Embracing Digital Disruption – #310

Embracing Digital Disruption

Now, we’re all told we need to embrace digital disruption to thrive in the 21st century. But how can legacy companies and new startups blend both digital and traditional business functions to achieve long-term competitive advantage? That’s the question my guest today set out to solve in his new book, The brains and brawn company, venture capitalist and Stanford Graduate School of Business lecture, Robert Siegel shows that while important digital is only part of the answer, it’s not never the only part the only answer. In fact, many, many large companies are successfully countering young upstarts in new creative ways while startups are learning a thing or two from the legacy businesses, Robert Siegel has done extensive research on companies such as Google Schwab ABN Bev stripe, and Survey Monkey. It’s my great pleasure to have him on the show today. Welcome, Robert.



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James Taylor  0:00  

I’m James Taylor and you’re listening to the super creativity podcast a show dedicated to inspiring creative minds like yours. 

Robert Siegel  0:58  

Thank you, James. It’s wonderful to be here. So great

James Taylor  1:00  

to have you with as your base down there in the Bay Area. Now you’re both a Stanford University lecturer and a VC. How do these two roles support or enhance each other?

Venture Capitalist

Robert Siegel  1:11  

So in my courses at the Graduate School of Business, I study things around innovation, Digital Plus physical, I teach courses on product management, where my operating career came out of, as well as financial management for entrepreneurs. And then in my role, as a venture capitalist, I see a lot of the newest technologies and newest innovations that are actually being developed. And so I actually get to have this unique position with a foot in both worlds, I get to see where the frontier is being pushed by entrepreneurs, you know, throughout the Bay Area, and all over the world. And then I also get to study both entrepreneurial and large organizations, given the courses I get to teach at the Graduate School of Business.

James Taylor  1:46  

So when you’re seeing all these brilliant, fresh, young minds every day, doesn’t give you hope for the future. We before we came on, we were talking about climate change, and what was going on in forest fires, do you have some hope? Are they using their brains to go for some of the more challenges around climate change and sustainability,

Robert Siegel  2:04  

I would say both in my role as a venture capitalist, but even perhaps even more, so my role as a teacher, you know, the, at Stanford, it’s like teaching at the United Nations. And when I stand in front of the room, I see men and women from every continent, with every type of the last name, and with every shade of hue that you can imagine. And they, I find that they want to do good, and they want to do well. And so whether the I think this generation that is coming up really has focused on much more than just making a buck, you know, they really want to actually have an impact as well. And so I’m hugely optimistic hanging around young people is the greatest way to be optimistic.

James Taylor  2:41  

Now, in this book, you say that we need to have organizations that need to have both brains and brawn to be successful today. So can you explain what you mean by that?

The Brains And Brawn Company

Robert Siegel  2:52  

Well, when I started the course, the industrialist dilemma, it began with Aaron Levie, the CEO of the box, and accesso, who’s the chief learning officer for SAP. And we were noticing that a lot of startup companies and disruptive companies were going into nontraditional tech businesses, they were going into mobility, they were going into FinTech, they were going into healthcare. And so we were seeing this dynamic that was developing, where we assumed when we started that these, you know, new ways of doing things would, you know, just, you know, kind of displace the incumbents. And we found out that we were wrong, that we found that the winning companies be the incumbents who are responding to it are the disruptors who were coming in, weren’t just kind of, you know, praying that the God of digitization, digitization was important, but it was kind of necessary, but not sufficient. And we found that the best companies were combining both digital and physical. And over the seven years that we taught the course it really kind of became more and more apparent, and the pandemic only accelerated that. And so we really started to develop this notion of what’s it like to how do you develop products? How is it different in a world that blends digital and physical? How do you organize your company? How is that different than a world that blends digital and physical? And also, what are the leadership attributes that you need? And how is that different than in the past? And so really, in our roles here in the Valley, we were able to kind of get this, you know, a wide breadth of companies, as well as trends that we were able to see, which is what led to my writing of the book.

