AI For Franchise Leaders

Tom DuFore 0:01

Welcome to the Multiply Your Success podcast, where each week we help growth-minded entrepreneurs and franchise leaders take the next step in their expansion journey. I'm your host, Tom Dufour, CEO of Big Sky Franchise Team. And as we open today, I'm wondering how are you utilizing AI in your business? And what are you doing to support your team with it? Well, our guest today is Matthew Lemurle, and he shares with us some practical ideas and steps you can take as a leader to be prepared for this disruptive technology change. Now, Matthew is a 30-year veteran of Silicon Valley who is shaping the future of digital finance by driving investment in some of the most transformative fintech blockchain ventures to exist today. As co-founder and CEO of Fifth Era Partners, which includes blockchain co-investors and AI access investment strategies, he's established one of the most robust early-stage investment ecosystems, backing a portfolio of over 1,500 startups, including 80 unicorns like Chainalysis, Coinbank, Kraken, OpenSea, and Tether through partnerships with top VC funds worldwide. He's also a best-selling author with acclaimed titles like Corporate Innovation in the Fifth Era, Blockchain Competitive Advantage, and the intelligent investor Silicon Valley under his belt. You're going to love this interview, so let's go ahead and jump right into it.

SPEAKER_01 1:28

Pleased to be here. My name is Matthew Lamelle. My firm is Fifth Era, and we are a specialist investor in private venture opportunities across AI, digital finance, and internet.

Tom DuFore 1:43

Well, thank you so much for being here today. And I know our audience might be thinking, wow, this is an interesting guest for our typical program. But what I found most interesting, and I'm hoping we can have a conversation about, is really how non-tech companies can kind of survive and thrive in today's changing economy with all of the different tech things that you see and are forward-looking and probably using tools and technologies that the vast majority of businesses out there haven't even touched yet. So I'd love just to talk a little bit about some of these technologies, tools, things you see, and just have a conversation there about your broad experience in these matters.

Why AI Is A Horizontal Shift

SPEAKER_01 2:27

Happy to, Tom. And I think uh for the audience, a good way to begin this is with something they've all lived through already. And you know, I think that most people who are either a franchiser or a franchisee or a small business owner can remember a time when we didn't really use the internet very much. For those people who have gray hair like me, they'll remember what that world was like. And we then began to hear about this new platform or technology. It was called the Internet. We didn't really know what it was for, and we thought it was over there. You know, whatever my business is, this is something else. And then we began to try it out a little bit. And we played around with emails or with electronic commerce, visited websites, maybe bought one or two things, but it was still for other people. It wasn't for us. Well, we learned that it was a horizontal technology. And what I mean by that is it was a technology that could be used by every industry and every business. It was across all industry verticals. And today here we are, and there's no franchise or franchise e that doesn't rely upon the internet for almost everything they do: for reaching out to customers, for marketing, for supply chain management, for store operations. It doesn't matter. You use the internet. And that is exactly what's about to occur again. Um, AI, agentic, and digital finance and infrastructure, these are horizontal technologies. And today you may be asking, how does this apply to me? You need to be thoughtful because it's going to apply to you and your industry very, very quickly.

Horizontal Versus Vertical Explained

Tom DuFore 4:14

So, Matthew, really quickly, when you say a horizontal technology, break that down for the audience.

