How to reinvent your business in the post-Covid era (Simon Sinek commented by Andrea Iorio)

"It's not about us saying: how do we do what we are doing, but how will we do what we're doing, in a different world".?

This phrase by Simon Sinek, the famous keynote speaker, was mentioned during an internal team meeting that was being recorded and that went viral on the internet afterwards, and really caught my attention while, by the end of 2020, in the midst of the Covid pandemic, I was looking for insights to reinvent my own business.?

And this is the quote with which I open this article, which is a transcription of the first episode of my new Podcast, Metanoia Club - an episode in which we talk about how to reinvent your business in the post-Covid era, commenting a quote by Simon Sinek. Yes, the great public speaker and author Simon Sinek, to whom I look up a lot in my day to day job as a public speaker. Simon was born in England, and grew up in Johannesburg, London and Hong Kong and started his career in advertising. That's where he likely got his great marketing and self-promotion skills, who led him to become one of the most sought-after public speakers in the world after his very famous TED Talk called "How do great leaders inspire action" that went viral on Youtube and up to today, it has been watched more than 56 million times, which is about the importance of finding your Why. Simon is also a bestselling author and shares his ideas in his 5 books:? Start With Why, Leaders Eat Last, Together Is Better, Find Your Why, and The Infinite Game: I have read all of them and I found my favourite being Leaders Eat Last, I simply love it. And what about Simon's purpose, Simon's why? Well, he describes himself as being? an unshakable optimist who believes in a bright future and our ability to build it together. Simon's WHY is to inspire people to do what inspires them so that, together, each of us can change our world for the better.

And with such a vision, he inspired his team recently with a speech that was so inspiring, that they decided to put it on the Internet, and ...well, guess what?...went viral once more. Here we go with Simon Sinek talking about how to reinvent your business in the post-Covid era:

"Change, or something unexpected, has put many companies out of business, and made other companies come out stronger and reinvent themselves. The invention of the internet has put many many companies out of business, the ones that couldn't reinvent their business for the digital age, but rather double down on the old way they did business. Every video store is out of business, because of streaming, and they couldn't reinvent themselves. When Starbucks moved into neighborhoods, many many coffee shops went out of business, not because of Starbucks, but because they refused to change the old way they did business. They still had an old ripped-up couch, when there was a better product. Uber is taking taxi companies out of business, not because of Uber, but because taxis refused to change. This is not unprecedented. The fact that it's more sudden, absolutely, more shocking absolutely, without a doubt. But this is not unprecedented in the business world. And so for us to say not how we do what we are doing, but how we do what we are doing, in a different world. And the world is different".

In 2004, Blockbuster, the DVD rental business that any Millennial has been a customer of, was at its peak. It had 9000 stores across the globe, and it earned 5.9 billion Dollars in revenue. Blockbuster therefore dominated the market, despite in 1997, a new competitor was born, namely Netflix.?

Netflix was founded by a frustrated Blockbuster customer, named Reed Hastings, who simply hated the fact that Blockbuster was charging customers a fee for every day they were late returning a rental movie. As a matter of fact, Blockbuster said it made $800 million in late fees, or 16% of its revenue, that year. In its early stages, Hastings' company, which had no late fees, would send DVDs straight to your house for a flat monthly rate.?

Then, in 2000, Blockbuster famously made 2 very bad decisions: the first was not to buy Netflix for 50m million Dollars - and I believe the executives might slightly regret this choice now -, and the second one was not to drop the late return fees on the allegation that they were an important source of revenue. They were so confident that their model was better than Netflix's, that they even mocked the Netflix algorithm on Outdoors across the country. They simply wrote: "Netflix has an algorithm. We have a callgortihm", showing a picture of a Blockbuster customer agent on the phone. Who has seen those, back in the days? What they meant is? that while Netflix's algorithm was somewhat obscure and incomprehensible, their human employees were available on the phone and would make your experience of picking a movie better than just some obscure technology.

