Connected & Ready

Digitizing your small to mid-size business, with Laurie McCabe

Episode Summary

From technology investment to company culture, small and medium-sized businesses often need a different approach than their enterprise-sized counterparts. Laurie McCabe, co-founder and partner at SMB Group, joins host Gemma Milne to talk about the unique strengths and opportunities for SMBs, how growth can create its own unique set of challenges, and how SMBs can prepare for the future. Dynamics 365 Business Central helps small and medium-sized businesses connect people, processes, and data. Flexible, scalable, and customizable, Dynamics 365 Business Central brings disconnected systems into a comprehensive business management solution that supports remote work scenarios, security, business continuity, and more. Watch a demo today: https://aka.ms/AAb0763

Episode Notes

Host Gemma Milne talks with the SMB Group’s Laurie McCabe about the uneven impact of 2020, both positive and negative, on small and medium-sized businesses and specific industries, the biggest challenges SMBs face when adopting new technologies, and whether they should pursue major transformation or more incremental change with these solutions.

About Laurie McCabe

Laurie is co-founder and partner of SMB Group. With more than 25 years of experience in the IT industry, she is widely recognized for her insights into small and medium-sized business technology adoption, requirements, and challenges. Laurie is a six-time Small Business Influencer Awards winner, has been cited as one of the 50 Most Influential People in Small Business Marketing by AllBussiness, and named one of the Top 200 Thought Leaders in Big Data & Analytics by Analytics Week.  

Learn more:

https://www.smb-gr.com

https://lauriemccabe.com/

 

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Episode Transcription

Gemma [00:00:05] Hello and welcome. You're listening to Connected and Ready, an ongoing conversation about innovation, resilience, and our capacity to succeed brought to you by Microsoft. I'm Gemma Milne. I'm a technology journalist and author and I'm going to be exploring trends around how companies are adapting to a disrupted world and preparing for tomorrow. We're going to speak to the innovators who are bringing products, operations, and people together in new ways. 

Gemma [00:00:30] Today, I'm joined by Laurie McCabe, co-founder of and partner at SMB Group, to talk all about building a new way forward for small and medium-sized businesses. We explore how SMBs have been navigating the biggest changes and challenges that continue to impact their businesses, how they've been using technology to not just survive, but to rethink how business is done, and what businesses can do to move into the future with growth in mind as digitization continues to accelerate. 

Gemma [00:01:00] Laurie, thank you so much for coming and joining us on the show. Why don't you start by giving us a little bit about who you are, your expertise, what you do, and what you're currently working on. 

Laurie [00:01:09] Thanks Gemma. Basically, on one of the co-founders of a company called SMB Group. And what we do is we're an analyst and research company and we focus on how small/medium businesses are using technology in their business. And we've been around ourselves for about the last 10 years and we were analysts in this space prior to that. So this is kind of what we're most interested and passionate about. 

Gemma [00:01:36] Incredible. So let's start with a little bit of context, because, of course, over this past year, small to medium-sized businesses have obviously been faced with quite a lot. Let's talk a little bit about some of the current issues that SMBs are facing, still facing, and working through and how they've been navigating this. 

Laurie [00:01:54] Yeah, well, we've actually done a couple of studies over the last few months looking at the impact of COVID on small and medium businesses and both in kind of the immediate time period when it hit back in late winter last year. And then following that up to see later in the year how they're managing to navigate through it. But as you can imagine, I mean, it's had a pretty devastating impact of about 75 to 80 percent of small and medium businesses, depending on the time period we're looking at, said it's had a negative impact. And that's everything from, you know, revenue declines to supply chain interruptions, to issues with reconfiguring for social distancing and work from home, and all the kinds of things were sadly all too familiar with now. So it's needless to say, it's been a pretty challenging time. We do see, you know, some hope on the horizon, though, because in our last study, we did see that most SMBs are starting to feel like they're going, you know, the ones that made it through the initial downturn. And let's face it, about 17 percent went out of business, according to the US Census Bureau here in the States. But the ones that survived revenue’s starting to stabilize or even turn up a little bit? So we think there is a light at the end of the tunnel, but the challenges certainly remain. 

