Podcast Transcript The following is a special presentation of Tony Kurre Radio. With Dr. Alex Heublein and Dr. Josh Klapow. This is Adapt or Perish. Josh: Welcome to Adapt or Perish. It’s another episode. I’m Dr. Josh Klapow along with Dr. Alex Heublein, president of Adaptigent. Alex, how are you? Alex: I’m good. How about you? Josh: I’m good. We are in a place of disruption. Today, we are actually the three of us myself, you, and Jamie, our producer are actually in three different places. And I was thinking about it, we are adapting. I’ve actually got a new microphone, Alex, that I have no idea how to use. So I’m doing my best. I’ve asked Jamie 17 times if it sounds okay. I’m not in a closet, so I can’t make that work. But, Alex, you and I we’re going back and forth. And we love in this show to weave in, rock into business technology, technology and innovation, strategy, et cetera, and the idea of disruption. And I was thinking about this when you brought this topic up because we’re constantly, particularly pre-pandemic, everybody was talking and about being a disrupter. I know from coming from academics, I didn’t exactly understand what that meant in the marketplace because it sounded a bad thing. But what I was thinking for over the last two years is, how do you become a disrupter? Or how do you be a disrupter when we’re on a constant state of disruption? Things are all over the place and does it make it even a good idea to be trying to be a disrupter or should we be constantly adapting? So maybe let’s start with that. And you even talk about the rock themes because I’m already thinking of them. But help me understand how we become or should we be disruptors in a state when there is disruption everywhere. Alex: And you’re bringing up a great topic, Dr. Josh. When you think about this… I think the conventional wisdom would say no. If the world is being disrupted around you, maybe that’s not the best time in the world to go out and try to be a disrupter yourself. So I think that’s one school of thought. All of your capabilities and all of your people and all of your processes and systems are everything. They’re going to be naturally programmed to be reacting to these disruptions in the marketplace. And so, I think it varies a lot by the type of company, the size of the company and the history and culture of the company that you’re talking about, right? I think when you’re dealing with big companies and those are a lot of the companies that we deal with at Adaptigent, we deal with global 2000 companies and they spend a lot of time over the last two years just reacting to the disruptions in the marketplace. So if you go look at big airlines, we have a couple of big airlines that are customers of ours. You look at manufacturers with all the supply chain challenges that they’ve seen. You look at higher education institutions, colleges, and universities trying to deal with, “Wow, what do I do about student enrollment and virtual learning and all of that stuff?” So, I think one of the challenges is that when you are in a situation in the marketplace where it’s being disrupted, it’s tough to go out there and say, “Well, we’re also going to allocate additional resources to going out and being a disruptor. So I think that’s the conventional wisdom. Now, as smaller companies, I think smaller companies have the advantage to potentially go out and say, “Well, we’re not being disrupted by this as much. Let’s go find some opportunities in the marketplace to actually be a disruptor while this other disruption is happening.” So I think it varies a lot by the type of company that you’re dealing with and how much you’re impacted by the disruption. But I would argue that the conventional wisdom that says, “No, just focus your efforts on reacting rather than focusing on proactive disruption during a disruption that’s happening in the marketplace.” I think that conventional wisdom is probably wrong because the capabilities that you need to react to a disruption and the capabilities you need to create a disruption, I think are very, very different. Josh: So, let’s weave into some of the music themes here because as you’re talking, I’m thinking, “All right, let’s think about other times where there’s been environmental disruption and where did music come in?” I mean, instantly I’m thinking about things war, whether it’s here or abroad and again you think about everything from anti-war songs and protests to just changes in music. I know we’ve talked about Genesis or I’m sorry, we’ll talk about Genesis, but the police, for example, right? Coming in with synthesizers during a classic rock experience. Is it possible to say, and I don’t know if we’re just playing with semantics, I don’t know that this is chaos, but in a time of disruption learning how to solve the problem, how to adapt, you actually are a disruptor because there’s less steady state. So, is there more opportunity to experiment with business solutions? Again, like rockers have done, whether it’s mashing up a hip hop and rock to experimenting with synthesizers and reverb and all that stuff. I mean, are we in actually a better position as businesses right now to be disruptors by looking for creative ways to adapt? That’s a lot of words. I’m sorry, but what do you think? I don’t know if I’ve just confused myself or not, but does that make sense? Alex: Well, no, I know it does. And so let’s think about the music industry, right? I mean, the biggest gets disruption in the music industry, when you look at the whole industry over the last, well, probably ever has been this idea of digital music and digital downloads, right? So, remember back in the late 90s, early 2000, we had the Napsters of the world come out and you had all of this people stealing music and copying music. And then finally some people came along and said, “Wait, this is crazy. We can’t keep doing this. It’ll destroy the music industry.” So, you saw things iTunes come out and