The industrial internet of things (IIoT) is an important source of data for digital transformation. What is IIoT and how can we capture and use that data? Industry analyst and CXOTalk host, Michael Krigsman, speaks with Guido Jouret, the Chief Digital Officer of ABB about this topic.
Industrial Internet of Things and Digital Transformation
Chief Digital Officer
The industrial internet of things (IIoT) is an important source of data for digital transformation. What is IIoT and how can we capture and use that data? Industry analyst and CXOTalk host, Michael Krigsman, speaks with Guido Jouret, the Chief Digital Officer of ABB about this topic.
Guido Jouret has been Chief Digital Officer of ABB since October 2016. Mr. Jouret served as Chief Technical Officer at Nokia Technologies since April 2015 until October 2016.
Prior to that, he was Chief Technology Officer and General Manager of Cisco’s Emerging Technologies Group, a unit responsible for incubating new businesses. Under his leadership, the team created nine new start-ups, including those, which became Cisco’s TelePresence and Internet of Things groups. He has lived in 12 countries including France, Singapore and the United States. Additionally, he worked for Cisco as IT Director for the Europe, Middle East and Africa region and in the Internet Business Solutions Group.
Jouret left Cisco in 2014 to join Envision Energy, where he led the software products business, including a platform for the emerging energy internet. Jouret has been Chief Technical Officer at Nokia Technologies since April 2015, and recently drove a major acquisition in the digital health sector.
He obtained his PhD in Computer Science from the Imperial College of Science, Technology and Medicine in the UK in 1991, and has a bachelor’s degree in Electrical Engineering from Worcester Polytechnic Institute in the US.
Michael Krigsman: The Internet of Things, it means devices, it means sensors everywhere, everywhere you can imagine, everywhere you can look. Before I introduce our amazing guest, I want you, please, right now, to subscribe on YouTube.
Today, we're talking with Guido Jouret, who is the chief digital officer of ABB. It's an enormous company that you may not have even heard of, but they have well over 100,000 employees, $36 billion in revenue. It's an enormous company, and I'm very happy to talk about IoT, sensors, devices, and the industrial Internet of Things.
Guido, please tell us about ABB.
Guido Jouret: ABB is involved in the movement of electricity, so we do the transmission, the distribution of electricity from power generation all the way to your house or to your building. We also turn that electricity into movement with electric motors, actuators, and industrial robots. We're one of the largest makers of industrial robots on the planet, so whether it's moving electrons or using electrons to make things happen, that's ABB.
Michael Krigsman: Okay, now you are an enormous company, and you were founded in 1883.
Guido Jouret: Correct. In fact, we had two roots. One was in Switzerland, the other one in Sweden. The ASEA in Sweden, the BBC--not the British Broadcasting Company, but--the Brown Boveri Company, came together in 1998 and formed ABB. Therefore, that became the company that we know today.
Michael Krigsman: Guido, you are chief digital officer of this enormous firm that's been around for such a very long time, well over 100 years, and so what does chief digital officer in this context mean?
Guido Jouret: All of the things we make, which today are copper, iron, and windings that help to actually move electrons or use electrons, as I shared earlier, they're getting connected because, increasingly, and we've been using software for over 40 years, but this embedded software is now reaching out so, essentially, connecting to gateways, connecting to the cloud. That connectivity allows us to innovate in a number of ways. That's why we have created a group level focus on digitalization, which is, how do we take our products and make them do more, do better together, and how do we then use that to innovate not only in technology but also new business models.
Michael Krigsman: Correct me if I'm wrong, but you're an infrastructure company. Is that, first off, the right term to use?
Guido Jouret: Yes, I think so, in many ways. We're an industrial company. We make industrial infrastructure.
Michael Krigsman: When we think about industrial products, we think maybe about switches, wiring, and things like that. First off, bring us up to speed on the kinds of products you're developing. Then, let's talk about what it means to become a digital company and digitize these types of products.
Guido Jouret: Sure. If you start with, say, the electricity grid, today the grid is evolving. It's moving more towards renewable energy. That means wind farms and solar. Essentially, it also means much more decentralized power generation.
But, those renewable energy sources are also a lot more volatile, which means you need to coordinate supply and demand for power to keep things in balance. So, the grid needs to evolve and needs to have what I call a digital nervous system; the idea that you put sensors in all of these devices so that, as power is generated or power is demanded, you keep the supply and demand in check and in balance so that everyone can enjoy stable, clean, reliable power. That requires sensors, actuators, connectivity, and networking from power transformers to circuit breakers and all the stuff in between.
