Paul Nunes and Ian Morrison (R.I.P.) - Navigating Second Curves

I received some pretty sad news just as I was about to release this show last week, and as you know, I've been announcing that I was going to release this episode with Ian Morrison and Paul Nunes, a new series I have called Innovation Show X, where two guests come together that have previously been on the show with common theme. And as I did.

Somebody left a comment on one of the youtube videos saying Ian morrison rest in peace and it turned out that he passed away last week and i considered should i release this episode or not i asked some confidants should i do so or not and it really comes down to the mission of the show and the mission of the show is for the very reason i interviewed Ian in the first place it's not for commercial gain. It is purely to share the ideas and the thought leadership of brilliant people.

And Ian Morrison was one of those people, a really nice man behind the scenes that I knew him. I had him on the show, spent around four hours together with him.

Over the couple of shows we did together and indeed this one paul nunes also Sends his sympathies to ian's family and his best regards to ian As well as he moves on and transitions to the s curve in the sky to the second curve in the sky He was a lovely man So I want to dedicate this episode of innovation show to ian morrison author of the second curve in rest in peace

Welcome to the very first episode of the innovation show X, where I bring together two previous guests with a common theme, and it could not be a better start than this one. With two curve jumpers, the author of the second curve Ian Morrison and the author of jumping the S curve, Paul Nunez. You're very welcome gents. Well, thanks for having

, Ian, I thought I'd come to you first and , maybe give us a general overview of what your main thesis was in the book, and then I'll come to Paul. And then we'll build on common themes and ways you brought some ideas further and how they interacted later on. But let's start off with the second curve, the main thesis, I was at the Institute for the Future from the mid eighties to the mid nineties and was president in the early nineties.

And that's really when the book was written and it was essentially codifying, in some senses, my predecessor, Roy Amara's, great Amara's that there's a tendency to overestimate the impact of phenomena in the short run and underestimate it in the long run. But as I say, an embarrassingly simple notion that the first curve is the old business.

It's where you make your money and what you're comfortable with, but you have a sneaking suspicion in your gut it's going to decline in absolute or relative terms. Maybe growth rates coming down, not necessarily revenue declining, and be replaced by a second curve, a new way of doing business or a new business entirely that's radically different from the first. And the dirty little secret of futurism is you cannot perfectly predict the future. Pace of change.

And you tend to overestimate the short run and underestimate in the long run. And and what what I try to do is sort of codify what was driving the curves more than anything else, and it was really this combination of new technologies, particularly the Internet new geographic markets around the world and also new competitors, obviously and also a change in consumers.

As you saw the rise of the middle class around the world and the rise of college educated seniors college educated consumers, rather in the U. S. And I think as we talked last time, I think Paul and others, there were a whole series. Of books coming out in the nineties, about the same time talking about the same phenomenon.

And I think all of us who were charged with thinking ahead for businesses , or with corporate leaders as Paul did it throughout his career could see their anxiety as they were dealing with a tsunami of change. And the second curve was our, the Institute's attempt to put a marker on how. Some of these things may unfold.

, and the tsunami came much quicker than even you had foreseen, which is where Paul came in because he saw from his own experience and Paul, maybe you would give us an overview of jumping the S curve. And you've had the benefit of both reading Ian's book just recently since we aired that episode, but also your own experience in Accenture over a long period of time. Jumping the S curve came out of a time that was just probably slightly later than Ian's, but not much.

And really there was just a slightly different focus, which is it came out of the question of how do companies sustain what Accenture at the time. So I was in what became the Institute for High Performance. Believe it or not, but this real focus on what is high performance in a business. Is it just getting the money out or is it about sustained success? And of course, continued or some level of longevity became apparent, just like a sports star it's not enough to have one good year.

You got to have a bunch of good years and in business, it's never really clear how many good years you have to have, but it's more than one. But it's maybe not forever. And so this question of, well, what causes a business to end and what causes it to move to another curve as we looked at, and then, how many curves are there? And when you think about it, how many curves can you string together? And so this was the first book in a series of books that we then wrote over the next 20 years.

But the first one was really this core question of, what are the simultaneously being successful in one curve, but then also successfully starting and being an important part and a real high performer, a winner of sorts in the second curve. And so with a lot of study, a lot of research, a lot of companies, we can talk more about that, but we consolidated all that insight into this book, Jumping the S Curve.

And it really was, I think with the number of people coming back to it now and really looking at it there. And one of the things I loved about the question is it's an evergreen question. It really, you know, this question of how companies maintain success along multiple horizons simultaneously. The essence really of successful business, I think.

Rather than me directing the conversation, I'll drop in some pieces here and there that I find interesting, but I thought it'd be more interesting for you guys to riff with each other as well, where you've both listened to each other's episodes, you've both read each other's books. And pieces that you found interesting from each other's work as well, that built upon your own thinking or brought it in a different direction.

