Krish Murali Eswar

TOP 20 INSIGHTS

1. On average, the world’s most innovative companies use 3.6 different types of innovation in a single new product or service, whereas average innovators only use 1.8 types of innovation altogether. Combining the types makes moves harder to replicate by competitors.
2. Hyatt uses “lab hotels” to find innovative solutions to recurring problems. A select number of its 488 global hotels have between 7 and 9 experiments running at the same time. Successful experiments then get implemented.
3. Chicago restaurant Next makes money on customers’ tabs paid in advance. To reserve a table, customers pay for their entire meal in advance. Next makes interest on those funds and dramatically decreases “no shows.” Pricing also changes based on the time of the reservation rather than the quantity of food eaten, therefore maximizing margins.
4. Natura, a Brazilian cosmetics company, has a modest R&D team but continually launches products on the cutting edge of “skin science” to the tune of $3.4 billion annually. This was done by relying heavily on “open innovation” partners – 25 universities around the world that come up with 50% of Natura’s products.
5. In the 1990s, Dell hand-picked its customers to maximize revenue and profitability. It researched corporate customers to see which had the most predictable purchasing patterns and low service costs, including which were second-time computer buyers and are therefore more likely to have fewer service calls.
6. Gillette completely altered its profit model after customers got hooked on its products. Gillette started with selling cheap blades to train the customer to throw them away instead of sharpening them to reuse. Later on, it switched to a higher margin on the blades.
7. At $147 billion in revenues, growing 5% annually means that General Electric must create a new Fortune 500 company each year. Former CEO Jeff Immelt created the “Imagination Breakthroughs” program to meet this need. Each business unit presents its best new idea every year, and winners get support and funding for their ideas.
8. Henry Ford’s success with the Model T was due to more than just the assembly line innovation. Investing in his employees led to a decrease in turnover costs and an increase in employee satisfaction. Ford paid twice the minimum wage so his workers could afford to buy the cars they were building and reduced the workday from nine to eight hours.
9. Ford also sold modification kits that made the vehicle a multi-use machine. Now known as the product system innovation, owners could use their Model Ts to make cider, pump water, saw wood, or blow snow, among other uses.
10. To sell diapers in China, Procter & Gamble used network and profit model innovations. Chinese parents were not convinced that diapers were healthy for babies, so P&G partnered with Beijing Children’s Hospital to prove they were safe and helped baby sleep longer. P&G also made the diapers at three different price points to increase their affordability.
11. Combine innovation “tactics” to produce innovations that can be replicated across industries. Zipcar and Chegg are both examples of companies that combined metered use and switchboard innovations. Zipcar provides easy-to-use and always available car rental by the hour. Chegg lends textbooks in a similar fashion.
12. By asking potential customers to vote on its website, fashion company Threadless figured out which designs customers would purchase before going through the trouble to produce them. Threadless has hosted over 42,000 designers pitching their designs, with over 80 million people voting for them.
13. Turn a successful innovation into even more money. Equipment manufacturer Caterpillar optimized its own supply chain and proceeded to capitalize on that knowledge and experience by forming CAT Logistics, a successful consultancy that helps others do the same. CAT Logistics garnered a revenue of $3.1 billion in 2010 and was spun into a separate company in 2012.
14. Harley-Davidson innovates in service and support systems, cultivating user communities among minority motorbike groups such as women and Latinos. Harley-Davidson was the top brand for minority riders with over $4.5 billion in sales in 2011.
15. Hyundai radically innovated its service just after the Great Recession. In 2009, customers gravitated towards the brand because of its guarantee that anyone who lost their job within a year of buying or leasing a Hyundai could walk away from the payments and the vehicle.
16. Almost 40% of the companies on 1999’s Fortune 500 list were no longer in existence ten years later. This fact underscores the importance of continuous evolution and innovation.
17. Take company values one step more than needed, like cleaning brand Method. Method steers clear from any ingredient that has the slightest chance to make a cleaning product unsafe.
18. Starbucks may be coming out with a new drink every season, but the average caffeine addict doesn’t realize that Starbucks’s core innovation was providing a “third place between work and home”. By cultivating this sense of space and belonging, they built a regular customer base who connected with the brand and formed a habit.
19. Indian “smart basics” hotel chain Ginger operates with a room to staff ratio of 1 to 0.36, as compared to the industry average of 1:3. They do this through a combination of tactics such as outsourcing tasks such as laundry and food service, promoting a self-service mentality, and eliminating under-appreciated luxuries that caused extra work and expense.
20. The Mayo Clinic achieves medical breakthroughs with a five-phase process that prevents risks in potential investments and innovations. As ideas move through these checkpoints, they are improved and gain access to more funding.

