WEBVTT 00:00:00.000 --> 00:00:00.500 align:middle line:90% 00:00:00.500 --> 00:00:01.488 align:middle line:90% [SQUEAKING] 00:00:01.488 --> 00:00:02.970 align:middle line:90% [RUSTLING] 00:00:02.970 --> 00:00:05.440 align:middle line:90% [CLICKING] 00:00:05.440 --> 00:00:11.392 align:middle line:90% 00:00:11.392 --> 00:00:13.120 align:middle line:90% JOSEPH HADZIMA: OK. 00:00:13.120 --> 00:00:15.340 align:middle line:84% Welcome to this session of nuts and bolts, 00:00:15.340 --> 00:00:18.320 align:middle line:84% where we're going to talk about business models or venture 00:00:18.320 --> 00:00:19.280 align:middle line:90% models. 00:00:19.280 --> 00:00:21.000 align:middle line:84% Bob Jones the other night, talked to you 00:00:21.000 --> 00:00:22.620 align:middle line:90% about finding your customer. 00:00:22.620 --> 00:00:27.280 align:middle line:84% And if you remember how he did that with his guitar lesson 00:00:27.280 --> 00:00:30.000 align:middle line:84% example, he looked at different customers, different pricing 00:00:30.000 --> 00:00:30.880 align:middle line:90% points. 00:00:30.880 --> 00:00:33.460 align:middle line:84% That's the beginning of what a business model is. 00:00:33.460 --> 00:00:36.160 align:middle line:84% The model says, how are you going to make money 00:00:36.160 --> 00:00:39.560 align:middle line:84% or how are you going to develop a sustainable business? 00:00:39.560 --> 00:00:42.500 align:middle line:84% And tonight, to tell us about that, 00:00:42.500 --> 00:00:46.440 align:middle line:84% we have Rich Kivel, who has been a serial entrepreneur 00:00:46.440 --> 00:00:49.240 align:middle line:84% and an investor and has seen many business 00:00:49.240 --> 00:00:50.633 align:middle line:90% models over the years. 00:00:50.633 --> 00:00:52.800 align:middle line:84% So Rich, I'm just going to turn it right over to you 00:00:52.800 --> 00:00:54.560 align:middle line:90% and take it from here. 00:00:54.560 --> 00:00:57.400 align:middle line:90% RICHARD KIVEL: Thank you, Joe. 00:00:57.400 --> 00:00:58.120 align:middle line:90% Perfect. 00:00:58.120 --> 00:01:00.170 align:middle line:90% Good evening, everybody. 00:01:00.170 --> 00:01:02.330 align:middle line:84% This is a fun topic, because it actually 00:01:02.330 --> 00:01:05.110 align:middle line:84% gets into the nitty gritty of how do companies make money? 00:01:05.110 --> 00:01:09.670 align:middle line:84% How do you think about bringing the product, the invention, 00:01:09.670 --> 00:01:13.330 align:middle line:84% the technology, the idea, the service 00:01:13.330 --> 00:01:15.510 align:middle line:84% that you're ultimately thinking about building, 00:01:15.510 --> 00:01:17.135 align:middle line:84% how do you ultimately get it to a point 00:01:17.135 --> 00:01:20.010 align:middle line:84% where you're able to generate revenue and ultimately returns 00:01:20.010 --> 00:01:23.490 align:middle line:84% for your investors, whether that be your venture investors 00:01:23.490 --> 00:01:24.750 align:middle line:90% or strategic partners? 00:01:24.750 --> 00:01:28.610 align:middle line:84% Or maybe you've angel funded your company 00:01:28.610 --> 00:01:32.050 align:middle line:84% and you really have yourself and a couple 00:01:32.050 --> 00:01:34.990 align:middle line:84% of friends that really want to make something special 00:01:34.990 --> 00:01:36.257 align:middle line:90% have an impact. 00:01:36.257 --> 00:01:38.590 align:middle line:84% So I'm going to talk a little bit about business models. 00:01:38.590 --> 00:01:42.170 align:middle line:84% Just my background real quick was the whole first part 00:01:42.170 --> 00:01:45.270 align:middle line:84% of my career was on the operating side of companies. 00:01:45.270 --> 00:01:50.970 align:middle line:84% So sales, marketing, partnerships. 00:01:50.970 --> 00:01:54.010 align:middle line:84% First time I became CEO was a long time ago 00:01:54.010 --> 00:01:56.150 align:middle line:90% when Joe and I actually met. 00:01:56.150 --> 00:01:57.630 align:middle line:90% It was an MIT spinout. 00:01:57.630 --> 00:02:00.770 align:middle line:84% It was actually a company that had won the MIT Business Plan 00:02:00.770 --> 00:02:01.970 align:middle line:90% Competition. 00:02:01.970 --> 00:02:05.610 align:middle line:84% And a couple of years later, after I exited a technology 00:02:05.610 --> 00:02:07.770 align:middle line:84% company, I got a call by the investors, 00:02:07.770 --> 00:02:10.150 align:middle line:84% and they were looking for somebody to run this company. 00:02:10.150 --> 00:02:12.530 align:middle line:84% They had a whole bunch of incredibly smart engineers 00:02:12.530 --> 00:02:15.330 align:middle line:84% and physicists and others, and they 00:02:15.330 --> 00:02:18.290 align:middle line:84% needed somebody that had operations experience, how 00:02:18.290 --> 00:02:20.930 align:middle line:90% to build the business model. 00:02:20.930 --> 00:02:23.785 align:middle line:84% This was back in the days of the Human Genome Project, 00:02:23.785 --> 00:02:25.910 align:middle line:84% for those of you that are in the life science area. 00:02:25.910 --> 00:02:29.470 align:middle line:84% In fact, just show of hands, life science people here, 00:02:29.470 --> 00:02:31.530 align:middle line:90% healthcare, biotech? 00:02:31.530 --> 00:02:32.290 align:middle line:90% OK. 00:02:32.290 --> 00:02:37.170 align:middle line:84% Tech tech, hard tech, deep tech, robotics? 00:02:37.170 --> 00:02:37.870 align:middle line:90% Excellent. 00:02:37.870 --> 00:02:42.130 align:middle line:84% What other areas are you guys in? 00:02:42.130 --> 00:02:42.650 align:middle line:90% Software. 00:02:42.650 --> 00:02:43.150 align:middle line:90% Yeah. 00:02:43.150 --> 00:02:46.710 align:middle line:84% So SaaS platforms, big data, analytics. 00:02:46.710 --> 00:02:48.650 align:middle line:90% What else? 00:02:48.650 --> 00:02:49.810 align:middle line:90% Oh, fantastic. 00:02:49.810 --> 00:02:52.690 align:middle line:90% Any specific realm? 00:02:52.690 --> 00:02:53.730 align:middle line:90% Geothermal. 00:02:53.730 --> 00:02:55.620 align:middle line:90% Excellent. 00:02:55.620 --> 00:02:56.260 align:middle line:90% Good. 00:02:56.260 --> 00:02:59.520 align:middle line:84% So essentially, when I got involved with this company, 00:02:59.520 --> 00:03:04.860 align:middle line:84% it was basically a company doing software called Bioinformatics. 00:03:04.860 --> 00:03:06.580 align:middle line:84% They were building software that would 00:03:06.580 --> 00:03:09.860 align:middle line:84% allow scientists and researchers working on the Human Genome 00:03:09.860 --> 00:03:12.500 align:middle line:84% Project to communicate with all of the instruments 00:03:12.500 --> 00:03:15.320 align:middle line:84% in their lab, which nowadays we just simply take for granted. 00:03:15.320 --> 00:03:18.410 align:middle line:84% You plug in just like your printer in your office. 00:03:18.410 --> 00:03:20.660 align:middle line:84% You plug it into the wall, it shows up on your iPhone, 00:03:20.660 --> 00:03:22.035 align:middle line:84% and it shows up on your computer, 00:03:22.035 --> 00:03:23.100 align:middle line:90% and everything is simple. 00:03:23.100 --> 00:03:26.460 align:middle line:84% But back then, when somebody sitting here 00:03:26.460 --> 00:03:29.740 align:middle line:84% across the street or diagonally down the street from us 00:03:29.740 --> 00:03:32.880 align:middle line:84% at the Whitehead Institute or the Broad Institute, 00:03:32.880 --> 00:03:36.140 align:middle line:84% were doing research, everything in their lab 00:03:36.140 --> 00:03:38.460 align:middle line:90% essentially was autonomous. 00:03:38.460 --> 00:03:42.280 align:middle line:84% So you got a new pen tool, robot, or microarray, 00:03:42.280 --> 00:03:45.420 align:middle line:84% and it showed up with its own computer and a tower 00:03:45.420 --> 00:03:50.560 align:middle line:84% of a computer stack and a screen and a keyboard and a mouse, 00:03:50.560 --> 00:03:52.720 align:middle line:90% and it ran its own software. 00:03:52.720 --> 00:03:55.900 align:middle line:84% And then you would go down to the refrigerator that 00:03:55.900 --> 00:03:57.820 align:middle line:84% was a barcode scanning refrigerator 00:03:57.820 --> 00:03:59.940 align:middle line:84% with all your samples, and that refrigerator 00:03:59.940 --> 00:04:01.400 align:middle line:90% had its own computer. 00:04:01.400 --> 00:04:04.300 align:middle line:84% And then the scanner, the robot, everything 00:04:04.300 --> 00:04:05.680 align:middle line:90% was running autonomously. 00:04:05.680 --> 00:04:08.600 align:middle line:84% So engineers were essentially put in a position, 00:04:08.600 --> 00:04:11.740 align:middle line:84% and scientists were, they had to build Excel spreadsheets 00:04:11.740 --> 00:04:13.720 align:middle line:90% to track all of this data. 00:04:13.720 --> 00:04:17.019 align:middle line:84% So import export, just constant chaos. 00:04:17.019 --> 00:04:19.240 align:middle line:84% And that became more and more difficult, 00:04:19.240 --> 00:04:22.320 align:middle line:84% as you can imagine, as the machines, the instruments, 00:04:22.320 --> 00:04:25.140 align:middle line:84% as we called them, the robotics and the scanners 00:04:25.140 --> 00:04:27.900 align:middle line:84% started taking so much more data. 00:04:27.900 --> 00:04:30.860 align:middle line:84% It was easy when you had a small microtiter plate 00:04:30.860 --> 00:04:33.780 align:middle line:84% and you had a little pin tool robot putting a little DNA 00:04:33.780 --> 00:04:36.900 align:middle line:84% sample into a well, and then it would show up 00:04:36.900 --> 00:04:38.940 align:middle line:90% once you imaged it. 00:04:38.940 --> 00:04:40.500 align:middle line:84% But that's really hard to do when 00:04:40.500 --> 00:04:44.140 align:middle line:84% you're doing tens of thousands or millions of data points 00:04:44.140 --> 00:04:45.100 align:middle line:90% at once. 00:04:45.100 --> 00:04:47.980 align:middle line:84% So our software essentially figured out 00:04:47.980 --> 00:04:50.340 align:middle line:84% how to communicate with all the instruments, writing 00:04:50.340 --> 00:04:52.990 align:middle line:84% APIs, things that we all take for granted now, 00:04:52.990 --> 00:04:56.250 align:middle line:90% and then helping downstream. 00:04:56.250 --> 00:04:59.590 align:middle line:84% So step one was really capture of the information. 00:04:59.590 --> 00:05:02.330 align:middle line:84% Then step two was visualize the information. 00:05:02.330 --> 00:05:04.150 align:middle line:84% So we caught all this information off 00:05:04.150 --> 00:05:05.870 align:middle line:84% of all these instruments in the lab. 00:05:05.870 --> 00:05:07.810 align:middle line:90% We then can visualize it. 00:05:07.810 --> 00:05:08.730 align:middle line:90% We can see it. 00:05:08.730 --> 00:05:11.350 align:middle line:84% We can decide whether this gene is overexpressing 00:05:11.350 --> 00:05:12.450 align:middle line:90% or underexpressing. 00:05:12.450 --> 00:05:15.390 align:middle line:84% And then downstream was the data mining. 00:05:15.390 --> 00:05:18.710 align:middle line:84% How do we create value from the information? 00:05:18.710 --> 00:05:21.070 align:middle line:84% And what's funny is I had no background 00:05:21.070 --> 00:05:23.470 align:middle line:90% at all in biotech pharma, 0. 00:05:23.470 --> 00:05:26.370 align:middle line:84% I didn't know how to spell bioinformatics. 00:05:26.370 --> 00:05:29.750 align:middle line:84% I think I might have went on Yahoo! back then 00:05:29.750 --> 00:05:32.110 align:middle line:84% and figured out what the hell it meant. 00:05:32.110 --> 00:05:35.090 align:middle line:84% But truthfully, it really didn't matter. 00:05:35.090 --> 00:05:37.110 align:middle line:84% At the end of the day, we were building 00:05:37.110 --> 00:05:38.910 align:middle line:90% software for scientists. 00:05:38.910 --> 00:05:42.790 align:middle line:84% And what mattered was, were we creating value out 00:05:42.790 --> 00:05:44.870 align:middle line:90% of this invention? 00:05:44.870 --> 00:05:48.630 align:middle line:84% So what you think about now, whether it 00:05:48.630 --> 00:05:52.090 align:middle line:84% be that you are working in the energy industry, 00:05:52.090 --> 00:05:55.530 align:middle line:84% whether you are building drones that are capturing information, 00:05:55.530 --> 00:05:58.350 align:middle line:84% whether you're building satellites that are actually 00:05:58.350 --> 00:06:03.150 align:middle line:84% looking at, let's say, methane emissions, 00:06:03.150 --> 00:06:08.830 align:middle line:84% at the end of the day, the value very often comes from the data. 00:06:08.830 --> 00:06:11.010 align:middle line:90% And that is the magic of it all. 00:06:11.010 --> 00:06:14.790 align:middle line:84% And that's been the case, truly, in a magnificent way 00:06:14.790 --> 00:06:18.390 align:middle line:84% over the past 20 years and growing more and more so. 00:06:18.390 --> 00:06:20.710 align:middle line:84% So what's fascinating is when I first 00:06:20.710 --> 00:06:24.990 align:middle line:84% had the privilege of doing this class, this exact lecture back 00:06:24.990 --> 00:06:27.190 align:middle line:84% in the old days with Joe and Joost 00:06:27.190 --> 00:06:30.170 align:middle line:84% Bonsen and that whole team, it was funny. 00:06:30.170 --> 00:06:36.570 align:middle line:84% We were looking at business models that were so arcane. 00:06:36.570 --> 00:06:39.230 align:middle line:84% It was basically, are you going to sell online? 00:06:39.230 --> 00:06:41.910 align:middle line:90% Are you going to sell retail? 00:06:41.910 --> 00:06:42.950 align:middle line:90% That was it. 00:06:42.950 --> 00:06:45.130 align:middle line:84% And then you had a couple of nuances. 00:06:45.130 --> 00:06:50.320 align:middle line:84% You had computer companies that Michael Dell competing 00:06:50.320 --> 00:06:52.360 align:middle line:84% against a company called Gateway. 00:06:52.360 --> 00:06:54.240 align:middle line:84% And their novel business model was 00:06:54.240 --> 00:06:56.480 align:middle line:84% that they would customize the computer for you 00:06:56.480 --> 00:07:00.080 align:middle line:84% based on your specific specifications versus everybody 00:07:00.080 --> 00:07:03.360 align:middle line:84% else that basically you walked into your local equivalent 00:07:03.360 --> 00:07:06.520 align:middle line:84% of a Best Buy, and you bought the computer they had there 00:07:06.520 --> 00:07:08.020 align:middle line:84% based on how much memory you needed. 00:07:08.020 --> 00:07:10.000 align:middle line:90% But there was no customization. 00:07:10.000 --> 00:07:13.920 align:middle line:84% So customization became a differentiating factor. 00:07:13.920 --> 00:07:17.440 align:middle line:84% And these were very, very small, incremental changes 00:07:17.440 --> 00:07:20.920 align:middle line:84% that took place until we suddenly 00:07:20.920 --> 00:07:26.200 align:middle line:84% saw ubiquitous Wi-Fi, ubiquitous internet connectivity, where 00:07:26.200 --> 00:07:28.480 align:middle line:84% we saw now business models that could never 00:07:28.480 --> 00:07:31.520 align:middle line:84% have existed just months or years before suddenly 00:07:31.520 --> 00:07:32.760 align:middle line:90% came into play. 00:07:32.760 --> 00:07:38.160 align:middle line:84% So what I'm going to do today is share with you where business 00:07:38.160 --> 00:07:40.000 align:middle line:84% models evolve from and how important they 00:07:40.000 --> 00:07:42.180 align:middle line:84% are to the decisions you guys make, 00:07:42.180 --> 00:07:44.780 align:middle line:84% whether you be the founder entrepreneur, 00:07:44.780 --> 00:07:47.200 align:middle line:84% you be the fifth hire in the company, 00:07:47.200 --> 00:07:50.065 align:middle line:84% or you're going to work for a big organization, 00:07:50.065 --> 00:07:51.440 align:middle line:84% and you happen to have the luxury 00:07:51.440 --> 00:07:53.240 align:middle line:90% of launching a new product. 