Peter Crosby:
Hi everyone, Peter Crosby here from the Digital Shelf Institute. It’s 2035. When you get there, what is it you wish you would have done as a leader in commerce for your organization now to prepare to win in that future? John Rossman, Author of the Bestseller “The Amazon Way” and Managing Partner at Rossman Partners, is spending every week spinning out a newsletter offering the practices, metrics, and skills you can use to make sure your 2035 self isn’t mad at you. The newsletter is called The Digital Leader, and John joined me to talk about his top-performing topics.
Peter Crosby:
So, John, I can't believe you agreed to endure a third appearance on our podcast. I looked up glutton for punishment on Wikipedia and sure enough, that was your picture, but really, thank you so much.
John Rossman:
Am I at the leaderboard on this now?
Peter Crosby:
I think you are. I'm not even sure if there's another third, I'd have to look back at the records, but...
John Rossman:
Well, I consider it an honor. So thank you for having me back. That means we're doing something right here.
Peter Crosby:
You keep saying smart stuff. So who am I to keep you out? And now you have to say smart stuff weekly because you have launched this newsletter, The Digital Leader Newsletter. Why in God's name would you do that? That's really hard work.
John Rossman:
I did. It is hard work and that's part of why I did it, was it forces a weekly writing and publishing habit where my natural procrastination skills when you're doing a book, but it also gives me a testing platform. So I can test and explore concepts and get feedback on them before maybe they go to the next commitment level. And I also wanted to explore and interact broader than just on The Amazon Way topics. And so that I can continue to just help deliver helpful feelings on how to think broadly about digital transformation and competing in the digital era. And it forces me to think about this stuff.
Peter Crosby:
Yeah. What I really like in the subhead of your newsletter is the phrase “practical coaching to innovate, compete, and win in the digital era,” because that is therein, I think, lies the difference. Is that what you're shooting for?
John Rossman:
It really is. And that's the value proposition I try to make to the reader on this, which is practical coaching and the goal is to help you and your company compete and win in the digital era. And the first newsletter I wrote was actually the value proposition for The Digital Leader. And I talk about who you are, and you are an innovator and a change agent at your organization, and what you need is practical tools to help you think and communicate better. And I think one of those gets a lot of attention, the thinking piece, and there's a lot of great work out there. And I kind of borrow and incorporate some of that into these newsletters, but it's the communication aspect that I've really come to value. And I think others undervalue that if you are a change agent and your job is to conceive and get others to go along with a concept, half the battle is communication. And by thinking through your communication strategy and how you do it, it actually forces you to think better. It's a forcing function back on thinking better too. So those are, at the highest level, I focus on how do we innovate and create change through thinking better and communication?
Peter Crosby:
Yeah, I remember from The Amazon Way, your bestseller book, by the way, the Amazon practice of using a press release to sort of get your thoughts on paper, and, as someone who spends a fair amount of my time, some part of my time writing press releases, I can tell you, it is a forcing function for driving cross-functional alignment or uncovering where there isn't some, which is pretty cool.
John Rossman:
Yeah. And the forcing functions you write are actually for public consumption. So it's a different type of goal that you need to do. The future press releases that Amazon uses are just for internal purposes and really try to specify a specific outcome that you're trying to get to, a specific achievement that you're trying to get. But again, it's a broad based announcement within the organization, but both are really important to get right and be specific and be committed to it.
Peter Crosby:
Yeah. And so, John, I reached out to you because I am an avid reader of the newsletter and, and I asked you, "Hey, John, you've been doing this for a bit." How long has it been? Is it seven months?
John Rossman:
It's been about eight months, seven, eight months. Yeah. And I call it a weekly-ish newsletter. It's almost every week.
Peter Crosby:
Give or take. It's COVID, man. You got to pull these things out when you can. So I asked you just sort of, what were your top five sort of performers or top four performers, whatever. And you sent over a list, and so many of them were the ones that really had sort of popped out at me. So I'm really excited to dig into these top issues. So you wrote one in early December that I felt like you essentially were trying to reboot the way that people approach digital transformation because that term, I don't know, I feel like it's become so embedded in sort of corporate speak that it's kind of lost its meaning. It's sort of everything and nothing. Because it has a budget number attached, people will like lump things under it or, or it feels like, "Oh, fine." But I feel like you were using this issue to try and re-energize it towards something sort of more tangible and maybe meaningful.
