Innovative Paths with Michael Ruckman on AI and Business

Summary

---

Escaping the Drift with John Gafford

Episode: Innovative Paths with Michael Ruckman on AI and Business

Date: September 2, 2025
Guest: Michael Ruckman, Founder & CEO of Senteo

---

Episode Overview

In this intellectually rich and engaging episode, John Gafford sits down with international business consultant Michael Ruckman for a deep dive into the intersection of AI, business transformation, and the critical necessity of genuine human relationships in modern organizational contexts. Drawing on decades of experience across 40+ countries—and rich anecdotes from Russia, Spain, and beyond—Ruckman unpacks why most companies approach innovation and AI entirely wrong, and what it truly takes to foster change in an organization, adapt business models, and stay relevant in a rapidly shifting world.

---

Key Discussion Points & Insights

1. Michael Ruckman’s Global Perspective & Stories

• Background:
  • Started with aspirations for medical school in California; moved to Spain, then Czech Republic, then Russia—spanning a consulting and innovation career over 40 countries, multiple languages.
    • “I spent most of my career outside of the US...worked in probably, oh, let’s say over 40 different countries. I speak four languages...” (02:35)
• Early Consulting Work in Russia:
  • Tasked with modernizing a “1970s-era” Russian banking industry; describes the unique blend of opportunity, danger, and wild unpredictability facing expats and businesses in early 2000s Russia, including stories of “gypsy cabs” before Uber.

2. The Nature of Change in Organizations

• Human Nature & Change

  • Most resistance to change is rooted in human decision-making, primarily dominated by primitive and emotional, not rational thinking.
    • “Most decisions are made in that primitive or emotional reasoning state... not made by rational.” (07:16)
  • Change is often less about pushing out the recalcitrant or “laggards,” and more about creating an environment conducive to adaptation.
    • “You can't walk into a company and say, I need all the innovators because we're going to drive change.” (10:15)
    • People are not strictly innovators or laggards—it’s context-dependent.

• Diffusion of Innovation (08:01–09:06):

  • Cites Geoffrey Moore’s law:
    • 2.5% Innovators
    • 13.5% Early Adopters
    • 36% Early Majority
    • 36% Late Majority
    • The rest are “laggards.”
  • Early majority, late majority, laggards—each play roles; some are detractors or outright saboteurs for change initiatives.

• External Consultants as Change Agents

  • “Once people inside are too comfortable with you, you lose your power as a change agent.” (16:09)
  • Most companies are built for stability, not fluid change—necessitating outsiders to shake things up.

3. Organizational Models Are Outdated

• Most businesses still depend on “classical management theory” (early 20th-century thinking), which prioritizes stability—suiting mass production, not the rapid adaptability required today.

  • “I’ll take a guess, but I’m going to guess that 90% of businesses operate based on the principles of classical management theory today.” (17:09)

• Product-cycles and business development, once measured in decades, now change in months:

  • “Now if you're not coming up with something new every six to 12 months... you're irrelevant in your customer's eyes.” (18:02)

4. AI in Business: What Almost Everyone Gets Wrong

• AI as Cost Cutting vs. Relationship Enhancement

  • Companies focus on AI as a way to slash costs, not enhance quality—especially customer experience.
    • “Right now, most corporations are so focused on cost savings... they're eliminating those low-hanging jobs. But unfortunately... those are the ones where you get a chance to impact the customer experience the greatest.” (21:24)

• AI Application & Human End-Users

  • Two essential factors:
    1. Humans are still the end users
    2. Humans still make the decisions
  • Implementation of AI must “fit how we create value as a business.” (20:59–21:24)

• Predicts next decade will be “organizational transformation” rather than digital or AI transformation.

  • “If the last 20 years was about digital transformation, then the next, let’s say at least 8 to 10 years... is going to be about organizational transformation because companies are not ready for the things that are happening now.” (22:43)

• Data & Customer Relationship Examples

  • Businesses are “stupid” about relationships because they measure the wrong things—exemplified by Ruckman’s ADT story:
    • “For $561, they're going to ruin the relationship with me and I'm still a customer of the company and they won’t resolve the issue.” (27:09)
  • Quotes from Ritz Carlton: empower employees to “make it right” up to $2k per guest, no questions asked—a stark contrast to cost-first philosophies.

5. Evolving Business Models: Product- vs. Customer- vs. Relationship-Centric

• Ruckman explains the historical evolution:

  • Balance Sheet Centric: Pre-1950s, mainly production-based, measured as whole-organization profit/loss.
  • Product Centric: Focused on sales/service of categories; P&Ls per product.
  • Customer Centric: Recognizes customer may use several products, but still focuses on events (buying car/home).
  • Relationship Centric: Focused on maximizing customer lifetime value—not just once-off events.
    • “If I'm looking at it from a relationship-centric standpoint, the most valuable thing I can possibly have is contact and dialogue with my customer.” (37:40)

• Quote:

  • “We spend so much time in business in a back room somewhere trying to figure out when all we really have to do is have contact and dialogue with our customers.” (40:02)

6. CRM, Data-Driven Customer Experience & The Limits of Prediction

• Case study: BNP Paribas' algorithm to predict when a customer wants a new car loan—achieves 29% hit rate (exceptional), but could be close to 100% just by asking customers directly.

  • “Have you ever thought about asking your customer when they plan on buying their next car because you’ll likely get 100% right.” (39:57)

• AI in Real Estate:

  • New CRMs summarize calls, build to-do lists, and help agents focus on listening and serving the client.
    • “When you’re on the phone you can really listen because you’re not scribbling... It’s just doing it.” (48:42)

7. Where AI Fails and Where It Shines

• Empathy & Context:

  • AI struggles with emotional nuance, social context, and empathy—crucial to customer service and loyalty.
    • “AI is developing from the rational. And it struggles. It struggles with social context, it struggles with emotional reasoning, it struggles with nuance—all those things important to us as a human end user.” (45:18)
  • Replacement of call centers with AI agents is often a mistake; customers want empathy, not efficiency alone.

• Best AI Applications:

  • Support for human employees: research, summaries, predictions that free up humans to deliver personal value and connection.
    • “How does AI make humans more efficient? Especially in dealing with the end user who's a human.” (49:38)

8. The Four Major Organizational Barriers to Progress

1. Organizational Models Are Obsolete:
   • Hierarchies and measurement systems built for another era are too rigid.
2. Corporate Culture Must Shift:
   • Move from directive, siloed, and competitive to collaborative and networked teams (e.g., Facebook’s network vs. Microsoft’s hierarchy).
3. Leadership Needs Reinvention:
   • Most “leaders” are managers; need more coaches and mentors who guide and inspire.
4. Approach to Change:
   • “The more you try to manage change, the less manageable it becomes.” (59:58)

9. The “Old Potato” Analogy for Change

• Some change happens best quietly, as with an old potato sprouting in the dark—successful pilots grow unnoticed, failures are quietly dropped.
  • “Some of the most successful [projects] were ones that started as a little nubbin in a potato... that were successful and they grew and we fed them and they went out.” (64:11)
  • Both grand announcements and subtle pilots are needed, but organic, under-the-radar change often finds the fastest adoption.

---

Notable Quotes & Memorable Moments

• On Acting on Principles Over Relationship:

  • “The prize for winning an argument with a client is losing a client.” — John Gafford (29:20)

• On Human-Customer Retention:

  • “If they had the right measures, then nobody would ever make those kind of decisions. If they said, hey, this guy's going to continue paying us for potentially the rest of his life, why would we screw him for $500 right now?” — Michael Ruckman (27:13)

• On AI & Human Empathy:

  • “The people in the Philippines or India are not bad people... but because of the rules, they might as well be a robot.” — Michael Ruckman (46:28)

• On Leadership & Inspiration:

  • “We need to move from the person that's an authoritarian, directive-type person... to an inspirational guide.” — Michael Ruckman (57:50)

• On the Limits of Top-Down Change:

  • “The more you try to manage change, the less manageable it becomes.” — Michael Ruckman (59:58)

---

Important Timestamps

• Guest Introduction & Global Career: 00:46–03:54
• Change Management & Human Behavior: 06:29–12:26
• The False Promise of Firing Detractors: 11:52–12:52
• Large-Scale Organizational Change Obstacles: 13:17–17:09
• Evolution of Business Models: 31:03–33:10
• AI Misapplications & Relationship Currency: 19:57–21:28, 43:09–51:04
• Case Studies: ADT, Real Estate, BNP Paribas: 25:00–41:07
• Barriers to Transformation & New Leadership Models: 53:24–58:02
• The Old Potato Analogy: 62:05–64:24

---

Key Takeaways

• Adaptability and Empathy in Business are Now Essential—Old models and cost-cutting strategies, especially for AI deployment, are quickly becoming liabilities.
• AI should empower—not replace—human value at the customer interface; empathy, personal connection, and human judgment remain irreplaceable.
• Change is best fostered by supporting organic pilots and building coalitions with natural innovators and early adopters, while recognizing that laggards and detractors need time and space.
• Relationship currency—the long-term, trust-based relationship with customers—is the most valuable asset businesses possess and is now the key differentiator in a world where anyone can automate a transaction.

