Don’t Fall Behind in the AI and Tech Revolution | Exponential Organizations 2.0 | EP #64

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0:56The next billion dollar company will be three people leveraging OpenAI and some of the other LLMs out there. Look deep inside yourself, find the MTP that you want to go after and just go after it. This is the best time in the history of the world to be an entrepreneur.

1:20Let's talk about what it takes to build an EXO. Right? We have a 12 -step program. It had to be 12 -step. It had to be 12 -step. You want to have heart back to kind of things that work. Well, by the way, just to, as a thing... We have behind us a wonderful rocket. I call this the spinal tap rocket. If you've seen the movie spinal tap, they tried to build a huge set and they put the wrong feet versus inches and they ended up with a so I call this the the spinal tap rock because by the way for those who've never seen the movie if you go into a Tesla and turn the volume knob full up them well volume knob goes to 11 and you can go find out why that's the case is kind of amazing all right back to how do you build an EXO all right so let's go through some of these steps and Peter jump in yeah we'll go back and forth step one and most important is what What is your MTP?

2:08Hopefully you've heard this over and over again enough that it sunk in. People beat this into you because it's been beaten into us. You have to select what fundamental problem you want to solve. That's step one. And you use the moonshot planner tool that Peter mentioned, use your own devices. We have an MTP tool ourselves. Ask your friends when I was young, what did I say, what I wanted to do? What fundamental problem do you want to solve and go out? By the way, once you have your MTP, I want you to challenge yourself at a cocktail party to share it out loud. Don't be embarrassed by it. My massive transformative purpose is and what the hell is an MTP?

2:47Well, you explain it. By the way, when you go outward facing with your MTP, it brings people to you. You'll be amazed. You've got to meet this person over here. I've got a friend you've got to be connected with. It's a magnet to bring partners community to you. You know when I say to a cocktail party I want to transform civilization. It doesn't it doesn't really work But so I think I got to think about that all right. So number one you've got your MTP. Okay number two critical Join or create communities around that MTP. So if your MTP is cure cancer Okay, you can either create community around that because there's lots of people interested in that or go to platforms like meetup or others that have thousands of user groups and existing communities that you can join.

3:30Why you want to find like -minded people, you want to share that MTP, you want to build a community or connect with your MTP to the largest group of people possible around you. So build and connect or just join communities that reflect your values in your MTP. Yeah, I mean, the worst thing you want to do is have a team split because we have different purpose. Yeah, right? MTP is like pulling a string at unifies it pulls you together. That's right. So composing a team around that based on your MTP is fundamental. By the way in the future I think we'll be hiring based on the alignment of an individual's MTP with the company's MTP because if there's not alignment on that there's no point really working together on things, right?

4:19So that's going to be kind of a prediction for the future. All right, Step three is put the team together. Here we recommend four roles, a CEO founder type visionary, a product person, a builder, and a business model finance person. Lots of startup theory has around what composition should be. You know, you and I've been talking about the idea from Jeremiah O 'Yan and a few others that the next billion dollar company will be three people leveraging OpenAI and some of the other LLMs out there, where the CEO takes care of vision and marketing. The product guy is building, using LLMs to build the product, and the operations guys making sure all the AI chatbots are operating.

5:07And we think that will be the next billion dollar company. Step four is your breakthrough idea. And notice here that it's step four and it's not step one, right? When you got your massive transformative purpose, which is going to last you a decade or two, now you're gonna find out what technologies, what business model is gonna be in service of transforming that? Because if you start with a technology, that technology may not last very long. It may be be obsolete at the rate we're going in a year or two. What really keeps this all focused, train on the tracks is in fact that MTP. Once you have the basic idea, right?