John Rossman:
I mean, you're speaking to the exact point that I start off with in this newsletter, which is digital transformation, it's a good term from a market definition, from a roll up standpoint, from a category definition, but it's a horrible term if you're an actual company and you're trying to make change happen, but that's exactly what happens. Companies have digital transformation strategies. They have digital transformation budgets, and they try to actually conceptualize what they're going to do underneath that term. And that's the start of the problem is you're not starting with clarity on what are the actual outcomes that you're trying to achieve.
John Rossman:
And so if you think about, well, what are the things we're actually trying to transform? It's typically one of five things. It's a customer experience. It's employee experience, it's an operational or quality issue. It's an extension or an innovation and a product or service, or it's a new business model. So let's start just by having five categories of what type of outcome we're trying to achieve and then play the what if game, and the what if game from a senior level, just teases out. I wrote one in there, which was what if office and staff productivity would improve 10% every year for the next five years? What if that was the thesis of your digital transformation? But now we've got everybody focused on an endpoint. What if we increase productivity? Well, just that simple question starts the wheel spinning like, well, what is actual productivity, right? How do we measure that? How do we do that? How do we define the outcomes? If productivity is actual deliverable outcomes, how do we define those things?
John Rossman:
How do we rationalize activity? How do we re-engineer processes, roles? And then how would we apply different types of capabilities? Maybe it's RPA, maybe it's some sort of enablement capability to actually improve the employee experience to an endpoint of achieving a measurable business outcome, which would be productivity improvement. That's where strategy really starts, and that's what needs to happen in digital transformation is clarity in mission. That's step one.
Peter Crosby:
And so you're saying that in your practice, when you consult with firms, you find that they don't really have a clear outcome even to start.
John Rossman:
Oh, I would walk in assuming that actually. So yeah, they think they're talking the same language, but they're actually talking past each other and they do not have... And the way to focus on this is again, to focus on outcomes. What everybody likes to focus on is either A, kind of the big bucket word, digital transformation, or B, the problems like, "Well, here's indications of something that's going on. Here's something that's not right," or real loose objectives like, "Oh, we want to improve the customer experience where we want to improve the flow here." Those things are interesting concepts, but you can't rationalize, you can't build, you can't prioritize, you can't put a business case or anything against those types of concepts.
John Rossman:
So let's talk about specific outcomes. Reduce customer churn by 20%, improve employee productivity by 10%, transition our business model to be 25% recurring revenue, those types. And those are still big buckets, right? And I'm not defining at all how to do it. I'm just defining, here's a specific mission. Now, underneath that mission, we can come up with a set of ideas or bets or sub thesis as how do we actually accomplish that?
John Rossman:
And then we can actually tease out those specific ideas underneath this category of an employee improvement or a customer objective. And then we can test these and evaluate, well, which ones do we want to lean in further? Which one do we want to go ahead and test and develop? But if you don't start with that general deeper categorization of what type of transformation are we shooting for, everybody just spins around in this mirage. We think we're talking against something, and we're actually not. And that's why most digital transformations don't even have a chance in being successful because we haven't defined the mission well from the start.
Peter Crosby:
Makes total sense. That's the what if stage, get everyone on the same page with a measurable goal. And then you move on to action two, which is rationalize. What does that mean?
John Rossman:
So now we have a thesis around either employee improvement, customer experience improvement, an innovation or a business model transition. Then we have a set of ideas. Now we can pressure test these ideas against each other, and actually look at it as a portfolio versus a single idea and all types of good things, good thinking, good choices and good decisions happen when we actually have a portfolio to review versus one idea. And that isn't the end of the game, but that's just the start of actually being successful in digital transformation.