SPEAKER_01 4:19

Yes, thanks, Colin. So a let me say what a vertical technology. We we tend to think of industries as being industry verticals. So healthcare, the finance, the fashion, the you know, the book industry. These are different vertical industries. And there are technologies and approaches that only work in certain industries. So, to use an example, the very costly clinical trial process is relevant to the pharmaceutical and biotech industries, but you don't really use that approach in finance and in the financial industry. Banks don't do clinical trials. So we have industry-specific technologies, processes, and approaches, and those are vertically defined. However, or industry-defined, when we see a technology that can run across all industries, that is a horizontal technology. And so the internet's a great example, but you could have the payment system. You know, the the way that companies let their customers pay is a horizontal platform. Visa, MasterCard, et cetera, are used by almost every industry. And that's being disrupted, and we can talk about that later. Digital finance is disrupting global payments. AI and agentic are disrupting the ways we make decisions and do work. All right. And the last thing I'll say on that, Tom, is the Uber narrative here is we're digitalizing everything with software. And we began by digitalizing communications and content. We did that with the internet. We're in the process of digitalizing finance. We're doing that with blockchain and digital tokenization technologies. And now we're digitalizing decision making and work. And obviously, the last one is the most disruptive of all because human beings do work. But if we figure out how to have machines digitalize and do the work, then that is obviously extremely disruptive to workforces and most businesses. So everything is being digalized. Mark Andrewsen got it right. Software is eating the world. It's just eating it much faster today than it ever has before.

Tom DuFore 6:58

One

Stablecoins And Cheaper Payments

Tom DuFore 6:59

thing that I think of from a leader's perspective, running a small business or a franchise organization with franchisees out there is this idea that you mentioned of blockchain, digital currency, things of that nature. And it makes me think of these ideas of cryptocurrency and some things some folks who listen in may be very familiar. Others might say, you know, it's still kind of a foreign idea. But I think of these franchises and franchise systems, at some point, some of them are likely to start accepting these alternative forms of payment into their business. And so I'd love for you just to maybe talk about what you're seeing, what's happening, where is the movement in doing this? And is this something that as a franchise or a leader of a franchise organization, you know, you could be leading your team ahead by thinking of accepting these alternative types of payments?

SPEAKER_01 7:52

Every business understands how it makes money and it knows the pain points in their own business. I think if there's if we're talking to an audience of founders, CEOs, franchisors, or even franchisees, they know their businesses pretty well, and they know how they make money, and they know what makes it hard to make money. Technology and innovation opens the opportunity for you to eliminate pain points and make more money, to grow your business faster, to do it more efficiently, to increase your margins, et cetera. And I think that that is what you have to have your eye firmly focused on. And that will vary depending upon the business and industry you're in. So the danger is to give a recommendation that works in one place and not in another. But having said that, going back to the internet analogy, you know what that did for your business, you know, and and it varied by business, but it probably helped you reach more customers, get more traffic, build better relationships with more people over time, loyalty. It maybe helped you source your products from more places around the world more efficiently, and so on. So down your whatever your business is, you could see how it helped you operate a bigger business. Now, in franchising specifically, the role of the franchisor is to create a plan, a business, a roadmap, a playbook that allows other people to operate pr profitable franchises with relatively little work. I mean, there is still a lot of work to be done, but you're taking away their work. You're giving them a kit of parts. And so I think the question you have to ask is what are the remaining pain points and how will these new technologies take them away? And so you happen to put your finger on one. I'm the former head of strategy and SVP of Marketing for Gap. It's a long time ago. And I remember those days when we used to look with horror at the reality that we had 450,000 people sourcing clothing, you know, moving clothing around the world, bringing it, for example, to America and to stores. We had hundreds of thousands of people selling all of that product. And we were making about 8% return on sales. 8%. And at the very last minute, Visa or MasterCard showed up at point of sale. And because we clicked a button and the payment went over their rails, they took two or three percent back then. It was a long time ago. That was 25% of all of our profitability globally from all of the work we were doing. Outrageous. It should have been free or close to free. Digitalization is now making it possible for point of sale payment processing to be very, very cheap, very, very fast. And we fully expect that stablecoin Rails will dramatically collapse the costs of point of sale payments for every industry and every business. Back when I was doing what I was doing, we had to sue with Walmart and other major retailers. We have to sue to bring down the costs of interchange and transaction processing from the major networks. Now it's happening through a process of disruption. And so the world's biggest stablecoin companies have names like Tether and Circle, and they're actually disrupting the traditional payment processes. And the traditional payment processes are trying to upgrade to digital financial rails. And in fact, Visa and MasterCard are doing that too. It's a long story. I'm not recommending that small businesses need to worry today about everything that the innovators are doing. I think you'll be beneficiaries of something like that, the reduction of point of sale costs, transactional costs. I'm not recommending that you necessarily have to put up a sign that says Bitcoin accepted here. But what you do need to do is to really think right now about how you can create a better franchise business model leveraging AI and agents. You should be thinking about that. How does marketing get turned on and amplified if you have agents doing a lot of the work? How does customer service get improved if you have agents doing frontline interaction with customers? Um, we tried that with voice response system. They were very clunky. Nowadays, a chatbot does it much better. Because as a franchisor, you can pass those efficiencies to an awful lot of people that rely upon you. You need to be sophisticated. I think I would say, Tom, for the franchisors and for people like you that support them, you're on the front line to deploying agents across small businesses of America. I think I think the franchisees can't be expected to try and figure it out one store or one outlet at a time. That's that's not that's not fair. And that's not something that they should be expected to do.

