The Shadow Network with KP Reddy

KP Reddy Unpacked: The CIO Blind Spot

January 30, 2024 KP Reddy
The Shadow Network with KP Reddy
KP Reddy Unpacked: The CIO Blind Spot
Show Notes Transcript Chapter Markers

Prepare to challenge what you know about innovation in the AEC industry, as we're joined once again by the visionary himself, KP Reddy, CEO of Shadow Partners. Let's  uncover the glaring oversight that's been plaguing industry giants: an overwhelming focus on the latest tech, while business model innovation—the true catalyst for change—remains underexplored. Embark on a revelatory discussion that promises to redefine how you perceive and integrate innovation into your business strategy.

This episode isn't just about the 'what' of innovation; it's the 'how' that will capture your focus. We navigate the treacherous landscape where bold pioneers risk it all for their disruptive brainchildren, and where companies like Blockbuster become cautionary tales for failing to adapt. With KP's insights, learn how mastermind groups can become the crucible for forging new paths in business models. It's a conversation that's set to spark a transformation in how you approach, utilize, and ultimately monetize innovation in the AEC sector.

KP shines a spotlight on a critical blind spot within the realm of Chief Innovation Officers in the AEC space. It's not merely a lack of grasp on advanced technologies, but a nuanced challenge around Business Model Innovation. He dissects this industry blind spot, highlighting the correlation between a robust business model and the success of innovation initiatives in the AEC space.

Want more discussions like this? You can connect with KP Reddy and other innovators in the AEC and CRE Industry in the Shadow Partners Community....go to ⁠⁠⁠⁠⁠bit.ly/ShadowPartnersCommunity⁠⁠⁠⁠⁠ to learn more today!

Speaker 1:

You are listening to the Shadow Network with KP Ready, your gateway to innovation and architecture, engineering, construction and real estate, with a sprinkle of startups that are making a difference. In between, check us out on YouTube at Shadow Partners. Never miss a live stream fireside chat or talk that we got going on with the industry's most interesting innovators and leaders every single week. You can connect with KP Ready and other innovators in the AEC and CRE industry in the Shadow Partners community. Go to bitly slash shadow partners community to learn more. Today. All it takes is a few clicks for you to make a difference. Welcome to the future and welcome to the Shadow Network with KP Ready.

Speaker 2:

If you're not following him on LinkedIn, I don't know what's wrong. You should be, because KP spends a lot of time posting his thoughts and his reflections on innovation for the built environment. He spends a lot of time talking to startup founders, to leaders of innovation and AEC and CRE firms across the globe. If you follow him on LinkedIn, or the benefit of that work, because he spends a lot of time reflecting and posting about it. So I am joined again today by KP Ready Hi, kp.

Speaker 3:

Jeff, how's it going?

Speaker 2:

It's going really well, got another post to talk about here. For those of you that don't know, my name is Jeff Eccles. I'm head of marketing and senior advisor at Shadow Partners, where KP is the CEO and the founder, and I get to come here every week and say hey, kp, what were you thinking when you posted that on LinkedIn? So we do this series where we unpack one of KP's posts. What inspired KP to write what he wrote? So I'm going to start out. I'm going to read this as a short post this time, so I'm going to read the whole thing and then we'll ask KP to unpack it for us. All. Right, it starts out. It says the blind spot that I see with almost all chief innovation officers in the architecture, engineering and construction space is less about understanding advanced technologies, but really around business model innovation. Hence a lot less success in monetizing innovation initiatives. We talked about this a little bit offline Earlier and I love this one because I think this is really the crux of the struggle, I think, for innovation in the AEC world. So what inspired you to write this particular post? It's just a pattern.

