Gary Hamel - Leading the Revolution Part 5

In this episode of the Innovation Show, Aiden is joined once again by renowned business thinker Gary Hamel. Together, they delve into the transformative insights from Gary's book 'Leading the Revolution.' The discussion explores how deeply embedded principles of innovation and renewal can help companies navigate and flourish in turbulent industries. Case studies from industry giants like Cemex, UPS, and Charles Schwab illustrate how these companies have reinvented themselves by fostering organizational activism, customer-centricity, and rapid experimentation. Whether you are a leader looking to future-proof your organization or an innovation enthusiast, this episode offers valuable takeaways on institutionalizing change and sustaining growth.

 

00:00 Introduction and Welcome

00:24 Discussing the Book's Relevance

01:01 Gray-Haired Revolutionaries

02:14 Institutionalizing Activism

02:38 Case Studies: Charles Schwab, UPS, and Cemex

03:12 Challenges in Sustaining Growth

06:35 Reinvention and Resilience

12:33 UPS: From Trucking to Technology

22:29 Charles Schwab: Bricks and Clicks

35:04 Customer Sensitivity in Pricing Strategies

35:42 Southwest Airlines' Unique Approach

37:17 Innovating in Media: A Personal Story

38:38 Pro-Consumer Decisions in Companies

40:06 The Importance of Understanding Value

40:24 Apple's Retail Strategy

44:12 Promoting Innovation at Charles Schwab

48:09 The Numbers Game of Innovation

51:57 Cemex: Innovating in the Cement Industry

01:07:27 Conclusion and Final Thoughts

 

Episode Transcript

(00:00):
Welcome back to another episodeof Leading the Revolution.
I thought we'd befinished this book by now.
In fact, I just looked at my notes and wewere supposed to be on Humanocracy now.
Another brilliant book by our guest.
Welcome back, Gary Hamel.
Nice to be back.
Aiden.
Yeah I, don't knowwhether we're just slow.
There was a lot of content in this book.

(00:21):
I'm not sure.
Man, there is so much content.
I was telling you, I'm sharinglittle excerpts to people all over
the world and they're loving it So,relevant, this content, which is
really why I wanted to share it.
This stuff doesn't go outta date.
The names may have changed, butthe theories and the processes
and the frameworks absolutelymore relevant than ever before.

(00:44):
This chapter is an absolute cracker.
Before we talked about changeagents individually inside
organizations, but this is moreabout the organization themselves.
And Gary, one of the things I do toprepare for shows is I pick a pin,
I've bunch of pins in a box over there.
And I picked out the Phoenix this timebecause this chapter is about something

(01:06):
old and you called them gray-hairedrevolutionaries, some organization
that's been in existence for a long timeand has to burn itself up, walk into
those flames, burn itself up and fromthe ashes of what it used to be, gather
what's still useful, and I'll tee youup here to give context to this chapter.
The way you open it is beautiful.

(01:28):
You say Activists shouldn't not needthe courage of Richard the Lionheart,
or patience of job or politicalinstincts of Machiavelli to make a
difference in their organizations.
Sincere, but bumbling activistsoften find themselves outgunned
and outmaneuvered by those who'vesworn allegiance to the status quo

(01:48):
In the Age of Revolution, we needorganizations that celebrate activism.
Is this possible?
Can the fires of revolutionary fervorbe made to burn brightly throughout
an organization rather than onlyin small pockets of insurgency?
It sure feels like that, as you'll seein this episode and in this chapter.
For those people who have read alongor are going to read along, the

(02:11):
answer is a resounding yes indeed.
Unless a company can institutionalizeactivism, it is unlikely to be able
to meet the twin challenges of theage of revolution reinventing itself.
Ala Phoenix here andreinventing its industry.
Three companies are covered in this.

(02:32):
I'm really gonna be testing Garyby, bringing his memory back because
they're huge in-depth case studies.
Charles Schwab, the pioneerof discount stock trading.
UPS.
We know them, but we did not knowwhat they'd evolved from in the past.
And a brilliant company and a brilliantcase study in the book, which is the

(02:52):
Mexican Cement Company, Cemex, and theamazing reinvention that they did there.
Gary, over to you to give uscontext to the chapter, and then
maybe we'll slice little bits andpieces out of those case studies.
Yeah, happy to.
One thing Aidan, I wanna stepback for a moment and, provide,
as you say, a little context.

(03:12):
Whenever you write about a company,I've written about a lot of them,
you are a bit of a hostage to fortunebecause organizations go up and down for
reasons that are often like exogenous.
There's a financial crisis or you havea a a change in the business cycle, or
even you get a change in the CEO mosttypically who comes in maybe with a

(03:33):
very different agenda and undoes a lotof what you may have written about.
I. But if you take the long perspective,I think you need to, the real challenge
is not so much how do you build acompany that forever outgrows, its
rivals, its industry, and so on,but how do you build a company that
is not going to fall into crisis?

(03:54):
We did a piece of research.
I don't think I ever wroteabout this some years back.
I got, very curious I presumablyevery leader, every CO at least of
a public company your, goal is tokind of outperform the benchmarks.
Now very few companies do this andbut in any case that's the goal.
And so I got curious, like howmany companies like, do this

(04:17):
on any kind of sustained basis.
So one of the things, we looked atAiden, we went back and I looked
over several, decades spans.
And I was asking, what's the likelihoodthat a company could deliver top core
tile earnings growth or revenue growth?
Over a succession ofyears, over that decade.

(04:37):
And it's quite interesting.
You know what we foundwhen we looked at this?
I think when we looked at the s and p500 over this particular decade, I think
there were only eight or nine companiesthat had delivered top quartile returns
in as many as seven years out of 10.
And nobody was any better than that.
Now, I haven't run this recently.

(04:58):
It might be a little different.
But it's extraordinarily hard.
Part of this is just arithmetic.
If you are rapidly outgrowingyour peers or your industry
year after year you pretty soon,like you're the whole industry.
So it's kind of a little bitcrazy to expect that in the
organization is gonna outgrow,outperform everybody else forever.
It's simply really doesn't happen.

(05:19):
And what was interesting is when we lookedat the companies that had done that you
found that there's only a relativelysmall number of ways of doing it.
One was you might have been acompany that just has a, big tailwind
behind you and you're at the rightplace at the right time, where.
Maybe companies are spending a lotmore on it or AI or something else, and

(05:40):
that it's just literally a, tailwindthat pushes you forward and you're
kind of right place at the right time.
A second thing might be you're a startup.
You have a killer new business modelmaybe, Facebook in the early years
and you're just literally watchingthat company rule that thing out.
But inevitably trees don't go to the sky.
Curves flatten out.

(06:00):
But that's another way of doing it.
A third way of doing itis that you do a roll up.
And we saw several ofthose over the years.
In fact, in a way that's whathappened in the cement industry.
It got much more consolidated.
So for a period of years, thecompany outperforms everybody
else simply by buying your rivals,consolidating them, and so on.
That doesn't work with really largemega acquisitions, but if you have a

(06:22):
very fragmented industry and somebodyfigures out how to roll that thing
up it's happened in, real estatebrokers and a variety of different,
so that's maybe another way andthen probably the rarest way of all.
Is it a company that's just capableof reinventing itself and reimagine
that builds a new business and so on?
Super hard to do.