John Rossman:
Part of the rationalization is actually evaluate these as, as a portfolio, and the type of portfolio I like is typically around potential benefit versus potential risk. And so the lower left hand quadrant tends to be those ideas or concepts that are pretty predictable and lower benefit. But what companies also need to think about is the bets that have high risk and high return and understanding what your portfolio, on that basis alone, helps you understand like, "Oh, do I have a concentration? Do I have any really big ideas?"
John Rossman:
Oftentimes companies want to start with more controllable, better, predictable outcomes. That's great. And as we grow in confidence in how we operate in this manner, then we'll advance into some higher risk, higher reward benefit. The key we're going to do on those types of bets though, is we gotta keep them small, right? You actually have to allow for the type of experimental based failure that typically happens, but that's where we're going to be planting lots of seeds. We're going to be debating lots of potential, and we're going to proceed on those in a very agile, incremental manner.
Peter Crosby:
That's great. That really does take us to the next one. You'll do book review issues, and one that stood out to me was focusing one on Peter Drucker's The Effective Executive, which is a well-read book. But you mentioned in the beginning just about the change management role that the folks who listen to this podcast sort of take on every day. And that seemed to resonate with you that this book had something to say about that in this situation. So how did you think about this book in your newsletter?
John Rossman:
Well, first is just the premise of the book, which is if you want to be a more effective executive, it's about making yourself more effective, and just that humble contemplation. Most of the work that needs to be done is on my practices and the way I think through things. And I think that's an empowering position to take a hold of. And then just the introduction on that book, I find, is just a stunning primer of if you want to be effective in being an operator and/or a change agent, Peter has eight simple steps to do, right? So.
John Rossman:
I'll just read, this is what makes an effective executive. They have these same eight practices. They ask what needs to be done? They asked what is right for the enterprise? They developed action plans. They took responsibility for decisions. They took responsibility for communicating. They focused on opportunities rather than problems. They ran productive meetings. They thought and said, “we, rather than I.” Think about, if you could model just those practices and think through how do I actually do those things in a more effective basis, how much better of a leader you would be.
John Rossman:
In this particular episode, I kind of double clicked on, "Oh, how do you run better meetings?" And it was something I used to work with a lot with my teams when I was a partner at Alvarez Marsal and like, "Hey, this is how we run meetings for impact." And it's all about... People think about the meeting moment. It's actually about the planning of the meeting and the pre-work that goes into a meeting. And then it's about the follow up of the meeting. So you need to think about a meeting as a three step, three phased activity and invest more time in the planning and definition of the meeting. And then more time on the follow out of the meeting, and your meetings will run much better, but I go into it a lot deeper in the newsletter.
Peter Crosby:
And by the way, loyal listeners, we will have links in the show notes to all of these issues so that you can dig into them a little bit more. And you talked a bit about sort of Drucker's examples are dated but that he lays out leadership and management practices. And if you don't understand the difference, all the more reason to buy it. What is the difference once you've emerged from Drucker and in your work with a lot of companies around the globe?
John Rossman:
Well, management is really about knowing the right things to do. Leadership is about building the will and the habit and bringing others along to do the right thing. And so that's why I think both are critical and we tend to lump them together, but they're actually distinct practices.
Peter Crosby:
Yeah. One of your first issues resonates so much with a book that we covered in the podcast recently. It's called The Human Element. It's by David Schonthal and Loren Nordgren from the Kellogg School. Their subtitle is Overcoming the Resistance that Awaits New Ideas. And when I read your newsletter entitled Innovate By Reducing Friction, that's exactly what they focus on, which is so many companies spend time pouring resources and thought and energy into the fuel, convincing you to buy, convincing you, to buy, convincing you to change, instead of focusing on how do I loosen these frictions? How do I put some oil in the works so that it's more likely for behaviors to change? Tell us a bit about how you thought about it in your newsletter.
John Rossman:
So to me, what friction is, is all the things that we ask a customer or partner or an employee to you because we haven't perfected our product or our service yet. It's all the data duplication, the questions you'd have, the comments, the customer calls you might have to ask ,the things that don't work, the things that you describe as kind of clunky or slow that you go like, "Really? We're still operating like this." And what happens in especially big companies is you just grow used to it, right? I borrow a line from Pink Floyd: “we just grow comfortably numb with it.” It works, but it's not what you would call a great or a superior performance.
