Gennaro Cuofano's Blog, page 227

How To Design A Winning Business Model With Adam J. Bock [Interview]

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Dr. Adam J. Bock is an academic entrepreneur, financier, tech-venturing expert, and co-author of a must-read book which is called The Business Model Book.

The Business Model Book is an incredible resource which cut through the noise of understanding how to use business models and business model analysis to start your next venture.

With Adam, we went in-depth into the business models world.

How did you get into the study of business models?

Adam J. Bock: I got into the study of business models formally when I started my Ph.D. in just around 2007. I need to emphasize that that came through Professor Gerry George who at the time was at Imperial College London, he is now the Dean at Singapore Management University.

And Gerry is one of the top strategy and entrepreneurship academics and experts in the world. And I had a lot of practical experience with startup companies and venture capital, and so business models and the thinking about business models was something that I was spending a lot of time on.

But Gerry is the one who linked all of that to our research, recognized that developing business model frameworks and understanding business models were going to be important.

And so he guided me in my Ph.D. to bring that practical experience and knowledge into a formal research process. And so, we conducted research during my Ph.D. and published papers and books on it. And ultimately that led to then The Business Model Book a couple of years after that.

What business models are not?

Adam J. Bock: In the book, we provided a much more extensive list of all the things that we felt it was important to distinguish from business models but I’ll emphasize three of them.

Strategy: A business model is not a business strategy, it’s not a corporate strategy. A strategy is about relative performance against the competition. That’s really what strategy is. Can you outperform your competitors? And that’s not what a business model is.
Marketing plan: A marketing plan, there are an awful lot of people who sort of see a business model and imagine that what it’s about is how you present information to your customers, how you interact with your customers. Clearly, that’s very important but a marketing plan is also not what a business model fundamentally is.
And Revenue Model: the most common misconceptions is that a business model‘s a revenue model. And this I think is one of the more pervasive misunderstandings simply because we have terminology that we use to talk about business models, the classic ones being razor blade models or a freemium business model. In the razor and blade model that you sell the razor cheap because you’ll then be selling supplies. That’s fundamentally a revenue model. It’s how you generate revenue. And the same thing with a freemium app model, where you give it away for free, and then there are upgrades or in-app purchases that people can buy. Those are fundamentally revenue models associated with how you generate sales pricing systems, and so on. And while those are useful to keep in mind, none of those things are really what encompasses an actual business model.

Those are the key ones we want to try to make sure we distinguish.

Were business models born with the Internet? (A brief history of business models)

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Mention of business models according to Google books

Adam J. Bock: The story of business models goes further back than that (The Internet), a good for 10, 20 years if you look in the literature and the research. There were various times when researchers were talking about models of business.

Economic researchers were talking about models of business where they were trying to create a process model for how organizations function. And then the phrase “business model” really was generated in the late 1980s, early 1990s and it almost just emerged randomly.

We’re not even sure. We can find examples of it in the literature in which people are beginning to talk about this shorthand for value creation, something about the way that the organization works.

It picked up steam during the dot-com boom. But it was used in a particular way. It was often used to explain why dot-com companies, these companies that now we know, which were just disasters, why they didn’t have to generate value.

People were arguing that they could operate at a loss indefinitely, that they had a different business model than anything that we were familiar with in terms of pricing stock or understanding how much a company was worth.

And of course the major, the critical thing about business models out of the dot-com boom was the fact that that was fundamentally wrong.

That isn’t the way the world works. There are no exceptions for business models. Every organization, whether it’s for-profit or nonprofit; whether it’s an internet company or a biotechnology company; whether it’s going to sell products or whether it’s going to raise money from private investors and be sold through an acquisition before it ever brings a product to market.

Every organization has to create demonstrable and ultimately monetizable value, and that’s the core business model concept that every organization has to have a viable business model for it to survive.

Gennaro Cuofano: These are critical points actually to emphasize. And I guess the first lesson that we had on this was during the dot-com bubble. And now we’re seeing again today also set of tech companies which are also going to IPO and where we see those business models which, while they generate a lot of revenues, they are not yet profitable.

What are some other common myths that surround business models?

Adam J. Bock: I think that there are myths around issues of how you create new business models, what makes a business model innovative. I believe that there’s the classic one, there’s a myth that you can have a business model in which you don’t have to generate profits eventually.

We see right now, in particular, Uber and Lyft being perhaps our best current examples of companies with tremendous revenues but generating considerable losses in the short term. People are banking on the longterm value that those companies presumably could generate.

But I think that the fundamental myth about business models, which we probably would want to talk about in a little more detail, is this idea that you can craft a business model on paper and then evaluate it and know whether a company is going to succeed or not.

When I mentor entrepreneurs or when I’m teaching in my classes, that’s commonly my biggest concern about business models is that. Because it is a shorthand for value creation and how the organization functions, it’s easy sometimes to imagine that we can write it all down on a napkin or a piece of paper on one of these canvases.

And then just looking at that, we can somehow predict whether that’s a viable long-term business or not. And that’s the most concerning myth from my perspective.