Speaker 3:

Working with so many of the top E&R executive teams and their innovation folks was there seemed to be this AI boom. There seems to be a much better understanding of the innovative technologies that are coming, whether it's AI or robotics. There seems to be one a lot of intellectual interest in understanding how things work. So if you're an engineering firm and you're looking at and you're the head of innovation, you probably are naturally intellectually curious to understand how things work 100%. The second half of innovation is the business model innovation, and that's where I think there's a huge gaping hole right in terms of understanding. How do you launch a new business? What's the business model making it ROI driven? And the challenge is so much of the innovation that's being looked at is how do we increase productivity? Now, the ongoing challenge of how do we increase productivity? Well, we know you can increase productivity right, that's a foregone conclusion with tech in general. However, if you become more efficient and therefore your costs are down, who benefits from that? If you can do it 20% cheaper and faster, does the client benefit from it? Ie, now you charge them less and you deliver faster, which might be okay. That might be a marketing strategy, right? We want to be the Walmart of structural engineering. Is there's nothing wrong with that strategy? Or do we want to launch a different product and we benefit from that margin benefit of being innovative and deploying a new technology? And I think the crux of why industry struggles with who benefits from the innovation and there's almost like a standard default to pass it down to the customer is because they don't understand how to create new business models. And that is squarely, and look, the marketing department of an architecture firm is not going to be that helpful. If they have their own job and their own skill set, they're not going to help you innovate a business model. So it really does come down to the chief innovation officer to have a skill set around understanding how to do new business model innovation, and from what I continue to see, there's not a lot there. In fact, the fault is to become a tech enabled services. Ie, we're going to provide the same service we've always provide, but we're going to put a little bit layer of technology wrapper on it and that's what that's going to be, which is not in some cases. That might be the right idea, but I think the lack of understanding and knowledge of how to build a new model is is is the where the real value is and there's like zero capability. It's like you know why didn't the taxi industry invent Uber? They didn't. You know there's, there's not going to do it right there, they're going to use technology to make themselves more like how do we make our existing business more beneficial? You know why didn't blockbuster get into stream? And there's millions of examples, probably right now, right, but I think it's incumbent that, if you are going to take on the role of a chief innovation officer, that it's not just about understanding what technology is coming out. It's about understanding how do I spin up new businesses. In many cases, maybe my mission is to spin up new businesses that put my existing businesses out of business. Right, god forbid. Right, I know you like saying that. Yeah, like creative destruction right. I mean, I think so. I think part of it, though, is I just did this workshop for a multi-billion dollar company, their C-suite. You know the question about what does innovation mean to us and how does it fit into our corporate vision and mission. I kind of argued like the innovation team might have a different mission than the corporate team, and that's okay. Right, that's okay. I mean friction, competition, all those things, those, those make the world go around.

Speaker 2:

Yeah, Some of this falls squarely in the arena of digital transformation versus innovation, right, we see a lot of. My interpretation is that we see a lot of digital transformation in the AEC space. We're driving towards that efficiency and some of the innovation people that I've had the opportunity to talk to, you know, and hear the numbers that are talking about it. It blows my mind. Right, Our utilization of XYZ software, you know, is 4%, something like that. So we see getting up to 6% or 7% as a huge victory. That's not innovation, right? And again, you want to be more efficient. But we're also in this such a low margin industry that it seems like there's a law of diminishing returns somewhere wrapped up in there.

Speaker 1:

Yeah.

Speaker 2:

So I love this conversation and it also leads me to bringing up the fact that we have now launched the mastermind groups for directors of innovation, chief innovation officers, and these are the mastermind groups are the places where these types of people that you're talking about, the people in these roles that have these titles they can come and they can bounce these ideas off of each other. How does this work in the real world? You know, and you're involved there, you stop in there and you share your experience and your advice and I facilitate these, but it's, you know, it's like I said, chief innovation, director of innovation. There are several nuances to those titles across the industry, but these are the type of people that are participating and saying, okay, what does it really look like to innovate on the level that KP is talking about? How does it look like to innovate the business model? Because I think that's super important and you know, like you said in your post, I mean that is the blind spot. I don't see a whole lot of people with their finger on the pulse of that.

