On this week's episode of Inside Outside Innovation, we sit down with Dr. Behnam Tabrizi, Author of Going on Offense: A Leader's Playbook for Perpetual Innovation. This week we talk about some of the key drivers that make companies like Amazon, Apple, Tesla, and Microsoft become perpetual innovators. Let's get started.

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Interview Transcript with Dr. Behnam Tabrizi, Author of Going on Offense

Brian Ardinger: Welcome to another episode of Inside Outside Innovation. I'm your host, Brian Ardinger, and as always, we have another amazing guest. Today we have Dr. Behnam Tabrizi. He has taught at Stanford University in the executive programs for 25 years. He's the author of 10 books on leading in innovation and transformation, including a newly released book called Going On Offense: A Leader's Playbook of Perpetual Innovation. Welcome to the show.

Behnam Tabrizi: Thank you, Brian. I'm excited about this podcast because it's my first podcast on the book, but incidentally, I just received a copy of the book. And the book is not going to be out till August 22nd, so it was a very nice surprise. Given that your interest is innovation, I think we're going to have a lot of fun.

Brian Ardinger: You spent a lot of time and research digging into companies to try to figure out what makes companies innovative and, and more importantly, which ones continually innovate versus ones that are one hit wonders. So maybe you can give the audience a little bit of background on the research that you did for the book.

Behnam Tabrizi: Sure. Just a little bit of background before the background. Out of the 10 books, two of them are kind of standout. One was The Rapid Transformation I did with Harvard Business Press, which talked about the sociology and structure of how you transform organizations quickly. And this was published in 2007 and in some ways, it was very different than the sequential transformation that was an accepted norm in the world.

And then what I realized, and that book did extremely well, and I realized the biggest challenge to transformation is personal transformation. Leadership transformation. I did the book on. Inside Out Effect, which I'm really proud of, it is about leadership transformation. And it was a conversation with a COO, which I talk about in the book with the COO of a Fortune 50 company where he had sent his people to Stanford. Where I realized, you know, there is a third leg that's missing and that is what's the secret sauce of some of the most innovative perpetual organizations in the world.

And that's something that I've been thinking about. I even thought about a topic before this conversation. And so, this was six, seven years ago, so I deep dived into this. Had a huge survey of over 6,000 people with executives, consumers, academics in terms of what they think are the best, most innovative organizations.

Had an amazing research team where we sorted through data. So, after just looking at all of this, we came up with 26 firms. We wanted to make sure we don't have survivalship bias, which is only looking at successful companies and only talk about successful. So, we also had companies that didn't indeed do well, like Blockbuster, Borders, and others.

So, I talk about those 26 companies, but several actually stand out and those are, they're regular organizations that we know as most innovative, which is like Apple, Microsoft, Tesla, and Amazon. The book also talks about these and how they're different.

What was surprising is that companies such as Google and Facebook did not make the list. So, I was looking at the secret of Silicon Valley. I found a couple of organizations that were in Seattle. And I also realized there are some organizations in Silicon Valley that they don't fit the bill, and in some ways, it was really a secret of extremely, extremely high performance, perpetual innovative organizations.

Recently, BCG has come up with the most innovative organization, 2023, I believe. Three out of four of my companies were actually top three and the fourth one was like the top five. So that was really nice to kind of know that my research still stands. It was a lot of research. It was a lot of detailed analysis and what the result was, we came up with eight key characteristics that these companies really did that was very different than the rest of the organization.

And as you know, Brian, 90, 95% of organizations around the world, non-tech, high tech, are struggling with this issue. And they want to be more, like a lot of CEOs are asking me, how could I be more like, Apple or Tesla. They don't want to be like them, but more like maybe 10% more of them, 15% more of them. So that's the perennial question that I get asked, and I hope that this book and our conversation would at least uncover some of the issues.

Brian Ardinger: There's plenty of places that we can start. You mentioned briefly the eight drivers that you've categorized that makes a company more perpetual innovation focused. Maybe we should start by going through some of those key characteristics and then tie it into some examples that you've seen.

Behnam Tabrizi: Absolutely. So, I came up with three overarching themes, and then eight, like you said, characteristic that kind of fits with this. One of my favorite movies is Matrix and Trinity is an important figure there. The three key archetype that came out of this research about this organizations is that they were generous. And by generous what I mean is they were generous toward their commitment.

There is a term I use in the book, which is existential purpose. This is not just a mission statement. This is true commitment to what they believe in. It kind of also touched on my earlier book, which is Inside Out Effect. I mean, the question that I always ask is why is it people are willing to die for a cause, but they show up completely uninspired in organizations and completely unengaged. You know, not engaged, disengaged, if you will, disengaged.