(06:43):
So in a way, even when I look atcompanies like Cemex, which you know,
is still a major cement company, I don'tthink their, share price has not been
like, outstanding over the last decade.
But in a world where there's so muchupheaval, simply the ability to kind of
maintain your place in the world and notsuccumb to crisis and not fall off a cliff

(07:07):
is a pretty substantial contribution.
So I kind of wanna make that clear.
Some of the companies I write about,a few blew themselves up, like Enron a
few have gone from strength to strength.
A few have kind of gone sideways,but but that's the fact that some
of these companies are still aroundis actually quite, impressive
and still doing very, well.

(07:28):
You flagged this in the chapter, andI actually saw it because you said
even among the thin, but vaunted grayhairs, the gray haired revolutionaries,
there are no unqualified exemplars.
You said this in the book.
There are no excellent companies,no company has totally cracked the
code of the new innovation agenda.
No company has fully internalizedthe new innovation regime with

(07:49):
its focused on big rule bustingideas and radical entrepreneurship.
But we can learn a lot fromthose who have made a start.
So in a way, you did giveyourself a little caveat to go,
no company can do this forever.
Very few companiesendure on the long term.
So I did spot that, by the way, man.
And, what you find and, we'll discoverthis as we talk about some of these

(08:11):
companies that have reinvented themselvesand done so sometimes in very dramatic
ways that has driven growth and so on.
But even there, what you find isthat often that was the product.
A CEO with a set of really deep values.
And over time that seal leaves, youmay get people coming in who are more

(08:34):
financial engineers, those valuesdissipate and they lose that energy.
Or you may have a company where a seniorteam is set up a particular innovation
process and we'll can talk about someof these that may be very effective.
But again, someone new comes in orthat process runs outta steam or,
the urgency behind it disappears.

(08:56):
And the reality is there's a lot tolearn from these in other companies.
But even there, very few companieshave really worked to systematize
this and to ensure that kind of thatinnovation engine, that reinvention
engine is running year after yearin some kind of a disciplined way.
So often you create a new, an aninnovation team or something else, it

(09:19):
does great work and then you come backa few years later and it's kind of gone.
So I think there's a lot to learnfrom these companies, but still
a lot that, needs to be done.
Maybe one other kind of definitionalthing early in the book I make this
distinction about whether an organizationcan reinvent its industry, which is

(09:40):
what startups typically do and whetheran organization can reinvent itself.
So I see like a new company likeAnduril in the defense industry,
which is truly a pioneer, is, workingon new drone technologies and how do
you deliver force with mass ratherthan just with, or, sorry, through
numbers rather than just size.

(10:01):
Super interesting company very, differentthan a Lockheed or a Boeing or whatever,
and how they think about defense.
Every, industry revolutionary does that.
That's the definition of yourchallenging the way your industry works.
But an equal interesting questionis, can you reinvent yourself
with respect to your past?

(10:22):
And I call that renewal.
Now the, problem is not in the companieswe're gonna talk about the, but the
problem is that sort of renewal,like reinventing ourselves, giving
up the past, moving to somethingnew, almost always happens in crisis.
Where or, after years ofunderperformance, you've gone through
a few CEOs and somebody finallycomes in and says golly we just we

(10:43):
have to change where we're going.
We have to rethink whowe are as a company.
So the goal for me is tobe able to do both, right?
To continually reinvent yourself, butnot after the fact, not belatedly,
not under duress, but at the sametime to reinvent yourself in a way
that really changes the industry.
And as I've, argued before, youdon't produce non-linear returns

(11:08):
with kind of conventional strategies.
So the number of companies who arekind of in that upper right hand
place who are good at both renewingthemselves, creating a revolution in
their industry, I call that resilience.
When you can do both.
It's a, it's maybe the rarestof all corporate capabilities
or institutional capabilities.
I.
I love that.
So it's the three Rs.

(11:28):
There's renewal, reinvention,and resilience all come together.
They're the, three thingsto aim for altogether.
Yeah.
And if you're not capable ofrenewal or revolution, what you're
left with is retrenchment, right?
Which, that is where alot of organizations are.
So that's kind of resilience arenewal revolution or, retrenchment.

(11:49):
And you get to kind of decidewhere in that space you are.
And I love the case studies in thebook, and again, I want to remind
our audience 20 years ago this bookwas written but think as well the
research that was done to get to them.
And Gary, I have to say that I read alot of books and , one of the reasons
I've gone deeper is because many of themodern books don't go very deep, and

(12:14):
it's clear you did extreme research andinterviewed so many different people
in these organizations , which is whythey're such interesting case studies.
I really highly recommend it ifyou're a company trying to redefine
yourself to totally reinventyourself, reinvent your industry.
The case studies really show that.
And UPS, we know what they do today,but when you look back at what they were

(12:38):
and then compare to what they are today,it was a totally different business.
This was pre iPhone, pre-Amazon logisticsand all these kind of companies.
So I'll, set you up, Gary here witha little quote from that chapter.
If you've ever had a cell phonebroken while under warranty, you
will know that you had to do.
All you had to do was call yourwireless carrier and by the next

(13:00):
day a new phone was on its way toyou with a prepaid postage label and
a box to return the faulty phone.
But you didn't probably know that ifyour carrier is Sprint, for example, the
phone sent back to you never actuallywas touched by a Sprint employee.
The new phone came straight from oneof the 500 warehouses at the time and
stocking locations throughout the country,maintained by UPS, and the broken phone

(13:25):
went to a cavernous UPS facility inLewisville, Kentucky, where its service
parts logistics business operated.
A repair operation.
That's right.
Your new phone was brought toyou by UPS, never by the carrier.
I thought that was just anice way to tee us up to go.
Somebody inside that company cameup with that idea and the company

(13:47):
actually brought it all the wayfrom ideation all the way through to
actually existence, which is so, rare.
Yeah, I think that business,that little example there, which
of course is still a business.
I think that got created in,in, in the late nineties about
the time I was writing the book.
I think they now call it SupplyChain Solutions, and it's about

(14:09):
a $13 billion business for UPS.
And one, one of the lessons we're gonnasee here, and we can get into kind of
mechanisms and specifics, but one ofthe things we're gonna see is one of
the most cri and, I might have mentionedthis before, but one of the most critical
things to this capacity for renewaland resilience is to be able to, to.

