[00:00:00] The Venture Podcast with Lambros Photios.
[00:00:06] Too many startups focus too much on building advantages and then defending them fiercely rather than inventing the future.
[00:00:14] And it’s something that organizations such as Amazon do time and time again from face value, it probably seems like they just trying to defend their stance. But what they are constantly doing is actually inventing like they’re a startup with little regard for the legacy. And this isn’t just the case for Amazon. This is the same for other organizations that we know all too all too well, like Facebook, Google and Microsoft. And given what’s happening in the world at the moment, it’s particularly important to be wary of the fact that organizations such as Air BNB and Uber popped up just after the global financial crisis and in lieu of everything happening. We’ve covid 19 at the moment. It’s incredibly important to make sure that your head is in the right place. Now, the individual that I’m speaking with is a gentleman called Alex Kantrowitz, and he’s written a book called Always Day One How the Tech Titans Plan to Stay on Top Forever. Alex, thanks so much for joining me.
[00:01:08] Thanks for having me. I’m really excited to have this discussion.
[00:01:11] So let’s talk about this. So you say in your book, something that I know you’re a huge advocate for, is that startups or large organizations like Amazon, contrary to popular belief, actually focus more on continuing to invent almost like their startup and don’t focus on just protecting their stance or their position in the market. Can you tell me a bit about that?
[00:01:32] Yeah, that’s right. So there’s a saying inside Amazon that Jeff Bezos likes to say, which is it’s always day one. And when I first heard that, I was like, well, what does that mean? It’s always day one. And my interpretation, without knowing anything else, was that Bezos was just telling Amazon employees, you’ve got to work as hard as possible. Does it matter that we’re not, at the time, hundreds of thousands of people in the company and marching towards a trillion dollar valuation? It’s always a one. You’re working as if you’re in a startup. That means weekend nights. That means holidays. And if you think about day two like, someone asked him at this big meeting, what a day two look like. He said dangerous spaces all by irrelevant how by excruciating, painful decline. But of course, like it was an all hands meeting and everybody, like, went up in laughter. And I was like, whoa! These people are real masochist. But the truth is that we’re always day one means inside of Amazon so that the company is always looking to invent as if it’s its first date. So we can say that’s right. It basically means I think you said it in the intro, in the introduction, that no matter the legacy, it’s important to be thinking towards the future always.
[00:02:39] And that’s why we’ve seen Amazon go from a bookseller into an online marketplace with everything to a third party marketplace, to a leading logistics and fulfillment operation to a cloud services company, to a Academy Award winning movie studio, Groser and voice computing platform for Amazon. The business that the company has today is almost irrelevant. The company is always so. People say Amazon will do whatever it can to protect its business. Actually, the truth is Amazon is is always creating the next business. And because it has its mentality, its far ahead of the market and almost all the differences. So it’s less a ruthless company that will crush competition at all costs and more actually an inventive company that is constantly pushing its employees to think of the future, rather ideas of management and then management as a pretty good system to bring them to life.
[00:03:31] Yeah, definitely. I know I spoke with I spoke to one of my mentors, actually, who gentleman called Craig Davis, who was the head of security at Atlassian. And he mentioned that they had not Atlassian has a product called Hip Chat, which is a competitor to Slack. And he mentioned that, you know, this this this whole mentality of all we need to we need to compete with with slack. We need to be a better product. I’m sure it’s important to make sure that you have a great product that’s competitive in the market. But he mentioned that it’s such a collaborative atmosphere between the two businesses, even though ultimately to the public eye that they’re huge competitors. The mentality, he said, was never. It’s us versus them. His mentality was it’s us and them to achieve world domination. We want to make sure that between the two of us, between Atlassian and Slack, we can take over the world and be world leaders where everyone on the planet uses one about two products. And I think that philosophy is something that is actually really endearing. It’s just this mentality. There is room for all of us. There is no need to squash other people in the market. But I think people have this perception that it’s all about, you know, Amazon or Google or Facebook. They’re trying to overtake us. They’re trying to make sure that, you know, that we don’t get a foothold in the industry. One thing I’m really eager to get your your opinion on, Alex, is around how, how how I guess the companies like Amazon approach a new product or a new venture. I think that there is there is the obvious mentality, which is that they either acquire a business or they build a team and create a product.
[00:05:04] So if they’re interested in entering an area or a new vertical, they create a product or they’ll go out and acquire a business or some other kind of hybrid of the two.