now you’ve got Spotify and Amazon Music and all that, right? So, I think that was probably the biggest disruption in the music industry, maybe in the history of music, at least from a business model standpoint and from a just from an economic standpoint. And I think the industry was on a precipice there. If the whole free downloads or people stealing music had continued, the economic incentive goes away for people to create new music and new bands to come into the marketplace, right? They’re taking huge risks, but if the rewards aren’t there, then you wonder how many people would go into it and produce the same quantity and quality of music that we’ve seen over the last however many years. So, I think that’s a great example of a situation where people had to adapt. People had to adapt to this huge disruption in the marketplace. And there’s people that would argue that “No, actually it was better before with the record companies running everything and not having to worry about digital rights and people stealing music and so on and so forth.” And then I think you’d have people argue that, “No, this has actually changed the game completely, because now as a band or as a musician I can go out there and self-publish a lot of my music, I don’t need this heavy handed record company that gets to decide who the winners and losers are really before anything go goes to market.” Because that’s the way it was back in the 60s, 70s, 80s, 90s, for the most part, right? It was all run by the record companies. So there’s been this big shift power from the record companies to the artists. And I think a lot of people would argue that, “Hey, that was an interesting disruption.” And the artists that have managed to take advantage of that disruption have been fairly successful at it, right? The artists that said, “No, I’m not going to do that.” Well, whatever, they’ve seen their routes to market go away in a lot of places. So, I think you’re right. I mean, I think you have to adapt to these disruptions in the marketplace. We see it in the music industry. We see it in just about every industry, really. You think about how companies have to react and adapt to changing circumstances, again, and you pointed out, right? It could be wars, it could be volcanic eruptions or earthquakes, or it could be pandemics, there’s always going to be something that’s going to happen that’s going to disrupt the marketplace. And so from a reactive standpoint, you have to be in a position where you can quickly adapt. And I think that’s the hardest part is being able to know what you’re going to do, if something does happen or at least have a pretty good idea of what you’re going to do, and be able to put that strategy in that adaptation in place very quickly before your competitors can do it, that can give you a pretty significant market advantage. Josh: So, let’s break down the idea of disruptor. I’ve never liked it. I mean, I understand the purpose, I think, but I keep thinking again, a lot of times disruptor is we’re going to do things differently and we’re going to change the way it is. And it’s almost like it has this feeling we’re going to play louder or it’s going to be edgier or it’s going to be something that nobody’s ever heard. You get almost this group think, we get all excited about how we’re going to do things differently. And sometimes frankly, the music sucks, right? It sounds terrible. Or in the marketplace you get so caught up on, “We’re going to be a disrupter.” Talk a little bit about where technology software, if you will, allows us to move things forward in an innovative way, but still sound good or deliver good and not just become this mess because we’re self-proclaimed disruptors. Alex: Well, yeah. And I think your comment about what is a disruptor or whatever, I think there’s a lot of confusion out there about what that means. And so maybe it’s worth spending a couple of seconds talking about, what does disruption mean? And what does it take to become a disruptor? I think you have to understand what disruption is in the first place. So, I think it all starts with innovation. You said people are going to come out, they’re going to do something different, they’re going to do something innovative. And whether or not that innovative thing is accepted by the market and becomes something big or not is a question mark. But it all comes back to doing something different, right? Like trying to innovate. And there’s lots of different ways you can innovate. And I think this is true of bands. It’s true of businesses. I mean, you can look at it from a very comprehensive perspective. There’s many different ways to innovate. And I think when we think about the marketplace today, when you look at companies, a lot of that innovation we think of is what I’ll call technology innovation, right? It’s the new iPhone, or it’s the new whatever that’s come out, that’s going to change our lives, VR goggles or the Metaverse is the new thing, right? Or cryptocurrencies, or what have you, right? There’s lots of different ways to innovate from a technology standpoint, but there’s lots of other ways to innovate, it’s not just about, “How can I innovate from a technology standpoint? I can innovate in my business model.” And again, we saw that disruption in the music industry where the business model of the music industry got disrupted because of a technology innovation, MP3s, where you could actually copy and share these aisles around, and they were much, much smaller than it would’ve taken normally. So, we had this technology innovation that caused a huge disruption in the music industry, and the music industry was forced to change its business model. So, you can innovate from a business model standpoint, from a process standpoint, from a brand standpoint, there’s lots of different ways to innovate it. Now, most innovation, when you think about it is what we call incremental innovation. So I’m going to take something and I’m going