Martin: Welcome to the business owners podcast where we throw aside taboos and share strategies for growing, protecting and exiting your business. My name is Martin Checketts and I represent Mills Oakley’s Private Advisory team.
So hello everybody! We’re now at episode three in our season about disruption and innovation, and I’d like to welcome back for the third time our expert panel, Steve Glaveski and Simon Quirk.
Both: Thanks Martin
Martin: Just a quick introduction for the guys – Steve is the co-founder and CEO of Collective Campus, which is an organisation that helps mature businesses to innovate in a clever way. Simon Quirk is a strategy consultant and entrepreneur who has founded and grown a number of start-ups.
Well gents, today we’re going to be talking about a specific case study around disruption and innovation for a mature business and it’s one that I certainly know a lot about because it’s the business in which I’m a partner, Mills Oakley. We’ve had the privilege of working with Simon and Steve on our own innovation project for some time now, and that project we’ve called ‘The Mills Oakley Accelerator’. Just to set the scene before we talk about how it works, I see law and dare I say it our business in particular as a classic example of a mature dinosaur business. We’re doing very, very well for now, we’ve got a good, strong business, but we’ve built that business and we run that business in a very traditional old-school way. We give legal advice face to face, we draft and negotiate documents, we churn those out, we run litigation through the Courts etc, and it’s not a tech-enabled business in any meaningful way.
And yet it’s one, it won’t be tomorrow, but in 5 or 10 years we could have our Kodak moment, absolutely. We could be displaced by artificial intelligence, by automated documents, by better, cheaper, faster, less expensive dispute resolution processes. And it’s something that we’ve recognised as a business. We’ve also recognised that we, the owners of the business, who are – and I’m generalising – but we are generally middle aged men, we’re often, and we’ve practiced in the same traditional way for our entire career – 20, 25, 30 years, very, very hard for us to disruptively innovate and perhaps even cannibalise our own business. So that’s why we sought the external assistance from Steve and Simon. So having set that scene, Steve, tell us about the Mills Oakley Accelerator!
Steve: Sure, Martin. So the Mills Oakley Accelerator has essentially, without sounding too ‘marketing spiel’-ish, it is designed to bring together forward-thinking law firm like Mills Oakley with emerging fast moving talented start-ups and this builds upon what we were talking about earlier about taking innovation outside the building. What that means is we get the domain expertise, the networks and the deep pockets, currently, of a company of a firm like Mills Oakley and pair that with start-ups who can take risks, can move quickly, can experiment, are willing to fail and do have the skill set when it comes to technology, design, marketing and so on. And so that way they can work together and essentially gives the start-ups a much higher likelihood of finding product/market fit because they have the backing of Mills Oakley. In terms of the Accelerator, we’ll talk about perhaps what the start-ups get really quickly and then maybe we can jump into some of the start-ups that have come through.
Martin: Absolutely. Yeah, I’d rather not talk in a lot of detail about them but I think to overview and perhaps contrast them to our traditional business. That would be very interesting.
Steve: Sure. So what the start-ups get firstly, they’ll be getting up to $55,000 funding from Mills Oakley as part of the program, they’ll be receiving mentorship by start-up experts, we’ve got the founders of four of Australia’s largest legal tech start-ups as mentors in the program so we’ve got guys like Brennan Ong from Law Advisor who’ve raised over $1m in the past year alone, including about half a million I believe from Lars Rasmussen who co-founded Google Maps, so they’re doing some great things. We’ve got the guys from Lachlan McKnight and Tom Kaldor from Legal Vision, another Australian start-up that’s raised over $4m. We’ve got mentors from Legally Yours, Law Path, it’s just an incredible collection of mentors that these start-ups can learn from. We’ve even got Ash Maurya who basically penned a book called Running Lean and a tool called The Lean Canvas which really helps people execute that lean start-up philosophy.
So we’ve got mentorship, we give them education, they take up residence for 13 weeks at Collective Campus in Melbourne CBD where they’re surrounded by other tech start-ups and they can leverage off their networks, ask them questions, bounce around ideas and basically the incubator program is designed so these guys can build fast, measure fast, learn fast and just rinse and repeat the whole lean start-up philosophy. So by the end of the 13 weeks we want to get them to a point where their ideas have gone through to a minimum viable product, it’s something that generates value for their customer segment and ultimately get them to a point where they’re ready for follow-on funding. Where do I go with this?