(14:31):
Reimagine or re redefine your,organization in a way that gives you
a, broader opportunity horizon, right?
What you never want to do is tomistake your company and its definition
for its business model, becausethat may be transient and almost by

(14:53):
definition is gonna have a finite life.
And I think what happened UUPS hadestablished, I think it was called the
Information Technology Strategy Committee,which sounds like one more kind of kango
or whatever but remember this is 1995.
The web is, literally justemerging at this point.
And Amazon has kind of hardly evenexists yet, but it was clear to them,

(15:18):
it was clear to them that this emergingtechnology was going to fundamentally
change the way people moved goodsaround, that it wasn't moving a package,
it was all the information that wentwith that package that allows you to
optimize the supply chain and so on.
And, one of the things that happenedat UPS, and it's kind of an interesting
question for Nico, I may ask, is likehow, over the last decade have you

(15:41):
challenged and changed your self identity?
Because if that hasn't happened, likeyou're on your way to being stuck.
And the, I think the epiphany thathappened, and it didn't happen all
at once, it wasn't like some topdown CEO thing, but as this group of

(16:02):
very young people at the time at UPSspread across the company as they were
kind of looking at what's changing?
What are the implicationsfor our business?
Ultimately the, epiphany came whenthey said, wait a minute, we're not
a trucking company with technology.
We're a technologycompany that has trucks.
And that sounds like a little bit ofwordsmithing, but it's it says no,

(16:24):
what's because for almost a hundredyears, the company had been so
focused simply on getting the righttrucks to the right place and so on.
And what also makes this story a littlebit interesting, as you might expect in a
company that prides itself on-time serviceand so on, they were super top down.
They were super prescriptive.
Like it was, a big move when they decidedthat they, would let drivers decide how

(16:47):
often they should wash their own trucks.
Because before you wash your truckevery day, whether it's dirty or
not, that's kind of dumb in SouthernCalifornia where it's probably
not gonna get dirty very fast.
So it was a very buttoned down, veryprocess driven, and, so to start
to think in these ways who are we?
And is there something else we can do?

(17:09):
That was a big shift, and Ithink it would've not happened.
A lot of curiosity, a young teama leadership that said, Hey,
we're pretty good at what wedo, but what else is out there?
So that curiosity and that ambition.
And so I think and then, and as we'llsee, another theme is they created
the time and the space for reflection.

(17:30):
And most organizationspeople are just so busy.
So you set aside this group madeup of people from across the
company, young people and so on.
What should we be doing next?
And you give them weeks and monthsto think this thing through.
And it wasn't for that team, itwasn't just an intellectual exercise.
They had to power to launch experiments.
And they launched many,experi experiments.
They made small acquisitions.

(17:52):
They set up a venture fund to trackkind of companies that they thought,
you know what, at one point they wereinterested what's the future of RFID tags?
So you take a stake in alittle company just so have the
Campbell's noses inside the tent.
And you could understand,where's this technology going?
How might we use it?
So I think
being alert to how the existing businesswas kind of plateauing creating a lot

(18:17):
of time and space for people to digdeep into what was changing bringing
new voices into the strategy process.
I. Particularly young people.
I think that was the key to,to, their, capacity to reinvent.
This is, now I'm sure today FedExhas a big logistics solution

(18:37):
business, probably DHL does.
So I'm not saying that but I thinkthey did it earlier and they did
it probably with more with more
kind of focus and so on at that timethan anybody else anybody else did.
The other thing you find there isthat, in this process of kind of

(18:58):
reimagining who you are, one adviceI would give to companies try to
redefine your industry or your market.
So it's many, timesbigger than your company.
I, often hear some companies,they're like, we're, market leaders.
I like in what market?
The moment you say that, that'slike an, ambition crushing thing to

(19:20):
say we're, market leaders, right?
We're the, biggest least airline leasingcompany in the world, like Whoopty do.
All right, so now what?
And so you have to constantly challengeyourself to redefine so going from being
a package delivery company, I dunno howbig that business is today, but then you
say no we're, a global logistics company.

(19:43):
That's a $1.5 trillion space.
So I think that's a discipline toevery few years, step back and say,
Hey, how do we redefine our, thespace we're in a way that we're
a relatively small part of that.
And that just as a disciplinething, pushing the opportunity

(20:04):
horizon and ever outwards.
I love that.
I, was thinking about the whole, I I'ma big fish in a small pond and you're
actually red redefining your pond.
Where do I play in a bigger pond?
And it's jumping a little bit to thenext chapter that I won't do, but in the
next chapter and the next episode, we'lltalk about the design rules to get there.
And one of them Gary talks about ishaving the courage to have a stretch goal.

(20:27):
Because when you have a stretchgoal, people imagine differently.
They, because if it's too incrementalyou'll, start to innovate incrementally.
But I wanted to link it backto the book we covered again,
competing for the future.
You, the book you co-authoredwith CK Alad, you and CK invented
the idea of competencies.
And what I thought was interesting,the UPS case study was that they,

(20:51):
they took an inventory of theircompetencies and then they acquired the
ones they didn't have, and then theyjust reinvented the pond to be able to
do more with the ones they did have.
Yeah I don't, think partly because itwas a, fairly concentrated industry
already the option of just going out andbuying a bigger competitor, taking a, big

(21:14):
competitor out of play and putting up yourmargins, I think was never really open to
them and probably a good thing as well.
I'm a big fan of acquisitionsas a way to build capability.
Apple did that when they got seriousabout building their, own in-house
semiconductor design capability.
And they bought a little company,if I remember, it's called Pa Palo

(21:34):
Alto Semiconductor, and you geta nucleus of skills and so on.
And that's, a very different thingthan, two alternative one is acquiring
a big competitor to get, more, pricingpower and or buying a fast growing
startup just so you can kind of plugthat thing into your distribution model.

(21:55):
Like when Coca-Cola maybe buys a, afast growing drinks company that's
not about building new capability.
That's just about addingsomething to the top line.
And, leveraging your distributionstructure is very different from kind
of having a roadmap for building newcapabilities and saying, Hey, there's
some fill-ins we're gonna have to need.
We need some nucleus of skillsand let's go out and acquire some

(22:16):
companies that can help us do that.
And I think UPS, at least at thattime, was super good in doing that.
And we'll talk about that again as we talkabout companies like, for example, Charles
Schwab Brilliant case study here as well.
Charles Schwab I'll letyou describe who they are.
'cause many people over this side ofthe world might not know, but I'll
start you off with a little quote.

(22:36):
And I love, by the way, thechapter titles here I did.
That didn't escape me.
UPS was getting out of the trucka kind of a nod to the idea of
getting outside the building.
And then Charles Schwabis bricks and clicks.
And I thought it was interesting whenyou said that because it was at the verge
of the internet really hadn't taken off.
And we know that term now, bricksand clicks, but back then it

(22:59):
was quite unique to write that.
And at the time, the president,CEO of Charles Schwab was
a guy called David Potro.
And he put it this way.
He said, we are change junkies.
We're addicted to change.
Very unusual for a CEO tosay that born a rule breaker.
Charles Schwab and co led its firstrevolution when it helped to create
the discount brokerage industryby undercutting the steep fees of

(23:23):
traditional brokers such as Merrill Lynch.
And Payne Weber in the secondrevolution came one source, a mutual
fund supermarket that eventually letinvestors choose more than a thousand
different funds before one source.
It was difficult for investors to moveassets between funds and anyone more
than a few and, anyone with more than afew investments received a bewildering

(23:47):
array of statements every, month.
I just wanted to give a bit of contextthere because again, we know now how easy
it is to invest with apps, et cetera, butback then, pre iPhone, pres, smartphone,
it was a very different industry.
Yeah for folks outside of North America,and I think Schwab does maybe have a bit

(24:11):
of a business in the uk, I'm not sure.
But they are, I think now the largestbrokerage company in the United States.
I it might be close with another companycalled fidelity, but they're they're
definitely, probably the largest, theyhave about $11 trillion under assets.
When I wrote this, they had 600 billionwhatever that is, 13, 14 times growth.

