Find Your Next

Andrea Kates: What I've learned is that organizations, whether they are global companies, local businesses, even non-profit organizations, are all challenged with growing, with figuring out how to find next year's solution, how to find what will be successful next, and how to adapt to change that's happening so rapidly. What I noticed is that we used to assume that what was next would look pretty much like what we did last, but we were really never taught a process for discovery, how to see change more quickly, how to adapt to get really ahead of tomorrow's opportunities, and that's what "Find Your Next" really means, is learning the tools and a process for discovery.

Rachel Salaman: Why did you think this was the right time to write this book?

Andrea Kates: It's interesting. For about 10 years or so I've been working with hundreds of companies, whether it was Royal Dutch Shell or Johnson & Johnson, whether it was a small high-tech startup or a hospital or even a community group, and what I noticed is that when we got really honest people were struggling, and what used to work pretty much almost automatically was that last year's strategy would translate into growth just by taking last year and sort of multiplying it by 1.10, and that was what next year was going to look like. Suddenly, about five years ago, everything seemed to be changing, you know, the world was changing much, much faster in terms of speeds of transactions, the customers were coming right into our companies and having a voice, you know, with social media, the global forces were coming in, and I realized that what I was taught in traditional business programs was really geared toward managing and not geared to uncovering opportunities, and I thought it was time for everyone to have a new set of tools that fit today's realities.

Rachel Salaman: Well we're going to go into that in quite a bit of detail, but just broadly how are the ideas presented in this book different from the usual ways that companies try to innovate or get a competitive edge?

Andrea Kates: So I don't want to be down on innovation, and I have been accused of being innovative in my thinking, I think that's a good thing, I think creativity and innovation are wonderful. The problem is that people in companies started thinking that they all had to innovate like Apple, you know, everybody had to be, they use this phrase, "outside, out of the box," and to be honest, you know, companies are really afraid of risk. So you can't afford to just have this "Let's make purple tacos," "What if we did," you know, it's like this new idea was so great and yet here you have the Board of Directors and the people who invest and the leadership thinking "This sounds a little bit risky to me," so there was a natural disconnect. What I tried to do was to bridge the gap, and my approach to innovation is basically what occurs in reality with breakthrough thinking, which is... I call it a hunch and we'll talk about it later, but the people who really move forward start with an analytic moment, just like a scientist would, where they keep looking at the data and the information and saying "What hasn't been working isn't really working any more, and I have a hunch that there's something else." So it's the innovation around working through what a better solution would be versus just what's creative and what's outside the box and what's really innovative that fits really well with a growth strategy for an organization.

Rachel Salaman: And the idea of the business genome, as you call it, lies at the heart of the book. Can you first of all explain for people who might not know what the term "genome" means in general, and then explain how you use it in a business context?

Andrea Kates: The Human Genome Project analyzed basic elements of the human DNA, and the purpose was to map patterns, and the key of this is patterns, that people had in common in their biology and characteristics that were linked to that. Now I'm not going to try to go into a science lecture here, but what I thought was interesting was that based on that idea Tim Westergren founded Pandora, which is the Music Genome Project, and I was really fascinated because he took these basic elements we've all been taught, like classic rock or jazz or classical music, and he noticed that it wasn't categories that would predict what Andrea or Rachel might like next, but it was actually a pattern. So I might have on my playlist a couple of songs from classic rock, a couple of songs from jazz, because it turns out my genome, you know, the pattern of what I really like about music, might be a woman singing in a minor key, and that could translate to two different categories, maybe even three, maybe bluegrass, jazz, classic rock. It's the same in business, we were taught that what we have to do is look in our silos, so if I'm an oil company I have to look at other oil companies, but in reality oil companies can learn a lot from companies in other industries to figure out what the next opportunity is for their customers.

Rachel Salaman: Is it possible to identify a number of genomic types for businesses, and if so, how does a company identify which one they are?

Andrea Kates: Right, so that's a really great question, and the old way that we've thought about typing is that you figure out who you are, you know, you sort of say "I'm this pattern" and that that was the key to understanding an opportunity. This is six types, six elements that I've described and developed as part of this process, that you can recombine so that you can have this hunch about where your opportunity might be. So, for instance, there's six elements; one is Product and Service, another is Customer Impact, the third is Process Design, the next is Talent and Leadership, the fifth element is Secret Sauce, and the sixth element is something that I call Trendability that we can talk about later. It's actually like if you think of the periodic table of the elements, you know, these are raw ingredients, but you might have the raw ingredients for coal that are exactly the same as the raw ingredients for diamonds, but there's a lot of difference in terms of how they interact, how these elements interact. So that's the difference between two companies that might on paper look like they're very similar.

