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Michael McCarthy, Executive Coach , Harvard Advanced Leadership Initiative

Michael McCarthy, Executive Coach

Michael McCarthy is a serial entrepreneur, an executive coach at Harvard and MIT, and a strategy consultant to scores of start-ups around the world.

He was previously America’s No. 1-ranked stock market timer in the U.S. for 10 consecutive years, at a self-founded money management company where, as a 26-year-old, he was already managing $100 million for private investors.

Having founded six start-ups,…
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How is your team changing the game within your industry sector?

Just last week, I had a healthcare company from Tennessee wanting to know how to do intrapreneurship pitches in-house; how to pitch things like app ideas that might be approved by upper management.

There are the important basics for the intrapreneur process, like knowing who you’re pitching to, and what their needs and criteria are; what they say – pre-pitch – would lead to their green lights and their red lights.

But for the brainstorm phase, I coach a mastermind process designed to remove negativity.

First, we gather five to six people from very different walks of life – different genders and ages and backgrounds and business units.

The (originator) is asked to take three minutes to describe the idea or the dilemma or the challenge, and they have to describe the kind of solution they’re looking for – like “I am looking for a solution in the form of an app, not a new business division.” You have to be clear on the kind of solution you want. Then there is three minutes of Q&A, just to clarify the challenge or the problem. Then, the person with the challenge or dilemma has to physically leave the room and they take their self-limiting beliefs with them.

It’s important they leave because what they tend to do is interrupt too much – and say “oh, I tried that; that won’t work.”  When they’re not there, people will be free to say the bad idea, and then leapfrog to a better idea.

The format we use in the brainstorming session is “yes, and,” where the response must literally begin with “yes, and,” which makes the shy people and the introverts feel safe. You can still disagree, but it needs to be in a positive way – one person can say “I think it should be purple,” and another can say “yes, and I think it should be any color but purple; but I might agree to maybe a shade of purple, like lavender.”

The person with the dilemma then returns to the room and just listens.

Recently, in Boston, for instance, this method led to a challenge for finding sufficient recharging stations for shared electric scooters being entirely reframed with this total solution: that pre-charged scooter batteries simply be swapped out by users at the scooter racks, and forget about recharging altogether.

And in Armenia – one of several developing countries where I have coached – the mastermind method provided an employment solution for returning refugees on either side of traditional working age, in an interesting social entrepreneurship challenge. The young refugees had few skills; and the seniors had skills but not the vigor to use them directly. So the group came up with the Armenian Shopping Network – based on the Home Shopping Network concept in the U.S. – with the returning Millennial refugees doing YouTube videos of the seniors teaching traditional Armenian cooking classes, and selling the products by mail. It turns out from the discussion that keeping the culture, the food and the language alive was particularly important in the diaspora. The young people do the social media, the baking and the shipping; the older people set up the recipes and the use cases.

When I coach start-ups, the first thing I do is to encourage them to consider doing a service business rather than using a manufacturing model. If there is a way to offer a product  as a service, it eliminates so many problems, and you don’t have to worry that much about  attracting venture capital and angel investment. Simply framing a business model around service stimulates innovation.

My second fundamental piece of advice is to make it a need, not a want.

The base challenges for startups in developing countries are quite different from those in the U.S. In Armenia, I observed that founders had a huge challenge with trust and personal cynicism.

People told me there’s no point in trying to start a successful business because the government is corrupt and they’ll just steal your business, so why bother. So, I had to overcome this very negative attitude that everyone is a crook. In an auditorium of 200 people, about half were incredibly cynical – that negative iron curtain mindset is a killer for start-up development. A lot of developing world entrepreneurs have a challenge around shyness, and the need to learn American style pitching – right down to the humor, and dealing with the apparent meanness of venture capitalists. They need to learn how to keep their self-esteem intact after rejection.

I must have talked to 1,000 would-be start-up founders, through my Harvard course on entrepreneurship, MIT Launch, Babson College and the $1 million Hult Prize.

In the start-up world, I think there is way too much focus on making a ton of money as a motivation to start a business. Just paying your own bills through your idea, not having a boss and doing what you want, when you want – could be immensely rewarding. Most start-ups don’t need to be focused on whether they’ll become a unicorn for the idea to be viable. Starting the Budi Foods business made me happy to be alive.

Just focus on the life that you want.

What are some of the biggest impediments to innovation in your organization or industry sector?

Self-limiting beliefs and negative thinking are the biggest inhibitors to innovation. If I have a brainstorming session and someone says, “that won’t work,” I kick them out…literally. I’d rather have someone with limited intelligence in a good mood than a brilliant person in a bad mood. They take all the shy people off the ideas board.

Also, being in your silo, or putting a ceiling on your business model, inhibits innovation. Saying, “Oh, we only do apps; we only do things in the U.S.; or we’re only in the food business” will prevent innovation.

How has innovation become engrained in your organization’s culture, and how is it being optimized?

One key element is that the CEO must believe in innovation, and that belief needs to trickle down. It needs to be embraced, not just tolerated –  it can’t be just “Innovation Day” for one day a year.

Also, they need to set aside dedicated, respected time for innovation. Companies should not cancel out innovation time; that innovation time needs to be ring-fenced, irrespective of other events, like end-of-quarter. The clear sense must be: innovation is how we stay alive and relevant 100 years from now.

When I had a chocolate company a few years ago, and we had our first commercial run at a new location in Ohio, I was on the production line on the first day. And I ended up involved with making a part for the chocolate machine, because they weren’t coming out right. I absolutely recommend that C-suite executives spend time on the production floor. If I was the CEO of FedEx, I’d go undercover as a FedEx driver for a day each month, and experience what it’s like, and learn from customers. You will discover so much as a lower-end employee, or if you drop into different departments, especially if something is not working in that department.


What technologies, business models, and trends will drive the biggest changes in your industry over the next two years?

The clear answer there is Blockchain – primarily because it benefits the consumer massively. Soon, consumers are going to see that certain services are much cheaper and faster. For example, when you want to buy an apartment, the commission will be cheaper because there are fewer middlemen, and it will be a much faster experience. Your references will be up in the Blockchain, instead of having humans reverify what was verified ten times before. It brings a lot of efficiency that trickles down directly to the consumer. Yes, Blockchain is in its early days, and I have yet to speak to someone who says they’re making money directly from the technology. But they are starting to use it. You’ll first see the benefits in financial services, like when you buy stocks or mutual funds – it will settle in minutes; you’ll see funds and checks clearing immediately into your account; you’ll be able to wire funds without a bank in the middle.

You’ll also see Blockchain efficiencies in supply chains, with shipping and tracking.


Can you share a specific innovation strategy you’ve recently encountered which you find compelling?

What I love is fractional real estate ownership, where you can buy a fraction of someone’s house in another city; you can buy $1000 of someone’s mortgage. You become a mini bank because you want the upside of the market exploding. You can resell that portion to someone else.  Its already started in Australia with a company called I love that it gets rid of the banks. 

And I’ll tell you something that someone should be doing, but that doesn’t exist yet to my knowledge. I think people’s identity and records that prove what they’ve done can be put on the Blockchain. So, for instance, if you become a refugee – something people don’t plan for – you’ll be able to get out of that refugee camp faster by proving that, yes you do have a PhD or engineering degree; yes you do have funds sitting in Vanguard to pay for a flight out. A lot of experienced teachers from Puerto Rico are now having to work as teaching assistants in Florida because the records showing their teaching certificates have been destroyed in the hurricane.

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