Gemma [00:03:26] Yeah, and I'm curious, I suppose, as an obviousness, rather, to that sort of 20 percent that have said this has a positive impact. So, you know, businesses, of course, that are creating products that have sold well or have been absolutely needed in this particular time, but is the source of 70 percent, 80 percent of negative effects across all industries. What sort of ones do you think are faring slightly better than others? 

Laurie [00:03:49] Definitely. First of all, the smaller companies tended to have had a harder time with this and kind of suffered, you know, more of the negative kinds of effects from this whole pandemic. But it's been across the board pretty deep. Now, industry wise, though, yes, there's dramatic differences. So industries like hospitality, travel, a lot of personal services, things like that, have been really negatively impacted. I mean, it just makes sense when you think about it. Most of us have really cut down or stop traveling by plane and staying in hotels. I think some of the other industries, it was, you know, like manufacturing is a good example. It was pretty severe at the beginning because there were a lot of supply chain disruptions. But those industries have been recovering better than say travel where we still haven't really been able to, you know, get a nice uptick. And then there's some industries that have fared well, you know, in addition to the ones that you might think about, like those that are manufacturing, things like PPE, you know, software industry has done really well, technology, communications, that kind of thing. 

Laurie [00:05:07] And then some industries that people think, oh, they must be doing great, have not been faring too well like health care, because with all the attention and money they've had to pour into COVID, they're really not making money on the more elective procedures and other kinds of services they provide in the medical sphere. You know, dental is a big one where people have just put off a lot of the more elective kinds of procedures. So it's been pretty uneven industry wise. 

Gemma [00:05:41] And what about the difference in size, so you said the small is where the kind of biggest amount of impact has been these smaller businesses. But when we think about medium-sized businesses and what has fared better, what is it that's kind of the thing that has separated those that have fared better than others? Is it about flexibility, is it size, is it being bigger than small, that's helped? What would you say is kind of the factors of, I guess, the companies that are doing all right versus having to stop trading? 

Laurie [00:06:11] Yeah, you know, we kind of already mentioned size. I mean, just in general, small resources – small business – have less resources, less cash on hand, you know, less expertise and maybe some of the different areas of their business that they need to help them pivot and do things like that. But regardless of size, you know, there's a few things that we see that really help companies. One, did they listen to their customers? Obviously, those that have an ear to the changing kind of customer psychology, what they need, what they want, how they want to buy, how they want to shop, who they want to buy from. All that's in a big state of flux. And so the most important thing, I think, for any business in terms of weathering all this successfully is to really been able to tune into that. And then in addition to tuning in, you have to be able to then execute and act on the changes. So whether you're going to add new products and services or you're going to change how you sell or any of these things, you've got to be able to execute. And I think there there's a couple of things that really come to the forefront. And one is in a lot of cases, having the right advisors in place. So whether that's business advisors like accountants or technology advisors or whoever you need, depending on what area of the business you're really trying to change, it may be more than one. But being able to get some good advice on how to execute effectively. And then, of course, today, in today's day and age, in a lot of cases, technology is also really key. Right. Having the solutions in place that are going to enable you to make that change. A very obvious one is virtual services. A lot of companies have figured out, hey, what I'm doing in the physical world, whether that's medical appointments, a lot of them have moved online or gym, you know, workout classes, things like that. Education, technology, getting the right solutions in place to be able to make those changes has been really important. 

Gemma [00:08:27] So building on that second point, specifically a bit more and thinking about technology, what would you say is the sort of the role of technology been? Has it been this, I guess, replacement for the physical in the sense that virtual services, as you mentioned there, it's what it's doing in that respect? Or are you seeing larger shifts in terms of changing whole ways these businesses are operating as a result of having to use this technology and having to rethink how it's done? Or is it still just a temporary thing? 

Laurie [00:08:55] I don't think it's temporary at all, but I think businesses are in different phases in terms of how they're looking at it. You know, for some, it's very tactical and it is in the moment and it will continue just because a lot of customers will now say, hey, I really like not having to be at the gym at nine a.m., I can do this workout, you know, virtually whenever I want. So I think businesses that are doing it for a more tactical reasons, it's going to stick. I think, though, there are a lot of businesses that are really kind of reexamining what this means over the long haul. One great example here is just this whole work from home kind of phenomenon that most of us that have worked in an office are now very, very familiar with. Some companies are just saying, oh, yeah, well, I guess as things kind of improve in terms of the virus we'll just have a hybrid work environment. People can pick, they can work at home, they can work in the office. You know, we'll let them do that very flexibly. Other companies are looking at it very strategically. They're looking at what kind of jobs can be done best at home, in the office, what kind of mix maybe between the two is best for employees. How do I really need to not only reshape the work from home environment to make that more facilitative to getting more work done, but what do I need to do in the office? How do I need to redesign office space? So I think that is an example, almost any business in any industry can look at and but, you know, we're seeing everything from just kind of - Oh, yeah, we'll give people a choice to really rethinking what the workplace means and how to best accommodate new work styles. 

