The Thor Ernstsson Hypothesis: Great Companies Make Decisions by Evidence Instead of Job Titles

Thor Ernstsson is a serial entrepreneur who is currently the founder and CEO of Alpha. In this episode of the Product Science Podcast, we talk about his varied experience running product teams at all levels of the industry, what to look for in new hires, and how to maintain an experimental mindset.

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Questions We Explore in This Episode

The Thor Ernstsson Hypothesis: Great Companies Make Decisions by Evidence Instead of Job TitlesWhat does Thor mean when he talks about a technology and product mindset? How did his experience building technology on top of traditional businesses inform his outlook? What was it like working at Zynga where they grew from two hundred to two thousand people in one year?

How does Thor approach experimentation? Why does Thor place an emphasis on optimizing around iteration? How do you get stakeholders on your side to enable experimentation and learning? How does iteration take more pressure off of individual releases?

What did Zynga look for in new hires? How did Thor apply those tactics to Rally Health? How does Thor flip the hierarchy at Alpha? What is his experience having Fortune 100 companies as his primary clients? How are these companies viewing automation? How is Thor helping improve the experience of getting diagnosed with cancer using a product mindset?

How can stand up comedy help you write your VC pitch? What can you learn from the scientific method that you can’t learn from studying business? Why is the size of an organization not the most important thing to look at when it comes to doing product right? How does Thor find people who are mission aligned in his organizations?

What was Thor’s experience working in the healthcare space? What is it like to make a small change in an industry that works at enormous scale? How does Thor differentiate between optimizing locally versus globally? How do you have a conversation with someone interested in buying your company? How do you lead teams and maintain an experimental mindset?

Quotes From This Episode

You may think the problem is you're not selling enough but the way to fix it is through optimization of your product and what you're actually doing as a business. The solution is often technology-related. - Thor Ernstsson Click To Tweet It doesn't matter what you're going to test or what you're going to experiment on, it just matters that you do it, because the alternative is not doing anything. And, yet, that's what most people do. - Thor Ernstsson Click To Tweet The final point is to iterate because you’re doing it to build a muscle. You're doing it to figure out how do you build to the core capability within yourself, within your organization, the ability to learn. - Thor Ernstsson Click To Tweet Here at Alpha, it starts with reimagining how organizations work by flipping the hierarchy so that it's run by data as opposed to job titles. - Thor Ernstsson Click To Tweet

Transcription

Holly Hester-Reilly: Hi, and welcome to The Product Science Podcast where we’re helping startup founders and product leaders build high-growth products, teams, and companies through real conversations with the people who have tried it and aren’t afraid to share lessons learned from their failures along the way. I’m your host, Holly Hester-Reilly, founder and CEO of H2R Product Science.
Holly: This week on The Product Science Podcast I have Thor. Thor… You know, I don’t know if I’m pronouncing your last name correctly, Ernstsson? Is that how-
Thor Ernstsson: Sure.
Holly: How do you say it?
Thor: My dad’s name is Ernst, so I’m Ernst’s son. So, Ernstsson.
Holly: Oh, for real?
Thor: Yeah.
Holly: Wow. Oh, that’s so cool. Okay. It’s like the things I read that happened in the past but haven’t yet met. Awesome. All right. Well, Thor Ernstsson. I’m so excited to have you here. Among many other things, currently Thor is the the founder on CEO of Alpha and has done a lot of awesome things before that, so why don’t we kind of go back to the beginning, and then we’ll kind of catch up to where you’re at now?
Thor: Sounds good.
Holly: So, I know you’ve been in tech and product for a while, but tell me how it started. How did you first get involved?
Thor: So, it was more about necessity than anything else. I was living in a place where I had to have a security clearance to do any meaningful work, and it turns out a a citizen of Iceland, I couldn’t get a security clearance, so I had to figure it out. And, it wasn’t really tech and product that pulled me in as much as entrepreneurship.
Thor: So, I could start a company, and I could be a contractor, but I couldn’t work for one, which is pretty ironic. And, as such, I got pulled into it and then started realizing that a bunch of people have similar problems, and those problems are often solved through a sort of technology and product mindset where it may not be… You know, you may think your problem is you’re not selling enough whatever, but in reality, the way to fix it is through optimization of your experience, of your product, of looking through what you’re actually doing as a business, and then the solutions to those are often technology related. So, I got into it in sort of a back channel way through solving more meaningful business problems, just using those as the tools.
Holly: Oh, cool. So, what kind of… Were you working for like a large corporate entity, or what kind of organization were you in at the time?
Thor: No, that was thing. It’s like I had to do my own, so started a… set up a little LLC to do a consulting business, and did that for a while. And, this was back in 2001.
Holly: Who were the clients, I guess, is more what I was saying?
Thor: Clients would be like mid-market companies, usually less than 100 million in revenue, sometimes as little as a coffee shop or a clothing store or something like that where they knew that the internet and e-commerce was the future, but they didn’t necessarily know how to get there. So, anything from, yeah, from traditional retail to asset management to service businesses and really just a lot of different kinds of non-digital, non-traditional technology enabled businesses that we not only brought online but really built the online e-commerce or just technology business on top of the traditional one.
