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cliff redeker: so today, we'reextremely thrilled to bring brian klapper here to google. he is the founding partnerof the klapper institute. he's the author of the bookthat we're listening in on today, "the q-loop: the artand science of lasting corporate change". and over lunch i had a reallygreat conversation with him, and one of the things that wepicked up upon is that change is something that allorganizations face as they
increase in years andincrease in size. and really, adaptation to changeis important, but what is even more important is justproviding a framework for these ideas to be expressedinstead of repressed. and so, as companies grow, it'svery critical that they stay nimble, and so "the q-loop"outlines ways that companies in all industries canadapt to that strategy. so we will have some time forsome q&a in the end, but in the meantime, please join me inwelcoming brian to google.
so thank you very much. brian klapper: thank you. it's an honor to be here. i thought i'd start with apersonal story to kind let you know how i got into thisbusiness of change, something that cliff and i were talkingabout over lunch. and for me, it started-- i was a partner in one of thebig strategy firms for many years, and we were given thehonor of working for a major
money center bank, directlyfor the ceo. and we spent a year working forthis guy, and he asked us, he said, i'll give you a blankcheck, but what i want you to do is develop a strategy forme that'll help me reinvent banking for the 21st century. as a strategy guy, it justdoesn't get better than that. that's as good as it gets. it's a white sheet of paper,it's a blank check. it was fabulous.
spent a year workingfor the bank. we had teams and teams ofanalysts producing hundreds and hundreds and hundreds ofmodels on economic and financial analysis, andby the end, we finally presented to him. picture a very large conferenceroom, polished mahogany, it was magnificent. the partners were in the room,presented to the ceo, and at the end of the presentation,he smiled and he said, i'd
like to congratulate you folkson maybe the most brilliant, insightful piece of strategyi've ever seen. i said, oh, thank you,that's great. he takes the deck, throws itagainst the conference room wall, the binder clip opens up,all of the pages scatter around, and he tells us, i don'tthink it's worth the paper it's printed on,nevertheless the tens of millions of dollars i spentwith your firm. so we said, ok, a, can you goback to the point of how
brilliant we were, because thatwas a much more enjoyable conversation. but i guess, b, why not? and he said, you know what? i think i understand 85% ofwhat's in here, and i think i'm a pretty clever guy. i have 160,000 peoplethat work for me. what am i supposedto do with this? what do i tell them todo with this work?
and so one of my partnersvolunteered and said, well, if you look at chapter 47 of thedeck, you'll see that there are gantt charts, and pertcharts, and roles, responsibilities, guidepostjobs, accountability. we have all of that. he said, that's not whati'm talking about. what do i do with this? how do i get 160,000 peopleto basically sing off the same hymnal?
i don't get it. so i flew back home,pretty dejected. inconsolable, actually, forthe entire weekend. and then my wife said tome, you know what? i think he probably gave youthe kindest gift that any client has ever given you. i said, what are youtalking about? this was a disaster. i said, ok, what gift?
he was honest. i wonder how many of your otherclients felt the same way that he did. you did some highfalutinstrategy work, but at the end of the day, they couldn'timplement. i said, you don't know whatyou're talking about. my clients love me, repeatbusiness, long term-- she goes, ok, i'm sureyou're right, ok. but i was thinking about it, andi actually decided to then
go ahead and audit my formerclients to find out what percent actually got that fullvalue of the work that we had created for them. and lo and behold,it was like 16%. so i quit two days later. i said, i can't dothis anymore. so i decided i wanted to get outof the ideas business, and actually get in the trencheswith clients and help clients really implement change.
because that's something that,quite frankly, companies large and small, young and old, alwayshave a difficult time doing, is really drivingchange through their organization. and there are many, manyreasons for that. and that's what i wanted tospend most of our time talking about today, are what are someof the reasons why change is so difficult for differentcompanies? and why there's so much talk andso many great ideas, but
organizations don't alwaysreceive the full benefit of all those ideas. so, as an example, suppose youknow of two artists, one of whom has brilliant ideas andalways takes those ideas and puts them down on paper andtranslates them into beautiful, beautifulpieces of work. the other artist has equallybrilliant ideas, but they never make it downto the canvas. i think we could all agree thatthe first artist is, in
fact, a brilliant artist. but what of the second? i guess i would argue the secondartist isn't really an artist at all. he's a talker, and there's avery big difference between being a talker andbeing an artist. and what i've seen when i visitso many companies is companies love toreward the idea. and they mistake brilliant ideasfor constructive action,
and that becomes a problem. and people often get promotednot on their ability to actually drive change throughan organization, but more on their ability togenerate ideas. and so why is that, andwhat's the difference? well, ideation is fun, right? especially at a companylike this. who doesn't love kickingaround ideas? it's a great time, it's fun.
