[Music] hi Shannon Waller here and welcome to inside strategic coach with Dan Sullivan Dan today you are showing me a brand new exercise that sounds really interesting especially for clients entrepreneurs who are looking at really creating new capabilities but having a filtering mechanism or a way of assessing how profitable they're going to be and you call this a profitability maximizer so I'd love to know where we'll we'll talk through the idea and the thinking tool but I'd love to know where did the need for this exercise come from what prompted you to come up with it well I think it's I'm interested in Technologies first of all I've got a an explanation or answer to your question that involves the world as a whole and then just related to our particular company and to the specific businesses that our entrepreneurial client have so the big thing is that all new capability start with somebody having a vision about something in the future that the reality of it doesn't exist yet and often times the people who have this are very very persuasive and they can talk about it in such a way that they give the impression that the new capability is just around the corner and you don't want to miss out so you want to you know it's like an offering in the investment Community they'll get people to invest right away but what I noticed is that I want to have credibility you know people look to me as a strategic coach they look to me when they bring up a topic of a new type of technology or something's just around the corner that I can give them some framework for actually evaluating just how true it is that is it's going to be a breakthrough but the other thing is that it may be a breakthrough and it's being talked about like it's right around the corner but it may be 10 years off and my feeling is that there's certain boxes that have to be checked before something is really a profitable success and so that's from the standpoint where other people are trying to engage you you know that there's a new capability and they would like you to invest in it or put a down payment on it and I think we have to become wiser and wiser as individuals not anything but what sounds like it's going to be really good and it's going to be here and usable pretty quick and what's kind of a prediction you know it's kind of a guess and it might be interesting to talk about but it's not interesting to actually invest money in it or time or anything like that so that's just the world in general but the other thing for us here at strategic coach you know we create a lot of new capabilities we have a lot of individuals in the company that create new organizational capabilities new technological capabilities new communication capabilities and what I'm looking for is a structure whether it's myself or you or anyone else that you have a very solid way of actually developing creating the new capability where you're not over promising and you're going step by step and the Very progress you're making is providing energy it's providing increased confidence for yourself for your team and for other people my feeling is that we've entered into a period in the world where creating new capabilities is going to be a pretty normal thing on a continual basis so any anyway I had the opportunity of someone who's creating a entirely new kind of event in the marketplace this is a very specific multiple Day event where a certain kind of breakthrough part of science and technology is being utilized and I simply utilized the framework that we're describing here and they were amazed at how comprehensive it was and allowed them to think about their event from many different angles that they ordinarily would not have done and they could immediately see that there were things that they knew that they had already proved that they could take advantage of very quickly but there were many things that they didn't know where they were going to require who's you know in our language and strategic coach who not how they were going to have to call on expertise that they did not have so they could make progress because they're clear about what they already knew about this but they could also make progress because they could very quickly attract and take advantage of the knowledge and capabilities of other people so it was my first test model where I actually applied it to someone else's new capability and they were thrilled they were actually thrilled with the conversation that so interesting Dan and it strikes me that this period of time who knows how long we'll keep going for probably a while is that there are so any new capabilities coming at us you know if you're on your phone if you're watching anything or reading anything or listening to anything there's new opportunities for new capabilities that's in air quotes and having a way to filter them this is something that I think companies need to have as capability teams need to have people need to have for their own just even as a consumer but also as a Creator and as someone who is you know wanting to persuade other people of the validity and the profitability of your ideas but not having a framework in which to do it so let's talk through the piece of which there are a few English is a great language for finding words that have a resonance with each other so I describe the checkpoints there's 10 checkpoints and they each start with the letter P and each of them ends with BL so the first one is plausible okay so we start there and that you know this is the starting point for any new idea that you're seeing something in the future that the innovator or the inventor whoever wants to create the capability has the ability to see things in the future as if they're already real you know and they're very excited you know emotionally they're almost committed already to it but there is no reality there's no evidence yet that such a thing is even realistic so I call this term plausible plausible means that you can imagine it you can see it and it's plausible and a lot of people think plausible means it's inevitable but obviously we have hundreds of examples like flying cars that we're all going to have flying cars well it was actually possible there were actually flying cars in the 1940s but it hasn't got on and it's 80 years and it hasn't really got on so it's PL and as we go up the piece it's actually possible and it's actually provable but there are forces having to do with what people would feel good about