How do you apply the lean startup methodology to the military? Well, that’s the subject of this week’s episode of Agile Giants. Pete Newell, whose name may sound familiar because Steve Blank mentioned him at the Corporate Entrepreneurship Forum as the co-author of his upcoming book, Innovation Doctrine.
Pete is the CEO of BMNT Inc., a Silicon Valley based innovation consultancy and early stage tech accelerator. He’s a retired US Army colonel and the former director of the US Army Rapid Equipping Force. You’ll hear on this week’s episode a little bit about what Pete’s been doing both with BMNT and in the classroom with Steve Blank. And again, just like we did on Steve’s episode, teasing this book coming out that I know so many of you are excited about, Innovation Doctrine.
- BMNT Website (Pete’s Firm)
- Pete’s article in Defense One
- H4X Labs website
- Steve Blank & Alexander Osterwalder’s video from the Corporate Entrepreneurship Forum
Sean Ammirati (00:08):
Welcome to Agile Giants, lessons from corporate innovators. I’m Sean Ammirati, your host, co-founder and director of the Carnegie Mellon Corporate Startup Lab and partner at the early stage venture capital fund, Birchmere Ventures. Each week, I’m going to talk to guests who are experts at creating startups inside large corporations.
Sean Ammirati (00:29):
I believe fundamentally a startup within a company is the same as one inside the proverbial garage, a group of entrepreneurs trying to make the world a better place using new ideas and inventions. However, I also believe some of the techniques and processes are just inherently different. This podcast is going to explore those similarities and differences.
Sean Ammirati (00:56):
How do you apply the lean startup methodology, not to a big company but to arguably one of the biggest organizations in the world, the military? Well, that’s the subject of this week’s episode of Agile Giants. Pete Newell, whose name may sound familiar because Steve Blank mentioned him at the Corporate Entrepreneurship Forum as the co-author of his upcoming book, Innovation Doctrine. He’s the CEO of BMNT Inc., a Silicon Valley based innovation consultancy and early stage tech accelerator.
Sean Ammirati (01:30):
He’s a retired US Army colonel and the former director of the US Army Rapid Equipping Force. You’ll hear on this week’s episode a little bit about what Pete’s been doing both with BMNT and in the classroom with Steve Blank. And again, just like we did on Steve’s episode, teasing this book coming out that I know so many of you are excited about, Innovation Doctrine.
Sean Ammirati (01:59):
So Pete, thank you so much for taking the time to chat with us on Agile Giants today. For the listeners, a few weeks ago, we had our Corporate Startup Lab Forum, Steve Blank and Alex Osterwalder spoke there. We rebroadcast that out to the Agile Giants feed as well. But Steve mentioned some of the stuff he’s doing with Pete, which got me quite interested in his background, and then was gracious enough to come and chat with us today.
Sean Ammirati (02:27):
Pete, I don’t want to just focus on that though. Maybe just for people who may not be familiar with you and your firm, start with kind of what led you to start your firm? And then we’ll talk a little bit about what you’re doing these days.
Peter Newell (02:39):
Yeah, no problem. So I think the fastest explanation is I spent the better part of 32 years in uniform in the military as a solider in the Army. Towards the end of my career, I was essentially volunteered, or volun-told, for a job to run the Army’s skunk works, an organization called the Rapid Equipping Force. This was about 2010, which is when we were just starting to wind down on the war in Afghanistan. In fact, I was just leaving…. Or were winding down the war in Iraq, and I was just leaving Iraq, and we were starting to scale up the war in Afghanistan at the same time.
Peter Newell (03:27):
I guess for truth in lending here, I knew nothing about entrepreneurship. I had no business background. I’m not a scientist, I’m not an engineer. I really am the guy who barely qualified to get out of college. And then we found that I was really good at solving problems, so for whatever reason, they thought that I was the guy who should be given the keys to the Ferrari and told to go out and find more problems to solve.
Peter Newell (03:56):
I did that for about three years, and I realized that I was addicted to the process of finding problems and articulating to people, building teams around them, and getting solutions back to the battlefield. And in fact, I got really good at it. Over probably a two-and-a-half year period, I built a process that allowed us to invest almost $3 billion, doing some pretty exotic stuff, everything from underground robotics to automated aerial systems to traumatic brain injury, data collections, vehicles, and you name it, we probably worked on it over time.