---

For more from Michael Ruckman, visit LinkedIn or check out his company, Senteo at senteo.net
For more episode info or John’s book, visit thejohngafford.com

---

Transcript

[A]

Hey, it's John Gafford from the Escaping the Drift podcast. And big news. My new book, escaping the Drift, is coming out November 11th. You can pre order it right now at thejohngafford.com There are tons of bonuses, tons of giveaways. Get the book. If you are somebody that feels like you might be drifting along, this is for you. If you know somebody that feels like they might be drifting along, this is for you. Available everywhere, all bookstores, every everywhere, Amazon, Barnes and nobles, the whole nine yards. But pick your copy up right now at thejohngaffer.com and get a bunch of the awesome bonuses I've thrown out because I promise you, I put my heart and soul into this thing. I want it to help you change your life. Pick it up everywhere. Oh, that. This is the wrap. This is the wrap up. Here we go. Bring it home. Bring it back. Look at that, man.

[B]

We're coming back.

[A]

This dude's been on stage before. You can tell. That's a wrap up. And now, Escaping the Drift, the show designed to get you from where you are to where you want to be. I'm John Gafford, and I have a knack for getting extraordinary achievers to drop their secrets to help you on a path to greatness. So stop drifting along, Escape the Drift. And it's time to start right now. Back again. Back again for another episode of the podcast. Like it says in the opening, man, gets you from where you are to where you want to be. And today, live in the studio. Man, this is going to be some brain power. You might need a thesaurus for this one, a dictionary. I don't know. You're going to need a textbook, some graphs and charts. In the studio today, we have the founder and CEO of Senteo. Healing is one of the finest international business consultants on earth, and we are lucky to hear from him today. How AI is going to affect businesses going forward and the value of the relationship currency and how. Why you need to place some value on it. Guys, welcome to the studio. This is Michael Ruckman. Michael. Hey, how are you, buddy?

[B]

I'm doing pretty good. Thanks for coming up.

[A]

It is hot. It is hot outside. A little bit of a sidebar. Michael is one of my favorite clients, so we're glad to have him here in the studio. He was nice. We went talking about doing this for years, and I finally coerced him into coming over to the studio, which is great. So Michael's like an. For those. You're gonna get to know him today. Hopefully as good As I do. He's like an international man of mystery. I love this. It's great. So he has done some amazingly cool things. And when we started talking about, we were playing golf and we started talking about AI and how companies are just implementing it all wrong, I was so fascinated by it, I was like, dude, you gotta, come on, we gotta talk about this. So first of all, let's talk about what gives you the credentials to haven. Have an opinion on this. Let's about who you are a little bit that way.

[B]

Okay. Okay. Well, I, I started my career, I was. Wanted to go to medical school and ended up being told that that wasn't going to happen because as a white middle class male in California, there weren't enough spaces for people like me. So I went to Spain to learn Spanish and, and never came back. Spent most of my career outside of the US I've spent most of my life outside of the US I've worked in probably, oh, I, let's say over 40 different countries. I speak four languages, three of them fluently, one of them kind of advanced. I struggle through Czech, but there wasn't really a great reason to continue learning Czech. So it's kind of funny. I learned Spanish and I thought, you know, okay, there's, you know, roughly 500 million people that speak Spanish in the world, so I'm gonna use this. Very useful, right? And especially, you know, here with anybody that's doing any work, anywhere you can speak Spanish. And then, you know, I moved to the Czech Republic. The company that I was working for, Pricewaterhouse Coopers, moved me to the Czech Repub. And I thought, God, I'm learning this language. There's only like 10 million people that speak this language. A waste of time.

[A]

And if I leave, I'm not coming back.

[B]

But then I, then I moved to Russia and it turns out Czech is a Slavic based language, Russian's a Slavic based language. So it actually was very useful in learning Russian. So I'm fluent in English, Spanish and Russian and I kind of have made a career out of working in those. In those countries.

[A]

You know, it was, it was fascinating because when we first met, you had just come back from an extended stay in Russia, working there in the banking industry, because you were essentially trying to catch their 1970s 70s banking industry up to the standards that we have today, which I thought was fascinating. What was it like? I mean, before we even get into this stuff, like, what was it really like being an American living in Russia at that time there?

[B]

At the time it was great. I Mean, let me break that into a couple different categories. So one of, one of them could be like quality of life as an expat in Russia. So I mean, there were things that were just unbelievable. The things that you would, you would go like, wow, this is awesome. You know, like for a little bit of money you could do things that you would never do in other, in other countries. But there was also, I mean, at that time, in the early 2000s in Russia, they consider the 90s like the Wild East. And in the early 2000s, things were calming down a bit. But still you could pretty much be killed any day. Not, not because somebody was going to kill you, right? Because you, you might fall into like an open manhole or, you know, an icicle might fall off the roof of a building and you know, stab you and kill you or something like that. That it was just like random shit that, that could possibly kill you.

[A]

KGB and their magic icicles falling off of buildings.

[B]

Or you got in a gypsy cab and the gypsy cab got in a, in a, in a wreck, you know. So at that point there companies in, in Russia, so it was just like paid hitchhiking. You would stick your arm out. Any random person would stop to give you a ride. You negotiate a price, you get in the car and you go. So I got rides from like dump trucks, fire trucks, army trucks, like. So I mean it was, it was interesting to be there because it was like Uber before.

[A]

It was like they were their time, they were ahead of their time, they.

[B]

Were ahead of their time. Just no app, right? So it was, it was an interesting time to be there. I got moved there to essentially modernize the, the banking system. And I had most of my career up until then was large scale program and change management. So project management, change management, large changes in large organizations and you start learning things about organizational behavior and corporate culture and things like that the minute you try to change anything in a big company. So I became kind of skilled in this strategic, or let's say tactical planning of how you guide change in organizations. There are a lot of people, most people like myself, who've spent careers involved in change. Large scale change in companies will tell you that the more you try to manage change, the less manageable it becomes. It's about creating the environment that's conducive to change. So you start dealing with a lot of human nature, human decisioning, things like that. And that is largely what I would segue into artificial intelligence.

[A]

Okay, well hang on a second, let's back up because that's that's interesting to me. So fostering an environment that is conducive to change.

[B]

Yeah.

[A]

So I, I just, for some reason I'm figuring I'm just thinking about margin accounting that's just done it this way her whole life. And this is just how I do it. And I don't care about the new software and stupid. And this is just what we do. How do you walk in, especially as a consultant? You're not there. You're one of the bobs. How do you, how do you walk in and turn that around? Does March just go? Or is there a. Well, a way to reprogram? March.

[B]

Okay, that, that's a. So, okay, there's a couple of things to understand here. One of them is the human nature, right. And human decisioning. So there, there's been years and years and years prob. Last hundred years or so of, of studying the, let's say the mathematics behind how humans take decisions. Largely how our brains work hasn't changed that much in terms of human decisioning for the last 50,000 years, maybe a hundred thousand years, depending on which, you know, theory you want to believe. But our brains developed from the primitive how do we survive? To emotional reasoning, which is, you know, how do we feel, how do we. How do we react to things? Do we have empathy or not? And so on. And then rational thinking. And so most decisions are made in that primitive or emotional reasoning state. They're not made by rational. I mean, there's a gajillion examples. You know, we know we shouldn't buy the shoes because we have a budget, but God, those shoes look so good, you know, and then we feel bad, or we know we shouldn't eat the chocolate cake because we're on a diet and only X number of calories today. But man, I had a rough day. So I deserve it. I deserve the cake, right?

[A]

Eat your feelings, Michael.

[B]

Eat your feelings. Totally, totally. I'm an emotional eater. Eat your feelings, stress eater. Right here. But yeah, so, so that, that kind of thing is, Is interesting. So to understand that, you also look at things like Geoffrey Moore, the law of diffusion of innovation. So there's two and a half percent of the population that are innovators, people that see the world not the way it is, but the way it should be, and they're willing to initiate some change. There's about 13 and a half percent of people that are early adopters. Those are people that, that are ready to follow some new idea even without proof that it would be successful just.

[A]

Because they like the Shiny new thing.

[B]

Then you get 18 and a half percent of people that are, that are. I'm sorry, 36 and a half percent of people that are.

[A]

I'm checking these stats. Yeah, you better, you better come correct.

[B]

It doesn't add up at the end.

[A]

Yeah, like I may be 147 of.

[B]

People, like a percentage or something, but it's like 36% roughly of people that are the early majority, 36% that are the late majority, and then the rest are called laggards. So, you know, Simon Sinek uses the example also where he talks about, you know, the first ones are the ones that are waiting outside the Apple store overnight to get the new iPhone.

[C]

Right.

[B]

Adopters are the ones that get it before the end of the year. The early majority are getting them, you know, first half of next year. The late majority are the ones that have an iPhone 14 when there's an iPhone 16 out. And the laggards are the ones that are still flipping Android, flipping their Android razor or whatever, bringing the, bringing the.

[A]

Green text bubble to the text chain.

[B]

Exactly. So, so those are, those are the things. So when you're looking at change in a company, margin accounting, you know, she could be an innovator and we don't know it, but she could be an innovator in some different part of her life, right? So I'm an innovator when it comes to technology, I love it, right. I love whatever the newest, shiniest, brightest thing is out there. But if you look at other areas of my life, I'm fairly conservative, so I might be a laggard somewhere else. So it's difficult to identify these people. And if you're driving change.

[A]

So you're so, so you're not necessarily pigeonholed as one person.

[B]

No, you can't. No. There's different areas of your life. So you might be an innovator when it comes to technology and when it comes to religion, you might be massively conservative, you know, or something like that, or when it family values or something like that. So people are different in different ways. And the only way you can really find this, so you can't walk into a company and say, I need all the innovators because we're going to drive change.