And maybe that'd be a good way for you to start building on the intersection part of today's episode. Yeah, maybe I'll start. I mean, I really love , the shark spin analysis. And you might want to take us through that. So we. Give the audience a reminder of how that works, , but this notion that your moment in the sun will get shorter and shorter with, with emerging technologies. And I think, you know, Aidan, you, you recently.

I wrote a little piece around the two books talking about, there's that great chart of chat GPT, you know, being, what did you call it? An eye curve. It's just straight up, right? I mean, it's just, it's not a diffusion curve anymore. It's just from zero to infinity. And I think the consequences of that are kind of terrifying and exciting at the same time. And so that notion of that. pace of change and the accelerator, the sharks fin getting tighter, I think is a profound insight.

And it's really driven, as you said, Paul, in the book about the underlying pace of the technology. Yeah, well, that's a part that came up in the second book Big Bang Disruption. And the idea there, I mean, we studied a lot Everett Rogers bell curve of, you know, innovation and innovation adoption.

I think one of the best and worst maybe models for business folks to ever come out was Rogers Innovation Committee, which is where you talk about, there's, you know, one and a half percent are innovators and then there's early adopters, you know, middle adopters, late adopters, and it's all along a bell curve and we love a bell curve, normal curve, the bell curve is what everything, we just love that, but if you break your mental model of that and say, well, not everything Distributes that way.

And in fact, you can have like a Poisson curve, if you want to be fancy and use fancy words, you know, like incomes or, you know, Poisson, there's a lot of the world that's not in a normal curve. And so the shark fin was just this recognition that with certain properties of technology, the key one being what we call near perfect market information.

And what that means is that the internet was going to inform consumers in a big way, and it really has, right, everything from TripAdvisor to, you know, these things that, that let you know what other people think, let you know instantly what quality or what government regulations have come around and found, you know, find. So we know a lot more about those that provide us that consumers are far more informed than they've ever been.

Well, that actually we recognize changes fundamentally the nature of shopping of the stuff you buy. I'm sold. I remember when, the partners in my company used to come home from Japan and, , they'd have this 6, 000 watch that, , it was basically led and it's like what does it do? I'll let them tell the time. Well, nothing, but it does it in liquid quarts, And it's like, well, I don't know. Really? You know, that's that's innovation. But in the old days, right?

So you could count on early adopters to spend a lot of money for something that wasn't really very good. What we found is that model has to change in the new world that we're in. People don't want things that are, they don't want to be part of the testing of technology. They don't want to be early adopters. They either want to be the earliest adopter, and that's your real fine edge. Mhm. Or they want the thing that works great for a real low price, and that's your Apple phone users, right?

Or there's the, Yeah. adoption is fail, fail, fail, fail, fail. And that's going to give innovators the belief that maybe they are failing, or that this isn't a good idea, that an e book is not a good idea, which was a digital inevitability. But the early failures would make you think, this isn't gonna work and then you get the Kindle and then all of a sudden everybody wants one because it's all the right features at all at a fantastic price and boom, everybody wants it.

Now everybody's got a Kindle. Everybody's got a GoPro. What do you do with the, , what do you do for your second act? And in fact, my co authors, I wrote a book about the, , what is the second act, because unless you've got one to make somebody throw away the first one, what are you doing? So then demand saturates faster than we've ever seen demand saturate in the world, and then it drops off to nothing. And then what do you do when sales drop off that quickly and you just bought a factory?

Or invested in other stuff. So that's the point that Ian's talking about in terms of the shark fin. And we didn't actually really see it until after the jumping the S curve, because it wasn't really apparent until a few years into the internet.

That we really saw that this near perfect consumer, , information was actually starting to really take hold and I can, I'll give just one more quick story because I really, I'll never forget going on one day early in the internet to when TripAdvisor , was new and wanting to go someplace for vacation and realizing that the 10 Top most popular hotels on TripAdvisor were all sold out. They're not sort of the mix. It's like, 11 through 11 down was available, had availability.

It was like a spring break a week or whatever, but one through 10 were all sold out. And that's when I realized the power of, , mass consumer beliefs, if not the reality of quality are going to start to really impact adoption very quickly. one of the things Paul, you look at the organizational life cycle as well, is there's multiple S curves at play.

And Ian, we touched on this during your episode as well, but Paul built on this with the capabilities within organizations, et cetera, I thought we'd just introduced that to give the full picture. And then we'll look at maybe some industries, , Ian you have a deep heritage in health care, for example, but I thought this was an important aspect another lens through which to listen to today's episode, Paul, maybe you'll bring us briefly through the multiple S curves.

