Travis Katz, CEO of BrightDrop, joins Matías Garibaldi on Drivers of Disruption to share his experience leading a new mobility business to record heights and re-imagining the future of last-mile delivery. Katz is joined by Asad Husain, partner in McKinsey’s in Toronto office, focused on supporting large-scale strategic transformation programs across automotive and industrial equipment clients. He recently authored The new automotive mandate: Moving from building products to building businesses.
BrightDrop, a start-up subsidiary of General Motors, has leveraged the strength of the incumbent to build a new business that continues to exceed industry records. In merging the start-up and incumbent worlds together, BrightDrop’s electric van was the fastest vehicle to launch in GM’s history—only 20 months from conception to first customer delivery. In 2023, BrightDrop is on track to be one of the fastest companies ever to reach $1 billion in revenue.
Katz describes how he redefined the way to run the business, the importance of continuous product iteration influenced by close customer partnership and the what the future could be in last mile delivery. An edited transcript of the conversation follows.
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Podcast transcript
Matías Garibaldi: Hello, everyone. Welcome to Drivers of Disruption, a show where we’ll be uncovering the latest advancements in mobility, challenges in the space, as well as potential solutions moving forward. My name is Matías Garibaldi and our topic for today is building new businesses in mobility. Our first guest is a successful serial entrepreneur. He’s led and founded companies in digital media, social media, as well as online travel. All of these before they were, you know, household things. And now he’s the CEO and president of BrightDrop, a tech company subsidiary of General Motors, that is focused on really disrupting the commercial delivery and logistics space. Welcome to the podcast, Travis.
Travis Katz: Thanks for having me. Great to be here.
Matías Garibaldi: Our second guest is a partner from McKinsey. He’s a core member of McKinsey’s Center for Future Mobility, and the majority of his work focuses on strategic transformations of large incumbents. He’s also the co-author of an article on building new businesses for incumbents. Welcome to the podcast, Asad Husain.
Asad Husain: Of course. Thank you, Matías.
Matías Garibaldi: Awesome. So, to kick us off Asad, I would love to get a quick overview of the mobility ecosystem of these last couple of years. I think there’s been a lot of change in the value pools, in the profit pools. We’ve been seeing, you know, companies entering the mobility space that weren’t there before as well as we’ve seen an incredible amount of IPOs or SPACs. I would love to get your structured overview of what has happened over the last couple of years and kind of what we’re thinking is happening next.
The new automotive mandate: Moving from building products to building businesses
Asad Husain: I’m happy to share thoughts and we’re going to test the definition of structure a little bit. But let me share a few ideas. And of course, we could talk about many different perspectives on what’s happening in the mobility market. But maybe I’ll start with a couple. Probably I’d say, one of the things I’d say is the rise of the broader mobility disruptive trends, the autonomous vehicles, connected vehicles, shared mobility efforts, a lot of efforts on sustainability, what colloquially is known as the ACES. I do believe that there are trends that indicate that the industry is reaching a bit of an inflection point when it comes to these trends, at different paces across them, but there’s real change happening in the industry as we’ll learn from Travis in a moment. And we’ve seen, of course, a lot of startups and new businesses emerge from these innovations and, you know, from some of the work that the McKinsey Center for Future Mobility has done, we are expecting mobility revenues associated with these disruptive trends to far outpace GDP per capita growth starting in 2024. And then the gap to GDP per capita growth is going to continue to accelerate higher and higher. So maybe that’s the first thing I’ll say. I’d also say, you know, it’s an interesting time to reflect back over what’s happened in the last, say, 24 months or so. We had a large number of IPOs in the mobility in the mobility tech space, record valuations for many different types of new entrants in the space. But more recently, looking specifically at the period in 2022, comparing, you know, December of 2021 to December of 2022, we’ve seen pretty significant enterprise value declines read by, you know, somewhere in the order of, you know, 50 to 80 percent for a wide variety of players relative to the broader auto sector, the established players, that decline has been, you know, 10 to 20 percent for those players. So the newer players have, or the startups that came up from scratch have had a bit more of a challenging time in the last 12 months, I think it’s fair to say. And then maybe the third thing, which is the intersection of both of those two, we’re seeing a lot of the established players, the incumbents stepping in, taking advantage of these mobility trends, launching new businesses, and really taking advantage of this unique moment in time. And one of the things that we found that was quite interesting was about 70 percent of automotive and mobility leaders in the space today describe new business building as one of their top three priorities. It’s a significantly large number, and it’s continued to go up over the last few years. The other interesting factoid that I think drives this is we’re seeing the result of disruption across industries in a very, very large way. So, for example, the average corporate tenure for a company that was on the S&P 500 back in the 1950s was about 61 years. If you were on the S&P 500, you would expect to stay on it for about 60 years or so, back in the 1950s. By 2020, that dropped to about 20 years. And we’re forecasting by the end of this decade it’ll be somewhere close to 12 years. So just like further pushes the necessity to reinvent, to expand what you’re doing, to continue to maintain this this level of performance that people expect when you’re an incumbent.
