From Military to Business: Lessons in Preparedness

Speaker A: Uh, are you a business owner stuck in fear, doubt and worry about what the marketplace will look like in the future? Then this show is for you. Strap on your seatbelt and get ready to disrupt and innovate. Here's your host, Lisa Levy.

Speaker B: Today we're talking about something most leaders what happens when things go wrong. Most business plans are built on hope and momentum, but very few are built with real contingency thinking. Today we're going to learn a framework for planning for multiple scenarios, building necessary redundancies and preparing your business for the unexpected without becoming paralyzed by fear. Joining me today is Tony Medrano, a three time tech CEO and former US Navy officer who's used contingency planning to save his company during one of the worst market downturns in history. It's a story that later became a Stanford Business School case study. Tony, welcome to the conversation.

Speaker A: Yeah, thanks for having me Lisa. Really excited. And I love this topic. I've been able to apply it for decades, since my military career ended.

Speaker B: It's an important topic and one I think that people brush over or kind of hand it off to technology. It's business continuity planning, it's disaster recovery. It's all kind of thrown over to that side quite often. But to set the context for this audience, what's positioned you to talk on this topic of contingency planning and building redundancies?

Speaker A: My first training was as a military officer. So I attended Harvard on uh, an ROTC scholarship. So I was trained from age of 18 to be a military officer. After I graduated, I went in the Navy and ran a firefighting and emergency response team on a destroyer. We also handled chemical, biological and radiological warfare, which is all about contingency planning. Right. Uh, just by the name of that. Anything can happen and it can be really bad. It doesn't always have to be and there's a lot of training involved. So you're preparing for a lot of things in the hope that they don't happen. Same with firefighting and damage control on a destroyer. But that, uh, framework was instilled in me very early and I, I carried with that, I carried that with me into the business community. So after, uh, after leaving the Navy, I went to Stanford Business School and law school in a joint program and found myself at the two year of a four year program with an opportunity to start a technology company with a couple Stanford engine engineers. Right. In the late 90s the market was booming and we had an idea for a mobile app platform. This was before the smartphone, but we saw the Internet as being in everybody's pocket, uh, very early on, even though bandwidth didn't support it and mobile app browsers were very, very primitive. I think we may remember the WAP browser or the, you know, some primitive other, other phones but, but it was still there. So we wanted to be at the, at the forefront of that. Well, building a platform technology is tough, especially when you're 28 and that the three of you are, you know, new to the technology industry and just out of grad school. But that's when a lot of entrepreneurial things happen when people are young and they don't know that it can't be done. So we jumped right in, raised our first round from SoftBank. And for the, you know, listeners that are familiar with SoftBank, you'll know that they throw around hundreds of billions of dollars, take high risks for really long place. Their leader Masayoshi san has a 300 year vision that he talks about and that's how you know, they often view technology and the world much different than quarterly view that U.S. financial executives and public companies take.

Speaker B: It's a very different mindset and I'm sure helped set the tone for the trajectory of what you were building.

Speaker A: Yeah, exactly, exactly. It really did that, that shaped us very early, when we were ready to be shaped. It was our first, our first company, all three of us. But I took with me the military training of planning, taking care of your people, having different contingency plans. People have probably heard the Department of Defense has a plan for everything. They write it up, they keep it somewhere just so they can pull it out when something happens. Not that they're going to follow it, but a plan does help provide a framework for what to do, what to think about. And I think that's the most important thing is people can poo poo a plan or brush it off because it's not gonna be accurate, it's not gonna be the right thing to do step by step, but it's gonna help you, it's gonna speed things up. A checklist helps you get through things faster without forgetting something that's critical or having to stop and think. You know, airline pilots use this all the time. They certainly know how to fly. But when something new happens, they pull out a checklist and go buy it. So they make less mistakes and so they have uh, effectively flowcharts process. So um, it can be all done beforehand, not on the spot. When your time is limited.

Speaker B: Yes. And when you have, you know, something that's on paper that you can refer to, it may Be wrong, but at least it seeds your thinking. Whenever we look at this, a blank piece of paper, our first inclination is usually to freeze. So, right. The idea that you have a plan, it may not be the plan you use, but it's that starting point, that jump starts thinking and gets you past that initial freeze.

Speaker A: Exactly. And if you start, you know, I'm always a proponent of, if you start moving in the general direction quickly, that's really good to have some momentum and some progress and a couple small wins or a couple small areas of risk reduction. You know, we're always looking at risk reduction in any of these situations, whether it be a fire, an emergency, a change in the market, a change in the weather, a change in people. You know, all those things can happen right away without any warning and you should be thinking about them. And there's probably a dozen, you know, maybe a hundred different things that are outside your control as an entrepreneur. That can happen. When I see people not planning for those, you know, I think they're being a little bit negligent. Maybe they don't want to win or they only want to win big under their own circumstances. They're just not going through the grunt work enough. They're focusing on the sexy and telling people what they want to hear as opposed to what the ugly truth may be.

