56. Banishing bureaucracy: How Octopus Group built a culture of entrepreneurship leading to a $9 billion valuation | Chris Hulatt

26:41We don't have any large block saying, I want to sell my shares. So we've got that sort of long-term freedom and flexibility. I think our investors and backers have also realized when we go into new areas, we don't get it right every time. We've made plenty of mistakes over the years. But overall, the things we've chosen to expand into, even though they might seem a bit wacky at the time, have been the right decisions. And building things steadily over years when you're not hamstrung by having to focus on short-term profitability is a real liberator. And I think you can build a stronger, better business because of that.

27:20So you've obviously made some good decisions because you have a good business and some very good businesses have come out of it. But you must have made some bad ones as well. I mean, what's the process when you start with a new venture and you decide maybe this isn't for us? How long do you give it? How do you make that decision? Sometimes product ideas that we're convinced will be really popular with the investing public and they're not. sometimes it is more on the institutional side it's very hard to persuade pension funds to invest in things we've tried a few times to set up funds and errors and it's been hard going to get the back so there's a process of trial and error here yeah absolutely sometimes it's down to people and probably my biggest learning over the years has been the right people can do amazing things but if you get people who aren't a good fit with your organization or they don't have the same drive and determination then a really good idea can be kind of wasted if you haven't got the right people behind it.

28:17So what do you look for in people? What makes someone the right person for Octopus Group? Yeah I think it probably depends on different parts of the group but certainly for us within the kind of wide Octopus investments and fund management business I think it's people who have a real passion for what we do who really understand customers who bring some kind of drive and determination, but also have a personality. People who are going to speak up and ask questions, people who are curious. People, I think, who struggle with us are people who just want something to be nicely kind of contained. They want their role to be pretty steady to not to change.

28:57And people who succeed are those who love the constant change and the evolution. They like the fact that in six months' time, maybe their role will be totally different, or maybe we'll have asked them to go and set up a different team or - Going to Australia. Yeah, absolutely. That would appeal to me. Yeah, and that is, I think, what makes it fun and interesting and engaging. But, of course, people are all different. And some people, if you want consistency and no change in life, then we're not the place for you. If you like a challenge, something that's fast-moving and where your ideas will always be welcome, then I think we're much more that kind of place.

29:33So how do you make sure that your team feels heard, that they're genuinely involved in shaping the business? You say, we want your ideas, but is there a process? Is there an approach that you bring to it that makes that happen? I think people are not shy with holding back when they've got a great idea. They'll tell people, we welcome that and make clear we want to hear people's thoughts. But we work in an open plan office. There's no hiding where I think in some businesses, people are kind of protected by layers of EAs and assistants. and if you want to see the boss, you've got to make a diary appointment.

30:08Well, it's only not like that for us. I sit in the midst of our open plan floor. So on any given day, I could have loads of discussions with people, some of which might have been organized and planned. Others, though, are just you bump into someone literally by the coffee machine. So you don't have a private office? No, I sit on... Simon, the other founder, he sits in our reception area and he likes that. He works in the reception? Yeah, because he sees the flows of people coming in and out, often they stop for a chat he might see someone he's not bumped into for a while does he check people in and out no i'm impressed by this we're refurbishing our office you're giving me some ideas i want a place in the reception but what it makes clear is like we are we're all in this together um that we want to be part of things and that uh we want people to feel that we're all approachable we're the same people we were 25 years ago there's no kind of man you literally grandeur to that or anything like that you make that literally the case we're not in a you know fancy corner office with people protecting us from any interaction with the rest of the organization and that is to me the kind of thing where you just suddenly you need to be listening you need to be um available to everyone you need to be part of it and if you're not part of it because you hide yourself away then i think you quickly how many people work in your office in the fund management building probably about 700 something like that so on several floors on uh three floors right yeah so i remember the day when you could stand up at your desk and see everyone in the company and as the business grows and you get beyond that it gets a bit harder difficult yeah because you don't know everyone absolutely and so you can try for a while but then you don't know everyone and you've got three founders huh yeah guy was the you're on different floors um just thinking the logic of this I like that yeah maybe you could divide it that way guy left um about 10 years ago okay uh he's gone on set up other businesses since then um but so the other remains a big champion of business and a big shareholder in it yeah okay so that's very interesting so walking the talk so to speak so you have a scheme called the springboard scheme which encourages people to start new ventures you know from out of your business which has been a successful pattern for you what inspired you to set that up and how does it work really it's an extension of what i've just been talking about in terms of encouraging people to bring forward ideas i think one of the biggest challenges for people who have an idea is how do they actually get it up and running and so we we noticed that we have people internally you say to them they'd say some comment like oh it must be great that you've set up octopus and then they say oh why I'd love to start a business.

