Operations of innovation with innovation theorist and disruptor James Chin Moody – Part Two
This is part two of Samuel Tait’s interview with James Chin Moody, founder of TuShare and Sendle. In part one, Moody gave an overview of his PhD in innovation theory, disruption and some of his biggest challenges in setting up Sendle – a business set to disrupt the traditional post office. Here he discusses the operational side of executing innovation.
Samuel Tait: What do you see happening within the next wave of innovation?
James Chin Moody: The whole topic of my book, The 6th Wave, focuses on resource productivity starting to take over in terms of a massive source of value. If you agree that the Global Financial Crisis was the end of the fifth wave and the transition point to the sixth, you then need to ask, “What might the sixth wave of innovation be?”
Our prediction (based on a lot of research completed when I was working with CSIRO) is that where the fifth wave was all about transaction costs, the sixth wave will be about resource efficiency and resource productivity. So you might say where previously the fifth wave was all about unlocking information to reduce transaction costs, what we’re going to be focused on in the sixth wave is atoms, the structure of resources.
Resource scarcity is one of the drivers so we are going to see increasing demand for resources, and at the same time increasingly scarce resources like phosphates or iron ores will deliver increased prices. We’ll see massive changes in institutions. We’re seeing institutional shifts now. Things like putting a price on things that were never priced before like a tonne of carbon, like a litre of water, that’s what water trading is. Also using technology to create marketplaces for physical space. This is what Airbnb have done. They’ve actually put a value on something that was previously not able to be valued, which is one night’s stay in a spare room of someone’s house.
ST: How were these principles used to create Sendle?
JCM: The way that these ideas relate to Sendle is that we identified that the sixth wave is about resource efficiency. It’s really just another way of describing what they call the circular economy. In the past it’s been very linear – you dig it out of the ground, you make it into a product, deliver it to a store, someone buys it and then they use it and then they throw it away. It’s a very linear journey for a product with value added at different stages. Whereas within the circular economy we are starting to see a journey for products where it might be used and then re-used, and then re-used again. At the end of that re-usage, it might then be up-cycled into something else and then that may be recovered and turned into resources for something new. Resources go through this very big circular journey.
What we realized and I guess for me the lovely thing about Sendle is that pretty much every single one of those re-use transitions involve logistics. And specifically it’s small-scale logistics. That’s what we really want Sendle to be. We want to be the logistics service for the circular economy. For us, it’s pretty much where we see a lot of value is going to be created.
Sendle is the logistics infrastructure we built over a couple of years for TuShare, and we realized that that infrastructure, it was quite valuable for other businesses as well. We realized that TuShare itself was an awesome business. They say sometimes in a gold rush it’s great to be the guys that are selling shovels. That was the point when we realized hang on: everyone needs the logistics solution that we created. Where you might say that eBay was the marketplace, it also needed a payment fulfillment mechanism which was fulfilled by PayPal. We realized that Sendle was a separate business and effectively bootstrapped it out of TuShare then raised some money independently to grow the business.
ST: Did you bring in external to help in developing Sendle?
JCM: We worked with a company called Step Change Marketing.They helped us work through a process to make sure it was customer-focused, marketing-focused. From this work, we could then start to bring out our core value propositions, what are the things that Sendle can solve that are most important to people.
Through this work we came up with things like our tagline, “Post without the Office.” It really was what we are trying to provide – a parcel delivery service without having to queue. Bringing you back to the core benefit that you offer, which was saving people’s time.
We started off with a company helping us do our development but we then moved this in-house. We also used agencies to help us do some of our creative. Ultimately it’s about looking at what’s core (and you need to own the core) and then what expertise you’re going to bring in. We bring in help for areas that we’ve decided are not going to be our core competency as a company. We look for a core competency of somebody else and work with them.
ST: How important is software to a company that picks up and delivers packages?
JCM: That for us is one of the big things. We see ourselves as a software company in the world of logistics as opposed to a logistics company trying to do software. That for us provides a strong piece of value that we offer our clients and also our logistics partners: we are not software consultants – our goal is to adding value throughout the chain. We’ve got a lot of respect for the big logistics companies like Fastway, Toll and Couriers Please. There’s a saying I heard recently at a world forum: “There two types of companies, those who know they are software companies and those who don’t know they’re software companies”. Software is definitely changing the world. An example is Tesla versus, say BMW. BMW is a car company putting software into a car. Tesla is a company that’s basically wrapping a car around mobile phone software.
ST: In the product and traction model how do you understand customer feedback and viewpoints?
JCM: Traction is generally around the acquisition of customers. Once they’re acquired, they have the product. So it’s absolutely trying to understand how people are using the product from the analytics. How people are using it? What do they like? What don’t they like? It all goes into making the product better. The product isn’t just a website. Product for us is the entire service experience. Part of the art of this entire industry is working with your partners to make sure that you’re providing an awesome service every step through the experience.
ST: How does this idea of product and traction impact your structure?
JCM: We we try to be a really flat. We’ve built our business structure around product and traction really. So I have two direct reports, one in product, one in traction. I look after operations. Because of our small scale that’s how we’re built.