the challenge, though, isimplementation is hard. it involves changing people. it involves influence. it involves changingorg structures. it's very different having anidea and getting an idea fully implemented. and one of the reasons,quite frankly, is the fear of failure. there's not a lot of failureat the ideation level.
failure comes at the lackof implementation level. i recently heard of this reallyinteresting story. well, i liked it anyway. and it was of a six-year-oldgirl. and the six-year-old girl neverreally paid a lot of attention in her core subjects,but she was sitting in the back of the room,diligently focused on some drawing that she was making. so much so that the teachersaid, i really want to
investigate what this girl'sdoing, because i've never seen her focus quite thisway before. so she goes back, and she talksto this little girl, and she says, excuse me, whatare you working on? and the little girl looks upin disgust and says, i'm drawing a picture of god, andgoes back down to her work. to which the teacher replies,but we don't know what god looks like. and the little girl looks upand says, you will in a
minute, and goes backdown to work. on a more personal note, my wifeand i were going through our dvd collection, and wedecided for mother's day this past year, we wanted to give ourmothers a compilation dvd of our kids growing upthrough the years. and we came across one of myyoungest daughter, danielle, she's now 13, she wasin kindergarten. and the teacher asks the entirekindergarten class, who knows how to make a thanksgivingdinner?
out of nowhere, my daughter'shand shoots up, and i look around, she's the only onein the class with her hand up in the air. not always right, but alwayscertain, my danielle. and so she raises her hand,teacher calls on her, and without prompting she stands up,because she needed to be an orator for this answer. and she stands up, andshe says, i know how my parents do it.
first, they get a bunch ofturkeys, then they get up a bunch of pilgrims. they stuff both the turkeys andpilgrims with stuffing so they're fat, and then ourfamily eats them all. not quite the way things work inour family in connecticut, but nonetheless. so, what do the two storieshave in common? between the little girl drawingthe picture of god, and my daughter danielle
convinced that we're cannibals? they don't feel failure. kids never feel failure. they only see the upside. they never consider thedownside, and that's probably something, as we get older, werecognize that decisions and ideas have consequences. but not to the kids. what i see so often in so manycompanies is so many companies
try and stigmatize failure. i'm working with a client nowwho says, we've always been a company that likes totake three shots and score three goals. i want to be a company thattakes seven shots takes, 10 shots, and scores seven times. and that's a great ambition,unless you're one of those three people thatshot and missed. so the question is, how canyou-- because if you're not
willing to fail, you'll nevercome up with something new. you'll never come up withsomething innovative. so how do you build anorganization, how do you build a process, that allowsfor failure-- i would argue that evenencourages failure, pursues failure in a way that promotescreativity, promotes ideation, and, ultimately, promotesimplementation? now, failure is partof change. and when you do the research,you'll realize that over 70%
of all company-wide changeefforts fail to deliver their intended results. and that's something small--like we want to improve our time to market fornew products-- or something large-- we want to transform ourentire organization. 70% of all efforts fails. and when i talk to c-suiteexecutives, what they tell me is, we have fabulous people.
our corporate cultureis terrific. our technology is fine, ifnot better than fine. yet why is it so hardfor me to get anything done around here? i've got 10,000, 20,000, 50,000people, all presumably going in different directions. i can't get them galvanizedaround some of the major issues that i'm looking forin my organization. why is that?
and when you dissect it, theroadmap for change is actually relatively straightforward. you create a vision, a strategy,communication plan, and then ignite peopleto execute. well, the vision-- executives don't get promoted toexecutive positions without being visionary. so most executives havethat box checked. strategy-- there's been tonswritten about strategy, firms
built around strategy. also something not terriblydifficult, once you have a vision. communication plans, there aredozens from which to choose. you can go on the internet andfind a million of them. again, not terriblychallenging. the question is the last one. and this is where theyall breakdown. 85% of the 70% break down inthe inability to ignite an
organization around atheme around change. and that's the challengingpart. yet, if you don't change, andeven as a company, if you are not able to change and makechange an ongoing part of your core capability, you're goingto have an issue. interesting statistic-- back in 1917, only one of theforbes greatest companies performed betterthan average-- average, in this case,being the s&p 500.
and 85 of those 100 are dead. they are no longerin business. i find that both frighteningand sobering. especially because, what doesit take to become one of the forbes top 100 companies? you folks would know. great products, great people,great ideas, great market position, in some cases,great location. so you've got everything goingfor you, yet 85% are no longer
in business. as michael collins has said,it's not because of what the world does to these companies. it's what the companiesdo to themselves that causes them to fail. when you peel back the numbers,some interesting themes emerge. three primary onesas to why these companies are out of business.