00:07:53.240 --> 00:07:55.840 align:middle line:84% At the end of the day, a business model 00:07:55.840 --> 00:07:59.040 align:middle line:84% is not only critical to the way the company operates 00:07:59.040 --> 00:08:02.860 align:middle line:84% and communicates and brands itself to the world, 00:08:02.860 --> 00:08:06.903 align:middle line:84% but it also needs to be flexible enough that it can adjust. 00:08:06.903 --> 00:08:08.820 align:middle line:84% So let's talk a little bit about these things. 00:08:08.820 --> 00:08:12.265 align:middle line:84% So starting in the very beginning of it, 00:08:12.265 --> 00:08:13.640 align:middle line:84% choosing the right business model 00:08:13.640 --> 00:08:16.400 align:middle line:84% is crucial for the success of any company. 00:08:16.400 --> 00:08:19.920 align:middle line:84% And for those of you that read some of the background material 00:08:19.920 --> 00:08:23.640 align:middle line:84% for this course, one of the definitions 00:08:23.640 --> 00:08:25.200 align:middle line:84% is that a successful business must 00:08:25.200 --> 00:08:29.240 align:middle line:84% be willing to modify its model to adapt quickly in any market. 00:08:29.240 --> 00:08:30.860 align:middle line:90% And that's absolutely critical. 00:08:30.860 --> 00:08:34.000 align:middle line:84% That will define whether your business is nimble and succeeds 00:08:34.000 --> 00:08:37.809 align:middle line:84% long term or maybe you got lucky and it was a blip on the screen. 00:08:37.809 --> 00:08:40.059 align:middle line:84% As a matter of fact, from that same book, if you guys, 00:08:40.059 --> 00:08:41.460 align:middle line:84% I don't know how many of you looked at it, 00:08:41.460 --> 00:08:43.377 align:middle line:84% but it was part of the reading of this course, 00:08:43.377 --> 00:08:46.930 align:middle line:84% was the business model generation book. 00:08:46.930 --> 00:08:50.670 align:middle line:84% And this model or this definition I think is perfect. 00:08:50.670 --> 00:08:52.610 align:middle line:84% A business model describes the rationale 00:08:52.610 --> 00:08:56.050 align:middle line:84% of how an organization creates, delivers, and captures value. 00:08:56.050 --> 00:08:57.690 align:middle line:90% That's it. 00:08:57.690 --> 00:09:01.010 align:middle line:84% And the value can be measured in many, many different ways. 00:09:01.010 --> 00:09:03.610 align:middle line:84% Hopefully it's measured on the consumer side, the customer 00:09:03.610 --> 00:09:05.970 align:middle line:84% side, the corporate side, whoever you're ultimately 00:09:05.970 --> 00:09:08.170 align:middle line:84% selling to, whether it's a SaaS platform 00:09:08.170 --> 00:09:10.490 align:middle line:84% and you're selling enterprise wide solutions 00:09:10.490 --> 00:09:13.330 align:middle line:84% to the financial service industry, 00:09:13.330 --> 00:09:18.750 align:middle line:84% or you're delivering a product to an end user, a consumer. 00:09:18.750 --> 00:09:24.210 align:middle line:84% So it's a B2B versus a B2C type of a model. 00:09:24.210 --> 00:09:28.050 align:middle line:84% When we think about frameworks, and this is something that when 00:09:28.050 --> 00:09:31.010 align:middle line:84% my career started it was in tech and then in biopharma 00:09:31.010 --> 00:09:35.770 align:middle line:84% tech for many, many years, and then a number of years back, 00:09:35.770 --> 00:09:37.570 align:middle line:84% I started to move over to the other side 00:09:37.570 --> 00:09:40.890 align:middle line:84% of the equation, which was investing in companies. 00:09:40.890 --> 00:09:43.360 align:middle line:84% And having been on the operating side, 00:09:43.360 --> 00:09:46.420 align:middle line:84% literally out there all the time raising capital for companies, 00:09:46.420 --> 00:09:50.340 align:middle line:84% expanding, hiring, firing, succeeding, failing, 00:09:50.340 --> 00:09:56.050 align:middle line:84% taking companies from literally eight people up to 85 to 250 00:09:56.050 --> 00:09:57.620 align:middle line:90% to 1,000 people. 00:09:57.620 --> 00:10:00.420 align:middle line:84% All of that growth typically happens 00:10:00.420 --> 00:10:03.860 align:middle line:84% because the organization is well funded 00:10:03.860 --> 00:10:07.620 align:middle line:84% and it has flexibility in its business model. 00:10:07.620 --> 00:10:10.740 align:middle line:84% When I go back for a moment to share with you the company 00:10:10.740 --> 00:10:13.460 align:middle line:84% MolecularWare, which was an MIT spinout, 00:10:13.460 --> 00:10:15.740 align:middle line:84% that company was building bioinformatics 00:10:15.740 --> 00:10:17.320 align:middle line:84% software, software for scientists. 00:10:17.320 --> 00:10:18.760 align:middle line:90% It had one business model. 00:10:18.760 --> 00:10:22.320 align:middle line:84% It sold to academics when I arrived as CEO of that company. 00:10:22.320 --> 00:10:24.660 align:middle line:90% It was my first CEO gig ever. 00:10:24.660 --> 00:10:27.220 align:middle line:84% And of course, they sold to the people they knew. 00:10:27.220 --> 00:10:28.660 align:middle line:84% These were all super smart people 00:10:28.660 --> 00:10:31.980 align:middle line:84% that came out of the RIKEN Institute 00:10:31.980 --> 00:10:35.520 align:middle line:84% in Japan, the Broad Institute, or at that time, 00:10:35.520 --> 00:10:37.660 align:middle line:84% I guess it was the Whitehead Institute, 00:10:37.660 --> 00:10:40.080 align:middle line:90% and that was the business model. 00:10:40.080 --> 00:10:41.960 align:middle line:84% But you can't really scale very well, 00:10:41.960 --> 00:10:44.820 align:middle line:84% nor can you be very, very attractive to the investment 00:10:44.820 --> 00:10:48.120 align:middle line:84% community if you have one client and that client is academics, 00:10:48.120 --> 00:10:50.060 align:middle line:84% or that one client is government. 00:10:50.060 --> 00:10:52.285 align:middle line:84% So we started to think about other models. 00:10:52.285 --> 00:10:54.160 align:middle line:84% Some of them we're going to talk about today. 00:10:54.160 --> 00:10:56.860 align:middle line:84% So we not only built software for scientists 00:10:56.860 --> 00:10:59.220 align:middle line:84% and sold to the academicians, which 00:10:59.220 --> 00:11:01.400 align:middle line:84% is an entirely different sales process. 00:11:01.400 --> 00:11:04.340 align:middle line:84% You've got different budgetary processes, different conferences 00:11:04.340 --> 00:11:05.740 align:middle line:90% you need to attend. 00:11:05.740 --> 00:11:10.220 align:middle line:84% But then we developed a series of other sales mechanisms. 00:11:10.220 --> 00:11:12.540 align:middle line:84% One of the first and most successful 00:11:12.540 --> 00:11:15.020 align:middle line:84% was because we had relationships with the RIKEN Institute 00:11:15.020 --> 00:11:19.420 align:middle line:84% in Japan, we decided that we needed to do more in Asia. 00:11:19.420 --> 00:11:21.700 align:middle line:84% And certainly building a sales force in Asia 00:11:21.700 --> 00:11:25.020 align:middle line:84% was out of the question for a little Kendall Square company 00:11:25.020 --> 00:11:27.140 align:middle line:90% with 15 people. 00:11:27.140 --> 00:11:29.818 align:middle line:84% So we started partnering with distributors. 00:11:29.818 --> 00:11:31.860 align:middle line:84% So we had this fantastic distribution partnership 00:11:31.860 --> 00:11:33.820 align:middle line:90% with a company called CTC. 00:11:33.820 --> 00:11:37.180 align:middle line:84% And CTC essentially sold our product for us. 00:11:37.180 --> 00:11:39.290 align:middle line:84% So that became part of our business model. 00:11:39.290 --> 00:11:42.310 align:middle line:84% So we had direct to academicians, 00:11:42.310 --> 00:11:44.870 align:middle line:84% which was great, because it was the name branding. 00:11:44.870 --> 00:11:48.630 align:middle line:84% Harvard bought our software or Lawrence Berkeley National Lab 00:11:48.630 --> 00:11:50.030 align:middle line:90% bought our software. 00:11:50.030 --> 00:11:52.640 align:middle line:84% But then all of a sudden, we started landing clients 00:11:52.640 --> 00:11:54.890 align:middle line:84% in other parts of the world that we could never touch. 00:11:54.890 --> 00:11:56.710 align:middle line:84% We could never, ever have afforded 00:11:56.710 --> 00:12:00.310 align:middle line:84% to put together a sales force and management and training 00:12:00.310 --> 00:12:03.670 align:middle line:90% to sell in Asia, as an example. 00:12:03.670 --> 00:12:08.637 align:middle line:84% So distributors became a second part of our model. 00:12:08.637 --> 00:12:10.470 align:middle line:84% And then as we started to build a little bit 00:12:10.470 --> 00:12:14.630 align:middle line:84% of a brand for ourselves, we said, how else can we sell? 00:12:14.630 --> 00:12:17.830 align:middle line:84% We wanted to sell more into the US and to Europe. 00:12:17.830 --> 00:12:21.590 align:middle line:84% But again, building a big sales force was not in our budget. 00:12:21.590 --> 00:12:24.510 align:middle line:84% So we then looked at what's called OEM. 00:12:24.510 --> 00:12:27.030 align:middle line:90% Who knows what that means? 00:12:27.030 --> 00:12:29.950 align:middle line:90% Anybody just yell it out. 00:12:29.950 --> 00:12:31.490 align:middle line:84% Original equipment manufacturers. 00:12:31.490 --> 00:12:35.310 align:middle line:84% So we realized, wait a minute, our software, 00:12:35.310 --> 00:12:37.730 align:middle line:84% we wrote APIs to all these cool instruments. 00:12:37.730 --> 00:12:41.230 align:middle line:84% Cartesian robots, biorobotics, Packard Bioscience, 00:12:41.230 --> 00:12:45.030 align:middle line:84% Axon scanners, Applied Precision scanners. 00:12:45.030 --> 00:12:49.630 align:middle line:84% Some of those people have really shitty software, 00:12:49.630 --> 00:12:51.950 align:middle line:84% and they've got good instruments. 00:12:51.950 --> 00:12:53.570 align:middle line:90% We've got amazing software. 00:12:53.570 --> 00:12:55.870 align:middle line:84% We're not interested in building instruments. 00:12:55.870 --> 00:12:58.270 align:middle line:84% Why don't we partner with them and bundle our software 00:12:58.270 --> 00:13:00.035 align:middle line:90% inside of their instrument? 00:13:00.035 --> 00:13:01.910 align:middle line:84% So we wound up landing one of our first deals 00:13:01.910 --> 00:13:05.110 align:middle line:84% with Applied Precision in Issaquah, Washington. 00:13:05.110 --> 00:13:08.410 align:middle line:84% And they had phenomenal imaging technology, 00:13:08.410 --> 00:13:11.670 align:middle line:84% one of the best scanners at the time, but really crappy 00:13:11.670 --> 00:13:12.250 align:middle line:90% software. 00:13:12.250 --> 00:13:15.150 align:middle line:84% Hard to use, kludgy, it was just a pain in the butt. 00:13:15.150 --> 00:13:17.350 align:middle line:84% And ultimately, they started selling more product, 00:13:17.350 --> 00:13:20.310 align:middle line:84% because now their software was seamless, fully integrated 00:13:20.310 --> 00:13:24.150 align:middle line:84% into their instrument, and it cost us nothing to sell. 00:13:24.150 --> 00:13:26.190 align:middle line:84% Every time they sold an instrument, 00:13:26.190 --> 00:13:28.150 align:middle line:90% we got a check in the mail. 00:13:28.150 --> 00:13:32.750 align:middle line:84% So we went from direct to distributors to OEM 00:13:32.750 --> 00:13:34.310 align:middle line:90% and then continued. 00:13:34.310 --> 00:13:37.800 align:middle line:84% So having that experience as an operating person, how 00:13:37.800 --> 00:13:42.360 align:middle line:84% to build these international or these national organizations 00:13:42.360 --> 00:13:44.620 align:middle line:84% was really based on those experiences. 00:13:44.620 --> 00:13:46.940 align:middle line:84% And now my job is I invest in companies. 00:13:46.940 --> 00:13:50.060 align:middle line:84% So we have a fund based out of London. 00:13:50.060 --> 00:13:53.020 align:middle line:84% We invest throughout Europe and the UK and elsewhere. 00:13:53.020 --> 00:13:55.000 align:middle line:84% We're doing a deal in Australia right now. 00:13:55.000 --> 00:13:58.600 align:middle line:84% And our focus is about 70% health care and everything else 00:13:58.600 --> 00:14:04.240 align:middle line:84% is deep tech, software, SaaS platforms, robotics, all B2B. 00:14:04.240 --> 00:14:08.080 align:middle line:84% So let's talk a little bit about how we see the world. 00:14:08.080 --> 00:14:10.490 align:middle line:84% This is also out of the book that 00:14:10.490 --> 00:14:12.740 align:middle line:84% was part of this class, which I thought was fantastic. 00:14:12.740 --> 00:14:16.320 align:middle line:84% This is essentially nine of the key ingredients, what 00:14:16.320 --> 00:14:21.640 align:middle line:84% they call the canvas in that book, the business model 00:14:21.640 --> 00:14:25.040 align:middle line:84% generation book, was about how do you think about a business 00:14:25.040 --> 00:14:25.652 align:middle line:90% model. 00:14:25.652 --> 00:14:27.860 align:middle line:84% And all of these slides will be available, of course, 00:14:27.860 --> 00:14:30.620 align:middle line:84% so you don't have to kill yourself to take notes. 00:14:30.620 --> 00:14:32.120 align:middle line:90% But I will say this. 00:14:32.120 --> 00:14:34.240 align:middle line:84% When you think about each of these slices 00:14:34.240 --> 00:14:37.420 align:middle line:84% of the pie, of course, in reality, 00:14:37.420 --> 00:14:39.135 align:middle line:90% they're not all the same size. 00:14:39.135 --> 00:14:41.760 align:middle line:84% They're going to change in size based on where your company is, 00:14:41.760 --> 00:14:43.860 align:middle line:84% from a standpoint of its product development, 00:14:43.860 --> 00:14:45.880 align:middle line:90% its financing, et cetera. 00:14:45.880 --> 00:14:50.760 align:middle line:84% But each of these components are so critical and very often 00:14:50.760 --> 00:14:51.700 align:middle line:90% they blend together. 00:14:51.700 --> 00:14:55.600 align:middle line:84% So you might have key resources or key activities that 00:14:55.600 --> 00:14:58.420 align:middle line:84% are being overseen by one of the managers in the company, 00:14:58.420 --> 00:15:01.080 align:middle line:84% whereas the entire marketing department is in charge 00:15:01.080 --> 00:15:05.760 align:middle line:84% of the value proposition and trying to segment the customers. 00:15:05.760 --> 00:15:08.640 align:middle line:84% But at the end of the day, each one of these things 00:15:08.640 --> 00:15:10.492 align:middle line:90% need to move harmoniously. 00:15:10.492 --> 00:15:12.700 align:middle line:84% And if you think about the most successful companies, 00:15:12.700 --> 00:15:15.560 align:middle line:84% and we're going to use a couple of examples here today, 00:15:15.560 --> 00:15:17.000 align:middle line:84% they have somehow figured out how 00:15:17.000 --> 00:15:20.200 align:middle line:84% to take these nine little pieces of the pie 00:15:20.200 --> 00:15:23.400 align:middle line:84% and have them move in a beautiful way together. 00:15:23.400 --> 00:15:27.200 align:middle line:84% And that includes everything from value proposition 00:15:27.200 --> 00:15:29.360 align:middle line:84% to the customer segments and then ultimately 00:15:29.360 --> 00:15:30.850 align:middle line:90% the cost structure. 00:15:30.850 --> 00:15:34.950 align:middle line:84% Because if you haven't modified and design your cost structure, 00:15:34.950 --> 00:15:37.810 align:middle line:84% ultimately you're going to start to lose money, which 00:15:37.810 --> 00:15:40.210 align:middle line:84% means you're not going to be able to properly support 00:15:40.210 --> 00:15:42.970 align:middle line:84% the client, which means you'll have no repeat business. 00:15:42.970 --> 00:15:45.410 align:middle line:84% So each of these things are amazing. 00:15:45.410 --> 00:15:47.410 align:middle line:84% For those in here that play instruments, 00:15:47.410 --> 00:15:52.010 align:middle line:84% it is exactly that concept of an orchestra or a jazz band. 00:15:52.010 --> 00:15:54.290 align:middle line:90% It needs to flow together. 