Sean Ammirati (04:34):
So I guess obviously, first of all, thank you for your service, that’s just incredible. But I read an article that said you started your firm in your driveway in Palo Alto, BMNT. So you go from 30-plus years in the military to starting this firm. Talk a little bit about kind of how you took those learnings from the military and then applied them in this new firm, new venture?
Peter Newell (05:00):
Sure. I’ll tell you how fast this happens. One day I was at a kitchen table thinking that I eventually was going to be a general in the Army. And I got a phone call from somebody who said, “We think you’re doing great. We want you to go to Korea and write speeches for somebody, and that will set you up perfectly.” And I said, “Yeah, but I really like what I’m doing. I like being an entrepreneur.” Back and forth, and eventually, they didn’t care, and I quite frankly decided that I was so addicted to what I was doing, I thought I was going to get out of the Army, and I was going to figure out how to do it.
Peter Newell (05:37):
So long story short, I ended up in Silicon Valley, rented a house sight unseen. In fact, we left Washington DC after I retired from the Army, we were homeless for about six weeks driving across the country, but found a place to live in Palo Alto. And just like the classic Palo Alto startup, started with nothing with four people in a driveway and started to do a lot of customer discovery about where we fit.
Peter Newell (06:07):
And the premise was we wanted to change the dialogue about technology innovation between Silicon Valley and the military and kind of close what the gap was. So we started looking at one job at a time, and eventually figured out what the real problem was, and we figured out how to deliver a solution to that. And fortunately, I met Steve Blank in the process. And that’s where things really changed.
Sean Ammirati (06:42):
So I do you want to get to that, and I want to get to Steve, but talk about the narrative back then and the narrative today. Because I think that would be interesting for folks, not just in this context, but also trying to change narratives maybe in their established organizations as well.
Peter Newell (06:59):
Yeah. So at the time that I moved to Silicon Valley, the summer of 2013, was this just about the time the Snowden files on NSA spying and how deeply penetrated tech they were. And if you sat in the Pentagon, the dialogue that went through the senior leadership at the Pentagon is Silicon Valley is anti-military. And if you’ve ever set foot on the campus of Stanford University, you realize how flat wrong that is. And if you spent time in Silicon Valley, you would realize just how many veterans and how many entrepreneurs truly do care about the country.
Peter Newell (07:40):
But the challenge was is there’s a… Silicon Valley has got a business process. It’s got a business practice that says, “I’m going to take an idea and connect it with the biggest problem I can find. And I’m going to take a small investment in that idea and the people around it, and I’m going to grow it into a unicorn and I’m going to do that in three years.
Peter Newell (08:04):
In the Pentagon, in the military, they have a business practice that says, “I’m going to tell you exactly what I want to buy, and you’re going to deliver it to me, and then I’m going build 1,000 of them.” The two don’t connect. So the challenge was really getting, not Silicon Valley to accept the military business process, it was getting the military to recognize that if they really wanted to capture all the pure ingenuity coming out of the Valley, they were going to have to change the way they bought things. And that was step one. So the first was changing the dialogue and the discussion to show people in the government how they could actually engage Silicon Valley about something that was important to the government and be successful at it.
Sean Ammirati (08:55):
Yeah. And just to double-click on the military point, so I teach at Carnegie Mellon, and I will say some of my best students are exactly the same, and it’s always a pleasure to have them in the classroom, for sure. So that is absolutely true. So to sort of catalyze this change in conversation, you start BMNT, which you describe on LinkedIn as, “An innovation consultancy and an early stage tech accelerator,” so talk a little bit about what does that mean in the context of the firm that you started?
Peter Newell (09:32):
SO as you go to work on this dialogue between the government, it’s depending on primarily centers for innovation, whether it’s Silicon Valley or Austin or Boston or Carnegie Mellon, is you realize that there’s a transaction that needs to take place that lends to a value proposition on both sides of the table. And what we realized that the government had that was most valuable to other people was problems. They have some of the biggest, hardest, nastiest, fastest moving problems in the world. And if you can teach them how to articulate them in a manner that makes sense to people and recruits those people to work on them, you can actually build some really good pathways to delivering a solution to those problems that probably are coming from the civilian sector.