32:50And when you then replied, well, why don't you? They say, well, I do have an idea of something I might do, but I don't really know how to actually get up and running. And usually if you probe a bit more, you'd find out that there are other blockers like if I don't earn my salary, I don't know how I'm going to pay my rent for the next six months. We went nine months without earning a penny when we set up our business. We know how tough it is. Practical reality is very few businesses get up and running and generating revenue in a way that the founder can can pay themselves really quickly it's it's it is really tough and so we thought is there anything we can do to not only help budding entrepreneurs and share some of our experiences and some of the things that we've found work really well and some of the things to avoid and benefit from our kind of learning so for the years but also say to people we'll back you so we'll give you some financial support so you can step down from your role at octopus go and have a go at starting up your business and then if it goes great we'll we'll cheerlead you and support you and watch your progress maybe we'll invest we'll certainly help you where we can but if it doesn't work then come and have your job back at octopus we'll find you a role again and so we're trying to de-risk it for people to encourage people to be entrepreneurs and say you know most people if you really push them they could come up with something they are passionate about that they think they could do um but we're trying to take away the reasons why people don't do that so it's okay so i've got an idea like that i work for you um do you pay my wages while i'm doing the new venture yeah we we usually agree some form of financial support for you so what for a year or something or yeah it could be like let's give you let's call let's call it six months and we'll see how you do and there'll be some sort of check-in process after six months it might be going looking like it's quite exciting i might be thinking i'm not sure this yeah and if It's going really well.

34:39You're probably in the midst of thinking, how do I start to raise some external capital from angels to... Yeah, and then we come back and talk to you again, I guess. Yeah, and... Yeah, because you can help with that. We do some of that personally. Octopus does it. We know plenty of other angels, so we can help with that kind of thing. And there's some... How many companies have come out of springboard like this? Yeah, there's been quite a number of people who've given it a go. And there's a number in progress at the moment, and we've had some new ones. One great example is a woman called Karen, who used to work in our HR department.

35:10And she'd been on maternity leave and she'd been thinking a lot during that time about all the challenges new parents face and prospective parents about all of the stuff that you kind of wish someone would teach you or give you access to knowledge and support and help about being a parent. And so she had this dream of setting up a business called Parent Cloud. And that is what she has done. And it's growing. She employs a whole bunch of people. What's it do, Parent Cloud? It's all about advice and help and support to parents and prospective parents. Community. Communities, but also support networks, information, I think classes, loads of different resources, which I think is really valuable.

35:51It's a great idea. She went through this process. Yeah, and she'd experienced what it was like being a parent, and I think that inspired her. But she also is doing a brilliant job of transitioning from being an HR manager to being an entrepreneur. And it is brilliant to see. And I think we all feel really proud that people have emerged from Octopus to do things that maybe aren't a business that we could just, isn't something naturally that we would do within Octopus. But it's an idea that it's a really great thing to give a go. And that's absolutely something we're really passionate about trying to encourage.

