Competitive Advantage Part 2

In this episode we discuss Peter Drucker’s quote that says, “Innovation is easy. Just put people in teams and have them work together. The problem is nobody knows how to do it.”

Listen to Part 1 here.

Listen to Part 2 of How You Can Achieve A Competitive Advantage 

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Read Along as Karla and Allen discuss How You Can Achieve A Competitive Advantage

Karla Nelson: And welcome to The People Catalysts’ Podcast, Mister Allen Fahden.

Allen Fahden: Hello Karla.

Karla Nelson: Hello kind sir. How are you today?

Allen Fahden: Oh, I’m a happy guy again, because we’re talking about what I love to talk about is competitive advantage, baby.

Karla Nelson: Oh, I love it. Yes. Competitive advantage. And this is the second part of a two part series, and we kind of encapsulate what we do in Peter Drucker’s quote that says, “Innovation is easy. Just put people in teams and have them work together. The problem is nobody knows how to do it.” I just wish we were a little younger and we could work with Peter Drucker because we could’ve actually showed him there is a process.

Allen Fahden: Yeah, that’d have been so good. I knew a guy who actually drove him to work when he was teaching at Claremont or wherever it was, and I was like, “Oh, can I do that? Can I drive him to work?”

Karla Nelson: Yeah. I’d love to drive him to work. Unfortunately, we lost him.

Allen Fahden: If I had automatic door locks, that would’ve been really great. I’m sorry, you can’t leave until …

Karla Nelson: You’re here, you’re stuck, right. The challenge with the quote, it’s brilliant in its own right, like many quotes, and that’s why everybody is drawn to memes and everything these days, but the challenge is that it’s too general, right. So we’re going to talk today about how to generate these big ideas, and then take those big ideas and put them back in the box. If you want to learn about ideation and implementation, which is putting a team together to figure out what you’re going to do and how are you going to do it, we just recorded a podcast on the specific steps of doing that. So you can go back to ideation and implementation, and we talk just about the process. But for the purpose of this podcast, we’ll be continuing part two of how to use the Hoodoo method as a competitive advantage based upon the well-known Johari window.

So in part one of the series we discussed innovation, right. And the place that most businesses play is that low competitive quadrant of the Johari window. And that most businesses, well it’s about 90% of them, claim they want to be innovative, but typically they respond to innovation either by killing the idea or running with a bad idea. But either way, and I know Allen, you call this fool’s gold innovation, right, it’s like, “Hey, we want to be a bit innovative, let’s go.” And it’s like eh, eh, eh. And so either they kill the idea, or they run with a bad idea, but either way you’re going to be out of balance, and at the end of the day you have to have your team in order to make that different. So if you can’t get that buy-in from your team in regards to innovation, they are really your boots on the ground.

Allen Fahden: Absolutely. And either of those ways, kill the idea or run with a bad idea because you don’t want to talk to the people who have things that can go wrong, then either way it doesn’t end well. And let’s see if we can explain that by use of Johari’s window, because it’s sort of like people are really flying blind here. And so those of you who don’t know about Johari’s window, this sounds really mystical. It’s named after two guys, Joe and Harry.

Karla Nelson: And we researched it. We were like this has got to be not real, but no, it’s true. It’s based after Joe and Harry, which I love, right. We’ve got to come up with our own window. Kar and Al. Karla and Allen.

Allen Fahden: Boarded up window, something like that.

Karla Nelson: Karal.

Allen Fahden: So most of us are stuck, and oftentimes don’t even realize it, in the bottom part of this quadrant. And so if you can imagine a window pane with four quadrants in it, the lower left is what we know that we know, and everybody always operates there. We want to look like the smartest person in the meeting, and so forth. And there’s also what we know that we don’t know, and people are a little more reluctant to presence that, but at the same time you find out there’s something you don’t … You say, “Hey, I’m going to go learn about this, and bring it back so we can do what we’re going to do.” But the problem is it doesn’t do anything to keep people from, as Karla said, that want to kill the idea or run with a bad idea. And it also dooms your company to be incremental, which we’ll talk about in a couple of minutes.

