paid subscribers. Free listening time is capped at 10 hours
per month. No piece of music can be heard more than five
times. You might think such constraints would put custom-
ers off. They do, but the offer is so attractive that users be-
come hooked and cannot bring themselves to forego paying
the subscription.
Jedidiah Yueh
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Giving things away for free should not be left to only
Internet companies. I recently asked the chief executive offi-
cers of two major worldwide legacy companies, “What if you
decided to offer part of your products and services for free?”
This is one of the questions about innovation that we always
ask our clients during Disruption Days. We propose a list of
questions which might not seem obvious.
The question I posed to these two CEOs intrigued
them. It caused them to reflect. I believe that provoca-
tive “what if” questions can prompt thinking that ends
up improving business models, and sometimes even imag-
ining new ones. In this case, a free offer can be a lever
for growth for a traditional company, as it often is for an
Internet pure player.
5. Data is the best tool for legacy companies to “maintain their
positions in the face of digital disruptors,”10 underlines Yueh.
Because they were born on the web, agents of the Internet
economy benefit from an advantage over traditional, legacy
companies. The giants, Google, eBay, LinkedIn, Facebook,
or the tens of thousands of start-ups created every year
are built around big data since the outset. It’s their natural
habitat, in which they’ve always evolved. They didn’t have
to reconcile or merge big data technology with their current
IT infrastructures, unlike legacy companies.
By contrast, legacy companies actually have a determining
advantage. Unlike new market entrants, they have the
resources and financial means to invest massively in such
things as hardware platforms, databases, extraction software,
advanced analytic tools, maintenance, and storage systems.
However, legacy companies, in their permanent state of
anxiety about digital disruptors, have often forgotten that
they have the means to prevail. If they accelerate their speed
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to keep pace with the digital economy, they can become the
real key players of the upcoming “analytics 3.0” era.
The challenge they face is how to make sense of all the
new streams of data that they have collected from a vari-
ety of different sources. This data, which can be structured
or unstructured, internal or external, is, for the most part,
disconnected. Companies need to learn how to exploit this
richness by changing the way they operate internally and en-
suring that the way they work fits with the new technology
available. They need translators to incorporate big data into
their business strategy in an understandable way, to bridge
the data gap between CMOs and CIOs and help them to
work closely together. Equally importantly, they must clar-
ify what data matters most for them, which is, in fact, the
most challenging task they have.
According to Cisco and McKinsey, “By 2020, some
50 billion smart devices will be connected, along with billions
of smart sensors.”11 Connected devices will generate an
unprecedented diversity and volume of information in real
time. For companies, this data will become assets as vital as pro-
prietary technologies or financial resources. Companies will
need to give themselves the means to exploit this abundance
of information, most of which is currently unexploited.
McKinsey states, “Though about 90 percent of the digital
data ever created in the world has been generated in just the
past two years, only 1 percent of the data has been analyzed.”12
6. David Packard, a founder of Hewlett-Packard, once said,
“No company can grow revenues consistently faster than its
ability to get enough of the right people to implement that
growth and still become a great company.”13
Yueh saw the importance of this often-ignored advice
primarily in his first company, Avamar. Located in Orange
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County in Southern California, Avamar had difficulty hir-
ing experienced executives and qualified engineers local-
ly. And as a result, his company’s growth was slower than
he had hoped and, when Yueh sold it, it was undervalued.
To avoid a similar outcome, he decided to base his second
company, Delphix, where the talent was, in the heart of
Silicon Valley.
Yueh describes this is in an unusual way. He explains that
there is a parallel between how apps are developed and the
geographical reality of Silicon Valley. The development for
a basic app system starts off with the hardware platform, then
the software platform, then the database, and finally, the
front-end app. He had discovered that the Silicon Valley’s
geography mirrors the steps in basic app development, fol-
lowing the same four strata. In the south are located Apple,
Intel, and Cisco. Moving north, one encounters Google and
Facebook. Then, going further still, between San José and
San Francisco, are companies like Oracle. Finally, at the
northernmost point, in San Francisco, Uber, Airbnb, and
Twitter are based. To be closest to the talent his business
needed, he decided to install Delphix in Palo Alto, just be-
tween Oracle and the software companies.
