Daniel Flynn on social entrepreneurship

Audio: Hello everybody. This is Barack Obama and we've brought together some amazing young people from across the country, from 60 nations around the world, people of different backgrounds, different professions but all of them are asking themselves how can they make a difference and bring about change in their communities, in their countries, in the world. And we have Daniel Flynn Co-founder of 'Thankyou' whose been doing some amazing entrepreneurial work tying together some good business with some good deeds.

Intro: From The University of Sydney Business School, this is Sydney Business Insights. The podcast that explores the future of business.

Sandra: So that was Daniel Flynn the co-founder and Managing Director of the social enterprise 'Thankyou' being interviewed by President Obama. Daniel is one of Australia's most successful entrepreneurs under the age of 30 and winner of the 2014 Victorian Young Australian of the Year. Welcome Daniel, thank you for talking to us today.

Daniel: No worries, it's great to be here.

Sandra: You were very young when you first came up with the idea of Thankyou water. Take me back a bit to the 19 year old who started this.

Daniel: The 19 year old who started this was actually not thinking of starting this to be honest. I was project management in construction and I actually thought I'd one day build buildings and get into property development and I had a grandfather who was a developer and I don't know if it was in my blood or not but that's what I was at it 19 and then I have this kind of moment that shifted everything and I was doing some research for a uni assignment and I read a number that said 900 million people don't have access to clean water and I thought that doesn't sound right, it sounds too big, and I click into it and to my shock it's not just the real number but four and a half thousand children die each day from waterborne disease. And here I am at 19 basically staring extreme poverty in the face and I'm thinking how do we live in a world that is so developed yet we're so underdeveloped and at that same time I saw another number which was the 50 billion dollars spent on bottled water globally, now a hundred and thirty billion I think is the latest number. And I look at that and go well that's extreme consumerism and it's also the dumbest product on the planet. But you've got extreme poverty and extreme consumerism existing in the same world and I just had this thought like well that feels wrong. What if there was a way to bridge the two. What if you could launch products that helped end global poverty and that's the beginning of kind of this rollercoaster ride.

Sandra: It didn't quite work out the way you planned from the beginning. Can you walk us through it a bit?

Daniel: Yeah it didn't. To be honest we didn't know what we were doing. We still don't really. And I say that because I think not knowing sometimes is actually a really interesting advantage because you don't know what you can't ask for. And our first meeting was with a big manufacturer and that didn't go very well. They're saying you're up against the big brands and they've given us the whole spiel about how the industry works. So it took us about five factories to find one guy who'd back us and ended up landing the largest deal we'd ever landed, it was in fact our first sales pitch we landed a 50,000 bottle order in the first pitch. So now at 19 I'm thinking this is easy and we pitched and all we had was an A4 sheet of paper frended up of what the bottle would look like. And honestly we hacked that but we get the deal and I think I thought this would be a fairytale ending and it wasn't. It just turned into a disaster and for the next three years we faced a whole bunch of issues and those who know our story know that the launch became a product recall due to a labeling issue. We re relaunched and got into about 350 cafes and outlets and then our factory didn't supply product for five weeks and during those five weeks we lose 300 of our 350 customers. And so it was a pretty dark moment to be honest. I think we all stuck in there and I say we, Justine, who was my girlfriend at the time, and Jared my best mate, they're our co-founders and we're still all together today. Jared and I aren't together but Justine and I are married but that was a crushing moment a year in because the whole dream had just sort of failed, so we thought, but there were two retailers looking at the launch and looking at our whole concept and we thought they were going to say yes so we found a new factory, launched up here in Sydney with a new distributor and they said you'll be in 2000 stores in month one. Then they went bankrupt holding our product. So it was another disaster. The two retailers came back saying no, then both came out with their own bottle of water that went to funding water projects. So we had knock back, set back, knock back and for three years we literally couldn't get one national retail deal.

Sandra: So how come you stuck in there? How come you kept going?