to make it better, right? And that’s where probably, I don’t know, I don’t have the official statistics, but I would wager that’s about 99% of the innovation. Josh: I love that one. I love it because then what we get to is we get to call ourselves disruptors or innovators, and I know this sounds snarky, but we’re doing it in a somewhat safer way. I mean, it makes sense versus going way out there. Sorry to interrupt, but the difference between innovation and incremental innovation versus this term disruptor, I the way you’re describing it, because it sounds more accurate than I think what actually happens. So, go ahead. Continue, I’m sorry for interrupting. Alex: No, I mean, that’s great viewpoint on it. So, incremental innovation is where most innovation happens. It’s the easiest innovation. It’s the safest innovation. And you see it ever every day. You see it in how bands evolve, they’ll go from one period to the next period of time and they’ll add some incremental innovation to their music and they’ll try some new things and do things that are different. And you also see it in the technology world, every new iPhone or Android phone, you buy, it’s got a bit better camera and it has a faster processor and it’s got a nicer screen or whatever it is. All of those things are incremental innovations. And that’s where most of the innovation happens. And that’s great, that’s fantastic. Disruptive innovation on the other hand is very, very different because what disruptive innovation tends to do is create entirely new markets or get us to think about the world in a very, very different way. And the difference between incremental innovation and disruptive innovation, isn’t always a bright line between the two, right? There’s shades of gray in there. You could call the iPhone a pretty disruptive innovation. I mean, there had been smart phones before, but it fundamentally changed the way we used these devices. We went from carrying around telephones to carrying around these super computers that are cameras and their MP3 players and their stream you can watch videos on them. I mean, it completely took the paradigm of the phone and threw it on its ear. And then you had the App Store come on. So now I could download all these really cool third party apps and expand the capabilities of this device. So, I’d argue the iPhone was a tremendous disruption in the marketplace. It was a disruptor. And so you have to think about it that way. Did it create a new market or did it go come at a market from the low end? So you see low end innovations come in into the market and they gradually grow and grow in capability until they just take over an entire market. So, I spent years working for Red Hat Software, and Red Hat had this thing called Linux, which was this hobby operating system back in the late 90s. And they slowly added capabilities to this thing over and over until it finally took over the entire Unix market. And so, you see disruptions happen from very different angles, right? They can very quickly create new markets, or they can come at a market that’s already existing. And basically just cannibalize the whole market by coming from the low end. They’re much, much cheaper products, typically are much, much cheaper solutions, but they tend to grow over time into something that’s still a lot less expensive, and now we’ve taken over the market because the capabilities have grown tremendously. So, I think it’s worth looking at it from those perspectives that disruption can happen in an incremental way, sorry, innovation can happen in an incremental way. It can also happen in a disruptive way. And one of the real distinctions between those two things is did it either create a new market in terms of the disruptive innovation or did it take over a market by coming at it from a different angle? Josh: Right. So, now you got me confused. I mean, I’m following you, but as you’re talking, you’re so funny, what I love about being this podcast, we’re talking business and my head is quickly trying to spin rock and roll. I’m trying to like, “I’m going down music, even though what we’re talking about is business.” So, switch over to music again. Is there any true disruptors? Isn’t it always been somewhat incremental? I mean, I know that you go, “Oh, well rock or reverb or punk.” But it feels you can always trace it back to something incremental. And the iPhone was a really good example, but now struggling. How much true market disruption is there again? I understand about digital music, but is there that much true disruption in the marketplace? And more importantly should we be thinking as companies, even though we say we’re going to be disruptors, should we really be thinking as incremental disruptors versus, I don’t know, can you think of something that is a true market disruptor or do we end up there? By doing in incremental disruption? Alex: Well, yeah. I mean, I think there’s always going to be that shades of gray between those things, right? And I think that when you look at incremental innovation versus disruptive of innovation, it really does come down to did it radically change an industry? Or did it create an entire new industry? Right, I mean, you could argue that rock and roll music was an incremental innovation, but the way it changed the music industry was tremendous, It changed the music industry in so many different ways that it was almost unrecognizable, right. After the rock and roll revolution occurred, or if you want to take punk rock or whatever genre of music, right? It changed the way and it changed the listening habits of people. It changed the dynamics of the marketplace. So, I think it all comes down to when you’re looking at it from an incremental versus disruptive standpoint, it’s not so much the innovation itself that distinguishes incremental innovation versus disruptive innovation. It’s how much of an impact did it have on the marketplace? And again, that marketplace could be