Juni 11, 2019

Episode 5: Gojek's Organisational Principles

Episode 5: Gojek's Organisational Principles

Intro: Welcome to GO FIGURE. My name is Nadiem Makarim, CEO and founder of GOJEK Southeast Asia's first Super App. GOJEK does ride hailing, food delivery, payments even on demand massages. You name it we do it. GO FIGURE is a podcast dedicated to expose the inner workings of ambitious tech companies in the emerging world. We like to talk about things we like and talk about things we don't like. There are a lot of myths out there that we want to dispell. So keeping it real is kind of our mantra. Hope you enjoy it.

Nadiem: Hey man.

Kevin: What's going on?

Nadiem: How are you? We got Nadiem and Kevin again, that's right on Go Figure podcast. Today, we're gonna talk a little bit about some things that matter very much personally to us in terms of the philosophy of building a long term sustainable successful business. Right?

Kevin: That's right.

Nadiem: I think that's what, that's the theme that we wanted to talk today. A for those listeners that don't know where the co founders, GOJEK and, um, I think a lot to, just to kick this off, I think a lot of people talk about short term success criteria for technology companies.

Kevin: Well, I think it's, uh, people don't even see it as a short term, right? It's people, usually people or media, uh, usually highlight the things that, um, short term strategies often are closely linked to. Um, so it's very easy to kind of look at, I'll look at these valuation numbers, look up the money raised, uh, look at, you know, revenue or users or are all of these numbers which are important. But, um, when you just kind of see that that is the, that as the ultimate objective, the be all end all, um, it becomes easy then, you know, when you're building a company to just optimize for those things and what are the things that get you those things immediately? Uh, rather than thinking about, you know, building an enduring company or in doing business.

Nadiem: And, and most of those things that we talk about or the media talks about are usually related to growth or capital raising or uh, you know, how many people you've hired. Um, yeah. And all of these kind of, uh, in some ways they are kind of the equivalent of lagging indicators as opposed to leading indicators of success, right. If you just focus on output numbers, then at a certain point, those output numbers like revenues, sustainability, all of this other stuff might go down over time if you're not investing in the long term leading indicators of health in an organization. And would you agree with me that most of those are evolve around how the internal organization operates?

Kevin: Yeah, it's the how, right? Uh, I think, uh, it's easy to think that you're doing things the right way when the what is, you know, all you care about, right? And the what you know, is easy to validated are those, you know, those numbers, uh, those, uh, those media stories are easy to kind of, um, it's easy to see that, oh, that's kind of the, uh, the, the objective. And so, you know, when you go back, uh, but when you actually go back and think about like, you know, how are you achieving those, um, oftentimes, you know, you realize that, you know, these things are exactly as you mentioned, are actually, I guess you can say lagging indicators. Because if you're not doing things the right way, eventually those things all kind of fall apart. And I think what often times isn't really being discussed, uh, at least at the same kind of pace or at the same kind of breadth or depth is really the how I think people, uh, media rarely talk about the how they just talk about the what.

Nadiem: And all these hows. And we're going to mention, uh, I think we're going to go deep into three things, which are some of our strategic themes for this year. 2019 is really about the how. And what's really interesting about it is that all these hows have no short term payoffs. They're very hard at realizing value up early.

Kevin: That's true.

Nadiem: But it requires a huge amount of faith that it will pay off. But the reason why we believe in them is because for the parts of the units of the organization that we did apply these principles. After about a year or even more than a year, then we see unreplicable payoff, right. Pay Off. That just kind of like took off. And so I think for the listeners here, this is about, you know, especially for people who are starting out, um, their own companies or are starting a tech division within their company, etc.

Kevin: Or even people who are, you know, already, I just kind of like working at a company that is, that is scaling right now.

Nadiem: That's right. Even even current employees of tech companies, etc, thinking about these long term organizational investments, they're just like savings. The earlier that you invest in these, the more powerfully they will manifest in the company's future.

Kevin: Right, they compound.

Nadiem: The compound. Yeah, exactly. Just like saving a dollar every day. Right. And so let's talk about these three things. So in 2019, there's three specific strategic themes that GOJEK has that represent our longterm investments. And the first one, organizational investments. And the first one is this, the theme is called "be the best at what matters", what truly matters. And this is a theme around focus. And around prioritization. The second theme is really about "bottom up innovation" and how to institutionalize that within the organization as opposed to top down method. And the third theme is really about building bridges and breaking walls. So just to review, that one more time. It's about being the best at what truly matters, which is about a focus. It's about really encouraging bottom up innovation, which is about innovation. And the third theme is about building bridges and breaking walls within the organization, which is about alignment and communication. Yup. Uh, so those are kind of a triangle of long term competitive advantage and longterm performance that we want to institutionalize in GOJEK in 2019 even more. And I think these are the things that very often organizations are too lazy to invest in upfront because they don't give, there's no instant gratifications here.

Kevin: That's right. Yeah. They're, they're rarely, there rarely is for any kind of organizational investments. Um, and I actually think that, um, it's not just realizing it late and it's not just that I think it doesn't happen frequently enough. I think, um, there's almost a cost to it actually. Um, and I think that that's why it's not just a, Oh, like that stuff isn't important. And you know, let's, let's focus on, you know, other things. Um, let's, let's ignore all of these. That's just noise. Like it's not, it's not just an ignorance of it. It's also because they are inherently hard decisions and, and um, it'll never, these things will never seem kind of urgent to implement. Like nothing is ever on fire and then you, oh, you have to do these things now. Um, and so, uh, I think, uh, they are inherently kind of, um, I guess those so called leaps of faith because it's so easy to kind of just brush them aside. It's so easy to say, you know what, it's not worth it. Right. Um, because you...