[00:05:15] But there’s this this is kind of interesting side to creating new products that I’ve seen from companies like Amazon where they don’t care too much for what we commonly call in startup world.
[00:05:28] The first move is advantage this perception that you need to be the first company to push forward with a particular product to build, you need to be the first one in market.
[00:05:38] I’ve actually heard numerous times that companies like Amazon and Microsoft intentionally don’t want to be the first mover because they want to learn from others mistakes. And it’s the mistake of startups to push so hard to be the first one in the market that a lot of the time they actually make a lot of mistakes. That then Microsoft and Amazon come in, learn from those mistakes, and build a better product from their first release. Can you talk a bit about, I guess, what your learnings were and been producing our in writing always day one. Did you did you get a similar vibe from companies like Amazon, Facebook, Google and Microsoft?
[00:06:12] That’s a great question. I mean, I think there’s definitely a nation of both with Amazon is a company that I do think gets out ahead of the market pretty often. So actually, I would dispute the premise when it comes to Amazon. I really do think that that company really seeks to invent its way out ahead of the market and then shown time and again that it’s been capable of doing it. I mean, look at Amazon World Services for Web services, for instance, or the Amazon Echo, which I know isn’t the first smart speaker, but definitely the first mass market. I mean, you look at the Amazon go store where people can walk and grab what they want and walk out. You know, these are all things that Amazon has pioneered. I mean, they’ve they’ve definitely you know, they’ve been here. There were e-readers before the Kindle, but the Kindle really popularized that stuff. So I would say that and by the way, the way that they do it is they have this internal process, which some of your listeners might be familiar with. But when someone has an idea, when anyone has an idea inside of Amazon, they write it down in what’s known as a six pager, which is they don’t bring new ideas to meetings about PowerPoint.
[00:07:17] They write all out as a narrative, six pages, single spaced. You know, often 11.5, you know, and they write exactly about what the product is going to look like. And then they show up. Everyone sits in silence. They read about it. And then, you know, if the after the question answers, if the people, the decision makers in the room liked the idea, then they’d go out and build the product. And I think one of the interesting things about that is the person who writes the memo is also the person that recruits the team and goes out until it goes out and builds the product. And I think what’s interesting about this is someone from Amazon put it to me. It brings the thinker and the doer part of the equation together. Typically of people that think in a company and people that do. And when you write this paper and then go out, recruit a company, recruit a team and go and build something, you actually take the thinking and the doing and you turn it into something that one person does. So so, yeah, I do think that this company doesn’t reinvent the way out ahead of the market. Very often the other example was Microsoft. Of course, Microsoft was dedicated for a long time to Windows to the point that if anyone wanted to work on something known Windows related, they’d find trouble getting support for it in the market, started by trouble getting support for the company. They couldn’t bring on Apple devices. They, of course, missed mobile. And then they had to make a decision about whether or not to focus on windows or to try to build for the future where they were already way behind Amazon when it came to the cloud, which was where the future was going. And this is kind of were that day, day one mentality comes into into effect. So for Microsoft, the question was focused on Windows milk, that asset until it runs dry and just sort of make as much money as you can until it goes down to zero. And that’s sort of your life as a company or what they could do is come second to the market and get into the culture services business. No, I mean, they had enterprise client that might be interested in it. And and then see what happens. And of course, Microsoft chose the second approach, underscore Nadella and went hard on cloud and actually revived the company because of it. So I think that what you’re seeing in terms of these companies coming to market late might not necessarily be a strategy. Of course, they have the ability to catch up because they’re big. But it is this push and pull between being in a day one and day two mentality. Typically, when a company has something that’s up and running, it makes heart. It makes it difficult for them to then go and invest in a new category. But what these companies have proven is that they do go to day one fairly frequently. And yes, so there might be a startup ahead of them or a company that’s ahead of them, but they know again and again, return to day one, reinvent themselves, enter the market, and then often they do a pretty good job. And that’s why we see them at the top of the economy. Yeah.
[00:10:15] Alex, let’s talk a bit about Microsoft. I look at I look at what kind of state vomited before Satya Nadella came in.
