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Transcript: How to triple in size

You can listen to this podcast, which lasts 60 minutes, here.

Contents

Introduction

Nathan Anibaba: My name is Nathan Anibaba, and you’re listening to Agency Dealmasters. My extra special guest this week is Felix Velarde. He really is a heavyweight agency and tech chairman, and world class positioning expert. His track record is just astonishing. He’s created just a ton of wealth for agencies over the years. Clients have included Alpha Century, Impero and MomentumABM to name just a few. I could have spoken to Felix for hours. This podcast is just free mentorship and coaching, for me, to be honest. His philosophy for growing businesses is pretty straightforward. It’s a process. It’s like baking a cake. A little bit of flour, and not too much sugar, make sure you’ve got the right number of eggs, get the right ingredients and you get the same results every single time.

In 1994, he started one of the first specialist web design companies, HyperInteractive. He’s founded several innovative, digital creative and strategy agencies. He was also the chairman at Pioneering, eCRM firm, Underwired and CEO of the Conversation Group. He’s got just a ton of M&A experience. He’s had just a fascinating career. If you are remotely interested in things like startups, proposition development, M&A, leadership, traction and salesmanship, then you will absolutely love this conversation. Without me keeping you in suspense any further, my conversation with Felix Velarde:


Background and history

Nathan: My extra special guest this week is Felix Velarde. He works with action orientated digital marketing and creative agency owners and tech startups. Most companies he works with triple in size. He’s started, lead and sold several agencies of his own. He’s been a non-executive chairman for many technology and agency businesses. He’s been a university professor teaching MBA programmes. He’s also part of a team founded by Vint Cerf, the internet’s co-inventor, to deliver internet access to 1.5 billion people. He’s also a glider pilot, and with a team of regulars, gave away £10,000-worth of cocktails at Burning Man this year. Is that right, Felix?

Felix Velarde: Yes, it was epic fun, and after the first four cocktails, you can’t really tell.

Nathan: He goes every single year. He’s just come back from spending three weeks in the jungle on his honeymoon. I’m very much looking forward to the conversation. Felix Velarde, welcome to Agency Dealmasters.

Felix: Thank you very much, Nathan. Glad to be here.

Nathan: Well, I’ve been looking forward to speaking to you for quite some time, actually. We’ve had it planned in the diary. When I was doing the research for this interview, I was looking for your LinkedIn profile. When you get to the bottom of someone’s history, it says, “Show for five more experiences.” Then I click that, and scroll to the bottom again. Then it said, “Show five more experiences.” Then I did the same. Went to the bottom, “Show five more experiences.” I normally do that once, for people that are guests on the show. Your experience, it’s not just any old experience. You’ve built some of the most successful agencies and tech businesses of the last 20 years. You don’t look old enough to have that much experience.

Felix: [Laughs] Yes, I keep the picture in the attic.

Nathan: Well, I was doing the math and I was just thinking, well, four years plus two years plus three years plus– I got to 178, or a figure like that. You should be that old.

Felix: An awful lot of it was done in parallel. Quite a lot of it didn’t take very much time at all.

Nathan: Okay, fair enough. Well, take us back to the beginning of your career. You set up Hyperinteractive in 1994, one of the first digital creative agencies. This was really early for digital. What things were you doing then?

Felix: Well, we were doing multimedia. I’d spent two weeks figuring out how to get a Mac onto the internet using a SupraModem. Those were tech struggle days, but I fell in love with the internet. I had this insight which was: if only you could take salespeople out of the process, people would make their own decisions. That’s what has become customer centricity, I suppose. I thought that was enormously powerful. Because I like the idea that people make their own choices. When people make their own choices, they come to conclusions that they want to come to rather than conclusions they’ve been pressed into. I always hated the idea of selling and salespeople, and pushiness and all that kind of stuff. If you can give people a construct, an environment that they can wander around in and make their own minds up, then that would be incredibly powerful. Then, if you could get them to create content, then you have this sort of magical confluence of things where — I don’t know. There was a bunch of us. We all wanted to destroy advertising. None of us could get proper jobs.

Nathan: [laughs] That’s the real reason.

Felix: [crosstalk] me, and Al Scott, and David DeAngeles, and people like Jon Bains, and Phil Jones. We basically set about to change stuff. HyperInteractive was 1994. The web was effectively switched on the end of the year before, so yes, it was pretty early.

Breaking out of the sales model

Nathan: It’s super early, really interesting. You say that you wanted to create a world where you didn’t have to interact with salespeople, what’s wrong with salespeople, and what do you–

Felix: I once had been a salesperson.

Nathan: I’m sorry, say that again?

Felix: I had been a salesperson…

Nathan: Just, you hated it. Fair enough.

Felix: [laughs] If you’ve got to persuade somebody, then it’s probably not that good.

Nathan: It’s a good point. That’s a very small part of salesmanship though, persuading. In fact, I don’t think that’s salesmanship at all. I think it’s presenting the value. The onus, as a salesperson, is to present the value to your prospect, and then get them to decide whether or not it’s for them.

