Minter Dial  00:05

Hello, welcome to Minter Dialogue, episode number 552. My name is Minter Dial and I’m your host for this podcast, a most proud member of the Evergreen Podcast Network. For more information or to check out other shows on this network, go visit evergreenpodcasts.com. So, this week’s interview is with Felix Velarde. Felix is a serial entrepreneur with a long track record in the agency side of the business. He’s currently CEO of the 2Y3X program, chair and board advisor, and partner and Chief Strategy Officer at the AVA Acquisitions. He’s also a celebrated keynote speaker and the author of “Scale at Speed: How to Triple the Size of Your Business and Build a Superstar Team,” published by Robinson. In this conversation with FedEx, we discuss his book The importance of creating a good company culture, establishing appropriate goals, governance, ambition, ethics, branding, and much more. You’ll find all the shownotes on minterdial.com. And if you have a moment, go over and drop in a little rating and review and don’t forget to subscribe to catch all the future episodes now for the show!

Mr. Felix Velarde! Or should I say Mr. 2Y3X. We’ve now known each other through various means over the years and we had a wonderful serendipitous exchange with Sally Henderson, our mutual friend and saw your book Scale at Speed: How to Triple the Size of Your Business and Build a Superstar Team about which we’ll be talking. However, in your own words, Felix, who are you? Who is Felix Velarde?

Felix Velarde  01:56

Good morning, afternoon, depending on where you’re listening from, who am I? So, I am an accidental entrepreneur, I started my first agency because basically nobody would give me a job. Or I couldn’t keep a job that anybody would give me. And it happened to coincide with the internet and being involved with is with various online community communities around music, and falling in love with the idea that you can talk to people on the other side of the world instantaneously, it was amazing. I had this idea that Greenpeace UK might be able to talk to Greenpeace USA for the first time. And that would be brilliant, wouldn’t it? And then the web got switched on. And I happen to be hanging around a design studio at the time. And so, we started hyper interactive. And so, that was one of the first I guess, digital, Mavericks had blue hair, attribute attitude. So, that’s where I came from. And then I had six agencies started six agencies, five of which were moderately successful, couple of which were very successful. One became the digital arm of Lowe worldwide in the late 90s. In an extraordinary deal, I think we got multiple, up to 12 that say, and then various disasters over the over the years and ended up running an agency group. And then kind of tried to retire about eight years ago, nine years ago. Roseburg started a two or 3x program to help it entrepreneurs like me, and I consider myself to be a very happy and very lucky man.

Minter Dial  03:44

Well, 2Y3X. What is that?

Felix Velarde  03:51

So, all the way through my career, I came up with funny names for my agencies that had double entendres, or ways of being misinterpreted. And one of my more recent agencies was called Underwired for that purpose. But always, I’ve always passionately tried to find great positioning and propositions for my agencies. And then when I was running the group, their agencies and now that I have chaired a bunch of agencies. So, I always wanted to find the name that actually does what it says on the tin. And 2Y3X is a program for agencies who are struggling to get past a growth barrier or growth plateau, one of the ceilings, and want to scale so that they can exit and so, 2Y two years, 3X three times of value or three times the revenue or three times the profit, whatever you want to set as a target and then it’s largely or partly a target-based program, but yeah, it does what it says on the tin.

Minter Dial  04:59

Indeed. Very nice for that. Let’s talk about agencies just a little bit because of course, I have my experience with agencies and to the extent that you deal with so many of them, and they are also normally helping other clients deal with their branding and such. How would you describe the state of agencies, marketing agencies, branding agencies, whichever you want to call them digital agencies today?

Felix Velarde  05:29

So, there’s a kind of, there’s two ways of answering that two different perspectives. There’s the kind of existential angst perspective, which is, oh, my goodness, how are we going to survive, the world is changing AI, sales enablement, and the economy, and so on. There’s this kind of momentary, slightly myopic view of where am i right now. And those things need addressing. And so, we work we do a lot of work, helping people address those kinds of things. But actually, the other way of looking at it is nothing has changed since J. Walter Thompson in whenever it was 1875. Agencies, by and large, do the same things in the same kind of way, using the same kind of frameworks for the same kinds of clients as they always did. And the thing that frustrated me, especially reading lots and lots of good and bad business books in the run up to putting together two or three eggs, and then later putting together the book scale of speed, was a nobody really teaches you that all of the stuff that is painful in running a business has been done before and addressed before, and shouldn’t be bloody painful. You know, we get taught about, you know, we get forced to read “Good to Great,” which is a brilliant book, by the way, Jim Collins and Patrick Lencioni, his books are amazing. And we pick one kind of nugget from them, and we pick out sort of start with why and think about your motivation and stuff. Or we pick out how to delegate Well, you know, we pick out acronyms, and smart and all that kind of stuff. And so, we get taught one thing at a time, and we very, very rarely get taught as entrepreneurs that there are systems for running businesses that work perfectly well. Thank you very much. And you don’t need to reinvent the wheel. So, for me, looking at it now from the outside, I see agencies is spending 90% of their time, trying to figure out how to do stuff that other people have already figured out. And 10% of their time, trying to figure out how they’re going to address the future, how they’re going to do better work, how they’re going to be more creative, how they’re going to engage their clients better, which is the important stuff. So, so. So, I have this kind of ambivalence, this, this sort of slightly polarized view of agencies, I think, is an industry really interesting time. This is really exciting. You know, how do you address the opportunities and threats of AI whilst keeping your staff? Because if you don’t keep your staff and ai ai, does it, who’s going to buy your products, because he’s tough is going to be at work? Who’s going to buy the stuff that you’re marketing for your clients? Which is the kind of the Henry Ford problem? And also, how do you address the career advancement problem, which is got a bunch of experts at the top? And we’ve got AI doing all of the work at the bottom? Who is going to be the apprentice who is going to be the trainee? And how do you accelerate them on to a path where they can become experts and leaders and so on. So, those two problems are, that they’re the naughty ones. They’re the interesting ones. And they’re the ones that I think agency owners and founders should be spending the vast majority of their time addressing for their own businesses, rather than trying to figure out how to do the stuff that we already know how to do. And you can find in your book and my book and a few others about how to grow and manage and build successful agencies and agency groups and, you know, do your fantastic exit or change the world whichever of those two you want to pick?