Gennaro Cuofano: My understanding from the book is that one of the main advantages of using a business model analysis is the fact that you can create business experiments.

Is business models analysis a primary tool for business experimentation?

Adam J. Bock: That’s precisely the idea that we tried to get across in the book. I think one of the most critical uses of these business models canvases. These tools that you’re trying to make sure you haven’t missed something obvious.

You put all of this information down in, into a canvas or whatever diagram or document and hopefully that helps you look sort of at a surface level or have we missed something obvious.

But the second thing is, you want to use that to identify underlying assumptions that you have about the opportunity or the business or the organization — making those assumptions explicit.

We think customers will pay for this. We believe this is the channel that we’ll use. We believe that this is the type of resource that’s going to be to make this business model work. Once you recognize what those assumptions are, you’ve set the stage for creating the experiments that will tell you whether or not the business model is viable.

And then this gets into classic lean startup sorts of methodologies trying to find your minimum viable product and so on.

But from my perspective, it comes back to making those assumptions explicit and then using those assumptions to run fast and inexpensive experiments to confirm how that business model will work. And that’s going to be your best indicator of whether or not you have a viable business model.

What’s a definition or effective definition of business models?

Adam J. Bock: It is the question that has been plaguing academic research for about 25 years now, and there is still is in, from the academics perspective, there’s still no agreement on a precise definition for a business model.

And this was the core of my Ph.D. research, and the first major paper that I published was this concern that the way that academic researchers were thinking about business models was not the way that managers and entrepreneurs think about business models.

And so we also tried to tackle this problem and that was eight years ago, almost nine years ago, from an academic perspective, we haven’t come to a single definition. But I want to give you a couple of examples that I think are helpful.

The first example I want to give you is, as an academic, to be completely honest, the most powerful definition that we have was actually one of the very first ones that were developed by Zott and Amit, two very top-notch researchers who really published the first major study on business models, back in 2001.

The academic definition

And they defined a business model as the content structure and governance of transactions to create value in the organization.

Read the study here.

And the problem is is that that’s a non-obvious definition. It’s a very academic definition but for people who have time or MBA students who are really interested in this; it’s almost worth reading the paper and kind of thinking about it because you realize by defining it so carefully, as limited to the way that the organization manages its transactions internally and externally, it becomes much simpler and clearer to actually assess what a business model is or is not.

Now, the sad part of this is that that definition did not survive and ten years later, Zott and Amit have written multiple new articles in which they’ve gone to other definitions.

But if you wanted an academic definition that’s personally my favorite. You might find that funny because the second definition I’m going to give you is the one that Gerry and I came up with, which I think is a good one, but it comes at this from a completely different perspective.

The entrepreneurial definition

When we did our research, we tried to recognize that there was something more holistic, there was something more interpretive about business models which were important to managers and entrepreneurs.

And so we defined a business model as the design of the organization to exploit an opportunity.

And we were trying to get at this sense that this was about the configuration of the business, how you tie things together and it all has to be focused towards something entrepreneurial, something to generate value, where there wasn’t value previously. And some aspects of that definition still sort of part in use.

That sort of higher level framework is very much in alignment with the sort of the Business Model Canvas but the definition that has emerged in these last five to six years, based in part on the success of the Business Model Canvas is more vaguely a set of activities and resources and processes that create value.

And it’s helpful to have that definition because it’s more all-encompassing and it does align very nicely with the Business Model Canvas, and it is in fact what Zott and Amit came to, sort of this activity-based approach to a business model.

And because it’s aligned with the canvas, it’s kind of a good working perspective but the trouble with it is that it’s vague enough and it’s a little vaguer than we might like and it sometimes gets expanded even further to include things like business strategy, which is exactly where as a researcher, I would prefer not to see business models go.

For MBAs, it’s probably useful to recognize two or three things here.

One that we are talking about a set of elements. We’re talking about a set of different aspects of the organization, activities, resources, processes.
Number two that we need to have all of this linked to value creation. That’s kind of really where all of this comes back to.
Number three, it’s useful to remember the design piece of this, right? This is about designing how organizations function.

I think if MBAs and managers and entrepreneurs keep those things in mind, I believe that even if we don’t have a single perfect definition for a business model, I think that there’ll be able to work with what’s available, to use the canvases and so on.

What are some of the business models tools available, and how to use them?

Adam J. Bock: I love the Business Model Canvas, and Alexander Osterwalder did just a phenomenal job and researching and developing and, and building that. But it does have limitations.

If you are an early stage venture or you’re not even, you don’t also have a company yet; you’re just trying to think about an opportunity, there’s a lot of information that would need to go into Osterwalder’s Business Model Canvas, that you might not have.

The lean canvas as an early stage business model tool

And so the two additional tools that I think are helpful, one is the lean canvas, which was developed by Ash Maurya. And I love the lean canvas, I use it very consistently in my classes and students like it.

It’s very focused on the customer problem and the solution to that problem. And so it’s very intuitive for students. So I, in the book and in practice, I recommend that the lean canvas is handy for very early stage companies.