00:15:54.290 --> 00:15:56.410 align:middle line:84% And if you get everything moving at the same time 00:15:56.410 --> 00:15:58.610 align:middle line:84% and they're all moving with some great flow, 00:15:58.610 --> 00:16:00.570 align:middle line:90% you create beautiful music. 00:16:00.570 --> 00:16:06.970 align:middle line:84% If your oboe is way off or your violinist is one beat behind, 00:16:06.970 --> 00:16:08.510 align:middle line:84% things are just a little bit off. 00:16:08.510 --> 00:16:10.470 align:middle line:84% And that creates this ripple effect, 00:16:10.470 --> 00:16:14.290 align:middle line:84% these second and third order consequences that ultimately 00:16:14.290 --> 00:16:16.330 align:middle line:90% impact the entire pie. 00:16:16.330 --> 00:16:18.770 align:middle line:84% The best companies have figured this out. 00:16:18.770 --> 00:16:20.890 align:middle line:84% So taking a look a little bit around how 00:16:20.890 --> 00:16:25.490 align:middle line:84% we think about business models, this is nothing new to anybody 00:16:25.490 --> 00:16:26.690 align:middle line:90% here, right? 00:16:26.690 --> 00:16:28.410 align:middle line:90% We're all consumers. 00:16:28.410 --> 00:16:32.170 align:middle line:84% So all of us have dealt with a gazillion different business 00:16:32.170 --> 00:16:34.270 align:middle line:84% models, whether we even realize it or not. 00:16:34.270 --> 00:16:38.770 align:middle line:84% Of course, subscription business models seem to rule the day. 00:16:38.770 --> 00:16:43.690 align:middle line:84% Subscription business models did not exist 15 years ago. 00:16:43.690 --> 00:16:46.190 align:middle line:84% There was nothing to subscribe to. 00:16:46.190 --> 00:16:49.330 align:middle line:84% If I wanted to go watch a movie for the weekend 00:16:49.330 --> 00:16:52.010 align:middle line:84% and I wanted to do it at home, I got in my car 00:16:52.010 --> 00:16:54.730 align:middle line:84% and I drove to this place called Blockbuster, 00:16:54.730 --> 00:16:58.110 align:middle line:84% and I walked up and down the aisles. 00:16:58.110 --> 00:17:00.890 align:middle line:84% It's about the size of a medium sized CVS. 00:17:00.890 --> 00:17:03.450 align:middle line:84% And I went to the adventure section or the romance section 00:17:03.450 --> 00:17:04.835 align:middle line:90% or the comedy section. 00:17:04.835 --> 00:17:06.210 align:middle line:84% And then I went up to the counter 00:17:06.210 --> 00:17:11.569 align:middle line:84% and I had my three VCR tapes or DVDs 00:17:11.569 --> 00:17:14.630 align:middle line:84% that I wanted to see that weekend or that period of time, 00:17:14.630 --> 00:17:15.630 align:middle line:90% and I brought them home. 00:17:15.630 --> 00:17:16.713 align:middle line:90% There was no subscription. 00:17:16.713 --> 00:17:19.970 align:middle line:84% I never needed to come back to that store again. 00:17:19.970 --> 00:17:21.690 align:middle line:84% All of a sudden, subscription models 00:17:21.690 --> 00:17:24.910 align:middle line:84% started to make sense when you have a new economy, 00:17:24.910 --> 00:17:26.609 align:middle line:84% you have a new world where people 00:17:26.609 --> 00:17:32.620 align:middle line:84% think less about owning and more about experience. 00:17:32.620 --> 00:17:35.820 align:middle line:84% Think about how companies like Zipcar and others. 00:17:35.820 --> 00:17:37.580 align:middle line:84% And there's a gazillion different models 00:17:37.580 --> 00:17:40.060 align:middle line:84% of equivalent Zipcars throughout Europe, 00:17:40.060 --> 00:17:42.500 align:middle line:84% because people say, why do I need to have a car? 00:17:42.500 --> 00:17:44.660 align:middle line:84% In the old days, and I'm talking old days 00:17:44.660 --> 00:17:48.560 align:middle line:84% like 10 years, 15 years ago, if you needed to rent a car, 00:17:48.560 --> 00:17:50.420 align:middle line:90% it was a nightmare. 00:17:50.420 --> 00:17:52.100 align:middle line:90% You're sitting in Cambridge. 00:17:52.100 --> 00:17:55.460 align:middle line:84% The closest car rental place might be at Logan Airport. 00:17:55.460 --> 00:17:56.760 align:middle line:90% You had to get there. 00:17:56.760 --> 00:17:59.260 align:middle line:84% Then you had to go to the rental center. 00:17:59.260 --> 00:18:01.580 align:middle line:84% Zipcar comes along and boom, they 00:18:01.580 --> 00:18:04.740 align:middle line:84% had a model where I can actually find a car with my phone 00:18:04.740 --> 00:18:07.700 align:middle line:84% three blocks from my house, and I can return it 00:18:07.700 --> 00:18:09.740 align:middle line:90% to a similar location. 00:18:09.740 --> 00:18:11.515 align:middle line:84% So subscription really changed the world, 00:18:11.515 --> 00:18:13.140 align:middle line:84% but there's obviously other models here 00:18:13.140 --> 00:18:14.620 align:middle line:90% we're very familiar with. 00:18:14.620 --> 00:18:16.800 align:middle line:84% We'll talk about different ones at different times. 00:18:16.800 --> 00:18:19.757 align:middle line:84% Obviously the freemium model, all of us are familiar. 00:18:19.757 --> 00:18:21.340 align:middle line:84% Certainly the App Store has completely 00:18:21.340 --> 00:18:24.940 align:middle line:84% dominated our lives, whether you use an Android 00:18:24.940 --> 00:18:26.950 align:middle line:90% or you use an iPhone. 00:18:26.950 --> 00:18:30.112 align:middle line:84% Everything's free for three days, 00:18:30.112 --> 00:18:31.570 align:middle line:84% and then we're going to charge you. 00:18:31.570 --> 00:18:33.757 align:middle line:84% Or everything's free for seven days, 00:18:33.757 --> 00:18:35.590 align:middle line:84% and then you're going to get hit with $14.99 00:18:35.590 --> 00:18:37.510 align:middle line:84% a month in perpetuity, and we're going 00:18:37.510 --> 00:18:39.750 align:middle line:84% to make it super hard for you to quit. 00:18:39.750 --> 00:18:41.890 align:middle line:84% So the freemium model really came into place, 00:18:41.890 --> 00:18:44.750 align:middle line:84% and this was mind boggling in the investment community 00:18:44.750 --> 00:18:46.150 align:middle line:90% not that long ago. 00:18:46.150 --> 00:18:47.750 align:middle line:84% You're going to give away your product 00:18:47.750 --> 00:18:50.910 align:middle line:84% and somehow you're going to become a successful company. 00:18:50.910 --> 00:18:52.870 align:middle line:84% So that's another way to think about 00:18:52.870 --> 00:18:54.050 align:middle line:90% how do I get to the market? 00:18:54.050 --> 00:18:56.330 align:middle line:84% Which one of these or two of these or three of these 00:18:56.330 --> 00:18:57.630 align:middle line:90% am I going to choose? 00:18:57.630 --> 00:19:00.030 align:middle line:84% The marketplace certainly has taken over. 00:19:00.030 --> 00:19:03.990 align:middle line:84% Think about the marketplace as the Etsys of the world, 00:19:03.990 --> 00:19:08.950 align:middle line:84% the eBays of the world, where I can actually myself create 00:19:08.950 --> 00:19:09.770 align:middle line:90% a marketplace. 00:19:09.770 --> 00:19:12.230 align:middle line:84% I can sell cool t-shirts, or I can wind up 00:19:12.230 --> 00:19:14.350 align:middle line:84% cleaning out my garage and selling 00:19:14.350 --> 00:19:17.470 align:middle line:84% a whole bunch of neat things that are in there, because I'm 00:19:17.470 --> 00:19:19.350 align:middle line:90% part of this marketplace. 00:19:19.350 --> 00:19:21.530 align:middle line:84% The advertising world has completely changed. 00:19:21.530 --> 00:19:25.510 align:middle line:84% It used to be dominated by big, big advertising companies, quite 00:19:25.510 --> 00:19:26.090 align:middle line:90% truthfully. 00:19:26.090 --> 00:19:28.110 align:middle line:84% I mean, there were these massive New York 00:19:28.110 --> 00:19:31.390 align:middle line:84% firms that worked with big companies, 00:19:31.390 --> 00:19:34.170 align:middle line:84% and those big companies had huge advertising budgets. 00:19:34.170 --> 00:19:36.270 align:middle line:90% And it was very, very linear. 00:19:36.270 --> 00:19:37.770 align:middle line:90% You bought TV time. 00:19:37.770 --> 00:19:39.275 align:middle line:84% You bought ad time in a magazine. 00:19:39.275 --> 00:19:41.150 align:middle line:84% So you're sitting there at the salon flipping 00:19:41.150 --> 00:19:44.570 align:middle line:84% through People Magazine and a commercial, or I should say, 00:19:44.570 --> 00:19:48.470 align:middle line:84% a page shows up and it's promoting some new product. 00:19:48.470 --> 00:19:49.870 align:middle line:90% That was advertising. 00:19:49.870 --> 00:19:52.970 align:middle line:84% Advertising now has completely transformed the way we live. 00:19:52.970 --> 00:19:55.030 align:middle line:84% We're completely unaware of how often 00:19:55.030 --> 00:19:56.710 align:middle line:90% we're impacted by advertising. 00:19:56.710 --> 00:19:58.370 align:middle line:84% And certainly, as I mentioned earlier 00:19:58.370 --> 00:20:00.430 align:middle line:84% when I gave you the examples of one 00:20:00.430 --> 00:20:04.830 align:middle line:84% of my earliest companies, direct sales, OEM, and resellers. 00:20:04.830 --> 00:20:06.310 align:middle line:90% Truly foundational ways. 00:20:06.310 --> 00:20:09.910 align:middle line:84% They've existed forever, but they are still 00:20:09.910 --> 00:20:12.670 align:middle line:84% some of the most important ways to think about getting 00:20:12.670 --> 00:20:14.310 align:middle line:90% your product to the market. 00:20:14.310 --> 00:20:16.670 align:middle line:84% If you are building a product, whether it be a software 00:20:16.670 --> 00:20:19.770 align:middle line:84% platform or be a technology instrument, 00:20:19.770 --> 00:20:23.640 align:middle line:84% or it winds up being a widget that actually helps people that 00:20:23.640 --> 00:20:26.497 align:middle line:84% are photographers work better, you have to think about, 00:20:26.497 --> 00:20:28.080 align:middle line:84% how am I going to get this in the most 00:20:28.080 --> 00:20:29.720 align:middle line:90% amount of hands as possible? 00:20:29.720 --> 00:20:32.760 align:middle line:84% And the OEM reseller, and essentially 00:20:32.760 --> 00:20:35.920 align:middle line:84% the direct sales market is still the way to do it. 00:20:35.920 --> 00:20:38.580 align:middle line:84% Think about in the area of pharmaceutical biotech. 00:20:38.580 --> 00:20:40.880 align:middle line:84% They still have direct sales forces, 00:20:40.880 --> 00:20:42.140 align:middle line:90% because doctors are busy. 00:20:42.140 --> 00:20:44.300 align:middle line:84% They don't have time to watch advertising. 00:20:44.300 --> 00:20:46.640 align:middle line:84% They're certainly not signing up to any freemium. 00:20:46.640 --> 00:20:48.580 align:middle line:84% They can only attend so many conferences. 00:20:48.580 --> 00:20:53.240 align:middle line:84% So you need to physically be there to actually educate them. 00:20:53.240 --> 00:20:54.620 align:middle line:90% So think about each of these. 00:20:54.620 --> 00:20:57.000 align:middle line:84% In fact, everybody here using a laptop 00:20:57.000 --> 00:21:00.840 align:middle line:84% is probably most familiar with the OEM model. 00:21:00.840 --> 00:21:03.160 align:middle line:84% Every one of our laptops, you open it up 00:21:03.160 --> 00:21:05.780 align:middle line:84% and if you're using a PC, it has a little sticker on it. 00:21:05.780 --> 00:21:08.200 align:middle line:90% Usually it says Intel inside. 00:21:08.200 --> 00:21:09.720 align:middle line:90% I mean, that's ingenious. 00:21:09.720 --> 00:21:13.040 align:middle line:84% I've never seen an Intel store in my entire life. 00:21:13.040 --> 00:21:15.640 align:middle line:84% They could care less about who I am. 00:21:15.640 --> 00:21:18.480 align:middle line:84% They're not selling direct to consumer. 00:21:18.480 --> 00:21:20.600 align:middle line:90% They don't care about B2C. 00:21:20.600 --> 00:21:22.640 align:middle line:90% They don't even care about B2B. 00:21:22.640 --> 00:21:28.080 align:middle line:84% They care about B2M, business to manufacturer. 00:21:28.080 --> 00:21:32.700 align:middle line:84% So they say, I'm not going to sell to Johnson & Johnson, 00:21:32.700 --> 00:21:35.238 align:middle line:84% or I'm not going to sell to Gillette or Fidelity 00:21:35.238 --> 00:21:37.280 align:middle line:84% and try to get them to buy a bunch of Intel stuff 00:21:37.280 --> 00:21:38.113 align:middle line:90% for their computers. 00:21:38.113 --> 00:21:39.840 align:middle line:90% I'm going to sell to Dell. 00:21:39.840 --> 00:21:41.760 align:middle line:90% I'm going to sell to ThinkPad. 00:21:41.760 --> 00:21:43.380 align:middle line:84% I'm going to sell to the manufacturer. 00:21:43.380 --> 00:21:45.800 align:middle line:84% They're going to do all the work for me. 00:21:45.800 --> 00:21:49.760 align:middle line:84% So the magic that we actually have in the world of technology 00:21:49.760 --> 00:21:52.660 align:middle line:84% is that we have so many options, which is fantastic. 00:21:52.660 --> 00:21:55.600 align:middle line:84% So think about different business model examples 00:21:55.600 --> 00:21:59.160 align:middle line:84% that just touch you every day, whether it be new clothing you 00:21:59.160 --> 00:22:02.120 align:middle line:84% buy, your Apple Watch or your iPhone, 00:22:02.120 --> 00:22:06.085 align:middle line:84% a laptop that you purchased, or some sort of a service that you 00:22:06.085 --> 00:22:07.960 align:middle line:84% recently picked up because you read something 00:22:07.960 --> 00:22:10.360 align:middle line:90% great about it on your phone. 00:22:10.360 --> 00:22:12.860 align:middle line:84% So let's talk about different industries and sub-industries, 00:22:12.860 --> 00:22:15.920 align:middle line:84% because there's lots of ways to think about business models. 00:22:15.920 --> 00:22:18.410 align:middle line:84% So the first two examples I'm going to give you 00:22:18.410 --> 00:22:21.210 align:middle line:84% are really known to you, of course. 00:22:21.210 --> 00:22:24.250 align:middle line:84% And then we're going to talk about industry specifics. 00:22:24.250 --> 00:22:28.233 align:middle line:84% So the number one example I think all of us know is Netflix. 00:22:28.233 --> 00:22:29.650 align:middle line:84% So for those of you that remember, 00:22:29.650 --> 00:22:32.370 align:middle line:84% anybody here remember Blockbuster? 00:22:32.370 --> 00:22:37.490 align:middle line:84% I find every year, Joe, the number of hands goes down. 00:22:37.490 --> 00:22:40.550 align:middle line:84% I'm getting really old, but this class stays about the same age, 00:22:40.550 --> 00:22:42.470 align:middle line:84% so the number of hands keeps going down. 00:22:42.470 --> 00:22:44.750 align:middle line:84% But Blockbuster was absolutely amazing. 00:22:44.750 --> 00:22:47.130 align:middle line:84% They owned the world when it came to video. 00:22:47.130 --> 00:22:49.430 align:middle line:84% And even when things went to DVD, 00:22:49.430 --> 00:22:52.050 align:middle line:84% they still had all of that physical real estate. 00:22:52.050 --> 00:22:53.755 align:middle line:84% And then the guys in Netflix came along. 00:22:53.755 --> 00:22:55.130 align:middle line:84% In fact, there was a slide I used 00:22:55.130 --> 00:22:57.370 align:middle line:84% to use in this presentation, and it was actually 00:22:57.370 --> 00:23:01.290 align:middle line:84% a billboard that was on Route 101 outside of San Francisco. 00:23:01.290 --> 00:23:03.890 align:middle line:84% And it said, "Follow your dreams. 00:23:03.890 --> 00:23:07.690 align:middle line:90% We used to mail DVDs. 00:23:07.690 --> 00:23:09.210 align:middle line:90% Netflix." 00:23:09.210 --> 00:23:10.810 align:middle line:90% And that's what they did. 00:23:10.810 --> 00:23:13.190 align:middle line:84% The guys at Netflix figured out, geez, 00:23:13.190 --> 00:23:20.410 align:middle line:84% the idea of owning 500 or 1,000 shops in strip malls around 00:23:20.410 --> 00:23:24.130 align:middle line:84% the United States, manning them with human beings, 00:23:24.130 --> 00:23:27.610 align:middle line:84% worrying about security, inventory, shipping, receiving, 00:23:27.610 --> 00:23:29.090 align:middle line:90% returns. 