2015

2015

Application Performance Management and Digital Transformation with Lew Cirne. CEO, New Relic

Lew Cirne. CEO and Founder, New Relic
Lew Cirne
CEO and Founder
New Relic

Software has grown more important to organizations in every industry. As companies rely more heavily on software to support their core operations and mission, performance and user experience play an increasingly large role.

Our guest on this episode is Lewis Cirne, Founder and CEO of New Relic, which develops a cloud-based platform to manage application performance. Lew has served as Chief Executive Officer since February 2008 and as a member of New Relic's Board since February 2008. From 1998 to 2001, Mr. Cirne was Founder and Chief Executive Officer, and from 2001 to 2006, he was Chief Technology Officer, of Wily Technology, Inc. Prior to Wily Technology, Inc., Mr. Cirne held engineering positions at Apple Inc. and Hummingbird Ltd. Mr. Cirne holds an A.B. in Computer Science from Dartmouth College.

Transcript

Michael Krigsman:

(00:01) Welcome to episode number 148 of CXOTalk. I’m Michael Krigsman and today I have the distinct pleasure and honor of speaking with Lew Cirne, who is the founder and the CEO of application performance management software company New Relic. Lew how are you?

Lew Cirne:

(00:27) I’m very well and happy holidays to you and thank you for having me on the program.

Michael Krigsman:

(00:32) Well it’s just great that you can join us today and you know let’s start by give us very briefly a sense of your background. How did you come to found the company?

Lew Cirne:

(00:49) Well you know my background as it relates to the company and my professional life really has to go all the way back to when I was 12 years old right around this time of year in 1982 when I got my first computer. In fact it’s sitting right over- just right next to me in my office. It was a VIC-20 and that Christmas I discovered that you know I had found the joy in my life or a primary joy in my life which is software and building you know this incredible capability great new things in software. So I’ve been doing that now ever since then, and really that joy of what can be done in software to have an impact in the world drives a lot of what we do at New Relic, because our mission is to help make software great. I think there’s an art to great software, but there’s also a science to it.

(01:40) New Relic provides the science, science is all about measuring things and then taking those measurements to make better decisions. We measure an enormous number of software applications at very deep levels for about 12,000 customers today and we do it in real time basis through our software Linux cloud. So that’s a little bit about how we got here and why it matters to us at New Relic.

Michael Krigsman:

(02:03) Okay and speaking of great software it is not broadcasting, so bear with me a moment. I use Google Hangouts and are we broadcasting folks, somebody answer me on Twitter.

(02:40) So apparently we are broadcasting there was a delayed reaction. You know, speaking of great software, when you use free services like Google Hangout you’re kind of at their mercy, but you were saying you founded the company and you have about 12,000 customers.

Lew Cirne:

(03:02) Yes, so and what we do for our customers is we measure everything that’s going on in their software, what the end-user is doing in that software to address three interrelated and important questions. And the first is we measure and help our customers understand how healthy is the application; is it running, is it fast, is it available, is it predictable.

(03:27) The second question is what is the customer experience. What is the end-user experience? Is it a good experience, is it improving, how many people are using your software, and how does that compare with historical trends.

(03:41) And then the third level of all of this is the business outcome. You know the whole reason why companies build software projects is to achieve some business outcome, and so tying the visibility of the business outcome, if you’re e-commerce that might be how much you’re selling right now, or if you’re a SaaS company it might be how many people are using your SaaS product.

(04:00) Tying that data all the way down to the customer experience and the application health, tying that altogether is super important and we’re the only company that does it and we do it with a cloud platform.

Michael Krigsman:

(04:11) So that’s quite interesting this notion of both the user experience and the business outcomes, you’re a very technical company so explain the linkage between what you’re doing and the user experience and the business outcomes.

Lew Cirne:

(04:27) Well think about it this way, in 2015 software is becoming a de facto way in which a company connects with its customer. You know in the past, you know people might interact with

Michael Krigsman:

(00:01) Welcome to episode number 148 of CXOTalk. I’m Michael Krigsman and today I have the distinct pleasure and honor of speaking with Lew Cirne, who is the founder and the CEO of application performance management software company New Relic. Lew how are you?

Lew Cirne:

(00:27) I’m very well and happy holidays to you and thank you for having me on the program.

Michael Krigsman:

(00:32) Well it’s just great that you can join us today and you know let’s start by give us very briefly a sense of your background. How did you come to found the company?

Lew Cirne:

(00:49) Well you know my background as it relates to the company and my professional life really has to go all the way back to when I was 12 years old right around this time of year in 1982 when I got my first computer. In fact it’s sitting right over- just right next to me in my office. It was a VIC-20 and that Christmas I discovered that you know I had found the joy in my life or a primary joy in my life which is software and building you know this incredible capability great new things in software. So I’ve been doing that now ever since then, and really that joy of what can be done in software to have an impact in the world drives a lot of what we do at New Relic, because our mission is to help make software great. I think there’s an art to great software, but there’s also a science to it.

(01:40) New Relic provides the science, science is all about measuring things and then taking those measurements to make better decisions. We measure an enormous number of software applications at very deep levels for about 12,000 customers today and we do it in real time basis through our software Linux cloud. So that’s a little bit about how we got here and why it matters to us at New Relic.

Michael Krigsman:

(02:03) Okay and speaking of great software it is not broadcasting, so bear with me a moment. I use Google Hangouts and are we broadcasting folks, somebody answer me on Twitter.

(02:40) So apparently we are broadcasting there was a delayed reaction. You know, speaking of great software, when you use free services like Google Hangout you’re kind of at their mercy, but you were saying you founded the company and you have about 12,000 customers.

Lew Cirne:

(03:02) Yes, so and what we do for our customers is we measure everything that’s going on in their software, what the end-user is doing in that software to address three interrelated and important questions. And the first is we measure and help our customers understand how healthy is the application; is it running, is it fast, is it available, is it predictable.

(03:27) The second question is what is the customer experience. What is the end-user experience? Is it a good experience, is it improving, how many people are using your software, and how does that compare with historical trends.

(03:41) And then the third level of all of this is the business outcome. You know the whole reason why companies build software projects is to achieve some business outcome, and so tying the visibility of the business outcome, if you’re e-commerce that might be how much you’re selling right now, or if you’re a SaaS company it might be how many people are using your SaaS product.

(04:00) Tying that data all the way down to the customer experience and the application health, tying that altogether is super important and we’re the only company that does it and we do it with a cloud platform.

Michael Krigsman:

(04:11) So that’s quite interesting this notion of both the user experience and the business outcomes, you’re a very technical company so explain the linkage between what you’re doing and the user experience and the business outcomes.

Lew Cirne:

(04:27) Well think about it this way, in 2015 software is becoming a de facto way in which a company connects with its customer. You know in the past, you know people might interact with their bank in the physical world by walking into a physical branch. But today the way most people interact with their bank is through software through the phone and their app.

(04:52) So if you’re in business and want to stay connected to your customer, you need to measure what the customer is doing in your software and because that is your connection to your customer and therefore the data that you need to grow your business. So what we started out with is just measuring the transactions flowing through that software. The transactions could be a request to log in or to look up your balance, or to purchase an item on an e-commerce site.

(05:21) We’re measuring how fast that was, but then we realized if we could build this big data platform on the data we’re collecting where we threw away nothing, and we could also go to a specific customer of a subset of customers and see exactly what they were doing to answer business question essentially with the same data in real time. And combining those two is powerful and unprecedented.

Michael Krigsman:

(05:44) So you’re making this link between metrics and guarding the technical performance of the applications and the software with the actual business results.

Lew Cirne:

(05:56) That’s right and a very strong correlation between the two. There've been many studies showing that a slow or buggy site will result in much poorer business results than a fast and highly reliable site.

(06:13) And so as a great before and after example one broadly documented success story is how New Relic was brought in late 2013 to help fix healthcare dot gov, where as you recall back then that was you know in a very challenged state when it first launched. There was inadequate visibility into why there were problems with the site.

(06:39) And New Relic was brought in after the President declared a tech surge and we were installed into Healthcare dot gov and literally almost instantly there was visibility available to hundreds of people that could use our cloud service to figure out what was wrong and what was working. And that could help them turn that project around and quickly came to a point where they were servicing the needs of you know, all of these millions of Americans so they could get healthcare.

Michael Krigsman:

(07:07) Now what about the user experience aspects, so you’ve linked what you do to the business results but what about user experience, why does that matter and whose user experience are you talking about.

Lew Cirne:

(07:18) That’s a great question, I mean at the end of the day if people aren’t enjoying using your software then they’re not going to use it, and if people don’t use your software then your projects almost certainly going to fail.

(07:35) So when we talk about measuring the user experience, what we mean is instrumenting not only the software on the back-end on the server that can generate images or data for a mobile app, but we actually have products that go into the iOS on the Android app and measure how good is that experience from the end-users perspective. We also do that in the browser so we can see exactly how good the page loads for our customers to.

(07:59) And we can slice and dice that in a variety of ways and we can tell you if it’s a better user experience on you know, how much better is the experience on Wi-Fi for our mobile customers versus various specific carriers. We can also break it up by geography or by class of customer because here’s a common problem that we see is especially on a lot of enterprise applications.

(08:22) The biggest customers often have the highest workloads or the largest amount of data stored in the application. So you’ve got this paradox where your biggest customers can often have the worst customer experience. And so measuring your customer experience by specific customer and segmenting out your highest spending customers is a great example of the kind of visibility that you need to have to make sure you’re delivering business results.

Michael Krigsman:

(8:48) So this is a technical discussion then or a business discussion.

Lew Cirne:

(08:54) Well we usually start as a technical discussion because we have about 500,000 people that have used our product and most of them are developers or DevOp people, and so that’s how we enter the account. We think of it as three layers of maturity starting with like the health of the software and developers care about the health of the software that they write. Then they more into operations who are responsible for keeping that running.

(09:20) That’s the kind of the first stage of that application health. Then we move up to the customer experience and that may go up to the application owner, who is responsible for delivering your customer experience, the business user or the product manager.

(09:33) Then ultimately that whole project has business results attached to it so we can actually go from there to the more senior executive. And making sure all those four constituents are well aligned and looking at the same data to make sure that they’re making good decisions together, that’s what we uniquely provide. 

Michael Krigsman:

(09:51) You know one of the things I found interesting as I was preparing for our conversation, is you speak about the company as an analytics company as opposed to a software performance company.

Lew Cirne:

(10:06) Yeah, well you know this is my second company in and around this general space. I founded a company called Wily Technology           in 1998, and when Wily was created there was no category called APM. Wily is credited with creating that whole category and that’s now a multi-billion dollar market and many players in the market. And many people think of New Relic as an APM company.

(10:33) So I founded Wily and ultimately sold it in 2006 and after selling the company I thought to myself, learning everything I had about APM and about software and about business what would I do if I was to do it again and a lot of that thinking came to New Relic and I came to a few conclusions.

(10:53) One was first of all we have to be all-in the clouds. SaaS delivery is the only way to attack this problem. It gives us a fundamental advantage and it’s a far better experience for our customers. So we decided to be the only pure play SaaS company and we’re the only pure play SaaS company in this space.

(11:12) So the second conclusion I had was I’d always felt like APM is this incredibly powerful and important must-have technology and you know I had experience creating that market, but it was always a step to something even more important. Right, the whole reason why we built software in business is to achieve some business results, and the more important that the software is to the business, the more important to see what’s going on in the software from a business perspective in real-time.

(11:40) So it’s rare when you get an opportunity to revisit a similar problem with a clean sheet of paper, and that’s what New Relic was and that’s one of the reasons why I think this company has turned out to have far more impact than my previous company.

Michael Krigsman:

(11:52) But how do you get business users to actually care about what’s essentially software development metrics.

Lew Cirne:

(12:03) Well it’s more than software development metrics, so as CEO of New Relic and I have a development background but I’m going to talk about my business head. I use our analytics to answer business questions continually. The kinds of questions I answer could be of all the 12,000 customers that use our product how many of them have more than 50 or 100 active users and who are those companies. Because I want to see where is New Relic broadly adopted within a customer right.

(12:35) So I can do that. I can segment that by country, I can segment that with how much customers spend with us. I can segment that by city. Last Fall I was going to Dublin to visits the New Relic European headquarters there and I had a few hours available on my schedule, so I did an instant query on our product to say who are our most active customers in Dublin, found a very recognizable name as one of our customers and was able to spend time with the customer. You know, that had an immediate business impact. In fact, we closed business based on that data shortly after my visit.

(13:12) Had I not had that data in front of me I might of like spent my time with the wrong account. Now what I can also tie it to though on the technical side is, is that customer having a good experience using our software, are they having troubles. So when I go and visit that customer I know whether or not it’s going to be an easy conversation they’re having using our product or if we have some you know issues we need to address. So that’s why you need both the business and the technical data together.

Michael Krigsman:

(13:41) So you’re collecting the data from individual customer, you’re aggregating that data which of course tells you a story about that customer and their experience, but you’re also aggregating data across the range of your customers. So what are the kinds of trends or learnings that you take away from that aggregated cross customer data?

Lew Cirne:

(14:06) Well what we’re seeing in our customer data is a couple of trends that are irrefutable now but we saw it early and is important to product strategy and that’s why I think we have such a lead in the market. We saw it early in how rapidly our customers were moving to cloud computing. And so for example at New Relic over half of our customers have at least some presence in AWS that they are using New Relic to monitor the workloads.

(14:30) We have far more customers using public cloud, using New Relic for public cloud than any other APM provider by a long shot. So that informed our product roadmap decision so we introduced new functionality specific for AWS last October that has had an enormous level of interest with our customers and even improves our value in prop in the cloud environment like AWS.

(15:00) The other trend we’re seeing is the migration from single language to multi-language and from monolithic to micro services. so if I look at the applications from about a decade ago, you might have one or two tiers where lots of code all went into you know a single large monolithic web application or web service. Now with micro services you have a lot more flexibility with your teams where you can have smaller teams doing you know smaller services that are interdependent in more complex ways.

(15:32) And those services are often implemented in different languages depending on the nature of the challenge for that service. So in New Relics own environment for example we have Node, Go[lang], Ruby), Java all interconnected in our production environment and we see that in our customers environment too. Why that matters is that New Relic is the only company that has more coverage of more languages than any other companies with Python and Node and all these other modern programing languages, so as companies address more and more technologies to build out the production environment we’ve got the data to show what we need to cover next and we do a good job of doing that.

Michael Krigsman:

(16:09) So what are the business implications of these development trends that you were just describing.

Lew Cirne:

(16:14) Well I mean the reason why people are doing this is all about agility, time to market and a great customer experience. You go back to what I was saying before that you know, if you’re a modern bank for example, I think the quality of your Android and iPhone app is equally important to the customer experience to the branches themselves. I would dare say it impacts the customer experience more than the physical branches especially younger customers.

(16:54) So how do modern enterprises deliver the very best customer experience? Well they’ve got to be agile and nimble and they can’t be spending their time addressing problems that other people are expert at. And so where there are some problems they don’t have time to address, well building data centers, building their own monitoring tools, standing up on premise technologies to monitor their application. That’s all wasted time and energy that could be built into developing a great customer experience.

(17:24) And so that’s why we see I think this move to DevOps where that helps software projects iterate faster and automate more, and it’s also why there’s a need to sort of see into the software in a real-time basis because a problem in the software is a problem in your business now.

Michael Krigsman:

(17:45) What about mobile, what is your data telling you about mobile and mobile trends.

Lew Cirne:

(17:51) What we’re seeing in mobile is that it reminds me of the APM market about 12/13 years ago, where we’re now getting to the stage where companies have had enough time you know and experience with their mobile projects to realize the importance to delivering a great customer experience. It’s not just about measuring how many people use my app. It’s measuring how responsive is the app, how many errors are in the app, how does that vary by geography or by version, and do I have problems in how my app behaves.

(18:29) Because if an app is slow, and let’s say for example you’ve got an automatic payment app where you’re a retailer and you want people to use your automatic payment app. But it takes 10 or 15 seconds for that app to spin up, people aren’t going to do it. they’re going to try it twice and then they’re never going to revisit right.

(18:49) So what we’re seeing now is companies recognizing that they need to see inside the mobile app in the way they see into their server. And the reason why this reminds me of in the very early 2000s was until recently most mobile apps were developed by third parties who were expert in building iOS and Android applications and after that outsourcing maybe it’s brought back in-house. Whereas this becomes more of a core competency of the enterprise where like your mobile app is your front door for the world and that has to be brought in-house. That expertise has to be brought in-house, and when things are brought in-house you’ve got to own the success of the project. That’s where there’s more of an investment in tools like New Relic Mobile to make sure it delivers great customer experience.

Michael Krigsman:

(19:31) So is it the business people who are driving these concerns about performance and user experience and whether users will drop off because the performance isn’t there or is it the development folks.

Lew Cirne:

(19:45) The issues with business people is that it’s such a broad term; the role is not clear enough. So we think of it as the application owner, the person who is responsible for the success of the project and that usually includes project management development and maybe marketing right. but it’s the person who determines what is the app going to do and what are the key metrics to make it successful.

(20:10) And so those are the people that are insisting on a great customer experience. They know the importance of an app that’s stable, so you know they’ll listen to their developers who’ll recommend New Relic to make sure that they’ve got the data that they need to be successful, and they love also seeing the higher level KPIs that we can deliver for them in real-time.           

Michael Krigsman:

(20:29) So really it’s a mixture going across you said product management and development and marketing, so it’s both the development people and the people on the ‘nebulous business side’.

Lew Cirne:

(20:41) Right, and the closest specific role I’d say is product management and then followed by the application owner which could be a General Manager depending or Chief Digital Officer. It varies by project depending on the nature of the project, but it’s the person on the hook of the success of the whole software project.

Michael Krigsman:

(21:01) Which ultimately I suppose most of the time would be a business person.

Lew Cirne:      

(21:06) Like if it’s a small company it’s the CEO, if you’re a SaaS company it’s the CEO, right. if it’s a digital project in a large enterprise it could be the Chief Digital Officer or it might be the General Manager for that project.

Michael Krigsman:

(21:23) Do your customers tend to be more innovative companies? And the reason I ask is because for many established companies it’s difficult to get strong communication across departments with sharing information and the collaboration that you’re describing.

Lew Cirne:

(21:41)  Our customers do tend to have an innovative mindset and that mindset exists  to varying degrees in almost every company. Sometimes it at the core of the whole company and the core company has bought into, and it could be enormous enterprises that are entirely bought into public cloud to SaaS and to agility.

(22:04) Other companies that’s less ingrained to the thinking at this point, so they’re a little more cautious with adopting things like cloud. But then we see in business units or modern digital projects they’re all in on cloud, because I don’t think there is a business you can find today that doesn’t have some level of investment or very few that don’t have some investment in cloud technologies.

(22:26) So it’s more of a mindset, but I think of it this way that there is a mindset of playing offense with software versus playing defense with software. When I use that term I mean playing defense with software is thinking about software as a cost reduction tool to automate existing processes. So software can be used for that. It has been used for that for decades, making payroll a little more faster and a little more predictable; that’s great defense for software.

(22:55) Playing offense with software is going to the topline for your whole company. It’s changing the customer experience in how they integrate with your company. Your company can take share, and that mindset tends to really love what what New Relic offers, because our platform integrates with all of the data I’ve just been talking about.

 Michael Krigsman:

(23:09) So New Relic is not just about driving efficiencies in the software development process but it’s actually about providing a product advantage so to speak.

Lew Cirne:

(23:23) That’s exactly right and of course we help on the efficiency side too, we have many customers as I say where I’ve reduced my hosting bill or my infrastructure costs dramatically because New Relic told me how to gain efficiency. But if we just stop there while that does offer value to our customers then we feel like we’ve not delivered on our full potential. And our full potential is to help companies rebuild their topline.

Michael Krigsman:

(23:48) In a way this is implied by the things you just said, but how are you different from a traditional enterprise software company put it that way.

Lew Cirne:      

(23:59) I’d say the most fundamental difference I think of New Relic is we are a product-first company, we’re a product driven company and so we care immensely about ease of use and design, and time-to-value of our product. And we want our product to be so compelling that we’re drawn into large and larger opportunities and our business grows in that natural effect of having the product the people love to use.

(24:29) I’d say that’s been at the core of our success to date and we continue to grow at a rapid rate largely because people love our product and they tell their friends about it. And so honestly, a lot of traditional enterprise software companies I think they’ve lost that; the previous ones in generation ones in particular especially in and around the kind of traditional IT management space.

(24:51) And so you know if you look outside my office and I’m in my office right now and if I were to walk 10 feet that way the lead designer for the company is right there. That’s the person closest to my office than anyone else and so that’s because we care so much about having products people love to use.

(25:11) And I think that in the modern era with the cloud where people can try our products even before they have a sales engagement or they certainly talk to their colleagues a lot. There’s  a lot more transparency now than there was 10 or 15 years ago where you had to rely on maybe what a salesperson told you or you know, a lot of uncertainty about how the product experience would be and you had to make the product decision in advance on that and take a lot of risk on that.

(25:43) So we think in the modern era, the decisions made while you evaluate the software and the experience you have in using the software has a huge impact on that, and that’s why we’re growing at a rate far faster than our market.

Michael Krigsman:

(26:02) You know that’s really interesting what you said that the lead product designer sits 15 feet from your office. The only other company where a larger company as opposed to a startup company you know are more or less in the same room, a company of where I’ve heard of that happening is Infor, where they’re an older established company, but Charles Philips their CEO is trying to change their culture. And their designers, they created an in-house design department and that design department is the closest group to his office.

Lew Cirne:      

(26:37) Interesting, wow yeah, I think it’s super important. I mean I think of myself as a very passionate product person and I think different CEOs have different areas of focus based on their skillset and interest and they hire remarkably if you want to be successful as a CEO, you want to hire remarkably talented people to cover for your weaknesses. So I’ve got a remarkably capable President who was the President of sales at Salesforce and has forgotten more than I’ll ever learn about growing a business and being successful in the field.

(27:12) And so it’s not that I don’t love visiting customers but it’s not my strength to you know run the sales organization but I’m very passionate about the product. And so I spend a lot of time not only with the lead designer but with engineers, and occasionally I try to go away and I call it coding retreats; four or six times a year I’ll go to a remote location to build something or experiment or prototype, and those coding retreats have often turned into new innovations that have turned into new products and new opportunities for us.

Michael Krigsman:

(27:43) So you’re obviously very hands-on and very focused on the product. How do you create a culture inside the company that respects that set of values?

Lew Cirne:

(27:58) Well I think it comes pretty naturally when you know if your founder CEO is very deep into the product then that tends to drive the culture that’s a little different from a CEO who spends all the time looking at the pipeline, and you know there are many different ways to make a business successful. We like to think of it as you know the business can’t succeed without great sales and great revenue growth and all of those sorts of things. But great sales and great revenue growth at our company ought to be a natural extension of a great product that is a joy to sell.

Michael Krigsman:

(28:36) That again is interesting, you’re a public company, so one would think, well you know you’re focused more than anything on the numbers and yet you’re saying your focus is – go ahead.

Lew Cirne:

(28:51) I mean the numbers are super important. They are but I forget exactly the quote that Jeff Bezos said, something along the lines of "if we just report a good quarter it’s reflective of great decisions we made (I don’t know) six quarters ago." So the better a job we do in making a great product that people love and tell their friends about, and a better job we do on all parts of our company like thinking about our financial model. Thinking about how we efficiently scale the go-to-market organization. Thinking about how we deliver the right message to our constituents in an effective way that differentiates our brand.

(29:25) I mean if we do all that work then it’s a more natural motion for us to deliver the business. Also that thinking is fundamental into how we funded the company on a business model. We’re a 100% subscription business. All the selling we do right now is for future revenues right, and so that has a much higher level of predictability than in a company that lives or dies by the traditional license and maintenance model.

(29:53) Of course that’s hardly unique today, there’s a lot of excitement about SaaS delivery models. But I would say that when I founded the company this wasn’t and decided on this model, it wasn’t because I read about it on a hot blog, it was because I had lived the traditional license and maintenance you know horror story before, where basically you lived and died by a handful of deals in the last few days of the quarter and that drove the whole company, and pretty soon you forgot about product integrity.

(30:19) So we decided to build a business model and company that’s well suited to us staying true to our north star of great products, and can still be effective as a public company and so far it’s been working.

Michael Krigsman:

(30:33) So what does this mean then for the different as CEO, the difference between on premise model versus the subscription model in the cloud mindset. I don’t mean financially but from a culture standpoint, what does this mean for your strategy and how you actually run the company.

Lew Cirne:

(30:59) Well we fundamentally believe that being all in on cloud is a long term strategic advantage for us and for a few ways. One you know of course our customers get you know continual improvement in their software on a regular basis and you know, the New Relic that customers use today is better than the New Relic that they used last week.

(31:23) We don’t have to invest in you know precious resources, our precious technical and prog resources and support on old versions of the software. Right, that can be an enormous drain especially if you go to scale.

(31:39) But what’s really exciting to me as a cloud company is what we can do with all this data that we’re collecting that you can’t really do as an on-premise company. Let me give you some context.

(31:49) We collect about 3 million software analytic events every second into our cloud. That’s more than a hundred times the tweet volume that’s going on in the entire world right now just as context. And we’re able to analyze it all in real time. Our customers are continually querying these events in real time, and I regularly see our software analytics cloud querying billions of events per second for our customers.

(32:20) So this data that is coming from the inside of the software we can and should do more and more things to be smarter about the analysis of that data. Not only, you know, the history of our space has been presenting charts of this data to help a human kind of figure out problems. And there have been a few companies that have talk about, well what if I can do ‘autonomic computing’ or an intelligent approach where they you don't have a human to look at the charts to figure out the problems, you figure out the problems yourself.

(32:52) The problem is none of it's ever really worked because the technologies have been on premise. You must experiment with your algorithms to see whether your algorithms are any good. In order to do that you need a ton of data to run the experiment on and only New Relic has this mass of data.

(33:10) I believe our launch on this opportunity is having a smarter and smarter cloud that it creates more and more incentives for our customers to put more data into our cloud and it has this remarkable flywheel effect.

Michael Krigsman:

(33:23) As you collect this data where do you envision the company going, how will you use this data to benefit your customers.

Lew Cirne:

(33:35) Customers are very pressed for time. They’re overwhelmed by an incredibly deep backlog of things to do. You know it’s not easy to run a production operation environment today where the stakes are so high and the cost of downtime is so high and there is so much stuff to monitor and so much stuff to watch. In fact, more than a human can watch.

(33:55) So we want to put more and more smarts into our cloud to reduce the amount of effort an operation person needs to do to keep the site running. And the only way I think to do that in a really effective higher quality way is to have an enormous amount of real data about what real customers are doing, about what real applications are doing, so that when you build your algorithms those algorithms have the data to upon which to assess their effectiveness and improve on a continual basis.

(34:23) It’s kind of like, could you imagine - you know Google search just gets better and better on a continual basis because they can see how effective their searches are on the whole of the Internet right now and then improve on it. You know if Google search was like an on premise compliance there’s no way that they could improve it in a continual way the same way, so that’s kind of the analogy that I think of.

Michael Krigsman:

(34:43) Are there specific examples you can think of where having this massive set of data will apply directly to customer’s problems, provide customer solutions.

Lew Cirne:

(34:57) We’re hard at work at various specific examples of that right now that it’s a little premature for me to share the details, but suffice to say that we’ve got very bright days ahead for New Relic as we continue to innovate in this space.

Michael Krigsman:

(35:15) We have just about 10 minutes left. What advice do you have for IT departments in this whole mix and CIOs who are just facing enormous change in the environment?

Lew Cirne:

(35:32) You know my advice first of all is I have empathy is an enormous amount of change and you know IT professionals have invested an awful lot of time and energy to become expert at delivering great service and quality in an approach that you know is going under an immense change right now.

(35:56) So you have to rethink a lot of things on how are you going to continue to succeed  in a world that demands a much higher level of agility and a much quicker time to market a much higher level of availability than just a few years past.

(36:13) It’s unquestionably true that everyone is moving so many workloads to public cloud, that has to be a big part of your strategy and it is a big part of strategy for IT departments and companies of virtually every size.

(36:27) So my advice to all of you is to see this as an opportunity to learn and grow, and think about how do you reduce the risk of migrating workloads to the cloud. How do you increase the likelihood that this will deliver a more better experience, a more secure experience, a higher performance experience for your customers than it has in the past in a traditional hosting environment.

(36:56) And then think about what’s the whole purpose of these projects anyway. There’s a business purpose for every project. You don’t fund 10, 20 or 100 developers on a project without having business goals. So there’s been talk about aligning teams with the business forever. Right, the way you align IT with the business I think, is you measure the health of the software and then express it in business terms on all of the same platforms, so you connect the business outcomes with the health of the software. And that’s where I think we can offer a great deal of help for companies that are wanting to move into the cloud.

Michael Krigsman:

(37:31) The measure the health of the software and express it in business terms. That seems like a really key point, maybe just elaborate on that.

Lew Cirne:

(37:40) Sure, it could be something as simple as we have an elevated error rate on a mid-level service okay, that is a technical term that would mean almost nothing to the line of business exec. But if I said, you know 6% of our customers are seeing errors when they try to add an item to a cart, that’s a business outcome because it’s talking in terms of people and it’s talking about what the function is trying to do and you can pretty quickly get a sense of what is the business impact of that problem. And that’s a very different problem from you know 0.1% of our customers are having a trouble updating their change of address form.

(38:21) And so if I’ve got to prioritize my work, now I’ve got this business impact to help prioritize my work and certainly, is a more valuable way to report up the chain. And of course, let’s think about the positive case like, since we improved the performance of add to cart, we’ve seen a 6% increase in the number of people that have added items to the cart and that has resulted in you know a higher level of revenue which New Relic Insights could also measure in real-time, so that our revenues are up over 2% in the last two weeks and that correlates with the improvement and performance. Those are the types of things we can do.

Michael Krigsman:

(39:07) So a key point then is express the technical context in business terms that the marketing manager, the product manager would care about for example.

Lew Cirne:

(39:24) You know yes, every stakeholder has a slightly different language or a slightly different view into what’s important to them. And so being able to present you know elevated error rate on this particular servlet and service on this server, that’s handy to an ops person, a DevOps person and developer so we speak that language.

(39:45) But then with New Relic Insights we can also speak the language of the technical support manager or the line of business manager or the marketer and it’s all based on the same data.

Michael Krigsman:

(39:55) And then I assume really you could have applied the same lesson that you were describing for IT. you could apply the same lesson to developers who want to make an effort to try and bridge the gap that they have with their business stakeholders.

Lew Cirne:

(40:12) Absolutely and you know one of the things I’ve learned is that the better a developer is able to empathize with the customer and the experience they're having, the better your products. And so if the developer knows that the code they’re writing is turning into a really poor experience or is being used in a different way than what they expected that helps them better empathize with the customer experience  and it usually turns into better products.

Michael Krigsman:

(40:38) It’s really interesting so empathy for the user is shall we say a key success factor for writing the best software products.

Lew Cirne:

(40:48) I think that’s true for virtually every function. I mean in a way it’s just one of those business truisms right. If your company can really empathize with your customer you’re going to do a better job solving their problems.

(41:01) I mean there are some airlines when I fly where I feel like that’s in the culture of the airline. There’s some airlines where I don’t feel like they have any empathy. It’s almost like they’re (unclear 41:10) and flown their own airline. So you know it’s not specific to developers in general but it’s like if you can connect every stakeholder to the end customer then you’re going to have a better customer experience, and the customer experience is going through software, that software is measured by New Relic, that’s why we matter.

Michael Krigsman:

(41:30) And this is obviously a point which you feel very strongly or passionate, so how do you ensure that your organization at New Relic is filled with people who have that empathy and again have the culture of having that as a goal.

Lew Cirne:

(41:50) You know, we do obsess pretty hard on building a culture that creates an environment where people love – I use the term ‘loving your Monday’s’ so people see work not as this means to an end, but actually is an integral part of the joy or a big part source of joy in their life. It comes down to two things.

(42:17) I think the first factor is everyone in the company no matter what your role, no matter how junior or senior everyone needs to matter and needs to feel like they matter and what they do matters, and what they do is contributing and challenging and is helping the grow. That’s the first thing.

(42:35) And the second thing is you must do your work with people, who bring out the best in you, who encourage you, who give you energy right, who want to make you do your best and want to deliver great outcomes because there are other people on this journey with you who want to make successful just as much as your own success.

(42:35) And so if those two things are happening then I think we’ve got a culture that help us withstand tough times and helps us excel in good times and that’s the hallmark of great companies. So we are very thoughtful about this and of course you know, the culture is so much more important to our company’s success than any other factor including technology. But of course, we eat our own dog food and every function in our company at New Relic Insights is to connect our employees to our customers.

Michael Krigsman:

(43:21) You know we only have just a minute left and we haven’t really spoken about being an entrepreneur and being a company founder but just one final question, what distilled essential advice would you have for entrepreneurs and founders. You founded a company and then sold it, you founded a second company in New Relic and you’ve taken it public. What is your distilled wisdom for entrepreneurs?

Lew Cirne:

(43:48) Well in one minute or less the most important lessons I’ve ever learned in my book, in both my companies have been about myself. I feel like self-awareness is without question the most important skill necessary to continue to grow and succeed and lead in a company and just grow and succeed in any function.

(44:09) So basically what I tell entrepreneurs when they think about starting a company I say you know I have no idea whether the idea will succeed. There’s a lot of risk in all start-ups but I guarantee you that if you give it your all you’re going to learn an immense amount about yourself and that is of incredible value.

(44:27) So what I learned about myself from my journey at Wily helped inform my thinking in how I would lead New Relic and the team I needed to bring along on with me on the journey and how I would fit inside that team. So that’s how I distil it down and you know I’m not done with learning about myself that’s for sure.

Michael Krigsman:

(44:44) So self-awareness and the corollary would be insight are the most important things.

Lew Cirne:

(44:51) Yes.

Michael Krigsman:

(44:52) Great well unfortunately we’ve run out of time and I think there’s a lot more we could talk about. Thank you for taking the time to speak with us today Lew

Lew Cirne:

(45:01) It’s a pleasure thank you very much. Happy holidays.

Michael Krigsman:

(45:02) we have been speaking on episode number 148 with Lew Cirne, who is the founder and the CEO of New Relic. Lew again, thank you very much I really appreciate you taking the time.

Lew Cirne:

(45:20) Thank you

Michael Krigsman:

(45:20) And everybody, thank you for watching. Next week there’s no CXOTalk because it’s Christmas and we’ll be back in two weeks and we have amazing guests lined up for January ,and February and into March so come back and I hope everybody has a great holiday and we will see you in two weeks, thank you and bye bye.

 

Companies mention in today’s show

Google:                        www.google.com

New Relic:                   www.newrelic.com

Salesforce:                  www.salesforce.com

Wily Technologies:     www.ca.com

 

Lew Cirne:

Twitter:           www.twitter.com/sweetlew

LinkedIn:        www.linkedin.com/in/lewcirne

Enterprise Social Collaboration with Elisa Steele, CEO, Jive Software

Elisa Steele, CEO, Jive
Elisa Steele
Chief Executive Officer
Jive Software

Social collaboration and community are essential parts of digital life inside the enterprise and in departments such as customer service and support. In this episode, we talk with Elisa Steele, CEO of social collaboration vendor Jive Software.

In this role, Elisa is responsible for leading and overseeing the day-to-day operations of the company. Prior to that, Executive Vice President of Marketing and Products, where she was responsible for Jive’s vision and end-to-end global marketing and product functions. She also served as Jive’s CMO. Prior to Jive, Elisa was corporate vice president and chief marketing officer of consumer apps and services at Microsoft, including brands such as Bing, Internet Explorer, Lync, MSN,Outlook.com and Skype, among others. Prior to this role, Elisa was the chief marketing officer at Skype, executive vice president and chief marketing officer at Yahoo! and senior vice president of corporate marketing at NetApp.

Transcript

Michael:

(00:01) Welcome to episode number 143 of CXOTalk, I’m Michael Krigsman and today we are speaking with Elisa Steele who is the CEO of Jive Software and we’re going to talk about enterprise collaboration. Elisa how are you?

Elisa:

(00:21) I’m good. I’m excited to be on CXOTalk. Hi Michael!

Michael:

(00:25) Hi, well thank you so much. You’ve had such an interesting career. You’ve done so many different things and this topic of enterprise collaboration is such an important one, so I really appreciate you taking the time.

Elisa:

(00:39) You bet.

Michael:

(00:40) So Elisa, let’s start by tell us briefly about your career history, the things that you’ve done just so that we have some context about you.

Elisa:

(00:51) Sure I started my career in sales actually and then moved so marketing and honestly from the very beginning of my career I have always been very interested in how people work together. And over the course of my career like all of us technology has changed incredibly, so it changes the way that you communicate, it changes the way you work with team.

(01:15) And so I’ve always been fascinated with this idea about collaboration, and of course as many of us have gone to different types of schools and education, and graduate school, collaboration becomes more and more important. And so, here I am now, it never really knew I would be where I am now, but you know leading a company, a team of people who really believe in how to help people work really strongly together to achieve great things.

(01:45) So I feel lucky now that every day I wake up to come to work, it’s really about something that’s been a passion of mine for a very long time. And I’ve worked in tech on different positions in different companies and have had exposure to so many different types of technologies and avenues of how to communicate with mass audiences and the consumer world or with smaller and more focused work groups in the enterprise world. So I’ve had the you know, opportunity to be exposed to a lot of different things.

