you.
26:54
that was the eye-opener for me.
26:56
And the fact that it didn't happen at Hewlett Packard, but happened in a
27:00
little retail store is what's amazing.
27:03
So we had this I had a little plant nursery on the side.
27:07
My wife and I and another couple ran this thing and we hired the the
27:13
Colorado College Hockey team off season to plant and manage our nursery plant
27:21
the trees and shrubs, move them around the lot they, were our, brawn and they
27:27
didn't know a tree from a toboggan.
27:30
Anyway, we we were trying to get them to understand.
27:35
What they were doing.
27:36
And I used this chart because VisiCalc hadn't yet happened, but but it this
27:42
would've been a perfect VisiCalc kind of chart or Excel spreadsheet.
27:48
So the tree itself cost a fair amount.
27:50
We bought these trees from a wholesaler then we had shipping costs on them.
27:56
We had to put soil in them, and then we had to buy a container to put 'em in.
28:01
So, the material costs are all this first column on the left.
28:04
Second is the labor of potting them up and then of watering and taking care
28:10
of them is what these guys were doing.
28:13
So their costs are in this column.
28:16
then the third is , my daughter was an advertising student.
28:21
She would place a story in the local newspaper and then they would charge
28:26
us depending on where it went.
28:27
So the cost of advertising.
28:29
So we would show this chart to these hockey players, and I might
28:34
as well have been talking Swahili.
28:36
Their interest in this was zero.
28:38
It didn't mean a thing to 'em, and so I drew it a different way.
28:42
Okay, so here's break even time for maple trees.
28:46
So the idea here is week one we spent so it looks like a couple hundred dollars.
28:54
these were dollars, couple hundred dollars bought us 10 trees.
28:58
So these were $20 a tree coming off the truck.
29:02
Okay?
29:03
then we had the cost of getting those things potted and ready.
29:08
so the first line, which goes mostly horizontal at about 200 up
29:12
there is the cost of the trees.
29:17
And, it because we're watering throughout, it keeps building a little bit.
29:21
And this is a logarithmic plot for a simple reason.
29:26
And then after five or six weeks, the trees have rooted
29:30
in and they're able to be sold.
29:33
You can't sell 'em while they're still loose because bare root when you go to
29:38
plant 'em and they'll actually kills 'em.
29:40
So you have to wait five or six weeks for 'em to be ready to sell.
29:44
Then we sell 'em.
29:45
The first one you sell for 200 bucks.
29:50
Okay?
29:52
So you practically make all your money back on the first
29:55
tree in terms of revenue.
29:57
only make about 40%.
29:59
'cause now you've got the selling costs, which I didn't have on that chart.
30:03
the difference between the upper line here, that's dotted and the
30:07
lower line that is dashed is the difference between the revenue you
30:12
take in and the profit you get to keep.
30:15
Okay.
30:16
And what I defined was that the break even time is where that profit
30:21
line crosses the original cost line.
30:25
Okay?
30:25
So very simple graph and you don't need to worry about where the shipping costs are.
30:31
They're bundled in you don't need all the detail of the previous slide
30:37
that no hockey player cared about.
30:39
But you do have a number here.
30:40
You have a BET metric in this case at about eight and a half weeks.
30:45
Okay?
30:46
And I never thought about this, but these guys are the most competitive.
30:50
This is, and in America ice hockey is a very competitive division one NCAA
30:57
sport, but it's at small colleges 'cause that's the only places that have ice
31:01
rinks and people that like to skate.
31:04
and so the point is these are competitive guys.
31:07
Okay?
31:08
So what happens is we publish these things and we had 'em for oak trees and
31:12
maple trees and whatnot, and the guy who planted all the oak trees says, I can
31:17
sell mine quicker than you can sell yours.
31:20
They started competing on when their damn trees are gonna be sold, which meant
31:25
they had to learn what the tree does and they had to talk to customers walking on
31:28
the, and instead of them being out there with a hose just standing there while the
31:32
customers are milling around, they're, Hey have you taken a look at oak trees?
31:38
Let me tell you about oaks.
31:39
You know what they do is, it was so funny.
31:44
The point of that is some years later, I'm in this meeting at
31:48
Hewlett Packard and these people are arguing about what's the best metric?
31:52
Is the Brunnergram better or should we have improved sales
31:56
forecasts or what should we do?
31:58
And I said, have you thought about having one slide captures everything
32:04
about sales, about marketing, about quality, about engineering, and
32:10
put it all in one slide and look for break even time, which is bet.