Minter Dial  09:21

Want to get back to something you said, Felix, a little earlier, which is yeah, these two ideas, split personalities, quote unquote, about the how the agency businesses, and specifically in the second one, you said that you know, there’s lots of things that haven’t changed I have to push back on that to say that it feels like the agency business has been completely up ended, in terms of the way things are done and the demands of clients and the opportunities for customer and for competitors. I have a friend in Paris who started an agency of sorts, called Eyeka and the idea was to crowdsource or at least to, to use the world’s supply of designers to answer your brand question, as opposed to having to go down to Publicis or Grey or whatever, and see them in their office, huge expanse. 15 people per meeting, you know, give you the riot act as to how to do a brand, that we know everything… And the way to do marketing is so much more complicated today. In that now there’s so many more channels to communicate with anyway. So, basically, what I’m saying is, I don’t see how it’s easy to say that the agency business hasn’t changed over these dynamic years.

Felix Velarde  10:50

I think this is a it’s, it’s about which angle you’re looking at. So. And by the way, the crowdsourcing of of ideas is not new, I listed Duncan has been doing it for 25 years, very successfully. And he rounds entropy back in the day, if you remember. So, these things aren’t particularly novel, I think that the proliferation of challenge channel channels is quite new. But I remember again, 30, or 40 years ago, going into xenolith. And being astounded at the sheer vast number of magazines, they had to play stuff in, and they had to do the typesetting and the LIFO. And all the rest of it, you know, that was just complicated in a very different way. We don’t have to do typesetting anymore, right? The Phil Joneses of this world who grew up through typography and so on. Look back at those days of, of, of, you know, the smells of being in a print shop, there was just a different kind of complication. Now, it’s just that we’ve got, you know, umpteen different social media channels. But we don’t have to deal with any of that legacy stuff anymore. It’s just we’ve shifted the complication into a different dimension. The thing that hasn’t changed is, by and large, agencies have a CEO who’s gone on waving ego type, they have an operations person who’s the client in the background, makes things tick type, you might call traffic, but you might call the COO, you might even call it an office manager. They’ll have a creative director, who’s brilliant. And then you’ll have a head of Client Services. And underneath end of line services, there’ll be a series of layers. So, you have an account director, who has three accounts, the head of Client Services, supervises all the account directors, you have a group, account director, who looks after eight accounts, you’ll have an account exec right at the bottom, who one day will become the client service. And it’s a standard pyramid model that limits the damage the juniors can do as they rise up the ranks. And it’s a very good way of teaching people how to do stuff. It’s not very empowering. And of course, it is just based on the way that armies were run in the 1800s. So, that none of that’s changed. You know, the strategy director is out on a limb, they don’t have staff because they’re the brains but that’s what staff is in strategic army terms, right? There’s the same old boring command and control, top down, toxic, largely male culture persists to this day. And if you’re going to get me on my hobby horse needs to be disrupted somehow.

Minter Dial  13:44

That makes total sense. I was thinking that it hadn’t changed. Because while that’s what was needed. What I understand now is it hasn’t changed and Good god, it’s about time to change. Alright, I get that we’ll talk some more about that shortly. But let’s start talking about your book a little bit which is a “Scale at speed,” which of course is on your screen for those who are watching How to triple the size your business and build a superstar team. Let’s start with what was your motivation for writing us? And why didn’t you want to keep it all secret?