Felix: Yes, I guess. Where it gets clever is presenting the thing to the prospect and getting them to workout whether there’s value in it for themselves. That’s where the power comes in. Again, it puts all of the onus on the buyer and chooser, if you want to call it, prospect. I prefer that. I think if you’ve got something that’s fantastic, then it’s fantastic for some people. If there aren’t some people for whom it’s fantastic, then you haven’t got a business or a product. Radical self-selection and survival of the fittest plays in that. I think our job, when we’re selling stuff, is to create something that people really, really want and get out of the way.

Nathan: Is it always obvious that it is something that people really want?

Felix: No, thankfully.

Nathan: [laughs] That’s the reason why we were employed, right, marketing?

Felix: One of the things that forms the foundation of what I do is proposition development and perceived differentiation. I have a very crystal clear proposition for my own business. The businesses I work with, we spend a lot of time working on crystal clear propositions. If you’ve got a crystal clear proposition, then it stands out and people want it, then fantastic. If you’ve got a “me too” proposition or something that says, “This is a bit woolly”, then people won’t find it and they won’t gravitate towards it.

Being an entrepreneur

Nathan: We will come onto that in a lot more detail a little bit later on. You said earlier that you struggled to find a job. That’s one of the reasons why you set up the agency at the time. It seems, from our CV, that you looked quite entrepreneurial from the beginning. Have you always been quite entrepreneurial? The second question is. You had blue hair.

Felix: [laughs]

Nathan: That’s not a question. That’s more of a statement…

Felix: Maybe that’s all wrapped up together?

Nathan: Okay, as to why you couldn’t get a job?

Felix: Exactly.

Nathan: Yes.

Felix: When I was a kid, I used to do drawings and paintings for money. When I was a teenager, I used to sit outside restaurants and draw them or paint them and then go in and sell the drawing or painting to the restaurant owners. Then, I discovered much more cool things and started painting a biker gang’s leather jackets. I was always kind of rebellious. I didn’t really believe in the system. I dropped out of school to go and work in nightclubs because that seemed like much more fun. I never really was a conformist. I think, as a result, you drift around and you do odds and sods. I’ve been taught how to sell and so on. Then, I’d fallen in love with the internet in the very early ’90s, having worked for one of the commercial precursors of the [web], Prestel, in the late ’80s. I found myself in a situation where I was out of work in 1994. I got together with a graphic designer persuaded him that the internet might present an opportunity even though it was pre-graphical browsing at the time.

Nathan: I don’t think it will take off.

Felix: It just looked like fun. We started and we created a famous agency. Then I saw that starts a new one. Then that one became the digital arm of Lowe, what’s now MullenLowe worldwide. I had our ups and downs and things, but had an amazing time in the ’90s. Then started to get very serious about it in the new century. I got much more involved in M&A and in leadership, having been an amateur CEO, if you like, a founder who found himself running these companies. I started to become much more professional in the mid-2000s.

Nathan: Well, let’s talk a little bit about that. You co-founded Head New Media, which became the world’s most awarded digital agency. You negotiated the sale of the agency to Lowe Group, as you mentioned. At the time, they were the fourth largest agency network in the world. There you created some of the world’s first deliberately viral campaigns. What campaigns did you work on, and tell us a little bit about what that experience was like growing such a successful agency?

Felix: It was huge fun. If you can imagine an agency filled with people with different coloured hair, it was all basically useless on a Monday with techno playing at full volume, and clients who couldn’t hear you on the phone.

Nathan: Amazing, you said.

Felix: Yes, producing really cool stuff for people like Snickers. We worked for loads of Unilever brands and Peperami and people like that. It was a lot of fun. We were making stuff up. We were trying to break all the rules, and we were trying to get out of the classic advertising box that Lowe was trying to persuade us to get into. We were sitting there just sticking two fingers up and saying, now we’re going to create the world’s biggest commercial soccer community and nobody’s done it before. There aren’t any rules. We’ll make it up.

Nathan: What was the paradigm of advertising at that time? How did people think about advertising, and how were you trying to change it?

Felix: Well, advertising had come from “the solution is TV, what’s the strategy?” In the mid-90s and late 90s, the advertising industry slightly discovered the internet and decided that, oh, well, how do we use the internet like we use magazines. We started sticking banners up everywhere, banners would just shockingly trite and dreadful and horrible. We basically said no, so that we’re just going to create communities, we’re going to get people to write their own content, we’re going do 400-page websites where every single page has been graphically designed differently. No templates. We’re going to create these incredible interactive forums and systems where people could do their own stuff. That was hugely fun. Everybody who worked at the agency had one day a week, where they could do a personal project, provided that it ended up on our experimental gallery called headspace. Head-Space was brilliant. It was global. We have people from all over the world contributing to it, and it broke every modes that there was and won every awards that it wasn’t broke every browser you could break. Was a lot of fun, and that meant the whole agency was just built around fun breaking rules. That was hugely attractive to some of the brands that we worked for. They were an extremely successful agency.

Nathan: I’m sure. Your rebel nature gave you that’s what enabled you to create that kind of counter-intuitive advertising with that approach to marketing because you had that rebel nature within you from the start.