Yeah, the idea of multiple S curves was something that we again didn't see in the early days. You know, jumping the S curve, but it was this idea that, well, maybe there's, , a third horizon and in fact, others have written , about , the now, the near future and the far future, but we actually looked at it as the past, the now and the future, because there's the legacy system and the best example for it is Netflix.

If you think about mailing video discs, online distribution, and then production content production. Which all sort of feed off of each other and it was, , if you study the history of Netflix, you realize that when Reed Hastings tried to raise the prices for the DVDs and kill that business, people went crazy. And in fact, today, I think it's still a half a billion dollar business in DVDs by mail. So the legacy never dies.

And so we, we say it's not true, , it's not binary, but it's just, it's three horizons of the old, the now and the new. Start to come into play and I think Ian would agree and something we can talk a bit about is this idea of , whether it's two or three the multi horizon management question and how does the top executive Become capable of managing in multiple horizons I think that's the key point.

I know and you had Mike Critelli on for a couple of shows from Pitney Bowes and, that was essentially the story. I worked with them in the 90s, in the early 90s, and it was sort of the genesis of the book in some senses. But it wasn't that they didn't know. I mean, , it's exactly what Paul said. , they knew in the long run that digitization was going to happened to everything in messaging.

The question was when and how fast and how to manage what was still a very profitable business of servicing existing first class mail streams with paper based product, which Lasted 17 years beyond when we were working with them and as we talked about, Miss Critelli laid out with you, it was only a Black Swan event kind of in around the 2008 recession that really kind of, it was a death blow Similar thing happened with newspapers, by the way.

, I remember giving a talk to the Newspaper Association of America, and I had this slide, . of my daughter, who was going to Sarah Lawrence at the time, and I said, you're going to the school in New York, you should really subscribe to the New York Times, , and, her response was Dad, why would I, why would I get the New York Times? It's made of paper, it requires dead nothing on it I can't get.

From the BBC website and I said, well, by the classified ads and she said that two words, Craig's list, right? So I put this slide up that quote from my daughter to these 800 marketing managers of newspapers and then showed them the data on classified ad sales. This is probably the talk was probably around 2003 and it was showed this precipitous decline for the very reason Paul was talking about. Is that. , disintermediate because there was perfect information, right?

You had Monster, you had other job boards. You didn't need employment ads anymore. You didn't need real estate ads to the same extent. So, I mean, this, almost every industry has gone through that kind of need for the leaders to juxtapose the, you know, the past and now in the future. I think that's a great way to parse it. One of the things that reminds me of, and maybe we'll talk about this is take it from a sporting perspective. So I play professional sport at the end.

You can always go on and play in a division two or division three club. But the real dilemma is I do that. I'm going to risk being severely injured. I'm going to risk ending my career prematurely, and I might not build new capability for my next curve in time. So you have to give yourself that time. So this becomes a decision you have to make. And I see it very, this was one of the really helpful things for me to understand how organizations move, because it's the same kind of framework.

Is that I have to build that capability before it becomes a necessity, because if I haven't, I won't be able to deal with the new paradigm when it comes to me. But at the same time, why would I turn away good money? Like Paul said, with Netflix, with dvd. com that's still churning off a really nice profit, but needs to be run really differently. And that's the real dilemma that's here for organizations that came through from talking to Mike Critelli as well.

One of the things that I loved that he just said in which I heard again and again from a lot of different places was they just, we saw what was coming. We just weren't in a position to act or didn't know like, you know, the timing and what to do about it. But I think it was, it's really interesting to hear that because we heard it again and again, , and in fact, in one of the books we talk about the inevitable future. Digital photography and stuff. People see that.

Yeah, digital is eventually going to be, , the way that photography is done. But I still remember, and I'm sure you do too, Ian, that people, the deniers, I mean, it was, gosh, it was in the 90s. People were still denying that, , Digital would ever be good enough to replace film, Right, For at least for really quality photos and that also gets to the point that , humans are not good at understanding geometric improvement.

They understand linear improvement, but they don't understand geometric improvement. The Aiden's point was the question , of how we make money. But so let's come back to that. But what were you going to say? , I was just going to reinforce the thing about the, not understanding geometric progression.

I think that's part of what the current challenge with Sort of forecasting the implications , of AI, the current generation of AI is just, you've got to think about it, not just in today's terms, but, with multiple doublings over the next 5 years. Yeah, we can't get our heads around that.

And AI is a great example in the sense that, you know, you have to maybe have two or four or eight, 16, 32 of Moore's law to get natural language recognition or to get, but this is where things become sentient. , , so what we used to follow in the, some of the think tanks that worked in with Accenture, but , we worked all the way back to the core. It's like, well, where's the status of Moore's law? And I think if you look now, I mean, they guaranteeing it another 10 years, maybe.