Well, if they only knew that some time in the future Netflix's algorithm would get to know you better than your spouse or partner, they'd never have had the courage to run such a campaign.?

But getting back to late fees, they maintained their decision until 2004, when they dropped late fees, but it was too late: between 2003 and 2005 Blockbuster lost about 75% of its market value.?

Today we all know what happened to Blockbuster, but I want us to reflect upon the reasons why it failed: was it because a new competitor got into the market? Not at all, this by itself happens all the time, but the main reason was related to the lack of reinvention in front of a changing market and changing customer expectations: by making the decision to protect 16% of their revenues, Blockbuster executives implicitly gave up 100% of their future revenues, without knowing that.

Ok, I am sure you're like "Andrea, enough of the Blockbuster and Netflix case because we all know about it", but to me it's extremely important to open the episode with this case because I want to apply Simon Sinek's question to this example as well: was it Netflix itself that took Blockbuster out the market, or was it the fact that Blockbuster didn't reinvent itself in face of a changing market? We now know it is because of the second scenario, or at least that's what Simon Sinek tells us, and this is exactly the same scenario in which many companies find themselves today.

Most of these companies are market leaders, and experienced a great deal of success until today, and their executives have to choose between maintaining the status quo and protecting their past success, or reacting to the chaos of the pandemic.?

Yes, it's chaos, let's admit it: the combination of the Covid-19 crisis and the exponentiality of the Digital Transformation brought about highly unpredictable and chaotic times for businesses.?

And while at first we can believe this is outright bad, it is not entirely so: chaos can be extremely powerful, and countless companies were born in periods of recession and chaos, such as Disney, CNN, Burger King, Microsoft, Airbnb and many others.

Eventually, chaos is full of opportunities - as chaos changes the rules of the game in business and in life.

How does that work? Let me explain more starting off with the fact that we are conditioned by a phenomenon called “path dependence”, through which we basically make decisions based on our successes of the past rather than on the current environment. In social sciences, the conception of "path dependence "states that the development path of an economic system depends on past events and is time-dependent. In other words, the trajectory of a path-dependent system depends on the path the system has followed to that moment. If we want to describe economic systems or organizational cultures properly, we need to be aware of their path-dependent nature and bear in mind that the reality we observe often represents only one possible realization and that other realizations, which were equally or even more probable in the past, could have been completely different of what then became the standard.

So, within the context of path dependence, we are subject to a pattern where we repeat old decisions and miss opportunities that are right in front of us, because we are stuck within our successes of the past. Again, look at taxis vs Uber: taxis preferred protecting their success of the past rather than responding to external changes and providing a better experience to customers.?

So when we have acute crises such as the Covid-19 pandemic, these crises lead to chaos, and since chaos is unpredictable, it causes the path dependence to decay and new paths are to be redrawn, in other highly unpredictable directions.?

Let me ask you something: in your opinion, what did the David of Michelangelo, the Sistine Chapel, Leonardo's Vitruvian Man, Gutenberg's invention of printing, modern accounting, Shakespeare's plays, the ceiling of the Basilica di San Pietro, in Rome, and the scientific method all have in common? Think about it.

The truth is that all these magnificent works and innovations happened during the Renaissance period, or Rinascimento in Italian, which took place in 15tn century after the global crisis caused by the pandemic of the Bubonic Plague, also called the Black Death, which caused the death of more than 200 million people and a huge economic and demographic collapse throughout Europe, in the 14th century.?