(24:38):
And again you find.
A couple of things here and, one isone of the things that has always
distinguished Schwab is just howunbelievably customer centric they are.
Chuck Schwab, Charles Schwab, thefounder, who lives not very far from
me, at least says one, one home notvery far from Wyoming, Silicon Valley.

(25:02):
People inside, at that time I wrotethis, said we almost never heard
our CR founder talk about growth,about profitability, about margins.
The guy was always talking aboutcustomers and, they had this passion
for helping people accumulate,manage, secure their financial lives.

(25:24):
And, I heard this story, I don't thinkit was apocryphal that Chuck Schwab
would once a week go serve in a SalvationArmy soup kitchen and, handing out soup.
And, one of his thoughts was.
Maybe if these people had morehelp earlier on in managing
their financial lives, maybethey'd be in a different place.

(25:45):
So I think there was and customerempathy was one of their deep, kind
of deep values because a hu a hugelypowerful engine, again, for innovation
and a way of escaping the prison ofyour existing business model is when
you really say who are these customers?
How are their needs changing?
What else can can we do for them?

(26:05):
And that's one of the reasonsthat, that UPS ended up getting
into repairing electronics and
and the service business because they had,I think they had invited in Michael Doll
and some other, computer companies to cometalk to them about what's happening in the
world of information and data and so on.

(26:27):
And they started going,Hey, wait a minute.
All you guys, all you different companies,you all have this huge repair operation.
It's really not your core business.
You're not very interested in it.
Often you're using the same spareparts, the repair things, the
same chips, the same whatever.
Like why can't we take this off?
But that, happened, that insight camefrom a deep dialogue with customers.
And

(26:50):
if, you are constantly learning froman understanding your customers, the
needs, the frustrations one, one ofthe things that we do in a that, we
do in a lot of our consulting workis we build a kind of empathy map.
And If you, can think of for a moment,Aiden, if you think of a whole menu
of human emotions, so you know Yeah.
You have good emotions, Ifelt empowered, I felt heard.

(27:13):
I felt respected.
I was pleasantly surprised.
And then you have an, like anegative set of emotions, right?
I felt discouraged, I felt ignored.
I felt whatever.
and and then you could thinkabout every stage of the customer
interaction, you start to ask whatare the emotions that were triggering
at every stage of that process?

(27:33):
And again, very few companiesdo that kind of systematic
kind of empathy mapping.
And it means you have to be outthere living with customers.
It's something we'llsee happened at Cemex.
And you have to spend timethere and you have to train your
employees to be very attentive toemotional cues from their customers.

(27:54):
And when they see somebody like thatlooks perplexed or frustrated, you go
Hey can, you tell me what's going on?
Did, we not rather than havingsome stupid phone survey at the
end we're going to text you back.
Like, how do we do today?
No, I want you to listen to me, and thenI want my frustrations to go somewhere.
So I think that is, again, somethingcommon you see to all these companies who

(28:17):
have reinvented themselves is they justgo deeper and deeper and broader in terms
of understanding standing their customers.
And, for Schwab, that was quitea transition because early on,
Charles Schwab is really orientedto very sophisticated investors.
So they basically letyou trade for yourself.

(28:38):
They didn't think youwould want any advice.
And then over time they realized,hey, most of our investors
are not very sophisticated.
And so that rather than say, Hey,that's not our market, we deal with
only kind of very sophisticatedself kind of managing investors.
They said, no, we gottafigure out a way to help this.
So you build a big network of financialadvisors that can help do that.

(28:59):
You build 400 branches in theUnited States so people can
actually they know where to go ifthey wanna talk about their money.
And so that was merging the bricksand clicks in a way that pretty much
nobody else was doing at that time.
So I think yeah I, think again, supersuccessful company, one of the few

(29:20):
that you can go back and see pivot.
And, also several of them, Aidan,were ones that would potentially
cannibalize their business.
So when they when they went from beingpretty much phone based and they would
execute a trade for you and chargeyou for that once you go online.

(29:40):
And they had new competitors at thetime that people thought were gonna
take 'em out of business or at leastchallenge 'em, E-Trade, which is
another online trading platform.
And there was a big debate insideSchwab because when you mo when you,
know, when you believe that everybody'sgonna be online you kind of have to do
it, but at the same time it was gonnacut their trading margins by, half.

(30:03):
That's a really, gutsy thing to do.
And so it's recognizing thatsomething is inevitable, right?
Everybody's gonna trade this way.
Nobody's gonna wanna be sittingout, everybody's gonna okay.
And yet, like the people we'recompeting with have much lower
prices 'cause there's less overhead.
So what do we do?

(30:24):
And a classic kind of a disruptiveinnovation in that sense.
And the only thing you can do isyou gotta follow your customers.
And I think in other companies,we're not so fast like Merrill Lynch
and others, but these guys said,you gotta follow our customers.
And, and, we don't want to createany opportunity for somebody else
to fulfill a need that we havenot filled simply 'cause we don't

(30:44):
have the guts internally to do it.
That was a really toughthing for them to do.
Similarly when they built this likesupermarket of, mutual funds and so on.
They charged a fee for theircustomers to have access to this
large group of mutual funds.
And, at some point they realized itwas more expensive to do business with

(31:06):
Charles Schwab than go directly tothese other companies and buy the fund.
They said we can't do that.
That's not sustainable.
So again, they had tochange their pricing model.
And you you have, to have the couragesituation to believe that if you follow
the customer, if you give them what theyneed, if you worry more about that than
the short term margin hit, will pay off.

(31:30):
But there are times, and that's afairly substantial act of faith.
But, if there's a better technology,if somebody's doing something to change
the economics of the industry in a waythat benefits customers and you're not
in front of that ul ultimately you lose.
And I think they understood that.
So they had, they they had the gutsto to, move earlier than I think

(31:51):
most of their competitors did.
Gary, that, that thing on fees, so thecourage to get rid of fees or be proactive
in getting rid of fees or be the one thatdidn't charge fees in the first place.
It made me think and loads of yourbook has sent me in many different
directions where I write a weekly article.

(32:11):
I've loads of them in draftnow after reading your books.
But I thought about this and I, theworking title is the Late Fee Effect
and how, for example, John an Yoko,the guy who was running Blockbuster,
wanted to get rid of the late feeshe got then ousted by Carla Ican,
but also here you have somebody inSchwab wanting to get rid of them.

(32:34):
made me think about, one of the thingsI'm ashamed about being Irish is Ryanair.
If you've ever, if you'veever traveled Ryanair, you'll
know what I'm talking about.
All the hidden fees and theextra fees that they charge.
And sometimes you'll go to somewherelike a Disneyland or somewhere that
and they'll charge you all thesehidden fees and it creates this

(32:55):
resentment in you and you feel likeliterally like a captive customer.
And I wondered what, your thoughts onthat were, because that willingness
as a leadership team to go, I knowthis was a revenue stream, but it's
extremely uncomfortable for the customer.
We need to have thecourage to get rid of it.
It's a really tricky thing, and Idon't think like so many things in

(33:19):
strategy, I don't think there's athere's like a rule here that just
tells you which way to jump on that.
Because I. Let, me, use an analogyand then let's come back to Ryan Air
which, by the way, I've never flown on.
Lucky you, Gary.
I've never been keen to do it.