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Gemma [00:11:20] And what's the kind of specific challenge for SMBs with this shift from office to, I guess, hybrid by choice of the employees? I'm thinking about, for instance, if you had a large business that has, you know, networks that everybody has to log into having to be in the same place in order to do critical meetings and all these sorts of things. Is it as simple as just going, oh, we'll just use the technology that's out there that other people have built? Or how easy is it for businesses that perhaps don't have as much resources to kind of, I guess, move these networks and move this way of working that perhaps they've been used to for a long time to this hybrid mode? 

Laurie [00:12:00] Yeah, as I said, you know, it depends on whether they're doing it very tactically and just getting some tools like for video conferencing and collaboration and things like that, or they're rethinking it in terms of that big picture way. I think that for everyone, though, right now, the situation is evolving. Right? And we really don't know exactly how quickly it's going to evolve and how much our behavior and psychology about all this is going to change. I mean, psychologists say it takes six months for people to really change their behaviors and get into kind of a groove with it. So we've all had more than six months now with this, you know, whatever you want to call it, new normal as we go into whatever the next normal is, again, we're going to have to make that adaptation. And so what we find the biggest challenge for businesses overall right now is just uncertainty. So they're trying to really say, OK, I don't know exactly what's going to be so how can I better prepare and plan for that? And it gets into all kinds of things. I mean, not just the technology, but the investments in terms of maybe real estate, in terms of owning it, renting it, keeping it, letting it go, all these kinds of things. So as I mentioned before, also reconfiguring physical work spaces that people are going to go back to. So there's so many components involved in this. And it is a lot for a smaller company to get their heads around. 

Gemma [00:13:44] So you mentioned this idea of this or being tactical about the changes, which is really interesting. I wonder if you could share some examples, perhaps, of some SMBs who have taken decisions that maybe at the time were tactical or maybe it's more just in hindsight that have made that change because of what's happened with the pandemic but actually, it's, you know, made the business go further as opposed to just keep it going?

Laurie [00:14:06] Yeah, well, there's an SMB, I spoke to a couple months back for another project, but they're beekeepers and they both sell bees and sell honey and all kinds of related products that they make with the honey. And they had a very big, you know, it’s a very customer focused business. So in other words, they had a lot of people visiting them and coming into their physical store front and asking them for tips and doing things on site with classes. So they've changed a lot of that, you know, to offer a lot of the services virtually to sell a lot more online, doing a lot more with e-commerce and building their online community, which is something they've never done before. But they really realize, hey, part of what people are buying from us is this experience, this community experience. They're not just buying bees. They're not just buying honey and honey products. They're buying into the whole community. So they've kind of recreated as much as they can of that online and they've actually I want to say, I think they grew something like over one hundred percent because they turned around at the end of the year and they're like, wow, this all really worked. And they were also able to expand. They mainly been doing business in more of a local community. But now that they're doing so much more online, they were able to really expand out from kind of their home base. 

Gemma [00:15:35] I think as well, what it sounds like with them listening to their customers and realizing that community was something important before the pandemic. I can imagine now with us not being able to hang out with each other physically, I can imagine online communities probably being a trend that a lot of businesses have been trying to build or tap in to feed that desire, perhaps that a lot of us have. 

Laurie [00:15:56] We have to be authentic, obviously. You know, and in your case, it was authentic. They have this kind of community and the quote unquote, real world. So they were just recreating it. I think it's hard sometimes because some people are you know, they're not necessarily selling the bigger experience. They're just selling widget A or widget B. So it's not something that lends itself to every business, but I think where you can, it's very important. 