And one of the things that we found that was quite interesting was about 70 percent of automotive and mobility leaders in the space today describe new business building as one of their top three priorities.
Matías Garibaldi: Super helpful. And I think that was organized because you made a list of three. And I think that that meets my checkmark for organized structure. That’s good. Okay. Very, very helpful. I think this is a great segway to introduce BrightDrop. So BrightDrop is, you know, I would define it as a last mile delivery ecosystem, one stop shop, right? It’s not only, you know, the electric step vans, but it’s also these electric carts, the software system as well as the telematics and even provides, services and maintenance to set up your charging infrastructure. BrightDrop came to be almost a little bit over two years ago and was interesting, as I remember back in 2021 at CES when BrightDrop was announced, GM’s stock increased 10 percent and in one day, lots of excitement. Travis, I would love to get your thoughts on how did BrightDrop came about? What was the genesis of BrightDrop?
Travis Katz: Yeah, so BrightDrop started inside GM’s innovation incubator. So like many big companies, GM has an incubator where you’ve got people thinking up new ideas and launching new businesses. So the team had been working on this, and really the idea they had been looking at was the explosive growth of e-commerce. So, you know, if you think about e-commerce as a trend, we all are buying more and more online, it hit $5 trillion globally in 2022 and it’s expected to grow to north of $7 trillion by 2025, so you saw this massive growth opportunity and at the same time, this increasing need as climate change is getting worse, and the impacts of climate change are getting worse, a really strong desire for companies to decarbonize. And so I think GM, with its intent to move into a stronger position in electric vehicles, seeing a growth trend, it seemed like an obvious place to start. And then I was brought in, and what was sort of unique about the way we started this thing, GM had started a number of businesses internally, and most of them, like with most big companies, didn’t get a lot of traction. And so they started with a very new approach of let’s bring in an outside CEO who comes from a different industry and let’s set it up in a way to really give it the success and try a different approach to doing it. And I think that setup that we’ve put together is going to be really critical overall for our success.
They started with a very new approach of let’s bring in an outside CEO who comes from a different industry and let’s set it up in a way to really give it the success and try a different approach to doing it.
Matías Garibaldi: That’s really helpful. That was actually going to lead me to my next question because although it’s a subsidiary of General Motors BrightDrop acts as its own company, right? So I would love to understand the relationship between, BrightDrop and General Motors, what are some strengths that the incumbent brings in to BrightDrop, but also, I would love to understand why bring in an outsider, right? There are strengths to that and in your experience, what strengths are you bringing in? Because in your past, you worked in startups, not potentially a large incumbent, so how did you marry those two things within BrightDrop?
