Digital transformation involves changes to an organization's business model, corporate culture, processes, and other people-focused activities. Although technology, platforms, and data can enable these changes, the focus remains on defining business goals and achieving outcomes. In this episode, we explore the relationship between technology and gaining the business outcomes associated with digital transformation.

Paul Daugherty is Accenture’s chief technology officer and leads the company’s Technology Innovation & Ecosystem group. He is also a member of Accenture’s Global Management Committee.

In addition to overseeing Accenture’s technology strategy, Mr. Daugherty has responsibility for driving innovation through R&D activities in Accenture’s Technology Labs; maximizing value from the fast-changing and dynamic technology ecosystem; and leveraging emerging technologies to bring the newest innovations to clients globally. He also leads the company’s highly skilled, certified technology architects, who apply new technologies and architectural foundations in building solutions for clients across industries. In addition, Mr. Daugherty is responsible for managing Accenture’s alliances, partnerships and senior-level relationships with leading and emerging technology companies, and runs Accenture’s CIO Council of more than 200 global CIOs.

Before being named chief technology officer in 2012, Mr. Daugherty was Accenture’s chief technology architect, leading more than 17,000 professionals globally who focused on advanced technology solutions. Previously, Mr. Daugherty founded Accenture’s cloud computing business, and led Accenture’s technology business globally for the Resources operating group. He also was instrumental in founding Accenture’s SaaS, big data and open source businesses, and played a key role in the company’s technology business during the major transitions to client/server computing and internet-based computing.

Mr. Daugherty serves as chairman of the board of Avanade, a joint venture of Accenture and Microsoft. He is also on the board of directors for Accenture Global Services Limited. He is a frequent speaker at conferences on industry and technology issues, and has published articles in a variety of publications. He serves on the board of trustees of the Computer History Museum and on the CIO Advisory Board for NPower, which provides IT services to non-profit organizations. Mr. Daugherty also helped found the Advisory Board of the Academy of Information Technology, a non-profit that works to increase IT career opportunities for urban youths.

Accenture DigitalThank you to Accenture Digital for presenting this episode.

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Video Transcript: Technology, Culture, and Digital Transformation with Paul Daugherty, Chief Technology Officer, Accenture

Michael Krigsman:

(00:02) Welcome to episode number 172 of CXOTalk. I am Michael Krigsman and today we are speaking with Paul Daugherty who is the Chief Technology Officer of Accenture. And I want to say thank you to Accenture for presenting this show. And I also want to give a special shout out to Livestream because they are our infrastructure supplier and they are fantastic. So we are going to be talking about the intersection of technology, culture, and digital transformation. Paul how are you today?

Paul Daugherty:

(00:47) I’m doing great. Thanks for having me on the show Michael.

Michael Krigsman

(00:49) Hey it’s so great for you to be here. Paul, tell us about Accenture and tell us about your role as Chief Technology Officer.

Paul Daugherty:         

(00:59) Yeah sure, you know the topics that you talk about mentioned tech culture and digital transformation, and those are just great topics for you know a lot of what we’re doing at Accenture so it’s a great lead in and a great set of topics for the day.

(01:14) So Accenture I assume most people know something about Accenture, but just to give you a real quick story. You know we’re a company of about $32 billion in annual revenue, approaching somewhere in the order of 290,000 people, moving towards 400,000 people. And our business is really about you know brining technology and innovation to businesses and to help businesses achieve their digital transformations by applying the range of services that we have. So that’s what we’re all about which is why I think this is such a great topic that you’ve teed up here Michael.

(01:47) My role at the company is part of our global management committee, working for our CEO Pierre Nanterme. You know asking Pierre what my objectives are it’s really to look at where we’re positioning Accenture and where we’re taking it a few years from now to make sure that what we’re doing, and the services we provide are as relevant and even more relevant with tomorrow’s technologies that they are what todays.

(02:14) So to accomplish that as CTO I’ve a range of responsibilities starting with our research and development our Accenture technology labs, and areas like our Strategic Minority Investment Program, where we invest in some of the smaller companies that we believe our future leaders.

(02:31) I’m also responsible for overall technology, alliances, and partnerships with all the companies that you would expect us to be partnering with, and the traditional leading industry leaders we work with as well as the new emerging companies.

(02:45) And also responsible for emerging technology businesses and the smaller  businesses that are incubating around new technologies, such as wearable technology, virtual technology and things like that, so that’s what I’m up to.

Michael Krigsman:

(03:01) So Paul, Accenture is a $31 billion company. You’re growing at 10% a year. you are a professional services company and yet technology is a core part of what you’re doing including advanced technology. So maybe tell us about that intersection.

