[00:00:00] The Venture Podcast with Lambros Photios.
[00:00:06] Strategizing in your business, not just about risk, but about testing, building, accelerating and scaling role.
[00:00:15] Absolutely fundamental. But risk is something I want to start off with today, because at the moment in the current environment, with everything happening pertaining to KOVA 19 and people working from home, the landscape is changing more rapidly than we can strategize around. And this is a huge issue because if we are being incredibly reactionary, instead of saying what we could potentially do a planning around this risk, then we inevitably are putting ourselves in a position where the environment controls us and we don’t control the environment. The individual that I’m speaking with today on the podcast is Steve Anderson. Steve Anderson wrote a book called The Basal Cell Letta’s 14 Principles to Grow Your Business Like Amazon. The oldest book, I should say, is based around 21 letters that Jeff Bezos issued to his shareholders on an annual basis and stayed from about to speak with an individual who previously studied a master’s degree in insurance law and was his area of specialization before he then evolved into a professional speaker, writer and futurist. Steve, thanks so much for joining me on the podcast today. Lambros, it’s a great pleasure to be with you. So safe. Let’s talk about risk right at the moment. In the current environment that we operate within with, we’ve covered 19 being for having having that foresight as to what’s going to happen next is vital. But a lot of us just we can’t plan it out. A lot of us couldn’t have foreseen, you know, where we’re at right now to three months ago. Talk to me about the importance, though, of of, I guess, utilizing what we have at our fingertips to plan and to make decisions.
[00:01:54] Well, certainly as business owners. It’s key to be able to look into the future as much as you can. And as you’ve said, you know it just a few months ago, it would be unthinkable to be in the situation we’re in right now. And if you’ve built your company around one core vision and some core principles, then you are able to adapt quickly. And, you know, we’re being forced really all over the globe right now to adapt and try new things. That’s really hard for a lot of employees that aren’t used to having to do that. And, you know, the the question I asked, which started to lead to the research for the book is, you know, our business is taking too many risks or not enough. And that’s really counterintuitive, certainly coming from the insurance industry, where everything we do is to mitigate, to reduce, to transfer risks to an insurance policy. But with change things changing as rapidly as they are today, you know, it’s you just don’t have time. You’ve got to be more nimble. And that’s where experimentation, invention come in. And that’s one of the areas that Amazon certainly shines out and has since its very beginning.
[00:03:15] Yeah. Let’s talk a bit about about the way Amazon has has really, I guess, differentiated themselves, these 21 that is firstly, how did you get your hands off hands? And what is it that, you know, what is it that you started to learn as you read through these? Was there a very particular way that Jeff Bezos wrote days? Was it was it clear that he had he had put in the foresight as to what the next five years business looks like? What was it that saved you? You, without a doubt, looks at a plethora of different businesses in your in your professional career. Did anything stand out from Jeff Bezos as a leader that I think got.
[00:03:54] Yeah, I think a couple of things stand out. One is the literally the amount of what I would call his secret sauce, how he runs Amazon is included in the letters. And so that was a first surprise, how much, you know, great information and great kind of tips and ideas and thoughts and strategies. So that was that was kind of the first thing that caught my attention. And then what caught my attention is the very first letter, which was written in nineteen ninety seven, was the first year they went public as a public company. And he laid out in that letter the plan he had in mind for Amazon. And it included actually all of the 14 principles that I came up with were included in that very first letter.
[00:04:45] But here’s also what’s amazing to me.
[00:04:49] Every subsequent letter from nineteen ninety eight through the latest letter 2018. He closes the letter by saying, As is my habit, I attach a copy of our 1997 letter and encourage you to read it. Now, again, over the years, that phrase has changed a little bit. But he always includes a copy. Now think about that. That ninety seven letter is obviously twenty one years old now, almost twenty two, and he still wrecked four ounces at it as his plan for growing Amazon. And that’s certainly long term thinking. And I think we see the results of that in a current environment. And looking at how Amazon is adapting to obviously a crisis and how quickly they are able to pivot and transition kind of as normal for Amazon into something very different. And I think it all goes back to having that core in place.