Travis Katz: So my background, I’ve worked in both large companies and startups, and the reality is there are different advantages for each of them. For large companies, you have access to capital, you have access to customers, you have brand and brand name, and there’s brand trust. With startups, you have speed, agility, the ability to sort of quickly turn and quickly focus. And so when we set up BrightDrop, we really try to see how can we set this up in a way that we take advantages of the strengths that GM brings to the table, which are many. So GM is incredibly good at designing vehicles and manufacturing vehicles. They’re investing heavily in batteries and battery plants. But what the ecosystem we’re going after in last mile delivery requires things that are beyond just traditional vehicles. So if you think about last mile delivery, you’re really talking about, a massive optimization problem of how do you move goods through an urban environment as quickly and as low cost as possible. That’s really a software problem at its core. It’s a simulation problem and an AI problem. And so what we wanted to build was a tech-centric company that’s focused around technology, software and data and marry that with the might that GM brings to the table and the brand trust that GM brings to the table on the vehicular side to really bring this ecosystem to life. And like I said, or like you said, Matías, we’re really building an ecosystem. So we have these electric delivery vans, we have a large one and a small one, the 600 and 400 Zevo. We have what are called e-carts. So these are electrically propelled containers, which we’re thinking about containerization. We have one that’s targeted at parcel delivery and a parcel market, another one that’s targeted at grocery, which has different requirements. And we have a software suite that really binds this all together. And it’s, you know, we have a desktop software, in-vehicle software, a software that runs on the mobile phones of carriers as they’re out in the field. So the system together needs to work. When I first came in, I was I was in for about three weeks when I basically had to go to Mary Barra and the leadership team and say, “Look, this is the right idea, but it’s not going to be successful unless we can run it in a different way.” GM is a company that is very much run, You know, it’s, you talk about the longevity of companies. GM has been around for more than 100 years and they have a very powerful system at how decisions are made, how a number of processes, how things are funded, the steps you need to go to. And the entire company really runs around this set of principles that was designed around the traditional automotive industry. And it’s powerful. That allows them to scale and do multiple vehicles, you know, tens of vehicles across the country, you know, across the world in different factories and do that efficiently. But when you try to put something different that doesn’t look like a vehicle into that system, the system breaks it sort of spits it back out. And so, they were very open minded and they said, “Okay, well, how’s the right way to set it up?” And so we really set the company up as a separate subsidiary. We run it like a tech company, and we’re focused on bringing in the talent that you bring in from a tech perspective, bringing the speed in the agility while still tapping into GM’s strengths. And I think it gives us, this is going to give us a lot of advantages. So I think what we’re seeing now on the startup side of the house is startups are bringing a lot of very interesting products to market, but they’re now struggling with both capital, when they go to customers, customers don’t know, especially commercial customers, hey, is this company going to be around in five years to support this vehicle or ten years? Do they know? Are they going to have spare parts in stock when I need them or am I going to be offline? So when you say we’re backed by General Motors, they know General Motors, they’ve been working with General Motors for years. And so that brings a level of comfort and a level of trust and that allows us to go faster.
So if you think about last mile delivery, you’re really talking about, a massive optimization problem of how do you move goods through an urban environment as quickly and as low cost as possible. That’s really a software problem at its core. It’s a simulation problem and an AI problem. And so what we wanted to build was a tech-centric company that’s focused around technology, software and data and marry that with the might that GM brings to the table and the brand trust that GM brings to the table on the vehicular side to really bring this ecosystem to life.
Matías Garibaldi: Asad, I have a question for you, because I think BrightDrop is a success story of doing this well. Travis, you mentioned a couple of potential pitfalls that could have have happened if you didn’t necessarily teach leadership, as well as leadership being open, and accepting, which is a big part as well. Asad, what have you seen in your experience on some of the major pitfalls that people fall into? And by people, I mean, you know, incumbents may fall into when they’re starting a new business.
Asad Husain: Yeah. Yeah, I think... So it’s clear incumbents have been trying and are trying in the current era, have tried in the past as well. Maybe if we synthesize a few things to take away, if we apply some pattern recognition on the the ones that didn’t work out, a few common things emerge. So I’d say under-resourcing is generally a big challenge. It’s very difficult often for a large incumbent to give the right amount of attention, energy, resources to something that is unproven. It just goes against a little bit the business model and the little bit the thought process of: “I will set a budget and I will evaluate people against this budget,” whereas being iterative and agile in a startup or a new business build concept requires a lot more flexibility, a lot more agility when it comes to that dimension. Another challenge I’ve seen quite often is this misaligned expectation on timing, which can become which can kill ideas potentially too early because there is a focus on near-term profitability or can basically force ideas to evolve at a much slower pace because, again, linked a little bit to the starving or scarcity of resources. Another one I’ve seen, I would describe as being killed with love. So for lack of a better way of framing it, the mother ship asks the new child to execute processes in the same way that the mother ship does. Again, it doesn’t work in the context of something that is meant to be a lot more faster, a lot more agile, and where you actually expect direction to change frequently over the course of this thing’s evolution. And then maybe the last couple I’ll talk about, one would be not necessarily leveraging an unfair advantage to the extent that it could be. So, for example, in the context of BrightDrop, we see BrightDrop as using its position to leverage the best of both worlds, right? The brand resources, knowledge, ecosystem, relationships of General Motors and the agility, flexibility, talent, timing of a startup. You sometimes run into these cases where people forget about the first half of the equation and they jump after a idea that sounds inspiring, new, different, but they lose sight of the fact that I may not have an unfair advantage as an incumbent in that space and they jump too far afield from the core or from something that would be even potentially adjacent to the core. And maybe the last one, I’ll just say, is which I see quite frequently, is this lack of iterative mindset. There is very often this desire to, again, informed by years and years of operation, there’s the desire to push a solution. How do I leverage my scale? How do I leverage an existing thing that I have and find a customer for it rather than being the other way around: What is a customer in this space looking for? What can I do to create an offering that creates value for them and therefore allows me to capture a part of that value? So very, very much sort of like a push versus a pull mindset is sometimes what we see with a lot of the companies that don’t work out. Travis, I’m curious, how do these resonate? Do these ideas ... you mentioned a few of those. What do you think?