Daniel: It's a really good question. I think there's probably a couple layers to it. In fact I look back thinking man we were 19/20 years old but we had a pretty deep connection with our purpose, our why. I don't think we jumped into it because of a brand or a product idea, we just thought this could change people's lives and it kind of had this almost mission vibe to it and every time we got knocked back it was like grrr it built this feeling of we're going to find a way. Now I'll be honest after three years it was too much. But what had happened along the way is we'd visited some programs in Cambodia, in Kenya we had had these moments where we met people and we were like woah yeah we'd only helped a few hundred people. But if everything we went through was for that one person, in Cambodia it felt worth it. So coming back home it was like a different perspective it was like well we've only helped a few hundred people it was meant to be a few million but if we can find a way to make that work, we can scale that moment we had, we can see that change play out to more and more families around the world. So it was our cause that drove us but I don't think cause is enough. I think purpose is a better word because cause is part of our purpose but I think for myself at 19 I saw something and I feel like to this day I can't unsee it. And I saw this opportunity which is global consumerism, like it's just big, and it exists and I'm a consumer I get it. Global poverty shouldn't exist and I find it hard to unsee that and I want to find a way to make it work. So at year three we were a bit nervous, we were a bit discouraged, but there was a fight in us and it kind of plays out from there.

Sandra: So what did you do in year three? What did you experiment with?

Daniel: We've all heard about Petition before. We had this idea of taking it a step further because retailers had said to us simply you don't have the money the big brands have and for a lot of start-ups like most companies that's often a reality. You don't have the budget of the incumbent or the big big brands and so we would say well yeah but put the product on the shelf and it's going to sell and they're like no no no you can't prove that. But if you put it on we'll prove it and it was this weird chicken and egg thing because we didn't have the money so we thought well before we go to the next pitch, we can't take money in let's take awareness in. And so we watch a video on YouTube and we then asked people to upload a video or a post onto the 7-Eleven Facebook wall. Now they were the largest convenience retailer in Australia at the time and what happened is people started singing, dancing, and rapping, uploading their videos and posts on to 7-Eleven's Facebook wall. And if you can imagine it media were like what? And so they start covering it and then more people are jumping on board and it started out with a few of our friends, and we knew them, and we're like you need to do a post and then there were strangers, then there were people we never met. This thing grew and grew and grew and the next meeting at 7-Eleven was a bit different and they've come onboard as a huge partner of Thankyou and in their stores alone we were able to raise over a million dollars profit to helping fund water projects so a really remarkable outcome after three years of setbacks and then us learning and going well let's never turn up to a meeting without awareness again. Let's change it.

Sandra: So what did the next big meeting you turned up to look like?

Daniel: Well it's interesting because the natural progression from there is in to supermarkets and Coles and Woolworths in Australia have 70 percent market share and they're known to be pretty tough to deal with. We were ambitious but we had had a 'no' from them for three years and we continued to get those 'no's up until year five. So now for five years even after being in 7-Eleven we've got retailers that aren't backing us and won't even give us one chance and so we launched a little video on YouTube and this was our boldest one yet said hey everybody two weeks from today we're presenting to Coles and Woolworths, now they've said no for five years but what they don't know is we've spent the last two years making a food range that funds food programs and a body care range that funds health and sanitation. And we want to take these 14 products to them in two weeks time. We said today we're launching the 'Coles and Woolworths campaign' and essentially it was like the 7-Eleven campaign but now playing the two biggest against each other and it went viral. It kind of shocked us the numbers. Actually one of my favorite memories other than just random people singing the coolest songs ever and recording them and posting them. So we had this moment where two helicopter pilots flew helicopters. So one in Melbourne, one in Sydney and the helicopter said "Dear Coles thank you for changing the world (if you say yes)". And we flew it over Melbourne and around the Coles head office for half an hour and then the same up in Sydney at Bella Vista round the head office for half an hour and I think that was my favourite day because it worked. Five hours after the meeting we had national ranging but also Peter and Geoff the pilots they flew for free cause we pitched to them and our pitch was this is our idea but we have no money and they're like you guys are crazy. And I actually think people do back causes but I think more so people back bold ideas. And that was the next big meeting.

Sandra: You're now in Coles and Woolworths. What's it like going up against some of the biggest companies in the world? Players like Coca-Cola.

Daniel: It's fascinating. I'll say that. Coles and Woolworths have become good partner of ours. But I think we get a seat at the table if it's commercial and what we have to do is we have to win in market. And so in our water category we've got big competitors like the one you just mentioned, in our body care we're up against huge multinationals. We just launched into nappies, we're up against some of the biggest nappy companies in the world and so on every front at Thankyou there's like 7/8/9 huge competitors and we sit in our little office in Collingwood about 50 of us and some days we're like yeah wow we've got a lot of team, other days we're like we do not have enough people. You know we're up against each of them have thousands of staff and millions, probably hundreds of millions, of dollars. So often there is this feeling of do we really stand a chance? Now we are optimists and we really believe in the impossible becoming possible but there are some things that happen in the market some levers that they can pull that do discourage you a bit, cause you like man, we can't do that and there are quick levers probably the most powerful in a store level is price. Big competition can drop its price pretty heavily and sustain a low price for a long amount of time and for a new entrant that will often lower your sales and if your sales stay low enough for long enough you'll lose the ranging in store.