Felix Velarde  14:20

The motivation for writing it was slightly a surprise and slightly serendipity. So, I had been running the program for a couple of years, I think three or four years. So, when was this as 2017 for a couple of years. And I was really passionate about it. I still am because it’s about empowering future generations talent and giving them the means and the motivation to design the future. And so, I was doing some podcasts as you do. And Lucy Mann, at Small Spark Theory, had just started a podcast and I’d met her at some dinner somewhere. And she seemed to be really, really down to earth and lovely. And she said, Would you be a guest because this sounds quite interesting. And so, I went on her podcast. And we did this this great recording. And it was a one-take recording, which was brilliant. There were no interruptions, there’s no Felix sneezing in the background. And, and at the end of it, she said, You know what, you write a book about this. And I thought nothing of it. And then about a week later, I got an email from somebody called Kate Barker. And Kate said, I listened to your podcast, you should write a book. I’m a literary agent now. But 10 years ago, you taught me at the institute, direct marketing, and yours was the only course that remembered. And I think you should write a book. Anyway. So, I started writing this book nice. And as you quite rightly questioned, I tried to figure out why I was doing this, as I started assembling all the articles and trying to get some kind of, you know, the writing process for me being completely, I was going to say novel, but you know, new to it, I didn’t know what I was doing. I downloaded all of the right apps and read a couple of books on how to write a book. And then of course, as a consultant, I’d read or speed read about 500 business books. And I kind of realized that 99% of them are one idea. And 75% sent hot air padding to get you to the magical 50,000 words, because at 50,000 words, I was told by a friend Tony Llewellyn who’s written dozens of books on coaching. He said, 50,000 words, they can fit your name on the spine. And that’s all that’s good peace. So, I knew I had to get to a certain count. But I also knew that I didn’t want a book that was all hot air. And that actually the program, the reason I started the program, partly was because I wanted to be a chair of an agency or two. And I was at that point, cheering, I think, five really great agencies, brilliant agencies. And they were going through the program, and they were doing really, really well as a result of it. So, I had lots of knowledge and experience from that. But I’d also spent, as I said, right at the beginning, you know, 20 years, screwing up managing agencies and getting it all wrong, and meeting and making all those mistakes, sometimes five or six times. So, I felt that I had quite a lot of knowledge. But I also remembered my days of, you know, the frustration of getting to 2 million in revenue and not being able to break through and bouncing off this ceiling over and over and over again, and it being soul destroying, you know, and eventually the agency would either go bust or I’d have to sell it just to get it financed, or so that I could take some money off the table. Or it would just linger on. And I could never break through this. And so, I had started five agents, one of the agencies was in interactive TV, and we very quickly realized that there wasn’t, that wasn’t going to be an industry. But the other five, you know, I got them all to a couple of million I could not break through. And by now, of course, I was what my mid late 40s, I now knew how to do it, I had the program, I’d watched a dozen agencies in the group that I’d put together, go through it, I’d been doing it with the agencies, I was chairing the program was doing it for agencies, so I knew what it was like the other side what transformation you had to do, to go from 2 million to 3 million, then three minutes, 5 million, and so on, knew how to do it by then. And so, I thought, You know what, I’ll just write a book about it. Because the worst case, a bunch of people like me, who wouldn’t listen to advice from outsiders, because, you know, because we’re big headed, and we thought that we knew it all. And at least, the books there, and they could read it, and maybe they can break through. And they don’t have to go through the pain of trial and error on stuff that where there’s prior art, then in the best case, somebody might read the book and say, well, this bit complicated. Let’s get Felix to come and do it. And so, there’s this kind of, you know, this this, I think my entire life is filled with kind of altruistic on the one hand kind of trying to make some money on the other hand, and wouldn’t it be great if we could merge the two things. And so, that’s where the book?

Minter Dial  19:28

Well, I love the preliminary where you got into it through a podcast, someone calls you publisher, both of whom knew you and therefore sort of sent you the gods wins to make the book happen.

Felix Velarde  19:41

Well, actually, I mean, Kate was brilliant because she waited for almost three years when I wrote the book. And then, and she gave me so much great advice, and I got some brilliant advice from people like Jim Stern, at Data Analytics Association and Michael Nutley, who was the editor at the Media Age, and CMO.com. And so, they don’t, they don’t help me get this thing into shape. And then Kate was just brilliant because she really, really was critical. And my partner Inna was just I sort of kept rereading, it was brilliant, and pointing out of the stupid mistakes and the repetitions and all the things that you get wrong. And then finally, I delivered this manuscript to Kate and she went out and seven days later, Hachette bought it. So, Kate is entirely 100% responsible for getting the book written in the first place, seeing it all the way through and then getting it sold to the biggest publishing house. So, I was very pleased to be honest.

Minter Dial  20:44

I can certainly understand that. So, it struck me about the book, though it doesn’t feel like it was entirely oriented to people in agencies, it’s more applicable to a wider group. How do you read that?

Felix Velarde  20:56

I think that’s fair. Again, it was a choice. I started off thinking, Who am I to talk about other businesses, when my entire career is about agencies, you know, agency, founder CEOs had a strategy group to do agency chair, and I only had a couple of other business, you know, I chaired a virtual reality software company and stuff. So, on the one hand, I was kind of thinking like, Am I really qualified. And on the other, I just thought, you know what this is all of these principles. Everything that I’m talking about applies to anybody who runs a business that doesn’t have a warehouse. So, I kind of fairly deliberately made it slightly more generally applicable.

Minter Dial  21:44

So, I do want to talk about why scale, and why speed. At the end of the day, you’re talking about being stuck at 2 million? And let’s just say you have 10% profits. That seems like a pretty good life. And is there a need to go further? I mean, of course, you may not have had the profitability, but the idea of always having to grow, always having to scale and do that quickly. Is that what it’s about?

Felix Velarde  22:15

The quickly bit? No, it’s no, the scale. Yes, capitalism works on the basis of continuous growth and continuous evolution. And if you don’t, at some point, the industry will bypass you and you will be left behind with nothing. So, you can you have to continually evolve. And evolution requires capital, even if it’s small amounts. And capital requires profit. And so, you know, if you want to do bigger and better things, if you want to continually disrupt or continue to innovate or continually survive, you need to continually make profit. And to my mind, the safest way of making profit is to make more profit than you did last year. Because partly because inflation. And, you know, when I started selling for 2 million that was that was, you know, that was you retired forever. These days, selling for 2 million isn’t you being retired forever, because half of it’s gone in taxes, and the other half has been distributed amongst your peers. And to pay off your mortgage and all the rest of it, and then you have to start again, another one. So, you know, inflation is two to 8% a year, or whatever it is, stock market goes up at 7% year, on average over a very long cycles, then you’ve got to at least keep up with that.