ST: What tools or processes do you use within Sendle?
JCM: We have one process which is we talk about yes/no. There are effectively three answers to every question: “yes”, “no” and “hell yeah”. For the small stuff it doesn’t matter, it’s either yes or no and you just have to be 80% right, and as long as your compass is OK you are generally progressing in the right direction. For the big decisions, you’ve got to be “hell yeah” because a “yes” for a big decision is actually a “no”. Unless the entire team is aligned, and this is for things like recruitment or which market you’re going to pursue or major impactful decisions – unless your whole team is saying, “hell yeah, we’re going to do that,” then for the big decisions you probably didn’t spend enough time on it. It’s got to be a “hell yeah!”
Again for important recruitments, you go around your leadership team and you can see, “Do we want to appoint this person?” Everyone knows the difference between a “yes” and a “hell yeah!” It’s a very small-scale process but for us it works quite well. It’s actually a form of language because if any one of our teams says, “this is probably a hell yeah decision,” immediately we bump it up in terms of importance. This includes the level of diligence that we need to do. Basically we take this approach for the really important stuff, everybody has to be aligned with a “hell yeah”.
ST: How do you measure the impact of what you are doing? How do you know you are succeeding?
JCM: At the moment we’re monitoring a couple of things in our balanced scorecard. One is of course the volume we are doing. However we are more interested in what our customer satisfaction is. Tracking our Net Promoter Score (NPS). We’re interested in deliverability and quality of the routes, that’s a big thing for us. And I’m interested in our team and how engaged they are. These are the key things we watch and measure in our business. In the old days you used to have one thing that was trying to track everything. These days what you do is you just find the best tool for that particular tracking job and then you connect it all together using simple APIs. That’s the advantage of being a software company – we can just put these things together.
ST: Can you describe the culture at Sendle and how you have developed it?
JCM: I think for me the piece that’s really important is we’ve tried to work really hard in defining, “What is our purpose?” Again if you want to be really authentic about your product and talk authentically to your market, it’s great to have a really clear purpose. Our purpose is to be the logistics service for the circular economy, that’s really what we’re here for. That means we’re really interested in people who are participating in marketplaces, the small-scale sellers. You have stuff coming out of houses, as well as going into houses, it’s a whole lot of things but it’s all about the circular economy. That gives you the frame to build your product and build your marketing.
In addition I’ve got a particular set of values that I look for in people that work with me. It’s pretty much in this order. It’s humble first, then honest, happy, hungry and lastly high achiever. They have to be in that order because you can get a lot of high achievers but they have to be more humble than they are high achieving. You get a lot of hungry people, but they have to be more honest than they’re hungry. If you really focus you can actually start to recruit for these values. We have developed a team that’s very open to feedback and are very passionate about what they do. There’s a secret sixth one, which is having a sense of humor. That’s really important for us too. We have great fun.
ST: What is the biggest lesson you have learnt through the experiences of setting up TuShare and Sendle?
JCM: I think for me it is focus. If you strip it back again to where we were talking about product, market, and traction. They become the three things that a startup really has to do well. That means what you can’t do is have too many products, too many markets and too many traction channels. If you think about it, lets say you’re selling three different products, and you’re aiming at five different markets. You know what? That’s too big. You may have three different products to five different markets but then end up using seven different traction channels: three times five times seven equals 105. You’ve got 105 different combinations of product/market/traction. Even if one’s working you won’t know which one it is. I did it completely wrong with TuShare when we first started. The whole key is to really try to strip back and really understand: “What is the product you’re offering to which market via which channels?”
Generally once you’ve got a product in the market, the best thing I think to do is iterate the traction channels. Find ways of getting that product to reach your market, see which ones work. I think that’s the thing in the best pitches that I see (we help a lot of startups because a lot of a startups need logistics). The best ones are the ones who are very clear about generally those three things: product/market/traction. It’s what they call product-market fit. That for me is the nerdy engineer’s dissection of what people currently call product marketing.
As a start-up we talk about traction instead of marketing because I think the term ‘marketing’ limits you in terms of thinking about all those traction channels, that’s the only reason why we use the different word. A lot of people think marketing is advertising and it’s not – marketing is actually much broader.
ST: Do you have any advice for pitching ideas?
JCM: That’s always hard. Look I think you’ve got to listen – that’s the best advice. I actually am really fortunate. Every single investor that I spoke to, if you listen hard enough, they always gave you a gem. It’s about taking those perspectives on board because they have seen a lot of things. You come out of it with a much more robust proposition.
ST: What advice do you have for people trying to succeed with their innovation programs?
- I think the first one is work out what your real purpose is. Work out how you’re extending that purpose beyond the limits of your company into your community.
- Secondly, make sure you are the first customer for your product. If you aren’t, you will never understand your product deeply enough – go find something that you are the first customer for.
- Then I’d say deeply understand these three areas: product, market and traction. Become a samurai in one facet of each of those three areas.
If you missed it, make sure to check out part one of this interview here.