If we shift to the industrial side, which is behind the meter, which is inside of a plant or a factory, we have everything from electric motors and, more and more, of course, about a third of the power that's used on the grid today is going towards electric motors. Those are electric motors that could be in people's cars but, in fact, more likely to be inside of factories and plants. Those electric motors are all getting equipped with sensors and connected.
The drives, which are essentially components that regulate the speed of a motor, they're very intelligent. They can download additional software. They can do all kinds of things from sensing the load on the motor and then sending that information back, or robots where you have smart robots, which can be updated and reconfigured to take on new tasks; robots that work by themselves inside of a car factory or, increasingly, collaboratively with people.
Michael Krigsman: Is the point then, or one of the main points, putting sensors everywhere?
Guido Jouret: Well, yes and no. It starts with that. I think that's where a lot of people go with the Internet of Things because they think it's all about sensing. But, actually, what we like to describe that as is, we want to sense, we want to analyze, and then we want to act. We call that closing the loop. You sense with sensors. You analyze with smart software, typically enabled by AI and machine learning. Then you act, which is turning the digital signal back into a physical action. That's done through something called an actuator, so that's essentially either a robot or a drive or some piece of equipment.
When you close the loop, you can automate. A lot of what we do is automation, which is the idea that we close this sensing analysis and actuation loop to help factories become more productive and to help autonomous vehicles and ships run. All of those involve the closing of that loop.
Michael Krigsman: What does this end up doing for the customer? How does this change the customer's business? Also, what kind of changes does the customer need to go through in order to take advantage of these types of capabilities?
Guido Jouret: The first place we always start is with sensing. We can start doing what's called condition monitoring. We start by saying, instead of doing maintenance every year, every six months, whatever the time interval is, we can actually do maintenance when the machine requires it, and we can detect problems before they arise. We reduce downtime, so that's about extending asset life and reducing the unplanned downtime. That's the basics.
The next level above that is, if you can not only sense but also act, increasingly these devices are programmable, so we can change their behavior; we can change their performance. That means we can make them more energy efficient. We can make them perform faster. We can make a number of tradeoffs. That depends on the customer. What do they want to do? We could boost productivity that way.
We can also, increasingly, sell these devices in new ways. We can sell the robot as a service. Instead of buying a robot, you're buying the output of a robot, and we will sell that robot alongside its maintenance, alongside with the replacement of the robot when it reaches the end of its useful life, all of that for a regular monthly fee. This business model innovation is the final and third step enabled by this industrial Internet of Things.
Michael Krigsman: This industrial Internet of Things has forced a change through ABB, forces a change through your customers, and now is enabling getting things done in a better way but, at the same time, changing the economics because of the business model opportunities that have become available.
Guido Jouret: These technologies affect three major variables: uptime, speed, and yield. Uptime is less downtime: your factory, your plant, your environment. Your grid is more productive. Speed: You can get things produced much more quickly because they're more programmable. You can now have an assembly line that reconfigures itself. You can take software-defined machines and make them do new things like increasingly we're seeing with cars.
Thirdly, though, we can also improve the overall output. For example, visual inspection. If you're looking at making widgets on a manufacturing line, you'll have some defects. Today, that quality inspection is typically done by people. Tomorrow, increasingly, it'll be done by smart cameras that are enabled by machine learning software to look for those defects. They automatically then discard, tune, and optimize the machinery to minimize those defects. Those are the key three variables that most people are looking to optimize or improve thanks to digital technologies in the industrial Internet of Things.
Michael Krigsman: We have a question from Twitter from Wayne Anderson who asks, "Where is IoT, the Internet of Things, in the hype cycle and are we ready to start realizing normalized productivity yet?"
Guido Jouret: That's a great question, and I actually like to distinguish between two IoT markets. There's the consumer market, so we all have seen the advent of smart speakers and colorful lightbulbs and those things. In many ways, they're sort of a nice to have. They're sort of, okay, this is cute. I can change the color of the lights when I approach my home, and I can set it up for the mood that I want. But it's not a must-have. It's not one of those things you can't live without, at least for now.