Michael:

(02:17) And I know that you were CMO at Yahoo and other places, but tell us about Jive. Give us a sense of the size of Jive and your market so give us context there.

Elisa:

(02:35) Sure so jive is about a $200 million public company. We offer, sell and evangelize services that help people work together across diverse locations, diverse work groups, different types of work processes and we provide software and really cool technology to help people do that on any device wherever they are.

(03:00) We’re about a 700 person company, we believe in the power of human centricity, and using technology connect the best ideas in the world. And we have locations all around the world. We have people at our company who work from all different locations, and we are probably the best used case of our technology. We wake up and use it every day and use it to connect with fellow Jiver’s around the globe as well as our customers.

Michael:

(03:30) So as CEO describe your role.

Elisa:

(03:37) Well as CEO I feel that I’m the champion for all things related to the company and our success. Sometimes the champions are the customers, sometimes it’s the champion of our employees and of course, it’s the champions of our shareholders and I like to represent and I like to dig in deep, where we have issues, challenges and problems to solve.

(04:08) We’re a very flat company from the standpoint of we all work together on the key things that we are trying to drive, so as CEO I want to make sure that all the different teams have the resources, the tools, the empowerment to work on what they’re doing and create the best that they can and really have the vision and the inspiration to move the needle.

(04:34) I believe in decision making at all levels in the company. I believe the people who are the closest to the work and closest to the customers

Michael:

(00:01) Welcome to episode number 143 of CXOTalk, I’m Michael Krigsman and today we are speaking with Elisa Steele who is the CEO of Jive Software and we’re going to talk about enterprise collaboration. Elisa how are you?

Elisa:

(00:21) I’m good. I’m excited to be on CXOTalk. Hi Michael!

Michael:

(00:25) Hi, well thank you so much. You’ve had such an interesting career. You’ve done so many different things and this topic of enterprise collaboration is such an important one, so I really appreciate you taking the time.

Elisa:

(00:39) You bet.

Michael:

(00:40) So Elisa, let’s start by tell us briefly about your career history, the things that you’ve done just so that we have some context about you.

Elisa:

(00:51) Sure I started my career in sales actually and then moved so marketing and honestly from the very beginning of my career I have always been very interested in how people work together. And over the course of my career like all of us technology has changed incredibly, so it changes the way that you communicate, it changes the way you work with team.

(01:15) And so I’ve always been fascinated with this idea about collaboration, and of course as many of us have gone to different types of schools and education, and graduate school, collaboration becomes more and more important. And so, here I am now, it never really knew I would be where I am now, but you know leading a company, a team of people who really believe in how to help people work really strongly together to achieve great things.

(01:45) So I feel lucky now that every day I wake up to come to work, it’s really about something that’s been a passion of mine for a very long time. And I’ve worked in tech on different positions in different companies and have had exposure to so many different types of technologies and avenues of how to communicate with mass audiences and the consumer world or with smaller and more focused work groups in the enterprise world. So I’ve had the you know, opportunity to be exposed to a lot of different things.

Michael:

(02:17) And I know that you were CMO at Yahoo and other places, but tell us about Jive. Give us a sense of the size of Jive and your market so give us context there.

Elisa:

(02:35) Sure so jive is about a $200 million public company. We offer, sell and evangelize services that help people work together across diverse locations, diverse work groups, different types of work processes and we provide software and really cool technology to help people do that on any device wherever they are.

(03:00) We’re about a 700 person company, we believe in the power of human centricity, and using technology connect the best ideas in the world. And we have locations all around the world. We have people at our company who work from all different locations, and we are probably the best used case of our technology. We wake up and use it every day and use it to connect with fellow Jiver’s around the globe as well as our customers.

Michael:

(03:30) So as CEO describe your role.

Elisa:

(03:37) Well as CEO I feel that I’m the champion for all things related to the company and our success. Sometimes the champions are the customers, sometimes it’s the champion of our employees and of course, it’s the champions of our shareholders and I like to represent and I like to dig in deep, where we have issues, challenges and problems to solve.

(04:08) We’re a very flat company from the standpoint of we all work together on the key things that we are trying to drive, so as CEO I want to make sure that all the different teams have the resources, the tools, the empowerment to work on what they’re doing and create the best that they can and really have the vision and the inspiration to move the needle.

(04:34) I believe in decision making at all levels in the company. I believe the people who are the closest to the work and closest to the customers know the most, and should be empowered to make those decisions and move the ball forward on the line. So every day I wake up as CEO, I want to champion people’s success in the company, and I want to champion our customers to succeed in what they are trying to achieve.

Michael:

(04:58) So that’s a key part of what you do is focusing on the activities that the folks inside the company are doing and making sure that those activities are connected to customer needs.

Elisa:

(05:11) And that they’re the right thing, so I think you know myself along with the executive team create focus for the company’s so that we are really working on the things that we think are meaningful to create the best results.

(05:25) And as CEO I think it’s super important to be connected to the market. What’s happening with the market, how are people changing, what is it that is the next thing to be able to help people solve operational problems and be the best at that.

Michael:

(05:42) So as you’re speaking with your customer, what are some of the key collaboration issues that you observe?

Elisa:

(05:53) You know I think in today’s world in general even talking before Jive and what we do with our customers, today’s world in general has dramatically and significantly changed and it’s going to change faster and faster every time we have access to new technology.

(06:09) So we’re seeing these shorter turnaround times for change, and in our business because we are all about productivity, getting work done, being engaged, driving to the right mission, those technology changes matter a tremendous amount because people form habits of how they connect with people and how they get their work done.

(06:29) And what we want to do at Jive is always give them the ability to have access to things that helped them do a better job. And so as the world continues to evolve around new technology, Jive thinks about and we think about how do we help people to have access to the right technology at the right moment.

(06:50) We also have a changing workforce in a pretty major way, because of technology we can all be remote. Look at this interview, we’re doing you know there’s hang out interview with people from wherever and all over the place, you know contributing to today’s show. And you don’t have to be in the office, you don’t have to be in a certain location. And so we have employees and workforces spread all over the world. We have multi-generational workforces, who have different habits of how they grew up and what they are comfortable with.

(07:22) And we have different styles of work. People learn differently and they interact differently, and so technology can be used in ways that are more adventitious for one individual’s style versus another individual style. So, if you put all of that out I really believe that when we talk about and the industry talks about the future of work, I think it’s really right now today that is so different. And if you haven’t been able to really learn, and adapt, and embrace new technologies with how you interact with people then you’re probably not able to keep pace.

(07:56) And so it’s a fast-moving industry, testing and trailing all of the time, and I think because of the change in the workforce that means that we change the nature of the way that we work on our business and with our customers, I think that technology enables us to actually be more acceptable to our customers and have more unique, genuine, authentic dialogue.

Michael:

(08:19) So you know all of this it’s so interesting to hear you describe this, this digital world that is so geographically dispersed which means that we’re bringing all of these different kinds of people and different roles and different locations together. And so what does all of that mean from the standpoint of effective collaboration and collaboration is the backbone of accomplishing anything in any organization.

Elisa:

(08:48) So there’s a pretty significant challenge going on in the workforce around what people may call talent wars and we’re all competing for that talent to be able to contribute to your company, your mission, your objectives. And to do that you’ve got to provide an environment which people can be their best and they feel that there’s not a lot of friction in how they can actually achieve their goals. It’s super important to stand up as employees, spending time as a full-time employee in your company is shortening and shortening. That creates productivity issues.

(09:25) So the environment for collaboration, the environment for an individual to be able to get their work done with ease and simplicity is critically critically important. We also know that as companies are moving forward to stay connected with their customers, everybody is digitizing their business. The front office, the back office, everything in between.

(09:50) And to be connected to your customers in a way that’s very intimate but in a digital world, not only on massive social public networks, but how do you connect with your customers in a way that’s meaningful through digital technology.

(10:06) You know today about 30% of companies are working with their customer communities through digital technology is a very low percentage. But these companies that are really doing it well, can actually demand a premium in the marketplace because customers feel so much more connected that they get value, they drive engagement with other customers, they learn faster, they’re more affiliated with your products and service. And companies reap the benefits from that from being able to have a premium relationship, which leads to higher margins, higher ability to retain customers.

(10:44) It’s predicted by a couple of analyst firms that by the end of 2017 there’ll be 80% of companies with digital communities for their customers, because it is becoming really critical to that adventitious and that high-value relationship.

(11:00) So I think this world of how do we communicate in this digital world that’s really exploded in the consumer world, and its exploded in the back office of companies. Now the next thing I think is all about how you use this digital technology to bring your customers in and have a very meaningful relationship, not only between the brand and the customer but the customers of the same brand.

Michael:

(11:24) So the notion then is how do we use these types of technologies to create intimacy with our customers and to help our customers create intimacy with their customers.

Elisa:

(11:40) That’s right and value that is exchanged that creates you know creates a positive business result and brand affinity, and that value sometimes is around productivity. Sometimes that value is around early understanding of technology. But mostly that value is about how do you help that leader in that company solves their key business problems. And if you can do that in a digital, smart connected way then they are going to stay pretty darn close to you.

Michael:

(12:11) And so how does collaboration technology help do that?

Elisa:

(12:17) You know collaboration technology I bet most of your listeners and viewers would agree it’s changing all the time, and in this industry there’s always new technology that you can go try. This is a time where I think that the merging market, which has been very different in the past as just a view players, there’s an opportunity for increased innovation, increased pace because of all the entrants that are coming into this market.

(12:47) Everyone needs and wants to be able to work in a better way. What do I mean by that? You know, I really believe that because of technology breaking down barriers, the lifestyle we lead every day is what we expect at work now. We don’t expect to you know, go home, have our personal life, hang our hat at the door when we walk into work, and now we have our work persona.

(13:13) It’s actually all integrated, because sometimes we are working from home, sometimes we are working from in our car. Sometimes we’re in the office and we are connected to some part of our personal life, whether it be our kids or significant others that we’ve got to connect to. We ‘re constantly using technology all day long.

(13:32) So I believe in this concept that lifestyle has translated to our work style, and if you can create a work style in your organization that really welcomes that concept and brings people into it, you’re going to get higher productivity, you’re going to drive more employee engagement.

(13:53) You know how much economic waste is in our economy of disengaged employees? There’s actually a 2-to-1 ratio between disengaged employees and engaged employees. Of course, we all want people who are engaged working on our brand and in our company, and in our mission.

(14:10) So once you have the right employees who’s engaged, you’ve got to be able to stay connected and to be able to give them the environment to really give their best at work every day, and then you’re going to get that high-value relationship.

Michael:

(14:26) And obviously collaboration is a key part of it, so for you as CEO I’m assuming this is something that you must be thinking about all the time.

Elisa:

(14:38) Well the thing I live it actually I really live it all the time and it’s why Jive was such a great fit for me, all the different companies that I’ve work for in my career and thinking about what I want to do next. It was really about for me personally, culture. What’s the environment that I want to work in that is really compatible with my style, and can bring out the best in how I want to work with people.

(15:06) And jive as I mentioned, culture is extremely special. It’s very open, we work together across all of our functions, across all of our levels in the organization to solve problems, solve our customers problems and to you know create excitement and plans for the innovation that we are doing inside the company. And we work in small teams, and we work in larger departments, we work across the company and that’s where you know, I get a lot of energy from that. I have a lot of passion around that.

(15:38) And I believe companies who really embrace this culture to attract the best talent, are the ones who ultimately do better. As a matter of fact, as most companies do we survey our own customers all the time. Every stat you look at in the marketplace of other you know third parties doing studies around the future of work; you’ll see all the kinds of trends that I’ve talked about today.

(16:07) But specifically we also want to know well how do our Jive customers actually use the product and get business results, and we’ve recently completed a survey that is absolutely you know insightful for us as our customers who use our product every day, report back on average there is almost a 30% increase in productivity in their company. They report that there is almost 30% decrease in their ability in terms of time in on boarding people and getting them ready to be able to do a really good job for their company.

(16:44) And this is super important because if you’re adding productivity and your decreasing the actual time that it takes people to be productive, then you are really driving the right business results.

Michael:

(16:55) So Jive is a public company but you’re not the size of a General Motors or an Intel and if we think about very large organizations that face these cultural challenges to such an extreme degree, how can collaboration or what can these companies do to help drive culture and harness it in the way that you’re describing. It’s just so much difficult in a larger organization.

Elisa:

(17:29) It is and it isn’t. So this is a great question to talk a little bit about because culture, I don’t think is defined by size. It’s really defined by leadership, and what does leadership want out of the company and what do they encourage in terms of behaviour that is around that culture and supporting that culture.

(17:48) We see companies, we see huge companies PWC, Cisco, many other big companies use jive across their entire enterprise, and use Jive as a hub for people to be able to get their work done across many different systems. Jive is a place where people can go to find the things that they need to get their job done. It’s a place where they can collaborate and connect with small workgroups or larger departmental news. And in companies that have leadership that really embraces that culture, it’s extremely valuable and people are very very engaged.

(18:27) We also see the same behaviour in smaller companies, because we don’t really look at it at the market in a traditional way in terms of this size company needs this size of solution, because what we see is multiple size companies have the same types of issues or problems they want to solve around connecting their workforce, uniting their team against the mission, and then creating value with their customers by driving digital strategies.

(18:55) So even at the smaller end of the market we have companies like GoDaddy and many other companies in the growing part of the market, Mapout is another example where they’re using technology like Jive to get their work done every day and connect and unify that workforce.

(19:20) It is a competitive advantage to have everybody working on the right things that are going to advance the company’s agenda, and so I think it’s not about size it’s about culture and it’s about leadership.

Michael:

(19:32) That’s a very interesting point, and so what are the leadership attributes or the steps that a company should take in order to align the culture as what you we’re saying to get people inside connected and to bring customers closer to the company and bring the people inside the company closer to the customers.

Elisa:

(19:57) I think about three things really. One is that the culture of the company needs to embrace different work styles. There’s really an important change in the workforce that’s going on that we talked about earlier on around multi-generational, multi-location, diversity of thinking that companies really need to be able to embrace so they can have that level of you know connection and diversity in the workforce. So embracing those different diverse work styles and then giving them the tools to be able to work across that together.

(20:30) The second is to empower and engage employees, so it’s not just enough to kind of individually give the tools, but how do you empower your employees to be able to use those tools to make decisions, move things forward and have empowerment.

(20:44) The third is to engage customers on customer’s terms not on your company’s terms. I think the world has completely changed in how brands are managed. It’s not really about who you think you are, it’s who you truly are in the minds of your customers. How do they see what you’re doing of value or not of value, and they really own the connection to your brand. You have to do deeply understand how customers are perceiving you, and then drive your strategy, and your company strategy and your brand around making sure that you have great insights there.

(21:21) So I would say individual work styles, super important. The engagement of employees that at every level from team to group, to department to company, and then how you’re digitizing and creating customer connection, your customers, and that creates a community of interest that then can be used to help your prospects understand your special value propositions that is unique and differentiated.

Michael:

(21:50) So focusing on collaboration this way creates a kind of coherence inside the company around the identity of what the company is but that needs to recognize how customers see the company.

Elisa:

(22:11) Absolutely, I think you know there’s a real understanding in the market today that customers, you know the shift of customers having so much accessibility to your brand, to your company, to your other customers has change the ways that companies need to manage and create strategy.

(22:35) It’s all about how technology has exploded. It’s all about the fact that you can go to a public network and you know right your opinion as an individual customer or consumer, and that can actually impact others views of your company and impact your own company’s actions. So this shift from the company really owns how they are going to message, is really moving to the customers and your prospects on how you’re perceived. And it becomes so much more transparent in the marketplace that you’ve got to take it into account in terms of how you manage the business.

Michael:

(23:16) Elisa we have a question from Twitter from Arsalan Khan and this is an interesting one and he asks what kind of cultural barriers do you see among your customers when they’re trying to embrace collaboration.

Elisa:

(23:34) I love this question, this question is actually the heart of understand how to break through the barriers, because you can have the best technology. You can have the best product, and you can even have all of it available to your employees and then it doesn’t work. Why is that? Is because of either two things, one, the culture doesn’t support it and two, the people don’t embrace it. So it’s really all about the people

(24:07) And what we’ve found is that customers who have leadership orientation around all the things we’ve talked about today, embracing the work style, driving a more transparent culture, making sure that their workforce is aligned to their mission, driving to the transparency that the modern workplace expects today. That is super important to be able to adopt and drive the right technology in your organization.

(24:40) Otherwise what happens people do one or two things. So either find the technology and the stuff they want anyways and it will be siloed off in a particular area in the organization, which means that doesn’t have as much power. Or two, they don’t stay at the company, and they move onto a place that really makes sense for them. And so it’s super important in the collaboration business that technologies don’t just focus on that technology. You’ve got to innovate and have the best approach to that.

(25:11) You also have to understand people, and how people react and change. The best ways we found on that either is the culture is compatible from the get go, or there’s a champion in the organization who really believes in the model and once the culture to evolve. That tends to be someone pretty high up in the organization. It could be a CEO or someone from the C-suite who is really driving the transformational change that that company is trying to achieve in their world. So it’s always people plus technology; it can never be one or the other.

Michael:

(25:49) So you raise a really interesting point and when companies are building a community or trying to foster collaboration there’s always the fear that we’ll build it and no one will come so that adoption won’t be there. And so what are the things that a company that is trying to build a community that needs to do in order to encourage adoption and broad dissemination and use of this collaboration technology.

Elisa:

(26:20) Yeah, I mean we found that once teams start to adopt the different way to work that it can be very visible in the organization and others start to participate. Is really getting to this use case of a particular solution that is going to address the business problem that company is trying to solve, and then having a change management programme and capabilities alongside the technology.

(26:50) Now once the transformation starts to take hold, a lot of our Jive customers say this to us, you know they say, I could never go back to the way I used to work. Because what they’ve found in working this way is that they get much greater results, much greater fulfilment, much greater connection. And many times when our customers may be move on from one company to the next company, one of the first things that they try to champion is to bring Jive into that company.

(27:19) Because just as our habits of the past kind of bring as long to today, once you develop a habit in how to work this way that’s extremely empowering and very productive, you don’t want to give it up.

Michael:

(27:33) Makes sense, once you do it you don’t want to go back. So a few more comments from Twitter, so Christopher Kelly says congratulations on your growth and being on the Deloitte 500.

Elisa:

(27:48) Hi Chris thank you!

Michael:

(27:51) We have great participants with CXOTalk. And Bob Rothman asks an interesting question, he says how do you align people when diverse points of view are so strong and they’re coming from a great place.

Elisa:

(28:10) Did you say that was Bob?

Michael:

(28:11) Bob Rothman.

Elisa:

(28:13) Okay Bob that’s a great question and I think I’m going to tell a story for that one. You know, when people work together there’s always a different level of communication in different types of team, and when you work very openly a very interesting thing can happen, which is the team, the best ideas actually rise to the top.

(2834) I have an experience where we were doing a big idea jam around a certain topic and there was hundreds of people involved in this idea jam, and it was very very visible. And you know the whole concept of an idea jam you know is like a hackathon or a half-day in engineering, you want to actually take the best ideas and do something with them.

(29:00) Maybe it’s not to create a product but you want to take action, you want to drive a new program, you want to make an executive decision. And people get involved and there is so much diversity of opinion and you’re exactly right. Some of the ideas can be actually non-productive or unproductive and you start to see, oh my gosh what if that affects you know the whole group that is participating here, groups with that idea and what the heck am I going to do about it.

(29:29) And what I see time and time again, whether it’s this idea jam that I’m referring to all whether it’s what you would call ‘bad behaviour’ or you know difficult situations, people actually self-correct and they bring the best ideas and people tend to rally around those ideas and then lift them up.

(29:52) And this is what I think that is so inspiring about open technology and sharing ideas, and about working in this kind of manner is that people can really get unified to how they are going to move forward, because of the fact that there is diversity of opinions. If you put that altogether and then drive a decision around it, you tend to get most people on board.

(30:14) I think this is an incredible way of management and I think it’s an incredible way of hearing diverse opinions, so everything can be considered before a decision is made. I do believe it super important that in today’s culture to be able to say, this is what we are considering and you go through all of those motions of diversity and opinion and the thought and all of that, and then you have to have a clear process of who is making the decisions and then how you move forward and execute together. But when you do it that way, your teams come long versus feeling like well, what about my ideas.

Michael:

(30:49) So it’s a matter of having the right environment along with the technology and that kind of sense of inclusiveness where the diversity of opinion matters, but at the end of the day we are going to go for the idea that seems to be the best idea.

Elisa:

(31:06) And on the flip side of Bob’s question is true to, which is ideas were hidden in organizations before, how could you find ideas in the corners of organizations, they’re in remote locations, they’re in other areas of the company you couldn’t, because you couldn’t lift them up to be so visible and be so apparent to others, and now with technology you can do that.

(31:31) We have so many stories in our customer base of ideas that were never known to the company that then solved really critical problems once the organization developed a different way to work. We have one customer who tells us a story about an entirely new revenue generating product line because the way that they change the way that they worked and they were starting to bring forward ideas that wow, like these are ideas that we actually want to execute against.

(32:01) We have another customer who tells us a story about a systemic technology problem that was in the company for many years. And after using and embracing these work styles and different ways to work, they would actually literally be able to solve this problem with a particular remote team, who came up with a unique idea to solve it. They executed it, and after several years of having this issue, they were able to solve it you know within a matter of months with focus. But it was never surface before because this particular team never even knew that they could contribute to solving that problem. So I think it works in both directions, optimizing to the best decisions.

Michael:

(32:41) You know it’s interesting that you brought that up, because the next thing I was going to ask you about is the use of collaboration for innovation, which is basically you just described.

Elisa:

(32:53) Yeah I mean collaboration is technology about getting work done and access and ease. User experience is incredibly important to us we’re really, I think a really interesting company in terms of the mix of we have an enterprise strength, it really a hard core technology for the enterprise. And at the same time its consumer friendly and user experience, so that users have a really simple and accessible way to use the product.

(33:28) So, yes I think it’s used critically to get work done. It’s also used to create great ideas and to share ideas, and for innovation. Many of our customers use our products for the story I said Michael, but also to go beyond that on how do we use it to innovate together, where we are bringing ideas together from all over the organization and by the way outside the organization, and going back to why are companies more and more developing customer collaboration areas and using external communities. Because customers have great ideas to. When they are engaged and working with you in a relationship that I described earlier, they’re actually bringing ideas to the table for your company as well.

Michael:

(34:19) Well that kind of co-creation or co-innovation, or co-partnership is if you can do that with your customers you know in terms of buying signals, there’s no better buying signal, because if you are collaborating directly with your customers they’re in it with you.

Elisa:

(34:39) I think you said it perfectly Michael, and I think that’s one of the core reasons why the market sees this business growing so much over the next year, two years because if you are not actually doing that today you’re either thinking about it, or you’re going to see your competitors doing it and you’re going to start to do it as well. But I think we are only on the beginning, only on the beginning of this journey.

Michael:

(35:02) So let’s talk about user experience and you mentioned that is extremely important at Jive, so maybe you can share a little bit of your thinking, and some of the things that you’re doing at Jive around that.

Elisa:

(35:15) Sure, Jive was a pioneer in this industry in a really great way, really developed this whole concept and category in business to be able to look socially and openly, and all the things that we talked about.

(35:30) With that said, it’s really not about having feature and function and being able to to have all of these different things that you can do with the platform. It’s actually about can it solve my problem in an easy and simple way. And so we’ve really evolved our strategy from all of the things that we can provide from the feature innovation standpoint, to how do we make those features and innovations available in a simple, beautiful, smart interface.

(36:03) Because, remember I mentioned the concept of our lifestyle has created an impacted our work style, we absolutely expect why would be go to work and think, okay, now we want to work with crappy applications, we want to work with beautiful applications because we work with them all day long on our phones and on our tablets, and on our computers in our personal life. So that’s what work is about, so why wouldn’t we want it as easy and as simple at work.

(36:33) So our philosophy on user experience is that it needs to be simple, a needs to be beautiful and elegant from the standpoint of interacting with the technology and it needs to be smart so that it delivers content and context to Michael, who is running his business that’s different in the content and context that it delivers to me or one of my colleagues.

(36:58) And so we’re using technology to make sure that experience is simple and beautiful, but at the same time it’s totally relevant to you and delivers the content that you need on the timelines you need it, because you have different needs in your job than I do.

Michael:

(37:15) So we’ve only got about seven minutes left, but this is a very important point and can you elaborate a little bit on this notion of content and context, and especially in the enterprise with collaboration. So what is context mean in the enterprise in this way?

Elisa:

(37:36) Sure I have different roles in my job depending on what I’m working on, and what teams I’m working on. So if you think of everything starting at the core of what that person or knowledge worker’s identity is. They’re going to be interacting with things all day long that creates different context for them.

(37:56) I may be working in my small workgroup on a particular project that’s due next week. At the same time, the CEO has you know put out a vision for the company that I need to understand so that I can connect and work to that. And there may be some tasks that I need to complete with HR or with IT or with other functions in the company that are cross functional to the identity that I have in my team group.

(38:22) So the context of what content I need every day, is going to be depending on what role I’m playing at that part of the day. So what we deliver is an experience and content that puts you in those roles, so that you can quickly be able to access what you need to either get that task done or what you need to be able to connect with the right individuals.

(38:49) So that’s what I mean by content and context that the technology is smart enough to be able to serve you the content and the experiences, and the people that you need to work with versus what they’re going to serve, what we’re going to serve to somebody else as well in a different context. Some of it is going to be similar in terms of company news, leadership, communication, cultural information, and some of it is going to be very different because it’s cross departments

Michael:

(39:23) So this is one of the keys to the success of collaboration, right is this notion of delivering the content in the right context for that person when they need the information.

Elisa:

(39:37) I think is critical to drive the right level of connection and engagement, which then leads to productive collaboration. So some content is shared by other organizations, and some content may be one of our most valued pieces of content is shared really by my team or by me, and so once that content has surfaced and I’m trying to create the ability to do the next thing with that content, I want the right people to surround it. So it works both ways; so content coming from other areas of the organization or outside the organization, and content coming from me and my team.

(40:15) So the capability to be able to work as an individual, centered on my identity, then being able to work in my team environment, which is my close-knit team of probably a small nature, my department, across those departments and then with my company. Being able to switch those roles and clearly having access to information, tools, and context and all of those roles helping me get my job done, using the technology in a really easy way and most importantly connecting me with the people I need to be connected with.

Michael:

(40:48) And so when those conditions are in place where all of that is happening, then the organisation has the ability to surface interesting things, important ideas that may be out of the limelight but can be useful to somebody else inside the company.

Elisa:

(41:08) Yeah we call that you know the ability to you know, see the surprise and then being able to you know take advantage of that, like ‘wow, I didn’t know that was going on over there. I’m going to connect that with what I’m doing, and now I have an even better way to advance my work, my teams work all the organizations work. So it’s always a great surprise and an innovation, where you then get those ideas surfaced were before they were hidden in places where we didn’t see and we couldn’t take advantage of them.

Michael:

(41:47) You know I have a lot of questions left to ask you, but we’ve only got three minutes, so definitely come back. So how is collaboration as you been describing it different from just people talking.

Elisa:

(42:07) So I think it’s multiple things, so I think there’s the right connections, the right communication, and then the right collaboration. And we’ve talked a lot about collaboration today and really it’s about those three things; connection, communication, and collaboration.

(42:21) Connection is super important because you know we talked a little bit about the macro trends of workforces working from all different places and the diversity of many different aspects of it. You’re not always going to be sitting next to the people that you need to work with. So getting and knowing the right connections is critically important.

(42:43) Communicating in a way that’s both – we kind of talked about content and context, which is which is just in time for me to be able to get my work done. I also need the ability to talk to you real time, whether it’s through you know work application or instant messaging applications, or life talk I need that real-time connection. All of that then you know how I had better collaborate in the right team.

(43:08) So I think it really about those and we call it the three Cs, and really driving the right capability across those. Some of it is about the technology infrastructure and that is super important, but it has to be that I can connect with the right people that I need to get the work done first.

Michael:

(43:27) Okay, wow there’s so much that’s here. So let’s just finish off by can you offer advice to enterprise buyers who are looking at improving collaboration connection inside their organizations. What advice would you have for them?

Elisa:

(43:48) Yeah I mean the first piece of advice I would say if you’re looking at, how do I improve the way we communicate and collaborate inside, and how do I improve the way that we create the right relationships with our customers. Then you really first have to determine how you’re going to pull together the right team across your organization to go and investigate that together. Because that is super important and how people work across different functions and making sure that there is a cultural appetite for being able to change the way people you know get work done today.

(44:24) And you’re going to find that your employees want this, and so you want to work with a team or a company that really has been through this and knows how to guide you through the journey.

Michael:

(44:35) And how about one last last question, what advice do you have for companies that are going down this path for encouraging adoption of this new way of working.

Elisa:

(44:50) Find the passion points for employees needs to change in the company and let them work on it with you. Because what happens when employees own the changes is that they go faster, they go better, and it’s a benefit to everyone.

Michael:

(45:12) So the key is to get by in and make sure that they the employees forms the change that you’re not forcing it at all.

Elisa:

(45:21) That has to be part of it. The same thing on the customer side by the way. Find your biggest issue with your customers and ask them to help you solve it with them that they can interact with each other, and suddenly it’s not a problem. It’s actually something that people are working on together. It’s not only going to get solved faster, but it’s going to create very meaningful relationships along the way.

Michael:

(45:41) Okay, Elisa Steele, thank you so much. This has been wonderful it seems that the conversation has gone by so quickly and we have learned a lot about collaboration and communication inside the enterprise.

Elisa:

(45:56) It’s been really fun Michael, thanks for being a great post.

Michael:

(45:59) So everybody, we have been talking with Elisa Steele, who is the CEO of Jive Software. This has been episode number 143 of CXOTalk. Thank you so much, and we are having a special episode on Monday at 10:30 Eastern time with Robert Tas, who is the Chief Marketing Officer at Pegasystems, so please come back on Monday and of course will be back again next Friday. Thanks everybody and Elisa Steele thank you so much.

Elisa:

(46:28) Thank you.

Michael:

(46:29) Bye bye.

Companies mentioned in today’s show:        

Cisco:                           www.cisco.com

Jive Software:             www.jivesoftware.com

PWC:                            www.pwc.com

Yahoo:                         www.yahoo.com

Mapout:                       www.mapout.ch

GoDaddy:                    www.godaddy.com

Innovation and Technology at Xerox PARC, with Stephen Hoover, CEO

Stephen Hoover, CEO, Xerox Parc
Stephen Hoover
CEO
Xerox PARC

The Xerox Palo Alto Research Center is among the most venerable institutions in Silicon Valley. Founded in 1970, PARC has led breakthroughs in areas as diverse as laser printing and user experience ergonomics. Wikipedia describes these accomplishments:

Xerox PARC has been the inventor and incubator of many elements of modern computing in the contemporary office work place:

  • Laser printers
  • Computer-generated bitmap graphics
  • The graphical user interface, featuring windows and icons, operated with a mouse
  • The WYSIWYG text editor
  • Interpress, a resolution-independent graphical page-description language and the precursor to PostScript
  • Ethernet as a local-area computer network
  • Fully formed object-oriented programming in the Smalltalk programming language and integrated development environment.
  • Model–view–controller software architecture

Our guest on this special episode is Stephen Hoover, CEO of PARC, a Xerox company. Hoover joined PARC in 2011 and oversees PARC’s work for clients in diverse focus areas and competencies including networking, novel electronics, human-centered innovation services, cleantech, intelligent systems, contextual intelligence, and more.

As Vice President of the Xerox Research Center of Webster (New York), Hoover supported core and next-generation research and development. He later led the global organization responsible for the company's software and electronics development. In these roles, Hoover was responsible for multi-million dollar R&D investments and product strategy encompassing several platforms and market offerings. He has led long-term technology investments in grid and cloud computing, nanotech, mobile, the Future of Work, and advanced printing and mass customization technologies.

Dr. Hoover earned his Ph.D. and M.S. in Mechanical Engineering from Carnegie Mellon University, B.S. from Cornell University, and 1 of 10 national fellowships at AT&T Bell Labs. He has 7 patents. Hoover has served on the Board of Directors for the Rochester Museum and Science Center, including leading its K-12 STEM Education Task Force; and is a regional Board Member of FIRST Robotics, an organization which inspires young science, technology, and engineering leaders through mentor-based programs.

LinkedIn: https://www.linkedin.com/in/steve-hoover-04376b3

Twitter: https://twitter.com/HooverSteve

Transcript

Michael Krigsman:

(00:02) Welcome to episode number 146 of CXOTalk, I’m Michael Krigsman and today I’m so excited because I’m speaking with Stephen Hoover, who is the CEO of the Xerox Palo Alto Research Center.  Xerox PARC is one of the most venerable research organizations in the world, and I’ll let Stephen describe all the incredible (Lost video 00:32 – 00:35) that were originally developed at PARC and so Stephen welcome to CXOTalk.

Stephen Hoover:

(00:42) Thank you Michael it’s good to be here.

Michael Krigsman:

(00:45) So Stephen just to begin very briefly tell us about your background. So you’re the CEO of Xerox PARC but how did you get there but very briefly.

Stephen Hoover:

(00:55) Sure, I have my PH.D from Carnegie Mellon and I’ve always been very interested in technology, from a technology side, the kind of the confluence of the physical world and computation. So my research area, technical research background is in applications of artificial intelligence to design tools, to kind of advanced methods of computer-aided engineering and then robotics and mechatronics.

(01:29) And when I finished my PH.D, I joined Xerox quite a while ago, actually 21 years ago and have been in a variety of innovation positions since then. Moving from the research side and into product development and delivery, and back into the research side in some technology strategy role. So it’s been a really interesting opportunity to kind of live across the whole spectrum of innovation from you know, crazy early ideas that you don’t know to work, to supporting you know 10 million customers with a new product release.

Michael Krigsman:

(02:04) So you’re a scientist who’s now managing scientists and researchers and I’m assuming some engineer people, different kinds of backgrounds. Tell us about Xerox PARC.

Stephen Hoover:

(02:18) So it’s a really interesting place and we have as you said earlier, a really storied history of founded in 1970 by Xerox, specifically chartered to create the office of the future. And we did some of the foundational work in personal computing, the creation of Ethernet, which we actually spun out here and in 3Com. To the creation of the graphical user interphase and the integration of the mouse into that to what you see is what you get editing, to the invention of laser printing and the commercialization of that.

(03:01) And have continued in that vein developing innovations for Xerox’s businesses today which is much broader than a printing business but is in fact half of Xerox’s is in the services business.

(03:16) We do transportation services for cities and other local governments, ranging from things like the EasyPass toll systems, and some of your users may be use EasyPass to fare collection systems. We work for healthcare companies in analytics and information management. We do customer care, we answer $2.5 million customer interactions every day that Xerox does.

(03:50) So at PARC, we are set up as a whole subsidiary to support Xerox by developing early-stage technologies and innovation to drive into their business, but what’s interesting we’re set up as a subsidiary also because we’re a P&L, in the sense that we’re in the open innovation business, so we do that not only for Xerox, but for other clients and customers in this world. We stepped into this model in the early 2000s, focused on open innovation as a business practice, actually before Henry Chesbrough coined the term open innovation in 2003, and it makes this a really interesting place, as well as the you know the business model and that focus on not only on some long term innovation and research but also how do I drive the current business results from that, putting those two together and then as I said doing it in this open innovation business model.

Michael Krigsman:

(04:53) So what’s the relationship that you have with Xerox, it’s really interesting that you’re

Michael Krigsman:

(00:02) Welcome to episode number 146 of CXOTalk, I’m Michael Krigsman and today I’m so excited because I’m speaking with Stephen Hoover, who is the CEO of the Xerox Palo Alto Research Center.  Xerox PARC is one of the most venerable research organizations in the world, and I’ll let Stephen describe all the incredible (Lost video 00:32 – 00:35) that were originally developed at PARC and so Stephen welcome to CXOTalk.

Stephen Hoover:

(00:42) Thank you Michael it’s good to be here.

Michael Krigsman:

(00:45) So Stephen just to begin very briefly tell us about your background. So you’re the CEO of Xerox PARC but how did you get there but very briefly.

Stephen Hoover:

(00:55) Sure, I have my PH.D from Carnegie Mellon and I’ve always been very interested in technology, from a technology side, the kind of the confluence of the physical world and computation. So my research area, technical research background is in applications of artificial intelligence to design tools, to kind of advanced methods of computer-aided engineering and then robotics and mechatronics.

(01:29) And when I finished my PH.D, I joined Xerox quite a while ago, actually 21 years ago and have been in a variety of innovation positions since then. Moving from the research side and into product development and delivery, and back into the research side in some technology strategy role. So it’s been a really interesting opportunity to kind of live across the whole spectrum of innovation from you know, crazy early ideas that you don’t know to work, to supporting you know 10 million customers with a new product release.

Michael Krigsman:

(02:04) So you’re a scientist who’s now managing scientists and researchers and I’m assuming some engineer people, different kinds of backgrounds. Tell us about Xerox PARC.