Paul Daugherty:

(03:23) Yeah I mean the way I think about Accenture is Accenture really exists at the intersection of technology in business, and I think the DNA of our company is around as you know think of it as that double helix twisting together getting the technology and business impact, and bringing business relevant technology innovation to our clients. So that’s really what we’re all about.

(03:47) So technology really runs through our whole business. So if you look at the five businesses of Accenture, we start with Accenture Strategy and our focus on strategy it’s around the intersection of strategy in technology in businesses is what we focus on in strategy.

(04:06) We have a consulting business that’s very focused on management and technology, consulting and applying these sort of transformation into our businesses with an industry context.

(04:17) We have Accenture digital, which is all about the digital set of technologies that’s transforming business. Accenture Technology itself which is the delivery of the new technologies but also the technologies deployed to customers. And we have Accenture Operations, where we have the full stack of operations capability from infrastructure to business processing in our technologies again qualifying technology.

(04:38) So technology is the common thread that runs through our whole business. And at Accenture, being a leader in technology and being ahead in technology is what allows us to stay ahead and growing market share and growing our business as you described. 

Michael Krigsman

(04:51) Now digital transformation is of course an important part of what you’re engaged with clients, but at the same time Accenture is part of this digital transformation environment itself; you’re subject as to what’s going on in the world. So when you think about digital transformation as applied to your own company to Accenture, what are some of the implications and how do you think about that?

Paul Daugherty:

(05:22) Yeah that’s something that we think about a lot because we’re in the era of digital transformation that’s the defining change that’s happening in business right now and you see it in every industry in every part of the world.

(05:38) and we recognised this several years ago. In 2013 we came out with a technology vision that talked about the fact that every business is a digital business. And at that time I would be provocative. I’d got to a lot of clients saying, ‘Nah you know we’re not a digital business. We manufacture and we do whatever we do but it was provocative at the time.

(05:56)  But it became an accepted idea and we saw that coming and starting back then we started making some changes in our business so we created Accenture Digital that I talked about a minute ago. We created a different sort of strategy practice fusing together the digital strategy and the technology with it and made a number of changes in our business to position ourselves for the digital transformation. And that’s why if you look at our results, the public results that we talk about we recently talked about our business and talked about rotation and the new rotation to digital cloud and cyber and the new technologies. And we announced that 40% of our revenue, so 40% of our business is in that new set of technologies. And that part of the business is growing, you know well over 20% a year.

(06:46) And so if you look at that what you see happening is you know that fact that we’ve been early in making these transformations that are in businesses has allowed us to do well in the market, gained some market share, and bring the right relevant services to our clients as they are in this era of needing a lot of help to make sure we’re providing the services.

(07:04) And you know that’s what we’re all about and really this idea of digital transformation and continuing to drive the transformation of our own business in being the leader in driving transformation for our clients is really what we think about all the time.

Michael Krigsman:

(07:21) So your business has been changing through the adoption of enabling technologies as well as I’m assuming change to processes, changes to how you relate to your clients. Can you describe the intersection again as the technology as an enabler and the implications for the business and how Accenture people work and how you’re organized and so forth. 

Paul Daugherty:

(7:53) Yeah like you said, the technology is an enabler catalyst, and we are in this period of amazing technology change. You know, it’s a type of exponential change in growth, which is hard for a lot of us to even comprehend, and we are at the early stages of this. So for all the amazing innovations and gadgets, and big innovations that we see every day and every week, it’s the early days. And we’re over the next five and 10 years see an amazing array of new innovation and things that are going to transform the landscape for companies.

(08:26) But the challenge is, and one of the things we talked about in our vision is there is already too much innovation available for companies, and you have far more technology out there, and also they have the ability to digestion and deploy the technology. So we talk about this idea of a digital culture shock, where we see many companies stuck in saying stuck between their legacies, stuck with some cultural changes, and stuck with uncertainty around how to innovate.

(0:56) And that’s what we’re trying to address is how do we unlock this digital culture shock, and really help clients with the technology adoption capabilities that they can take advantage of innovation that’s there. And that’s where the broader set of services that Accenture has that come into play. So we have the strategy group that work with our clients on understanding digital in what’s happening. And if you are in the industrial equipment business, should you decide to become a two sided B2B platform and change your business model, move away from a product orientated business model to a platform-based services model. That’s big questions like that which will shape the future of the companies and shape the winners and the losers of the future, and that’s in strategy.

(09:36) Consulting is what is set around process transformation. There’s an opportunity in front of us now and in front of every company that we haven’t seen since the 90s to really reshape and re-engineer the way the company does business based on the availability of data, machine learning, and machine intelligence etc. wrapped into business processes.

