Hello, welcome to another episode of Unlocked. I am Skot, and here we talk about unlocking the potential of people in order to unlock the potential of organizations. Today I've Lucas Sauberschwarz on the call. Yes, that name is not a name from South Georgia. That name is a German name, and Lucas is talking to us from Germany today. I'm really excited to have him on the call. Not because I love that German Swiss area, it just makes me all tingly. I lived there for a while. It's part of my heart, but because Lucas is super smart, super smart when it comes to the idea of strategy and innovation. He's one of the leading thinkers about strategy and innovation, has written a book called the corporate strikes back and this book was released three years ago in Germany. Publishers loved it so much and wanted him to make it available to everyone.
So it's going to be released in English here in the United States and globally here in November, 2021. If you're listening to this after that, it's already out, so go get your hands on it. Here's the idea, not only was Lucas so smart that he beat when he lived here in America, that he was the top person in his class when it came to English, but he was also super smart and understanding what the difference was and what the problem was with smaller organizations that were supposed to be more agile and able to maneuver faster when it came to innovation versus the larger organizations and established corporations that are like monumental behemoths that aren't quick to turn. That it takes a lot of time to slow them down. It takes a lot of time to maneuver those shifts.
When it comes to innovation, argument is, smaller companies innovate a lot faster and better than larger companies. Well, Lucas has something to say about that. And we talk about that. What is the problem with larger organizations? Why haven't they been able to innovate in recent years? So what's that issue then and how can they be more innovative as we go into the future? We're going to talk about all that on this interview here. Here we come, Lucas. Lucas, Guttentag.
Guttentag. Pleasure to meet you Skot.
That's awesome, having you on the show. This is the first German speaking guest I've had on the show. So congratulations. You've made it.
Thank you so much.
And I wish we could do the whole interview in German, but my German is not that good anymore. So we're going to do this in English. I'm stoked for you and your book, because you've just told me that the book was released in Germany three years ago, but you were asked to make it international because it was on an Amazon bestseller and it was so good that they wanted to bring it to everyone and now you've just released it in English. It's coming out in November of 2021 this year. Congratulations. That's super cool. I think you probably thought you were done with that book and then it came back. Give us the premise of the book. Talk about the book a little bit, how you came to write this book three years ago and what the impact has been.
Yeah, Well, when I founded my company about 10 years ago, innovation was, let's say a little bit different than it was today. And when we looked at the innovation topic, we were very interested in how large corporations can actually innovate because, I mean, you see it happening all the time. Those Silicon valley companies being successful or not, but bringing new innovation, disrupting whole business segments, et cetera. For some reason it seems to be a little bit easier with small companies, but what about the large corporations? I mean, why don't we hear so much actually about the large corporations but rather hear about a lot of frustration and innovation about things not going so well even though they are the Goliaths and the startups are just the David. And this was something that fascinated me and I had the feeling that especially there was a need for large corporations to understand how they can actually successfully innovate and how they can actually strike back, let's say on all those startups. That's also why we chose the title, The Corporates Strike Back.
Okay. This came from something though. I mean, you're noticing something and working with your company so early on, and you're the start of your company, were you working with the larger companies or the smaller companies?
I was working with the larger companies and maybe it helps you to better paint a little mental picture for all of us because it's really interesting. I mean, many people ask me, if you can choose between the big one and the small one, why would you work with the big ones for innovation that don't seem so promising for the [inaudible 00:06:52] stuff, let's say. Let's paint this mental picture. If you say the big corporation is this big cargo ship, cruising through the sea and the startup is this little speed boat. When it comes to innovation, I mean, it's quite easy. One is very agile, very fast. The other one is a big cargo ship. And we actually put them on an imaginative race from Hamburg Harbor to New York.
And we actually calculated that. Who would win if both would go to New York from Hamburg. It's of course the startup and it's because the cargo ship needs around six days from Hamburg to New York, the speed boat would take around one day, so it's six times faster. If you look at the innovation, I mean, speed is such a crucial factor. And so the question is now, why do I still think that the corporate has the better preconditions for successful innovation? Because if you look at innovation, not only in speed terms of speed, like who's faster, but rather on the impact level, who can create a more impactful innovation. Let's stay with this example. To carry the same load of cargo from Hamburg to New York, the speed boat would have to go back and forth 800, 10,000 times. We've calculated that as well, as you see.