and what they would find useful that just hasn't supported this idea yeah that makes total sense yeah so you see it and it's intriguing and it's worth a try so a project that you would actually engage with would go on to possible so plausible is the first thing and plausible is not the same thing as possible okay plausible is just that you can engage with it in your mind okay and you can talk about it and people would say oh I don't think so or other people say oh that'd be really neat and everything else but you can tell there's really no level of commitment for the vision it needs a lot more work before you can get it to the point where you can actually engage people in a practical way yeah interesting Dan so possible is committed and courageous you're starting the work yeah and then tell me about provable this is interesting well possible now you've actually started to take the vision and you're trying to bring it about and I say first of all you have to be committed to it because you have to now devote time to it that is above and beyond what other time you're committed to other things so it requires a commitment to spend the time you don't have the capability and confidence yet of the finished project so wherever you don't have capability and confidence you have to put courage in there you have to move forward and it's internally driven you're not being supported from the outside yet but it's possible and then what you want to as quickly as possible get to the third step where it's provable okay and you can prove with you know objective evidence that what you're proposing actually works you know we have many many different Realms where there's new capabilities some of them are technological capabilities well you would have to have the technological proof that it actually works you know or a scientific breakthrough you have to have evidence and there's objective standards about that it's judge so right there you can see that there's a lot of work that has to go before that Vision you had you know it's grounded in reality and you have to think about how can we prove this as soon as possible that it's actually real you know yeah it's interesting Dan if I think about you know you'll have an idea and you'll Broach it in the workshop and you prove whether or not it works in conversation with other people that's how you do that with your ideas now technology or science has to have some other markers in their world or a product or you know anything like that but the whole point is that you're not going to pass the First Acceptance threshold just on the basis of the idea or that you're working on it you have to actually have evidence that someone outside of yourself says yeah I see that this actually works so the next one Dan is permissible and I think this is probably where a lot of ideas die yeah they don't make it past this part so what does perissa mean it's against the law that's pretty straightforward well I'll give you an example and Peter diamandis is a great example with his first private spacecraft that he created X prise for you know it was the first private spacecraft that went into technically what space is and there's altitude away from the earth you know it's in 60 70 m I'm not quite sure what the thing is and you have to prove first of all you have to create a spacecraft that goes that high and then it comes back and it lands and within two weeks you do it again with not more than 20% replacement of the parts on the original fight you can't change more than 20% of the parts and you know they had dozens and dozens of competitors and one of them won it but when he started the contest to do this there was a $10 million contest and there were two problems with it he didn't have the $10 million for the prize that had to be created as part of the project but the other thing was it was forbidden by the federal Aeronautics Administration to have a private vehicle go into outer space it was against the law so he had to get the law changed and he had to get his 10 million to do it you know so one thing you want to check out you know that what you're doing is not running the fou of regulatory issues that could stop you you know it may be a great idea and people are very excited about but it's just not acceptable by the law and they did change the law for him they did well he got to the chief administrator and she said oh yeah it's kind of antiquated it's time to do this so she they changed the law very cool so that sort of gets it I want to use another flight analy off the ground okay but then it needs to be protectable Dan and you've you spent a lot of time getting to know this world very well yeah protectable means that if you're creating something new and you're breaking new ground with it you want to make sure that you take the proper steps and these are legal steps that 100% you own the property the intellectual property and this shows up you know and what we're talking here it shows up as copyrights trademarks it's a proprietary Innovation this is new on the planet and you're the owner you're the owner of this Innovation this new capability for example we'll show the actual worksheet that goes along with my explanation here so our system so I did this and the artist got finished and has all the words has all the design set and the moment moment that happens she sends it to our IP our intellectual property department and that afternoon this new thing which is only a day old in its creation has already been logged in as a copyright application okay so everything new that we do in coach especially everything that's used in coaching entrepreneurs same day now the moment we're set on the design at automatically the copyright goes in and then we'll take a look it may deserve a trademark which takes a longer period of time and we have one over the past year the certainty uncertainty tool which I think is patentable that we can actually get a patent on this so very cool but you have to be sure that your new capability is protectable so it's permissible that's looking at the law from one direction does the law even permit it yeah but the other thing is that you have to use the law to protect yourself intellectual property law that's fascinating the really great thing is as soon as you put the C with a circle around it it's copywritten then you can register the trademark which is what we do instantly and then it can be trademarked and all the other things so the law is on your side if