John Rossman:
And so really to get into friction, you need to listen to your customers and really understand, what are they saying? What are their points of frustration? The best place to look and listen to this is in what your field sells, sales says, what your customer contact centers say. Why aren't you winning deals? How do your competitors compete against you? It's all of those little things that add up. The benefits of addressing friction are twofold. First is you actually make for better customer experience and adoption and use will improve and you'll have operational improvements too. But secondly, you're actually building the habit of being more connected, more customer-centric, a finer eye for detail. And you're thinking about how would we actually make an insanely better capability?
John Rossman:
And so that's the work you do to build bigger ideas for innovation. So to me, Amazon's story is really a 25 year story of reducing friction in discovering, purchasing, getting, returning, dealing with the full life cycle of retail. And they have just taken it on sometimes in little ways, sometimes in big ways, but it's this constant attention to what are we still asking customers to do that is burdensome? It's just a tremendous habit, and we just grow numb to it.
Peter Crosby:
Yeah, and Amazon has succeeded at delighting customers and setting the bar for every other experience. And one of the parts that I loved in your newsletter was where you took many paragraphs to sort of unpack in sort of an analyzing friction of the pharmacy experience in store. And I wept with both laughter and just sad recognition of that experience. You want to just talk about that?
John Rossman:
Yeah. That was at a pharmacy. We were in San Clemente, and I was trying to pick up a prescription. And I was thinking about this concept of friction, and that whole story is actually true of just all the little things that they asked me to do and the clunky customer experience versus how I envisioned Amazon would reinvent the pharmacy experience. So, as you said, I did go into a narrative about what I thought that customer experience should be like.
Peter Crosby:
And so for people that want to start tackling the interrogatory of figuring out what friction is in a particular moment, what's the best way to sort of approach uncovering those moments?
John Rossman:
It would depend on the situation, but one way is to look at customer contacts and look at the Pareto Analysis, the Manhattan Diagram of customer contact, and what's the root cause of those customer contacts. That typically is a real good indicator from a customer standpoint, where is their friction? And in most products and services, it's typically, also is around adoption. What would it take to get our customers to use our service, our capability more? If the core works today, what are the edges, the compensating things, the slow things, the duplication, the quality errors that we're asking them to compensate for that if we had a perfect product, wouldn't be there? That's where the signals of friction come from.
Peter Crosby:
Yeah, it's been exciting over the years here to just watch brands get better and better at sort of their ownership of the digital shelf. And it's one of those things, which is very complex because there's so many retail or marketplace or D2C endpoints that they want to show up on. And every one of them is a different sort of set of requirements and everything. But to see them part of the analysis, if you're going to tackle that, is figuring out particularly internally, what is it that makes this take so long and what is it that makes it so darn hard and, and where are the biggest wins for picking out, reducing that time to market and reducing that cost and expanding the amount of time our products can be in the market. And it's really cool to see those things start pulling apart and speeding things up. It's wonderful.
John Rossman:
And when you start with the end in mind and from the customer experience in mind and work backwards, what you'll typically find is that your org structure and jobs and roles get in the way of improvement. And that's where you need to really rethink like, "Well, why do we have organization structures? Why do we have jobs?" They're not for the purpose of actually executing. One of the great hallmarks again from Amazon is like, how do we minimize bureaucracy? And that's what a customer-centric approach helps bring is an orientation to outcomes and customer satisfaction versus how you've defined your existing business. And the willingness for teams to fight through their org structure is one of the defining features that winning companies are able to do. They're able to figure out how to minimize how the org structure plays a role in actually what the customer experience is because a customer doesn't want to understand your org chart.
Peter Crosby:
Right. They just want what they want when they want it.
John Rossman:
Again, why an orientation to outcomes versus current state problems, how things work today, to me, none of those things are relevant in defining what we want to do. They're relevant in, how do we solve for it? But, at the beginning, don't start with those constraints. Start with what's the outcome that we'd like to achieve?