36:27So you've obviously done a few of these. I mean, is there a sort of success rate? I mean, I imagine it's not that high. in a way 10 20 yeah i think it's probably higher than that but it's also that is kind of not the point um i think is it not the point well i think if it works great if it doesn't you have learned so much about what it is like to try and start a business that next time you as the entrepreneur yeah you as the entrepreneur have so you come back to octopus you've learned a lot about yourself better educated yeah so you've learned a lot about the challenges of business what that really means you'll have learned a lot more than you would have done just doing your existing role for another the year and on the back of that next time you have an idea and you give it a go you'll you'll have a much better chance of making it work you'll know so much more have you got some people who've done it more than once uh well certainly there's um yeah a former colleague of ours who worked in our renewables team for a long time uh he was very passionate about africa he went down to africa to join a small energy software company in johannesburg yeah and he was involved in running that for a while um he then moved back to the uk and he has with another former octopus person started a new business in the uk again doing energy billing software with particular applications in uh in africa he's really passionate about it he's learned so much during his time in south africa and now he's bringing that to bear on the next thing he's involved with so this sort of learning process is so important um and then getting the right people around you the right supporters the right angel investors um mentors this is like what the ecosystem yeah i think but i think you're doing yourself in a way a disservice because i think what's really interesting and striking to me is how you're quite happy for people to go and learn and take a risk possibly at your expense and come back maybe or go off but if they come back and do their existing job i think they'll be so much better at it well that's what's so that's what's so inspiring about this for me and thought of it like that and and i think that's really interesting you've created you've created a sort of academy or ecosystem for entrepreneurs here that yeah and i'd love to develop and grow we'd love to keep expanding that and to really just champion other businesses to think about this as well um some businesses do little sort of spin out programs and things but this is the thing that i think works really well for what we do is it doesn't have to be anything to do with octopus so it's we're not saying to you to you we'll only help you if it's something to do with financial services whether that's not really the point of it a lot of ideas might be because that's the sort of yeah i could set up an electric motorcycle company or something so people's passions can people come to you who don't work for octopus well i mean if someone listening thinks oh i've got an idea should they come and well a lot of people approach someone and i think um partially because you know we do do some angel investing ourselves and that's something we enjoy doing.

39:24I think like a lot of people in business, investing in other early stage businesses is far more fun to me than investing in the FTSE 100. I'd far rather meet someone and think, oh, they are super talented and driven. I love their idea. I'd love to be a small investor in it. That is great fun. So you're really backing the person quite a lot here. Always the person because they're the ones who got to get up every morning and make it happen. And the best idea doesn't just sort of turn into a successful business in itself. So, yeah, it's all about people. So when you marry a good person with a good idea, you're onto a runner.

39:57Yeah, absolutely. And I think a good person can take a sort of reasonable idea and make a success of it too. So it doesn't have to be a super good idea with a good person. Well, if you think about what we do across the Octopus Group, I'd say none of it is kind of unique. It's not sort of patent protected drug discovery that we're doing where you've designed something and then you've got an absolutely sort of secure position. We do things in fund management, which lots of other companies within a few miles of where we're speaking today do. Energy supply. There's lots of businesses that do that.

40:27It's the same electrons out of the plug, but it's how you package it up in a way that is super consumer friendly and engaging and has some brand behind it. Those are the ways you take a product and turn it into a successful business. By bringing energy and creativity in a way. Yeah, absolutely. So what do you think are the biggest barriers to entrepreneurship today? and how can businesses help remove them? What could be done here? Yeah, well, I would love there to be something of a kind of national springboard program. I think a lot of people, particularly outside of London and the Southeast, might be sitting there with a bit of an idea of how to start a business, but no real idea of how to access that early capital that they're going to need.

41:07And if you're in a community where none of your friends or family or neighbours have started a business, you haven't really got the role models that you might need And you probably don't easily know where to go and where to turn to raise capital. And I think the barriers are even higher if you've never managed to build up any savings. So you see London and the southeast as a sort of place where it's easier to do some of these things. Well. Perhaps the north of England or Wales. Is that right? I think when we set apart. How can we help the people in those other areas? Yeah, exactly. And so if you've done a job where you've been able to build up some savings, then that's great.