It’s very difficult often for a large incumbent to give the right amount of attention, energy, resources to something that is unproven. It just goes against a little bit the business model and the little bit the thought process of: ‘I will set a budget and I will evaluate people against this budget.’
Travis Katz: Yeah, no, absolutely. And you know, this is not my first time doing this. So I have a lot of benefit of hindsight because I was with MySpace at the time that MySpace was acquired by News Corp and watched as MySpace, which was the biggest site of the Internet at the time, eventually sort of, because of a lot of the factors that you mentioned, was sort of squeezed out and created an opportunity for Facebook to overtake it. So... I think all the things you mentioned are very, very real. And the reality is, even for BrightDrop, we are going to be tested on this in the next 48 months because as the economy starts to cool off, BrightDrop was started in a time when capital was very inexpensive and optimism was just generally high. When you’re suddenly in a traditional automaker where the you know, your stock price, it’s a value stock and your your investors are looking at, you know, points of margin on your EBIT. There is going to be a lot of pressure to for GM to say, hey, how do we cut costs in things that are not profitable? The balance is going to be tough. I think we have the commitment. You know, Mary Barra is a very visionary CEO and I think she’s quite unique in the industry. The company has placed a few big bets. So one of them is with Cruise Automation delivering autonomous technology, and the other one is BrightDrop. But yeah, patience, you know, if you’re a traditional company. So if you think about it, you know, I’m very empathetic to the leadership. So if you think about introducing a new car, so GM introduces new cars every year, they’re going to introduce 20 plus vehicles this year. But if you’re introducing a new vehicle, you know, it’s already in a category that is well understood. So you understand what a pickup is. Customers understand what a pickup is. You can estimate, you know, exactly how big the market is. You know how big the market is. You can estimate roughly what share you’re going to get. So it’s a very predictable path when you launch a new vehicle to know roughly how much money you’re going to make, how much market share you’re going to get. That’s all pretty straightforward. When you’re doing a new business and inventing a new category, which is really what we’re doing around BrightDrop. There’s a lot more uncertainty. There’s a requirement for more iteration. As you get in and start spending more time with customers and products, you start to find, “Hey, this product works really well for these use cases, but for other use cases, it might be better if we tweaked it a little bit this way or that way.” And so part of the success has to be a commitment at the at the executive level to say, hey, we are going to invest and commit to this for a period of time to see how does it play out and how does it evolve. And at the same time, in a subsidiary level, one of the things we’ve had to really invest in building is really strong UX research and design research, really gathering information and collecting the data that we need to really help shape and evolve the products, so we’ll be positioned for long term growth as opposed to thinking what’s the best thing for next quarter’s earnings call?
When you’re doing a new business and inventing a new category, which is really what we’re doing around BrightDrop. There’s a lot more uncertainty. There’s a requirement for more iteration.
Matías Garibaldi: That’s very interesting. I think you hit a couple of points, Asad, that you actually mentioned in your article in regards to certain mindsets that, like mindset shifts that incumbents need to make when they’re going into a market that is a little bit more uncertain and you’re kind of mentioning, you know, the MVP mindset, the build, measure, learn kind of iterative loop. I think the second one is, you know, customer first, understanding what the customer actually wants in a product. And I recently saw, Travis, you in a conversation alongside FedEx and talking about that partnership together of co-developing the vehicle together from almost from the very beginning. I would love to dive a little bit deeper on that. And what was the strategy there? Obviously, General Motors knows how to make vehicles, but this is a different type of vehicle. It’s a different type of use case. How did you go about, you know, first finding a partner and how did that relationship get established? And what were the benefits to that relationship?