James Taylor  4:15  

Now you in the book, you break it down, like like a body. You talk about the brains and the brawn. And I was actually thinking it was a few years ago, I was attending a talk by a professor of forensic anthropology. And she said to me, she said that she was talking about what she was going to do when she died because everyone’s always interested in people that are unnatural. In forensics, what are you going to do when you die? Do you want to be created all that kind of stuff? Actually had no, what I want to do is a tea as a teacher consider the sort of sort of a teacher and electro, I want them to use my body as a, you know, for scientific purposes to kind of do all the things that they have to do to train the students. And then what I want them to do is I want them to boil down my body to is just the bones and I want them to hang me on like so like when they ask Elephants you have an in for me that. She said that means I get to teach for another 100 years because students will come in and see her skeleton as well. So that’s kind of like, that’s a pretty awesome way of thinking about teaching STG for many, many years. But in the book, you break down thinking about the brains and the brawn and talking about these attributes. And can you give us a high-level overview of these 10 attributes, the outline in the book?

10 Attributes

Robert Siegel  5:27  

So we looked at all the 70 plus companies that have come to these two courses, the industrialist dilemma, and systems leadership, and we’re looking for trends. And we really came up with 10, five that were digital and five that were physical, that corresponded both to the brains and then to broadly to our body. So on the brain, the left hemisphere, which is how do you use analytics, the right hemisphere? How do you manage and lean into creativity? The amygdala? How do you deal with empathy both for customers and employees and other people in your ecosystem? The prefrontal cortex for cortex Excuse me, how do you think about risk? And then finally, the inner ear? How do you balance ownership and partnership, and these are all things that our brain does that we found great companies excelled at these five attributes. But on the physical side, there were some very important things we found, like our spine logistics, great organizations, we’re good at logistics, hands, the craft of making things we saw new technological trends, and what’s happening in manufacturing, muscles operating at a global scale, or the ability to kind of have a platform that can bring, you know, value globally, but things can be customized locally, we found hand-eye coordination, how can you drive and shape your ecosystem? And then finally, stamina? How do you survive over time? And the idea behind the framework is that there are 10 attributes, and leaders and companies can look at their organizations and actually measure themselves on each of these 10 attributes. Give yourself a score, so you can get an overall rating for how your company is doing on the brains and brawn scale.

James Taylor  6:51  

Now, early on in the book, you kind of set out you talk about Daimler, Mercedes Benz, and that you can map that them on that scale. But you also have another company, which is a company that I’ve heard about over the years, I’ve never actually used any of their products myself, I didn’t realize they’d actually go into partnership with one of my clients GlaxoSmithKline. So and that’s 23. And me. So I know, in Silicon Valley, this company gets talked about a lot for different reasons. So maybe, as an example, could you talk about like 23 and me, and how that kind of came upon your scale, how they worked out.

Robert Siegel  7:26  

So 23andme is run by a woman named man with just skiing and is a well-known executive here in Silicon Valley. And she realized that out of our saliva, we can get basically samples of our DNA, which give a lot of information about our genetics. And that can be combined with environmental questions. And so the combination of digitization has allowed her to build a database of like 12 million people to really understand how a variety of health issues that can be predictive about our probabilities of having certain health attributes, the certain risks for diseases, etc. And she’s able to stay in touch with these people through a series of digitization, you know, capabilities through an app on your phone or through a web browser. And literally, it starts with you spit into a vial, they do the analysis, and then they ask you a series of questions, how much coffee do you drink? How much alcohol do you drink? What do you feel like when you do these things, and they’ve got now a really, really large database where they’re able to see trends and be able to see patterns for people who might be at risk of disease. Now, this information, which is basically just software and spits, is proving that it might actually be potentially more effective for developing drugs. And so what Ann and the team realized that they needed to do is they were not going to go into the manufacturing of pharmaceuticals, nor were they going to go into the distribution of pharmaceuticals, you’ll look at GSK, which is run by Emma Warmsley. You know, Emma, realize that there’s this amazing database of information where they might be able to develop drugs much more quickly than they could, and for much, perhaps smaller disease states that might have made sense economically prior to having this information. So the two companies decided to partner to take the development and data information from 23andme, the manufacturing and commercialization competencies of GSK. And they now have a collaboration where they’re actually testing eight drug potential targets right now, based upon the competencies and know-how both companies and what’s amazing, it’s a great combination of brains and brawn, right brains of data analytics, the ability to partner in figuring out what you’re going to do internally, what you’re going to do externally. And then how do you partner with someone like GSK, for distribution for sales for actually operating globally. And so you see, that kind of partnership really enables a potential of a company that could complete up end the pharmaceutical industry and the healthcare industry, with software and spirit. And that’s one of the things that’s really different this time.

