Don't Be So Far in Front of the Parade | with Greg Beatty
GAIN Momentum episode #5 - | with Greg Beatty
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Jason Emanis: Welcome to the Gain Momentum Podcast, focusing on timeless lessons from global industry leaders about how to grow and scale a business in hospitality, travel, food service, and technology. I am Jason Emanis , and I'm here with my co-host Adam Mogelonsky. Adam, how are you?
Adam Mogelonsky: Great to be here.
Jason Emanis: And our guest today is Greg Beatty. Greg is a gain advisor, a recovering lawyer it sounds like COO spent, quite a few years in hospitality servicing hotels and coming to us from Thailand. How are you, Greg?
Greg Beatty: I'm doing great guys. Thanks. Jason and Adam, happy to be here. It's Friday evening in Bangkok. I know it's Friday morning for you guys. And I can tell you the future looks bright.
Adam Mogelonsky: It's good to hear.
Jason Emanis: That's good. Adam, you wanna take it
away?
Adam Mogelonsky: Yeah. So, The way our format works here, Greg, is we have four questions that are focusing on timeless lessons that apply for anyone seasoned veterans people who are interested to learn to become seasoned veterans, focusing on travel and technology, but also applicable to every single industry.
So, With that in mind, I'm gonna take it away with the first question. So, And that is when it comes to scaling a business, what is the single piece of advice you would give entrepreneurs from your perspective as a professional in the travel industry?
Greg Beatty: Single piece of advice is actually pretty hard to narrow it down to one. I would actually have to jump it to three questions. If I can do that. When I think of scale, I think of growth. So what's the additional resources that would be required to scale? Cuz presumably you're looking for economies of scale.
But some additional resources may still be required, especially for distribution of additional products. Why do we wanna scale? of course every company wants to grow, so that's rather obvious. But why now? Why must we scale now and how are we gonna do it? Again, if you're looking for economies of scale you wanna do it with, Pretty much the same resources, if possible.
And I think the best example would be software. Cuz if you create another license of software it doesn't cost anything. But if you're not in the software business, that scaling the more production is going to cost some money. So how are we gonna do that? that would be in my initial thought.
When I think of scaling, I think of growth as well, right? How do companies grow? And the classic examples would be you grow organically or you grow through an acquisition, you buy another company. You grow additional revenue streams with more products. And also I, I think some people think that, That scaling is also going into additional countries.
When I was working with a Japanese company called Docomo inter Touch, we service the Hyatts, the Hiltons, the Marriotts around the world outside of North America, and I always fantasized cuz I was at one time I was the c o and I always wanted to go to additional countries. So I was excited to go to new countries.
But I can tell you that our c e o was not always excited to go to new countries. And I'll give you one example. Marriott, they wanted us to go into Libya because they were building a new hotel in Libya. So they were opening that country for themselves, and they wanted us to to be their technology partner put in the wifi system in, their new hotel in Libya.
And of course I was excited to. to be able to travel there. But it never happened because the c e o didn't agree to it because he didn't think we could get scale in that country. Number one, because one hotel, yes, you get the anchor. Customer, the anchor client, that's not good enough to scale the business in that country.
The money that we would've made from one hotel, the revenue would not have covered the cost because we would've had to hire at least one person in that country. We would've had to set up a physical presence. We would have to pay for the setup fees of the company and annual accounting fees and everything.
So Generally the cost of going to one of those countries is 15 to 20,000 per year. Just the costs of legal and accounting costs. And we would not have recouped that from that one hotel cause it was a rather small hotel. So then it becomes incumbent on us to actually scale in that country of which we knew nothing about.
So we didn't do it and one of our competitors did get the deal and actually turned out to be a blessing in disguise because three months after that hotel went live it was taken over by Gaddafi's counterparty. it became a hangout for the, for the rebel government. So that, that turned out to be a blessing in disguise.
So going back to your question, when I think of scaling I don't think it's the same as going into new countries and geographic coverage, cuz coverage is not the same as scale.
Jason Emanis: Yeah I've been through expansion in a small company. It was hard, man. It was a big adjustment. I, and I feel like a lot of executives aren't equipped for the decision analysis to make those jumps. I don't know where they go, to equip themselves so to speak.
Greg Beatty: We couldn't do it remotely either because once we install a system into a hotel, you have to have somebody to service it because we have to meet service levels, and the only way we can meet service levels is by having someone in country, right?