[C]

Right.

[B]

You know, the innovators are great because they help you to detail your concepts.

[C]

Right.

[B]

The early majority are great for pilot projects.

[C]

Right?

[B]

The, the, the, the, sorry. The early adopters are great for pilot projects. The early majority are great for rolling things out. Then you have the other 50% of people in your company that are just. You just need them out of the way because they're just going to cause problems. The late majority, they're the doubters. Like, oh, I don't know our company, I don't know our city. It's not going to work. I don't know, you know, is this the right time or whatever? And they'll just doubt, doubt and doubt.

[A]

And down Debbie Downer.

[C]

Yeah.

[B]

And then the. The laggards are the ones that will sabotage. So if margin accounting is a laggard, she will do everything possible to block that change. And as humans, we don't love change, right? So we. We don't, you know, go out seeking change. Those are weird people.

[C]

Right.

[B]

We like things to be very kind of normal and, you know, consistent and predictable and so on. That's great for us. I have my evening routine with sugar free gummy bears where I arrange them by color and by odd and even. I have a little bit ocd.

[A]

Okay, That's. I don't think that's okay.

[B]

I had a friend come over recently and he came out and I had my gummy bears out on the counter and he was like, what is going on here?

[A]

You're like, no, they have to force point due north. Due north.

[B]

Yeah. We like things that are predictable in life.

[A]

Okay, all right. I feel like we should play. I feel like we should go play blackjack after this. I feel like you'd be just ruthless.

[B]

I'm pretty good at blackjack.

[A]

I feel like you would be. No, black king. There's a black king. Black king. Black king.

[C]

Anyway.

[A]

All right, so margin accounting, let's say she's a saboteur in a company. What, do we just get rid of her? Is there a way to counsel her off or is that just who she is?

[B]

She might be valuable, so she might be great. Not involved in some change project. I mean, there's always room for people in companies. I mean, and it's not. It's. It was very rare for me in any change project to walk in and say we need to fire a bunch of people. It was always like, you know, let's. Let's get the people that are into this and let's figure out. And so there's. There's a lot of. There's the textbook, you know, kind of change project where you. You build a case for change and you promote it and you do a roadshow in the company and you figure.

[A]

Out who drop the new logo that looks exactly the same, but it's $2 million worth. Of dev.

[B]

Exactly. Exactly. So you figure out who' on board and you bring them on to detail and pilot things and you show your successes and you roll out and whatever and you avoid the people that are going to be your detractors and your, and your saboteurs. But in general, you go with, you know who's on board and you move with who's on, who's on board. It's difficult to do that in, in any company where you just are going to walk in and say, we're going to fire people because you don't know if you're firing the right people.

[A]

Yeah. And I also think now with, especially after Covid, where there's a lot of remote people, like, it must be incredibly difficult to move some of that stuff because you have no idea who you're dealing with and you don't know what they're saying in the DMs. No, you just don't know that the whole, there's no, there's no, like, look across the cubicles and look at the coffee machine and you say like, that probably isn't conversation. Yeah, that looks like it's not going my way. You know, it must be incredibly hard to do that now.

[B]

Yeah. There's also, there's a professor in, at a university in Holland who is this Homan, I think his name is, and he, he always talks about the on stage, off stage of driving change. So he'll say like, you know, there's the leader that's out there going like, we're going north. You know, and everybody's like, yeah, north. And then, you know, when they're around the cooler or, you know, having a cigarette somewhere or whatever, they're like, I don't know, north is that.

[A]

Yeah.

[B]

Are we northwest? Are we more east? Like, what are we doing? And so there's always this kind of, you know, on stage support, especially if you're, if you have an authoritarian leader that, you know, nobody's going to stand up in front of everyone and go, I don't know, you know, if north is the right way, you know, what, what qualities.

[A]

If you're, if you're a change leader, not a consultant, obviously be a leader of a company. What makes a good leader through times of change?

[B]

Well, I'll give you a little.

[A]

And what makes a badly.

[B]

I'll give you a little story around that. So I had a project a few years ago where the CEO was a friend and turns out I had, I had worked in that company. I won't mention the name of the Company. But I had worked in that company before, and the CEO was on my team. And then he grew up and I left the company. He grew up and became the CEO. And he said, you know, we need, like, massive change here. Can you come in and be the change leader? And I said, you know, it's great, but you have to understand that, you know, the CEO is essentially the change leader. You know, you can outsource that to me, but you need to make sure that you're supporting, you know, so I'll come to you and I'll say, you know, hey, we're going to do this, we're going to do that, and you need to make sure that you're going to stand behind every single thing. Otherwise you render me useless in that role.

[A]

It's like, what was it, Michael Scott, when he sent Dwight out to get the new insurance plan? You do it? I want to do it, yeah.

[B]

So in, in essence, you know, if you're gonna. If the CEO is not the change leader and he's gonna outsource it to somebody, he needs to trust that person enough to say, hey, you know, that what he says goes. I had another project a number of years ago in, in Ukraine, of all places, and it was a CEO of a bank. And he got the whole management team together and he said, hey, listen, if Michael says we're doing something, we're doing it. That' can trust that. He's already come to me, he's already cleared it, and he has my, my, you know, okay, that we're doing this stuff. And I literally went to the guy every morning and said, these are the things I'm going to talk to people about today. And I went and talked to people in about the first three or four months. They would all go behind the scenes and go behind and go, Michael told us we're going to do this. And he's like, hey, I told you, you know, that if it comes from Michael, it's coming from me.

[A]

Yeah.

[B]

And after that, everything was smooth. But it, it changes like a weird, a weird thing.

[A]

Well, how challenging was it for you to walk into these companies as the unknown and have people like, listen to that, like, okay, this dude is all sudden here telling us what was going to happen and how it's going to go. How tough was that overall for you? And what, what makes you built that, makes you able to do that?

[B]

It's almost easier to be the person from the outside. And once, once people inside are too comfortable with you, you lose your power as a change agent. So it's, it's a bizarre, there's like a little conundrum there, little fear. Yeah, you cross, you cross a barrier and you're no longer as effective. So most companies are poor at change. So most companies aren't designed for change.

[A]

Is that, is that why companies bring in consultants to do this stuff instead of just trying to do internally?

[B]

And most, most companies would be better off bringing, bringing in external coordination of change versus trying to do it internally if it's not in the DNA of, of the corporate culture. So if you look at. And there's still. I have a friend who, son is in business school right now in Barcelona and about seven, eight months ago, I, dude, please send me what they're, you know, teaching you because I just want to, you know, check stuff out. They're still teaching classical management theory. You know, classical management theory was 120 years ago. Yeah, 100. Roughly 120 years ago.

[A]

Yeah.

[B]

You know, there's three fathers of classical management theory and they all had different, slightly different approaches. One of them was top down. You know, you govern like you govern business the same way you govern government. You have laws, you patrol, you punish those that don't, that don't abide by the standards or the rules or whatever. You have Frederick Winslow Taylor, who was bottom up, you know, he believed that you could find the best process for anything and then build upwards to, to build controls and quality, quality features into a business. And then you had Henri Fayola, Frenchman, who was, he was the first one that came up with the concept of team spirit. You know, it was like number 16 or 18 on his list of priorities. But at least he had something in there.

[A]

We happy?

[B]

Yes.

[A]

I mean, not really 16. We care if you're happy.

[B]

If you look at when they were thinking up classical management theory, it was the early 1900s, they were dealing with the issues.

[A]

Industrial revolution.

[B]

Well, they were dealing with the issues of how do we manage mass production and what, what classical management theory is largely about. And I would say I'll take a guess, but I'm going to guess that 90% of businesses operate based on the principles of classical management theory today. But it was designed for stability in production environments and it was designed for people, the production lines, where people are doing, you know, really monotonous, redundant. And they had to keep people motivated. Well, that's very different today. Like humans aren't putting stuff together anymore. It's, you know, machines and robots and so on. And so business is very different. The other thing, you know, 120 years ago, a typical business development cycle or a typical period of time that was enough for customers to change their needs, preferences, and behavior. Could have been 10, 20, 30 years. Well, now if you're not coming up with something new every six to 12 months. Yeah, you're. You're stagnant. You're irrelevant in your customer's eyes because needs, preferences, and behavior are changing so fast today. So these business cycles, where business was designed for stability. Well, now we need business to be adaptive. Well, we need to be responsive to changes in needs, preferences, and behavior.

[A]

Yeah, that's the current. That is the only currency that's respected is innovation.

[C]

That's it.

[A]

What are we doing tomorrow?

[B]

Well, I mean, if Apple didn't come out with a new iPhone every year or if Samsung didn't come out with a new television every year, I mean, their market share of sales would just plummet.

[A]

Yeah.

[B]

Insane. You know, and sometimes they're regurgitating, you know, they're thinking up new words for the same crap.

[A]

But this one's titanium.

[B]

Yeah.

[A]

And I needed that so heavy in my pocket. The other way.

[B]

Oh, couldn't. Couldn't live without it.

[A]

Could live without it. It's titanium. Well, it's so interesting you say that because as we move to the new. The new economy, not only this is what we call Segway in the podcast Segway, because you're talking. So as you talk about manufacturing, we're no longer manufacturing on the lines. You know, more and more work is.

[B]

Now being done by AI and robots.