Travis Katz: Yeah, so when you’re doing a B2B business, where you’re really selling into another business, you’re not going to succeed unless you have partners that are willing to engage with you early on and help to feed you with you know, requirements, help you explore different concepts. And so we’ve had a fantastic relationship with FedEx and this goes back many years and FedEx was involved in both helping us understand what are the requirements for an electric delivery van and what really makes that successful but also allowed us to test these e-carts in real life concepts, on real routes, with real couriers to be able to gauge and measure what is required. So we are very, very grateful for FedEx, and we’re working closely with a few other partners as well. You know, this really requires, you know, some trust and some patience from both sides. So it’s not something that you can just walk in the door, You know, most companies, if you think about a business last mile delivery, you know, if you’re FedEx every day, you wake up and you’re like, oh, my God, we’ve got to get all of these packages to all of these addresses, you know, before 10 a.m. And so it is a very, very fast-paced business. So when you’re doing something like co-development, you’re really inserting something into the process that could slow them down for a period of time, as you’re learning. So that’s not the kind of decision that companies want to take on lightly. And most companies will say, you know, they usually have, you know, groups that are set up, innovation groups, for example, that are set up to sort of test new things. But they’re not going to do it unless they trust that you are a real company, that they trust that you will be able to bring a product to market at scale. And so the relationship with General Motors and FedEx is, you know, it’s a long standing relationship. And I think that trust was really instrumental in helping us go after it. We also both had very shared goals, so both companies have committed to getting to net zero by 2035 or 2040. So when you have those shared values and those shared goals, that makes those kind of partnerships much easier to bring to light.
Yeah, so when you’re doing a B2B business, where you’re really selling into another business, you’re not going to succeed unless you have partners that are willing to engage with you early on and help to feed you with you know, requirements, help you explore different concepts.
Matías Garibaldi: And Travis, I have a follow up question on that, too. Was there ever hesitation from the company to go to a potential customer/partner before having a product in mind? How... Did you have to basically change mindsets or potentially convince folks of getting comfortable of having a conversation before a product was there? In the startup world I can see that being, you know, happening a lot, but sometimes in the incumbent world that might not be the case. So curious if you ran into any issues or any stories there.
Travis Katz: Yeah, so just to be clear, we did already have product concepts in place before we engage with them.
Matías Garibaldi: Gotcha. Okay.
Travis Katz: We saw this vision for last mile delivery. We had a sort of early design for a last mile delivery van. We had studied urban mobility and had come up with this concept for the sort of electrically propelled containers, the e-carts.
Matías Garibaldi: Got it.
Travis Katz: So we went to FedEx and essentially pitched those. And I do think it’s really important. You don’t want to waste people’s time and you get limited bites of the apple. So you really need to do your homework in advance and really do a lot of research. We actually have our own research lab in here where we’re testing out products, we’re bringing in people from outside the company and running them through real life tests to help us iterate on products so that by the time we go to a customer, we’ve got something that is pretty well baked, as opposed to saying, “Hey, we want you to be our, you know, do all of our research for us.”
Matías Garibaldi: Right.
Travis Katz: Companies, they just don’t have the bandwidth for that, it’s not a reasonable ask. So that’s been really important and something it’s a skill we’re getting better at. We’ve set up a sort of mock grocery store that we can run in and run grocery-picking runs with real grocery pickers in there to sort of help test how do drawers open? How do people interface with the hardware? And those those lessons are just invaluable, the small things that you pick up. So then by the time you get out in the field, you should have something that’s reasonably well baked. With the van, part of how we did get there, you know,in the early days was we sent our design team and engineering team out on real runs with couriers in the field so they’d spend a day doing ride-alongs and watching Okay, what were they doing during the day? Where were they staging the packages? How were they moving? Where were they getting stuck? Where were their design elements in the vehicle that were slowing them down? So that led us to a lot of design decisions. So creating a really wide bulkhead door to make sure if you had a big box, you could walk straight in from the cabin, a really big windshield with a wide field of view that improves safety dramatically. You know, it’s hard to see in those big vans. Is there something in front of me? We created a lower step in height, which is something that was enabled by the I heard about this. the battery which goes underneath the floor but that allowed us to lower the step in height. And that matters a lot. We lowered it by a few inches. It doesn’t seem like a lot, but the average courier is getting in and out of these vehicles 100 to 150 times per day. And so the wear and tear on your knees and that sort of thing. And just the fatigue you feel. If you can lower down a couple of inches, it makes a big difference. So a lot of that was stuff that, you know, you can’t sit in your ivory tower with a design team and know those things you actually have to get out in the field. And so those kind of things really became quite valuable.