Where Leaders Should Start Learning

Tom DuFore 13:39

Where's a starting point for me to start gathering more information on building this out or maybe a discovery process, something that they might look at and say, okay, here's one thing I could start with to head down this pathway?

SPEAKER_01 13:52

The first thing is to pay attention to competitors, especially larger competitors, and to learn from what they're doing. I'm going to I'm going to make the assumption here that most of the people listening in are not Walmart and they are smaller and they have more limited resources. So watch what, for example, Walmart is doing and pay attention because they're already deploying a genetic capability across almost everything they view. And as those pieces start rolling out, you'll learn about what works and doesn't. So watch your competitors, especially the larger, more sophisticated ones. The second is pay attention to your customers, especially the technology-enabled customers, which actually means the younger customers. You know, I'm generalizing, obviously, but the digital natives, which are today half of America, people that are 45 or so and younger, and they grew up in a digital connected world, they are embracing these technologies today. And when they show up at your place of business, listen to what they're unhappy about and what they're asking for, because that will give you a direct feeling of where they think these technologies are ready for prime time. So, for example, just to use you an example, if your younger customers are constantly complaining because your customer service requires them to fill out a form and fax it in, you know, you should be paying attention to that because what they're basically telling you is that other people are allowing them to interact with, as an example, an AI chatbot and not to have to fax in forms or to have the forms pre-populated by the agent. So I would say pay attention to your competitors and what they're doing better than you and faster than you. Pay attention to your customers and what they are unhappy about and what they're getting from others. And then listen to your employees as well, because your employees know what's broken in your business. And whilst they may be frightened right now of losing their jobs and so on, there's no question that they already know what could be done better. And if you show up with solutions that allow human beings to do more easier, then it's good for them as well as good for your business. So I would focus on the pain points in the business that the employees and you yourself know need fixing. And we we just touched upon a great example. If you're losing 25% of your business to payment fees, uh, shouldn't you be thinking about the more efficient approaches that dramatically collapse cost of payments of point of sale? That'd be an example. Now, I said a lot then. We actually wrote a book on this, Alison and I, years ago, Tom, called Corporate Innovation in the Fifth Era. It's available everywhere. It used to be a bestseller. It's uh not really written for a franchisee or franchise or it was very specifically written for the boards and leadership of the world's largest companies. But having said that, if you were to pick up a copy, it would give you a little bit more substance to what I just said. So it has, it actually has examples. This is what Facebook, Google, Microsoft, Amazon actually do to drive innovation through their businesses. And really, we're talking here about corporate innovation. How do franchisees and franchisors embrace AI and agentic and digital finance, which are innovations, across their businesses, preparing for a future world?