Gemma [00:16:25] So thinking again about some of these good examples or these tactical examples that you've been seeing, are you finding that businesses are sort of taking one part of their operations or one challenge and going, we need to fix this already kind of going let's take a step back and completely transform our business model, And they're really different than they were a year ago. I mean, I'm sure both is happening, but I'd love to hear a little bit about what you're seeing in terms of what feels most or less. 

Laurie [00:16:51] I think in most small and medium businesses, you almost have to be incremental. You just can't boil the ocean and do everything at once. And in some ways, medium businesses, it's even harder than small businesses because you have more legacy. Right? And it's harder sometimes to kind of shift gears because you've got to literally stop what you're doing and figure out how to do it differently rather than adding something like the example I just talked about. So usually in the smaller companies, the bigger challenges are very customer revenue focus. I need to attract new customers. I need to retain my existing customers. I need to boost revenues, get revenues back. Those are the more immediate top challenges. So they're doing a lot around new digital sales and marketing types of activities, social activities, customer service activities. That's very, very customer centric. We find that as they grow and they become you know, they have more employees. They have more moving parts to manage in their organization, within their organization. The top challenges that seem to bubble up higher are around employees. Improving employee productivity, which you can think with the work from home situation. Obviously, that's paramount, right, that people are able to work productively wherever they're working from. So that's been a big challenge and a big focus. Also reskilling employees and reconfiguring sometimes the makeup of the workforce because they realize, hey, you know, I'm not going to need so many people maybe in a retail location, but I am going to need more people doing customer service online or whatever. More people may be doing analytics on the marketing end. And so we definitely see in the medium businesses more of a maybe some of the first efforts are more geared towards that. Where in small some of the first efforts are often more geared towards the customer. 

Gemma [00:19:00] And sort of zooming out a little bit, even more. What would you say when you think about, you know, acceleration of digitization, adoption of lots of different new tools, technologies, processes, what have been the biggest challenges then for SMBs considering this acceleration and so much new stuff, not knowing where to start, perhaps? 

Laurie [00:19:20] Well, the biggest challenge is always for adopting new technology. And this is no different. Our lack of time, lack of money and lack of the ability to take it all in. Right. And figure out, you know, it's all the lack of problems. I don't have enough time to really explore, first of all, what part of my business really needs the most attention and then look at, well, what do I really need to do in that part of the business and how would I do it? And then finding the time to do it. And then the last thing is the budget. Right? Especially now with covid and a lot of businesses. Well, more than 50 percent having revenue declines during this period. They're just cash strapped. I will say, though, that still about a third of businesses of SMBs are planning to increase technology investments. And this is often in a time where whether it's hardware, software, communication services, you know, those are the areas they're trying to maintain or increase spending, even though they may be cutting and a lot of other areas, because I think most small and medium businesses realize today that they're going to need to digitize. They're going to need to get not only all the advantages of automation, but they're going to need to be able to have the information and the data and be able to look at that information and be able to more easily evolve and adapt their businesses based on data instead of just gut instinct. 

Gemma [00:21:00] And how is this that, I guess, play out in terms of thinking about these businesses in their current specialties. Because if you're suddenly going, hey, you're a business that you thought was X is now about data, or data has this massive central role that perhaps was seen as a sort of helpful thing on the side or a thing we'll look at some point or, you know, when we have enough money in the bank, we'll hire someone. Is that shift – how is that faring with companies that don't have that initial – that aren’t built data by design? 

Laurie [00:21:33] You know, getting better insights from data, I think is always both a goal and a challenge for SMBs. Right? We just in the technology world, sadly, we just don't often make it as easy as it should be. You know, first of all, a lot of businesses are using a lot of different solutions and they're not integrated and they don't talk to each other. So they got information all over the place. As things get more integrated, it is a little easier at least to kind of get your arms around the bigger picture. Most small businesses and medium businesses, even, they don't have data analysts. So they need to be able to just query and find out what they need to find out and look at it in a visual way. And sadly, this isn't always that easy to do. So it's not for lack of wanting to do it. I think most businesses today realize that it is important to be able to analyze and look at and segment and do all the things, you know do the what ifs do some scenario planning, but it just really isn't always that easy. And when they have to stop, change, bring in new applications, new technology. So that end goal is great, but getting there can be still very painful. 