00:23:29.090 --> 00:23:30.858 align:middle line:90% Oh my God, that's exhausting. 00:23:30.858 --> 00:23:32.650 align:middle line:84% Why don't we just put a bunch of warehouses 00:23:32.650 --> 00:23:35.170 align:middle line:84% around the United States, load it up with DVDs, 00:23:35.170 --> 00:23:38.825 align:middle line:84% and when people want a movie, we just mail it to them. 00:23:38.825 --> 00:23:40.450 align:middle line:84% And if they keep it for a day, so what? 00:23:40.450 --> 00:23:42.533 align:middle line:84% If they keep it for 10 days, we don't really care. 00:23:42.533 --> 00:23:45.730 align:middle line:84% We'll just literally print another movie. 00:23:45.730 --> 00:23:48.650 align:middle line:84% So that transformed the entire way that all of us 00:23:48.650 --> 00:23:50.490 align:middle line:84% thought about movie rental back then. 00:23:50.490 --> 00:23:52.990 align:middle line:84% Now, keep in mind, it was a sign of the times. 00:23:52.990 --> 00:23:55.130 align:middle line:90% There was no bandwidth. 00:23:55.130 --> 00:23:58.770 align:middle line:84% If you wanted to download a movie, when Netflix first came 00:23:58.770 --> 00:24:02.210 align:middle line:84% out and started shipping DVDs in an envelope, 00:24:02.210 --> 00:24:06.150 align:middle line:84% if you wanted to download a normal feature length film, 00:24:06.150 --> 00:24:09.810 align:middle line:84% it could take six, seven hours to download. 00:24:09.810 --> 00:24:12.630 align:middle line:84% It would take two to three times the length of the movie 00:24:12.630 --> 00:24:14.260 align:middle line:90% to download it to your computer. 00:24:14.260 --> 00:24:16.583 align:middle line:84% It would eat up all of your memory, 00:24:16.583 --> 00:24:19.000 align:middle line:84% and then you would watch it, and then you would delete it, 00:24:19.000 --> 00:24:20.340 align:middle line:90% and then you would do it again. 00:24:20.340 --> 00:24:23.700 align:middle line:84% So they realized this download stuff is just not for us. 00:24:23.700 --> 00:24:26.080 align:middle line:84% We're going to send people DVDs on demand. 00:24:26.080 --> 00:24:30.700 align:middle line:84% Everybody in the world ran out and bought a DVD player. 00:24:30.700 --> 00:24:34.490 align:middle line:84% So for companies building DVD players, it was awesome. 00:24:34.490 --> 00:24:36.240 align:middle line:84% They were like, oh my God, this is heaven. 00:24:36.240 --> 00:24:41.300 align:middle line:84% Netflix literally built the DVD industry. 00:24:41.300 --> 00:24:44.980 align:middle line:84% So that was their business model. 00:24:44.980 --> 00:24:45.900 align:middle line:90% Convenience. 00:24:45.900 --> 00:24:47.860 align:middle line:90% No late fees. 00:24:47.860 --> 00:24:50.680 align:middle line:84% Two days after you order it on a Tuesday, bang. 00:24:50.680 --> 00:24:53.000 align:middle line:84% It's at your house on Wednesday or Thursday. 00:24:53.000 --> 00:24:54.297 align:middle line:90% You watch it over the weekend. 00:24:54.297 --> 00:24:55.880 align:middle line:84% Maybe you shared it with some friends, 00:24:55.880 --> 00:24:57.940 align:middle line:84% and then you sent it back in an envelope. 00:24:57.940 --> 00:24:59.053 align:middle line:90% It was amazing. 00:24:59.053 --> 00:25:01.220 align:middle line:84% And they then created a little bit of a subscription 00:25:01.220 --> 00:25:04.300 align:middle line:84% service where if you paid a certain amount per month, 00:25:04.300 --> 00:25:08.420 align:middle line:84% you were able to at any one time have three DVDs. 00:25:08.420 --> 00:25:10.880 align:middle line:84% Or if you paid a tiny bit more per month, 00:25:10.880 --> 00:25:12.740 align:middle line:84% you were able to have five or six or seven 00:25:12.740 --> 00:25:15.183 align:middle line:84% DVDs, which is great if you have a family that's 00:25:15.183 --> 00:25:17.100 align:middle line:84% got a bunch of kids who are watching one thing 00:25:17.100 --> 00:25:19.900 align:middle line:84% and you have parents that might be watching something else. 00:25:19.900 --> 00:25:23.520 align:middle line:84% So they were essentially doing direct to consumer mailing, 00:25:23.520 --> 00:25:26.060 align:middle line:90% and they created subscriptions. 00:25:26.060 --> 00:25:28.460 align:middle line:90% And then the world changed. 00:25:28.460 --> 00:25:32.780 align:middle line:84% Netflix, like Blockbuster, could have easily gone bust. 00:25:32.780 --> 00:25:36.940 align:middle line:84% There's no more Blockbusters, but Netflix 00:25:36.940 --> 00:25:38.800 align:middle line:90% could have easily gone bust. 00:25:38.800 --> 00:25:41.880 align:middle line:84% But they figured out that if we incorporate technology, 00:25:41.880 --> 00:25:44.780 align:middle line:90% we can begin to stream movies. 00:25:44.780 --> 00:25:46.840 align:middle line:84% They didn't abandon their whole business model. 00:25:46.840 --> 00:25:51.240 align:middle line:84% They slowly moved into the streaming service. 00:25:51.240 --> 00:25:53.140 align:middle line:84% And people were like, this is fantastic, 00:25:53.140 --> 00:25:54.440 align:middle line:90% but it's the same company. 00:25:54.440 --> 00:25:56.540 align:middle line:84% Before they used to send me a DVD. 00:25:56.540 --> 00:25:58.960 align:middle line:84% Now I hit a button and now it streams to me. 00:25:58.960 --> 00:26:01.720 align:middle line:84% Sometimes you have a little buffering issue, but it's OK. 00:26:01.720 --> 00:26:05.740 align:middle line:84% And this is quite a few years ago. 00:26:05.740 --> 00:26:08.220 align:middle line:84% Who would have thought Netflix, which 00:26:08.220 --> 00:26:12.310 align:middle line:84% was a company that shipped DVDs and offered streaming 00:26:12.310 --> 00:26:15.390 align:middle line:84% with lots of buffering and slow points, 00:26:15.390 --> 00:26:17.190 align:middle line:90% would become what it is today? 00:26:17.190 --> 00:26:22.030 align:middle line:84% Think about the business model that Netflix has today. 00:26:22.030 --> 00:26:26.030 align:middle line:84% What does Netflix do when you think about them as a company, 00:26:26.030 --> 00:26:28.370 align:middle line:84% forgetting about their original business for a minute, 00:26:28.370 --> 00:26:30.030 align:middle line:90% how do they make money? 00:26:30.030 --> 00:26:31.790 align:middle line:90% Who are they competing with now? 00:26:31.790 --> 00:26:33.990 align:middle line:84% They were competing with just Blockbuster. 00:26:33.990 --> 00:26:36.590 align:middle line:90% That was it. 00:26:36.590 --> 00:26:40.150 align:middle line:84% Tell me what you know about Netflix besides the fact 00:26:40.150 --> 00:26:42.010 align:middle line:84% that you can go on to your Netflix app, 00:26:42.010 --> 00:26:45.550 align:middle line:84% on to your smart TV, or on your iPhone or iPad and watch a movie 00:26:45.550 --> 00:26:47.510 align:middle line:84% or download it for your plane ride? 00:26:47.510 --> 00:26:51.470 align:middle line:90% Besides that, what do they do? 00:26:51.470 --> 00:26:52.990 align:middle line:90% They produce movies. 00:26:52.990 --> 00:26:55.990 align:middle line:84% Can you imagine the CEO of Netflix 00:26:55.990 --> 00:27:01.070 align:middle line:84% back in the days when he was shipping DVDs to people's homes 00:27:01.070 --> 00:27:03.630 align:middle line:84% telling his investors, someday I really want 00:27:03.630 --> 00:27:06.190 align:middle line:90% to compete against Hollywood. 00:27:06.190 --> 00:27:09.080 align:middle line:90% You know Paramount, MGM? 00:27:09.080 --> 00:27:11.800 align:middle line:84% I think I want to compete against them. 00:27:11.800 --> 00:27:13.560 align:middle line:84% They would have thought, dude, you're 00:27:13.560 --> 00:27:15.760 align:middle line:90% completely out of your mind. 00:27:15.760 --> 00:27:17.400 align:middle line:90% You ship DVDs. 00:27:17.400 --> 00:27:20.240 align:middle line:84% This is basically a mail order company. 00:27:20.240 --> 00:27:23.560 align:middle line:84% They have now become one of the most powerful producers 00:27:23.560 --> 00:27:25.680 align:middle line:90% of content in the world. 00:27:25.680 --> 00:27:28.320 align:middle line:84% They're winning awards left and right 00:27:28.320 --> 00:27:32.480 align:middle line:84% and crushing all of the old fashioned movie production 00:27:32.480 --> 00:27:35.960 align:middle line:84% companies and TV production companies. 00:27:35.960 --> 00:27:38.840 align:middle line:90% What else do they do? 00:27:38.840 --> 00:27:40.180 align:middle line:90% What is something new? 00:27:40.180 --> 00:27:41.360 align:middle line:90% Go ahead. 00:27:41.360 --> 00:27:43.340 align:middle line:84% AUDIENCE: As of, I believe, February 1, 00:27:43.340 --> 00:27:47.860 align:middle line:84% will raise every subscription price by $1 or $2, 00:27:47.860 --> 00:27:49.160 align:middle line:90% depending on the level. 00:27:49.160 --> 00:27:51.660 align:middle line:90% All 315 million of them. 00:27:51.660 --> 00:27:54.680 align:middle line:84% RICHARD KIVEL: And even beyond that, they 00:27:54.680 --> 00:28:01.240 align:middle line:84% then introduced the password protection non-sharing policy. 00:28:01.240 --> 00:28:04.040 align:middle line:84% All of the investment community was like, oh my God, they're 00:28:04.040 --> 00:28:05.440 align:middle line:90% going to get crushed. 00:28:05.440 --> 00:28:08.200 align:middle line:90% People are going to run. 00:28:08.200 --> 00:28:11.540 align:middle line:84% They increased the number of subscriptions. 00:28:11.540 --> 00:28:14.440 align:middle line:84% The day they announced no more password sharing, 00:28:14.440 --> 00:28:17.720 align:middle line:84% their increase in subscriptions over the following week 00:28:17.720 --> 00:28:22.120 align:middle line:84% was something like 18 million new subscribers. 00:28:22.120 --> 00:28:24.640 align:middle line:84% Because now I can't give my password out 00:28:24.640 --> 00:28:26.640 align:middle line:84% to my friend and my kid and my kid who 00:28:26.640 --> 00:28:28.590 align:middle line:90% gives it to his girlfriend. 00:28:28.590 --> 00:28:30.340 align:middle line:84% Now all of a sudden they're like, oh shit, 00:28:30.340 --> 00:28:32.680 align:middle line:90% I'll just open my own account. 00:28:32.680 --> 00:28:35.700 align:middle line:84% So these incremental increases in subscription, 00:28:35.700 --> 00:28:37.600 align:middle line:90% which is really hard to do. 00:28:37.600 --> 00:28:41.200 align:middle line:84% But once it is literally part of your life, 00:28:41.200 --> 00:28:43.680 align:middle line:84% you're not going to give that up. 00:28:43.680 --> 00:28:47.660 align:middle line:84% And then on top of that, without even increasing prices, 00:28:47.660 --> 00:28:49.880 align:middle line:84% they increased revenue in number of subscribers 00:28:49.880 --> 00:28:54.200 align:middle line:84% exponentially just by saying this password sharing thing 00:28:54.200 --> 00:28:56.360 align:middle line:90% has to be very limited. 00:28:56.360 --> 00:28:58.585 align:middle line:84% So that is something else that they have done, 00:28:58.585 --> 00:28:59.960 align:middle line:84% which I guess you could say, it's 00:28:59.960 --> 00:29:02.680 align:middle line:84% not necessarily a new business model as much 00:29:02.680 --> 00:29:06.770 align:middle line:84% as it is tweaking and fine tuning an existing business 00:29:06.770 --> 00:29:09.770 align:middle line:84% model to become more profitable without punishing 00:29:09.770 --> 00:29:10.910 align:middle line:90% the customer very much. 00:29:10.910 --> 00:29:13.490 align:middle line:90% They didn't double their prices. 00:29:13.490 --> 00:29:17.773 align:middle line:84% They essentially said normal cost of business increase, 00:29:17.773 --> 00:29:19.190 align:middle line:84% but you can't share your password. 00:29:19.190 --> 00:29:21.930 align:middle line:84% And most people knew I shouldn't be sharing my password anyways. 00:29:21.930 --> 00:29:24.470 align:middle line:90% So they didn't lose anybody. 00:29:24.470 --> 00:29:26.710 align:middle line:84% They gained something like 18 million. 00:29:26.710 --> 00:29:27.690 align:middle line:90% Think about this. 00:29:27.690 --> 00:29:34.350 align:middle line:84% They have just hit 300 million subscribers this week. 00:29:34.350 --> 00:29:35.390 align:middle line:90% It was just announced. 00:29:35.390 --> 00:29:36.057 align:middle line:90% AUDIENCE: Today. 00:29:36.057 --> 00:29:38.290 align:middle line:90% I think it doubled. 00:29:38.290 --> 00:29:40.530 align:middle line:90% RICHARD KIVEL: Yeah. 00:29:40.530 --> 00:29:42.610 align:middle line:84% So you've got a company that now has-- 00:29:42.610 --> 00:29:46.348 align:middle line:84% we're talking about the population of the United States. 00:29:46.348 --> 00:29:46.890 align:middle line:90% I don't know. 00:29:46.890 --> 00:29:48.930 align:middle line:84% What are we at as a country, 400? 00:29:48.930 --> 00:29:50.290 align:middle line:90% Something like that? 00:29:50.290 --> 00:29:53.610 align:middle line:84% 300 million people are subscribers 00:29:53.610 --> 00:29:55.490 align:middle line:84% and pay every single month, whether they 00:29:55.490 --> 00:29:57.050 align:middle line:90% watch a movie or not. 00:29:57.050 --> 00:29:58.690 align:middle line:90% I mean, how awesome is that? 00:29:58.690 --> 00:30:01.690 align:middle line:84% And on top of that, they now have a market capitalization 00:30:01.690 --> 00:30:05.010 align:middle line:90% of $400 billion. 00:30:05.010 --> 00:30:07.370 align:middle line:84% Do you realize it's kind of nuts. 00:30:07.370 --> 00:30:12.570 align:middle line:84% That's bigger than the GDP of most countries. 00:30:12.570 --> 00:30:15.970 align:middle line:84% Look up the GDP of Greece, Italy. 00:30:15.970 --> 00:30:19.730 align:middle line:90% Look up the GDP of Ireland. 00:30:19.730 --> 00:30:23.450 align:middle line:84% They have valuations that compete 00:30:23.450 --> 00:30:26.403 align:middle line:90% with the GDP of big countries. 00:30:26.403 --> 00:30:28.070 align:middle line:84% Google is probably the greatest example. 00:30:28.070 --> 00:30:29.650 align:middle line:84% They're actually the one that I often 00:30:29.650 --> 00:30:31.950 align:middle line:84% think of from the standpoint of competing against GDP, 00:30:31.950 --> 00:30:33.530 align:middle line:90% against market cap. 00:30:33.530 --> 00:30:35.810 align:middle line:84% I mean, it's mind boggling when you think about it. 00:30:35.810 --> 00:30:37.893 align:middle line:84% But something else that they've done, because they 00:30:37.893 --> 00:30:39.810 align:middle line:90% keep changing their model. 00:30:39.810 --> 00:30:42.190 align:middle line:84% They got into producing TV shows. 00:30:42.190 --> 00:30:45.510 align:middle line:84% They then got into producing-- or movies and then TV shows. 00:30:45.510 --> 00:30:47.470 align:middle line:84% They now have some of the world's best actors, 00:30:47.470 --> 00:30:49.990 align:middle line:90% actresses chasing them. 00:30:49.990 --> 00:30:51.850 align:middle line:90% Can I get in your next show? 00:30:51.850 --> 00:30:54.810 align:middle line:84% Years ago, no actor wanted to be in a TV show. 00:30:54.810 --> 00:30:57.470 align:middle line:84% If you went from commercials to TV to movies, 00:30:57.470 --> 00:30:59.210 align:middle line:90% you never went back. 00:30:59.210 --> 00:31:01.660 align:middle line:90% I'm not doing a series. 00:31:01.660 --> 00:31:04.260 align:middle line:84% It's to a point now where you've got people 00:31:04.260 --> 00:31:07.513 align:middle line:84% like Nicole Kidman, top actors and actresses saying, 00:31:07.513 --> 00:31:08.680 align:middle line:90% are you guys doing a series? 00:31:08.680 --> 00:31:09.960 align:middle line:90% I would love to do a series. 