But let me share with you where the opportunity is. If you are stuck in the lower two quadrants, you are going to be repeating the same cycle again, and again, and again where you’re stuck between killing the idea, the big idea, or running with a bad idea. So the way out of this is to move up into the quadrants, and particularly the right quadrant, which is what you don’t know that you don’t know. This is the scary part. This is all the stuff you don’t know. And so there’s what you don’t know that you don’t know, and you don’t know that you already know. We’ll get to that in a minute because that’s really like what? How am I going to do that? But there is a way to do it. So what you do is you say okay, there is a lot of stuff that I don’t know that I don’t know. Let me find out what that is because there is where the opportunity lies, because the opportunity is to be different.

So you go into that area, what I don’t know I don’t know, and you entertain some possibilities. That’s where the big out of the box ideas are. Now the interesting thing is it’s scary to be doing that, but there is a point where, because a lot of us feel like we’re not prepared, we don’t know enough, scary ground, but once we get through that and start presencing some of the things, oh, let’s go into artificial intelligence, or let’s fly drones around and see what happens, then once you get into that and become familiar with it, you’ll realize that, when you go back into yourself, your own preparedness, your own knowledge gets you into the upper left quadrant, which is what you don’t know that you know. Or in this case, I didn’t know that I knew, or I didn’t know that what I already knew could be very useful. Because once you understand a lot about artificial intelligence and you understand-

Karla Nelson: You’re like, “Oh, I can apply it to what I already know.”

Allen Fahden: Exactly, because people are working to make it commercially viable and simpler to adopt. So that’s the way the world works, we just don’t call it that. So once you get into this, that’s the golden place is on that upper quadrant, and to move back and forth between what you don’t know you don’t know, which opens the door to new opportunity and ideas, but the way to bring an idea back into the box so you can implement it, one of the ways, is to get into what you didn’t know that you already knew, and you’re a lot better at this than you thought you were. And that’s a pretty happy thing.

Karla Nelson: Yeah. And it’s you’re better at it, but it’s also that you already have everything you need, right, to be able to implement that thing, right. And that’s a good point, because Allen, you talked about bringing it back into the box, and I know that’s what the focus of the podcast was, but even when you were talking about it, it’s so funny because everybody looks at oh, we have to have the best idea, and it’s got to be this great big idea, right. And it’s not necessarily about being really, really, really creative, even though what’s the Blue Ocean strategies numbers? You know them better than I do.

Allen Fahden: Oh yeah. If you play in what they call uncontested market space, meaning you have implemented a idea that nobody else has, then you will get approximately twice the revenue of your competitors who don’t play in uncontested market space, and four times the profit. And just think about it. If you’re a category of one, people have to come to you. Who else are they going to go to? So it’s all there, it’s just the how to get stuff, and that’s what we’re helping you with today.

Karla Nelson: Yes. And there’s the breaking point of ideation implementation. So again, go back to the podcast, listen to ideation and implementation because it talks about the step-by-step process that you can use. But for the purpose of this podcast, when you talk about the idea, of course that’s ideation. Bringing it back into the box is going to be implementation, right. And so I always say to many people all across the world that I’ll take a mediocre idea any day over a big idea that doesn’t get done.

Allen Fahden: And that’s the sad commentary on the world we live in, because it’s like settling. You’ve had to settle for that because you know that a big idea is not going to get done because all of us who don’t know what we don’t know, we don’t know there’s a better way to do it. And so I can understand why you think moving the needle a little is still a better than implementing a great idea that doesn’t happen at all.

But one thing to know is that if your competitor implements a good idea, that just reverses what we were talking about before, I’ll take a mediocre idea any day that it gets implemented over a big idea that doesn’t get done. If your competitor implements a big idea, it basically marginalizes you. And so it doesn’t matter if you’re making a better buggy whip, as they used to say, you’re improving on something that’s already been where the game’s over, because you’re not in the game anymore. So what we are trying to do here is to change that where it gets a lot easier to implement a big idea. You can do it, and if you’re equipped to do it, life can be quite good.

Karla Nelson: Yeah. And with that being said, Allen, and identifying the different levels of innovation, but even if you’re innovative on the front end, you have to be weary of the challenges on the back end, right. So you can be innovative on the front end, right. And you’ve got these great ideas, and you’re nimble, and you’re small, and you don’t have to have 50 people approve something to have something move forward, and whatever, you have to be weary that eventually you go from … Because this is the law of diffusion of innovations, people. 110 years of marketing and research. How people adopt new ideas. And we’re not changing human nature anytime soon, right. And so you have to be aware that there’s this bell curve that happens in business, and so we start at the startup stages, but then we grow to a certain point, and after we hit a certain market penetration, then naturally we are aiming towards a different dynamic.