the music marketplace. It could be the marketplace for airlines or whatever it is, but did it change them? Did it change it fundamentally? And I think that’s the big distinction there. It’s not so much about the innovation itself. Yes, you could have incremental innovations that all of a sudden became very, very disruptive in the marketplace, that looked incremental innovations in the beginning, but now these things they’ve taken over entire markets. And that I think is what every what a lot of big companies are trying to do is they’re trying to say, “What is the next big thing?” And then you have startups coming in, “Saying I’ve got a very different take on this. And I have the advantage of the fact that I can move faster and I can innovate faster than maybe some of these big guys.” I don’t have as many resources, but I have the ability to move quickly. And moving quickly a lot of times is one of the success factors in disruptive innovation. How quickly can I get there? Josh: So, all right. So, if I’m a big company and again, I think about bands, we’re doing great. It’s a chaotic time, but we’re bringing in revenue. We have the resources, if I’m a large company to maybe not even adapt as much during a time of disruption, because we’re still, okay. What is my mindset about moving forward during this time? So, again, I’m making this up because you talk about the big companies. I’m the rolling stones, I’ve been around forever. People are going to buy my stuff. They’re going to listen to my stuff, I don’t need to be a disruptor. If I’m a gigantic company, do I really need to be pushing it forward? Or do I just need to make sure that as we talked about in earlier shows, that I’m staying current enough that I don’t slide back. Alex: Well, yeah. And I think when you look at the rolling stones, for instance, I mean, that’s a great example of a band that innovated over 50 years, I mean, they just they kept innovating. They kept bringing new sounds and new techniques and new albums to market, where as lot of bands, they were stuck in their one sound and they weren’t ever going to expand beyond that sound. And there’s thousands of bands that you’ve never heard of because they never adapted, they innovated, right? They had their one thing and they did it for a little while and they were the one hit wonders or whatever, but they were genre period type of bands where once that little genre moved past them, they couldn’t adapt and they couldn’t continue to innovate going forward. So, I think that’s a good example of a band that incrementally innovated over time, they didn’t just stop. They didn’t just say, “Hey, man, we’re who we are and we’re not going to try to keep on innovating.” They kept on innovating or we’ve talked about Rush in the past as well, they just kept innovating, right? And it pissed off a lot of their fans they moved from all kind of hard rock to synthesizers then back into more hard rock. And so, I think those bands that have the longevity they’ve been in incrementally innovating for a long, long time. And that’s one of the things that help them last for 40 or 50 or however many years. I think as a big company, the question is, “Yeah, look, we’re doing great. Our profit margins are fine. So on and so forth.” The reason those companies are doing well typically is that they have been incrementally innovating. And then the question becomes, “Well, do we want to do something very, very different? Do we want to go out and disrupt a market? And is that even something we want to try?” And I think what we found through over the last 100 years or so is that in history is just littered with the corpses of big companies that they didn’t try to disrupt things. They just kept saying out, “Nope, things are good. It’s always going to be this.” And you can look at these companies over and over throughout the years. And I think we’ve talked about on previous shows, you look at a company Kodak that invented the digital camera, and they looked at it and said, “Wow, this could be a big disrupter, but our film business is so good and the margins on that are so good that we’re not going to go disrupt that business.” And so somebody else came in, took those ideas and disrupted that business. And eventually they filed for bankruptcy. I think it was something 20 years ago. So, I think it’s become you always have to be thinking about how do I go out and not only be very, very well prepared to react to disruptions in the marketplace, but also be able to go out and push those disruptive innovations. And the mentality that you need though, between incremental innovation and disruptive innovation, that tends to be a very different mentality. So, the incremental innovation, you get these short term results, you see them on your bottom line, you see your company becoming more profitable or selling more stuff or increasing customer CSAT. They’re very quick feedback types of things. I do it, I see some fairly immediate results of doing it, whereas disruptive innovation can take a lot longer. So I’m not going to see the results maybe tomorrow, I’m going to see the results maybe in a couple of years. And so I think you have to balance as a big company, you have to balance the disruptive innovation with the incremental innovation. And you have to do both though, any company that thinks, “Well, we’re just going to do this very small, incremental innovation for the rest of time. Probably won’t be around in 20 or 30 years. And so that’s the danger you run. Josh: Okay. So two part question. I’m blanking on every one of them, but I don’t know why it comes to mind of Styx, and Mr. Roboto, right? That’s about time when I left being a Styx fan. And I’m sure there’s tons of other examples, right? Where you’re just this powerhouse and you’re going to call something creative and it’s just not coming to mind other ones, but Mr. Roboto came out and I was like, “What?” And I just, “Well, you and you used examples, rush as