And it's interesting because it's quite in same logic in the real world. Albain has had very interesting study where they check how big are actually the chances for a startup to create a huge impact and impact as huge as it is relevant enough for large corporates. And they said, okay, how many startups actually able to bring a value of $500 million and profit to the growth? How many actually make it? And it's interesting because we all have this rule of in minds, how many startups actually make it. One of 10, 12, 10, I don't know, maybe one of 20 it's you have quite at least some chances of success to be successful with a startup. But actually it's the same logic when it comes to this huge impact of innovation and then found out that only one out of 17,000 startups actually make the value creation of $500 million and profit from the growth.
The question is, how is it with those large corporations? They check that as well. And what they saw was the chances for large corporate, if it actually uses the strength of the core business is 2,000 times higher than that of a startup. It equals one to eight. One out of eight innovations of large corporations that actually use the core strengths of the organization create a value of five or a million dollars and profits of the growth. You see it was quite an interesting argument for me at least to say, okay, how would a corporate actually be able to use the core strength for innovation or to put it differently, how can it actually use its current competitive advantage to create new ones? And this is quite a complex topic, but one that has been fascinating me since more than 10 years now.
I love that analogy. That's a really good picture. And I had no idea I could get to Hamburg in a day, so that's cool. I'll just get on my speedboat and ride but I have to carry all my gasoline with me too, I guess. That's interesting to think about, because you do think initially, and that's where I was going to even ask you before even starting the story is, but aren't those smaller companies more agile? They can move, they can pivot. They can invest and then if it didn't work out, they can pull out really quick and invest, is that right? They can move fast. Then you got that, they call it moving the Titanic, moving that cargo ship is just going to be super slow, but the effectiveness at the end of the day, when you say, okay, the impact though, that cargo ship is going to be much greater than that speedboat because that speed boat has to go back and forth 810,000 times. You think about that, that's a lot of trips back and forth. Let me ask you this then.
Okay. I get it. You've got me big cargo ship, cool. Corporations can be more innovative. They can make a bigger impact with what they do. Let me ask you why don't we see more companies making an impact, larger companies that are established making more of an impact through innovation in recent years. Why is that not happening then?
It's interesting. You can even compliment this picture. And you already said it when you referenced to the Titanic, because we looked also at how agile is this large corporation. And the big cargo ship, it takes it about four miles to come to complete halt once it decides that it wants to stop, even if it wants to change direction it needs five ship length. I mean, imagine all the orders have to actually come to the team from the captain. This again takes time, it makes it more difficult. It's interesting and this is already one part of the answer to your question.
If you ask managers of large corporations, how is it? What's the best strategy to innovate? And you showed them this picture. They will say, okay, we need to do it actually like the startup. The startups have been sort of successful in recent years, so they need to have the secret formula and we just have to apply the secret formula and then we can be as innovative. I mean, we have much more power. We are bigger. We can create more impact. We can scale easier. What they do is then, I mean, there was even an expression for that piece. Silicon Valley, this learning journey through the Silicon valley. People would, like managers of large corporations would fly to Silicon valley, look at the secret recipes, see design thinking, lean startup and all these kinds of startup tactics and come back and try to implement them. I mean, they have more resources, they have more financial power and so on. If they would just do the same as the startups, but with more power, it should work. And it didn't, it doesn't.
The question is why, why doesn't it work? I mean, exactly what you described, there haven't been these great success stories of big corporates all over the place, but they have been very many success stories from startups. And the huge problem is, the corporate, let's put it very easy, is not a startup. A large corporation has nothing to do with a startup. It is the complete opposite. If you apply a methodology made for a startup in a large corporation, it won't work.
Very easily explained, the startup has a greenfield. There's nothing there. It doesn't have any structure or processes, stakeholders, et cetera, so it can just take a pain point, most relevant pain point from a customer, build the relevant solution, bring it to the market and have a chance of one to 17,000 to be very successful, let's say. A corporate applying the same strategy, what happens is, they talk to customers, find very relevant pain point, even create solutions, test iteratively with the client, and then try to bring it into the structure, at least explain it to the diverse stakeholders.