There are so many ways I can go, but ultimately we’ve got start-ups coming through that are working on contract review automation, we’ve got start-ups that are working on chat bots, which are essentially when you’re chatting to someone on say Facebook, you have a little person who pops up in the bottom right corner, think about that being completely automated. Say you have an accident of some kind and you want to speak to somebody about that, you’re not sure who to speak to. You jump onto Google and the Google search brings up things like Mills Oakley, Corrs Chambers Westgarth and you’re thinking oh, they’re probably, they deal more with commercial clients perhaps… and maybe they’re going to charge me a lot… I’m not too sure about that… so you jump onto Facebook and you say hey I’ve just had this car accident, my back hurts and the bot will start speaking to you. And the whole purpose of that is to get you to a referral to a free consultation. To take some of that fear out of the process and to just guide you and take some of the noise out of the process. So that’s another great idea.
We’ve got a cloud-based legal practice you mentioned traditional law firms don’t use technology in any meaningful way – one of the start-ups that have come through the program is all about taking that purely online, like a virtual legal practice where everything is done online. There’s so much exciting stuff coming through this program and we’re really thrilled to be partnering with Mills Oakley to deliver what we hope will be some disruptive legal-tech start-ups and I guess at a personal level what excites me the most about this program is that a lot of these start-ups aren’t necessarily looking to disrupt incumbent law firms the top end of town and take market share away, where they’re looking is at non-consumption, so currently more than 90% of Australians can’t afford legal services for complex matters. For simple matters, sure, but for complex matters it becomes too costly. What these start-ups are doing by using technology systemised technology, standardised technology means that they can deliver legal services for a much lower cost because they’re taking out the human element and the high cost base that comes with flashy offices on Collins Street and places like that and essentially delivering service for a lower cost, which means that they’re unlocking a lot of non-consumption which means that more people can protect their basic human rights which I am really excited about.
Martin: Oh, I love it – and I have to kind of smile when I hear you speak about all of the support that these start-ups get and how it’s really done quite differently to any traditional businesses. At the Collective Campus, there are other start-up people around, it’s a community, and it becomes so obvious to me, why as a business we failed at innovation to date. I mean it’s as plain as the nose on your face, I’m sure so many of our clients will be listening and empathising with that. I mean, Simon, you might remember we had the abortive Mills Oakley Innovation Think Tank a couple of years ago where we got a bunch of our lawyers and look I think we got the most progressive forward thinking people in our whole firm. We got them all together, we had an off-site and we spoke about innovation, but of course all it ever was, was ideas. And it went nowhere. And the reason it went nowhere is that of course, all of our lawyers in our business are very successful doing what they currently do, and they’ve got daily time budgets to meet, commitments etc. etc. All of the financial levers in our old-school business model are about not innovating!
Simon: Yeah you’ve really hit the nail on the head and it goes back to what we talked about possibly in the first episode, around why can’t the people innovate? Well, because, the people who we’re asking, once we had the ideas, and there were some good ideas, perhaps not as where we’ve gone to with the ideas in the Accelerator, not even close, we were probably more looking at innovating our existing business model, but they were good ideas. But as you pointed out Martin they didn’t go anywhere. And the reason is because we were asking people who were within an existing business model, a very successful old law business model, there are innovations within it of course, and that’s what we consistently talk about the fact is the job of the existing firm is to innovate our current business model, and we’ve been very clear about that messaging now. From the learning that we got, we had to go through that processing to get where we are now – to sort of say no, we’ve tried to innovate internally, but, because these people are still housed within the existing structures and the incentives and the mindset and the culture, it didn’t work. And that lead onto the Mills Oakley Accelerator, that laid the foundations in a way. So, that’s why I think it’s really exciting that Mills Oakley recognised there was a need to do this, and in a sense, we learned from our mistakes. So we did actually learn from that. So I think that’s a brilliant story about not just going well, okay, it didn’t work, we can’t innovate or we don’t know what to do – no, we kept on going and that’s lead us to where we are today.
It is a really interesting, when you say wow, I can see why we didn’t get those ideas up and running – you can see how different, and I think in the previous episode I talked about the different mentality within the start-up community and that is that people, mentors, from law advisors and there’s overlap, but there’s a term, I don’t really like it, but it’s called ‘coopetition’, but what it is, and we actually had to educate some of the people coming into the Accelerator, and the information on it we got some very good questions, the right type of questions from people saying well, what if we go into the Accelerator and someone steals my idea or …will the firm steal my idea, how do I know? We got over that, but that’s the old mindset. In this world we know that ideas are just a form of currency and there are many others. With Collective Campus they’ve got to go in there and they’re going to share their ideas and learn off each other, that’s how you learn – by sharing your ideas and it’s that mentality from the mentors to the co-working space, very different mentality from what we’re used to. Where you horde everything within the four walls.