5:50Now you need to kind of start putting flesh to that raw idea. So you have a fill out a lean start of business model canvas coming from Austin, Alex, Austin, or the EXO canvas which was developed by our community, you can find it at EXOcanvas .com. If you fill those two out, basically it's talked to you through how to think about partners, channels, customers, vendors, value proposition, et cetera, et cetera. So you've fully thought through the idea before you start building anything. Please don't build anything until you've filled out these canvases to get a rough sense, because it'll tease out any mistakes you make and you want to go as long as possible without building things.

6:28I remember when I was building an extra, which we did, my co -founder Rohit instantly wanted to go talk to a hundred people about it. I'm like, wait, no, you'll give away the idea. He's like, no, no, I want free feedback on the idea from 100 people. I get free feedback. Can I stress that an idea is the easy part. I remember a conversation with Elon who said, when you look at the relative value of the idea to implementation, the value of the idea rounds to zero. It's all about implementation, manufacturing, manufacturing, and implementation. Again, I made the same mistake early on. It's just not wanting keeping the idea close, but you lose.

7:11It's a lose, lose, lose when you don't share the idea. Because you don't find out all the ways it's failed, all the people that can help you, believe me. If you're the right person to make it happen, you're driven by the MTP. The idea is just the very first incremental step. Right. So now you have your idea and you've built your business model canvas and EXO canvas, etc. The next step is to find a business model. My favorite part is finding the business model. I am the most excited, more excited about business model innovation than I am around the technologies. I hate the business model part. Really?

7:48Yeah, I struggle with this a huge amount. We've been struggling for years in EXO to find different testing, different business models, etc. and I'm just like, God, Dan, can we just go, we can talk about it. We'll talk more. Maybe I could use some advice from that. Let me talk through the business model side, right? Because there's a really big inflection point that's happened around building a business and finding a business model. Chris Anderson, who's the editor of Wired Magazine and created the DIY drones community and he invented the long tail idea, except I wrote this book a few years ago called Free, arguing that as we make information more widely available, every business model goes to free.

8:25And then you have a bunch of layers on top of that free information. Digital information. It's demodidation. And you have an advertising business model or a subscription model or something. Let's use the example of music. We used to have eight major music studios selling scarcity, selling you the physical cassette, the CD, the DVD, selling scarcity as their business model. Then we digitize music, right? All of those eight pretty much disappear. and now you have two platforms, iTunes and Spotify, settling you abundance on a subscription model. Right? So that we saw in the music industry, we've seen the same thing in books and in news.

9:00We'll see the same thing in transportation and healthcare and education is going to happen. So you basically argued that most business models will go to free. And it was a very seminal book around at the time. Kevin Kelly, who we talked about already wrote a response to this, saying, Better than free would be what are the business bottles around this? And he wrote a blog post called Better than Free. Everything that Kevin Kelly writes is amazing, but please go read this blog post. It's seminal if you want to build an EXO. What he does, he identifies if the base information is basically widely available, like digital health information or so on, there's about one of eight ways in which to add value to that.

9:41So if you look at this list, Airbnb is giving you accessibility. Uber is giving you finability, Facebook is giving you personalization, financial markets often sell immediacy, etc. And if you have an information -based industry, you're using one or more of these. And we think what Kevin's identified here are the business models of a digital world. And we think more and more 21st century business models will focus on this aspect of this. So critical to go check this out. Now just on a slight segue, Kevin talks also about the word of book called What Technology technology wants. Basically saying the pace of technologies in X -eroval now past our human ability to limit it, which is an AI conversation that we can have at some other point.

10:26Anyway, technology wants to be free. Technology wants to be free. And it wants to be abundant even though human nature is like keep everything scarce and try and limit things. So now you have a business model. You've got some sense of what it looks like. Let's go to the next few steps of building an EXO. Okay, once you have the business model, the next step is to build the MVP. This is again coming from Lean Startup Thinking. It's really, really critical. What's the smallest feature footprint of a product to give you to get it out there and launch and task with customers? Hopefully this is second nature and it's obvious to you, but building an MVP, again, this is about building a data driven company.