[00:10:22] And so for those who are unaware, obviously, after Bill Gates hands over the reins to to say VOGNAR, who is, I believe, one of the first five employees at Microsoft that is classified as co-founder, who focused very much from my perception, at least with Windows 8 on the touch interface, making sure that you had large study inch monitors that had a touch interface all the way down to a four inch kind of mobile devices that focused very heavily on windows. In my opinion. And then you had Satya Nadella, who came along and focus on kind of revolutionized reference, referenced revolutionizing things like office with Office 365 building at Azura, which is now one of being largest revenue builders at Microsoft, a competitor to Amazon Web Services and Google Cloud.
[00:11:11] I believe for a few successive periods they’ve actually been the highest revenue generator of any of the three giants from a cloud from a cloud perspective.
[00:11:22] So, yes, he’s definitely bringing venture kind of what what the business does and what it focuses on. It was some would say it is risky, but I think it was quite necessary. Now, my mentality, if I’ve understood this right, Alex, is that we under under understate bonum Microsoft was very much focused on the dates who they were focused on protecting the legacy of windows and protecting their market position and ultimately works towards them. Sorry against them. But when Soskin Adella came in and started focusing on these other products, ultimately they acted by a very complementary way to Windows and actually helped to push up not just windows, but every other product in this way. What’s your perception of, I guess, how that that that changing rein to Satya Nadella actually transformed Microsoft to a business that’s focused on day one? Is that what happened or was it was Microsoft? Always, always, always, I guess, somewhat focused on the day one in some capacity.
[00:12:21] Yes, so I would say I think that what happened at Microsoft was absolutely and they too were hoping that focusing on milking Windows asset as much as they can. And I want to make a distinction here that’s pretty important. And I think your listeners should seize onto it. There’s two different types of cultures today. One is the culture of refinement. And a culture of refinement is a company that is focused on taking its flagship products and making it inclusive incrementally better over time. That’s one option. The other is a culture of invention and the culture of invention as a company that’s focusing on building the future. And typically, when you focus on the culture, refinement, you’re going to miss what’s coming next. And that’s exactly what happened with Microsoft. They kept on refining Windows again and again and again to the point where it totally lost sight of what was coming next. In this model, like we spoke about and it was going to miss club and Steve Ball was very much the company under him, very much ran in a state of let’s refine windows, you know, like you were mentioning. Let’s make Windows touch. Let’s make it on this screen and that screen. All of this were windows, refinement and Windows was a desktop operating system. And you can’t go to work with a desktop operating system in an era of mobile and artificial intelligence. Yeah. And I mean, and the Web. Right. So. So then try it. And Dallas is a very interesting choice for CEO. He has spent more than 20 years inside Microsoft working as part of the middle management. Right. And OK. He end up over time. He ends up over time going on a few interesting projects. He works on things and people make fun of things. But one thing teaches you, it’s it’s something that’s hosted entirely on the Internet. And it has to make sense of all these links on the Internet, pointing to all these other Web sites and decide what to elevate and what not to. It’s a tremendous cloud and machine learning problem. So, in fact, you get put in charge of the provision called server and tools and server and tools back in the day was a massive business for Microsoft. And what it did was it provided servers for businesses running applications by the company. And it was obviously all all servers that were installed locally inside these companies. So in a move for the move to the cloud begins to happen. And Satya is running server and tools. And he knows that when he starts to see that the future is going to look much more based and much less like the way that server and tools was run that day. That is really interesting story where they do analysis and they go to the customers and they ask the customers, hey, would you be interested in moving to the cloud or wouldn’t you? Are you interested in maintaining your current setup? Almost all these customers said we want to maintain our current setup. The reason is because they were all CIO chief information officers who are responsible for controlling their company’s technology spend. And if they went to the cloud, all of a sudden their power, which was the money they were buying technology for every division inside the company that how would be distributed and all of a sudden marketing would be able to buy its own system and sales would be able to buy its own system and finance would be able to buy its own system. So the CIO told Microsoft, hey, we are not going to the cloud. The company did a deeper analysis and found that within a few years, 90 percent or 90 percent of those CIO CIO will either be moving to the cloud or get fired. So actually, what’s interesting about this move to day one from Microsoft is that they actually didn’t listen to their customers. So start your read this analysis. Yes. Some of these stocks himself and says, OK, inside server and tools, we’re going to move entirely away from doing this old way of doing things and focus all our energy on the cloud. And yes, provide some solutions for customers that want to take time transitioning this way so we don’t lose them, lose them. And then Beltway, it comes time. So obviously, like Steve Ballmer made a ton of money for Microsoft, but when it came time to see where Microsoft was looking towards the future, it just wasn’t in a great position. And obviously, desktop was becoming less and less important. So Bombers announces he’s going to resign and then Target becomes a natural person to put into action to take over Microsoft because he had already moved his server and tools division towards what the future was going to look like. Build Azure, as you mentioned, and said, OK, we’re going to move this way. So actually, the strategy was all decided precisely by the time we took over Microsoft as the CEO. But then the thorny question became, how do you take a culture that’s filled with people who don’t listen, alpha males, people who yell at each other in meetings and turn them into a culture, a pregnant turn them from a culture of refinement to one of invention. And invention requires listening to ideas. I mean, it’s simple, but it really makes sense listening to ideas. I come from anywhere inside the company, collaborating, you know, being able to build something that’s. For your part. That’s a sum that’s bigger than the sum of its parts. Right. And then a CEO who doesn’t yell at the employees is a bummer, too. Sometimes, you know, you go into these pep rallies every year and scream like a little again. And you can watch that on YouTube. So you take that and turn to them to do a hackathon. So it was really the strategy was determined. And then it became OK. Now, the most important thing is to turn this company from a culture, from a company that prioritizes refinement, culture that’s built to set that up to code to a company. Apparently that invention and then transformed the culture in order to support invention inside Microsoft.