So, it's five more doublings. I mean, yeah, it's the whole chess board kind of things. Five more doublings of today's computer power for the same price, puts you in another realm of. Potential of what technology can do for you.

So I think that and I think that brings us, , that cost thing maybe brings us a little bit to the thing that I was hoping to talk to you a bit about Ian, because I know you've got some great industry examples and the profound change on industries was this idea of where we make money. And what do consumers actually pay for and how do we, and then the whole thing of, the legacy business.

One of the things we looked a lot at is how the legacy business businesses are needed to fuel the future because they basically create the investment until you get the revenues and the profits from the new business. Right. And so I think GE has struggled historically. I think we. The facts would bear that out.

The G sold a lot of businesses, some that it had to for lots of different reasons, it's complicated, but there's no doubt that the lack of the throughput of profits and, , having those businesses hurt their ability to continue investment. In the new so just a fascinating area to us and to me in particular over time has always been this, , because you can do things like cross subsidies, who pays for Google Maps because it's free is , is it really free?

And, even now it was yesterday I was watching some movie with Commercials again, commercial televisions coming back, commercial videos coming back. Yeah, sit and watch a commercial for 30 seconds, you know,, every five minutes and it's free. So anyway, I'm curious, your experience Natty and on the, , which industries and how did they think about making money?

Right. , and that relates to what has been my continued frustration with the disruption of of health care. I wrote a couple of pieces recently sort of bemoaning the fact that we were promised and certainly in 2020 saw this enormous bolus of venture capital chasing after digital health. Much of which is vaporized in the market, you know, I mean, they, these companies have blown up in short order going from IPOs with 10 billion valuations to zero in the space of 24 months kind of thing.

Partly because of, of perhaps hype, but the, I think healthcare is one of those industries where the first curve, has a lot of inertia. And part of it's legitimate because to innovate in health care, you're, you're dealing literally with life and death situations. So, you know, you can be a little less, you know, my son was employee number 11 at Bleacher Report, you know, which is a sports based website.

Now you can experiment with you know, you know, see what consumers like or don't like in terms of basketball sneakers, but it's not the same thing if you're dealing with somebody's mental health or their diabetic medication. And so there's a legitimate caution. There are some industries which have shown kind of an an ability where the first curve is an ability to, to sort of minimize disruption if you like, and the incumbents stand up. You know, in a in a pretty strong position.

I mean, because I do think the other thing I'd love to get all your thought on because I think you're absolutely right about the real question going back to the genesis of all of this is how do you sustain high performance? And I struggled with the book to really identify those companies who made the successful transition from first to second, really, GE, you would argue could have been that company when we were writing the book.

, I actually worked with him a couple of times, thought he was a really smart guy, but, went all sideways through just the component parts didn't work together. , critical part of , the market, but , it's hard to see companies rediscover and manage through that now near and future set of s curves effectively. There's a lot of good stories around , disruptors, but managing from, , as you described, that Netflix transition is a good one. I think Microsoft.

More recently has done that in terms of the shift from, desktop solutions to cloud and A. I. But I've struggled personally finding good examples of, crisp transition from one to the other , over time. Yeah, I'm curious of your take on this. One of the things we used to love to say when I was technically a futurist at Accenture was give them a give them a change and a date, but never both. I, I stole not, never, never in the same sentence.

Give them a number of date, but never the same sentence. the same sentence, exactly. Because you never wanted to connect the two. And I think that. Highlights nicely this hobby horse of mine, which I've been thinking a lot about lately still, , Schumpeter started to help people understand the difference between innovation and invention or the terms that he used because I think there's the question of technology invention, which is this.

Do you have the technology you need to then innovate and use it in practical applications and sell it? And when companies get ahead, when innovation gets ahead of invention. Which I think maybe in electric cars, if we look at that, , right, it's like we know the battery technologies are getting better. It's fascinating just to read how many competing technologies and battery technology there are now and when they're going to happen.

But I think we also kind of know Battery technology for electric cars isn't there yet, winter, you know, winter takes half the mileage out of cars and a lot of cars have to drive in winter conditions you know, the batteries catch fire or whatever. So this. You know, when, and I think, you know, for GE Predix you know, and the Internet of Things was another one, which is, you know, an early bet that they went into quite heavily.

And then it's a question, you know, and then related to that is what, what do consumers really want? , and when are they going to want it? Because, you know, nobody really wanted or cared about digital photos until they did. So these these transition points, these break points, timings that that, that consumers need, , when do we get the quality and the features that consumers really want and then get that mass adoption.

And those inflection points are, critical to discern and sometimes difficult.

Goes back to I'm sure what you did with your colleagues at Accenture and what we try to do when I was at the Institute and, and subsequently in, in the health work is To try and develop tracking mechanisms, you know, whether it be using surveys or other data tools to to really have some metrics and discipline around when things are actually moving to a point of inflection and that that this, you know, if you can come up with with metrics that sometimes can.