The existential purpose of the organization together with the existential purpose of individual in the organization. It really stood out with these organizations. I would hate to use the word cult, defining these organizations, but my colleague Chuck O'Reilly makes the distinctions, and he says, the difference between cult and these type of organizations is that calls disenfranchised people, but these organizations, you can always leave and you can go to other organizations. And if you have an Apple or Amazon, or even Microsoft on your resume, you actually become more employable at the same time, there are very strong value cultures and each one is also very different.

So that's one of the things that stands out. The other thing that I think I also want to mention, and I won't be able to go through all eight, it's the ferocious of these cultures. It's dizzying to walk into this organization because it's chaotic, it's fast paced, fast moving. So, I talk about this tempo.

And what I found is that the tempo is not just always on full throttle. Sometimes they slow down, sometimes they move fast. So that's really another key point. And the final thing, which it's important and it's important to talk about, which is really distinguishes an organization such as Microsoft. I know earlier you told me you saw the HBR article I wrote on this book regarding Microsoft versus Google. It's the courageousness.

Brian Ardinger: Let's talk about that for a bit. So, Microsoft, you know, obviously they were innovative at early stages with Bill Gates and the, and the founding of the company and that. And then it seemed to wane until Satya came back. And so maybe you can talk about maybe that transition and how Microsoft rediscovered its soul or its focus on innovation.

Behnam Tabrizi: During Steve Balmer, where toward the end we're getting really in trouble, there is a saying by Jeff Bezos looking at his west in Seattle and say, what I don't want you guys to be, and he would tell all his troops, you know, he now has 1.3 million people, don't be like Microsoft. So, he was kind of like, the poster child for this is not who you want to be.

So, Satya took over and he was an insider. So, people were thinking, oh, it's going to be business as usual. The shadow and the ghost of Bill Gates still is alive. Ballmer is alive. This guy's not going to let this guy, well, lo and behold, he took over. Like you said, he discovered the soul of the organization. He completely redefined the purpose of the organization.

He came from cloud, so he doubled down on the cloud business. He made a major restructuring. I mean, these are some of the courageous restructurings and put the engineers on doing the most important work. Engineers were slowly, slowly becoming second class citizen in Microsoft, so he elevated their status. He changed their incentive system. He changed the culture, as we all know, from know it all to learn it all.

Most importantly, he also made some major decision on what not to do and getting out of the Nokia business. I was talking to a Google senior director the other day. That was a very courageous, bold move because they had spent so much money and when you spend so much and you are a high performer, high achiever, you want to make things work, right?

He completely walked away. He said, this is not our business. He wrote it off and he doubled down on cloud. And then, you know, early on he started paying attention to AI and he went on offense. That's why I love the book. It's going on offense because a lot of organizations play defense. You know, let's cut costs, let's play cost shares.

We have a cash flow. You know, windows is a cash flow. Search is a cash flow. Let's not do something crazy. He went on offense, on AI and the HBR article about how Microsoft went innovative. It's really talks about a lot of detail about what it took for Microsoft to do so well.

And just parenthetically, I want to mention this because I love these pairwise comparisons. When you look at Microsoft versus Google, at some point Google had 70% of all the top talent in AI in house, and yet Microsoft stole their thunder. Now, I would not rule out Google's coming back because it has the talent, but the whole point about going on offense is how can you transform your culture, so you unleash the talents in your organization? I mean, that's really the key point, the key nugget of this book.

Brian Ardinger: So, let's talk a little bit about the traps or the barriers that companies encounter when trying to be innovative and, and why don't they lean into being more on this ongoing innovation efforts versus, again, trying to protect their moats and the status quo

Behnam Tabrizi: When you're a startup, right? When you join a startup, I always say you kind of feel like you have empowered, you know what to do. It's a small place, you show up. You are visible. As organizations grow and grow, people become invisibles. They become more complicated. They create inertia. Politics becomes rampant.

Just like individuals the cash cow, the cash flow makes people enjoy the, the fruits of it. It takes a lot, Brian, to have the commitment of Apple, Tesla, Microsoft, and Amazon. You have to really lean in. One of my favorite CEOs, David House, who transform Bay Networks, which I talk a lot about it in, in Rapid Transformation book.

He always says, when you go to dysfunctional organization and you meet the executives, they're very happy. They get paid a lot of money and they're not accountable for much, and they're like powerful fiefdoms and so forth. So, It takes a lot. It takes a huge movement to be able to transform it.

The reason I wrote this book is that given my background in transformation, I wasn't interested in, okay, it takes a lot. I wanted to know exactly what is the playbook? What is the step-by-step effort they need to do to transform themselves?