With the van, part of how we did get there, you know, in the early days was we sent our design team and engineering team out on real runs with couriers in the field so they’d spend a day doing ride-alongs and watching Okay, what were they doing during the day? Where were they staging the packages? How were they moving? Where were they getting stuck? Where were their design elements in the vehicle that were slowing them down?
Asad Husain: And Travis, I’m curious, you describe much of the research that you did on the vehicle itself, how the user of the vehicle would interact with it. You know, from the grocery examples that you gave from the height of the vehicle, from the size of the windshield, the doors, I’m curious how in the early stages, when you’re having a conversation with a potential customer, how do you talk about the ecosystem of what is the offering going to be? Because it’s beyond the vehicle? I think that’s a big part of the value proposition. I’d love to hear how you framed and how that was internalized by customers.
Travis Katz: Yeah, I think we’ve had great conversations around this and the reason it’s so powerful, the ecosystem concept is, it’s really looking at the problem space holistically from the customer’s point of view. So there’s the vehicle aspect. So one of the thing that these companies are trying to do always is they want to lower their costs of running their business. They also have this imperative to eliminate carbon emissions. And so the vehicle is designed to do both of those things on its own. So because it’s electric, you know, it takes the carbon emissions down pretty dramatically. Also because it’s electric, it takes that total cost of ownership, of the cost of running the vehicle, down a lot. So electric vehicles tend to be more expensive upfront, but the savings in just fuel and maintenance, you know, we estimate customers will save between $7,000 and $10,000 per vehicle per year shifting to electric. So in some senses, it’s kind of a no brainer from an economic perspective. But when you look at the broader problem set that they’re facing, that’s not the only problem they’re facing, is their cost. So in urban delivery, you’ve probably seen this in your home city, one of the things that’s happening is these trucks are trying to move around. There’s no parking. And so oftentimes these trucks have to double park. They’re getting parking tickets, they’re blocking traffic and creating congestion, which can cause challenges for cities. And when you have things like you’re trying to serve an urban area and you have a high rise building, there’s only so many packages you can fit on a dolly before it becomes unwieldy and too heavy to serve. And so the idea of the e-cart was to really help, you know, containerize things. So one, it will be faster for loading/unloading, you have everything for a specific block package in there, but also with the electric propulsion, it lets you carry more than 250 pounds of packages effortlessly. So it’s no strain on the driver. That means instead of doing three or four trips back and forth to the van, you can do it all in one go, an entire high rise in one go. That saves strain on the drivers and, you know, keeps the couriers from, you know, getting tired out. And so you have lower churn, but it also means less curbside dwell time. So it means you can do more with less. And we measured this with FedEx. FedEx was able to deliver 25 percent more packages per day using these e-carts than without them. So it’s it’s pretty massive. So when we go and talk to customers, we talk about what we saw in the field, you know, observing these things and the problem of double parking, the problem of having to sort packages on the curbside. We bring in pictures and say, you know, these are some of the things we saw. And the customers really like it. You know, they understand that we understand the broader challenges they’re facing, we want to partner with them to help them get to solutions. So that’s a very, very powerful story. On the software side it’s a very interesting conversation because all of these companies have their existing software suites that they use. A lot of these are sort of mix of internal, internally grown stuff and third party stuff they’re plugging in. And so there’s a strong lock-in effect. It’s hard to change software. But the reality is the world is changing. And when you start to move from the old school vehicles and couriers with dollies to connected vehicles and connected e-carts, and you’re streaming live data back from the field, that data is powerful and you can start to unlock massive insights to change the way that you do business. And I think ... that takes a little bit more discussion with customers to really help them understand that, “Hey, the way you’re doing it works for you today, for sure, but there’s big gains to be had,” and you’re seeing companies like Amazon really pushing the envelope on this with Amazon logistics. Amazon’s core, one of their core strengths is machine learning. And they have tons of machine learning capabilities and they like to point machine learning at different problems and seeing where they can move the needle. Everyone’s going to have to keep up with that pace of innovation and that kind of thinking. And so there’s just a huge amount of opportunity. I think we’re at the very beginning of this journey.
It’s hard to change software. But the reality is the world is changing. And when you start to move from the old school vehicles and couriers with dollies to connected vehicles and connected e-carts, and you’re streaming live data back from the field, that data is powerful and you can start to unlock massive insights to change the way that you do business.