41:38But a lot of people haven't. and yet is it right that that means you can't really have a crack at starting a business you know so many ideas will be in their heads you could well be a good person with a good idea in some other location yeah so i think could you craft some kind of national government-backed version of our springboard program where you say to people if you want to leave your job and sign up into this program you'll get a little bit of financial help to maybe ease the way of paying your rent for three months six months access to lots of online training courses to really help you turn your idea into a business as quick as possible so that you don't spend loads of time like learning stuff that you could easily be just showing what to do all of the kind of basic stuff you know how do you even set a company up all of that kind of thing and ideally also access to role models and mentors who can be a sounding board for you i think someone should give you a call chris and i'll help set that up it sounds like a very good idea and and i think the point is then can we become a kind of nation of entrepreneurs again uh which is good i think is is that is where economic growth comes from that's where jobs are created typically they're not in it's not in the large companies so for that to work you'd need you'd need some central sort of um clearing organized or it could all be a platform digital platform yeah i think it could you need the commitment of the the individuals employed so you can always come back yeah and that's probably the hard part and you might never be able to make that component work but but you could give some incentive for the employer to have them back like no national insurance or something like that if they do encourage entrepreneurship yeah i'm sure there's a lot you could tinker with to try and do that but my my basic point is uh we've got a great startup culture here um but a lot of it is in some sectors a lot of it is in the southeast a lot of it's in oxford and cambridge and london and those kind of places um how do we break out of that so that if you're in parts of the country they're not traditionally associated with that really strong ecosystem how can we how can we democratize well they used to be interestingly you know those great industrial towns in the north was where the 18th and 19th century entrepreneurs came from yeah they built all sorts of huge businesses and so there's no reason why they shouldn't be again no and you can build a business anywhere now that is the great thing that with with digital connectivity you don't need to be in london to start a business um but i think often people think uh it's not for me or i'll never be able to do it and trying to break out of that mindset would be so powerful it'd be better if there were more people rather like you have in the states who just encourage you if you have an idea rather than say what you think of that for sort of well we did some research a few years ago in conjunction with um with a think tank and they went out and asked people in their 20s can you name an entrepreneur role model?

44:26And the two names that got most mentioned were Alan Sugar and Richard Branson, who obviously have had great careers, but they're guys in their 70s. And can we not find role models in their 30s or something that people can look up to instead? Yeah, I mean, that is interesting. If you ask people in the US - I mean, they've been on television quite a lot. Yeah, and that helps, but that just kind of shows there's not a great raft of well-known UK business It'd be easier to name American. Absolutely. So, yeah, that's true. In America, people are just much more exposed to businesses, to people who run them.

45:03Founders are quite vocal. And there's a lot of interest in it and media coverage. But here, it tends not to be. Well, we're trying to encourage more coverage through this podcast and other ways. So you at Octopus have your tentacles, if that's fair to say, in a number of different things. You mentioned fund management, Octopus Energy. How do you keep a shared purpose across such a diverse business? If indeed there is a shared purpose, by a sense there is. Yeah, I mean, the businesses are run very separately. So on the Octopus group side, we've got the fund management business. We've got Octopus Money.

45:41We've got a fintech platform within the group and a few other bits. And we run that as one entity. Greg runs Octopus Energy very separately. it's in a different building to where the fund management businesses are for example we've always run them with a lot of autonomy very separately but I think there is still a bit of a kind of shared DNA one is people who really really believe in the customer and really think about that hard that encompasses and and is part of anything really that we'd ever want to have the octopus name attached to I think increasingly use of technology is part of it but the values are sort of making a difference you know can we play a part in tackling climate change can we play a part in trying to help people build businesses um and can we do things in the right way the sort of behaviors within an organization as important as what people see externally as well um and i think those are again things that we just believe in like do things in the right way move quickly you know be decisive don't get bogged down in bureaucracy uh sort of thing i really don't like within a business when you hear people say things like oh maybe i'll can i write a paper for next month's committee meeting well why don't we sit down talk about it now we can make a decision in 10 minutes and then you can get on with it so yes businesses need to move quickly the world is evolving so rapidly i think businesses have to really keep up with that and if you don't have a structure that allows decisions to be made quickly and you sort of get bogged down i think businesses as they grow they become fearful of failure so they lose that spark and that willingness to try things that were so powerful when they were much smaller.

47:19You've got to fight all of that all the time as a business grows. Otherwise, you just plateau and you become like every other large business. And that, I think, is something we've always been very conscious of and want to avoid. So when you say you've got to fight that all the time, you've got to be alive to it. You've got to be alert to it. You've got to stamp it out in a way. Yeah. Because you're saying, I think, that it will appear if you don't keep it in control. Well, I think it partially is because people who joined the business might have worked in bigger companies where that was part of their role and just how they saw life.