The people from controlling say, "Do you have a profit margin of 15%, you don't? That's it then. You need a sales guy actually willing to implement it." I'm not incentivized on that. There's so numerous reasons why this is difficult if you start actually with the pain point, trying to build the solution and get very frustrated when you find out that you don't have a greenfield, but you have a brownfield for innovation. That's tough.
I can imagine. I can imagine when there are these companies out there that they take on this persona of, we are innovative. We want to be innovative. We want to change things. And because they're trying to out innovate their competition. You've got companies like Apple, Amazon, Google, you've got Tesla, you've got these companies that are out there, you would maybe the Apple of old was this innovative, break the mold, no rules, think different company. Are they still, or are they kind of just meeting the expectation of those around them trying to still have that persona of innovation, but yet not really innovating anymore. I mean, the iPod innovative. The way they did the Mac computer, the iMac, innovative. Certain things like that. What would you say about that scenario?
I mean, these companies, as example that I take a lot of times to show how innovative actually these startups are, but they are not startups anymore. Exactly as you pointed out, I mean, today there are large corporates and if they still use only the startup methodologies, it will be tough for them to create impactful innovation. I mean, again, there's always this chance of easily one to 17,000. And of course, I mean, if Google makes 17,000 startup projects, one can be huge impact, but would you actually put your strategy on that? Probably not.
And Amazon, for example, is really best practice of a large corporation, a large cargo ship nowadays using their power to create a huge impact, but not by just, even if you would think so, not just by taking the pain point of the customer, creating a solution, but thinking about it much more strategically, much more thinking about how can I use my current competitive advantage to create the future competitive advantage.
Because if you think of the Kindle, for example, I mean, it's so smart. They have this platform, they have all this content with the books, they have their network of author suppliers and so on. They just need this device. And it's so easy to actually push it in the market and not only sell it, but at the same time, push all of the other products at the same time, because it really helped their marketplace to grow. It helped the content, et cetera, PP. Or a different example, for example, if you take Apple, you named that as well, Apple with the app store. I mean, it's not just people wanted an app store.
It was this pain point of app store. Maybe there was, but I'm sure there have been hundreds of hundreds of thousands of different possible pain points to choose, but they chose this one of the apps and they created an app store that in fact, help the iPhone sell more devices because it makes it so much more attractive at the same time, created a business model that brings so much revenue and profit by the ecosystem that they put out there. It's the, let's say, smart kind of innovation of large corporation that is quite different than that of a startup company.
Would you argue that Apple is still as innovative as they were back in the day when they were coming up with the iPhone and iPod and the app store and et cetera?
Well, it's difficult to say. At the moment I would say no. I mean, we all see what happened since Steve Jobs is gone and what happened to Apple. But I think the logic how they actually can be as successful as before would not be to just, try to, let's put it very, very black and white to now try to be a startup company and make as many cool innovation things as possible. But again, do it in the described way that was successful for Amazon, for Google, for Apple to actually connect, to use the current competitive advantages for new ones. And I think what you have to keep in mind is this is very complex task, it's not something that you can just create in a brainstorming.
And I think that's the tough part. That's why we still see that there's not many companies, not many methodologies, not many systems that are actually perfectly fitted to corporates, to large corporates, because it's much more fun to just go on design thinking, sprint workshop, have a day together, drink a couple of deals, come up with cool ideas, work with the customers, create whole solutions, test them and just bring them to market. In large corporation, this is much, much different. I mean, we can go into more detail in that if you want, but to make it very, very simple, I mean, the complexities of existing structures, processes, stakeholders, organization, logo, design, and so on, make it so much tougher to just have a new innovation and put it into the market.
But if you are not able to cope with all the complexities of the internal world, it will not be possible to scale it using the internal capacities that you have. It's these two sides of the coin. If you're not able to actually take all the complexities into account, you won't be able to use the advantages that these bring you when it comes to scaling your innovation. And that's the ballgame, let's say, that large corporations have to face if they want to be successful with innovation.
Going off of that and continue on that thought. We've talked about Apple. As other companies are still in that mode. You've got Amazon that started out selling books and now they're selling everything and scaling that way. You've got Facebook that started out as a social platform for college students that now has division called Facebook labs where they're coming up with VR, virtual reality and augmented reality type equipment to change that experience. It's like, what is a social company have to do with that and that experience. And then you've got people that do car companies that are also building rocket ships to go to space. And so how do you continue to implement those critical success factors? What are those critical success factors for large companies to make sure that they can still have that innovative mindset, understanding they're not startups anymore. They can't do it the way they did it before, they have a lot more responsibility, shareholders, other things that are involved, how do you still keep that innovative mindset and make sure that we're successful when we are innovating?