Matías Garibaldi: That’s very exciting. I guess one thing I want to ask you, Travis, is, I guess what’s next for BrightDrop? I want to think about, I want to ask you, what’s the next milestone you’re excited about without skipping the milestone that you recently achieved, which I think is very exciting, the speed to $1 billion in revenue. Could you elaborate a little bit on that milestone? And then, you know, what are you shooting for next? Obviously, the times right now are a little bit more difficult, but I’m sure there are certain milestones that you’re looking forward to the next year or two years, or three years.
Travis Katz: Yeah, so we’ve been on just a. just a rip roaring ride, I guess I would say. So we launched this thing two years ago and we have been just setting records along the way. So our vehicle was the fastest vehicle to market in GM’s history. It was 20 months.
Matías Garibaldi: 20 months, yeah.
Travis Katz: From inception to first customer delivery. That may be the fastest vehicle ever brought to market. So there was a lot of new thinking about how to do that. We set a world record for the longest distance traveled by an electric van. So we’re in the Guinness Book of World Records. And then, more recently we’ve lined up major customers. So FedEx, Walmart, DHL, Verizon, Purolator in Canada. So big customers are signing up with BrightDrop and see us as part of the ecosystem that’s going to help them get to the future. And then most recently, as you were alluding to, we announced we’re on target to be the fastest company to reach one billion dollars in revenue in history. So we’re on target to do that in 2023. So it’s a really exciting time, but we’re really just in the very beginning of this journey. And I think when we look at where we see the future going, it’s really about reimagining last mile delivery. So the model we’ve been on, people are buying more and more things in e-commerce. To deliver those things they’re having to put more and more vehicles into cities. The infrastructure of cities can’t get bigger. You can’t make the streets wider in Manhattan, the buildings are there. And so we’re starting to create traffic congestion. Things are getting slower. And meanwhile, consumer expectations are that I’m going to get things faster and faster and faster. We think there’s a way to thread the needle and do both and eliminate the carbon emissions, but also really make the system work better. But to do it, you have to really rethink it. It can’t just be about throwing more vehicles at the problem. You have to think about how can we use multi-modal transportation, e-carts, foot couriers, bikes, micro hubs and really connecting all these dots together, leveraging software and data. So when we look forward, I think the impact of what we’re going to do, from a vehicle side we’re going to start seeing that very quickly, the e-carts are going to start coming in at scale shortly after that. But then the real power is going to be coming from the data and the unlock from the data as we start to connect all these dots together and start to pull out the insights of how do you redesign the system to allow us to keep scaling at the pace that everyone wants it to scale while fitting in the constraints of, “We need to do it without carbon emissions and we need to do it without, you know, creating congestion in our urban landscape. So it’s it’s a fun problem to work on. It’s big. And we’re looking at the same kind of thing for grocery and grocery fulfillment. So in some ways, it’s similar. You’re trying to get groceries to people in the most efficient way possible, but it’s a very different set of challenges because you have things like temperature control and you know, the is the ice cream going to be melted by the time it gets there? That’s sort of the ultimate test of if you did a good job. Grocery e-commerce has been just massively taken off since the pandemic. Almost everyone is losing money with every delivery they’re doing, but they feel like they have no choice because the switching costs are low. And so if my grocery is not going to deliver, I’m just going to go to the next one that will. So there’s a lot of hunger for solutions in the grocery space as well. And so we’re very excited about that. Then we think a little bit longer term, we have our sister company, Cruise Automation, and that’s doing autonomous vehicles. So when you start to think about the concept of if you marry autonomy with these sort of last mile solutions, what could you do? And I think, you know, the opportunities are massive. So when we look at this this business, I mean, it’s a massive, massive opportunity and it’s one that’s ripe for disruption.
We announced we’re on target to be the fastest company to reach one billion dollars in revenue in history. So we’re on target to do that in 2023. So it’s a really exciting time, but we’re really just in the very beginning of this journey. And I think when we look at where we see the future going, it’s really about reimagining last mile delivery.
Asad Husain: Maybe I’ll build on something that you said too, Travis. I’m 100 percent aligned on electrification. The push for sustainability, it is, like, there is wide ranging consensus across geographies for a push in that direction. I also think from a connectivity standpoint, your point around data, using data, it’s going to become much, much, much more prevalent in this space because the amount of incremental value that can be unlocked relative to the cost of doing so is just astronomical the kind of impact that this can have. On autonomous, I think I’m with you that it’s going to unleash the next wave of innovation. I think it’s also going to help bring some other concepts to the market. So different form factors. If you think about autonomous bots or autonomous lockers. Not applicable for every kind of delivery or every kind of geography, let’s say, but in certain use cases you can see these different types of sub modes taking off, a little bit further down the road with the expansion of autonomy, with consumer acceptance, also solving the problem of not just the “How do I get the package to the consumer but to their actual door?” So how do you solve that last foot/last meter kind of problem as well is going to be interesting to see how that evolves over the next few years, too.