Peter Newell (10:31):
So the first one is what I would say is as a consultancy. We built a services business around teaching the government how to curate its problems and prioritize them and articulate them in a manner that other people would understand. And then we taught the government how to use those problems to curate the best and brightest companies, ideas, and people, and very quickly wrap them around those problems and try to get in the nucleus of something that could actually be used to find a solution. So largely the services business was built around that.
Peter Newell (11:10):
Very quickly, we found that from the nuclei that we were building were potential startups who had never worked with the government. And from our premise, we weren’t just trying to find startups to work with the government, we wanted to find and launch startups who would stand on their own two feet as commercial entities, who could also do government business. And that kind of forced us into the role of… And we started out just mentoring people, but eventually launched what we call H4X Labs, which is our incubator accelerator for company building that has the capacity to deliver on government issues.
Sean Ammirati (11:55):
So how would you contrast it with a lot of people are probably familiar with In-Q-Tel as a sort of well-known VC fund that has some similar double mission, if you will, support the agencies and build companies? How would you contrast your accelerator piece with that work? And then I want to get to the services piece as well.
Peter Newell (12:15):
That’s a great question. It comes up a lot of times. So In-Q-Tel is actually what I would call a partner to… It’s almost like a channel partner. It’s a partner, and somebody who uses the practice that we have to actually help their companies deliver. And kind of a way it works is In-Q-Tel gets from us really well-curated problems. So we work with the agencies and the intelligence community to create this swath of problems, which suddenly attracts more companies that somebody like In-Q-Tel can then take on and very narrowly focus on building capacity.
Peter Newell (12:54):
At the same time, we actually partnered with In-Q-Tel to build an investor network that’s focused on defense investments. So this investment thesis that I talk about of dual-use technologies, In-Q-Tel is part of what I call the plank owners that is defense investors network, which, it’s an informal network of well over a hundred investors around the country who want the opportunity to invest in things that are important to our country, but they don’t invest dumbly. They want to invest in real businesses, which helps In-Q-Tel.
Sean Ammirati (13:29):
Yeah. So is the early stage tech accelerator then a feeder to In-Q-Tel as well, would you say, in this network, or would they typically come in alongside of you, or are there deals that fit you that don’t them? How do you think about the funding landscape, if you will, of these types of problems?
Peter Newell (13:49):
I would separate the two.
Sean Ammirati (13:51):
Peter Newell (13:51):
At the one end, I would say that it’s more a three-dimensional model. You get different inputs from different directions for different reasons, and eventually have to triage them and figure out what the work is to be done with them. So in some cases, In-Q-Tel might step in and say, “We have this company that we’ve invested, it’s doing great stuff. But the potential for this company inside a very narrow intelligence world isn’t big enough to… The juice isn’t worth the squeeze. Can you think of other places where this might help? And are there other problems they could solve? Can we get them into an Air Force SBIR?” And we’ll look at those types of things.
Peter Newell (14:36):
In other cases, they’ll, in fact, we have things that we’re working on that we’re talking to folks in In-Q-Tel about that may be of interest to them solving a problem, which is very informal, personality-driven kind of connection. Because In-Q-Tel is a fairly large organization, it’s got a lot of partners that focus on things, and everybody’s got a portfolio, so it kind of depends on who you’re talking to, one. And I would say that In-Q-Tel is only one of many that are like that.
Sean Ammirati (15:09):
Yeah, I think that that’s definitely true. I think they’re one of the better known at least among the tech entrepreneurs that I talk to. Which probably leads to the last question on this, and then there’s some other stuff I wanted to talk to you about as well. But if an entrepreneur is listening to this and thinks that their startup should be working with the early stage tech accelerator part of your business, what’s the best way for them to get in touch with you and what are the types of entrepreneurs that are best fits for the BMNT tech accelerator?
Peter Newell (15:40):
Actually, there are kind of two ways now. One is from an incubation standpoint, we look at really, really early stage seed and pre-seed companies who have identified something that they’re working on that may be applicable to a problem the military has. So whether it was coming out of a, what I would call the Hacking for Defense class or what it’s soon to be called at Carnegie Mellon, I think you guys will be the first Hacking for Homeland Security class focused on cyber security. In fact, I think you guys are teaching it in the fall.