Stephen Hoover:

(02:18) So it’s a really interesting place and we have as you said earlier, a really storied history of founded in 1970 by Xerox, specifically chartered to create the office of the future. And we did some of the foundational work in personal computing, the creation of Ethernet, which we actually spun out here and in 3Com. To the creation of the graphical user interphase and the integration of the mouse into that to what you see is what you get editing, to the invention of laser printing and the commercialization of that.

(03:01) And have continued in that vein developing innovations for Xerox’s businesses today which is much broader than a printing business but is in fact half of Xerox’s is in the services business.

(03:16) We do transportation services for cities and other local governments, ranging from things like the EasyPass toll systems, and some of your users may be use EasyPass to fare collection systems. We work for healthcare companies in analytics and information management. We do customer care, we answer $2.5 million customer interactions every day that Xerox does.

(03:50) So at PARC, we are set up as a whole subsidiary to support Xerox by developing early-stage technologies and innovation to drive into their business, but what’s interesting we’re set up as a subsidiary also because we’re a P&L, in the sense that we’re in the open innovation business, so we do that not only for Xerox, but for other clients and customers in this world. We stepped into this model in the early 2000s, focused on open innovation as a business practice, actually before Henry Chesbrough coined the term open innovation in 2003, and it makes this a really interesting place, as well as the you know the business model and that focus on not only on some long term innovation and research but also how do I drive the current business results from that, putting those two together and then as I said doing it in this open innovation business model.

Michael Krigsman:

(04:53) So what’s the relationship that you have with Xerox, it’s really interesting that you’re an R&D organization that also has a P&L. so as you talk about the relationship with Xerox what does that P&L responsibility imply for you?

Stephen Hoover:

(05:10) So we have two fundamental roles for the company, one again is to do early-stage innovation and research for Xerox for itself, so we had a relationship that then looks like what any, not any but innovation for organizations and large companies that do that well, which means you are you know closely working with the business units on their strategies, you’re developing technologies and new offerings that extend their current business and take them into you know, radically new places. You’re working with corporate strategy, and again to ensure that you are both being influenced by the strategy but also influencing the strategy about where it needs to go, what technology to enable, and business opportunities come out of that

(06:03) And in addition we have this role in open innovation where we again, many of the early-stage technologies that we work on are very relevant to people outside of Xerox. So how do we go and find those customers and clients to help them in their business, and then even find relationships where we may do an early-stage innovation work that we start to work with external companies, and then we bring that company in as a partner for Xerox to extend its offerings. So this open innovation is a very interesting model.

Michael Krigsman:

(06:42) So is the reason for having a P&L is so you can self-fund the organization or are there other reasons beyond that.

Stephen Hoover:

(06:51) One of the reasons is absolutely to be able to look at a broader reach. One of the roles is if you are a good innovation organization or a parent company, then what you are doing is developing innovations were they're occurring in businesses, but also innovating in new businesses that they are not in today, to give them some options to expand beyond their current markets.

(07:27) Now, it may turn out that some of those things aren't the right things for the parent company to take up for a variety of reasons, and then what do you do with those. They may be great ideas but the parent company isn’t the right place to do that. Or it may not be clear in early-stage technology or what the real opportunity is, so how do you go and explore that? When you go explore it by creating those opportunities yourself as an innovation center and finding other companies to do it. So it isn’t one aspect is yes, it allows us to have a broader set of innovation exploration areas, but doing it in this way it forces you to do it kind of in the crucible of a market still, even if it isn’t clear that the parent companies the right company to take that up, or in what form.

(08:17) So it kind of keeps you honest in some sense in that regard because you are forced to go out and compete you know in that way and survive. So yeah, part of it is in the funding to be in broader areas, but part of it is you know, it’s a great crucible to test out new ideas. And you know, in my experience and a long history in innovation there are three major reasons why significant innovations fail.

(08:49) One of them is the technology isn’t right, it’s not ready and it doesn’t work. But another is that you have understood the market wrong. You’re not actually solving the problem you know, in a way that customers will adopt and the third is that you don’t have the right business model. That while you are creating value in the world for those customers, you’re not able to appropriate value along across the ecosystem to the right people in the right ways, so that the whole value chain makes money right. In the end, businesses are going to need to make money to deliver a product success to a customer over the long term. And so, if you’re not exploring those other two aspects; the market and the business model, then I would argue that you’re actually not doing a good job of innovation. So this gives us a much broader way to explore those areas.

Michael Krigsman:

(09:47) So as you say into the crucible of market relevance. Steve we’ve lost your video, so make sure it’s plugged in, if not we keep going because we have your audio, but it would be nice to see you as we saw you earlier.

Stephen Hoover:

(10:06) Google Hangouts says I’m on and I see myself, so sorry I’m not sure what the problem is.

Michael Krigsman:

(10:12) Okay there’s nothing to be done about that. So tell us about research at Xerox, the basic research versus applied or product research.

Stephen Hoover:

(10:36) If your listeners are interested and kind of want to understand this business of applied research versus basic research, and how to think about that in a model, I can refer them, there is an interesting book and the book is entitled Pasteur’s Quadrant, and it’s trying to capture you know in MBA school we learned how to describe the world in a series of 2 x 2 matrices, right. And this 2 x 2 matrices, in this case is articulating one axis is about knowledge for knowledge’s sake or is it about solving a problem.

(11:24) And the other axis is basically about the time horizon of which you are operating, and Pasteur’s Quadrant is this upper right quadrant where the idea is it’s not so much about knowledge for knowledge’s sake, but it is about generating new knowledge and new science because there is the focus area in which you know you need new knowledge and new science to understand the world, and then to create things in the world which deliver the results that you need, and that’s the idea. You know, Louis Pasteur, he was very focused on not just new knowledge, but okay, how do microorganisms work, right. What is going on in this space, and knew that knowledge was needed to then lead to things like antibiotics and antiseptics etc.

(12:15) And so we live in that quadrant and you know the one below it which is okay, with that new knowledge now how do I actually turn that into a product or an offering. So, so I actually described that left axis wrong, it’s about a product or an offering and about knowledge for knowledge sake, or is it about application.

(12:39) So we live more in that right-hand side of that, and balance between the upper right and the lower right. So we do care about understanding the knowledge generation, generally it is in a focused area where we believe that we can both contribute to the quality of the knowledge and convert over time that knowledge into an innovation, right. And that’s one of the distinctions between innovation and invention, innovation is an invention that solving a problem right that people care about. And in the end we are about innovation, right, but to do that we do good science in those focused areas and that’s the balancing act that I think you’ve got to walk, and a lot of the more pure basic science, understanding the world right. You know, string theory, those types of things, that is more in an academic environment.

Michael Krigsman:

(13:37) And what are research areas or innovation areas that PARC is focused on right now

Stephen Hoover:

(13:45) We’ve got five core areas. One of them is there are a lot of people focused on big data analytics and we certainly are as well, because the amount of data in the world and the sense that you can make out of it, it is absolutely one of the forefronts.

(14:08) One of the things that we try to do is bring a unique perspective to that, which actually ties back to our history and so I called human centered big data. And what I mean there, and I’m going to start with an analogy right, so one of the things that we described earlier at PARC in our foundational days is we looked at computing technology, and we made it so that people, average people can use it; the personal workstation. That you don’t need to be a computer programmer or an expert, and we were able to do that because we understood how work got done in an office. Right, and this is again one of the values that Xerox brings to the market today, Xerox talks about work and work better. Very focused on the job that the person is doing.

(14:57) And our role then is to understand the jobs that people are doing and how technology can help make them get that job done, and in a way again that is easy for the person to adapt. So for example, one of the things that we’re doing today is in the support of Xerox, Xerox as I articulated earlier has a significant business in customer care. Right so, 2.5 million customer interactions daily, well how can we learn over all of those interactions, which is a more likely problem to solve, more likely and answer to a problem a customer has.

(15:38) and And how can we do that in a way that today you have got capabilities where computers – you know, automated chat-bots, right. You’re chatting over the computer and on the other end it’s not a person initially but a computer agent. Well, it turns out that computer agents are pretty capable, but there’s a place where they run out of knowledge right, and what you don’t want to do is tick off the customer on the other end because what starts to become apparent is this stupid agent asking them stupid questions and not really resolving their problem.

(16:16) So we are developing technologies to actually have dialogues and monitor that dialogue. Is the person getting frustrated? Does the conversation seem to be progressing, and if not, how do you seamlessly hand that call over to a live agent in a way that nobody even knows or can detect. That all of a sudden there is a person on the other end answering the question because the computational agent has run out of its ability to solve the problem.

(16:44) So this idea of, again human centered big data, here the human is you know both sides of that equation, the end customer, so really understanding their state of mind and what they’re doing. Then the call centre agent and how are you helping them take over that call, and then as I said, actually using that as a learning opportunity. Now, we watch what the customer care agent, the human does to solve the problem, we take that data and through machine learning, make our diagnostic algorithms better for the next time.

(17:21) So I personally think there is a kind of a really big idea in here that is there is a lot of focus on pure automation and that’s good and it will happen, but as computers become more and more capable, you’re reaching this point where we're going to have human computer teams solving problems. And how do you interact together to come up with a better answer, and there is a lot of science in that, there’s a lot of technology in that. I can give your listeners an example in this, it used to be that humans were best at chess in the world, and then artificial intelligence, technologies came along and computers beat the best humans in the world. Big surprise you know just over a decade ago too many people and too many chess players.

(18:14) But who are the best computer chess players today? Human computer teams, literally you take a person and a computer and they work together because computers are really good at deep fast search, evaluating all of these alternatives, but they are not the best at what’s the high-level strategy. So, you may be thinking three or four strategies, the computer investigates those three or four strategies and tells the human the likely outcomes, the human therefore picks the next strategy and they play back and forth in the cycle. That’s what the best chess player is today, and we’re going to see work happen more and more in that way, so we have a significant investment in this whole area of machine learning and empathetic computing, understanding again what’s people’s intent and behaviors and how do I help them.

Michael Krigsman:

(19:07) So a core foundation of what you’re doing is this notion of simplicity and making the problems applicable so that people in ordinary offices can make use of these technologies

Stephen Hoover:

(19:22) Exactly, work can work better and it’s interesting you talked earlier you know at PARC we have a large number of scientists and engineers in the physical sciences and electrical engineering and chemical engineering, but we also have social scientists. Cognitive psychologists, who are experts at conversational analysis, ethnographers who go out and understand and observe and again as people are doing a job. What is the real job they're doing and what is the things that are hard and easy about it and what can help them best.

(20:00) So recognizing again, you got it dead right, this is about how do we do this simply and in ways that stick with people that actually they can use, requires that kind of deep understanding as well as you know, design thinking and those types of things. It’s more than that, there's an actual science into that. And we do work in areas again of modelling cognitive processes of people right, how do people think.

(20:32) We have some very interesting work in those areas particularly around human behavior. You know one of the hardest things to do is to change yourself right, be it I want to eat less, I want to exercise more, whatever that is, there’s an actual science of how change happens. And a lot of people are saying you know, we’re going to build apps to monitor your food and be the nanny on your shoulder telling you what to do. That’s not enough, you actually have to, again understand how people do change behaviors and then build those artificial intelligent agents and chat-bots to provide the suggestions and advice to people in a way that actually sticks.

(21:19) So for example we’ve gone out and it turns out one of the best ways for people to make changes in their lifestyle is a coach, and we’ve done studies of how coaching works, why does that work and how could you provide the same, and coaches are very sensitive and very dynamic right, watching how you’re behaving, how do you respond and then giving you the right nudge and are you the right person. You know, some people respond more to you know, ‘hey why don’t you try harder’ and some people respond more to ‘hey that was a great job’ right, and a good coach knows what you are and picks that up and tunes that message and styling to you. Again, how do we have computations to determine your personality profile and address you in that way, and there’s a lot of science and research we’re doing in those kinds of areas.

Michael Krigsman:

(22:10) I spoke yesterday with a woman named Julia Hu, who is CEO of a company called Lark Technologies which is actually working precisely in this area you were describing of coaching. So they take sensor data from phones and then they take human experts and they deliver the coaching through an app, so it sounds like this is a similar kind of area.

Stephen Hoover:

(22:38) Yes a very similar area and then how do you engage you know people’s social network right, into this in a fruitful way, and again there is some science there about what makes good teams, right, how to build a social circle in this case that is again, the right mix of people and the right kinds of things and yes how do you create you know, AI agents who can perform some of the coaching capabilities. That’s dead right, what’s interesting we’re doing this for a variety of reasons. I mean it’s actually very relevant as I said for Xerox as well as some of our customers outside of Xerox.

(23:26) We do a lot of work today with Healthcare companies in helping them kind of manage their information processes and more and more information is about their patients. You know, what are they doing and how are they behaving, so we see moving from not only kind of managing the digital flow of information inside the enterprise, but helping enterprise organizations serve their clients more directly. I mean as everybody becomes more and more connected I think there are fewer and fewer B2B companies and everybody in some sense becomes a B2B2C connected customer.

(24:13) Again, Xerox is more of traditionally a B2B business, but as our customers are business customers are connected to their customers in real time, which we all are; we’re a connected world, we all become a B2B2C company, so that’s part of the progression that we’re on.

Michael Krigsman:

(24:27) So as you’re dealing with these future of work issues, you talking about technologies but at the same time there’s just as much a cultural and human and social set of dimensions so you must be addressing those as well.

Stephen Hoover:

(24:44) Yes and there’s kind of two sides to that and one is inside our own innovation environment right. so one of the things that we really value at PARC, we think a lot of innovation comes from multidisciplinary work, which kind of makes sense because okay, there’s a well understood area or field, a silo, a technology and you make progress in that field, then there’s another one. And if you can connect the two in interesting ways then you know that’s a white space; it’s a new opportunity.

(25:29) And so I talked about there’s a lot of focus on big data and on what computers can do and we’re saying, but wait, it’s also about how people learn and how they think and you know, marrying those two together.

(25:38) So, one of the cultural things we try to do is to leave space for people to explore those white spaces because I think that’s a key piece of innovation. The other pieces is you know, a lot of ideas when you start out it’s not clear where they’re going or that they make sense but some of them will. But if you try to kind of narrow those down and control those too early before the people got the time to experiment and figure that out, then you’re going to miss a lot of innovation opportunities.

(26:17) On the other hand if you just keep pursuing a bad idea (26:21 – 26:23 Lost audio), well you’re wasting everybody’s time and money. So it’s a real balancing act on how do you give people enough freedom to kind of explore something at the beginning that it’s not clear that it makes sense, but they’ve got to have the ability to go and figure that out. And you’ve got to let people be – you know, you’ve got smart people who can think out of the box, you know you’ve got to let them be a little crazy every now and then. And if you try to turn this too much into a tops down process you’re going to end up in a place that’s not very innovative.

(27:02) So there’s this real balancing act between how do you set some large strategic goals, and then how do you give people the white space to innovate, but how do you devine the good ideas from the bad ones and kind of invest more in those, so there’s a whole art to that.

Michael Krigsman:

(27:22) So how do you herd the genius set of cats inside that crucible of the market of reality to produce something that’s absolutely great. 

Stephen Hoover:

(27:37) Well I’ll push on you a little bit is yeah that’s a piece of it but how do you let them herd you. You know it isn’t one way. I mean I don’t know where the right places to go, all right I’ve gotten really excited. You heard me earlier about the idea of human computer teams, and you know it does start to resonate with me as I said, I see a strong value in this idea of connecting humans and technology and solving their problems together, and again that’s just who PARC is.

(28:14) But framing this idea of new human computer teams, right, that’s not something I came up with. That’s the cats who herded me right and they start to talk that way, that’s an interesting metaphor. Right, on some levels it’s a metaphor, but metaphors are powerful because they give you different ways to think about things. And so when you start to think about it that way that’s a different way. So it’s not only how do you herd those cats but how do you get herded.

(28:42) That’s a really important piece, and if you want people who are innovative you’ve got to be open to that. I mean or they’re going to go somewhere else where people will stop and think differently right. So if I can’t think differently after some of the people who are working in here who have new ideas, then you better fire me because I’m not going to get the job done. So it’s a two-way street.

Michael Krigsman:

(29:07) So you yourself being adaptable in terms of what you’re doing and I’m assuming also in terms the strategy of the organization to some extent.

Stephen Hoover:

(29:18) The strategy of the organization, what are the you know the technical directions, as I said this whole framing around human computer teams it’s a relatively new framing. And I think again one it’s differentiated and valuable which is what we ought to be doing.

Michael Krigsman:

(29:34) What about some other areas, such as Internet of Things or automation and robotics. I know you’re doing work in areas such as that so talk about that a little bit.

Stephen Hoover:

(29:47) So the couple of different ways into that. So certainly the Internet of Things we see as the analogy that I make for people, it’s a really important trend for people who haven’t kind of thought about it deeply but have heard about it I think it’s a useful analogy.

(30:12) If you think about it you know one of the things that Google and search has done for us is it has infinitely expanded the capacity of the human memory, right. I don’t have to memorize all the facts in the world. I can go out and look them up and find it if I want to learn about reinforcement learning. You know, I go and Google it and I find the Wikipedia article and I learn about it.

(30:41) So it’s expanded my brain, my memory to be you know to nearly infinite capacity right, that I can quickly and easily find that new information and integrate it when it’s relevant to me on a preference.

(30:53) The analogy I want to make for you and your listeners about the Internet of Things is it’s about Googling reality. It’s about right now my body right, my body is the sensor. I see things, I hear things, I sense the world around me, well why does that have to be geosynchronous and why does it have to be synchronous in time and space from where I’m at, right which is what my censors normally are right.

(31:21) You know, I sense something at the time it occurs and it has to be near my body, well, the Internet of Things says no it doesn’t. I want to understand the state of pollution in Beijing; I go and find it on the internet, right.

(31:33) So this idea of kind of expanding your body right, so now take that idea and that’s for an individual not for an organization right. I can instrument and understand what my customers are doing with my products across the world now. I can understand are those devices starting to fail. I can understand the environment they’re in and adapt their behavior to be responsive to the local environment, right.

(32:05) You know, GE and their jet engines, when a plane’s running into a headwind you know, run the jet engine differently because I know I’m in that situation. So this idea of the Internet of Things and then you couple it with the data analytics and the machine learning so that I can make sense of all that data, right, to get a job done, what’s the problem you’re trying to resolve. And in our case Xerox we put – again transportation systems, cameras, where our cars are going. We as I talked about earlier about EasyPass, that’s the Internet of Things. You put a little transponder in your car, it senses as it goes by, it knows it’s you, it charges your credit card. But now, why do I have to put the transponder in the car, I’m going to have a camera up there to take a picture of your license plate because computers can see.

(33:00) And now I can see how many cars go by and I can help cities understand how to manage traffic better. You know there are cameras across cities for a whole bunch of reasons now. I can be looking at parking and helping people find where’s the open parking space.

(33:17) Connected cars, cars drive by, you know, how many cars today and I think it’s a regulation either today or next year that all cars will have a backup camera. Well, you’re driving down the road and your camera is seeing where there’s empty parking spots, how do I get that information and direct people to the open parking spots.

(33:38) To optimize again the capabilities for people to get the job done they’re doing, and so in our view that’s the power of kind of the Internet of Things and going to capture that power and then from a technology viewpoint where we’re working, whether it’s analytics to kind of optimize outcomes and behaviors.

(33:56) Another, we have a significant investment I talked about our foundational work with the creation of Ethernet, we have a totally radical new network and technology called Content-Centric Networking that really deals with two things; the explosion of information that is occurring and is just going to radically increase with the Internet of Things. Because now if I can Google reality, imagine all that data. And the reality is current internet protocols isn’t designed to handle that quantity of data. And the other piece as we all know is security.

(34:30) It’s not built into the network, it’s an add-on so Contract- Centric Network that builds security inherently into the network and therefore is much more secure.

(34:42) And then the third area for us is the Internet of Things, I talked about a lot of it is it’s sensing the world. How do I do low cost, highly distributed sensing if I’m going to put the things on the internet and if it takes $100 to put a smart computer on a bottle of vaccine to measure it’s temperature during to the shipping, well I won’t do that. but we’re working on technologies in areas like printed electronics, how do I make very low-cost electronics that are smart enough.

(35:21) Silicon has got cheaper and cheaper to put on more and more transistors. You know, my iPhone is the power of a crazed super computer from 1996 and I can buy it for 200 bucks with my 24 month plan. But if I want to put a temperature sensor on a bottle of vaccine as I said for 50 Cents, the reality is I don’t need a whole lot of intelligence, and it’s gotten cheaper with silicon to cram more and more intelligence, but what I want is a whole other price down at that dollar, smart label, sensor that I can put out and sense those things. So we have a whole focus area on printed electronics because we think that’s the Internet of everyday things. And we have a set of partners in that area and we’re also working with Xerox you know to take some of those initial technologies to market.

Michael Krigsman:

(36:06) How does this actually work? So do you have projects with commercial companies, what are the mechanics of that?

Stephen Hoover:

(36:14) So we have our sort of open innovation business. So the mechanics of this are, yes, we have four classes of open innovation models. I mean, one is a pure kind of collaboration, right. We’ll work in an area and we’ll go out and find a university or a commercial company who has got capabilities in those areas and we form an agreement to team and kind of I’ll solve this part of the problem and you solve that part of the problem, and we’ll share and compare information. And that’s a kind of a classic way to a lot of open innovation that happens, and by and large at most companies it means universities.

(36:58) The different thing that we do is we also go out and we do a fair amount of early stage, high risk research under Government funding, because it turns out the Government is willing to fund and has a process to fund a fair amount of potentially high value, but high value risk, longer term research and technology and development.

(37:23) So we go get research contracts with DARPA if you’re familiar with them, the crazy wing of the defense department research right. we don’t do any classified work but a lot that they do isn’t classified because they’re trying to again just uncover new areas. We do work with the National Institutes of Health; we do work with the Department of Energy in those areas. And then we also work with commercial clients where we are helping them innovate in new spaces and that’ll take two kind of forms.

(37:59) Sometimes it’s a problem that they have and we co-ideate with them, how could you solve that problem, we’ll generate ideas; generate a product out of that. we have a whole process for this. Again, kind of our history in innovation, there’s a way to approach that initial stage of ideation. And we work with them and develop that and then, if we find a good idea they’ll partner with us, fund us to do the forward looking research and innovation in those areas.

(38:31) And sometimes it’s again innovation that we’ve already developed, be it on government funding or other sources where we’re partnering with them to take that to market. I can give some examples if that would be useful for you.

Michael Krigsman:

(38:46) Well you know, we’ve only got about five minutes left, and I wish we had another hour but maybe tell us about automation and robotics, what are you doing with respect to that?

Stephen Hoover:

(39:07) Our focus comes in two ways and one is ties very much to what I articulated today, kind of half of Xerox’s business is in a document and information intensive business processes. And so there is what we call robotic process automation, which basically is looking at current workflows and work streams that are not automated, and how do you automate them in a digital world, right. So this is physical world automation and this is digital automation, and it takes the characteristics of the analytics and things that I talked about. And again automating customer problem resolution, and so there’s a whole focus in that area.

(39:49) In terms of the automation in the physical world, we’re focused on – and this is one of those areas where we’re kind of in advance of where Xerox current business is, but I think there’s some interesting long-term opportunities for what we call ‘Systems of Systems’. 

(40:12) So here we’re doing some interesting work with the defense department about – you know a passed example that I can talk about what we’ve done is satellite swarms, which is basically the idea is right now, we build one big satellite and send it up in space, and if that satellite is really expensive and if it fails you’re done.

(40:36) What if instead I could build a series of small satellites that were all individually re-deployable but can be controllable in some coordinated way. So you know, it’s a swarm of 50 satellites, small and cheap. Well if one dies that’s okay. When I want a lot of imagery on a certain place I’ll aim 50 of those at the same place, when I don’t I distribute them, and there’s a whole challenge of basically if you think about it you’ve got this complex system and you’re trying to redesign it constantly during its use because you’re trying to have it do different things. As pieces fail, and don’t fail, multitask again to look at different problems, to sense different things.

(41:18) So there’s a whole science around kind of AI planning and thinking how do you manage that system of systems. The other piece of it is, back to my human and computer team. In the end those systems are being tasked by a human. How does a human interact with that level of complexity and manage it and hope the system has local autonomy understand what the human that begat the task, what the human is trying to perform and coordinate and adapt together. And so we’re working in that space and I think about it as the Google autonomous car, well what do you do when you’ve got 1000s of autonomous cars on a road, and how do they behave together. And how do they behave with the humans that interact with them. so we’re at that system level of the problem, and we think that’s where the next wave of complexity as automation occurs it’s going to be systems of systems interacting and the science and again the interactions with people we think has interesting problem spaces.

Michael Krigsman:

(42:28) So a core part of your activities it sounds like this notion of where the person and the computer come together, and how does the person accomplish something of value of using the computer, and having the computer be structured and the user experience be structured so that the human can manage that complexity.

Stephen Hoover:

(42:51) Exactly and again there’s a whole set of science around that, someone goes that’s design no it’s more than design, you know it’s how do I understand, how does a computer build a model of the world that’s a shared model with the human because there’s assumptions. Again, you and I are having a conversation and there’s a lot of implicit assumptions that we share and those evolve over the conversation. How do I do that? Again understanding are you a pessimist or an optimist, are you a realist and how do you take information in better.

(43:27) And what is the best way to split the tasks that again leverages the strengths of computers and people, as computers become more capable that becomes more important and harder, and how do you leverage that. So there’s a whole host of scientific and technical challenges in there that we’re investigating.

Michael Krigsman:

(43:47) Well it’s a fascinating conversation Steve, as we go, as we leave unfortunately our time is just about up, what advice do you have for organizations who want to innovate, maybe they’re stuck with their traditional processes, and having resistance and pushing back, folks in those organizations, how can they do a better job of pushing innovation.

Stephen Hoover:

(44:14) The two biggest things that I see that people struggle with are 1) Is this idea of risk. Exploring new areas and ideas is inherently risky, and so much of our business process where you’re about delivery of something is about risk avoidance, and in innovation you need to do the exact opposite. You need to embrace risk, not because risk is good but because the reward that comes with solving that problem is valuable, and as I said it’s not about risk avoidance. I said earlier there’s three kinds of risk: technical risk, market risk, business model risk. Wherever the biggest risk is, how do you create an experiment to uncover is that risk, risk means I can’t predict the future. To predict what is going to happen or to design a system to you know, so that that risk doesn’t come true.

(45:17) So there’s this weird mentality shift of embracing risk and then agile learning processes around that. the other piece I would say is the hardest thing for existing businesses to do is to innovate in a way that challenges your current business model.

(45:38) New technologies can radically change business models and if you’re not open to that you’re going to get caught behind the eight ball.  So how in your organization are you leaving space and it can be very painful at first, I  mean you know if you’re used to selling hardware and software and cloud computing comes along, you’re going to think you’re going to make less money because people are going to buy fewer computers and you don’t get as much money off of every unit sell in the cloud. They can buy it by the drink, they don’t have to buy it at peak capacity, they buy you know the dynamic capacity.

(46:20) So yeah, you’ll make less money on each transaction, but the consumers in the end will consume more of it, and that’s the opportunity you’re going to get but it’s really hard for existing businesses to see that. so set up space where you are innovating and exploring innovation in ways that hurt your own business. If you don’t do that and technology changes your business you will end up a victim and you don’t want to be there.

Michael Krigsman:

(46:42) Well, it sounds like what you’re describing is the philosophy that you said earlier that you aim to yourself, but you have to let the cats hurt you as well, which means be open to change, be adaptable and flexible.

Stephen Hoover:

(46:58) Yes very good.

Michael Krigsman:

(47:01) Well Stephen Hoover, CEO of Xerox Palo Alto Research Center, known as Xerox PARC thank you so much for taking the time. This conversation has gone by in a flash and it’s been fascinating. Thank you so much.

Stephen Hoover:

(47:18) Thank you, take care.

Michael Krigsman:

(47:22) And to everybody who has been watching we really appreciate it and come back next week where we will be talking with the CIO, the Chief Information Officer for the city of Palo Alto. Thanks so much everbody, have a great week, bye bye.

Mentions in today’s show:     

DARPA:                                    www.darpa.mil

GE:                                           www.ge.com

Google:                                    www.google.com 

Lark Technologies:                  www.lark.com

Wikipedia:                               www.wikipedia.com

Xerox PARC:                            www.parc.com

Smart Cities and Digital Transformation, with Jonathan Reichental, CIO, City of Palo Alto

Jonathan Reichental, CIO, City of Palo Alto
Jonathan Reichental
Chief Information Officer
City of Palo Alto

The City of Palo Alto lies at the heart of Silicon Valley near Stanford University and companies such as Google and Facebook. In this episode, Palo Alto's Chief Information Officer, Jonathan Reichental discusses smart cities, digital transformation, leadership, and innovation in local government.

Dr. Jonathan Reichental, currently the Chief Information Officer (CIO) for the City of Palo Alto, is a multiple award-winning technology leader whose 25-year career has spanned both the private and public sectors. In 2013, he was recognized as one of the 25 doers, dreamers, and drivers in government in America. He also won a best CIO in Silicon Valley award and a national IT leadership prize. His innovative work in government has also been recognized by the White House. Dr. Reichental works with his teams to apply technology innovation in organizations to create new value and to enable work to be more meaningful and fun. He is a popular writer, including recently co-authoring The Apps Challenge Playbook and he is a frequent public speaker on a wide range of technology and business-related topics.

LinkedIn: https://www.linkedin.com/in/reichental

​Twitter: https://twitter.com/Reichental

Transcript

Michael Krigsman:

(00:02) Welcome to episode number 147 of CXOTalk. I’m Michael Krigsman and today I’m speaking with Jonathan Reichental who is the Chief Information Officer for the city of Palo Alto in the heart of Silicon Valley. And we’re going to be talking about smart cities and data and government and open government and a lot of interesting topics related to innovation. Jonathan, thank you so much for joining us today.

Jonathan Reichental:

(00:37) Thank you Michael, it’s great to be here, I love what you’re doing here so I can’t wait for the conversation.

Michael Krigsman:

(00:43) Well thank you, I am excited and I’ve been an admirer of yours for a long time, watching your tweets and from afar watching the things you’re doing with government and data in Palo Alto. So let’s start by give us a very brief sense of your background, just to set context.

Jonathan Reichental:

(01:05) Sure, so the fact that I’m doing public service is a little bit of a surprise to me as it is to many of my own colleagues, friends, and family. Most of my career is in the private sector, it’s always been tech and it’s always been innovation so those are the two common themes throughout my career today.

(01:27) So I was in the private sector for close in for about 20 years and it’s only in the last four years that I’ve embarked on this very interesting adventure around the future of cities and the future of local government. So that’s my journey and it’s a fantastic place to innovate as you’ll hear in the minutes ahead.

Michael Krigsman:

(01:50) Well tell us about Palo Alto. It’s a famous city and you’ve got a lot of interesting companies there, so tell us about Palo Alto.

Jonathan Reichental:

(01:59) It is a unique place, you’re right Michael. I think that people are surprised at the size of our city. It’s 25 square miles, it’s 67,000 residents only, but I have to say that it grows by 120,000 more people during the day so right now we’re at about 180,000 people in our city.

(02:22) There’s a lot of reasons why it’s become sort of at the heart of Silicon Valley. Hewlett and Packard have a lot to do with it as of the semiconductor industry overall and bringing in engineers out here and building facilities.

(02:40) Today we kind of have a bit of a nexus of important things. We have Stanford University up the street; you can almost see it from my office. You’ve really got the venture capital home here in the world, billions and billions of dollars flowing through Palo Alto each month. You have an affluent community as a result of all the tech firms and this propensity towards innovation. You have a lot of people who are engaged in networking and engage in civic life. So it’s not one thing which makes Palo Alto special, it’s a combination of things.

Michael Krigsman:

(03:30) That must present a challenge to you. You’re chief Information Officer in a city that’s populated with Stanford, the VC’s as you say, Facebook, Google and so many startups it must present a challenge for you.

Jonathan Reichental:

(03:49) I used to be the Chief Information Officer with O’Reilly Media working with Tim O’Reilly. I used to make the comment that being in an amazing company like that it feels like everybody is a CIO or CTO. Now I think I live in a city, I mean I work in a city where everybody is the Chief Information Officer. But I like to think of this as a very positive thing. You know, people are very interested and understand tech and I have this incredible network that I can leverage for ideas, for participation, and brainstorming.

(04:27) A lot of the big tech companies now and a lot of small companies are getting into the civic innovation space. So I have to say that it is something that is a very big positive. I never lose sight as I go around and talk about the cool things we’re doing and some of the assets that I have at my disposal and

Michael Krigsman:

(00:02) Welcome to episode number 147 of CXOTalk. I’m Michael Krigsman and today I’m speaking with Jonathan Reichental who is the Chief Information Officer for the city of Palo Alto in the heart of Silicon Valley. And we’re going to be talking about smart cities and data and government and open government and a lot of interesting topics related to innovation. Jonathan, thank you so much for joining us today.

Jonathan Reichental:

(00:37) Thank you Michael, it’s great to be here, I love what you’re doing here so I can’t wait for the conversation.

Michael Krigsman:

(00:43) Well thank you, I am excited and I’ve been an admirer of yours for a long time, watching your tweets and from afar watching the things you’re doing with government and data in Palo Alto. So let’s start by give us a very brief sense of your background, just to set context.

Jonathan Reichental:

(01:05) Sure, so the fact that I’m doing public service is a little bit of a surprise to me as it is to many of my own colleagues, friends, and family. Most of my career is in the private sector, it’s always been tech and it’s always been innovation so those are the two common themes throughout my career today.

(01:27) So I was in the private sector for close in for about 20 years and it’s only in the last four years that I’ve embarked on this very interesting adventure around the future of cities and the future of local government. So that’s my journey and it’s a fantastic place to innovate as you’ll hear in the minutes ahead.

Michael Krigsman:

(01:50) Well tell us about Palo Alto. It’s a famous city and you’ve got a lot of interesting companies there, so tell us about Palo Alto.

Jonathan Reichental:

(01:59) It is a unique place, you’re right Michael. I think that people are surprised at the size of our city. It’s 25 square miles, it’s 67,000 residents only, but I have to say that it grows by 120,000 more people during the day so right now we’re at about 180,000 people in our city.

(02:22) There’s a lot of reasons why it’s become sort of at the heart of Silicon Valley. Hewlett and Packard have a lot to do with it as of the semiconductor industry overall and bringing in engineers out here and building facilities.

(02:40) Today we kind of have a bit of a nexus of important things. We have Stanford University up the street; you can almost see it from my office. You’ve really got the venture capital home here in the world, billions and billions of dollars flowing through Palo Alto each month. You have an affluent community as a result of all the tech firms and this propensity towards innovation. You have a lot of people who are engaged in networking and engage in civic life. So it’s not one thing which makes Palo Alto special, it’s a combination of things.

Michael Krigsman:

(03:30) That must present a challenge to you. You’re chief Information Officer in a city that’s populated with Stanford, the VC’s as you say, Facebook, Google and so many startups it must present a challenge for you.

Jonathan Reichental:

(03:49) I used to be the Chief Information Officer with O’Reilly Media working with Tim O’Reilly. I used to make the comment that being in an amazing company like that it feels like everybody is a CIO or CTO. Now I think I live in a city, I mean I work in a city where everybody is the Chief Information Officer. But I like to think of this as a very positive thing. You know, people are very interested and understand tech and I have this incredible network that I can leverage for ideas, for participation, and brainstorming.

(04:27) A lot of the big tech companies now and a lot of small companies are getting into the civic innovation space. So I have to say that it is something that is a very big positive. I never lose sight as I go around and talk about the cool things we’re doing and some of the assets that I have at my disposal and we do take advantage of it. We do like to work with a large range of stakeholders to achieve the successes we’ve had.

Michael Krigsman:

(05:04) So you take advantage of the local community and essentially the brain trust that exists all around you.

Jonathan Reichental:

(05:11) Yeah, first of all you know, we were inspired by the amazing stuff that happens around us. One of the things that I do with my tech team here in the city is about every two month I take the team out for an hour or two to visit one of the amazing businesses in Palo Alto. And we’ll have our meeting there and we’ll have our all-hands meeting. We’ll hear from the company, we’ll hear from one of their leaders in what they do. We’ll observe the environment in which they work. We were very inspired about the open workspace model and we’ve adopted that here as a consequence.

(05:51) So it broadens minds and it’s a way for us to be inspired and by the way it’s an interesting way for companies to be inspired about the possibilities of local government.

Michael Krigsman:

(06:04) And do you find that these companies are willing to invest the time to share with you and your team.

Jonathan Reichental:

(06:16) We’re sensitive of course to the role of local government and not to over impose. I’ll give you an example, last year I hosted what was called the Palo Alto Apps Challenge. It was a competition that lasted about six months and it was a way to engage the community in helping identify challenges and then solving those challenges by writing software and eventually deploying some smartphone apps.

(06:49) It was enormously successful by the way, 30% of the participants were under the age of 18, which to me was one of the greatest metrics and outcomes of it. But during this journey we had an opportunity to tap into the local innovation ecosystem and in particular we brought some of the 10 finalists to Cloudera. Cloudera is a growing big data company; very successful, and we brought them to Cloudera, their CEO said he would support us getting some coaching from their senior engineers. So the finalists would be able to work with these senior software engineers.

(07:35) And we did, and we went there and we spent an evening with them. And later on I asked the finalists and the eventual winners, you know, what was the thing that was the most exciting to you as part of this process, and they listed a couple of things but in the top three was the ability to work with you know some of the finest software engineers in the world for several hours, so they could comment on code, they could do white boarding sessions. They really liked that and that really in many ways you know epitomizes what’s pretty neat about living and working here.