Speaker B: And the ugly truth. And what we're really talking about today is unsexy. This is work that needs to be done. It's irresponsible not to do it. And Tony, I'm curious with your perspective of you today. Looking back, what's an assumption you made early on about planning that turned out to be false or dangerous?

Speaker A: Well, one that happened in my first startup was time to break even. We made an assumption that we were going to be able to raise a third round of funding. Our, our first round of funding was a, ah, valuation of 5 or 6 million raised maybe $2 million, you know, just the three of us. And we started small and we're very conservative. Then the company became really successful. Mobile app platform started to resonate with people. We executed well from getting new customers and from building engineering and all of a sudden we were valued at $300 million before launch. Well, we raised money on that and with that came requirements by the investors to grow fast. So that means hiring. And this was all out in front of revenue. You know, back 25 years ago, revenue didn't come in from enterprise customers as strong as it does now. Now you can get enterprise revenue really early in a company's, you know, Life cycle. Back then, building a platform, you needed hundreds of millions of dollars because you were building it from scratch too. There was nothing to build upon. Right.

Speaker B: This was bleeding edge.

Speaker A: Yeah, exactly. You had dozens of engineers coding as opposed to using AI and other tools. So we were barely making revenue even though we had dozens of customers signed and hiring a lot of people based on the market conditions and our last round of funding. Um, so all reasonable, however, being that taking that much risk made me nervous just as a military officer, where if you're going fast, even though things look in a, uh, maybe using a plane or a ship metaphor, even if things look smooth, you have more risk because you can't turn. And if things go wrong, you're just going faster. Speed will kill, Right? Same same principle if you're spending money fast. So then March 2000 came around, which was the all time high of the NASDAQ. And then the crash went from 5,100 down to a thousand. Later, if people remember those days, it was going down 5% a day, sometimes for months at a time. This was right during our attempt to raise a round. And this crushed us. So in that aspect, I was nervous at the speed we were going, but I had never experienced a market downturn before. And also because we were a platform, we were building real technology with real engineers out of Stanford. It wasn't a dot com, so we figured, oh, this is a dot com bubble bursting, that's fine. We expected that they were, you know, barbecues. Dot com was kind of ridiculous, but we're building real technology. Uh, so we were late to react because we thought it didn't apply to us. But we were naive in the sense that a, uh, market downturn affects limited partners in VC funds. They have less money, they don't make their capital calls because they're cutting back now the VC funds cut back now no matter what you're in. We found VC funds were just cold, dark and quiet. And they agreed that we had done well, but they just said it's not the right time to invest in platform plays. So it was a real struggle for us. And then time became an issue when you're burning money, uh, just like if you're burning gasoline, you know, in an aircraft, there's only so much time you have. You gotta make decisions quickly. And that's, I think, another element that entrepreneurs forget about is the element of time. Perfection is great, but sometimes under the pressure of time, less than perfect. Dancers are the better ones. You know, in the military, I use metaphors all the time, but you know, if you're out of ammunition, you've got to fix a bayonet and charge. Sometimes it's not the right, right thing, it's not the thing you want to do. But in some circumstances it's better than sitting there waiting for ammo to come.

Speaker B: Action sometimes is better than no action, even if it's not ideal action.

Speaker A: Yeah, exactly, exactly.

Speaker B: Make the best decision in the moment and in the next moment make the next best decision.

Speaker A: And that's not a good situation. You want to. And this is, I think, also why you want to plan for different situations. Because, you know, you can compare it to neuroplasticity, but, you know, call it executive team plasticity. It gets your team used to thinking about different decisions. So then you have to debate less. You say, oh, well, we talked about what we would do in a market downturn, so we're going to do something like that. Or we talked about what to do if the CTO left. Now we've got to make do with that. Or what if, you know, our investors didn't live up to the promises they made? You know, we talked about that as well. And so now we can make that decision quicker, which, which really matters.

Speaker B: And what we're, what we're describing here is contingency plans, right? These are all those different things. And when you're working and you've worked in many businesses, what's the point of resistance that you get from some executive teams when you say we need to invest in this exercise?