James Taylor  9:44  

And what I love about I think early on the book, you talk about this idea, it’s almost like sometimes when you have that great combination, it’s like Lennon McCartney or I was doing event recently with Steve Wozniak lives in the bay area as well and that Jobs and Wozniak was great. We called Creative peers. Sometimes the brain, the brain can come together. And that will you in great collaborations,

Robert Siegel  10:04  

when that’s what I think people don’t understand here in Silicon Valley, we will often pray to the God of digitization. You know, a lot of my students, want to go to work in these clean offices behind computers and sling code. And yet we live in a physical world. In fact, the company right now, one of the most dominant companies on the planet is Amazon. And Amazon is an unbelievable combination of brains and brawn. And so as we, you know, our ability to shop there, the data analytics, they do, but they get us, our whatever we buy in two days, right. And we love Him because of it. And so as we went through a variety of industries, we saw a lot of companies were doing a great job of combining the digital plus the physical. And that is, I think the key insight is that if you’re only going to be physical, obviously, in a world that’s moving towards digital, that’s not going to work. But if you don’t understand issues about logistics, manufacturing, operating at scale, you know, you’re not just going to be able to sit in your clean sterile rooms, and you know, have your slides like you have in all the startups here in Silicon Valley, it’s much, much more than that, you’re gonna have to go out and get your fingernails dirty.

James Taylor  11:03  

Now one of those attributes you talked about, I guess it’s the right hemisphere, and you share lots of different key states, all these different attributes, people can get their head around these different attributes. So our listeners are really interested in creativity. Can you share this concept you speak of in the book on that particular chapter, about grinding creativity, which I think is a great phrase, and how a company like Alain technology, how exemplifies that?

Grinding Creativity

Robert Siegel  11:29  

So if we read the mainstream press, you would think that creativity is a lightning bolt that hit you. And the entrepreneurs a genius who comes up with something out of nowhere, because she or he is just smarter than everybody else. And we talked about in Silicon Valley, the ability to see around corners. And yet we found with creativity, a lot of its kind of like, start-stop two steps forward, one step back. And that’s the idea of grinding creativity, you just have to kind of stay at things until something works. Here, Thomas Edison famously talked about, he didn’t, you know, come up with 1000 Incorrect filaments for the light bulb, it was 1000 opportunities to learn before he got it, right. And so this notion of grinding creativity, it’s got to become part of the everyday operations of a company, or you’re constantly trying and checking new things, and trying to create that muscle tissue. Well, yes, you have to operate at scale. That’s why you put systems and discipline in place. But the idea that you want to try new things at all times, that’s the notion of branding, creativity, aligned technology was actually spun out of Stanford University, and the founders realize that they can use plastic molds to replace the braces, you know, the brackets and wires that many of us were when we were younger. But with plastic molds, you have the ability to create a much richer experience, it’s actually more hygienic. For the people who do it, adults like it more, because they don’t have to have you know, railroad tracks on their teeth. And you can actually give very, very customized smiles to people from any part of the world. And the way the technology work is really cool. They take a digital image of your mouth, they then come up with a system for straightening your teeth and is highly customized for you as an individual. They then manufacture these clear plastic trays, and they send out 500,000 of these clear plastic trays every single day, from their factories in Mexico. All right, and give you a sense of this. They are the world’s largest user of 3d printers. Aligned technology is the world’s largest user of 3d printers. And what’s so great about their creativity, not only did they combine digital and physical, but they made it so simple that they also created a new business model. In the old days, you had orthodontists who straightened our teeth and dentists who cleaned our teeth. well, aligned can actually have a dentist sell these clear plastic aligners called Invisalign. And that actually created a business model opportunity to combine with a digital and technology innovation that has allowed them that build a company that’s worth over 60 billion US dollars right now. And it

