MIT Sloan CFO Summit Summaries: Fireside Chat with Safi Bahcall - Fostering Innovation
Recently, I attended the MIT Sloan Business School CFO Summit. It was a virtual summit spanning two days with a star studded speaker list. I took extensive notes during the event and thought some of them would be of interest to the readers of this blog. One of the sessions was a fireside chat with innovation expert Safi Bahcall author of the book Loonshots : How to Nurture Crazy Ideas that Win Wars, Cure Diseases, and Transform Industries. Below is a summary of the presentation:
Safi Bahcall began by introducing the concept of TECO - Turn every crisis into opportunity. To demonstrate this, he shared a story about the infamous drug Thalidomide.
When it was first developed, people found out it was good at relieving nausea. Many regulatory agencies in other countries approved the use of the drug for pregnant women to relieve morning sickness. Frances Kelsey was at the US FDA and just got in there. When she reviewed the application to approve it, she thought something fishy. She started asked questions of the pharmaceutical company, and the company wouldn’t give straight answers. This went on for some time, and while fight continued, birth defects started appearing around the world. We know the rest of the story: this drug was found cause severe birth defects and was banned from use.
Many yeas later, Judah Folkman had new idea for treating cancer. He surmised if you could block blood flow to tumors, it should cause the cancer to die out. He began to passionately explore this theory. Everyone ridiculed him. He was asked to resign from several board positions he currently held if wanted to continue his research. He continued his research despite all of this. Finally, he had an idea: use the drug Thalidomide in cancer patients, because it would prevent blood flow to the tumors. He started talking to the FDA seeking to gain approval for its use. Initially they agreed to the meeting, but as the date approached he realized through several conversations he had with others that the FDA never planned to give him a fair hearing. Folkman realized they planned to ambush him and completely sink his idea. Him and his team were going to lose everything.
In a last ditch effort, Folkman flew up to Canada meet with Randy Warren a Thalidomide survivor. He was born with defects due to Thalidomide and required numerous surgeries just to live. Folkman asked him to come to FDA. Warren thought Folkman was crazy but said you’ll help save lives. He agreed. He came to FDA and told the committee that this drug ruined my life, but asked that they approve this drug for Folkman's prescribed treatment, and regulate it better. It will change lives. Committee flips after hearing his testimony, and approves drug. It ended up working well.
TECO – turn every crisis into opportunity
Folkman and his team were able to get a victim of a drug to advocate for drug. This was a powerful argument. In the end, Judah Folkman was vindicated, despite mountains of opposition. When asked how he kept going against such resistance he said, “You can always tell a leader from the arrows in his @$-”
To be successful though you need balance. Balance between "artists" who take the crazy risks and "soldiers" who get things done on time, on budget, etc.
Safi called it "Beautiful baby syndrome". Artist looks at their idea and sees a beautiful baby full of potential, The soldier sees it as potato covered in vomit and drool.
He then briefly talked about the evolving role of the CFO and how they are great candidates for mediating this balance within their organizations. He then discussed his TECO Playbook.
TECO playbook: Spot, Build, Close
Spot the new need
Build from your strengths
Close the skills gap
He then covered several examples to show us the TECO playbook in action.
In 1993 revenues fell off cliff. They face severe competition in their core business driving down profits. Before, their profits had been more than next 7 largest competitors combined. In less than 2 years, they turned it around.
They spotted a new need. They created opportunity to advise IT customers what to buy..
They built from their strength. They had 50,000 sales people with trust based relationships.
Then they closed the skills gap. Their sales people had been pushers of product, They needed to flip to become advisors. All sales staff were given training and told to change their methods to advisory or leave. Half left, and the remainder managed to turn it around.
Westfield Shopping Mall
Amazon killed malls. People would browse in malls, then buy on Amazon.
Nearly everyone heading for bankruptcy in last few years except for Westfield.
They spotted new needs. People need a place to go out. They need a town center or experience center.
They built from strength: they have the real estate
They closed the skill gap. They had boring old retailers. They replaced with experience providers. Like Nike, where they analyze your gait on a treadmill, then you open your phone app, they help you select your shoe based on your analysis and a custom shoe arrive at home. Nike removed inventory and had no returns. They were a new kind of retailer. Furthermore Westfield added music, yoga, co-working spaces, fine dining. They became experience centers.
Cloud Service War - Amazon vs. Google
Safi views this as the biggest wealth creation opportunity of the 20th century. The 1st chapter of this history started 10 years ago. If asked anyone then who has best IT and cloud engineering people would have said Google.
However Amazon won the cloud game. How? Let's look at both using the TECO playbook.
Google Spotted the new need. Cloud computing services.
They built from their strength of best cloud engineers on the planet. They planned to use a small team of engineers to build a technology solution that was better than the others available, and billions would come use theirs. They did it with search, mail, and maps. Tried to do it here again. Unfortunately, that's not what happened. They missed something. They were marketing primarily to companies not individuals. If you want the Chief Technology Officer of big company to give you all their proprietary data, need to make them feel incredibly secure about giving you their data.
This brings us to our next competitor, Amazon. If you had asked people when this cloud service war was starting "who has best customer service on planet online?" most would say that’s Amazon.
Amazon did same thing around the same time. They understood this was about making the customer feel comfortable and secure.
They spotted same need. Cloud computing services.
They built from their strength of customer service.
They closed their skills gap by hiring phenomenal cloud engineers.
In the end they beat Google in cloud space.
In the middle of a pandemic. The companies that have done the best over past several decades of crisis are the ones that turn the crisis into opportunity.