[A]

That's a segment. Right. So this is kind of what you've really spent the last two, three years leaning into is this.

[B]

I haven't. So what's funny is I talk a lot about AI. I'm talking about it constantly. I'm writing articles on it constantly. But I'm a bit of a strange one because I'm writing on AI, not from the standpoint of the technology, but the application of the technology into business context. And how do businesses extract the value from AI? And there's a lot of really strange things happening, right? So you, you look around the world where they go, oh, we're going to replace, you know, x, hundreds of thousands of employees with AI agents. Well, brilliant. Okay. But how you do that, it. It needs to be represented in the change that's in the business environment. And unfortunately, there's two. Two big factors that are influencing that. One, the end user is still human. And that's likely to be for a long period of time.

[A]

Yeah, hopefully.

[B]

Hopefully. AI doesn't you know, decide that we're useless and get rid of us. But, you know, for, for the foreseeable future, the end users will still be humans.

[C]

Right.

[B]

And the people making the decisions, the people managing businesses and the shareholders of businesses are still humans. Right. So AI isn't, it's not like it's just gonna, you know, randomly change everything by itself. It needs to be implemented into the context of how we create value as a business. And I think that's something that a lot of businesses are missing. They're just overlooking it.

[A]

Well, I think, I think right now they're looking at as a cost cutting instead of a quality improvement.

[B]

Yeah, it's, it's not.

[A]

Well, I think it's certain things now it's a toss up. Would I rather talk to an AI customer service rep that I can clearly understand? Even though there's that weird drop off, it's. Got it. I mean, okay. Because I can understand the. Got it.

[B]

I didn't get that.

[A]

Right. Would I rather talk to that or would I rather talk to the person that I can't understand at all on the other side of the earth?

[C]

Yeah.

[A]

Right. So I think right now most corporations or companies are so focused on cost savings. How do we use AI to cost saves? They're eliminating those low hanging jobs. But unfortunately, like you just said, those low hanging jobs are the ones where that's where, that's where you get a chance to impact the customer experience the greatest.

[C]

Yeah.

[A]

You know, I think, look at the grocery store, right? Yes. You don't want a super chatty cashier, but I'd much rather have somebody bring up my groceries and smile at me and then have somebody bag them and ask me if they can push it out, then me walk over and just scan everything and deal with those bags and oh, this thing jammed or whatever else.

[B]

I didn't come here to work.

[A]

I don't want to work. Right. I don't want to do that. Right. So. But I think, think, you know, that's, that's a very small example of that and I think you're seeing that at great scale in big companies.

[C]

Yeah.

[B]

Yeah. Let me take one step back.

[C]

Yeah.

[B]

If you look at the. There's a kind of prediction that I made about a year ago where I was doing an interview and somebody asked me, you know, if the last 20 years was about digital transformation, what do you think the next 20 years is? Is it about AI transformation or is it AI taking over things? And I said no. My prediction would be that if the last 20 years was about digital transformation and digitizing business. Then the next, let's say at least eight to 10 years at a minimum is going to be about organizational transformation because companies are not ready for the things that are happening now. I wrote an article a few years ago, they were asking me, it was a Middle east council of shopping centers and they were asking me to talk about digital and retail. And I said, you know, the majority of, of applications of digitizing business happened in the beginning along the lines of how do we create more efficiency, how do we lower cost? And unfortunately there's a small window of opportunity there. It gets to a point where you can't make things any faster, any cheaper and so on. So you've got this kind of limit, limit of benefit there. And when companies started looking at digital as how do I use digital solutions then? To enhance customer experiences, to improve the quality customer relationships, to improve the quality of dialogue with customers, understanding customers needs, preferences and behavior. Then all of a sudden it unlocks an almost endless opportunity area.

[A]

Yeah. Because you're looking well, you're using date, you're using data driven decisions to improve relationships. To improve relationships.

[B]

To improve not only individual experiences, but to improve ongoing relationships. And this is something where businesses are, are also struggling.

[C]

Right.

[B]

Businesses are designed for sales and service, they're not designed for quality of relationships. So when you think about that, like what measures are there in terms of, you know, sales and service? Great, we know how to measure that in business. How do we measure revenue per customer per year or customer lifetime value? How do we measure customer lifetime value where we say it cost me X to acquire a customer and I can earn this much per year with that customer for the duration of a relationship. So there's customer lifetime value.

[C]

Right.

[B]

If I look at that, then maybe I'm going to take a loss on something because I know that that customer is going to stay with me for 25 years. Years.

[C]

Right.

[B]

I've got this thing going on with adt, the insurance or the security company. Right.

[A]

Now, I love this. I'm gonna preface this story which Michael asked me if it was okay to bash this company before we started this over something incredibly petty. And I'm thinking to myself, you're talking to a guy who's been at war with Chili's restaurants for three years over towing my car. So. Yeah. So number one, one suck at Chili's and number two, you have the floor. Please feel free to take ADT to task.

[B]

So. Well, John knows very well I bought a house a couple of months ago.

[A]

Yes, you Did.

[B]

And when I moved back from, from.

[A]

Your question, he didn't buy a house. You stole.

[B]

I've been known to do that, but.

[A]

Well, you have excellent representation.

[B]

Exactly, Exactly.

[A]

Excellent.

[B]

So, so I bought a house. But when I, I, I, I had an apartment for a few months because I, I wanted to time to look for a house and figure out where I was going to live and so on. So I, I had adt put the alarm in the apartment and I said, just FYI, I'll sign the contract, but I'm moving in like anywhere from three to six months. No problem, no problem. We'll take everything with you. No, no problem. So by the house, they come out and they said, well, you can't use the same system for this house because it requires a partition and you can't do that with the old system. But don't worry, we'll take everything back back, and, and you won't have to pay for that old system because we're putting the new system in more expensive, blah, blah, blah. I said, great, no problem then, right? So now they're trying to charge me for the old system and the new system. And I said, you can't do that. You know, a, a verbal commitment is legal in the state of Nevada. B, I have like endless emails, text messages and voicemails saying that you guys are gonna, you know, resolve this and you're not going to charge me for this debt and, and so on. And, and they came out to the apartment and uninstalled and took the old system with them. So I no longer have the old system.

[A]

Griswold crushed the old car, then bring it around. So you gotta take the truckster move. I see it.

[B]

And yet they will not agree to forget about the debt of the old system. So for $561, they're going to ruin the relationship with me and I'm still a customer of the company and they won't resolve the issue.

[A]

And I hope every podcast you ever go on, you tell the story.

[B]

Unfortunately, that's only one of these situations where businesses are just stupid. So I wrote, I wrote an article several years ago and the title was Are Businesses Stupid when it comes to Customer Relationships? Yes. And the reality is, it, it's not that people are stupid. It's that the way they measure performance in the business isn't designed to measure the quality of customer relationships. If they had the right measures, then nobody would ever make those kind of decisions. If they said, hey, this guy's going to continue paying us for potentially the rest of his life. Why would we, why would we screw him for $500 right now? And I guarantee their cost of acquisition of a new customer is probably somewhere between three to $600.

[A]

Well, so I think the difference is, I think the difference is, is you look at certain hospitality companies, I believe, I think it's, I think it's Waldorf Astoria or Ritz, one of them. Ritz has a standard deal where any employee in the house, I think it's like two grand. Any problem under two grand they can solve. There's no questions, there's no run up the ladders. If it's going to be less than two grand, it makes me happy. They just fix it.

[B]

Yeah, I've had that.

[A]

They're all empowered to make that happen. And I think two things. I think, number one, other companies have not gotten on the hospitality bandwagon of understanding that your clients, you need to treat them in a hospital way. But I think there's also this weird thing that's happened because of social media. I think if you look in the, like, I think before the rise of social media, if you go back to like 2005, right, when it was just MySpace and everybody was just worried about being in somebody's top eight, that was it. But now everybody has an opinion on everything and then you see that people are just, it's just everybody fights about nothing online and this and that, and this value that people now place on being right has just gotten to be so ridiculous. And you know, there's times in our business when like an agent that works for us will call and be like, well, there's a Nissan, blah, blah, blah, you know, it's the principal thing. I'm like, there is no value in the. Don't ever. This is business. There's not principle, don't. It's not principal, don't. It's business, number one. Number two, the, the prize for winning an argument with a client is losing a client.

[B]

You're losing the relationship.

[A]

Yeah, you lose the relationship. And I don't understand why people don't see that. And I think you're going to see these companies that are, that are in none as you would see service businesses like the ADTs of the world where it's like, dude, we're just installing it, we're starting a security system. We're not looking at this as a long term relationship. You're not going to have a magic moment or a personal touch. I think these companies have got to start, you know, adopting principles like, what is it? Unreasonable hospitality if you've ever read that book, which is amazing, right, you've got to start adopting those principles and looking for places within your business that you can access, sell.

[C]

Yeah.

[A]

You know, I think one of the things we just talked about, it's funny, I, I literally was just, I was watching, I was looking for, you know, like sometimes you're looking for something on, especially on your computer and that massive files and you find something else that's actually better. You're like, oh my God, I forgot about this. This is better. Right? So I found a speech that I gave seven years ago. Seven years ago, I was talking about this on a stage and I was talking about challenging people for like planning their business. Like you have a financial plan, you might have a marketing plan. How many of you guys have a customer success plan plan that, that like where you lay out exactly what an elite customer experience is.

[C]

Yeah.