James Taylor  13:45  

was a phrase in there, I’d never heard this phrase before. And I’m definitely gonna use it share of chair what his share of chair

Share Of Chair

Robert Siegel  13:53  

most dentists or orthodontists will actually think about their businesses, you know, their medical service providers, most of them are not business people, but yet they run small businesses. And so this notion of share of chairs, you know, if a customer comes in, what are the goods and services that a dentist or an orthodontist charges a patient for? And so from the perspective of a line, they’re trying to figure out, how can we provide tools not just for straightening the teeth, but if we can understand our customers, businesses or our channels, businesses, we can help them actually sell more? And can we sell them more goods and services? So it really kind of gets to this notion of understanding customer outcomes, great systems leaders, which is what I talked about, at the end of the book, understand and start with the question of how do all these changes of digital and physical? How does it impact my customers first, and so aligns interpretation of that is what’s my customers, businesses, a dentist or orthodontist? And what’s the share of chair that I can get from them by selling them the goods and services that they need to be better at their jobs?

James Taylor  14:53  

Which I guess goes back to what you were saying about Amazon? You know, Jeff Bezos says that we have almost like compulsive obsessive about our customers, you know, they’re they’re thinking also interesting, not just thinking in terms of what customers are wanting now, but what might be wanting in a few years time and willing to put that investment into that as well.

Robert Siegel  15:11  

Well look at prime, it’s kind of up there with fire in the wheel, like we love it, we never have to leave our house, I’m at the point where a lot of the household goods that I buy, I buy through prime, and I don’t even go to a grocery store or a, you know, pharmaceutical store or drugstore, because like, they may not have my brand of tooth floss teeth, you know, that I might like and so on. But I can get on Amazon, sure, fine, I’ll buy six and deliver it whatever Amazon Prime delivers it, Jimmy, they understand that what I need is availability. And they’ll sell it in a way that makes sense and is convenient for me. And I want to juxtapose that to people who use data and information for what’s in interest only for their company. Now, while Amazon is having some issues with are they competing against other people who sell on their marketplace, you know, you kind of see this notion of people who use data to serve customers. Well, that’s actually the thing that we’re Cust companies can really thrive and is interesting. I

James Taylor  16:03  

think one of the last times I was in San Jose, I was at an event and it was a gem nickel, Doug Dietz, who’s an engineer from General Electric was talking. And he has immunity when they make these MRI scanners there. And they built this really fantastic MRI scanner, and they were taking getting commissioned as the first hospital, but we were somewhere in the Bay Area. And as he was kind of standing there in the hallway, he saw his first patient, this like five-year-old child walking towards a Ruby note, you know how strange hospitals are, they can smell strange, and they look strange. And this kid was like praying and I was in tears. They were scared as parents, they’re kind of worried because they can see the fear in their child. And that point, Doug talks about, he said, I suddenly realized that I got so product-centric, I lost sight of being customer-centric or patient-centric. And then you’ve probably seen these amazing what they did with those MRI scanners, like turning them into like pirate ships, right, repainting them, putting mood lighting in the room as well. And it all came from just going for that and more product-centric approach to being much more customer or client-centric, which is

Lived, Not Hacked

Robert Siegel  17:07  

a problem in Silicon Valley. As much as I love the place where I’m from and where I live, you know, we have this notion that the products will save us and technology will save us. And we forget that there are humans, you know, people will talk about what’s your life hack here in Silicon Valley. It’s like, I thought life was supposed to be lived, not hacked. And not everything is supposed to be optimized. And so actually, there’s a recent book out by some of my colleagues at Stanford that talks about in this quest for optimization, we forget sometimes, what’s the purpose of what we’re doing, the technology’s there to serve, you know, not to dominate.