[00:18:02] Yeah, that’s honorable. I think that last detail actually wasn’t where I always knew that. I think everyone knows the the famous Steve Ballmer get up on stage and and scream at the top of his lungs to to motivate his team, but to transform. I knew Satya Nadella wasn’t the kind to get off and do that on stage. But to convert those into hackathons, I think is a huge testament to his strive for across collaboration, which is obviously incredibly important when it comes to that day. One mindset, and it’s something I want to talk a bit about. It’s a lot of everything going on at the moment with Carbon 19. I think there’s a huge scare. And this is initial kind of crippling feeling that, you know, we there’s not much we can do. The economy’s crashing and there’s we’re stuck at home and we can’t do anything about it. And our businesses are ultimately at the mercy of what’s happening on a macro scale.
[00:18:57] I think realistically da I think this does present opportunities. I’ll beat you.
[00:19:02] You need to be particularly cautious during these times. Bruce I presents opportunities that businesses such as a BMB and we’ve really started to flourish during the global financial crisis, which is just out, which was just over a decade ago. That’s when they really started to grow. They saw certain opportunities that the global financial crisis made us aware of and they capitalized that on those in real time. Instead of focusing on maintaining their market position, they focused on reinventing themselves or inventing a new business altogether and didn’t focus too much on how do I protect this position I’ve currently got in the market or how do I build a business that currently exists? It was all about how do we create something new that actually that is actually relevant. It’s important to acknowledge also show that the culture shift that is happening in that despite the fact that it’s easy to say, hey, in 12 months from now we’ll go back to normal.
[00:19:56] The reality is, is that I believe the shift towards a work from home, work from home kind of structure will majorly cause a major transformation or culture shift. Given this this force kind of effort, Alex, during a period like this where where things do start to get really tough and people are ultimately crippled both financially and and and mentally as well, psychologically by what’s happening in the market, how is it or why is it most important now to actually focus on on brain venting as opposed to just trying to protect your market position?
[00:20:36] That’s right. Emphasized. Want to say everybody out there should not be discouraged. That’s just the worst time to pretend to be discouraged. I think there’s a lot of room for cautious optimism right now, but it’s just a matter of approaching it in the right way. So, I mean, first of all, the thing is we’re dealing only in an economy that changes all the time anyway. In the 1920s, a company would stand Fortune 500 for 67 years. Now they stay there for 15 years. So we’re already moving in as transforming the economy where what you do, what you did yesterday might not be a good enough to get you to where you need to be tomorrow. And so for companies that embrace that, this world right now is going to be will be quite similar. It will be a world where good companies adapt and the companies who are unable adapt will just fell a little faster. But it’s never too late to start bringing in a mentality and processes that can help. That can help your company adapt. So I can give like a quick three step process that sort of follows the tech giants the way that they reinvent themselves, that if you’re up for it, let’s do it.
[00:21:49] Show. OK. First number one is mindset, mindset is so important.