Martin: Absolutely. One part of that mentality that took me a while to get my head around is the equity ownership of the businesses that come out of the accelerator, and I’d like you to talk to me about this Simon because it might be a blocker for other business owners who are thinking about doing similar things. So my old school mindset coming into this was that okay, we’ll get some kids out of uni, we’ll pay them a small stipend and we’ll give them a 10% kicker of the equity of the business that Mills Oakley will control, and they’ll be awfully grateful for that! That wasn’t the model that we ended up going with thanks to the advice of you gents! But, Simon, tell me why that thinking doesn’t work in this innovation and start-up space.
Simon: Thanks Martin, that was one of the hurdles and just as an aside, it might seem like a bit of marketing, but there have been a number of those areas where Steve, you and I have had to educate Mills Oakley on the way things work because it’s so different, and we were even commenting at the pitch night earlier in the week for the initial selection process for the start-ups in the Accelerator how good Mills Oakley has been. That you’ve accepted it and moved on, so, that’s been really good. Mills Oakley ends up with a small stake in this business…
Martin: We get a measly 7%! Is that right, Simon?
Simon: That is right. But, there are several reasons for this. First of all, that 7%, even with the level of investment Mills Oakley is putting into it, if, with the remaining 93%, that gives plenty of bandwidth for, and I think this is one of the main things if I’m taking it from an investment approach, if the founders are too heavily diluted early, that gives plenty of bandwidth then for us to be able to, as they come out of the Accelerator, do a big seed round. And by the time they come to what’s called Series A funding when they’ve got revenue and it’s going to be a $7m round, they still own, hopefully significantly more than 50%, 60%. And there are venture capitalists, there’s a guy called Jim Shyman at Maiden Ventures who is making a lot of money out of driver-less cars and what have you, I read a blog post of his recently and he said “I will not touch anything in a Series round where the founders are starting to approach 50%”, 60% even he said is a bit skinny. Why? Because in the subsequent rounds, this thing’s really going to kick. They get too diluted their interests are unaligned, so in fact it’s really in Mills Oakley’s interest, believe it or not, if we got something that’s really going to fly, to actually take a smaller stake. Does that make sense?
Martin: Wow, and again that’s a fantastic example of the different head shift rather than the zero sum gain kind of negotiation in the old world when you just try and get as much as you can and you pay as little and it’s that win/lose kind of binary outcome. That’s fascinating.
Simon: And you want them to innovate because these teams, if they are going to get it up and have a high growth business, they are going to virtually, they are going to smash themselves to get there and you want them to do that. You want them to really feel like this is their baby.
Martin: Because, Steve, we had this chat before we went on air, it’s about the people isn’t it? It’s about backing the right people?
Steve: Yeah, mindset underpins absolutely everything when it comes to, not just start-ups but life in general but when you’re building a start-up, one of the things that we look for even when we’re reviewing applications for the Mills Oakley Accelerator it is things like resilience, because building a start-up is notoriously difficult, and you’re going to face a lot more no’s than yes’s especially in the first year or two. So you need to be able to pick yourself up and as Rocky Balboa always says, it’s about how hard you can get hit and keep moving forward. It’s one of my favourite quotes and you could be the smartest person in the room academically, you might have a great team, you may have a great web developer, designer, marketing person, you could have a pretty good idea too – but: unless, 1. You’re willing to put ego aside and learn from feedback, and 2. Unless you’re willing to hear ‘no’ a thousand times before you hear a yes and keep picking yourself up and just have that ongoing self-belief, you’re probably not going to make it. I mentioned Air BnB on a previous episode where they made $200 a week for the first year and they were getting rejected by venture capitalists, would have been very easy for them to say hey guys, this isn’t working lets go out and do something else, we’re all smart guys, they’re all like Ivy League graduates, but they didn’t – they stuck to the course, they believed in themselves, they got past all the no’s and they got there in the end. That’s one of the biggest things we look for and the other personal attribute we look for is curiosity. And I’ve got a little trick that I do whenever I’m reviewing start-ups who apply to such programs, I like to get onto social media, if they’ve got a public Facebook account or LinkedIn or Twitter and I just have a bit of a geez, I want to see who do they follow? What are their interests? What pages do they like? What influences do they subscribe to? And if all I see on their Facebook page is that they watch The Bachelor and American Idol or something and that’s it, then they’re just consuming whatever mainstream media is throwing at them, maybe they’re not thinking laterally enough. Maybe they’re not asking enough questions. Maybe they’re not challenging the status quo and challenging the status quo is one of the key attributes when it comes to the innovator’s DNA and not just accepting the way things have always been done around here, not accepting that mentality.