(09:57) And the availability for us employing consulting people who understand different industries and business processes and that can lead that change, and come equipped with the datasets and tools, and the data science to do it is really what is part of that business.

(10:11) In our technology business employing solutions using agile, new techniques, dev ops and continuous integration, delivering in new ways that we call liquid IT. In addition to you know the traditional delivery that’s important for many types of problems that our clients have. And then operations, you know, operating businesses under continual basis for clients, and with digital services kind of wrapping around all of that, so that is a little bit more on how the business works and addressing your question.

Michael Krigsman

(10:39) Paul we have a question from Bilal Zaidi and I hope I’ve pronounced your name correctly and if I haven’t Bilal I apologize. And Bilal says, while many companies know that they need to change but they’re unsure of what to do. So can you offer advice on companies who recognize these changes but they’re just not sure what to do next.

Paul Daugherty:

(11:05) Yeah that’s a great question and a great point. And to prove to the answer and to back up Bilal’s point we did a survey last year with the World Economic Forum, along with some work that we were doing for the forum in digital transformation. And the survey came out with results that said 87%, which is roughly 9/10 executives believed that the digital technologies that were coming would disrupt their company within five years. So 9/10 were saying this was going to disrupt their company’s within five years, a striking you know high number.

(11:42) Only 7%, which is less than one in 10 said they had the road map and understood what to do, and that is just a striking dichotomy that we see of people understanding the nature of the change of disruption. But being uncertain about the road maps, I think that data lies at the heart of the question there.

(11:58) And I think we are in an era where a lot of companies are searching for the answers. I think one thing that certainly is not the right thing to do now is the old school way of looking at a long term strategy forecast and spending a year developing your five-year strategy. I mean those days are gone and what we believe the right approach is, is more of an agile approach to strategy as well and it doesn’t just apply to the system development. So understanding how to you know get a more nimble organization and culture in place, how to get more early experimentation in place, develop the kind of guidelines in what you need to do, and then fail fast using the Internet mantra.

(12:41) An old line that we use for years which still applies, and it applies even more. I think today is this idea of think big about the possibilities, and understand where you might take your business. Think about in my example earlier the B2B business platforms, and big ideas and start small to experiment and get the experience. And be ready to scale fast where you have the success. So think big, start small, scale fast is more relevant today than it ever has been.

Michael Krigsman:

(13:08) I spoke today, this morning with the CIO of a major bank in Europe and we were talking about this issue, and he made the comment that there’s no longer this issue of the appetite of these long multi-year transformation a let’s plan out a three year transformation project. But they’ve adopted as you were saying an agile approach now where everybody involved is a developer and it shifts IT from the mindset of defaulting to know to actually helping contribute to solve problems.

Paul Daugherty:

(13:47) Yeah I think that’s a great attitude to take and I think the CIOs who are leading this change I think are taking that type of view. I think it’s a tremendously challenging time to be a CIO or a technology leader in a company because things are changing so fast. And if you’re the CIO you’re responsible for keeping the business going, keeping the lights running, as well as developing new innovation for the business.

(14:13) And I think those CIOs that are taking on that kind of mindset and look at how do they become the coach to the rest of the organization in understanding the changes in technology, educating the business and being at the forefront of the change are the CIOs who are doing very well in this generation of technology change.

(14:31) I think the CIOs in organizations that are struggling are the ones that are a little bit more in support mode and a little bit stuck. And it’s not that one’s good and one’s bad, it’s just that in this environment, the business is going to move that fast, and the demand for speed is so great. As a CIO the technology I think you have to be in front and be part of the change, rather than you know, waiting for the change to hit you. So taking that kind of approach that you described with the CIO is it is a pattern that we see, and it’s something that I see with our CIO, Andrew Wilson, I know you have talked about and talk to on your show before.

(15:14) A great example of Andrew you know in our business taking a very proactive view in developing a vision, and developing the best digital workplace to support Accenture, and then figuring out how to get the rest of the organization there and that type of mindset I think is really important.

Michael Krigsman

(15:28) Paul on this subject sometimes one hears CIOs and IT in a sense suffering under digital transformation and the risk of IT becoming essentially a almost a commodity supplier of infrastructure services. And yet on the other side there’s this tremendous opportunity and set of possibilities for CIOs, innovative CIOs, digital CIOs, and so you were talking about this but can you elaborate on advice that you have for CIOs in order to take advantage of digital transformation and embody the qualities that you were just describing. What can they do, what should they do?

Paul Daugherty:

(16:13) Yeah it’s a number of things. I think the first thing is around getting on the front foot with it and the CIO actively participating in the dialog the business change and where the business is going and how the technology enables the business change. That varies a lot on companies. In some companies the CIO is in essence the Chief Digital Officer as well and he’s the one the organization goes to for that kind of technology insight. And many other organizations there might be a Chief Digital Officer or somebody else tasked with that kind of role.