Teams and organizations that are at that very initial stage of getting launched will find the lean canvas to be a very helpful, straightforward tool for putting together the elements of their business model.

RTVN framework for a very early stage venture

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Source: bizmodelbook.com, RTVN framework worksheet here

But if you’re even earlier than that, I mean you’ve come upon this idea that you think might be innovative or it might have a market opportunity, even the lean canvas might be a little more than you’re prepared to develop. Because it does require you to think in at least a little bit of depth about channels and customer relationships and cost structures and you just might not be there yet.

And so for that, we recommended this model (RTVN), which stands for resources, transactions, value, and the narrative. And it’s meant to be an extremely simplistic way to get started with a business model.

Think about the essential resources that you’ll need. What is it that creates value? What are the transactions that take place? Who do you interact with? Whether it’s suppliers, customers, partners, how is value created and then captured? And that those are not necessarily the same thing.

How you create value and then how you monetize that and capture it may be slightly different. And then surrounding that, we encourage early entrepreneurs to make sure they do think about the narrative.

What’s the story that ties all of this together? Because maybe the single most important thing about business models, if we could jump ahead 50 years and think about how business models changed management, it might be that the ability to use a business model to tell a straightforward and clear story about why an organization is going to be successful is really what makes it work.

And so you make sure that as you think about these elements; the resources, transactions, values, or if you use the lean canvas or if you use Osterwalder’s Business Model Canvas, that you always have in the back of your mind, what’s the underlying story here?

What’s the compelling way to explain, whether to employees or partners or investors or customers or suppliers. What is that story that shows why this business works?

Gennaro Cuofano: There is also another part where you say to focus on actually the resources which you call SHaRP resources.

What are the SHaRP resources and why they matter?

Adam J. Bock: The SHaRP resources perspective is a variation of a more longstanding approach to resources in strategic management and corporate strategy.

There’s a framework called the V-R-I-N or the VRIN framework based off of the resource-based view of the firm, which is this long-running strategic framework in the academic literature.

When we were thinking about what we did want to make sure that we distinguish this a little bit from a business model perspective simply, again, to kind of make sure that we didn’t get too caught up in links with strategy.

The SHaRP resources framework helps to emphasize that organizations gain advantages and are successful because of the various resources within the organization. And resources is a very generic term, it can refer to human capital, it can refer to financial capital, physical assets, capabilities, skills, knowledge.

We wanted to make sure that people had a relatively straightforward way to think about those and to assess them in a relatively simple way.

And so SHaRP stands for:

Specific: They’re going to be the people or the assets, or the way money is used that are specific to that particular opportunity in that industry.
Hard to copy: They need to be hard to copy. Because if anybody can get access to them, then your advantage is going to be limited either in time or in geographic scope.
Rare: They need to be rare. They need to be something that once you access, they become something that other organizations can’t as easily also generate.
And precious: They have to be valuable in some specific way.

The more of those characteristics that a resource has, the more it contributes to the success of a business model. Thus, having a resource, an individual for example, who’s very specific can provide a lot of value to your opportunity, that’s very good.

But if they have unique experience, they have unique capabilities, no one else has been working on the same kinds of topics that a person has been working on, the more of those characteristics, hard to copy, rare and precious, the more likely that that person’s going to be that person, that asset, that capability, that skill will actually ensure that your business model is viable in the long-term.

What’s the customer journey map and why it matters?

Adam J. Bock: The customer journey map is one of those tools that I’m constantly surprised not to see more often. The customer journey map is a very simple thing, and this is not something we invented by any stretch of the imagination.

It’s a map or a diagram or even a narrative that explains every step that your customer takes:

From when they first become aware of your innovation, product, company
All the way through the educational process, the purchasing process, customer support after purchase,
And ultimately to a point where they’re either becoming a longterm customer or also, they’re also helping refer other customers to you.

And this customer journey map is incredibly powerful for thinking about from a business model perspective because it shows you every interaction that you have with the customer and it gives you a relatively clear and testable process for thinking about all the things that your business model has to do to be successful.

And there are many versions of the customer journey map, and there are at least a dozen different templates online that you can access. But I am constantly surprised that I don’t see more entrepreneurs generating a customer journey map in conjunction with their business model because I think they go hand in hand if you know what your customer journey looks like.

Putting together the business model and recognizing the critical places in the business model where you’re going to create and capture value becomes dramatically easier.

What’s a business model narrative, and why it is essential?

Adam J. Bock: The business model‘s narrative is a couple of things. It could be a little bit of your organizational story. It could be a simple description of how you create value. It could be in part what makes your organization unique from any other.

The way that we have tried to encourage people to think about the narrative is to tie it explicitly back to the RTVN framework.

So the narrative should encompass in some simple way the essential resources, the key transactions, and how value is created and captured. And it’s not the case that the narrative has to be perfection.

It is something that you can constantly return to say, “Is this actually what the business does and do all of the elements the business model in this canvas or in this broader analytical framework that we’ve created, do they all ultimately tie back to that?”