well.” But so where does a software company like Adaptigent come in on different mindsets. So, I’m going to take the big risk and I’m going to risk it. I’ve got this great idea, it’s called Mr. Roboto, it’s going to be awesome. Here’s what I need. Where does Adaptigent come in on the disruption side if that’s the mindset? Whether it’s incremental or market or whatever, versus what I know a lot of companies are dealing with right now, which is look disruption, non disruption, and we just got to make it work. How do you all help your companies on either the innovation side or frankly, just the adaptation side. Alex: Yeah. And a great question. And by the way, the whole, Mr. Roboto, Kilroy Was Here album from six that’s when I got into Styx, right? Because I loved it. Josh: Are you serious? Alex: Yes. I loved it. I’m a nerd, man. Josh: I am so sorry that I’ve insulted you. And yet at the same time, dude, come on- Alex: Come on. Josh: … compared to Pieces of Eight. I mean, I’m sorry, go ahead. Alex: But it was just my mindset, right? I’ve always been a nerd, right? And so that album came out. I can’t tell you the number of times I listened to that album, right. I loved it, but you’re right. It was so different than anything that they had done before, right? But an amazing, I mean, if you look at the album, sales on Kilroy Was Here, that was probably their best selling album. I’d have to go look, we’ll have to go look it up on Wikipedia or whatever. I’ll bet you that was Stick’s best selling album if you take out greatest hits collections and things that, right? So they went radically different direction heaps the synthesizers, completely. This concept album just really took a huge risk there. And I think for those guys, it paid off. I mean, I don’t know what the album sales were again, but I’ll bet you five bucks that was their best selling or second selling album in their whole history. So, again, how do we help companies? We do it in a couple ways and I think it’s similar. One of them is we help remove barriers to innovation. There are a lot of companies out there. And I think almost every company out there would love to go out and be a disruptive innovator. They would love to go out and truly change the marketplace and do amazing things and so on and so forth. The challenge is that if you’ve been in business for a while, you’ve gone out and put systems and processes and technologies and rules and policies and procedures and all this stuff in place to run your business in a steady state business, where there are these small incremental innovations occurring. And those are great. That’s fantastic. But the whole system is set up almost the government, right? It’s designed to do things but not move quickly, right? Hopefully it’s designed for relative efficiency at scale, but what typically the mindset and all the systems and processes and technology, all of those things are designed to support the scale. And now you’re trying to come at a market and go after something entirely new. Now you’ve got the opposite of that problem. You’ve got the opposite of scale. I’m actually trying to scale this up from almost nothing. And now I’m going to end up in a situation where I’ve got to go out and grow it rapidly. I have to think very, very differently. And I don’t need the bureaucracy. I don’t need all of the processes and rules and so systems and so on and so forth. Those things get in my way. So one of the things we do is we help companies remove some of the barriers to innovation through technology, right? To be able to leverage those things that they have in place that are designed to help them execute at scale and leverage them in a way where they can go out and try to disrupt new markets and do things very, very quickly, very rapidly. And that’s really what our big differentiator in the marketplace is, “Don’t take six months to do something. We can do it in six days of what you were trying to do in six months.” And that gives you the ability to move rapidly. And we talked about that earlier, right? It’s the companies that can move quickly to take advantages of changes in the marketplace. Those are the ones that typically go out there and become the disruptive innovators. Because we talked about this earlier, the idea of where there’s change, there’s always opportunity for someone, If we lived in a static world, there would be no opportunity for anybody except the people that own all the companies, right? And the companies would execute along and they would have their profit margins and so on and so forth, but in a static world, there’s very little opportunity to go out and really disrupt. But in a rapidly changing world, that creates huge opportunities for bands, for companies, for organizations, what have you? Where there’s change there’s always opportunity, but there’s also some downsides, A lot of disruptive innovations destroy existing competencies. To a completely new world when you start looking at the world from an innovation standpoint, they create new competencies, they create new opportunities, but they also destroy opportunities. And you want to be on the creation side of that rather than the destruction side of that. Josh: That’s right. Well, all right. We’re going to, we got to stop here because we’re out of time. But man, I think we need to cover this in our next podcast, in our next show. I’m sorry. I got podcast on my shows. We need to cover this because I feel we’re just doing the starting point, right? Which is the adaptation of disruption. But you’ve talked about this is how do you sustain that and create lasting market change? Got the Beatles in My Mind Revolution, maybe I know we’re going to cover that on our next show. So that’s all the time we have though for this show. So, thank you everyone for joining us on Adapt or Parish with Dr. Alex Heublein and myself and Josh Klapow. Please stay tune to Tony Kurre Radio Network so that you full episode of Adapt or Perish.