Minter Dial  23:42

Well, I hear you. Certainly the inflation piece, of course, and all that. And I also hang out with people who are work with privately held companies, where the pressure to grow at more than your famous 8% that you just mentioned, or whatever, you know, there’s one very famous large luxury company that just grows at 7% every year and is very happy as such, and doesn’t have the pressures to cut corners and do other things because they’re privately owned.

Felix Velarde  24:12

And I think this is brilliant. By the way, I did absolutely nothing wrong with it. In the same way that I think that there are lots and lots and lots of different business formats that I really admire, employee and trusts, for example, I personally have never been able to figure out how to make that work. Because if you want to change, then it requires decisiveness. And if everybody owns the company, nobody wants it to change because they’re quite happy with what is what it is. And so, getting changed through a multi owner process is much more difficult than doing it through two or three founders. And I think that if you’re that I’m in the business of constant change, I’m in technology but if I’m making you know nice dresses, then it might be very different handbags. And I think there’s room for the whole gamut of different types and styles of company. I just happen to be an expert in the kinds of companies that do change that are innovative, the one to be creative, and that wants to scale. And so, the book is for people who are a bit like me, in that, and for the people who don’t want to grow, then that’s fine. There are other books for those people.

Minter Dial  25:32

Totally well put Felix love it. How do you define success? I think that would be a fine little segue. Oh,

Felix Velarde  25:41

happiness. Happiness, yeah, I I’m, I consider myself to be successful, just on the basis that I am happy. I get to do the stuff that I want with the people that I want. I don’t, I’m enormously fortunate that I can choose not to work with people who don’t share my values. Enormously fortunate. And I think being able to do work, where you get to be able to change the world in the way that you want to, there’s amazing, and so I’m privileged to be that. I haven’t made 20 million quid, I would love to everybody buy a copy of the book, because I think I make 41 cents a copy. Go to the bank. But yeah, it’s money, isn’t it? I used to think it was when I was 25. I thought money was it. But when I didn’t make money, but you know, when, by the time I was 26. I think success is having a team of people that you love working with around you. And being part of enabling them to do the stuff that they love to do, frankly.

Minter Dial  27:01

Well, which brings me then to this notion, which she talked a lot about, which is the ability to set out a really ambitious goal. You talk about the big, hairy audacious goal.

Felix Velarde  27:16

It was Collins’ phrase, by the way…

Minter Dial  27:18

The idea of having a big goal, right is there and at one point, you said, Well, if you didn’t make three times, at least you made two times over the goal that you had, and, and so good. I was wondering to what extent, though, that goal setting and the comments that you just talked about, with regard to success, come into your conversations with other agency owners?

Felix Velarde  27:42

All the time, I mean, 2Y3X is predicated on the idea that you set a set of goals three years hence. And you figure out what’s going on in year three, in order to make those goals happen by the end of that year three, and then you have to figure out what you’re doing in year two, in order to be able to get to the beginning of year three, and then you have to figure out what’s happening over the coming 12 months to get to the beginning of year two, then you do that by co creation, with a bunch of people in the in your agency or your company, because co creation is infinitely more powerful than telling people what to do. And so, that those three-year goals are incredibly important. They’re the starting point, and as well as the ending point, but they’re the starting point for the whole methodology behind two or three eighths and scale at speed. And that it sort of stems from some work by Dr. Edwin Locke, who spent the last 40 years or so working on something called goal setting theory. And his original notion was, if you set a reasonable goal, people will think, Oh, well, I’ll do that later. If you said really tough goal, then you will have to come up with a plan. And if you have a plan, and you follow the plan, you’re more likely to achieve the goal. Anyway, there’s tons of science behind this around motivation and superstars want challenge and, and so on. And he’s even calibrated how big the goal should be. And so, we use a sort of a simplified set of, or simplified version of goal setting theory as the starting point for the strategy map that sits underneath the two or 3x process. And but for me, just setting a financial goal doesn’t do the job. And the reason it doesn’t do the job that I want to do, at least is because if you just say okay, well, we want to buy I want to exit for 10 million, and therefore, I’m going to have to be making 2 million EBIT-DA to get the right multiple and after all the costs, and after all the taxes. So, 2 million EBIT-DA and I’m at the moment I’m at 300,000 EBIT-DA, so that’s quite a challenging thing. And we’ll put together a plan, we’ll just go for that profit now, what you’ll find is that there are infinitely easier ways of making 3 million profit or 2 million profit than running an agency. Because frankly, running an agency is pain in the ass, especially with all the clients and staff and the changing landscape and the proliferation of social media and all the rest of the stuff that we’ve already talked about. So, if it’s just a financial goal, do you know what my advice would be? Go buy paperclips in China and sell them for a penny more here, because it’s easier. It’s crap for the environment. Everybody worked for who works for you will hate it, but you’ll make your profit and jobs are good. So, for me, that doesn’t do the job of creating a successful outcome. So, I want in the goal setting and the way that the two-way tracks works is you have your financial goal, yes. So, that you can retire in comfort and go and addressed the Pacific Garbage Patch, or whatever it is you want to do. And then you have a culture goal. And the culture goal is what kind of place do we want this to be to work at. And so, that might be we want this to be the destination agency. In the UK, for the brightest smartest graduates all we want this to be the place where the nicest people come to work. Or we want this to be the place where people come to get the best skills in the business and the best discipline in the business. Whatever it is that your vision is for a place to be. That’s what we setting the goal. And then finally, we want to say What Kind Of Products Do we want to sell, because it’s perfectly legitimate to sell cheap crap to people who need cheap crap, right? That’s fine. Or just as equally as saying, well, we want to sell gold plated shovels to, you know, the Vita that they’re both equally legitimate, we just need to express it because when we express it, firstly, we start toward the to get towards somewhere towards a proposition. But also everybody knows in the company what we’re supposed to be doing. And that’s really handy. So, you’ve got these three goals, holding each other kind of in balance, you got financial goal that says drive it in this direction, and make sure that we make a profit. We’ve got a culture goal that says, and by the way, make this an amazing place to work somehow. And a third goal, which says, and we want to win a bunch of awards, or we want to be known for producing the best widgets, or whatever it is. Because together those three goals lead to what I would call the successful outcome.