Thor: And, then wound up joining a buddy to do something that was totally different but still related, which was build games on Facebook. And, this is now 12 years ago, 11 years ago, and we were looking at it the same way. So, how do you actually figure out what people want? How do you quickly test, learn, iterate, and put stuff out there? Because, no rational person is going to say, oh, I really need this virtual farm equipment in my life otherwise I’m not going to be happy. Nobody is actually going to say that, and yet, we got 450 million users to actually do that and actually want that, and it’s kind of crazy, because it was the exact same process that I was going through before.
Thor: So, whether it was how do you sell on item of clothing on eBay to one person versus how do you deliver this virtual good to literally over 100 million people was the same process. So, I realized then the opportunity that goes with scale is just fundamentally different. So, it’s still tech and product, it’s still solving fundamental problems, but the problem shifts as you grow in scale.
Holly: So, I mean, it’s incredible that you went from kind of hustling, like finding people who need help getting on the internet in all sorts of forms and figuring out how to do that, and then you, I think you just said, you joined a buddy, and that turned into or started… Was it already… That’s Zynga, right?
Thor: Yeah. So, that was… So, we started their first remote studio.
Holly: Okay.
Thor: So, it was already a thing. When I started talking to him it was about 60 people, and then when I finally came on board, it was probably about 120, 140, something like that, but the scale in growth was so crazy, because we went from 200 to 2,000 people in one year. And, it came with a lot of really interesting challenges as we did that. I had a front row seat, but fortunately not… Let’s just say I didn’t have to deal with those challenges, but I could still learn the lessons from them.
Thor: And, then afterwards started a few things. One of them is a healthcare company down in DC, and obviously, Alpha, which is a market intelligence platform here in New York where we help product teams figure out what products to build using the exact same mechanism that I described earlier of just rapidly learning and putting stuff in front of people and iterating, but now doing it in a technology-enabled way, as opposed to having to struggle and suffer and doing it all manually and it takes weeks or even months.
Holly: Yeah. So, there’s a lot of steps in there that I think are really interesting to our listeners. It sounds like you… from the very beginning you were doing a lot of testing and iterating, right?
Thor: Mm-hmm (affirmative).
Holly: Like, running experiences as a core part of how you learned to do things. What are some of the things you’ve seen along the way where other people maybe have had trouble with it? And, how have you helped them learn how to do better experiments or figure out this shit in the first place?
Thor: Sure. There’s three basic points that happen in sequence that help just about everybody, and the first one and the hardest one is just to do something, because it doesn’t really matter what you’re going to test or what you’re going to experiment on, it just matters that you do it, because the alternative, as stupid as it sounds, is not doing anything. And, yet, that’s what most people do.
Thor: So, just getting out of bed in the morning, just deciding I’m going to try something, trying it, learning from it, and doing it, because most people they’ll get stuck on that, and they’ll plan, and they’ll wait to execute, and they’ll just think about it, and they’ll consider it, and they’ll spend weeks or months not actually doing it versus, again, literally just let me just try this, whatever it is. It doesn’t matter. It doesn’t even have to be core to the business problem you’re solving, because if you don’t have it as a mindset or a habit or skill, you’re not going to be right the first time you do it. So, first point is just to do something.
Thor: The second point is to learn from it as opposed to launching something, where if that experiment involves launching a product, then that better be right. And, if that experiment is to get a product in the market, see what people think of it, if they’ll buy it, if it’ll generate revenue, etc., there are so many moving parts to that you will almost certainly fail. So, the vast majority of new products fail, and it’s often because they go into the market uninformed. They have a lot of hypotheses that didn’t get tested. There’s a lot of assumptions that are baked in. And, it wouldn’t have taken a lot of effort or work to just find out that it turns out people don’t want a Facebook device in their homes listening and watching to every action for a company that’s probably one of the worst regarded companies when it comes to privacy globally today. Like, it wouldn’t have taken a lot of effort to figure that out, but they didn’t. They decided we’re just going to do this anyway.
Holly: Yeah.
Thor: Right, so what we’re talking about isn’t just like a two-person startup. These are huge multi-billion dollar companies as well that go through this process, because at the end of the day, it’s all about people. And, then the third point is to really think about what you’re doing from a process standpoint and optimize around iteration, because it’s not just enough to do something once. It’s not just enough, like, if you launch it, it has to work, so if instead you just have a learner’s mindset and you just say what we’re doing here is not building this product, we’re just going to put it out and learn. Because, it’s a lot easier to get people behind learning than it is around getting product on the market.
Thor: And, these people often might be people whose job is to tell you no, lawyers, etc. But, if you get them on your side by telling them, well, we’re going to learn from this, it’s time bound, and all this other stuff, then there’s a lot of things you can do, whether it’s a startup or a Fortune 500 company.
Thor: And, then the final point is to iterate, because you were doing it really to build a muscle. You’re doing it to really figure out how do you build to the core capability within yourself, within your organization, the ability to learn? And, doing something, doing an experiment, doing a test, it’s fine. Doing it again, it gets better. Doing it again, it gets better. By the time you’ve done it 20-30 times, you actually know what you’re talking about.
Thor: So, then when you apply it to the real problem you’re solving, you’re actually doing it properly, but most people don’t even do it the first time, or they might do it once, often through an outsourced relationship, and they think, oh, we validated this. But, in reality, they didn’t. In reality, it’s huge confirmation bias. They see something that they want to see, and they decide that’s it.