[00:05:52] Yeah. Got it. Steve, if you were speaking with a business idea right now, they gave you a call and they said, hey, Steve, you know, I’ve got a you know, I’ve got a bunch of products and services that my business offers. And the predicament I’m in at the moment is that they’re not ripe for the card market. They don’t you know, they they made sense six months ago, given the environment has changed. They don’t anymore. What can I do? What would you tell them safe?
[00:06:20] Well, I think the first thing is really do a deep dove into those products, products, services, whatever that might be, and identify the core benefits to the customers that were in that product and then have a very honest and realistic conversation with yourself as business owners, with your team, whatever that might be, and say, OK, we thought people had these needs at this time. What’s changed? What hasn’t changed and what can we do now to be prepared for when this is over? And I am absolutely convinced it will be over. I’m also convinced we will not go back to normal. We will figure out what a new normal is. And so as a business owner, how are you going to pivot? What do you need to do to change? What do you need to create now?
[00:07:14] Maybe while you have some time as where many of us are, you know, quarantine orders at home or, you know, staying away from each other, not just be fearful, but planned ahead. You know, what’s going to be the first 90 days after we get back in are able to get our businesses going again. Spending that time now will pay dividends in the future. And you don’t know what what’s the future gonna hold?
[00:07:45] But you certainly know where your core value and benefits are. And I’ll go back to a core principle of mine and a core principle at Amazon, which is customer obsession. And the other thing I would say is, what can you do today? Not necessarily for income, although I think you should still charge if you can. But what can you do today to provide value? Because what you do now, people are going to remember when this is over.
[00:08:16] Safe. You mentioned that once we go back to normal, things would never actually be the same. So, you know, once we come out of this lockdown site, this quarantine site that we’re in at the moment, things won’t just return back to normal. And I very much agree with that, with that thought process. Do you believe that? Do you believe that companies need to start offering a new product or service and now that adds value during this lockdown period, knowing we could well be here for, you know, 12 to 18 months, if not if not consistently than through a cyclical period of of quarantine and not a quarantine? Do you believe that? Do you believe that we need to put in place products and services that add value now? Because this is a this is a state that we could be in for some time and those products and services will ultimately govern the business. Why would I change 24 months from now when we come out of this?
[00:09:12] Yeah, absolutely I do. And the way I think about it, I know there’s pushback in terms of, you know, should I sell things now? Should I not? Should I offer I’m free, should I not? And I think a key concept there and certainly as a small business owners and entrepreneurs, you know, your your biggest goal and the best way you can benefit your current customers when we get out of there is actually to be still in business. And, you know, yes, you can make some concessions. Yes. You might need to rethink your payment plans. Yes.
[00:09:44] You know, you might have to pivot somehow.
[00:09:47] But to say, you know, I’m not going to sell. I’m going to stop selling.
[00:09:52] Isn’t serving your customers well in the long term.
[00:09:56] And so, again, maybe you do something that is free and then leads to something that is paid. But if you’re serviced again, service, platform, product, whatever it is for you, if you’re not continuing to try and develop value there, you won’t survive. And then you will be able to take advantage of what you have to offer. Yeah. So, I mean, it’s a delicate situation. So I can’t I’m not going to say, you know, do or don’t. But you’ve got to stay in business in order to be able to bring the economy. I mean, the whole economy back. We need businesses that can be there to provide the products and services when we all get back as consumers.
[00:10:42] Be a business or individual to be able to get the economy going again.
[00:10:48] It’s exactly right. And you mentioned a really interesting point that that you that you didn’t delve into. But I want to talk about briefly for a minute is that we you know, you said I can’t tell you whether it’s going to work or not.
[00:11:00] And the reality is, is that no one can say whether a particular strategy, whether a particular offering, whether something that you perceive as a value add is actually going to add value in this market. There’s no way of no there’s no way of doing market research because there’s no doubt it’s call upon. There’s no way of understanding whether something could potentially work given the opportunity. The only opportunity we really to have as entrepreneurs is to go out there and trial and to make sure that we’re as nimble or as pivotal as possible so we can adapt in real time to make sure that we can continue to keep trying in different ways to add value to potential customers, because ultimately there is no historical data to call upon here as to what’s going to be something that will add value to to out to our customer base.