And this is so important because as people, as humans, we think in narratives. We automatically create stories about everything. About ourselves, about the organizations we work for.

And that is a compelling way to communicate information extremely quickly. So we feel like it’s a bit of a missing piece that a lot of entrepreneurs, they know about it, and they’re thinking about it as they build their pitches.

And so from our perspective, why not make that explicit and make sure that it matches exactly what it is that your underlying business model is doing?

What are some of the key obstacles to designing a great business model?

Adam J. Bock: I think there are three.

The first one is the unstated assumptions. Getting those assumptions and hypotheses down in the business model. I think that the most common mistake that I see is when entrepreneurs put together a business model, but they still have these assumptions in the back of their head that are driving how they think about the business model and they never get written down.

And what that means is that if you don’t write them down, you’re never going to test them. And that’s an extremely dangerous place to be. We know that from studying entrepreneurs that the assumptions that they have about how a business is going to work are often not reflected in the market reality because very often we are not our company’s primary customers and so it’s just really essential to get those assumptions written down.

The second thing from my perspective is just failing to look beyond the surface. So you look at a business model, and all the pieces seem to link up, and you just leave it there. And the reality is that business model analysis is fundamentally more complicated than that. We can look at the example of low-cost airline carriers like Southwest and Ryanair and sure, some things are obvious, they don’t serve champagne on the flights. Well, that’s an obvious element of the business model.

But you can look at a company like Southwest Airlines in the United States and they spend more on training than most other airlines do. That doesn’t seem to fit the low-cost business model concept. But you have to look deeper. Because mistakes in the airline industry are very costly. If you’ve got the bag on a wrong flight or a flight gets delayed, the costs of those mistakes are extremely high. And so training ultimately is a low-cost activity even when you spend more on it because it’s generating returns in the long haul.

And then the last thing I think is the last obstacle is missing the value needed for the customer’s relationship. Where does the need of your customer match up to the value you create in the organization? What is the value created in the business model? And again, this is where that customer journey map I think is critical because it ensures that you’re making that connection very, very explicit and there’s no shortage of other tools out there that you can use in terms of linking up customer needs with value creation.

But making sure that you’re doing that very explicitly from my perspective is a critical obstacle that a lot of entrepreneurs face in building an effective business model.

Why Digital Marketing Automation is Important in 2019 And Beyond

Automating aspects of your digital marketing efforts can save time and money while improving the functionality of your business.

91% of marketing automation users have said that it’s “very important” to the overall success of their online marketing activities.

Increasing efficiency is one of the key goals in any successful business, and automating processes can help business owners to perform functions both quicker, and more effectively.

Social media posting, PPC campaigns, emails, landing page content, and lead generation services can all be enhanced by the process of digital marketing automation.

What is Automation in the Digital Marketing Industry?

Automation is the process of using different tools, services, and software to automate repetitive, complicated, or time-consuming activities.

In digital marketing, automation gives businesses more time to grow and operationalize communications so that companies can take care of themselves without the need for constant attention.

How Can Your Business Benefit From Digital Marketing Automation?

Your business can become more productive, improve campaign management, increase marketing ROI, measure performance more accurately, and generate more leads by automating some of its digital marketing processes.

The statistics speak for themselves:

Over 50% of marketers believe that the marketing tech industry is evolving faster than the speed that their companies use marketing technology.
63% of companies that are successful in marketing automation plan to increase their marketing budget.
33% of businesses have already implemented marketing automation into their businesses.
Marketing automation drives up to 14.5% increase in sales productivity and a 12.2% reduction in overall marketing overheads.
67% of marketing leaders currently use some form of marketing automation platform.

Digital Marketing Automation Has No Loopholes

When your business decides to manage and run your marketing campaigns using a clearly defined process, you’ll never overlook anything.

You can now receive instant performance reporting and analytics that will help to improve your marketing decisions.

Lead nurturing opportunities will be streamlined, and teams will be able to improve the potential of all marketing campaigns.

In addition to all the improved automated performance optimization and reporting, split testing can help to reduce unwanted decision making efforts.

Your Business Can Increase Revenue Opportunities

By automating processes such as up-sells, cross-sells, personalized reminders, appointments, and follow-ups, you can develop a new level of trust with your client base.

All of your prospects and customers will receive a level of attention and care that is unrivaled by competitors as automation creates a more personalized connection between your brand and customers.

By combining automation with convincing, attractive lead generation strategies and lead magnets, your business will increase opportunities to make additional revenue out of marketing investments.

You Can Reduce Staffing Costs

You no longer need to hire more employees to execute planned strategies for each marketing department. A small team of digital marketing experts can set up all processes and guide your marketing department.

However, it’s worth investing in a professional digital automation strategy and the software and training needed to execute the plan in-house.

Once functions have been automated, your marketing processes will be set for the weeks and months ahead. Now, your core team can focus on in-house creativity and potential new projects.

What Processes Can be Automated?

Everything from sending follow up emails, to upselling products and answering customer support calls can be automated these days.