And our whole focus is don’t jump over the team just to go to the customer, right. And how to coordinate the team in order to get to that point, to have that option of first starting out with a great big idea and getting it done, but then what happens with most businesses from a big picture standpoint is that they have to actually buy innovation. They buy it through acquisitions and mergers because they’ve gone too far down that bell curve on the law of diffusion of innovations that they’re not creating new ideas, they’re just implementing.

Allen Fahden: Yep. And then of course, sadly what they’ll do is impose their culture on the company they acquired, and they’ll kill the goose that laid the golden eggs. All the extremely innovative people will be gone, and a lot of the customers will be gone. And that’s another thing that doesn’t end well.

Karla Nelson: Yeah. So it’s balancing those two, right. It’s the team and the customer. So you have to understand both internally your team, where are you on the law of diffusion of innovation, innovations, I should say, and who are you speaking to? And then customer-wise, separate those two, because we’ve always been taught that we only focus on the law of diffusion of innovations with a customer. And the closest thing we ever got to that with Simon Sinek, Start With Why, which is hugely successful, but it’s like how do you even know? Okay, speak to the why. Okay, that makes a lot of sense. At the same time, that’s why our assessment internally with the team identifies how people adopt new ideas. So how do you generate them? How do you pick the idea, the best set of ideas? How do you poke the holes in the ideas? And how do you get that entire team behind the idea so you don’t have to actually innovate through acquisition?

Allen Fahden: Yep. So let’s do a couple of examples. We’ve talked before about there being several kinds of innovation. Pretty well-known that the spectrum is the most disruptive is called radical innovation, where whatever you’re doing is new to the entire worlds. Think about the iPhone that Apple did that was lauded as to the 20th century what electricity was to the 19th century. The innovation of the century, or the 21st century, or whatever it was introduced in, versus breakthrough innovation sort of in the middle, which is something new to your category, where you can borrow something from another category and bring it in.

And then the most common, of course, is incremental innovation, where you’re just continually making improvements to things. It’s sort of the approach of Deming, and quality, and so forth, and you can make a lot of headway that way. But two interesting companies to contrast are Apple and Amazon, and probably the biggest force in Apple was Steve Jobs, who his motto was the idea has to be insanely great. Well, how are you going to get something insanely great out of a company? Everybody can buy into the idea, but the things you have to do to implement that idea, you’ve got to be autocratic. And certainly Steve Jobs had a reputation for doing that [crosstalk 00:15:56].

Karla Nelson: Yeah, I’ve even heard that people didn’t want to be in the elevator with him because he would look over and say, “What do you do?” And if they didn’t have an answer, they’d be fired.

Allen Fahden: Yeah. They’d be fired, or they’d be completely embarrassed because they’re being read the riot act about what-

Karla Nelson: Yeah, and we’ve heard even other stories with our good friend, which we won’t name names here, was the first person that Steve Jobs called when he got put back in charge of Apple. And he had some really interesting ways of being autocratic. I think it was maybe even a different word for it based off of his methodologies. But we can’t deny that it didn’t work, right.

Allen Fahden: Yep. Well that’s one way to do it. And so there’s one end of the spectrum. And then the other one is Jeff Bezos and Amazon. It’s really interesting. While Steve jobs said pretty much his mission was to do something insanely great, Jeff Bezos had a mission, in the mid ’90s, of being the best internet bookstore. Best bookstore on the internet. Okay, that’s exciting

Karla Nelson: It is kind of juxtaposed. It’s like, huh? First you start thinking huh, and then you’re like but there are no online bookstores.

Allen Fahden: Yeah, and in a sense he was taking something that was already there, using somebody else’s disruptive innovation, of course, which was the internet, and riding on the wave of that. But just as Steve Jobs-

Karla Nelson: Yeah, that’s changed just a little bit, right. I mean they’ve been able to go up that ladder based off of that incremental kind of stay. But good night they lost money for 14 years. What company can do that?

Allen Fahden: Well, and you know what the game was the internet. Suddenly you can do that because of the dotcom exuberance, they say. Whereas Steve Jobs unfortunately couldn’t do that because Apple started in the early ’70s, and they were a computer company, and they’re supposed to make money every quarter, and they went through a lot of hard times, and so they were held to different standards.