Peter Crosby:
And I think one of the big challenges that anyone certainly in the commerce business right now is that looming threat of disruption. Who of these sort of up and comers or breakout sort of small brands are going to start taking my market share in some big way or is there some place that I should be, some channel I should be showing up in or something else that my competitors are going to do first. You lay out in one of your newsletters, nine easy steps and one lie to avoid disruption. Hey, do you want me to lie, John? Is that what you're asking me to do?
John Rossman:
The suggestion is that people do lie to themselves at the end of the day. That's the inference. And no, what I'm trying to promote is we have to be brutally pro and start with self assessment and honesty to avoid disruption.
Peter Crosby:
And part of avoiding disruption is imagining what that might be, right?
John Rossman:
Yeah. I'm big on outcomes, right? What's the customer experience? What's the business outcome? What's the feature that is going to win? And then working backwards, Amazon, they call it start with the customer, work backwards. But working backwards from that outcome definition is really that orientation that you're going to hear from me time and time again.
Peter Crosby:
And one of the things that you talk about, one of the approaches that you can use is something called guided wandering, and I immediately wanted a whole newsletter on it. And so here's a chance to preview the next newsletter you'll write on it.
John Rossman:
Oh, I love suggestions on that. So guided wandering again, kind of the term and the concept comes from something Bezos talks about, which is, understand the difference between when you're in a predictable operations, current state situation. In those circumstances, you should have a plan, and you should execute accordingly, and you should have high predictability and expectations that things go according to plan. When you're trying to innovate or figure something new out, that's more like guided wandering.
John Rossman:
And the two, both of those words are important, right? First is the wandering piece. That means it's going to be a little messy. You don't know exactly what the outcomes are going to be. You don't know exactly what it's going to lead to, but the other piece is being guided. It can't be completely random when you're trying to figure out an innovation, a new experience, a new business model. You have to have a thesis or a strategy about it. Amazon's been in the retail business guided by three core customer insights. Customers will always want more selection. Customers will always want a lower price, and customers will always want more convenience. So all of their wandering has been in those three swim lanes. You have to figure out what your swim lanes are and then understand we're going to try some things. Try to keep them small, try to keep them experimental, and that's a different type of mentality in playbook than your predictable circumstances. And that's what guided wandering is about.
Peter Crosby:
Yeah, I loved what future astronaut Jeff Bezos wrote in the Amazon 2018 shareholder letter you quoted in your newsletter. “Wandering in business is not efficient, but it's also not random. It's guided by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it's worth being a little messy and tangential to find our way there.”
John Rossman:
And that gets to the first step about avoiding disruption, which is, do it early. The problem companies get into is when they try to figure this out and it's late. It becomes really expensive. You don't have the ability to wander and to figure things out. You have to be extremely proactive. There's a lot of different concepts around this, around your horizon one business, your horizon two business, your horizon three. And what most companies do is they naturally make everything about all their priorities, the vast majority of their budget. Their real focus is on delivering for today. That's your horizon, one business.
John Rossman:
And so the encouragement is, be deliberate about how you spend time in the horizon. Say, that's the three to five years out concepts, and businesses and horizon three, your five to eight years out concepts. You need to really allocate time and resources in very discreet, measurable, well-intentioned manners across that. But again, companies just focus for today's results, and then you can't explore. You have to then make deliberate actions and that's hard, risky and expensive.
Peter Crosby:
Yeah. I mean, ultimately the way to avoid disruption is to disrupt yourself is kind of what you're saying.
John Rossman:
Yes, but you need to do it proactively and deliberately and understand that it really takes two operating mindsets. One is your traditional operator's manual and management science manual about how to run predictable businesses. And the second is about, how do we create themes? How do we create concepts in a portfolio of ideas and then explore those cheaply quickly and decisively so that we're building future businesses?
Peter Crosby:
And so John, you often get called in to sort of have these conversations or help guide these with the wandering maybe. And do you find when you arrive there, can you tell the ones that are going to be successful at this, and the ones that, in some ways no matter how much you wander with them, they may not find the path forward? What are the characteristics of companies that are sort of set up to actually accomplish this?