Here are some functions most businesses use automation for:

Publishing social media posts
Sending out emails via targeted campaigns
Website widget content
Disseminating bulk SMS and phone calls
Online advertising placements
Data management
Data analysis.

If you invest just $1000 in a solid marketing automation strategy, you are almost certain to make at least triple this amount back in profits over time.

Make a list of the processes that your business could automate and estimate how much time this will save your team.

Get a quote on the cost of automating these processes, and compare this to the value of the time you currently spend doing these tasks manually. You may be pleasantly surprised.

Other business resources:

What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business

How To Write A Mission Statement

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Published on June 12, 2019 04:13

Master “Unlearning” To Build A Successful Business With Barry O’Reilly [Interview]

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Barry O’Reilly, is a business advisor, entrepreneur, keynote speaker, and is the author who has pioneered the intersection of business model innovation, product development, organizational design, and culture transformation.

Barry is the founder of ExecCamp, the entrepreneurial experience for executives, and management consultancy Antennae.

He wrote an amazing book, “Unlearn: Let Go of Past Success to Achieve Extraordinary Results” and he is also the author of “Lean Enterprise: How High Performance Organizations Innovate at Scale.”

We’re diving deep into “unlearning” and how it can help organizations thrive in this era.

How did you get into the study, research and practice of unlearning?

Barry O’Reilly: After we wrote “Lean Enterprise,” I was coaching a lot of senior executives and business leaders in scaling of startups or larger organizations about how to create high-performance organizations to innovate at scale.

One of the things I constantly came up against was while learning new things was hard, the significant inhibitor to helping people, especially high-performance individuals get better, was not their ability to learn new things. It was their inability to unlearn their existing mindsets, behaviors, and methods that were once effective, but now they were starting to limit their success.

So it was very interesting to me because a lot of the behaviors that make these people very successful when they tried to take the next step, some of them can actually be inhibitors to taking that step and succeeding.

A change in mindset

And a simple example might be, you know, if you can imagine when you were just a contributor in a team, say you were a software engineer and you are really great at writing code, and you come into work and you write code all day and then you were great at that. Very competent.

So you suddenly started to have to manage other people who were writing code, and often, the transition from being a contributor to be a manager, people try and often get stuck using the same behaviors that made them successful when they were a contributor when they were trying to be a monitor.

Often you need to flip your emphasis. Instead of measuring your success and the amount of output you create, stories you deliver, features you shift, your success becomes helping other people to deliver and improve their practice and get better rather than you do all this work.

These are very simple like examples, but where we often get trapped, and we have to recognize that maybe we need to let go of some of the behaviors that made us successful in our last role and innovate the way we work to be successful in our next role.

What’s the learning organization and what’s unlearning instead?

Barry O’Reilly: In the 1990s, Peter Senge published his book, “The Fifth Discipline,” which was the art and practice of learning organizations. That concept sort of exploded into the world. Everybody was becoming a learning organization and sending people to Stanford, Harvard, Cambridge, and Oxford to get these certified learning organization leadership programs.

But it was interesting because at the same time, while Senge was talking about learning organizations, another mention of by Bo Hedberg talked about unlearning. The interesting thing is while knowledge grows, it sort of simultaneously becomes obsolete as reality changes. Understanding involves both learning new knowledge but discarding obsolete or misleading knowledge.

Recognizing what’s not working

And Bo Hedberg sort of described this as a process of both learning and unlearning. What most people forgot or missed that trick with learning organizations is they thought it was just about doing more stuff.

But the real trick is to recognize what’s not working and let go of and then incorporate new things to help you learn at speed what works and what doesn’t. And you know the reason I think you see this huge disruption happening in business models is for a long time companies didn’t recognize that pattern.

Learn fast and rapidly innovate

Even in 1990 when Senge’s book came out, the largest organizations in the world were big organizations that scaled through hiring people, being number one in their market, building a moat around their business that they had high barriers to entry.

Even in 2008 that was still the case, the largest companies in the world were Exxon, General Electric, Microsoft, AT&T. But now if you look today, the largest companies in the world have fundamentally shifted the way that they work.

They’re building these platforms that allow them to both learn what works and unlearn the behaviors that are not working for their customers and rapidly innovate its speed. The reason companies like Amazon, Apple, Alphabet, and Facebook are powering ahead of the competition is they recognize that they can scale through technology infrastructure rather than people.

They build platforms that allow them to learn at huge fidelity, high accuracy about what features customers use and don’t use, what features work on don’t work. So they’re learning to unlearn at the same time.

That’s allowed them to have an exponential impact relative to the rest of the organizations in the world and truly sort of out-innovate them both in business modeling, product design, process delivery, and customer delight.

Is disruption organizational or it happens at an individual level?

Barry O’Reilly: What I always say is disruption doesn’t happen to organizations. The truth is it applies to individuals. Because organizations are just led by individuals. And often what happens is people get into leadership roles and they believe that the things that made them successful in the past will continue to make them successful in the future.