(16:49) But regardless the nature of the organization and the degree of responsibility for technology and digital technology I think the CIO needs to make sure they have a seat at the table and are carving out that seat at the table to be part of the change and shaping what’s happening, so that’s the first part of it.

(17:08) The second part of it is what you hinted at with your earlier question with the CIO that you talked to which is making sure as a CIO you’re adapting, you’re developing different speeds in the organization. People talk about two speed It or multi-speed IT or whatever it might be, and I’m not a big fan of just the two speed concept.

(17:26) I think this idea of having a very fast, nimble capability in IT to move at the pace of business is really critical, so that IT can be seen as the enabler and the change agent in that think big, start small kind of program, in addition to scaling fast which is what IT has always been good about. So I think that developing that different kind of approach and mindset and different skillset around new technologies are important.

(17:52) And that then leaves culture and talent issue for a lot of IT organizations, is that if you look at what you have got in the organization across your in-house organization, and the partners that you work with. Do you have the talent in terms of the insight in the strategic thinking, the skills and the right technologies and the knowledges of the cloud architecture and data architecture etc., to take the organisation where you need to. And most organizations are recognizing that they need to go through a talent change as well as the culture change to make sure that IT is operating in this new mindset.

(18:27) And the fourth thing I would highlight is the need to really think about new architecture, because the new world needs to look a lot different than today’s world. So thinking about how you evolve the current architecture. Nobody has got a clean slate and green field, but how do you take the current architecture that you have, and add the APIs and the new approaches to increase and improve the access to the likes of technology. To improve the access to all of your technology to other stakeholders, and think about the right way to embed agile architecture and new types of techniques into the technology that you’re deploying. So those are just some of the things I would highlight Michael.

Michael Krigsman:

(19:03) We’re talking with Paul Daugherty, who is the Chief Technology Officer of Accenture, and if you have questions for Paul right now there’s a Tweet chat going on using hashtag cxotalk, so Tweet your questions in and we’ll see whether we can get Paul Daugherty to answer them. Paul, you were just talking about culture and it seems this is a very important piece, and yet you’re the Chief Technology Officer, and so historically we spoke about technology and there was no discussion of culture. Why is culture so important in this mix today?

Paul Daugherty:

(19:43) I’m just going to tweet myself a question, but that’s a good one. It’s important because most organizations, Accenture included need to shift their culture a bit because of the pace of change that’s coming from a technology perspective.

(20:05) As I said earlier with strategy. The days of top down, multi-year strategy are gone in the same way you know, the era of very ridged fixed organization structures are gone and people need to work differently. The pace of change in innovation is always going to increase, so a leader at the center of the corporation, the leaderships ability to drive the change in the organization just isn’t going to work. Many companies aren’t going to be able to win if that’s what they’re trying to do.

(20:33) So understanding how the culture of the company changes to become more innovative and more adaptive as it goes is really essential. That is something that we are really focused on at Accenture were talking a lot in our company is an innovation led culture. You know, again our purpose is we’ve defined it is to be the leader in bringing innovation into business. And to do that what we need is an innovative culture, and innovative people at every point in our organization and we’re focused on that. And I think that’s not just our company. That’s true of many companies and I would argue that most companies in the digital era, because the pace of change is going to be so extreme you need an organization that can adapt quickly. And that can except change as a new normal rather than something you just do once in a while, and embraces and recognizes innovation and understands how to bring that into the business.

(21:24) There is a line that I love and I’ve read a number of times over the years that says, ‘Culture eats strategy for breakfast’, and I believe that’s really true. In an era where strategy is extremely important and people need to point their companies in a new direction. But the thing that is really going to get you to that strategy is having that culture that is aligned, where the people’s purpose fits your organisation purpose, and you’re moving the same direction.

Michael Krigsman

(21:50) Okay, so we’ve spoken about technology, we’ve spoken about culture and change. now will you layer on top of the the role of business model change and business models in digital transformation.

Paul Daugherty:

(22:08) Yeah you know this is something that’s evolving very rapidly, but I think the reality is the business models are changing very rapidly in lots of different ways. So I talked to you earlier about platforms and the idea of platforms, and we believe the move towards digital platforms is really a profound shift in the way that business will work in many industries, and we’ve seen that happen already.

(22:36) So the platforms started with you know, Amazon with e-commerce platform, iTunes with the music platform etc. But if you look at the analyst forecasts and if we look at what is happening in the industry we expect dozens if not hundreds of different industries platforms to develop. So that’s things like GEs Predix platform that they are using with their technology, but it’s the businesses and the new way they are approaching healthcare around those businesses which we had an announcement yesterday in something we are doing together in healthcare.