The Agent First Economy Ahead

SPEAKER_01 17:39

So, so Tom, where are we heading? We are actually heading to an autonomous digital economy. You can call it, if you wish, a machine-to-machine economy. That's what BlackRock calls it. And every franchise and every franchiseur will be agent first, human beings second. It doesn't mean there won't be human beings, but I think we already know that the agents are cheaper, quicker, can scale faster, and do more than we can do. So the franchise, the the competitive franchise of the future will be agent first, people second. Right now, most franchises, franchises are people first, technology second. That's going to flip.

Tom DuFore 18:31

How can someone get in touch with you, learn more about what you're doing, or get a copy of your book? Where can we send folks?

SPEAKER_01 18:38

Yeah, so we're an investment firm. We're SEC regulated RIA. Anyone can go to fifthera.com and if they sign up, even if they're not an investor, they can sign up and get newsletters and webinars and things like that where we talk about these technologies and how we see them playing out, particularly AI, blockchain, digital finance, and internet. We we are an investor. So we're not trying to be consultants or sell services to folks. We're just trying to invest capital and make money as uh good investors. But that's the main way. It just happens that in the past we wrote some books and had, you know, they are they're still available on Amazon and Apple and all good booksellers everywhere.

Career Misses And Big Pivots

Tom DuFore 19:26

Well, Matthew, this is a great time in the show. We make a transition and we like to ask every guest the same four questions before they go. And the first question is: have you had a miss or two on your journey and something you learned from it?

SPEAKER_01 19:37

I'm gonna give you an answer to that, but you know, my first career, 25 years or so, was being a consultant. I was a senior partner of some of the world's largest consulting firms. I started at McKinsey. I ran the Global Financial Group at Kearney, the global digital practice at Booze, and I was at Monitor for a while. So in those years, uh, my my goal was to help the world's biggest companies, the Walmarts and Bank Americas and so on of the world get better. I think I carried on doing that for too long in retrospect, because I was in Silicon Valley, I've been here for 40 years, and my other clients had names like Microsoft, Google, eBay, PayPal, and they were just moving faster and getting more done. And they were demanding, but they were fun. And I took a long time in making the decision to stop focusing on trying to help big companies get better and instead work with the disruptive companies that are changing the world today. And I'm so happy when I eventually made that shift because I think it's much more fun to work with people and teams that are trying to make their businesses better and serve customers better and bring better products to market. That's just more fun than working with companies that are trying to maximize their profitability and maybe actually do things that are not good for customers and try and persist in bringing to market products that actually are not that good. That was my biggest single miss, how long I took to transition. Um, the other one was going from being a consultant to an investor. I also think I was a very good consultant. I made a lot of money and I got too comfortable. And trying to reinvent myself in the zeros as an investor was hard. And I wish I'd had actually pulled that trigger maybe 10 years earlier. It's all worked out fine today, but I do think I can see in my own life there's 10 years or so in which I was doing the comfortable thing, which in retrospect was not the best thing. And I'm much, much happier now that I am an investor in disruptive businesses that are changing every industry. That's actually much more enjoyable.

Tom DuFore 22:02

You talked about this trend that we're seeing of this machine to machine, and mentioned one of the things you enjoyed about working with the tech companies, working with the people. It was more fun and all of that. So I think for a lot of small businesses out there, and I just read the Gallup survey today, it's the highest-rated institution in the United States. It's the most favorably viewed institution, is the small business community in the country. I have a hunch that a large part of that is there's kind of this connection, a human-to-human element to it. So how do you see maintaining a little bit of this human component in business while also this move to this machine-to-machine? You're kind of right in the middle of all of this stuff. You're seeing it. So just kind of get your opinion or thought on that.