Peter Newell (16:14):
Oftentimes, we’ll get input from people who say, “I was mentoring a team on this thing, but I have a company I think fits in the space, and I’d like to talk about the types of problems that I’m hearing.” Sometimes there are other cases where I think the answer is more about acceleration. You have a standing company that’s building a product that has recognized something in the military that they think they have an application to, and they’re interested in pursuing that. And that’s really more like an accelerator of… We’re not an organization that does a lot of door opening and introductions. It really is looking at the company and saying, “Are the conditions inside this company appropriate for delivering something to the military?” And helping them figure out is it to cyber security standards? Do they understand contracting? Can your business really withstand what it takes to work with the government? Do you really have a pathway? And do you understand the problem correctly? And trying to help them get to that point. So it’s a little of both.
Sean Ammirati (17:21):
And, I guess, if they think they’re a good fit, and they’d like to get in touch with you, what’s the best way for them to reach out to your firm?
Peter Newell (17:29):
The fastest way is an email to firstname.lastname@example.org. That goes straight to the folks that run H4X Labs, and get an assessment out there. I think we have 32 companies that worked with H4X Labs this year, so it’s a growing crowd. That’s probably twice what it was last year.
Sean Ammirati (17:53):
That’s awesome. So I’d like to, lots of different people who listen to this, a lot of them are responsible for innovation in large organizations that are not the military, but they’re your Fortune 500 companies, that kind of thing.
Peter Newell (18:07):
Sean Ammirati (18:07):
And as I was looking at your background, and I read an article you wrote on Defense One a little bit about this as well, I think there’s a lot of lessons around how you look at managing risk that are really applicable for people, not just in the military, but in these other innovation organizations. And so, I thought I’d just sort of ask you to share a little bit, and again, we can link to the Defense One article as well, but just share a little bit about lessons that you’ve taken from your military experience around managing risk and specifically the experience and the training necessary to do that well.
Peter Newell (18:43):
Sure. I’ll start with the premise of entrepreneurship and company building is I don’t know that there’s any successful entrepreneur in Silicon Valley who’s built a worthwhile company that has not failed to build another company before, even Steve Blank. His first book, The Four Steps to an Epiphany, was about his journey from five failures to two that were good and one that was a unicorn. What you experience as an entrepreneur going through the process is essentially how to manage risk, the risk of not scaling versus the risk of spending too much money versus other things. In large organizations, it’s really hard to gain that experience because people see any expenditure that fails as being wasted money instead of an opportunity to learn something that allows you to make better decisions.
Peter Newell (19:41):
In the military, as an infantryman and a war fighter, I spent probably 90% of my career practicing the art of war fighting, which meant that I went to practice battlefields and got killed incessantly over and over and over and over again. And every time I did, I had somebody watching over, watching the organization say, “Now, Mr. Newell, now that you’re dead again, why’d you fail?”
Peter Newell (20:07):
And over time, you learn to experience, what I say, a sense of timing, just how long it takes to get the right assets in the right order and get them doing the right thing. You learn a sense of just how many little things can cause you to fail. And you also learn that when you’re working in a large complex organization of how to speak to people and ensure that, although they come from diverse backgrounds, that they understand what it is you want them to do. So it’s really just kind of practicing the thing, but it really is about that experience.
Peter Newell (20:44):
Most of all, you learn to manage risk. And when I say managing risk, I could talk about being in combat saying if I reduce the risk that’s on something, which means I’m in the normal parameters of how we’re going to do something, I’m not just all in the risk, I’m actually transporting the risk someplace else. And I have to understand that although I may get it right here, I may be causing another problem someplace else that will kill me or kill somebody else.
Peter Newell (21:14):
Entrepreneurs learn that starting in… You go to Stanford University, there are well over 200 classes in their catalog that say, “Entrepreneurship.” So entrepreneurs start learning this at the college level, and then they go out into the world and they learn it by building companies and doing things. People in larger organizations don’t have that platform. I can send you to a class to learn about it, but I’m going to come back to my organization, and I’m not going to be allowed or expected to fail at something in order to learn about risk and how to manage it so that I don’t fail on things that are truly critical.
Peter Newell (21:55):
And that’s the real premise to that managing risk is if you’re a large organization at the enterprise level, and you look at the people under you, my question is what are you investing in their education? And what are you investing in helping them gain experience at making decisions, in an environment where somebody is observing them and giving them critical feedback about not just their decision, but the implications of their decision on the organization, so that they gain that experience and making risk-based decisions? That’s a really long answer.