So then it becomes an extra cost. And they do expect us to meet those service levels, and you can't do that remotely. So at least the service levels we had,
Adam Mogelonsky: I wanted to bring in another thread here is that you are a trained lawyer as well, and I think that's pretty interesting merging the legal and the technology. And I'm wondering how have you brought both of those skill sets together to help companies decide on answering why scale now?
Greg Beatty: Okay, so from a legal's perspective, I'm not litigation, I'm transactional.
Adam Mogelonsky: So I would write
Go ahead
Greg Beatty: Scaling. Okay. So from a contract perspective, one of the things I would do is when we need partners in a certain country we have to do the due diligence on those partners.
And I always think that You can have a good contract, but it's more important to have a good partner because if you don't have a good partner, but you have a great contract, it won't necessarily be enforceable in a practical sense. You might have the right to make a claim but you're really gonna go to court or you're really gonna go to arbitration sometime the business case for that, it can be more expensive to get that resolution than the original money that is due to you.
So the due diligence becomes much more critical than a great contract. And speaking of contracts, the one, one question I always get is well, how can you do,, how can you write a contract for such and such a country? When I worked in many countries and you know what most. Times even different legal systems like the civil law and the common law systems.
If the contract's generally gonna be a freedom of contract. So whatever the parties agreed to. Unless it's against you know, the morals of that country or something. But that's ver a very rare exception. Generally speaking, all countries allow the freedom of contract. So I was able to draft contracts across many countries, and if I felt I needed to get something approved or certain clause looked at by a, local legal counsel I would certainly do that.
But it was on a clause by clause basis as opposed to outsource it's in the whole contract to a local lawyer
Adam Mogelonsky: interesting. I'm gonna move on to the second question here. So Greg. a little bit about this edging into it, but what are the common pitfalls or failures you have witnessed that business owners should look to avoid when scaling their business?
Greg Beatty: One way to scale the business is by producing additional products for your existing customer base. One problem I saw that we actually had was we had several products and several features on those products, and it became not only confusing for our sales team, but also to the customer.
So how you present those products or those features or how you frame them became very important because you had to take The, complexity out of it and make it simple. How did we make it simple? We usually had to pair things down to gold, silver, and bronze or premier package you know, secondary package.
But how you frame all those, products and features is very important. And we learned the hard way because, we confused customers many times and the sales team got. got angry because they couldn't sell this quickly. They thought they could sell more products and sales commissions on each deal.
But it turned out to be counterproductive sometimes by having too many options. So you limit the options, simplify the options. That would be number one. And if I can dovetail into one other case where we were primarily we sold wifi, we put in we designed wifi systems and sold the wifi hardware and software for the authentication and the wifi systems, you know, one access point in every room and so on.
And we were good at it, but then we decided, That we were gonna try to get into the CC T V cameras because every hotel also needs those. Right. And if we're knocking on the door at one hotel to sell them wifi, well why don't we sell them CCTV cameras? Right. well I went to a couple of conferences on that industry, CCTV cameras security.
And learned that it's a whole new industry. I learned how complicated it was. First of all when I went to that conference, there were at least 100 hardware vendors and probably 50 software vendors. So even choosing like, what's the right hardware solution? What camera should we use? And then it would be like Well, do you want the film in black and white or do you want it in color?
How many megapixels do you want? And then you have to design the network to put in. Where do you put in the ic, the CCTV cameras. Do you want back of head? Do you want front of head? And as it could be an invasion of privacy for some people. So how so where you position those cameras was very critical.
Make a long story short. We didn't sell one and another reason we didn't sell one was because not only did we, we couldn't master what the product was. Very quickly, the sales pitch went to, was directed to a different team. The wifi was directed to the I.T. People at the hotel. But the CCTV cameras were pitched to the engineering department.
We didn't know that until after we invested a lot of money to learning the CCTV cameras in that industry. The quick lesson that we learned was if you're gonna fail fast. And we did. So we didn't lose a whole lot of money. We didn't lose a whole lot of time. I'd say six months. We did hire a couple of people, so we had to let them go, but it wasn't a huge disaster because we realized that.
Hey, we failed. Fail fast, and that's okay if you fail. Fail fast and learn from it.
Jason Emanis: I think it's common to underestimate, even going back to expansion, it's, it just seems common to underestimate these investments, whether it's expanding or adding products. I've been, I've seen that as well. It's like, new product into a hotel. Great. Come find out. Very complex sell.