With so many dead and dying, patterns that had kept medieval society stable were replaced by hostility, confusion, greed, remorse, abuse—although, at times, by genuine caring. At the same time, the Black Death turned the economy upside-down. It disrupted trade and put manufacturing on hold as skilled artisans and merchants died by the thousands—not to mention the customers who bought their wares. Workers’ wages skyrocketed as arable land lay fallow; landlords, desperate for people to work their land, were forced to renegotiate farmers’ wages. Famine followed. Widespread death eroded the strict hereditary class divisions that had, for centuries, bound peasants to land owned by local lords. With so much land readily available to survivors, the rigid hierarchical structure that marked pre-plague society became more fluid. The Medici family, important patrons of the Italian Renaissance culture, originated in the rural area of Mugello in Tuscany and moved to Florence soon after the plague. They initially established their fortune in the wool trade and then branched out into banking.?

See? What the Bubonic Plague also did was that it broke the path dependence on a feudal and pre-aristocratic world, through a deep crisis that introduced greater social movement and the emergence of a middle class that changed the rules in the world of arts, in science, technology, music and geography, and so on.

Let's fast forward 7 centuries to today and to our current world of Covid-19: even though on a much smaller scale than the Middle Ages Plague, Covid also brought about a crisis that sparked some chaos in the recent path dependency we have been living in. Look: between 2010 and 2019, the world experienced one of the periods of greatest growth in recent history, with the global GDP growing more than 2.5% each year.? Covid brought about a crisis in 2020 that affected world GDP with a decline of 3.6% according to World Bank estimates, and although 2021 will see a strong rebound? with a 5.9% growth according to the IMF, we see deep disruptions across multiple fronts: very high inflation and raw material prices to the moon, supply chain disruption and chip shortages, with an overall growing social inequality and polarization as a result.

This point in time is exactly when we have the highest chance to change trajectory, since we are deep into chaos, and to rewrite the rules of the game in business and society. It's up to you: for instance, there will companies that react to new customer behaviors accelerated by Covid-19, and those that will get back to the good ol' status quo as soon as they can, under the excuse that consumers changed their behavior just because they were forced to. Well, a recent report by Deloitte titled "The impact of the Covid-19 crisis on short and medium-term consumer behavior" showed us that it's not very much true: interviewing consumers that bought online for the first time after the beginning of the pandemics, 80% declared that they will continue buying online even after things get back to the new normal. See that it's much more complex than thinking that we as human beings simply like to stay in our comfort zone? ? At the same time, there will be companies that will promote hibride workplaces, and those that will get back to the same workplace mechanisms as before. And we can go on and on: there will be companies that will take advantage of relatively historically low interest rates and finance innovation, and those which will not, as well as there will be companies finding solutions to chip shortage, and those which will not, and so forth.?

But what is the main problem that makes companies prefer to maintain their status quo and stick to the past? It is basically the fact that when things go well, such as in the decade between 2010 and 2019 or when you are dominating the market and growing double digits every year, companies often set up a ton of rules, policies, processes, structures, compliance, and alike...do you know why? To protect their current success, to make it last as long as possible: see, this is why we get stuck on path dependence. And that is also why, confronted with the opportunity to reinvent our businesses and innovate, we often come up with a number of excuses to stand still: "we are not big enough", "we are not nimble enough", "this does not depend from us", "we cannot do this", "we need to focus on what works", "we need to show results", and so forth...so basically what are we saying? Excuses, excuses, and more excuses.

Now, let me clarify something as I don't want you to get me wrong: crises are terrible, and they come with huge burdens, the main one in the case of Covid-19 being the loss of human lives it unfortunately brought about.

But we cannot overlook a very interesting phenomenon: crises generate a sense of urgency.

Why is it that we do not have the necessary sense of urgency to reinvent and transform our businesses, until a crisis strikes??

The truth is that oftentimes the external change is so subtle although quick, intangible, and it seems so distant from us, that we do not feel touched by it...or maybe I should use a better word: "burnt". Why burnt? Because the best way to describe how this works is through the famous urban legend describing a frog being slowly boiled alive. Poor frog! The premise is simple: if a frog is suddenly put into a pot of boiling water, it will jump out and save itself from impending death. But, if the frog is put in lukewarm water, with the temperature rising slowly, it will not perceive any danger to itself and will be cooked to death. Why so? Since the frog is only slightly uncomfortable with its warm surroundings, it keeps trying to adjust and get accustomed, making itself believe that the slow, gradual change in temperature is normal. Only when the slow change suddenly starts accelerating does the frog realize it just signed its own death warrant. It has already lost its strength to jump out!