(33:40):
But, having said that let me, giveyou a counter example, which kind
of makes the point there, thereare no simple rules and strategy.
So I look at the cable televisionindustry here in this country.
I don't know exactly how it workselsewhere for years, the way that industry
worked, you paid a monthly subscription.
It could be quite high, it could be like ahundred US dollars, and they gave you this
huge bundle of programming and channels.

(34:01):
And the dilemma with that is you paidfor a lot of stuff you never watched.
So I believe at one time the average cablecustomer in the United States, I'm gonna
pick a number that's more or less right,but please don't, somebody kind of hold
me on this, but I think the average cableTV company was paying about $6 a month.
For a set of, sports relatedchannels called ESPN, which

(34:24):
had several different channels.
Now I watched sports but I've neverhad ever watched anything on ESPN
and yet I'm being charged $6 a monthand I can't do anything about that.
And what happened over time the cablecutters, we started to unbundle that
and now, or bundle it in different ways.
Right now I can go to YouTube TVand they have a particular bundle

(34:45):
of channels, but it's much cheaper.
They have more options and so on.
You wanna be very careful if you have amodel where some subset of your customers
is paying for things they aren't using.
'cause that's an opportunityfor some somebody else to
come in and cherry pick them.
And pull 'em.
So it's hard to make a rule.
If I look at Ryanair, you gotta ask,I'd ask a couple of questions like,

(35:10):
are, customers happy with this?
Are there, are theyhappy that it's a menu?
Now, obviously we'd all like morefor less, but they're happy that
they only pay for what they useor they find the whole thing.
Does it feel like, to use anAmerican expression, they're being
nickled and dimed, like at everytime you turn around there's some
little hidden fee or something else.
So you have to be really sensitive todoes this feel empowering to customers

(35:32):
and thank God I'm not paying for that.
Or does it feel that we'retaking every opportunity to
get back into their pockets?
An interesting little story aboutthat Southwest Airlines, which has had
difficulties in the last few years, butit's still one of the top two, I think

(35:53):
most admired airlines in the UnitedStates, despite being a discount airline.
For years, and it still exists.
They have a policy of allof your bags fly free.
I guess up to two, you can'ttake it in your bags, fly free
wherever every other airline nowcharges you something for that.
And they got a lot of pushback fromsome of their investors who are saying,
Hey, you need to charge people for this.

(36:14):
And somebody modeled out likehere's if you charge 30 or $50
a bag, here's what you get.
And So the people at Southwestsaid, yeah, that's interesting.
But instead of doing that,they instead launched an ad
campaign reminding passengersthat on Southwest bags fly free.

(36:36):
just that advertising campaign added abillion dollars to their market value.
Or no, sorry, to market valuerevenue, I can't remember.
But, just reminding people ofthat fact had a big uplift.
And so the CEO said theinvestors were right that bag
policies makes a difference.
They're just wrong in how to go about it.
So there's not a simple rule here, butyou do have to constantly balance to

(37:01):
what extent does this move make lifeeasier for customers or more complicated?
it empower them or piss them off?
And if you're pissing 'em off, you'lldo that only so long until somebody
else figures out a better model.
My first job after rugby was in media,so digital transformation for a media

(37:23):
company, and we were one of the firstradio stations to do audio pre-roll.
So before you, when you turn onthe app, a little ad would play and
it was a brand new revenue stream.
There was no mass distribution of the.
This yet, but the amount of pushback,like I was the guy who brought it in and
I knew it was terrible user experience.
And I was like going, because the,with any early innovation, you're

(37:47):
only making small money at the start.
And it was one of those thingswhere , the sales guys hated me
because they saw it as cannibalization.
The marketing people hated me.
The programming people hated mebecause it was like affecting
programming and , therefore theythought the audience numbers.
as an innovator, you're like goingit's the future of the company.

(38:09):
Mm-hmm.
start somewhere.
And today it's everywhere.
It's omnipresent this idea.
But it was one of those ones where ifyou're the innovator, sometimes you're in
these situations where you're like going,yeah, I know it's gonna be uncomfortable
at the start, but that's the future.
And I just wondered, had yany observations on that from

(38:29):
Yeah,
worked with?
I, do I think when you seesomething, you, a development or
an idea inside of your company.
That is fundamentally pro-consumer.
You have to be really carefulbefore you reject that.
And, one of the problems is so manydecisions there, there are many
decisions inside companies that touchthe consumer, but are made by people

(38:54):
who know nothing about the consumer.
Let me give you one or two examples.
So this goes back quite a few years.
I was talking to a senior groupat a big American car company.
And at that time and maybe but Hondaand Toyota were growing much faster, and
they actually had better than technology.

(39:15):
O obviously Honda's had thisreputation for making some of the
world's like best powertrains.
They've been in Formula One.
And so at this time every Honda fourcylinder car had 16 valves and overhead
cams and so on, just made it run reallysmoothly, high revving, beautiful engine.
And on the back of every Honda,there'd be a little like thing
saying 16 v 16 valves, whatever.

(39:38):
Or, and so I asked I askedthis group of guys at Ford.
I said guys, why don't youeven make an engine like this?
And they said to do this would costus $69 to, add to double the number
of valves in the car from eight to 16.
And I thought, I said, okay, I get that.

(39:58):
But every kid who's buying one ofthese cars the, enthusiast, they'll
pay you $250 more to, have that.
And, and obviously this decision wasbeing made by some cost accountants
and manufacturing had no senseof and, I and, you see this over
and over again, people understandcost but don't understand value.

(40:22):
I'll give you another example.
I. If you've been inside, I dunno whatthe, Apple store looks like in Dublin, but
around the world, there's some obviouslyvery iconic Apple stores, the one in Fifth
Avenue for sure, there's the one in Dubai.
But in general, they'rereally amazing cool places.
And the one in Chicago, which youknow, is just this huge piece of

(40:44):
glass right along the river and so on.
So I've often asked people in retailingand so on, could you ever get a
store like this through your CFO?
'cause clearly this is not thecheapest way to build retail space.
And the answer's no.
And, I say, yeah, so whywould Apple spend this money?
Because they want you.

(41:04):
And in fact
Rob, Johnson, who I've met,he's a nice guy lives nearby.
He was the first CEO of Apple retail.
And I'll get this quote wrong,but he said we wanted to build
something that felt like a publicspace, like a gift to the community.

(41:25):
And and, so they were trying to createan emotional connection, a bond, whatever
that made customers more likely tobuy, made them more loyal and so on.
Is it easy to put dollarsand cents on that?
I don't think so, but if youlook at their margins, I think
it's like doing pretty well.
So you also have to be super carefulabout having decision making processes

(41:51):
where people, as I said, people are makingdecisions that impact customers who are
actually not out there who, do not havea real understanding of who these human
beings are, what motivates them, and
it's interesting.
I'm gonna see if I can conjureup another example here.

(42:14):
If if you think about the words thatare important to us as human beings
words like beauty and authenticity andtruth and whatever, these are words that
hardly get used in most large companies.
Steve Steve Jobs would talk about beautywe wanna make things that are beautiful,
that are lovely to hold, lovely to touch.