Holly: Yeah. I love that, and it’s one of the things that I love about what Alpha has created, because it’s… You know, the platform that you have built has really made it so quick and easy for people to just practice that skill and not… I find it one of the best ways to convince those hesitant planners that we should just go live when they know that they can go live again next week and thew week after and the week after, and then it’s like, okay, calm down. If the survey isn’t perfect, if the question isn’t perfect, if the prompt isn’t perfect, we will check it again.
Thor: Exactly.
Holly: Yeah. I love that. So, I want to know more about what that looked like in those crazy high growth days at Zynga. What were… What was the ethos around experimentation? I mean, obviously, you were doing it? Was everybody doing it? Had it been built into the DNA? How did it work there?
Thor: Yeah, very much part of the DNA. And, it’s not… So, there it was more about analytics, metrics, measurement, testing, figuring it out. They’d be testing every possible thing to the point when a new game would come out, we would basically create a quick and dirty version of it and see what would work. Are there mechanics? Are there flows? Are there things that somebody else has figured out? What can we learn from that? And, we would do it by building maybe ten-click prototypes or something like that, and then driving traffic into it and seeing what people would do. We would do all kinds of data capture, both on live products and live things, but also on prototypes and simulated things. We’d do focus groups, and we’d do basically everything you can think of.
Thor: And, the most effective was always the… sort of the quick and dirty stuff combine with super heavy duty analytics. Like, every single click, every single modal, every single interaction is tracked, and then we would do analysis, both live and after the fact, to see what are the actual drivers of the outcomes that we want? So, what are the actual things that get you to play? What are the actual things that get you to pay? And, then what are the actual things that get you to share it with others? And, then how do you replicate that across everything?
Thor: So, we would have regular, not meetings, that’s the wrong word for it, but forums to share best practices. And, then those best practices would be implemented across the board, and the people that owned that were product managers. So, product people are the ones that are really calling the shots on what goes in and why into these products, because, as an engineer or as a designer or even as a game designer, you won’t necessarily know those other things around sort of the user psychology of behaviors. And, it’s not like you’re Stanford MBA or Harvard MBA is going to prepare you for it, either.
Thor: So, what we hired for are super analytical, super smart people that could learn, because nobody had the answers, because it was all crazy anyway. So, like, nobody… Again, no PowerPoint deck is going to tell you that people will prefer a pink tractor over a purple one, but by just testing it, by just doing it, by seeing what they actually buy and what they actually click on, we could actually… we could test a really extraordinary amount of things, where any idea, just about, could have been tested and in many cases was.
Thor: So, afterwards, at Rally Health, we applied the same mindset, because we had no idea what was going to drive patient engagement other than some basic psychological principles. We didn’t know what problems people had integrating their fitness devices, like Fitbit and all that stuff, with their healthcare data. We didn’t know if it was just because they don’t want to do it, or because it was too hard, or because the data wasn’t there, or whatever it would be that people weren’t doing it.
Thor: So, then we started tackling problems that are related to… that are more specific problems than the bigger thing of driving health care engagement, and what we learned is you can actually take a lot of these things, parcel them into more manageable pieces, solve each one, and then put it back together in a way that makes sense. So, you can optimize locally and do a lot of work there as a product team and engineering or design team, and then when you put it back together, you understand how it fit into a more cohesive experience.
Thor: And, by doing that, you break down complex problems in fields like education, health care, and others, and really start making a more meaningful impact than saying, you know, we’re going to solve it all with this magical silver bullet that doesn’t actually exist.
Holly: Yeah. So, tell me a little more about that. So, you… what was your role in Rally Health, and how did that get started?
Thor: Yeah. So, I’m always in this tech and product role, so usually a CTO. So at Zynga that was a studio CTO role. I think the title was architect, and then a Rally CTO, and then here at Alpha, again, it’s largely a role I play. Moonlight is a CEO. And, really, it’s around solving these hard problems. Like, how do we have a framework? How do you get people together that have the necessary skill set? In the beginning it’s going to be generalists that can just like… they got a blank piece of paper and figure it out. Will figure out what they should put on there.
Thor: And, then over time, as the organizations mature, you hire a specialist. From the beginning it was like five of us at Rally that really had no meaningful experience in health care, but we knew online, we knew e-commerce, we knew optimization, we knew gaming, we know all those sort of things that were relevant. And, then fast forward six months, twelve months, and I wouldn’t be surprised if we had more like medical doctors on the executive team than not, because there was like… the pendulum swings, and now it’s a bunch of specialists that can actually bring their network and deep expertise into this framework that we’ve created.
Thor: And, then similarly here at Alpha, it starts with, all right, so we’re going to reimagine how organizations work by flipping the hierarchy so that it’s run by data as opposed to job titles. And, then as you do that, you encounter all these really interesting problems, because it turns out people don’t like behavior change. They’re really, really resistant to it, and it’s really, really hard, so to do it, you know, we think we’re solving one problem, but in reality, there’s 20 others that we’ve got to address first.