11:09We think we know what the customers want, but we don't actually. As Steve Blanks said, no business plan survives contact with the first customer. Right? Because you think you have a sense, but when you get out there, I remember Reed Hoffman saying it a different way, if you're not embarrassed by your product, when you launch it, you've waited too long. Why? Because if you wait till it's perfect, you're gonna get it wrong, and you're gonna make assumptions that you haven't validated. So in the minimum, I remember when I was running Brickhouse, Yahoo's incubator, we had Catherine Affake, the founder of Flickr, coming in and talk to the engineers.

11:43And she said, talk to a team and they go, what's so great about your product? And they go, we have 20 features in this product. It's gonna be beautiful, et cetera. And she said, all right, build a two that you think are gonna identify the two features out of the 20 that you think are gonna make it work and make it succeed, launch those two and then get a feedback loop going. Yeah, right? You asked for tell, it talks about very similar. He says, you know, when you look at all the things you have to do in a company, instead of ordering them the way of a priority that you might have, reprioritize them in order of which ones are going to teach you the most and do those first, right?

12:21It's constant learning in this regard. Constant testing. And the eighth step here is validate marketing and sales. Again, this is part of your MVP. How are you going to market it? How are you going to sell it? How are you going to price it? Are you marketing it direct? Are you going through channels, through partnerships? All of this is fundamental to get to scale. And Validate marketing sells and managing your funnel, right? How many people do you have interested in the product? How many have signed up for the free thing? How many people might sign up for a paid model? What's your churn, et cetera, et cetera?

12:56And so there's a whole now very well -understood scientific, very clear metric process on how to manage your funnel. Okay? Like if you have, if you're an enterprise sales, which takes like nine months to do an enterprise sale, then you better have a big funnel and figure out you're getting a lot of stuff in the front because only if you are going to drop at the bottom and Keep you viable, right? So getting your funnel right and managing the sales funnel is absolutely critical in this piece of this. So now you have at this point, you should have what's called product market fit, which is you have a product that people are paying for and and with feedback from customers that they're excited about your product.

13:34If you don't have both those things, you don't have product market fit, go back to MVP or go back another step or figure it out of another breakthrough idea. Everyone listening is probably saying that's great if you're a startup. But what if you're running a company that's at 50 ,000 employees and you've got, you know, how are you still building an MVP? You're still building an MVP. Because the only way you know that something's going to work today is by getting it out there and iterating. Okay? And big companies are very, very bad at this because they're trying to get it perfect before you launch it.

14:07People want to wait till it's perfect, etc. It never happens this way. Look at the biggest companies in the world and they've all been iterating very, very well. Amazon is famous for constantly iterating. They had no idea whether Amazon Prime would work, right? You've got a bit of experience. Tell the Amazon Prime story. It's so fascinating to see the mentality and psychology there. Yeah, Jeff Holden, who was the VP of product both at, but chief product officer, both at Amazon and Uber, with all my boarded ex -price tells the story. When Amazon Prime was first proposed as an experiment, it was considered a foolish idea.

14:45Bezos basically said, try it. And now what percentage of Amazon's? Amazon Prime is a, I think it's 25 % the killer one is Amazon Web Services. And this is now again another example. But I want to give a shout out to Amazon Policy that I completely love. If you have a big company, I dare you go home and go to the office tomorrow and implement this policy. They realize that in any company it's really easy to say no to an idea. One of 20 people can say no, kills the idea. Where if you're a startup, you can go to 20 investors once as yes, you're off to the races. So how do you deal with that impedance mismatch in a big company?

15:28So they came up with a policy and it's called the Amazon Institutional Yes. So if you're inside Amazon and you come with me with an idea and I'm your manager, I'm not allowed to say no to your idea. My default answer has to be yes. If I need to say - If I want to say no, I have to write a two -page thesis as to why it's a bad idea and post it publicly on the internet. So they've created friction and embarrassment to saying no, it's way easier for me to go, just go do your idea, I'm sure you're going to fail at the next level, et cetera. And now the product gets tested, and at least now you have real data.