number one, adherence to abusiness model that's no longer relevant. so, the marketplace changed, thebusiness model didn't, and the company went out. blockbuster. secondly, the company took itseye off the customer ball. so how do you makemoney, right? you meet the needs-- both the implicit andexplicit needs--
of customers, both what theywant now, and even what they don't know what they want it. and the extent you cananticipate what customers want, that will be a successfulbusiness model. companies took their eye offthat particular ball. consumer tastes change,companies didn't, they went out. in that same bucket, it'scompanies that tend to design products more for themselvesthan for customers fall risk
to that particular model. third, and last, is companieslost out to more nimble competitors. what was once the new, new thingstopped becoming the new thing, and, as a result, theyhad a talent drain. they had a brain drain. and some of their most creativepeople got frustrated working in what was oncea very entrepreneurial organization, and they left toeither start their own firms
or to work in companies thatrepresented the ideal which was the company that theythought they joined. so those are the three primaryreasons why you see organizations change. gary hamel, in his book "leadingthe revolution", had a great quote. this is going back probably 15years, even before amazon became relevant, and it wascommenting on walmart. and he said, how many peoplethink the retailing revolution
will start with walmart? who amongst us wants to spendour time walking around the soulless canyons ofwalmart looking to save $10 on a hammer? and he hit it right, because ifyou think about where did we buy hammers whenwe were kids? probably the localhardware store. and then where? the big box retailer.
and then kmart, and thenwalmart, and then amazon. where's it going to go? who knows. 3d printers, maybe, who knowswhere it's going to go? but it's not going tostop with walmart. let me ask you a question. does anybody know, back in the1960s, early '70s, what the largest restaurant chain inthe united states was? not mcdonald's, young man.
howard johnson's. anyone ever hear of them? red roof, orange sherbet,popularized in mad men? howard johnson had over 1,000restaurants around the united states on the most popularhighways, they had the best location of any of them. they were the number two foodproducer after the us army, and their market share waslarger than mcdonald's, burger king, and kfc combined.
and what was theirbusiness model? bring your kids in, have a nice,comfortable meal, relax, take your time, and we'llserve you good food at a reasonably good price,in a very relaxing, enjoyable setting. now, imagine that you've got alarger share than mcdonald's, burger king, and kfc combined. you've got the best location,you've got fabulous products, and your customers love you.
so imagine you're up at theboard of directors. you're sitting at a board ofdirectors meeting for howard johnson's, and an analyst comesin who's responsible for competitive research and says,folks, i think i've seen the future, and this is ourbiggest competitor. it should strike fearin your hearts. that's our competitor. what's your reaction? you've got to be kidding me.
the clown? i'm going to get takenout by the clown? and you obviously knowhow the story went. so what happened? why did the clown win? women were getting intothe workforce, time became a commodity. people didn't have the time,nor the patience, nor the interest to spend with theirfamilies eating long family
comfort meals. they wanted quick, they wantedcheap, they want to get in and get out. and there was no place betterpositioned than howard johnson's to take advantageof that. yet the clown won. so, i wrote this book, "theq-loop", and the q-loop was designed to really offer aprocess of ideation through implementation.
and people say to me, why a q? what's with that? and it's the flow of ideas, orwhat should be the flow of ideas but isn't always. so at the top of the q-- i like to think of the topof the q as the top of an the senior management. there's nobody more visionary,there's no one that should be looking out over thehorizon, more
than your senior managers. and they do, forthe most part. ideally, in the q-loop, though,they would then start organizations on what icall an idea quest. come up with a focus mission,and then bring that idea quest, that vision down to thebottom of the organization. down to your front line people,your first and second level supervisors. that's where that could bewellspring of ideas for the
organization, and isalmost never used. then back up to the top of theorganization for resourcing and staffing, and then backdown one more time for piloting and then out theq for implementation and firm-wide rollout. one of the questions i ask wheni'm in these kinds of meetings is, i talk about aconcept that i'm quite fond of, and it's calledorganizational iq, collective iq.
and the notion there is, let'ssay you've got an organization of 10,000 people with anaverage iq of 120. that's 1.2 million iq pointsavailable to the organization. and when i asked seniorexecutives what percent of that 1.2 million iq points doyou take advantage of in your decision making, your ideation,your input into strategic planning, for the mostimportant decisions you companies makes,what do i get? 1 to 5%.
ideas, visions come from the topof the organization, and they stay in that very top ofthe q, and they never make it down to the lower endsof the organization. and why does it matter? well, because the folks thatare on your front lines are the ones closest toyour customers. they're the ones that witnessmillions and millions and millions of customerinteractions, and do you know what they do with them?
typically, absolutely nothing. they keep them to themselves. they are busy typicallyprotecting an organization from the customers. nobody wants to see how thesouffle is made, and that's what your front lineworkers do. i call them heroes, because theyare the ones that prevent your customer from reallypeering inside to how things really work in mostorganizations.