Thor: So, learning how to do that is the primary thing we’re doing, and then once we figure it out, then it’s how do you scale up the solution? How do you systematize, implement, and roll out? Because, we have over a third of the Fortune 100 as clients. So, when we say large, complex organizations, we don’t mean, you know… We don’t mean a few hundred people trying to figure stuff out. In many cases it’s hundreds of thousands of people, and we’re saying, all right, so if there’s one big consulting firm, for example, where their head of HR said to me the other day they have 400,000 people, and they know that in five to ten years, at least half of them, their jobs will not exist, there will not be a need…
Thor: And, this is like one of the top firms in the world. There will not be a need for them to spend a random 25-30 year old consultant, bill them out at $300,000 a year to do manual labor, effectively, from a technology standpoint. It’ll just be automated. It’ll just go away. So, what will it look like? Are they going to let go of half the work force, and how do they do that internally? How to figure out who, etc.? Are they going to re-skill them? How do they do that? And, then what does that mean for their clients or for their organizations or for their revenue? And all these other much more complex things than like how do we introduce this tool into this company?
Holly: Yeah. So, you’ve gotten to a place where you’re really looking at huge problems, right, that are happening out there, and I think one of the things that you mentioned in there that is a really important skill for product leaders is how to break that down into pieces that different people and different teams can work on in a way that you can then break back… or put back together into something that’s a whole.
Thor: Exactly.
Holly: Do you have any… I don’t know. Can you share like more specifically one of your past stories of how you did that?
Thor: Sure. So, there’s lots of ways to do that badly, too, so it’s worth noting that it’s not just as simple as you take the thing apart, and you solve each component, and you put it back together. That doesn’t actually work either. You may think of it from the perspective of building a car. You know, if you have tires from a Formula One race car and an engine from, you know, whatever, it’s not actually going to work well together. The whole thing has to work well together. Well, that doesn’t mean that the constraints from one component overflowing into another can’t be accounted for. It has to be an explicit, conscious thing.
Thor: So, the tool, I guess, that has worked the best for that is when you take it apart, when you say something like, let’s just talk about the patient experience when you get diagnosed with cancer. You know that, for example, you’re going to be frightened and confused as soon as you get the diagnosis. Whatever the doctor tells you, you will literally not hear. Your brain is, in most cases, physically unable to process whatever is said. And it doesn’t matter. They still optimize for their thing. They’re going to say what they’re supposed to say, and largely it’s because of compliance to legal things, but also it’s just because they’re busy and they need to move onto the next patient.
Thor: So, the people that get left behind are unfortunately the people that are suffering the most are the patients in this process. So, now that the recommended advice is to bring somebody with you that can process the information for you and help you out as you go through it. So, that’s an easily solvable problem, because you’re talking about communication from one party to another. Like, all right, so you can look at how to solve that one problem, but really, it’s just one component of many. So, now you need to be able to reference. You’re going to need to be able to go back to it. You really need all these other things around.
Thor: So, by taking a problem like that apart, talking about [inaudible] in education, to all right, every time you talk to a doctor, there’s certain things that need to happen: X, Y, Z. How do you optimize X? How do you optimize Y? How do you optimize Z?
Thor: And, then testing it by putting it back together. So, you optimize the component, and then you see how the component plays out in the larger process. So, it’s not just enough to solve that, because you can have the best possible explainer of what’s going on, but if the patient is literally not able to receive it, it just doesn’t matter. So, how do you figure out how to make that better? Because, obviously, that should not be full of complex things that are not helpful, but at the same time, that isn’t necessarily the moment that the patient needs to receive it.
Thor: So, being able to tie together the problem you’re solving on a micro level to the bigger workflow process outcome on a macro level and going between those two states, so that as you’re running an experiment, you optimize locally, but you then look at the global picture and you say, all right, so is this really the solution? Because, otherwise, again, data science, there’s a process you go through where you can get stuck in local minimum amount of [inaudible] if you’re trying to figure out how to optimize something. You can optimize a model. You optimize whatever it is. You have a fitness function, and you evaluate it, and you evaluate it, and all of the sudden you wind up with any deviation from it reduces the value. But, in reality, it’s because you’re stuck somewhere that isn’t the maximum or minimum. It’s just the local one and you need to snap out of it.
Thor: So, doing that to yourself mentally if very important as well. Actually asking open-ended questions about are these really the constraints we’re dealing with? So, like, you can optimize and optimize and optimize and optimize, but if nobody is even looking at the page you’re optimizing, probably not where you should be focused on.
Holly: I love that. That’s, I think, a lot of sort of the growth between an average product manager and like a fantastic one, and same for founders comes in this place of getting outside of that local optimum or maximization.
Thor: Mm-hmm (affirmative).
Holly: And, I’m curious, because with what you just said, some of it just seems like you have a good discipline of asking yourself tough questions, like pushing to think about the bigger picture. Are there any tactics that you’ve… or you know…
Thor: Sure.
Holly: … practices that have helped you instill that?
Thor: Sure. So, one of the best is sort of cross discipline training, so if you look at what make a really great entrepreneur and all you’re doing is reading books on entrepreneurship, you’re probably not really going to get any better, because then it’s just like they’re writing to an audience that already knows most of those concepts anyway. But, if you start reading about history or literature or creativity or, like, one of my favorites is standup comedy, you will actually learn more about your VC pitch by studying how Jerry Seinfeld writes jokes than any amount of this is what your pitch deck should have: X, Y, Z. Because, really all that stuff is extracted out of formulas that worked for somebody else. Whereas, the other one is more fundamental around empathy and listening and being present and iteration.