[00:11:51] I absolutely agree. And the immediate thought that comes to mind is you have got to be OK with failure. And in fact, my first principle is encourage successful failure. Yet none of us really know the game plan right now. None of us really have a roadmap. It is a unique situation. And so you’re going to make mistakes. And I think, one, you’ve got to be transparent, certainly with your clients and with your prospects. Hey, we’re trying this. Give us feedback where we’re at. We are willing to pivot and to change as we need, but we need feedback. Is is helping, is it not? What else can we do to serve you? But so many businesses in especially as a business, gets bigger.
[00:12:41] The problem is their biggest risk.
[00:12:46] Is actually being successful because they start protecting what got them there. When I looked at all those other kind of businesses that had failed in the past, you know, some obvious big names, block buster, BlackBerry, Kodak, read a lot of what they they they tried to protect what got them there. And I think now is the time to embrace failure. And that’s where Amazon shines, Bezos says several times in his letters. Amazon is actually the best place for an employee to fail because they have a structure around it.
[00:13:22] They encourage successful failure. They learn from their failures and they pivot to something better.
[00:13:30] Yeah, it’s exactly right. Yeah. Now you do speak in your book safe about kind of Basso’s a successful failure approach. And I believe in some circumstances it can be counterintuitive to many businesses. But I think at the moment, given the current state we’re in, I wouldn’t say there are many alternatives. What do you think?
[00:13:49] Well, there probably. Well, actually, I mean, I think the alternative is just to hunker down and try and weather it out. I hope things are OK on the other side. I’m not sure that’s a great strategy. You know, I’m not original here, but hope is not a strategy. What are the things that you can do? And you may find, you know, a lot of failures in Amazon continues to have a lot of failures because they experiment. And the problem is and again, Bezos talks about this. If you’re gonna do an experiment, you have to embrace failure, because if you don’t have the option for failure in an experiment, it’s not an experiment. And so those go hand-in-hand. I actually think in general, the whole emphasis on innovation is misplaced. Actually, I think what every business, almost regardless of size. They need more experimentation, which leads to invention, which then allows innovation later. But experimentation and invention are really key. Yeah. The phrase I mean, that Paisios uses over and over again that continues to resonate with me is we invent at Amazon on behalf of the customer.
[00:15:10] Yeah, exactly right. I you mentioned it. I mentioned it. I think about four or five times saved in previous podcasts over the last couple of weeks that ultimately all businesses at the moment have two choices. They can either go into hibernation mode, reduce their costs as much as humanly possible and make it so that they use the capital, that they’re putting the bank to stay alive through this period and effectively go into what I call survival mode. The alternative, which is what you’re kind of expressing here, is this mentality that, wait a second, is a changing ecosystem. We can’t assume things seem to go back to normal because why in the world would they go back to normal after this is all over?
[00:15:48] I think it’s I think it’s I think it’s very shortsighted to think that when this is all over that things will just resume back to normal and the world will be exactly the same as it always is, as it always was.
[00:15:59] Sorry. And the reality is, is that things are vastly changing and there’s an opportunity here to try and reinvent not just yourself as entrepreneurs, but to reinvent your businesses and to innovate and to continue innovating.
[00:16:14] You spoke briefly about experimentation and the importance of making sure that we experiment. What are some ways that that businesses can go out there and experiment new ideas? You spoke briefly about know going out to customers and asking, you know, does this work for you? Can we improve? Do you like this new product or service we’ve got on offer? If you do, why do you like it? If you don’t, why do you dislike it? Going out to a market and asking them for feedback is is fundamental. What are some other strategies that you can recommend that that that entrepreneurs use to start to introduce or experiment with new products or services? Knowing that the amount of capital that a lot of startups would have at the moment to invest into experimentation is very limited. So what is it they can do, I guess, is what I’m asking with with minimal expenditure. But with, I guess, the maximum results.