47:47whereas for us we've all we've this is what we've done for 25 years so we don't know the kind of bureaucracy of big businesses but we do not want that to kind of permeate into our business i think it's about also challenging like there are 10 of us sat in this meeting room do we need all 10 why maybe there's only needs to be three or four people and making sure does a meeting need to last now if it can last 15 minutes um what is the point of this discussion what decision are we taking can we take it quickly i remember occasionally colleagues would bring you know maybe a little spreadsheet crunching the numbers on something and their their response was often should i go away and do some more analysis and i think that is really the answer i think so much in business you've just got to make decisions quickly without perfect analysis you cannot wait until you know all of the information all the answers something by then so much has passed by I think you've got to be willing to trust your instincts.

48:45And we've done that a lot over the years. And we've learned that that has turned out to be very powerful. You kind of learn to get a bit of a sense of people you meet, opportunities, decision making. It becomes a sort of innate thing that I think business, you know, once you've been around a while, you just can do that quickly. And that is so important as well. Well, decision making is key. Good decision making makes a big difference, obviously. but someone once said something to me that i found quite helpful the great thing about making a decision is you can always make another decision yeah absolutely guys carry on making decisions and that's helped me a lot actually over the years the worst thing is to just sit not make a decision totally and i but i think so many people fall into that trap and i think it particularly happens when people start to get a bit more risk averse they think often as a business grows people start to focus more on the downside and protecting what they have and they lose some of that enthusiasm than they used to have to be looking for ways to grow, to launch new products, do new things.

49:43Some of that may be natural sort of human behavior, but what it does do is just change the whole culture of a business. And for us, we have always wanted to be the kind of place that was willing to try things and keep taking risks, launching new things. As you say, you can always decide to row back from something if it's not right, but way better to try and keep that ambition, Be bold, do stuff. Don't get paralyzed by fear or by indecision. Be bold, do stuff, and don't get paralyzed by fear or indecision. I like that very much. So Octopus Energy scaled incredibly fast. What do you think made it stand out in such a crowded market?

50:24I think the time of its launch was, looking back at it, very important. We were coming into the market at a time when there was lots of change going on in the energy market, but people were also very dissatisfied with their energy providers. And I think there was a sense in the market that for many consumers, they thought, I've been with that supplier for 20 years. I'm so loyal. Surely I'm getting their best price. And sadly, the answer was usually you're getting their worst price. Loyalty was not rewarded. It was punished. Punished. And rapid switching was happening. All of these things. Promiscuity was rewarded.

51:00Yeah, just characteristics of a market that was going through rapid change. We thought we could do a few things differently. We thought, firstly, we could build something that used technology in an amazing way. And that is absolutely what the team have done. They've created what's called the Kraken technology platform that underpins Octopus Energy. That is now not just what we use within our business, but we've licensed it to a whole bunch of other utilities. and it has this very unusual characteristic which allows very low operating costs but also amazing customer service. And that's because it just puts at the fingertips of the customer service people all of the information they need in a very usable kind of format.

51:38The technology is constantly evolving and being updated to make it as user-friendly as possible, both for people like you and me submitting meter readings through the app but also for people in the team trying to respond to customer queries. So if you want to switch, it's easy, basically. Yes, if you want to, the key is do the basics amazingly well, look after people, be very responsive to any queries. And also we found bring some brand and personality to it too. So signing off emails with the slogan, love and power, using bright colors, making sure we minimize any use of jargon. And we talk to people as human beings and as customers, not as that sort of adult child looking down at you, swamping you with jargon, trying to confuse you.

52:31That's not for us. It's all about we want people to understand what we're saying. We want them to feel they can get in touch if they've got a query. We want them to feel that we are on their side in an energy market. It's quite complex, quite difficult, where sadly power prices have been pretty high in recent years, partially because of the Russia-Ukraine war. and the impact that's had on gas prices so we want to do everything we can to make sure people get a fair deal that loyalty is worth it and we look after them make them feel part of something and just look after them really really well and you can see that in things like the trust pilot ratings i remember how my parents said none of their neighbors would switch to octopus in the early days uh until we won our first witch recommended provider um you've won a few and then we've won I think seven or eight years in a row.