Minter Dial  32:34

Yeah, we’re the, the that Japanese model of be good at something, love it and have a market for it is a Nike guy. That’s right. So, you talked about values and creating this culture? And to what extent is a brand, the brand name relevant? And I mean, to, let’s say, that sounds like an obvious question. But in my mind, the notion of brand has changed quite a lot. Over the past few decades, and certainly within the entrepreneurial world, I continue to see that brand is an afterthought, you know, it’s like, I’ll put my name on the front, or I come up with a tricky name, but nothing really more profoundly understood or lived by the remaining parts of the company. What do you think, especially in an agency, situation is brand How bad is important for them?

Felix Velarde  33:38

It’s interesting, I think. I mean, I’ve done an awful lot of naming. And, you know, I’ve done propositions for some of the most famous agencies in the business. And, and I love doing proposition development work, I love it. But it really is my kind of side hustle. So, I don’t do very much of it. I, I used to think, I mean, I remember when I was first getting into marketing in my 20s, and really, really getting stuck into brand, because I think my first few clients were people like Hewlett Packard, and Mars confectionery, Snickers, and, you know, big, big, big, big brands, and trying to understand how they taped and you know, looking at things like brand onions and McCann, would it you know, all of this stuff. And during my time learning about brands, and what I discovered fairly early on is that whatever you are called, whatever this great name is, it will lose its meaning almost instantly. And, you know, and it’ll acquire some other attributes. And if you’re lucky, it’ll become a noun or a verb. You know, Hoover But if you’re, White Collins Rutherford Scott that has became WCRS, who cares? I mean, it doesn’t it’s meaningless, right? WPP, the most successful agency group in the history of agency land stands for wire and Pratt plastic products, because that was the vehicle that Martin Sorrell bought and reversed into when he wants to list. They’re meaningless. And so, for me brand is, what’s your reputation? What do people know about you, or think about you or think they know about you? And what, what sticks. And so, for me, I think, you know, in my very early days, in agency land, I just wanted to piss everybody off, I had blue hair, I thought advertising people were, you know, that we’re in an industry that needed to be destroyed, because the internet and people power and all that kind of stuff. And so, I was fairly obnoxious, and when try and make making quite a few enemies, who, in fact, thankfully, Now friends, but fairly, also fairly quickly realized that actually, you’re probably going to be around for a while. And if you want to be around for a while, then you need to, you need to be consistent, and probably not be quite so obnoxious as I was a time. And, and I’m very proud of the reputation that I have, I haven’t deliberately gone out to make it because I don’t think you can, as an individual, you’re you become known for being a certain type of person. And, you know, it’s, somebody said to me once brilliantly, that politics isn’t very complicated. It’s just what other people say about you, when you’re not listening, and I thought that was really cool. And it’s the same with brand and reputation is not about the stuff you put into it, other than your actions. And so, quite rightly, Exxon, and shell and all the rest of it, they’ve got a terrible brand. So, we’ve got that, you know, amazing brand recognition, but, you know, appalling reputations because of the actions that they undertake the corruption and all that kind of stuff. You know, nobody gets that that oil licence from Venezuela without being fundamentally and deeply corrupt. And on the other hand, you have great brands that have a reputation for doing nice things, and being nice. Patagonia is a great one. And I’ve just discovered the Patagonia has got one of their flagship stores is next to Harvard University, which I think is brilliant brand association. Because obviously, everybody at Harvard now goes in shops, and so you know, so that that kind of clever brand marketing works. But underneath it all, there are values, and you and those values of the human come through somehow. And when the vet when the human changes, the values change, they remember when the body shop, you know, was run on values by Anita Roddick, and when they got bought, and then and then later when she it, the values change, and the associations change. Just like Ben and Jerry’s, you know, the second that they sold out, they became the sellout hippies, and everything changes.

Minter Dial  38:24

Well, I mean, of course, I worked at L’Oréal at the time of the acquisition, so I knew a little bit about that. But Ben and Jerry’s, I thought they were brilliant, because they had the balls to tell Unilever that ad perpetuum, they had to have certain things kept ad perpetuum, which someone had to sign off on before you made the acquisition. So, I thought they were still a little bit ballsier than the majority of people selling out…

Felix Velarde  38:52

But you know, like everyone, we all have sold out at some point. And all we can do about that is try and live up to your values and try and do as much good as you can. If that’s one of your values.