Gemma [00:22:55] You said some of the issues around sort of communication and I guess acceptance of the idea that you do kind of just need to dive in. What would you say are perhaps some of the myths or these ideas that are quite prominent that perhaps stop SMBs from trying new things or jumping in or thinking it's going to take all the time in the world when in fact, in reality it doesn't. Let's do a little bit of myth busting, shall we? 

Laurie [00:23:18] Well, I think we've got a double-edged sword here because everything is – I can help you do this faster, easier, cheaper, better. But we all know I mean, just from our trying new technology, a lot of times we end up pulling our hair out because it's not what you see is what you get. Cloud based solutions are a perfect example. We've made it really easy for everybody to turn on cloud-based business solutions, but because they are business solutions by their very nature, they're going to require planning and forethought. So, you know, the comparison here is video conferencing. Video conferencing is pretty easy because you can literally just turn it on and use it and get value from it. But when you need to integrate financial processes, marketing processes, sales processes, human resource processes, and you need to get all these things done, it's not a question of just turning on the technology. It's a question of planning how you're going to use that technology in your business. You've got to be able to take the time before you turn on that solution and look at your business processes. Figure out what do I have that's working well that I need the software to kind of meld and adapt to and where am I maybe doing things that are in a very clunky way? And here are some nice best practices that the software can help guide me to do, so I can do it better. You know, sometimes it's just hard to carve out the time for that, but it's really important to do so because if you don't do it, you're going to be kind of continuing to push up against all the limitations of doing things. And I don't even want to say a manual way, most companies, you're using software in some way, shape or form. But a lot of times they're using something here and something there. And this doesn't talk to that. And I can't readily pull information out and I keep having to put stuff in spreadsheets. And, you know, people don't have a unified view of what's happening. So it's really important to take that step back and do that planning. And that's what I said before. It's not just the technology to help you execute, it’s the advisors, a lot of times. You need to work with vendors or vendor partners that are you know, they've been there. They've done that. They can help you get from point A to point B better, faster, and more successfully. 

Gemma [00:25:59] So we've talked a little bit about what SMBs should be thinking about in terms of, I guess, strategy and how to think about implementing new tools and processes. But I would also love to hear a little bit of what you think about, you know, some specific technologies, low code, automation, AI, machine learning. What do you think of some of these technologies and the approach of these technologies? How should SMBs be sort of utilizing these new innovative technologies?

Laurie [00:26:22] Well, I think for most SMBs, they will never have the bandwidth to bolt these things on. Right? Most of them are not going to be going out and thinking, oh, let me go find some AI that I can put into my ERP or my HR or whatever that's going to help me, you know, really boost the automation and get better insights and do things more effectively. I think for most SMBs, the cloud is really the route they're going to take. So if they're using business applications in the cloud from any of the big vendors, you know, you could just go down the list of companies. All of these vendors are building AI and machine learning and natural language processing and all these other capabilities into the solutions that businesses already use. So if you're using one of these solutions, you're going to get to take advantage of all the benefits that these newer technologies are going to bring to your businesses without having to figure out, well, kind of how do I get this? How do I bolt it on? How do I use it? No, it will be surfaced. It is being surfaced up to you, you may not even know it. So if the application you're using is automatically categorizing expenses and transactions for you, you're using AI. You know, if it's identifying anomalies or outlying issues in your data, probably AI machine learning popping in there for you. And that's the best way to use it. Right? When you don't have to figure it out. And so we really see the cloud as a springboard for SMBs to be able to get a lot of value and take advantage of these solutions without kind of getting dragged into the muck of the plumbing, which none of them hardly have the time or money to do. 

Gemma [00:28:21] So we spoke about this balancing of time, money, and talent, and we've talked about how SMBs can be getting involved with lots of these new technologies. It seems maybe like a basic question, but what are the benefits of new technologies and why should SMBs be using the little money, time, and talent that they have to invest in this stuff? 