Yeah. Maybe let me used words from Edison that he once said around 100 years ago, he said, little bit interpreted from my side. Successful innovation is 1% inspiration and 99% perspiration. And I think this is something that got lost a little bit in the minds of large corporations. Because when I've talked with CEOs of large companies, they always have the impression or we don't want to analyze and make slide decks and so on. Let's just get going, let's just have a good idea, test it in the market, talk with customers and just you're implemented. That's the spirit that somehow came over from Silicon Valley and they tried to implement, but that's not how it works. Rather than the way that Edison said. And maybe because he asked for critical success factors, maybe let me put it as easy as possible. In the last century, everybody understood an innovation process, coming from good idea and technology, petals, whatever, and the innovation process was bringing that on the market more or less. And then startups in the Silicon Valley completely renovated that process when they said okay, a solution without a problem is not a solution.
Okay. The solution without a problem, it's not a solution. You shouldn't start with the solution, but you should rather start with the problem and then build the right solution and then implement it or bring it to the market which the chances of success are much higher understood. And that's how large corporates are working at the moment. But for a large corporation, there's actually two steps before the problem that you should consider. The first thing is, you have to understand what's your objective. What are you actually aiming for? I mean, most shareholder corporations aim for, let's put it, profitable growth. But they follow a process that is more about satisfying the customer, having the highest customer satisfaction. But this is in fact not the objective of the company.
It could lead to, customer satisfaction could lead to higher revenue growth. Could even lead to higher profitability, but it [inaudible 00:27:21]. You don't know it. It's actually quite easy to make the customer happy, just lower the price of your product, or give it away for free. Everybody's happy. You have a huge customer satisfaction, but you won't reach your objective. So understand what you actually want to achieve with innovation. It's very important because then from my experience, 90% of the innovation projects that are started in companies right now at the moment, can be just stopped right at this moment because they don't make sense.
They won't really help the company achieve their objectives. And so you already have potential 90% more resources to work on those that at least have the chance and the general potential to help you in your general objective. That's the first critical success factor. Don't start with the pain point of the customer, start with what you want to achieve with innovation in your company. And the second factor then is, I mean, if you know where you're standing at the moment and you know where you want to go, it's not that it's so easy and you can just have a straight line and go from status quo today instead of tomorrow. But that's external influence factors. That's the excellent world. I mean, new technologies, new trends, new market realities, et cetera. So what are the new rules of the game created in an [inaudible 00:29:00]. I mean, the external environment has gotten so complex that what's successful today, maybe it's not successful anymore tomorrow.
There's a lot to take into account from the external world. And I think this is what most managers have in mind already looking at trends and new technologies saying, "Okay, we need to do something with AR and with blockchain technology and whatever." But as important as the external world is the internal world. Because, as I pointed out before, to use the current competitive advantage, you need understand what this current competitive advantage is and what the complexities of your company are to actually use it. In the second step, once you know what your objective is, the critical success factors bring the external chances and risks together with the current business model to understand, what is the sweet spot of very interesting market opportunities, let's maybe put it easily as that and the strengths of your corporation, because if you mentioned them, if you say, okay, "I understand there's a huge market possibility and a half already possible strengths that I can use to conquer this relevant market opportunity."
Well, then you have something that at least, again, concretizes the potential of reaching your objective which might be profitable growth or something else, and depending on that, you would choose the sweet spot. And only then if you already understand what is the biggest market potential that you can at least apply to some extent, which you already have, then talk with potential customers, understand what their pain points are within this sweet spot that you have already found, and then go forward in more or less the way that you're used to. It's still much more complex as you can imagine, because you have all these internal realities of the company, but the most critical success factors are the beginning to start at the right point and go on to have the right points addressed in the beginning of the process.