and it's a vast treasure troveof information that is almost never taken advantage of, andi think that's a big shame. in addition, you're askingthese people to implement your ideas. how many people loveto implement someone else's ideas? show of hands. few people like to implementother people's ideas. but people fall over themselvesto implement the
ideas that they had ahand in creating. why wouldn't they? and especially if your frontline, first level supervisors, these are the people wherethe pragmatism exists. they're not in the ivory towerup on the top floor of an office building, these are thepeople in the trenches. they're going to war every dayon behalf of the company. so there's huge pragmatism thatexists on the front line, and all of the ideas that wouldcome from these people
typically are very pragmatic in nature and easy to implement. so, if you follow the q-loopconcept, it's vision up front, ideas come from the front line,up to the front again for resourcing, for span ofcontrol, for prioritization, back down for testing, and thenout for implementation. and yes, testing is extremelyimportant. ask jcpenney what happens whenyou implement great ideas that aren't previously tested.
so, rapid cycle innovation is afabulous tool, not just for it products, but for processes,for org structures, for incentive structures. it works brilliantly. before you can implementsomething like q-loop, though, it's helpful to understand howyou currently solve problems in your current organization,or how you realize opportunities. so, i built this matrix.
on the x-axis is understandingthe degree to which you believe your solution willcontribute to solving an issue, or realizingan opportunity. on the y-axis is to what extentyou as an organization deeply understand why thatissue has occurred. why the problem has occurred, orwhy that opportunity might present itself. 70% of all organizationsare in this first box. we don't understand why theproblem occurred in the first
place, and we really have noidea how our solution is going to solve the problem. and we call that firefighting. and that's just gathering abunch of people a room, throwing them against a task,and eventually, if they are the right people, you're goingto find that they're going to come up with a solution. now, will they understandthe causality? probably not.
will the solution stickand be robust? doubtful. but it will have them solvethe problem in relatively short order. and some organizationsthrive on it. they love the chaos. it's just not sustainable andnot good business practice. it's certainly not efficient. if we go along the x-axis--
so i really understand how mysolution will solve the problem, but i don't have thefaintest idea of what the problem occurred, nor whatthe great idea could be. we call that tribal wisdom. so what is that? that means there's a greatopportunity for us here, we want to enter a new market,we call george. george is the newmarket expert. george comes riding in on thisbig white horse, dismounts,
and says, ok, folks, minions,tell me the problem. i, george, will solve it foryou with the aid of my big white horse. and george solves the problem. why? because he's george, and he'sgot a big white horse. and that's a fine way to solveproblems provided george never goes on maternity leave,provided george never leaves the company, provided theproblem is always within
george's wheel house. so it's a very risky way tosolve problems when you rely solely on experts. young, emerging companiestypically solve problems this way. tons of pockets of expertise,bring in george and the horse, they solve the problems, georgegoes back, organization feels, well, that's gone. until the next problem.
but by not codifying this, bynot building part of your institutional knowledge, you're always relying on george. the problem with implementinga more robust approach to ideation through change isyou're going to have resistance, as wetalked about. who do you think the biggestresistor will be? george. because the day that all boatsrise is the day you take away
george's horse. and who is george withouthis horse? he's a little guy thatjust solves problems. so he's going to resisttooth and nail. so how do you solve that? you include george in ideation,because if you don't, he's going to resist. and we don't want him to leave,because he has talents that none of us have.
if we go, we say on our currentlevel on the x, we go up the y-axis to where you haveno idea how our solution is going to solve the problem. but we love generatingpotential ideas. we do, however, have a prettygood insight as to what the marketplace wants, or why theproblem is occurring. we call this the conferenceroom solution-- i call this conferenceroom solution. it's my least favoriteof the four boxes.
and this is where, typically,senior management will come down from the mountain. they'll say, i've got an idea,execute it, my minions. and if you think of the gears--think of big gears that intersect-- large gear, small gear, smallergear, tiny gear. big gear representingsenior management. big gear moves one quarterturn, what happens to small gear?
yeah, it spins around likea top, and finally flies off the flywheel. because what's so simple tosenior management, as we all know, who are not seniormanagement, not always quite so simple making that one littlechange to a program. typically, many, many, manyorganizations are run via conference room solution. and i'll talk about that alittle bit more in a minute. and then lastly, fact basedanalysis, which is collecting
data, collecting reams andreams of customer data, processing through a thoughtfulfact-based approach, and bringing it backdown for implementation. and that's typically thesmallest box, in terms of how most companies solve problems. i think this is the enemy to alot of the work that we're talking about. because this is thede facto way that people solve problems.
i live in connecticut, so i wason the plane ride over, and i was reading an article inthe times, and it was about a new approach to solvinga crisis in the new york area hospitals. so three or four hospitals-- the big ones, cornell, columbia,beth israel-- they form the consortium, andthey did some really great customer customer research. all made sense.
and so they talked to theirpatients and said, what did you like about your stay? what didn't you like? what can we do better? how can we do a betterjob of servicing you? and one of the major issues fromthe patient perspective is i can't distinguish thenurses from all of the other health care workers. logical and make sense.