Michael Krigsman:

(08:14) Now, you’ve been very involved with this idea of digital transformation in cities also known as smart cities. Tell us about that, so to begin with what is a smart city?

Jonathan Reichental:

(08:30) Yeah, we’re getting into this topic in a big way. It does start with digital cities, so we started the journey about four years ago, around the time I joined. You know, the city manager approached me and said, Jonathan what’s a bold vison for tech at City Hall, and you know I was doing my own work, and I was researching and talking to a lot of colleagues and talking to a lot of people outside the city. And we basically settled upon the idea of creating, building and enabling and leading a digital city in the United States.

(09:04) And digital cities is just what it sounds like. It’s using the internet to provide city services, so it’s taking a lot of paper based services and putting them on the internet, on website, deploying lots of cell phone capabilities and smart phone capabilities, having a more open government and making available data in machine consumable formats as well as other formats. A whole collection of internet related digital related areas.

(09:38) By the way, we started that journey in 2011. In 2013, the center for digital government based out of Sacramento named Palo Alto the number one digital city in America for our size. So we were thrilled to get that recognition of our efforts. It was not a recognition that we’d finished the job. If anything it was a recognition that we had started the journey and were heading in the right direction, and each year since then we’ve been named in the top five most digital cities in America.

(10:11) But if I could get to the heart of your question which is smart cities, smart cities is really the next generation for this. In digital it is really about moving from analog to bits, and in smart cities it’s not only the sort of digital world, but it’s the physical world too.

(10:33) So if I could sort of summarize, we have significant challenges in our cities, whether it’s great transportation options, whether it’s the impact our cities are having on climate change, and they happen to be the number one most important place for making a difference. Whether it’s energy and energy solutions, whether it’s better buildings, more health, better public safety, all of these things are going to benefit from an improved and innovative technology.

(11:06) So if we bring together massive city problems – and these are tough ones. We bring together innovative technology, data, civic engagement. If you kind of mash that together you really have the beginning of a definition of a future in which cities just operate better; they create a better quality of life. And I think if you can distil out of that in somewhere there is a definition for what a smart city is.

Michael Krigsman:

(11:35) Give us some examples, this is pretty interesting. So you’re bringing together massive problems, data, and innovative solutions, so give us some examples of how this actually makes life better for the people who live in Palo Alto.

Jonathan Reichental:

(11:54) Okay, so I’ll use two examples; one relatively simple and one more complex. You know when you enter an urban environment and when you come into Palo Alto, there is a lot of traffic in the Downtown areas. The general number that’s thrown about is that about 40% of the congestion are people looking for parking spaces, 40%. And this is pretty consistent worldwide; this is not an American or Californian phenomenon. This is a global phenomenon. So we go find ways for people to identify available parking spaces so cars can go directly to them, I think we can extrapolate potentially you can reduce the amount of overall urban center congestion.

(12:44) So a smart city approach would say, well how do you make available this knowledge that a parking space is available. Well you might have a sensor and yes, in Palo Alto we are experimenting with sensors in parking spaces. And once a sensor knows whether a car is in that space or not that information then transmits to some cloud resource, which in turn is consumed by an app, and then the app will inform the driver.

(13:13) So that’s one that I think everybody can relate to this one, but let’s continue the thought around transportation because it happens to be definitely among city governments among the top five big challenges.

(13:30) In the city of Palo Alto we recently have gone from analog traffic signals to internet protocol based traffic signals. So traffic signals become nodes on a network, they become potentially more intelligent. We can control them through software.

(13:46) Now there’s lots of advantages. People get frustrated by traffic signals, maybe a light, a very popular intersection; the light is too long at red. Perhaps it’s too brief and it could be dangerous. So now we can do a few things now with this new network. For one, we can have a dynamic and we’ve got dynamic across the entire city, so it changes based on conditions. So that’s one and that’s not entirely innovative, that’s happened for a while even on the analog systems but we can have a granular level of managing those signals.

(14:23) The next thing we can do we can start to have a series of sensors on traffic signals that can count traffic, you know count different types of traffic. Is the traffic bicycles, pedestrians, cars, trucks, and the sensors can tell us what direction are these different entities going.

(14:41) Once we are able to collect that information in real time, 24 hours a day, we can start to inform the decision makers about how we plan our infrastructure, how we can redesign dangerous intersections or make them more efficient. So we’re working on that, so that’s smart transportation. That’s having the infrastructure respond to human and human needs in a much more organic and intelligent way.

Michael Krigsman:

(15:10) So the sensor data enables the beneficiaries immediately like in the case of parking, or people that are circling around trying to find a parking space, and yet you can also use that data for broader strategic planning within the scope of city planning departments.

Jonathan Reichental:

(15:35) I think that’s exactly right and think of these things as sort of the near term opportunities. I mean if we can get both of these things right and we’ll tweak and calibrate as we work through this work, there’s going to be obvious advantages to the community of Palo Alto and other communities to do this.

(15:54) But let’s start to think even further; we’re going to be collecting an enormous amount of data with these traffic signals. There might be other stakeholders who are interested, and we’ve already met with some of the car companies, many of the global car companies have innovation labs in Palo Alto or close by and they’re interested in traffic information. They’re really interested in real time traffic information that we can potentially send o the cloud over our network and then it can be consumed by a whole range of stakeholders because we’re basically going to make it all available. And so you can imagine a leading car company might want to understand traffic patterns in a particular urban area.

(16:45) If we even go further maybe the car company wants to feed that data to the cars, the cars can be more intelligent and more informed and I start to think about a world potentially in the next decade or beyond where we have self-driving cars and cars on demand, data is going to be really important. Rich, real time environmental data will really contribute towards safer traffic, easier flowing traffic and our hope and I think everyone’s hope is just a smarter traffic network.

Michael Krigsman:

(17:22) Jonathan, we have a question from Arsalan Khan on Twitter who asks, is there a smart city model that you have used or learned from as you’ve been constructing your smart city in Palo alto.

Jonathan Reichental:

(17:40) Thank you so much for that question. So one of the qualities that the city of Palo Alto adheres to and certainly a personal quality is we’re going to be transparent about everything, and we’re really at the start of this smart city journey as are most cities despite that some claim differently. We’re all figuring this out together.

(18:09) The way I would define the state of Palo Alto today is we have a couple of handfuls of initiatives and projects underway that meet the definition of smart city initiative. I’ll say to you today, we don’t have a cohesive multi-year strategy yet. So it’s December 2015 if Michael you and I talk a year from now, I hope my answer will be different I think it will be.

(18:37) I’ve been charged to work with some of our city leadership to start to craft a framework for what a smart city strategy looks like in Palo Alto. And I’m going to say this right now that I’m going to share it with whoever wants it. We’re going to be open about it and publish it, and so at the right time and when it’s ready and others want to review it and even use it. Part of the privilege of working for the birthplace and heart of Silicon Valley is that people look to us, and are interested in what we’re doing and we can create positive models for local government.

(19:14) So it’s not the best answer your Twitter follower wanted but it’s a honest answer in where we’re at in this journey together.

Michael Krigsman:

(19:26) Well clearly you’ve done a lot, but clearly it’s still early days for all of this and then there’s sensors, an Internet of Things, everything you’re talking about.

Jonathan Reichental:

(19:35) Yeah, so what does it mean early days, what it means is there’s enormous opportunity ahead. There’s an enormous amount of opportunity for those people who want to make a difference, those people who want to participate from a social good perspective. It’s early days for entrepreneurs. And you know, as we look out and I listen to some of the analysts who are well informed of this, this is a multi-billion dollar opportunity and over the course of a decade or so, it’s multi-trillions of opportunity to effectively rethink, redesign, reengineer and rebuild our cities.

(20:16) Some countries have the luxury of building new cities, that are being built from the ground up as smart cities, but sadly that won’t be the case for the mass majority of cities of the world. We have to change the wings on the plane as the plane is flying. We don’t have the choice to shut down a city for a few years to do the retrofit; we have to do it while it’s on the way.

(20:45) So you know, I would encourage so many people to think about how they can be part of this as a long-term employment opportunity, even a short-term employment opportunity, how businesses can get engaged. This is going to be high value work in the future. You know, we’re entering a world in which we’re thinking about what will humans do when robots and artificial intelligence are contributing to so much of what we do. It’s got to be high value, good work for many of us. And if you want to look at one of the sectors, you know I’m really excited about the possibilities for cities and what we can do.

Michael Krigsman:

(21:27) Okay, so let’s talk a little bit about how you go about these projects. It requires infrastructure, technology, there’s a cultural dimension I’m sure inside the city. There’s getting the public to use this. I’m sure that along the way because you’re in government and because you’re transparent you must have critics that say no, no, no, don’t change because that’s the nature of the beast; you’re doing something new. So how do you go about doing this.

Jonathan Reichental:

(22:01) Oh it’s so easy! I’m just kidding of course. There’s many parts to that question; that is an insightful question. You know, if we never did anything with tech at the beginning we’d still have a lot of work to do on culture, and we do have to educate city leaders, elected officials, city managers, commissioners, the people who are in a position of being able to make the important decisions that lie ahead.

(22:39) There is going to be a period of education. You know, that fact that we’re just having this conversation today and we’re talking about what a digital city is and what a smart city is, we’re already ahead of the curve. You know, many people don’t understand what this is and many people don’t understand how the things we’re talking about fit into the context of other city priorities,

(23:02) We still have you know, here in Northern California despite quite a lot of affluence, we have a housing crisis and we have a homeless crisis, I mean we have drought. We have very fundamental challenges that when you talk about digitizing and smartness, people might say, well wait a minute; we’ve no patience for that. that might happen in a different time you’ve got to solve these other issues.

(23:28) What we have to do as leaders, technologists, and entrepreneurs and innovators is educate and then being to build the storyline around how a smarter city actually helps to solve some of these other issues like better use of water.

(23:50) If we have sensors on water water systems for example, that are small and cheap, we can detect leaks easier, and we can solve those leaks so we don’t lose as much you know fresh water as we do when we distribute water around cities. This is a big problem in the US, but it’s a huge problem in places like India, China and across the world, so let me be clear that the challenges ahead are not, even for an enlightened and educated and engaged community like the city of Palo Alto.

(24:28) Let me just give you just one quick sort of idea of that. one of the things people challenge me with when I’m in conferences talking is they say well it’s so easy for you because you’re in the city of Palo Alto. Well there’s a little bit of truth to that. I certainly have people who will listen to these ideas because they’re in tune with tech. but we’re also careful and pragmatic about taxpayer money. We also have a lot of priorities. So often when I come forward with an idea or my team does, particularly when that’s pushing up against the edge of innovation.

(25:08) You know, when we first proposed our open data platform there was a lot of resistance, and I take that responsibility to be able to educate, build a strong business case in support of something like this, really focusing on value and benefit. So I don’t get a free ride. It’s a little easier that it would be perhaps in a different city without the technology ecosystem we have here. But the onus is on us as leaders to use the same quality we use in the private sector to convince people of value and move forward with the tough work ahead.

Michael Krigsman:

(25:48) Tell us about, let’s talk about the data aspect of this, the type of data you can collect and the ways that you can use it internally, but also in the ways that you can share it with the public to make that open data accessible to other people who have good ideas and might want to use it.

Jonathan Reichental:

(26:07) Thanks for that question. We really started our open data work around 2011 and we were modest in our aspirations at that point. There was no platform so I wanted us to deploy a platform. I wanted us to get some basic data sets on it, demographic information, some energy information; after all Palo Alto is a full utilities city. We provide electricity, gas, water and other utilities.

(26:40) We wanted to experiment and get some experience in taking data from our enterprise systems and making it available to the public. At the time we really characterized it as a – first of all a responsibility. Government has to make available most data anyway through both the Federal Assess to Information Act, Freedom of Information Act or here locally the California Public Record Act. So we have to do it anyway mostly, so this was a way of saying, we’ll get ahead of the questions and make the data available; makes for a richer, more open democracy.

(27:28) You know when we put our salary information on open data, the day we did that really changed in many ways the relationship between the city and the media. This was an area that historically was contentious because sometimes you know, many many years ago the city would make available a PDF file and when the media wanted to publish salaries, and the PDF file wasn’t exactly the most fun to work with when you want to slice and dice and analyze data. So today you can do that we make it a machine consumable format so you can take a look at that data.

(28:10) But as the years have passed we’ve matured our open data platform, the value proposition has grown too. Just a couple of years ago we posted our permit data. And permit data is very valuable and very interesting to a large number of stakeholders. And actually we just published in in near real time, so I think at the time once every 12 hours. If you went in on Monday morning to our development services center or actually go online and request the permit for some construction in your house, by night that information which is public record would already be on our open data system.

(28:53) So we started publishing that and a number of companies decided to build applications around it, by consuming that permit data and building solutions for lots of people who are interested in it. Think about that, all we did was make the data available. These companies on their own volition and own budgets built solutions that ultimately are actually quite useful to our community and to our city staff.

(29:21) So we started to enable an ecosystem of external private entities to build solutions that we may have ultimately had to build or perhaps we would like to build but never got to it. And so today, it’s quite a rich interaction between the data sets we have and the stakeholders from private businesses to academics to community members, who consume and use that data for a whole host of things.

Michael Krigsman:

(29:53) I think that this whole notion of the combination of processes for example like parking, how can we do parking today, how can we think the way that we do parking being enabled by sensors and by data, woven together through the cloud is so interesting. Do you have other similar examples of things you’ve either done or would like to do?

Jonathan Reichental:

(30:27) I’ll give you another example and I’ll also kind of issue a challenge to entrepreneurs. So the backdrop of your question is here we see the emergence of the Internet of Things, right, this idea that we’re going to be able to not only have almost every device and piece of infrastructure collect information and be able to produce information, to create an enormous amount of data, send that to the cloud, have that consumed, have machines make decisions independent of humans.

(31:09) We’re creating this you know an enormous amount of new capabilities. If the first sort of phase to the internet was about connecting humans to computers, and then the second phase was about using the internet to connect humans to humans, this third phase which is connecting machines to machines is going to be much bigger and transformational than those two first phases.

(31:40) And if you think about what that means when you embed an Internet of Things in a city context and the city ultimately is a collection of things we can only anticipate that we’re entering of what potentially could be a series of revolutionary changes in the way our cities operate. So I want to really stress the opportunity that the Internet of Thing presents in a city context a lone.

(32:10) The other example I’ll give here moving away from transportation is around energy. Cities need to think deeply about how they’re going to be powered and provide the quality of life that every human wants around the world as we are now an urban planet and the entire planet will live in cities by about 2050 and energy needs are going to be enormous. So we have to be thinking and acting on different way of providing and consuming energy.

(32:49) By the way a slight segue, we’re very optimistic about the role solar will play now. I think we’re moving from solar being a novelty, to solar becoming a real viable option and then potentially leading the charge in decades ahead.

(33:09) So when we look at energy there is a concept called Smart Grid, which really reflex the very best of the Internet of Things. Rather than your house being a I call it respectively a dumb entity on the edge of an energy network, your house becomes a treasure trove of data around every socket and every device you use, your washing machine, your television, you know every one of your iPads and other devices. And if we can start to collect that at the device level, and we do as an experiment we’re starting to do that in Palo Alto here, we have a small smart grid, we start to aggregate that and we can do lots of things with that data.

(33:58) So at the house level, right down to the home and family level an enormous and interesting amount of data can be produced and actually delivered back to the family in a way that they can understand their energy consumption behaviors.

(34:14) But we can also take neighborhoods and aggregate this information such that now we can see behavior across neighborhoods, now we can look for opportunities for improvement. When we feed that information in an anonymous fashion back to neighborhoods people become quite competitive. We start to gamify how they use their power. So if you are a outlier and you see houses and homes of similar size and you’re an outlier, Then perhaps would be an incentive there to understand more, like what are we doing different to our neighbors and perhaps  encourage positive behavior.  So you know, you can see the range of possibilities here and I’m only touching on it very lightly

Michael Krigsman:

(35:09) How do you sell this inside the city, because as you said there are all of these different priorities and here is Jonathan Reichental who is the CIO of the city going before the city council or to whatever group it is that needs to fund this and approve this, and you’re talking science fiction and they’re saying, well what are they saying?

Jonathan Reichental:

(35:39) Well hopefully it’s not all science fiction. You know when you’re a leader you do have to paint a vision for the future and sometimes you can lose people that way of course, but other times you have opportunity to inspire. So some of the things we do we try to be as practical as possible. I mean we’re only given a little bit of space to think big and to envisage the future. We have to make it real quickly and so that’s what we try to do.

(36:17) Now, this is not a mission for me alone. One of the important qualities for being successful in beginning the journey towards smart city is that everybody’s involved. And so the messaging has to come across departments, whether you’re the public works department, the utilities, the parks department, even our police chief and even libraries, we all have to be part of this dialog and not only champion positives across departments, but champion the positives that are relevant to individual departments.

(37:07) I’m looking forward to your follow there, I would just say that, let me summarize by saying we have little room for science fiction but we have to be visionary, bold, but we have to be almost always practical and this voice from change has to come from across the organization.

Michael Krigsman:

(37:28) So this type of innovation, the only way to make it happen from what you’re saying is to develop a consensus or at the very least a collaboration around some goals that goes across different departments in the city.

Jonathan Reichental:

(37:49) I really do yes that’s exactly right. You know let me give you two quick little thoughts here. One is on the broad topic of innovation and I’ve been one way or the other involved with innovation for almost 25 years is innovation doesn’t belong to a department or an individual. Companies and organizations that have Chief Innovation Officers need to be real careful about how that’s implemented, because what happens is the people will see that somebody else owns that responsibility and that will allow them to be not a participant in innovative things.

(38:33) Now that said, clearly the Chief Innovation Officer has a significant role to play but it has to be collaborative at heart. It can’t be a center; it has to be collaborative across the organization. And the other thing I want to share, I think I’ve lost my train of thought on that but let’s continue.

Michael Krigsman:

(38:58) Yeah, the whole idea of collaboration and on that topic and unfortunately we’re drawing to a close we have another five or 10 minutes left. What advice do you have to people who are listening who are maybe not in a location like Palo Alto, which in it’s DNA seems open to many of the things that you’re talking about, but who are listening and hearing what you’re saying how do I do this in my city? This sounds great but where do I start?

Jonathan Reichental:

(39:36) Yeah, firstly if they’re asking that question I’m super excited because that is the first right question. You know, it’s going to start with a conversation and a conversation with many people. As we go into 2016, a couple of big themes are emerging around tech and our society and organizations. We are well under way now with the digital transformation.

(40:06) You know the digital transformation is so quick and so aggressive the big domains and organizations that we’re so familiar with are quite scared. You know are quite scared about the change ahead. They come to Palo Alto and they set up innovation labs just to try to figure out you know how to shift gears and become part of the digital transformation. It’s changing everything from healthcare to hotels and taxis, tourism, publishing; there is not a domain in our society and in our economy globally now that isn’t impacted by digital transformation.

(40:50) And the second phenomenon is the Internet of Things and how this may be and will likely be bigger than the opening acts of the internet over the last 30 years. So you’ve got to have the conversation and you asked me, what are the steps to take, if you’re hearing silence in your organization whether it’s a private company or a government organization that should be a little bit of a red flag for concern.

(41:26) You know in the private sector in a big way because that’s an existential threat; your business won’t survive if you’re not embracing the digital transformation. In the government it will be a matter of you know, quality services, it will be a matter of meeting community expectations. And the government is going to be about having the kind of cities we want to live in. so you’ve got to start this conversation.

(41:49) Now the next thing to have is a vision, what is that vision for your city. And building that vision you’ve got to bring in the right stakeholders. It could be that the discussion starts at the CIO level. Now by the way, lots of cities don’t have CIOs or CTOs, so if you’re a city manager, or in fact if you’re just a person who is passionate about this space you’re the one who should probably raise it if it’s not being raised and get it to the attention of executives.

(42:22) From there you’ve got to build a vision, even if you are not intending to build or to start the work next year or the year after, what is the comprehensive plan over the next 15 years. The vision will reflect your challenges, so every community, every city is different and so you’ll want to focus on the things that are really important. Is it a better economy for which many cities that’s a driver? Is it more housing options? Is it transportation which I’ve used as a theme throughout this conversation today? You know, identify those areas and wrap around that with some form of strategy.

(43:01) To the extent you can and the extent you have tech communities, as tech organizations in your community, I think there is an opportunity for some outreach and building a workgroup of both city leaders and other stakeholders within your city or organization, the tech community and the other private organizations that have a role to play, and community members. You know we’re all about digital but you’ve got to get in a room you know, at the community center and have a debate, you know bring forward what’s happening in other communities like Palo Alto and others where there are positive changes happening.

(43:52) And I wouldn’t worry about the funding right away. Right, there’s a lot of work to do and it’s going to take a long time. I’d really be concerned right now in those initial steps; the right stakeholders, a vision, and a rigorous debate as you  work towards developing your vision and strategy.

           

Michael Krigsman:

(44:10) So one final question then related to this because unfortunately we’re just running out of time. What advice do you have to innovators in the government facing resistance, what should they do?

Jonathan Reichental:

(44:32) And I have empathy for them, because I know that they do get this resistance. You know I think they could look to good examples, do their homework and show the possibilities. Look for champions. You know in organizations when you want to get things done that are complicated and there is a chance for resistance, some of those strategic moves you can make are defined as allies. Find out who is on the same page with you, take people to lunch, have coffee and begin to build a network of people who support you.

(45:14) If it’s just you and you’re an alone voice that’s going to be hard and it is hard. You know so, this is not easy and I know some IT managers somewhere in the United States is watching this video live or will watch it as a recording and say you know, Jonathan, he’s in Palo Alto, he’s got all these advantages. You know I have a high degree and empathy for that. So start the hard work because it’s worth it, it really is worth it. We have to together recreate our cities. We can’t apply the solutions of the 20th Century with 211st Century problems. It’s going to require bright and motivated individuals.

(46:08) So you have my support, I reach out to people that could help champion, and that could be me but it could be somebody in a city that’s closer to you that you admire, and know that when you do succeed and it’ll be worth the effort and the difficulty it is right now.

Michael Krigsman:

(46:32) Okay, well what an insightful conversation that we’ve just been having with Jonathan Reichental who is the Chief Information Officer fo r the city of Palo Alto. Jonathan thank you so much for taking the time today to share your expertise with us.

Jonathan Reichental:

(46:52) Thanks Michael, I have enjoyed it and I’m always surprised how quick the time goes. By the way, I’m thrilled with the work you’re doing and I think these videos that you do, these conversations are valuable. I’ve watched many of the interviews you’ve done and you get incredible people on your show, so keep it up and thank you it was a privilege to spend some time with you today.

Michael Krigsman:

(47:16) Thank you you’re very kind, and I hope you’ll come back and we’ll do it again.

Jonathan Reichental:

Yes.

Michael Krigsman:

(47:21) You have been watching episode number 147 of CXOTalk with Jonathan Reichental, who’s the CIO for the city of Palo Alto, and boy oh boy, this 45 minutes has gone by quickly. Everybody, thank you for watching and thank you to Jonathan and we’ll see you next week. Bye bye.

 

Companies mentioned on today’s show with Jonathan Reichental:

Cloudera:                                www.cloudera.com

Facebook:                               www.facebook.com

Google:                                    www.google.com

Hewlett and Packard:           www.hp.com

O’Reilly Media:                       www.oreilly.com

 

Follow Jonathan Reichental:

LinkedIn :       www.linkedin.com/in/reichental

Twitter:           https://twitter.com/Reichental

Website:        http://www.reichental.com/

Digital Marketing and Transformation with Robert Tas, CMO, Pegasystems

  • Episode: 144
  • |
  • Partner: Pegasystems
Robert Tas, Vice President, McKinsey
Robert Tas
Vice President
McKinsey & Company

Digital has transformed marketing in profound ways. This episode explores the changes in marketing and what that means for customer relationships in the enterprise.

Robert Tas is Senior Vice President and Chief Marketing Officer (CMO) at Pegasystems, with responsibility for leading the organization’s global marketing efforts, including its brand, advertising, communications, product marketing, industry business lines and global programs teams. He has more than 25 years’ experience in marketing and operations and is a pioneer in the internet digital media industry.

Most recently, prior to joining Pega, Robert was Managing Director, Head of Digital Marketing at JP Morgan Chase & Co. (JPMC), where he led the Global Digital Marketing Group, serving the company’s wholesale and consumer business.

Transcript

Michael:

(00:03) Today on episode number 144 of CXOTalk, I am speaking with Robert Tas who is the Chief Marketing Officer of Pegasystems and we’re going to be talking about digital marketing and digital transformation, so it’s an exciting morning on episode number 144 of CXOTalk, Robert how are you?

Robert:

(00:32) Good morning Michael, I’m terrific thanks for having me today.

Michael:

(00:35) Hey, thanks for talking the time first thing on a Monday morning, and we’ve known each other for a while. You we’re on a panel that I was fortunate enough to moderate a couple of years ago at MIT, at the MIT CIO symposium on digital transformation, so it’s great to talk with you again.

Robert:

(00:55) Thank you.     

Michael:

(00:55) Robert, let’s start, tell us a little bit about your professional background and about Pegasystems so we have some context.

Robert:

(01:07) Happy to. So my background’s probably a little bit unique in some of the CMO’s that I talk to. My background actually started in the technology world, where I had spent a number of years in my career at working at enterprise technology companies like Sybase, which got acquired by SAP while ago, and then idea that a bunch of progressive start-ups in CRM, in Internet databases, in security. And the one thing that is kind of consistent in my career is that I’ve always been fascinated about what technology can do for business and how it’s transforming business.

(01:48) And then I got into the Internet, probably about 15 years ago and started on the technology side, working for a company and that really was a technology company at first called Tacoda, which really used analytics to power that Internet advertising as it’s known today and all those great segments.

(02:08) And it really opened my eyes to helping connect customers, to consumer brands, B2B brands, and how technology was really shaping the world and how the Internet was really helping to evolve all of our lives. And then I built my own start-up and raised some venture capital and sold the company, and spend a lot of time in the demand side platform business. I really understood the convergence of how media was being bought and sold, not just digitally media but all media and that was an amazing experience.

(02:40) And then I ended up working at JP Morgan Chase, in a really interesting role where I helped create its first sort of center for excellence for digital, really trying to infuse digital into the organization and build many of its capabilities that include you know, personalization, media buying platforms. I ran social media; I built the first content group. It really was an amazing journey to help infuse digital into one of our most largest and successful banks in the world and really seeing how they’re going about their transformation.

(03:14) And then about a year and a half ago I joined Pegasystems, which for those who don’t know is an enterprise technology company providing strategic applications to the largest global companies in the world. And we serve the likes of Horizon, Vodafone, JP Morgan, American Express, and people like that powering their customer facing and back office systems that really drive customer experience. And it’s been an amazing experience to come to Pega and I’ve been here just over a year and a half.

Michael:

(03:43) And Pega is a public company and you have about $600 million in revenue.

Robert:

(03:49) Yep, well a little bit more but growing. We’re growing nicely, we’re growing in a tough category in a space that people don’t know very well. We are actually doing very well globally. We have over 3500 employees now and we have offices all around the world, and like I said we serve large global enterprises.

Michael:

(04:05) Okay, so let’s talk about digital marketing, what are the kinds of marketing activities that you undertake that you do at Pega?

Robert:

(04:17) Well

Michael:

(00:03) Today on episode number 144 of CXOTalk, I am speaking with Robert Tas who is the Chief Marketing Officer of Pegasystems and we’re going to be talking about digital marketing and digital transformation, so it’s an exciting morning on episode number 144 of CXOTalk, Robert how are you?

Robert:

(00:32) Good morning Michael, I’m terrific thanks for having me today.

Michael:

(00:35) Hey, thanks for talking the time first thing on a Monday morning, and we’ve known each other for a while. You we’re on a panel that I was fortunate enough to moderate a couple of years ago at MIT, at the MIT CIO symposium on digital transformation, so it’s great to talk with you again.

Robert:

(00:55) Thank you.     

Michael:

(00:55) Robert, let’s start, tell us a little bit about your professional background and about Pegasystems so we have some context.

Robert:

(01:07) Happy to. So my background’s probably a little bit unique in some of the CMO’s that I talk to. My background actually started in the technology world, where I had spent a number of years in my career at working at enterprise technology companies like Sybase, which got acquired by SAP while ago, and then idea that a bunch of progressive start-ups in CRM, in Internet databases, in security. And the one thing that is kind of consistent in my career is that I’ve always been fascinated about what technology can do for business and how it’s transforming business.

(01:48) And then I got into the Internet, probably about 15 years ago and started on the technology side, working for a company and that really was a technology company at first called Tacoda, which really used analytics to power that Internet advertising as it’s known today and all those great segments.

(02:08) And it really opened my eyes to helping connect customers, to consumer brands, B2B brands, and how technology was really shaping the world and how the Internet was really helping to evolve all of our lives. And then I built my own start-up and raised some venture capital and sold the company, and spend a lot of time in the demand side platform business. I really understood the convergence of how media was being bought and sold, not just digitally media but all media and that was an amazing experience.

(02:40) And then I ended up working at JP Morgan Chase, in a really interesting role where I helped create its first sort of center for excellence for digital, really trying to infuse digital into the organization and build many of its capabilities that include you know, personalization, media buying platforms. I ran social media; I built the first content group. It really was an amazing journey to help infuse digital into one of our most largest and successful banks in the world and really seeing how they’re going about their transformation.

(03:14) And then about a year and a half ago I joined Pegasystems, which for those who don’t know is an enterprise technology company providing strategic applications to the largest global companies in the world. And we serve the likes of Horizon, Vodafone, JP Morgan, American Express, and people like that powering their customer facing and back office systems that really drive customer experience. And it’s been an amazing experience to come to Pega and I’ve been here just over a year and a half.

Michael:

(03:43) And Pega is a public company and you have about $600 million in revenue.

Robert:

(03:49) Yep, well a little bit more but growing. We’re growing nicely, we’re growing in a tough category in a space that people don’t know very well. We are actually doing very well globally. We have over 3500 employees now and we have offices all around the world, and like I said we serve large global enterprises.

Michael:

(04:05) Okay, so let’s talk about digital marketing, what are the kinds of marketing activities that you undertake that you do at Pega?

Robert:

(04:17) Well much like everybody in both the consumer and B2B world. We have a plethora of demand generation programs, brand building programs, thought leadership programs that we run. We recently did a pretty unique piece of digital content with the Economist and partnering with one of our e-system integrators Accenture. We built a digital portal on the Economist talking about digital transformation.

(04:44) We’ve partnered others like Bloomberg and Forbes and really trying to bring about the sort of enterprise issues that using digital as a way to help the buying process. One of the things that when I joined Pega was the marketing was really much more a sales support function, and we really tried to make it a growth engine for the company, where we were trying to get our brand out there in a more thoughtful way, and trying to educate the market on the big issues that are driving digital transformation in their large enterprises.

Michael:

(05:15) So as you are seeing your customers going through digital transformation, what are the marketing impacts of that? So how does digital transformation change marketing?

Robert:

(05:31) Wow, I mean that’s a topic in itself, but its dramatic Michael. I think the reality is that marketing is being redefined by the customer, the consumer. You know the consumer is touching all facets of the organization, and I believe marketing is really the catalyst and the you know the Chief Customer Officer in a way to help fight for that customer across the organization and to ensure that every department treats that customer in the best possible way, because we no longer define marketing as just by an ad campaign.

(06:04) We define marketing by our experience, and that experience is end to end and I think that is a big transition for many companies to try to make, where the marketing guys are now starting to touch things like the call center. They are starting to touch things like product design. They’re starting to touch things like fulfilment. You know, as we think of our own experiences the world of marketing has changed so dramatically in the last few years, and I think it’s going to continue to evolve.

(06:30) And I think organizations that really get this are the ones that are at the forefront pushing their definition of really the customer and how they are driving that customer centricity into their own organization.

 

 

Michael:

(06:42) So Robert we hear about this term of customer experience all the time and you said that there’s this difference between customer experience and ad campaign, so maybe you can take us through what is the difference.

Robert:

(07:00) I think if we all picked up our phones and look at it and you start thinking of the applications that are on your deck you know, whether it’s Airbnb, even your banking application you know or Über, I mean those have all redefined what our expectations are and how we expect to interact with all brands. And I think whether you’re B2B or B2C it’s irrelevant.

(07:23) I think those expectations have been now set, and we have to respond whether it’s by a HR application internally here or my Über, I want instantaneous feedback. I want something with immediate transparency to what I’m trying to do.

(07:39) I recently purchased something on an e-commerce site, and I’m a big big fan of the brand and I was so disappointed in their digital experience. As you compare it to Amazon or others, it just sets the bar. And you know, this product I ordered took almost 10 days to get to me, and they didn’t update their website with you know tracking information, little things you take for granted now are becoming the norm. And I know it’s a consumer example, but I think that’s in all categories.

(08:08) I think you know in my business and the B2B side, we want to take our content and push it out there. We want to have things like our product demos which never used to be online available. We want reviews, we want people to be able to collaborate and ask questions. We want to use digital to really help empower our customer, and I think you are seeing that across all facets.

Michael:

(08:30) So the skill set and the mindset and the capabilities that are needed to for marketers to create these types of experiences as opposed to pushing out ad campaigns is completely different. So, how did you retool marketing to be able to conduct this type of experience type of campaign?

Robert:

(08:59) Well, I think it’s a multiple pronged approach there. I think you have to bring in experts in certain areas, like we have roles at Pega that didn’t exist before I got here. You know whether you call that the analytics role or some of the content roles that I mentioned that I created at JP Morgan. You know, it’s really reimagining of the marketing function and then I think you have to train people. I think you have to give them opportunities to experience. I think you have to create boot camps. I think you have to figure out how to transfer that knowledge and experience.

(09:29) I remember when I was at JP Morgan and I ran social media and we were writing the job description for the head of social media, and the executives were saying, well let’s go and hire someone who’s done social media at a Fortune hundred company that has 10 years, 15 years’ experience, and well that person doesn’t exist.

(09:40) You know, and I think that’s the reality, you have to reimagine these things, but you have to invest in training your folks and giving them opportunities. You have to partner with agencies that have expertise that you can build. But I think the most important thing is you have to have a cultural transformation programme. You have to understand that this is a transformation and is a change to the way you run your business.

(10:12) I see often people do digital off to the side, they have the digital group, they check the box and they may be have an mobile app and things like that. But what we’re seeing today is that those failed because the customer gets a worse experience. The customer gets a negative experience, where they are treated the same way as some of the other entry points. And I think that lack of connectivity into the enterprise is hugely detrimental to their brand.

(10:41) You know, my little branded story that I shared with you, you know it’s so frustrating, you walk away and it’s such a bad taste in your mouth. But that’s how the brands are being redefined. It’s not by when the customer actually sees you and hears from you, but it’s those micro-moments that we like to talk about that are defining each of our experiences.

(11:02) And I think it’s the companies that has to figure out how to map to those micro-moments and really think about how everybody in the organization is just diligently attacking those to make those frictionless, to eliminate the customers clicks, to really help them through the process. It’s a really different mindset.

Michael:

(11:20) So there’s a realigning of the organization and of the entire organization and not just marketing around what is best for the customer and what the customer needs.

Robert:

(11:29) Absolutely I mean you know, you used to have and again I’m still proponed by advertising, I just think you can’t do the ad campaigns separate to the product, to the fulfilment to the rest of the organisation. You can’t make these promises of the marketing guy without being able to deliver on end to end on it, and understanding that when that person clicks on that button what happens? What’s the digital experience? What’s the connection point and how you’re going to manage that, to all the way through to fulfilment and that entire journey. You know McKinsey loves to talk about their customer journey, and I think it so critical to have the entire organization bought into that vision of a customer map.

Michael:

(12:12) But explain a little bit more why this is the case, so right I click on a button, I want to buy something, how does this affect the whole organization. Take us through the mechanics of it, because you’re somebody who’s doing this.

Robert:

(12:26) Well I mean using my e-commerce example I logged into a website hoping to find out where that my product was. Couldn’t find it, had to call the call center. The call center had to go and search for it. The call center had to go back and figure out why I was calling, what my problem was. Connect that back to the website and the web traffic that I have and there is a huge disconnect right.

(12:49) So, then the customer by the way here I am, I’m calling this call center, I’m angry and upset and 10 seconds later the brand is retargeting me with an offer. How disconnected is that? Instead of retargeting me with thank you, or hey here’s 10% off because of your trouble, it’s hey, here we want to sell you something and have no context with your experience with me.

(13:12) I mean that’s the gravity of the real-time nature of this, and companies that aren’t connecting those dots are going to lose. They’re going to take that person who’s disgruntled and then there going to amplify it over and over again in that negative context. And it’s so easy to have that break versus organization like Amazon or Über or others that have this seamless transparent process where everybody is connected into it.

(13:38) Everybody knows, oh you had a problem or you had a dropped call or your car didn’t show up, Über’s you know emailing me 10 minutes before saying your car is going to be late, we’ve given you a $10 coupon. It’s that kind of experience that’s the new normal.

Michael:

(13:52) So, okay, so you have this cultural mindset that is bringing together everybody in the company around this reference point of the customer. And then you pull together the right skills, but you also need technology, so there’s a technology component to enable this as well.