Karla Nelson: Yeah, that’s a good point is the different types of innovation, but being clear on that, and then really, regardless of what type of innovation you choose to run with, is that you have to go out of the box and then bring that back into the box, right. So you want to be different, you want to get that two times the revenue and four times the profit based off of the fact that you can create these ideas, but then you have to pull them back into what you’re already doing, right. So if you want to learn how to bring that idea back into the box, you have to get into that top left corner of the Johari window, right. And then you need a process for doing that. And that’s exactly what we teach is 94% of failure is process failure, not people failure. And of course that’s Edwards Deming.

And so understanding there is a process by which you identify what you’re going to do and how are you going to do it, not only to make it three to eight times faster, just to get that 100% buy-in from the team, because the team is the most critical portion. And I don’t care if that team is just you and one other person, or a team of 100, or a team of 40, or whatever that is, but you have to have a process by which you adopt what you’re going to do and how are you going to do it no matter what type of innovation you choose.

Allen Fahden: That’s right. And generally what happens is we’re using the wrong process. And in order to understand this, it’s really important not to-

Karla Nelson: Or no process at all.

Allen Fahden: Or no process at all, which is the default.

Karla Nelson: That’s typically what we approach.

Allen Fahden: Right. And so now one of the things that happens with people, and especially I’ll just ask all the listeners who, when you have an idea, probably the first thing you think of is oh, this could be pretty good. And then if you really like it, you say, “Hey, this could be great. Oh man, I could be famous. This is incredible. I love this, let’s do it.” And then all of a sudden you think about presenting it to somebody. Now you’re saying, “Wait a minute. They might not like my idea. They may not see things the way I do. They might think I’m crazy. In fact, they might not like my idea and not like me. And pretty soon I lose my job, and then I can’t eat, and I starve to death, and then I die.” So that’s a little extreme.

Karla Nelson: Yeah, but that’s a shaker’s view that definitely-

Allen Fahden: That is a shaker’s view of the world.

Karla Nelson: Because a prover would never even be like it’s not going to work anyway. It doesn’t matter. A maker’s like, “Just give me my job back.”

Allen Fahden: So it’s your choice, but if you want to be greeted with a nice, warm, fuzzy, a down quilt for your ideas, or you want a slap in the face with a cold piece of raw liver, it’s really up to you. But what happens is that what we’ve done here is introduced the idea of fit and sequence. And fit and sequence just simply mean this, you’ve got to have the right people in the right place at the right time doing the right thing. And the handoffs are everything. So if you have an idea, and you’re what we call a shaker, an idea person, make sure that your output person is a mover, because that’s a person who’s going to-

Karla Nelson: That’s me.

Allen Fahden: Yeah, that’s you, and you have ideas-.

Karla Nelson: I love ideas.

Allen Fahden: Because you’re going to say you love it, and then be practical about which one you go with. And as a shaker, I don’t care which idea you go with as long as it’s mine. So in other words, what we’re talking about here is put the right people in the right place. Fit in sequence and reduce fear in the corporation. And one of the things that Deming, the quality guy, that was his number one goal is to decrease and get rid of fear in the company, in the organization, but he really didn’t have any processes that would do that completely, and especially in the area of doing something new, because nobody knows how to do that. And so this is one of the great benefits of learning the Hoodoo is to reduce fear. Reduce fear not of just doing work, everybody’s okay when they’re working in their strengths, but reduce the fear of handing it off.

Karla Nelson: Oh, I love that. It’s a process by reducing fear. I never thought about that, but that’s exactly what the Hoodoo method does because everybody gets to be a part of it. So they’re not stressed in the different ways that your core nature of work actually makes you stressed, or what we like to call in corporate America employee engagement, right. Because we get disengaged for different reasons, and so it reminds me, you have to share your up bottled water story, because actually Allen created the idea of bottled water way before it was actually bottled water, but it was just too new of an idea. And so share with that. Share that story with us.

Allen Fahden: Okay. So this is a time, some of you may know this, is that Coors beer didn’t have national distribution. In fact, they refused to distribute their product, their beer, east of the Mississippi. And so if somebody went to Colorado, you’d say, “Hey, I’ll give you some money, just bring me back a case of Coors.” And this great mystique, because people want what they can’t have. And so what was written on every can of Coors, it said brewed with pure Rocky Mountain spring water. And it’s like well, I’d love to be a distributor in the Midwest of Coors beer, but there’s no way that could happen. And so one day I had an idea. Well, wait a minute, it’s pure Rocky Mountain spring water. I wonder if there’s a way we could sell that to people. And so I told a bunch of people about the idea, and they said, “You’re out of your mind. Nobody’s going to pay for water. What are you going to do? Put in a bottle.”