Thor: Instead of starting with this is what it should be; here’s the formula. Starting with I don’t know what it should be, but let me test all this stuff out. If people laugh at these things, great, let me do more of that. Let me refine that. Let me make it better. Let me iterate on it. That’s the same process you should go to when you’re talking to investors, when you’re talking to partners, when you’re trying to hire people, when you’re talking to customers. Be responsive to what they say. If something works really, really well, do more of that. If it doesn’t, don’t do that. Again, especially in the early stages.
Thor: And, some of that advice might be codified in these sort of books or business books, but in reality, these come from other fields and other disciplines. So, when we talk about experimentation, there’s probably more to learn from the scientific method and biology than there is from seeing how Best Buy turned into a different kind of company because of… You know, whatever.
Thor: It’s not really the lesson that you can apply to your own business from somebody else. It’s more the principles underneath them that are often from other disciplines.
Holly: Yeah. I love that you touched on that one, because that’s one of my personal passion points is the scientific method, and everything that I learned about it from chemistry and physics and know how that applies to what we do today. And, it is… Sometimes when I talk to product managers who are trying to do more experiments, and they tell me about the way they design an experiment, and I think about, like, what do I hear when they tell me that? And, how do I process what needs to change about it? And, it really goes back to the principles form how to design experiments…
Thor: Exactly.
Holly: … not from any of the product management books. You know?
Thor: Exactly.
Holly: You know, I feel like I come across standup comedy in a lot of product managers That seems to be it. I think, too… Why do you think that is?
Thor: It’s a… Improve is iteration. It’s an emerging field, product management. Like, there are some that do it really well, but it’s really pretty new. So, buy you can draw a direct line between… I commented. It’s probably a little bit more improv, but things like that that are creative fields and things that are emerging, like, I think there’s… you could’ve said the same about sales, like sales in [inaudible] BDRs, SDRs, etc., ten years ago when that was a fairly new thing. Now that’s a pretty well established thing so people actually go into that as a career. So, if you look at what does it take just to figure shit out on the fly and be effective? Like, that skill set is largely comedy, improv, things like that.
Holly: Yeah. I also love how in that space there’s so much about, well, you just have to do it.
Thor: Right.
Holly: Like, you can’t just go plan somewhere in a vacuum what you’re going to say on stage or, like, it’s just practice and iterating, and you know you’ll never get there if you just plan it.
Thor: Exactly. Exactly.
Holly: Yeah. It’s good for that. So, I guess, I didn’t… I don’t know if I realized that you had kind of been an entrepreneur before you were in product roles, but you definitely seem to really span that whole thing, jumping back and forth, sometimes being in a larger organization.
Thor: Mm-hmm (affirmative).
Holly: You know, sometimes in a smaller one. What are the… How much do you think that works for most people, and how has that worked for you?
Thor: If you look at it from the size of the organization, you’re going to get stuck in these false patterns and equivalences. It’s really the team that matters, so if you’re working in a huge company but on a great team or in a tiny company but on a great team, it’s going to be the same experience. You know, there might be some differences around resources and other constraints, but really it’s the same kind of thing.
Thor: So, what I’ve always found is that it really comes down to people, not the name on your W2, so if you’re working with great people, you’re going to be happy. And, you’re in the right setting with the right vision and motivation and all that stuff. But, if you’re not, it’s going to be kind of miserable, and people are going to check out, and they’re there for the paycheck, and there’s usually a bigger check around the corner somewhere else. So, what I’ve found is really getting people aligned with a vision of some sort that they share, or that we would all share.
Thor: And, you can get people really, really motivated and really excited regardless of where they are. Like, I’ve built teams within large… I’m not going to say shitty organizations, but it wouldn’t be unfair to call them that, and people love it. They’re like super motivated. They love it, because they’re working on a challenge that’s something interesting, that’s something they want to do, and you recruit the right people, which is probably, obviously, a huge part of it. And, then drive them along a certain path where it’s where they want to go, and they want to work together. And, it’s not that they’re working for you necessarily, it’s that they’re working for each other, and they’re helping each other get there. Because, they all want to get there together.
Thor: So, I’ve seen that be almost identical, regardless of the size of the organization. Now, the jobs change, the roles change, etc. Like, a larger organization you have to… Like, a lot of them get a little bit watered down, because they have to. But, you can still have small teams and have highly cross-functional teams that can deliver the same regardless of the size of the organization.
Holly: Yeah. Absolutely. How do you build up that vision and find the right people when you’re creating a new team?
Thor: That’s a good question. So, I always do the same thing, which is start with a list of conversations. It doesn’t matter if it’s fundraising, recruiting, or something internal like this. And, if it’s internal, you have a smaller number of people to talk to, but still. And, then you just have a conversation, and you talk to other people in the organization and you say these are the things we’re working on. Like, who really cares about that? Who’s really motivated to address integration of behavioral health care in primary care, and why do they care?