Robert:

(14:13) Michael there is and you know Pega is very fortunate to provide some great technology, but I can’t stress enough as I talk to a lot of my peers and our customers. I was recently at a world economic forum event, where they had the Chief Strategy Officers of major corporations coming together, and the theme I kept hearing from everybody was how do I get my management to buy in?

(14:42) Some are creating new roles like Chief Digital Officers and I’m not a huge  proponent of that and we can talk about that, but I think this is a CEO level mandate that culturally has to change the organization in the way you think.

(14:56) You can no longer implement a product centric culture, and hope the rest of the organization does right. Compensation structures have to change. The way you measure people’s performances has to change, and it’s far more integrated than it’s ever been. You know, we’ve all seen the websites where the website is disconnected from the retail store.

(15:20) You know, I wanted to buy a TV a year ago and I called Costco and I wanted to go and pick it up because I wanted it for the game and I couldn’t. They said, well our websites aren’t connected to our stores. That’s not okay any more, that doesn’t work, and you’ve got to take the entire structure and reimagine it from that customer’s perspective.

Michael:

(15:40) So, you know it’s interesting that you mentioned the Chief Digital Officer, because when I talk with CMOs and I talk with CIOs, there’s always this question of where should the ownership of digital lie inside an organization?

Robert:

(15:59) You know, again having been a guy that’s created a digital function at a major corporation, you know I always viewed my job was to put myself out of a job. It’s unfathomable for me to say that I can have one guy or one group that runs digital for an entire organization the size of JP Morgan Chase, or others.

(16:21) And the reason I say that is that everyone has to be digital. The world is digital. It’s no longer this little thing on the side where we have our website as a brochure. The website is a major channel like retail is. It can no longer be treated as oh someone else has got that bulb they’ll figure it out.

(16:42) Every facet of a business has to be reimagined. Every facet from legal, risk, compliant, product, and I can go down the list all have to be accountable to what the digital experience is like.

(16:56) You know, when I was doing social media at the bank, you know I had legal risk in the meetings with me, I had educated them on how customers were going to use you know Twitter to do service, how that was going to go about, how we were going to re-engineer our call center to be able to handle that.

(17:14) It’s hugely Omni-channel right, there's nobody that gets a pass on this, and when I hear people higher Chief Digital Officers I worry that though I agree they can be a catalyst, but I think ultimately this is an organizational choice. This is a decision that a company has to make at a scale to reimagine their business and that’s why I’m very passionate about the fact that digital has to be a C-level, CEO level mandate and they have to be accountable to it to really affect change.

Michael:

(17:46) So marketing in a sense is the most visible from the outside point of view marketing is the most visible aspect of digital, because that’s what the customer sees when they hit the website.

Robert:

(18:01) Yeah, I mean again marketing is that advocate for doing what’s right for the customer. You know, the one lesson I learned from one of my old bosses at JP Morgan, he said, ‘Robert, you have the customer card. Your job is to make sure that we don’t screw it up. Your job is to protect the customer, make that experience better and better every day, and use the digital technology to help improve that’.

(18:23) Now, we obviously want to sell them things, make things better, and get the right products and things like that, but we want to be thoughtful in building that relationship and that’s the beauty of digitals, we had this amazing set of data. That’s the other thing that we are seeing as an evolution is you can’t have these silos of data in the organization. You have to have one view, one moment, one set of truth around what the customer is telling you with their behavior, or even more prescriptively their voice or their actions and being able to have all groups leverage that. There has to be one lexicon of customer across sales, service, marketing, product and so forth.

Michael:

(19:02) We have an interesting question from Bob Rothman who asks, how do you differentiate between customer satisfaction and customer experience?

Robert:

(19:17) Well I think they’re very intertwined obviously. I think that customer satisfaction and people use MPS as a common measurement of customer satisfaction, would they tell their friends to use the service or product, and that’s a big one. I think that’s a telling sign.

(19:34) You know, in my definition is the customer’s behavior speaks the truth. What do they do with their actions? Do they come to my website repeatedly? Do they use my product repeatedly? Are they showing me the behaviour that I want?

(19:51) You not my example of my e-commerce experience, you know if I’m that company, am I going to go off and improve myself service? Am I going to learn from Roberts call center call of how frustrated he was and make changes to my process? Because they didn’t need that call, I’m a pretty digital guy. I wanted them to solve my problem on line, but I couldn’t and it didn’t work. So, there’s an opportunity for someone to take data and improve that experience which really then customer satisfaction is a result of.

Michael:

(20:21) So customer satisfaction happens when the experience is right?

Robert:

(20:28) I even take that a step further Michael, and say that customer satisfaction happens when an experience isn’t right but you make it right and maybe even proactively, you know you start to predict where you’re going to have experiences. I used my Über ones where my car was late and Über knew that and new that I waited a long and proactively sent me a coupon to say, hey sorry, have that on us and we are trying to make it better.

(20:55) You know, those are the types of micro-moments that we have as an opportunity to transform our brand and relationship and that satisfaction. Listen, we all live in an imperfect world, we know that things aren’t going to go perfectly, it’s how we respond to that. So when I talked to that brand earlier and they kept telling me ‘sorry, you’re out of luck, we don’t know what you’re talking about’, and that just makes the customer experience bad, the satisfaction bad. But it’s when you actually have the ability to respond, change, and learn do know and I think that’s what great brands do out there is they take this amazing set of information and feedback and adapt their businesses to improve.

Michael:

(21:33) So is it safe to say that customer experience then is the sum total of these micro-moments that you been talking about?

Robert:

(21:42) I like that. I like that, I think that’s very safe to say, and that’s where I come back to saying that it’s not a marketing thing. It’s not one guy’s job to be the customer experience. You know, I went into a hotel the other day in New York and I wanted to check my bag, and I wasn’t staying there, and I am a Starwood Platinum guy, and the guy said no to me. You know he said it in his New York attitude, and it just wasn’t a great experience.

(22:12) Now, he doesn’t know who I am, but that brand experience is lost their, and that person who manages that hotel has an opportunity to learn and change that. And you know, they’re not using, they’ve got to be able to connect that entire experience through the customer’s journey. Because one, I do a lot of events at hotels.  I’m a great Starwood loyalist, and there’s so many opportunities to just do little things like those micro-moments and do them better and learn what’s important for your customer.

Michael:

(22:43) But these micro-moments, I mean you have just described why this is so difficult, because you can lay out the best campaign in the world and have the best website. But when Robert Tas shows up at the desk, if the person behind the desk doesn’t treat you in the right way it’s all for not.

Robert:

(23:09) You know Michael I hear you, and you’re right. However, what I struggle with is that I see the silos of organizations and the way they go about learning and being iterative in the process and I think we are not pushing the envelope. I mean the great news is that technology is available now to be able to learn when I’m unhappy, be able to learn what my context is and experience is, and be able to apply those things.

(23:38) Companies just aren’t choosing yet to apply them. My e-commerce example today and they’re retargeting me after a bad experience. We’ve all had that, we’ve called the call center, we’ve had a bad experience and yet you’re seeing another ad. What a missed opportunity that is to really build my relationship, and I think we’ve got to push the limits of really understanding this customer centricity mindset.

(24:01) My experience by the way is magnified you know, 10 times the younger you get. You have a little five year old boy, when he starts and the computer doesn’t work, he gets frustrated and he’s five and that his bar. I think the millennial’s, this is the new norm. We’ve got to dramatically overhaul what customer experience means and that’s not just the website or advertising campaign, or social media. It’s broader than that and we all have to be accountable.

Michael:

(24:29) So the problem is when we think about customer experience in terms of just marketing, when in fact the experience is created by these micro-moments that comprise all of the interactions that a customer has with the brand.

Robert:

(24:46) Absolutely, I was looking for a cell phone the other day and I was searching around on the site, and one of these cell phone companies took me to a webpage and it was a dead end. And it was a bad experience right, and they lost me, and it’s because the marketing guy and the fulfilment team aren’t connected in that journey.

(25:07) It’s understanding that when you make that promise of whatever that is onto delivered that, you have to be able to deliver end to end. You know American Express who is one of Pega customers and we run their service backbone, and we run their service architecture. When you call American Express and have a problem you know, it’s Pega that’s helping fix that.

(25:30) What they’ve done amazingly well and I love what Jim Bush says is that you know service and American express is no longer a silo, it’s horizontal across every single service person at American Express, like every employee, every department has an obligation to do their part. Whether that is getting me a new credit card because I may have lost it or getting me money, or finding my luggage or whatever that experience is, you need to have that end to end culture and manifested in every single thing.

Michael:

(26:03) So this type of transformation it is so deep and so difficult and I imagine that for most companies this would take quite a long time, because it gets back to the cultural dimension that you were talking about at the beginning.

Robert:

(26:20) It is it takes a long time, you know I mentioned that thought leadership piece, we did a survey with Accenture and the Economist around digital transformation and the survey talked about whose leading the charge, and there’s a lot of talk about you know CMOs as the new change agent and all that. and surprising to me, only 16% of CMOs are leading the digital transformation charge. That was a pretty shocking stat.

(26:48) But what’s also surprising to me and I mentioned that economic event I went to, is that I don’t think we’re aiming big enough.  Don’t think we’re really transforming. I think we’re making iterative change and I think we’re seeing companies do better, don’t get me wrong, but man are we really dramatically flipping up over the business. You know, as I think of and I struggle naming companies, traditional brick and mortars that have made that transformation leap, and if you really think about it I don’t know that I can show you one.

(27:20) You know maybe Netflix is a great one because they went from the CD to the download and the digital side of the world they’re probably one that come to mind in me. the one that actually comes to mind and probably fair but I’ve got to give them huge, huge credit is Facebook. Facebook has made this leap from being a digital company to a mobile first company. I mean they stated their business and had a little advantage, but boy, you would not have thought as Facebook as a mobile company when it first went public.

(27:52) That’s the kind of transformation I want to see out of the traditional fortune 500. I want to see us really raising the bar of reimagining our businesses. You know including the hotel business right now, you now seeing what Airbnb’s doing. You know, it would be great to check-in to my hotel room with my phone if I could, but we’re got to reimagine business models. We’ve got to reimagine the way we engage that journey across all of our customers and I saw today that Marriott is going to try to buy Starwood.

(28:21) You know, good scale, but how are they reimagining their business and how are they using digital to really drive that organization forward.

Michael:

(28:30) You know I wanted to mention regarding Facebook, how when they went public, they went public about 28 I believe and the reason the stock went down below the offering price, precisely for the reasons you we’re describing and their concerns about their ability to transform to mobile and now, having done this so well the stock is up over 100.

Robert:

(28:59) That’s a great example of a CEO that stepped up and said, ‘oh my god, this is going to change and here’s how we’re going to do it’, and I think that’s how you shift culture. And I get it, it’s really really hard when you make billions and billions of dollars of doing something a certain way. But again, every major business is going to be – if it already hasn’t then be disrupted.

(29:22) If I’m in the insurance business, the healthcare business, Child co I mean I could go on and on. I’d love to see these companies really pushing the envelope and I don’t mean opening a little office in Silicon Valley or hiring a couple of digital guys from Google. It’s really a dramatic transformation that has to come and I think that’s a C-level, board level mandate.

Michael:

(29:47) What about CRM, Customer Relationship Management, what’s happening to CRM in this world in which the customer relationships are changing in so many different ways.

Robert:

(30:03) Well Michael I mean you know the talk we just had about digital transformation, I think CRM is being transformed. I remember you know when Siebel first came out and really set the bar of what CRM and the promise of. Honestly, I think if we all look back CRM has not lived up to the promise of what it should have been. And I think today depending on your definition, whether it’s salesforce automation or call center automation, you know CRM today is needing to be and being pushed to do a heck of a lot more.

(30:38) You know, as we think of digital transformation the ability to connect the customer from the front office to the back office, takes CRM to a whole new level. You know having those truths that I talked about earlier or having one place that has one 306 degree view of the customer is paramount to deliver CRM effectively because the people that are touching your customer is a heck of a lot broader than it was a few years ago.

(31:06) You’re no longer in that one silo doing your thing, you’re now required to connect across the enterprise and have a common set of information to make better business decisions to empower that customer, and by the way, to empower that customer at a speed that your organization has never thought of.

(31:24) You can no longer do things in days, months, and ours. It’s seconds, the customer wants their information and everybody has to be able to move at that, and I think that CRM being something that’s now global in requirement it needs to have predictive and adaptive analytics, it needs to be able to change to that new thing.

(31:44) We no longer live in a world where we can buy a system, put down several million dollars, plug it ain’t and walk away for 20 years. Those days have gone. The reality is that we’ve got to change, we’ve got new things coming, Snapchat WhatsApp or whatever those things like be. We’ve got to figure out how to harness new information into the ecosystem within our customer’s world, being able to apply that across all of our businesses in a speed that is just redefined in how we go to market.

Michael:

(32:15) That’s a really interesting point, so historically, CRM was essentially a database of let’s say documenting communication transactions with a customer.

Robert:

(32:32) An incomplete list of transactions.

Michael:

(32:34) Okay an incomplete list of transactions, so I call the customer, I’m a salesperson, I put it in the CRM system and send the customer an email, it’s in the CRM system. So now with customer experience touching all of these different channels that you were describing, so when you talk about a 360 view of the customer elaborate a little more about what you mean by that and how it’s different from CRM in the past.

Robert:

(33:05) Well several things. First of all, the dataset that in that 360 view, like you said is no longer just a transaction. I’m sure you can name companies that have you in their email database, there direct mail database, and their web database and those don’t talk to each other.

(33:25) You know I subscribe to a print publication, and yet I still get offers in the mail, or a credit card company I called the product that I keep getting offers sent to me. You know, the reality is CRM became that silo of this customer record, but never became the place where all the customer data is stored, bind and optimized and I think that’s the evolution as companies are now realizing that they have to have this central repository and they need a brain and they need analytics and technology to help the organization optimize that experience.

(34:02) You know, when I go to a Horizon or my bank, I want to be able to get an offer that’s right for me, not for this segment but for me based on my family, my situation. And I think that companies have to figure out how to connect the dots, and that’s why I say that it’s not just about data it’s about connecting data, people, process across the entire journey.

(34:27) It doesn’t do me any good to make an offer that I’m going to reject, or I’m going to get reject for if my credits not good. That’s only going to hurt my brand. It’s really important to be able to take those pieces and connect the natural workflow, business rule associated with that CRM view of the entire customer interaction.

(34:46) it’s kind of like my e-commerce example, they’re targeting me and ad is something that the pixels set up on that website because I went to it. It has no connection to the customer service experience that I had, and they are missing an opportunity to leverage that engagement.

Michael:

(35:03) So how does the data that lives inside a CRM system, how can that be used to then actually be able to make real improvements in the customer experience. What’s the connection between the data and the ultimate experience?

Robert:

(35:23) Well I think when we first started the conversation is you have to look at those micro-moments that the customer is showing you where there is engaging, how there is engaging, they’re time spent. You know, using my e-commerce example this morning, I spent probably 10 minutes in my profile page on that e-commerce website and didn’t do anything. If you look at my click stream, my click patterns it didn’t do anything, because I was talking to the agent of that experience, they’ve got to take that in mind that and say, well can we see a pattern here. And then they’ve got to connect the processes to enable change of that.

(36:00) they’ve got to create a loop that says, ‘what else are we doing to touch this customer, oh we’re selling them and ad oh my God, we shouldn’t be giving him and ad when he’s a dissatisfied customer’. You’ve got to take that journey and break it into those components and how to understand how to create the organization to be able to leverage it.

(36:20) You can’t have the digital marketing guys pounding ad’s out there, and the service people trying to close call volume or call time. Those can’t be the metrics that are defining customer experience today.

Michael:

(36:32) So you’ve got this body of data and the customer comes in and now has some type of interaction and the system basically immediately then needs to compare that interaction with data that is stored in order to trigger some type of next event in the sequence. And that next event has to be absolutely appropriate to this particular customer and that’s what creates the micro-moments that you’ve been talking about.

Robert:

(37:11) I sometime say its common sense right, you have to pass the smell test, you have to do things. There’s a set of journeys we all have whether it’s in our own companies or in others that we should know with some predictability of what we want to occur.

(37:30) You know, when I go in and I type ‘refund’ on a website, it should know what I’m trying to do. It should know what to send me to, how it should help me and it should be able to connect my digital footprint to the call center if I choose to go that path. And it should also say, how can we get Robert what he needs in a way that I don’t need to call the call center. I would have been happy to do it myself, proven that self-service is a really big thing. There’s so many learning moments there that the organization has to take and apply across the board. It’s not in one department; it’s across all those departments.

Michael:

(38:08) What’s the best way for the organization to in a sense to use the term model those customer interactions in the right way because it requires so much of a detailed understanding of what the customer is doing at so many different moments in time.

Robert:

(38:28) Well ironically one of the things that I tell people that they should do as sort of 101s, step one is go and be a customer yourself you know and actually see the journey and experience it across all devices. Experience it across on how you would do it on a mobile phone, tablet and so forth and you know, it’s a huge eye opening experience.

(38:56) Number two, listen to all the call center calls. Three, look at all the drop-offs in different phases in the journey as you would predict. You know I think those are all things that you could rally and create culture change around and really be able to reimagine those experiences, and you have to make this cultural where everybody in your organization is going after this, and everybody is aligned in solving those and removing friction through the process. 

Michael:

(39:26) Okay Robert, we only have about five minutes left and so for somebody who’s listening that is thinking, god, I want to do all of this but it’s like rocket science. Where should this person start?

Robert:

(39:43) I think you have to start by creating a culture in the organization that says the customer is at the center of our business, the customer’s going to drive and make every decision around our strategy around our operation and is going to be our true North. And that’s a big big statement just so we’re clear.

(40:06) I’ve been to a lot of presentations where everybody says we’re going to be customer centric and we’re going to do this, but there’s some real tenancy to making that decision. There’s some hard choices that you’re going to have to make. Things are not going to be popular; they’re going to cost money. It’s a big decision to really make that decision to put that customer in the center.

(40:24) The second thing you need to do is bring in experts and different pieces of that customer experience that can influence the whole. So I think bringing in digital, mobile, analytics, those content skills are important to the team. I don’t believe you can replace your entire team. I think you’ve got to bring in and infuse that expertise and you’ve got to create a collaborative culture to be able to take that in, that’s why I don’t love the Chief digital Officer because I feel like sometimes business owners say they’re digital so they’ll figure it out. That doesn’t kind of work that way; you all have to be on the hook for that. That’s why I think each team member across all the functional areas needs to bring in some of this digital native skillsets

(41:14) And then third and final, is you’ve got to hold yourself accountable to the customer. Customers don’t like their behaviors, how they use stuff, how they go about stuff. They show you with their actions how and what they like, what they don’t like and by the way ask them. they’ll tell you, they want to give you feedback. They want to be a part of the process. You know they want to make their experience better and that I think is an amazing shift in our world where the customers are actually dying to be part of it.

(41:18) And when you have brand loyalists like me with my experience today, I’m dying to help that company figure out how to make it better because I want to give them my business. But if they don’t and if they continue to ignore my feedback and ignore my three calls to the call center and my web traffic, I’m going to leave. I’ll find somebody who won’t, and I think those imperatives are critical for organizations to go take.

Michael:

(42:10) So create the right culture, get the skills in place that you need, be accountable to the customer and actually listen to the customer.

Robert:

(42:22) Yes.

Michael:

(42:24) I guess that’s a pretty good summery of what’s needed. Obviously it’s easier said than done by far.

Robert:

(42:31) It is. You know, I think that it’s just such an amazing time to be in the market suite and to have that moniker and that mandate, that ethos right now. It’s such an exciting time. I wake up every day enthusiastic, excited, a little petrified but I just think we’re in such an amazing time; we’re redefining everything.

(43:00) Nothing has to be done the way it was done last time, or last year or whenever. We have a clean slate and our customers will tell us what they like and we can build on that and we just want to listen and to be able to move in a sea that’s very different.

(43:15) We’re not doing you know, 12, 24 month planning cycles anymore. We have instantaneous feedback. We’ve just got to train our organizations to listen and to be able to take advantage of the and you know, the next five years of marketing is going to be a heck of a ride.

Michael:

(43:32) Okay, Robert Tas, this has been very eye-opening about digital transformation and the role of marketing. We have been speaking with Robert Tas, who is the Chief Marketing Officer of Pegasystems and you have been watching episode number 144 of CXOTalk, Robert thank you so much for taking the time today.

Robert:

(43:58) Thank you thanks for having me.

Michael:

(43:59) It’s been a very very fast 45 minutes, and Robert we’ll have to do it again another time. Everybody thank you again and have a great day, bye bye.

Companies mentioned in today’s show:

Accenture:                               www.accenture.com

Airbnb:                                     www.airbnb.com

American Express:                 www.americanexpress.com

Bloomberg:                             www.bloomberg.com

Facebook:                                www.facebook.com

Forbes:                                     www.forbes.com

Google:                                    www.google.com

Horizon:                                   www.horizon.com

JP Morgan Chase:                   www.jpmorganchase.com

Marriott                                   www.marriott.com 

Pegasystems:                          www.pegasystems.com

SAP:                                          www.sap.com

Siebel:                                      www.oracle.com/Siebel-to-SalesCloud

Snapchat:                                www.snapchat.com

Starwood:                                www.starwoodhotels.com

Tacoda:                                    www.tacoda.com

Uber:                                        www.uber.com

Vodafone:                                www.vodaphone.com

WhatsApp:                               www.whatsapp.com

Lee Congdon, CIO, Red Hat: Transformation and the Digital CIO

Lee Congdon, CIO, Red Hat
Lee Congdon
CIO
Red Hat

How can a CIO reconcile the demands between technical proficiency and business responsiveness? Although the organization demands infrastructure and cost reduction, strategic business relationships and innovation are key goals for every modern CIO. 

Lee Congdon is a Chief Information Officer of open source software and services firm Red Hat. In this episode, he shares ideas for balancing infrastructure and innovation in a dynamic and transformational environment.

Transcript

Michael:

(00:03) Episode number 139 of CXOTalk. I’m Michael Krigsman and today I am speaking with Lee Congdon, who is the Chief Information Officer at Red Hat Software. And we are going to be discussing the role of the CIO and IT and digital transformation, and all kinds of exciting things. Lee, how are you today?

Lee:

(00:30) Michael, I’m great thanks. I’m looking forward to our conversation.

Michael:

(00:38) As am I and the audience as well. So Lee, you’re in a pretty interesting position of being CIO of Red Hat, which of course is one of the primary suppliers of software for the Internet that runs many of the websites that we use every day. So, give us a brief sense of your background.

Lee:

(01:05) Sure, I am a computer science major from Purdue. I also have an MBA from Northwestern. I’ve worked for large technology companies like IBM and I worked in financial services for City, for the NASDAQ stock market and for Capital One for a number of years as well. I’ve been at Red Hat for about eight years as CIO, and it’s been quite a journey and I like to think of it really as three different jobs as we went through the various stages of growing that company. But with a technology background and some financial services really summarizes what I have done in my career.

Michael:

(01:43) Okay so you have a pretty broad based background both in business and technology, tell us about Red Hat.

Lee:

(01:53) Sure, Red Hat is a company of about 8,000 folks. We provide enterprise software solutions and you know we don’t sell software. Many of your audience may know that we provide services associated with open source software for LINUX operating systems, JBoss middleware and a variety of cloud products. 8000 people, headquarters are running in North Carolina. Our second largest location is in the Czech republic, but we in 80 locations around the globe. Many of our associates work remotely as well, and we are really focused on I think two things you would say is central to our business model. Our ability to operate in communities that develop open source solutions, and our subscription business model that allows us to offer those solutions to customers certified with bug fixes etc., at a very attractive price.

Michael:

(02:54) So, it must be interesting being the CIO of a company that employs basically technologists who are such experts in the technologies that everybody uses on the Internet.

Lee:

(03:12) I get lots of advice, and when I first got here you know it takes an adjustment. We are an open organization and I refer you to Jim Piper’s book about the open organization, but we are very much a candid exchange of views again going back to those open source communities.

(03:30) So, when I first got here I quickly learned that folks would send me an email complaining about an IT service and copied the entire organization. And your initial reaction coming from organizations with great cultures but managed differently are you know, do you try and get that person fired, do you call their manager and tell them to be quiet, do you respond that you know you don’t understand my budget constraints, you don’t have the experience that I do etc., etc., etc.

(03:58) But it turns out that once you get beyond that and start to realise that this open culture can help you a great deal. You realise that unlike any other job you have had and you can get real-time feedback on the quality of solutions that you are delivering to the organization. You have a tremendous source of ideas for things that you can change and improve.

(04:17) So, it is different. I certainly have many people that have strong opinions about my job, but I think we have been able to turn that to our benefit in the IT organization by listening to those folks, treating them as customers, engaging in an honesty exchange about what needs to be done, what the priorities are, and has also been a very positive experience

Michael:

(00:03) Episode number 139 of CXOTalk. I’m Michael Krigsman and today I am speaking with Lee Congdon, who is the Chief Information Officer at Red Hat Software. And we are going to be discussing the role of the CIO and IT and digital transformation, and all kinds of exciting things. Lee, how are you today?

Lee:

(00:30) Michael, I’m great thanks. I’m looking forward to our conversation.

Michael:

(00:38) As am I and the audience as well. So Lee, you’re in a pretty interesting position of being CIO of Red Hat, which of course is one of the primary suppliers of software for the Internet that runs many of the websites that we use every day. So, give us a brief sense of your background.

Lee:

(01:05) Sure, I am a computer science major from Purdue. I also have an MBA from Northwestern. I’ve worked for large technology companies like IBM and I worked in financial services for City, for the NASDAQ stock market and for Capital One for a number of years as well. I’ve been at Red Hat for about eight years as CIO, and it’s been quite a journey and I like to think of it really as three different jobs as we went through the various stages of growing that company. But with a technology background and some financial services really summarizes what I have done in my career.

Michael:

(01:43) Okay so you have a pretty broad based background both in business and technology, tell us about Red Hat.

Lee:

(01:53) Sure, Red Hat is a company of about 8,000 folks. We provide enterprise software solutions and you know we don’t sell software. Many of your audience may know that we provide services associated with open source software for LINUX operating systems, JBoss middleware and a variety of cloud products. 8000 people, headquarters are running in North Carolina. Our second largest location is in the Czech republic, but we in 80 locations around the globe. Many of our associates work remotely as well, and we are really focused on I think two things you would say is central to our business model. Our ability to operate in communities that develop open source solutions, and our subscription business model that allows us to offer those solutions to customers certified with bug fixes etc., at a very attractive price.

Michael:

(02:54) So, it must be interesting being the CIO of a company that employs basically technologists who are such experts in the technologies that everybody uses on the Internet.

Lee:

(03:12) I get lots of advice, and when I first got here you know it takes an adjustment. We are an open organization and I refer you to Jim Piper’s book about the open organization, but we are very much a candid exchange of views again going back to those open source communities.

(03:30) So, when I first got here I quickly learned that folks would send me an email complaining about an IT service and copied the entire organization. And your initial reaction coming from organizations with great cultures but managed differently are you know, do you try and get that person fired, do you call their manager and tell them to be quiet, do you respond that you know you don’t understand my budget constraints, you don’t have the experience that I do etc., etc., etc.

(03:58) But it turns out that once you get beyond that and start to realise that this open culture can help you a great deal. You realise that unlike any other job you have had and you can get real-time feedback on the quality of solutions that you are delivering to the organization. You have a tremendous source of ideas for things that you can change and improve.

(04:17) So, it is different. I certainly have many people that have strong opinions about my job, but I think we have been able to turn that to our benefit in the IT organization by listening to those folks, treating them as customers, engaging in an honesty exchange about what needs to be done, what the priorities are, and has also been a very positive experience as a way I would categorize it.

Michael:

(04:41) So, tell us about your role as CIO at Red Hat, what you do and your relationship to other parts of the organization.

Lee:

(04:53) In terms of responsibilities I would class ours as pretty typical for an IT organization. We own all the IT services and systems whether it’s identifying prospects, whether it’s developing customer relationships, processing orders, collecting cash, running the website, running the internal collaboration service, email and so on. Ensuring that we provide those sorts of services and you know, the distinction we make is that we deliver the enterprise services, the product team delivers the product services. So build and test. We partner together on certain services like our customer portal, where they largely develop the customer experience but we run the production.

(05:37) In terms of our relationship with other parts of the organization, be it sales, legal, finance and so on, and we treat them as our customers. We organize around delivering services to those organizations. We have what we call towers faced up against each of our customer organizations, typically with a tower lead. Some develop in program management resources to ensure that we’re responsive to the needs of those customers.

(06:02) And then on the backend we have the typical sorts of production services, data and analytics capabilities and the other things you would expect, information security and so on. We have an office to the CIO to help us with the coordination and administration, but I would say a relatively straightforward IT organization, certainly comparable to ones I’ve seen in other organizations.

Michael:

(06:24) So, you’ve organized IT so that you mirror in a sense your customers, right, so that you can get feedback into the product groups.

Lee:

(06:37) Absolutely and I think that plays out a couple of ways. So, first of all we are organized to match to all of our customers. So we have people that are dedicated to the needs of those functional groups that I mentioned. And we have a group that interfaces with the product team and is providing services to then again, whether they’d be collaboration, messaging, data storage, networking and so on.

(07:03) But then my IT enablement or production team also works closely with the product team, and my IT infrastructure team delivers our software infrastructure, our J boss enterprise service and so on, also works closely with the product team, so that we’re engaged with them. As we start to use our products, we call the product customer one, as we start to use our products early in the cycle, we then can give them feedback on what works for us and what doesn’t work for us, new capabilities we need, and as practitioners work with them to improve the products.

(07:41) So we think that’s a very positive relationship, and in addition to that direct relationship we do participate in open source communities, so we have that option within Red Hat as well. And then over the years we’ve become a bit of a talent factor as well, as we have got folks in IT and as IT continues to develop as a business and technical function. Some of our folks really enjoy the development side of IT, actually take careers in our product organization and move over there.

(08:12) We think that a win for IT because they have career paths. Certainly a win for the product team because they get people who have actually been active practitioners using the product. And it’s a win for Red Hat because we keep those people inside the organizations. So I think there are a lot of synergies built around customer one and our use of the products. In some we’ve run all of our infrastructures internally on Red Hat products, whether it’s the operating systems and the middleware and so on.

Michael:

(08:38) So Lee, you mentioned that IT is both a business and a technical function, what do you mean by that?

Lee:

(08:47) Yeah that’s a great question. Increasingly you know, we’re transitioning from this idea of being an industrial embraced economy to being an information-based economy, and I think it’s becoming critically important for businesses, governments, educational organizations, basically all enterprises. I think there are if you are exceptions now, to understand that it isn’t just about product, it isn’t just about the service, it’s about the information wrapped around that. And we’ve seen disruption in a lot of industries, music, publications, publishing, taxicabs etc., where the fact that there is information impending or impinging on the traditional industry really changes the name of the game.

(09:33) So, every business is becoming an IT business and that means that IT organizations increasingly can’t just deliver digitization of process, but instead they need to understand the business, and help become information leaders and help drive the business in the directions that the technology enables, and it increasingly requires if you’re going to be competitive if you are a public company for example.

(09:55) So, IT and the business are increasingly intertwined, and you know you hear talk about systems of record, and systems of engagement. Typically more and more in every enterprise you need to understand your business and how you’re going to engage with your customers, prospects and so on if you’re going to be successful.

(10:14) So, IT is a key part of the business just like the people team in terms of having human resources or the finance team in terms of having the right funding for various initiatives and investments. IT has to be a part of the business. It is a service organization, but it can’t be just a service organization.

Michael:

(10:34) But one of the things I think happens in some IT organizations is the focus on infrastructure and cost-cutting and efficiency overshadows the goal to be innovative and really displaces innovation. How do you avoid that from taking place?

Lee:

(10:55) Well it’s a problem for most of the IT organizations and for the business, and I’m fortunate to have the problems of both right now, so I’ve been in other situations where I’ve had to reduce resources, and that is not a pleasant opportunity as a leader.

(11:10) But, what I will say is if you solely focus on reducing cost you are probably setting the wrong tone for the long term. And I advise folks that even if you have a lot of technology debt, even if you have a cost problem, you’ve got to get innovative and put a plan in place to get yourself moving forward.

(11:31) One of the advantages of technology is more and more capabilities are becoming more and more available at a lower cost, driven by open source, driven by cloud computing, driven by Moore’s Law.

(11:45) So this is not typically an unsolvable problem, but it does require taking the initiative and ensuring that the business doesn’t just treat IT as a cost center. IT has got to step up and deliver a broader set of business services and a broader set of business values as we’ve been discussing.

(12:03) But under those circumstances you know, you can’t save your way to success. You’re going to have to think about not just saving money in IT, but finding the right investment pattern across your entire enterprise, so you’re investing in the mobile apps, the new tools to find customers, the new solutions to engage your customers, the new solutions to improve your marketing capability, whatever it might be appropriate for you in business. You’ve got to be investing in those things; otherwise you are not likely to be as successful over the long term.

Michael:

(12:35) Well of course what you’re saying is true, and when I speak with IT leaders, such as yourself especially innovative IT leaders, this is always the message and yet for many companies view IT first and foremost awaited drive efficiency. And I wonder sometimes whether on the one hand IT folks in some of these companies have the sophistication in a sense to fully interact with the business as an equal partner. And when they do on the business side, do they have the sophistication to understand what IT can actually do for them?

Lee:

(13:25) You know, first of all IT does need to be a efficiency center and a revenues cost over time, you know I’m not trying to abdicate that responsibility at all. But, just like anything else you got to do that and the next thing I think that if you’re enterprise is going to be successful. So if you focus too much on cost control and this new environment that I described, your business partners can likely pick a software as a service solution and do it without you. They can pick a mobile app and do it without you, so you can quickly get into the situation great you are the caretaker of a depreciating set of assets. The interesting things is that are moving the business forward are occurring elsewhere and it you’ve missed an opportunity.

(14:09) So I think despite the pain, despite the challenges, of course as an IT organization you need to make the investments to refurbish your portfolio, to retire your technology debt, to lower the cost of your legacy infrastructure. But that’s just table stakes in fact you probably wouldn’t get credit for it in today’s environment.

(14:30) You’ve also got to bring new ideas about how to drive revenue or to reduce cost for the business as a whole to your business partners if you are going to be truly successful as an IT organization. If you don’t, as I say they’ll typically do it without you in some fashion where there is a critical need and they have a budget, and then you’ll end up with a non-integrated set of solutions, potentially security exposures. Probably bad deals as well, because they are not particularly experienced in negotiating technology deals, yet, you’ll have another example of the customer database in your enterprise etc., etc., etc.

(15:08) So I think one of the things that IT organizations have to do is identify the business opportunities, the shadow IT that if we get to in this conversation and treat that as an opportunity and go out and embrace those as examples of where the business is willing to spend money to improve their processes or to improve their capabilities, and to find a way to engage their as well as on the cost save that we talked about.

Michael:

(15:37) So everybody, I am speaking on episode number 138 with Lee Congdon, who is the CIO of Red Hat software, and I would like to take a moment to ask you to like us on Facebook. I know, like I was on Facebook and sign up for the mailing list.

(15:54) Lee, we have a question from Bob Rothman, who asks there are many company focus so called transformation programs, where IT is core how do you partner with other business functions?

Lee:

(16:13) You know, we are fortunate in that Red Hat is largely a digital business today, and that we aren’t in the mode of completely transforming our business model. We are rapidly evolving from being an operating system and a middleware service provider to becoming a cloud provider as well. So that change is going on within our organization. But typically it occurs to answer the question at multiple levels. Working with the senior leaders at the organization I and my direct reports need to understand where the business is going, what the strategy is, what the critical needs are, where the gaps are, where are the things that were not doing as well as we could be where our strengths are, and use those just to prioritize a set of ongoing projects and investments to improve the business.

(17:07) At all levels in the organization, we need to set the expectation with our folks that they’re going to listen to the business challenge and not just to the technical challenge. They’re going to engage with business partners, whether it’s how do we help the people team, how do we help the marketing team, how do we help the product team, and incorporate being a service organization into what we do.

(17:30) I think there are also some examples where we identified typically technology driven innovation that’s got to be relevant to the organization. Two current examples for us are pushing to make Red Hat more data driven, to increase the capability not just for reporting, but analytics and predictive analytics within our organization to drive business value. And in this world where we’ve got so many channels of information and so many tools to use, to focus on improving the productivity of our associates as well, to better tool select, to better training and so on of better consistency across the organization and better enablement.

(18:10) Now, from a transformation standpoint as we look to IT, I do believe that as organizations are moving from an industrial view of the world to an information based view of the world, and if your organization isn’t digital yet, IT has the opportunity to play a leadership role in that transformation. In partnership with the business, IT can’t do it by themselves, but based on their awareness of leading firms in your industry and leading firms in various uses of technology across the world. Relating that back to your business problems – I say business but this can apply to education, government, and other organizations as well, relate that to your business needs. And help your business partners build a strategy and a path to evolve as an organization to take advantage of these great new technology capabilities that are rapidly becoming available, frankly at lower and lower costs in many cases and with greater and greater flexibility.

Michael:

(19:15) Okay, so the cost environment is going down in terms of applications that end users within the business can purchase. What is your view of shadow IT and enabling or not enabling users to make purchases of technology on their own, and how do you work with the business to balance the various goals and constraints on both sides.