In the industrial side, many of those things I'm describing, whether it's the changing of the grid because of renewables, whether it's the advent of automation, whether it's to be able to make things more flexible. Unfortunately, now, for example in geopolitics, we're seeing the advent of more trade tariffs, more barriers. We predict that that's going to lead to more of a push towards localized manufacturing, onshoring, bringing manufacturing back. That's going to require automation for those factories to be viable because they need to achieve levels of productivity that need to be very, very high.
I would distinguish between, on the consumer side, the Internet of Things, at least for now, seems to be largely sort of a solution in search of a problem. Therefore, I think the hype is still relatively high. But, on the industrial side, I think that there's no hype at all. In fact, arguably, many of these consumer technologies, whether it's augmented reality, whether it's blockchain technologies, whether it's machine learning are not fads. They're not hype. They are being put to use in industrial contexts right now.
Michael Krigsman: These types of technologies are very interesting. One of the reasons that it's interesting is because you're taking infrastructure and adapting it. Would it be accurate to say wrapping it in or leveraging these? When you talk about blockchain or machine learning, it's very different; the image is very different from factories with large, industrial motors, for example.
Guido Jouret: Correct. I think what you can see is that anything that can be connected will be connected. Whether it's the drives, the motors, the transformers, the circuit breakers, all of these devices, if they have behavior or aspects of their performance that can be tuned or optimized, then we're going to put software inside and we're going to connect them. That's already happening.
Now we have to figure out, how do we deliver new sources of value? Can I make a factory that can reconfigure itself with minimal human intervention? Why would I want to do that? Because I can make things in smaller batches and serve customers that I can't get to today.
If I've got a grid that becomes smart, that can adapt the loads on the grid, that can send signals back to smart buildings to tell them to consume less because right now I'm not able to generate as much power, then I don't have to bring onstream these old peaking plants, these polluting plants that generate a lot of emissions, so I can run a cleaner grid. All those things are possible today. I think they're not hype because they're not solutions in search of problems. We have these problems, and the technology is ripe to address them.
Michael Krigsman: Is technology the enabling force here? Maybe you can describe what are the enabling technologies. I know you've been discussing them. Just succinctly, what are the enabling technologies of the industrial Internet of Things?
Guido Jouret: The first one, I think, is clearly connectivity. Not only 5G, but clearly things like just regular wi-fi, ZigBee, Bluetooth. There's a whole raft of wireless technologies and, not only wireless; it could also be wired because, in an industrial plant, a lot of the equipment doesn't actually move around. Just connecting things, that's, I think, job one.
The second one is cheap compute. Thanks to the mobile phone revolution, we now have small supercomputers in our pockets, while those same processing capabilities are very useful inside some of our devices, whether they be robots or others.
We also have a strong interest, ideally, in machine learning as well because, for many things where we have predictive maintenance or we're looking to predict the future performance of something, we have physics-based models, which are based on the science, but sometimes we don't know what the model is, but we have a lot of data. So, we can use machine learning to train the algorithm on past data and try to use that to predict future performance.
The blockchain is another one, which is very interesting, typically because, in many of the best use cases for the industrial Internet, we're looking at getting benefit from an entire supply chain, so not just one plant, but something is made in a plant, then it goes on a truck, then it goes to a ship, and the ship delivers the container to the remote port. Orchestrating and keeping track of all that, a blockchain is an ideal mechanism to do that because multiple companies are involved.
Then augmented reality is another one, which in terms of the consumer hype cycle, maybe a little bit fading or waning, similar to 3D TV. But, augmented reality, in our sense, in our world, is extremely relevant because we have this challenge in the industrial world, in many industries, where we have a lot of aging of the workforce. A lot of people are aging out, and the new person coming in has to do the job of maybe 10 or 20 people. The only way we're going to teach them the necessary skills is by putting a pair of goggles on their head that guides them through a task. There might be a remote expert whispering in their ear or just an overlay of computer-aided graphics telling them what to do.
Michael Krigsman: Where are we in terms of adoption of these kinds of technologies among your customers?
Guido Jouret: Right now, I would say that depends on the type of technology. Connected devices, that train has left the station. Pretty much everyone is doing that today. The only question now, does that connectivity stop in my plant or my factory, in my enterprise, or does it go all the way to the public clouds or not? There, there's a bit of a debate. Some industries are fully embracing the cloud, some not, but I think that's happening and there's really no big debate there.