[A]

For that. How many of you guys have that? And I was like, holy crap, that was seven years ago. And literally as an exercise this week, I did it with my real estate team, I did it with our real estate staff here about what creates that experience for agents. I did it with our title company, the sales guys. What creates an elite experience for the agency use them, our escrow staff, all of it across the board. And we really just came up with a standard of what the bare minimum experience, the, that we're going to tolerate for our clients. And it's really high. Yeah, like excellence is our standard. That's it. And why don't more companies think like this? Like, is it just not hit them yet? Have they not realized it?

[B]

There's a particular, so this is a, I, I have a number of articles that I wrote on this as well. There's, there's a, an evolution of business models that's happened over the last, you know, however many years. You know, if you look at, if you go back, you know, 100 years in time, most companies were what you would call balance sheet centric. So they're in, they were largely production based companies. So you're, you're focused on your P of the organization as a whole and the business is largely reactive. In the, let's say 50s, 60s, 70s, 80s, 90s, you know, you were getting into these, these refined product centric business models where you're largely focused on sales and service of different product categories and you measure success based on product P. Ls not necessarily based on a customer. So in businesses that have multiple products, you might have a customer that has, you know, for example, I did A lot of work in the banking industry. So you, you might have a mortgage with a bank and an auto loan with a bank and a credit card and deposits and all these different things. But most banks were still measuring. And a lot of banks had completely different systems and different databases. Like they didn't even know that a customer that had a mortgage also had an auto loan.

[C]

Oh.

[B]

So you know, there's no cross selling system. And so, you know, when banks were largely product centric, that was how they measured performance. Then you get into this customer centric wave of development where they said, hey, we have a customer. A customer might go across multiple product categories and we need to start looking at the customer as a whole. How do we deal with customer needs, preferences and behavior? But largely the customer centric world is about event based activities.

[C]

Right.

[B]

Buying a car, buying a home. They don't look at the fact that hey, a person is going to buy a car probably every, let's say four to seven years for the rest of their life. So I don't want to sell a person just one car or one car loan. I want to sell them all their car loans for the rest of their life.

[C]

Life. Right.

[B]

And that's a relationship centric mindset and it requires everything to change in business. Everything from the organizational structure to the way they develop products, the way they measure performance, the way they motivate their staff and so on. If you took a, a client team and said, hey, I'm going to measure you based on long term performance of customer lifetime value.

[C]

Right.

[B]

Then they wouldn't be screwing me over like one, one our alarm system.

[C]

Right.

[B]

They would say, this guy is, is potentially going to pay us for the rest of his life. Life. And if we do a good job, his kids will also pay us and his neighbors and his friends and everybody else because he's going to tell people.

[A]

But I think, I think, I think companies do do that, but only at the critical moments. I think, I think you get transferred to that. I want to cancel.

[C]

Yeah.

[A]

Okay, cool. We're going to transfer you over to our lost person.

[B]

Exactly.

[A]

That is the only person getting graded because you're already a foot out the door.

[C]

Yeah.

[A]

They're like, can we, can we, can we keep you?

[B]

Oh, there's, there's another one.

[A]

So there's the quiet walk away that they don't do anything about.

[C]

Yeah.

[B]

To all the, all the big consultancies for years were promoting this thing called a save desk. Yeah. So. And they would, they would run these large data models and say, okay, you know, based on changes in customer behavior. This is the, the, the cohort that we believe is going to leave you in the next period of time, you know, and they would say, okay, if it's within two months, we need to take action. What I found when we started looking at all of these models is companies spend a massive amount of money cannibalizing their own customers. Because these models are often wrong. They're predictive models. And they say, these are the customers that are going to leave you. And so what do companies do? They go, oh, my God, they're going to leave us. Let's offer a discount. Let's offer them two months for free, or let's give them six months for free.

[A]

Thanks.

[B]

Or let's do this or let's do that.

[A]

And the outlier that wasn't. That was perfectly happy anyway.

[B]

So the predictive models were largely unprofitable because the customers weren't necessarily with one foot out the door, but they were trying to kind of preempt and save the customer before they left. Left the ones that already were leaving. Well, it's hard to. It's hard to turn them around at that point. So some of them at the save desk, they might save them, but because they weren't able to identify and change the root causes why the person was. Was leaving in the first place, they gave them a month or two for free and they hung around and they still left in two, three or four months.

[C]

Right.

[B]

And so all they did was really spend a bunch of money for nothing, and they still ended up with the same result.

[C]

Result.

[B]

So what we started doing was saying, okay, let's map a customer life cycle and let's figure out where are these changes in customer behavior. You know, if somebody's interacting with your company a particular way and that starts changing, well, you need to have dialogue. You don't need, you know, some random, like, hey, we'll give you two months for free. You need to say, hey, what's going on? John, I noticed that your behavior changed, right? We had a. We did a. It was an online supermarket in Eastern Europe.

[C]

Europe.

[B]

And they had this thing where they were like, okay, if people don't place an order from us within five weeks, then we know that they're out the door and they're gone. So we should send them all these things. Well, it turned out they were sending all these offers of like 30 off, 40 off, like save offers to people that were on vacation. You know, they went on vacation. They didn't place any online orders for that Period of time. And then they come back and they're like, oh yeah, yippee. We got like 30 off of our next order.

[A]

Oh my gosh.

[B]

Crazy, crazy stuff.

[A]

And what did that, and what does that cost? So what can companies do? Like, for example, like with real estate, we are the worst offenders. I mean, not personally. Our company does a good job. My team does a great job.

[B]

I've had good experience.

[A]

Great, Greg, thank you. But, but what I'm saying is this industry, I think it's something like less than 15% of people use the same realtor twice. Like, it's just, they just, it's less than 15% which is insane.

[B]

If you think, well, it's horrible.

[A]

Yeah, it's horrible. I think the industry is getting better with some of the tech that's being built to hopefully keep people in touch with their clients. I know we, we just implemented a brand new really, really slick CRM designed to help our, our agents do that same thing systematically and using AI same way. Like, hey, you need to like, here's your call list for today. And it's not like leads. These are your clients.

[B]

Yeah.

[A]

These are people in your sphere. You need to call on touch base with them.

[C]

Yeah.

[A]

And, and I think that's smart. And I think that's, I think that kind of gets to your end point of, of how to use AI and how it should be being used.

[B]

Exactly.

[A]

But you know, what can companies do? What should they be doing better right now? Where like, it's like just, you're like just banging your head against the wall. Like, this is so obvious. What do you.

[B]

Okay, so if, if, if a product centric business is focused on all of its product indicators and, and the, the measure of success would be, you know, let's say new customers buying my product, replacing customers that are lost in attrition, and keeping a particular product, a base of customers in my product, that would be like a product centric business. A customer centric business. I'm trying to identify particular life events for a customer and say, okay, how can I provide a more complex, holistic solution for this particular life event?

[C]

Right.

[B]

So somebody that's buying a home isn't just going to deal with the, the purchase contract. Right. They're dealing with all kinds of stuff because they need to move and they need to buy new furniture and they need to, you know, choose all this thing, choose a school and you know, all these different things. So if you're looking at it as an event and providing more holist, a complex solution that would be Another one, if I'm looking at it from a relationship centric standpoint, the most valuable thing that I can possibly have is contact and dialogue with my customer.

[C]

Right.

[B]

So years ago, I did a project with BNP party by was. It's the one of the top 10 banks in the world. And we were with their management team for largely the large part of Europe.

[C]

Right.

[B]

And one of the ladies that was in there was the head of their CRM systems for, For. For the European bank, which is the most of European Union. And, you know, she came up and she said, oh, you know, I want to talk to you when you, when we have a break, because we have this algorithm that we've been working on, and I'd like your opinion.

[A]

Okay, here we go.

[B]

I said, all right, great. You know, let's do, let's do this. Right. So on a break, we sat down and we started talking about it. And she said, you know, our thing is we want to. We want to attack this idea that people will buy a car and keep it until they finish paying off their car loan. Loan, because not everybody waits until they're done with their car loan to buy their next car. And I was like, oh, genius, right? Yeah. So she said, our job is to figure out, you know, when we can start offering people a new car, a new car loan and all this stuff, because they don't always wait until the end.

[A]

No.

[B]

So we don't always know. And she says, we've been working for a year and a half on this algorithm, and we've looked at, you know, behavior of different income segments, like urban. Urban and, and rural. We've looked at different education levels. We've looked at different price points. We've looked at all these different. And we've come up with an algorithm that we've. We've had about a 29% hit rate on people that are interested when we initiate content.

[A]

Pretty good.

[B]

I said 29% in CRM circles.

[A]

Pretty good.

[B]

Amazing. Like, side note.

[A]

Yeah.

[B]

You know, most CRM campaigns, If you're getting 1 1/2 to 2%, you're a God.

[A]

Yeah.

[C]

Right.

[B]

Which means.

[A]

Especially cold outreach like that. Yeah.

[B]

Which means that you're bombarding 98% of your audience with things that are irrelevant.

[C]

Yeah.

[B]

And not useful and potentially disturbing. But hey, that 1 1/2 to 2%, you're a God.

[A]

Yeah.

[B]

If you've gotten that level of conversion. So when she said 29, I was like, you guys are rocking.

[A]

Yeah.