So I hear you saying that, and this is a definite departure from what you would normally hear. Let's start with a problem. What's the problem? Do the market research, find the problem, create a solution to that problem, because you said it before. A solution without a problem is not a solution, but your methodology is saying, "Hey, we're not ignoring that there is a problem. What we need to focus on is, first, our own authentic company objective. We're not just going to chase every problem and then like come up with a solution for it, because maybe it doesn't fit our goals. Maybe it doesn't fit what we are as a company, as an organization, what our culture is, what our vision is, for what we're here for. Let's instead drive the conversation, let's figure out what fits our brand, what fits our mold. And then let's steer the conversation in that sphere to see if there's a problem in that sphere that we can tackle. Do I have that right?
Absolutely. I couldn't have said it better. Thanks a lot, Skot.
Well, you probably could have said it better in German.
That might be the case. Yeah.
Awesome. I want to wrap up this interview with a story. Do you have some experience? Is there some company you've worked with that has been able to do what you're talking about? Is there something in the book you can reference that can bring this all home for us?
Yes. Happy to do so. We have a company that we worked with a couple of years ago. It's one of the leading RV suppliers in Europe, it's called Hymer and was actually bought by THOR, North American company, not quite recently. So to create the, I think now largest RV company in the world. Interesting field, especially as a whole team was quite fan of campervan et cetera. Again, as I pointed out, we didn't start with the pain point of the customer in the beginning, but rather with the objective of the CEO of the company. And his objective was to increase the revenue significantly and at the same time, increase the image of the company. And the good thing is, once you increase the image of being more innovative, it helps sell all the models of the company itself.
It was quite an interesting and good objective as a starting point. And now I think it's interesting to see of what I mean with the sweet spot of internal capabilities and strength and at the same time the external environment because it makes so clear I think why it makes sense to have this step before looking at the pain point. In the motor home market, what we thought at the time, I mean, now it's growing enormously anyway, but even at the time, a couple of years ago, there was a large growth in the campervan segment. It was grown by double digit numbers. I mean, because everybody with a driver license is able to drive these kind of campervans and it's got more sexy also for young people to drive, et cetera.
What we saw was, there's a huge possibility, a huge opportunity in terms of the campervan segment. And we also saw, and that is quite interesting that most motor homes and also the campervans, I mean, people look, especially on the interior design. It's not about, do they have, I don't know, artificial intelligence implemented in the cab, but rather, where's my bed, where can I get the bathroom, where's my couch, where's the television, these kind of like totally basic things actually, but this is the most crucial factor when it comes to the purchasing decision. How does the interior design look like? And if you look at a campervan.
I mean, there's not many possibilities. It's like the smallest kind of vehicle you can put a bed in it, maybe if you're lucky toilet and that's it. And thousands of models have at least been created throughout the last decades where every possibility was probably looked at from some angle. But still we decided that if this is the most promising thing to look even further into the external environment. And especially as we saw, we connected with the internal capabilities, we saw that we have a very strong brand, Hymer. It's in Europe. It's very, very strong brand for customers, at the same time, it's interesting, you can patent interior design. It's crazy. I mean, you can actually put a patent on interior design. And so if you look at revenue potential, if you can patent something, that's of course very interesting revenue potential, but still you're back to the point. I mean, you have the campervan, then you have the interior design, that's already two aspects that we wanted to focus on. And then we look even deeper into, okay, but where could be the sweet spot from external. You see, there's not been any creative things until this point. We looked at then, what kind of people are actually driving these campervans?
Is it families, is it large families, small families or is it just one person. We looked at many, many, many, many different aspects there. What we found out very easily just from secondary research was that more than 80% of motor home users use their motor home, not only the campervan, but motor homes in general, just as a couple without kids, two people, that's it, not three people, but just two people more than 80%. At the same time, you could see that in fact, and it wasn't very easy research, how many motor homes in the world really internationally are there that are created for two people. It was at the time, maybe a handful internationally that were created for two people. And I mean, Hymer had everything there of course, to create a new interior design for two. It's very easy. Without any splash of genius or any creative, whatever magic, but just by strategic analysis, we could understand that if we would be able to create a campervan with an interior design for two, we would probably be very successful. And if we would even make it, find an interior design, which if you just put it for two, that's a huge potential for innovation because you just put the bench away, behind the driver's seat, that fits two more people. And if you put that away, I mean, you don't have to think about a lot.