James Taylor  17:38  

And the final pod book, you talk about what it requires to become a systems leader, a leader is able to drink to change to drive change in their organization. So can you describe a little bit more about this idea of systems leadership,

Systems Leadership

Robert Siegel  17:51  

you’re previously even, you know when I had operating jobs in large companies like GE and Intel, or even running startups as I did, you know, people who rose up in an organization, you came out of a function, it could be marketing, sales, engineering, manufacturing, and you rose up in the organization, and you hopefully had teammates with you, that complimented your skill sets. And what we’re finding is that in a world of blends digital, and physical, everything’s constantly interacting with each other, and great leaders see the system, like not only are your products talking to customers on an ongoing basis, but what happens inside of your company between different functions is critical, you know, understanding that leaders need to do so I talked about how systems leaders need to be able to understand those interactions and combine the best of both of these, the what happens when these different groups interact with each other, they need to combine it knowing how to operate at scale, but also how to manage innovation, how to have IQ and EQ at the same time, understanding what’s happening inside the building and outside of the building. And so I talked about this called, you know, operating in intersections, this idea of being able to understand new business model innovation with technological innovations, understanding things like global Plus Local, knowing how to manage context, in a world where there’s so much data and so much information. You know, my colleague, Jeff, and will, will talk about that truth equals facts plus context. And so, you know, what great leaders need to do is think the facts are the facts. The context is how we understand things. And that’s critical for your employees and for your customers. And great systems, leaders need to be great at communicating like you can’t just be slinging code and be great at the product, you got to help set the context for everybody. And then finally, you also have to have this notion of going risk on in times of disruption, you know, the disruptions going to happen, and great systems leaders run towards the disruption as opposed to away from or away from it. My colleagues on the faculty here at Stanford in the finance department would say, you know, the financial theory says In times of volatility, you go risk-off and you go conservative, and when times are good, that’s when you go risk-on and I actually found great leaders do the exact opposite. In times of disruption, you have to actually run right into the disruption. You have to go right towards it because we don’t know what’s going to be on the other side. But we do know is that whatever’s on the other side will not look the same as it is now, my old boss, Andy Grove used to say to us at Intel, you can’t save your way out of a recession. And similarly in times, like we’re going through now, even with the pandemic, there are we come out the other side, there’s got to be leaders need to be leaning forward to be thinking about what’s going to be different, and how can they give their company in edge, you know, in these times of incredible change. And that’s really the notion of systems leaders to ship is thinking about the system and understanding how it fits together, and how you can shape it to what you will play to your company’s strengths.

James Taylor  20:30  

Now, Stanford, I seem to remember they have these expressions, you’re either a fuzzy or you’re a techie. Is that still the case until you either like a liberal arts kind of social sciences person or your maths and physics and, and technology? So I guess what you’re talking about there is, is being at the intersection of those things, and being able to speak to those languages, and being able to converse and take ideas back and forth. So in your own work that you do. When it comes to your own creativity, you’re getting all these inputs, amazing inputs, thinking about things in different ways. Where do you go? Or? And how do you ensure that you’re always looking within yourself to kind of find your own creativity and continue to kind of, to kind of develop your own creativity?