Karla Nelson: Yeah, nobody’s going to pay for bottled water, right. That seems ridiculous now. But I mean what year was this?

Allen Fahden: It was about 1970. I don’t think you were a thought in somebody’s head about that time. But yeah, there was no way. And so being a shaker, I said, “Thank you for the objection. I’ve got to figure out a way to make people pay for water.” And so what it came to was a lot of people at the time were paying quite a bit of money for really, really fine scotches, and bourbons, and things like that. So people drank a lot of distilled spirits. And so I said, “Well, wait a minute, here’s the pitch. What if we just say that if you’re going to pay $25 for a bottle of Crown Royal, or Johnny Walker Black, the best whiskey, why would you drink tap water with it? Why not put the best water in the world, pure Rocky Mountain spring water, into that?”

Karla Nelson: Yeah. And it was a little too innovative for 1970.

Allen Fahden: Yeah. Nobody wanted to do that. Even the movers-

Karla Nelson: So they couldn’t bring it back in the box. That’s basically what you’re saying. It was crazy innovative, but how do you bring that back in the box? They had all the ability to bring it back in the box, because they had the processes, they had the systems, right. And it was like who would do that? Well, you know what is funny is my background is finance, and any gas station, and anybody who’s been in finance, and this is way back in the day, the best gas stations … The two things that are harder to finance than anything are restaurants and gas stations, and that’s for various different reasons, but in gas stations, the largest margin of anything they sell is water.

Allen Fahden: What a surprise.

Karla Nelson: Yeah, The largest margin is bottled water. And so it was funny because we were working with this customer, and they had many, many, many, I think it was 20 some gas stations all across the nation. We’re like, “Why wouldn’t you apply to get your liquor license?” He’s like, “Oh no. That’s too much trouble. I get a much higher margin on bottled water.”

Allen Fahden: Yeah. So here we are. The world changes, and so how do you change the world is you implement a new idea.

Karla Nelson: Yes. And the piece is bring it back into the box, right. Take it out, run the process, figure out what we’re going to do, right, have everybody adopted it, and then bring that back in the box. That reminds me even of Airbnb, right. I mean, they started out, their whole company was selling air mattresses, and trying to talk people into letting people stay in their extra bedroom on an air mattress, and then serve them breakfast the next day, right.

Allen Fahden: I didn’t know that.

Karla Nelson: Now, they’re the largest wholesaler in the world, right. So they went crazy. They were like, “How are we going to sell these air mattresses? Okay, let’s go out of the box. Talk people into charging $80 a night and then serve them breakfast the next morning in wherever they want to go and venture out to,” right. But they still brought it back in the box by … They’re the largest wholesaler in the nation and they don’t own any real estate.

Allen Fahden: Yeah. And that model was already there for them, and that’s because using software to optimize something … I mean Amazon did that just by adding reviews to their books, and so they just made it easy, via software and the internet, for people to get into that business where there was a pent up demand to make more revenue off your house. And that’s a great example of-

Karla Nelson: It’s incredible.

Allen Fahden: … the fourth quadrant of Johari’s window, because once they said, “Well what if we just did a bed-and-breakfast thing and forgot about the mattresses. Make it an intangible business,” well suddenly they go into the what I don’t know that I know, meaning what I didn’t know that I already knew, and that’s okay, we got a business.

Karla Nelson: And all they did was, yeah, apply technology to it, right. Exactly. And so that’s how you bring it back into the box. So I think we could go on for hours on this conversation, Allen.

Allen Fahden: Oh, let’s.

Karla Nelson: We’re just slightly inspired by the conversation we’ve been having, and passionate. I’m not sure if the listeners actually hear that. Just kidding. So of course we are validating our assessment right now. So if you’d like, you can go to our website, thepeoplecatalysts, and that’s plural because we need you all but not at the same time, .com. And you can take it there. It will be free for a very short period of time actually, right now, because we’re really closing the window on that. And Mister Fahden, is there anything else you’d like to add before we sign off?

Allen Fahden: No, just don’t close Johari’s window because that’s where the opportunity is, thanks to Joe and Harry.

Karla Nelson: Yeah, Joe and Harry, cheers.

Allen Fahden: Cheers Joe. Cheers Harry.

Karla Nelson: Yeah, you got it. All right. Thank you. And until then, we’ll see you soon.