Speaker A: Biggest resistan, I think comes from often the board of directors and the investors and maybe founders who are drinking the Kool Aid, a hundred percent wedded to the vision and the upside, and often treat any type of contingency planning or playing a devil's advocate or just asking critical questions as a sign of disloyalty. And I think of it as nothing of the sort. It's a sign of problem solving and wanting the organization to survive. You know, it's cross training. Right. Uh, and that's not disloyalty because you think that other things might happen beyond our control and you want to figure out what if. So you have effectively lowered your risk and increased your chance of success. I mean, this happened at, uh, one of my latest companies where I was vice president of business development. I came on board when we were at zero revenue, built the company up to a billion in revenue through enterprise sales to the NFL, to Google, to the NBA, Netflix, a lot of venture capital firms that were buying our high end home lab system and a Lot of sports teams had their dreams on a big consumer technology that would be in every home. And this, uh, you know, this is something a lot of people studied in business school. But when you think your product is going to be used by everybody and loved by everybody, you're insane, frankly. You don't know your target market. You haven't done the work. You haven't. You made the tough decision saying, you know, my baby is pretty to me and maybe 10% of the people, but not everybody's going to love it. So you got to be real. But sometimes people, you know, you're calling a founder's baby ugly, or sometimes they assemble like this last company. Did you know, Q Health, A board of directors of. Yes. People that were all in the consumer area. No entrepreneurs, no operators, no people with general executive experience. They wanted to go consumer. So they hired people that knew how to spend money on consumer technologies, like from big companies like Johnson and Johnson and things that were just not operational. So the board, in a lot of cases, have narrow areas of expertise, very senior, very brilliant, but they're not used to running a P and L in a small company where you could die at any moment. So. And they just walk away at the end too. You know, they sort of come in once a month and use their buzzwords sometimes and then walk away. Maybe make some referrals.

Speaker B: Yeah, fantastic. No value add. Thank you. Goodbye.

Speaker A: Yeah, yeah.

Speaker B: Um, I mean, when we're talking about this idea of contingency planning or maybe versus optimistic planning, right. That one version of truth that we want to pretend is, is the potential outcome. Does the willingness to think differently and plan for legitimate contingencies vary between a smaller, younger business versus a more mature, larger seasoned business? Do are there differences there?

Speaker A: Absolutely. Um, you can look at it mathematically of, you know, how many data points are you extrapolating from? If you're in a large, mature business, you've got a lot of data points and you really know where the revenues come from in the past. And you have a pretty good indication of where it's going. At a startup, maybe you have a couple data points, a couple customers. Maybe you're only scratching the surface. Um, you know, this has happened companies. Um, one, I remember I, uh, took over as CEO. We had a couple million in revenue, and I had a couple ideas for big projects that could, you know, double, triple the revenue and really get us some great exposure. And I told the team, these are five new projects. If one of them succeeds, that's great. If two of them succeed, it's a miracle. But what we're going to do is we're going to invest small, watch, you know, monitor the success and measure it and then try to fail quickly and not waste time on something that's not going to work. We're going to experiment. So the, um, attitude of experimenting is something that's new to a lot of people. It's pretty common in startups and in big companies it's not as often. Maybe there's not a willingness to experiment and people often get budgets involved and they like to plan years ahead as opposed to, hey, I'm going to try this experiment on social media this week. If it doesn't work, I'll know and then I'll move on. In startups, that's tolerated and oftentimes the CEO is doing it themselves with the core team. So I think that's one of the big differences is the ability to fail at a big company. Sometimes if you fail, you're afraid of your job and the politics take over all those things. So it's, it's too bad. And, um, you know, that's why I prefer startups.

Speaker B: Yeah. And let's play with that idea. Right? Because in the scenario of experimentation, failure is a viable outcome. It's a lesson learned. It's a, this doesn't work. We're trying something else. Will you share with us a story of a fantastic failure, a fun failure?

Speaker A: Okay, I've got a fantastic sports failure that actually relates to my newest business. So I was training for my first ironman triathlon in 2019 at, uh, the age of 48. I'd never run a triathlon before, only run one marathon. And for viewers, an, uh, Ironman is 140 miles. You swim two and a half miles in the ocean, bike 112 miles, and then run a marathon 26.2 miles all in the same day. All right? In a row, you know, you're not stopping, you're grabbing power gels on the run and water on your bike while you're still moving. Six weeks before it, I got hit by a car while I was cycling. Car T boned me. I went over the car, still clipped in the bike upside down, bounced off the hard ground, separated my right shoulder. It's still permanently third degree separated, so the collarbone and the shoulder blade aren't connected at all. But I got up, it didn't hurt that much. I made it to the doctor's office, they checked me out and my first question was, hey, can I still compete in the, uh, in the Ironman in six Weeks and the doctor, you know, I went to the best sports clinic around. I live in a sporty area where triathlons, this is the home of triathlons actually. Right. The home of the Ironman Triathlon. And a lot of military officers around too. So they get a lot of, a lot of injuries. Uh, he said, yeah, but come back in two weeks and we'll see. You'll do a strength test and keep your range of motion up. Do this, you know, dude, keep doing cardio for sure, sure. Even though you won't be swimming for, for a while. So I did all that and what I, what I found is that even though it was, I mean a life threatening incident, the injury wasn't so bad, but oh, I could have easily, easily died in that, in that fall. I just did a good roll and didn't get hit by a car going the other way. So uh, I made it and then went through the training. Got really extremely motivated to complete the full Ironman and not a shorter triathlon that I actually had as a backup plan. So I signed up for two triathlons. One is a short one which was reasonable and one the Ironman maybe I could do. So I had a stretch goal and a, you know, and a poor market goal. Right.