you do the right things and if it's permissible which is interesting yeah and I just want to say that the most powerful IP law in the world is American intellectual property law because americ corporations are everywhere on the planet but if you read it's right in the first article of the Constitution of the United States that the main reason for the law is actually to disseminate throughout Society new ideas new methods new technologies and in order to do that we've got to give the inventor and the innovator a time period where they get the benefit and they get reward Ed for their Innovation so a lot of people think that it's designed just to protect the innovator but it's actually the main purpose is that the society gets smarter and more capable as a result of encouraging Innovation I love that and yeah it's an incentive it protects you from just creating stuff and having someone else take advantage of it you know there's tons of stories of entrepreneurs who've crashed and burns or even entertainers who didn't protect their own IP and it was owned by somebody else so this is really key I even just saw an article this morning about the number of they're actually musicians who are copywriting their own phrases their own terminology the names of their albums and it was kind of like is this is a wild thing and in my head I'm like that's a really normal and smart thing to do so for us we really you've really got this down and you have for a long time but if you don't do it the costs are so high so Dan the next one's pretty interesting and I love how they're stack in on top of one another this is really cool so we got plausible possible provable permissible and protectable the next one is priceable yeah now this this is a fun use of the word yeah and again this is if we're talking about profitability maximum profitability well the most essential ingredient is that you have a price for the new capability that allows you to make a profit and it's one of the first first things you know that I check out with anything new that I create one is I test immediately and the likely person who would write the check for it so check writers I said I don't check out on team members I don't check on with friends and family in my private life or anyone like that I only test a new idea on the person who would actually pay for it because they want to use it you know I've done it for years I've done it you know in terms of Coach pricing for Coach I've been at it since you know mid 1970s and I've got a pretty good sense of where's the right place to start with the pricing and the thing is that I never go low with price I always go high with price because it tells me that I want the customer to buy this I want the who they see such value in the new capability that they don't see it as a cost they immediately see it as an investment so right they don't see it as a cost people who see it as a cost I'm not interested in having as customers oo that's so good that's so good and again that's a trap that people fall into is they undervalue it or they're so desperate to have it get out that they don't put an appropriate price well it's almost like they're operating at a loss before the even have the new capability out there because they didn't price it right and it's very very crucial that you get a sense and people are scared you know it's one of the things I've noticed that people are afraid of getting immediate Clarity on what the price is that would work for this product but I find it undermines their confidence for developing the new capability I think it also undermines the confidence of the person buying it yeah as you said you don't want people who are cost focused you know as clients you want people who are really focused on the value then they're looking at it lot like a commodity but they're looking at it as an investment for how it's going to help multiply them well here's the thing I'm not Walmart you know I'm not competing on price I'm not Amazon I'm not competing on price I'm in a business where we're providing a powerful service to very successful affluent entrepreneurs yeah okay so we're not going for the bottom of the market here we're going for the top of the market if you're going for the bottom of the market you still have to price it so that you can make a profit on volume right 100% yeah love that Dan next one is packageable and packaging is one of the things I've learned pent about from you an appreciator of great packaging so what does being packageable mean in this context well that the way the new capability is presented to the marketplace to buyers it looks good it feels good it's attractive it draws you in we're very Central I mean human beings are very Central you know we like things that sound right look right feel right and everything like that before you start developing it there a interesting thing that was learned afterwards after Steve Jobs died at Apple that he never started by designing the product he started by designing the box that the product was going to come home in and what it felt like to open that box and I remember it was kind of like after they had done two or three iPods when it was back you know in the 80s with iPods or early 90s and I used the iPod that particular iPod for maybe you a year or two years and I moved on but I kept the box for about 15 yours because it was such a beautiful box you know and everything that Apple does before you even get your hands on the product you're so admiring of the packaging you know and their stores and what their stores look like and that is that they realize that people love things that you know they look yummy you know from a central standpoint I feel good just carrying the package you know I feel good yeah you know and everything and we're very influenced by yeah packaging could not agree more I laugh because I have the same apple boxes it's hard for me to throw them away and it's just such a pleasure and apparently the inside of Apple devices are also just yeah well he would tell his Engineers he said show me what the inside looks like and they said well what does it matter the customers will never see the insight and he says no but we'll know we'll know that the insights look good okay I mean I think think you know people like that who are legendary they're also a bit fanatical so that wouldn't be somebody else's concern but it was his concern and they are the single most profitable company in the world you know what I mean