In terms of augmented reality, there is a lot of experimentation going on right now. Within ABB, we have over 45 projects where there is the use of augmented reality to deliver expert on demand, to cut the project design cycle times, all kinds of applications like I just described. I think that's rapidly maturing.
Blockchain, I think, is less further along. Typically, it gets a bit of a bad rap because people associate it with cryptocurrencies and bitcoin. We're not talking about that at all. We're interested in the blockchain part of it, not necessarily the coin part.
There, I would see some early signs. In particular, just if you look across one of the industries we serve in marine, there's a great example of a joint venture between one of our customers, Maersk Shipping, and also IBM. They've set up a joint venture. They've got over 90 companies participating in the blockchain initiative. I think that's starting to take hold, but it's earlier yet in the adoption.
Machine learning, that's being used everywhere. I think that's rapidly maturing and is under the covers inside of a lot of solutions we're delivering today.
Michael Krigsman: I want to ask you about how a company like ABB, given historically hold you are, adapts to innovate around these types of new technologies. But, we have another question from Twitter, and again from Wayne Anderson. Wayne, you're a font of excellent questions. He's asking, "How do you adjust to deal with privacy and security concerns?"
Guido Jouret: That's a great question. In the world of the consumer, we call it privacy. In the world of business, it's often expressed as a concern for intellectual property. I.e. I have my Coke formula. How do I make sure that if you're connecting your devices in my plant, you're not also learning my formula? I think that's a great question.
We decided to address that head on two years ago. We published something called our Data Manifesto where we realized there was a bit of a gap. While there was emerging legislation in the consumer space, things like GDPR and other things, the General Data Protection Regulation, there was a bit of a gap in the industrial side on how we have conversations around customer data. Where does that data go? What kind of data can we see as a supplier of equipment?
It's not a small or trivial concern at all. If you, for example, can monitor the equipment in a mine that is pulling diamonds out of the mine, in theory, by monitoring the speed at which you're pulling ore out of the mine, you could infer how many diamonds will get produced. That may give you insights as to what's going to happen to the price of those diamonds when they reach the market.
I think customers are right to ask these questions. We decided to frame that in a couple of ways. We said, "Look, there's identity data, sensor data, and then the insights from data. The first two clearly belong to you. The third, as a course of doing business, we will gather insights about your use of our equipment that we cannot choose to unlearn. That's just part of just making products. But, if you decide to stop being a customer, we will delete these first two types of data. They are yours. If we want to try and use your data, we will need to ask you for permission first and explain to you why we want to use that and what we want to do with that."
That was really inspired by two sources. We went to what the healthcare industry has done with the Healthcare Information Privacy Act, or HIPAA, and also the Passenger Bill of Rights in the airlines. Again, those two were the sources of inspiration for us, and we encoded that in our data manifesto, which is then also implemented in our online ability platform, which is how we develop our solutions.
Michael Krigsman: It sounds that while security is baked in, the notion of data privacy and intellectual property protection has been very carefully thought through because, obviously, it's an extremely nuanced set of issues.
Guido Jouret: It is, and I think it's almost impossible to be connected, to be digital in some form, and not automatically get closer to your customer, in fact, arguably, that is the purpose is to reduce the separation between a supplier and their customer. Therefore, just by virtue of selling devices that are increasingly connected, we will learn more about our customer's business. Arguably, for them, that is a good thing because we can do a better job of serving them. However, it does raise that interesting question around, how much will you learn and how much control do I have over what you've learned? We wanted to make that explicit.
Michael Krigsman: I want to remind everybody that we're speaking right now with Guido Jouret, who is the chief digital officer of ABB. It's an enormous industrial Internet of Things company with over 100,000 employees. Right now, there's a Tweet chat taking place using the hashtag #CXOTalk. You can ask Guido questions. It's a great opportunity. If you're interested in IoT, now is your time to ask.
Guido, tell us about how a company like ABB transforms itself.
Guido Jouret: Yeah, I think that's typically a reason why a company decides to hire a chief digital officer in the first place is to really raise the awareness and the strategic importance of digital technology because, as I pointed out, we've been working with software over 40 years. It's embedded software for the most part, but it's not like we didn't know about software, about digital technologies.
I think, primarily, what my role has been within ABB is to do three things. The first, to enable our business units to transform themselves by creating new growth businesses around these digital technologies. It's mixing it in. It's not about stopping what they're doing and doing something new. It's about accelerating the adoption of digital in their products and services. That's job one.