You know, give you at least a real time picture of where you are. It might not be a predictor always because you're dealing with historical data, but that's why we were big believers in surveys and future intentions, you know, of decision makers in health care. We'd survey doctors and consumers and employers and saying, you know, what are you going to do next kind of thing.

And it's not always a perfect predictor, but it does give you a basis to try and extrapolate some of those curves , I think that's exactly right. You've got to stay close to the consumer and consumers don't always know what they want. You know, it's the old apple kind of thing that, they want faster horses.

Sort of question so you have to be a little careful with that obviously as you know But definitely that was our experience that you know There's just no substitute for talking to real people who are putting real money their money on the table For things and what are they gonna pay for? I know this has been a foundational set of activities at the Institute in the last 20 years. But also, you know, you look at companies like IDEO and some of the great design shops, they they make use of.

ethnographic tools. It's not just surveys. It's, it's really observing, you know, using anthropological methods, how people actually use stuff. And often that gives you insight into what a consumer is getting joy out Yeah, exactly.

And a couple of good examples I have of that Amazon picked the price of Kindle based on single family member decision making, which is one of my favorites that basically, if it was going to be over 300 bucks, the spouse had to have a hand in the decision, but under 300 bucks, you can pretty much Just decide on your own. In fact, I was told in India that that that number is 40.

The head of household or the house can make it can make a singular purchase decision for under 40 bucks, but over 40 bucks, it becomes a family decision. But so those things. And then the other great one learned ethnographically, of course, was the the sachet packets for shampoo and stuff in India and other developing countries where the promises they've People love your shampoo. They just can't afford to buy a whole bottle of it.

So from an innovation standpoint, finding these non technical reasons, you know, it's not that it doesn't clean enough or do whatever. It's simply not affordable in the way you're selling it Interesting. available because of the short, because of the shortage of stores. So one of the things that we also did to find the inflection points, and I'm glad you mentioned that term because, you know, Malcolm Gladwell and others, everybody talks about these inflection points.

But one of the things that we looked at in our later book, in our third book, was this idea of trapped value. And the idea of as technology gets better, you can start to see where value is potential starts to appear and isn't getting used. And the example I like to use for that, just because everybody knows it is. Car share services or Uber, Lyft , and regulation starts to come into it too, right?

And particularly in healthcare, but this idea that at some point it just becomes such a good idea to use technology that people actually, , flout the law. In order to deliver the product. And so, one of the things that comes to mind too from your health care, I think it's just like telemedicine. And I think of how many teleconferences I've had with my medical professionals that, inconceivable. 10 years, 20 years, , 15, not even 20, 15 years ago.

And partly because of this whole thing of regulation and, it's unknown, it's uncertain. So I think technology and consumer adoption has changed dramatically since when we were looking at this early. I don't know what your thoughts on that are. Absolutely. , and don't get me wrong on the digital health stuff. I mean, I think we're seeing telehealth used increasingly, but the notion that it was going to replace.

The incumbents easily as has been challenged, I think, in the experience of the last five years, and it's partly as I say, because health is more than just the odd office visit. I mean, people get conditions that require complex interventions and that tends to create the necessity for a wider range of services. than any of these startups are able to orchestrate easily and really , puts the pressure back on.

The other thing in health that's been is the, it's why the focus on the consumer is so key is, the role of third party payer , in the healthcare area. Very few people are purchasing healthcare, nor would want to on a retail basis. For all of their care, , it's tough to come up with a couple of hundred thousand dollars for coronary bypass surgery , without the use of insurance so, that's been a market altering factor , and, , reality really.

That makes health care a difficult space to innovate in, but it doesn't mean that there aren't profound changes and that the same technologies like AI , and the use of telemedicine can't be promulgated. It's just trying to figure out the right business model has been more challenging, I think, for some of these disruptors , than they imagine. It's a tougher industry, I think, to play in than some others. Paul you mentionedu in your book Eroom's Law.

The reverse of Moore's Law, because it actually plays out in Ian's world, which is mainly in the healthcare, etc. And that came to mind, and maybe you'll explain Eroom's Law just as a reminder for our audience. But also one of the things I'm seeing a lot of at the moment is so much innovation because of longevity, because people are living longer, et cetera.

And then if you combine that with when we were under pressure to push medicine out during the pandemic, we were able to, and that almost short circuited a lot of regulation, and maybe you both had some thoughts on that because. We're probably going to see more of that.