Sean Ammirati (22:28):
No, it was a great answer. It was awesome. I think there’s a lot of people listening to that thinking, “Well, how can I change my training program to actually take some of those lessons into my learning and development experiences around innovation?” Do you have any kind of actionable steps you’d recommend people take based on your experiences?
Peter Newell (22:48):
Yeah, I would say first and foremost change the dialogue about the metrics you’re grading your efforts on. And oftentimes, and this is what I really love about lean methodology, is the metric is focused on learning not on an output. Because you’re eventually going to get to the output, but the discipline is really about the rigor of how many hypotheses did you generate? How many interviews did you do? How many failed? How many things did you learn in order to build the confidence that you made the right decision eventually?
Peter Newell (23:22):
So if you change the dialogue about the type of work you do to invest in learning and building the human capacity to make better decisions, then it changes the way people grade you in terms of your success rate, instead of I’m building this many new products that are going to do something.
Sean Ammirati (23:43):
Yeah. That’s awesome. So you’ve mentioned, Steve, a few times, I do want to sort of tie that thread in, so talk a little bit about the stuff you and Steve are working on these days together.
Peter Newell (23:54):
Well, Steve and I bumped into each other quite by accident in 2015. Now, I had no idea who Steve was and he had no idea who I was. And in the course of a 20 minute coffee… A 20 minute coffee turned into a three-and-a-half hour white boarding session between the two of us, and we have been closely tied together ever since.
Peter Newell (24:18):
And in Steve’s words, he looked at what I was doing in combat and in the battlefield in terms of problem curation, and in my version of lean and his version of lean, and said, “You know what? We’re going to rewrite everything we did, and we’re going to write this for the government.” And then, we roped in Alex Osterwalder. And Steve and I and Alex, we wrote the business model canvas to be the mission model canvas, and eventually we rewrote it all down.
Peter Newell (24:47):
We first started by launching a college course called Hacking for Defense, which is essentially a government-facing version of the lean startup class that Steve started teaching in 2009, 2010. The Hacking for Defense class spawned just recently Hacking for Homeland Security, but Hacking for Diplomacy, Hacking for Oceans, and Hacking for Energy. There are all kind of… All of these hacking programs at the academic level were focused on the concept of a mission model canvas, which means I have a problem, and my entrepreneur is on a mission to solve the problem. Which may result in a company, but it may be something else.
Peter Newell (25:34):
That class was taught in 44 universities in the United States this year, seven more in the United Kingdom, and we are just launching a platform to teach in Australia. I think next year, we’ll be around 70 universities. As I mentioned, the Department of Homeland Security has now adopted one they call Hacking for Homeland Security, which started with working with FEMA on disaster relief, I think next on the pipeline, as I mentioned, we’ll be working on critical infrastructure, cyber security at Carnegie Mellon, and I think behind that is the Transportation Security Administration on something else.
Peter Newell (26:16):
But Steve and I have taken the opportunity to look at the collision between government problems and young, really bright college students, and have come to the realization that the work that’s done in this classroom really does look, sound, and feel like a different version of public service. So we have created an opportunity for entrepreneurs to perform a national public service that makes this a better country or a better world that also teaches them about entrepreneurship and risk-taking and provides an opportunity for them to actually build companies that attack the great problems that they started to work on.
Peter Newell (26:59):
Wrapped up in all of that is changes to the methodology, new tools, new ways of language, which eventually lands us where we are today, where Steve and I are working on a book that is essentially Innovation Doctrine. It’s how do you build a common operating practice and common language for innovation in large enterprise organizations that allow them to do this at scale and at speed the way the rest of the world does?
Sean Ammirati (27:25):
Right. And that is something that Steve talked about at the forum and that basically the chat room went crazy when he mentioned the Innovation Doctrine book, Pete. So I can tell you at least sample size of 600 people at the forum, I think they all wanted a copy. So a little customer discovery on that one for you.
Sean Ammirati (27:44):
So the last thing, and I like to ask every Agile Giants guests this, but I want to sort of customize it a little bit based on your background. So I have tons of military officers who come to Carnegie Mellon for their graduate degree while they’re in the military or often sort of towards the tail end of their military as they’re kind of pivoting their career. And I think, I like to ask everybody for career advice going back to an earlier point in their career.