To understand how all this works in business, I want to use the case of a company that we all know about, and of which we likely are customers: Domino's Pizza.?

But it is also likely that not all of you might know that around 2008, Domino's Pizza was on the verge of bankruptcy, with Sales down and customers complaining all over the internet.

Thus began their “Pizza Turnaround” campaign with the December 2009 release of a branded documentary video addressing their pizza quality in a brutally honest way. Ominous music swells as real customer comments fill the screen. Gripes like “the crust seemed lacking,” and “mass produced, boring, bland pizza,” build up to the crescendo of all complaints, “microwave pizza is far superior.” OUCH.

The video cuts to then CEO Patrick Doyle. This is the moment they’re either going to try and minimize the damage or be direct with their consumers. Doyle responds, “There comes a time to make a change.” Domino’s makes the right choice.

An explosion then sounds, a metaphor for Domino's willingness to blow up their past, clear the rubble, and start anew. The rest of the video is full of upbeat rock music. We see the efforts they’re putting into improving every part of their pizza. It all has a documentary feel. It shows that they are a brand based on authenticity who cares about pizza and making their customers happy.

By this vulnerable admission of responsibility, Domino's employees started doing various experiments, from launching a "home order" button to stick to your fridge in order to easily order pizza, to delivering pizzas through drones, up to allowing you to make an order through just an emoji. Yes, an emoji! Just imagine any other pizza company that was having good results overall, where the CEO would mention to the Board of Directors that among your most important initiatives in the quarter, you implemented a system to order pizza via emoji? Let's admit, In most companies, you would be ridiculed first, and then likely fired.

Patrick Doyle, the CEO who turned Domino's around, created a culture of constant innovation that tolerated experimentation and mistakes, and made the company stock increase by more than 1800% across the last decade, and made Domino's listed on Fast Company's most innovative companies in the world in 2019, with more than 60% of its sales in the US coming from Digital channels.

Although Domino's Pizza was not on Simon Sinek's list of examples, it might very well be part of them. This is a clear example of how you can break free of your "path dependence" when crises spark the necessary sense of urgency.??

But before we wrap it up, we have to make a very important caveat: breaking free of a path dependency and innovating is not a silver bullet by itself.Why? Because if we think it is, we will make the positive results of innovation the path that we will protect and that we will depend upon. How? Through all those rules, processes and bureaucracy that we often set up to protect the result of innovation. No, we can't go about this: we have to constantly create the necessary sense of urgency to break from the past, especially when things go well - actually even more when things go well because that is the perfect timing to break your path dependency. If it is later than that, it just might be too late.?

To conclude this article, I would like to bring about what are some implications for leaders here: I would like to distinguish between innovation, and a culture of innovation.?

Let me clarify this statement: although innovation is a process, we often associate it with the result of this process, and that is dangerous because we think that innovation can stop when things go well.

This is why I want to make clear that we need a culture of innovation, namely constantly having the urgency to break from our path dependence, and innovate whenever the circumstances of the world call for that, even if it means killing off an innovation from the past.?

The big danger of considering innovation as an output is it makes us believe that it will last forever: the truth is that it doesn't, since the external circumstances of the market, the customer, and the world change all the time (and even more quickly in the digital world) as we said earlier, and for the company has prosperity, what we need is an ingrained culture of innovation.?

Therefore I'd like to leave you with an assignment: please think if you and your company are changing at the pace the external environment is, and if not, what is holding you back?

Think about it as homework, and I'll also love to hear what did you think about this episode.

You can write to me on my website andreaiorio.com, or find me on Linkedin and on Instagram under the name Andrea Iorio.?