[B]

However, have you ever thought about asking your customer when they plan on buying their next car because you'll likely get 100% right. And it comes down to this concept. You know, we spend so much time in business in a back room somewhere trying to figure out when all we really have to do is have, have contact and dialogue with our customers. So if I look at the real estate industry, I would say, okay, how many of those realtors have regular contact and dialogue with their customers? And if they're doing it with, you know, a day runner from the 90s.

[A]

For the old folks, day might. Was it day minder? I thought it was day minder or day run. Was, was it day runner?

[B]

I don't know what was the little gre.

[A]

The little books of throwaway?

[B]

Was it the day planners or the day. I think it was day runner, wasn't it?

[A]

I think it was day might.

[B]

Okay, I could be wrong.

[A]

Agree to disagree.

[B]

Yeah, yeah. Well no, this is, this is our maybe Dave Runner. You might start 50 something mind memories here.

[C]

Yeah.

[A]

Back in ought for, remember the 90s there was no, I don't really. So there you go.

[B]

Oh, the other day I had somebody asked me to send him a fax and I would be like, well sure, I'll get right on that. If it was the 90s, like I don't happen to have a fax machine.

[A]

Let me jump in my time machine. Really Send you where, what country were they calling from?

[B]

Yeah, it's, it's the medical system here. Like you can't get a referral from one doctor to another unless they receive a fax.

[A]

That's just.

[B]

Can you, can you fax that to us?

[A]

That's so insane.

[B]

Sorry. So that's so I could drive it over to you easier than I could fax it to you at this point.

[A]

Yeah, exactly. That's so insane.

[C]

Yeah.

[B]

So going back to one thing. So I mentioned that thing about digital, digital, you know, the digital transformation and saying that companies started out by looking at the efficiencies and cost cutting side of it. And then they finally started saying okay, now how do we use this to improve the quality of customer content contacts, the quality of customer experiences and the quality of customer relationships. And that's where they found they unlocked this, you know, unlimited potential. Not all companies have done this, but the ones that have are enjoying, like.

[A]

I said, we, we have in a big way.

[B]

Well, and the ones that have are, are enjoying it.

[C]

Right.

[B]

I, I get, a lot of times I get companies that are like, oh. So I did a thing for one of the universities here and it was a Strategic planning session. And they, I'm management tables.

[C]

But they were great.

[B]

And they were like, we are so relationship centric. And I was like, okay, let me ask you a question. How do you plan your budget? How do you plan your budget? And they were like, oh, their budget is like purely product centric. It's based on like the.

[C]

Yeah.

[B]

And so, you know, a lot of times in business we, we believe and there's a huge lag between management and shareholders.

[C]

Right?

[B]

So you're, you know, management, shareholder, you want to believe that your organization is customer centric, relationship centric and so on. But when it gets down to the people that are doing all the work, they're largely in most companies they're managed by product centric or even balance sheet centric indicators. Right. They're following that old budget and so on. So why do we, why do we think that they're going to find, you know, an empathetic response to a customer that's having an issue when their bonus comes from? You know, I used to say in banks I could be the most customer centric person in a bank branch, but if I get my bonus based on the number of credit cards sold, every person walking through that door is a potential card holder.

[C]

Right.

[B]

You know, so, so what I want to segue with in following the lingo, that's it. From the digital transformation thing to the AI space, companies are making the same mistake, right? They're saying like, how do I use AI to reduce costs? And what they should be saying is, if my end user is a human, how do I use AI to improve the quality of customer contacts, customer experiences and customer relationships? And largely that's not going to happen with an AI agent interacting directly with the customer. Customer, no, because AI struggles with it. So if we look at the way that our brains developed as humans, and if we look at human decisioning, our brains developed from the primitive to the emotional to the rational. And most of human decisioning happens.

[A]

Some of them did, yeah, yeah.

[B]

Some of them didn't get there, right?

[A]

Not quite all the way through that.

[B]

But, but largely human decisioning is dominated in the primitive and the, and the emotional.

[C]

Right.

[B]

So does it satisfy my emotional needs? Am I going to feel good about this? Does it represent a threat to me?

[C]

Me?

[B]

Do I feel threatened? I mean, we've all had that feeling when you're going to buy something, you know, at Best Buy or somewhere and you're like, I don't know, I don't believe this guy. Yeah, I don't trust this guy.

[C]

Right.

[B]

That's that gut feeling. That's the primitive brain going like, no, this is risky. Don't trust this guy.

[C]

Right.

[B]

So that's. Human decisioning is largely dominated by the primitive and the emotional, not the rational. Because we can find a million rational reasons to trust that guy.

[A]

Sure.

[B]

But our gut has that gut feeling.

[A]

Dude, you. You laugh. I. I won't. I got. I'm at a point now where I am. Well, part of it's my choice, and part of it's. I promised I wouldn't do it again. I'm not allowed to do business with people unless my wife gets a look at them.

[B]

Oh, nice.

[A]

Yeah, I've had. I've had two deals in my life go south to the tune of seven figures.

[C]

Right?

[A]

Seven figures are north of that. That went south. And both times my wife was like, do not do this. Like, got. Just got a vibe off that and was like, don't do it.

[B]

It's amazing how accurate two times.

[A]

And both times she was right. And I was like, so from now on, it's like, anybody I want to do anything with. Yeah, I'm like, like, you got to meet my wife.

[B]

Yeah, exactly.

[A]

She's wife. She's got to get. Look at you.

[B]

We can tell ourselves a great story, and you can use the rational to convince yourself in all kinds of different ways, but you still won't feel good about it because your primitive reign's still going like, I don't know. I don't like this guy.

[A]

Yeah, you know, whatever about it.

[B]

So if we look at the way that AI is developing, AI is developing from the rational. And it struggles. It struggles with social context, it struggles with emotional reasoning, it struggles with nuance, all of those things that are important to us as a human end user. User.

[C]

Right.

[B]

So if I'm online and I'm dealing with, well, how often do we get what we want? You know, when you're talking to a bot somewhere.

[C]

Right.

[B]

I mean, how. And how often are we just like, Agent. Live. Agent.

[A]

Representative. Representative. Representative.

[B]

Oh, I'm sorry. Can you tell me, Representative, what you need? I need to talk to a human. Because you're not a human. Yeah, Right.

[A]

And.

[B]

And that's where we go. Because we don't. Who has time for that?

[C]

No. Right.

[B]

We don't. It's not our job to train the models.

[A]

It's not there. It's not there yet.

[B]

So. And the problem is, it's not. It's not that. I mean, AI is not going to take over anything in the next little bit.

[C]

Right?

[B]

So it's. But it struggles with context, nuance and emotional reasoning. And unfortunately, as end users that are human, we need an empathetic response.

[C]

Yeah.

[B]

We need somebody that's going to go like, oh, God, I'm sorry that happened. You know, let me see what I can do.

[C]

Yeah, right, Yep.

[B]

You know, and unfortunately a lot of now. So a lot of the cost cutting stuff has driven things to be moved offshore.

[C]

Right.

[B]

So this has happened. Been happening for years. Well, when we get to that agent in the Philippines or in India or somewhere else that we're talking to. Yeah, we don't understand them. But also they're so dominated by the rules that have been created for them.

[A]

That they might as well be a robot.

[B]

They're unable to be empathetic. They're unable to say, hey, listen, I'm sorry that happened to you. Give me a minute, I'm gonna see what I can do.

[A]

Yeah, no, it's our problem because they.

[B]

Have in their rules and even. Yeah, and even Amazon now, you know, you get on their chat thing, it's useless, you know, and some of them.

[A]

Have gotten away from even having anything. So I. So meta. Yeah, so I was doing, you know, we were doing, we were doing good.

[B]

Luck talking to a human.

[A]

No, no, no, no, no, no. There's no talking to nobody. So met. Listen to this. So you tell me how mad you are. So meta, whatever. We spent a lot of money on ads with meta whatever and I realized that, oops, we loaded an incorrect account, an older account. Right. With $985. So I went through and trying to transfer that $985 something else. And also in the account just goes. It disappears into ether. There's no phone number, there's no email, there's no, there's no nothing. If you can't find their little help thing, there's no ticket.

[C]

It's.

[A]

Yours is gone.

[B]

Yeah.

[A]

So after fighting and fighting and fighting, I have to charge it back to Chase. I'm like, have you talked to anybody? There's no way to talk to anybody.

[B]

Please.

[A]

Help doesn't exist. I'm talking to you.

[B]

You can tell me who to talk to.

[A]

Yeah, I tell it. If you get somebody over there, you let me know because I can't get anybody.

[C]

Y.

[A]

And it's, it's wild. But I think that, I think that certain industries like ours, I will say this is. They're doing a really good job of implementing AI to help us increase the customer experience.

[B]

Well, there's the, there's the, there's the secret.

[A]

Yeah, because the cr, The CRM like we're using, for example, if you get on with a client, it's. It's recording the call and before you can hang up like you hang up the call and the CRM is popped up, an email that it's crafted that summarizes the call you just had. It builds to do. If there's any to dos you need to do, it puts them in your to do list. If there's an appointment that got scheduled, it puts it in your calendar. If anything needs to happen, it's there and you can send the follow up. And I found in the agents that we have that are using the system is, is when you're on the phone you can really listen because you're not scribbling. You're not, you're not. Okay.

[C]

Huh? Huh?