Total different audience underestimated the product management side. On our end, the training of the sales team,
looping in marketing and getting them trained upright, and it's, it was just, ooh, it was rough.
Greg Beatty: Yeah. And, so we did train one guy. We hired one guy to, to pitch to the hotels. But because we're in many countries, our headquarters was in Singapore, but our hotels were all over Asia and the Middle East and Africa. So we had to send that one guy out to do site surveys just to get the information to do a proposal, we wouldn't even necessarily get the deal. So it was very costly to do the proposals. Anyway, we failed fast. If I could just say one, one other interesting example was, again, we were the wifi guys. The hotels wanted to get into all the brands wanted to test the mobile key where your phone the key to your door.
So, So you would get your, you know, room 5 0 2 would get downloaded into your phone, sometime as you entered the hotel or before you entered the hotel. So you could bypass the front desk, you know, and we've all suffered through those long queues at the front desk, right? So it sounded like a great idea.
And some hotels are still doing it, but they've been talking about it for 10 years and not many hotels have implemented it. And here's why. The finance people didn't like the ROI because they were already using the key card. So there's one ROI they've already invested in the. Traditional key card system.
So the finance people were like why should we buy a secondary system? Because the mobile phone is not meant to replace the key cards. It's supplementary too, right? So the CFOs at the hotels would say why should I pay for two ways of getting into the room? So that was a really hard sale.
And then technically even when some hotels just wanted to trial it they really couldn't bypass the front desk because in many countries around the world, and I don't know what it's like in the US or Canada, but the guests, when they come into the hotel, they must log their passport at the front desk.
That's a police requirement, not a hotel requirement. So the hotels must follow that rule, right? So they didn't save any time after all. And then if it works for the door to get into the elevator, sometimes you need the key card to, to go up to your room, right? To go up to your floor. And then you get like eight people in the elevator at the same time and they've all got their phones out trying to, you know, get their floor destination.
It was a nightmare. So that's one of the reasons why this hasn't really been, taken off. Except for maybe small, some small hotels. And then of course, the four star, five star hotel. They want that human touch, right? They want to interact with the guests. That's where they get their value and their high rates because they, oh, they know the customer's name.
Oh, Mr. Jones, welcome back. So
Adam Mogelonsky: Yeah.
Greg Beatty: was fairly interesting to go through that pain.
Adam Mogelonsky: The whole idea of fail fast really resonates with me. I guess just really quick follow up is on that example about the pivoting or expanding to CCTVs is a lot of those obstacles, why weren't they ad identified before you went through the whole process of developing a sales team and sales apparatus around trying to sell into that vertical?
Greg Beatty: That's a good question because we did not do a business case for that, and usually you think you should. It was more of an, It was more of a an emotional Touchpoint for one of the leaders in our company who just wanted to wanted to do it. And actually, you know, it sounds like it sounded like a good idea, right? You're at the hotel already, sell 'em another product. They definitely need CCTV cameras. We could get more revenue, we can grow that way. But we didn't do our research We tried to get to first base before we, you know, knew the team we were playing, and, we failed.
We didn't sell one, not one. well actually, you know, we did one be because they got it for free because we needed a reference site, which is another thing that's always bad. Again, when we go into new countries, it's not about new products, but the sales team Oh, that we gotta get that.
We gotta get a big brand name. We gotta get the Oriental, we gotta get a Shangrila, we gotta get this JW Marriott. We gotta get this Four Seasons. So they want this nice reference site that the sales team really cares about. I never saw it resonate with any customer. No customer ever said to us like, no.
No Hilton ever said, oh let's do business with these guys because they got that shangrila, they got that flagship hotel. No, it's a good story to spin, but it doesn't spin any revenue at all.
Adam Mogelonsky: Wow, that's that's almost counterintuitive to a,, how a lot of technology companies, operate these days.
Greg Beatty: Well,
Okay. So, that, That was our experience. Of course. Yes. I know when something, when you're, Especially if you're a startup company, you need to have some reference sites, right? And when we pitched hotels countries around the world they would always say, well, do you have a reference site in our country?
I'll just use Marriott as an example. it's not a real example. I'm just using the name. If we had a Marriott hotel in one country and then in the adjacent country , we didn't have any hotels and we were trying to get a Marriott in that new country, we would say well, got three Marriotts in the country next door.