So we have right now 55 products on the market but we would have lost in our history 20 plus products because they weren't staying up with the sales rates and so it's a real competition. I'd almost say it's a fight and literally every month you are on your toes and that's a healthy thing. And I actually remember reading a quote once that said "it's not the big that eat the small" but "it's the fast that eat the slow" and that for me gives me hope because we can't be big but we can be fast and I think that's been part of our success. The long term success of Thankyou, that's a big question and it's going to take everything we've got to continue to have that speed and ability to scale our idea.

Sandra: How do you decide on what product ranges, you have got over 50 now, how do you decide what to go into next year? You started with water and that was a clear choice because of the problem we were trying to solve. How do you decide?

Daniel: It's a question we get a bit because with a brand like Thankyou it's almost like where do you stop and there's a part of us, all the co-founders, all of our team, that we don't stop. We're like Thankyou this and Thankyou that, we could do anything. Then there's this other side that goes hang on we need to do a few things. 1. Start with a why, why are we making this product? And so the why behind water began with the world water crisis and in those same communities that we work in, now in 20 developing countries, issues like maternal infant health, it's a big deal, health and sanitation, food and so in these communities there are more needs than just water and so for us it was a natural progression to go well we want to fund maternal infant health and from there we go okay. So if we're funding maternal infant health what would be the natural progression into our market, a product that would link and we thought maybe baby food, for a few reasons we didn't go there, baby formula, few more reasons we didn't go there, got to baby body care and we thought well our body care range right now is a handwash, it's number one in it one of the supermarkets but in I think the biggest supermarket in the country we just overtook Dove's total business. So Thankyou body care versus Dove body care, it overtook it which is mind blowing. So that's working. Baby body care is a progression and nappies was this other really interesting opportunity to us.

So we're trying to marry up two things: one is the why but two is the opportunity we see at that consumer level because if you don't get the consumer insight right, if you don't get the value proposition right and pick a gap in the market, you're stuffed. Cause doesn't work which does surprise a few people but we've launched oats before, plain rolled oats, and back in those days we thought our oats are just as good as everyone else's oats and we're helping end world hunger, surely people will choose Thankyou but they don't, they choose whatever the best price is and whatever the best value proposition is and oats taught us a big lesson that it's about value add and at about getting the consumer insight right. So we're looking kind of at both.

Sandra: So what did you get wrong with the oats?

Daniel: I think we just believed that cause might sell the product. Since then there's these two rules that have appeared on our walls at the office. We got this from a good book, it says rule number 1 "make a great product" rule number two "never break rule 1" and the asterix on Rule 2 says "never use a good cause to sell an average product" and the truth is the oats were kind of average. They were just oats whereas you pick some of our other products and the idea behind is everything from the scent, to the formula, to the packaging is an experience that you want and if we tap into enough of those consumer levers hopefully we'll hook you on the product and then the cause well that may bring your a long term commitment. So that's kind of our view because products like oats and even our water over the years has declined massively. It's no longer the biggest part of what we do.

Sandra: Why is that?

Daniel: We've always said bottled water is a silly product. So from day one it's been bottled water is a silly product, if you're going to buy it choose Thankyou. And we've kind of been known for that a little bit but the market's changed so the commoditisation of water right now in Australia you can buy a 24 pack of 600ml bottles of water cheaper some days than we can make it. It's weird, it's like well why don't we just go pick it off the shelf and wrap our label on it like what is going on here and it's the system changing so you have retailers that are willing to sell at a loss leader, so below cost to get consumers to come in, and that just completely destroys market and value in a market. So we've experienced that. Strangely the bottled water market has grown but only in that bulk low price space and I think for us too, focus, we haven't put as much focus on our water, it is what started us but man have we got excited around our body care range which at last read made up nearly 60 percent of our business and the launch of nappies. These are the things that are really working because they're more technical products, we like them because they're things that people need, you don't need bottled water. And yes we still have it available but at the same time I think we are asking the tough questions at Thankyou like we've probably all heard the statement "if you don't disrupt yourself, someone else will" and we're now nine years in and we're looking going we can't do what we've done for the last nine years and not actually ask the big questions and challenge ourselves and go what if we flip this or drop that or change that and what people will see from Thankyou over the next 12 to 18 months I think will be quite surprising because they're like woah that's bold and it is bold because we know it's only bold moves that took us this far and it's only bold moves that will keep us going. So we're up for questioning everything and you know water is in decline if we were really really passionate about bottled water we'd probably find a way to make it work. But it's bottled water.