[A]

And what, and what with one hand over here. Because it's just doing it. And then, you know, with me, especially in the sales process, I've always told people be impossible to understand. And why I love this is something that I have done for years is if there's any time I have ever with a client, I probably did it with you. If there's ever a deal point that changes or something that's happening with what we're doing, that's changing. As soon as I get off the phone, there's a text message or an email email that comes behind it. Hey, just to clarify what we just talked about, this is what happened. And the reason I do that is because in three months I don't want a phone call. Like, no, that's always said, oh, no, no, no, no, no, no. Go back to this text on March 27th, buddy. It's right there. And it just diffuses things very quickly.

[B]

It's good form.

[A]

And it just, it just, there's no argument. It just, oh, yep, you're right. And you move on. There's nothing like that. I know. He didn't say that. I know. That's how he said for three days as they stew over it. So being the clarity of conversation is really helping our industry a lot.

[B]

And well that. So that's the, the, the space that businesses should be exploring. So how does AI make humans more efficient? Especially in dealing with the end user who's a human.

[C]

Yeah, right.

[B]

So how, how can we make things more efficient in that sense? How can we reduce back office work? How can we speed up things like, hey, I need to research this for you. You know, if you're a lawyer and you need to go research something if you have a human doing that, that's going to take hours and hours or days and days, whereas I can do it in a couple of minutes.

[C]

Right.

[B]

We used to build a lot of these predictive models for the save desk stuff that I was talking about. But in, in building what we call behavioral turning points. Right. So if you, if you have a, a significant change in behavior and you can map these things out, then we need to have like responses, the potential responses. Well, we would have 17 data scientists digging deep in data for months.

[A]

Pattern recognition in 15 seconds on a giant data set.

[B]

Exactly right. And, and it's more accurate.

[A]

Yeah, way more.

[B]

And you don't have to deal with personalities and egos and, and stuff like that. So the, the humans on the front line, more efficient. Where what businesses are trying to do is say, oh, I'm going to replace this entire call center with AI agents. Well, that's a mistake.

[C]

Right?

[B]

Because you're never going to have customers on the end going like, thank you, thank you for that AI agent who goes, got it? Tell me, can you tell me?

[A]

Got it, got it.

[C]

Yeah.

[A]

Weird pause.

[B]

I didn't get that.

[A]

Got it.

[B]

No, it's just not, it's not, you know, maybe in 10 years, maybe it'll be like, like that. But because AI is developing in that progression from rational to emotional, and our brains develop in a very different way. And human decisioning is, is dominated by the primitive and the emotional, at some.

[A]

Point they will intersect in a meaningful way. But we, we ain't there yet.

[B]

But right now, an AI agent is not going to replace a human that can provide an empathetic and understanding response and say, hey, you know, that happened to me one time. You know, I'm, let me see what I can do.

[C]

Right?

[B]

And until we redesign the processes so they're not so rigid that the guy in the Philippines or India, they're not bad people. You know, they have feelings too, and they have the capacity to be empathetic.

[A]

Yeah. I gotta tell you, I do feel sorry for a lot of the outsourcers we used to get. I get hit up every day from at least one of them. Like, hey, sir, do you have any work? And it was like, no. Because what we used to wait for you through upwork to do for three days, it's now getting done in 10 seconds by, you know, one of our GBTS that we have programmed to do what we need to do. So I, you know, it's, I think it's definitely going to hit the third world harder than It'll hit America, but I mean, it's definitely coming. I don't know what. Yeah, I tell my kids, you know, I think that, I think the biggest commodity skill you're going to see out of somebody is the ability to look across the table and connect one on one with another human being and move them in a way that makes them feel seen and heard. Because I think if you look at this generation of kids, they're all head down on the phone. So I'm like, so many of them are not going to have that skill.

[B]

Oh, yeah.

[A]

And if you have that skill, you're going to be able to write your ticket. I mean, hopefully he's going to Harvard, so that'll help too. But yeah, if you, if you have that skill where you can connect with people, I think it's going to be. Yeah, that's going to be invaluable.

[C]

Yeah.

[B]

So I had a lunch with my banker a couple weeks ago and she said, you know, I have a new analyst who's, you know, just graduated usc and, and would you mind if he comes to lunch with us? Yeah, sure, whatever. So we ended up having lunch. Great kid, Great kid. Wasn't in his phone for a second. The entire lunch made valuable conversation, connected and everything afterwards, I said, he's going to go far. Yeah, he's going to go really far.

[A]

Going to be a star.

[B]

He's not in his phone. He's not nervous. He's not socially awkward. You know, he's going to be, he's going to do fantastic.

[A]

Well, let's throw our, let's throw our, our tinfoil hats on. What should we be worried about?

[B]

Well, I think the, the, the biggest issue, and this is what I'm writing a book on right now, is the biggest issue for business is going to be their ability to adapt. And there's actually four key components of, of that that businesses are struggling with largely, you know, if you look at, at all of the major problems of business adopting or extracting some of the benefits of AI or technology or whatever, it largely comes down to their inability to guide change in, in a, at a speed that's consistent with the speed of changing needs, preferences and behavior of customers.

[C]

Right?

[B]

So now we'll throw into it the speed of development of AI and all these new opportunities can't keep up. And they can't keep up in these four categories. So one of them is the organizational models don't work.

[C]

Right.

[B]

So the organizational model, which, an organizational model is the structure. So how a company, how teams are structured in an organization, the management model, how decisions are taken and how resources are allocated, whether it's money or people or whatever. And the third component of an organizational model is how we measure performance.

[C]

Right.

[B]

So the, the model itself is broken. The model itself is designed on classical management theory, which is from 100 years ago. The world unfortunately has changed a little bit.

[A]

We're no longer building nug. Standard Oil is no longer canning those products on the line.

[B]

Ford is long, you know, Henry's going along, gone. So you know, the, the ideas that were very relevant and valid during that development period are, are no longer relevant for today.

[C]

Yeah.

[B]

And it's largely, they're largely not relevant because of the speed required of change. So what was designed for, for stability in production environments is now rigidity in, in a business environment today because we need business to be responsive and adaptive. So that's first category then is organizational models. How businesses are organized, how performance is measured, how decisions are taken and so on. And that's a problem. The second area is corporate culture. So if you look at that evolution of business models, the, the balance sheet centric organizations were largely authoritarian. They were largely hierarchical and directive.

[A]

Sure.

[B]

And decision decisions, you know, trickled down from the top and nobody took initiative because I don't want to do something that's going to make the boss man mad, you know, or whatever. Product centric organizations became more matrix type organizations, multiple reporting lines, you know, the official and the unofficial reporting and so on. Customer centric organizations become more like satellites.

[C]

Right.

[B]

You have these little event driven hubs where people are trying to create value and they're more value driven in terms of how do, how do we enhance value in, in these customer events and so on. Relationship centric organization are like a network of teams. So if you look at the way Facebook is organized as opposed to say Microsoft, like, you know, Microsoft is an adapted hierarchy where there's lots of scandal and conflict and competition in the organization. Where Facebook is a network of teams largely where people are trying to understand like, you know, how, how is what I do going to affect another team over there and how can we benefit from each other so that, you know, we're not duplicating things and creating inefficient scenarios and so on. You walk into, I mean, I've walked into, into pretty much, I don't know, let me be bold and say, you know, largely two thirds of the companies that I walked into as a consultant had just massive amounts of duplicated efforts where you've got teams and they had no Idea teams doing the exact same thing. And you're like, hey, guys, you know, did you realize that you're doing 70% the same thing that this team over here is doing? No, ours is different. Ours is better.

[C]

Right.

[B]

Because they're designed for conflict. Yeah. And they're designed for competition. They're not designed to be a collaborative environment. So the second kind of major zone of corporate culture is this shift from working in directive environments to collaborative environments. We need people to share and benefit from each other if they want to move quickly. You can't. You can't change an organization quickly if you have people competing with each other. And, oh, that guy did something stupid, you want to throw him under the bus because, you know, he.

[A]

You want to go fast, you go alone, you want to go far, you go together.

[B]

Exactly. So that's the second one, the third one. And, you know, everybody gets mad at me when I start talking about this. But the third one is the leadership. You know, unfortunately, the majority of people that are in leadership positions are not leaders. They're. They could be good managers, but they're managing with power and authority. They're not managing with example and guidance and motivation. And they're not inspiring.

[C]

Yeah.

[B]

And they're not inspiring.

[C]

Right.

[A]

Yeah.

[B]

So if you took. If you were going to create a portrait of a leader, you know, we need to move from the person that's an authoritarian, directive type person telling people what's to do, and we need to move to an inspirational guide.

[C]

Right.

[B]

Somebody that's saying, like, hey, you can do this. Somebody that's grouping people together and saying, like, go, guys, you know, let's go.

[A]

Isn't it funny how, like, the world thinks Steve's. Steve Jobs was a super inspirational dude? He was just an absolute pirate.

[B]

Yeah.

[A]

Just an absolute tyrant.

[B]

However, there was. There's one thing that. And I. I don't know if this is true or not, but they, you know, they would. I heard people saying he was an asshole, but as soon as somebody was on track, he let them go.

[C]

Right.

[B]

He let them just do the thing. He let them roll and do their thing. And so that's something that, you know, one of the things I always talk about is there's this, in this leadership kind of range of. Of styles. There's the ones that are largely authoritarian that lead like a government.

[C]

Right.

[B]

So there's rules and standards and I need to patrol and punish and. And so on. And there's people that are more like a religious leader where it's inspirational guidance and I need to get people to behave because they want to behave that way and they're going to group together because they want to group together and so on. Well, if there's a fire, you can't be an inspirational guide. You need to sit down and say, yeah, get the hose, we're going over there.