Felix: Also because I didn’t know what you’re supposed to do…

Nathan: Interesting. All right. You weren’t classically trained. You didn’t know what the right thing was.

Felix: Yes. It was just okay. I’ve had an insight, or had an idea. Let’s throw everything at it. It was very experimental and very creative and enormous fun.

Nathan: While you’re doing that, you probably make a lot of mistakes while throwing a lot of stuff at the wall and figuring out what sticks.

Felix: If you’re anxious enough and loud enough that you’ve got blue hair, nobody notices.

Why do agencies struggle to grow?

Nathan: Yes. Nobody notices, because they’re focusing on the blue hair. After 20 years starting and growing companies, you now help agencies and tech companies grow fast. I think you said that typically, you help companies triple the size of their organisation, whether ambitious startup, sort of market leaders, agencies or tech startups. Your new company delivers a two-year programme called the 2Y3X programme. Two years to triple growth. What are the main reasons agencies typically, in your experience, struggle to grow?

Felix: Most of them don’t have a plan. I know it sounds really dumb. Any plan is better than no plan. Most don’t actually have a plan. Most people’s plan is, “we want to grow really big and we want to sell. So we best win more business.”

Nathan: What’s wrong with that?

Felix: Well, it’s not a plan. It doesn’t tell you actually what still will have to do. It just gives you some kind of aspiration. It’s funny because if you think it’s classical terms, a scale-up as a definition, or a gazelle as a definition, or two definitions of fast-growing companies, both of those definitions say that to qualify as a scale-up or a gazelle, you’ve got be growing at 20% a year. This is really very fast. That kind of implies that everybody else is growing at maybe 10% a year. To be really, really good, you’ve got to be growing at 20%. I retired five years ago, four and a half years ago, and started doing M&A for some agency friends, and both on the acquisition and on the sell side, because I’ve done a lot of M&A during my career. Then got swallowed up in helping companies put together a programme of accelerated growth, because I’d had a whole bunch of agencies where we’d grow them fast. I run an agency group of 12 agencies. I’d spent a few years teaching people how to create a plan based on a vision and a strategy, and then how to execute that in the right order so that you create incremental growth.

How do you double revenue?

Actually, in order to double the size of a company in two years, all you have to do is 3% extra every month. In compound interest, that shows. I started out thinking, it can’t be that difficult to double the size of a company, and I’d done it myself. I’d done it because I’d sold an agency. I’d bought it back a couple of years later because I thought there was an opportunity, and I doubled its revenue and its profit in 12 months, and then I sold it again. I thought, that was just the application of a straightforward plan, and making sure everybody stuck to the plan, and everybody rallied around it and believed in it and then delivered their bit every single month. Four and a half years ago, I started doing that with agency clients, and with tech businesses, particularly in virtual reality and machine learning. It turns out that any plan is better than no plan and to put this stuff in the right order and you don’t do stuff that is a waste of time. Believe me, over the last 22 years, I had spent a lot of time doing the same mistake over and over. I knew what not to do. You get the right stuff. You cut out the wrong stuff. You put the right stuff in the right order and assemble a brilliant team, and then you just force the pace. It took two years before I realised that yes, it was doing the doubling every two years was quite straightforward. It took another year to realise that actually, half of the clients were tripling in two years. We put together the consulting business, 2Y3X, with Frank Kelcz, who is a venture capitalist, and from publishing in tech backgrounds. In order to create the 2Y3X programme, that then forces the pace. We work with some– Seriously, I mean, the companies that go on the programme have made a decision to grow fast, and so they’re self-qualifying. They’re not just vaguely ambitious, “I will make it rich and will sell for millions.” Actually, they’re committed to it, and they’ve got a great team, or they want to build a great team, and so they come on to the programme. It was a long rambling answer, I can’t even remember what the question was.

The formula for agency growth

Nathan: From what you said, it seems to be the case that you can grow an agency or grow a company. It’s like a process. It’s like a machine with clear inputs and outputs. There’s a formula to predictably growing your agencies there?

Felix: There is. I guess the formula is 2Y3X.

Nathan: Call this number.

Felix: Exactly. It is. Everything starts with proposition development and positioning, and that magical competitive differentiation piece. That only takes a day or two, in reality. It only takes a day, but it also takes quite a lot of bravery. Because you’ve got to say, in order to be precisely x, I’m going to give up a, b, c, d, e, f, g, amongst companies, especially agencies. They’re guilty of saying, “Oh, we don’t want to say that we don’t do a, b, c, d, because what if Coke rings us up?”

Nathan: Sure.

Felix: Reality is, Coke is never going to ring you up.

Nathan: Especially if you do everything.