Job two has been to develop and deliver a common technology platform. We call this the ABB ability platform leveraging Microsoft Azure as the platform as a service. We extend Azure technologies with our own technologies, and that's a common software foundation that we developed, and we provide to all of our business units. Now, we're building on the same common technology foundation, so we can build new solutions much more quickly.
The third is to do what I'm doing right here, which is to evangelize, communicate, and act as the chief spokesperson for this digital transformation within ABB. I think the question behind your question, Michael, is quite often there's an element of culture and resistance to change; why should I embrace this? This is one of the more interesting aspects of the role, which has nothing to do with technology and is everything around winning hearts and minds.
Michael Krigsman: That's exactly right because a company established in 1883 obviously has been very successful, has gone through many different types of changes, but the change from the physical world to the data world is a massive one. How do you change the culture, win people over, get them to take the risks of changing business models and revenue streams, and innovate successfully?
Guido Jouret: Yeah. I think one of the things that companies like ABB, which have been around for over 100 years, have sort of in their DNA is the ability to sense and adapt to the changing markets because clearly there have been many technological revolutions in the past. The electrification transformation that happened as sort of the second industrial revolution, that gave birth to our company, the advent of electricity and its use in factories and plants. Then the digital revolution, which really started, I would say, in the '70s and early '80s, again, gave rise, for example, to our robot business unit and various others that have emerged since then.
Being close to technology has always helped us. We sense these technology trends, and we've been able to jump on them in time to make them successful growth businesses for us. Now, however, we do have a much, much broader range of digital technologies that are coming to the fore, so it's not just about microprocessors and software which, clearly, we've known about, but I think it's the rate of digital innovations across this wide swath of everything from AR, machine learning, blockchain, connectivity, all those things we just described, all of that happening at a frenetic pace.
That's why my organization was set up was to say, "Look, we need an organization that's really out there leading this charge for the company, bringing those innovations back, sharing them with the business units to say, like, 'How would you reinvent this part of your business by using these technologies?'" That's why there are digital people in my team, but there's also many, many more inside of our business units as well, as an extension of my team.
Michael Krigsman: Digital, then, is not a veneer, but you designed the talent to be spread throughout the organization.
Guido Jouret: Yes, clearly, because it's one of those things that if it's just cosmetic, if it's just the lick of paint on an old thing, it will not help. It won't lead us to really embrace and get the benefit of these digital technologies.
Our customers are asking for these technologies. They're on their own digital transformation, so the transformation I described for ABB is actually mirroring the transformation that many of our customers are also seeking to undertake.
I hear, for example, customers saying things like, "We're a manufacturer. We make these widgets. We want to make them faster. We want to make them cheaper. We want to be much more flexible in how we're able to get to, ideally, a lot size of one. We want to go to mass customization. We want to do that with the most productive workers we can get."
These are the comments we're getting. These are the requests we're getting from our customers. We're responding to that. That's why, as a manufacturer ourselves--in fact, we have over 290 factories--we're busy transforming and digitizing our own supply chain so that we can not only sell these products but also learn from our own internal deployment of these products.
Michael Krigsman: Where would you say, just overall among your customers, in general, or in the market more broadly, manufacturers are in terms of their adoption of these kinds of technologies?
Guido Jouret: It's a great question. We talk a little bit about this technology or digital adoption S-curve. We shared that with our investors in the fall of 2016, but just to give you a bit of a high-level sense of what it looks like. You've got the telecom computer companies, which embraced the digital revolution, I would say, probably in the '90s. But, many of our customers, many of our industries, manufacturing included, they're still in the knee of the S-curve. They're really just getting started.
Of course, when you think of manufacturing, a lot of people go to car companies. They think like, "Oh, but I've seen lots of robots on the factory floor." That is true in automotive, and 70% of all the robots ever sold are in that one industry. When people say the robots are coming, they haven't even shown up yet. They're still, in fact, in their infancy in terms of deployment.
If you take outside of automotive, the level of technology adoption in factories is really low. In particular, if you think about even high-tech manufacturing, their use of smart software to coordinate things, the use of robotics, just barely getting started. Then other industries such as oil and gas, mining, and food and beverage are even further down in terms of their digital adoption S-curve standing, so it's really early in many ways.