(42:34):
And so I just think that gets lost.
I, see it in, in the call centers wherewe save a few dollars per transaction by
putting something in India or somewhereelse, and it's hard to understand and
they don't have your details and whatever.
Okay?
Somebody made a decision to save a fewcents without any impact on how that,
impacts your customers.

(42:55):
So I think that's one thing you alsosee here, the courage to innovate, the
courage to challenge yourself comesfrom, Hey, this is undoubtedly the
right thing to do for our customers.
And so it's up to us to figure outthe economics to make that work.
Rather than say like tough they justhave to live with that frustrations.
Suck it up.

(43:16):
We, by the way, we don't havean Apple store in, in Ireland.
Oh,
Yeah, I know.
It's, a big, I know we have a, Iwas just back from, I was doing
a talk in, Vancouver and thereis this stunning one over there
near the art gallery in Vancouver.
It's absolutely beautiful, but Iactually obs, I was like going.

(43:36):
We don't actually have one.
We have, they outsource it to acouple of different companies, but
they're not beautiful pieces of art.
No offense to those.
Anybody from Apple that's listeningyou guys need to solve that.
You, run a lot of yourfinances through Ireland.
I think they deserve a store.
Yeah And, the factorythen in Cork as well.
It's it's,

(43:57):
yeah.
Yeah.
So I'll come back to, because thatidea of get outside the truck.
And get outside the buildingis very relevant to Cemex.
But there was one last thing I,a couple of things I just wanted
to pull on and Charles Schwab.
One was one of the things you identifiedhere, which was early for this as well,
which was the innovation meritocracy andyou, interviewed a few different people

(44:22):
inside the company who were now VPs,actually were rewarded because they came
up with ideas when they were younger andthe company fast tracked them as a result.
And I was thinking about the psychicreward of that, let alone get becoming
a vp, but other people observingthat and going, what the heck
Jenny from HR got, she's a VP nowbecause she came up with this idea.

(44:46):
The idea was implemented and now she'sgetting recognized beyond belief.
I thought that we're literallyputting your money where your
mouth is showing behavior andrewarding people who risk things.
No, I think, yeah super, important point,not only in fast tracking those people,
does it send a very powerful message.

(45:07):
This is how you get aheadin the company, right?
You don't get ahead bymanaging the status quo.
You don't get ahead by sucking up.
You get ahead by championing a new idea.
Seeing it through that makes a difference.
It also means that, as, those peoplegrow up, hopefully they understand
what that experience was like.
They wanna mentor those youngercareer people who may be

(45:28):
trying to do the same thing.
And you have, and again, I dunnowhether this is still true at Schwab
because again the generations change.
But but it makes a big differenceif, the leaders at the top are all
innovators, if they've all builtsomething, if they all come up with ideas.
If it's not what I call an aristocracyof administrators and and a lot of

(45:49):
companies, I, that is not the case, right?
You have a much moretraditional career path.
It's mostly about ticking the boxes.
And so you end up with peopleat the top who really have no
experience in building something.
There, there was this book I'mgonna forget the author, but it's
about Elon Musk building Tesla,and it's called Power Play.

(46:10):
And whatever you think of Musk, and he maybe somewhat in the process right now of
blowing up America's federal government.
We'll see how that plays out.
But the reason I would encourage everysingle manager, leader, vp, SVP to read
that book is it gives you some senseof what it takes to build something

(46:30):
new when there's a lot of headwinds,a lot of things working against you
because the persistence, the couragethe sacrifice in some cases, the
ruthlessness that you have to haveis not something that gets rewarded
or selected for in most companies.

(46:52):
And yet, if you wanna keep movingforward, these are some of the
personal traits you have to have.
So that's just a little recommendation.
Anybody listening, watching,go out and find this book.
It's called Power Play.
It's by a Wall Street Journal reporter,and we'll see what happens to Tesla.
But super interesting story about whatit takes to actually build something.
And so at Schwab, they hadtried to promote people who at

(47:14):
least, were, trying new things.
And high highly, recommended, I would say.
One last thing on Schwab was the rapidexperimentation and prototyping because
you mentioned in here as well, likethe leaders you in, you interviewed,
and again, I just wanna remind people,late nineties when Gary did these this

(47:37):
research and interviewed these people.
'cause we hear today about fail fast, failoff and fail inexpensively, et cetera.
But Gary did this work back then,and Schwab were talking about it
because they were saying we knownot all of the ideas will work.
But the ones that will, pay forall the ones that didn't work.
And I've heard people like Jeff Bezosay that today in recent interviews

(47:59):
recent enough in the last decade,Schwab were saying this two decades
ago, which I thought was fascinating.
Yeah.
We, may, I may have said something likethis before, but I think it's important
innovation is always a numbers game.
I, look here in Silicon Valley,it's not where I'm right now, but

(48:20):
where I live most of the time.
And a, a VC company will get a thousand,let's say a thousand business plans.
And they might have meetings witha hundred of those prospective
entrepreneurs and might investthen in 10 of those firms.
And maybe one becomes, huge breakout.
But it's those kinds of odds, right?

(48:41):
You kind of go a thousand down toone and and you can get kind of
better over time at picking out thewinner so you don't end up with,
too, many losers, as I like to say.
You have to be able to distinguishbetween ideas that are smart, stupid,
and not just stupid, but nevertheless,like there's no way around that.
And I think I think Amazon realizedthat coming out being a startup

(49:05):
and understanding a little bit ofthis process, you understand that
I have to recreate somehow thatin my own organization, right?
I need a process that's generatinghundreds of thousands of kind
of Strat lets mini strategiesbaby strategies every year.
Then we'll try to look at the bestand we'll kind of ramp them up
and we'll experiment and so on.

(49:25):
And so I think Schwab also a rule breakerthey had that kind of ethos as well, that
we just gotta be trying more things fasterfor less money than, our competitors.
And there's literally, I don'tthink there's anyway around that in
northern California where I live, ifyou walk out under you take a, walk.
We have a lot of live oaks there.

(49:45):
They call them California Oaks.
And you'll see hundredsof acorns on the ground.
And you go that's prettywasteful of nature, right?
Like, why are you spreading it?
What, they're eaten by squirrelsor they rot out, whatever.
But every once in a while, somebodysome, of one of those acorns finds a
per perfect combination of sunlight andmoisture and soil and it germinates.
And we're, a littlesmarter than oak trees.

(50:07):
But it's the same arithmetic, right?
If the oak tree does not know where thefertile ground is, and often at the top
of the company, you do not know wherethe next idea is going to come from.
So if you're not creating thatkind of ecology of new ideas and
supporting 'em in some way, likeabsolutely you miss the future.
And and in different ways, everyone ofthese companies had a way of doing that.

(50:28):
Everyone valued newideas, knew we had to try.
A lot of them were willing to experimentacross the organization, not just isolated
in one part, but across the organization,within the core business and without.
Yeah, it's just that's, aninescapable arithmetic, right?
It's it's like theprocess of co procreation.