Felix: Yes, so abandon it. Then they might ring you up the day that they decided they want to do X. That’s the foundation, the cornerstone. I spend an awful lot of time doing that, and it’s hugely fun. The outcome is, everybody knows exactly what the agency stands for, and what you’re going to do for the next two years or three years. Then you build around that, and then you put together the strategic plan, and then the roadmaps, then you build the team and all that kind of stuff. As you say, there’s a formula, there’s a process to it. There’s a predictability to it. The first nine months is about building the main blocks. Suddenly at nine months, everything’s changed, and you start getting the transformation. Then after about 18 months, you start seeing the heavy lifting happening and the growth takes off. I just did a nine-month review yesterday with one of the companies on the programme. They’ve just completed their nine months. They’ve gone from where they were. They are several million turnover agency. They’ve increased their retainers by 67% in the first nine months of the programme, in terms of revenue. That’s amazing, because that gives them an awful lot more security now to build on.

Agency proposition and differentiation

Nathan: Where did that come from? Did that come from getting really clear on who they are in that value proposition? Did it come from just generating more new business inquiries, but at a higher value? Because you say there were three main ways or areas where agency struggle, new business, differentiation and alignment. I think you alluded to the differentiation part earlier, where you said that agencies like to add on service offering. They don’t want to be seen to not have something. What do agencies typically miss here? What is that differentiation and alignment?

Felix: Differentiation is one of those things where glibly you can say it’s easy, because all you have to do is pick one and do it — Jim Collins’ “Good to Great”, which is the manual for leaders…

Nathan: For all business. Right.

Felix: Exactly. He talks about the Hedgehog Principle, which is picking something that you can be the best in the world at and getting on with it, and defending it. It’s got to be plausible, it’s got to be something that you can really do. It’s got to be something that you love doing, and that you’re passionate about. Obviously, that is profitable. If it’s commodity, it’s not going to be profitable. If it’s a novel, then it’s likely to be differentiated, but you might not make a profit because there might not be a market for it. There’s balance we had. Differentiation really is paint your flag, you hoist it high and obsessively repeat it. That bit is fairly straightforward, because even, as I say, you can establish your competitive differentiation and your proposition in a day with a following, when two days is the longest it’s ever taken us to come up with a proposition. Some of them are awesome, the creative agency for entrepreneurs sounds really simple, but actually is very hard working because if you’re an entrepreneur and you want a creative agency, who do you go to? Part of the proposition, then the alignment thing is absolutely crucial.

Building alignment in the senior team

Nathan: What do we mean here?

Felix: The programme is focuses on how do you develop a strategic team that’s going to take the business on to the next two, three years, and do all of the heavy lifting, because if you can create that team, once you’ve created that team, the agency starts to sing. What I mean by singing is, I don’t know if you have been around yachts or boats, but when the wind blows in a certain direction, and then blow through all of the cables on the line, there is amazing melodic sound. That’s what happens when an agency is singing. It’s that the wind blows in the right direction, and everything’s lined up just right, and you get the most beautiful chain out of your company. Designing that team and managing it and putting it together in such a way that creates that, that resonance and that alignment and that harmony is nine-tenths of the battle.

Nathan: Get the right people in the right seats, moving in the right direction. Again, another Jim Collins quote from good to great. That’s essentially what you’re saying there, isn’t it?

Felix: Yes, essentially, they’re going to be A players, and there are ways of qualifying A players and finding them and hiring them and managing them.

Nathan: There’s a whole set of processes, right?

Felix: All of these things, there’s a whole load of nested processes that happen in the right order to get the correct effect, but that alignment thing, that alignment piece, once everybody is aligned, it makes very fast race extremely easy.

Nathan: The process is called the Growth Lab, and that’s the name that you’ve given it, which obviously helps founders overcome inertia and you say, overcome feast and famine and avoid fatal errors?

Felix: The naming of Growth Lab, it was designed specifically to overcome one thing, which is senior management thinking that they had a right to be in that aligned team. When sometimes senior managers are much better off senior-ly managing stuff.

Nathan: Now, that’s interesting.

Felix: …than driving strategic growth. So it’s a balancing act, and very often we have very junior people in the Growth Lab, the superstars of the future are really critical to include, I think.

What makes a successful business owner?

Nathan: From all the founders that you’ve worked with, how did do the most successful ones think differently? How do they approach problems around growth in differentiation? How do they approach things differently to the less successful ones?

Felix: I can only speak for the ones that I’ve worked with. Obviously, I’ve met an… When I was CEO of The Conversation Group, I think I met 100 agency owners in 12 months I’ve met a lot, and obviously I’ve been around the block since ’94.

Nathan: 130 years.

Felix: I probably know most people in digital, but I’ve only really worked with either my own management teams or the ones that we’ve acquired or the ones that have engaged us to do growth acceleration programmes. My observation of the ones that choose to engage with growth acceleration programmes in a very serious way, especially the super successful ones. They have made a decision that they want outside help, they’re fiercely ambitious, fiercely independent. Certainly the ones that work with us, they tend to be mavericks, and I would imagine that that’s probably because they can tell a fellow maverick when they see one, maybe we just speak the same kind of rebel language. They’ve made a commitment, they’ve reached a plateau, they’ve got two or three or four million revenue, and they stagnated for a year or two. Maybe they’ve been working with non-execs or a non-exec consulting firm, and they’ve drained the knowledge that they can get from non-execs. Non-execs have a shelf life, because non-execs tend to come in with one big focal point and will sort out lead generation or marketing, and then they run out of things that they can really add value on. They stagnated a bit, the owners would have stagnated a bit, but they’ll be fierce and ambitious and they’ll have to come to the conclusion that life is too short to keep pissing around, and so they’ll come in and work on a programme knowing that it’s going to be bloody hard work for a couple of years, but at the end of it, they’re going to be able to say that they’ve– you know, if you double your revenue, the value in your company has gone up by a factor of three or four, triple it and your value’s probably gone up by five times. They have to be determined.