Nadiem: ... it's so fuzzy sometimes. It's so complicated. What do you think is the ultimate sacrifice? Should we go one by one and talk about it?

Kevin: Yeah, yeah. I think, I think one very easy one. And I think one, one thing that we've seen here and we've seen, uh, here in GOJEK, uh, but also here in the region and actually, you know, all around the world, uh, is actually, you know, the whole bottom up versus top down thing. I think that one especially, you know, coming from anyone, you know, listening who is coming from a leadership, I think it's very, very easy, um, without malice to kind of, um, think that, you know, top down either explicitly or implicitly is better.

Nadiem: Yeah. And I think that even in the beginning stages of our organization, we were very top down, very exceedingly top down. And, and there were some clear benefits to that. Yeah. There were some clear benefits. So we move faster, right? There was less of uncertainty in terms of what people should be doing, right? Because they receive direct commands on what to achieve and sometimes how to achieve it. There was less lack of clarity in what product teams need to prioritize because their leader's just prioritize for them or we prioritize a for them. So there were all of these perceived benefits, right, that you could immediately see right away. And that's how we grew really fast. Right. And so on. Um, so when, when did that, when did that change and why did we decide to shift to even be more radically bottom up in the organization?

Kevin: So I think, I think in the early stages, it's, um, in the early stages, it's, it's really easy to do a top down without feeling bad about it. Especially because, you know when the, then the company is like 30 people all in the same room, even top down doesn't feel very top down, right? Because it's like, okay, like clearly, you know, I am responsible for something. You're helping with this, you're responsible for that. And so it's very easy to kind of, you know, create that alignment and people are excited. Uh, and we're all kind of just executing, right? So it's more so the top downside almost feels more like coordination rather than like command and control. Right.

Nadiem: You don't have to be an asshole. You don't have a top down a way of working.

Kevin: No. You don't.

Nadiem: A lot of people confuse that. Top down isn't about being a, uh, you know, like a tyrant. There are very, very many good benevolent dictators in tech companies out there, right? In all companies. Yeah.

Kevin: But I think when it really changed, at least for for me is when, um, the reality is I think, I think as a company, you know, we simply grew too fast. Um, and it's out of our control, right? I mean, we, we, I mean the last, what, four years, uh, we just kind of held on, right? And it was, it wasn't like, oh, we have to grow this fast. We just did. Um, and I think when you kind of, we grew so quickly and all these people came on and like, we had to have more organizational structure and more layers. I think the habit of just like, hey, like, let's do this. Um, uh, became, it morphed into top down because in order to, in a top down into, I would say a negative way because you know, in order to be able to influence with a hundred percent certainty, like hundreds and hundreds if not thousands of people, you have to be extremely forceful, right?

Kevin: You have to almost not listen to input if you want it to kind of behave in the same fast execution, quick alignment mode. Right. Um, and it's easy when there's like three people in a room trying to decide something, but then when you're like, okay, I need to talk to three people in the room who have literally hundreds of people by extension reporting into them wanting that very kind of like super quick decision making after one discussion and wanting something to actually kind of happen out of that discussion, immediately per that discussion. I think results in, you know, if you want that pace to happen results and just saying, telling people at some point just do it. Right. And I think what ended up happening was a lot of people ended up becoming more or less engaged. Uh, you know, people.

Nadiem: And why is that a bad thing? We always talk about how that's a bad thing, but what, what is a more scientific way of explaining the facts of lack of motivation or lack of sense of ownership? What does that mean in terms of real business performance?

Kevin: Well, I think a few things, right? I think, um, I think what we've seen, are there's a different flavors of it. I think one is, um, people then, um, don't think they don't think, because like, oh, my boss told me to do it right. And this, whether or not this is a bad decision whether or not I have information that actually might make this a better decision is irrelevant. Right. I don't have to think, because as long as I said my boss did it, I'm safe. Right. Right.

Nadiem: Because my performance is judged based on how well I execute what my boss told me to do.

Kevin: That's right. Yeah.

Nadiem: As opposed to solving the problem.

Kevin: Correct. Right. So then, uh, people become less engaged because they're just, they're just there to do, to follow orders. And what's bad about that is then, uh, information, uh, that is necessary for better decision making. Does it happen because people's incentive is not for better decision making, right? People's incentive is to, oh, okay, my boss told me to do that. How well and how quickly can I do it? That's it. Right.

Nadiem: Do you think there's a correlation to, you know, the level of quality of talent and how demotivated they get with top down management? Like usually the, what I've realized is that the more talented a person is their level of disillusionment when they hit that kind of top down mindset without actually being able to air or voice their opinion effectively enough and guide the direction of whatever scope they're doing is even more cataclysmic for great talent.

Kevin: Yeah, I think so. And look, hey, you're a new father, right? You're a new father and you have two daughters. How would you approach like, your kind of parenting style with respect to this, right. Like, I mean, growing up I think we all were, and then, and, kids who probably question authority. Hmm. Right. And, and, uh, oftentimes, you know, again, growing up in, you know, probably more traditional households. Questioning authority was not, you know, something that was viewed positively and, but then how did you feel in terms of, you know, the things that you did, uh, with respect to that authority? Right? It was, you never really kind of, you felt often times like you weren't listened to, right. Like the end, Oh, you had all these ideas. Uh, but then it just didn't, it, it didn't matter. Right. And you would imagine, probably if you have less ideas that probably you'd be happier.