16:01One of the results of this policy was actually Amazon Web Services, nothing to do with their core strategy, not on any roadmap. Nobody can figure out how to say no to it, and that's one of the most successful products of all time and delivers 75 % of Amazon's profits globally. It's just unbelievable. Everybody, Peter D. Madness here, I've been asked over and over again, what do I do for my own health? Well, I put it down in this book called Peter's Longevity Practices. It's very readable in just an hour. In the book, I cover longevity diet, exercise, sleep, my annual found upload, meds, and supplements longevity mindset.

16:39It's literally consumable in just an hour's time. Hopefully to incentivize you to make a difference in your life, to intercept the technologies is coming our way. If you want this, it's free. Just check out the link below and download it right now. Another example is Kickstarter, right? Hopefully you've all heard of Kickstarter, played with Kickstarter. You know, it was thought of as a platform for young companies to try their product out and get commitments early on. What we're seeing is large corporations actually trying things on Kickstarter as well to get early information about who wants what color, who wants what different product elements.

17:13My fellow Waterloo grad, Eric Medjikovsky. Medjikovsky, right, Pebble Watch. Pebble Watch, wanted to, he went to, this is a great little story. He came out of Y Combinator, right? Best incubator in the world with the best network in the world. Trying to raise $100 ,000 to build a prototype of his running watch. All the investors said no, because of the Silicon Observer, value is very biased against hardware at the time. So now he's got three weeks of cash left, right? He's like, oh, about to run out of money. So he puts up a project on Kickstarter desperately saying, can I raise $100 ,000? Can I presale my watch?

17:47Raises $10 million on Kickstarter, right? Now that tells you two or three really interesting things. One, all the investors are wrong, which is fine, is why investors use a portfolio approach. More importantly, if you have crowdfunding, why do you need the investor? And now the sophisticated investment ecosystem on Silicon Valley's rendered irrelevant, in a sense, because I can crowdfund something. but third, and maybe most importantly, to the point you're making, for the first time in business history, you can validate demand for a product without building the product. Throughout history, you had to build a product and go, do you like it or not?

18:23Customer goes, I have a new... Now Eric has a new problem. He's got to build a lot more watches. He's off to China on the next slide. That's the, that's the, but that's a great problem to have. We've got $10 million in the bank now. I've got to go do this. So, by the way, Sony Corporation is now launching anonymous Kickstarter campaigns and then funding the successful ones because it's just an easy way to validate success. So really critical. Data -driven decision making, it's not listening to the experts who tell you what they think. Yeah, so constantly run experiments validate your marketing skills, okay?

18:55Step nine, once you've got a funnel out there and so on, is to now implement the EXO attributes of scale and ideas. Do as much staff on demand, community and crowd, implement algorithms, leverage assets, that's, figure out engagement models for your product, and then all the internal mechanisms, what's the inner, how are you gonna, what interfaces, where do you wanna automate the interfaces between you and the customer? What dashboards are you running? How are you doing experimentation and what experiments are you running, right? How do you decentralize decision making and what social technologies are using in a separate company?

19:29It's not a big deal, right? It's not implementing all 10, it's necessary, right? and you might actually begin with a couple of these and then move towards others as part of your plan. That used to be the case. So in the first book, we are research indicated if you implemented four of these, then you got, it became an EXO. But I think today the market basically says the data now shows that if you're not implementing all of these, somebody else is, right? And so the more you implement these, the better. In the faster you can implement dashboards, for example, the faster you've got a real time sense of what's happening with the business.

20:06The more you can implement experimentation, the more you're implementing a learning organization. And if you, these are no excuse not to be implementing them. They're just the fundamental best practices as an entrepreneur today. Yeah, now really critically, I'll give you a great example as a company and a Australia called Smart Group. And what they do is every quarter, they pick, they get 10 people, each of them picks one of those scale or ideas attributes and they implement that attribute. So they have 10 projects going on on a non -stop basis, implementing scale and ideas, they grew 5X over a two -year period by doing this.