People with 20 years experience in a certain industry start to fall into the fallacy that they’re an expert, that they know everything. But technology is changing. Customer demand is changing. The world is changing all the time. You’ve got to have a system to continuously adapt your behavior to changing circumstances that you’re facing.

When you think about the best leaders of the world, they’ve cultivated a capability within themselves to innovate and adapt or even anticipate the future. They invest in experiences that enable them to grow.

They seek situations that are uncomfortable, uncertain and the results unknown. They’re experimenters. They’re constantly trying new things to find out what works and what doesn’t.

When you pair that mindset with the ability to leverage your technology to help you experiment at speed, I think that’s where you see the rise of people like Jeff Bezos who is continuously trying new things for Amazon to see what works and what doesn’t and the massive success that they’re realizing as a result.

How does the Cycle of Unlearning work?

Barry O’Reilly: What I was constantly finding with these leaders is that when they start to recognize that they’re not living up to the expectations that they have for themselves or they’re not achieving the outcomes that they wanted, they were signals that they needed to unlearn.

Their behaviors were not driving the outcomes that they want. Often how I try and explain this to people is just like a product has features and you’ve got to continuously innovate your features to stay relevant in the market with your product, humans have behaviors, so you need to continuously innovate your behavior to stay relevant in the market. I think leaders sort of understood this.

When they sort of recognized when they needed to unlearn, what we would do then is take a next step of relearning, teaching them new skills, strategies, behaviors where they could experiment with these by thinking big and starting small and experiment with all many behaviors, they could find the behavior that started to drive them in the direction that they wanted and get some of the breakthroughs that they were aiming for.

Breakthroughs are really a disability to recognize new information and new perspectives. That’s what sort of starts to shift your behavior, is you get these new behaviors, they get new insights, new information, which impact your mindset, and then you can start to go through this process.

Not a one-and-done cycle

It’s not a one-and-done cycle. You don’t unlearn once. It’s really a system that you need to continuously adapt your behavior too. That was a really exciting moment for me because then I started to realize, well, if this is a system, that means we can define it and then we can start to teach people how to use it.

I’ve been coaching now senior executives from Fortune 500 companies right through to scaling startups here in San Francisco, this program and process for the last three or four years. Now I’ve started to build an application where people can actually use this software to teach them how to continuously innovate their behavior to changing circumstances.

It’s been amazing to see the impact of this system. As you say, in the book there are lots of case studies from Capital One and NASA and the National Health Service in the UK where they’ve had these exponential business results as a result of adopting this process. It’s been a pleasure to be a part of it.

What are the key characteristics of unlearning?

Barry O’Reilly: I’ve noticed that there’s a number of characteristics that you’ve got to cultivate within yourself if you want to unlearn.

Curiosity

The first one is a sort of curiosity. The reason I say curiosity is because it’s about getting new information, new information to challenge your existing perspective and mental model of the world.

My example of, well everyone tells me they’re curious, but the challenge I put to people is, when’s the last time you gave someone on your team who is maybe less experienced than you or new to the group, a problem to work on that you knew how to solve and then they started to solve it in a different way than you would?

What was your initial reaction? Did you stop them and tell them, no, you need to do it this way or were you curious enough to understand why they’re solving problems in a different way?

You know, one of the executives I worked with at when the world’s largest banks, he used to go and sit with graduates when they were hired in the company and he would pair with them and get them to sort of ask questions like, what new technologies are you using? How can we solve problems that I thought that you might do in a different way before?

He used to role model this curiosity in the company. This is a someone who’s running a multibillion-dollar portfolio sitting down with graduates who are starting on their first day so he could both learn and unlearn with them. So how curious are you really?

Ownership

The second one is ownership. This is more about owning the outcomes of your efforts. Often what I find is when people are trying to do innovation and are struggling and it’s not working out, they often will say, well, we would’ve been successful if it wasn’t for that person or another team.

Really, if you want to be serious about unlearning, you’ve got to own the results. You’ve got to recognize that the only behavior you can change is your own. Whatever results you’re getting, you’ve got to own them and adapt your behavior to start to succeed.

Commitment

Then the third part is about commitment. It’s like you’re going to try things that you’re not good at. You have to really commit to sucking at it for a while and deliberately practicing getting better and taking on more challenging steps as you go, which means you need to be comfortable with being uncomfortable, and none of your growth is going to happen inside your comfort zone.

It’s just going to be on the edge where your feet are sort of just touching the ground as you’re floating in the water. The way you get people comfortable with not being uncomfortable as you create safety.

Safety is about thinking big and starting small, so you learn fast what works and what doesn’t.

Starting small also makes it safe to fail. You have high psychological safety because you can try out new steps and not feel foolish and working in small steps so that as you to sort of learning quickly what works and what doesn’t.

Recap of the key characteristics to master unlearning

Small steps also have small risks. So you invest in getting information to inform what you’re going to do next and iterate. These are sort of the key characteristics I often say to people, and I sort of summarize it in thinking big, starting small and learning fast, but being aware that you need to be curious, you’ve got to own the results, be committed to be comfortable with being uncomfortable and create safety to succeed.

