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Harnessing Uncertainty to Survive Disruption

22 August, 2019 | 16 min 59 sec
Podcast Host Tania Salarvand | Podcast Guest Leonard Brody
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Brief Summary

The digital revolution is changing the way we live and work, and organizations must pivot their business models to adapt, whilst maintaining their core offering. Entrepreneur and Venture Capitalist, Leonard Brody explores the necessity of creating your own internal intelligence division to survive disruption. If you are a business or tech leader, looking to future-proof your business, this is the podcast for you.


Highlights


A human being 30 years ago was a physical being; we didn't have the technology platforms that we do now. Today, when dealing with customers, we have to be very aware of the behavioural markers of somebody who we are identifying and relating to in their virtual identity versus their physical one and the difference between the two personas. People do things in their virtual identity that they wouldn't do in their physical one.


Institutions are things we set up to govern our lives, such as businesses, religion, government etc. We are witnessing an unravelling of these structures because many of them were based on technology or patriarchal assumptions that are no longer true. With the internet, we owned our communications for the first time and were able to challenge how we think about these structures. Institutions need to be aware that the humans that they serve, are not the same as the humans 20-30 years ago and react accordingly. 


If you dont know what you dont know, your organization will cease to exist. You are in an environment where you are exposed to phenomena that you won’t know about until its too late and can't control. So how do you defend against that? By creating alpha-modality, which allows you to prepare for your own destruction.


Alpha-modality is two-fold:


  •  A conscious choice to twin the organization- with the entity as is today as one part, and one part looking at the entity going forward. 


  • Test and learn. Companies dont test live products in the wild enough. Every brand has fans that they can engage to test their product, even if it fails.


One of the great obstacles to growth and innovation are the boards of directors because, over-time, their focus has shifted from strategy to risk management. If the board isn’t holding officers accountable for alpha-mode or creating a vision of the future, no one will. 


Importance of creating the Future Committee (F-Com), whose job is to hold other officers and directors accountable for the vision of the business in its own destruction. Their job is to have deep intelligence about threats to the business and have a formalized process by which their organization can react to that. 


The biggest mistake leaders make is killing their innovation strategy when the market gets tough. It’s easier to think about innovation when times are good- when you have excess cash and are not in crisis mode- but need to recognize that when times are tough- that’s when you should be doing your biggest experiments to allow you to survive and grow in the lows.

Podcast Transcript


Tania: Leonard Brody has been called a controversial leader of the new world order. Personally, he's one of my favorite speakers for his really direct take on business and innovation. Welcome to Pragmatism in Practice, a podcast from ThoughtWorks, where we share stories of practical approaches to becoming a modern digital business. I'm your host, Tania Salarvand.


If you haven't heard of Leonard Brody, that's about to change. He's the Chairman of Creative Labs, an award-winning entrepreneur, venture capitalist, bestselling author and Emmy-nominated media visionary. Over the course of his career, he has worked with the G8, the United Nations, the Financial Times, Visa, Pepsi, Fortune, and many more.


During his keynote speech at ParadigmShift, Leonard explained his concept of the Great Rewrite as a fundamental resetting of the operating system of earth and life as we know it.


I sat down with him in Toronto to talk about how enterprises can rewrite themselves, face the questions the future holds, harness uncertainty, and turn it into excitement, innovation, and success. Take a listen.


Leonard Brody: My name's Leonard Brody. I am a longtime entrepreneur, road wearied entrepreneur. Currently I sit as the Chair and co-Founder of Creative Labs, which is a joint venture partnership with the CAA Creative Artists in Los Angeles.


Tania: Well, thanks so much for joining us.


Leonard Brody: Thank you.


Tania: I really appreciate your time. I wanted to explore this concept of this physical versus virtual space. A lot of organizations are trying to battle the how much do we do physically versus how much do we really create the seamless experience online. Your research shows that two-third of our experiences, whether personal, professional with brands, with logos, it's going to be virtual. Tell us a little bit more about that. What does that research say, and how are businesses working on evolving that?