(23:09) If you look at what Phillips is doing with HealthSuite, they have platform for connecting patient, providers, and physicians. If you look at many other cases like that you see the emergence of platforms which are changing the business models. For GE back to them as an example, you can listen to Jeff Immelt and Bill Ruh, you know the GE digital leadership that’s about changing from product to a services model where the services are able to deliver to a platform. And what’s important about the platform is that it allows you to deliver services from an ecosystem of partners to deliver greater value to your customers. And that kind of change is what’s really going define the future of many industries where you see that happening already and lodging Airbnb and things like that moving many many industries.

(23:57) So platforms are a key part of the change. I think the other thing that will affect change with business models is some of the changes that technology brings into the way that you think about your own business. You know, and some of this gets into stretching the boundaries on your thinking, but if you look at what’s going to happen to the insurance business as you have more autonomous vehicles. As an example the CEO of Volvo came out recently and said when they introduce their self-driving cars in several years, there autonomous vehicles they’re going to self-ensure as a way to get their purchases, and passengers for the self-driving cars more comfortable. So what happens to the insurance in that type of world?

(24:37) There is many many other impacts where you know, the boundaries between the industries blur and shift a little and causes you to rethink where your focus is. And how you need to compete and we see that happening in many many cases.

Michael Krigsman

(24:50) We have an interesting question from Steve Massi on Twitter, and Steve is saying innovation and culture without the right type of underlying vision can lead to chaos. And so how can companies ensure that as these changes are taking place that they’re focused, that they’re coordinated, that they’re going in the right direction.

Paul Daugherty:

(25:16) I completely agree and you can’t have undirected innovation and you know very distributed culture can lead to you know it’s like an explosion with a lot of collateral damage and a lot of chaos as Steve says.

(25:32) So I think that’s a good point and that’s why all this starts with a vision. You know a company needs to have a sense of where it’s going. I’ve told you what our vision is which is different from what it was several years ago, but it is the vision that we have and it’s been successful in the market as we see it evolving. So I think it starts with that clear vision as the organization can get aligned. But then the change to the organisation, the culture, and creating more of an innovation it’s going to be very important for most companies in dealing with that new vision that they’re setting. So it’s a good question and absolutely right, you need the driving vision to align things but then you need more flexible mechanisms to help develop it.

Michael Krigsman

(26:19) So you mentioned innovation and you’ve spoken about innovation as one of the important pillars at Accenture, so how do you innovate, and also what is your relationship to startups and to smaller organizations who may be developing interesting new technologies.

Paul Daugherty:

(26:38) That’s a very rich question there and so I will give you a few perspectives and not make it too long. You know the way I think about it, so if you think about our business. As I said earlier 30 billion in revenue, and we are approaching 400,000 people and 40% of our business is in digital technology. So those sound like interesting numbers, but if you look at the other side of that what does that mean every year. That means every year we have to add 3 billion of revenue, profitable revenue. We don’t have the luxury of what some start-ups that can generate growth on profit.

(27:15) So in essence we have to add 100,000 people every year and that is what we hire every year with new skills that generate profitable growth equivalent to 3 unicorns of revenue. In technology generally that didn’t exist four or five years ago, that’s defined by the rotation to the news. So it’s the need for innovation in our business and create a few unicorns a year, and as it all in a profitable way to our business and simply transition and continue to grow our workforce.

(27:41) So that’s the way we see the business, and to make that happen. We need to have a lot of innovation mechanisms in our business. And it’s also changing our view, and I would argue, 10 years ago it was fine to be a fast follower in technology, because the cycles moved slower. If you are a little late at client server technology or the gold ERP wave you can still catch up a few years late and still catch the meet of the curve. You know the meet of the transition.

(28:09) The technology moves so fast today that if you are not at the forefront with the important technologies you’ll miss the key part of the positioning and growth, and in our industry you certainly will. As an example block chain, two years ago wouldn’t have been singled out by many people as an important technology for us to focus on. In just two years it’s been important for us to have a block chain practice. We’ve invested in a couple of block chain startups, so we work with them more closely to drive the change. And we’ve got block chain R&D going on and we have got block chain work going on with clients across different industry groups. Not just in financial services, but in many different areas of financial services. That’s just in a couple of years, and that’s the type of speed in which the technology is moving. And it’s moving that fast; artificial intelligence with many many other technologies.

(28:58) So back to your question, how do we make that work. So we have something we call our innovation path, which is how we make innovation work. It starts with research. We have Accenture research which generates thought leadership and provocative points of view on such on trends, the game changing trends like our technology vision. That’s Accenture Research.