This story highlights an unavoidable truth. It has
become crucial to eliminate any barriers to the best talent.
To attract the most competent staff around the world, a
number of companies such as BMW, Siemens, Pfizer,
DuPont, and L’Oreal are opening R&D centers in places
where they can find the best engineers, computer techni-
cians, or biologists. More and more frequently, Western
companies find that their labs located in Shanghai, Seoul,
or Tel Aviv are among their most productive. The center
of gravity of innovation is shifting. Whatever the sector,
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whatever the company, executives increasingly understand
that if they can’t get the talent to move to them, they need
to move to the talent.
7. In the start-up world, people are more open to changing
their minds.
Yueh believes this to be an essential key to success in a
digital world where time cycles are moving faster and faster.
When time becomes the enemy, you cannot hang on too
long to a bad idea. Tim Cook, Apple’s CEO, says that Steve
Jobs could completely change his mind from one day to the
next. Yueh puts it paradoxically, “If they want to be ‘right
a lot,’ leaders have to be willing to revise their understand-
ing and reconsider what they already know.” He concludes,
“Leaders can’t be obsessed with only one point of
view.”14
This is not dissimilar to Charles Darwin’s philosophy
as described by Charlie Munger, Warren Buffet’s business
partner. In his book, Yueh recalls the comparison drawn by
Munger: “He [Darwin] tried to disconfirm his ideas as soon
as he got them. He quickly put down in his notebook any-
thing that disconfirmed a much-loved idea.”15
These seven preceding points cover the views I have forged
since reading the words of Yueh, Ries, and Peter Thiel, and also
following discussions with the heads of many start-ups. I think
that so-called conventional companies, which were not born
from the Internet, can learn from these findings and apply them
to their own ways of working, thus reinforcing their competitive
stance.
Considering what Yueh writes in the conclusion of his
book, this is more important than ever now, when estab-
lished companies are being challenged more drastically than
before. Yueh writes, “As the Innovation Cycle continues to
Jedidiah Yueh
87
accelerate, every company is about to be eaten by a software
company. Even the software companies.”16 I cannot say if his
predictions will come true, but I do know of a great many
legacy companies from the old economy that I believe will be
able to resist longer than Yueh thinks. Better than resist, they
will know how to really take advantage of what this new world
has to offer them.
The future is not yet written, and the old economy may still
have a few surprises for us. It won’t be the old economy versus
the new economy but, as Jim Collins would have said, it will be
both.
Category of One
Great entrepreneurs don’t try to gain market share; they cre-
ate markets. They branch out and create their own categories.
They come up with totally different value propositions. They
think beyond mere products, considering instead business mod-
els, as Apple, eBay, or Netflix have done so brilliantly. Compa-
nies that are neither technological nor digital, such as Starbucks,
Lego, or Disney, have also succeeded in making such leaps. All
of these organizations address customer needs that were pre-
viously unknown. They are not category leaders, but category
creators, like Salesforce, which built the success of software as a
service (SaaS).
In a 2011 Harvard Business Review issue, it was underlined
that “Wall Street exponentially rewarded the category-creation
companies, giving them $5.60 in incremental market capitaliza-
tion for every $1.00 in revenue growth.”17 I imagine this is still
the case today.
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Thiel, who created PayPal, is also one of the associates of
the Founders’ Fund and was among the first to have invested
in Facebook. His voice is one of the most listened-to in Silicon
Valley. Thiel recommends creating monopolies. Considering
that competition destroys profit margins, he incites people to
create value where it is least expected. As a result, a monopolistic
situation will emerge. In this way he denounces the “ideology of
competition.”18 His thinking is based on common sense: “Every
business is successful exactly to the extent that it does something
others cannot.”19 So when he encourages young entrepreneurs
to create their own monopolies, he’s obviously not talking about
illegal, but creative ones.
He gives lots of advice on the subject in his book From Zero to
One. Here is some of it:
“Creating value is not enough. You also need to capture some
of the value you create.”
“If you’ve invented something new but you haven’t invented
an effective way to sell it, you have a bad business. No
matter how good the product.”
“All companies must be ‘lean,’ which is code for ‘unplanned.’
