Editor’s Note: We are delighted to have Robert Siegel join us to discuss his book, The Brains and Brawn Company: How Leading Organizations Blend the Best of the Digital and Physical. Rob is a lecturer at Stanford Graduate School of Business where he researches strategy and innovation in both large and small companies, as well as the opportunities and challenges that technological change brings to these firms. In addition to his work at Stanford, Rob is a partner at venture capital firms XSeed Capital and Piva Capital.
[MV] The book explores the importance of combining digital innovation (Brains) with traditional business operations (Brawn) in order to either maintain or break through to market leader status. What led you down the path of exploring this topic in the first place?
[RS] In two of my courses at the Stanford Graduate School of Business, The Industrialist's Dilemma and Systems Leadership, we look at how the combination of digital and physical is hitting almost every industry and every product and service. After studying over 70 companies we started to synthesize the key trends of successful organizations that were thriving in a world that combined Brains and Brawn. We found best practices in how products are developed, how companies are organized, and the attributes of successful leaders.
In my career I worked in both large and small companies, and at this point I get to study these trends while at Stanford, while also being an active venture capitalist and a consultant to organizations. The many angles that I've seen of these trends culminated in the writing of the book.
[MV] It's a popular narrative to suggest that software startups will disrupt every industry, yet you say that incumbents are not necessarily doomed and disruptors are not ordained. Why is that?
[RS] We found that winning companies combined the best attributes of both incumbents (often with a physical-first DNA) and disruptors (often with a digital-first DNA). Many of the skills of long-standing organizations -- logistics, manufacturing, working with governments, etc., are becoming increasingly important. And we saw that many of the digital upstarts had a lot to learn from their physical brethren. Similarly, the digital disruptors had developed many new skills and competencies around data and risk taking that are needed for all companies and that are required for large and established organizations.
[MV] Software plays an increasingly large role in how companies deliver value to customers whether or not the product they produce consists of software. What's an example of how a traditional product business has leveraged software to deliver a stronger value proposition to their customers?
[RS] A great example is the American retailer, Target. They have not only built an incredibly formidable eCommerce front-end for shopping, but they use data to improve both the online and in-store customer experience. They now have a large data science and data engineering in Silicon Valley that has more PhDs than most university math departments!
[MV] For obvious reasons, most of your analysis is focused on large corporations who have a tremendous amount of resources at their disposal. How would you think about applying your concepts to SMBs in traditional industries?
[RS] SMBs will need to develop digital competencies, but will also need to consider where they need to partner with others so that they can be competitive against both their larger traditional competition, as well as new entrants who are using new tools to serve customers better. Shaping one's ecosystem and knowing how to partner well are key determinants for success in today's increasingly connected world. Change can’t be made overnight, but with the proper leadership and long-term orientation it’s absolutely possible for SMBs to see the same level of impact from embracing technology and likely more than big companies. Nimbleness can be a huge advantage for SMBs.
[MV] Every CEO has heard the terms "digitization" and "tech transformation" yet knowing the jargon is easy, actually doing something about it is much more difficult. In your view, how should companies start embarking down this path and get to where they have tangible proof points?
[RS] First and foremost, the CEO needs to be engaged in the process. He/she cannot just delegate it to a team and get updates once a month. Companies need also to have a patient time horizon towards investing in building digital competencies, and may also need to come up with good ways for companies to organize so that employees can participate in the upside of taking career-risks when trying new things.
[MV] One of the most important concepts you describe in the book is what it means to be a Systems Leader. Can you briefly describe a Systems Leader and how they affect an organization?
[RS] A systems leader is one who understands the whole picture of how a company is operating, both internally and externally. Systems Leaders have the ability to see and master strategies from different perspectives at the same time: How to use IQ and EQ, how to drive innovation while hitting quarterly numbers, and who can see the big picture while also managing details. Fundamentally, great Systems Leaders:
Operate at intersections—they can pursue more than one goal at a time
Manage context – they are great storytellers and can control a narrative
They have a Product Manager's mindset and can move smoothly between customers, engineering and commercialization organizations.
[MV] Are there areas where you want to further explore or dig into next? Any predictions for Brains and Brawn in the future?
[RS] I want to look more closely at how global geopolitical issues will shape the world that is increasingly interconnected. The combination of digital and physical will continue to expand, and companies will be finding ways to cross-borders regardless of geopolitical tension. Looking at what business leaders need to do in an increasingly complex world is an area I am starting to look at more closely.
[MV] We really appreciate you sharing more about your work, Rob. For our readers, be sure to check out the book if you haven’t already.
[RS] Thanks Mark! I hope everyone enjoys reading it as much as I did writing it.