32:15
I said and they said, you bet.
32:19
We wrote it up.
32:20
We had this meeting on a Friday in Santa Rosa at a group division.
32:25
We had seven divisions.
32:28
I had this group meeting and my co-author for the HP book later,
32:32
and I were hosting the meeting.
32:34
And they came up with 46 metrics that would be important to
32:39
measure their products by.
32:42
And I said, you can't keep track of 40.
32:45
It is, it's like my daughter had the fur coats they, were measuring
32:49
32 things at their dress shop.
32:52
She said if you're interested in profit, why don't we sell the big ticket items?
32:57
And didn't you have a guy that he went out and the his salesman told
33:02
him, I never show the cheap ass product 'cause it takes me three
33:06
times as long to make the same money.
33:08
Sounds like your daughter didn't lick that off the stones
33:11
So anyway, the point was we had these 46 metrics and I said let me show you
33:16
something I used with my hockey players.
33:19
They went nuts.
33:20
we drove home on Friday night.
33:22
Santa Rosa's, about 120 miles from the Bay Area.
33:26
We get home like nine at night and Sunday morning in Monterey,
33:30
we were supposed to have a meeting of the entire HP senior council.
33:36
So this is, the 20 people running the company.
33:40
And on the way home, I said to this guy if we could write this up as a
33:45
paper and I could present it Sunday, he said we only have 24 hours.
33:51
What can we do?
33:52
We finished the paper at three in the morning.
33:56
And we both wrote versions and he finally wrote the final copy.
34:00
He put it under the windshield of my car in my driveway at three in the morning.
34:05
I grabbed it and made copies at six, drove to Monterey and presented it at nine.
34:13
And the president of hp, John Young took it to Harvard Business Review.
34:18
First he got it in Fortune Magazine as the best metric that HP has ever done.
34:23
And then we later got it in Harvard Business Review.
34:25
It's been republished in 20 or 30 books, and it's never once been
34:30
iterated, which is astonishing to me.
34:33
And what I'm busy at the moment.
34:36
We have just put together a, white paper and we're putting
34:40
together a a video series about how you actually would use this.
34:45
And I'm doing this 35 years after I did it for Harvard
34:48
Business Review, which is nuts.
34:49
Should have been out there.
34:51
But I was busy doing other things,
34:52
Chuck did you get the credit for the HBR article?
34:56
Oh
34:57
Oh, good.
34:57
Okay.
34:59
and
34:59
Not always happens.
35:00
That's why I was asking.
35:01
it is, that's got its own story.
35:04
And I could maybe show that when we're done.
35:07
. My interpretation, and I'm gonna show the map now in a second, the return map is,
35:11
and I wanted our audience to understand this and also to check that I have it
35:15
right, that I'm seeing the giraffe, right?
35:18
So it's a shared picture of what a project is expected to give back.
35:23
That's what return means to the company over a period of time, and
35:27
how confident everybody is about that.
35:29
And importantly, it's not just financially because.
35:32
Oftentimes it's not financial return.
35:35
It could be like this.
35:37
Return map itself is a product that gave back because it helped
35:42
the reputation of hp, et cetera.
35:44
But it also covers things like revenue and profit expectations,
35:48
costs and investment over time.
35:50
Risks and assumptions.
35:52
Operational impact, that's an important one.
35:54
Manufacturing quality delivery.
35:56
So the impact it has on operations and market uptake and customer behavior.
36:02
So this could be, again, a halo effect for the organization.
36:06
And crucially the thing I took most from it is it's not a one-off business case.
36:11
It's a living map that evolves as reality unfolds as you get
36:15
feedback from the marketplace.
36:17
In the books.
36:18
The fact that it's a living
36:19
Wow.
36:20
Yeah.
36:20
So let's take a look at it.
36:22
so I've already outlined with the one we showed for the for the
36:26
nursery the idea, let me make a couple key points here though.
36:32
The first is that the y axis is a logarithmic axis, not a linear.
36:39
We're going up by powers of 10, 1 10, a hundred to a thousand.
36:45
Logarithmic understanding is pretty low in most circles.
36:49
We teach at an engineering school.
36:51
We especially teach it in biology and places like that.
36:56
It's almost never taught in the business schools.
36:59
I've had as many as two people in an audience of a hundred at a business
37:03
school raise their hands to say they've heard about logarithmic plotting.