Nathan: Quite fascinating. Going back to a point that you made around the leadership team, you mentioned that it’s important to get alignment around your leadership team and get the right people in the right seats, moving in the right direction so that they can sing ultimately. What are the components of an exceptional leadership team, because if you read anything from the guys’ Attraction, they talk about having a visionary, an integrator, someone that’s, a visionary is the person that sort of big picture plans, integration is the person that can get stuff done, and then breaking the leadership down into four or five main core areas, marketing, sales, operations and finance and under finance can come IT and all the rest of it. From your experience, what are the components of an exceptional leadership team, both structure and personalities and attitudes?

Felix: I spent many, many, many years working with people like Julia Perry, the leader in team-building psychometrics in the UK, and with things like StrengthFinders and all of that kind of stuff. I have done every psychometric test on myself and on my leadership teams and on the companies we work with and so on. Having been obsessed with it for many years, came to the conclusion it doesn’t matter, [laughs] but what really, really matters is that they’re A-Players; they’re absolutely committed, absolutely held to account and hold each other to account. There are processes and methods for getting people to hold each other to account.

Nathan: The Traction guys say, by the way, they have to get it, want it and are committed to it, GWC, I think they call it.

Felix: Traction is really a good book by the way. I’m not going to say that it’s very similar to 2Y3X, but definitely one of its sources is the same as one of our sources, which is Scaling Up by Verne Harnish, but they have a couple of other sources that we haven’t leant on and we have something that we have lent on that are much more in the consulting space. I rate traction and I rate the advice that they provide. It’s just that on the team makeup side, in terms of the psychology, I’ve discovered that the reality is that all that matters is eight players and the various qualifying aspects that you need, you really and you need a complete finisher and all of this sort of the standard and building team type stuff. It doesn’t make any difference or very little difference. One of the problems is that people’s psychology and people’s roles and attitudes change depending on what the task is that they’re working on. If you’re doing a programme like 2Y3X, then your tasks change every quarter. Trying to create some balance of team psychology in a longterm team where the roles are changing every quarter is impossible to do and an actually complete distraction. The one thing that I think is very good about traction is that they have a scorecard for core values. They’ve got an ABC level for core values. I think the core values and when I say core values, I don’t mean the crap that you put on your website, I mean your personal–

Nathan: Or the stuff on your wall. Right. Saw.

Felix: “Continuous improvement”; “integrity”; “The customer is always right” – that’s crap. Honour is a core value. I think core values are absolutely critical. Understanding those and creating alignment within those gives you all of the psychological enlightenment that you need in an extraordinarily high-performing team.

Scaling Up

Nathan: You talked about the book Scaling Up by Verne Harnish. Let’s talk a little bit about that because you said it’s your number two mandatory reading for entrepreneurs and business leaders. It’s a great book. It’s a really good book. It’s a framework to grow any business essentially into sort of an industry-dominating firm in their vernacular. Their focus is on people, strategy, execution, and cash. Why do you rate the book so highly?

Felix: Because it’s exquisitely well thought through. It has a fatal flaw but it’s– Every component part and there are many, many components within that book not only fit together with all the other component parts but has secondary reinforcing effects that are unintended consequences that are positive unintended consequences and I love it for that. I like multidimensional systems and this is the ultimate self-healing or self-supporting strategic framework. The fatal flaw is that you need 1000 people in your company to have the resources to be able to implement it. I think Traction and 2Y3X are very simplified versions of it. Traction focuses more around the sort of the people side of things and 2Y3X focuses more around the balanced scorecard and strategy map and roadmap processes. Everything that comes out of Scaling Up is different because there are so many different facets of it. It’s an extraordinary book.

Nathan: Quite fascinating. Verne Harnish says in the book that handling a company’s growth essentially requires three things, an increasing number of capable leaders, scalable infrastructure and an effective marketing function. To what extent do you go along with that and where have you seen agencies fall down in one of those three or maybe all of those three points?

Felix: Well, my own practice focuses on scalability for fairly obvious reasons. If you haven’t got a structure that can scale easily, if you try and grow something and triple its revenue or triple the profit, then it’s going to fall over extremely fast. I like agencies where at the end of the programme, I can turn around and say, “Look, they won Agency of the Year five times.” They’ve gone on to dominate. Building in scalability is for me it’s absolutely critical because if you don’t then you’re screwed. Frankly, I think that marketing should be a process and good marketing is just a process of consistency and differentiation. Marketing is not rocket science. If it were rocket science–

Nathan: I wouldn’t be doing it.

Felix: Agencies wouldn’t be in business at all! [laughter]

Nathan: Quite fascinating. You’ve worked with some amazing clients. I’m just going down your list here, Alpha Century, Impero, Verb… Is there a particular client that you’re most proud of the work that you’ve done for them and the results that you’ve generated?