hundreds and hundreds of peoplerunning around, i can't distinguish them. so they convened a meetingof the minds, the senior executives, they said,how are we going to solve this problem? and they came up witha solution. let's immediately order allnurses to wear white. a little 1950s for my taste, butnonetheless, let's order all nurses to wear white.
and they went ahead andprocured like a million nurse uniforms. how well do you think that wasreceived on the part of the nursing community? not great. but it seems so logical. nurses, white, pure,clean, sanitized, health care, hospitals. why didn't the nurses like it?
any ideas? it wasn't their idea. and what were their ideas? well, they had somereal concerns. number one is, whitelooks great at the beginning of the day. but i'm dealing with bodilyfluids, ladies and gentleman. by the end of the day, itdoesn't look white. so it's a disasterto maintain.
number two, white, when washed,tends to get sheer. good news for the patients,bad news for the nurses. and this third thing, and maybemost importantly is they lost their identity. nurses really enjoyed beingable to pick out their own uniforms, their own scrubs. and so they took away theirentire sense of identity. so what seemed like such a greatidea in the board room, when you try to implementit, it was
an unmitigated disaster. and that was so easily solvableby simply inviting the actual users of the product,of the idea into your ideation process. yet that was never considered. the other reason i don't likethe conference room is because it exists so far awayfrom the customers. howard schultz-- founder and ceo, as youknow, of starbucks--
visits 25 stores a month. 25 stores a week, excuseme, 25 stores a week. and when asked, why do you dothat, he said, my business is incredibly simple-- and i would argue, actually, allbusinesses are incredibly simple, if you let them be. my business is a simple. what i do, simply, is i pourcoffee, i serve coffee to one customer at a time.
that's my business. and unless i can go out thereand taste it and smell and watch it and observe it, i'mgoing to lose track of what really matters to my company. so it's vital that you reallyget out there and understand what your customers arereally looking for. what i want to do now is talk alittle bit about how you can use some of those techniques andget in with your customers to maybe shake your idea treea little bit, and maybe give
you some new ways to promotesome creativity. and they're a littlebit nontraditional. so one of them is what i callimpose artificial constraints, or ask what if? what if you lost all of your bto b business tomorrow, and you had to only focuson b to c? how would you survive? conversely, what if you lost allb to c, and you became a b to b business exclusively?
what if you had to introducenew product in the next six months that would materiallyadd to revenue? what if you lost half of youremployees tomorrow night? they're all gone. you went from a companyof 50,000 employees to 25 overnight. what would you do? what if you were unable to gaina single new customer for the next 24 months?
now, you may look at me andsay, well that's absurd. those constraintsare ridiculous. and i would argue, maybe, butwhat it will do is it'll force you to squeeze every last ounceof value out of what you're doing today. let me give you isa case study. so, working for a very largebrand name financial services firm, and they were stuntedwith how to grow. it cost them as much to acquirenew customers as it
did for the revenue that theycouldn't get out of that revenue box, muchas they tried. so let's try the artificialconstraints. and we said, in this case, whatif you weren't going to get any new customers? and that caused them to think inways they'd never thought. they've always been thinkingvery vertically, they weren't thinking laterally. so they said, ok, well, if wewere unable to get any new
customers, how do wemaximize the value of our current customers? so they started thinking aboutshare of wallet, which wasn't really a metric they werethinking about in the past. and they said, ok, we need tomaximize share of wallet. how might we do that? well, the way that they werestructured was this company sold all their productsthrough non-dedicated financial advisers.
and the entire industry-- andit's a mature industry, been around for 50 years-- every one dedicated all of theirresources to focusing in on a financial adviserrelationship. because unlike the automotivedealers, these financial advisers were not dedicatedto the company. they could sell any product. so unless we had a deeprelationship with the financial adviser, we wereafraid we would never get any
new customers. so all of our offices werelocated by where all the financial advisors were. however, when we did theartificial constraint of what it, what they then realized--and they did analysis they'd never done before-- they realized that the financialadvisors typically brought them no more thantwo deals a year. that was it.
and because they were a brandname, they were brought to every major deal that there wasto be had-- this is a b to b kind of business, obviously. so they were brought to everypossible deal because of who they were, yet they closed theirfair share of deals. and so, the analysis of whatif caused them to say, we don't want to close our fairshare of deals, we want to close our fair share of dealsas well as that of the next three competitors.
we want it all. and they should want it all. why not? well, in order to get it all,the phrase we wound up using were there always got invited todance, they just never took their date home. so the question is, how do youincrease the odds of winning once you get takento the dance? and for them, what they realizedwas, they had nothing
interesting to say. they won their fair share ofdeals because they were the same as everybody else. what if they had somethinginteresting to say? so they decided in a pilot-- and pilot is something you'regoing to hear from me a lot. i love the concept the pilots. rapid cycle innovation,all about piloting. and it's not just aboutproducts, it's about services,
and even lines of business. what if we pilot apractice model? so think consulting firmsor law firms. and we would actually build apractice around machinery, health care, high tech,utilities, what have you. and let's go to the dance withsomething really interesting to say, not only about thepotential client, but also about the industry trends andhow we can save them and their participants money.