On autonomous, I think I’m with you that it’s going to unleash the next wave of innovation. I think it’s also going to help bring some other concepts to the market. So different form factors. If you think about autonomous bots or autonomous lockers.
Travis Katz: Yeah. Yeah, I agree. And I think the last, I call it the last 100 foot problem on autonomy for delivery is no joke. So you can imagine it’s great having an autonomous vehicle come and bring your stuff, but if you’re on a zoom call on the 18th floor of high-rise and your toothpaste is arriving, you know, what do you do? And so that I think we’ve got some ideas of how that all comes together, so stay tuned.
Matías Garibaldi: That’s awesome. That’s a very exciting, very exciting space. I think to close us out, I’ll ask a question to the both of you. I’ll start with you, Travis. What advice would you give to incumbents looking to start new businesses?
Travis Katz: Yeah, I guess the main ones ... I guess a few things. One, you want to figure out, okay, where are your core advantages? Where do they open up opportunities in markets that are new and adjacent? So it’s got to be something that really builds off something that your core. But then you need to really think about what are how do you win in a new business environment that’s very different than the core. And I do think it’s critical to do things like bring in outside talent. If you put in the people who are used to running the core business, they may be very talented at that, but it’s a very different skill set going from 0 to 1. So you really want to bring in people who have built businesses from the ground up, and then you really need to carve them out in a way that they can operate with a fair degree of autonomy. In fact, there’s different ways of doing that. You know, raising external capital is one way to do it. That’s, actually GM learned a lot from the Cruise story, as Cruise raised outside capital from a number of strategics. That creates a bit more of an arm’s length, honest broker relationship where you have to think what is in the best interest of this business and this growth business. So that can be helpful. Setting up a board of directors type thing with outside directors that can help share perspective and sort of challenge the traditional thinking inside the company. But I think really setting up, you know, you have to really create some guardrails if you expect the new startup to conform to the ruleset and the budgeting processes and all the things that you run with your existing companies, you’re probably going to kill it. And that’s been the history of most company’s innovations. They end up killing them at some point by doing by applying the rules that work for their core business. So it’s not that they’re doing dumb things. They’re taking the things that work in the core business and trying to apply it to a new business. And those those rules don’t necessarily work.
One, you want to figure out, okay, where are your core advantages? Where do they open up opportunities in markets that are new and adjacent ... And I do think it’s critical to do things like bring in outside talent. If you put in the people who are used to running the core business, they may be very talented at that, but it’s a very different skill set going from 0 to 1. So you really want to bring in people who have built businesses from the ground up, and then you really need to carve them out in a way that they can operate with a fair degree of autonomy.
Matías Garibaldi: Asad. Any follow ups on that?
Asad Husain: Yeah. Maybe I’ll share a couple of thoughts. I think the... in terms of the “where to compete” and “where to target,” I think incumbents have this interesting Goldilocks problem of it’s got to be close enough to the core, but not so far away that I have no unfair advantage or right to win, but also not so close that the existing business will kill it with love, as one would say. I think that’s one one challenge to be overcome and one challenge to be very mindful of as you’re building and launching a new business. I think the second one, I would say, is really, really understanding the customer need. What is the customer in the space really want? And thinking of it through three lenses, one from a desirability lens for the customer, second from a viability of the business that you are building. Does the business model work? Is it doable? And then third, maybe the feasibility lens of am I the right person to do or launch this business? I myself or with the help of feasible partners, I think those are the three lenses to use to evaluate opportunities. And then maybe the last thing I would say is this idea of being MVP fail-fast logic is very similar to the lens that Travis was describing. It requires a different mentality, requires real, real focus, and an also a willingness to let go, which is difficult for large players that have built business through relentless focus on many, many different fronts, leveraging scale, etc... So it’s a little bit the knowing, knowing which of your cards to play when and structuring the problem in a way that allows you to attack new space.
Matías Garibaldi: It’s fascinating. I think that’s a perfect spot to close for this episode. Travis, Asad, thank you so much for your time. I found this conversation fascinating and I hope to speak with both of you again.
Travis Katz: Thanks for having us, it was really fun.
Asad Husain: Thanks a lot. It was amazing.