37:08
Microsoft in a thousand page professors document they use for Excel mentions
37:15
it for one paragraph, doesn't show you the tab that gets, it doesn't
37:19
show you an example to use it.
37:21
Einstein called that the eighth, power of the world.
37:24
He said there's seven wonders of the world and logarithmic.
37:27
Plotting is the eighth wonder of the world.
37:30
It's an incredibly powerful thing.
37:32
The reason you have to use it is if you look at this here, we're doing,
37:36
these are thousands of dollars.
37:38
So here's a hundred thousand, here's a million dollars.
37:42
In this particular example we never get above $200,000 investment,
37:48
but we get sales of of 50 million.
37:53
You can't plot 200,000 versus 50 million and see anything on a linear plot.
37:59
you have to do it on a logarithmic plot to be able to distinguish this.
38:03
So that's the first thing is the ordinance.
38:06
The second thing is these estimates, and these are all estimates these are
38:12
estimates made by each department.
38:14
So the engineering department is responsible for this
38:17
blue line of the investment.
38:21
Primarily, okay.
38:23
The red line is the responsibility of the sales and marketing team.
38:29
The profitability line is the responsibility of the team to assess the
38:36
manufacturing costs, the quality assurance feedback cost, all of the, if you will
38:42
subordinate costs that go into a product.
38:45
So the point is, everybody in the room has an input for their
38:50
line and you can challenge 'em.
38:54
And so you can have the Brunnergrams underneath the investigation curve.
39:00
can have all sorts of marketing or estimates.
39:03
You can have manufacturing estimates, you can have quality estimates.
39:08
Each of those are subordinate to these graphs.
39:11
But the point is, everybody in the room, all departments have a say
39:15
in how this diagram gets built.
39:18
Okay, now having a say in it and then drawing the line essentially
39:23
assigns responsibility, right?
39:27
So let's let's move forward to the next slide and which
39:34
is that living document slide.
39:36
and here we are.
39:36
We've gone down phase and what we find is, oops, we we slipped development
39:42
here instead of coming out month 16, we're gonna come out month 23.
39:48
So we just lost seven months of development time.
39:52
So that's on R&D, R&D Slipped their schedule by seven months.
39:58
It didn't cost anymore.
39:59
We didn't spend any more money until later.
40:02
The reason is later is 'cause we had to keep the team in place.
40:06
But on a log scale, that was a small cost.
40:10
What that does though for sales is sales now moves out and now
40:15
you've got new competitors in the space and the windows are smaller.
40:19
And so the new sales team says I'm not gonna forecast 50 million.
40:24
I'm gonna forecast maybe 8 million.
40:27
What you're gonna cut it from 50 million to 8 million.
40:30
'cause I slipped a few months, know?
40:33
And so then you have this debate between the two teams.
40:36
then the guy running manufacturing says, yeah, and you're not selling as many, so
40:41
I can't get the same manufacturing costs.
40:44
Manufacturing cost goes up sales come down, and so he says instead of losing
40:52
seven months on development, we're gonna lose 19 months and you go, huh.
40:58
So you can imagine this could generate what I would call team disatisfaction.
41:04
But the point is you have the unit acting as a team, they're all
41:11
responsible for their part of it.
41:14
And as you said, and you can also look at it and offer
41:16
suggestions to the other team.
41:18
So for example, the sales team might say I could probably get back close to
41:23
that 50 million if you could give me one new feature that the competition
41:28
has that we didn't know about.
41:29
And so if you do that it might cost you another month or two, but
41:33
that would get that ramp back up.
41:35
So you have this iterative thing between several departments around
41:40
one graph . And without this forcing function, you don't have a way to
41:45
bring that whole team together.
41:47
So this, was the secret of Hewlett.
41:50
would organize things around divisions and and a division was 500 people.
41:55
And he said that way, he says, the marketing people have to eat
41:58
lunch with the engineering people and they become friends and allies
42:02
I believe in the teamness of that as well as the intrinsic
42:07
value of seeing those graphs.
42:09
have you ever heard of the jigsaw classroom concept?
42:12
It was after segregation was lifted in the states between African American
42:18
children and American white children.
42:21
And this guy Elliot Aronson, I had him on the show.
42:24
Brilliant man.
42:26
He brought in this concept called the Jigsaw Classroom.
42:28
And essentially it was, they wouldn't teach the same lesson to everybody.
42:33
They'd get them to learn different segments of the
42:35
lesson, so hence the jigsaw.