(29:18) Then we have Accenture Labs, which is a major R&D investment in seven labs that we have around the world with researchers and Ph.D.’s, who are driving hands-on applied research with those trends in those technologies. We have the hands-on experience to drive those as they take off.

(29:33) And then we have Accenture Ventures, which is where we invest and we reach out and work with start-ups, VCs and entrepreneurs to build that innovation through an open innovation approach that we run. Then we take investments in companies where we believe we can create a kind of a special relationship and create a good way to grow their business and our business, you know, together going forward.

(29:56) And then we have something we call Accenture Studios, which is where we bring our clients to ideate and co-innovate together in an environment that combines everything from designs thinking, to experiential hands-on technology, to new development techniques like extreme programming and agile development as such that you can quickly ideate and build solutions. Then that skill gets into our global delivery network and all of the businesses of Accenture. So we are investing increasingly in that, and if you look at our business we’re again 30 billion in revenue, and we invest about 3 billion a year in improving our capability, about 10% of our revenue. It’s about a billion in internal investment and about a billion in acquisitions and about a billion in people in training. And that for a company of our size in our industry that is a lot of investment to make, but we believe that’s what’s required to keep moving the organisation at pace.

(30:52) And I can come back around to this, but to round out one point that I mentioned acquisitions. We have acquired over 40 companies in the last 36 months, and bringing in that new capability to accelerate this kind of rotation is a key part of the strategy as well.

Michael Krigsman

(31:05) From an innovation standpoint one thing that I find that is quite interesting at Accenture, recently I spoke with Mary Hambleton who works at Accenture Labs and she was talking about things such as virtual reality, augmented reality, 3-D printing, workforce crowdsourcing, a whole bunch of new technologies and new ideas. But as she was talking about it wasn’t just abstract, pie-in-the-sky. It was always connected to very specific use cases with enterprise ROI. So when you’re thinking about innovation and the connection to RIO use cases maybe talk a little bit about that.

Paul Daugherty:

(31:53) Yeah, that’s fantastic and that’s what gets us really excited. Yo can get anybody excited at Accenture when you talk about the accommodation of innovation and business value. That’s exactly the way which we look at it. Even start on that innovation path, even starting at the research stage we’re looking at what’s the potential.

(32:08) So when we started working with drones a number of years ago, it was what was the applications, and we started working with oil and gas companies around pipelines inspections using drones. We just deployed an application using drones for a very very large agricultural producer in Asia to use drones to dramatically improve their agricultural productivity etc.

(32:31) So we’re looking for those combinations of the technology and the use case, with virtual reality as a great example. One of the really exciting things that we did their last year was work with a manufacturer to apply, augmented reality in the manufacturing setting. So an assembly worker using augmented reality, with laser guided precision and the machine intelligence and the machine learning built into the software could operate at a far more skilled level using augmented technology and make that person a better worker, a safer worker, a more productive worker and better quality products. A win win win for the worker, you know and for the company.

(33:10) And those kind of scenarios get as excited and you know it goes across many domains. We do a lot of work now in artificial intelligence, which we believe is going to be you know define the next big wave of innovation around digital and what’s happening. And artificial intelligence, we believe is going to have a massive impact, and it’s one of the biggest impacts that we’ve seen and how we work among all the technologies today.

(33:36) And that’s why we’re working with technologies like IPsoft at Amelia that we announced a relationship earlier this week, and we announced the creation of Amelia practice to take the deep learning, you know cognitive learning agent Amelia and apply it into the business scenarios. So one of the things we did this week at the Sapphire conference, I think you might have been Michael is we demoed Amelia using SAP and learning how to use SAP to perform business processes and transactions in a very compelling way. Thereby the off loader augments work that people were doing, so that’s an example of a time directed value there. So we’re obsessed with this idea of looking at the technology and then saying okay, how can we generate some procurement with that technology.

Michael Krigsman

(34:25) So obviously you’re not focused on pure R&D. your focus is on the application of new technologies to business in order to provide some specific measurable concrete value to that business.

Paul Daugherty:

(34:41) I’d say that’s true, but one of the directions we’re pushing is we’re pushing and stretching out at the boundaries of our R&D a little further, and the line is blurring between you know pure research and applied research. The example I gave you, is we are doing work in quantum computing right now. We are not doing quantum computing hardware, but we are very interested in quantum computing software. And we submitted our first ever quantum computing problems to be solved recently, and why would we do that. If we looked at that a few years ago we would say why would Accenture be doing that.

(35:15) The reason is that we believe that there is a high probability that there’s a narrow range of problems that will be solved in a very compelling way in a very short term using quantum computing, and thereby we want to be a leader in bringing that technology to our clients. So we need to get a little earlier on the innovation and research then we normally would.