Sean Ammirati (28:12):
But I thought for you it’d be interesting to think about what advice would you give to somebody where you were roughly eight years ago when you started being a mentee, and if there was someone in 2020 thinking about starting their own venture coming out of the military like you did, what advice would you have for him or her?
Peter Newell (28:32):
Well, I do that probably every week, I have somebody else come to me. Probably a lot of senior military officer who are like me who know what I’ve done and are interested in making that transition. And the fact I have a son who’s a 30-year-old captain in the army, who’s getting ready to get out, he’s going to join the reserves. But he’s now making those same transition. We’re having these long, heartful conversations about discovery.
Peter Newell (29:00):
The first warning I give people leaving the military is you spent a lifetime building a network inside the military that is focused on war fighting or whatever it is you did, and it’s a great network. You need to invest time in building a network outside of the military that involves a diverse set of people with diverse opinions that will teach you about the opportunities you have in other places.
Peter Newell (29:26):
The second conversation, and invariably, people ask me how I started the company. How did you do this and become successful? And BMNC is, it’s not a large company, but we’re 60 people working in three countries, and we’re not hurting. The kind of discussion I have with older people is, first, if you think you want to get involved in entrepreneurship, are your family finances straight? Do you got kids in college? Are you ready to start over? Are you ready to work for nothing? Are you ready to be the CEO of a company and find yourself scrubbing the bathroom floor before a meeting because you don’t have a janitorial… ? Are you ready to go without an income for a year?
Peter Newell (30:10):
So it’s all those things that an entrepreneur goes through, and honestly, it’s my version of scared straight. I try to be honest with people about what I went through launching my company and the impact, not just on me, but on my marriage. Entrepreneurs know the traumatic stress of launching a company and living like that for years is detrimental to most relationships. I was fortunate, my wife and I have been married for I think 31 years now. She grew up with me in the military and in combat and then this transition, she says there’s very little difference to her between combat tours and building a startup.
Peter Newell (30:49):
So the first advice I give to all of them is really do some introspect on what it is you think you want to do. And then do some introspect on what made you good at what you were doing? Because too often people say, “Well, I did this job, and that translates to doing this job.” And my answer to them is, “You need to remember what it is that made you good at what you were doing, and then go look for other places where you have the opportunity to grow into something.” Too often, I think, and I have a couple of counseling sessions like this for folks next week, where somebody says, “What openings do you have in your company for somebody like me?” And my answer to most of them is, “I recruit people in my company who have the capacity to do big things. I acquire them, and I build things around them.”
Peter Newell (31:39):
So my question is, “What do you have the passion to do?” Now, if you think you have the passion, use that same discovery mode of what’s an MVP for what it looks like to you? Where do you live? How do you get to work? Who do you work with? Who do you associate with? And start talking to people about that environment you want to build around yourself and start getting feedback. And eventually what people will say, “Well, yeah, talk to these guys, you know this kind of job.” Of if that’s not going to happen, it’s a pipe dream. But you really have to go through this same process.
Peter Newell (32:15):
I am absolutely fascinated with the power of discovery if it’s applied correctly, not just in building companies, but also in, I would say, managing your life and building opportunities for yourself and your life. It’s the same mentality, same discipline. It also requires mentorship. And I think, as you’re probably aware and your listeners are probably aware of it, one of the toughest things to get as an entrepreneur or somebody doing discovery is critical, honest, brutal feedback that’s focused on helping you get out and do more better analysis to make better decisions.
Sean Ammirati (32:54):
That’s right. Well, Pete, that was a fantastic answer, just really interesting. I think if you haven’t written about that, I think actually there’s this applying the discovery principles to managing your career. I guess after you’ve released your bestseller on innovation doctrine, that could be a great book number two for you. But that was fascinating, and this whole conversation has been amazing. Pete, I really appreciate, again, your time today and being willing to come share your expertise with us and best of luck continuing to scale up BMNT.
Peter Newell (33:25):
No, I appreciate it. And I look forward to seeing Carnegie Mellon leading the wave with its own new Hacking for Homeland Security class soon.
Sean Ammirati (33:34):
Peter Newell (33:34):
Sean Ammirati (33:42):
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