Sandra: At the end of the day a lot of consumers are not buying bottled water anymore because of environmental concerns, because of the waste and so on, is this something that you've asked yourselves whether this is a business you want to be in?

Daniel: Totally. Yeah bottled water for us is like the awkward cousin or like the part of you that's like it's our history but it's bottled water and here's what I love about it and let's not take this sentence out of context but here's what I love: I think bottled water is a mirror that's held up in front of us as citizens and it's an ugly picture. It's like oooh that's not good but it's almost like the picture of extreme consumerism. So I like that's how we entered but I think over time we've gone is this a space we really want to keep growing and growing in? No not really. It serves a small purpose because often water for people is the simplest way to understand Thankyou. Then they understand body care and nappies and beyond. So we think water still has a role but we are looking at what's a better way to do it and a more sustainable way and that's all part of our journey.

Sandra: Speaking of a better way to do it, how do you see the future of Thankyou. Are consumer preferences changing? You've grown very very rapidly. Is that still something that you want to do? Do you see that as a fundamental part of your business?

Daniel: We do see growth as very fundamental because our formula is real simple. All of our profit goes to ending extreme poverty. So the more profit we make, the more impact we make. And it's just so direct for us. And right now we've given 5.5 million dollars. We've raised more than that but given 5.5 and that's helped 755,000 people, that's a direct link. We need to and want to scale those numbers and we believe that we should because it is possible, there are other brands in the market that are much bigger. So we're very driven by that but we do have to be careful. And one of the things we've talked a lot about at Thankyou over the last year is three words which is "better before bigger" and we are really focusing in on not just the ambition of being bigger but it's around better systems, processes, products, and better is an interesting word but I can tell you right now if our product isn't better in a year's time from the one you bought today 90 percent of consumers won't buy even because of the cause. So the consumer expectations are changing from not just price but quality, design, even through to how it gets to their home. Is the future going to the grocery store? Probably not. It may be part of it. It may not be. And I'll let others way more qualified than myself talk about the future of retail but I do think it's changing and at Thankyou we have to be on the front foot because we are essentially a product company and it only works if consumers buy in. So we want to be on that leading edge of contact with the consumers and I think that will be the sustainability of our model.

Sandra: How do you see the role of technology? You've used technology for quite a few things whether it's social media campaigns whether it's improving your processes or creating some of these products, where do you see the biggest role for technology next?

Daniel: It has been a huge part of our history. One of the more known things we've got is "Track Your Impact" where every product has its own unique tracker code and if you log that on our website we'll send you a report with GPS coordinates and photo proof and all that once the project's completed. So we've used technology to connect people and I think simply the future of technology is that, it's about closer connection. Once upon a time if I wanted food for dinner and I wanted takeaway I've got to get in the car drive down the road to get it. Now it's a very different experience, so many competitors now and it's mindblowing to just think how small the world is becoming, how connected it's becoming. And there are heaps of negatives to that and there's a lot of commentary on that but I think in the space we're in it creates a really remarkable opportunity to close the gap because when I was 19 I literally thought there's big problems in the world but that's out there somewhere but I think technology actually helps us realise no no that's close, it's a couple hour flight away. It is literally just that person, their story, that could have been me. We're seeing refugees now running and fleeing and we're like oh why are they in clothes like the ones I'm wearing, why they're all holding phones because we're getting access to see the reality of humanity. And I think that's one of the silver linings on the growth in technology.

Sandra: How well have you and how are you experimenting with new business practices, new products, new ways of pricing things, new ways of doing things? What role does experimentation play in your business?