Keeping Humanity In Small Business

SPEAKER_01 22:51

Yes, that is such a profound and important question, Tom. I agree. Small businesses are mostly in business for the right reasons, and small business owners care a lot about their customers, and they often struggle to do a good job, but it's not complicated. Customers deserve good products and services, and small businesses strive to deliver that. And I think that at its core, that is the contract, right? Uh, business is about serving customers and delivering value to them. I do think these technologies will make that possible cheaper, quicker, easier, and that the small businesses that embrace these technologies will go further, faster, deliver more customer value and ultimately make more money. But I do think that the role of the human being is going to shift. And I do think it's inevitable, and there is some risk that something will be lost, which is your question, really. You know, what is most important in human-to-human interface and how do we hang on to that? And Tom, I don't have all the answers to that. I'll give you, I'll give you just when I was a consultant, and this is a long time ago, almost 20 years ago, I was at Booze co-leading the Global Digital and Innovation Practice, and we did a piece of work where we interviewed digital natives around the world. We called them Generation C, the connected generation. We interviewed thousands of them, and we asked them simple questions. And some of those questions were things like Do you how many friends do you have? How often do you interact with them? What do you do with them? And you know what? They had consistently, they had more friends than my generation. They interacted them more frequently, and they did exactly the same things as we do. We just relied upon physical interactions, and they were very comfortable with digital interactions with their friends. It's an example. And what I'm the reason I'm raising it, Tom, is because even though there is a risk we'll lose something, I think there's much more to be gained. And society is going to have to figure out how we transition from A to B. But I am a believer that AI energentic will bring more positives to humanity than negatives. But I do agree that there is a risk that we lose some things that are very important in the process. And I don't know that I know what all of those things are. I'm certainly not a, even though I've written novels about dystopian features, I don't actually believe that AI will kill humanity. I think humanity will figure out how to leverage these tools just in the same way we've leveraged every other tool going all the way back to the wheel and the fire. You know, we we figured it out, and I think humanity is better for all the innovation that's occurred for the last tens of thousands of years.

Tom DuFore 26:09

Thank you for that. I appreciate it. Well, I'll get back onto the script here. And the next question is have you had a make or a highlight or two to share?

SPEAKER_01 26:18

Yeah, well, that's the flip side of my other answer, Tom. I am more happy and excited today than ever. And it's because we're an in we're investors. We've actually invested in about 80 unicorns of technology unicorns of digital finance, AI, and internet. And it's great to see the progress these companies have made and are making. And I do believe that customers are benefiting much more than they, the, the reverse. So for me, I couldn't be more excited to be in the middle of this new phase of innovation as an investor. And most of what we back, if it succeeds, I think brings great value to everyone. Obviously, as a venture investor, most things you back fail. And that's part of the challenge of being an investor, but comes with the territory. So for me, that's the big thing. I, notwithstanding that I did it later than I maybe should have, and I, and it took a long time to become good at it, I'm very happy with what I do today.

Agents As The New Multiplier

Tom DuFore 27:21

Fantastic. Well, the name of the show is multiply your success. And so he's asked: have you used a multiplier to grow yourself personally, professionally, or organizations you've run?

SPEAKER_01 27:31

Yeah, okay. So, Tom, in the past, my answer would without question have been great people. It would have been, you know, everyone says it, I would say it too, hire people that are better than you, train them, give them a charter and a mandate, and the results will be amazing. And it was always about, you know, the leverage of surrounding yourself with outstanding people better than you. Today I'm going to give you a different answer, and it's not just self-serving. Um we, as an example, as an investment firm, we create documents, PowerPoint documents. My team have just figured out how to upgrade our document production with AI agents, and now Claude literally in seconds can do what used to take us a week to do. It's a tiny example. It's a tiny example. But for every franchise or a franchisee, today, the AI agentic tools can already lever up you and your people to levels you would not have imagined. The amount of work you can do, the customers you can interact with, the marketing you can do, the management of your supply chain and your operations that are possible with these agentic technologies. And we're just beginning. So if it used to be, humans are the multiplier. Today it's agents are the multiplier. And I'm absolutely confident that that is the new theme of the next decade and more.

Tom DuFore 29:13

Very good. Well, the final question we ask every guest is what does success mean to you?