Thor: And, what you’ll find right away are people that are willing to step up and take on almost any job to do that, because they’re mission aligned. They’re focused. They’re trying to get something done, and they want to do it. Now, it could be for personal reasons. It could be career growth and development. It could be, you know, somebody’s been in a certain role for a long time. Like, buddy of mine is a lawyer, and he’s been a lawyer for a while and decided he doesn’t want to do law anymore. He wants to be a product manager, and you know, he goes from making mid six figure salaries, pretty cushy career, to probably making a tenth of that as an entry-level product manager with no expertise or training.
Thor: It’s like, if you’re willing to go through that, great, and it’s not because you care necessarily about the company. It’s for internal reasons, but it doesn’t matter. Somebody like that, as long as they stick with it and as long as they’re genuine, they are going to work their ass off, and they’re going to drive the team forward because they have these reasons to do so, whether it’s external or internal. So, that’s probably the main criteria in a team for the first, say, like ten people.
Holly: Yeah. I’ve worked with people like that, and I’ve worked with people who are very far from that. And, I’m finding myself curious. What do you do when you yourself find yourself on a team or somehow working in an organization where… What do you do with people who don’t have that motivation for it?
Thor: As a manager or if you are that person, do you mean?
Holly: As a manager.
Thor: So, always try to find the role that makes them happy, even if that role includes outside the company. It could be internal and, great, we’ll try to make that happen. But, in many cases, that role might just not be at that company, especially as the company matures.
Holly: Mm-hmm (affirmative).
Thor: You know, it was fun and crazy and interesting or whatever. All right. When you’re a few hundred people it may not be that interesting anymore, and that’s okay. So, figuring out career paths, figuring out individual motivation, and stuff like that is probably the first step, and if you understand that, then you can either figure out how the current opportunity or company places a role in that individual’s development, or if it doesn’t, figure out what would and how you can enable them.
Holly: That’s definitely one of the areas that I’ve seen, especially in younger, growing startups, not all leadership teams are good at that. Sometimes they just… seems like they’ve missed that, yeah, building that skill. It’s a hard skill, right? But, it sounds like you found your ways through that.
Thor: Yeah. No, it’s been… I mean, that’s like the core discipline. And, also, just from doing this enough times. I’ve probably gotten… Actually, I don’t know the number… over a dozen companies off the ground. Actually, no, way more than that. Over like 20 companies off the ground that are funded or exited substantial businesses, and even though I learn something every time, there’s a lot more commonalities than differences, regardless of the industry, regardless of the field. And, yeah, I mean, it’s cliché, but it really just does all come down to the people in the beginning.
Holly: Yeah, it really does. Do you ever talk to people who don’t believe that? Like, I know I-
Thor: Sure. All the time.
Holly: What do you tell them?
Thor: I mean, it’s… They have their perspective, and usually it’s like technologists. So, usually people will say something like, no, no, no, it’s not the team that matters. It’s my algorithm, or it’s my data, or it’s my report, or my whatever. I’m like, okay, there is value in that, but there’s a very low terminal value. Like, it’s not really going to get anywhere beyond that.
Thor: You can look at something like… Google’s probably the best example of an algorithm driven company where a single innovation, a single idea, basically, or looking at who links to you has been determine of value. You say, all right, so that’s a business we’ll build… Actually, it would be an interesting report to get, but for hundreds of billions of dollars in revenues. And, then now like 20 years later, there’s still basically that, but they still have tens of thousands of really great, some of the smartest people in the world, trying to figure out what else they’re going to do.
Thor: So, if you say it’s just the algorithm and nothing else, then they could have just like… they could have called it quits a long time ago and not done anything, and it would have not become one of the best known and most interesting tech companies in the world. So, it’s not the algorithm. It’s not the data. It’s the people around it. Now, there does have to be some sort of innovation or some sort of technology or some sort of unique advantage, obviously, but that’s not the end-all, be-all. Like, there’s… what you do with it is then the question, and that’s all about people.
Holly: What’s [crosstalk]
Thor: Also, doctors, by the way. Doctors don’t believe that, what I’ve just said.
Holly: Oh, yeah? What do they believe?
Thor: They believe that… First, they believe they’re god.
Holly: Yes.
Thor: So, they must be right all the time. There’s no possible chance that anybody else can come and tell them what’s right or wrong. So, building a company from the ground with doctors is actually a whole different kind of challenge. They fundamentally don’t believe in the team.
Holly: Mm-hmm (affirmative). Yeah.
Thor: And, I’m making a huge generalization there, but I’ve seen this play out many, many times.
Holly: Yeah. I mean, definitely there are… I’m sure there are some doctors who have a really strong team and work in a strong team, but I’ve also coached startups in the health space and I mean… Which of the people on their team were they coming to me, telling me, Holly, how do I do product management with these people? It was the doctors.
Thor: Yeah.
Holly: So, yes, on the whole I hear that for sure. So, that actually… I wanted to circle back to how does the Rally Health story end? So, I think I read about it, but for our listeners, I want to hear from you what happened with that.