Minter Dial  39:09

Well, so the issue with brand and agencies is that you have this reputation story but I suppose it’s hard to have your own brand. I mean, in that you are working for a Unilever, Procter, a L’Oréal, a Ford Motor Company, and so on. And these become your these are the brand you’re working on as you’re an account executive or something. Your brand within that would, if there’s a real brand with real values, like you say you do Felix, would suggest that most branding agencies would only work with certain companies according to who they are. Whereas in my experience, Felix, maybe part of the second bracket of agencies that we talked about earlier that haven’t changed. They’re like I’ll take whatever business comes in the door!

Felix Velarde  40:00

Yeah, and that there will always be people who don’t consider to be anything but money to be the marker of the driver of what they do. And you know, without wishing it to get into politics, there are always people who are going to vote for the other side. You know, and I’m in the Americas right now and watching people having arguments about voting for the other side, the Mexican presidency, he will have it and further up north.

Minter Dial  40:34

But that’s that’ll be later on. But the Mexican one, where you are currently, is exactly on time on target to women for once.

Felix Velarde  40:43

In one sense, brava. I am values motivated. I associate with people who are values motivated. I, when I sold my agency to Lowe in the 1990s, one of the first gifts that they tried to give us was Nestle as a client. And we said no, which probably lost me a couple of million quid. And it pissed an awful lot of people off because they were trying to be nice, but they didn’t share my values. And it was my first lesson in do deals with people who share your values. And they weren’t trying to be nice. And it was an incredibly generous gift from their point of view. And from our point of view, as, you know, a bunch of upstarts in a studio in Brixton. Nestle was beyond the pale and we weren’t get in touch with a bargepole. And so, the agencies that come into 2Y3X, by and large, share our values, or at least closely proximate to them. And those that don’t probably are going to not select this system anyway, because it’s a progressive system that addresses all the discount factors and creates succession teams and so on, but works by giving real decision-making ability and capability to the next generation of future talent. And one of the consequences is it liberates you so you can sell and leave. And that will increase your value, which is great. So, there’s all sorts of great things in it. But it does require a certain kind of ability to say, You know what, it’s time for my ego to shut the hell up and pack itself away. And it’s time for me to let other people advise us and my team take responsibility for take taking on the project of growth. Because if the team takes responsibility for it, then they’re going to be highly motivated. They’re going to be being trained by these external coaches from 2Y3X. And I’m going to be able to sit back and relax and start thinking about whether I want to open in New York or whether I want to do a charitable project, or whether I want to end up doing an EOT in my agency, or become a B Corp or whatever. And those things are liberating. But if you are the kind of commander who is a micromanaging martinet, you aren’t going to go for that kind of program anyway.

Minter Dial  43:17

So, EOT is Employee Ownership trust. The two things I really enjoyed about what you said, at least I wanted to pick up on one that’s specifically in the book, which is this idea of values and the work you show how to sort of get down to the core values. And one thing I really applaud is focus on just three values. It’s that need to choose, which is a little bit of hard work, and then define what you actually mean by it. And the second thing you just said, which is, you know, look at the values and have some overlap, as opposed to have a perfect overlap. And I think that’s true also, with the way you should recruit individuals in your company. What are your values? And when you have that conversation at the recruitment level, what are your values? Well, mine are A, B, and C? Well, I have B, C, and D. All right, well, we have B and C together, the idea of trying to find complete overlap is pollyannish. And doesn’t allow for that diversity of thought.

44:16

Yeah. But I think the other the other point about reducing it, if you like distilling it, or down is that by the time you get to three, possibly four core values that are shared by the core team in the agency. Actually, some of those values are quite broad. You know, integrity is a very broad valley. Right? You could articulate creativity or owning it. They’re very broad. And so, that gives you a lot of latitude in the interviewing and recruiting process to get people who, who their idea of integrity is always being scrupulously A honest about the mistakes, right, for example, where somebody else’s idea of integrity is always been consistent and predictable. And both of those sit under the same sort of heading, and those people are likely to be able to work very well together.

Minter Dial  45:21

It’s a very fair approach, I’ll call it a very pragmatic approach. Because when I went through this type of exercise at scale, what I thought was really important was to be able to define what we mean by value. And the way we define any of these lovely words like family or integrity, or whatever it might be, you know, trustworthy, respectful, is to define it as observable behaviors. So, that, you know, my version is observable. So, which by my extension means we’re not encompassing all versions of it. So, that means that while your version of integrity doesn’t match with mine, dude, yeah, and have that conversation.