[00:21:55] I think it’s really important for a company to say, OK, we’re going to be a company that’s OK with reinventing ourselves. And yes, we have legacy businesses and preexisting businesses. But if we get attached to what we’ve done up until now, we’re gonna be in trouble. We have to be investing towards the future. So, again, that’s moving yourself from the day to mentality to a day one mentality. And that’s really what’s going to make a big difference. Second thing, there’s two different types of work, and I talk about this a little bit in the book. The first tech work is called Execution Work. And the execution work is anything that supports an existing business that’s closing the books, that’s writing higher letters, that’s moving numbers from one spreadsheet to another. The second type of work is called idea work. An idea work is basically anything that goes into dreaming up new inventions, new business lines and bringing it to like. I think it’s pivotal to any company that wants to reinvent itself to really focus on minimizing met execution work and making room for ideas, for ideas, work that can happen in two ways. One is you actually take technology and detail in the book, in the book about how these companies use automation, artificial intelligence to bring execution with down so that employees can have time for ideas. The other way to do it. It’s really just to examine your business and look for, hey, what are redundant processes? What are the what’s the work that we’re doing that we don’t necessarily need to do? Taking a lot of time we’re using to support new business products, our existing business products, and is adding a lot of value to mixing that and having those people and their time that we’re spending their time doing execution work, focus on the idea. So just to recap. Number one, take your mentality. Change it from culture, refinement to one of invention, a culture and a two to one a day one.
[00:23:42] Be ready to forsake your current business in order to build the next business, because right now so much is changing that you need to do need to be able to do that to bring down the amount of execution work you have and make room for ideas. Now, what do you do with those ideas? And this is the key. I think companies really need to build systems that bring ideas from employees to decision makers. You know, there are so many companies out there where a person has an idea. They bring it to their boss. Their boss brings it to them about their boss, bring it to their boss and so on and so forth. And that’s the 12:54 skips. If it makes its way, if it if anybody along that chain says no to the idea and before it gets to the CEO or decision maker, it’s dead, it’s over. And I think it’s very important for companies today to tell employees, we need your ideas because it’s your ideas and that the ideas coming from the top that are going to be able to get us through this. And you need to have the channel and the culture that will make sure that when someone has an idea, they can feel comfortable and encouraged to bring it to the decision makers. What does that feel like, a six-page process like Amazon has or a feedback process like Facebook has where people feel empowered to go up to anybody in the organization? Even Mark Zuckerberg can tell them what they think. There are posters all around the office that they feedback as a gift or maybe something more like a Google where, you know, companies are where the company really focuses on collaboration, where ideas flow side to side through email groups and chat and internal social media, and they make sure that these good ideas aren’t lost in the corporate muck.
[00:25:20] So that to me is a three step process that companies should follow if they want to find out how to reinvent today and end up not getting stuck in this moment to find themselves get out ahead of it.
[00:25:33] Yeah, that’s incredible. Alex, before we wrap up, I’ve just got a quick one. So for our listeners, we’re doing something slightly different with this podcasts. We actually have one of Alex’s books, always day one, how the Tech Giants Plan to Stay On the Tech Titans plan sound tough forever. We’re actually giving away one of these books to one of our listeners. Oh, you’ve got to do is haven’t haven’t had over the Linked-In and put together a post. Now, don’t just want it to be any posts. Once you’ve listened to this podcast, I want you to have a bit of a think about whether you’ve been involved in a culture day one which is reinventing or culture of day two, which is focusing on the legacy and preserving a particular position in the market instead of innovating.
[00:26:18] I want you to focus on whether you’ve been involved in a culture of day one on day two and share that story. And also, most importantly, what you’re going to do next to make sure that your business adopts a philosophy of always day one and off the tail end of that. I’d like you to share that on your Linked-In. I’d like to share that story on your LinkedIn and and make sure you tag myself and Alex. And we will actually go ahead, pick one of the one of these stories and and provide or send over them a copy of Alex’s book, always day one. I think it’s a phenomenal rate. There’s a lot, too. There’s a lot to learn from it. For those of you who don’t know, there’s actually 130 interviews from insiders like Mark Zuckerberg, Steve Wozniak and Mark Cuban in the book that talks about effectively different philosophies they use or have or continue to use within their businesses. And as you know, there’s also those incredible learnings from businesses like Facebook, Google and Microsoft. As always, if you found this podcast to be valuable, though, please make sure that you subscribe on iTunes or Spotify. Alex, it’s been an absolute pleasure. Thanks so much for joining us.
[00:27:30] Thank you for having me. And I’m just wishing health and love out to everybody out there. We’ll get through this moment. So one thing.
[00:27:51] The venture podcast with Lambros Photios.