and they launched the pilot. within three weeks of launchingthe pilot, a billion dollar asset signedup with them. and they signed up with themfor one reason-- they said, finally someone is thinkingand actually shattering industry paradigms. you finally have something tosay to me, as opposed to being a commodity provider. we're going to go ahead, andeven though we know you're in
pilot stage, we're going tosupport you by transferring all of our business. they launched in 2012. all pilots were fully installedby the end of 2012, and this client achieved theirannual revenue targets for 2013 in march of 2013. and now other folks in theindustry, other players, are starting to migrate tothe practice model. and it all got there because ofthe what if, the artificial
constraint. so it's a good one, i'dencourage you really think about how you could maybe applythat into some of the challenges that youguys are facing. another one like the what if isalter your point of view. you clearly have a point ofview, and you're more often right than wrong. but altering your point of viewcan be a really powerful exercise as well.
give you another example. oh, and i apologize for usingfinancial services again, but it's a good example. this was an insurance company. fortune 100 insurance company,been around forever, belt and suspenders organization,extremely conservative. head of insurance wanted tointroduce a new product for the senior market, and hischallenge to us was, i want you to create for us agame-changing customer
experience from cradleto grave. from the time the customerbecomes aware of the product, until she uses it andgets it serviced. i want innovation, iwant game-changing. they've been at thisgame-changing concept for this product for about nine monthsbefore we started working with them. and for them, they literally--true story-- got as far as changing the colorof the stationary from
white to ivory in theirwelcome letter. i wouldn't exactly callthat game-changing. it's an interesting exampleto me because they only knew what they knew. and they didn't have the abilityto think beyond their current paradigms. so it's often helpful to bringin a very different paradigm to shake their tree. so example here wasmini cooper.
early in the year, i boughtmy wife a mini cooper for her birthday. now in the category of probablytoo much information, my wife's a former auditor at jpmorgan, investment banker. so she loves numbers. i can't spend more than $10without her knowing about it. so clearly, trying to buy a carwithout her knowing about it probably wouldn'tpass muster. so i went to the dealership andi said, i want to do this
for my wife's birthday, itneeds to be a surprise. and, quite frankly, i don't haveenough cash to pay for this thing, so i need to gothrough some sort of credit card or write you acheck, and here's where the problem starts. he said, don't worryabout that. sit down, relax, havea cappuccino, and let's design your car. i said, ok.
as you may know for mini, thereare truly a million different combinations of minicooper that you can design. so we spent about three hourshaving fun designing the car. i then said, ok, there's stillthe elephant in the room, which is how do i payfor this thing? he said, here's what i'mthinking-- do you have an insurance card with you? i said, i do. he said, may i have it please?
i said, absolutely. gave him the insurance card,made a copy, came back, said, it's all done. i said, what's all done? all i gave you was an insurancecard and the specs for the car. he said, well, no,it's all done. you wife's birthday istwo weeks from now. here's my thinking, if thisworks for you, mr. klapper--
i'm going to have the car drivenover and parked in your driveway at 10:00 am,if that works. it'll have a big red bow, ok? i said, ok, it sounds good. and it's ok with you, what i'dlike you to do is i'm going to have the keys there. drive around-- itwas a friday-- drive around for the weekend,let your wife have some fun. on monday morning, have her comein, or you come in, we'll
settle up all the financesat that point. i said, well, do youneed a deposit? he said, not necessary. where are you going to go? you going to steal a car? you don't look like thecar theft kind of guy. we'll settle thefinances later. enjoy the car, enjoy thesurprise, and happy birthday to your wife.
two weeks later, we dothat, big success. a box comes in the mail,beautifully gift wrapped, from mini, to my wife with stickers,and coupons, and mugs, and key chains, and allkinds of things, mini cooper membership. and several months later, otherboxes came as well to build the affiliation. that's what i would call game-changing customer service.
why shouldn't every singleinteraction be like that? it didn't cost thema lot more. in fact, i would argue it costthem no more than the crappy experience we get when we buymost cars, as i had three weeks ago when i boughtmy daughter a car. wasn't a mini, and it was yourtypical car experience, which was, to put it kindly-- sub optimal. we then use this approachto insurance.
