Robbie Kellman Baxter created the popular business term “Membership Economy.” She is the founder of Peninsula Strategies LLC, a strategy consulting firm. The Peninsula Strategies website is www.peninsulastrategies.com. Her clients have included large organizations like Netflix, SurveyMonkey and Yahoo!, as well as smaller venture-backed startups. Over the course of her career, Robbie has worked in or consulted to clients in more than twenty industries.
Before starting Peninsula Strategies in 2001, Robbie served as a New York City Urban Fellow, a consultant at Booz Allen & Hamilton, and a Silicon Valley product marketer. As a public speaker, she has presented to thousands of people in corporations, associations, and universities. Moreover, she has been quoted in or written articles for major media outlets, including CNN, Consumer Reports, The New York Times and the Wall Street Journal. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business.
Robbie’s book, The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue, was published by McGraw-Hill (March 2015).
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Morris: Before discussing The Membership Economy, a few general questions. First, who has had the greatest influence on your personal growth? How so?
Baxter: This might sound corny, but my parents and my husband Bob have had the greatest influence on both my personal and professional growth, because they always have believed in me and have always provided a safety net, or at least the feeling of one. Knowing that I have people to turn to if risks don’t work out has given me the confidence to launch my consulting business, write the book and continue to stretch myself.
Morris: Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.
Baxter: Almost twelve years ago, I was brought in to do some work for Netflix by a business school classmate. At the time, I had been an independent consultant for a couple of years, and prior to that had been a big firm (Booz) strategy consultant—always a generalist. At Netflix, I fell in love with their business model. I loved the subscription-for-unlimited-access model (as a person who loves all-you-can-eat buffets) and I loved the relentless focus on doing a single thing really well. I also loved how carefully they tracked post-transaction engagement, as opposed to just focusing on basic metrics like acquisition and retention. As a result of working with Netflix, I changed the focus of my practice to specialize in subscription and membership oriented businesses.
Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?
Baxter: At Harvard, I studied poetry. That was such a gift. I learned to think analytically and I learned to write, but I also had an opportunity to develop an appreciation of the arts that is still a tremendous source of pleasure and inspiration. Going back to business school helped me round out my tool box of business skills and develop a big picture understanding of how organizations thrive. At both schools, I developed friendships that have evolved into tremendous professional relationships as well.
Morris: What do you know now about the business world that you wish you knew when you went to work full-time for the first time? Why?
Baxter: I know that you need to be on a team where your boss really believes in you and where the company is growing quickly. These two elements define a great professional situation for me. It’s not enough for your boss to think you’re “pretty good”. Also, especially as a woman, I encourage people to spend at least some time in sales. Revenue generated is never subjective.
Morris: Of all the films that you have seen, which – in your opinion – best dramatizes important business principles? Please explain.
Baxter: The Godfather. Culture eats strategy for breakfast.
Morris: From which non-business book have you learned the most valuable lessons about business? Please explain.
Baxter: Can’t select only one. Here are three:
o Free by Chris Anderson: I wish I had written it! I think the way organizations use free, especially as the variable costs of content, software etc approach zero, can be a source of competitive edge.
o The Enneagram Made Easy: A great tool for understanding how other people think and what they value. It’s been tremendously helpful in helping me relate with clients and colleagues.
o Getting to 50/50 by Joanna Strober and Sharon Meers: As a working mom, being thoughtful and deliberate about the professional choices I make has helped me have a wonderful career while still having the flexibility to parent the way my husband and I think is best for our family.
Morris: Here are several of my favorite quotations to which I ask you to respond. First, from Lao-tse’s Tao Te Ching:
“Learn from the people
Plan with the people
Begin with what they have
Build on what they know
Of the best leaders
When the task is accomplished
The people will remark
We have done it ourselves.”
Baxter: Anytime that you can integrate yourself into the way people are working and learning, it will be easier to teach. I am very interested in how educators are moving toward a flipped classroom, having students read on their own and then discuss and engage when they are together with their colleagues and the teachers.
There is nothing new under the sun—what’s new is the context and the lens through which things are examined. When leaders can fully immerse themselves into the environment of their followers, and simply provide a new lens, rather than implying that they are offering something totally new, people are more likely to engage, and it is through engagement that goals are achieved.
Morris: From Isaac Asimov: “The most exciting phrase to hear in science, the one that heralds the most discoveries, is not “Eureka!” (I found it!) but ‘That’s odd….’”
Baxter: This is true in business too—the best entrepreneurs notice what doesn’t make sense, and analyze the data looking not just at the middle of the bell curve, but also at the ends and the edge cases. Noticing what is unexpected and exploring those areas can lead to the greatest advances.