Lee:

(19:48) Yeah, it’s a great question, and I think as I said I think shadow IT is an opportunity. That’s an example of a business partner that is willing to spend money on a technology solution that I haven’t yet explained the value to the services that I can bring to the table.

(20:07) We think we have pretty good visibility across our organization, and these are no longer shadow IT, but there are some business led IT or business driven IT solutions that make sense. What we try and do is there’s a range right, to maybe something that IT runs 100% for the enterprise, or maybe something like a small website that the business has contracted with an outside provider to do on their own.

(20:33) What we like to do is look where we are going to drive value so some of the things that I touched on earlier. We have a lot of experience in negotiating with technology providers. We may be able to help improve the quality of the contract or the deal that we get. We require – this is one of the few areas where we do require, we require whatever solution the business except have the appropriate information security characteristics. But increasingly, we can bring value by integrating those solutions into for example our single sign-on package.

(21:04) We also see, which see across the enterprise, we also see that many of these cases the business organization will pick a provider, the brochure or the website looks great, but the realities of running IT production may be somewhat different than the vision that was presented by the vendor in sell mode, and the business often don’t have somebody who is willing to take a page at 02:30 in the morning local time and resolve the problem so that the service is available again, and you can’t always do that during normal business hours East Coast US West time for example.

(21:39) So all of those sorts of things are things that the IT organization can provide value to access other data and integrating data across the enterprise as well. So we use those tools and the trust and partnering relationship that we’ve built up with various paths of the organization to engage with the business, give them the freedom and flexibility to move quickly. But give them the trade-off to say, if we do this quickly, these are the short-term and the long-term benefits and costs. Sometimes you just need to move quickly and see if it’s a good idea and throw it away if it’s not. Other times you know that it has proven itself out and making a long-term investment and it’s worth spending more time to get it right so it’s sustainable.

(22:24) And we really try and be open and candid about those conversations with our business partners. Even if they start with a shadow IT and business led project to begin with, we work with them to then fold it back into the IT portfolio over time, to deliver some of the services that I have described and ensure it’s consistent with our overall technology strategy.

Michael:

(22:45) So, another related question people often have is when you’re working with let’s say marketing, marketing always want is rapid turnaround for example on the campaigns that they’re putting out. And in many companies IT is not sufficiently responsive to the needs, which that becomes the underlying driver for this kind of Citizen IT; shadow IT, whatever we want to call it. So at Red Hat, how do you work with departments and functions inside the company to make sure they get what they want in the timeframes that they need it?

Lee:

(23:30) Yeah, marketing has been a great example of a partnership, and I would argue a success story for the process I just described. Probably 18 or 24 months ago, we knew we needed to revamp Red Hat dot com. We jointly with Jackie Yeaney, our CMO worked together to devise a strategy, to pick a technology strategy, to pick a look and feel, and to really think about the stories we wanted to tell on the new website.

(23:58) You know, I give my team a lot of credit and I give Jackie’s team a lot of credit. But we were able to work together to develop a strategy. This is one of the few projects where we used technology and were able to get the technology platform up quickly. But the long pole in the tent from a project standpoint was actually getting our content translated into all of the various languages we use around the world.

(24:19) So it wasn’t just the IT deliverable that was the inhibitor in terms of getting it done quickly, but we got it done on schedule. It was a tremendous success, and then we jointly were able to reach out to other parts of the organization and we are continuing this process now of folding in some of those micro site campaigns to ensure we’re tracking them consistently, single sign-on across our where property, etc., etc., etc.

(24:44) So that has been a true partnership with the marketing organization, where we can go together with the rest of Red Hat and described our capabilities, and work as a tightly integrated team to offer in this case marketing services campaigns to the entire organization.

(25:04) It’s been a great success for us and I think and Jackie’s team would say the same thing, we are interdependent in terms of our ability to deliver these services. Again, my team focuses on the technology side of it, with hopefully a good awareness of the marketing. And Jackie’s team focuses on the marketing side of it with hopefully a good awareness of the technology that’s certainly my observation.

(25:26) But we are one integrated team offering a set of marketing services across Red Hat and I and I think Jackie, both view that as a great success, and a great example of the type of process that I was talking about.

Michael:

(25:38) So but how does the IT folks learn enough about the ins and outs of marketing and marketing campaigns and analytics from a marketing standpoint and marketing software, how do you learn enough that you can really contribute to the business discussions with such a very specialized field?

Lee:

(26:00) It’s a great question in some ways it’s a combination of things. So you have to hire folks that have that background, and have done that sort of work before and obviously if there available and they may be working for an agency or something like that. But many people have done those types of tasks before. You are willing to spend money to train your fault and develop the skills necessary to support the business. You give the team and open environment, a shared set of objectives and expect them to work together.

(26:30) So they learn from each other very rapidly in what the priorities are and what the current techniques are. You encourage them to engage with the industry through tradeshows, through benchmarking through leading organizations, through talking to vendor’s etc., etc., etc. so they all know what the trends are. And as I say it’s actually getting easier for IT people over time, because more and more marketing solutions in particular are technology driven rather than solely a ‘business’ knowledge, but rather they do require increased understanding of technology, because that’s one area where the state of the art is advancing very rapidly.

(27:12) So, it doesn’t happen without conscious thought, but if you set the expectations and recognise people in the IT organization for their contributions, not only on the technical side. But in supporting their customers and understanding the business, and ultimately leading the business, we’ve found that you get great results and you get them in a very good timeframe.

Michael:

(27:36) Okay, Lee you mentioned the term expectations, and it seems to me one of the big drivers of change inside IT is as technology knowledge proliferates out, and we have the so called consumerisation of IT, and as you just described technology in areas such as marketing is becoming more and more important. So as users become more sophisticated, they now have more changing and more demanding expectations of IT, so any thoughts on that?

Lee:

(28:14) Well you know, I like to joke that you know we have a lot of customers within the organization that have plugged a wireless router into their cable connection, and therefore assume that it’s that easy to run a global telecom network, with wireless access point in various buildings around the globe and have that all work consistently.

(20:34) So part of this is education and ensuring that your customers understand that somethings aren’t as easy as they might appear on the surface. Some of it is additional investment to make it easy for the end user if there’s going to be business value there. Some of it I think is an acknowledgement that we are increasingly looking at associates who bring their own devices, bring their own technology capabilities, and bring their own services. In part of the art of the consumerisation standpoint is figuring out as an IT organization, do I want to be in the to-do list business, or do I just tell my associates that whatever tool they use must be appropriately secure and describe how that will occur, and let them make the decision as to what to do list manager they want.

(29:29) I similarly calendar clients, similarly email clients and so on, so I think you’ill see folks that are bringing their own devices and bringing their own services we need to just leverage that to understand what we want to provide as an enterprise service to ensure that we have appropriate information to security. But also allow our associates to bring the tools to the table that they need to get the job done. So I think that consumerisation is a real challenge.

(29:50) On the enterprise side, as I said, developing good partnerships means that you can explain to your business partners that it won’t always be as easy as the vendor said it was going to be to do function X. And that these are the sorts of things that we need to work together, to put together a financial plan, project plan, what outcomes we expect, what the return is going to be, education is going to be required and so on.

(30:24) Again, those are sort of basic functions for an IT organization, things that we’ve been doing for years. But if you’ve never led a large IT initiative before on the business side, you may not be aware so I think you can add value and education there. A lot of it is based on the level of partnership and an openness and willingness to ask the questions. So you started on this path without us, you know presumably there is an opportunity for us to work together in going forward. How do we need to engage to ensure that we’re all successful here? Again, that worked very well for us in a variety of environments.

Michael:

(30:59) What about communication? How important is communication to everything that you’re describing.

Lee:

(31:06) It is essential and it is hard. And it’s hard I think because of the clutter, we have lots and lots of tools. We have that messaging, we have business social, we can post paper in the elevators, we’ve got billboards in the snack bars you know electronic billboards in those snack bars, and so many many channels for communication.

(31:29) You know, it always amazes me, and I guess I’ve learned over the years that you know an executive can be crystal clear on their vision and then messages to the organization about priorities and so on, yet it never ceases to surprise one that when you get to people within your organization that have never heard that before. And it never ceases to you know amuse me that we can do a large communication campaign, and a week later have an associate ask where are the internal distribution lists, a question that indicates they clearly never saw it.

(32:00) But that said I think we’re learning and attempting to learn from our marketing and internal communication partners, the technique that they use message to our customers, prospects and so on and apply those to how we message to our associates internally. This is very early stages but, you know we only have 8000 associates. Some want to probably get emails, some probably want to get text messages, some want to visit the business social side etc., you know, we are actually talking about how we are going to customize on our messaging to each associate in the organization, so that we deliver the messages that they need to hear in the most effective manner. And of course successful in that then obviously we’re going to share it across the organization, and let the other organizations that need to deliver messages to our associates to participate as well.

(32:48) But I like to think of it and getting back to our discussion about marketing, this is a marketing problem. We need to get the messages to our associates and we need to be flexible in terms of thinking about how we’re going to do that. You have to be thoughtful that we don’t creep there out by learning to much about them too fast. And if we tell them you know, our research shows that if we text you 3:35 on a Friday afternoon, you will in fact read the text message. You know, that may creep some people out, so we have got to think about how we are going to be you know transparent in enrolling this out.

(33:23) But that said, I think there is a lot of techniques that we can learn from what’s happening in the internet and the digital marketing that we can provide through our internal communication. That’s a bit of a pet project of mine and something we are thinking about as we go forward.

Michael:

(33:40) Okay, we have just over 10 minutes left which is a shame because we could go on for a long time here. But we have a question from Wayne Anderson, this is a thought-provoking one who says, when the impediment in the business partnership is security, does your approach change?

Lee:

(34:03) You know, security is of the essence of all of us, and having worked in financial services, where it actually was real money on the wires, you know I’m highly sensitive to this solution. It is a dangerous world and it’s getting more dangerous, so we don’t take this lightly at all.

(34:22) I think it is a combination of multiple things. First of all you have to have world-class technology and take all the technology steps that are reasonable from a business perspective to ensure that you’re secure.

(34:33) You have to have a frank and candid exchange with your business partners about what the technology trade-offs are. Often its ease of use, often it is customer engagement and finding the right balance between accepting business risks in the process and turning away customers is going to be an ongoing challenge.

(34:57) You need to be constantly looking at those processes and implementations independently from people outside the team and probing for weaknesses. You need to be engaged with others around the industry to ensure that you’re learning from current best practice. You need to hire the best people that you can afford and give them the tools and the freedom to do their job. There are no easy answers here, I think it’s one of the most difficult problems facing us in IT organizations right now in terms of the breadth of the problem. So I don’t want to make light of it at all, but applying some of the techniques I’ve described and ensuring continued rigor and focus is important for all of us to continue. I won’t say there are any easy solutions here.

Michael:

(35:48) Okay, again in this spirit that the fact that there are a lot of things I want to talk with you about, but soon we’re going to run out of time. So, when I have spoken with CIOs like Kim Stevenson from Intel for example here on CXOTalk, and you and I have had this conversation. You have to begin with what she calls operational excellence. In other words, if you want to be taken seriously and to be respected by the business and have credibility, you need to deliver your projects on time. So maybe tell us the platform for CIO credibility and IT relevance.

Lee:

(36:32) I would say for me it’s been a bit of a journey we’ve gone through at Red Hat. First, you have to deliver appropriately reliable production, that may be five nines that might be 97% it depends upon the application and it depends upon the requirements. But you have to deliver appropriately reliable applications. As I like to say, nobody wants to have a strategic IT conversation if the email server is down, so you need to start there.

(37:00) Then you need to have predictability and appropriate risk management in your project. You need to get transparency, visibility, you need to know the status, you need to know when a project goes to red and how you’re going to recover. And by the way, train your business partner, we do almost all agile now. So train your business partners to get comfortable with your project methodology that they may not be familiar with at that level of engagement for example, so that you now in a mode where you can get the basics right, and you need to never lose focus on those. The expectation is there that production will run and you will be able to deliver the project.

(37:35) If you backslide in those areas, you’ve got to get back into it instead of the conversations that you don’t want to get into. In parallel, and based on those successes you then need to think about how you’re building partnership. Some of that can be serendipity. New organization needs some solution comes to IT and can ask for help, so some of that can be conscious marketing and allocating resources to build partnerships across the organization.

(38:00) You have to do this in my opinion for all of your partner organizations, but they’ll occur at different speeds and different paces depending on the level of available funding, the priorities that they’re willing to partner your internal culture, all of those things will be drivers. Assuming you have been successful up to that point, then you need to think about where am I going to lead the organization. Not just IT, but the entire organization.

(38:24) For us, we’ve established a couple of technology-based initiatives right now where we want to be the leaders in making Red Hat increasingly data driven, as we move from reporting to analytics to predictive analytics, thinking about what IT can do to facilitate that process and make us even better at managing our data in the organization. And another opportunity that we see in leading the organization is improving our associate productivity in terms of tools, in terms of training, and in terms of good advice. In terms of providing appropriate consulting and so on.

(38:56) So those are examples where I think, the four steps that I think of it is baseline, production, baseline projects, partnership, and then enterprise leadership is the simple diagram I keep in my mind when I consider what we are trying to accomplish.

Michael:

(39:11) So when you are thinking about IT activities and plans and strategies, this four step model that you described is this really firmly in your mind.

Lee:

(39:20) Absolutely and thinking about where we are along that continuum with each of our partners, and how we continue to move up when we think of it, the pyramid, move up that pyramid with each of our partners internally is very much of how I think about the world in terms of delivering services to Red Hat.

Michael:

(39:39) And how much do you communicate this pyramid to people both inside and IT as well as outside IT.

Lee:

(39:47) The dialogue is very much driven by the business, and what their business needs are. So depending upon how they want to think about the world, we may be having strategy conversations about products. We may be having strategy conversations about marketing campaigns. We may be having strategy conversations about associate data or enterprise culture, depending upon the organization.

(40:11) I don’t know if we render it, I mean we certainly show the diagram from time to time in one fashion or another in our conversations with our partners. But I think we add the most value in the organization by talking in their terms and prioritizing our requirements within their business framework, rather than imposing the IT framework on them.

Michael:

(40:33) So you are not shoving and IT framework down their throat, your using that to guide your actions in the context of what the business wants from you from what their needs are.

Lee:

(40:43) That is correct, and the things that frankly we want to push them on aren’t IT things. We want to push them on business things. We want to push them on things that we think are going to drive more revenue, reduce cost, make us more a successful enterprise that’s to the best to all of our benefit.

(40:59) If I’m pushing them on an IT methodology issue or something you know something like that, that actually isn’t going to give us the most benefit either in IT or the enterprise over time.

Michael:

(41:11) Well you’re giving us a fast education, and we’ve just got literally a few minutes left. So let’s talk about innovation and working with start-ups. So tells about innovation at Red Hat and the role of IT in helping drive innovation.

Lee:

(41:26) Yet I think Red Hat is very fortunate to have great communities of open source developers, that gives us a tremendous innovation engine and IT participates that in several ways. We consume the Red Hat products and to a lesser degree projects. We typically consume products not projects in IT for the same reason we encourage our customers to do so.

(41:52) Our IT folks are able to participate in projects outside the enterprise, and in fact sponsor their own as well. So I think the innovation engine for Red Hat IT starts with the innovation engine for Red Hat which is this community development model.

(42:08) In addition to that we do the same things that most IT organizations do. We listen to small organizations with interesting ideas. We talk to promising vendors. We talk to our existing vendor’s. We talk to our customers and others about the tools they’re using to solve similar business problems and to solve similar IT problems, and we learn from that.

(42:37) We’re fortunate to be in a fairly aggressive mode at bring new associates into Red Hat, so we learn from the new people that joint us, how things work in their former enterprises and what their opinions are. And share those pretty broadly across the organization. We’ve got several vehicles that we use for exchanging ideas that I eluded to earlier.

(42:58) And because we are a tech company all that comes pretty naturally to us, so you know a lot of our internal discussion lists revolve around emerging technology - we have a lot of enthusiasm. So a lot of our internal discussion lists revolve around emerging technologies, the types of trends that we’re all observing. It’s great because it’s around the globe, so we see not just a US view or an East Coast view, but a global view of that. So for all of those reasons I think we tapped in pretty cleanly to a lot of ideas and sources of innovation.

Michael:

(43:29) And you sponsor of a partnership with Citrix around this as well aren’t you?

Lee:

(43:35) Here in Raleigh we are a co-sponsor of the innovators programme. We have a dozen, in fact I sat through the pitches yesterday a wide range of solutions of very interesting from pain management technology, to desalinization hardware, to mining the output of coal plants and a variety of other technologies as well, so just fascinating. But yes, we co-sponsor and we have a team, one of our teams from Red Hat is engaged in that innovative project, and they’re looking at tools that may enable us to make developers more productive by finding them the answers to their problems before they look for them, by monitoring their activity monitoring the log files in their development in the production environment, and pre-identifying potential solutions, so they don’t have to go out and search for the fix of each that each of the individual problems they encounter. It’s an interesting concept and looking forward to seeing how it works out.

Michael:

(44:42) Okay, we are really done, but let me ask you one final question. What advice do you have for technologists, for CIOs, for folks in IT who want to contribute more strategically to their business organization, to their company?

Lee:

(45:02) Don’t lose your IT skills, don’t lose your passion for technology, but realise you’re a business person. Find out everything you can about your business. Find out everything you can about your businesses challenges and opportunity and provide your unique perspective as a technologist to addressing those business challenges, and I think you’ll do just fine.

Michael:

(45:23) So really take what you already know of the technology, but enhance that knowledge with deep understanding of the business side.

Lee:

(45:32) That’s correct, and if that means investing in a business education or learning something about finance or marketing, or sales or whatever it might be, you know think about that because I think having that combined business and technology background now is a very powerful set of skills, as I say as we shift to this information driven economy. And so that plus the benefit of hopefully the lifelong learning skills that you have required as part of the process I think will pay dividends.

Michael:

(46:03) Well Lee Congdon, thank you so much for taking the time to speak with us today. It’s been such a rich conversation and I wish we had a lot more time.

Lee:

(46:13) I do too, I enjoyed our conversation.

Michael:

(46:15) Everybody we have been speaking with Lee Congdon, who is the Chief Information Officer at Red Hat software. This has been episode number 139 of CXOTalk. Next week, we are talking with the CIO of the Federal is Communication Commission along with a colleague from the Department of Defense and we are going to be talking about change agents in the federal government. So thank you for watching and please come back next time. Thank you.

 

Company’s mentioned in today’s show:

Capital One:                www.capitalone.com

Citibank:                       www.citibank.com

Red Hat:                       www.redhat.com        

Chris Curran, Principal and Chief Technologist, PWC: Digital Transformation and the Evolving CIO

Chris Curran, Principal and Chief Technologist, PWC
Chris Curran
Principal and Chief Technologist
PWC

Digital transformation is rapidly changing the CIO and IT relationship with lines of business and corporate functions like marketing and finance. As the proliferation of technology outside IT increases, the CIO must establish relationships and find ways to serve and partner with business colleagues. 

In this episode, we talk with Chris Curran, Chief Technologist and Principal in the US Advisory practice at PwC and responsible for technology strategy and innovation. Chris oversees the firm's Digital IQ research series, an important set of data points on digital transformation and the impact on IT.

Transcript

Michael:

(00:04) Okay, welcome to CXOTalk. We’re starting a few minutes late due to problems with Google Hangouts, you have to love technology. Anyway I am Michael Krigsman, this is episode 138 of CXOTalk and today we’re talking about digital transformation. We’re talking with Chris Curran, who is Chief Technologist and Principal at PWC and who has been doing research on digital transformation and the linkage to performance for a number of years. Chris thank you so much for joining episode number 138 of CXOTalk.

Chris:

(00:54) Hey Michael thanks so much. 138 episodes that’s amazing. Anyway thanks for having me and look forward to spending some time talking about all things digital and our digital IQ survey which we’ve just launched a couple of weeks ago, which has been running since 2007 to look at some of the leadership behaviors and priorities for company’s who report top performance and try to help give all leaders across the world some insight into what some leading companies are doing to get the most out of digital.

Michael:

(01:32) Well your survey is a large one. How long have you been running the survey for?

Chris:

(01:38) So I think this is our seventh year and this year is our largest survey. We’ve got 2000 business and IT leaders who participate across 50 countries and I believe about 25 industry sectors. Something that makes the survey unique is that it’s not an IT survey, it’s not a CIO survey. It’s a leadership survey where we look at input across the board from CEOs to CFOs to heads of HR and CIOs across the board to try and understand you know their perspectives on Information Technology and digital. And when you know I say digital I mean the big D digital, capital D, right enterprise and that application of technology. Not the little D you know just marketing or customer facing technology.

(02:31) But that’s part of the process in learning and communicating to you know in the marketplace and with our clients is to try and help them figure out what they mean by it and what they hope to get out of it.

Michael:

(02:43) And actually we’ve already had a comment from Twitter Chris, somebody is asking how do you define digital and how do you define transformation in this context?

Chris:

(02:55) Well we define and in fact we define Digital IQ as the degree to which an organization weaves Information Technology into everything they do from strategy to execution, customers, employees, operations, innovation, the whole gamut of the enterprise.

(03:20) And so you know, the definition of digital is a great conversation because you know as technologists we’ve always been digital and so you know, the latest round of buzz around the world digital is puzzling to some and you know I had my a-ha moments a few years ago you know when the digital term was coming back in vogue and a buddy of mine who runs a small ad agency here in Dallas was telling me about you know, his perspectives on it and you know as simple as the ad agency’s terminology of talking about the channels in which they communicate. So there’s the radios channel, the TV channel and the print channel and the digital channel.

(04:11) And you know so digital there I guess the renewed sense of interest in digital from his perspective came out of you know the agency’s talking about their digital channels versus the thing we’ve been calling digital all along which is Information Technology, data, and analytics and all that good stuff. So you know, that was an awakening for me of sort of understanding those different perspectives, and I think it’s a smaller story that brings to light the larger story which is everybody is interested in technology now, right. This isn’t just about the CIO and the IT organization helping how to figure out how to automated business processes and crank reports out.

(04:55) It’s now you know, in everybody’s interest to figure out how to improve their customer

Michael:

(00:04) Okay, welcome to CXOTalk. We’re starting a few minutes late due to problems with Google Hangouts, you have to love technology. Anyway I am Michael Krigsman, this is episode 138 of CXOTalk and today we’re talking about digital transformation. We’re talking with Chris Curran, who is Chief Technologist and Principal at PWC and who has been doing research on digital transformation and the linkage to performance for a number of years. Chris thank you so much for joining episode number 138 of CXOTalk.

Chris:

(00:54) Hey Michael thanks so much. 138 episodes that’s amazing. Anyway thanks for having me and look forward to spending some time talking about all things digital and our digital IQ survey which we’ve just launched a couple of weeks ago, which has been running since 2007 to look at some of the leadership behaviors and priorities for company’s who report top performance and try to help give all leaders across the world some insight into what some leading companies are doing to get the most out of digital.

Michael:

(01:32) Well your survey is a large one. How long have you been running the survey for?

Chris:

(01:38) So I think this is our seventh year and this year is our largest survey. We’ve got 2000 business and IT leaders who participate across 50 countries and I believe about 25 industry sectors. Something that makes the survey unique is that it’s not an IT survey, it’s not a CIO survey. It’s a leadership survey where we look at input across the board from CEOs to CFOs to heads of HR and CIOs across the board to try and understand you know their perspectives on Information Technology and digital. And when you know I say digital I mean the big D digital, capital D, right enterprise and that application of technology. Not the little D you know just marketing or customer facing technology.

(02:31) But that’s part of the process in learning and communicating to you know in the marketplace and with our clients is to try and help them figure out what they mean by it and what they hope to get out of it.

Michael:

(02:43) And actually we’ve already had a comment from Twitter Chris, somebody is asking how do you define digital and how do you define transformation in this context?

Chris:

(02:55) Well we define and in fact we define Digital IQ as the degree to which an organization weaves Information Technology into everything they do from strategy to execution, customers, employees, operations, innovation, the whole gamut of the enterprise.

(03:20) And so you know, the definition of digital is a great conversation because you know as technologists we’ve always been digital and so you know, the latest round of buzz around the world digital is puzzling to some and you know I had my a-ha moments a few years ago you know when the digital term was coming back in vogue and a buddy of mine who runs a small ad agency here in Dallas was telling me about you know, his perspectives on it and you know as simple as the ad agency’s terminology of talking about the channels in which they communicate. So there’s the radios channel, the TV channel and the print channel and the digital channel.

(04:11) And you know so digital there I guess the renewed sense of interest in digital from his perspective came out of you know the agency’s talking about their digital channels versus the thing we’ve been calling digital all along which is Information Technology, data, and analytics and all that good stuff. So you know, that was an awakening for me of sort of understanding those different perspectives, and I think it’s a smaller story that brings to light the larger story which is everybody is interested in technology now, right. This isn’t just about the CIO and the IT organization helping how to figure out how to automated business processes and crank reports out.

(04:55) It’s now you know, in everybody’s interest to figure out how to improve their customer relationships, improve their products because they are seeing how it’s happening in their own personal lives, this whole consumerization in the technology world.

(05:09) So that’s why there is a lot of energy behind it I think and not only that there is so many more sources of interesting Information Technology and emerging technology out there now than there were before. And the level of innovation and creativity has gone you know so far up that it’s creating ideas of interest in all of our leaders across the C-Suite.

Michael:

(05:33) Okay, so digital is not just about marketing, it’s not just about IT but it’s a broader organizational mandate and your study, the Digital IQ Study examines the link between digital transformation and corporate enterprise performance. So let’s explore that because I think that is a missing piece. For many of these conversations around that performance piece is missing. So to begin with how do you define performance, what are the kinds of performance metrics that you look at?

Chris:  

(06:15) Right so each of the participants in our survey tell us their growth rates in revenue and margin and we use that to segment the participant group into top performers and others, and the top performer segment is roughly 20% of the sample and we correlate that group to their answers in the survey. And you know our survey spans strategy and innovation, operations, operating models, skill sets, project performance measurements and metrics. A lot of leadership priority and management practices kind of questions versus the quantitative you know, how much do you spend on that xzy kind of questions.

(07:08) And so this year we did something a little bit different. We decided we we’re going to build a score, a digital IQ score and see what we could learn from that. And so we formed what we thought was a set of behaviors and attributes that we thought would correlate to high performing companies and there were 26 of them, and in our survey we asked for level of agreement statements around those 26 attributes.

(07:43) And what we found after we analyzed the data and correlated it with the margin and revenue growth data, that there were 10 of them that were very correlated to performance. And those are highlighted in our study this year, which you can find at pwc.com/digital IQ.

(08:04) So each of those uniquely are correlated to performance, and then together we created a digital IQ score which has two interesting characteristics. Those top 20% digital IQ scores in our survey base were twice as likely to be top performers in margin growth and 50% more likely to be top performers in revenue growth.

(08:37) So if you scored high in those 10 attributes, you were twice as likely to be a top margin grower and 50% more likely to be a top revenue grower.

Michael:

(08:46) So what is the magic of these particular attributes and also I think you should tell us what those – I know you went through them briefly, but give us a listing of those attributes. And I also just tweeted the URL, pwc.com/digitaliq if you actually want to  see the survey results as we’re talking.

Chris:

(09:07) Right, so there’s 10 and these are rated by level of agreement with the statements. So the statements are the CEO and active champion for digital. Digital leaders are involved in business strategy. Formulation, business strategy is business aligned and shared across the C-Suite. Business and digital strategies are well communicated across the organization. We look outside the company for new ideas. Digital investments are made for competitive advantage. We effectively use all of our data to drive value. We proactively plan for cyber and privacy risks. We have a single multiyear roadmap for our digital strategy and we consistently measure digital investments.

(09:56) So those are the 10 who individually and then together correlate with performance.

Michael:

(10:02) Okay, so what is the common thread among these 10. Well first off, why did you select these attributes and what is it about these 10 that drive this correlation to higher performance?

Chris:

(10:18) Well so the data selected the 10, we selected 26 of them that were organized pretty neatly I thought. Initially when we build it across strategy, innovation, operating model, talent, skills, technology and execution and so we thought there was going to be a pretty well organized framework across those dimensions. But what we found was once we did the performance correlation, only 10 of them were super highly correlated, and that’s why we extracted the 10 out of the 25 or 26.

(11:00) So what’s a common thread through these? I don’t know if there’s a single common thread, but one of the things that strikes me when I think about these and when I talk about them is how important communication is. You know, and that’s another one of those sort of Holy Grail things I think. You know, we talk a lot about change management, communication and things like that and those all sound like really fuzzy hard to grasp onto things that we intuitively think are important but were not quite exactly sure how to get under the covers of how do you really communicate to really drive change.

(11:38) And so you know, I was at the Gartner symposium this week, and had a chance to see Jeff Immelt, who is the CEO of GE in a fireside chat kind of interview, and talking about a CEO who is champion for digital, I mean Jeff Immelt he is the poster child for this, and the interesting thing is that you know he’s up there, he’s at a Gartner conference. You know, and why is the CEO of GE at a Gartner conference? Well he’s there because he believes that all industrial products companies are also going to have to be software companies.

(12:20) So harness the data, you know streaming off of all the sensors of all this heavy equipment and actually be able to drive and connect that data into performance and process improvement and innovation and all kinds of other dimensions.

(12:34) So, you know he’s there communicating their vision, and also communicating the same inside of GE I’m sure, and having that level of leadership is so important because for example you know he talked about divesting businesses to refocus on becoming digital. And only the CEO can drive that kind of change, right the vestures and reinvestment and they just recently created a digital business unit of their that isn’t just an overlay business unit, it’s a real business and it’s going to grab all the different parts of GE and put them in this digital business. I think leadership and communication is a big thread that goes through this.

(13:25) Another interesting thing around communication is when we first got these 10 attributes and saw that they were the ones that were most strongly correlated, we had a client who was running a leadership workshop and wanted to know if they could use some portion of this digital IQ study to help generate some conversation. And so we said sure, and it just so happened that I had hot off the spreadsheets, the 10 attributes. So I said, let’s go and score these 10 attributes for what turned out to be 125 leaders across the organisation, to see if it would really resonate with them. And I was a little worried because you know they’re a pretty digital savvy organisation, so I was a little worried that it would be kind of like they would be off the charts and it wouldn’t be very interesting.

(14:20) But one of the things that we learned was that while they scored very highly in some of these attributes, two or three of them really created some interesting conversations for their leadership conference. Because for example you know, they believe very strongly in the need for getting value out of their data and analytics, but they didn’t score themselves very high in being able to do it because they just hadn’t built the capabilities yet.

(14:51) So as strongly as their C-suite is behind their digital program and their CEO is a champion for it, you know they still had a lot of room to grow around communicating throughout the organisation, getting the most value out of their data and measuring their investments. Those were the three that popped out.

(15:11) So to me it’s not all or nothing. Everybody is going to have a different outlook on these attributes but hopefully provide some guidepost for organizations to help to priorities in where they’re going to spend their efforts and not only as a leadership team but also within their teams and businesses.

Michael:

(15:33) So, a key element then is the measurement, a establishing a linkage or correlation between what are the digital activities that you’re undertaking and the business result, and there can be a range of business results. Now, we have a question from Wayne Anderson on Twitter, who’s wondering you mentioned innovation as being one of those potential results, how do you go about measuring innovation? How does that come into play here?

Chris:

(16:06) Yeah, there’s a lot of dimensions to the innovation topic. Let me start with a question that we asked the survey participants around the value in sort of their reason for investing in digital, and again digital when we say that, were talking about you know digital enterprise investments, which is basically all of the information technology investments that an organisation would make for strategic value and for operational value.

(16:33) So, we asked what are you hoping to get out of your digital investments? And the top three answers were revenue growth, and so almost 50% I think it was 45, 48% said that they wanted to grow revenue. The second was improve customer experience, that was 25%, and 12% said they were trying to grow margin. So those were the top three reasons, the number one reasons that people chose.

(17:12) 1% said that disruption or either trying to disrupt their markets, or preparing to block disruption or to fend off disruption was their top reason for investing in digital. So when we said and included the top three reasons, 92% included revenue growth, 8% included disruption.

(17:42) And so, when we get to the innovation discussion, you know the vast majority of people that we surveyed said their companies are focused on growing revenue. Right, growing their current business model revenue, 8% said somewhere in their top three priorities that they were focused on some sort of disruption. Then you say okay, let’s think about that in the context of innovation.

(18:07) That implies that those 92% that if they have an innovation programme are focused around innovating around their core business, you know innovating for a new market, disruption and that type of thing.

(18:19) So I just start with that context because I think it’s pretty interesting, and especially with all the buzz in the marketplace around disruption. You know we talk a lot about interested companies who are disrupting food service, or transportation or the hospitality and hotel businesses, automobile businesses. But at the same time, at least our survey base tells us that they are not actively investing in it yet.

(18:51) So I am really looking forward to seeing the data next year to see if that number starts to move up as more companies say okay, my core business investing in digital, I’m making good progress there and now I’m going to start divert more of my dollars to learning about disruptive potential in my markets.

(19:14) How do you measure innovation is something that we’ve tracked over the years. Before we talk about that though I’ll throw one other idea out there, and that is that the innovation process, while it should be a process, it’s not the same process, should not be the same process that we use for our typical project life-cycle.

(19:43) So the stuff that we want to go out and get a return on investment around, because we are putting a new CRM system in that we expect to improve process throughput or increase customer lifetime value of whatever, those all have distinct ROI like business cases behind them that we estimated and calculated, and hopefully we try to track afterwards to see how well we did.

(20:07) But the innovation process you know – I’ve drawn a blank on who said it, but Peter Drucker said that innovation is work, and I like to think of it that way. It’s a different kind of work, but it’s very distinctive kind of work that needs to be managed and tracked just like every other work we do, or it’s going to be nebulous and we won’t know what we expect out of it and we can’t manage it and then it won’t happen because our leaders won’t give us more money to do more innovation.

(20:44) So the first contextual point there is that you know most companies say they’re really not doing this disruptive kind of innovation right now. The second point is that you can’t use the same sort of ROI orientated processes to drive innovation.

(20:59) So how do you measure it? You know we’ve asked those questions and we’ve gathered data around you know, some people measure it based on the number of ideas that they put through their innovation process

(21:11) Some folks measure it based on the number of patent’s that the file out of that process. Some folks measure it around the number of ideas that come out of the back end of their innovation process and go into the ROI process. Some folks try to measure it it in terms of the actual value that they get in the marketplace, which is a lot harder, but would be the ultimate goal if you could do that.

(21:36) So, lots of different ways to measure it and it is important to measure it. We’ve just got to think about it in terms of measuring different things, because we are doing different things. We’re trying to manage new ideas to change existing processes, to create new processes and activities to create new products, and for some people ultimately you know creating new markets and new business models.

Michael:

(21:59) You know, Chris I realise that digital transformation is not just an IT activity or a marketing activity, but I talk with a lot of CIO’s and one of the big questions that CIOs have today is what are the appropriate metrics that they and IT should be looking at? Because the historical technical metrics, things like systems uptime, latency, and application availability in today’s world are pretty meaningless, now they’re important, right. The system has to work and it has to be there, but if a CIO wants to be delivering higher value, what kind of measurements, metrics, KPI’s should they be looking at?

Chris:

(22:51) Yeah, I think maybe working backwards from you know the mission and objectives of the organization and its functions is one place to start. You know, one of the things that organizations depend on on the IT function to do is help them run their technology projects. And something that’s always fascinated me is the project management discipline in organizations, regardless of is it an IT project or not, just the fundamentals around managing, planning, organising, measuring, staffing, evaluating projects tends to be in the IT function.

(23:31) So, you know one of the things that I think is important is how good are you at executing projects? And one of the questions that we ask in our survey is you know, is for success rates around projects. Remember, I don’t know if they still do it, but the Standish Group used to do a study around project success rates, which I always looked at and was very interested in over the years and I don’t know if they still do it. But we ask a similar sort of question just so that we have it for our survey participants for the percentage of projects that are successfully delivered on time, on budget, and then within the originally planned scope that I think is a little additional flair that I put in there because it is easier to cut scope than to cut budget to affect the others. But you know are you delivering what you set out to deliver is the third leg of that stool.

(24:29) So you know the data is I don’t recall the specific data from this year, because we didn’t include it in our printed report but we will include it in some subsequent reports that come out of Digital IQ this year.

(24:42) I believe it was about two thirds of companies said that they were on time, on budget within planned scope, and I think whatever the delivery metrics are around executing projects, I think that would be one set of them that I think every IT organization should be focused on.

(25:00) And then the question is you know how do you attach some metrics to the broader digital enterprise, right. So how important is it to the IT organisation to drive customer appreciation and satisfaction with digital products. You know, should the IT organisation have some kind of metrics around usability that type of thing. I think when you can maybe start figuring out how to measure the interactions between the software and technology that an organization delivers and their customers in satisfaction in using it, those would be some interesting things because you know that’s what we’re trying to do. We are trying to improve customer experience with one of the things that we are according with our survey participants.

(25:56) So, how do you measure customer experience in the context of what IT can influence, so that would be another category of things that I would explore.