Felix Velarde  46:09

Yeah, it’s important to have it, you know, there is an entire methodology in the book, that is the methodology we use for every single client who comes into the program. And all of the agencies that are required here in the state. Is, is about defining, and when we’ve defined sufficiently in a group is then saying, Okay, now take that out, and turn that into the kinds of definition that you would put into a staff handbook, for example, it’s good examples, here’s some bad examples. Because we want to be able to hold people to account against our values, if we’re going to say respect is one of our values, respect for other people’s time and space, right, as opposed to respect for other people’s existence. So, respect for other people’s time and space. You know, if you’re finding somebody up at 11 o’clock at night with a crisis every three weeks, that’s not respecting the time and space. So, you can hold somebody to account on that, you can either recognize that, that means that person doesn’t share that value, and then you can start making decisions about that person. Or you can do course correction, both of which are entirely valid. Personally speaking, I can’t imagine having anybody in my my consultant, set it at 2Y3X, who doesn’t share our values. And so, far, I’m just trying to think back… we’ve never had anybody working at 2Y3X That hasn’t exactly shared our values. Different methodologies, different ways of thinking, different backgrounds, different colors, genders races, you know, orientations, the works. I mean, we are a very diverse company, when you compare us to most consulting firms. And that means for me is really interesting, because I’ve got, you know, our MD for the last couple of years, Mo, is brilliant. She was head of consulting at Adobe, she lives in Zambia. And she ran 2Y3X brilliantly from Zambia, for her stint of two years. She’s gone now back to being a consultant for 2Y3X. A completely different mindset to my completely different way of looking at the world completely different way of engaging the world. And a brilliant managing director. And she goes about making decisions in an utterly alien way to me. But her job is managing director. She had total power to do whatever it whatever way she wants, because I know that she shares my values, and I share her values. And so, we can trust each other to come up with a solution completely differently. But that will be on value. If nothing else.

Minter Dial  49:07

It’s funny you do say I think you say value-based selling I think of it as values-based selling, because value-based selling seems to be more about the buck.

Felix Velarde  49:21

Finding value-based selling isn’t just a methodology. It’s the burglarisation of Spin Selling if you like. It’s just how do you do consultative selling, figure out what value you’re giving and that’s very different to money.

Minter Dial  49:34

Of course. I was I was just riffing on that. But now that you’ve just talked about Mo, and you have your experience of being the chair of several agencies, and going for the topic of governance is rarely addressed. And it’s not clear for me in general how to set down and governance. You have the privately held you have with us with P back V He back to our indoor publicly traded and then then you have this, this issue with ethics. And very rarely are those in for having been on a few boards is the topic of ethics addressed on the board. So, just give us a little riff. And that little time, we have left to talk about what you think of best practices, in terms of setting up governance for an agency or a smaller company. Knowing that obviously, the smaller companies don’t usually have 15 people boards that are fully paid and meeting every month. What would you what sort of advice would you provide for people to wanting to set up the right governance?

Felix Velarde  50:38

Interesting. And in fact, we’ve gone through that process at two or 3x, as well. And we’ve looked at it long and hard. It’s either an M&A company in Austin, Texas, and we bought five agencies. So, we, you know, we look at that, it’s, I find it really interesting, because sometimes, I’ve come I’ve been in situations where I’ve been the one saying, we need to think about ethics, or this event, it’s all white men. And I’ve been battling against other people, where that does not compute where they it’s just not a factor for them. Going back to your point earlier about companies that will take on, you know, Philip Morris tobacco, because they don’t, you know, they don’t have a set of guidelines, I worked with companies that have sets of guidelines I have I do work, the one of the first quarterly tasks in the program, is figure out what everybody’s core values are, and turn that into staff handbook, and mantra and proposition. Because I think it’s incredibly important that we know who we are, and how we are, how we want to behave. So, that we can teach the people in our companies that that is the way that it is. And if you’re on the wrong bus, you will be happier somewhere else. And less disruptive, and so on. If you go somewhere where you share their values, it’d be brilliant, that you can be able to be an A player over there. For us, I want to only recruit people who share our values. And so, it’s a very explicit part of the intake process, or the recruitment process, or whatever level it is. And we’ve just got new COO, who’s amazing. And we haven’t been announced yet. So, talk about this space, much of the space. Yeah, by the time this comes out, you’ll know. But I think that you do need to bake it into things like the staff handbook, I think that you do need to state that you will be judged based on your behaviors. And I think that you need to be absolutely clear about calling people out when they do transgress, and figuring out what to do about it, whether it’s a course correct, or move them on somewhere else. And I spent it and I think that that’s especially true a board level, you have to recruit your advisors, your non execs, your chair, your consultants that come in the programs that you join, also need to go through that same filter. And as a small company, it’s very easy to do that. Provided that the founder has an external adviser, who is prepared to hold their feet to the to bad phrase, to the whole flame, to hold them to account. And I think that, you know, I went for many years beginning my career without any external advisors at all, I thought I knew it all. And how wrong I was. So, you know, one of the things that I’d say is find a non-exec, who shares your values, and make sure that they call you out when you when you deviate is really, really important. In terms of governance. I think, you know, we’re dealing with small enough companies, you know, our clients are a million to 10 million in revenue. That actually you’re talking about very small boards, and you’re not talking about particular governance, you know, it’s a miracle if they’re doing board meeting board minutes at all, let alone having external people saying, you know, here’s your remuneration CEO. You know, I have yet to see that happening in agencies. No matter how good an idea it is, so I think doing it organically by intent is probably the only way that I’ve seen it working.

Minter Dial  54:40

Well, I certainly in being pragmatic. I started the travel agency in my life. And we did not have any governance models and or any ethics at the time. That was back in 1991. So, it’s not about being pollyannish or you know, overly idealistic about it, but I do think it bears being too talked about in the context of scaling at speed. Because if your objective is to scale at speed, and how do you face the, the example of Nestle, which, by the way, owned 26%, of L’Oréal, it has a bearing on the output, you know, so what if we get that we’ll take our target, you know, but I’d hit for our reputation possibly, or our ability to look in the mirror. And then the other thing just add into it is artificial intelligence. And even if you’re small today, AI will be used. And so, the question is, how do you apply any governance or ethical framework? On a generally what is a black box?