Leonard Brody: I think the reality is that, what I was referring to is, if you think about a human being, the human 30 years ago was a physical being, pure and simple. We just didn't have the platforms that we had today that created diversity and change in our behaviors. I think what we've evolved into now is a bifurcated human, which is a person that is predominantly physical in their structure, their values, their norms, how they behave physically versus that same individual's behavior when they are behaving through a screen. And the vast majority of us are doing that through a screen today. So the argument is when you are a marketer or when you are dealing with customer support or HR, you have to be very aware of the behavioral markers of somebody who you are identifying and relating to in their virtual identity versus the physical one. And what we know is those behavioral markers are quite different. In other words, you would do things in your virtual identity that you would never, ever do physically. And you can imagine that's true in a whole subplot of stories. But I think that that's the reality; is we have to be much more cognizant of that and be aware of the fact that when you are speaking, you need to be very clear about who you're speaking to and understand the differences in those two persona.


Tania: Which brings me to the next point. As this evolves, as how we interact; behaviors, thoughts, feelings, and the new generation who won't even know a lot about physical interaction, you mentioned that what's holding us back are institutions. Can you tell us a little bit more about how do you define institutions and what is it about an institution that needs to evolve or change and how hard is that going to be?


Leonard Brody: Yeah, so to me, I think of institutions in the context of things that we set up to govern our lives. Now, you could look at that at education, government, the workplace, religion, the family unit would be an example of that. Most of these institutions were set up as a way to structure a society or civilization, and they typically followed kind of power pyramid models. So you have a CEO, head of family, Prime Minister or President in that same structure. What I think is going on is you are witnessing a unraveling of those structures because many of them were based on technological or patriarchal assumptions that are either no longer true or, frankly, were never true to begin with.


And so when you have an event like the internet in the late 90s, where for the first time in our history, we own our own communication at scale globally with very little costs, very few people in between. It's no longer the nightly news broadcast era. This is a consistent 24/7, million to million conversation. Those structures get challenged because the assumptions that underlie them and get challenged. And you can see that in almost everything from marriage, I talked a little bit about marriage, to how we think about religion, to how we think about government.


So I think institutions have got to be very clearly aware that the humans that they serve are functionally different than the human beings who walked here 35 years ago, 40 years ago. And a great example of that is the Catholic church. So if you look at the Catholic church, I mean the Pope, if there was a Nobel Prize for the rewriter of the year, I would say over the last two years, Pope Francis would be a pretty good candidate. Because if you think about the changes that, now, he's not always successful and it's a behemoth of an organization to move, but if you think about the 2,000 years of history and conservativism and orthodoxy that the Pope is dealing with, he has made some incredible changes to understand that the people who he serves are not necessarily the same people that were there 100 years ago or 1,000 years ago. And arguably if the Pope can do it in the Catholic church, there is really no excuse for anyone else.


Tania: Along those lines, so you speak a little bit about what you coin as alpha mode, and I think it speaks to a little bit of this; how to break free from the institutions, how to really embrace and empower businesses, customers, people to do things differently.


Leonard Brody: Sure.


Tania: Explain that concept a little bit to us.


Leonard Brody: Yeah, so alpha mode was something that I was trying to figure out a way to express the difference between the way I think companies looked at growth in the 80s and 90s, which was really around this Japanese Keiretsu model where everybody kind of had a symbiosis. So everybody was not necessarily related, but we're all swimming together in this beautiful pattern. And what I realized when I started doing a bit of a deeper dive on this is that unfortunately when the world is getting reset, when things are moving at a pace that you can't control, and the best analogy for that, by the way, is companies need to take a page out of the playbook of what the CIA and the Mossad do for a living. Their job is to know what they don't know. And in their world, when they don't know what they don't know, people die. And I would argue there is a thinly relevant analogy, which is if you don't know what you don't know, companies will end up suffering and ceasing to exist. Well, it's different than human life. The theory is the same, which is you are in an environment where you are exposed to a bunch of phenomena that you either A, won't know about until it's too late; B, couldn't have even thought of or controlled. And so the question is how do you, as an agency or an organization, defend against that?