20:40They were already a public company, by the way, so this is not a small company. They were already a public company, and then they grew 5X by applying the full scale and ideas methodology. Our 10th step is to implement and establish a culture, but I would say a culture begins from the very beginning. And it's what happens when the CEO is not watching. it's the interaction between your employee base, between your founders. And again, it starts with that MTP, it starts with the original founders, and that culture is gonna drive everything. Elements of the culture, I really personally always wanna be driving, it's data -driven, experimentalism, fundamentals there.

21:22Yeah. Now, we found over the years that having an EXO structure takes out a lot of politics, right? as we said in the implication, most of the, in most traditional companies, almost all the conversations about what's happening on the inside, that personal product didn't work, did they get budget for that thing, why is that kind of trying to steal my team members? And within the EXO, most of the conversation about what's on the outside, are we solving the fundamental problem or not, etc. So that's critical. And by, we found that by implementing more of the attributes, the culture stays young alive, of a learning organization oriented constantly towards the MTP.

22:01Step 11, constantly retest your assumptions. So this relates back to experimentation, but you've got to retest, is my pricing correctly? Am I really following my MTP? Because often you can drift off to the side. Oh my god. We had been there. We had, so almost accidentally became a consulting company and we spent more time advising big companies than trying to solve big problems. The community actually rose up and go, hey, what happened to the impacts out of it? And we're like, oh, dang, we kind of accidentally left that round. Because you're in your own soup. It's really hard to gauge and see what is happening around you.

22:38So make sure you have active advisors that are constantly calling you out and testing you against what you're doing. Are you aligned towards the MTP or not? Bert Routan, who is the famed aerospace designer engineer at Skelet Kapazins. he built Spaceship 1 that won our $10 million dollar ex -price has a quote I love. He says, question don't defend. If you're building a part of a cultural attribute, if you build a culture which asks, you know, which allows questions to be asked any time, so defending yourself. As soon as you start defending your position, you're backed into a corner and you're not able to explore new areas, you're not telling yourself the truth, you're simply defending yourself.

23:20So question don't defend is one of those cultural elements of asking questions. You know the video of Bert talking about this is so amazing. He goes, I've never been so goddamn excited is when trying to win this. X win this prize. I want to just do a quick shout out here. Yeah. It's so amazing to watch an X prize unfold and the rationale behind this is when you put up a 10 million dollar prize Something like 30 or 40 teams will spend like up to 150 million dollars in R &D trying to win the 10 million dollars So it's the most leverage model for innovation ever where you can crowdsource hundreds of teams.

23:55How many teams are registered for the carbon extraction process? We had 1200 teams going after Elon's $100 million. We just launched this wildfire exprise and after the first month we have something like 60 or 70 teams all designing different ways. Detecting the fires is not the hard part. But if you found a wildfire igniting that's moving and you had to put it out autonomously in 10 minutes without humans in the loop, how would you do it? Right, and so it's fun and it's exciting and it's changing the business model, right? The business model, again, I love business models. The business model for insurance was always, you know, Fire insurance will pay you after your house burns down.

24:38What about flipping the model and saying, our fire insurance prevents the fire in the first place. That's the strength. That's right. I want to just do an anecdote related to the MTP. One of my favorite stories at X Prize, and you watch all these teams running around, like mortgaging their house, hoping to make it. Oh my God, yes. Right? My favorite story is the oil cleanup X Prize funded by Wendy Schmidt, the $3 million prize for anybody who could double after the deep water horizon oil spill. The turns out the oil cleanup technology has not changed since the 1980s since the Exxon values because there's no Economic incentive so very quickly prize gets put together to say can you double the effectiveness of existing oil technologies tonight?