SPEAKER_01 29:19

And that's transition, Tom. So my answer for that today is almost certainly leave the world in better shape than when I came in and make sure my family and my children are happy and are set up for success in their own lives. Those would be my answers today. Now, between when I started out where I am today, there were lots of other answers to your question, and money was much more a part of the answer in the past. Today, I'm very fortunate. I always like quoting Arnold Schwarzenegger on this one. You know, he came to America and he said, I came with nothing. America was great for me. California was great for me, and I'm very appreciative of that. For me, that's the same journey. Came to California with nothing with Allison. Uh, California's been great, and we've been beneficiaries of the innovation economy. But success now is leave the world better than when we came in and make sure our family is set up for success.

Final Thoughts Before The Recap

Tom DuFore 30:21

Well, as we bring this to a close, Matthew, is there anything you were hoping to share or get across that you haven't had a chance to yet?

SPEAKER_01 30:28

No, Tom. Your audience is not my typical audience. My typical audience are investors. They want to invest capital in good investments, and that's what we do. So I haven't talked about any of that, but I don't think that was the purpose of today. Given what's behind you, big sky franchise team, I would like to sort of finish up just reiterating what we've said. I think there's no franchise and no group of franchisors that will not benefit from this new horizontal technology, AI and Agentic. It is going to ripple through everything you do. It is going to eliminate most of your pain points, and it is going to allow you to scale your businesses. I think the responsibility sits with the franchise, because you've got to create the roadmap, the kit of parts that you can roll out across your franchise. And then for people like you, Tom, who I believe do some consulting and support, you need to be a thought leader too. You need to show up with all of your franchisees saying, here's five things you can do today that level agents in any franchise. And if you if you could answer that, if you could go to a franchise ours with a kit of parts that says, here's how you use agents in discovery of new customers. Here's how you use agents in soliciting and converting customers, here's how you use agents in managing your supply chain.

Three Takeaways And The Win Win

Tom DuFore 32:02

Matthew, thank you so much for a fantastic interview. And let's go ahead and jump into today's three key takeaways. So takeaway number one is when he talked about AI being a horizontal technology. And he said, think of when the internet started and everything started digitizing and going online. It started with communications. Now he said it's happening with finance. And what's transforming down the road is decisions are getting digitized and finishing work. He gave that quote that said, software is eating the world just a lot faster. Takeaway number two is when we he talked about where do you start? So he gave a great example and starting point for leaders of small to mid-size enterprises, where he said, start paying attention to what your competitors are doing, especially your large competitors. What are they doing better than you or faster than you? He said, pay attention to your customers. What are they unhappy about or getting from others? Pay attention to your employees. And he said, there's a very good chance that you have some digital natives on your team. Allah, some young folks under kind of mid-40s, that are already doing this and no answers. You just have to ask them. And takeaway number three is he said, where are we heading with this? And so to him, he said, we're heading to an autonomous digital economy, where it's more of a machine-to-machine economy that he described. And it's going to change where it's a machine first digital online economy and people second. And now it's time for today's win-win. So today's win-win is when he started talking about the franchise or he said the role of the franchise or is this horizontal technology is taking place. As the leader, you need to start leading your team on how to incorporate AI and this technology into your business. Start thinking about what are the remaining pain points and how is technology going to help take them away, these pain points away for your staff, for your customers, for people involved. And as a leader of your company, franchise system, and so on, these are things you should be thinking about. And I need to be thinking about. That's part of the reason why we do these podcasts and interview these guests to start thinking and learning more about this. And so that's the episode

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Tom DuFore 34:47

today, folks. Please make sure you subscribe to the podcast and give us a review. And remember, if you or anyone you know is ready to franchise their business or take their franchise company to the next level, please connect with us at BigSkyFranchise Team.com where you can schedule your free no obligation consultation. Thanks for tuning in, and we look forward to having you back next week.