Michael Krigsman: We have some additional questions from Twitter, and so let's turn to that. I want to remind everybody, again, that we're speaking with Guido Jouret, who is the chief digital officer of the huge, industrial Internet of Things company, ABB. There is a tweet chat right now using the hashtag #CXOTalk. You can ask questions and you'll get answers.
Here's an interesting one. How do you manage the perception that you may be competing with your customers as your devices are part of their value chain, and then there is the issue of the data collection?
Guido Jouret: That's a great question. In fact, that's another aspect that we see quite often with digital technologies. With e-commerce, it's very clear that there's always a question around, are you bypassing your distributors because now your customers can buy direct, for example?
One of the ways we're addressing that is, we have specific digital initiatives that are designed for our channel. We have a lot of system integrators, engineering procurement contractors, and others who add value to the products we make, typically by configuring them for customers, installing them and, in some cases, operating them. We want to figure out how digital technologies can help sustain them as well.
One example of that is 30%, 40% of our products in the motors, drives, and robotics business are not sold directly to an end customer. They're sold into a system integrator that puts them inside of something else. I'll give an example. That electric motor might be integrated into a bigger machine called a compressor. You see them on construction sites all the time. They compress air. Fine.
What value can we provide with digital technologies to somebody who builds compressors because they might say, "Wait a minute. If your motor is now connected and that motor is sitting inside of my machine, are you now going to be directly connected to my customer?"
One of the examples of an initiative we've kicked off is to say, "Well, actually, we want to provide software tools to allow the makers of compressors to more quickly put software into their machine, and we will offer to host," white label, if you will, "a portal that will have that compressor company logo on the top right corner, and we're just providing them with a very rapid way to provide compressor monitoring, compressor optimization, or whatever else they want to build around it." Our motor is inside. It's powered by ABB software, but it has the name and the logo and, of course, retains the customer interface to the maker of that compressor, not directly to us. That's one way in which we add value to our channel but, at the same time, we don't take a backseat when it comes to digital technology. We don't let all of the digital conversations happen with our channel, also.
Michael Krigsman: There's a balance between where you assert yourself and where you take a backseat, as you said.
Guido Jouret: Correct.
Michael Krigsman: We have another great question again from Wayne Anderson. Wayne, you're on a roll today. You know I love -- one of the great things about doing CXOTalk live is the questions that come from the audience are so excellent.
Wayne makes the comment, "Not every company is tackling digital with a chief digital officer, with a CDO, and so what made the conditions at ABB ripe or appropriate to bring in a CDO into the role?"
Guido Jouret: It's a great question, and it's clear that companies use different approaches. In some cases, you already have a chief technology officer who is doing not only research and development but potentially also very much customer facing. Sometimes it's a CIO who is not only doing the back office systems but also can support the business with technology to enable the products to become more digital.
We have both at ABB; we have a CTO and a CIO. But, I would say, similar to many other large companies in our industry, we've chosen to embark upon having a dedicated chief digital office, and I would say there's a slight tongue and cheek answer to that question, Wayne, which is, when I was being interviewed for the role, our CEO said, "Are you a technology guy or a business guy?" I thought, "Okay, here's a trick question," so I gave the only answer I knew, which was, "Yes."
I think, actually, although it's slightly tongue and cheek, it really gets to the heart of what is a CDO, which is that intersection of technology and business acumen because it's not only about providing technology to the business units because, if that's all you needed, then ideally your CIO or CTO could probably do that. But, it's also about innovating in these new business models, and those new business model innovations are an integral part of the technology. They're enabled by the technology. They feed on the technology and vice versa.
I think, to get that ideal blend, and to have that be carried forward as an imperative that is strategic where somebody gets up out of bed every morning thinking it's my job to make this company more digital and no one else has a similar singular focus, I think there you really probably need a chief digital officer. We see a lot of companies starting to embrace that.
Michael Krigsman: When you talk about innovation, where does innovation of the chief digital officer lie? Technology would fall under the CTO or the product groups, I assume, so where do you fit into business, into innovation?
Guido Jouret: I think the best source of innovation comes from the interface with the customer. As I like to say, customers' frustrations or their aspirations are your biggest source of innovation. What are they trying to fix and what are they hoping to get to?
The best sign for innovation is to look for what I call evidence of tinkering. Find customers that are solving problems with unorthodox solutions, which is, they're trying to do things in ways that you might initially frown and go like, "What are they doing? Why are you trying to push that square peg in a round hole?"