I don't know if you guys saw recently Bill Anderson declaring a war on bureaucracy, he's the CEO of Bayer, for example, that this was a huge problem with inside that organization, but regulation is also necessary as well in that field.

well, the regulations required in a lot of fields, actually. mean, regulation of taxis uh, even. Versus an Uber or Lyft, mean, Having medallions meant the government knew who was driving the taxis and that they might be maintained that goes to a really interesting thing. That is another sort of hobby horse of mine or one that I think a lot about. is the nature of risk and payment, right? And who absorbs and and who benefits from the risk.

So, I think in the vaccine world, what we saw was that consumers you know, we're willing to adopt a lot more of the risk than we were in the past. And that could have a major downside, that also took a lot of the cost, and particularly the cost of time and development out of that equation.

you know, And I think what's really interesting in the technology world, even on a small scale, is how consumers are confronted every day with little risks and insurances and how they decide to manage that and self insure that. So, for example, go to an electronics store. It's always right. Do you want to ensure your television? Basically, do you want to extend the warranties? Do you want to do all these things?

And consumers often don't have the best knowledge of what the real risks are and how much they're paying to, uh, mitigate that risk. And so there's enormous opportunities there. But then there's also the idea that Risk could disappear in auto driving if cars become much better or become self driving, in which case, well, who would pay for the insurance then on a self driving car? Would it still be the consumers? Would it still be the driver?

Or maybe the person who sells you the car bundles in the insurance. So insurance, the insurance consumer of auto insurance in the future is actually car makers. Not consumers. So this idea when things become cheap and when things, when technology takes the risks out of things, other people can bear the costs of those risks. Really to me, uh, an interesting really opens up innovation and lots of industries again.

And so that's a really fascinating area for me when I would, advise know, push in listeners to think about know, you know, let's try and reimagine, not sort of innovation in your industry, you know, reimagine how things are paid for and who bears the risks, the producer, the consumer and and middle people. Right. And that's a fascinating line of argument around some of the big challenges facing the planet, like climate change.

A lot of , what you just said about risk, things like carbon offsets are just examples of reshuffling that risk and managing that risk in innovative ways for the benefit. Of a bigger goal. I think similar story with what I think is a big challenge for the developed world is and the developing world for that matter, too, in the long run is the fact that you've got very rapid aging populations, half of whom have no money, and the whole aging in place and the of how is that going to work?

What's the role at the same time? You've got a baby boom. That's whatever the number , is going to essentially pass on trillions of dollars to the next generation, starting out those relative risks of things like reverse mortgages and other more creative solutions to end of life, financial and health management. I think there's huge opportunities there that have yet to be tapped in terms of, , what we can do. business model innovation.

It's not just, I think you would be using technologies and solutions, but there really needs to be business model innovation around, as you're saying, Paul, this reshuffling of risk , and who bears that risk. I think that's a great, great point, Ian, because the, this question you know, there's necessities there, there's some enormous problems that the world's going to face um, and is facing.

And like you said, whether it's climate change or whether it's aging populations and so needs based, needs driven innovation is one that we don't often talk about, but I you know, seeing the list articulating, and there was actually a you know, bit with climate change.

Um, And I, I don't remember the details, unfortunately, but I I think it was a Scandinavian guy used to publish a list of like all the world's big problems you know, climate change was like 47, you know, know, compared to malaria and other stuff. It's like, look, we and it was, I just remember looking at the list and say, Oh, you know, he's kind of right. We got a lot of problems in this world. Whether that be know, clean drinking water, the world doesn't have clean drinking water.

The world still Food scarcity issues, if not pure starvation like it used to be, but we also have obesity problems that are through the roof and we're starting to see some major solutions to that. But yeah, I think you hit on a really great point, which is as we think about and talk about innovation, think about technology driven curve changes. There are also the fun ones that we always talked about as futurists and that, but know, demographics is destiny. Right.

And so, you know, as innovators and as companies looking at where these next curves are coming from and all the challenges um, have they built in the know, the list of challenges that they built in the inevitable future uh, some of these other demographic changes and other, um, which aren't gonna you know, So it's the population is not suddenly going to get younger. Now they might be healthier until the age or whatever, the shape of that triangle is gone like this, right?

We've got a cylinder where there was a triangle. Um, And the implications for workforces, for taxation, for just everything. Um, So yeah, I do like this idea of the problem driven innovation in the world today is going to be an exciting time.

I thought one of the things we might riff on guys is love the metaphor of the phoenix as an S curve jump, the mythical creature that every 500 years willingly walks into the flames, burns itself up and only through that creative destruction earns the right for a new life cycle. And one of the things we were talking about before we came on air is reluctance of some organizations to draw, to walk into the flames.

I always think of I I'm my childishness will come out here now because I love that show family guy. And I often thought about a scene where the Phoenix it's coming to the end of its life cycle. It's like, come on, Phoenix, time to walk into the flames and the Phoenix, like I'm just one more drink. Just, just give me one more drink and a reluctant Phoenix.