Daniel: I think for any organisation or group of leaders wanting to foster innovation you have to be experimenting. And some of the experiments will work, some will fail. We're launching subscription nappies and that's cool. We'll see how that goes. We're always experimenting and that's part of our journey, that's how you learn. Our more recent experimentation was around price point and we did something where we launched a book called Chapter One and it's a simple book, it's the first chapter of our story and 100 percent of the profit from this book funds Chapter Two which is the future of our story. And the premise of the book is our whole idea of giving all the profit is kind of nice. Well it's a little naive because you do need money to launch into new markets and new categories and we always said we don't want to change our model. So the book became this almost crowdfunding concept but we took crowdfunding a bit further. So you buy the book and we say to you 'you pay what you want' and this isn't just on our online store this is in every airport retailer in Australia and New Zealand. So you walk into the store Relay, Newslink, or Watermark, you go up to the counter, Chapter One they will literally say to you how much do you want to pay? And that is not a normal conversation at a retail level. The retailer challenges they're like no one will understand it and we're just like yeah we get it we get it but just give us one month and what you have to understand of this story is we backed ourselves in.

We literally said don't pay for the books upfront, we'll give them to you, if they sell then you pay us. So we took all the risk and we said one month of trading and if that works give us two and if that works give us three. Today we're at like month 22 and it's still working. But when 'pay what you want' launched we saw a huge online support, $360,000 in the first two hours, the next day we launched in stores and within one month we're at 1.44 million dollars raised. Right now we're at 1.8, actually 1.9 million dollars profit and the least paid is about five cents, actually heaps of people did that. We joked but it's actually true we have their addresses on our online store. People did that and I'm like cool you tested that but 'pay what you want' was a bet on humanity, that people are more good than bad. And it has paid off.

Sandra: And what have you learned?

Daniel: We've learnt that people are good. So on average we make more per book through 'pay what you want' than if we sold it in a normal retail price and the most paid was five thousand dollars. Then it became seven and a half thousand and the most recent as of six weeks ago was an online order for fifty thousand dollars for one book. Now trust me the book's not that good. But it's not a book, it's an idea that people are buying into. And for the retailers well here's the fascinating bit. So they weren't sure if it was going to work. We ended up winning last year not their Book Innovation Award but the Retail Innovation Award. We messed with the system but as I was coming up to receive the award the Managing Director gets up and he says to everyone Chapter One outsold every business book launch and was second only to our Harry Potter launch week. And I think that we experimented with price which created a disruption in store. It forced people behind the counter to have to tell a story. We experimented with the book itself. In fact if you open the book it's printed in landscape so it looks like it's printed the wrong way and the idea is if you're at a bookstore you'll open that book and you'll be like what what's going on no no no no no this is a misprint, and we messed with that system and I was asked how did we change the convention in books and I literally said we just hit rotate on the print file and the system would say well hang on there must be a reason that millions of books are printed the other way. You can't just change it. But we did and it didn't cost us anything and the payoff has been absolutely remarkable because now people read our book on an aeroplane or in a public space and because they're holding the book essentially landscape it cuts through. People will walk up to other people going what's that book, what are you doing? I mean as marketers cut-through is the hardest thing ever. But you have to experiment to get cut-through and some people are convinced the book is quicker to read. And I love those people, they're like you know iPads and emails are written in this format and I'm like yeah! We're not perfect at Thankyou but we're not afraid to experiment. And I think when you learn that that's when you can cut through.

Sandra: What's your next experiment?

Daniel: Our next experiment is actually a big one. It's probably the scariest one for me and maybe our other co-founders. Not because it's super technical, actually probably is, but we're launching Thankyou into a new country so it's the first market outside of Australia to take Thankyou. Now there would be a narrative that says you guys have done pretty well one country. It's a series of flukes and good wins and you know the Australian culture blah blah blah and well done on your one country project. We think this idea should be much bigger. So New Zealand is the first test market for us outside of Australia and huge US brands test there, from Nike, to Google, Facebook and a lot of consumer brands globally actually test in New Zealand. So while some might say oh that's a very small country actually from spending two years there it's a pretty remarkable country because stuff either works in that country or it fails. In Australia we're big enough to sustain an average idea but in New Zealand there's only 4 million people, average doesn't last, you can't run a company off average. So it's going to test us more than anything we've done and I like that but man am I a little bit nervous because if it doesn't work there an argument would be well is that it? And anyway I don't need to think about that because we are throwing everything at it and we believe that the New Zealand people will grab this and maybe take it further than the Aussies could so we'll see what happens.

Sandra: We'll see what happens. I hope we can chat about that next time.

Daniel: Yeah me too.

Sandra: Thank you for talking to us today.

Daniel: Thank you for having me.

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