42:37
So they would work together rather than competing for the attention of
42:42
the teacher so say there was a weaker member on the teams just like you with
42:46
sales and marketing, that they would help each other and they go, okay,
42:50
how do I help you get better?
42:51
Because I need you to do well.
42:53
So we all do well as a result.
42:54
That kind of mindset.
42:55
And then did you ever hear about, this was a famous article in The Economist,
42:59
it was called The Green Volvo Effect.
43:02
I don't
43:03
Have you ever heard of that?
43:04
Oh my.
43:05
You'' I love this one.
43:06
So Volvo had this specific color green Volvo, and they
43:11
couldn't get rid of it, right?
43:13
So sales and marketing plan, they go, okay, let's make a plan.
43:16
Let's get rid of this thing.
43:18
So marketing put on a great marketing show.
43:21
Sales do their piece.
43:22
They clear them off the lot, but nobody told Manufacturing.
43:28
And manufacturing went to went, these things are selling like hotcakes.
43:31
Let's make some more.
43:35
Yeah.
43:36
It's the exact opposite of what it's, it is what you're solving for
43:39
there, but also the comradery and helping each other getting through it.
43:43
But also back to the giraffe you're seeing everything the way it
43:47
should be and everybody's sharing it, and you're also learning.
43:51
The challenges of the other parts of the department.
43:53
I think people miss that that you'd, people don't know how difficult it is
43:57
to sell something you're not really au fait with or how to market it
44:02
when you don't really understand it.
44:03
And in the engineer's head they can see it as clear as day.
44:06
So getting them all in the same room like that is, is brilliant.
44:10
talked about the teamness that it builds.
44:12
What I didn't talk about was the iteration effect.
44:16
A as you're doing the second project and you come in to
44:19
make the new return map for it
44:23
are, more diligent about how to build their part of the curve and so we wound up
44:28
not only building more team camaraderie and team understanding, we also wound
44:33
up building a more accurate forecast.
44:36
Which helped everybody.
44:38
It was just you can order the right number of parts, you can build the
44:41
production line, the right size you can get the, right amount of marketing
44:47
documentation out there, et cetera.
44:49
It really had a, twofold positive impact.
44:54
I'm laughing to myself.
44:55
'cause me and Chuck, before we came on, we were like going,
44:57
ah, we'll do maybe 30 minutes.
44:59
We're nearly an hour in Chuck.
45:01
said you had some watchers saying, when are you gonna get to the tools?
45:05
I hope they're a little more satisfied now.
45:07
The last one then is strategic cycles.
45:09
I love this.
45:09
And I think this one is so key I'm a metaphorical thinker and I thought about
45:14
this where, when my kids were younger, they watched this show called Octonuats.
45:19
It's a show about these underwater animals who are explorers and they stumble across
45:26
different animals and they're all real animals, but they stumble across this
45:29
turtle, the sea turtle and the sea turtle.
45:32
Goes from the north, from the cold water right down to Australia.
45:38
And the way it navigates it is it slips into a stream.
45:41
So there's these gulf straits.
45:43
And when you get into the stream, you just fly down.
45:45
It's like going down a tunnel in the water slide.
45:48
Yeah.
45:49
And I remember when I saw it, I often thought that's what's missing sometimes
45:54
when you build a product or a project that isn't in line with the company's strategy.
45:59
And the strategy is the water strait and it, if you do it will fast track it.
46:04
But if you build it outside that.
46:06
Zone, it's gonna go really bad.
46:08
And I love what you say here.
46:09
"Strategic cycles are a set of consecutive initiatives aimed at a
46:13
specific market segment or opportunity.
46:16
Apple's decision in 2001 to enter the digital music arena with iPods.
46:20
And then iTunes is a great example.
46:22
That Chuck Shared the music entree was a significant new thrust for
46:27
Apple, which for 25 years was strictly a personal computer manufacturer.
46:32
And then you also share beachhead products.
46:35
These are truly new ventures, and they usually define the first round,
46:39
followed by major refinement of a thesis, which concludes with a suite of fully
46:44
tuned offerings in the third phase.
46:47
And you say here, the trap for most companies is when they embark on
46:50
ambitious strategic cycles, is that a given phase becomes all consuming.
46:55
And you recall here the classic adage, our job was to drain the swamp, but we're
47:00
busy here with all these damn alligators.
47:03
So this is a fairly simple, diagram actually.
47:08
The key point to me is that before so if you draw vertical lines on
47:16
this, the second phase investment, starts roughly using the, roughly
47:24
the same resources you had been doing for investing in the first one.