And I thought about this, that I'd love you to share this where you've seen cases of organizations doing this really well where they have something like dvd. com with Netflix, but they sell it off at the right time or when they get it wrong or where they are so in love with it that they escalate commitment and they double down onto the product that they love or the service that they love or the brand that they love, because this is a huge problem with S curve jumps.

you know, I love sort of questions, although it's very hard. And I think Ian might agree with me. Uh, Such the toughest question, you know, when do you walk into the flames? And I think GE walked into the flames a bit by selling off a bunch of old stuff that was clearly old, you know, or old model or, you know, old school, but. Not having it then when it needed it for the next stuff, like predicts and internet of things.

I think what's interesting is finding success in a first curve, sort of like Nokia and it's dumb phones for lack of comparison, a better word to call it compared to, you know, normal phones compared to smartphones. Well, everybody loves that story for lots of different reasons, but I think the most important feature we found was the fact that Nokia had such.

Financial ties to the old model that it just didn't have the flexibility to move into the, the fire anyway, you know, it owned the production capacity in China so that it could get that great quality control and get the production under control in the early days of China outsourcing. Well, that meant it owned all the factories.

Well, who's going to, if you say, if you move into smartphones as Nokia and say, that's the future, who's going to buy your old, you know, dumb phone factories or what are you going to do if you still got loans, you know, that you've got to pay off on those So the value of those factories. So you get caught in this difficult place between the smart investments and the really smart stuff you did on the one curve versus the things you got to do to be successful in the next.

So I think this whole thing, and just because we're mentioning shows on there, I do have to mention the one scene that I loved in a. Show that kind of mocked the vik the Vikings series uh, on television the Viking thing.

So there was this comedy version of the Vikings and has like the old people being brought to the top of the mountain to jump off and it's just you know, they're supposed to make way for the new people, and they're there talking to him, and he's like, you know, who wants to go first in the great tradition of whatever, and all these, like, old guys are like, I'm only 47, I don't think it's actually really my time yet.

You know, I just, jumping off things is not really my you know, and so just the excuse is like, yeah, why do we do, you know, so I just love as sort of the metaphor for, know, we all think this, like, jumping into the future, , you know, going to Valhalla and giving up the old is a great thing, You know, when it comes right down to it, most of us are pretty good with the way things are.

And so it's, uh, it's a terribly difficult cultural and personal thing to, to jump into the know, again, another family guy's sketch was old yeller. You know, that story of the dog yeah, the sketch, there was a phone call to the family home and the dog forgot who the caller was and they're like, Oh, yeah, this is the second time this has happened. So they bring him out to put them down.

And I, I was, I'm saying that because Oftentimes an organization will wait until there's ample evidence that the organization, the brand needs to be sold off. The assets are no longer useful, et cetera. And by then it's too late.

And one of the ones Paul you shared with us beforehand was some of the organizations where you'd seen that they clung too long to the brand, or they'd fallen so in love with the brand where they could have made money from it, selling it to a VC, et cetera, yeah, one of the great stories that was from my personal experience because I know some of the people involved was just the Yellow Pages, right?

The Yellow Pages are this book for buying know, that we used to have with everybody's phone numbers, all the business phone numbers, and then there'd be ads and it was supported by the ads in the phone book in that. kind of recognized with Yelp and everything else that this was going away and it was going away very quickly. And so some people I knew had put together a plan. It was not rocket science and that, but you know, if you don't advertise to advertise, if you don't spend a lot of money.

Doing anything but reselling to the people who are already in there. That you can cut your sales expenses to nothing and basically create a glide pattern out of the yellow pages and, reap a you know, recover a couple, a few hundred million bucks or whatever it was at the time, but the yellow pages, people were having none of that. It was like, No, the Yellow Pages is an institution. You know, We think it's got a 50 year, not a 10 year glide path.

And I you know, another a hundred million dollars of advertise, you know, of sales push and promotion, we can up the number of advertisers again and blah, blah, blah. And of course they just, the money just melted away, blew it. But So emotion uh, sentimentality and and Ian, you have a great one in your uh, about general dynamics.

I don't know how much you know about that, but it was just that was a great company is like, Oh They got out of the business and pretty, not necessarily glamorously, but pretty effectively and pretty well, and made a lot of money for a lot of people. We actually used to have a folder at the institute of selling at the top hall of fame. You know, Medco probably did that, when they sold to Merck in early nineties. Although you could argue PBM valuations went up after that.

But, but just on this emotional resistance to getting out. I wrote a piece in the early 90s saying that hospitals were the railways of the 1990s, you know, that they, the, the thing that killed the railways was the, the owners loved choo choos too much, you know, they liked the trains.