Key lessons from the audio book

1. Everyone can be categorized according to how they get their money: Employee, Self-employed, Business owner, or Investor. Each of these four categories, or quadrants, has its strengths, weaknesses, and characteristics.
2. Employee, or the E-quadrant, values security above all else and seeks the safety of a long-term contractual agreement. This person works within someone else’s system to earn money.
3. The Self-employed person, or the S-quadrant, does not want their income to be dependent on other people. They essentially own their job and is likely a hardcore perfectionist who values independence and expertise.
4. Self-employed is the riskiest quadrant. Nationally, nine out of ten such businesses fail in the first five years, mostly due to a lack of experience and capital. The key to success in this S-quadrant is to know when to get out and move onto something new.
5. The Business owner, or the B-quadrant, has a system where other people do the work— like Henry Ford, who surrounded himself with smart people who knew all the answers so that he could concentrate on new ideas.
6. The Investor, or the I-quadrant, uses money to make money. The opportunity for real wealth lies in the I-quadrant.
7. E- and S-quadrant stock market investors focus on diversification. But as Warren Buffett advises, diversification is a way not to lose money, rather than a way to make money. The better strategy is to focus on a few investments, not on diversification.
8. To quote Buffett: “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” Don’t hand over your investment decisions to an “expert.”
9. The right side of the quadrant is the safe side. With a secure system that produces money for you, you don’t need to worry about unemployment.
10. The secret to wealth is the same as the secret to win the game Monopoly: buy four green houses and then trade up for a large red hotel.
11. Your mortgage is a liability and a debt that you have to service, not an asset. Even if you pay off your mortgage, your house is still a liability: it has to be maintained, and you have to pay taxes on it. Property is only an asset if it generates income through positive cash flow.
12. Gold is not necessarily the ultimate asset: “Even gold is only an asset if you buy it for less than you sell it for.”
13. The ideal path to financial independence is to move from quadrant E or S into quadrant B, and from there into quadrant I. A financially successful Business owner will have the skills, time, and money to support the ups and downs of the Investor.
14. You don’t become rich when you work hard to make money that you then spend, you become tired. Kiyosaki lived modestly for years and worked hard not to pay bills but to acquire assets.
15. People who fear loss buy a stock at $20, then sell it as it rises lest they lose what they gained. They also hold on when it slides down to $5 with hope that price will come back up. The Investor is neutral on wins and losses and only sell a stock when it has peaked or as soon as it starts to slide.
16. To start on your path to financial freedom, write down where you want to be financially one year from now and five years from now. Draw up personal income and balance sheet statements to show all your income, expenses, assets, and liabilities.
17. To eliminate your consumer debt, put aside $150-$200 every month to pay down credit cards, then car payments, then your mortgage. Most people can be debt-free in five to seven years. Put what you used to spend to service your debts into assets that generate income.
18. Educate yourself. Spend at least five hours a week to read the Wall Street Journal, listen to the financial news, read financial websites, magazines, and newsletters, or attend seminars on investment and financial education.
19. Become an expert at one particular type of problem. Bill Gates is an expert who solved software-marketing problems. Warren Buffett is an expert who solved stock market problems. Kiyosaki became an expert who solved problems in apartment housing.
20. Acquire assets that provide passive or long-term residual income. Start with small steps, the “green houses” of Monopoly, and gradually build up to larger investments.

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7