What’s status quo leadership and why it might be damgerous?

Barry O’Reilly: The danger is when people are successful in one company or context, they sometimes believe that they can sort of copy and paste the same behaviors that made them successful in that context and company into another.

You’ll often see when people move companies that they start implementing all the same practices they had in their last company because it’s comfortable for them. They know how to manage that type of system. They know how it works, they know how to manipulate it.

But often those systems aren’t the ones that are going to be most successful for an organization. You really have to adapt your behaviors to the context and the company that you’re in to be successful.

Avoid to just copy and paste frameworks

This is one of the dangers we see a lot at the moment with these huge scaling frameworks.

You have organizations that are just copying these massive frameworks from books and trying to just print them onto these complex systems that companies are, and you’re never going to get the same performance improvements that you expect when you do that you’ll cause a lot of activity, but does it actually drive any business outcomes?

Define the outcomes

A lot of what I focus on, especially when I’m coaching leaders, is they need to get good at defining outcomes, what they’re aiming for. Recognize where their behaviors or existing behaviors are not living up to those outcomes, and then start to relearn new behaviors to try and drive the outcomes that they want and get the breakthroughs as they need.

Build a system to continuous innovation through unlearning

As you start to teach people how to continuously innovate and adapt their behavior, then it starts to be less of concern what the problems are because they have a system to continuously innovate based on the problems are given.

What I’ve seen when working with teams like that is that they have exponential benefits and extraordinary results because you’re teaching to team both how to learn but unlearn, recognize when behaviors are working and not working and innovate and adapt.

I think based in the world that we’re in, the pace of change that we’re facing, I think teams that are able to adapt capability, they are going to be outperformed teams that are copying processes and trying to execute processes out of books or scaling frameworks or templates.

How to use the Three Cultures Model to build a successful company?

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Credit: excella.com

Barry O’Reilly: A lot of this is done by the work of Ron Westrum, and Ron is basically studying behavior sort of economics in organizations, specifically in health care. He sort of categorizes organizations into three types:

pathological: Pathological environments are where people use knowledge as power and they seek to blame people when there are failures.
bureaucratic: Bureaucratic organizations create lots of processes to ensure that failure never happens, and if a failure does happen, they look to see who didn’t follow the process.
and generative: In generative organizations, it’s about seeing knowledge and information as free that everybody can access it, and if everyone has good information, they’re gonna make good decisions. But they also recognize that nobody can often anticipate when failures are going to occur, so when failures do happen, they’re seen as new information to help the system get better.

And that’s why you find with these organizations that are powering ahead like Amazon and so forth, is they’re making it safe for people to gather new information. They build these platforms where they can safely experiment with customers to find out what works and what doesn’t roll back changes that don’t work and double down on changes that do.

They’re going to find out things, unexpected things, things they thought were true, maybe validate them, but the concept of failure is seen as a step on the way to progress. That you figured out something that doesn’t work and you’ll progress.

Not that it was somebody’s fault and they should be brought out and fired or reprimanded for trying to learn a lot of customers might potentially want. then there are systems in place to allow them to learn that safely and cheaply.

What are unlearning prompts? And why they matter?

Barry O’Reilly: A lot of people get quite upset when I say you need to unlearn because they feel like I’m saying that everything they know is wrong. That’s not correct. As I said, it’s a system. It’s about recognizing when you need to change the behaviors to drive the outcomes that you want. You don’t forget them.

I described it as unlearning is moving away from once useful mindsets and acquired behaviors that were successful in the past, but now might be limiting your success. It’s the conscious act of letting go of outdated information and actively engaging in taking in new information to inform your decision making and action.

It’s a system of both learning and unlearning, recognizing what works and doesn’t.

How do you know you need to unlearn?

Well, the simple thing is to say this a situation where you’re not living up to the expectations you have for yourself, or maybe you’ve defined some outcomes that you’re not achieving.

Maybe you’re struggling to resolve a problem. You’ve tried everything that you know and you’re still not getting the results you want, or there’s an area that you’re just totally avoiding altogether because you’re struggling with how you can solve that problem.

They’re all signals that you probably need to unlearn, that you’re existing behaviors are not driving the outcomes that you want and therefore you’re going to have to relearn new behaviors to try and get you there.

This is why this idea of unlearning is an essential but sort of over overlooked step of being able to learn, and what I’ve figured out over time is that unlearning is just as important as learning, and recognizing when you can identify those limiting behaviors, not achieving the outcomes that you want, relearn and breakthrough, that’s what leads to extraordinary results.

Is there a number one reason people don’t unlearn?

Barry O’Reilly: I think what happens is it’s hard for people to recognize our own that their behaviors are not driving the results they want. Often when people don’t get the outcomes that they want, very rarely do they look at themselves to say, what could I have done differently?

They often sort of focus on factors that they mightn’t be in control that led to failure. Really the problem there is you’ve got to really flip that mindset that needs to be unlearned.