Felix Velarde  55:43

Right? Yeah. And it’s fascinating. And so, having conversation the other day with this, and we have two or 3x works in quarterly modules, your module might be implementing a client satisfaction survey, or a new way of recruiting people or a risk register or something like that. And one of the modules that we fairly recently started to do as a done with you service is AI evaluation, as a quarterly task as sort of how do you do the transformation, which is inevitably coming? And I think that there’s a whole raft of stuff on ethics in AI, as a kind of macro level. But I think at the micro levels at the agency level. Again, the two markers for me in this conversation that I find really fascinating, because I don’t know what the answer is, as opposed to a lot of things where I’ve seen very good answers. And so, I can borrow them. This, I don’t know what the answer is. But there are a couple of guiding principles. One is, as I think I mentioned before, the Henry Ford, who was a toxic human, but actually invented quite a lot of interesting things. But one of the things that he said was, I want to pay my workers enough that they can, they can afford to buy one of my cars. And now that that in the context of AI is really important, because if AI puts everybody out of work, who’s going to an AI is doing all the marketing, for products, who’s going to buy the products that AI is now marketing, because there won’t be any, you won’t have any money. So, that’s the first issue. The second issue is, so that tends or might drive towards a solution that says, let’s find an AI way of empowered way of working, that allows us to retain our staff, and continue to pay them at the levels that they are paid. Now, if those are the parameters, what does that mean, our AI solution is going to be and for me, that means drive up quality, don’t drive down price goes to Adam Smith and all that then as we get into basic economics. And again, we’re back 180 years or 150 years back to the start of the industry when the problems were the same problems as they are suddenly now with AI. So, that’s on the one hand. And then the second piece is how do we how are we going to create experts if there’s no entry level? Because we replaced the entry level for AI? Now that’s the one where I don’t know what the answer is. I have a I have a set of solutions for the first question, which is what we deploy in in two threads. The second question, that one I haven’t cracked yet. And I don’t think anybody’s successfully cracked yet. And I’m reading all of the interesting writers as evil as are and people like that and rob them, you know, some really interesting thinking going on. On about it, we’re in a position in agency land where we can talk with and you know, I’ve been around long enough to know a bunch of real experts. And it’s a fascinating conundrum. And I have a feeling that the solution is going to bubble up from the bottom, from these future generations who we’re supposed to be empowering, and not come from the likes of us with our gray hair and our long perspective. And so, again, it comes down to let’s empower the people who the brightest and the best of our future generations to come up with an answer because their answer is likely to be much better than my answer or your answer all appears answers.

Minter Dial  59:32

Yeah, you were, what you were talking about has very strong parallel with the journalists, were entry level journalism, working at a little stump in in a small village newspaper is the way to learn to get your teeth sharp and to end up at the New York Times, or somewhere else. However, those jobs are all being usurped by AI and such where the business model doesn’t allow for it anymore. So, same kind of pop music guys, talk together and deal with that. together. And the other thing that makes me think of is, in terms of what solution is out there? Well, I certainly think that in business schools, and in business today, still, we are, I consider myself of that because I went to business school as well. And we’re not known for being particularly empathetic. We’re not known for being particularly service oriented service to the others were more along the lines of being an egotist, narcissist. It’s all about me with rather question on ethics. So, I think if there’s a solution, it’s also to be found in starting by rewiring the way we teach students to do business, as well as hopefully have some better examples in business on how to do it. Last question for you, Felix is scale of one to 1010 being the optimal best and zero or one being horrible and the worst marketing as a force for good.

Felix Velarde  1:01:07

My instinct is to say marketing is neutral on that, because it’s so broadly, it’s a reflection of the market, by definition. And the market is driven, some by, you know, people’s people who are values driven. And some people who values driven in a different political or progression direction than people who have no values at all. It’s a broad spectrum. Humanity is a broad spectrum, whether we like it or not. And marketing is just a reflection of that there are people like, Lazar damage, and Paul KitKat, who are teaching ethics in marketing, and who are writing books about it, and who are trying to remind our industry that we do have enormous influence on brands, as well as the public. And I think that those people are to be applauded. And there should be more. I think, people like me who write books about how to do things in a progressive, future, facing way, have their role to play. And those are really important too. And, you know, I’ve been a, I’ve been a lecturer and teacher help business school, for example, from MBA students, for years, and I think it’s very important that you teach people that there is a values-based way of running businesses. But overall, you know, we are a necessary voice, are we going to win? No. is the other side going to win? Not if we’re still around. And so, there’s responsibility in there.

Minter Dial  1:03:04

On these fine words, Felix, how can anybody get in touch you track you down by a book? What’s the best way?

Felix Velarde  1:03:12

Buy the book in all formats on Amazon, and Waterstones and all the other bookstores. The second edition is just about to come out, I think, April 2024, in the US, it’s already out in the UK, in Europe and India. And other places. I think he’s coming out in Chinese in September. Which is going to be interesting, because obviously I won’t know where the typos are. So, please do buy the book. Hopefully, it’s interesting, too. Why three x.com is where you can find out all about the program. You can do self-assessment tests, and you can figure out what the cost is and all of that and what your quickest wins are. Two ways. race.com If you want to get in touch with me either hit me up on LinkedIn linkedin.com/in/agencychair or [email protected] will get me.

Minter Dial  1:04:06

Lovely, Felix, muchas gracias. Thank you, sir. Have a lovely day and stay in touch

Felix Velarde  1:04:11

Thank you, Minter. Lovely to see you.