(35:35) So your point is generally true, although with the pace of which technology is moving every technology coming into this is quicker. And we need to push a little bit more into research, and the phrase I use is the latency between innovation and market impact is shrinking like it’s never shrunk before. And that means that if you don’t have the ability to sense and pick up on these early stages of innovations. As I said earlier, you will be a fast follower isn’t good enough in many cases and you may miss the opportunity.

Michael Krigsman

(36:04) So what what does this mean for managers of established companies, and sometimes we hear the phrase ‘legacy companies’ it’s not a very nice phrase. What does this mean for established businesses who are running an existing business and have an existing model, and yet it’s not enough to be a fast follower. What are the implications for them?

Paul Daugherty:

(36:30) Yeah, that’s something we spend a lot of time on and it’s a hard question, it’s a really tough question because people have got a business to run and if you are a public company quarterly earnings, and you need to move the business along as you invent the new business. So there are a lot of pressures along the way.

(36:49) I was with the top leadership of a fortune 100 company this week talking about this very issue and the kind of dialogue we had is and the way we need to think about it which is what are the assets that you have. I mean every company has got great assets, and I wouldn’t call them legacy companies you know they are the incumbent leading companies of today. And the question is what assets are going to hold you back and may become the anchor, and what assets are going to be assets that you leverage into the new world.

(37:18) And we look at our technology vision and the things that we talk about that are important in digital world. We talk about things like these platform economies which involve building these complex ecosystems. If you look at the idea of digital trust which is the trust that you have with your customers. If you look at this idea of intelligent automation and really understanding deeply understanding how business processes and people work, and how information flows.

(37:42) A lot of the incumbent companies are very good at a lot of those things in addition to having scale, supply chains, value chains, customer relationships etc. and I think the art of it is, how do you take the right assets that you have and look at how to repurposed those for the digital context moving forward and creating that future. And not do it too fast, if you do that too fast, you kill the old business and lose the ability to invest in the new. If you do it too slow you get overtaken. So I think that issue of balance and pace is right. And don’t necessarily look at changing the whole business, it’s what are the key things that you need to get right to be successful in transitioning the business.

Michael Krigsman

(38:21) We hear a lot about startups like Uber and Airbnb, although I wonder if at some point when a startup is valued at so many billions of dollars is it no longer a startup and it’s a global company.

Paul Daugherty:

(38:35) When you’re valued at 80 billion then…

Michael Krigsman

(38:40) So we hear that these companies that are the ones to emulate, but for established companies as you said with scale, as with very successful products with supply chains and so forth, you can’t just magically just turn a switch and become an Uber.

Paul Daugherty:

(38:58) No you can’t and I think the open estate that companies make is trying to be an Uber. I’m a big believer in Sun Tzu Art of War, which is don’t take your enemy on the frontline, figure it out how you attack from a different angle and do something different. And I think too many discussions where we get called in by the senior leadership in the organizations and say tell me how I can be the next Amazon or whatever or the next Uber or the next Airbnb or the next Google and the problem is the questions wrong. You might want to emulate their success. You might want to emulate their speed. You might want to emulate their culture. But what’s the right strategy for your organisation that will be successful in an environment where you have companies like that and more unicorns coming all the time that will help be moresuccessful and looked at it in that way.

(39:48) So again, it comes back to is that you need the attributes of these leading digital companies, and I think every organisation does need to develop those attributes, because that will be a pre-requisite to success. But it’s not emulating their strategy. It’s coming up with a strategy that fits the market position and the assets that the other companies are bringing to the table.

Michael Krigsman

(40:11) So having a clear sense of what their own strength, their own assets are but that also implies they have a clear sense of their own trajectory, and isn’t that the hard part going into the future knowing what to do.

Paul Daugherty:

(40:26) Yeah I think it’s no easy cook book to be able to answer it, but you also have to look at what’s going to be good and differentiating value and going forward, and what’s going to go away and not be differentiating you know if you believe block chain is going to be an architecture which you know kind of transforms the way a lot of transactions work and eliminates intermediary organizations in a lot of cases which I believe it will. Then if you depend on a party of business on that make sure the business model that you either embrace it and become a leader and deploying the block chain to enable architecture, or you move away from that and identify a different way to provide value in the marketplace. So I think it’s all about looking at you know what you can’t do or don’t want to do and what’s threatened and what you can do and navigate the course as best as you can and again revisiting it continuously because the environments changing fast.

Michael Krigsman

(41:24)Paul we only have a few minutes left, but we haven’t spoken much about changes in talent and workforce capabilities and what are the implications on workforce when digital transformation starts to take hold inside a company.