You have to recognize that the only way and only person you can really change is yourself. By constantly trying to adapt your behaviors to get the results you want, eventually you’ll get the breakthrough that you need, and as your team and your peers see you start to constantly change your behavior, they’ll get inspired and they’ll be willing to try and change their behaviors, too.

Getting good at defining outcomes that you’re aiming for together, so you have a clear sense of what success is and where you’re trying to go, would be the other key part that I recommend is sort of a minimum requirement if you’re going to try and tackle this stuff.

Build a growth mindset

And I guess probably a key step is really to actually build up a growth mindset, which enables you to actually understand that you can improve in the process of unlearning. What are some of the key conditions to actually go through these unlearn, relearn and breakthrough processes? What are some probably a few key conditions for those things to happen?

You know what I’ve definitely learned when I ask anyone, do they have a growth mindset or a fixed mindset, nobody tells me they’ve got a fixed mindset. But the interesting thing is a lot of people do, and what happens is when you’re very successful at what you do, you’re used to getting great results.

Fixed vs. growth mindset

You’re used to being given problems that you like. You have great processes to solve those problems, and then you get the results and you get confident that you’re great at getting results.

Say you’re a product manager and you’re great at building products, all your products get launched and they’re successful. Now when you start to ask people than to do different things, so say you were a product manager for an e-commerce website, but now you’re going to ask somebody to move into a new role.

Can you be a product manager for, let’s just say a hardware device and a hardware device that has to connect to lots of other different pieces of hardware and software to make sure that it’s delivered on time. That is sometimes a tougher or more complex problem, and maybe a problem you don’t like.

The processes that you’ve used previously mightn’t actually be the best processes to solve that problem. Now you’re in an environment where it’s a difficult problem that’s unknown and unstructured for you. You don’t really have a clear process of how you’re going to use it.

The results that you’re used to getting are in jeopardy, and then people really start to react to that. They start to get concerned because they’re used to getting good results. Really one of the big shifts in learning and unlearning or growth mindsets versus fixed mindsets is you have to recognize and reward the effort.

Switch the focus from the person to the process

If you focus on results, people won’t do things that they won’t get good results in. That’s a fixed mindset. You see this with your children. If your children do swimming and you constantly tell them you’re great at swimming, anything that they do that might jeopardize them from not being great at swimming makes them nervous

Rather than rewarding him for saying, wow, that was a great effort. You dived into the pool, you looked like you were having fun. Brilliant. I wonder what else you can do. And the same is true with people.

I think recognizing as you change your roles, as you start giving bigger, harder problems to solve, often your first pass through a problem and the process and the results won’t be what you expect. You’re going to have to do things that you’ve never maybe done before that don’t work for you or new skills and recognize that the result isn’t about success or failure anymore.

It’s about new information and using that information to inform how you redefine your problem, how you try a new process and get another result to see if it moves you in the direction or the outcome that you’re aiming for.

Recap about growth vs. fixed mindset

That, again, is a huge shift for a lot of people. But this is sort of the real point of growth versus fixed mindset. Learning and unlearning, getting comfortable with being uncomfortable and sort of choosing a different path, courage over comfort, to tackle uncertainty and grow yourself as a result of taking on those challenges.

What suggestions do you have for executives to bring this process in their organizations?

Barry O’Reilly: Think big, start small, learn fast.

Thinking big is about trying to transform your organization. It’s really tough. But you can start small and start transforming yourself. What I always say to senior leaders is think about a place where you’re not living up to your expectations, not achieving the outcomes you want.

You’re struggling, don’t have an idea how to solve a problem, and then go and write that challenge down, and then go and find someone you trust, and ask them, on a scale of one to 10, how well do they think your existing behaviors are driving results towards solving that challenge? Let’s say that person gives you a six.

Then I want you to ask them, well how can I just get half a point better? What ideas would you have that I could go from a six to a six and a half? Get them to brainstorm a few ideas with you.

Then I want you to pick the one that’s a little uncomfortable. Not totally uncomfortable, just one that feels a little outside your comfort zone. Try that behavior for a week, and then go back and check in with the person again and ask them, hey, this is the challenge I was trying, here’s some new behavior I tried.

On a scale of one to 10, how would you think that that’s impacted most trying to solve that challenge? Then ask them again how to get half a point better. I guarantee you if you get into that process, that system, you’ll be amazed at some of the results you achieve.

Key takeaways

While knowledge grows, it sort of becomes obsolete as reality changes. Thus unlearning stand for learning new knowledge but discarding obsolete or misleading knowledge.
Disruption doesn’t happen to organizations but it applies to individuals. Because organizations are led by individuals.
Just like a product has features which you need to continuously innovate to stay relevant in the market, humans have behaviors, which needs to be continuously innovated to stay relevant in the market
You need to be curious, you’ve got to own the results, and be committed to being comfortable with being uncomfortable and create safety to succeed.
You have to adapt your behaviors to the context and the company.
You need to build a generative organization
Master a growth mindset, which enables you to understand you can improve in the process of unlearning.

And most of all think big, start small, learn fast!

“Unlearning” Your Way To Business Success With Barry O’Reilly [Interview]