47:28
That starts before you have any idea where the phase one sales ramp is gonna end.
47:35
So you're really starting the phase two investment without any solid knowledge
47:42
of the sales phase one sales rate.
47:45
So you're, making a bet that the phase one sales are gonna be worthwhile.
47:53
they may not be quite what you estimated but they're worth the
47:58
investing in second phase because they're gonna be good enough, okay?
48:02
And the same is true for the third phase.
48:04
So the point is, you're always forward investing without knowing the full
48:10
outcome of the previous investment.
48:12
Okay, so let's put numbers on this.
48:15
If you imagine the first investment for the iPod was on
48:20
the order of about $3 million.
48:24
And sales went to it.
48:25
Phase one sales reached about one third of prediction.
48:31
Okay?
48:32
We didn't know that until we're halfway into the second investment.
48:38
And so people were urging jobs to drop it Hey, man you missed
48:44
the thing by three to one.
48:46
They sold like 75,000 units in the first I think in the first 90 days.
48:54
And then it took another almost a year to sell another 75,000 units.
49:00
It was just but he's getting urged to drop this investment because
49:06
we need it over on computers.
49:09
And he said no.
49:10
He kept going.
49:11
And he hit this phase.
49:13
He hit about twice what the sales had been on the first one, but only about
49:18
half of what he estimated on that one.
49:20
So he's in the middle of the third phase people are still
49:24
saying, what are you thinking?
49:26
You're squandering basically our birthright, which is computing.
49:31
And that's when he came up with the iTunes idea.
49:37
And the iTunes idea was that you could really sell every song for a buck.
49:43
And and what that did was change the world against Napster which was offering free,
49:49
downloads even though they were illegal.
49:53
so what he co-opted with the iTunes wasn't the fact that he could get
49:59
a dollar per, it was that the music industry would now endorse him.
50:04
Okay.
50:05
And it's, it is kinda like that gulf stream for the turtle.
50:08
Once, once you have the music makers behind you you, got, a clear path, right?
50:15
Sales quadruple instantly and and the rest is history.
50:20
Same with the iPhone.
50:22
The iPhone did not have internet connectivity on the first one or the
50:27
second one, but on the third one it did.
50:30
And And the Palm PRI came out with probably the best phone ever built,
50:36
and had better features by far than the iPhone built by the same team,
50:41
by the way, who resigned from Apple because they were pissed that Jobs
50:46
took the credit and they didn't get it.
50:49
yeah, that story isn't out there too strongly.
50:52
John Rubenstein is the source of my input there.
50:55
Anyway, the point is they bring it out just as Jobs gets the
51:00
connection to the internet.
51:01
wireless.
51:04
And killed him.
51:06
Now he didn't have a phone.
51:07
Now he had an information portal.
51:10
Way different.
51:11
Way different.
51:13
So my point is, if you think about it in terms of these triads it, gives
51:20
you a structural way to describe it to your bosses who are questioning.
51:25
Why are you making this investment now?
51:27
Because in the scheme of things, I need that full sequence to
51:31
make this strategic cycle.
51:33
brilliant.
51:34
Chuck and I, have asked Chuck behind the scenes, I don't think I said this
51:38
before, but Chuck is gonna kindly come back on the show with Steve Sasson,
51:42
who was the gentleman who created the Kodak digital camera inside Kodak as a
51:47
23-year-old, and he met huge resistance.
51:51
So I thought these two gents would be able to share war stories, scars, scar tissue
51:57
arrows in the back.
51:58
Chuck as well.
52:01
Chuck, it's been an absolute pleasure, man.
52:02
I think.
52:03
We did great credit to this book and I highly recommend reading it.
52:07
It's worth the read as well, the personal stories, bring it to life.
52:12
Chuck has lots of challenges he got through there as well.
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Amazing challenges to get through anyway in life as well as doing all this
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you intrapreneurial pursuit as well.
52:21
And Chuck, it's been a huge pleasure speaking to you.
52:24
I learned loads and I'm looking forward to keeping in touch and
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supporting your work in any way I can.
52:30
it's been a pleasure to have this time.
52:33
I've never had anyone dig into the book as deeply as you have.
52:36
And I am profoundly impressed.
52:39
It's an absolute pleasure.
52:40
As I said, the Odysseus of intrapreneurship,
52:43
author of Permission denied Odyssey of an intrapreneur, Charles House.
52:48
Thank you for joining us.
52:50
So much.
52:51
Bye.
52:51
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