Nadiem: Right. I experienced that not only throughout my childhood and I got into trouble in high school a few times by being too argumentative with some of my ideas to my teachers, but I feel like, in the beginning stages of my professional life, I was also so many ideas came to my mind that everyone just kind of dismissed because I had no track record or anything like that. I was just labeled a dreamer all the time. Right. But you know, I think you're right. That's exactly the, the, you know, the concept of not being able to have agency or control over your thing when you know that you are capable, that's a difference. Right? There's people who are not confident enough in their capabilities and yeah, sure, they would like to be told what to do. Right. That makes them feel more safe. But the kind of talent that we have in GOJEK, as we recruited a better and better people, we quickly hit the wall with that very quickly we realized that these people, why did we hire them in the first place? If we're just going to tell them what to do.

Kevin: Right. And how did you feel? Right? Like when you were at these places where you work and you just weren't listened to right. You, you left.

Nadiem: I just got it done. Yeah. And then I left after a while, right? Hmm. Yeah. It was fun. It was good. I learned a bunch of stuff, but then I'm just, I'm thinking what's next? I'm thinking what's next? And it doesn't have to be me who's like more on the end of the entrepreneurial scale. It can be anyone who just wants to have a sense of contribution. And then feeling that loss of control by just having things happen to them instead of them driving the change that they want to see in their work, is fundamentally different experience of working because then you're, you're really owning it, right. And you're beat, you're there. Right?

Kevin: But did you also know people who are totally fine with just like, hey, heads down. It's going to do, you know, I'm going to do whatever, you know some, someone told me and, and I think you know, you, you also have smart people who kind of, or smart people who also fall in that category. And I think in a way I think we're almost, we have a bias towards finding smart, creative, driven people. Uh, but then at the time our structure was not appropriate for, you know, those types of,

Nadiem: but that's the difference, right? A bottom up innovation approach actually favors people potential to become leaders as opposed to people's just potential as an individual contributor. Right? Because the whole point about having a sustainable long term business is having a critical mass of people who can lead. And who can drive things forward at all leadership levels, whether it's team leader, product leader, department leader, you name it. Like you, you need these self-driven individuals who are proactively finding the solution as opposed to simply executing it. And the reason why is because as the company grows, the level of complexity is so high. The level of interdependency is so high is that you have to be a creative problem solver in order to be an effective leader. And you also have to be a very effective collaborator to do that.

Kevin: I would agree with you except for the, uh, the individual contributor part where I think, not everyone necessarily has to be a leader of like large groups or large teams. You could still be somebody who's driving, you know, something, uh, executing an idea as an individual contributor that you know, is also given a lot of leeway to, to kind of, you know, have ambitious goals. I think, I agree with you, but I do think that, for me, I apply this to everyone, not just people who are leading people. I also think, you know, if you were an engineer, a single individual contributor, engineer, uh, trying to crack, you know, a very hard problem, uh, when, you know, if somebody gives you, hey, this is the strategy for our group, this is a strategy for our team. Being given that freedom to even as an individual contributor to kind of figure it out and actually deliver something great, I think is definitely the kind of people that, you know, we try and have more and more of and we just kind of people that we want to appreciate because of, through this policy.

Nadiem: Yeah, I get it. You can, you can either be a people leader, but you can also be a thought leader. That's right. But at the end of the day, you have to be a leader or somehow. Right. Even if you're not leading a team, you need to have thought leadership. And what's the difference between thought leadership and just being really good at execution? Thought leadership means actually thinking on your own two feet and being able to come up with solutions that are better than whatever your boss tells you. Yeah. Yeah. That should be like a fundamental kind of mechanism that happens. The more that people below you come up with better ideas, the more you know you're on the right path.

Kevin: Yup. Yup. Right.

Nadiem: It's not how quickly they get it done. Yeah. Which used to be our criteria back in the day.

Kevin: Yup. I think also a lot of, one of the reasons why this is one is challenging is because a lot of times people, people, leaders, then might feel insecure, right? It's like, okay, if I am the leader here, I am the most senior person within this group of other people and I am not the one who's coming up with the ideas and I am not the one that's getting credit for making the right calls or coming up with the right ideas, then what is my value? I think there's also oftentimes that question from, from a lot of folks who then, you know, or might be resistant towards this idea, it inherently kind of challenges, um, maybe, you know, traditional notions of what somebody in a leadership position should be doing.

Nadiem: Yeah. It's very hard. That's something that people consistently come up against. Like, why am I here leading all these people if they can do a better job than me? Right. But you are managing those people who are better than you. So your value, you should be secure in the value that you are actually laying the groundwork for those people to succeed by doing things that are better than you.

Kevin: So what do you think then is the, in this framework, right? But what do you think is then the ideal leader? Like what should they do and, and what would you give them credit for?

Nadiem: With the context of being a bottom up facilitating leader, right? Well, it's hard. It also depends on what department, what function, what rate of urgency there is. So there's all these factors, but overall, as a general characteristic, some of the things that even I struggle with, by the way, so I'm not saying I, yeah, I'm very good at this as well. First, is actually coming up with problems instead of solutions. That's a really simple but very difficult thing to achieve. Creating a verbal communication ritual, uh, sharing a problem and resisting sharing the solution until all parties have spoken in your team. Right? It's a very small, it's very small nuance, but yet critical. Like instead of going up, Oh Kevin, you've got this major issue with allocation in this one city, I need you to immediately pump up incentives right now by this percent so that we can hit a BCR of this percent. Or like hit a reliability rate of X percent. Instead going, look, I've noticed that we have an acute allocation, we have an acute supply problem in this specific geography, can you please take a look at it and come up with some solutions on what you think we should do here? Right. So that very act of just delaying. You might have solutions in your head and that's fine. You can then bring your solution. Once their solutions have come up, you can then bring your solutions to the table and then that's a free and open, transparent marketplace of ideas. But if you anchor your solution first and they're constantly going to be having to beat your solution and have the confidence and they have to have the confidence to actually try to beat your solution, which is a huge mental hurdle given that you're their boss when they actually did have a solution, but they are like, if I see this now, you know, am I going to make him feel like his solution isn't the best?