And the thing that will kill the hospitals is that they like big white buildings, you know, and being important and we'll miss where all growth is going to be in the long run, which is, going to be in the ambulatory environment, and that was actually true, although I think it really helped galvanize hospital leaders, and so most hospitals now, even a big academic medical center like Stanford, where I live right next door to you know, about over half of

their revenues come from outpatient activity, not inpatient activity. And that's true of most big uh, So, you know, it can be done, but,, the attachment to the old core technology to, you know, film uh, as opposed to digital photography, which is so emotional and powerful, difficult for folk, but you and one of your books, Paul, it was a great exchange with Aiden around your definition of strategy was it has to involve asset allocation or reallocation, right?

you know that's really the hallmark of your phoenix metaphor Aiden is Okay, put your money where your mouth is you've got to actually divert dollars pounds to that new enterprise and where are you doing that?

Meaningfully, I mean and my friends at Volvo with the story I told about how they doubled down basically on the truck and bus side of the business and get rid of the car company, was wrenching for them emotionally because the manifestation of the brand to them as Swedes was the cars, right?

I mean, they weren't as they loved their trucks, but it wasn't like Most of them drove, well, all of them drove Volvos, but you know, I mean, their attachment to the, to their vehicles was so profound and to all it stood for in terms of quality and safety and all the rest of it. So that was gut wrenching for them.

And yet they did make that kind of asset allocation, as Paul would suggest, to what was a rationally um, logical, diversion of strategic assets to the second curve of Of globalization, basically. I mean, what they were betting on was globalization and being able to service trucks remotely with new satellite technology no matter where you were in the world, that was gutsy.

And yet even then, some of their executives try to get the car company back later because they probably felt lingering guilt about doing in the brand that was a Swedish icon. It's tough stuff. To put your money where your mouth is , and actually take that leap. And that's why I think a lot of people end up going, not so much, , I was, when you were talking about your different sketches, I was thinking the Monty Python sketch, , where bring out your dead. He goes, I'm not dead yet.

You know, so not quite ready Yeah, exactly. That's a great, it's a great example. It's like, yeah, Yeah. you will be soon. It's, you know, do you throw, throw the baby out with the bathwater? what we found was the, like you say, put your money where your mouth is. The challenge of, you know, I think we found like 80 percent of companies still allocate innovation resources based on revenue by units.

So, you know, say you've got 10 business units in your company, you know, who gets the most money to innovate? Well, the one that brings in the most revenue. Well, that doesn't make any sense at all, really. Right. Because you have to have a strategy above it. One of the things I was very fortunate at Accenture was both to work with literally something like 15 or 20.

CSOs at Accenture over time, but CSOs changed pretty quickly and a bunch of CSO circles worked a lot with CSOs, chief strategy officers, and this idea of, where you find the money to pay for innovation and how you allocate that, which really gets to this idea of really needing leaders that are multiple horizon, you know, at least two horizon, if not three horizon leaders, and you know, Look, the plan is we've got a core business.

We've got a you know, we've got an old business that gives us, you know, sort of flagship name and stuff like Coca Cola. We've got the now businesses which are throwing off a lot of cash and we got the new businesses, but they've all got to be managed you know, as a set, not as individual businesses.

And actually a pharma company that I worked with was a great example of that too, because that was one of their big problems, is that each of the units was considered itself separate and none them kind of wanted to pay for the innovation of the other ones. And it's like, well, if you don't take any of the money from the individual businesses to pay for the innovation of the other businesses, there's no strategy me, that's just watching the fire burn, right? Because it's.

you're gonna run into a problem. It's gonna be, well, who sat there and watched that happen? Uh, And some of the toughest things I've ever seen was watching good chief strategy officers.

talk to the business and and really work them through the budgets and say, you know We could have this innovation plan and this is where the money would come from This is where it would go or we could have this strategic one and you guys got to decide whether you know guys men women Got to decide whether you want to do it traditionally Or whether you want to do it strategically and what's going to be best in the long run for everybody for the share price that I got and seeing

them kind of come to the like, yeah, all right, maybe not everything, but I'm going to tithe more of my, you know, innovation rewards for my revenues and profits to the rest of the business, because, hey, we're a global United business. We're not just my business.

Um, So I, so thanks for the lead into that, Ian, because I think that's, you know, this whole idea that strategy is resource allocation is, I think, a fundamental point. So I've had these books on show on the shelf for audience behind me here to absolutely brilliant books. I've learned so much from them. I've got so many inspirations for blogs and my own thinking has marinated so much from reading your books, guys. Even today, I thought about all the other pages came to mind this, this story.

I might not write that someday, but I have to say. Pleasure. Episode one of innovation show intersections has been a massive success. And I want to thank the author of jumping the S curve, Paul Nunez, and the author of the second curve, Ian Morrison. Thank you for joining us. Aiden. So much fun. Great fun to meet with Paul and really loved it. Thank you.