[C]

Right.

[B]

And so a leader, A leader needs to have the full range of abilities and the skill set, but you need to know when to use it as well. There's an old, it's called situational leadership where they talk about, you know, using different skill sets based on different situations and the different audience that you have and so on. But largely, you know, people that are in leadership positions today, they're largely managers, they're not necessarily coaches and mentors and people that are guiding things and so on. And when we move from a hierarchical directive structure to a network of teams, there's no longer that authority and power to manage with. You can't just walk in and threaten to fire a whole team because you need. You don't have that.

[C]

Right.

[A]

You don't have it.

[B]

And that team is probably up, vital, you know, piece of, of what's happening in that network of teams. Otherwise they wouldn't exist.

[A]

Yeah.

[B]

So that's the third one is the, the approach to leadership. And then the fourth one is the approach to change, which is the more you try to manage change, the less manageable it becomes. So unfortunately, the, the businesses need to look at how do we create an environment that's conducive to change. And in most cases, and I'll use an old Russian phrase, initiative and a kazuyim.

[C]

Right.

[B]

It means that we punish initiative.

[C]

Right.

[B]

So that was an old Soviet rule.

[C]

Right.

[B]

We don't want your initiative. No, follow the rules. Just do your job, keep your head down, do your job. Don't, don't create any ripples in, in the, you know, and that's it in our reality or whatever. So in it's even nakazuim. It was like the, the whole idea of like, you know, just don't make it shut up. Like, don't, don't bring that up, because if you bring it up, somebody's going to tell you to do it and if it fails, you're going to get fired. And now we're all working and so on. So that kind of culture doesn't work anymore. We need, we need a culture where people don't feel threatened. They can bring up an idea, somebody says, hey, you know what? That's a good idea. Go try it out. And if they fail, they fail quickly and efficiently and we wipe it under the table. So you asked me about Marge in accounting.

[C]

Yeah.

[B]

Let me that.

[A]

This is the rap, this is the wrap up. Here we go. Bring it home, bring it back.

[B]

Look at that man coming back.

[A]

This dude's been on stage before. You can tell that's a wrap up.

[B]

See me about, ask me about margin accounting. So there's probably a lot of margins in accountings around, around most companies.

[A]

It's a very accounting type name.

[C]

Yeah.

[B]

And there's, there's the official way to guide change in an organization. And the official way is you go through all these. John Cotter, who is a, a well known strategist, they still teach him in business school and so on. You've got this, these eight steps of guiding change in an organization. You're building your case and you're promoting and you're identifying the people that are and building your coalition and piloting things and celebrating your successes and driving things to, to a scale and so on. And that works great. However, humans don't like change.

[A]

Yeah.

[B]

So we're going to resist things and there's going to be large portions of organizations that resist change. And so when that happens, we need a different approach. And this is where we come to Michael Ruckman's Old Potato.

[C]

Right.

[B]

So this is the thing that I thought of and it just weird.

[A]

I used to be in a college band called that same name. Michael Ruckman's Old Potato. That was the name of our band. It was really weird.

[B]

It's funny because I never put two.

[A]

And two together till right now.

[B]

I still have not come up with a better way to explain this. But think about this. You got a potato and you forgot about it in your cupboard and you come back to it in like a month. What do you find?

[A]

It's fine.

[B]

It's grown, it's growing. There's some little stuff growing on it, little white things. Maybe one of them sprouted out a little bit. But you can still kind of pick them out and it's still a potato. You could still eat it if you cut enough off of it.

[C]

Right.

[B]

Let's take the same potato, potato and say that you forgot about it for like six months and you come back, nobody paid attention to it. Now what do you find?

[A]

I, I've never had a six month potato.

[B]

I don't know, it's not a potato anymore. Like it is transformed into something completely different. And, and you can, you're not going to eat it, you're not going to Cut stuff out of it, you know, whatever. So what happens is a lot of change happens organically, and a lot of change, if it goes unnoticed, we'll. We'll find the things that are successful and we'll make them more successful, and we'll find the things that are unsuccessful and. And we can just pick them out and get rid of them before anybody notices about it. So what I often say is, in change projects, you've got the public project, you know, the thing that you've publicized in the organization and promoted, like, we're going north, and everybody's on board.

[C]

Right.

[B]

And everybody's on board publicly, but there's a lot of people resisting and even sabotaging behind the scenes. And then you've got other things that you're doing where you're launching some little pilot projects and nobody really notices that they're happening. And the ones that are unsuccessful, we pick them out and basically that's it. And nobody even knows it happened. And the ones that are successful, okay.

[A]

This is maybe working.

[B]

We add to them, give them more budget, give them more people, give them more whatever. And when it's a sex success that nobody can dispute anymore, then all of a sudden, there's no resistance because nobody can argue with it.

[C]

Right.

[B]

It's already. It's already generating money. It's already.

[A]

So the big grand announcement is the wrong way to go.

[B]

It's.

[A]

It's a little.

[B]

Well, you need both, unfortunately.

[A]

Okay.

[B]

Because. Because you need to look over here.

[A]

You don't see what's going on over here.

[B]

Yeah, yeah. So you. You need people say, like, let him go. Resist over there.

[A]

Yeah.

[B]

You know, and so on. But I'll tell you, out of all the projects I've had in. In my career, some of the most successful ones were ones that started as a little nubbin in a potato that, you know, they were successful and they grew and we fed them and. And they went out.

[A]

That's where it went.

[B]

And a lot of those are the ones that don't require a lot of investment. There was a project that I did with a bank and in Russia, and we said. They said. We went in and they said, we've got the most advanced CRM system in Eastern Europe. And I said, great. You guys are awesome. This is great. So we went and did an audit of the System. They had 16 different databases and 42 different front ends, and none of them were integrated. And. And we said. I said, boy, what. How could you call this a CRM system? It's a. It's a park. It's like a parking lot of different systems. And so we went through this exercise of it's called Master Data Management. And you take a section of the data from different databases and combine it and so on. And there were 16 different versions of me and some of them I was rich and other ones I was poor and some of was an employee and other ones I wasn't an employee and you know, and so on. So I was 16 different people according to their CRM system. And it was wild. And so in the end they said, okay, it's going to cost us $35 million to, to integrate everything and there's nobody that's willing to sign off on that budget, so we're done. And at that point I had a development budget that the CEO had given me and I said, okay, listen, I'm going to find a team. So we found a team, they were eight, eight people. And I gave him $50,000 and I negotiated with a company to give them a free license for a year. And I said, you guys have a year to create value. Salaries are paid for, you got $50,000 to spend, you got a free license, you have a year to create value.

[A]

Go get it.

[B]

They went out in three months and created enough value and, and they decided that they were going to work in three month cycles. They were working in what they call sprints. So they had two week sprints and they were working in three month cycles. So within three months they needed to, to have return on investment. They worked for five years, they spent over $50 million. But they were, they were only in the red for the first 50,000 that I gave them and that was it. After that they were completely self financing and they were driven by that. They were driven by, we create value and that value finance is our next stage of development.

[A]

Because that was the mission statement.

[B]

Because that was the mission. Well, dude, well, when's the book going to come out? Hopefully I'll be done with the writing by the end of the year and then, you know how it goes. It's not a big publisher.

[A]

We'll see this, this in eight to 12 years.

[B]

It's another six to eight months after that to get it published.

[A]

A little longer than that.

[B]

Depending on.

[A]

Publish it. Depending, depending on the season at which they want to drop it.

[B]

Exactly. Depends.

[A]

So anyway, we can talk about that up there. Well guys, thank you. Michael, if they want to find you, how do they find you?

[B]

I'm pretty easy to find. LinkedIn. LinkedIn is easy. I'm always on LinkedIn Facebook, Instagram.

[A]

Michael Ruckman.

[B]

Michael Ruckman. The company is called cinto cento.net okay.

[A]

And that's it. Well, thanks for coming in.

[C]

Perfect.

[A]

Well, guys, if you're listening to that today, man, I would just say this. If you work at a company, be the person that is open to helping drive change. Because it is coming whether you like it or not. If you're somebody that out there, that is your own boss, whether you are in real estate or insurance or mortgage or whatever it might be. If you're selling something your own boss to that level, focus on relationships. They are the new currency. We'll see you next week. Hey, it's John Gafford from the Escaping the Drift podcast. And big news. My new book, Escaping the Drift is coming out November 11th. You can pre order it right now at thejohngafford.com There are tons of bonuses, tons of giveaways. Get the book. If you are somebody that feels like you might be drifting along, this is for you. If you know somebody that feels like they might be drifting along, this is for you. Available everywhere, all bookstores, every everywhere, Amazon, Barnes and nobles, the whole nine yards. But pick your copy up now at thejohngaffer.com and get a bunch of the awesome bonuses I've thrown out because I promise you, I put my heart and soul into this thing. I want it to help you change your life. Pick it up everywhere. What's up, everybody? Thanks for joining us for another episode of Escaping the Drift. Hope you got a bunch out of it or at least as much as I did out of it. Anyway, if you want to learn more about the show, you can always go over to Escaping the Drift. You can join our mailing list. But do me a favor, if you wouldn't mind, throw up that five star review. Give us a share. Do something, man. We're here for you. Hopefully you'll be here for us. But anyway, in the meantime, we will see you at the next episode.