and you may say, oh, waita minute, insurance? and that's what the team said. we don't have a sexy car likea mini cooper, how do we make this work? and we said, well, let'stalk about it. what's the first thing thathappened on the front end? and he said, well, youhad the choice, you had unlimited choice. i said, i didn't have unlimitedchoice, i had the
perception of unlimitedchoice. there's a big difference. there were a millioncombinations, there we're not a million and one. had i wanted a million andone, i couldn't get it. so all of the potentialcombinations were predetermined and costed out. that's a pretty powerfulmodel. why can't you do that when youoffer your insurance product,
but give the customerperception of unlimited choice? so that's something theydid on the front end. so their salesforce went ourwith ipads with different options and allowed customer toreally interact with their agent, which had neverbeen done before. next thing that arrived was awelcome letter, hand signed by the head of insurance, welcomingthem into this insurance family.
third thing that came outwas a stock certificate. this was a security productfor senior citizens. they could harken back to thedays of when you actually owned stock in the company. highly-rated insurance company,as part of the product, instead of a minicooper, they got a physical stock certificate that actuallyshowed tangibility to what was heretofore anintangible product. very powerful.
they instituted white glovecustomer service, concierge level service focusedon senior training. and then the last thing was, inthe mail, about three weeks after taking delivery of theproduct, they got a blanket with the logo the insurancecompany. a security blanket. what did that do? well, it gave seniorcitizens a warm feeling about the company.
it also was a greatmarketing tool. so when one senior citizentalked to the other-- where did you getthe new blanket? i got it from this insurancecompany when i bought this product-- it became viral marketing. so, taking a non-industryexample to solve a challenge that you have is a very powerfulway to shake paradigm and get people tothink laterally.
last example i'll give you onthinking differently is what i call killing the status quo. newco. driving your companyout of business. i've done this on the corporatelevel, i've done it on the department level,i've even done it on the process level. so a company would come and say,we want to go ahead and-- how long does your productdevelopment
process take today? and they'll say, 18 months. i'll say, ok, that's more thana little bit of time. what would game-changing be? and they'd say 12 months. and said, well, think again,that's not game-changing. how about four weeks? and they'll say, you don'tunderstand my business. and i say, probably that'sa good thing.
why don't we go ahead and designa newco process without any constraints thatyou have today. forget structure, forgettechnology, forget anything. let's see if we canget a product to market in four weeks. cradle to grave. and by applying the principlesof dazzle, beguile, astound, and delight, those are alwaysthe founding principles of what newco would look like.
kfc up in canada had someissues, more than a few. they had 500 stores, stock pricehad declined from 13 and 3/4 down to a littlemore than a buck. the brand had stopped resonatingwith younger consumers, traffic was gone. no, they didn't go back tohoward johnson's, but they were going elsewhere. and they said to us, we needa massive operation transformation.
and oh, by the way, our fieldturnover is 200%. can you help? i said, probably. but the last thing i would do istackle this as a 400 or 500 restaurant storetransformation. that's going to fail. let's pick a store. and let's pick a store and puta charter in place that's about dazzling, beguiling,astounding, and
delighting our customers. and let's build a store the waywe would want to build a store if this wereour company. so we formed a team-- eight people. half time, two constraints-- they had 45 days to get thestore turned around, and they had a budget of $20,000. no other constraints.
and over the course of 45 days,we had representation from marketing, from product,from r&d, from technology, from sales, from ops, aswell as store people. and 45 days later, weopened a store. 300 operational improvements. products that we took fromthe test kitchen and launched them. specials that they'dnever done before. new deals, new promotions,door-to-door marketing, sub
zip code marketing. things they've never thought ofbefore, we put it all into this store. we called it model store. and when we launched modelstore, model store went from what was in the bottomdecile-- no, not bottom, excuse me. it was in the third or fourthlowest decile store to the single highest-performing storeout of 450 in the entire
same store, sales had doubled,average check had doubled, profitability had doubledagainst any control you'd ever want to measure forthis model store. and that became the blueprintfor how you roll it out across the entire enterprise. a very powerful concept. put yourself out of business,put your process out of business, put your departmentout of business, even put your company out of business.
it's a very powerful wayto reinvent yourself. and you can do it in a ratherrisk-free way, because if this store didn't work? it was one of 450. there was no downside risk. i'm doing it witha company now. they've actually completelydecimated the top two floors of their office space, andthey're building newco to put the entire companyout of business.
what they believe is theirbusiness model is starting to fade, they want to test a newconcept before they start, they're bare bones staffing it,lean budget, rapid time frame-- crazy time frame-- and they're bringing overcustomers one at a time, and staffing accordingly until theycan ultimately build out this new organization. it's all about lateralthinking. lateral thinking is extremelydifficult.
vertical thinking is easy. so if i were to ask you, whatwas the name of your elementary school, couldyou tell me? yeah. what was the name ofyour first pet? could you tell me that? what was the first streetthat you lived? you're all shaking your heads. it's very easy to recallhistorical, factual research,
because our brains arewired that way. they're wired in a veryvertical way. it's when you start to makelateral associations like the ones we just talked about,that's where the mental engine seizes a little bit. let me put you throughan exercise and see if this works. please think of a waiter. what are the first words thatcome to mind when i ask you to
think of a waiter? friendly. busy. what else about a waiter? what other words come to mind? quick word association. good memory. food? restaurant?