Thor: Yeah. So, we built it as a patient engagement tool, a platform where it was the only place still where you can combine self-reported and clinical data to drive messaging, engagement, and other things that are critical in the health care space. And, it was a valuable enough tool for UnitedHealthcare to buy them and fold it into Optum in their offerings. So, now the Rally team is a core part of the United leadership team, and then… And, this is their sort of premium engagement solution across the entire breadth of business, and the last I saw it was doing over a billion dollars in revenue. They bought it for more than that. And, it’s great, because it’s taking a consumer, digital first approach, and by that I mean how do you really put the user in the center of all these decisions, and how do you really make tech enabled delivery mechanisms, and all this other stuff that’s obvious but really hard to do in health care? So, it has made it easier. That’s really it. It solved a simple problem with data that makes something a little bit easier for a lot of people, and that’s a multi-billion dollar company.
Holly: Yeah.
Thor: It’s a multi-billion dollar acquisition and a multi-billion dollar revenue company right now, so it’s interesting to see in large industries like health care, education, transportation, a bunch of others how tiny, tiny, tiny little things have huge upside, huge outcomes.
Holly: And, I think for those of us who work in, I guess, faster moving parts of startup world tend not to work in those huge industries that have just ridiculous amounts of the economy tied up in them.
Thor: Mm-hmm (affirmative).
Holly: And, so then when we do see something like this I don’t think it’s intuitive to all of us that that’s the case, right? Like, you can take this tiny little piece and make this tiny little improvement, but the scale is so huge…
Thor: Right.
Holly: … you know, know that it’s amazing and impactful and lucrative.
Thor: Yeah. Well, I would actually push back on that a little bit.
Holly: Yeah?
Thor: Because, if people think they’re working on a peer to peer lending app or something like that, and they think they have to own all of that. In reality, they’re working within finance, and they’re working within a tiny little subsection of finance, but still, it’s finance. If you’re doing a podcasting company, you’re working within media. Like, the broader industry is still huge even if what you’re looking at as a problem is small, so this is where I would go back to what we talked about earlier of optimizing locally versus globally, and if you’re really tackling that problem, whatever it might be, like, how do you actually scale it out? How do you actually think about where should you focus your effort and your energy, because it’s limited? So, you have limited time, and you have all these other constraints individually, because in a vast majority of cases, you are within one of those industries.
Thor: Like, if you hate finance, but you have a crypto company of some sort, well, tough shit, you’re in finance, whether or not you want to be. Like, that’s what you’re…
Holly: Yes.
Thor: The people you’re talking shit about, you aspired to be them.
Holly: Yeah. Yeah.
Thor: Because, you’re working in the same space. It just happens to be a different tool you’re deploying to deliver the same value to the same people.
Holly: Yeah. No, yeah, you’re totally right about that. I stand corrected. I think, for me, it’s… one of the things that happens is, and this is exactly the small optimization versus the big picture, is we think about the sliver of the market that’s in this frontier phase as what we’re trying to capture, and then we do, depending on what stage we’re at or what we’re doing, you know, maybe talk about how big the whole market is, but we’re really not thinking about those numbers as much in what we’re doing.
Thor: Right.
Holly: So, yeah, I think that’s totally true. I also want to know… I like to just kind of uncover some of the things that I think seem opaque from people who haven’t done it, and one of them is things like acquisitions. So, how did that happen? Did you build a longterm relationship with United? Did they just come to you? Like, what… Go back to that.
Thor: Yeah, so that was a little bit more complicated, because… So, in health care in particular, you have to be able to have the conversations in order to get deals done and what not. So, our investors that we actively recruited and got to back the company were luminaries in the space. Like, they had accomplished a lot. They were CEOs of big companies, like Aetna and others, that backed us. So, that was a little bit of a unique situation because a part of the company DNA on our side was getting these people that were very much experts and insiders to be able to help navigate the ecosystem.
Thor: Now, in other cases, you might use advisors, and they did users there, too, but you might use advisors to help. So, the thing that’s interesting about M&A is if you’re an entrepreneur, chances are you have not gone through something like that before. Chances are that when you’re talking to a corporate development person you’re having those kinds of conversations, maybe not for the first time, but even if you’re a successful serial entrepreneur, no more than like two or three times. So, let’s say in a 20 year career you do that three times, like, that’s great. Whereas, on the other side of the table, this is what they do all day, every day.
Thor: So, they have had that conversation a million times, and they’re playing by just a different set of rules, because you don’t even understand what the hell they’re saying, especially not if it’s your first time. So, you think somebody’s really interested in buying your company, it’s like no, they’re just doing their job. Or, you think getting a meeting with an executive is like a huge milestone, but in reality, it’s that executive’s job to take the meeting. They’re just doing their job, their regular nine to five job, but to you it’s like a life-changing opportunity. So, there’s this huge asymmetry in that relationship that it’s very difficult for most people to navigate, so that’s where, assuming the deal size is large enough, that’s where these advisors come in, you know, investment bankers and other transactional advisors.
Thor: So, you know, building a relationship is important, maybe not necessarily with the deal people, but certainly with the business unit people. So, if you’re trying to demonstrate to a potential acquirer that you can deliver value to them, there’s no better way to do it than to actually deliver the value, actually start working with them, actually see what it would be like to work together, and then make a decision that can have a huge impact on the actual deal terms, too.
Holly: Cool. I know very little about all of that, so that was really informative. Are there any other sort of passion areas that you’d like to talk about that we didn’t hit?
Thor: Yeah. How much time do we have?
Holly: Let’s get going and see.