Felix: No. They’re all very different and the personalities are very different. Sometimes it’s harder work than other times where it’s just a joy and you want to go out for beers with people. The amount of work that the people we work with put in especially around building exceptional teams is wonderful to watch. Obviously, some of the propositions I find cuter than others. “We make tired brands famous again” which is Impero’s. They’re the ones that won five agency of the year awards last year. You can’t help but be proud of them but actually we only doubled their revenue, so it’s not–

Nathan: Only.

Felix: It’s not the most effective case study but as an agency they come out the other side of it (A), twice as high but (B), my god what an agency. They’re the envy of the industry and it’s lovely to see the– What a team. They’ve got an amazing team. I think one of the common factors of all of the people who we worked with is, because there’s such an effort or emphasis right at the beginning on building a superstar team, you find by the end of the two years that you’ve been working with a superstar team and my god, that’s fun.

Nathan: I’m sure. For your own growth as well and your own professional development. I’m sure it must be amazing.

Felix: It is. You’re learning constantly. The funny thing is, as you pointed out, I am quite old.

Nathan: I didn’t say that by the way. Those were not my words.

Felix: [laughs] I’ve got people on some of the growth app teams who are in their very early 20s. The amount that you learn from people who are from a different generation with different attitude to life, who’ve grown up through different education system, who’ve grown up from birth knowing how to work an iPad, there is a constant refreshing joy that you get from working with ambitious companies.

How to delegate effectively

Nathan: Quite fascinating. You mentioned a little while ago about building exceptional teams. You said that the seven most important words for a CEO to their employees or their team is, “I don’t know. What do you think?”

Felix: Yes, I think that I borrowed that probably from Jim Collins. Either Jim Collins or Patrick Lencioni.

Nathan: I won’t tell them.

Felix: [laughs] It’s okay. Everybody borrows from– [coughs] I think I borrowed that from either Jim Collins or Patrick Lencioni. It’s actually it’s the seven most powerful words not only for a CEO but seven most powerful words for anybody who manages people because to get the best out of people, you want to get them to think for themselves. By saying something like, “I don’t know. What do you think.” When they come to you for a solution forces them to think for themselves. You can teach delegation. There’s a formula for delegation and there’s a formula for setting people tasks and goals and smart and smarter and all that kind of stuff. Reality is, if somebody comes to you with a problem and you’ve always got the answer because you’re smart and you’re bright and you know what the answer is, somebody comes to you and says, “Oh boss, I’ve got this problem.” And you say, “Well, do it this way.” they’ll learn how to think. If you turn around and say, “I don’t know. What do you think?” They are forced to consider it answer. The more that you do it, I know it sounds cheesy, but you might as well stick a sign on your door. If every single time somebody comes to you with a problem, or an issue, or question, you say, “I don’t know. What do you think?” Pretty quickly, they’ll come to you and say, “We’ve had this issue, but I know what you are going to say, so I thought three different solutions. Which one do you think that we should do?”

Nathan: Fantastic.

Felix: At which point you say, “I don’t know. What do you think?” Then they say, “Well, my recommendation is we do this.” You say, “Great, go off and try it.” If it screws up, then hey ho, we’ll learn that it’s not B next time, it’s A or C or check in with me tomorrow and see how we’re getting on. You’re devolving responsibility for being creative and coming up with good solutions to people that you employ. Now, that then requires you to employ great people. I’m a passionate believer that if you’ve got anybody in your company who is not an A player, you should be getting rid of them. I can be quite brutal like that. I tend to– Most of the clients that we work with pay for the whole of the two-year programme in the first couple of months, by getting rid of the people that we tell them to get rid of.

Nathan: Really interesting, wow.

How to hire ‘A Players’

Felix: Because you don’t want people who can’t think for themselves. You don’t want people who are holding you back, or won’t allow you to move into the direction that you want to go. We do quite a lot of work around people.

Nathan: Tell us what the criteria is for A Players then.

Felix: Geoff Smart’s definition, he wrote a book called Who: The A method for Hiring. Geoff Smart’s definition of an A Player is somebody who is in the top 10% of candidates and of those is in the top 10% of people most likely to be able to fulfil the requirements of the task. In effect, it’s a top one percenter.

Nathan: Wow, that is a really high bar.

Felix: Well listen, if you head towards that bar, I’ll buy you a drink. If your support staff are near that very high bar, then you’re going to improve the people here and people like working with smart people.

Nathan: Definitely. Jim Collins almost says, it doesn’t really matter, as long as you have the right people on the bus, A players, it doesn’t really matter what your strategy is, because the right people will figure out what the best direction is to go.

Felix: Kind of.

Nathan: Kind of? Okay.

Felix: I understand where you’re coming from, but the reality is–

Nathan: Not me, Jim Collins.

Felix: You have the right people on the bus for the task at hand.

Nathan: For the task at hand.