And I wasn't interested in just studying one company because if I only studied Microsoft, Brian, I would've just said, okay, Microsoft did this, then you do this. But because I have so many examples, it's important to kind of juxtapose those together and realize there is no one size fit all.

Brian Ardinger: I agree with that. From reading the book and looking at the particular examples, it, it does seem like there are different ways and approaches, but at the core, it seems to start with a purpose. There's got to be somebody driving this need for consistent change, or at least looking to the future and being okay with failure being okay with trying things. You talk about in the book having this startup mindset even after they've scaled up the company. Can you talk a little bit more about that?

Behnam Tabrizi: The startup mindset is actually an interesting one because it was one of those characteristics I talk about in the preface that was added late. But I just love that because the dream to run a large company is to have the size and scale of a large company. And the agility of a startup. Microsoft, Apple, Tesla, and Amazon. I mean, to me, Amazon is amazing. I just wrote a piece that I sent to Fast Company on Amazon.

I don't know Brian if you saw their quarterly report. They just like ran an all eight cylinders. Running 1.83 million people organization and be able to have that startup mindset is truly, truly remarkable. So being able to pivot quickly, being able to move quickly, being able to make decisions. Jeff Bezos talks about day one and day two, and he always says, you know, don't fall into the day two, because day one is that startup mentality.

So, I added that chapter because I felt like this is so critical and that was a missing. Early on I had seven, but this eight one really added to the depth of the work that we were doing.

Brian Ardinger: So, let's talk about some more examples. You mentioned Tesla is one of the prime examples, and clearly, they've driven the EV market and there's a lot of people playing catch up in that particular space. What has made Tesla a perpetual, innovative type of company?

Behnam Tabrizi: I just recently wrote a fortune just a few days ago, a fortune piece on Tesla and how it basically won the war in EV, especially Superchargers. I just saw that Mercedes joined them too. It's truly amazing. I remember as a kid, we always used to be cynical, or the grownups made us cynical that there won't be any more, any new car company. And this guy cat came out of nowhere and completely transformed the car business.

What makes Tesla so unique? First of all, I just got to give a little bit of context. Tesla is the most chaotic organization I studied. It's absolutely crazy. It's not for faint of hearts. But one thing they do, which is really, really important is they have extremely high aspirations.

If I may sum up one key learnings that I had by just deep diving Tesla, by talking to a lot of current and former employees versus other organizations, is that when I studied GM and others, they're still using the known methods. The known methods of you gather the data, you'll make decision, the known methods of what kind of organization structure works well.

Tesla doesn't believe in any known methods. In fact, they're very anti known methods. They're like, okay, what's the most rational thing to add at every time? What's the first principle? What is it we need to get done? And then they move in very quickly. So, the speed and ferocity of Tesla is what really surprised me.

The other thing that also surprised me is how aspirational and courageous they were. They would not compromise on thinking big and doing big things. And of course, as someone working there, the amount of commitment people have and how they're just like working day and night and how they're excited about this organization is just truly at another level, if you will.

So those are some of the things I go into a lot of depth because I talk to a lot of people, but the ferocity and also the boldness by which things are done. The other thing that I also, I think in Tesla is very important is that, you know, a lot of people talk about, oh, what's the right organizational structure to do certain things?

Tesla doesn't care about structure. Tesla basically, there is this axiom that whatever you want to get done, find the shortest path. Like I need to talk to Brian. Brian is Senior VP. I'm individual contributor. Email to Brian. I don't need to go get permission. If I get permission from my boss and Elon finds out, or I don't know, whoever finds that, I might even not make it, if you will, because I'm just like doing the known methods of, oh, I need to be polite to my boss. So that I think is fascinating about how things get done.

Brian Ardinger: We've obviously talked about some of the successful companies that are perpetually innovating. Let's give some reasons and some examples of companies that have failed to do that and maybe reasons why

Behnam Tabrizi: One of the pieces I wrote about the book, I talk about how organizations like Borders or you know, Nokia and Blockbuster, especially Blockbuster, they see the change coming.

Oftentimes their response is incremental. The change was so rapid for Blockbuster that it basically pulled the rug underneath them and they weren't able to adapt and so forth. Let me give a current example. Right now, with Google, what we have is their search engine is cash cow. Their search engine potentially with AI could be disrupted.

A 5, 10% cut in their margin could really have a heavy toll on their stock, you know? And so, they need to make tough decisions. They need to cannibalize their own search engine. They need to go to AI. The entire business model is changing. And I'm sure with the founders going back, Larry and Sergei, they are thinking about some of these issues.