Thor: It’d be a lot. There’s just a lot. No, there’s a lot of things. Primarily, it’s around creating a culture of experimentation. What an experiment driven organization really is. It doesn’t matter the scale. And, all the things that you have to go through to really do that. All the things you have learn, unlearn, and do, so any topics like that are always fascinating to me. Obviously, because that’s the platform we built at Alpha, but also it’s because it’s what I’ve been doing for almost 20 years now.
Holly: What are the biggest things that people need to unlearn to operate in that culture?
Thor: Planning upfront with… in a sea of unknowns, you’re going to be wrong, so the faster you just start doing something, you’re actually going to get to the right answer faster. Because, again, the planning, planning, planning, execution mindset, which is fine if you’re building a factor with capital needs, and then you’re going to go through sales and marketing and all that stuff later, that’s just outdated, because if you’re building an app and you get it in the market and iterate on it, that’s great. Then that’s what you should do.
Thor: So, really, flipping it from launching to learning. You say what are the things I can do today to learn so that when we launch it, which hopefully will be very, very soon, it’ll be more likely to be successful? And, then you keep learning and you keep iterating. That’s the most important thing, as opposed to planning upfront for how things will be once the skies open up and a rainbow comes down to you with a pot of gold and just delivers it to you, because that’s how all entrepreneurial ventures go, of course.
Holly: But, it almost sounds like it is for you.
Thor: No, it’s… Anything that works, there’s another ten things that don’t work.
Holly: Yeah. No, I know that’s true. It seems like you found some pots of gold, but maybe not because a rainbow opened up and just delivered them. Yeah. No, that’s awesome, and I feel like I’ve said that in so many ways just today. Like, I’m constantly face with that, because I’m also always coaching people on experimenting, and it’s like, okay, we got past for one thing we just did. It’s like we got through this first phase of just exploring more, trying to expand out so we’re not stuck in a local area, and then we’re like, all right, this is the place we want to do some deeper focus, and now people are like, cool, we’re going that way, and I’m like, but still for learning, not just we’re building the thing. Like, it’s for learning. So, I hear that. What is different about leading that kind of culture as opposed to just being in it?
Thor: That’s a good question. I think the biggest difference is that you own it, and it’s not about owning the activities and the actions and the tasks and that kind of stuff, it’s about actually making sure that people understand why it’s important and then actually have all the things they need to be able to be effective in an experiment driven culture. Because, it goes from, again, the planning and the resources around that to, all right, so what’s the thing you’re trying to learn? What are the blockers in your way to get there? And, how do I systematically as a leader not just remove those blockers, but equip you with the tools to do so? Which often requires other people buying into it as well.
Thor: So, if it’s a singular organization that’s committed to it, that’s actually not that hard. It’s when you have an organization within a larger one, where that organization works a certain way and a larger company does not. That’s when you get a lot of really difficult tension, and it’s natural tension. But, it’s… You know, that’s when you have to be more deliberate about creating cover so that people can do it. So, as an executive, you would have to be able to set the ground rules and to communicate them very clearly and having buy-in from your other managers and peers that it’s okay to have a different culture here, because eventually that’s where we’re going. We’re all going to become that, but let’s again, let’s not run it as a separate company.
Thor: Because, if you remember, it’s all about learning. Let’s see if this is more effective, if this works in a pocket of the organization, and if it’s five people or five hundred, it doesn’t really matter, if you can demonstrate the right results out of that, it works. Whether that’s to your investors if you’re a startup or a management team if you’re in a big company, that’s the biggest difference is that your job is more about enablement than directing activity, which, in my opinion, is what it should be anyway.
Holly: Cool. Any final, like, I guess, favorite message for founders who are trying to do it better?
Thor: The biggest is just understanding that it’s just not going to be the way they think it’s going to be and accept that, and if they’re operating in that mindset, they’re learning, they’re experimenting, they’re figuring it out, like, everything’s going to be fine. I don’t know a single founder that’s like really, actually, I would say like struggling in a meaningful way. Like, everybody says it’s hard. Everybody says it’s… It’s not. Like, cleaning dishes is hard. That’s a shitty job. But, what we do, we’re all… It’s all gravy from there.
Holly: Yeah. That’s good perspective. Awesome. Well, if people want to learn more, what would be the place you want to send them?
Thor: So, we have a lot of resources around this kind of stuff at Alpha, and so alphahq.com and browsing around is probably the most helpful. We have a podcast with great guests, some of which you might know.
Holly: Perhaps.
Thor: Perhaps. This is productmanager.com. There’s a lot of [inaudible 00:52:09], or if you just want to email me, happy to chat about any of this, happy to help in any way I can, thor@alphahq.com. And, there’s probably some other resources based on the kind of problems that you might be trying to solve that I’m happy to help with as well.
Holly: Awesome. Well, thank you so much. This has been a really awesome conversation, and I can’t wait to share it with everybody. So, thank you, Thor.
Thor: All right. [inaudible] See you soon.
Holly: Yeah. See you.
Holly: The Product Science Podcast is brought to you by H2R Product Science. We teach startup founders and product leaders how to use the Product Science method to discover the strongest product opportunities and lay the foundations for high growth products, teams, and businesses. Learn more at h2rproductscience.com.
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