Martin: Wow. And you tested for that didn’t you? As part of the Mills Oakley Accelerator in that you had one of the three-day workshops where you, as I understand it, a key part of that was really to test the ability of the candidates to take feedback, for example, and to test their resilience. Can you tell me about that aspect?
Steve: Sure, so, the boot camp was designed for a number of reasons. I want to hone their business models to better understand their business models, to get them ready for the pitch night that we held at the culmination of day 3 of the boot camp, but it was also to better understand and to get to know the people behind the start-ups and to see how well they responded to feedback. Did they take feedback on board? Or did they completely disregard it? One of the guys that came through the program was a former partner with Allens, so he’s spent over 20 years with that organisation and he was probably one of the most sponge-like people in the room. He conceded that hey, I know the law, I get that side of things, but I don’t get entrepreneurship. I don’t get the mindset, the way we do things, and everything we talked him through he took that on board and it came out in his final pitch, and so the boot camp serves a number of things, but, ultimately it was about understanding are people resilient, will they take on feedback, and do we think they have what it takes to roll with the punches and keep moving forward?
Simon: I really enjoyed that pitch night, it was almost, the ones that really went from a position where they were pretty rough on day one through to where they got to on that final night, I don’t know if pride is the right word but it I was really pleased for them. When we were sitting there I was kind of leaning across to you and going ‘wow’, you know, they’ve really listened and so, it was a great experience. It really was an extended interview. They might not have seen it that way, but it was.
Martin: That’s great guys. So drawing to a close for this episode, I hope we’ve inspired some of the listeners out there to think about whether they might run an Accelerator similar to the Mills Oakley Accelerator. I’m certainly very excited about ours and I’m very keen to take the next step which will be for us to invest in hopefully two or three or maybe even more of these start-up businesses. So just to close off, if anybody out there is thinking about setting up their own Accelerator I’ll ask each of you Simon and Steve to give me your two top tips for anybody who is looking to do the same and I’ll start with Simon.
Simon: Definitely go external. We had a lot of discussions along the way and part of that ongoing learning for Mills Oakley when we started John said we’ll we’ve got some spare space at Mills Oakley and I said hmm I don’t know – so it was a bit of an educations process. The program is really important as well, and I think that’s why partnering with Collective Campus, to have that co-working space to have that access to mentors and the ongoing education because it’s something that if you’re going to do it properly and you’re going to make that investment, it’s not to say all of them or any of them will end up being the next unicorn or billion dollar start-up, but make that investment and actually put in the right structures to give them the best chance, and it’s important for brand as well I think, one of the criteria that we have for each stage of these start-ups go through is they need to have a professional experience, really good experience and get value. So for the start-ups that don’t make it through the boot camp and I’ve already got this feedback after the pitch night, they need to have got value out of coming down to Melbourne and being part of it, so that’s important.
Steve: I just reiterate taking it outside the building and ultimately putting them through a structured program because there’s a number of Accelerators out there where start-ups are just given office space and some funding, but funding without the mentorship, without putting them through a structured program where it is about defining those assumptions early and here’s how you can go about testing them and how are we tracking and providing that ongoing guidance, that’s what start-ups need. Especially if they’ve never done this before. If we just give them some space and some money, chances are they’re just going to do what organisations have always done and just blow the money and not get anywhere.
Simon: Steve I actually think that for most, unless they just cannot move forward without an injection of cash, I think it’s actually the mentorship and the education and the networks that is much more important than just the money. A lot of Accelerators, so called, don’t want to be critical but they’re just a property place I think, renting space.
Martin: Isn’t that interesting, because as a partner in the mature business who’s kind of sponsoring this, that’s the one thing that we absolutely can’t provide. It’s easy for us to kick in a bit of money, that’s alright, but we cannot provide the other stuff and I think you’re right, I think that’s more valuable. Anyone can whip-round the hat with family and friends and the like, but it’s the structure of the piece.
So thank you very much gents and I’ll look forward to joining you soon for our final episode of the series. Thank you!
Both: Thank you.