00:31:09.960 --> 00:31:11.100 align:middle line:90% How cool is that? 00:31:11.100 --> 00:31:15.320 align:middle line:84% I get to do 20 seasons, five seasons, 50 episodes, 00:31:15.320 --> 00:31:16.697 align:middle line:90% whatever the number is. 00:31:16.697 --> 00:31:18.780 align:middle line:84% It's absolutely incredible the impact that they've 00:31:18.780 --> 00:31:21.140 align:middle line:84% had on the industry and on Hollywood, 00:31:21.140 --> 00:31:23.280 align:middle line:84% and they started off mailing DVDs. 00:31:23.280 --> 00:31:24.780 align:middle line:90% That was their business model. 00:31:24.780 --> 00:31:27.900 align:middle line:90% Something new that they've done. 00:31:27.900 --> 00:31:28.980 align:middle line:90% Live events. 00:31:28.980 --> 00:31:31.780 align:middle line:90% Never before. 00:31:31.780 --> 00:31:33.580 align:middle line:90% Something else? 00:31:33.580 --> 00:31:36.580 align:middle line:84% AUDIENCE: They use the [INAUDIBLE] suggestions and also 00:31:36.580 --> 00:31:38.242 align:middle line:90% design suggestions. 00:31:38.242 --> 00:31:40.200 align:middle line:84% RICHARD KIVEL: That's a really excellent point. 00:31:40.200 --> 00:31:41.960 align:middle line:84% It goes back to what we talked about earlier, right? 00:31:41.960 --> 00:31:44.293 align:middle line:84% It's great that you have software that does A, B, and C, 00:31:44.293 --> 00:31:45.680 align:middle line:90% makes life easier. 00:31:45.680 --> 00:31:47.860 align:middle line:84% It's cool that I can actually search the hell out 00:31:47.860 --> 00:31:52.100 align:middle line:84% of this massive library of movie options, 00:31:52.100 --> 00:31:56.080 align:middle line:84% but it's actually using technology, deep learning, 00:31:56.080 --> 00:31:59.940 align:middle line:84% data mining, AI now to help me find things 00:31:59.940 --> 00:32:02.820 align:middle line:84% that are more relevant based on my own feedback, whether I 00:32:02.820 --> 00:32:06.260 align:middle line:84% gave it a thumbs up or a thumbs down after I watched a movie. 00:32:06.260 --> 00:32:08.140 align:middle line:84% They know if you started watching a movie 00:32:08.140 --> 00:32:10.900 align:middle line:84% and then you killed it and you never went back to it. 00:32:10.900 --> 00:32:12.960 align:middle line:90% I mean, there's so much data. 00:32:12.960 --> 00:32:15.220 align:middle line:84% So what you have there is more personalization, 00:32:15.220 --> 00:32:18.900 align:middle line:84% which, to use an old term, is stickiness. 00:32:18.900 --> 00:32:20.700 align:middle line:84% Of course I'm going to keep using this, 00:32:20.700 --> 00:32:23.360 align:middle line:84% because they've made my life easier. 00:32:23.360 --> 00:32:25.740 align:middle line:84% And now they're doing live events. 00:32:25.740 --> 00:32:27.240 align:middle line:84% Think about what you're seeing now. 00:32:27.240 --> 00:32:28.940 align:middle line:90% They have done fights. 00:32:28.940 --> 00:32:32.860 align:middle line:84% They have done a number of other type of live events. 00:32:32.860 --> 00:32:35.980 align:middle line:84% That starts to really be interesting. 00:32:35.980 --> 00:32:39.380 align:middle line:84% I mean, could we be watching the Super Bowl on Netflix 00:32:39.380 --> 00:32:40.322 align:middle line:90% in five years? 00:32:40.322 --> 00:32:42.780 align:middle line:84% AUDIENCE: We just watched the Christmas-- the NFL Christmas 00:32:42.780 --> 00:32:43.725 align:middle line:90% game. 00:32:43.725 --> 00:32:45.100 align:middle line:84% Either Christmas or Thanksgiving. 00:32:45.100 --> 00:32:47.220 align:middle line:90% RICHARD KIVEL: Yep. 00:32:47.220 --> 00:32:48.340 align:middle line:90% Absolutely. 00:32:48.340 --> 00:32:50.780 align:middle line:90% The Tyson fight. 00:32:50.780 --> 00:32:52.860 align:middle line:90% Think about that. 00:32:52.860 --> 00:32:57.990 align:middle line:84% So they're essentially modifying change in their business model. 00:32:57.990 --> 00:32:59.518 align:middle line:90% They're a great example. 00:32:59.518 --> 00:33:00.810 align:middle line:90% Next one, of course, is Google. 00:33:00.810 --> 00:33:01.530 align:middle line:90% This is easy. 00:33:01.530 --> 00:33:02.980 align:middle line:84% I mean, you've got a company here, 00:33:02.980 --> 00:33:05.230 align:middle line:84% and I think this is really the one that I should refer 00:33:05.230 --> 00:33:10.110 align:middle line:84% to when I talk about market cap versus GDP, not so much Netflix. 00:33:10.110 --> 00:33:15.350 align:middle line:90% But 2.4 trillion market cap. 00:33:15.350 --> 00:33:17.430 align:middle line:90% That's whack a doodle. 00:33:17.430 --> 00:33:19.153 align:middle line:90% It doesn't even make sense. 00:33:19.153 --> 00:33:20.570 align:middle line:84% And what did they start off doing? 00:33:20.570 --> 00:33:22.670 align:middle line:90% Search. 00:33:22.670 --> 00:33:23.450 align:middle line:90% That was it. 00:33:23.450 --> 00:33:24.630 align:middle line:84% They were going to build a better search 00:33:24.630 --> 00:33:26.838 align:middle line:84% algorithm, because there were a whole bunch of really 00:33:26.838 --> 00:33:29.470 align:middle line:84% smart people out of Stanford and elsewhere that said, 00:33:29.470 --> 00:33:31.070 align:middle line:90% search sucks. 00:33:31.070 --> 00:33:32.450 align:middle line:90% This just doesn't make sense. 00:33:32.450 --> 00:33:36.210 align:middle line:84% And humans aren't going to learn Boolean logic 00:33:36.210 --> 00:33:40.630 align:middle line:84% and put quotes here, a plus sign, plus this asterisks. 00:33:40.630 --> 00:33:42.830 align:middle line:84% We need to come up with better ways of searching. 00:33:42.830 --> 00:33:45.630 align:middle line:84% So they brought technology in and increased 00:33:45.630 --> 00:33:48.110 align:middle line:90% the value of search. 00:33:48.110 --> 00:33:51.110 align:middle line:84% And that's all they were was another search company. 00:33:51.110 --> 00:33:53.150 align:middle line:84% For those of us that remember those days, 00:33:53.150 --> 00:33:56.110 align:middle line:90% there was Lycos, Yahoo! 00:33:56.110 --> 00:33:58.590 align:middle line:84% Gosh, I can't even remember all the names. 00:33:58.590 --> 00:33:59.310 align:middle line:90% Amazing. 00:33:59.310 --> 00:34:04.150 align:middle line:84% I mean, I think Lycos was a Boston company, right? 00:34:04.150 --> 00:34:05.370 align:middle line:90% Unbelievable. 00:34:05.370 --> 00:34:06.870 align:middle line:84% And I remember at the time thinking, 00:34:06.870 --> 00:34:09.449 align:middle line:84% do we need to start another search engine? 00:34:09.449 --> 00:34:11.830 align:middle line:84% I mean, this doesn't even make sense. 00:34:11.830 --> 00:34:13.870 align:middle line:90% They crushed the search space. 00:34:13.870 --> 00:34:16.647 align:middle line:84% And they could have stopped there and still been relevant. 00:34:16.647 --> 00:34:18.730 align:middle line:84% But then they moved into other parts of the world. 00:34:18.730 --> 00:34:19.710 align:middle line:84% What are some of the other things 00:34:19.710 --> 00:34:21.590 align:middle line:84% that they have done from a standpoint 00:34:21.590 --> 00:34:24.350 align:middle line:84% of transformative business model changes 00:34:24.350 --> 00:34:27.070 align:middle line:90% that makes Google relevant? 00:34:27.070 --> 00:34:30.590 align:middle line:84% How else do all of us use Google or most of us? 00:34:30.590 --> 00:34:32.070 align:middle line:90% AUDIENCE: Google Drive. 00:34:32.070 --> 00:34:34.270 align:middle line:84% RICHARD KIVEL: Google Docs, Google Drive. 00:34:34.270 --> 00:34:36.906 align:middle line:84% I don't have to think about documents. 00:34:36.906 --> 00:34:38.489 align:middle line:84% Basically, I can go onto Google Drive, 00:34:38.489 --> 00:34:40.010 align:middle line:84% boom, use their Excel spreadsheet, 00:34:40.010 --> 00:34:42.510 align:middle line:90% save it, live action. 00:34:42.510 --> 00:34:44.929 align:middle line:84% My team, most of which is based in Europe, 00:34:44.929 --> 00:34:48.090 align:middle line:84% can all work on the same Excel spreadsheet at the same time, 00:34:48.090 --> 00:34:49.330 align:middle line:90% and it's instantly changing. 00:34:49.330 --> 00:34:53.938 align:middle line:84% We don't have to keep version 1.1, version 2.25, 00:34:53.938 --> 00:34:55.480 align:middle line:84% then I send it off to this person who 00:34:55.480 --> 00:34:57.280 align:middle line:84% makes some other version, and then 00:34:57.280 --> 00:35:00.520 align:middle line:84% we're missing the changes done by somebody over the weekend. 00:35:00.520 --> 00:35:01.880 align:middle line:90% Absolutely incredible. 00:35:01.880 --> 00:35:05.080 align:middle line:84% So that became another subscription model, 00:35:05.080 --> 00:35:08.160 align:middle line:84% another way they demonstrated their prowess in technology. 00:35:08.160 --> 00:35:10.200 align:middle line:90% What else does Google do? 00:35:10.200 --> 00:35:11.980 align:middle line:84% AUDIENCE: Google Voice or Google Maps, 00:35:11.980 --> 00:35:14.280 align:middle line:84% both of which I use 12,000 times a day. 00:35:14.280 --> 00:35:15.840 align:middle line:90% RICHARD KIVEL: Exactly. 00:35:15.840 --> 00:35:17.880 align:middle line:90% So think about Google Maps. 00:35:17.880 --> 00:35:20.720 align:middle line:90% Cool, free. 00:35:20.720 --> 00:35:24.680 align:middle line:84% The data analytics behind Google Maps is where all the value is. 00:35:24.680 --> 00:35:28.200 align:middle line:84% They know more about the Earth than most anyone. 00:35:28.200 --> 00:35:29.900 align:middle line:90% They know the topography. 00:35:29.900 --> 00:35:35.560 align:middle line:84% They know which ships are moving in the ocean. 00:35:35.560 --> 00:35:40.380 align:middle line:84% They know more about us than anyone in the world, 00:35:40.380 --> 00:35:43.320 align:middle line:84% whether it be the fact that we searched something 00:35:43.320 --> 00:35:45.600 align:middle line:90% and they now know that about us. 00:35:45.600 --> 00:35:47.680 align:middle line:84% Google has an entire group devoted 00:35:47.680 --> 00:35:52.040 align:middle line:84% to health, global health, that integrates with global health 00:35:52.040 --> 00:35:55.120 align:middle line:90% organizations like the NIH. 00:35:55.120 --> 00:35:57.500 align:middle line:84% If there is an increase in the number of searches, 00:35:57.500 --> 00:36:01.240 align:middle line:84% let's say, in the Pacific Northwest 00:36:01.240 --> 00:36:04.360 align:middle line:90% around particular symptoms. 00:36:04.360 --> 00:36:08.260 align:middle line:84% Runny nose, head fever, puking, you name it. 00:36:08.260 --> 00:36:11.400 align:middle line:90% Let's say little kid symptoms. 00:36:11.400 --> 00:36:14.680 align:middle line:84% Once Google starts to see that trend, then in the Pacific 00:36:14.680 --> 00:36:18.320 align:middle line:84% Northwest, let's say Seattle, blah, blah, blah, 00:36:18.320 --> 00:36:22.880 align:middle line:84% they're starting to see this, that becomes a biomarker. 00:36:22.880 --> 00:36:25.800 align:middle line:90% That becomes a data point. 00:36:25.800 --> 00:36:28.120 align:middle line:90% And they track that. 00:36:28.120 --> 00:36:31.200 align:middle line:84% And then they can share it with health organizations 00:36:31.200 --> 00:36:34.000 align:middle line:84% because they know that the flu this year hit that part 00:36:34.000 --> 00:36:37.560 align:middle line:90% of the region really hard. 00:36:37.560 --> 00:36:39.180 align:middle line:90% And what does that mean? 00:36:39.180 --> 00:36:42.058 align:middle line:84% Well, it has this ripple effect of power 00:36:42.058 --> 00:36:43.600 align:middle line:84% where it's like, that's cool to know, 00:36:43.600 --> 00:36:46.320 align:middle line:84% but what if we also let clinicians know, especially 00:36:46.320 --> 00:36:47.960 align:middle line:90% pediatricians? 00:36:47.960 --> 00:36:52.210 align:middle line:84% What if we're able to then communicate, 00:36:52.210 --> 00:36:56.497 align:middle line:84% sell our data to groups like PPD or some 00:36:56.497 --> 00:36:58.830 align:middle line:84% of the big pharmaceutical biotech companies like Johnson 00:36:58.830 --> 00:37:01.450 align:middle line:84% & Johnson that make over-the-counter medicine 00:37:01.450 --> 00:37:07.210 align:middle line:84% for kids suffering from the flu or vomiting or whatever it is? 00:37:07.210 --> 00:37:07.950 align:middle line:90% Think about that. 00:37:07.950 --> 00:37:11.130 align:middle line:84% It is an entire shift in how data collected 00:37:11.130 --> 00:37:13.970 align:middle line:84% from a company that did nothing but search now actually 00:37:13.970 --> 00:37:17.810 align:middle line:84% transforms the way health is actually treated. 00:37:17.810 --> 00:37:20.990 align:middle line:84% And when you start to see severe illnesses, 00:37:20.990 --> 00:37:25.850 align:middle line:84% you start to see things that are scary, that information is then 00:37:25.850 --> 00:37:28.450 align:middle line:90% communicated to the NIH. 00:37:28.450 --> 00:37:32.140 align:middle line:84% So every year we make new flu vaccines. 00:37:32.140 --> 00:37:33.890 align:middle line:84% They've got a pretty good high probability 00:37:33.890 --> 00:37:35.810 align:middle line:84% of working, because many of them, 00:37:35.810 --> 00:37:38.850 align:middle line:84% they're designed for multiple strains. 00:37:38.850 --> 00:37:41.250 align:middle line:84% But sometimes it just doesn't work so well. 00:37:41.250 --> 00:37:42.810 align:middle line:84% Once they're able to identify there's 00:37:42.810 --> 00:37:46.530 align:middle line:84% a new strain or a strain that is resistant to a vaccine given 00:37:46.530 --> 00:37:49.572 align:middle line:84% in that particular region, action can be taken. 00:37:49.572 --> 00:37:50.280 align:middle line:90% Think about that. 00:37:50.280 --> 00:37:52.765 align:middle line:90% It's absolutely mind boggling. 00:37:52.765 --> 00:37:54.140 align:middle line:84% Think about the fact that they're 00:37:54.140 --> 00:37:57.260 align:middle line:84% able to use their satellites and Google Earth and other things 00:37:57.260 --> 00:38:01.780 align:middle line:84% to actually help predict weather. 00:38:01.780 --> 00:38:04.480 align:middle line:84% There are companies in the financial service sector, 00:38:04.480 --> 00:38:08.220 align:middle line:84% and I spent two years myself at a big hedge fund in Connecticut. 00:38:08.220 --> 00:38:09.960 align:middle line:84% We looked at data from everywhere. 00:38:09.960 --> 00:38:11.520 align:middle line:90% I mean, I'm talking Google data. 00:38:11.520 --> 00:38:13.420 align:middle line:90% We looked at Palantir data. 00:38:13.420 --> 00:38:17.180 align:middle line:84% And we made bets, currency bets and other things, 00:38:17.180 --> 00:38:21.380 align:middle line:84% based on the fact that we were able to collect data from, let's 00:38:21.380 --> 00:38:25.060 align:middle line:84% say, public and non-public sources around the world. 00:38:25.060 --> 00:38:27.640 align:middle line:84% If I'm able to see trends in a particular area, 00:38:27.640 --> 00:38:31.420 align:middle line:84% I'm able to actually make decisions. 00:38:31.420 --> 00:38:34.540 align:middle line:84% How do we predict or how do we know 00:38:34.540 --> 00:38:38.480 align:middle line:84% how many cars are going to be sold in Q2 of this year? 00:38:38.480 --> 00:38:42.100 align:middle line:90% 00:38:42.100 --> 00:38:44.540 align:middle line:90% AUDIENCE: Registrations. 00:38:44.540 --> 00:38:47.940 align:middle line:84% RICHARD KIVEL: Perhaps registrations. 00:38:47.940 --> 00:38:49.900 align:middle line:84% If I ask you, how do we know how many cars 00:38:49.900 --> 00:38:53.120 align:middle line:84% were sold in Q4 of last year, how do we know? 00:38:53.120 --> 00:38:56.660 align:middle line:90% 00:38:56.660 --> 00:38:57.700 align:middle line:90% Because what? 00:38:57.700 --> 00:39:00.420 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:39:00.420 --> 00:39:03.000 align:middle line:84% RICHARD KIVEL: Yeah, but also financial reports. 00:39:03.000 --> 00:39:06.220 align:middle line:84% The CEO stood up at his annual meeting at the end of Q4 00:39:06.220 --> 00:39:09.980 align:middle line:84% and said, we're very proud to announce that blah, blah, blah, 00:39:09.980 --> 00:39:13.500 align:middle line:84% and this number of SUVs versus this and profitability. 