Rachel Salaman: In your book you describe in detail your Find Your Next Process, as you call it, and you say it involves four steps; Sort, Match, Hybridize and Adapt, and these are related to the six elements that you just talked about. Now I thought it was interesting that you said that this process should replace SWOT thinking; SWOT standing for Strengths, Weaknesses, Opportunities and Threats. Do you think there's no place for SWOT thinking any more?

Andrea Kates: So if I had my way every strategy meeting would start by taking the SWOT analysis off the wall and replacing it with a genome map of the future. That's not to say that SWOT is not a valuable tool, but it's walking into a room that is dominated by the past and dominated by snapshots of who you are that seems to brainwash a company or a team into thinking that their future is their past. So let's envision that Nikon, the camera company, walked in and saw its strengths, and they saw that their apertures were really strong and their shutter speed and their clarity of focus, all of these things were strong, and they have this huge room, then next to that they have a benchmark of Canon and Olympus and all the other companies and how they match up. Well, you know, they would be missing what I call "the periscope," where they pick up their periscope and they twirl it around, and they say "Wait a minute, maybe instead of looking at our current strengths, weaknesses, opportunities and threats in our past, and instead of looking at other camera companies in our current category, let's look outside the category and see what's happening, say, with iPhones, where people are taking probably just as many iPhone pictures as with a camera, and put that on the radar screen, front and center." The minute you walk into this room you see that the future is based on different things than a SWOT would reveal, you would never have iPhone on a SWOT analysis in traditional thinking.

Rachel Salaman: Wouldn't it be a threat if you were doing a SWOT analysis, wouldn't you put an iPhone in a threat, as a threat?

Andrea Kates: It's actually more of an opportunity. People tend to see a competitor like an iPhone as a threat, and that doesn't let them see the possibilities of what is changing in their customers' perceptions, what they need to adapt to in terms of the new realities, and some opportunities that emerge from seeing the blend or the hybridization between, you know, what is it that an iPhone is able to do, what about sharing on the internet, what are some ways that ecommerce has come onto the scene, and you piece those together first, then you go back, reverse engineer and say "Oh my gosh, we've got this huge opportunity to marry A plus B plus C into a whole new offering from Canon," or Nikon or whatever the camera company would be.

Rachel Salaman: So if we could just talk about those four mapping processes a little bit more, and start with the first one, which is Sort; what exactly should people be sorting here?

Andrea Kates: That's a great question. Sorting in the old thinking was sorting the obvious, and I recommend in the process that you sort this periscope approach. So, for instance, if you're Starbucks, the old way you would be sorting coffee, you would be sorting the commodity pricing of coffee, you would be sorting how many cups of coffee your consumers have been drinking, and on and on. In the Find Your Next approach you would be looking at beverages in general, and you would be looking at hanging out, you know, the feeling of where you would sort of be between work and home, they call the third place. It might lead to the realization that home brewing and craft beer and really interesting wine bars are something that are entering the scene in terms of the customer preference, and you might end up thinking perhaps that Starbucks had an opportunity in the area of alcohol, you know, offering alcohol, which in fact just last week they announced they're doing. A lot of the future is in plain view, so we see it but we just forget to put it on our walls because we're stuck in this old mindset.

Rachel Salaman: Well the next process in your mapping process is Match. So what is being matched here and how does a business go about doing that?

Andrea Kates: Another really good question. So once again, in the old thinking you would match by benchmarking, you would match your industry against your other, but in the six elements what you do is you start with your hunch. So, let's say, take an example of Pennzoil, which is an oil company that had a commoditized product for cars; they were commoditized, which means that they weren't able to get margins any more and they were viewed as equal to any of their competitors. So in the old thinking they would match themselves against the viscosity, say, of the oil of their competition, but in the way that you have a hunch, you say "I have a hunch that perhaps there's a service which is the changing of the oil that might represent some value in the new equation." So the oil might be a commodity, but the changing of the oil could become the differentiator. So you take the feeling, I call that a genomic pattern, of oil changing, and you start matching who else does something like that, you know, a metaphor, like "Who does something where people are comfortable and they're waiting for a service to be done, that they could be doing at home but they'd rather pay a premium for someone else to do it for them?" So is it like a shoe repair, is it like... you know, what is it like? So if you think about where people are comfortable waiting, you know, a very pleasant waiting room, say, in a well-run clinic, they usually have elements like Wi-Fi, there's usually a sense of huge professionalism, there's a cleanliness, there's a great computer back-end that tells you when your car is ready after the oil change, there's a reminder system. So you start looking at something like a great waiting room in a hospital and a great system like that that reminds you to come back to the dentist in a few months, and you think "Why couldn't we do something like that with our oil and provide an end to end service that makes our oil much more valuable?," and you would come up with a company like Jiffy Lube, where they charge you a premium, you're pleased to pay it, and you've matched the genome of the hanging out and the waiting and the full service to other industries, to teach yourself "Gosh, we're not just selling viscosity, we're actually selling a whole end to end pleasant experience where you're very pleased to pay for a complete oil change."