Kevin: Yes. Yup.

Nadiem: Right. So I think that would be my one. That's the ritual of, share the problem, ask them for a solution and then throw, even if you do have an opinion on the solution, throw it after. Hmm. Those issues happen. That's, I think the first thing. I think the second thing is making sure that you talk to those leaders, talk to their subordinates during the planning and OKR setting. OKRs are Objectives, Key Results. It's basically another word for our target setting and goal setting. Um, that process not involving your one downs in that process is basically the first, it's like the original sin. It's very hard to recover after that. If you just set from top down that, that direction without actually taking in the feedback and inputs of each of those key leads under you, I think that's where the beginning of the end, you know, like that's where you start losing credibility, you start losing trust and you start losing motivation. So I think on the planning process, what's your idea of an ideal bottom up leader?

Kevin: I think for me, I agree with everything that you said. Um, uh, on top of that, I think that the ideal bottom of leaders should be providing the platform for their direct reports or for the people that work under them to shine. For me I always find it non ideal when I work with somebody who I know has, you know, several direct reports and if I work closely with them if I never kind of, you know, if I never really hear either directly from or at least a mention of, you know, somebody else's, um, really significant contribution to the team that's a flag for me. Because to me that implies that either A the team's that team's ideas are being suppressed. Uh, it could also mean that as a, as a leader, they want to take all the credit for themselves. And that inherently blocks bottom up because it means that the people under this person can rise up because then they never get the credit that they deserve.

Nadiem: That's super interesting. I have the inverse of that as the red flag. So when I go and say, Hey, can you do this? And the leader immediately says, yeah, yeah, yeah, we can do that. So what I've realized is that the best bottom up leaders will never do that. The best bottom up leaders were like, hold on, let me talk to my team first. Right? Just that, that little tell. That's a really good reflection of it. That's a bottom up leader.

Kevin: No, I agree. Yeah.

Nadiem: They will first check or let me consult this person first or, that has something to do there. I'm going to check it out first. So it's funny, it's almost the same thing. It's just a different way of seeing that red flag.

Kevin: Yeah. Well, what for you, it's when, you know, you're trying to, when you're trying to raise something, right? For me it's when they're trying to raise something to me, right? When they're trying to raise something to me, I would like to hear, you know, I would like to hear, um, credit given to others. And I think the good sign of a bottom up leader is one that is secure in knowing that their job is to provide the platform and distill from their team, you know, the best ideas. Rather than being the guy or the girl who has all the ideas. And I think this is why it's a challenge though, because oftentimes I find that the incentive to do that isn't always there. Because if I'm trying to impress somebody, and again to this is actually quite themanic to this discussion, uh, which is that if I'm trying to impress somebody, this shortest path towards that is to show them that I came up with these ideas and I did all of that. Right? And so if you kind of focus too much on the what and the output here, which is just like all me, uh, then the easiest thing to do is just for, it's for me to always make it look like, you know, I'm the person who has all the ideas and the execution to my boss. And I think for most bosses it's easy to fall into that trap as well. Right? Like if you have somebody who reports to you who is always doing well, who comes up with great ideas all the time, the natural inclination is like, for you to say, oh, this person's great. So that's where the challenge I think is also kind of getting the incentives. Right. Um, and I think that's kind of something that even today, I think us as an organization we're still grappling with.

Nadiem: Yeah. I can't, I can't tell you how many times. Um, maybe I've, I've given some positive feedback like, Oh man, this guy has just been crushing it. Yeah. This person's been crushing it. Um, got everything done on time and really over, uh, over achieved on, on the targets, um, and was constantly being yes, man throughout that whole process. Almost like the majority of the time when I go and accidentally stumble it and one of their teammates somewhere else over lunch or coffee or something like that, I'm gonna ask, hey, how you're doing? And that's sort of the, the waterfall comes out. It's been horrible. I don't know exactly why I'm doing all this stuff. I don't know. I haven't gone home since like two days. And it just shows that there, there are some of these like achiever showers or, uh, you know, uh, leaders that yes, they do, they hit those milestones, but at what cost?

Kevin: Right. To the point of what's sustainable.

Nadiem: Exactly. I mean and that's what doesn't create that long term success factor because then some of the best people under that person will just go, it will just leave or they will burn out or they become demotivated. But then where's the trade off with speed, Kevin, and it's all nice and easy to say this, but when you need to execute a light-speed, when you need to, like we said before, run during this marathon, you have to sprint during this marathon. Where do you draw the balance of this bottom up? Innovation is the sacrifice really. I think a lot of people are or a lot of listeners are wondering like is it really worth it? Is it really like what do you get? Okay. Because we know the risks you slowed down. There might be some misalignment and what teams are doing versus each other. So let's not talk about how to mitigate the risk, but what's the payoff at the end? Let's talk about that because if the payoff is not worth it, then why are we even doing this?