00:39:13.500 --> 00:39:15.760 align:middle line:84% It's almost ancient data at that point. 00:39:15.760 --> 00:39:16.800 align:middle line:90% It's completely useless. 00:39:16.800 --> 00:39:20.360 align:middle line:84% You cannot buy a stock based on how many cars GM, Ford, 00:39:20.360 --> 00:39:24.580 align:middle line:90% Tesla sold last quarter. 00:39:24.580 --> 00:39:27.060 align:middle line:90% Trailing data is useless. 00:39:27.060 --> 00:39:29.620 align:middle line:84% What if I could use satellite information to actually see 00:39:29.620 --> 00:39:34.060 align:middle line:84% how many cars are being shipped out of Japan 00:39:34.060 --> 00:39:37.260 align:middle line:90% every single day of the year? 00:39:37.260 --> 00:39:39.540 align:middle line:84% Because I can tell you this, that if there's 00:39:39.540 --> 00:39:43.380 align:middle line:84% less ships leaving the port in Japan, 00:39:43.380 --> 00:39:46.870 align:middle line:84% that happens to be producing all of these Japanese cars as one 00:39:46.870 --> 00:39:50.590 align:middle line:84% example, or German cars, you name it. 00:39:50.590 --> 00:39:53.910 align:middle line:84% I can guarantee you that sales will be down next quarter. 00:39:53.910 --> 00:39:55.710 align:middle line:84% But nobody reports on this stuff. 00:39:55.710 --> 00:40:00.790 align:middle line:84% Because the car dealers know things are slowing down. 00:40:00.790 --> 00:40:03.030 align:middle line:90% Interest rates have gone up. 00:40:03.030 --> 00:40:05.710 align:middle line:84% Perhaps consumers are being more conservative because we 00:40:05.710 --> 00:40:08.030 align:middle line:84% have inflation, so they're keeping their car 00:40:08.030 --> 00:40:09.350 align:middle line:90% a couple years longer. 00:40:09.350 --> 00:40:13.550 align:middle line:84% None of that shows up in the sales data today or yesterday. 00:40:13.550 --> 00:40:17.590 align:middle line:84% But if you're a car dealer, like a Herb Chambers, 00:40:17.590 --> 00:40:19.413 align:middle line:84% and you're looking at your 15 dealerships 00:40:19.413 --> 00:40:20.830 align:middle line:84% and you're looking out of your lot 00:40:20.830 --> 00:40:25.110 align:middle line:84% and you're seeing umpteen cars sitting there 00:40:25.110 --> 00:40:27.390 align:middle line:84% and you think to yourself, geez, in Q1 00:40:27.390 --> 00:40:29.930 align:middle line:84% we would have sold this many, and in Q3 it went down, 00:40:29.930 --> 00:40:32.550 align:middle line:84% and in Q4, it went down a little bit. 00:40:32.550 --> 00:40:34.150 align:middle line:90% What the hell does that mean? 00:40:34.150 --> 00:40:38.230 align:middle line:84% Well, they do not want Nissan to suddenly 00:40:38.230 --> 00:40:41.190 align:middle line:90% deliver them another 90 cars. 00:40:41.190 --> 00:40:43.310 align:middle line:84% So they call their Nissan rep and they say, 00:40:43.310 --> 00:40:45.910 align:middle line:84% we're going to cut it back to 40 this quarter. 00:40:45.910 --> 00:40:48.790 align:middle line:84% We'll push the old shit we have on the lot. 00:40:48.790 --> 00:40:52.070 align:middle line:84% But nobody in Wall Street knows that shit 00:40:52.070 --> 00:40:55.370 align:middle line:84% until the end of the quarter when the CEO comes out and says, 00:40:55.370 --> 00:40:57.310 align:middle line:90% we sold less cars. 00:40:57.310 --> 00:40:59.670 align:middle line:84% Can you imagine you're able to use satellite technology 00:40:59.670 --> 00:41:03.350 align:middle line:84% to actually track the number of ships carrying cars 00:41:03.350 --> 00:41:06.030 align:middle line:90% and actually predict the future? 00:41:06.030 --> 00:41:09.110 align:middle line:90% Now, that's a business model. 00:41:09.110 --> 00:41:11.268 align:middle line:84% That's the kind of stuff that data is able to do. 00:41:11.268 --> 00:41:12.810 align:middle line:84% So when you think about your company, 00:41:12.810 --> 00:41:15.870 align:middle line:84% think about your business model, your first business model 00:41:15.870 --> 00:41:17.270 align:middle line:90% might be simple. 00:41:17.270 --> 00:41:19.110 align:middle line:90% You're shipping DVDs. 00:41:19.110 --> 00:41:24.190 align:middle line:84% You're selling this widget to companies that do presentations. 00:41:24.190 --> 00:41:27.010 align:middle line:84% You're selling this software to a logistics company, 00:41:27.010 --> 00:41:29.790 align:middle line:84% and that logistics company is going to increase productivity 00:41:29.790 --> 00:41:32.030 align:middle line:90% by 15%. 00:41:32.030 --> 00:41:35.950 align:middle line:84% But be prepared because your business model needs to change. 00:41:35.950 --> 00:41:37.970 align:middle line:84% You need to become more valuable to your client, 00:41:37.970 --> 00:41:41.160 align:middle line:84% more sticky, and more relevant all of the time. 00:41:41.160 --> 00:41:43.380 align:middle line:84% So I'll stop there with those two examples. 00:41:43.380 --> 00:41:45.630 align:middle line:84% And then just let's talk about a few other industries. 00:41:45.630 --> 00:41:48.100 align:middle line:84% Real quick, stop for questions, feedback, 00:41:48.100 --> 00:41:52.720 align:middle line:84% comments, anything really crazy I said that doesn't make sense? 00:41:52.720 --> 00:41:53.980 align:middle line:90% All right, let's keep moving. 00:41:53.980 --> 00:41:57.040 align:middle line:84% Let's talk about a couple of industries. 00:41:57.040 --> 00:41:59.860 align:middle line:84% And this goes, again, back to our original pie chart that 00:41:59.860 --> 00:42:02.360 align:middle line:84% came out of this great book that's part of this class, which 00:42:02.360 --> 00:42:04.600 align:middle line:84% is you've got these nine different things that you have 00:42:04.600 --> 00:42:05.260 align:middle line:90% to think about. 00:42:05.260 --> 00:42:07.902 align:middle line:90% And every industry is different. 00:42:07.902 --> 00:42:09.360 align:middle line:84% If you're in pharmaceutical, that's 00:42:09.360 --> 00:42:12.155 align:middle line:84% a hell of a lot different than the diagnostics industry. 00:42:12.155 --> 00:42:13.780 align:middle line:84% And if you're in the diagnostics space, 00:42:13.780 --> 00:42:16.600 align:middle line:84% it's a heck of a lot different than the medtech space. 00:42:16.600 --> 00:42:19.340 align:middle line:84% The medtech people are basically selling medical technologies. 00:42:19.340 --> 00:42:21.800 align:middle line:84% It might be hips, it might be knees, 00:42:21.800 --> 00:42:24.040 align:middle line:84% it might be an instrument sitting on a desk. 00:42:24.040 --> 00:42:27.000 align:middle line:84% The diagnostic people are actually selling tests. 00:42:27.000 --> 00:42:29.440 align:middle line:84% The pharmaceutical people, whether they're 00:42:29.440 --> 00:42:31.940 align:middle line:84% biotech or pharma, if they're really core biotech, 00:42:31.940 --> 00:42:34.800 align:middle line:84% they're building stuff, and they don't sell anything. 00:42:34.800 --> 00:42:37.880 align:middle line:84% And then they're hoping that stuff at phase two or phase 00:42:37.880 --> 00:42:39.760 align:middle line:90% three gets acquired by pharma. 00:42:39.760 --> 00:42:43.520 align:middle line:84% And then pharma pushes it out to their massive sales teams. 00:42:43.520 --> 00:42:45.920 align:middle line:84% So each of those within the life science sector 00:42:45.920 --> 00:42:47.760 align:middle line:84% all have a different business model. 00:42:47.760 --> 00:42:50.600 align:middle line:84% So one example I wanted to give is medtech. 00:42:50.600 --> 00:42:53.000 align:middle line:84% Because being at MIT, I spoke to one 00:42:53.000 --> 00:42:55.240 align:middle line:84% of the panelists that was up here earlier who's 00:42:55.240 --> 00:42:58.338 align:middle line:84% doing a company that is brand new company that's 00:42:58.338 --> 00:43:00.380 align:middle line:84% going to be spinning out of one of the labs here, 00:43:00.380 --> 00:43:02.040 align:middle line:90% Bob Langer's lab. 00:43:02.040 --> 00:43:04.560 align:middle line:84% And when you think about that new technology, 00:43:04.560 --> 00:43:07.247 align:middle line:84% right now, we're just trying to make proof of concept. 00:43:07.247 --> 00:43:09.080 align:middle line:84% But when it gets out into the market, how do 00:43:09.080 --> 00:43:11.960 align:middle line:84% you ultimately sell it is really critical. 00:43:11.960 --> 00:43:15.760 align:middle line:84% Because in fields like medtech, health care, life sciences, 00:43:15.760 --> 00:43:19.040 align:middle line:84% you not only need to have the greatest whiz bang stuff, 00:43:19.040 --> 00:43:22.920 align:middle line:84% but you need to think about adoption. 00:43:22.920 --> 00:43:25.840 align:middle line:84% You need to think about how do I get the most 00:43:25.840 --> 00:43:30.140 align:middle line:84% influential prescribers, doctors, clinicians, surgeons, 00:43:30.140 --> 00:43:35.840 align:middle line:84% pediatricians, oncologists to do this and look at it 00:43:35.840 --> 00:43:38.050 align:middle line:84% and then tell their friends at the next conference 00:43:38.050 --> 00:43:40.810 align:middle line:84% they speak at that there's a new surgical instrument that they're 00:43:40.810 --> 00:43:42.010 align:middle line:90% using? 00:43:42.010 --> 00:43:45.422 align:middle line:84% So in this world of medtech, as an example, and some of you 00:43:45.422 --> 00:43:47.130 align:middle line:84% all raised your hands earlier that you're 00:43:47.130 --> 00:43:49.610 align:middle line:84% in that field of life sciences, you 00:43:49.610 --> 00:43:53.730 align:middle line:84% have a problem that most other industries don't have. 00:43:53.730 --> 00:43:57.650 align:middle line:84% You need to be able to first make things work. 00:43:57.650 --> 00:43:59.910 align:middle line:84% Make sure that it's both efficacious and safe. 00:43:59.910 --> 00:44:02.250 align:middle line:84% It works, but it doesn't kill anybody. 00:44:02.250 --> 00:44:04.130 align:middle line:84% It's probably a good combination. 00:44:04.130 --> 00:44:06.690 align:middle line:84% But even though you have a great product that works 00:44:06.690 --> 00:44:10.090 align:middle line:84% and it didn't kill anybody, nobody 00:44:10.090 --> 00:44:12.290 align:middle line:84% might write a prescription for it. 00:44:12.290 --> 00:44:14.930 align:middle line:90% No doctor may ever even use it. 00:44:14.930 --> 00:44:17.890 align:middle line:84% And depending what kind of doctors you're dealing with, 00:44:17.890 --> 00:44:19.530 align:middle line:84% holy shit, then your business model 00:44:19.530 --> 00:44:24.463 align:middle line:84% is even more challenged, because if you're dealing with surgeons, 00:44:24.463 --> 00:44:25.630 align:middle line:90% they're pretty cutting edge. 00:44:25.630 --> 00:44:27.450 align:middle line:90% They love the newest gadgets. 00:44:27.450 --> 00:44:30.450 align:middle line:84% If you're dealing with psychiatrists, 00:44:30.450 --> 00:44:34.010 align:middle line:84% probably not so quick to adopt new technology. 00:44:34.010 --> 00:44:36.650 align:middle line:84% They're still using DSM 5 to actually predict 00:44:36.650 --> 00:44:38.663 align:middle line:84% what the particular disorder is or disease 00:44:38.663 --> 00:44:40.330 align:middle line:84% that their patient has, and then they're 00:44:40.330 --> 00:44:43.650 align:middle line:84% prescribing very often off label drugs or drugs that 00:44:43.650 --> 00:44:44.770 align:middle line:90% are off patent. 00:44:44.770 --> 00:44:47.470 align:middle line:84% So you have different types of users. 00:44:47.470 --> 00:44:49.217 align:middle line:84% Those are the people you're selling to. 00:44:49.217 --> 00:44:50.550 align:middle line:90% So you have to think about that. 00:44:50.550 --> 00:44:52.543 align:middle line:84% In the medtech world, your business model 00:44:52.543 --> 00:44:54.210 align:middle line:84% is absolutely critical, because not only 00:44:54.210 --> 00:44:57.170 align:middle line:84% do you have to make something that doesn't kill people 00:44:57.170 --> 00:45:00.430 align:middle line:84% or makes their life better and really works, 00:45:00.430 --> 00:45:02.650 align:middle line:84% but you also have to figure out how on Earth 00:45:02.650 --> 00:45:04.450 align:middle line:84% am I going to be able to pay for this? 00:45:04.450 --> 00:45:06.410 align:middle line:84% Are they going to be able to pay for it? 00:45:06.410 --> 00:45:08.690 align:middle line:84% Is this going to be a direct to consumer, 00:45:08.690 --> 00:45:11.770 align:middle line:84% all of us open up our phone and we get advertisements 00:45:11.770 --> 00:45:13.955 align:middle line:84% for this gut microbiome test, and we get 00:45:13.955 --> 00:45:15.330 align:middle line:84% advertisement for something else? 00:45:15.330 --> 00:45:20.290 align:middle line:84% Know your ancestry and you'll be able to better manage 00:45:20.290 --> 00:45:22.930 align:middle line:90% your future health. 00:45:22.930 --> 00:45:27.810 align:middle line:84% Or if you're a person suffering with cardiovascular issues, 00:45:27.810 --> 00:45:30.342 align:middle line:84% you may see something on a commercial. 00:45:30.342 --> 00:45:32.050 align:middle line:84% But at the end of the day, if your doctor 00:45:32.050 --> 00:45:35.780 align:middle line:84% doesn't write a prescription for that new medication. 00:45:35.780 --> 00:45:38.300 align:middle line:90% It just doesn't sell. 00:45:38.300 --> 00:45:40.920 align:middle line:84% So when you think about your business model, 00:45:40.920 --> 00:45:44.980 align:middle line:84% it's really important to think about who are the constituents I 00:45:44.980 --> 00:45:48.020 align:middle line:90% need to convince? 00:45:48.020 --> 00:45:52.260 align:middle line:84% It's not as easy as selling cool t-shirts on eBay or Amazon, 00:45:52.260 --> 00:45:55.380 align:middle line:84% where I'm just hoping it's cool enough that people will buy it. 00:45:55.380 --> 00:45:58.740 align:middle line:84% And if it doesn't, I don't really have a lot of overhead. 00:45:58.740 --> 00:46:00.520 align:middle line:90% It is a complex industry. 00:46:00.520 --> 00:46:05.980 align:middle line:84% It's like selling SaaS platforms to the automotive industry. 00:46:05.980 --> 00:46:08.680 align:middle line:84% The automotive industry doesn't move very fast. 00:46:08.680 --> 00:46:11.420 align:middle line:90% It doesn't change very quickly. 00:46:11.420 --> 00:46:14.060 align:middle line:84% And because it's very big and powerful. 00:46:14.060 --> 00:46:19.500 align:middle line:84% It probably is hard to get an automotive company 00:46:19.500 --> 00:46:24.080 align:middle line:84% to put new technology into its system, 00:46:24.080 --> 00:46:26.080 align:middle line:84% because everything's working just the way it is. 00:46:26.080 --> 00:46:27.955 align:middle line:84% Yeah, we can make it a little more efficient, 00:46:27.955 --> 00:46:30.140 align:middle line:84% but we kind of like our procurement 00:46:30.140 --> 00:46:32.305 align:middle line:90% process the way it is. 00:46:32.305 --> 00:46:33.930 align:middle line:84% If you want to sell into that industry, 00:46:33.930 --> 00:46:35.790 align:middle line:84% you need to think about who are the constituents I'm selling it 00:46:35.790 --> 00:46:36.372 align:middle line:90% to. 00:46:36.372 --> 00:46:37.830 align:middle line:84% Versus, let's say, an industry that 00:46:37.830 --> 00:46:39.990 align:middle line:90% is right at the cutting edge. 00:46:39.990 --> 00:46:42.030 align:middle line:84% Software companies that are looking 00:46:42.030 --> 00:46:45.190 align:middle line:84% to tweak the finest little bit of value out 00:46:45.190 --> 00:46:48.392 align:middle line:84% of how their disparate teams communicate. 00:46:48.392 --> 00:46:49.850 align:middle line:84% They're going to download that app. 00:46:49.850 --> 00:46:51.590 align:middle line:90% They're going to try it out. 00:46:51.590 --> 00:46:53.990 align:middle line:84% They're going to do things at a speed and a pace 00:46:53.990 --> 00:46:56.830 align:middle line:84% that you wouldn't normally expect. 