(50:50):
I don't remember how many million spermset off in search of the egg, but, we'd
all no We, just one, just find the egg.
I don't want all this waste.
like, life doesn't work that way, sowe just kind of have to recognize that.
But very few organizations, I think theymay say these words, but very few have,

(51:13):
the systems, the processes, the freedom,the time, the incentives for, that kind
of early stage, very expansive ideageneration and testing to take place.
sometimes I have empathy forthe leaders of businesses.
It's tough work.
It's really tough work.
It's that saying, I think it was JimRohn, do you want to suffer from the

(51:34):
pain of discipline or the pain regret?
And in a way it's that kind of decision.
It's like going I could be theone who eventually leads to the
downfall of the business, or Icould be the one that reinvents it.
Oh, it's way easier just to ride outto my retirement and not do much.
I like you see with footballcoaches or whatever.

(51:54):
But Cemex is a brilliant case study.
I absolutely loved reading about them.
I'll tee you up again, Gary, with a littlebit from the opening chapter of this.
If there were any questions aboutwhether adversity breeds creativity,
Gary says, don't look any furtherthan Monterey, Mexico where the

(52:16):
headquarters for Cemex was or is.
I'm not sure if it's still there.
The country's most innovativemultinational cement producer,
the cement producer isn't the mostobvious place to search for examples
of revolution and renewal, but thenagain, neither is Mexico, but Cemex
is no ordinary clinker as the thirdlargest cement company in the world.

(52:37):
At the time, Cemex enjoyed operatingmargins that are nearly twice as high
as those of its two global rivals.
Again, this content probably outta date,but just to show you what it was like
then in 2001, a tough year in general forthe world economy, Cemex sales managed
to expand a healthy 23% to $6.9 billion,

(52:57):
cemex is proof positive that new attitudesand new values can change in old industry.
What I loved about what you said aboutthem, Gary, was that they literally
got beyond thinking that they were acompany that sold bags of cement, and
they did it in a wide range of things.
Learning was at the heart of it.

(53:19):
Yeah.
One of the things one of the criticallessons to take away from, that timeframe
that I looked at Cemex, again, I can'tspeak for what has happened since, but
it's a proof that there's nosuch thing as a mature industry.
And that digital technology, whichdid play a very important role

(53:39):
in Cemex, but digital technologyis not the only way you innovate.
I've, been trying to collectstories and I'm gonna forget them.
I've written them down, butI'm very I'm, super interested.
I. In companies that reinventwhat look like mature industries.
We talked about Lululemon inathletic clothing where you'd had
Nike and Adidas and so on forever.

(54:00):
Or I think about a company here inthe United States called Athletic
Brewing, which does zero alcohol beers.
And I, think they're probably numbertwo or three in that segment now up
against the big majors because theyjust, they said, this is gonna be real.
We're gonna, we're gonna build, we'regonna try hundreds and hundreds of formula
and try to find the one that's like thebest tasting kind of non-alcoholic beer.
And and you take this hugelymature industry or I look at

(54:24):
Wayfair or whatever and furniture.
So like never think there's a lotof mature thinking, and particularly
in mature industries because therehasn't been much change there.
But there's no such thingas a mature industry.
And if you can innovate and cement likenobody else has an excuse, I think.
But again you, see some similar thingsthat cemex some different things.
Certainly they have a strong.

(54:48):
They, they were very early to understandtechnology and in the cement industry it
was kind of very backward in that sense.
And one of the things they used technologyearly on for was not so much like gaining
more control although that was part of it.
So you can actually understand what'sgoing on in every cement plant, which
historically had their own IT systems andyou talk to them by phone or whatever.

(55:08):
And in Mexico at the time, luckyeven if you were able to do that.
So they were certainly the first in, inMexico, maybe the first in the industry
to kind of tie all these plans together.
And the real benefit of that,Aiden wasn't like, okay, now I
can watch from the center and seewho's screwing up the real benefit.
They made that transparent to,everybody across the whole company.
And so you could very quicklysee where you weren't as good.

(55:31):
So a across multiple criteria,like how much are you paying
for energy, for human costs?
What is your quality?
You could see, or for labor, you couldsee all of These These metrics and you,
ab you very quickly knew where you stood.
And I think in as a way of provokingimprovement transparency and

(55:52):
peer pressure is like, there'sprobably nothing better than that.
So they were very early and thatdrove their, pace of improvement.
They also invested, and I think thisis important today, is then they
invested very heavily in creatingface-to-face meetings and networks.
And so at the time and I'm, theyprobably do this now virtually, but at

(56:12):
the time they were bringing togetherall of their plant managers from around
the world every month in a physicalplace where you could share like
what's working, what's not working,where are you running into trouble?
And, not only that, but you are buildingthese lateral personal relationships,
which means if I have a questionfrom him, Hey, I know that Ignacio
is doing something really amazingin Guadalajara, let me call and see

(56:34):
what's going on there and see if likehe can sense somebody up to help me.
The pace of improvement ismuch faster when I don't have to
go up and ask for help, right?
When, I can connect to other peoplewho are leading whatever it is across
the organization, I can learn themvery fast, copy them very fast so
that was a big investment as well.

(56:54):
Another thing you see there that you sawdefinitely at, both UPS and, Schwab was
really, deep sense of who the customer is.
And a lot of theirinnovation came from that.
They were very concernedabout how do you help people
poor people build housing.
And so they actually sent a teamof mid-level and younger folks out

(57:18):
to live, literally live for a yearin one of the poorest parts of
Mexico, and understand what's thehousing challenge for these people?
And they learned that one, one of theways people accumulate a little bit
of money to, to build a first littlefour walls or a little extension.
Was you had these community lotteriesmostly run by women, where a family
would contribute a little bit of moneyevery month, and then all of that would

(57:40):
be paid out to one of the families.
And you keep running that littlesyndicate until every family had,
so it was, kind of like a communitysavings plan, and they felt Hey,
we could help them do that better.
We can put the systems in we canmake it, make sure it's done in a
fair and equitable way, and so on.
And you would've never discoveredthat without kind of like

(58:01):
being in that environment.
'cause the people, the seniorpeople at Cemex and whatever they,
didn't live that kind of a life.
And so they, created something calledPaton Hoy, which is this little way of
helping people save and build houses.
And I think thus far, they've, I thinkit's now about 25 years old, and they've,
served 600,000 families in that way.

(58:23):
They also realized, again, by really.
Following the customer,wherever that goes.
And understanding,
not, being an order taker.
They understood that a lot ofthe money for families to build
houses in Mexico came from Mexicansabroad, repatriating their earnings.
A lot of them in the United States.

(58:44):
And typically there were very hightransaction costs on doing that.
You'd send money back with the intentionthat your family would build a building,
they might have a party instead.
You had no control over that.
So they created another business.
I, think it's Conex, I won't remember,but where they would help that person
in the us transfer money in at avery low, cost, help them specify the

(59:07):
materials that were going to be needed.
Then those materials willbe delivered to your house.
And and when you're gettingcement and not a Corona beer, like
there's not much you can do exceptbuild the damn like extension.
You saw example after example of thatat Cemex, we like let's just follow
that customer need wherever it goes.