Kevin: Yeah, I think so. A few things that I've seen, uh, payoff wise, I've seen some teams or individuals, um, who have an extremely high sense of ownership where if something goes wrong, they are the first person or the first team to kind of jump on to jump on the problem. Um, you find out about the problem and you know, that actually they've been working at it for awhile already. Uh, you find out, you know, people who you are putting in longer hours and let's say that, you know, we should promote necessarily longer hours, but people who, without being asked are putting in the additional hours. And I think the ownership comes because it's your idea, right? Right. Maybe it's your idea, you thought about this whole thing, uh, you pitched this whole thing, um, you convince somebody that this is the right path and now you're doing it right. So for, you know, if you kind of went through that whole thing you know, that this is, this is your idea, this is your baby. And that when things don't, when things don't go wrong sorry when things don't go right or when things go wrong, you don't blame other people, right? You don't say, oh, that's not my problem. You say, yeah, that's, you know, I'm going to solve it. And, and because you also understand the decision making that goes into, into that, um, you are also much better at problem solving, right? Because you understand the whole logic of like, why you made these decisions. Do you understand what the objective was? You understand the key results that you were trying to achieve. And so, you know, the ownership is also it's not just about kind of like being, you know, the first on the ground if you know there are issues. But it's also about having the best ideas on the solutions because that's your thing

Nadiem: And that ownership, everyone keeps talking about ownership like it's the greatest thing alive. But what, what about ownership makes sustainably successful teams? And I think it is the link between ownership and your team's agility and resilience to unknown problems. Unknown problems. Once, because most problems are unknown problems. You only figure that out later, right. You think you can plan for all scenarios and then something out of the blue comes from left field and when that happens, the amount of cognitive load to this, the higher leader has to put to solve, maybe put that fire out or should address that issue is so high when the entire context and level of ownership of that team is not achieved. So it's when the shit hits the fan, that actually this concept of ownership and bottom up innovation shine, right.

Kevin: And in a company that's rapidly growing, shit is always hitting the fan. I mean on a daily basis shit is hitting the fan. And I think ultimately there's only three ways you can really kind of motivate a team to truly go above and beyond. Uh, what is obviously the, that, that, that ownership. The other is fear. And the third is some material incentive, right. And obviously, you know,

Nadiem: Fear and money. You're great for short term. Oh, they're great. Yeah. Fantastic for short term but disastrous for long term.

Kevin: Yeah. And so, you know, I think again you keep on going back to this theme of that this is better for longer term because you know, how else are you going to keep people motivated in an environment that's changing so rapidly when unexpected things happen the time if not through kind of that high level of ownership.

Nadiem: And so let's talk a little bit about, I want to talk a little bit about what we actually did right in the organization to pay tribute to this bottom up innovation. I think one of the biggest things that we did in 2019 was... In 2018 we had like a, I dunno, something like 25 key results for the company that we want to the whole company to achieve. And what we did in 2019 is that we reduced it to seven basically. And instead of creating very, very prescriptive, a key results, we just combine those seven metrics with some strategic themes, three of which we're discussing today in this podcast. But that enabled this OKR setting process to be much more bottom up. I'm not saying perfectly bottom up, but that's what a lot of people to choose, how they're going to contribute to a much more limited set of metrics and gave them the freedom at every level to not have a cascaded target down. But they rationalize how they're going to help achieve that metric as opposed to we set these very prescriptive targets and goals and then each then the, the groups take it on and then the sub-groups take it on. And then it's like a cascading process. So this is one of the most fascinating discoveries that I had is that actually cascading KPIs. Some, some people we used to call it and management consultant and we used to call it KPIs. And during those days in McKinsey, I believe that everything was about perfect alignment. So you have to have targets at the top and everything has to be MC, the middle layer has to contribute to the top layer. The lower layer has to contribute to the middle layer. And that is actually you run into huge amounts of problems, cascading targets that way. Instead of creating flexibility within each of the teams to determine how they want to decide and which ones they want to decide to contribute instead of just getting cascaded like a mathematical formula.

Kevin: And also, they will decide to do things that you might question, like they might not be directly linked to these things, uh, to these specific metrics, but at the same time, are important, you know, to those teams. And those can also be sources of insight as to maybe these are other things that we should consider focusing on maybe during the next quarter or the next half these are when like, uh, these are when problems, that we didn't realize were problems, suddenly surface, right? Like, oh, we didn't know, uh, this team that's suffering on the ground because of this problem. They decided like, okay, we're going to tackle this. Yes. And, and as leadership, we had no idea that this is such a big problem. Yeah. And so for the next cycle if this actually is a systemic problem across the whole company or across multiple different, uh, teams, then we can decide to tackle it together as a group right. But without that process, we wouldn't have known.

Nadiem: Yeah. Because they're closer to the problems. They just had a way or a means to communicate through bottom up. Right? Then we're able, even leaders become, gain far greater visibility and transparency into what's happening on the ground really. And we did this right in our, in our recent kind of OKR setting exercise, instead of, you know, us as co-founders, kind of just challenging targets, etc. What we did was we invited all the groups together so that peers could challenge and review and we had a whole section of how they can help the issues that they can help with for other groups. And you instantly saw the energy in the room whereby it wasn't just leader saying, oh, I like that. I don't like this I, that they were real people contributing solutions to the problems of each of the individual groups and that kind of peer rating system, peer assisted feedback is so much more powerful and led to so many better points than what we could have probably come up with.

Kevin: For sure.