Michael:

(26:04) Yeah, that’s a particularly interesting one. When you were talking earlier about project management metrics, it brings to mind several CIOs that we’ve had on CXOTalk including Kim Stevenson, who is the CIO of Intel and Brian Lilley, who is the CIO of Equinix, a large data center provider have spoken about operational excellence and the need to deliver projects on time, on budget and to get the results that you are looking for from your projects as a baseline for IT to establish credibility. But you asked the rhetorical question to what extent should IT have metrics that relate to business outcomes like usability, customer service, customer experience. And so let me put the question to you and in your opinion, how closely should IT be linked to those kinds of business orientated metrics?

Chris:

(27:03) Yeah, a good question. One of the questions that we ask in our digital IQ survey is what is the role of the CIO in IT in the context of this big digital question.

Michael:

(27:19) Yes, tell us please.

Chris:

(27:20) Right, so the first option was everything market facing and internal regarding digital, the second option was internal IT functions plus technology innovation, and the third option was just internal IT. So 41% said that IT leads all digital enterprise investments that’s currently. While 31% said that their IT was leading all internal IT efforts including innovation. 28% said leading internal IT only. So that’s today, 41, 31, 28.

(28:15) And then we said what would this look like in three years? And then it changes, where 36% say leading all internal IT efforts including innovation, and 34% leading all digital enterprise investment. So basically the shift in our survey participants said they see a shift from ITs role being the majority of them said leading all digital enterprise investments to leading all internal IT efforts including innovation.

(28:40) And so to the point around the measurement question, it depends on what your measuring, right. If you’re measuring all digital enterprise investments, then I would expect IT and the CIO to have more metrics regarding the market facing use of technology. So, does it make sense to make IT heavily incentive measured on customer satisfaction? Maybe not, but maybe it would make sense to create some more tangible measures like do some surveys on customer engagement around the technology solutions, you know the apps and the websites and things like that.

(29:33) Maybe if more metrics around the average stay on the website for customers, things like that, that go to point towards the usability and things like that. Or maybe more direct measures around usability. So my point is if IT is indeed leading all enterprise digital investments, then yeah they should have some measures that are orientated around those using the technology both internally and externally.

Michael:

(30:02) So Chris, we have a question from Bob Rothman who is wondering, so who should own digital transformation? Should it be under the CIO, should it be under the CMO? Who is responsible for this?

Chris:

(30:18) Yeah, there’s kind of two parts to the ownership. There is the ultimate owner, the how does the organization view its leaders in the context of who ultimately owns digital. So that’s a sort of one ownership accountability point, and then there is the who is running it and driving it day-to-day.

(30:37) So we asked the question, which executive is ultimately responsible for digital enterprise investments? So if you ask me that you know five years ago, I’d probably say well that’s the CIO. Or maybe if you take the word investment literally, you might say CFO.

(30:55) But today, the responses are 34% CEO, 27% CIO, 14% CFO, and 14% Chief Digital Officer. So in terms of the ultimate ownership you know a third of a company says the CEO is the ultimate owner of a digital enterprise investment which I think is pretty awesome.

(31:25) So 34% of the sample out there are the Jeff Immelt’s of the world you know and I think that’s where it should be you know the ultimate ownership of this stuff because this is about creating a digital enterprise.

(31:39) I think you know the other thing that’s interesting is the Chief Digital Officer you know popping up 14%, so that’s you know a couple of hundred of our survey participants who said that the Chief Digital Officer was the ultimate owner of the investment. And given that’s a relatively new role, and certainly not everywhere I think that’s pretty interesting to.

Michael:

(32:06) So these are business projects and they need to be driven or rightfully should be driven by the business owner so to speak, where does that leave IT and the CIO?

Chris:

(32:28) So one of the questions is – I should throw out some more data, so we ask a question, and we’ve been doing this question for several years now to. What percentage of the enterprise technology spend is outside of the CIO budget?

(32:50) Three years ago it was about 35%, last year 50%, this year 68%. I mentioned that I was at the Gartner symposium and they said that their number was about 50% this year and they asked a similar question.

(33:03) So whether it’s 68% or 50%, it’s a lot and you know IT doesn’t control the budget anymore. They have some of it, so the question is so if we are not in a world of control any more, we are in a world of influence you know what we do? So I sort of wrote a blog that sort of tried to redefine the potential roles of the CIO you know on my blog CIOdashboard.com and talked about you know it’s not control any more, it’s about collaboration and communication and consultative relationships. It’s not about information as much as it is about integration. It’s not about organizational control, it’s about outside in thinking.

(34:01) It’s about bringing in the outside and being the best prepared, and to bring the best ideas about what’s going on in the marketplace to the organisation. And so you know, a couple of things that I think are part of this, one is if you think about where the innovation is coming from that everybody’s so fired up about, it’s not coming from big organizations. The big organizations may be the ones that end up firing these big ideas. But they are coming from the start-up world, from incubators, from the universities, from open source; from the makers you know those environments. Those environments and those places, and those people are not places and people that enterprise IT or enterprise in general has expertise in. They don’t integrate with them, they don’t know them, they don’t you know love them and they aren’t them.

(34:57) And so a big place I think IT can define itself moving forward in this much more rapid innovative technology world is embedding themselves in these places, in these innovation places. And so that’s kind of what I mean by bringing the outside in. So that’s one area that I encourage you know technology leaders to get smart about and to share and what they learned.

(35:23) And then the connection point, part two is taking those ideas and building prototypes and demos that help to communicate. So back to those 10 attributes. You know a lot of those 10 attributes that correlate with performance, or are about communication.

(35:39) So one of the best ways to communicate ideas around new technology is through demos. You know demos are worth a million words. You know, so let’s figure out how to build more capability within our technology function, to take those outside ideas and build prototypes and demos, communicate better to the organization in what is possible.

(36:03) And I think you know I think integrating all those new ideas together in the organization is important as well. And I think another role for IT is to develop a much stronger skillset around integration, because more and more we’re going to be bringing third party services, and ideas and cloud, platforms, and apps and all kinds of things that we are not building or we are not the primary builder of.

(36:26) But we want to integrate with our customer data, our billing data and pricing data, and all the history data that we have, and we want to get the value of all of the analytics and insights that can come from connecting all of that data together, where no single third-party is going to have that view like we do.

(36:44) So I think those are the three areas, outside/in learning, demos and prototypes, and integration are the three things I think can really help define the future for IT.

Michael:

(36:56) So this creates a big challenge for IT because for two reasons. Number one, many established IT organizations are run by people and employ people whose focus is technology. It’s not communication, it’s not thinking about organizational innovation. It’s about keeping systems running, that’s number one. And number two there companies in many cases that view IT as oh, those are the people who keep the system up. So there’s a gap that has to be bridged on both sides.

Chris:

(37:37) Yeah and what I say communication, I’m not saying that I think everybody in IT needs to go and be a public speaker. What I’m saying is that if I’m an operations person and I’m you know, seeing a lot of challenges around penetration threats and testing. So if I’m a cyber person and that’s the security area I practice in, what I’m suggesting is go figure out where some new sources of innovation around penetration testing are out there in the world. Right, they are probably not coming from the large established security vendors.

(38:16) I mean they’re certainly thinking about those things. But go think about and learn about where those new ideas are coming from and then build some little prototypes and demos to figure out how you could apply those to your context, and then communicate them to your peers and your leaders. That’s what I mean by communication, not so much you know, everybody needs to stand up and be in the C-Suite presenting their ideas.

Michael:

(38:41) But it’s an issues of capabilities, issues and talents, competencies, experience and also the corporate culture inside the organization. Is the organization willing to except IT playing a more partnership role?

Chris:

(38:58) Right, you know it seems pretty straightforward to me that the organisation that has their employees in it and that they’ve made investments and the way IT one of their own business functions would be one that they trying to figure out how to work with. But it’s not always the case, and I think a lot of it is going to be getting back to the leadership question you know, who is driving the, you know, who is ultimately responsible for the digital investments and what is their vision.

(39:28) Is their vision to you know create the capabilities themselves, or is their vision to partner with others to do it. And as you said you know, there’s less and less importance on infrastructure and sort of up time and service fundamental baseline infrastructure service delivery, as more of that gets provided by third parties. So you know we have to figure out how to shift our focus into some of these other areas.

Michael:

(39:55) What do you think about this notion of two speed IT, I think some of the Gartner people calls it bi-model IT, the notion where IT is simultaneously undertaking traditional infrastructure activities, but at the same time has a group within IT that is undertaking more innovation activities.

Chris:

(40:17) Yeah, I think I’m bought into that idea and I think so for example I’m working with a commercial real estate firm who is trying to figure out how to bring more tools to their brokers. And you know those tools have a very mobile, very intelligent, very busy set of brokers that are out there trying to do large commercial real estate deals, so they have a lot of expectations about the kinds of technology that you know needs to run on their phones and their tablets and things like that and give them a lot of insight in a very short period of time which is not a typical sort of IT software project.

(41:05) And so we’re talking with them and doing the same with some hospitals, and high-tech companies and others who are building these what I call fast tech capabilities. And I think one of the reasons to do it is to attract some of these other kinds of new tech stat skill sets. If you’re trying to recruit folks into sort of you know long form, waterfall, DLC, ERP, CRM kind of environments it’s going to be nowhere near as attractive as being able to say, you know we’ve got this mobile app factory and its DevOps based. And you know we have business and IT people embedded in the teams, and you know we are doing weekly sprints and we are releasing apps every month or whatever it is.

(42:05) I think you know, that’s being part of being able to attract the talent and build the talent is having those separate environments. I think it makes sense, because as we’ve learned over the years with different waves of Information Technology paradigms if you will, back in the client – server days or the object and analysis design days. You know, there was some that believed that those were that we should transform our whole IT organisation into those things, into practicing, distributing computing architecture or practicing object analysis and design.

(42:42) What we learned was everybody is not in tune with that and not a good fit with those things. And in fact we didn’t really need all those things for everybody, because mainframe still made sense. You know the minicomputer world still made sense for some business problems, and likewise the web, mobile, and IOT-based systems are going to make sense for certain kinds of systems, but not all of them. So I think the two speed bi-modal idea makes a lot of sense.

(43:11) But the thing I don’t like about it is, it implies that they are two separate things, and the reality is that they have to work together. You can’t build a high impact enterprise mobile app without access to you know customer data or product data or whatever and that is not going to come from the high-speed place. It’s going to come from the other place, and so they have to work together. So I don’t like the idea of the sense that it’s split or its bi or its two speeds. I think you know it makes sense in concept but they have to work together. You have to figure out the operating model to make them work together because you don’t want to create – you have to be very careful about creating the have and the haves not inside of IT.

Michael:

(44:03) That’s a very real problem that the notion that you can create two groups of IT, as you said the have and the haves not within IT, and as you said they are one team that you are trying to achieve a common goal.

(44:18) Now Chris, we’re just about out of time, but before we go based on your experience, and based on your research and your data, what advice do you have to organizations who want to undertake digital, and obviously of course want to do it successfully. What have you learned and what can you share?

Chris:

(44:41) I guess maybe one thing that pops to mind which I remember back to a insurance client of mine, who is undertaking a large transformation, remaking their aged interfaces, their customer interfaces, all of their back office systems regarding and related to their claims processing, bills, policies, proposals and so on, the whole shooting match.

(45:15) I think back to one of the more impactful meetings that I attended with the CEO and the leadership team there, where we showed them a demo, a concept demo for what part of this future could look like. And the CEO was blown away because it gave him a chance to finally sort of visualize what all these ideas, and conversations, and PowerPoint decks and meetings all meant.

(45:50) So you know, I guess what I would say is my one piece of advice to bring a lot of these points together is build a vision that is articulated in tangible stuff. Build a vision that you can start to communicate using demos and prototypes, and videos.

(46:14) We have some interesting videos on our digital services website and it’s digital.pwc.com that are some examples of these, part of the possible videos that help to set a vision for what’s possible in the context of employees and customers and what people do day in and day out. And it really helps to bring life in what the digital future could look like through a transformation. So on that what I would say is use some of these techniques, especially you know, eat your own cooking. If you are talking about digital transformation, use some of the digital assets like demos and prototypes, and videos and things that can help you bring life to the ideas.

(46:56) And they are very impactful and really can help to communicate in ways that you know might not have been able to communicate before.

Michael:

(47:06) So create context.

Chris:

(47:08) Yes, digital context.

Michael:

(47:10) Digital context, okay. Well unfortunately we are just about out of time and this has been a very fast 45 minutes. So thank you Chris Curran. We have been talking with Chris Curran, who is principal and chief technologist for PwC and who for years now has been running the digital IQ research, and this has been episode number 138 of CXOTalk. Chris, thank you so much for taking the time today.

Chris:

(47:44) Thanks for having me Michael.

Michael:

(47:46) And I hope we’ll do it again sometimes soon Chris. Everybody, I am Michael Krigsman, thank you for joining and please come again next time. And we’ll see you next week. We’ll be talking with Lee Congdon, who is the CIO of Red Hat next week, bye bye everybody.

Company’s mention in today’s show:

Chris Curran’s blog:      www.ciodashboard.com

Digital IQ Study:            www.pwc.com/digitaliq

Gartner:                          www.gartner.com

PWC:                               www.pwc.com

Standish Group:           www.standishgroup.com

Twitter:                           www.twitter.com

David Bray, FCC and Corina DuBois, Office of the Secretary of Defense: Change Agents in Government

Dr. David A. Bray, Visiting Executive In-Residence, Harvard University
Dr. David Bray
Visiting Executive In-Residence
Harvard University
Corina DuBois, Communications & Strategic Advisor, Office of the Secretary of Defense
Corina DuBois
Communications & Strategic Advisor
Office of the Secretary of Defense

To innovate and be responsive, the federal government requires change agents -- people working within the system to drive improvements. Change agents rely on skill and communication to gain buy-in from peers and help evolve the bureaucratic culture inherent in many large organizations.

In this episode, we talk with two accomplished change agents working in the government. Dr. David A. Bray currently serves as the Chief Information Officer (CIO) for the Federal Communications Commission (FCC) and Corina DuBois offers communications and strategic planning advice to the Office of the Secretary of Defense.

Transcript

Michael:

(00:02) When we talk about digital transformation a key component is change and we talk about change management exactly what that means in the context of digital transformation we can discuss, but the notion of change agents, the people who are driving change who are helping push and accelerate innovation is very important. And today on episode number 140 of CXOTalk, I’m speaking with David Bray, who is the CIO of the Federal Communication Commission and Corina DuBois who is a strategist and senior communications expert for the Secretary of Defense and the Department of Defense. And Corina, I know I just mangled your titles so I apologize about that, but in a second you can tell us your exact title. I’m Michael Krigsman and David, how are you?

David:

(01:09) I’m great how are you Michael.

Michael:

(01:11) Great and Corina thank you for joining us and this is your first time on CXOTalk.

Corina:

(01:15) Thanks for having me, I’m happy to be here.

Michael:

(01:18) So to begin and Corina since I mangled your title, tell us your exact title and tells us what you do at the Department of Defense.

Corina:

(01:26) Well the title doesn’t matter so much, it’s more about what we’re able to do. But I am a strategic planner and communication advisor for the office of the Secretary of Defense. So that means I get to think about the future in what the Secretary would like to accomplish while he’s there at the Department of Defense, and how that affects the public and that can be external or internal programs.

Michael:

(01:50) Okay so you are advising the Secretary of Defense from a communications strategy and public perception perspective is that correct.

Corina:

(01:53) Absolutely, I do a lot of writing and thinking about what it is that we want to accomplish as a team with him at the steer.

Michael:

(02:10) And do you want to give us a little bit more insight to explain the kinds of things you are thinking about to make it a little bit more concrete.

Corina:

(02:19) That’s a really good way to what I do day to day. So the Secretary of Defense as you know thinks about a lot of different areas where change is needed or policy is needed. And so it could be anything from what’s important to us in the biotech field or how we want to think about innovating from outside the five sided walls of the Pentagon, or what’s important to us on Veteran’s Day and thanking people for the service that they’ve done for our country. It runs that gamut of all the different issues that face the Department of Defense and our country.

Michael:

(02:57) Great, thank you. David, you’re the CIO of the FCC, so why don’t you give us a brief sense about your role and the things you do at the FCC.

David:

(03:07) Sure, so the FCC oversees the IT for the Federal Communication Commission. The FCC itself has been around since 1934. We have 18 different pairs of offices, and basically the scope of the FCC is interacting with the public and industry on anything that’s wired or wireless. When I arrived at the FCC I shortly showed up after my arrival back in late 2013 from the CXOTalk with you back on number 45, so here we are 95 episodes later. When I arrived we had 207 different systems and haven’t changed and we’re 10 years old for a commission of only 750 people, and that just wasn’t sustainable. We were spending more than 85% of our budget trying to maintain those systems.

(03:37) And the good news is after 1) doing some pioneering efforts that we could go to the cloud at doing the computing at one sixth the price and half the time it would take from doing it on premise. As of this Labor Day weekend, all of the systems that we installed that we had at the FCC, the 200 different systems and more important the different applications, we either went to the cloud or we really loaded it up into seven different trucks and we’ve now moved to a commercial provider

Michael:

(00:02) When we talk about digital transformation a key component is change and we talk about change management exactly what that means in the context of digital transformation we can discuss, but the notion of change agents, the people who are driving change who are helping push and accelerate innovation is very important. And today on episode number 140 of CXOTalk, I’m speaking with David Bray, who is the CIO of the Federal Communication Commission and Corina DuBois who is a strategist and senior communications expert for the Secretary of Defense and the Department of Defense. And Corina, I know I just mangled your titles so I apologize about that, but in a second you can tell us your exact title. I’m Michael Krigsman and David, how are you?

David:

(01:09) I’m great how are you Michael.

Michael:

(01:11) Great and Corina thank you for joining us and this is your first time on CXOTalk.

Corina:

(01:15) Thanks for having me, I’m happy to be here.

Michael:

(01:18) So to begin and Corina since I mangled your title, tell us your exact title and tells us what you do at the Department of Defense.

Corina:

(01:26) Well the title doesn’t matter so much, it’s more about what we’re able to do. But I am a strategic planner and communication advisor for the office of the Secretary of Defense. So that means I get to think about the future in what the Secretary would like to accomplish while he’s there at the Department of Defense, and how that affects the public and that can be external or internal programs.

Michael:

(01:50) Okay so you are advising the Secretary of Defense from a communications strategy and public perception perspective is that correct.

Corina:

(01:53) Absolutely, I do a lot of writing and thinking about what it is that we want to accomplish as a team with him at the steer.

Michael:

(02:10) And do you want to give us a little bit more insight to explain the kinds of things you are thinking about to make it a little bit more concrete.

Corina:

(02:19) That’s a really good way to what I do day to day. So the Secretary of Defense as you know thinks about a lot of different areas where change is needed or policy is needed. And so it could be anything from what’s important to us in the biotech field or how we want to think about innovating from outside the five sided walls of the Pentagon, or what’s important to us on Veteran’s Day and thanking people for the service that they’ve done for our country. It runs that gamut of all the different issues that face the Department of Defense and our country.

Michael:

(02:57) Great, thank you. David, you’re the CIO of the FCC, so why don’t you give us a brief sense about your role and the things you do at the FCC.

David:

(03:07) Sure, so the FCC oversees the IT for the Federal Communication Commission. The FCC itself has been around since 1934. We have 18 different pairs of offices, and basically the scope of the FCC is interacting with the public and industry on anything that’s wired or wireless. When I arrived at the FCC I shortly showed up after my arrival back in late 2013 from the CXOTalk with you back on number 45, so here we are 95 episodes later. When I arrived we had 207 different systems and haven’t changed and we’re 10 years old for a commission of only 750 people, and that just wasn’t sustainable. We were spending more than 85% of our budget trying to maintain those systems.

(03:37) And the good news is after 1) doing some pioneering efforts that we could go to the cloud at doing the computing at one sixth the price and half the time it would take from doing it on premise. As of this Labor Day weekend, all of the systems that we installed that we had at the FCC, the 200 different systems and more important the different applications, we either went to the cloud or we really loaded it up into seven different trucks and we’ve now moved to a commercial provider, so there are no systems hosted on premise at FCC anymore.

Michael:

(04:17) All right, so you have given up on premise systems, how is that even possible.

David:

(04:23) It’s actually quite possible. 1) I feel more comfortable going to the cloud in a sense that we’re small, only 750 people. And even if I took all of the IT people that I had and have them focus on the care and maintaining of those systems, as I said, 85% of the budget was just on maintaining those systems, I wouldn’t be able to do any new IT and there are things that we have to update because our system are so old. So by making this move to going off premise and going to the cloud, it really allows us to actually focus to spending more and more of our budget that we have at the same amount to actually try to move forward with new developments.

(04:56) We are actually now actual spending 50% less of our costs in maintaining those systems. I also recognized that going to a public cloud model: 1) it’s faster and more expedient, but then 2) it’s also more resilient because they are going to have hundreds more people focusing on the security on the care and feeding of those systems that I possibly would have had as a small agency.

Michael:

(05:13) Okay, so Corina you’re focused on communication strategy, David you’re focused on technology strategy and yet for both of you a key part of what you’re trying to do is to innovate within your respective spheres and to drive forward to push change inside each of your departments, right, and the title of this show is change agents. So is that a fair assessment that for both of you, you are trying to push change.

Corina:

(05:50) Absolutely, I’m actually quite new to my current role, but previously at the State Department and Consular Affairs, I was chief of media for the Bureau of Consular Affairs. So I got to think about the way that we communicated with the public via it being different online, web, mobile, social app development. And so that was sort of the crux of bringing technology on with communications to try to figure out the best way to reach people in the way that they expected to find the information. I would say a good part of my job was spent either strategizing or almost evangelizing in why we needed to use innovative new technology. Things that focus on public sector items and still maintaining safety and security, building once and using so many times, being able to reach more audiences with the same data but maybe just different points of that data.

Michael:

(06:42) Okay so when we talk about the need for change in the Federal Government, maybe this seems like an obvious question and we talk about change agents, why the focus on change agents. And again maybe it seems like an obvious question, but you guys are in the Federal Government so I think coming from you carries a lot more weight that just somebody on the street such as myself just making that comment or observation.

David:

(07:12) So change agents I think are particularly necessary now because the world we’re in is changing so quickly. 2013 there was 7000 network advisers on the face of the planet and (unclear 07:23)  on the face of the planet as well.

(07:26) This year alone, two years later after 2013 there are now 14 billion network on the face of the planet and come 2022, anywhere between 75 and 300 billion. The same thing is happening with data. Data on the face of the planet is doubling every two years. Back in 2013 there were 4 million terabytes of data on the face of the planet. That’s the equivalent of 400 million Libraries of Congress. The Library of Congress is about 10 terabytes. By the time we get to 2022 it will be 96 million terabytes, so that would be 9,600 million Libraries of Congress. It will be huge, and if you put that in perspective it will be more data than all  (unclear 08:03) planet.

(08:04) Now in the product sector, we see this happening with Silicon Valley and in other parts of the United States as well where basically people are iterating quickly and able to do a fail fast and fail often model. The chance that we have in public service is 1) We’re not going to have an IPO, we don’t have a (neutral thought offering?) at the end of the day. We are stewards of tax payer’s dollars and if you fail with tax payers' dollars, people are going to say why (unclear?) slush fund, you can’t spend it like a capital fund.

(08:28) So I think we have to have this conversation about where we’re going to - there is no text book for what we need to do, and at the same time we can’t take all the principles from Silicon Valley, because we can’t fail fast and fail often. We also have to recognise the narrative that is present in public service, which is, you go back to the Federalist Papers of 1788, James Maddison said he wanted ambition to counter ambition (the Federalist Papers #51). He wanted checks and balances in the system. So sometime people lament ‘government is slow to change;’ ‘it takes a while.’  But that’s actually part of the intentional checks and balances. And that’s actually why when I first met Corina, I recognized that 1) she was a fellow change agent but then 2) It’s important to meet other change agents, not just within your agency but across agencies because the only real way you get change done that’s lasting in public service is to build those networks and to build that consensus such that from the bottom up but you do have less change in going forward (?).

Corina:

(09:20) I think some of the opportunities that we have and one of the few reasons why…

Michael:

(09:25) I’m sorry to interrupt, please to speak loudly and project your voice towards the microphone.

Corina:

(09:34) I think one of the key things that we can use as an opportunity is that this sort of innovation change hasn’t been done before, so there’s not only regulations that stop us from being able to do things, and having other change agents and other people that give you that reality check and say, this is a smart way to go forward. We’re also doing some more things, let’s create this footprint. Let’s create the policies and the budgets and the structures that can get us to that next step. Let’s move beyond: "We can’t do it, because we’ve never been able to do it" and get to "Let’s be able to this smarter" and "Let’s do this together." And I think that approaching that from the whole of Government makes it so that we have a bigger footprint to make.

Michael:

(10:20) So there’s this notion that if you can identify other change agents then you can come together and help consolidate that influence and that push towards innovation in a stronger way.

David:

(10:35) I think so and it’s also the recognition that in any organization, don’t expect everyone to be thinking about disruption and innovation, that’s just not feasible. It was actually the Ford Motor Company back when when it looked at it that said it had about 20% of the people in their organization that are really doing 80% of the change agent work, and I think that would be the same that’s true in public service.

(10:58) The thing that’s interesting though is that in the era we’re facing, to try and do top down change, it’s often out of date by the time when it gets implemented. So you need to think about how can we do bottom up change and the challenge with that is where you can do bottom up change in the private sector by creating your own startup and being entrepreneurial. In public service how do you do bottom up change and recognizing that at the end of the day, anything that we do has to be authorized by law, and law itself is top down. So it’s interesting conundrum of: can we create these creative spaces in which change agents can show what’s possible, they can build a coalition of the willing, they can demonstrate that we can take these steps forward such that the people that are more of the late adopters or even laggards  are more willing to move along after seeing what’s possible, and I think that’s the conversations that's hard to have, because people expect to take what’s going on in Silicon Valley and just transplant it to what’s going on in Government whether it be at the local level, state level, or federal level.

(11:53) And I think what we’re saying is that there are great lessons to be learned from silicon Valley, but we also need to understand that there are existing narratives, there are existing challenges. I mean our budget in the Executive Branch is not set in the Executive Branch it’s actually set in the Legislative Branch and that’s something that’s not present when you’re dealing with private sector company, now the private sector company has autonomy about where it sets its budgets and sets its priorities.

Corina:

(12:15) So budget and priorities is really both great points. I have found success in figuring out what it is that my leaders are trying to accomplish and figuring out how I can help them do that, and then try to demonstrate value and then ask them where can we budget for this, and a lot of the times people don’t know, because they just haven’t thought about repurposing their resources that way.

(12:38) So if I can demonstrate that there’s a reason and a value, not only to our leaders but to the public that we serve, then I’ll be able to get buy in and almost walk backwards and downwards and be able to reprioritize and allocate the energy, the resources, the budget, the time and maybe sometimes even the IT systems that we’re using to be able to accomplish those goals.

Michael:

(13:07) So developing quick wins or making it clear of the value of the change and making it clear. How do you overcome fearfulness, but there is still risk associated with change, how do you address that.

Corina:

(13:23) I think you have to be realistic about it, and get people to buy in, so taking measurable risks. So I’ll give you an example, when I was at the State Department, part of our role was to give timely and relevant and orderly information to people as they were travelling overseas. Like today, Mexico is about to have a huge hurricane hit them, right, so they want to get that out to them as quickly as possible as information.

(13:51) So what I did was I looked at ways in which we could do that, so that many different people get the same information that we’re putting out as an official source many times through API’s, and most people in the bureaucracy had no idea what an API was, and once I explained that’s how we all check our weather from a different devise be that style, size or platform and got the same weather information that I explained in the API format for people that who weren’t familiar. So I said, what happens if we can tell the whole world what places we think are safe or not and be able to do that and let other people tell that story for us.

(14:29) It took a long time but we got the buy-in, we got the technology, we invested in the cloud and we were able to start developing that as ways as API’s.

(14:38) I had somebody who I really enjoyed working with and always will, and at the time he was my direct supervisor and he came to me and said, “You know what, they’re just not using the data right and not doing what we want them to do with it.” So we actually had to sit down and think as an organization, are we comfortable with people using our information the way they want to use it, instead of being very government driven, where we’re telling people this is the way thou shall use the information.

(15:08) And so it was a huge cultural shift to be able to say we’re going to take this risk and we know that people aren’t going to do exactly what we want them to do, but in the end we are servicing our public and we are meeting our goals and needs with these new resources.

David:

(15:25) And I think to actually emphasize what Corina said. there is no text book for the new world we’re facing, and so we have to be willing to experiment. And oftentimes when I talk about this with people and they are concerned or they have concerns about (what is it they fear?) It’s worth pointing out that expert report meeting out of danger is the root for both expertise as well as experiments. And the only way you get expertise is doing dangerous things, which are experiments.

(15:51) And so it’s having that conversation with the public saying “Look we want to do what we can do in terms of the best we can with the resources we have”. and "We also want to hear from you so that’s why both Corina and I are on Twitter." That’s why I listen to the public. I want to learn as much as possible, because 1) I know I don’t have all the answers and in fact there’s a wonderful Harvard Business article that says “in praise of incomplete leaders;” the best leaders actually admit they have blind spots.

(16:15) So with that said, recognizing that we are going to take risks because that’s the only way we’re going to keep up with the exponential era and we’re actually going to do dangerous things, we’re going to do experiments, and see what works out. At the end of the day if we have that drive, if we have that receptiveness to learn from people, then most importantly is that we have that determination to get this stuff done. In fact, we have a phrase at FCC which is which is GSD, which is short for ‘get stuff done” and maybe something else in a different context.

(16:42) We’ll power through whatever happens and we’ll learn from it and the goal is to keep up with the pace of change that’s happening globally in society and technologically.

Michael:

(16:53) What about this notion of the umbrella of buy-in.

Corina:

(17:00) The notion of the umbrella of buy-in, give me a little bit more.

Michael:

(17:04) David you’ve spoken about that in terms of culture, in terms of changing the culture and the need to gain buy-ins from your peers, how do you balance if you’re trying to drive change in a large organization. How do you balance the need for buying in versus just pushing forward, you know down the torpedo’s full speed ahead.

David:

(17:28) Right, so on that one at least I’ll say from my own experience you can’t always be disruptive. If you’re always being disruptive then you’re not meeting anybody’s expectations. And if you don’t meet anyone’s expectations then you don’t have any allies that’ll back you up when you take something risky and it doesn’t work out.

(17:45) So that’s where I do tell people that 1) the Greek work leith, means to send  unto death and actually the word leadership, so leadership is sent unto death. And that’s because back in Ancient Greece, the leiths were the ones carrying the flag in front of the army, and that’s all well and good until one man in the army meets another man in the army. Who's the first to die? The leith.

(18:04) So you do have to get buy-in and you also have to understand the narrative. When I arrived at the FCC the average person had been here for 15½ years, and the average contractor had been here for 19 years. And so when I said we were going to move to public cloud and we’re going to go to everything off premise, that actually did create some fear in the sense that I’m going to lose my friends that I have been dealing with for 15 years because now were going off site, and it wasn’t anything related to technology at all.

(18:28) So you need to understand the narrative, you need to figure out how you can adapt it. I also think it’s useful to actually ask people what brings them joy because 1) It puts them in a reflective state or mood, but then 2) You find out what they’re really interested in and passionate about. And so even if you have to change or disrupt things, you can still be consistent in what bring some joy, so that yes you are moving someone’s cheese, but may be you are still getting them to a place where they can provide benefit and actually find enjoyment in the work they’re doing.

Corina:

(18:55) I found the most value in actually playing by all of the rules at the beginning. 1) It’s so that I can learn them and know them...

David:

Subversive…

Corina:

(19:04) But 2) That organizationally potentially people trust that the things that I’m talking to them about are things that are for benefit the organization, not my benefit as a leader. Sometimes I’ve pushed forward ideas that I particularly don’t really care for, but I think they are best for the organization or the people that we serve.

(19:23)  And I think if you want to take a risk knowing that you have that background and that balance and that trust, it does make it a lot easier to say: ‘This is going to seem a little whack-a-doddle, but just hear me out.’ And I’ve also found great value in being able to be told 'No,' and sometimes that means lets walk away from them. And other times it means I never gave you enough information to get to a 'yes.' So I get to go back and think how we get there. Sometimes that means calling up people that are change agents and saying how did you get here, help me out with this.

Michael:

(19:59) So trust is the foundation in a sense of being able to drive change through a large organization.

David:

(20:07) Absolutely, in fact, trust — and I would define trust as the willingness to be vulnerable to somebody else that you can’t control. And with that, one of the things that I often state — and when I arrived at the FCC, I said we really have three core values, which is you need to have benevolence; you need to have competency; and we need to have integrity. And it’s interesting because those three things: benevolence, competency, and integrity — right, are the things that if you think those are true about a person, and science has shown that psychologically you are more willing to be vulnerable to them and therefore you actually trust them.

(20:41) And I think the benevolence is key because we are in public service and the other thing that is also the case is I’m a non-partisan senior executive, which means I don’t side with either party, and that means that I have to be trusted by both parties as someone who is being apolitical. I’m not bringing my politics into my role. I would deliver what we have to do and at the end of the day, I need to be focused on what is the biggest impact to the public and the best contributions that we’ve done.

Michael:

(21:09) So change then is a function of trust is that an accurate statement?

David:

(21:15) Yes you can only get lasting change with trust.

Corina:

(21:20) And I think that that’s also one of the things that's so hard to be a Fed. A lot of people don’t trust that we’re actually trying to do the best that we can. I’m not going to say that every Federal employee is, but we’re glad that you’re there and listening to us talking. We like to listen back.

(21:41) But from a public perspective, if people don’t trust us as an institution, it’s difficult when we do try to change things even if it’s for the better to try to make it so that people are trusting that we have their best interests. And that’s apparent in government. And I think it’s something that every Fed in whether they show up at 100% or not, understand that when they come into the door at work every day that people might not buy-in to everything that you’re selling and they don’t trust you, and it’s your role to continue to fill that.

David:

(22:11) I also think Michael you’re hitting on a key point about trust because I do have concerns that the way that the rate of social, global technological change that’s happening so fast that people are feeling a strain on the system. Not just a strain on the system in terms of government, but the strain on the system in terms of what’s my identity, what’s my life and where I fit in the world.

(22:34) And that itself, the rapid pace of change is causing mistrust in institutions is bigger than government, and so we have this risk that while in the United States we do have checks and balances in the system, we don’t want things to move quickly because we don’t want any one person to have too much power. It’s worth pointing out that the founders actually fought a war against a King, and the last thing they want is a king-like individual. And we know that power corrupts absolute power corrupts; absolutely.

(23:01) But the rate of technological change itself maybe causing distrust in the Federal government and that becomes an issue because then what takes its place. I think there’s also the case where in the past we’ve had people who are ‘government professionals’ and that was seen as different than people that were in the public. And actually if I can make a suggestion now with communication and technology, members of the public can if they want to, they don’t have to if they don’t want to, they can be participants.

(23:27) When I arrived at the FCC, we did launch the FCC speed test app, which if you choose to, you could actually monitor your own connections to be on broadband or on wireless and anonymously share that with your IP address. We would know where you were in a five mile radius. You can share that with the FCC and through port policy (?).

(23:43) We actually made the code open source so that people could see that we didn’t have your IP address. They saw that we did privacy by design and it turned up for a while to be the fourth most downloaded app on Google Chrome on the iOS Store.

(23:54) And so I think we can actually in this new age think about the role of public service isn’t something that government professionals have to be the only ones doing. It can actually be something that the public can do, as Corina was talking about what my predecessor response and things like that. It can also be something that maybe public private partnerships can do. But we need to figure out this new organizational form because the world is moving so quickly and it doesn’t have to be something that each of us as government professionals are the only ones doing. But if the public wants to and is hungry to do they can also have the opportunity as well.

Corina:

(24:26) I think the public actually has a great opportunity right now especially with social media, because never before have their voices been heard without that gatekeeper, and to continually use these new platforms, the public forces the government to change, they have to keep up. Nobody wants to testify in front of Congress why didn’t we listen to them and what we were hearing on Twitter, right. So keep it coming everybody.

Michael:

(24:57) So we have a great question from Bob Rothman who asks, how do you deal with change when your intent is good but the public is cynical and I would actually amend that question to say, how do you deal with change when your intent is good, but inside your own organization you’re surrounded by anti-innovation antibodies, the people who do don’t want change.

Corina:

(25:31) Well that’s why I drink wine!

David:

(25:36) And we do have happy hour with a bunch of change agents, because when you’re banging your head against the wall it’s nice to know that you’re not the only ones doing it. I do think to some agree I think we’re both masochists in that I actually thrive when there is anti-innovation in anybody’s presence because you know what, I’ll be honest, if I took a job that had been done before or if someone said it was easy, I would get bored and in fact I do seem to move onto different jobs only because I want the job that people say, it’s near impossible, it’s never going to work. You know, they’ve had nine CEO’s in eight years why are you coming to this fold.

(26:08) And so I think for both of us we actually thrive a little bit about it actually being an impossible mission. It’s almost like Sherlock Holmes when he gets a case; it’s like the game is afoot.

(26:17) I think the other thing is we’re both on social media, be transparent in what you’re trying to do. Be transparent about the fact that you have limited resources and don’t get to set your own budget.

(26:26) In some cases, as Corina mentioned, third parties saying things may be listened to more because they’re not in the system. You know if I said we need to change, people are going to say yeah, yeah he’s in the system or maybe he is just trying to get a bigger budget because he wants to have a bigger empire, which is definitely not what I’m trying to do.