Develop Your Own Creativity

Robert Siegel  21:14  

There’s no, it’s funny, you say that this notion of fuzzy versus tack, right, that is like that is caused so many of the problems, I think that we have in society, this notion of this, this false demarcation between groups. And actually, that’s part of the challenges of artificial intelligence is you know, if you don’t have humans in the loop, like you can have horrible things like, you know, the Nazi spewing bot that Microsoft created and launched on Twitter because there was no human in the loop that was monitoring the AI. And so you really have to be looking to constantly thinking about how you are growing and changing twice in my career, I can remember distinct times where the world had passed me by where I was, you know, playing yesterday’s playbook and once in my role as a CEO, and once in my role as an investor. And so I now try to force myself every, you know, 3456 years asking, What do I need to do to change Katrina lake, the chairman and founder of Stitch Fix asks her direct reports every year if you were hiring for your job today, would you hire yourself? And it’s a great question to before she’s unfortunate to have to look in the mirror and say is my skill set current. So what am I doing? You know, right now I teach, I’m very grateful, I teach six of the most popular classes at the Graduate School of Business, I’m in the process of sunsetting, all of them so that I can start six new courses. And you know, things are going great like this would be my dean thinks I’m crazy, right? It’s like, why would you do this? It’s going so well, it’s like because I don’t want to be that person in six years, who’s teaching the same courses the same way. And so you have to kind of force it on yourself, you have to push yourself into that zone of discomfort. And you can’t, you know, yes, it’s nice when things are going smoothly, and you can rest a little bit, but you know, the world’s gonna change. So you’ve got to decide are you going to drive the changes, the change is going to be driven to you and kind of enjoy it, understanding that it’s uncomfortable, understanding that now I’m going to teach new classes, and I have no idea if the students are going to like them, I have no idea if they will have the impact that they’re going to have in the future that I’m having now. But what’s my choice? What’s my alternative? The last thing I’ll say on this is I like hanging around young people. They you know, the former CEO of Intuit talks about this notion and importance of having fresh eyes and wise eyes together. Like that’s really what you need. And the mindset of being able to learn from the past, but also being able to kind of try new things and be willing to try new things. I when I’m working with companies, I’ll often ask them how many of you have TikTok on your phone? Right? And very few, you know, people over 45 have TikTok on their phone, like, you need to have it on your phone. And you need to understand how the next generation is communicating with each other because that’s going to drive business as well. And you can’t be dismissive of it, you have to be like, Oh, here’s something new to try. You know, don’t throw out the baby with the bathwater, but on the other hand, be open to new ideas.

James Taylor  23:59  

I think there’s a perfect example I’ve just seen, just having a conversation with a wonderful expert on communication skills. David, JP Phillips, and he are, I think his TED Talks got 6 million views or something ridiculous. But now on TikTok. He’s recently just taken to getting into Tik Tok. I think he has like 1.2 million followers 16 million views. And he’s sharing stuff that you would normally share with, you know, leaders of companies. But there’s a real thirst for this knowledge. He just has to kind of repackage it and do it in a slightly different way for the audience. He’s got this whole new audience that he never had before. And it’s really you can see as invigorated in it because he’s having to change things up. He’s having to learn different ways. Robert, where is the best place for people to go to learn more about the brains and brawn company as and also to kind of learn about more about you and your other writing your other work?

Amazon.com: The Brains and Brawn Company: How Leading Organizations Blend  the Best of Digital and Physical eBook : Siegel, Robert: Kindle Store

Robert Siegel  24:50  

So for The brains and brawn company, you can go to your favorite online bookstore seller, you can go to Barnes and Noble Amazon porchlight any place like that, and in terms of me and my personal website is https://robertesiegel.com/ And there’s stuff about the book, there’s a link to all of my blog posts. You know, some of the thoughts sometimes I’ve spoken in the press, you can see reviews of the book. And so that kind of gives a broader context of who I am. And, you know, hopefully, there’s something there that could be helpful for people as individuals are for their companies to grow and get better.

James Taylor  25:21  

Well, Robert, thank you so much for coming on sharing all about the brain’s number one company and also sharing a bit about your creative life as well. Thank you, James. You could subscribe to the super creativity podcast on Spotify, Apple Podcasts, or wherever you get your podcasts. While you’re there. Please leave us a review. I would really really appreciate it. I’m James Taylor on European listening to the super creativity podcast.

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