They didn't care. It had to be in their country. But then if you're gonna do that, then you have to think of a plan where, how are you gonna grow that country with a cluster of hotels? Because we had certain KPIs and certain, you know, number of employees versus the number of hotels would be one, typical one.
So we had to make sure that if we were gonna get one hotel in a country and open up that country, that we had to have a a cluster of hotels that we would expect to get within, you know, one or two years.
Adam Mogelonsky: Really gotta pick your battles. All right. We're gonna move on to the third question.
what do you see as the key opportunities and challenges for companies in 2023 and beyond?
Greg Beatty: So I see it in Asia, at least The the occupancy rates definitely going up big time and not at discounted prices, which of course, they were during the covid. So, The hotels, the travels picking up. All the planes that I've flown around the region have been At least 90% full.
Okay. There's less planes in the air, but the planes that are flying are at least 90% full. The occupancy rate of, I'll take a guess, is 70%. It's not a hundred percent like it used to be, or close to 170, but it's not 30 like it was during covid. So the definitely the travel, tourism, hotel business is picking up.
But opportunities. So Covid, I think you know, the one word I heard is touchless, you know, the, you know, any technology that is touchless so that the hotel guest isn't touching stuff, you know, where they can, you know, pick up germs or whatever, right? So anything touchless was quite, is quite, attractive to hotels. but the. the question I think has to be asked is for any business what problem are we solving? So if we have a new product or we have new technology, new way of doing things, what problem is it solving? And it's gotta be a valuable problem that you're solving. I've looked at a lot of business cases and written a lot of business plans.
When you have a business plan, it all comes down to this, which is how is my new business going to help people? And if you can answer that basic question and have a good answer for it, is probably a good business plan. Right? So the opportunity is a product or a solution or a technology that helps people give one example.
In the hoteliers that I'm talking to out here people that own hotels, one of the things that they want to do is reduce staff by 50% in the next three to five years. So do you do that? Through automation? Through technology. So if you have a product that can help solve that problem because they want to reduce labor.
They have to reduce cost because you know, my hotels, the owners of hotels, it's so competitive. Right? And they're Their profits are, you know, razors are thin. So they're looking to save money. The biggest cost is usually labor, right? So if they can save on labor, and usually that's gonna be through automation.
If you have a product that helps them do that, you solve a valuable problem for them, right? So there's the opportunity . One company that , a startup company that I'm helping is they do recyclable mattresses. This is a new business. I've never heard of this business before, but hotels, obviously, they need to buy mattresses, but it's usually a CapEx cost for them.
This company, it's based in Thailand. It's basically a leasing program for the mattresses. So the hotel doesn't have that CapEx upfront. They can lease it. And to my surprise, I thought there would be some like 10%, 20% premium on the overall cost of the duration of a mattress. And I think their maximum rental period is eight years.
But what they'll do at the end of eight years or, you know, and the hotels can actually commit to a lesser time than it could be two years, three years, four years, five, but the maximum is eight years. Whatever they choose, let's say they choose four years, at the end of that four years. the company who's leasing the mattress takes it back and recycles it.
you know, that it's a circular economy. The bio circular green economy, bsg, it fits that model. Having said that, it's doing a great thing for the environment, recycling these mattresses in a very Good way. They're having a hard time getting financing, even though it's a great story.
And they have very good business fundamentals. The guy that's leading the company went to Cambridge University in the UK so, he's got all the right credentials. But it's still a hard time. And I've worked with some other startup companies that are in the E S G and bio circular green economy, and they're having a hard time.
So I'm just shocked at how hard it is even for these green companies to get financing to get off the ground. Even though that, you know, those companies make big headlines every day. The practicality of it is how do you get financing? And it's hard. It's hard.
Jason Emanis: yeah, I just wanna, I wonder if it's like a, just a priority in the investors, they just don't have that priority. Cause it's also urgency. Are you solving a problem? And then how urgent is it? Like the labor thing is interesting. We all know that's a problem and most of us know it's not going away.
So it's pretty urgent that we find some solutions. Maybe in the investor's minds, they're like, mattress. Well,
Adam Mogelonsky: I want to think that the reason why they haven't sold investors is just timing. They're just a little bit ahead of the curve, but. Again, I don't know. It sounds like a great idea.
Greg Beatty: I love that phrase. You're ahead of the curve. My favorite phrase along the same lines is you don't wanna be so far in front of the parade that people don't know you're in it. Right. So, so you don't wanna be way out there and super advanced. You wanna be just ahead of the curb.