00:46:56.830 --> 00:47:02.510 align:middle line:84% The challenge is that there might be high switching cost. 00:47:02.510 --> 00:47:04.990 align:middle line:90% So you've got to challenge that. 00:47:04.990 --> 00:47:08.070 align:middle line:84% All of us today, we could sign up for an AT&T contract 00:47:08.070 --> 00:47:10.212 align:middle line:84% today and get our discounted iPhone and so forth. 00:47:10.212 --> 00:47:11.670 align:middle line:84% And then a year from now, we decide 00:47:11.670 --> 00:47:13.230 align:middle line:90% we're going to go to T-Mobile. 00:47:13.230 --> 00:47:15.390 align:middle line:90% Maybe we have to pay a fee. 00:47:15.390 --> 00:47:15.982 align:middle line:90% No stress. 00:47:15.982 --> 00:47:16.690 align:middle line:90% Keep your number. 00:47:16.690 --> 00:47:17.950 align:middle line:90% Go to T-Mobile. 00:47:17.950 --> 00:47:24.870 align:middle line:84% So that's high switching cost for the company, low switching 00:47:24.870 --> 00:47:26.990 align:middle line:90% costs for us. 00:47:26.990 --> 00:47:30.790 align:middle line:84% And if I'm the one buying stuff, I like low switching costs. 00:47:30.790 --> 00:47:37.190 align:middle line:84% If I join this fancy Equinox fitness center 00:47:37.190 --> 00:47:39.050 align:middle line:84% and I'm not locked into a two year contract, 00:47:39.050 --> 00:47:40.925 align:middle line:84% and I can quickly move over to something else 00:47:40.925 --> 00:47:44.130 align:middle line:84% and go to LA Fitness, that's low switching costs for me. 00:47:44.130 --> 00:47:45.630 align:middle line:90% I like that. 00:47:45.630 --> 00:47:47.998 align:middle line:84% But for them it sucks, because they 00:47:47.998 --> 00:47:49.290 align:middle line:90% might have tremendous turnover. 00:47:49.290 --> 00:47:51.550 align:middle line:84% So you have to think about that as well. 00:47:51.550 --> 00:47:53.050 align:middle line:90% Who am I selling to? 00:47:53.050 --> 00:47:54.270 align:middle line:90% What is the differentiation? 00:47:54.270 --> 00:47:58.030 align:middle line:84% And how do I get them to keep coming back forever? 00:47:58.030 --> 00:48:01.330 align:middle line:84% Because for me to be competitive in my industry, 00:48:01.330 --> 00:48:05.070 align:middle line:90% I have to have no contract. 00:48:05.070 --> 00:48:07.550 align:middle line:84% Think about some of these new mobile phone companies 00:48:07.550 --> 00:48:08.408 align:middle line:90% out there. 00:48:08.408 --> 00:48:10.950 align:middle line:84% Who can think about-- what are a couple of the names you hear 00:48:10.950 --> 00:48:13.430 align:middle line:84% that are some of these newfangled phone companies 00:48:13.430 --> 00:48:15.670 align:middle line:84% out there, one of which is represented 00:48:15.670 --> 00:48:17.090 align:middle line:90% by a very famous actor? 00:48:17.090 --> 00:48:20.070 align:middle line:90% 00:48:20.070 --> 00:48:21.390 align:middle line:90% Mint Mobile. 00:48:21.390 --> 00:48:22.630 align:middle line:90% And there's a few others. 00:48:22.630 --> 00:48:25.150 align:middle line:90% Consumer Cellular. 00:48:25.150 --> 00:48:25.970 align:middle line:90% Think about it. 00:48:25.970 --> 00:48:31.120 align:middle line:84% Does anybody here know who Mint Mobile 00:48:31.120 --> 00:48:34.080 align:middle line:90% uses for their entire network? 00:48:34.080 --> 00:48:35.880 align:middle line:90% T-Mobile. 00:48:35.880 --> 00:48:36.740 align:middle line:90% Why would that be? 00:48:36.740 --> 00:48:39.880 align:middle line:84% Think to yourself, holy shit, Mint Mobile 00:48:39.880 --> 00:48:43.120 align:middle line:90% is using the T-Mobile network. 00:48:43.120 --> 00:48:45.520 align:middle line:90% Why would they do that? 00:48:45.520 --> 00:48:48.080 align:middle line:84% Because T-Mobile realized that there's 00:48:48.080 --> 00:48:50.960 align:middle line:84% a different level of consumer that 00:48:50.960 --> 00:48:55.360 align:middle line:84% might want the flexibility of bring your device, 00:48:55.360 --> 00:48:57.840 align:middle line:84% no contracts, short term contracts, 00:48:57.840 --> 00:49:00.200 align:middle line:90% super cheap on a monthly basis. 00:49:00.200 --> 00:49:02.720 align:middle line:84% But you're not going to be able to download 00:49:02.720 --> 00:49:04.160 align:middle line:90% as quickly as you want. 00:49:04.160 --> 00:49:07.640 align:middle line:84% There's going to be some restrictions around bandwidth. 00:49:07.640 --> 00:49:10.960 align:middle line:84% But your roommate, who's a T-Mobile customer, 00:49:10.960 --> 00:49:13.440 align:middle line:84% is probably paying $70 more a month, 00:49:13.440 --> 00:49:18.240 align:middle line:84% and they have ubiquitous connectivity. 00:49:18.240 --> 00:49:19.420 align:middle line:90% That's a business model. 00:49:19.420 --> 00:49:20.760 align:middle line:90% Think about that. 00:49:20.760 --> 00:49:23.840 align:middle line:90% T-Mobile has a business model. 00:49:23.840 --> 00:49:25.300 align:middle line:90% AT&T has a business model. 00:49:25.300 --> 00:49:26.420 align:middle line:90% They're almost identical. 00:49:26.420 --> 00:49:28.320 align:middle line:90% Verizon has a business model. 00:49:28.320 --> 00:49:33.960 align:middle line:84% In the UK, my phone is a Virgin Mobile carrier. 00:49:33.960 --> 00:49:35.400 align:middle line:90% That's their business model. 00:49:35.400 --> 00:49:39.320 align:middle line:84% But T-Mobile said there's an entire part of the market that 00:49:39.320 --> 00:49:43.840 align:middle line:84% we cannot even touch, because the way we operate in the big 00:49:43.840 --> 00:49:46.860 align:middle line:84% stores is one year contracts, fancy phones. 00:49:46.860 --> 00:49:51.440 align:middle line:84% Lock your ass in, and we're going to charge you a fortune. 00:49:51.440 --> 00:49:53.280 align:middle line:90% And they got smart. 00:49:53.280 --> 00:49:56.040 align:middle line:84% So what you think about is even companies 00:49:56.040 --> 00:49:59.520 align:middle line:84% that have a great business model that's succeeding, in order 00:49:59.520 --> 00:50:04.400 align:middle line:84% for them to capture an entirely new part of the market, 00:50:04.400 --> 00:50:07.040 align:middle line:84% they might have to reinvent themselves 00:50:07.040 --> 00:50:11.720 align:middle line:84% or they create a new brand that they own. 00:50:11.720 --> 00:50:12.980 align:middle line:90% What's another example? 00:50:12.980 --> 00:50:16.000 align:middle line:84% Think about this in other industries, not tech, maybe 00:50:16.000 --> 00:50:22.340 align:middle line:84% tech, of brands you know that were known for one thing, 00:50:22.340 --> 00:50:25.490 align:middle line:84% perhaps, and now they've got multiple brands 00:50:25.490 --> 00:50:30.170 align:middle line:84% under the same umbrella to serve different consumers. 00:50:30.170 --> 00:50:31.248 align:middle line:90% What's an example? 00:50:31.248 --> 00:50:32.790 align:middle line:84% How about in the automotive industry? 00:50:32.790 --> 00:50:35.970 align:middle line:90% 00:50:35.970 --> 00:50:36.890 align:middle line:90% Who is it? 00:50:36.890 --> 00:50:41.370 align:middle line:84% AUDIENCE: [INAUDIBLE] and Lexus primarily. 00:50:41.370 --> 00:50:43.530 align:middle line:84% RICHARD KIVEL: And Toyota, right? 00:50:43.530 --> 00:50:45.530 align:middle line:90% Lexus and Toyota. 00:50:45.530 --> 00:50:48.350 align:middle line:90% So think about that. 00:50:48.350 --> 00:50:52.770 align:middle line:84% Toyota dominated forever, but it was 00:50:52.770 --> 00:50:56.830 align:middle line:84% considered the car you bought, middle of the road, 00:50:56.830 --> 00:50:59.130 align:middle line:90% safe, reliable. 00:50:59.130 --> 00:51:03.010 align:middle line:84% They knew they were never going to get the up and coming kick 00:51:03.010 --> 00:51:06.450 align:middle line:84% ass researcher who was making $50,000 a year and is now making 00:51:06.450 --> 00:51:08.810 align:middle line:90% 450 a year at Novartis. 00:51:08.810 --> 00:51:12.050 align:middle line:84% That dude, that woman, were not buying a Toyota. 00:51:12.050 --> 00:51:14.010 align:middle line:84% They were buying the Mercedes or they 00:51:14.010 --> 00:51:16.070 align:middle line:84% were buying something else, the Cadillac, 00:51:16.070 --> 00:51:17.955 align:middle line:90% whatever it was at the time. 00:51:17.955 --> 00:51:20.330 align:middle line:84% Toyota realized we have an entire part of the market that 00:51:20.330 --> 00:51:24.930 align:middle line:84% we cannot even reach, and they created Lexus. 00:51:24.930 --> 00:51:26.570 align:middle line:90% Nissan. 00:51:26.570 --> 00:51:29.050 align:middle line:90% What did Nissan create? 00:51:29.050 --> 00:51:30.010 align:middle line:90% Infiniti. 00:51:30.010 --> 00:51:31.210 align:middle line:90% Same thing. 00:51:31.210 --> 00:51:34.170 align:middle line:90% What did Volkswagen create? 00:51:34.170 --> 00:51:36.690 align:middle line:90% Acura. 00:51:36.690 --> 00:51:38.197 align:middle line:90% Audi was an independent brand. 00:51:38.197 --> 00:51:39.030 align:middle line:90% They may own it now. 00:51:39.030 --> 00:51:40.650 align:middle line:90% Who the hell knows? 00:51:40.650 --> 00:51:44.030 align:middle line:90% They created Acura. 00:51:44.030 --> 00:51:44.770 align:middle line:90% What is it? 00:51:44.770 --> 00:51:46.130 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:51:46.130 --> 00:51:46.550 align:middle line:90% RICHARD KIVEL: Oh, yes. 00:51:46.550 --> 00:51:47.092 align:middle line:90% You're right. 00:51:47.092 --> 00:51:48.170 align:middle line:90% Absolutely. 00:51:48.170 --> 00:51:48.790 align:middle line:90% Was it Audi? 00:51:48.790 --> 00:51:51.050 align:middle line:84% I thought Volkswagen created a different brand. 00:51:51.050 --> 00:51:53.170 align:middle line:84% AUDIENCE: They bought [INAUDIBLE]. 00:51:53.170 --> 00:51:54.947 align:middle line:84% RICHARD KIVEL: Oh, that's right, they did. 00:51:54.947 --> 00:51:56.030 align:middle line:90% And that's just different. 00:51:56.030 --> 00:51:58.050 align:middle line:84% That's a consolidation in the industry. 00:51:58.050 --> 00:52:00.030 align:middle line:84% But when you think about some of these brands, 00:52:00.030 --> 00:52:02.150 align:middle line:84% think about brands that we all wear every day. 00:52:02.150 --> 00:52:07.650 align:middle line:84% Think about Ralph Lauren as a brand. 00:52:07.650 --> 00:52:09.890 align:middle line:84% What's under the umbrella of Ralph Lauren? 00:52:09.890 --> 00:52:13.930 align:middle line:84% What's at the high level and lowest level of Ralph Lauren? 00:52:13.930 --> 00:52:15.690 align:middle line:90% Does anybody know? 00:52:15.690 --> 00:52:19.780 align:middle line:84% Have you heard of the brand called Lauren? 00:52:19.780 --> 00:52:20.560 align:middle line:90% Google it. 00:52:20.560 --> 00:52:24.020 align:middle line:84% Lauren is like their bespoke tailored 00:52:24.020 --> 00:52:29.540 align:middle line:90% $900 for a jacket Lauren. 00:52:29.540 --> 00:52:35.620 align:middle line:84% The next level down is Polo by Ralph Lauren. 00:52:35.620 --> 00:52:39.100 align:middle line:84% You know there's actually a level above Lauren? 00:52:39.100 --> 00:52:42.140 align:middle line:90% It's called a Purple Label. 00:52:42.140 --> 00:52:48.080 align:middle line:84% It is made to order couture level under Ralph Lauren. 00:52:48.080 --> 00:52:50.820 align:middle line:84% You know where it is all the way at the bottom? 00:52:50.820 --> 00:52:54.940 align:middle line:84% Polo Sport, which is still a great product. 00:52:54.940 --> 00:53:00.900 align:middle line:84% But if you're just looking for a cheap sweatshirt or a zip up 00:53:00.900 --> 00:53:05.122 align:middle line:84% Polo Sport works great, and it's part of the Ralph Lauren brand. 00:53:05.122 --> 00:53:06.580 align:middle line:84% If you're at the next level, you're 00:53:06.580 --> 00:53:12.060 align:middle line:84% buying the cute little horse on your shirt, the $95, $110 zip 00:53:12.060 --> 00:53:13.660 align:middle line:90% up sweater with the horse. 00:53:13.660 --> 00:53:16.180 align:middle line:90% Polo by Ralph Lauren. 00:53:16.180 --> 00:53:18.860 align:middle line:84% You could buy a really nice jacket for $200. 00:53:18.860 --> 00:53:20.340 align:middle line:90% The next level, Lauren. 00:53:20.340 --> 00:53:22.780 align:middle line:90% The next level, Purple. 00:53:22.780 --> 00:53:24.100 align:middle line:90% Think about that. 00:53:24.100 --> 00:53:26.980 align:middle line:90% They own your entire life. 00:53:26.980 --> 00:53:29.473 align:middle line:84% You became loyal to the brand when you were 17 years old 00:53:29.473 --> 00:53:31.140 align:middle line:84% and all you could afford was Polo Sport. 00:53:31.140 --> 00:53:32.940 align:middle line:90% You thought it was so cool. 00:53:32.940 --> 00:53:35.660 align:middle line:84% And now you're at the next level and you're still 00:53:35.660 --> 00:53:38.020 align:middle line:90% loyal to the brand. 00:53:38.020 --> 00:53:41.060 align:middle line:84% That's the beauty of companies that 00:53:41.060 --> 00:53:43.920 align:middle line:84% think about business model every single day 00:53:43.920 --> 00:53:47.820 align:middle line:84% and what is the market segment that we can capture next. 00:53:47.820 --> 00:53:49.580 align:middle line:84% So let's move along a little bit. 00:53:49.580 --> 00:53:51.320 align:middle line:84% Digital commerce is always changing. 00:53:51.320 --> 00:53:53.653 align:middle line:84% I'm going to blast through these, because this stuff you 00:53:53.653 --> 00:53:54.180 align:middle line:90% guys know. 00:53:54.180 --> 00:53:56.220 align:middle line:84% But when I think about digital commerce, 00:53:56.220 --> 00:53:59.060 align:middle line:84% because it's changed so much, not only because bandwidth 00:53:59.060 --> 00:54:02.080 align:middle line:84% is increased, but now with the intervention of AI, 00:54:02.080 --> 00:54:04.060 align:middle line:84% which we'll talk about, you've got 00:54:04.060 --> 00:54:07.140 align:middle line:84% all of these new models that were created. 00:54:07.140 --> 00:54:10.960 align:middle line:84% Think about Uber really owns no cars. 00:54:10.960 --> 00:54:15.180 align:middle line:84% Airbnb doesn't own any hotel rooms, 00:54:15.180 --> 00:54:17.550 align:middle line:84% but they have more rooms controlled 00:54:17.550 --> 00:54:22.390 align:middle line:84% than the top three hotel companies in the world combined. 00:54:22.390 --> 00:54:25.790 align:middle line:84% That sharing economy suddenly became very, very valuable. 00:54:25.790 --> 00:54:29.030 align:middle line:84% The personalized economy is pretty incredible too. 00:54:29.030 --> 00:54:32.027 align:middle line:84% It's I've got a subscription to this, and consumers say, 00:54:32.027 --> 00:54:32.610 align:middle line:90% you know what? 00:54:32.610 --> 00:54:33.210 align:middle line:90% Surprise me. 00:54:33.210 --> 00:54:35.590 align:middle line:90% I'll try that out. 00:54:35.590 --> 00:54:38.390 align:middle line:84% I'll take a shot, because I already subscribe 00:54:38.390 --> 00:54:40.310 align:middle line:90% to this particular brand. 00:54:40.310 --> 00:54:41.390 align:middle line:90% I'll try it. 00:54:41.390 --> 00:54:44.550 align:middle line:84% Think about companies like Rent The Runway. 00:54:44.550 --> 00:54:45.910 align:middle line:90% I'll try it. 00:54:45.910 --> 00:54:47.550 align:middle line:90% I'll pay my subscription. 00:54:47.550 --> 00:54:52.230 align:middle line:84% I get this beautiful dress or five of them sent to me. 00:54:52.230 --> 00:54:52.730 align:middle line:90% I'll try it. 00:54:52.730 --> 00:54:54.990 align:middle line:84% If I don't like it, I just send it back. 00:54:54.990 --> 00:54:57.870 align:middle line:84% It's not the sharing economy, but it 00:54:57.870 --> 00:54:59.730 align:middle line:90% is this personalized economy. 00:54:59.730 --> 00:55:00.770 align:middle line:90% They know my style. 