You just put it away, you have so much more room. So there's so many more possibilities for interior design. And again, it's just a relevance. It's not creative. And if you have this in mind, even though if you would just have stopped there and said, "Okay, we don't care about pain points. We don't care about anything, just make a cool lot with this story, make some kind of cool theory design for two, probably the model would have already been successful. But in fact, we of course looked then very intensively on the problem. Even the project manager working on it, he quit his apartment and moved into a campervan that he built himself for half a year while working on the project to understand what people actually needed driving around the world and talking with people. And in the end, we then created a campervan, the so-called Dual Car and It's also actually available, I think in the US since some time. It was such a success that actually in the press, they talked about it as a sensation, as a revolution and it won the price at the best European concept for campervans at the time. So yes, a great innovation, I think, but it was not only at least because of finding the right pain point and having cool ideation and so on for the right solution. But it is rather the starting points that made the difference there, I'd say.
Really, really cool. That's a great story. A Great example of how to implement that thinking and through that methodology, it's really smart. Did they give you a free campervan for payment?
Yeah. We had it for quite a long time, actually because we tested it. I mean, we were in the process to help them until the concrete production of the product. And then we were always the test drivers. But no, there's still something that comes up. Maybe if somebody from Hymer or so hears it, I would be willing to take one of the dual cars for myself as a special promotion.
Nice. Exactly. I mean, you basically just sold a campervan on the show, so they should give you one.
As a thank you. Awesome Lucas. Thanks for sharing that. Thanks for sharing your thoughts about this because I think this is something that we haven't talked about a lot on this show. And it's so important. We talk about unlocking people and unlocking the permission for people to think this way is what's going to drive innovation inside of our organizations. And I think that that thought process that you have is, is really, really smart. So the Corporate Strikes Back is coming out soon here, it's already out, it's been out in Germany for three years and that's maybe why you're so innovative over there already. So congratulations but really, really stoked for you and the opportunity for you to sell the book here and internationally. So everybody get your hands on that book. If people want to get in touch with you, Lucas, how can they contact you?
I think the easiest probably would be LinkedIn. So just drop me a personal message. I'm very happy to hear from you.
Okay. Fantastic. Very cool. Thanks again for being on the show. It's [inaudible 00:42:49].
Was a pleasure. Thank you so much Skot for having me again.
A tiny speed boat needs to go back and forth from Hamburg to the United States, 810,000 times to deliver the same impact as a cargo ship. Okay. That's interesting. Yes, it can maneuver faster, but the impact is not going to be as great until that 810,000 visit. Okay. Who has time for that? Not me. Well, here is also something to think about that one in 17,000 that actually make that $500 million impact. That's interesting thing about too. So yes, we've heard about small businesses and the failure rates and success rates and how we need to strive to be that and grow and just it's that grit, it's that grind. And we're not discouraging the innovation of the smaller organizations, right? We need that and that fuel. So how can we take that same mentality though, of the startup and bring it into the larger corporation?
Not that we can do it the same, because Lucas is very clear about, it's not the, so you can't do it the same. It doesn't work the same. Nobody is expecting you to do it the same, but how can we take some of the thoughts and the philosophies and what that is and bring it into the larger organizations and how can we switch around our thinking? It just hit me. I told them the light bulb went off in my brain because I've heard and I've even told my clients and I've even researched this myself, study the problem, market research, market research. What's the problem. What's the problem. But first let's think about our own objectives, our own brand, our own strategy, our own thought process. And within that sphere, figure out what the problem is. Okay. Instead of going willy-nilly all over everybody else and thinking about within the whole realm of everything, what is the problem? Wasting time, money, resources, let's figure out our goals and our strategy first, then let's go out and drive the conversation as opposed to reacting to the conversation. Let's be proactive, not reactive. Okay. Lucas, thank you for being on the show.
It was really fun talking to you. Empire strikes back. I'm sorry, not the empire, star wars. Corporate Strikes Back. That was a plug for star wars and your book Lucas. So the Corporate Strikes Back is out now, go ahead and get your hands on it. Good luck, Lucas, in everything you're doing. If you want to find out more about me, you can go to Skotwaldron.com. You can find some interviews there, free resources, some writing, more about what I do, et cetera. Go to YouTube, like, subscribe, comment there. I've got a lot of few free videos. A lot of these interviews are on there as well. And I would love to connect with you on LinkedIn. All right, everybody. Thank you for being here on another episode of Unlocked. See you next time.
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