Planning is arrogant and inflexible.”
“Selling your company to the media is a necessary part of
selling it to everyone else.”
“Successful people find value in unexpected places.”20
These points of view may first have been directed toward
tech start-ups, but they can also be a source of inspiration for the
heads of more traditional companies. Even today, the majority
of new businesses created are not start-ups, in the strict sense of
the word.
As for me, I advise clients looking for new sources of inspi-
ration to proceed in the following way. Start with the four com-
ponents of the digital revolution: sharing, disintermediation,
Jedidiah Yueh
89
transparency, and client centricity. It is always worthwhile for
a company to ask how it can move to the next level on each of
these topics. For instance, how could sharing take a different
form than just crowdsourcing? What kinds of disintermediation
can be envisaged? How can a company have more transparency
in its activities? What is the difference between a company that
says it’s customer-centric and one that really gives the power to the
consumer? These questions are at the very heart of a company’s
digital transformation and the answers can help it accelerate the
rhythm of its innovations.
A major leader in the food industry, dominant in its mar-
ket and apparently unattackable, asked us recently to imag-
ine a competitive business model, one that would be highly
destabilizing. We examined the company’s current activities
against the four components just described, and came back
with some very competitive ideas. The result was particularly
telling. The company in question has eventually integrated
elements of the model we imagined, to better prepare itself
against the entry of a disruptive newcomer into its sector. Of
course, we will never know, but perhaps we have kept at bay, or
discouraged, potential new entrants who were contemplating
disrupting our client’s business.
As this illustrates, innovation includes knowing in advance
how to reduce the capacity of disruption by new competitors. If
you cannot predict the future, at least you can always be prepared.
As General Douglas MacArthur once said, “The history of
failure in war can almost be summed up in two words: too late.”21
PART
THREE
DISRUPTIVE
CORPORATE
CULTURE
In this part, I don’t refer to the word culture in its noble sense, literary, artistic, or scientific. I also don’t mean it as popular
culture, born of social networks and used daily by marketing and
advertising agencies striving to insert their clients’ brands into
our lives.
What I want to evoke here is corporate culture. Definitions
abound. Here are several that work harmoniously:
• “Culture is a blend of the values, beliefs, taboos, symbols,
rituals, and myths companies develop over time.”1
• “Culture is the tacit social order of an organization.”2
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• “Culture is the identity of a company as perceived by its best
customers.”3
To these brief definitions, I would add an extract from an
article I wrote some years ago:
All corporate culture is the fruit of a collective adventure.
The sensitivity and intelligence of thousands of men and
women creating something they share in common. A mental
structure, a communion of desires, a sort of collective élan.
An interpretation of the future, coming from the values of
the past.4
Corporate culture is evidently intangible. At first sight,
it would appear to have nothing to do with the numbers.
It’s conceptual and unquantifiable; however, it can provide
a real competitive advantage. As well as elements such as
assets, turnover, growth, return on investment, share price,
which are measurable, there also exist numerous studies that
have scientifically proven the importance of a strong culture.
The benefits of corporate culture are not just intuitive; they
have been confirmed by the social sciences. James Heskett,
who co-authored a book on the subject with John Kotter,
analyzed the cultures of 200 companies and demonstrated the
impact of culture on their results. He concluded, “On aver-
age, culture can account for 20 to 30 percent of the differential
in performance when compared with the quartile which is the
least culturally remarkable.”5
On this subject, I often quote David Maister, former pro-
fessor at Harvard Business School and member of Omnicom
University. Over the course of his career, he has examined hun-
dreds of service companies and questioned literally thousands of
people. The data he gathered shines light on the direct correla-
tion between culture and profit. Maister explains, “Offices with
Disruptive Corporate Culture
93
strong corporate cultures enjoy the highest employee satisfaction,
and offices with the highest employee satisfaction are the most
profitable ones.”6 In other terms, a powerful corporate culture
attracts the best talent and contributes to employees’ well-being.
This, in turn, translates into increased productivity and reduced
staff turnover, the combination of which goes on to generate
higher profits and greater success.
Some may say that these facts are out of date, that the
research is 20 years old, and that business has since moved on.