53:19I think you've taken the cup home. And that's really, I think just, that's something which is a real validation of what we're trying to do. I think about one in four UK households as customers and a real voice to champion all of the things I've talked about. And Greg does that amazingly well. And I think he's a real pro-consumer voice within the energy market. So customer first is what I'm hearing. Absolutely. If you look after customers and you do a great job of that, then you'll build a big business. If you spend all your time looking at monthly P &Ls and that's what you're obsessed about, then I don't think you're going to build a successful business.

53:59Don't be surprised if you don't build a big business. Yeah, absolutely. No, that's very helpful to hear. So final question, where next for Octopus Group? What are you looking forward to in the future? Well, the way I think about it is kind of what do I want to tell my grandchildren one day in years to come that we did as a business what we feel proud about uh i'd love us to continue doing great things in fund management so a few years ago we started an affordable housing team you know an area that in this country we really need more of and it's been really pleasing to see the growth of that so i'd like to keep finding new areas like that where we can set up teams that can make a difference building things or backing things investing in entrepreneurs i think there's an opportunity to do that on a more international basis.

54:44So we've made steps recently into new markets like Spain and looking at one or two others. We have the Australia office I talked about earlier. Those things are really important. Fund management is a huge industry. Our needs as consumers for pensions and things just keep going up. So I think there's a lot we can do in this sector. And for us as the group, being a big ongoing shareholder in Octopus Energy, watching what and cheerleading as that business continues to go international and expand into new markets and get real scale and play its part in the whole energy transition that makes us really proud too and i think there's a lot more to come well there's a huge amount there i wish you every success with that and i think we'll have to have you back in the studio and find out how it's going in a few years time but no that's a remarkable story and thank you for coming to share it with me chris absolute pleasure really enjoyed it thanks very much i'm going to ask you two questions at the end which I ask everybody um the first is what gets you up on a Monday morning because here at Reed we love Mondays so what yeah uh I think it's like the challenge of every day for me really is different I meet new people get to do different things meet new colleagues um and still learn new new stuff constantly and so that to me is the day when you stop enjoying it is probably the day to hang up your boots, but hopefully that will be a long way down the future.

56:06Have a line and stuff. I hope that's a long way off. And then the last question, you maybe partially answered it just now, but where do you see yourself in five years' time? Yeah, some things I really enjoy doing. I like taking the Octopus story out to the wider world and traveling to meet potential investors in our funds around the world. I love visiting the team in Australia and also lead our government relations on the fund management side. So those all keep me pretty busy. There's a lot happening in the political world. I think a lot of opportunities for us to keep meeting new pension funds in places like Japan where they're liberalizing their international markets.

56:45So, yeah, that keeps me busy, keeps me motivated. There is a lot happening in the political world, isn't there? I mean, it could change a lot. Absolutely. I mean, it's... It feels very volatile and febrile to me. Yeah, UK politics clearly going through a sort of transitionary period in terms of we've gone from very stable, largely sort of two party kind of system into one where lots of parties have a reasonable vote share. And that is going to make it, I think, really fascinating, interesting times. Yeah, and quite unpredictable, perhaps. And also, you know, from where we are today. But you like change, so that's good.

57:22Well, from where we are today, next election is a long way off too. So I think there's all sorts of things that are going to happen. But right now, our priorities work with the government to help share with them our thoughts and ideas and suggestions about what can be done to really chase that economic growth that they keep talking about. Yeah, well, I wish you absolute success with that, because that would be good for everyone. Thanks very much, Chris. Pleasure. Good to talk to you. Many thanks to Chris Hulat for joining me today and sharing how Octopus has built a culture that empowers people to innovate and think boldly.

57:54if you'd like to learn more about octopus group their springboard scheme or becoming a b corp you'll find all the links in the show notes i'm james reed and this has been all about business thanks for listening and see you next time