These are tough decisions, but being able to be bold, but at the same time, going back to the book, Brian, I really, really believe in this, especially after deep diving in this area for seven years, is that Google, by just being bold is not enough. That's why I have eight characteristics. That's why I believe there is no bullet silver bullet that will resolve it. You need to go all out on this.

Brian Ardinger: If you're bold but don't have the processes in place or the reward, that type of action and things along those lines, it can easily go the wrong way. Yeah, I think we see that a lot with companies. You know, this idea of innovation theater. So, they try to do the things that they see Microsoft or Amazon doing, but they only do a piece of it, and they don't put it into a holistic approach to how they're actually going to redefine the companies in the, in the years to come.

Behnam Tabrizi: That's really a good point. My previous background, I loved math and I studied computer science. At that time, I, when I got my Master's from University of Urbana Champaign University of Illinois. I took a lot of machine learning and ai, but at that time it was algorithm. We couldn't even conceive that one day we'd be here.

We thought it was just kind of fancy things. But when you study engineering, you learn system thinking. I mean, this is just emphasizing what you just said, which is so creative and system thinking is holistic thinking and piecemeal thinking doesn't work. And that system thinking has been a bedrock of my work, starting with rapid transformation.

Which I said, why is it that during the re-engineering in 2000, it took 4, 5, 10 years to transform one area and then go transform another area, then transform another area? Why can't we do all of them at the same time quickly, like the way Microsoft did it later? So that holistic thinking to me is very, very critical. There is no silver bullet.

Brian Ardinger: So, the last question I have is around the individuals that make up the company. Is this something that has to be driven from top down, or are there ways for individual players or teams within the company to take on this perpetual innovation mindset and processes?

Behnam Tabrizi: That's an excellent question. This is a question I get oftentimes in the executive programs I teach at Stanford, right? Not always you get in front of CEOs and present this, right? You get vice president, you get senior managers, you get director. The cynical perception or the maybe usual perception is that unless the CEO wants to do this, nothing's going to happen.

So, there's not much I can do. And there's some truth to that. Let's just not like act like no, there's no truth. One of the things that I learned about this after I wrote the book, Brian, there was an individual Cameron who read my book two or three times and copy edited and find errors that another copy editors didn't find who was supposed to be the best in the field.

So, I think by the time the third time she read the book, she was kind of sick of it. So, I called her, I said, Cameron, what do you think about the book? And she said, you know what I thought there are things I could learn from my own career. Like going bold, you know, having a tempo, having existential purpose.

And I said, wow, I never thought about that. So, I sent the piece to Wall Street Journal about this, that, how can you actually improve your career on this and so forth. And it may end up in other venues like CNBC, but my whole point is you can actually use this book to improve your own career. But also, if, let's say you're a manager of a unit, you can actually change the culture of your unit.

I don't believe there is one underlying culture in organizations, although I talk about it that way, but down deep in my heart, I believe there are subcultures. And as a leader of organization, maybe a piece of this, you can change the subculture. You can, for example, take the eight points, have a conversation and say, how can we improve on these things? What are the things I personally could do to improve on these eight?

And I really do believe it will improve the performance, but more importantly, it will make people happier showing up to work every day, which is the biggest right now problem at work today is disengagement of a large population of workers.

Brian Ardinger: What's the worst you can do is give it a try and see what happens. Right,

Behnam Tabrizi: Exactly and I think this conversation are useful. I mean, with my Rapid Transformation, I had a Paul Taylor from England came to my class when I read the book. I talked to his people. He was running a factory and he called me a year later. He said he transformed the entire factory by just applying this. And I'm like, wow, this is like a best thing I could ever hear.

For More Information

Brian Ardinger: Well, I hope people pick up the book. It's called Going On Offense. Thank you Dr. Tabrizi for being on Inside Outside Innovation. Look forward to continuing the conversation in the years to come.

Behnam Tabrizi: Well, first of all, I want to thank you, because your questions were right on number two. I just love the inside outside, you know, because I talk a lot about the way organization could succeed if they could connect the inside to the outside world. Yeah. And outside to the inside world. So, you pick the best name, Brian.

Brian Ardinger: Excellent, I appreciate that. One last thing, so if people want to find out more about yourself or the book, what's the best way to do that?

Behnam Tabrizi: Amazon. Type in Amazon. Going On Offense. You know, you will do that. And fortunately, or unfortunately, I'm all over the web so they can find me.

Brian Ardinger: Excellent. Well again, thank you for being on the show. We'll, we'll talk again soon.

Behnam Tabrizi: Thank you. Take care, Brian.

Brian Ardinger: That's it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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