[00:17:03] Yeah, a couple of things come to mind.
[00:17:05] One is this whole idea of obsessing over customers is again core to how Basso’s thinks it’s spin in every letter that he’s written and what part of what comes out of that. And I did mention that inventing on behalf of the customer. And Basso’s describes an example prime right. Kind of ubiquitous now, but in its early days of the early 2000s, it was a crazy idea that actually no manager, none of the people on the senior leadership team thought they should do it. But Basso’s said if it’s better for our customers, it will be better for Amazon and ultimately better for our shareholders. Well, you know, again, the history has shown he’s been right. That mindset has has kind of gone through many different products and iterations of third party marketplace. Third party sellers is another example. And I think what you have to do and again, it’s back to a principle, which is the second one bet on big ideas is you start small. And as you get more information that this is looks like it’s going to work. Then you start betting.
[00:18:17] I heard it once described is, you know, don’t take the cannonball approach, take the rifle shot, approach small little experiments and then build upon what you learn from that. I think another tool Amazon uses is what’s called the six page narrative, basically a tool that they use to get all of the thoughts and ideas about a new venture, a new decision, a new platform, a new product out beforehand. And encompasses a future press release. So they actually write a press release for the idea of a new product when it’s going to be released. And again, what’s the benefit to the customers? They haven’t F.A.A.. Q What are the questions that people are gonna ask and what are our answers? They do all that work before they even get going. And that now gives them a tool. By the way, if it does fail now, they can go back and say, OK, what did we think was true that actually ended up not being true and how can we adjust in the future? But again, starting small and building and I think you should have. And again, a core idea. Let me get this out.
[00:19:29] What in your business now? What process do you have in place that’s causing friction with your customers? If you can solve those problems, then you will have a winner on your hand Prime. Sort of a friction problem having to pay for shipping. Once we removed Amazon, remove shipping as a decision barrier. Now, people who have an Amazon Prime subscription. By two point four times as much as those who don’t. And again, that’s the counterintuitive part.
[00:20:08] But that’s also focused, obsessing, not even focusing, obsessing over customers. I think that is the place to start in your business.
[00:20:16] Yes. Obsessed with customers. Try multiple things. Don’t put all your eggs in one basket and start very small with those new ideas and gradually iterate and grow over time. Right.
[00:20:28] That’s the worst thing you can do is is have a kind of a new idea and try and move it through committees. Yet again, another principle at Amazon is high velocity decision making. Well, Amazon and you can see that now they are moving, pivoting, changing. They hired over 80000 thousand new employees worldwide to help with this crush of orders. Within a couple of weeks. How did they have that? How’d they do that? They they didn’t take a long time to over obsess over decisions. They said, here’s what we need to do. Let’s do it. Figure out how to do it. And fortunately, they had the infrastructure in place to be able to support it.
[00:21:09] Yeah. I love that. I mean, it’s this whole idea, this whole principle that ultimately, you know, you can get bogged down in the details and focus on how will we. Yeah, I think so many people focus on how do we scale to a million customers before they even have a product, before they even have their first customer. And I think, you know, it’s it’s so vital to two experiments. You know, it was it was it was important a year ago. It’s not like this is something that’s that’s only relevant now, but it’s only more important now because the reality is, is that the resources that we use have access to we don’t have access to anymore. And so we have to use the resources at our fingertips.
[00:21:43] I think people can leverage those to the best of their abilities to experiment with a few different product or service offerings that add value and reduce friction.
[00:21:52] And as you say, you know, you have to obsess over your customers. I think that’s ultimately where people are going to win.
[00:21:59] Please make sure you check out Steve Anderson’s book. It’s called The Base. Also Letters 14 Principles to Grow Your Business Like Amazon. And if you found this podcast to be valuable and you want to produce more like this, please make sure that you hit that subscribe button on iTunes or Spotify Save. It’s been an absolute pleasure. Thanks so much for taking your time.
[00:22:19] Lambros was great fun talking with you. Thank you.
[00:22:37] The venture podcast with Lambros Photios.