so those are the wordsthat you typically associate with a waiter. friendly, busy, restaurant,food, tablecloth, somebody said candles. why did nobody say dump truck? caterpillar? dead cat? why wouldn't those be the wordsthat you would have jumped to when i asked youthink of a waiter?
why friendly, busy,helpful, food? why didn't i get any votes fordump truck or dead cat? because those are logicalassociations, and i don't typically associate a deadcat with a waiter. and i don't know where youeat, brian, back in connecticut, but out incalifornia, that's not the way that things work. true. typically you associate a waiterwith logical things
that you associatewith a waiter. but a dead cat doesn'tmake sense. what i'd like to do, though, isgive you another challenge, if you don't mind. pretend you're a consultant,and you've been hired by a failing restaurant to designa growth strategy for that restaurant. and the only source ofinspiration is you must use a dead cat in all of your ideasand thoughts to help the
failing restaurant. the knee jerk reaction to thatchallenge, real quick. be honest. come on. what do you think? it's ridiculous. why is it ridiculous? they're completely separate. yeah, and most people have thereaction, that's ridiculous,
it's silly, it makes no sense. and, in fact, i'm noteven going to play. you go back to connecticutwith your dead cat. very common reaction,thank you. but what i'm goingto ask you to do for a second is persevere. go beyond the ridiculousness,and truly now, put yourself in that consultant's mind, and seeif you can design a growth strategy using a deadcat as inspiration.
give me some thoughts. audience: [inaudible]. brian klapper: love it. so, dead cats versus livecats on food wastage. perfect idea. what else? brian klapper: ok. brian klapper: sure. so build a restaurant that'sincredibly flexible,
incredibly agile. be the agile deadcat restaurant. when i've done this before, i'veheard things like, what if we cater to cat lovers, andwe put some warm milk down on the bottom of every table? so bring your cat,come on over. i've heard dead cat cafe. i've heard lots of differentoptions for how to turn a restaurant into a successstory using a dead cat.
but your first reaction wasthe most interesting one, which is this is silly. the reason it's important, andthe reason i wanted to take you through the little exerciseis because this is what the front line feels whenthey are given an idea that they have to go ahead andimplement that they ultimately don't think is pragmatic,it doesn't make sense. and we have senior managementsaid, here's the idea, implement away.
most people's reaction on thefront line is resistance. this is ridiculous, this doesn'tmake sense, this doesn't tie to mymental model. but if you persevere through it,there's often some pretty good goodness onthe other side. but it's not easy. last couple of slides. resistance exists at alllevels, whether it was ridiculousness at the dead catstory, or whether it's trying
to implement a major changethrough an organization. most companies just wantto avoid it and hope it goes away. it doesn't. it doesn't ever go away. best case, you'll get activeresistance, so least you know how to help. worst case, it'll be passive,where people will nod their heads, and at the end of theday, go back to doing what
they're doing. the best way to overcomeresistance is to recognize it's there and involve thoseresistors into ideation and into messaging. so the way that i like to work,typically, is every project that i work on, whetherit's large or small, always has a definedtime period-- 30 days, never longer. even if it's a large project,it's the piece of a project
with a measurable deliverywithin 30 days. people lose interestafter 30 days. management lose interestafter 30 days. so 30 days to deliverable. i love to have a pilot workingwithin 30 days. team composition? love it to be no more than fiveto seven people, flat out, working hard. think of the analogy of a crewin scull, when you get to more
than five, six, eight people,you have people that are coasting, not peoplethat are working. so i like the team size cappedto five to seven, people 30 day deliverable, quantitativemandate. and make sure the people who areideating are the ones that are ultimately going to beresponse for implementing. so make sure the idea comes fromsenior management so they buy into it, they resource theproject properly, and, ultimately, it's the doers,the ideators, that are
responsible for implementation. and what you're going to find isyou are absolutely going to turn resistance into passion,because people love to implement the work that theyhad a hand in creating. final thoughts are i knowthese talks happen with tremendous frequency here, andhopefully at some of the better ones, you're ableto walk away with an idea or two that-- maybe there was a phrase thatsaid, well, that was kind of
interesting. i learned a little something. it was worth giving up mylunch hour to listen to. but what i hope is that youcould take something away from this, even if it's just oneconcept, and try and implement it into your day to day job. so, depending on where youare in the organization-- whether it is senior managementand it's about building a committed team andliving the change you want.
whether you're lower in theorganization, and you want to hold leaders accountable. whether it's about creatingorganizational energy. there's clearly tons of energyhere in this building, but around a specific project. adopt a personal approach. own the change. i hope that some of the lessonswill serve you as you go out and continueyour careers.
so, i wish you the best, andi thank you very much.