(59:29):
We're here at the end, but letus make it as easy as we can at
every stage of that interaction.
All the way back.
UPS they, built a kind of systematicgroup that was responsible for,
kind of being a magnet for new ideasacross the company and experimenting.
I think the other thing, one thingthat Cemex was doing at that time,

(59:52):
which I didn't see at UPS or Schwab.
Is every every year they would havea new set of company-wide challenges,
like really difficult questions likehow do we make housing easier to, for
poor people?
Or how do we dramatically shrinkthe time it takes to build

(01:00:14):
something with our cement?
Or how do we help contractors getaccess to the equipment that they need?
And so every year there'd bethree or four of these challenges.
They would invite ideasfrom across the company.
They would pick the very best of these.
They'd go out and experiment with them.
And I think, we often thinkabout the strategy process is
about like making decisions andsetting directions and telling the

(01:00:36):
organization where we're going.
I, it seems to me like the top teamevery year ought to be and maybe you
definitely need to ask around first, butfind three or four really provocative
challenges that you know if you can solvethem, are gonna help you grow and expand.
and source those to the organization.
And Cemex was very good at doingthat in a disciplined way, getting

(01:00:58):
ideas back, evaluating the best,getting teams built around them
and going and running experiments.
So again, their pace, at least at thattime, their pace of experimentation
I think was probably faster than theother cement company in the world.
Gary I, loved the way Cemex thought.
They thought as an organizationand there was a, you listened to

(01:01:19):
the, CEO at the time in a Stanfordspeech, and at the time when you
wrote this, more than 74% of theirsales came from bagged cement powder.
So I was thinking about how you'reyou're running a company like this.
You have a wide range of education,more some more open-minded managers on

(01:01:41):
these different sites all over Mexico.
Somebody says, we're gonna spendthe equip millions back then,
I suppose, on an IT system.
And if I was a franchisee or I was likeone of these guys running a site, one
of the seme factories, I'd be like.
What a waste of money this is.
I can't believe, , senǒr ismessing with spending money on

(01:02:01):
stuff that we shouldn't be in.
And you have the equivalent ofthat all the time inside companies.
But what I loved what you told us hereabout Cemex was the bags of cement
were typ typically sold to smallconstruction supply stores where cement
makes up about half of their business.
Cemex selected a thousand ofthese distributors outta 4,000 in

(01:02:22):
the country and started wrappingvaluable services around it.
Cement.
Their goal at the time was tocreate competitive differentiation
for something that is a commodity.
Said one of the executives youinterviewed, it may sound strange to treat
cement as anything other than a commodity.
But then Gary says, does anybodyfault Perrier for treating water

(01:02:44):
as something more than H2O?
And there's, many more thanPerrier today, what I thought
was really, interesting was.
They didn't just go andlive with customers.
And again, this is another articlethat I started writing and I,
said, get outside of the building.
And I, it was that nod to that quoteabout get outside and meet your customer.

(01:03:06):
But it was like get also out of yourhead that you're in the building game.
So as some cemex get outside there.
of the companies, one of thepeople they met was a contractor.
And the contractor said, you know what?
Winning government contracts tobuild low cost housing is actually
a great way for me to make money.

(01:03:26):
The problem is trying to get peoplefor long enough because by the time
I get this that I can build the comp,the, these houses, and then by the
time I construct a team to build it.
Too much time has passed and what, becauseof that conversation, they created these
molds and the molds, then were able toinstantly create pre-fabricated walls or

(01:03:51):
ceilings or whatever it might have been.
I thought that was just absolutelybrilliant case study of this and something
that you see all the time with companiesyou work today in the modern day.
But maybe you wanted to say something tothat kind of mindset in not just Cemex,
but in other companies you work with.
Yeah, I think

(01:04:13):
it is this kind of justperpetual opportunity mindset.
I don't know, I don'tknow how to describe it.
Other, yes, it's, it's being super attentito the unarticulated customer needs.
It's looking at anything that makes itdifficult for your customer to do business
with you and tackling that you know,which they did helping people repatriate

(01:04:34):
funds and, get building supplies.
But it's just a way of, it's, Ithink it's just a way of being.
Where you wake up every day saying Hey,I live in a world where like amazing
number of interesting problems to solve.
What can I do?
We're, and it's it's kind of the oppositeof kind of this static view of this is my

(01:04:56):
business and this is what I'm going to do.
One of the analogies I've used,it's maybe not a very good
one, but I'll, use it anyway.
I, think a lot of people in business, theythink of their business like a, little
farm and I have my 40 hectares or acres orwhatever it is, and I plant every day and
I harvest, and I hope for rain and so on.

(01:05:17):
And it's, but it's a very staticthing that's not, and and over time
maybe the soil becomes depleted orpeople don't want that crop anymore.
Or the EU says you can't growit, or I don't know whatever.
But that's the that's my plot of ground.
That's I think maybe you shouldbe more like a shark where
you can never stop swimming.
You're always moving to findwhere what you can consume,

(01:05:42):
what you can eat, and so on.
But it's not static.
And I think, I don't knowwhere that comes from.
Is that a personal trait?
Is it something Certainly, I think youcan encourage it in our organization,
but I, the, the other thing I would sayabout Cemex, and I suppose this is maybe
today you not a very interesting thingto say, but none nonetheless, I think

(01:06:05):
what Cemex understood 25 years ago, Ithink what higher understood 25 years ago
or believed you can build a world classcompany anywhere in the world, right?
And
geography is not destiny.
Industry is not destiny.
You can build an innovative, fast growing,amazing company in any part of the

(01:06:26):
world today, part because technology isvery mobile, knowledge is very mobile.
When And I think the, fastestgrowing automaker to to, to a
hundred million vehicles in history.
You They were flying in engineers fromToyota every weekend to help them.
So, I'm told I any firsthand knowledge,but I was told that so yeah, do not let

(01:06:50):
your geography or industry, whatever, be a
put a ceiling on your aspirations.
And I can tell you, being a smallrelatively small company by global
standards in Monterey, Mexico and say no,we're gonna be like the best manage, most
innovative cement company in the world.

(01:07:10):
They had no right, you would sayto think that way, but they did.
And so that's,
we'll, maybe talk about itwhen we talk our next time.
But, it's, kind of tautogical, but noorganization outperforms its aspirations
Beautiful way to finish.
I was gonna, add to it, but I'm not gonnait 'cause I love the hope in that message

(01:07:33):
gary, and I've taken enough of your time.
I'd loads more in that chapter, but I'mgonna leave it to you, the audience to
read that for yourself because there's alist of routes to renewal that Gary gives
as well roots to be able to get there.
The one thing I did like about theCemex story was the CEO says, you
know what, one of the things iswhen you're from a poor country
like we are, you gotta work harder.

(01:07:55):
And that's what I find thathustle, that desire to hustle,
because you're not complacent.
Gary, for people who wanna findyou, find out more about your
work, keynotes, et cetera, where'sthe best place to find you?
Gary hamel.com and anybodycan drop me an email.
I'm just Gary at gary hamel.com.

(01:08:16):
So yeah, happy and find me onX at Prof, Hamel on LinkedIn.
Always happy to have a conversationhear what's on people's minds.
I
Brilliant Gary.
And again we'll try and wrap it up.
Try and wrap up leading the revolution.
I'm loving it.
I'm hoping I'm not boring you, Gary, byrevisiting your old work, because I have
loads more to get through behind therefor people that can see us on the, video

(01:08:39):
here, author of Leading the Revolution,Gary Hamel, thank you for joining us.
thank you very much, Aiden.