Rachel Salaman: So let's talk about Hybridize now, what's involved in this process, or have you covered most of what's involved?

Andrea Kates: I think I've covered it. The hybridization comes from matching something from Industry A, like the Pennzoil example, with something from Industry B, like the waiting room in a great dentist office, and turning out something C, which would be Jiffy Lube. So it's A plus B from another industry equals the new C.

Rachel Salaman: And then the final step is Adapt?

Andrea Kates: That's the toughest one, because really how do you connect today to the vision you've got for tomorrow? You don't overnight have a bunch of scientists that are used to dealing with viscosity and oil formulations suddenly be able to develop lovely customer service in a waiting room, they don't just automatically get there, and sometimes you really have to reject the option. So years ago Starbucks came up with the idea for polenta, which is like offering sort of cornmeal, because they noticed that people who went to Starbucks also ate polenta. It turned out to be a miserable failure, you know, so sometimes you have to abandon that also in this adaptation process. So what you do is you test a couple of things, and then the one that you believe your organization can really embrace and race forward with is the one that you go forward with after you've decided what the possibilities are.

Rachel Salaman: So in your experience do you think it's possible to identify any pitfalls that a business should bear in mind when they start out on this mapping approach and trying the Find Your Next process?

Andrea Kates: It's a really good question. That's why you have to test. You know, the process doesn't stop with innovation, the process doesn't stop with "what if" thinking, because we can all think of fantastic, creative ideas, but if it doesn't fit with your organization's capabilities you can't get there somehow. Or if you notice that it's not sitting well with your customers, you know, if the restaurant tries to introduce a lunch option that nobody wants to eat, then you don't institute it system wide. So I think that the pitfalls are two-fold, and it's sort of two sides of the same coin. I mean, one, that you have to acknowledge that there's huge risk in doing nothing. So a lot of times people say "Well that seems too risky to try this new idea," but they have to remind themselves that doing nothing will land them really in a worse position, so they have to do something. Then the second pitfall is to do something just to do it, without realizing that either (a) the organization really will never be equipped, or sometimes you have to change the people, you have to say "We need for there to be a culture of customer service, not just a culture of chemical formulation. What will it take for our organization to adapt to that new reality and to be really fantastic at this new skill set?"

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Rachel Salaman: Now most of your book is devoted to exploring the six business genome elements or building blocks that we've already talked about. So perhaps we could just talk about those in a little bit more detail now. The first one is Product and Service Innovation; can you share your observations in this area using one of the case studies as an illustration?

Andrea Kates: Well I'll use quick case study that I think is easy for people to understand. There was a hearing aid company that had a battery that was very difficult for people, elderly people to change because it was hard for them to see it. So the product innovation was to watch the consumer and then actually develop a battery with a little tab, so that it was not only a battery that was going to work longer but also easier for the customer to change. So they took care of the whole problem, not just a product that was easier from the engineer's point of view.

Rachel Salaman: And then the next building block is Customer Impact. Now can you bring us up-to-date with how this has changed in recent years?

Andrea Kates: Well I think everybody knows that brands are now a contact sport. Our companies live in glasshouses like they didn't used to in the old days before social media and before customers wade in so much about our brands, even if they haven't told us about it they'll be chatting on the internet about us. So to me the best companies, whether it's a Nike that incorporates the fact that they know that people are buying sports equipment, not just to buy the equipment but to get in shape, you know, they'll connect with the community and put you in touch with a trainer to help you stay on track. They'll use the community connection so that you can be part of, say, a Nike community of people who all wake up in the morning and say "How many miles are you going to jog today?" So they've integrated the positives of this customer dynamic into their strategy.