Felix: There’s no point in having just A Players and then saying we can have a strategy that doesn’t appeal to you. They’ve got to be A Players in the context of them being in the top 10% people who can complete that task successfully. If you’re going to say, “We’re going to be the best CRM strategists in the world.” So I had an agency where our stated goal was we want to be the best CRM strategists in the world. If the interest of the A player is in creative and not in strategy, then they’re in the wrong place. They’re going to be B player at your place, and they will be an A player somewhere else. Often, I find that the person you get rid of from your team, because there are C players, because they’re holding everybody back and wingeing, goes off and find somewhere where they really want to work and they become an A player there.

Nathan: Fascinating.

Felix: I have no problem with that at all.

Nathan: It’s not that they’re perennially C players, it’s just that they are in the wrong context, they’re in the wrong seat?

Felix: Completely. I think everybody’s an A Player at something, it just may not be working for an agency.

Nathan: That’s a good point. Felix, I know I’m conscious of your time. I don’t want to– I can sit here talking to you for hours, but I’ve only got a few more minutes left with you. Let’s get into everyone’s favourite questions. These are the questions that I ask all of my guests. Tell us about a time when you failed, and what you learned from the experience.

Felix: There are so many failures that I’ve had. I have practically– I’ve made every mistake that you can make running an agency. Over 22 years of running agencies, I cocked things up left, right and centre. Sometimes I make the same mistakes two times or three times in a row. After a while, sometimes the message drips home that you shouldn’t do it like that anymore. I mean, I remember pushing a superstar employee too hard once and I broke them and they quit. It was hugely upsetting for them and it was hugely upsetting for me. That taught me that you’ve got to respect people, you really have to respect people and you have to respect the fact that people have lives and aren’t necessarily always as driven or as motivated as you are as an owner. I will continue to make mistakes. I’m sure. It’s just that after 20– whatever it’s been, 25 years now, it’s very easy for me to say to other owners to spot the obvious mistakes that they’re going to make and to have more often to show them a better way.

Nathan: They’re not mistakes, they’re teachable moments. That’s my new term for them. Teachable moments. Tell us some of your early mentors. Who were some of your early mentors? Who influenced your approach to growing agencies, to entrepreneurship?

Felix: Funnily enough, we mentioned Vistage earlier. I joined Vistage– Vistage pitched me for five years to join and I joined them eventually reluctantly and then I went along to my first meeting and within the first hour of my first meeting, I think I’d made 50 grand by writing something down somebody had said as a throwaway remark. I did Vistage for a few years and my mentor there was Charles Llewellyn and he was the chairman of the bank, six foot nine, extraordinarily bright man. He was the one who taught me the value and the power of coaching because I don’t think he and I ever finished a coaching session without me going, “Aha, I’ve got it. I’m really sorry, Charles, can we finish?”

Nathan: I’m off.

Felix: I’m off. He was amazing and he taught me everything that I know really. A truly extraordinary man.

Nathan: Wow. You definitely got your value from a Vintage then?

Felix: I certainly got my value from Charles. Charles was an amazing man, is an amazing man but he was an amazing mentor for me. He showed me all of the things that I didn’t know I was missing which at the time was a lot.

Nathan: Do you think every CEO needs a mentor?

Felix: Yes.

Nathan: Okay. Move on. [chuckles] Simple answer. Really, why is that?

Felix: Because one of the– Let’s call it a benefit and a feature of CEOs especially if you’re into psychometric testing and stuff. Your classic CEO’s and ENTP probably with an assertive bit tacked on to it. We as CEOs, we have tendency to have come up with a vision and to be brilliant at driving people towards this vision and don’t tend to check whether or not we’re heading on the right path. Sometimes the only people that can give us on this feedback are our spouses but they tend not to have the same industry experience as we do. Having an external mentor or a coach can give you a perspective and hold up a mirror that allows us to perhaps temper our pace or temper our decision making so that we don’t break things too often. I think that it is really important that we check in and don’t fall victim to our own hubris.

Recommended books for CEOs and owners

Nathan: We’ve mentioned a few books earlier, Verne Harnish’s book, and Traction. Tell us about some of your other favourite books.

Felix: I don’t think Traction makes my top 10.

Nathan: No, it doesn’t?

Felix: It doesn’t. I think it’s a good book and certainly interesting but it’s a derivative of Scaling Up so what can you say? Jim Collins’ Good to Great, Patrick Lencioni’s The Four Obsessions of The Extraordinary Executive.

Nathan: Great book.

Felix: Jim Collins Good To Great obviously, Built to Sell by John Warrillow is a really, really good book.

Nathan: Haven’t read that.

Felix: There’s a whole bunch of great books. Best book on negotiation by far is called Never Split The Difference by a man called Chris Voss who is just charm personified. He’s lovely. That’s a book that’s really, is written in a really unusual way because every single example is a negative example and he writes from the perspective of somebody who was the chief negotiator for the FBI in kidnap situations so it’s a really interesting book. What else? Who: The A Method for Hiring, best book on hiring people bar none. Again, complicated and complex but brilliant.

Felix: What else? Those are kind of the mandatory reading I feel.

Nathan: What’s your process for choosing books or deciding which books to read?