you know they're the highest valued stock of any company in the world but no one matches their profit margins yeah and they said design tone that has my estimation has yet to be replaced which is very cool Dan the next one is producible so this means that once you've got something that you again have protected and priced and packaged but now it has to be something you can replicate and make more of is that right yeah so let's say you make something and it's a big hit and the market just wants any amount that it can get its hands on but you don't have the ability to meet the demand you don't have the ability to supply your brand new capability in such way that it meets the demands of a eager Market yeah and a lot of people have fallen down on that issue because they had a plan a which was to get it out to the market they didn't have a plan B what if the market wants a 100 times what you've graded you know can you actually meet the demand we're seeing that now that we've gone virtual with strategic coach we're not limited by is there a conference space that we can have can the travel schedule happen to the cost of a workshop justify you know the cost of a global virtual Workshop is the same for every workshop and it's very low you know so it's very very producible exactly we were saying the other day there's just the number of workshops that can happen in one day yeah all over the world it's pretty pretty amazing Dan the last two are also pretty interesting for me preferable yeah tell me about preferable well usually you're creating something where there's an existing not so good solution to a particular issue okay there's something that already exists and you're putting out something you I'll give you an example Blackberry looked like Blackberry was going to be the world beater because they had the first kind of manageable in your hand phone you know but you had to hit buttons a lot of the space of the device was made up of just the little keyboard and you know people really had to learn how to use their thumbs really on the keyboard and apple figured out well you don't have to have a keyboard you just have to have on the screen what looks like a keyboard and just have a pressure sensitive thing and they just wipe Blackberry out just like that you know Blackberry would have to completely reingen itself to actually keep any position in the marketplace and then others copied Apple but Apple stuff is always more beautiful they just have an ability to do it so the the big thing here is that it's preferable it's preferable and that means it's Superior to anything out there and there's authoritative influencers say no no no hands down this is the best out there now the thing thing to think about here you don't get to the preferable stage which is number nine in my checklist unless you've done the first dat really well exactly and because some of the what you can price for it and whether or not it's preferable has to do with how well is designed and packaged right so these are all stacking on each other which I find really interesting you know I just going to Riff on Apple for a second because I remember there was a world class I believe it was a football soccer team getting off a bus into a person they were wearing Apple airpods MH like you're talking about an influencer that's what they were wearing and so there's just this reinforcement from people that others are looking to that this in fact is the product that you want to get cool kids prefer this exactly all the cool kids in the world regardless of what they're doing prefer this over any other solution that's preferable that's a very important Point very preferable your last one Dan is palpable and I'm super curious to hear what you have to say about this one well palpable means you love it those for whom it really matters just want it and price is not a really important issue at all they just want to get their hands on it you know and that's when you really have a kind of a viral product you know the product is really you know there's lots of things that we have in our lives there's been short-term crazes for some something and but it was sort of a a fashion but usually it's things that have a iconic style you know that usually become helpable we love certain things and we're passionate about them we're very passionate about them we developed a a real loyalty a real brand loyalty to those things so the thing that I want to say about the 10 PS that I put here first of all it's kind of you know whimsical because how did he find 10 words with P that end in BL and I said well you have start early in life being comfortable with dictionaries and there's things like anonyms and synonyms and you know certain things that are secret tunnels in the language but the big thing is that each of the P's is very distinct there's no real overlap real overlap between P's but the the other thing is that I noticed because I just had a success about three hours ago with a brand new capability in the world and what I noticed was the quality of the discussion with the team there was a team there they said wow boy what we can think of when we use these as the criteria and I think the big thing is that so much of the thinking about marketing and positioning is very quantitative it's very very quantitative it's very technological but actually what the profitability maximizer really does is that you get a 360 degree it's a 360 spherical sense of this new thing that you're creating in the world and you want to give it maximum right from the start as you design the new capability that you give it maximum possibility to be a success a maximum success very profitable and I think that the checkpoints kind of Ensure and encourage that you'll talk about the right things here I find that so useful Dan because there's a set of criteria right and you can instantly almost look at something and go check not checked done not done in place yet no idea it just gives you this template for knowing how to develop things in an order that makes sense like you have to do one two and three before you do four five and six so it's this incredible framework and I want to talk about the scoring as well because the scoring is not linear yeah well I have a value score in other words that each of these stages starting from the beginning the value of your capability keeps going up there's a score and just to make it very simple but at the same time introduce the concept of multiplier I