That's the best sign that there is a problem worth solving. Then, once you know what that problem is, you can then work with the technologists, whether they're in your research organizations, whether they're with your partners because clearly, increasingly, technology companies are providing that innovation as well. Then figure out, is there a better way to solve that problem? If so, how would we do that, and can we work quickly with a customer to pilot that together? That, I think, is the best source of innovation is to listen to your customers, watch what they're doing, figure out if you can do it better, and then figure out how to apply technology to do that.
Michael Krigsman: I love that idea of looking for signs of tinkering because it means that you have to have a relationship with that customer and, let's say, an engaged relationship, which is not the same as just having a relationship with a customer.
Guido Jouret: That's correct. In fact, it also implied a high level of trust because, clearly, if they're putting something together and it's Band-Aid, barbwire, bubblegum, and duct taped together, they might be a bit hesitant to share that with people outside saying, "Look at how well we've solved this problem," because they're going to look at that and go, like, "My goodness. This looks like a Frankenstein."
But, you don't look at the elegance of the solution. You're saying, like, "Wow, this must be a real pain point for you that you put together this thing." What's even more compelling is the fact that you didn't obviously find something that met your needs because you had to cobble it together. That suggests to us that there's an unmet need in the market.
Michael Krigsman: We have another question from Twitter. You can see I'm very biased towards taking the questions from Twitter. This is another great one. It's from Andrew Morawski, who is the president and country chief executive of Vodafone North America. He was a guest last week, in fact, on CXOTalk. It was a great show. He asks, "Did ABB have a difficult time adjusting to having a chief digital officer sitting in between or at the table with the business and the technology groups?"
Guido Jouret: That's a really good question. I would say that by the time the decision was reached that the company needed a chief digital officer, there had already been an initial consensus, a decision reached to say, "Look. Here's why we need to create the position, and this is how it's going to work."
I would say that a lot of the operating model, i.e. how it works on a day-to-day basis working with the divisions, the business units, that was not set up or not established yet because the function or the role was new. So, one of the first things I did was I moved myself to Zurich and I spent four months living in Zurich so that I could be close to some of my colleagues there. I'm normally based in Silicon Valley, so I created part of my team here, but I also have part of my team in headquarters in Zurich, part of it also elsewhere.
I think that initial getting to know them, spending a lot of time with them and, once I did that, what a lot of them shared was, like, "Yeah, we could really use some help and how can your team help in terms of technology?" which I knew would be a fairly obvious answer, but actually there was a lot of requests, and there still are. In fact, there's a growing sense of requests to help innovate in shaping the business models as well as the new solutions.
It's starting to become more and more of a partnership where they're saying, "Look, clearly your team and you, you have expertise in these digital technologies. Get to know what we're doing and why don't we combine forces? Why don't we get people together from both sides? You can help us as full-fledged partners. That is the model that we're trying to move towards.
Michael Krigsman: It sounds like that's the goal and you're the process of getting there. It seems like that's a lifestyle change, and it never ends, I would assume.
Guido Jouret: Yes, but one of the key governance decisions we took was that my team is not a complete P&L, meaning I do not take solutions to market directly from my team. In some companies, the CDO and the CDO organization does do that. It's almost like a business unit in its own right. We chose not to do that.
I think the main reason why I really like that decision is there's no friction; there's no conflict of interest between myself and the business units. I'm not their enemy. The only interest I have is to help make them successful. If they use my services and my skillsets, that's all upside for them. The cost is already paid for. Not free because, clearly, we have to get paid and we do have a budget, but it's already paid for and I don't come between them and their customers.
Michael Krigsman: You're also very intimately involved with customers at the same time, it sounds like.
Guido Jouret: Yes, and very much so. In fact, ideally, that's because, as I mentioned earlier, that's the best source of innovation. Frankly, a lot of our customers are asking these questions. They're saying, "Hey, we're embarking on a digital transformation strategy. Tell us about yours. What's working? What's not? What should we think about?"
That's a natural door opener into bringing along either the chief digital officer or somebody from the team. A lot of our country managers, a lot of our division presidents, they do that, and I think that's great. Once the conversation goes deeper into solution development or potentially piloting or selling them a full-blown solution, clearly, that flows directly to the business units. I stand aside and let that happen, and I wish them all the best.
Michael Krigsman: It sounds like you're involved with strategy in partnership with your customers regarding their business and their digital trajectory.