John Rossman:
Well, there's a lot of characteristics of companies that are either, good, they're going to struggle. There's not one leading indicator to it from an outside in standpoint just looking at do they understand new revenue and new customers, and are they measuring the percentage of new parts and new services, new revenue, new customer versus older. That's a good leading indicator of, are you building the future businesses of your business? That's an outside in metric, but once you're inside understanding, are they deliberate about exploring the future? Do they use the customer as a way of cutting across their bureaucracy? Do they have a fine eye towards friction and reducing friction? Do they have a growth and innovation agenda?
John Rossman:
Those are some of the quick questions that help indicate like, "Well, where on the spectrum are we?" But at the end of the day, wherever you are on the spectrum, it's about senior leadership and their willingness to learn, to commit, to adopt some new ways and not asking them to change what they're, but to add to their playbook in shifting so that we can build this portfolio, this pipeline of how do we have guided wandering into some new topics here?
Peter Crosby:
I'd say the step that I struggled with the most was step five, which is be a perfectionist because, in my experience, and I have sometimes been that in my career, but I found in those moments often I was obsessing over every detail in a way that sort of made the perfect the enemy of the good, which is that sort of well worn saying. I was wondering what you meant by “be a perfectionist?”
John Rossman:
Like all of these things, it's tricky to use the right concept in the right moment. Being a perfectionist, what I was talking about, is really two key moments. The first is when it comes to operational excellence, you should set and commit to high standards relative to the things that really impact the customer experience, impact operational scale. How do we get rid of complexity in the business? And you have to create an organization that pays attention to details.
John Rossman:
Secondly, when we are innovating or creating something new, really understanding and understanding that you have to create an insanely better product or service to win new market, to win new customers, to win new jobs to be done for them. Being just as good as the competition typically is not a recipe for really gaining new market share. So you have to have an eye to the details of the value proposition and the single superpower that is going to differentiate your new product or your new service. So that's where detail is needed when you're exploring, but then you can't over apply it. And that's where it takes judgment and wisdom on all of these aspects of kind of using the right perspective at the right moment.
Peter Crosby:
And I have to say, the thing that helped me understand that a little bit more sort of where you were coming from is you have an issue from January 13th called Chasing Perfection; Use Metrics to Build a Culture of Accountability, Customer Obsession and Excellence. And in that you had a quote from Vince Lombardi, which really helped put it in perspective to me, which he said, and for those of listeners who are not familiar, he was just a hall of fame coach from Green Bay. The Super Bowl trophy is called the Vince Lombardi Trophy, but he said, "We are going to relentlessly chase perfection, knowing full well we will not catch it because nothing is perfect, but we are going to relentlessly chase it because in the process, we will catch excellence. I am not remotely interested in just being good."
John Rossman:
And so having high standards for teams and individuals that details manner in every type of business and that people should understand the details of business. Personally, I think that is a winning attitude and a winning expectation for teams. And we use that data and that attention to detail, again, to chase perfection for how our current or horizon one business operates. And we know how to apply it appropriately when we're talking about new concepts and new services that we apply that appropriately to the right detail and to the right concept.
Peter Crosby:
Oh, John, thank you so much for doing a trifecta with us. This is really wonderful to have you back. And as I said, I love your newsletter. If folks listening want to sign up and get your weekly-ish output, where should they go?
John Rossman:
Well, you can go to Substack and search The Digital Leader, John Rossman, or even at Google, if you search The Digital Leader Newsletter, you can get it. It's available for free. And I appreciate anybody who reads it and sends me feedback.
Peter Crosby:
You do take feedback. I know. I see you writing about that a lot when you sort of come upon a new topic or take a new tack. It's really impressive to see, and I know how much it takes to do output like this, and it's great stuff, John. Thank you so much.
John Rossman:
Peter, great to be here. Thank you.
Peter Crosby:
Thanks again to John Rossman. The link to his newsletter signup and the individual issues covered are in the show notes. Please share it with your peers in leadership so they won’t be mad at their 2035 selves either. Thanks for being part of our community.