Felix: [chuckles] Well, about 15 years ago somebody sent me on a speed reading course. I think probably Charles Llewellyn told me to go learn how to do speed reading. I went on a speed reading course which teaches you how to strip-mine books. In effect, if you treat a book, a business book like a newspaper where you just look at the headlines and then you dive into it. If you’ve seen that every business book has got five main points it wants to get across and you just say, “Well, I’m going to spend 15 minutes working out what the five main points are.” By the end of it, you’ve got a pretty good idea what’s in the book, whether it’s well written, what points are that it’s trying to make and whether or not you want to re-read it but properly. I probably get through– It used to be much more but these days it’s about 100 books a year.

Nathan: 100 a year.

Felix: Yes.

Nathan: Are you actually taking the content in because one of the issues I’ve had with speed reading is can you really absorb?

Felix: You’re not taking it in word-for-word.

Nathan: You’re not taking it in word-for-word. Okay.

Felix: No, not at all. What you’re doing is you’re taking in the most [inaudible 00:56:24].

Nathan: You’re stripping it.

Felix: You’re taking the themes and the main points and you’re doing deep-dives on the interesting bits. Don’t forget most business books are 90% padding.

Nathan: They are but how do you know which bits are the padding and which bits are mandatory reading without reading it? That’s the speed reading course [inaudible 00:56:43].

Felix: [crossalk] then look at the beginning of every chapter because the first paragraph normally says this is what’s going to happen in the chapter. Then, the last paragraph in the chapter tends to say, “This is what we just learned.” Even if you just did that, that’ll probably give you 80% of the content of the book.

Nathan: Have you read the book How to Read a Book?

Felix: No.

Nathan: It’s exactly the same or similar to that. It basically says, “Look in every single book there are a handful of ideas that the author is trying to communicate.” In most business books they’ll have an introduction but what you do before you actually read the book is you– What he recommends, is go to the back of every chapter. Look at the summary, there’s normally a summary and then you understand what they–

Felix: Totally. Exactly. That’s speed reading.

Nathan: That’s speed reading. Interesting.

Felix: That’s one of the techniques of speed reading. There are lots of others like being able to scan all the words in it very fast and all that kind of stuff. Reality is with a business book you want to work out what it’s trying to say and once you’ve worked that out, you make some discerning judgments as to whether or not you can be bothered taking it any further. Most books say the same old shit over and over again. It’s only the brilliant authors that are really worth reading.

Nathan: Sure. Yes, investing the time in. It’s such a time commitment to really, to go through, yes, 300 pages or whatever it is. Last question about reading because I’m fascinated about this. You read 100 books a year. Of those 100 books, how many of them do you put down as opposed to continue? What’s your buy to read ratio is what I’m trying to get at.

Felix: The ones I really focus in on, probably number about 20 a year, where I read them properly. Maybe 15 but 15 or 20. I’ve got a list of I think 12 books that are mandatory reading for all of the companies I work with. I make everybody on the whole growth lab team read all of those books. Those are the sort of the fundamentals for building a fantastic company and running a fantastic company that can scale. There are lots of interesting books. There’s this great book on– I read a great book the other day on pricing strategy that if I ever come across a client that’s having problems with pricing strategy, I’ll get them to read that. Some of them are highly specific, highly tactical books.

Nathan: Last couple of questions. What do you do for fun when you’re not growing agencies?

Felix: I travel as much as I possibly can. I go to Burning Man. I go to a few festivals every year because I’m still trying to pretend that I’m my blue-haired rebel. I’m writing a book of my own. I just finished the first draft. That seems to take up an awful lot of time. I have as much fun as everybody else does, although probably more because I’m fortunate enough that I don’t run my own agency anymore.

Nathan: Fortunately.

Felix: I just help other people grow theirs.

You get what you pay for

Nathan: Makes sense. My final question, Felix, what do you know about growth and growing agencies today that you wish you knew when you started your career?

Felix: That other people know an awful lot more than I do is still probably the case and don’t be afraid of getting advice and investing in the very best that you can invest in. I think when I started out, I wanted to do everything on the cheap and grow my own and I thought that my way was the best way and so on. I think that what I’ve learned is that if you want to do something quickly, invest more in the talent, and the advice and the processes that will allow you to do it because actually, you’ll be able to achieve great things fast if only you have the right resources in place. That costs more. To hire a fantastic client services director, for example, is going to cost you an awful lot more than trying to teach somebody who’s currently an account director how to run half-million or million-pound accounts. You’re on a hiding to nothing with the latter. If you want shortcuts, you’re going to have to pay for them.

Nathan: It’s quite fascinating. Felix, thank you so much for doing this.

Felix: My pleasure.

Nathan: We have been speaking with Felix Velarde. He is a co-founder of 2Y3X, the two-year growth acceleration programme that’s designed to triple revenue. You can find out more at 2Y3X.com. We’re not going to ask you to subscribe or give a five-star rating or share this episode with a colleague because our thinking is if the content is any good, you’re willing to do that anyway. We’ll leave that decision up to you. Email me at [email protected] I’m Nathan Anibaba. You’ve been listening to Agency Dealmasters.

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