Speaker B: If you want a contingency plan, one might say, yeah, it was a contingency

Speaker A: plan exactly for sports and same type of optimization. If everything goes well, I can do this. But now I was so motivated to really try and hack the system to see if I could swim with one working arm, two and a half miles in the ocean and then cycle. I couldn't change the gears because I had to just stay grabbed on like for dear life to the bike handles. So I couldn't change the gear while I was cycling. And you know, cyclists will think that's insane. And it really was. It wasn't the, it wasn't the smoothest bike ride up the hills. Luckily it was a flat course. And then I had to run the marathon like this to keep my shoulder locked in. Cause it couldn't, you would fall sort of out if I was running normal. So for me, that failure, you know, getting hit by the car and getting injured ended up being a benefit. It put some constraints on me that challenged my planning and that gave me more motivation to try and hack the system as opposed to a feeling like everything's okay. I mean this is the, you know, obstacles or perseverance or that doesn't, that what doesn't kill you makes you stronger. All those adages we've heard, heard for years really were true. So I'd say that sometimes failures can be immediate successes, not just in the lessons learned, but they channel you down different paths that may be the right ones. I mean this happened in business to me a uh, couple times too. This incident has really led to my current business longevity plan where we help optimize people's health outcomes starting with fitness, going to weight loss, peptides, biomarkers in genetics. We incorporate that in a digital twin using you know, some of my, my AI background and, and expertise and model a digital twin based off of what the NFL, one of my former clients does for its players. But we do it a lot more inexpensively than the NFL does. We don't have as much to lose. Our customers are normal and Pay, you know, $39 a month for access to a simple uh, SaaS version of the digital twin that the NFL uses to, to optimize for injury pre those kinds of things. Because I think we're all learning about the longevity market. It's been big the past past year or two that injury prevention is one of the biggest things that drives longevity. If you fall and break your hip, I think if you're over, over 50, you have like a 50% chance of making it through the next year. Right. So you want to prevent injuries at

Speaker B: all costs and especially with an aging population and the uh, the statistics of after a fall, the likelihood if you recover for another fall and at what point in time. Right. It actually decreases lifespan. And so all of this. And I'm bringing it back. Right. But is thinking about more than one potential future outcome?

Speaker A: Exactly.

Speaker B: All of the things that we've been talking about, the stories that you've shared and Tony, you have shared some great stories with those. If you've piqued interest or curiosity from the audience and they want to learn more about you or what you're doing with longevity, how do they find you?

Speaker A: Sure, the best place is LinkedIn. You can find me Tony Medrano on LinkedIn. There may be a few other Tony Medranos, but I'm the one wearing the triathlon gear. You'll be able to see me clearly standing out from the other profile pictures

Speaker B: and for everybody, that link will be in the show notes to make it easy. And this was a really fun conversation where we've gone from the tech journey to the ironman under what I would consider some of the worst possible conditions to compete and even begin to think of swimming two and a half miles in the ocean with one arm. Absolutely fantastic stories. TONY and today. Audience, we, we've talked through. Most companies plan for success. Very few plan for what happens when things go wrong, let alone multiple things, multiple contingency plans. And that mindset is not about pessimism. It's a discipline for preparing for multiple futures. Because if you're only looking at the easy street, you're actually planning for failure. And while we've talked through some of this, right, it's this isn't a waste of time or energy. This is protection to prevent things that could otherwise kill your business. So my challenge to all of you listening, in the next seven days, stop and think about what happens if something significant breaks in your business. What is one backup option? What's an early warning signal that you should be looking for? Is there a decision you should trigger to make sooner rather than later so that you're thinking ahead before the worst thing happens? Because as I said earlier, a blank piece of paper causes us to freeze. Having an idea of what a plan can be gives you a direction. Tony, thank you so much for being here with us today. And audience members, you know my rules. Don't get left behind. Join me next time.

Speaker A: That's it for today's episode of Disrupt and Innovate.