Rachel Salaman: And in your book you have quite a few examples of how companies have successfully looked outside their sector or across industries, as we discussed a little while ago, when it comes to pleasing their customers. Could you just share one or two of those now?

Andrea Kates: Well one of my favorites is the Hyatt Hotels and Resorts, and what they did is they noticed from their customer satisfaction surveys that they did every month, you know, "How do you like your room" and those types of things, that a very small data point had reached a much higher level on the radar screen, which was "Does your room smell clean and fresh." You know, you sort of expect your room to smell clean and fresh, and so usually it's what I call a "no brainer," it's like check the box and move on, but they noticed that the importance level of the guest, that question had moved up significantly in importance. So they sort of stopped for a little bit and paused, got the group together and said "What does this mean? If we could be the best in the world at providing a clean and fresh room, what would that look like?" That's where creativity does come in, right, so that they had the metric and then they said "What are some of the ways?" and they brainstormed, "What are some of the ways we could really execute the 10 out of 10 in terms of impact?" What they came up with was that there was a new way that you could engineer the air of a room with HEPA filters, you know, with filters that were used mostly in hospitals, and you could make absolutely the cleanest, more fresh air in the world, and they called it The Respire Room. They introduced it as a test to see if customers would prefer them, and it turned out that their hunch was correct. Number one, the metric was very important, and that nobody had ever... you know, they had competed on the heavenly bed or the softness of the bed, they had competed on loyalty rewards, but they hadn't ever competed on air, so they figured out a way to do that. So, number one, they saw that it was an emerging preference; and number two, they did get creative about ways they could solve that; and number three, they engineered something that would have a huge impact in terms of preference, and as it turns out the guests actually pay a premium for not just a non-smoking room but for a Respire Room, where you have the best night's sleep that you've ever experienced.

Rachel Salaman: Well moving on to your third building block or genome element, that's Talent, Leadership and Culture. So firstly, can you just explain how those three things fit together in this context?

Andrea Kates: If you think about the elements that your company has to leverage, the people are very, very, very important in terms of your competitive advantage, and two companies that are the same; one that has a culture that's thriving, where people are highly motivated, and the other that isn't, but they have the same raw materials, almost always the company with the talent, the leadership and the culture, you know, the people, the mojo, the connections, the dynamics, sense of satisfaction, will always do better in the long run. I think what's different is that we were all taught these models for how to be good leaders, these models for how to motivate people, models for what kind of culture should work, and they're old fashioned, you know, they're from the military mindset as if we're all fighting Napoleonic warfare, or they're from command and control, where what you're trying to do is use people to be efficient, to get something off a conveyor belt. But these days you have to look at people very differently, and sometimes people work remotely, people work 24/7, people work in one country and are interacting with someone across the globe. So we have to think differently about what really motivates people, what motivates the milennials, where it might matter very much, the values of the company that they work for might be a high motivator, not just the salary, the compensation, the pay check. So times have really shifted.

Rachel Salaman: And the next building block is Process Design, and what are your main points here?

Andrea Kates: Well I always like to use the example of an airport, because if you gave anyone an exercise to redesign an airport, say you gave that assignment to 10 people, all 10 people could justify an efficient process design for the airport. Now one might be looking at it from the perspective of if there's an elderly passenger that has to get quickly and very efficiently from where they're dropped off to the gate, that could be one way to design an efficient airport. Or you might, say, you know, from the perspective of the food handlers, you want to make sure that the refrigeration or the food delivery has the shortest possible distance. Or maybe you're trying to look at the process design from the perspective of the airplanes themselves, you know, the flight patterns. So we could all justify process design and optimizing that, the problem is, whose perspective should you look at? So what I believe is important, especially as fast as thing are moving, is to take a process and ask yourself first "Whose perspective will be dictating the optimization of any given process," whether it's a billing process, whether it's a design of a physical process, you know, who's point of view is the dominant point of view to redesign this process. So the point is, I would say measure twice, cut once, and as a team agree on whose perspective should be part of the optimization process before you start optimizing.

Rachel Salaman: Now next comes something you call Secret Sauce, so you'd better start by explaining what you mean by this, if that's okay?