Laurie [00:28:43] Yeah, well, I mean, SMBs do not invest in technology in a vacuum. They only invest in technology because it's going to help them achieve a business goal or help them solve a business problem. And so I think if you stay focused on that, that's the most important thing. And that's going to help you prioritize what investments need to come first. You know, where is the biggest vulnerability in my business if I don't change? And what do I need to change? How do I need to change it? And we do know from our research that the SMBs that are continuing to maintain or increase technology investments, that correlates with better business performance. So it has helped them both survive through this pandemic to date better. And it's also helping them to have a better outlook for the future. So it does correlate, but it is a correlation effect. It's not a causation effect. You know, just throwing money at technology. Of course, that's not going to help. It's got to be the mindset that I can apply, you know, resources to technology investments that are targeted to help my business. And I'm going to look for these outcomes. When I search for the solution, I'm going to look for the evidence. I can get these outcomes then I'm going to measure to see if I'm getting the outcomes I want. So if you take that kind of disciplined approach, I think the investments really do pay off. We can certainly see that. Sadly, some people are still kind of resistant to technology. And I don't know really if there's any way to get them over that hurdle. But what I would say is you have to look as a business - what is the cost of inaction here? You know, what is the cost to my business if I don't do anything, if I don't figure out how to do digital marketing better, if I don't figure out how I can use technology to help the recruitment process. You know, whatever it is that you're trying to do, if you're continuing to kind of put your head in the sand, you know, just ask if your business can survive that way. 

Gemma [00:30:58] So I've got one last question for you, which hopefully kind of loops back to our original – you know, we opened up by talking about the context of the last year and thinking about SMBs and whether that's to do with general business strategy or whether that's to do with technology, adoption or whatever. Thinking about the whole picture from your expertise, what's your advice for SMBs? In terms of charting a path forward, what should they be doing or thinking about now in order to move into the future as best as possible? 

Laurie [00:31:26] Yeah, well, I think a couple of things. Number one, as I said before, listen to your customers. So if you don't have mechanisms in place to do that, you know, whether that serving, community, customer service, you know, avenues, channels, that you can really gather that information, you need to think about how you're going to do that better. The next thing is nobody has a crystal ball, but we know some things are really being reshaped and probably will be forever. So I don't think anybody believes that in a year from now, the workplace, quote unquote, is going to suddenly look like it did in 2019. We're going to have a more flexible kind of way that people work. So start thinking about how you can really optimize both the work that's done in your commercial locations as well as the work that people are doing at home, not just from a productivity standpoint but from an employee satisfaction standpoint. You know, I think as the economy comes back, the talent crunch, the people we're all going to want is going to be pretty intense. 

Laurie [00:32:43] And the other thing is the puck has just moved to people want no touch, they want no touch transactions. Whether that's in payments, you know, if there at a kiosk, you don't want to touch it, you'd rather talk to it. So think about factory floor, you know, all those things. Any ways that you can reduce the human touch points in terms of physical contact. Think about that, because we're all trying to automate and that's a great kind of place to start. And then the third thing is just what I mentioned before. You know, all these things are going to be very important. But to execute successfully, you are probably going to need new technology or to at least use the technology you have more effectively. And most SMBs don't have the specialized, let's say, in-depth kind of resources maybe in the technology area you may have some technology people, IT people, but if they don't have the drill down experience that you need, you're going to need advisors. So talk to your friends, your colleagues, anybody you know that can give you some recommendations, look online. There's a lot of different online sites and try to, you know, seek out some people that truly are going to have that the expertise so that you don't have to go through this learning curve for the first time. You can kind of piggyback on someone that has been there and done that. 

Gemma [00:34:16] Amazing. Laurie, thank you so much for coming on the show and sharing so many insights, obviously, from your vast experience, but also by keeping your finger on the pulse over the last year. And hopefully there's been lots in there that SMBs or anyone who's listening can really take forward thinking about what things are going to look like as we move through 2021. So thank you for coming on the show. 

Laurie [00:34:35] Thank you, Gemma. I enjoyed talking to you. 

Gemma [00:34:39] That's it for this week. Thank you so much for tuning in. You could find out more about Laurie’s work and indeed some of the broader themes we discussed today in the show notes. If you enjoyed the episode, please do take a few moments to rate and review the podcast. It really helps other people discover the show. 

Gemma [00:34:55] And don't forget to subscribe and tune in next time to continue our conversation about innovation, resilience, and our capacity to succeed. 

Ad [00:35:08] Learn how Dynamics 365 Business Central can help your small or mid-sized business bring disconnected systems together to improve financial visibility, optimize your supply chain, streamline sales and service, and deliver projects on time and under budget. Watch a demo by following the link in the episode description.