Nadiem: Right. And that was the payoff in my mind. That's a short term. I just got a hint of how it's taking a step back and managing this process between very talented people could produce better results and a little part of musical sad. Right. Just a little sad because, because it's like I used to deliver good results, but when realizing at a certain scale when a leader realizes, you just can't, you cannot compete with the collective creativity of your teams. Right. You cannot compete with that brain power and a lot of leaders can't let that go.

Kevin: Yeah. And we're also much further from the problem. This is a good segue to the other theme. Which is around building these bridges.

Nadiem: Build bridges, break walls.

Kevin: Yeah. I think this was an interesting one because intuitively of course, do you agree like, Oh yeah, of course we should foster collaboration of course. Uh, we should, uh, get, uh, teams to align with each other. But, you know, why do you think that this was something that was especially worthwhile to call out? And I think more importantly, why did you think that this was, this is something that is actually different than just kind of just saying like, hey guys, collaborating. Right? Like what, what does this mean? Like what are what should we be willing to sacrifice, uh, in order to kind of achieve this.

Nadiem: In order to achieve building better bridges? Bridges. I think in many ways we have to sacrifice the concept of overly, number one, overly rewarding teams for their achievements of their own team only instead of the bigger group or the bigger company for that reason. Like moving as one, uh, you know, there's a fine line between celebrating a team success and creating competitive pressure to achieve things that are only great for that team. Yup. I'll set up elsewhere and the inverse part is to create an incentive or at least a cultural incentive to help out other teams, so breaking down silos, there's a payoff to it, right? There is a cultural payoff in an organization for helping another group out or another team out even though it doesn't directly fall under yours, but we took some forcing like some really, really interesting policy changes from processes that we took forth as a result of this. We didn't just say, you know, build bridges, break walls and then not back it up by anything. Right. We actually forced groups to share their key results. Like I was pretty significant percentage requirement minimum. That must be shared with another group. Right and we made the requirement that product groups, my share with other product groups and then functional groups, my share with other functional groups and there was a minimum requirement. Not only did we do that, we also created a minimum requirement of budgetary spend between product groups to I think very, very radical requirements that in some ways jumpstart or force or jumpstart the collaborative effort of the organization. And you saw that even in our, in our core product group, a session where everyone was like typing questions and challenges online. It was just very dynamic. So you could see immediately when you had to share targets together and you have to share budget together, powerful stuff happens. Yeah, very, very powerful stuff happens so you have to back it up. You can't just, you can't just throw it out there. It's not a, it's not just a value like a core value. It is an actual, you know, tradeoffs that you have to make and some of the trade offs you're asking about the trade offs, what's the risk of doing it, things like that. Well, some of the risk is that you actually slow down some of the key initiatives because you realize that other teams require, you sacrifice a little bit of your ego in a team in exchange for helping out a partner group or buddy elsewhere. Right. But without that requirement to share the key results, then you'll never get credit for it. So a lot of companies and organizations try to tell their teams you must collaborate more, but they don't create the goal setting incentive with which to achieve that.

Kevin: Yeah. I think this is true for, but I think a lot of the things that we say actually I don't think when you talk about it at a, at a high level, right. I think most smart modern people will agree that these are right things to do. Like I think maybe bottom up innovation is a very specific one. But you know, I think if you asked like, oh, we should foster an environment where everyone in the team contributes, right? Like, like everyone will agree that yes, absolutely we should do that. And everyone will agree that it is the right thing to have teams collaborate. Right.

Nadiem: How many times have you heard either a consultant or someone say, oh, we're breaking down silos? It's like the favorite catch word. Oh yeah. We really love innovation. Yeah. Yeah. We're all about that.

Kevin: Yeah. All the time. But it's how far are you willing to go to kind of make that happen? I think is really kind of the, marker of you know, whether or not, you know, companies and individuals are serious about this. And I think that's very important to him to codify it. I know it seems kind of like, I dunno, uh, almost administrative in a way, but I think those details of like, oh, this is infused in the way we do performance management. This is infused in the way we do a goal setting. And this is infused in how we run meetings and cadences. Right. I think that part is, I think, um, the next step of really kind of instituting these philosophies that generally sound good. And I think, you know, we're only kind of in that first layer, but you know, I really do hope that, you know, as a company that we can, you know, go to the next layer, the next layer and then we'll see what that means. But, um, I think we really have to be almost obsessed with like infusing that in different parts of the company. I guess processes if you will.

Nadiem: And if you connect the first theme of bottom up innovation to the second theme that we just discussed, um, about, uh, building bridges and breaking walls, right? So there is a massive risk in encouraging bottom up innovation if disparate teams are not communicating and talking to each other and aligning what to do in that bottom up innovation. Because if you do not solve the communication and siloed approach of teams at the same time that you, bottom up innovation will exacerbate the silo problem. Right? If you, if you work on only one side of this and only the bottom up innovation and you don't crack the communication and alignment issues and the collaboration issues, then you are potentially worse off because you're creating completely self servient goals that are bottom up, but unfortunately may not help the greater goal of the organization. So you need that forcing mechanism. Right?

Kevin: I agree. And then, it is a tenuous balance and I think in some ways, right? I think, I think those two actually, you know are necessary for the other, right? I think just forcing, just saying that, hey, collaborate more without it being bottom up I think probably makes top down worse, right? Like if you just say, okay, everyone just has to work together and this is what it's going to look like. Right? I think actually these two parts or these two themes actually almost go hand in hand in that sense.