And it turns out that the best structure to do that is to create something called alpha modality, which means don't assume that the core of the business is going to be able to respond to all of this, because it won't. It's got shareholders, quotas, real things to do. And boards are not compensating people to be engaged in that activity. So there has to be a conscious choice to twin itself; to have the entity as it is today and the entity as it might or should be going forward. And it's like a master servant model, where the job of one is to prod along or potentially replace the master.


And the other meaning of alpha mode is I think companies don't test enough. A test in the wild, meaning I think it's very common for companies to not want to test live product. And I think in this environment, there are always fans of a brand. Every brand has a bunch of fans who use it every day and love it. And if those fans have the ability, knowing that the product isn't perfect and knowing that it may not be around in a year, to test and engage, not enough companies take advantage of that. So it's those two meanings of the twinning and the testing that I think prepare and force companies to prepare for their own destruction.


Tania: I think this continuous experimentation and how to not be afraid of failure, you mentioned that quite a bit as well, and essentially compensating for failure, which I think is a new topic of conversation for a lot of organizations; but also along those lines you have spoken to kind of this future committee or an FCOM, You mentioned the board being a part of these conversations and helping guide and gauge them. What exactly would the mandate of an FCOM be in your mind?


Leonard Brody: Yeah. The thing that's very clear to me is one of the great obstacles to growth or reaction to this rewritten world or what we would've called innovation before, are the boards of directors. Because boards and corporate governance, I think in their origin story, it was about risk management and strategy. They were there to help the business grow. Since Sarbanes-Oxley, that strategic piece, especially in public company environments has really been replaced by a focus on risk management.


And the issue is if the board isn't holding the officers accountable for that alpha mode or that vision of the future, no one will. Because inevitably, it's the same reason we have a bicameral government and a Senate and a House, because you need that check and balance to ensure that people are thinking about that stuff. To me, that job has been neglected by most boards in North America. And so the same three structures at a board of directors exist and have for 100 years, which is your comp committee, your governance committee, your audit committee.


What I have pushed for is the creation of something called the futures committee or the FCOM. And I think a lot of companies are now starting to do derivatives of that, where it's typically a mixture of independent board members, executive and some members of the traditional board, whose job it is to hold the other officers and directors accountable for a vision of the business in its own destruction. In other words, they become the board equivalent of your Mossad or CIA. And their job is to make sure that they have deep intelligence in place. They are in all the conversations that may be threatening to the business and forcing those conversations to the dialogue table, and then having a formalized process by which the company can react to that. And it's very common. If I told you the number of conversations, you've probably heard them where people say, "Oh yeah, yeah. We tried venture capital, it didn't work." It's like, "Of course it didn't work." None of these are going to work in their totality. The whole point is you have to be engaged in this stuff to figure out how to create iterative models that do work.


It's like saying the first time when you were a baby and you got up, you walked, and you fell, you're like, "Yeah, I'm done with that. I did it once. It didn't work. I'm done." So that's the whole role of the FCOM is to say, "No, no, no, no, no. You fell. You need to get back up for strategic reasons. We're going to help put the plan in place to do that and measure it and change the way we compensate people to encourage that behavior." That's, to me, the role of the FCOM.


Tania: And that's really critical, the compensation piece, but also this idea that you talked to about having someone with diversity and experience at the table, whether that's at the board level, it's at the lower level, it doesn't matter. What do you think it is that folks that have either a startup experience and failure, for that matter, or success coming into large enterprises that have been around for hundreds of years and are trying to change but we know that that's a very slow moving path? How do you feel like those types of folks really help invigorate or create something new for that organization?


Leonard Brody: Yeah, I think when you've had some DNA in a startup environment, there are some lessons you learn. So if you came out of biz school or law school and you kind of went right into the firm or right into Goldman or you went right in the stream, you miss some very important lessons which people who have been in startups understand; which is the importance of pivots, the importance of managing a pivot, understanding how to take a customer base that's doing something and slightly move the trajectory and do that quickly, and do it in a way where you understand the risks of that failure.


