The Faces and Voices of Energy

Rewriting Energy

D8U4CQyUIAAmuaK

Creator of The Great Rewrite, Leonard Brody is a serial entrepreneur, venture capitalist and best-selling author.
KPMG partnered with Brody and Forbes to bring The Great Rewrite to life on Forbes. Speaking on the sidelines of the KPMG GEC 2019, speaker Leonard Brody delivered a message of both the future of innovation and historical context called “The Great Rewrite.”

The bottom line?

“The Great Rewrite is not the argument that the world is changing and you should transform. It’s about understanding the historical context in which the transformation is happening,” he said. Without looking at how industries historically thrive and then often die, and approaching this exercise with great ‘humility’ about how your organization will live beyond you, is a recipe for irrelevance. “History is littered with companies that couldn’t adapt to change.”

A student of change

Brody knows about entrepreneurship from the bottom up.

He sold his live entertainment business and later joined a JV with the Creative Artists Agency called Creative Labs. “What we do is change management all day long at Creative Labs. There is truth in numbers.”

Brody is a big believer of looking at an industry’s own mortality.

His job recently, he said, was to “take this 55 year old company and take it, kicking and screaming, into the new era.” Although he says it is popular to think of the transformations and the current moment as completely unprecedented, this isn’t necessarily true. “It is in fact the fourth rewrite of the planet. It is trying to give executives at any level a framework they can look at the world and not just their industry.”

Unless companies understand the moment they inhabit, he said, they may be doomed to the trash bin of history. “False historical bias is the Achilles heel of most executives all over the world,” he said. Financial markets, for example, look at historical contexts that are “far too short.” Understanding mass scale shifts is easier, according to the Great Rewrite, when you understand how previous mass shifts have taken place over the past hundred years or more.

The challenge is that “most executives have a short historical context. They get blindsided by what they don’t know.” He uses the examples of how cars don’t depend on ownership anymore as an epitome of the American dream. Most people now lease. The auto industry had to adapt.

Cryptocurrency is another example of disruption that Brody uses. “The massive bomb here is Amazon, Google, and the five major players. They are already announcing their own currencies.”

Diversity and culture

So how does culture fit in, and how can women power this transformation? “Statistically you see,” said Brody, “women are better with change. Period. If you looked at the data and the willingness to deal with change, women do better.”

Acknowledging this is a gross overgeneralization, Brody says that boards and leadership should represent the diversity within their customer base – and that includes women.

“As you move to more technologically complex environments, they require machine to human and human to human interaction. Women are probably better stewards to that change, managing that change.”

“What is missing in the diversity argument,” said Brody, “is organizational diversity.” This means people from outside the legacy industry. “You need to introduce 30% of the people with startup experience. Then you can start to change the DNA. You should be spending 10 percent of everything you hold dear earmarked to the question ‘what does the world look like during our mortality’?”.

To make this more direct, companies need to benchmark this. From the top, boards need should be forcing 10 percent of revenue from new product lines.

The problem, says Brody, is an inherent resistance to the risk of failure.

“What happens with a board of directors, is companies don’t have a successful way to reward successful failure. Energy companies are what he calls legacies. “Companies in legacy sectors recognize you shouldn’t affect the core with something risky from day one. You have to create a ring-fenced environment from day one.”

The answer?

“How do you enable people culturally to test and innovate things they may not have done in the day to day context of their jobs.” This means protecting these units from the vagaries of the market or the oil price. “You have to build a SWOT team to build this project. It requires a braveness from the board level.

You have to assume the world doesn’t need you.

Eventually you have to assume they won’t.” You need enable a core team, he said, to “enable people culturally to test and innovate things they may not have done in the day-to-day context of their jobs.” This is important, he said, from the top to the bottom of the organization. Hiring people at the beginning of their careers at the bottom, and strategic thinkers at the board level, is the secret sauce.

“It is hugely important for companies to get that cultural piece.” Fintech companies have been able to engrain the culture of innovation into traditional legacy industries. There has to be a structure to these collaborations. Buying new technologies and taking a wait-and-see approach won’t work, he said.

Technology alone will not save us

There is good and bad news, according to Brody. “Technology is an enabler and not a deliverer. It’s really about a human framework for change.” At the core of Brody’s premise is that “humans are the core currency of the new world.”

The good news, Brody says, is that “now, everyone has pretty deep clarity that there is a lot of change and this requires a response. But they don’t know what the response is yet.” What many struggle with, he said, is ”a macroeconomic, techno framework to understand this in a framework other than technology.”

So how can companies both innovate and keep the core business going?

By carving out laboratories of innovation, says Brody. To do this, a company has to emerge from its denial about its own eventual demise. “You have to be very clear and focused on understanding your own mortality as a business, and understand what the world looks like when you’re not needed.” To respond to disruption, “a bold response is required.”  The toe-in-the-water period, he said, is over.

Regina Mayor, KPMG Global Energy Sector leader

Companies in legacy industries such as energy, he said, need people with “entrepreneurial skillsets and mindset. You cannot train for that – you are either that or not. An organization needs both. The balance for management is to find the right balance between people who have entrepreneurial mindsets and organizational experience and those who don’t but have other skillsets.

For true entrepreneurs, “you need to build stuff and fail.” A lot.

Brody holds up Google “as a good model, for somebody to say: I have an idea. I need a budget. I want to test it. It has a 90 percent chance of failure but that ten percent is important. That failure is important, I’m going to learn and stretch the organization.” Not many companies have a stomach for that much failure, he noted. Shareholders don’t tend to reward any innovation that doesn’t affect the day-to-day bottom line. The time horizon is too short.

Banks are another legacy industry, he said, that have actually innovated well. “Banks have done a good job of easing in testing, they trial and test them early. Individuals working on projects and portfolios are ringfenced.” How is this carved out? “They are measured and their budgets are separate from the parent.” He recommends any innovation unit to get a signed memorandum of understanding from the leadership.

“It should say, ‘When the stuff hits the fan, because it will, or the economy tanks, you will not abandon us.’”

How you can lead the change

Brody had some advice for innovative thinkers, on how to change your organization.

“You have to be very clear with your management, that you want to spend time working on very specific definable projects and research.” This research, he said, should answer the question, “what does the world look like when we are not in it? How do we structure internally to do that?” For companies, the stakes are high if they do not change. “At a high level, the companies who have that culture and can sustain it will sustain talent. The ones who don’t, will lose it.”