Speaker 3:

No, and I think not to get me now. We'll talk about a ton of this in the mastermind groups and maybe I'll do some more other workshops on this. But you know, if you had this amazing idea, innovative idea that drives to our true ROI, is highly disruptive, has big scale, maybe you would quit your job to do it Right? And I think that's kind of what happens. You know, when we look at the not talk to 50 startups. You know, see 50 startups a week about in our space. None of them, like, came from from the restaurant industry. No, they worked at an engineering firm, they worked at a construction company and they have disruptive ideas, but they no longer work at those companies. And when you ask them, like, why didn't you build it at this company? I know your company, I know the CEO, they're very supportive, why wouldn't you have done it there? And the response is because, if I'm successful, it'll cannibalize some of their existing businesses. So I got no support. Yep, and I think that's something like from a hedged bet perspective. It's okay to build businesses that might cannibalize your existing business. Right, because chances are it may or may not. Right? I mean, here's the interesting. The Blockbuster example is a simple example right, if Blockbuster had started doing streaming which, by the way, they did get into the DVD delivery stuff, the subscription business, a little bit too late but they did get into that. But think about the optionality of I have streaming and I could go to a store and get a DVD, like giving customers. It may not have killed the DVD business but it would have given clients, like the customer, optionality and it might turn out that people would stream and buy the DVD. They might have done both. So I think it's a super interesting thing around this idea of cannibalizing an existing business line and I think a thoughtful chief innovation officer should always have something that will attack and you know, attack an existing business, attack the golden goose, because that's where the best ideas start to come to the forefront.

Speaker 2:

Yeah, as you were saying that and you were talking about people quitting their job, I thought back through our most recent past incubator cohort and of the 11 that we admitted into that cohort, 10, 10 of the founders or groups of co-founders are from the industry. One runs arguably tangentially from the industry, but not specifically out of an AE firm or something like that. So you know what's the math on that 97%. And you were talking about quitting the job. We had a co-founder. That that is, and maybe maybe that's what you were thinking about when you brought up that example. But we had a co-founder, had an idea, took a two leadership, decided to quit his job, quit his job, sold his house, has a you know a wife and young baby and he put all the chips on the table to create this innovation and he just graduated from our incubator. That's real right. People do this all the time and I think you're exactly right. You're going to see this in teams. Why not spin this out?

Speaker 3:

Yeah, no, 100%. I think I'm excited about our mastermind groups and I'm excited about the conversations. You know, I kind of look at this and say you know, man, like I get to do this as a job, like this is fantastic.

Speaker 2:

Yeah, exactly.

Speaker 3:

But I think also just the idea of moving the industry forward. Around these ideas it's kind of like let's go have all the conversations you're not allowed to have, but let's all do it together in a safe space.

Speaker 2:

It makes it okay.

Speaker 3:

It doesn't get any better than that, you know.

Speaker 2:

Yeah, because it's not a beat the mastermind drum too loudly, although I'm happy to. I'm a huge proponent of mastermind groups. I have facilitated for almost a decade and currently belong to two, participate in two and it's just. It is a great way for people in like situations, like-minded people, to put their heads together and learn and mentor and create an environment that supports something bigger as a whole, supports something bigger than the parts, and I think it's a great environment to get into. And so, if that's something that you're interested in, certainly reach out to me, reach out to KP. We do have I think we have capacity maybe a seat in each of the mastermind groups. I think we have a little bit of capacity to add. If you're interested in joining that. Again, we call it innovation leaders masterminds. It's for chief innovation officers, directors of innovation, and there's a group of your peers to join and to support and to learn from. If you just joined us somehow, if you missed the beginning of this, we've been talking about KP's post on LinkedIn. It says the blind spot that I see with almost all chief innovation officers in the architecture, engineering and construction space. It's less about understanding advanced technologies, but really around business model innovation. Hence a lot less success in monetizing innovation initiatives. If you are not following KP Ready K Period P Period, ready R-E-D-D-Y on LinkedIn, you need to be. This is his personal profile, is what we're talking about here. His personal profile is where you can go to learn about what's happening in the AEC, the CRE, industries, innovation for the built environment. He's always posting about things that he notices, his reflection on conversations he's had he said it earlier startups and leaders of some of the largest, most valuable firms in these markets. So follow KP Ready K Period P Period, ready R-E-D-D-Y on LinkedIn and join us again next week we will unpack another of KP's posts on LinkedIn. Kp, thanks for doing this with us again this week.

Speaker 3:

All right, thanks, Jeff.

Speaker 2:

Absolutely fun to do it.

Speaker 1:

Thank you for tuning in to another episode on the Shadow Network here with KP Ready as always. Remember you can connect with KP and other innovators in the AEC and CRE industry in the Shadow Partners community. Go to bitly slash shadowpartnerscommunity to find out more today. Until next time, deduction.

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