have 10 check off points and I number them one through 10 but each of the numbers is squared so 1 squar is 1 2 squar is 4 so you have 4 9 16 25 and the last one is 10 squar and it's 100 and I said that's kind of neat it starts with one and it goes to 100 so you can see that there's been an exponential increase of value as you've added these 10 considerations that you've thought through and satisfied the requirements for each one of these so I love it it's one squar two squar three squar that's really interesting yeah and then you can rate you can pick a list of some things that you're working on and see where it's at is that right yeah and you can do this to existing capabilities for example you have an existing capability but it hasn't done quite what you thought it was going to do and you can reverse engineer you can reverse analyze the capability and you'll see that that you're weak in certain number of the categories that an existing capability would be much more profitable you would maximize it if you will go back and correct one of the 10 criteria you didn't really get the price really right and you really haven't proven it in such way that it would be immediately obvious that this is a great thing and then you say well how could we do that and then all sorts of specialties you know skill Specialties and knowledge come into this and you can be doing it forever you can be taking what you've already created and keep improving the profitability of the new thing well it seems exciting to me that when you take an existing capability probably some tweaks to either protection or Price or packaging could dramatically amplify something and to the point we can get it to be pable yeah one of the areas where I really notice that most on entrepreneurs don't get the impact when they're creating new capability is that they haven't protected it legally it's not really their property and they're worried I don't want to get it out there too well known because people can steal it so they're not getting the protection right to copyright trademark patent right they've probably diminished enormously their confidence about their own new capability their afraid well I don't want to get this real big that's not the reason why I did it and I said the reason why you're saying that you don't want it to big is because you're not sure you could protect it if somebody else stole it and made it really big and you wouldn't have a leg to stand on if you said well that's my product it's so interesting Dan I can remember conversations with very specific entrepreneurs about putting something into the form of a book and packaging it that way and they're like just under the waterline and I can see that if they can package it you know into a book sell it on Amazon do all the things their idea could totally shoot up but they're just hesitating probably because it's not protected and they just hadn't seen this Vision so I'm excited about this model because I think it's powerful when you're going to a conference someone's throwing new ideas at you we're exposed to you exposed to a ton of scientific and health and techological breakthroughs all the time and it gives you a framework for assessing where something is at as well as our own company and how we're going to do this so if someone's going to just kick off into gear with these 10 PS I'm going to say them again just in case someone's taking notes they can grab them so first of all D needs to be plausible then possible provable permissible Allowed by law protectable priceable packageable hopefully beautifully producible and preferable so it becomes palpable so if someone wants to take action on this right away with this idea Dan what would you recommend well I think that it's very helpful because this is going to become standard language in strategic coach and you know we'll show what the form looks like we can put that up on the screen but we're at the stage right now where it's not completely protected so we're going to give you a screenshot but we're not actually going to let you download it yet yet because it's not protected yet and we want to test it more with our own checkw writers to make sure that it is but what I want to say here is that I would say probably a hundred attempts by entrepreneurs create new capability doesn't become as profitable as they want or profitable at all simply because they haven't checked all the boxes of preparing their new capability to go out into the world and be powerful and have tremendous impact and I've just learned from trial and error usually ruing trial and painful error that the world is not gentle towards new capabilities you know there's no vacuums out there to fill there something's out there so you have to have a new creature that's got um a lot of muscles when you go out there but I'm very pleased with this you know uh I have to tell you just following the two-hour walkth through with one new event one as I felt personally enormously useful with this but I had a feeling that there was a comprehensiveness to these 10 considerations and that you know the entrepreneurs that I was working with they said you know we wouldn't have thought about half these things that you've brought up but they're very easy to talk about and very easy to understand but under normal circumstances we would have charged ahead and then we would be caught up at the last minute that we hadn't done certain things and I said yeah and all this happens behind closed doors you can do most of the stuff behind closed doors but when the show opens you want to make sure that the new creature that you're sending out on stage is capable confident you know oneof a kind unique powerful value transformative yeah I love it well Dan thank you it's it's kind of very fun to be introduced to a a tool that's new and sharing this thinking and I think it simplifies the complexity quite dramatically of coming up with new ideas but also frankly just filtering out all the new things that are coming across our plates all the time so I appreciate that from a multitude of perspectives thank you well thanks for taking me through it this is the first time that I've had a tour through it you know you ask questions that struck you as useful to know so I appreciate we can send this out after we introduce it into our strategic coach workshops we can send this out as a context provider a Persuader of the context of what we've created here yay awesome thank you Dan thank you Shannon