Morris: From Thomas Edison: “Vision without execution is hallucination.”
Baxter: I think the best leaders go back and forth between visionary and tactical. You have to be able to see the future, but also able to engage in the messy work of trying and failing.
Morris: Finally, from Peter Drucker: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”
Baxter: Wheel spinners
Morris: In one of Tom Davenport’s recent books, Judgment Calls, he and co-author Brooke Manville offer “an antidote for the Great Man theory of decision making and organizational performance”: organizational judgment. That is, “the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader’s direct control.” What do you think?
Baxter: I think they’re talking about the wisdom of crowds here. There is some truth to the idea that the more diversity of good thinkers you have in the room, the better the decision. For example, when you want to be sure you have considered a broad range of options, it’s useful to have more than one person involved. And boards of directors were established as means to keep the power of a single CEO in check. However, many decisions made by committee regress to the mean. I’m still a fan of a single leader—who has a big vision and then brings in a team to help with execution and also leverages advsiors for feedback, all under the oversight of a diverse board of directors.
Morris: Here’s a brief excerpt from Paul Schoemaker’s latest book, Brilliant Mistakes: “The key question companies need to address is not ‘Should we make mistakes?’ but rather Which mistakes should we make in order to test our deeply held assumptions?'” Your response?
Baxter: Organizations definitely need to plan to make mistakes, and expect some of their decisions to be wrong. Such an attitude makes people more willing to take risks and try new things. Putting bumpers on risk taking minimizes the potential negative impact of these mistakes that may arise, and I’m a fan of placing constraints on risk taking where possible. I also believe in looking for ways to test deeply held assumptions — by identifying those assumptions, by bringing in new voices, and by asking the question “How would I structure a well-funded organization so they could put us out of business?” But I don’t think that we can identify mistakes in advance of them happening, as indicated in Schoemaker’s book. Then they wouldn’t really be mistakes, but rather well-defined and managed experiments.
Morris: In your opinion, why do so many C-level executives seem to have such a difficult time delegating work to others?
Baxter: Two reasons immediately come to mind:
1. Because they are so good at so many things. Often the CEO is better at getting a particular job done than the person who has official responsibility around that area. I tell leaders to expect things to take twice as long the first time they delegate, and only have 75% of the result. The upside of delegating though is that eventually the lower level team members speed up and often become better than the CEO. The CEO just needs to have faith.
2. Because the CEO is responsible for the success or failure of the program and feels tremendous pressure.
Morris: The greatest leaders throughout history (with rare exception) were great storytellers. What do you make of that?
Baxter: Most people learn better with stories to compliment the information that needs to be absorbed. Stories give people a framework which helps them retain the information. In addition, we love to hear stories, and if our leaders tell them, we will find the leaders much more interesting!
Morris: In recent years, there has been criticism, sometimes severe criticism of M.B.A. programs, even those offered by the most prestigious business schools. In your opinion, in which area is there the greatest need for immediate improvement? Any suggestions?
Baxter: The top business schools are designed to provide value in the following ways:
1. First, as a signaling factor, indicating which people the admissions officers have identified as having the traits that seem most likely to develop into great leadership.
2. Second, through the academic courses that round out the skill sets of these potential leaders
3. Third, by providing them with a community of peers and mentors, a cohort of future leaders to challenge their ideas and provide a diversity of examples of what leadership can look like
I’m most excited about the ways business schools are disintermediating these three sources of value. For example, Massively open online courses offered by institutions including Wharton, Harvard and Stanford, make it possible for students to master the core curriculum of the top schools, for free. And there are all kinds of mastermind groups and networking events designed to build communities of leaders and connect young leaders with more experienced mentors. And finally, it seems that employers are developing ways beyond formal education to determine who might be the best fits for a particular role.
MOOCs, flipped classrooms and executive education are interesting approaches to expanding the reach and impact of business education. Historically, speaking, the idea of offering a Masters in Business—an advanced degree in something considered to be more a trade than an intellectual pursuit—is a pretty new idea.
Morris: Looking ahead (let’s say) 3-5 years, what do you think will be the greatest challenge that CEOs will face? Any advice?
Baxter: The challenges facing CEOs don’t really change over time. The tools they have change though. If the best CEOs of the past 100 years got together for dinner, they’d complain about the same issues:
o Finding, developing and retaining the right talent
o Staying current with the latest tech advancements without getting distracted
o Identifying and beating competition, and most importantly
o Staying connected with and meeting the evolving needs of customers
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Robbie cordially invites you to check out the resources at these websites:
Peninsula Strategies link
Robbie’s Amazon page link
Robbie’s Business of Consulting blog link
The Membership Economy video trailer link
The Membership Economy summary video link