00:55:00.770 --> 00:55:03.270 align:middle line:90% I get it sent to me. 00:55:03.270 --> 00:55:06.590 align:middle line:84% Entirely different models, but they work so well. 00:55:06.590 --> 00:55:08.150 align:middle line:84% Certainly the replenishment economy 00:55:08.150 --> 00:55:10.670 align:middle line:84% is actually taking off more and more. 00:55:10.670 --> 00:55:12.550 align:middle line:84% And these are driven by the smart sensors 00:55:12.550 --> 00:55:14.560 align:middle line:90% in all of our lives. 00:55:14.560 --> 00:55:17.520 align:middle line:84% These are the things that when you sign up for your Amazon 00:55:17.520 --> 00:55:19.300 align:middle line:84% account and you do an Amazon subscription, 00:55:19.300 --> 00:55:22.260 align:middle line:84% think about it, that's a replenish economy. 00:55:22.260 --> 00:55:27.480 align:middle line:84% I know that every 30 days, I need another box of Cascade 00:55:27.480 --> 00:55:33.280 align:middle line:84% for my dishwasher, or I need another something or other 00:55:33.280 --> 00:55:35.680 align:middle line:84% that will be delivered to me automatically. 00:55:35.680 --> 00:55:38.240 align:middle line:84% I don't have to think about it anymore. 00:55:38.240 --> 00:55:42.520 align:middle line:84% Refrigerators are now using RFID and all sorts of other tags 00:55:42.520 --> 00:55:46.178 align:middle line:84% where you're going to be able to barcode scan the things that 00:55:46.178 --> 00:55:47.220 align:middle line:90% are in your refrigerator. 00:55:47.220 --> 00:55:50.220 align:middle line:84% And when you're out, it just goes on to your shopping list. 00:55:50.220 --> 00:55:52.000 align:middle line:90% It's the replenish economy. 00:55:52.000 --> 00:55:55.040 align:middle line:84% That's an entirely cool business model. 00:55:55.040 --> 00:55:57.480 align:middle line:84% Versus the I run out of shit and go 00:55:57.480 --> 00:56:01.760 align:middle line:84% to the supermarket economy, which is pretty much how 00:56:01.760 --> 00:56:03.440 align:middle line:90% I live still. 00:56:03.440 --> 00:56:04.420 align:middle line:90% I make a little list. 00:56:04.420 --> 00:56:05.860 align:middle line:84% Oh, shit, I'm out of those things again. 00:56:05.860 --> 00:56:06.735 align:middle line:90% I put it on the list. 00:56:06.735 --> 00:56:08.660 align:middle line:84% And then at the end of the week or month, 00:56:08.660 --> 00:56:11.920 align:middle line:84% I might go over to the supermarket and buy it. 00:56:11.920 --> 00:56:15.032 align:middle line:84% I'd much prefer it show up to my house. 00:56:15.032 --> 00:56:17.240 align:middle line:84% So think about those little tweaks in business models 00:56:17.240 --> 00:56:19.480 align:middle line:84% really work, and certainly the do it for me 00:56:19.480 --> 00:56:21.920 align:middle line:90% service economy has exploded. 00:56:21.920 --> 00:56:24.622 align:middle line:84% Everything from, I mean, my shirts get dirty, 00:56:24.622 --> 00:56:26.580 align:middle line:84% I put them in a bag, I hang it outside my door. 00:56:26.580 --> 00:56:28.145 align:middle line:84% There's a little guy in a van shows 00:56:28.145 --> 00:56:29.520 align:middle line:84% up, boom, takes them twice a week 00:56:29.520 --> 00:56:31.560 align:middle line:90% and brings other stuff back. 00:56:31.560 --> 00:56:35.200 align:middle line:84% But that has now accelerated into a lot of other industries 00:56:35.200 --> 00:56:36.960 align:middle line:84% where people are basically getting 00:56:36.960 --> 00:56:39.960 align:middle line:84% services that only the rich could afford 50 or 20 00:56:39.960 --> 00:56:41.440 align:middle line:90% or 30 years ago. 00:56:41.440 --> 00:56:43.920 align:middle line:90% And now anybody can do it. 00:56:43.920 --> 00:56:46.400 align:middle line:84% Think about home cleaning services. 00:56:46.400 --> 00:56:49.280 align:middle line:84% I mean, when I was young, no one had a maid unless they 00:56:49.280 --> 00:56:50.740 align:middle line:90% were really, really rich. 00:56:50.740 --> 00:56:52.812 align:middle line:90% They had a cleaning person. 00:56:52.812 --> 00:56:55.020 align:middle line:84% Then all of a sudden, it became more and more common. 00:56:55.020 --> 00:56:58.400 align:middle line:84% And now every time I open up my phone, 00:56:58.400 --> 00:57:01.760 align:middle line:84% there's a new ad for some service, whether it be handyman 00:57:01.760 --> 00:57:03.720 align:middle line:90% or it be cleaning people. 00:57:03.720 --> 00:57:08.000 align:middle line:84% I can get my car waxed and detailed in my driveway. 00:57:08.000 --> 00:57:11.970 align:middle line:84% So think about whatever you guys are building. 00:57:11.970 --> 00:57:13.870 align:middle line:84% How am I going to get to my consumer? 00:57:13.870 --> 00:57:16.130 align:middle line:90% Who do I have to convince? 00:57:16.130 --> 00:57:17.350 align:middle line:90% How do I scale? 00:57:17.350 --> 00:57:20.350 align:middle line:90% How do I change as times change? 00:57:20.350 --> 00:57:23.690 align:middle line:84% The hospitality industry, I think, is one of the most fun. 00:57:23.690 --> 00:57:26.170 align:middle line:84% For a gazillion years, we've all basically 00:57:26.170 --> 00:57:28.970 align:middle line:84% just used travel agents or we would go online 00:57:28.970 --> 00:57:30.610 align:middle line:90% and we'd book our trip. 00:57:30.610 --> 00:57:33.490 align:middle line:84% We'd go and search, what are the flights? 00:57:33.490 --> 00:57:35.330 align:middle line:90% What is this, what is that? 00:57:35.330 --> 00:57:37.330 align:middle line:84% Before you know it, we pull together our trip. 00:57:37.330 --> 00:57:40.690 align:middle line:84% Nowadays, what you're seeing is these incredible technologies 00:57:40.690 --> 00:57:42.010 align:middle line:90% allowing us-- 00:57:42.010 --> 00:57:47.810 align:middle line:84% you can use ChatGPT and say, act as a travel agent. 00:57:47.810 --> 00:57:52.330 align:middle line:84% Design me a six day trip in Rome. 00:57:52.330 --> 00:57:54.630 align:middle line:90% I'm very interested in museums. 00:57:54.630 --> 00:57:56.270 align:middle line:90% I'm interested in science. 00:57:56.270 --> 00:57:58.170 align:middle line:90% I'm interested in academia. 00:57:58.170 --> 00:58:00.850 align:middle line:84% I am not interested in any family events, 00:58:00.850 --> 00:58:04.430 align:middle line:84% and I want it to be within this particular area. 00:58:04.430 --> 00:58:04.930 align:middle line:90% Boom. 00:58:04.930 --> 00:58:06.610 align:middle line:90% We have that in front of us. 00:58:06.610 --> 00:58:10.130 align:middle line:84% So the travel industry has been transformed by technology, 00:58:10.130 --> 00:58:11.570 align:middle line:84% and now we're talking about things 00:58:11.570 --> 00:58:17.490 align:middle line:84% like co-robots in the future, renewable tourism events. 00:58:17.490 --> 00:58:20.170 align:middle line:84% What you also have is space tourism. 00:58:20.170 --> 00:58:22.112 align:middle line:84% Things that we never dreamed of before. 00:58:22.112 --> 00:58:23.570 align:middle line:84% There's a company that I'm involved 00:58:23.570 --> 00:58:27.090 align:middle line:84% with that's in Spain that literally builds 00:58:27.090 --> 00:58:29.690 align:middle line:84% these massive, bigger than this room, 00:58:29.690 --> 00:58:32.570 align:middle line:90% giant monster helium balloons. 00:58:32.570 --> 00:58:37.390 align:middle line:84% And they have this capsule and it goes to whatever orbit 00:58:37.390 --> 00:58:38.390 align:middle line:90% it particularly goes to. 00:58:38.390 --> 00:58:41.890 align:middle line:84% You can see the entire curvature of the Earth. 00:58:41.890 --> 00:58:44.690 align:middle line:84% Who would have thought that would be a business model? 00:58:44.690 --> 00:58:46.610 align:middle line:84% But you have companies that are creating 00:58:46.610 --> 00:58:49.090 align:middle line:84% new technologies and new business models 00:58:49.090 --> 00:58:51.530 align:middle line:84% and becoming very, very successful because 00:58:51.530 --> 00:58:53.210 align:middle line:90% of the changes in that industry. 00:58:53.210 --> 00:58:55.370 align:middle line:90% And AI will change everything. 00:58:55.370 --> 00:58:57.467 align:middle line:84% So I'm going to close with a few comments on this. 00:58:57.467 --> 00:58:59.050 align:middle line:84% When you think about AI, which I think 00:58:59.050 --> 00:59:01.383 align:middle line:84% is touching all of our lives, whether you're in medtech, 00:59:01.383 --> 00:59:06.330 align:middle line:84% you're in energy, think about this entire value chain. 00:59:06.330 --> 00:59:08.920 align:middle line:84% Most of us, including myself, when I think about AI, 00:59:08.920 --> 00:59:11.420 align:middle line:90% I think about NVIDIA. 00:59:11.420 --> 00:59:13.380 align:middle line:84% They're on the back end somewhere. 00:59:13.380 --> 00:59:19.540 align:middle line:84% And I'm using ChatGPT or I'm using someone else's GPT. 00:59:19.540 --> 00:59:23.740 align:middle line:84% But when you're thinking about your company, where do you fit? 00:59:23.740 --> 00:59:27.220 align:middle line:84% If you're an AI company or you're just a company 00:59:27.220 --> 00:59:31.180 align:middle line:84% using AI to reach new markets, where do you fit? 00:59:31.180 --> 00:59:33.140 align:middle line:84% I mean, the data center infrastructure 00:59:33.140 --> 00:59:35.860 align:middle line:90% is a phenomenal area right now. 00:59:35.860 --> 00:59:38.220 align:middle line:84% And it's not just big data centers. 00:59:38.220 --> 00:59:40.700 align:middle line:84% There's a company in Europe that we due 00:59:40.700 --> 00:59:42.080 align:middle line:90% diligence the hell out of. 00:59:42.080 --> 00:59:43.600 align:middle line:90% We ultimately passed on it. 00:59:43.600 --> 00:59:48.380 align:middle line:84% But they're building massive data centers in Norway. 00:59:48.380 --> 00:59:52.300 align:middle line:84% The weather there happens to be pretty cold and dark 00:59:52.300 --> 00:59:53.940 align:middle line:90% most of the year. 00:59:53.940 --> 00:59:57.940 align:middle line:84% A fantastic place to put a massive, 00:59:57.940 --> 01:00:01.100 align:middle line:84% five football field sized data center. 01:00:01.100 --> 01:00:05.500 align:middle line:84% Lots of land, very cool air, low cost from the standpoint 01:00:05.500 --> 01:00:07.420 align:middle line:90% of air conditioning. 01:00:07.420 --> 01:00:10.880 align:middle line:84% So think about, hey, data centers, that's a business, 01:00:10.880 --> 01:00:12.620 align:middle line:90% but that's not a business model. 01:00:12.620 --> 01:00:14.985 align:middle line:84% Data centers in Norway using renewable energies 01:00:14.985 --> 01:00:16.360 align:middle line:84% with funding from the government, 01:00:16.360 --> 01:00:18.780 align:middle line:84% now we're starting to talk about a business model. 01:00:18.780 --> 01:00:20.580 align:middle line:84% And a contract with NVIDIA that gives us 01:00:20.580 --> 01:00:25.940 align:middle line:84% these particular computers that are able to actually process. 01:00:25.940 --> 01:00:28.420 align:middle line:84% So think about where you want to be. 01:00:28.420 --> 01:00:31.040 align:middle line:84% Most people are actually at the app side. 01:00:31.040 --> 01:00:32.620 align:middle line:84% That's normally where I think of. 01:00:32.620 --> 01:00:34.800 align:middle line:84% As a consumer, what app can I use 01:00:34.800 --> 01:00:37.980 align:middle line:84% that's going to be powered by this infrastructure? 01:00:37.980 --> 01:00:41.600 align:middle line:84% So OpenAI we're all familiar with and Anthropic and Azure, 01:00:41.600 --> 01:00:44.900 align:middle line:84% and then you've got the cloud companies like AWS, all of which 01:00:44.900 --> 01:00:46.640 align:middle line:90% are the data center side. 01:00:46.640 --> 01:00:48.247 align:middle line:84% And then you've got all of the apps. 01:00:48.247 --> 01:00:50.080 align:middle line:84% In fact, when you even go to the next level, 01:00:50.080 --> 01:00:53.260 align:middle line:84% if you take a look at AI tools and revenues, 01:00:53.260 --> 01:00:57.340 align:middle line:84% what you ultimately see is that here's just a snapshot. 01:00:57.340 --> 01:01:02.580 align:middle line:84% ChatGPT on the left all the way to Pictoria, Leonardo.AI. 01:01:02.580 --> 01:01:04.410 align:middle line:90% I use this thing called Otter. 01:01:04.410 --> 01:01:05.942 align:middle line:90% Anybody ever hear of Otter? 01:01:05.942 --> 01:01:07.150 align:middle line:90% Isn't that the coolest thing? 01:01:07.150 --> 01:01:08.390 align:middle line:90% I'm telling you. 01:01:08.390 --> 01:01:10.170 align:middle line:84% I'm actually able to sit in meetings, 01:01:10.170 --> 01:01:11.870 align:middle line:84% and I'm in a lot of Zoom meetings, 01:01:11.870 --> 01:01:13.870 align:middle line:90% and actually pay attention. 01:01:13.870 --> 01:01:16.690 align:middle line:84% Whereas before I was listening, writing, listening, writing. 01:01:16.690 --> 01:01:19.070 align:middle line:84% I was trying to be my own scribe. 01:01:19.070 --> 01:01:20.550 align:middle line:84% Or I'd have someone from my office 01:01:20.550 --> 01:01:22.830 align:middle line:84% would dial into the meeting, and that was their job. 01:01:22.830 --> 01:01:27.070 align:middle line:84% Now, otter.ai, Otter AI just joins the meeting. 01:01:27.070 --> 01:01:28.870 align:middle line:84% That's it, sits in the background, 01:01:28.870 --> 01:01:31.270 align:middle line:84% and it transcribes every single word that's 01:01:31.270 --> 01:01:32.610 align:middle line:90% being said in the meeting. 01:01:32.610 --> 01:01:35.750 align:middle line:84% And as soon as the voice of the person changes, 01:01:35.750 --> 01:01:38.650 align:middle line:84% it changes to speaker two, speaker four, speaker two, 01:01:38.650 --> 01:01:39.910 align:middle line:90% speaker seven. 01:01:39.910 --> 01:01:41.250 align:middle line:90% It's absolutely incredible. 01:01:41.250 --> 01:01:42.370 align:middle line:90% And then it uses AI. 01:01:42.370 --> 01:01:44.550 align:middle line:90% So it's not just a transcript. 01:01:44.550 --> 01:01:46.170 align:middle line:90% A transcript has limited value. 01:01:46.170 --> 01:01:50.270 align:middle line:84% I don't really want to read an hour long meeting transcript. 01:01:50.270 --> 01:01:53.190 align:middle line:84% It then uses AI and it creates a summary for me, 01:01:53.190 --> 01:01:56.630 align:middle line:84% and then it creates an action item for me. 01:01:56.630 --> 01:01:59.830 align:middle line:84% So it can hypothesize from the meeting 01:01:59.830 --> 01:02:03.990 align:middle line:90% what actions were to be taken. 01:02:03.990 --> 01:02:06.310 align:middle line:84% PowerPoint presentation to be sent. 01:02:06.310 --> 01:02:08.230 align:middle line:84% Excel spreadsheet to be reviewed. 01:02:08.230 --> 01:02:12.510 align:middle line:84% Follow up email related to meeting in June. 01:02:12.510 --> 01:02:14.750 align:middle line:90% It's absolutely incredible. 01:02:14.750 --> 01:02:18.550 align:middle line:84% So on the app side, the opportunities are incredible. 01:02:18.550 --> 01:02:20.230 align:middle line:84% And being able to use and leverage AI 01:02:20.230 --> 01:02:21.950 align:middle line:90% is going to change your life. 01:02:21.950 --> 01:02:24.850 align:middle line:84% So let me end with this, pitfalls. 01:02:24.850 --> 01:02:26.755 align:middle line:90% Don't overcomplicate things. 01:02:26.755 --> 01:02:29.130 align:middle line:84% Make sure that you really understand the market dynamics. 01:02:29.130 --> 01:02:30.547 align:middle line:84% I probably gave a lot of examples, 01:02:30.547 --> 01:02:32.070 align:middle line:90% whether it be medtech or others. 01:02:32.070 --> 01:02:35.830 align:middle line:84% And really be flexible. s companies that survive 01:02:35.830 --> 01:02:38.310 align:middle line:84% are the ones that see the future and they really 01:02:38.310 --> 01:02:39.650 align:middle line:90% think about changing. 01:02:39.650 --> 01:02:41.310 align:middle line:90% So you have to be adaptable. 01:02:41.310 --> 01:02:44.190 align:middle line:84% And thank you very much for listening. 01:02:44.190 --> 01:02:47.540 align:middle line:90% [APPLAUSE] 01:02:47.540 --> 01:03:00.000 align:middle line:90%