For our second Scale Up talk of 2023, it was my pleasure to welcome Ajay Agrawal, founder of the Creative Destruction Lab (CDL) to speak with our team. CDL is a not-for-profit program for early-stage, science-based companies, and was essential in helping get BenchSci off the ground. It’s also where I met my co-founders, Tom Leung and Elvis Wianda.
Ajay is a professor, entrepreneur, and author specializing in the economics of AI. He was also named to the Order of Canada and listed as “one of the 50 most powerful people in Canadian business”. As a multi-faceted leader in business and economics, Ajay shared his unique perspective on current and future trends in AI and machine learning (ML), as well as some tips on how to thrive as a start-up. Here are five takeaways that stuck with me from our conversation:
Problems are simple, people are complex
Success in a scale-up is about more than just providing solutions for your customers. It's also about ensuring that you have the right people, in the right roles, working towards a common goal. When asked about what he learned while scaling from one CDL location in Toronto to twelve locations worldwide, Ajay shared that "solving technical problems requires a certain type of muscle, and creating an environment that allows people to do their best work, be fulfilled, and truly believe in a company’s mission requires a different muscle and can be just as hard." He added that this is even more true when employees are remote.
Throughout his experiences as an economist and teacher of entrepreneurship, Ajay found creating this environment for employees to be challenging in real-life applications. "Economists tend to believe humans will always make the rational decision,” he explained. “But this is far from true in the real world, which can greatly affect how multiple people work toward the same goal.”
Ajay also reminded us that, as a company grows, it’s important for its people to understand the goal they’re working towards and be reminded of it often. He advised that scaling companies should ensure their mission and goals are top of mind so that employees understand where the company is going and what their role is in that journey. This also helps with alignment at all levels of the business.
As the founder of CDL, Ajay has seen a few thousand of start-ups at various stages of growth. During our conversation, he shared that one thing many of CDL’s stand-out companies have in common is tenacity. More specifically, a founding team's tenacity is a strong indicator of how successful a company will be.
"Almost always, startups start working on the wrong things. But if the team is tenacious, they can bounce back and figure it out," he said.
Startups often go through an early phase in which their offering is not aligned with market demand. “This is where many companies fail," Ajay explained. For a company to invest capital in creating a product and fail to have the desired market impact is a difficult situation for founders—many will panic and not know what to do.
Ajay recommended that companies persevere through to the next phase of their start-up growth. If a company can find their product-market fit and build the right product, it can set them up for great success in the long run.
Alignment is vital for your company and your customers
Throughout our conversation, Ajay emphasized the importance of alignment in all aspects of a company, including with customers, to ensure successful growth as a business. One of the most important things for growing companies, according to him, is to know and understand how they create value for their customers.
Determining this and ensuring that it aligns with your KPIs and goals throughout the business is a key factor as you scale. Ajay explained that understanding the value you offer your customers, allows you to better align your internal initiatives to ensure that you are consistently delivering the same value to your customers, if not surpassing it.
Think system-level, not point-level
Co-authoring the books Prediction Machines and, more recently, Power and Prediction has given Ajay a unique look into how companies are using AI and machine learning to improve their business. He’s found that many companies have been focusing on point solutions—singular predictions within the workflow—rather than broader, system-level changes that affect an entire system.
"Something that surprised me was how often opportunities for system-level change were left on the table.” Ajay told us. Rather than solving a problem at a single point, system-level solutions consider how entire systems could be redesigned to solve multiple problems simultaneously.
As companies grow, they may encounter unique opportunities to implement system-level AI change to improve their market. System-level solutions aren’t appropriate in every situation though, for example, if they would require too much capital or significantly change a company’s business model. In these cases, all efforts should be made to ensure point solutions have significant enough impact on the market to set a growing company apart.
Investing in trust can help resistance
Change management is something that businesses deal with every day and will continue to face as technology continues to advance in the coming years. Ajay believes that change management is also one of the hardest things for a scaling business, as trying to implement change with external clients can cause difficulties that can trickle into different aspects of the company.
"A key issue with many CDL start-ups is that they develop a product that begins really well. They go to sell or implement it, and there's resistance," he shared.
After seeing this happening with multiple CDL start-ups, Ajay realized that, rather than a technology problem or an economic problem, these companies were struggling with change management.
"I started having meetings with a large consulting firm that does change management really well and learned that one thing they do is invest in relationships at the C-suite level of very large companies.” he recalled. “Their firm had built up trust with C-suite/Leadership teams, rather than coming in and telling them what they need to change without first establishing a relationship."
Ajay advised that investing in relationships can be a huge benefit to scaling companies, as senior leadership will be more receptive to an upcoming company's proposals when they already know the company compared to when an unknown company comes to them with the same proposal. Building trust is essential when trying to sell or implement a product that involves change management. Investing in this trust can only benefit scaling companies in the long run.
Working at a startup constantly presents new challenges. Scaling up successfully is incredibly difficult, which is why I appreciate hearing from industry leaders like Ajay. I’m grateful he made the time to share his experiences with us.