Guido Jouret: Yes, very much so because, in fact, in many ways, it's not like, "Hey, tell us about this technology. Thank you very much. We'll go away now, and we're going to think about the strategy." The two are interwoven, so almost no conversation around digitalization is in a vacuum without the strategy component.
It's all about how are you going to use this technology to get closer to customers? Where will these new sources of value get created? How do you capture some of the value that you create for the customers? How do you best sell these products? Is it in the business as usual business models or do you need to set up new ones? Who are going to be your new partners in achieving these kinds of solutions? It opens up a whole slew of what are essentially strategic questions.
Michael Krigsman: Folks, we've had some superb questions today, and there are more coming. We're almost out of time, so there's a tweet chat going on right now. Use the hashtag #CXOTalk, and you can ask our guest, Guido Jouret, who is the chief digital officer of ABB, any questions.
Guido, we've been talking about customers. What advice do you have for customers, for large companies who are historically manufacturing businesses that want to become digital? How should they go about doing that?
Guido Jouret: I think the first thing to decide is who is on point to lead the digital transformation. I'm not suggesting that they have to automatically rush out and create a chief digital officer function or team, but it does help because the problem is, if this is urgent and it's becoming more and more of an issue, if it's just a hobby or an additional responsibility for someone else who is already very, very busy, you probably won't make that much progress. The first is, who is really responsible and accountable for making progress.
It is, however, a team sport, meaning you can appoint someone and tell them, "You're in charge," but then give them no authority to act and, therefore, you won't get very far. You clearly have to make that a mandate for all of your customer-facing business units and services groups. You have to say, "I want to see an increasing proportion of our revenues come from fast-growing, digitally enhanced solutions that we're developing." That is the mandate to the line functions.
Then I think you also have to pick your battles wisely. One of the challenges, especially with companies that are very proud of their technology is what Geoffrey Moore calls the question of core versus context. The question sometimes manifests itself in different ways. You can ask people the question like, "Hey, can we build this?" A lot of very proud engineers will say, "Yes, we can."
The better question is, "Should we build all of this? What should we partner for? What is really our core that really adds to the differentiation? And, how do we double down on that?" That is, I think, usually one of the first significant hurdles because a lot of proud companies with very good engineers, the engineers want to be able to tackle everything.
Partnering sounds a bit like you're giving up, like you're delegating or you're recognizing you're not going to be very good in doing that yourself, but it is an essential skill. In fact, we've chosen to partner with a number of technology companies to build out our own platform, for example. That's a significant, early decision point.
Then, how do you put a lot more focus on just the couple of things rather than peanut buttering, spreading them out across everything? It's very tempting to sort of sprinkle your digital pixy dust across a wide range of businesses, across a wide range of products and say, "You know what? Everybody, do more of that."
The challenge with that is that if you have something that really starts to take off, it'll probably get starved for resources, so you need to be able to double down. That's part of the journey. We can talk about this for a lot longer, but I want to make sure that I give you a bit of time back to maybe get to a couple of the last questions.
Michael Krigsman: Well, we're pretty much out of time, but let's take one more, and I'll ask you to answer it quickly. Again, it's from Wayne Anderson. Wayne, you're just on fire today. On this notion of advice, "What is one mistake that you have observed that you can share that would help executives who are undertaking these types of digital transformations just do better?"
Guido Jouret: Yeah, I would say that the number one mistake is waiting too long before engaging a potential customer. You've got an idea. You work on it. You go back to the labs, go back to the buildings, hunker down, do all this development thinking, like, "Okay. We're only going to show this when it's ripe and when it's ready."
I would say a lot of customers are very interested in being part of that development journey with you. I call that having a project versus having a product, and there are many customers who say, like, "No, I want to do this together. I know this stuff isn't completely baked, but I want to get to market quickly, enjoy this capability early, so let's work on this early enough and I'll help you shape it."
Michael Krigsman: Okay. Great advice. Unfortunately, we're out of time. It's been a very, very fast 45 minutes. Everybody, thanks for watching. We've been speaking with Guido Jouret, who is the chief digital officer of ABB.
Don't forget; subscribe on YouTube. Go to CXOTalk.com. We have lots and lots of great videos, and we have more fantastic guests and shows coming up. Have a great day, everybody. Bye-bye.
Published Date: Oct 12, 2018
Author: Michael Krigsman
Episode ID: 559