So I think part of it has to do with the organizational experience that you bring from having been in a startup environment, especially one that's failed, which is very advantageous, you are far less concerned about that failure when you've been through it one or two times, and you've seen how to manage it, how to pivot around it, how to grow. There's no better experience than having had to shut a company down. I really mean that. Having to lay off people and having to live through that experience is incredibly valuable and motivating to make sure that you don't go through it again. But when you think about affirmative action, it's important to have an affirmative stance to make sure that a percentage of the people in the company have organizational backgrounds from a startup environment. I think it's super critical.


Tania: And lastly, as you give advice and/or support or are a coach to a lot of executives, what's the one common mistake that you continuously see or hear that you want to maybe bring to their attention because sometimes it feels obvious and it's not? What's the one mistake that you consistently see and would provide advice to?


Leonard Brody: Yeah. I think the biggest, certainly in number that I see it, and the repetition is it's much easier to think about what we used to call innovation or this rewrite when times are good. When times are good, you have excess cash, you're not in crisis mode. The biggest mistake I see most boards and officers make is the first thing that goes when the market gets tough is their innovation strategy, or the equivalent of it. So I always say to people, I'm like, "If there's an innovation department in your company," which there should never be, but if there was, they'll be the first people fired in a recession. And I think that is the very dangerous move. Because if you look back, all of the great companies that we see today that are making up the sort of Fortune 200 were started in recessionary moments. Not all, but a significant chunk of them. It's this recognition that when the times are tough, that's when you spend capital. That's when you grow. That's when the opportunities are. You should be doing your biggest experimentation in the down times, not just the good times. And you see that mistake repeated all the time.


Tania: As we end, tell us a little bit maybe about your book.


Leonard Brody: The book is really just a amalgamation of the research and the work that we've been doing around trying to think about what a world looks like in a post-innovation environment. I'm not a big believer that the term innovation is all that useful or helpful. It's a term that meant something 20 years ago. I don't think it means much today. And so what we're really trying to do in the book is to create a framework for executives, or anyone for that matter; teachers, executives, high school students, just anyone who wants to try to wrap a framework around how we got here and where we're going and can take pieces of that framework and say, "Look, this makes sense to me. This doesn't make sense to me." But the main driver of that is the vast majority of what we are experiencing is based on human dynamic, not technological dynamic. And with AI, that may or may not change. But today, the vast majority of this change is human-driven.


And I think when you are thinking about the world and you're piecing together these stories, the most encouraging thing is to figure out how do you serve humans that work inside the company and your customers in a better way by acknowledging that they're not the same people that walked here 20, 30 years ago, and try to build businesses around those persona. And I think that, the whole story of the rewrite, is to try to give somebody that framework to be able to work within.


And the second thing that's really important is humans are terrible historians. We are terrible at context, at understanding that when I talk about this rewrite, this is not something new. I'm not inventing some sort of new theory. We have rewritten this planet several times before. You can look at the turn of 1917 and 1918 as a great example of that rewrite. Prior to 1917, breakfast cereal did not exist. In other words, the breakfast meal was a completely different industry. And the arrival of the breakfast cereal drove a whole consumer foods business, which is what we see today, and the sort of rewrite of the American table and how we ate, and the whole concept of it.


Home ownership. In 1914, less than a third of people in North America owned their own homes. So the concept that home ownership is a thing is a very modern phenomenon. So I think the other angle of this book is to really take a look at historical context to say, "Look, we've been through these rewrites before. How did we respond? What were the likely results? What are likely going to be the similarities and dissimilarities this time around," and try to bake those into a framework.


Tania: Thanks for listening. Be sure to watch highlights from Leonard's keynote talk, The Great Rewrite: Innovation In The Next 700 Days at thoughtworks.com/paradigmshift.


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