Andrea Kates: Well Secret Sauce is really another way of saying brand, but it's a little more than brand because it's all of the intangibles, and this is going to sound a little bit Pollyanna-ish, a little bit overly zealous, but I believe that a lot of brands, even brands that are as boring as Google, which is just a search engine, people can fall in love with them. You know, it's not just the "nice to have," brands can become something that is central to our lives. Like, for example, there's a company called Zappos that sell shoes, that people have literally fallen in love with the brand, and it's not just the shoes, they're the exact same shoes you can buy almost 10 to 20 other places, but it's that the brand has delivered what it promised and has created a connection with the consumer. So we care about the brand, we love the brand, we prefer the brand, and the stories that they always tell us, you know, something about their customer service representatives are trained not to get you off the phone quickly but to do full resolution, that you love the brand because you get to the point of what really is bothering you. So if you're afraid to buy the shoes because you're afraid that they won't let you return them, they'll address that front and center, they'll say "Oh my goodness, of course, our return policy is this and that and the other," and they'll talk with you about your fears almost as if you're a friend, which sounds a bit odd for a shoe company. It's worked. I mean, they grew leaps and bounds, and of course they were bought by Amazon and have maintained this brand affiliation and preference over the years.

Rachel Salaman: So how can businesses use your process to get to the point where Zappos got?

Andrea Kates: I think the key is to care about authenticity and to be consistent. So, for instance, if you say that you are going to be easy to do business with, which was one of the things Zappos tried to do, you really have to do it, you really have to make sure that you answer the phone on the first or second ring, that you make it such that your return policy really is easy, because people get wise to false promises. I think that a lot of times brand starts off in the advertisement department with a slogan, but it's not necessarily embraced by the whole company. So I think everyone in a company needs to get in the room at the same time and build the brand strategy as a huge corporate, strategic initiative, as opposed to just "Oh, well let's get the advertising people to pick a pretty color and find some nice commercials about this."

Rachel Salaman: And your sixth and final building block is what you call Trendability. So what do you mean by this, and how can it help a business find their "next"?

Andrea Kates: Well the word "Trendability" is tricky, because the word "trend" sometimes is used in a way that I don't find useful. You know, for something to be "trendy" sometimes means that it's going to be a flash in the pan or something that lasts only a short period of time in the public's preference. What I mean by Trendability is true trendability, like GE experienced when they made a multiple billion dollar investment in what they call GE Ecomagination. This is a huge global company that had to look at sustainability and whether it was just a, quote, "flash in the pan," or a true trend that would resonate for years with the public. What they decided over many years, it didn't happen overnight, "Oh, let's look at a new trend, people are wearing yellow." No, it was not like that at all. They looked at a lot of data and poured over it for a long time, trying to really quantify the impact of this new trend, which was that people seemed to really care not just about what GE had to offer but whether or not it had a negative impact on the planet, whether or not it was sustainable, and those elements came to the forefront. So trendability I believe is really important, and has to do with your company being really in touch with where the future is heading and staying on top of it, planning for it and investing wisely in the next frontier for your customer, their preferences, and basically where the world is going.

Rachel Salaman: So finally, in writing this book what came to the fore for you as the most important tips for businesses that want to get a competitive edge or find their "next"?

Andrea Kates: Well I think everyone should do what a client did a few years ago, where they noticed, number one, that there was a change, and the noticed, for instance, that something like their customer satisfaction scores were going down, their market share was eroding, something where they noticed that there was a little bit of a change and they feel the initial repercussions. So what I think should happen is, ask yourself three questions; number one, what seems to be changing about our environment, and write it down, you know, what's changing in our own sales, what's changing in our industry, write that down, number one. Number two, what signs of change do we see in adjacent areas? So, for instance, if you're a restaurant, what are your customers eating other than in your restaurant? Are they eating granola bars, are they grabbing food and eating it in their cars, are they eating tomatoes from a farmer's market? Those are early signs that there's an opportunity ahead of you. So that's the second thing, for you to write down what change do you see in these adjacent areas. Then number three, and it sounds a little bit unusual, but I really think you have to close your eyes and get in touch with your hunches, because business leaders who are experienced can feel the early signs that there's an opportunity that could be out there, and we always kick ourselves, saying "You know, we could have been the next iPhone," but, you know, you weren't, and the reason that you weren't was that you didn't take that number three moment and really sit down with yourself and say "What are my hunches about what's coming next?"

Rachel Salaman: Andrea Kates, thanks very much for joining us.

Andrea Kates: Wonderful to talk to you, thank you for your time.

Rachel Salaman: The name of Andrea's book again is "Find Your Next: Using the Business Genome Approach to Find Your Company's Next Competitive Edge," and you can find out more about her and her work at businessgenome.com.

I'll be back in a few weeks with another Expert Interview. Until then, goodbye.