Eric Schmidt on how he uses 5-year plans to predict if a startup can become a $100 billion company

Summary

The speaker discusses the challenges of building scalable businesses in today's interconnected global market. Traditional strategies, such as building a great product and a sales force, no longer suffice for large-scale growth. The speaker emphasizes the importance of clever strategies, such as using platforms and crowdsourcing information. He shares the example of leveraging machine learning and crowdsourced data in dermatology to build highly scalable businesses. The focus is on how businesses can learn from users and create services that outpace individual knowledge, which could lead to the next generation of billion-dollar companies.

Takeaways

• 😀 The business landscape is constantly evolving, and what works today may not work tomorrow.
• 😀 Traditional business strategies like building a great product and organizing a sales force are often insufficient for large-scale success.
• 😀 Global interconnectedness demands more scalable strategies beyond just hiring salespeople and selling to customers individually.
• 😀 Successful companies create innovative ways to access information or perform tasks without relying on the full cycle of traditional strategies.
• 😀 While many new business ideas may be good, they are often not good enough to disrupt larger markets.
• 😀 A five-year plan can help predict growth and develop a more scalable strategy for success.
• 😀 A common example of scalability is offering a product for free, then upselling users, as it maximizes reach and profits.
• 😀 In five years, the focus will be on apps that leverage smartphones, fast networks, and machine learning to solve new problems.
• 😀 The future will likely involve crowd-powered systems where users teach the platform, allowing it to become more effective and scalable.
• 😀 A potential model for the next big companies could involve crowdsourcing data, applying machine learning, and selling superior services back to users.
• 😀 A successful business model today could be one that leverages scalability through user contributions and machine learning to outperform traditional expertise.

Q & A

Why is the business industry considered tough, according to the speaker?

The industry is tough because just when you think you've figured out the rules, they change again. The evolving nature of business strategies and market demands make it difficult to sustain growth using traditional models.

What basic business strategy is taught in business schools?

Business schools typically teach a simple strategy: build a great product, organize a sales force, sell to customers at a fair price, and ensure customer satisfaction.

Why does the speaker argue that the traditional strategy is insufficient?

The speaker argues that this strategy, while effective, is not scalable in a global market that is interconnected. It's too hard to hire enough salespeople and maintain direct relationships with every customer to create a large business.

What is the alternative approach to scaling a business in the global market?

A more scalable strategy involves creating innovative methods of accessing information or doing things without requiring a full cycle of traditional customer interaction. This often involves leveraging technology and new platforms.

What does the speaker suggest about many new business ideas?

The speaker believes that while many new ideas are good, they often aren't good enough to be transformative or scalable. They need to go beyond traditional models to succeed.

What is the speaker’s advice for businesses looking to grow over the next five years?

The speaker advises businesses to create a five-year plan to project their growth and then focus on developing a more scalable strategy. One example might be giving away an app for free and upselling users.

How did the speaker predict the rise of certain apps five years ago?

Five years ago, the speaker predicted that apps using Google Maps and GPS would emerge to offer useful services. While they didn’t predict Uber specifically, they recognized the potential for personal transportation systems using smartphones.

What key technological components does the speaker foresee for the next five years?

The speaker envisions the next five years focusing on systems that use Android and iOS, fast networks, and powerful machine learning. These technologies will be used to crowdsource learning and solve complex problems.

Can you explain the example the speaker uses to demonstrate the potential for crowd-sourced knowledge?

The speaker uses a dermatology example: If they had a million dollars, they would crowdsource dermatologists to categorize skin samples. They would then use machine learning to analyze these samples and sell the service back to dermatologists, offering more accurate diagnoses than individual practitioners.

What business model does the speaker believe could lead to the next major corporations?

The speaker believes that a business model based on crowdsourcing information, using machine learning to improve services, and selling those services back to users or others, has the potential to create the next major corporations, potentially worth billions.