Adam Mogelonsky: Greg, we're gonna move on to the last. Question, and you've answered a lot of this already, but maybe there's a few other points that you have. So that fourth question is, what are the key things innovative leaders and entrepreneurs should prioritize and focus on to gain traction for their business?
Greg Beatty: Okay. So, Conceptually I'll just say, Look for quick wins. So when you talk about the word traction, that, you know, build momentum, right? So look for some quick, easy wins rather than one big, large, new product that, you know, has to be validated and market tested.
Just come up with something small. There's nothing wrong with small, right? So I'd say look for quick wins. I had a conversation with someone, we were talking about I'll call it the triad of what's more important for leaders of a company.
Is it employees? Is it profit or is it customers? And this. Conversation transpired because the CEO of one company Was saying well, we gotta treat our, we gotta treat our employees right. And the conversation revolved around some severance pay and some holiday turnover, cuz some people were collecting like 60 days of accumulated of holiday time.
And I said most countries, most companies should make the employees use up that holiday time. Within the first three months of the following year, maybe six months. Right. But you don't let them bank up like 60 days. Right. That's actually poor management. the CEO say, oh no, we've gotta treat our employees.
We got, you know, the right way. And we, if they don't want to take the holiday and we'll just keep it in well, that it creates a liability for the company accounting liability. Right? So, one guy was gonna buy into the company, but he didn't wanna buy into the company, invest in the company because of all this liability which was not counted in the, what the guy was asking for the investment portion.
So that got into conversation of what's more important, the revenue, the employee. Or the customer. And I think there's no one right answer to that because it really is a blend of the three. But it should be a blend, not just one. Right? Because, you know, you say, oh, happy employee makes the customers happy, cuz you want the, you know, the smiley face of the sales team to go out and approach the customer, right?
Yeah. You wanna have happy employees, but you also want to have customers, right? So, It's a blend of all three. I think not just one weighs more than the other. so I would look for getting traction by continuing to examine that triad.
Adam Mogelonsky: Interesting.
Greg Beatty: Just one more thing. You gotta remain, personable. To the customer, right? So again, we're gonna go back to that triad, the customer, right? So one story last year, I met a guy from Australia who is up here in Bangkok, very successful person owns this company.
And you grew the company three times during Covid. And I said well, how did you do that? And he goes, you know what? And I never. All my customers must pay a hundred percent upfront, right? I never finance anything. I don't do any, any financing for it. I never do anything on credit.
They gotta pay upfront. So how do you do that? What do you, what are you selling? Are you selling something sexy that people need? And you know what? It was printing cartridges. The guy sells printing cartridges right now. The guy's so successful that he's got like three luxury cars. I think one of them's a Lamborghini and one of them's a Rolls Royce and another one's a Mercedes.
So he has three cars, three luxury cars. Very successful. But he goes, you know what, Greg, I never once got a thank you note when I bought those cars, but every customer who buys a printing cartridge from me gets a personal thank you note. thought that was a, I mean, I locked that one in the memory bank.
That was a conversation I had last year, but it's so poignant, right? That's printing garbage. He said, Hey, it's a customer. You gotta make the customer happy. Make 'em feel good. the other thing dovetailing of that one is he said, customers want two things. They want a solution to their problem, which we talked about earlier, and they want to feel good.
And he goes, the thank you note makes 'em feel good.
Jason Emanis: Yeah, that's a good story. That's a good story. Customers like interacting with senior leadership that, you know, some sale goes down and senior leadership reaches out with a thank you. It works real well.
Greg Beatty: And he also, when the phone rings, he answers it. If he's there by the phone, he picks it up. Yeah. I'm the c e o of the company, a big company, but he's, he operates in three countries, New Zealand, Australia, and the uk. But he answers the phone. I'm not afraid to do that.
yeah
Jason Emanis: Better man than me. You. You better text me before I answer the call,
Adam Mogelonsky: Yeah
Well,
Adam Mogelonsky: Greg truly, fantastic answers, a ton to learn from and maybe to listen to two or three times just to really grasp some of the concepts here. I can't thank you enough, Greg, for coming on.
Greg Beatty: Thanks guys. Thanks for inviting me to the podcast and and thanks for, you know, engaging in the answers as well as asking the question. So, thank you for that Jason and Adam. Much appreciated.