Nadiem: And so the, the role of leadership there, and I think that there's a point to be made about when you're talking about building bridges and breaking walls, forcing that from a top down approach also is not very effective. Like leaders need to reframe their mind. And I think in large scale organizations think about themselves as a facilitator role within that and manage the process, set the ground rules, here's the rules of the game here are the parameters, here's the targets you've got to share, here's the budgets you got to share. Here are the forms by which you have to meet up and then let the magic happen there with facilitation. Yeah, right. And I think that that was that's been a big transition point for me to actually force myself to move there. And then we come to the third kind of strategic theme, which is be the best at what matters. This one's good about focus and prioritization. So we've cracked that we need to first bottom up individual. We need to tap into the collective creativity and power of our teams. Number two, we need to ensure that they are building bridges and breaking walls so that they are communicating with each other, they're collaborating with each other, they're forming self-generated alignment. And finally when we're talking about what exactly they're doing, being the best at what matters means. If you're the best at everything, you're the best at nothing. This has been a contentious kind of battle. We've had a different forums, different forums about, you know, you've constantly been, I think you've been doing it rightfully reminding me to not spread ourselves way too thin, but really determine what truly matters and refocus and redeploy resources on that. And this can be a very powerful thing when combined with bottom up innovation because what truly matters to the user. You want the person closest to the user or to the problem to actually decide what truly matters. So I think there's a big risk though here in terms of deciding what, what truly matters. So this theme is about focus. Yeah, just can't do everything. This is one thing that I think all companies, including ourselves are consistently terrible at consistently. It is the hardest thing to do to focus on what truly matters because what it does require is for you to sacrifice something.

Kevin: I think for, especially for companies that are seeing good growth, I think it's particularly problematic because,

Nadiem: yeah, when, when things are bad, you have to, yeah.

Kevin: Yeah. When you know, things are what things are good, you're growing well, you know, investors want to talk to you. Everyone, you know, media is writing about, look at all this amazing stuff.

Nadiem: I can do anything.

Kevin: Yes, of course I was like, Oh yeah, okay, we got this, we got this. And I think it's easy to kind of get into that, uh, into that mode and yeah. The sacrifices I think are what's hard. Right. And I think in a world where, you know, a company is growing and in a world where there is competitive pressure obviously in many different, you know, from many different angles in the business, I think there is the temptation to say, oh, we have to win every single thing. Right? I think that's dangerous, right? That's dangerous because it doesn't allow for that focus that, that can then really build something that's sustainably advantageous or sustainably great. Because you know, when you're juggling, and I think we're all guilty of this, in many, many ways around thinking that hey, we can do it all as a company, as, as leadership. Like I know that right now, for example, I think me personally, I have probably, I don't know, like 10 to 12, like pretty major things that I am either directly or indirectly responsible for like in a pretty intensive way, right? Not in a light touch way. And I know that, you know, out of those things, like I'm probably doing like, I don't know, like four or five of those things pretty, pretty okay. And the other is a probably not doing a great job and I'm probably disappointing people, I'm probably dropping balls. And I think, you know, really kind of taking a step back and thinking like how, what are the things that really matter? And there's a lot of different ways to define what really matters. Like what's urgent, what is high leverage? Sometimes this is dangerous, but you know what you're good at. But I think really having that mindset of being, thinking about, you know, what are the things that really matter and what are the things that don't matter, even though I kind of feel like I should be doing them right? Because it's easy to say, oh, those things don't matter and it's easy. Right? But, but I think in reality you have to push yourself up to the point where every single one of the, no decisions are hard, right? Right. Easy, easy things to say no don't count.

Nadiem: They don't count. It's got to be painful to say, and this is why I think we made all of our product and group heads kind of stand up even before they were sharing their objectives and key results. Right. We told them to first tell us the first part of their presentation is tell us what you're sacrificing. Tell us what you want to be the best at. Tell us why it matters and tell us what you're going to be sacrificing. Yeah. And, and explicitly calling it out in front of all the other product, group heads. Right. And that's a very powerful statement. And getting feedback from people about that. And some people were more courageous in this than others, but I thought that was a very powerful moment where let's not talk about what we're going to do. Let's talk about what we're not going to do. And that's okay. Let's have these explicit conversations. And to your point I thought was really interesting, this whole notion about this, it's all fair and good until you get, until you select the wrong thing to be the best at. It's all fun and Games until you get that decision wrong. And here are some common mistakes that I've seen. And here's where it gets really tricky. Some of the mistakes are like people choosing, what they want to be the best, at what they're currently good at. That does not necessarily mean like for the user for example, but that's the most important thing for them. It's just that they have, their team happens to do that really well. But in the bigger scheme of things, it's not what truly matters to their end user.

Kevin: Yup. And you see this in product teams all the time, right? Oh. Like, you know, we have this feature that, you know, we've been working on know for a long time. Uh, yeah. We've invested so much time and effort. I look at all these great things that this thing can do now, but, right. Does it, you mean do people actually care? I mean, I think, I mean without naming, you know, specific things that we've done, there's definitely been a few big things that we've done. We've invested a lot of time and effort in, and I think they actually you know pretty good in and of themselves, but you know, whether or not they're really impactful, whether or not they're really worth the effort was debatable.

Nadiem: Debatable. At the very best. Yeah. And this is where it also gets tricky. He's like, what? You want to be the best that what truly matters must be passion agnostic. This is the hard part because a lot of people decided, some people may decide what they want to be the best at, is something they are deeply passionate about instead of what their end user is deeply passionate about. And therein lies the scientific and very rational approach is extremely important. And the research and the data is very important as well. Yeah. With which to decide what to be the best that because it's not just to be the best, that it's something you can leap frog, either competition or any kind of state you can be the best at something that truly matters to that end user. Right. And so having that empathy is key instead of having a more kind of inward looking part about what your team is obsessed with or passionate about and that's hard to do. Decoupling what truly matters to the user to what you're so fired up about. Oh, I love this feature. It's gonna be what where we are going to do or be our best at. And that just doesn't work. Right?