Paul Daugherty:

(41:44) Yeah, that’s a massive topic and I think it’s really interesting and it’s something we think about a lot in the number of employees we have. We really believe and convinced that this liquid workforce is the right way to build a workforce in the future. And the liquid workforce looks much different than today’s workforce in many ways.

(42:06) You know one of the things we did recently that attracted a lot of attention was our CEO and our Chief Human Resource Officer Ellen Schuck announced the elimination of the annual performance reviews in the traditional fashion and moved to something called performance achievement because we believe that people need to be coached and managed to be successful in a very different way in a digital economy than they were in the industrial economy. And sort of moving away from the old way in doing things to a new way of doing things that I think is critical, so that’s one example.

(42:33) I think the constitution of the workforce is different. The surveys would tell you that in the US up to 50% of the workforce will be contingently contract labor within a few years. What that means is that the expertise you want may not work for your employees and they may not work for you as employees. So understanding how to use models like crowdsourcing or crowd talent models may be critical to you. I would argue for most companies there going to be something you do where you’re going to need that different crowd, you know capability going forward.

(43:06) For us we look at that in many ways. We look at processes like testing; you know the testing business where you test big systems for clients. That’s going to be automated, that’s going to be crowdsourced. That’s going to look very differently in a very short period of time, which is why we’re doing a lot of work around crowdsourced innovation and how we leveraged that and built that within our business.  So there’s different ways of managing employees. Different mechanisms like to take advantage like how do you get skills to take it to marketplace like cloud and crowd models are critical

(43:34) The other thing I think is key with the millennial and Gen-Z populations that are coming in develop very rapidly is providing a digital workplace allows them to excel. What I hear time and time again from employees at a lot of companies is that the employees come in and they’re frustrated that their technology at work is so awful compared to the technology they use in their personal lives.

(43:57) And we need to close that gap as technology leaders to make sure that people have the best technology to enable. And for the digital generation coming into the workplace we are allowing them to be as effective as possible. And those organizations that have their infrastructure of the digital workplace has to happen or I can’t imagine in going forward.

Michael Krigsman:

(44:18) Well I’ve just been informed that CXOTalk is trending number 46 in the US. So thank you to everybody for watching and we have just a minute or two left. So Paul Daugherty you’re the CTO of Accenture, one of the largest professional services companies in the world, one of the largest companies in the world. When you think about digital transformation, what advice, what is the distilled essence of your advice that you can boil down to offer people who are listening, who are facing this very difficult challenging transition environment.

Paul Daugherty:

(45:02) That’s three things I boil it down to and the first is learn. If you’re not learning everyday you’re going to find yourself in a tough spot. So individual that as leaders we need to learn every day. I wake up every morning and the first thing I look at is what happened last night, what happened overnight, what new tech innovations and new announcements that is happening because it’s moving that fast and we need to figure out how to continually reinvent ourselves so learning is the first thing.

(45:32) Second thing is you know imagination; we’ve got to think differently. Just because something didn’t work yesterday doesn’t mean it won’t work tomorrow because we’ll have new ways of doing things. Imagination becomes more important as an attribute to individuals in organizations.

(45:49) And the third thing I would say is a phase I’ve been using I heard a little while ago I like is ‘Hack the future’. If we could all hack the future and bring the future to the present in very different ways, the technology is very accessible; you can go out there and be hands on. Anybody can go out there and be an amazon (unclear 46:06) or innovate using technology and understanding how do you hack the future and bring the future to the present is within our grasp and it’s something we all need to think about.

Michael Krigsman:

(46:19) Okay, well thank you so much, we have been talking with Paul Daugherty, who is the Chief Technology Officer of Accenture and you have been watching episode number 172 of CXOTalk. Paul Daugherty thank you so much for taking the time today.

Paul Daugherty:

(46:37) It was a pleasure, thanks Michael.

Michael Krigsman:

(46:38) And everybody next week is Memorial Day in the US so we won’t be here, but we’ll be back the following week and please join us again and thanks so much, bye bye everybody.

 

Companies mentioned on today’s show:

Accenture                                www.accenture.com

Airbnb                                     www.airbnb.com

Amazon                                   www.amazon.com

CXOTalk Twitter chat              https://twitter.com/hashtag/CXOTalk

GE                                            www.ge.com

IPsoft/ Amelia                         www.ipsoft.com/amelia/

iTunes                                      www.itunes.com

Livestream                              www.livestream.com

Twitter                                    www.twitter.com

Uber                                        www.uber.com

 

Paul Daugherty:

Twitter                        https://twitter.com/pauldaugh

LinkedIn                       https://www.linkedin.com/in/paul-daugherty-22101414