Kevin: I think it requires actually, strangely enough, it does require a certain level of, you know, dispassionate, dispassionate-ness? Yeah. If you just kind of have to really view things from you know, a problem or customer or user first. Um, I think it's very easy to fall in love with, you know, your solutions and your ideas or the things that you know, you particularly good at or you've, what you've been doing for a while. And I think that that part is, yeah, I agree with you that that is, that is probably one of the harder ones where you can actually, cause it's hard to see that, oh, this thing that, you know, I'm really fired up about it. This thing that I've been doing for a while actually doesn't really matter. That's a really hard thing to save for I would say anyone.

Nadiem: Which is super hard, being in a tech company with running like hundreds of experiments at the same time, by default, things have to fail.The majority of things have to fail. Right. So if you're, if you, if you don't have that mental resilience to know that your baby could be irrelevant, yeah. Then you know, it's kind of hard being in a tech company. Or you have to constantly experiment by default, that means you have to fail most of the time. Right? And I think that kind of like ties us all together. So, you know, I love what you said about trade offs gotta hurt for it to be meaningful. They have to be painful for it to mean something in the organization. So if what you're saying, what you're sacrificing is not painful, then I think that there's something wrong there that you should reassess again. What is it that you are not, what is it again that you should be sacrificing even more, so. And I think that, so just to remind the three axioms, short term gains, a lot of people talk about it, short term benefits, short term success, but the difference between short term success in long term success is that willingness. And I think courage to believe that those unsexy, slower, more painful investments you put into your organizations will ultimately lead to far longer successful run, and in a much more sustainable way.

Kevin: Yeah. And it's hard. It's hard and, it's hard in any kind of fast paced industry, right? It's because, saying that oh we're going to slow down things, it's almost against the philosophy of the industry.

Nadiem: Blitzscaling.

Kevin: Yeah, totally. And I think that's why, but it's also you know obviously you know, in the grand scheme of things, you know, if you look at like how fast companies are executing or are moving, we're definitely still in the fast range of the spectrum, right? If you kind of look at the universe of companies. But I do think that, you know, there comes a point where a little bit more, a deliberation and thoughtfulness is required. And I think out of, at least for, you know, all the companies that I admire. Like I've seen this be a pretty consistent theme where you know, I'm always shocked when I hear the amount of effort and depth a lot of your leaders I've seen in many other companies put into their people put in to their organization that don't have like payoffs this week or next month or might be at best to be something like, oh, next quarter, you know, this is going to be great. And I'm always really amazed at you know companies that will say like, okay, this is one thing we're really going to nail. Right? And kind of see that in you check in like every year it's still the thing that they really want to nail that level of conviction of saying like, oh, we're going to be great at this. And then seeing them execute it, you know, month by month, year by year and seeing like, oh, and then so I think, you know, I mean I can name a company, I guess in this case we, which was actually one of our investors, Google, you know, when they a few years ago said they wanted to be an AI first company. It was like, okay, that sounds cool. Right? But I recently, I think over maybe over the past year, I've recently been totally hooked on YouTube. I never used to be a regular youtube visitor. Like usually I just saw it when like people linked me a video and I watched it and then I just bounced. Right?

Nadiem: Same exact thing. I feel exactly the same. I don't know why suddenly I'm so much more...

Kevin: Right? The recommendations are just amazing, right? You just like, fuck, I've just spent like an hour and a half on my life just like in a YouTube hole.

Nadiem: Yeah. It's like a learning hub, right? Either that or entertainment. But for either reason, it just keeps guessing what I want to do next.

Kevin: And so you see like the, that payoff, right?

Nadiem: Like they want to be the best at recommendations.

Kevin: What artificial intelligence. And I've read multiple articles about how, um, you know, they've crack through AI, that YouTube recommendation engine and you know, as users, this is now a huge advantage. Like if imagine trying to start another just general video sharing platforms,

Nadiem: like it creates these moats. Yeah. Massive moats.

Kevin: Yeah. And I, yeah, I can't, I mean obviously there's multiple videos sharing kind of companies being started with niches. But I really think that, you know, YouTube have such a large advantage, I think in the general video space I really don't see how they could get challenged in the near term. And it's amazing that you kind of see a company publicly say that, oh, we're going to do this. And then suddenly like a product just like leaps in terms of just quality, uh, you know, about like a year or two years after that.

Nadiem: Well did I think, I think we've covered a lot of ground here. We've run out of time, but you know, we could go on for hours about,

Kevin: Oh, this is a great topic.

Nadiem: Yeah, we can go on for hours about this. But you know with all great things, I think we've come to two kind of conclusions. Long term success takes a lot of sacrifice in the short term. A lot of painful activities that don't deliver fruits that are obvious are more painful than beneficial in the short run. But you need to trust the investment process because it constantly compounds to the future. And I think it's much easier for companies to ignore this fact, but if you get that right in the beginning, there's your probability of success. I think coming in year three, four, five and then 10 years is exponentially greater. So make those painful moves early.

Kevin: Yeah.

Nadiem: And be successful later.

Kevin: Yep.

Nadiem: Awesome.

Kevin: Cool.

Nadiem: Thanks a lot Kev, until next time. See? Yeah. Cool.

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