(26:41) But, having that sort of willingness for your networks involves people on the outside, involves sort of strategy to keep you sane and really to sort of figure out that narrative, that conversation about why. What is that sense of urgency and why we must change because we have a sense of urgency, there is often an easier way to clear that path. But you do have to be willing to take flack and I think if you’re doing similar does and oftentimes people never know the flack that we are encountering as we try to be change agents.

Corina:

(27:14) True. I mentioned earlier if somebody tells me no or they don’t find value in what’s happening I actually respect that. I don’t enjoy hearing it, but I take it in and I think ‘Well, why is that happening?’ and ‘Why should I change that?’ Right, is it because I want to change it or because there is actually a need.

(27:34) So I have found looking at data is a great way to be able to say, ‘Here’s the information,’ ‘Here’s why we have to do this,’ ‘Here’s whose asking for it’ and ‘Here is the value that it will bring.’ Right, and sometimes that ‘no’ that I encounter is good, and sends me back and lets me know that maybe I’m going down the wrong path, right.

(27:53) So part of my job is to be fluid and to listen to those people that say this is never going to work. I will agree with David, probably the best thing besides drinking wine is when somebody comes and says: ‘You know what? I didn’t believe and now I do. And I might not like it; I might not do it. I might not get on with Twitter but I understand the value in what we’re doing now as an organisation.’

David:

(28:20) Yes, and I think those are the moments that you have to hold onto because there will always be resistance but we can overcome it. I think Corina is being really modest, so Michael if I could allow Corina to tell us a little about how sometimes in just by a change in by where you are and your role. Can you tell us a little about your role in the navy?

Corina:

(28:38) Absolutely, I thought you’d never ask! I was one of the first females on combat ships. And I served when I first reported onboard there were six females and the ship’s crew and when the marines came on there was about 3,000 more males. And we set off with our first Navy WESTPAC with I think about 60 females with the same ratio of males. And at the time I didn’t really realize that there was anything new going on. I was in boot camp right before — you know a couple of years before that where they first integrated females in camp and I didn’t really think about anything about that. Now looking back I realized the relationships that I made with other women who were in now that same situation with men that supported us through those situations, and the way that we reacted as professionals and personally really shaped that new change.

(29:34) I would say that anybody listening today or later is if you are in one of those new situations and you don’t realize that you are painting the path and you actually are, and it’s nice to take a deep breath and think how do I do this in a way that I want somebody to do it in 20 years from now.

David:

(29:52) Right I think it’s key to be a non-anxious present and I think that’s the human body that you do in service and I think sometimes change you don’t recognize until 10 or 15 years later.

Michael:

(30:02) So Corina, I have to ask what was that like. That must have been some experience.

Corina:

(30:11) It was surreal. First of all I’m directionally challenged, so I could only figure out how to get through the ship, like find where the mess decks were, so I was going through my own personal crisis when I got onboard and couldn’t find anything, except where the food was and I guess that was important. But it was surreal. I definitely at that time walk into a room and wasn’t female first and professional second. And I have a very good friend who was onboard that ship with me, her names Andi Burminggood, and she has now since commanded her own ship and she’s stationed overseas right now. And her and I walked into a room together one one day. It was the middle of the night and you’re doing some engineering exercises underway, and we had been told that we needed to stick around because we were going to be part of what was going on.

(31:04) When we entered this room we were asked to provide beverages for the engineering crew that was onboard, and Andi looked at me and said I didn’t join the navy to serve coffee did you, and I said no actually that’s not why I joined the navy or why I came onboard this ship. So we turned around and walked out of the room, and I didn’t realize that at the time that I could have lost my job and gone to jail. But it was having somebody that was like that a change agent and we didn’t realize that that was going to happen and that was our mindset and that was the way we were able to play it.

Michael:

(31:44) But that’s an interesting example for a bunch of reasons, but one of which is in order to drive a change in attitudes on that ship among officers, you took a very significant personal risk. As you said, you could have lost your job, you could have gone to jail, and in a way isn’t that the fundamental difference between people who are willing and comfortable with change and those who are not, is the willingness to take that risk.

Corina:

(32:26) I think that’s a great way. I mean my friend and I knew each other in a professional capacity and enjoyed reading books together. Not once did we ever say, okay if anybody gives us a hard time we’re going to tell them no. It is just something that happened and it happened very naturally and it didn’t feel like the way that we were reacting was wrong. So that helped shape my career, literally as a professional but also as a female and sometimes working in the IT sector women are not as well represented as they should be.

(32:59) And so that shapes the way that I look at organizations now, not just in the government but those that we do work with and think about how are we representing all of the people, all of them as professionals, and how are we diving into the best roles that they can have.

David:

(33:18) And I think while it is true, there is only going to be a certain amount of people that are going to be willing to put that risk on the line, and to be willing to actually say, maybe I can get fired, or lose my job, or even worse. Those people can then inspire other people that maybe on the fence, and so I have no doubt that your actions probably later had other people say I’ve been on the fence and that actually tipped and cued my mind.

(33:39) And I think that’s important is that any organization you’re in, while you maybe the early adopter of whatever change is needed, think about how you address those then later adopters and even the laggards so you can win the hearts and minds because it really is about winning hearts and minds.

Michael:

(33:55) So risk taking then is a form of leadership, and if you combine risk taking with trust and credibility in a way that’s your definition of a change agent is it not.

Corina:

(34:08) Absolutely, and you can be at any level in any organization to be a leader, to be a risk taker and to just be a change agent. You don’t have to be at the very bottom with something to prove, and you don’t have to be at the very top until something is done. You can be anywhere in that organization and truly effect that sort of thing.

David:

(34:25) And sometimes being a change agent means at that time and moment you may be fired, or you may be sent someplace else. Back in 2000, I signed up for a little program called the Biocares Preparedness and Response Program and we were 30 people. I was the one IT person who also knew some biology, charged with whatever would we do if a biological event ever happened in the United States.

(34:47) And we were only 30 people out of an agency of 15/16,000 people and I was trying to push at the time, it was the early days of agile and scrum, and we were told no you have to do waterfall, you have to follow the five year plan. And I’d say: “I’m sorry, I don’t have any deal with the bio-terrorists that they are not going to strike until we actually get this system setup in five years. I need something that’s a minimum viable product” and I was getting into trouble. And in fact, the enterprise IT was going to come after me saying I was a trouble maker.

(35:15) And I almost left, except 911 happens, followed by the anthrax event where literally on the fly and we took what capabilities we had done in an agile manner in less than 24 hours and put it in a way to actually monitor the anthrax events that were occurring in October and November.

(35:32) But have no doubt, I mean there are going to be change agents who are doing the right thing and at the time are not rewarded or recognized. And it’s only five, 10, or 15 years later that actually in hindsight they were doing the right thing. They actually did open the organization to where it needed to go.

Corina:

(35:49) And probably every decision that we try to put forward might not be the right thing, or maybe you don’t know that until 10 or 15 years. The intent to get there and to iterate, not just from an IT perspective, but actually in the way you operate and take information and testing is key.

Michael:

(36:08) So we only have about 10 minutes left, and this conversation as really flown by very very quickly. But let’s try to develop a kind of framework for driving successful change in a large organization. Maybe David, let’s start with you. If you were to lay out a framework for driving successful change in a large organization, what would the key points be?

David:

(36:36) So from my own experience, be humble, recognize that you don’t have all the answers, make sure you listen and learn to the existing narratives. Don’t come in guns a blazing right away or else people are going to say, you never take the time to listen to me, why do I need to listen to you.

(36:54) Build a coalition. Oftentimes what I’ll do is I’ll pay out of my own pocket. I’ll pay for coffee and donuts, and say “Between the hours of 10 and 12, if anyone wants to come and tell me what they’re hearing in the organization, I provide breakfast snacks, you tell me what you’re hearing” and so that’s gathering the narratives.

(37:10) And then once you have taken that time to begin to build that framework of: you are listening to people; you admit that you have blind spots; you want to learn. Then you can begin to actually put out your narrative that maybe is taking existing narratives and slightly beginning to tweak them, or picking the ones you want to amplify.

(37:26) And also, most importantly, creating a sense of urgency that is shared amongst that coalition, because you can’t do the change alone. You need to have other people embody the sense that this is perfect.

Corina:

(37:39) I like those ideas. I work it a little bit differently. I do start out understanding the organization and the needs and the way in which they’ve worked to meet those needs. But then I jump all the way forward and I think about where I want to be. In three years what will I want to see. If I’m the lead in the organization, what will that legacy be and then I work backwards from there. Well then who needs to know about this; who needs to give buy-in; you know, who needs to be consulted where I’m getting more information. What are the actual tactics that we have to start taking to get there.

(38:12) And that ladder rung, I sort of move up and down over and over as whatever that scope is or however it changes. I agree be humble, and know you don’t know all of the answers, but sometimes you’ve gotten here by running your mouth a little bit, so there’s a little bit of that there too. And always being able to articulate why you’re doing this, why you think it’s a good idea, the value that you’re going to add to your organization and your public. And be able to talk to people about that in 30 seconds or less from a communication stand point is key.

David:

(38:48) Yes, and I think the point that Corina said about ‘why’ is so key. Oftentimes I see people trying to drive change either about the ‘what’ or the ‘how’ that gets lost. If you’ve not led with the ‘why’, you’re not going to be able to get to where you want to go.

(39:02) And also what she said about where to be in three years or two years. I often kind of put it at some point, point of no return, because then you can’t roll back the change that you rolled out. So at the FCC, when we move to either 100% public cloud or commercial service provider, which we did achieve, we can’t bring the servers back. In fact, we literally cut the cables that were here, so there’s no return.

Michael:

(39:25) So the communication and the ability to communicate well is a critical component of this.

Corina:

(39:35) Communication that’s appropriate for your sector, right. The IT folks want to talk about waterfall and agile and scrum, right, that’s their whole language that fortunately I know some about, but that’s probably about it. So being able to communicate effectively within the circles that you are trying to influence or get information from and sometimes that changes. I would say another thing the change agents that I’ve encountered, something that I really value in them is that they can speak in more than one language. And I don’t mean that from a perspective of I speak Spanish or French, but it’s I’m not illiterate in what it is that David is trying to do. I understand it enough, and I might not be able to write fluently in it, but I can actually speak it. And that helps with the change agent to understand the same common vocabulary that people are using, to understand why they need to do something.

Michael:

(40:29) So the ability to speak in the language of your constituency or stakeholders.

Corina:

(40:35) Absolutely.

David:

(40:36) Very much, and you have to be multilingual. And the other thing I would say is communication with the goal of 1) learning and listening, but 2) also building trust. There is a reason why Corina and I dress this way is that we don’t always wear a T-shirt and blue jeans to work even if we might want to, because while that be a way of changing the culture but is that really the image that you want to go to or would you prefer to have this be camouflage, and I do this camouflage because I don’t wear this at home. But I wear this camouflage is because of what I want people to focus on is more of the other things that I’m trying to drive change on, versus what attire you wear or not. Now that said, I expect my developers they are more than welcome to wear blue jeans, but when I go to the hills I’m probably not wearing blue jeans. 

Michael:

(41:21) Any other final points of advice, so Corina what advice do you have for somebody who is working in the government or in any large organization, it doesn’t just have to be the government. Working in a large organization wanting to drive positive change with the best of intentions and it’s just been beaten back. What should that person do?

Corina:

(41:52) I like to tell people never walk into a room and apologize for who you are or who you want. Focus on you know what you can do well, and how you can provide value to the people that you’re doing it for. You will always come out of it.

Michael:

(42:11) So always be sure that you are providing value, which of course now in order to do that you have to be undertaking the steps you both were describing earlier, including listening to their stories, communicating so that you have credibility. So it requires all of that doesn’t it?

Corina:

(42:30) Absolutely, I know I’m short on time, but I want to tell this one vignette. I’m not sure if I’ve told you. When I was about 16, I was working in a nursing home. It was one of my first jobs and I was working in the kitchen and I really could not stand being a server or being out on the floor. So I would volunteer to come in at four in the morning and do all of the prep as long as I didn’t have to go out.

(42:51) One day we were very short staffed and I had to go out and serve and I wasn’t familiar with the people that were in the community. And one gentleman that was asking for bacon and he really really wanted bacon. So I went back to the kitchen and I looked, and all there were like these bits and pieces of you know bacon that’s at the bottom of the bin. So I went back out and said, you know there’s really not any good bacon to bring you. There’s just like these crumbly bits and they’re not good and you know, we’re just out of bacon. And he told me, he demanded that I go back there and I bring him whatever it is that was there.

(43:28) So I did. I was 16 and influential, and I was trying to do the best job that I could and I scraped up these oily, gross bits because I thought this is what the guy wanted. And I go back out and I give it to him, and he stands up and he yells at me that I didn’t respect him enough to bring him actual bacon.

(43:47) And I later learned that maybe he hadn’t remembered our earlier conversation, but it stuck with me and the thing that I learned was, never present something to somebody that you don’t have the whole confidence in that’s going to be the right product. I don’t think I should eat bacon, for all I know (I should go on diet?) and I never would out there, and there is a lot of other questions I should have been asking. But the bottom line is always that I stuck with me, even if I don’t think I’m getting it right and I’m giving you the best that I can and listening.

Michael:

(44:20) Okay, so if you’re not listening it ain’t going to work, and David, we’re just about out of time here, so your advice to that person who is struggling to try and drive change.

David:

(44:34) The first would be look up the poem by Rudyard Kipling, 1895, called If, and recognizing that we probably need to adapt it to the 21st century to be augmented. The first two lines are, If you can keep your head about you and all are losing theirs and blaming it on you, if you can trust yourself and all men and women doubt you but make allowances in having to.  I think that really embodies that you need, one, believe in yourself, but also have that humbleness to step outside and say maybe I’m missing something. And then the other thing is whatever environment that you are in, recognize is we spoke about you brining your talent to that environment, but it’s also about that environment appreciating the talent you bring. Then if you have tried to be a change agent for six month or nine month, then that environment is not appreciating the talents that you brought. Guess what, there are plenty of other environments and maybe you should go to them.

Michael:

(45:27) Okay, well amazingly great advise and this conversation you know it feels like we’ve been talking for five minutes, but we’ve been talking for 45 minutes. So I want to thank you both, and this has been episode number 140 of CXOTalk. I’m Michael Krigsman, and today we have been speaking with Corina DuBois, who is with the Department of Defense, and David Bray, who is with the Federal Communication Commission about change agents, being a change agent in a large organization. Corina and David thank you so much for taking the time today.

David:

(46:10) Thanks for having us Michael.

Corina:

(46:11) Thank you.

Michael:

(46:12) And everybody, thanks for watching. Next week we’ll be talking with the Chief Marketing Officer of Arrow electronics, a huge huge company. Join us then, and please like us on Facebook. Thanks everybody, bye bye.

 

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Digital, Mobility, and Consumerization in the Enterprise with Sanjay Poonen, VMware

Sanjay Poonen, Executive Vice President and General Manager, VMware
Sanjay Poonen
Executive Vice President and General Manager of End-User Computing
VMware

The consumerization of technology in the enterprise and mobility are two critical elements underlying digital transformation and the evolving workplace in many companies. The challenge of issues such as mobility and security are significant however.

In this episode, we speak with Sanjay Poonen, who is Executive Vice President and General Manager, End-User Computing at VMware. Previously, he was was president and corporate officer of Platform Solutions and the Mobile Division at SAP AG.

Transcript

Michael Krigsman:

(00:38) Okay finally we are starting episode number 145 of CXOTalk and you know when you rely on the internet sometimes these things happen. In any case I am thrilled to welcome Sanjay Poonen, who is the Executive Vice President and General Manager of End-User Computing with VMWare. Sanjay thank you for your patients in this delayed start, thank you for joining us how are you.

Sanjay Poonen:

(01:14) Michael it’s great, don’t worry at all. Technology has its ups and downs but the good news is people always connect and it’s a delight to be on your show.

Michael Krigsman:

(01:24) Well you’re very kind. Sanjay as a way of setting context give us a brief sense of your professional background.

Sanjay Poonen:           

(01:32) Yeah, Michael we’ve known each other for a couple of years actually dating back to my SAP days and it’s always been a pleasure to get a perspective from you on innovation.

(01:44) I started my career right out of college. I came actually to the country as an immigrant on a scholarship to Dartmouth and 50 bucks in my pocket. Finished my undergrad and then worked at Apple as my first job as an engineer and this was a project that Apple was working with IBM called Taligent.

(02:04) Four years later I did my Harvard MBA, came back and was involved with a startup that I was part of the founding team with named Alphablox that eventually sold to IBM and then was an executive at Informatica running one of their business units and also ran marketing. Went onto Veritas and Symantec and probably the most formative parts of my years was at SAP where I spent seven years built the analytic business, the big data business, the mobile business and also ran industry solutions. All in all I had a great time in what you would call building the systems of engagement are at SAP that complimented the systems of record.

(02:43) And here I am  of the last two years at VMWare, Pat Gelsinger, my boss and CEO, Joe Tucci our Chairman succeeded in convincing me that there was a big opportunity in End-User Computing and that’s what we’re doing here and it’s been a boat load of fun.

Michael Krigsman:

(02:57) Okay so Sanjay, your background incorporates both the business side and the technology side, tell us about your group at VMWare and End-User Computing.

Sanjay Poonen:

(03:11) Yeah, you know I am a product guy. I’m a a software engineer computer science person and although I’ve been more in business roles the last few years, my hard core kind of DNA is an engineer and product person. so you know what I’ve have really sought to do is in any role build innovation that’s a forcing function better than you know the alternative in the market. We at VMWare have tried being a disruptive innovator and everything we’ve done a the data center.

(03:40) What we’re trying to do in this notion of the digital workspace or mobile workspaces are also being disruptively innovative, so you know it’s just a joy to bring that innovation and along the way we’ve innovated some through organic moves; we’ve made some bold acquisitions and the combination of organic and inorganic moves have put us in a very formidable position today in the market.

Michael Krigsman:

(04:02) And so End-User Computing what does that encompass?

Sanjay Poonen:           

(04:06) Yeah so just like the word says, it’s the computing needs of end-users, so if you think about your computing need as an end-user you have a desktop, you might have a laptop, you might have a tablet, you might have a phone and you might sit in a car or you know you might have computing inside a vending machine.

(04:22) All of these are areas where in the way that applications are delivered to that device needs to be so simple or like we like to say so Sesame Street simple that you can deliver any app to any device. Applications today you know could be client server, they could be web, they could

Michael Krigsman:

(00:38) Okay finally we are starting episode number 145 of CXOTalk and you know when you rely on the internet sometimes these things happen. In any case I am thrilled to welcome Sanjay Poonen, who is the Executive Vice President and General Manager of End-User Computing with VMWare. Sanjay thank you for your patients in this delayed start, thank you for joining us how are you.

Sanjay Poonen:

(01:14) Michael it’s great, don’t worry at all. Technology has its ups and downs but the good news is people always connect and it’s a delight to be on your show.

Michael Krigsman:

(01:24) Well you’re very kind. Sanjay as a way of setting context give us a brief sense of your professional background.

Sanjay Poonen:           

(01:32) Yeah, Michael we’ve known each other for a couple of years actually dating back to my SAP days and it’s always been a pleasure to get a perspective from you on innovation.

(01:44) I started my career right out of college. I came actually to the country as an immigrant on a scholarship to Dartmouth and 50 bucks in my pocket. Finished my undergrad and then worked at Apple as my first job as an engineer and this was a project that Apple was working with IBM called Taligent.

(02:04) Four years later I did my Harvard MBA, came back and was involved with a startup that I was part of the founding team with named Alphablox that eventually sold to IBM and then was an executive at Informatica running one of their business units and also ran marketing. Went onto Veritas and Symantec and probably the most formative parts of my years was at SAP where I spent seven years built the analytic business, the big data business, the mobile business and also ran industry solutions. All in all I had a great time in what you would call building the systems of engagement are at SAP that complimented the systems of record.

(02:43) And here I am  of the last two years at VMWare, Pat Gelsinger, my boss and CEO, Joe Tucci our Chairman succeeded in convincing me that there was a big opportunity in End-User Computing and that’s what we’re doing here and it’s been a boat load of fun.

Michael Krigsman:

(02:57) Okay so Sanjay, your background incorporates both the business side and the technology side, tell us about your group at VMWare and End-User Computing.

Sanjay Poonen:

(03:11) Yeah, you know I am a product guy. I’m a a software engineer computer science person and although I’ve been more in business roles the last few years, my hard core kind of DNA is an engineer and product person. so you know what I’ve have really sought to do is in any role build innovation that’s a forcing function better than you know the alternative in the market. We at VMWare have tried being a disruptive innovator and everything we’ve done a the data center.

(03:40) What we’re trying to do in this notion of the digital workspace or mobile workspaces are also being disruptively innovative, so you know it’s just a joy to bring that innovation and along the way we’ve innovated some through organic moves; we’ve made some bold acquisitions and the combination of organic and inorganic moves have put us in a very formidable position today in the market.

Michael Krigsman:

(04:02) And so End-User Computing what does that encompass?

Sanjay Poonen:           

(04:06) Yeah so just like the word says, it’s the computing needs of end-users, so if you think about your computing need as an end-user you have a desktop, you might have a laptop, you might have a tablet, you might have a phone and you might sit in a car or you know you might have computing inside a vending machine.

(04:22) All of these are areas where in the way that applications are delivered to that device needs to be so simple or like we like to say so Sesame Street simple that you can deliver any app to any device. Applications today you know could be client server, they could be web, they could be mobile in any of those form factors, a device factor could be a desktop or a laptop running Mac or Windows or Chromebook. It could be an iPad, it could be an android tablet, it could be a Samsung android phone or it could be a vending machine.

(04:54) The ability to deliver any app to any device is something that we are uniquely you know provisioned to do and that’s my focus here in the End-User Computing team at VMWare

Michael Krigsman:

(05:05) So any app to any device, so may be drill down into that for us a little bit.

Sanjay Poonen:

(05:12) Yeah, so you know if you think about yourself in any industry, perhaps you’re in healthcare, you may have a Windows application that you want to be able to deliver on an iPad and it just so happens that yet has not been completely built for HTML 5 or mobile. You might have a web application like a salesforce that you’re trying to deliver to any type of device that might be somewhat easier but it still needs security so you can put this on your own device  tablet.

(05:42) And finally you may have a mobile application, it might be a DocuSign or a Dropbox or Box that you want to deliver onto your phone, so that you can actually get the benefit of digital signature but you want the security of it. Being able to take any of those applications that I described client server, web, mobile and then say don’t worry about the type of device, we can now help to deliver to your end users. What’s the benefit for the end-users? Their productivity goes up significantly, we call that then allowing the end-users to work at the speed of light. They can work and play and you know, they can go from the office, to the park, work at home and their applications are just seamlessly served for them, just the same way that music or movies are served up to you and your consumer experience with you know Netflix or iTunes or whatever you have in the consumer world.

Michael Krigsman:

(06:30) So obviously there is a very significant technical infrastructure but I would imagine that what you’re describing relies equally as much on the human factors and the user experience to keep the simplicity.

Sanjay Poonen:           

(06:45) Absolutely, I think there are two aspects that need to happen, there’s a technology stack behind that and that’s what VM does, we’re an infrastructure company, the fastest growing infrastructure company. We have great assets in the data center and we now have great assets in the digital workspace.

(07:00) But the digital experience absolutely has to be pristine. We in fact call it the coming together of consumer simplicity but then apply security. The user experience means as such that if you move from any of these devices you don’t notice a difference. It’s just served up to you, you don’t have delays and the reason that many of the companies who focus on this type of problem and have failed in the past is the solutions have been too costly and too complex. So we come at this with a very new approach to it and a more innovative solution to one that is actually built for the mobile cloud era. You know in the mobile could you need something that’s much more optimized for a tablet or a phone or a machine as opposed to just the old desktop world. And the cloud environment needs to have something that has been built for a cloud first deployment as opposed to just on premise.

Michael Krigsman:

(07:49) So when you’re talking about bringing together consumer with enterprise you’re very much focused on the security aspects from the enterprise point of view.

Sanjay Poonen:

(08:00) Yeah, I’ll give you an example. We just acquired a beautiful company called Getboxer  that has an inbox experience that runs on your iPhone or your Samsung phone. That’s not intended to replace naturally the consumer grade email, but in many cases customers told us they were frustrated and they desired to have something that was as secure that they had in the past with Blackberry, but they didn’t like the user experience of products like good technology and they wanted a product that had a consumer grade user experience but also enterprise security. And that product, you can all download it at the app store. Download Boxer and you’ll get an example of it’s beautiful user experience.

(08:42) We use its consumer feedback that we get from 10 of millions of users who download this into the enterprise version of our enterprise role management solution inside AirWatch, and now Boxer is now going to become the face of our future inbox capabilities. That’s a good example of consumer simplicity meets enterprise security.

Michael Krigsman:

(09:04) And when you talk about the digital workspace or people use the term the digital workplace, talk about that and the connection to what you were just describing.

Sanjay Poonen:           

(09:16) Yeah you know digital is what everyone seems to be saying right now. I like it quite frankly it actually represents the movement and the way from paper to something more you know driven by an automated machine or phone and so on and that’s a good paper move into digital. It also represents the moving away from manual to automated.

(09:36) So the word digital we like that you know, Gartner and a number of analysts are using that which is great. Whether it’s the workspace or the work place, I mean it really is very simple, like as that term says the space that you work. We were the first to coin the term workspace in 2007, we made it an acquisition, and I was looking back historically how far back we used it, and began to play out the vision that a workspace could be something that was neutral to the type of device that you were working in. So it didn’t matter whether you are on a Mac, Chromebook, a Windows laptop, or a Windows desktop or then later on a tablet or phone. The space in which you work could be abstracted away from the physical applications, and that’s something we’ve now really really perfected with an innovative stack that is cloud centric, and we’ve now coined that term the digital workspace.

(10:25) So we coined the term the workspace way back in 2007. We’ve evolved that now to be very mobile centric, more software defined if you would. And we think the nice way of describing that today is a digital workspace, you’re going to hear that of being something that becomes this gravitating term for the delivery of any app to any device.

Michael Krigsman:

(10:46) Okay so Sanjay then what does this mean for how people actually work. You’re describing technical capability now talk about the impact on how people actually get their work done.

Sanjay Poonen:

(11:02) Yeah, you have to take a day in the life of any person, so you take a doctor, you know and I showed this demo at last year’s VM world. But imagine a doctor who enters a hospital and the first thing they do maybe is they go to their office and they bring up an application. It might be medical records and it’s on their Windows but it’s delivered not by physically running that ERM application in their desktop. It virtualizes running behind the scenes on a server and our data center software what’s deployed to you is a virtual desktop or virtual app. You don’t know about it, but it just seamlessly you log in, single sign on and it’s there.

(11:38) Then you pick up your iPad and you walk to the ward and maybe now with that same ERM application or some other one where you’re going to be zooming in or if you would into an x-ray could be delivered through but now it’s an iPad. You get into the ward and you now have a thin client computing terminal where you’ll actually be getting very very highly graphical digitized versions of some part of the patient’s anatomy or whatever have you or an MRI scan.

(12:07) That again is delivered to you on a different type of thin client computing, again none of the software is actually sitting on that but it has all of your profiles and credentials.

(12:15) Finally, you leave your office, you get in your car and you’ve collaborated around a particular you know, consultation you want with another doctor that might be in another hospital, and you’ve marked a particular x-ray diagram or MRI you know in a nice collaboration tool like Content Locker. You share this with another doctor; they annotate it back and send it back to you. That day in the life of a doctor, what’s behind the scenes powering their entire user experience is VM technologies, Horizon. AirWatch, single sign on identity, but to the user it’s a very very seamless way in which they’re just working and we’re just the plumbing of the infrastructure that make all of their applications delivered into any device.

(12:24) So we’re not an application provider. Those are companies like Epic or in the case of financials it might be SAP, or CRM it might be Salesforce or HR it might be WorkDay or document sharing it might be Dropbox or Box. We are the infrastructure company that allows any of those applications to be delivered to any device. And you can take that same use case to any other industry.

Michael Krigsman:

(12:45) So the point then is to give the user absolutely the full set of capabilities that they would have if they were I a physical office but essentially mobile where ever they happen to be.

Sanjay Poonen:           

(13:34) Michael, that’s what we describe as working at the speed of light. That means your life continues and you don’t have to lug around your desktop wherever you go because that application ran on Windows right, or it’s not even running on an iPad.

(13:47) So we take a lot of inspiration from the consumer world. In your consumer world you get in your car and you don’t lug around 300 CDs and then try to load them up in your car. That might have been what you did in the 1980s or 90s. Now you have iTunes or your iPhone or iPod and you connect it into your car and music is just streamed in. The same with movies you might be watch here on Netflix, you get on a plane, you land in London and you can start the movie exactly where it stopped. That same experience of working at the speed of light is what we’re trying to bring from the consumer world into the business world.

Michael Krigsman:

(14:26) Sanjay, we have a question from Alan Burkson who’s asking about thin client and he said, is that term is a pre-public cloud term and so I guess that maybe you can talk a little bit about thin clients versus apps.

Sanjay Poonen:

(14:44) Yeah, I’d say listen from our perspective we think that the client ends point to it, without actually getting to the (client?) it was used before can get thinner and thinner. In other words it doesn’t require fat desktop. Whether it’s Windows, whether it’s Mac, whether it’s Phonebook, each of these endpoint now are getting thinner and thinner. Now there is a term thin client computing where the term is a really thin client and the horsepower might have better graphical capability or so and so forth. So whether it’s the physical thin client that of Dell, HP or anybody else you know sort of makes or it’s the you know, the adjective as opposed of sort of the way in which you would describe the client becoming thinner and thinner.

(15:29) From our perspective we’re actually not you know focused on that. We can certainly run on thin client computing terminals like you know, some of these hardware folks make. But if your client computing strategy or endpoint strategy is to not really have a fat client but to have a thinner endpoint, we think that’s where the world is going because long-term all of these horsepower moves to the cloud. All the applications move to the cloud and what you want to be able to have is have that being delivered out irrespective of endpoints.

(15:58) If you have to install software or install identities, all of the profile, all of the software on every single endpoint that you want, it just physically is impossible to get done. You lose your mobility because you want to be able to use an enterprise application in the terminal of San Francisco airport or in many cases where it’s the new mobile endpoint; these applications haven’t been built sometimes for Android or IOS or even for the web. So that’s how I would think about the current and the future of thin client computing.

Michael Krigsman:

(16:34) So again there is this significant infrastructure that companies need to put in place to enable the capabilities that you were describing, but at the same time to get users to adopt this new way of working requires a digital mindset and cultural changes even and work and process changes to take place as well.

Sanjay Poonen:           

(17:01) Yeah and I agree. Listen, I’d say while it could be scary infrastructures. Infrastructures behind the scenes are what we do well. infrastructure problems is what VM solves really well. we’re the fastest growing infrastructure company, you know from zero to 6.5 billion in 15 years and you know we like those problems because we abstract them away, we virtualize them if you would and we make the simpler and easier.

(17:25) Now the other thing that makes that simplest today in any cases is you don’t have to start up that infrastructure yourself, we can do that in the cloud, whether it’s desktop service or running on mobile solutions. Solutions are all cloud centric.

(17:38) Now the other part that you talked about which is just as important which is the process and the people aspect and I’d advise a lot of technology leaders in life and business leaders, you have to have a very different mindset to the way in which you think about things in this mobile cloud era.

(17:51) First off you have to go digital, I mean you almost have to make a sort of a revolution to paper processes and manual processes and look at every single way by digital technologies, where phone can replace the need to capture paper receipts. You can take a copy receipt and then digitize that and expense reimbursement gets done on a much more mobile centric way. That’s what Concur and companies in that area do really well.

(18:17) Workflow processes that are very cumbersome to route this, to route that could be a much simpler workflow process on a mobile application that’s built and then the approval of you or my boss Michael could be just routed via email and that workflow process whether it be expense or you know vacation days. Then there’s number of processes; medical records, it’s a beautiful digitization for us that should not be – today it’s very point to point. You share a text message maybe your phone calls and the sharing of information and some of it for good regulatory reasons HIPPA and other has to be confined. But there’s’ a lot we can do to bring the world of document sharing, sharing of medical records or even images of x-rays and make it so easy for two doctors to collaborate.

(19:04) In many cases in doing that you’re actually probably saving a life, so we look at any of these use cases. Another one that I’ll give you, a great one that’s you know in the airline industry AirWatch is becoming almost a de facto standard. You think about these pilots lugging in you know 30 pound bags into the cockpit, you know I’ve always wondered what’s inside that bag. I assure you it’s not their toiletries. It’s a lot of paper manuals for the landing instructions of a plane or the flight instructions about you know, the plane or the airports it’s going to land in.

(19:34) That can now be digitized, United Airlines and several others are the first to do that with an iPad. Other airlines like Delta pick a Microsoft surface tablet, and whatever your device is the document have been digitized and you know it reduces weight of what you take into the cockpit.

(19:52) The next thing that happens, the flight attendants have got iPads where they’re checking out what the passengers are ordering and they’re maintaining your profile so that they can have a much better customer relationship with you. And then the third thing that happens is the people on the shop floor who are maintaining the plane have an iPad to actually help with the experience of how they’re going to do the maintenance, predictive maintenance and plant maintenance of the aircraft engines.

(20:15) So the entire aircraft industry there goes digitized, the infrastructure providing that behind the scenes is VMWare technologies. So we want to be in a place where you go industry by industry whether it’s healthcare, whether it’s education, whether it’s financial services or whether it’s airlines we’re bringing that digital infrastructure to the working experience from everybody from the flight to a fight lieutenant to a mechanic; that’s the way we think about the problem.

Michael Krigsman:

(20:40) Okay so your customers are putting in this kind of infrastructure which then has the potential to significantly change the way work, but what is then required to drive adoption and to drive the cultural changes that are necessary to convince people to collaborate, who maybe before you know didn’t; they were focused on their own silos.

Sanjay Poonen:

(21:08) Yeah and I think it’s a good question. Ultimately the people and process aspects it take a leader who is willing to drive change by saying the world is moving digital or the next generation is moving digital. It’s really important that we revolutionize in the way we think about this process and embrace the technologies of the millennials. It could be a mobile device it could be a cloud technology, so at the core of it we think and this is no disrespect of age. I mean I’ve got my grandparents – my parents that are dealing with my children now on Facetime or whatever have you.

(21:46) So irrespective of age there has to be a impetus by a visionary leader who says, the digital transformation has got to happen and we’re going to embrace cloud and embrace mobile, and throw away aspects of things that are either paper or manual and make that a mandate. And usually without that leadership you know and then they create centers of excellence to allow the delivery of that technology very quickly, whether it’s the rapid transformation of the desktop to something that can be virtual, or the rapid deployment of mobile with management security systems like AirWatch or the sharing of documents or identity management, all the type of thing that happen. Those are just technology areas behind the scenes; a visionary leader is driving that into the organization.

(22:32) And then I think usually you find line of business, the users themselves are delighted to welcome this because in many cases they’re using consumer applications like Facebook or Twitter in their consumer life, they can bring their Mac or their iPhone or their Samsung phone and they can bring their own device, bring their own phone, bring their own laptop and they can get the experience of business applications now on their personal devices improving their productivity.

(23:00) Ultimately, the gain for the end-user is significant productivity gain that allows the to work, again work at the speed of light and they get more done in less time and then they can do what they want with their self-esteem; time. Some of them might to go and spend time with their families; some of them might want to work more. I’m not here to make a judgement call on work/life balance, but I would say in general that if we could increase the productivity of end-users the company or the organization benefits at the end.

Michael Krigsman:

(23:28) So there’s a significant leadership component, it’s not just the technology but it’s the technology combined or within the context of leadership.

Sanjay Poonen:           

(23:37) I think, I mean listen it can happen without leadership too, but our studies have shown and the research of what we’ve done of best practice companies that have rolled out business mobility initiatives there’s often a visionary leader CIO, CTO, or maybe even a CEO that’s driving change and forcing this often – with of course you know a bottoms up also encouraged.

(24:00) So I think it’s a combination of  a strong leader but then maybe a group or voice of millennials that are from the bottom up, you know demanding and requiring change. That combination is a tornado that ultimately helps an organization. And there are companies after company that I could cite, that I case studied that are best practice examples of embracing that type of digital revolution.

Michael Krigsman:

(24:21) So you have the technology infrastructure, you have leadership at the top that is driving the vision of where this is going but you also have grass-root support for that vision and for the execution of that vision.

Sanjay Poonen:

(24:37) You’ve got the right three things there and then I’d say if you’re going to add a fourth it would best be a process - -I mean it’s always people, it’s product, people and process, right. The three Ps that typically make you know anything in innovation really well. on the process front you find set-ups like centers of excellence, to make it such that the roll out of the technology or you do things like roll it out in mobile and cloud centric, these are process oriented ways by which you say, hey listen, we’re not going to do something unless it’s this. Or we’re going to have this lean mean center of excellence.

(25:08) For example one of the things we’ve done here as we’re rolled out mobile, is we’ve created an IT café, right near our real café or restaurant where people can go and have lunch and they can go downstairs to the IT café, they bring their device and say, hey listen I need help. All of a sudden we find all the helpdesk calls are going down, and all of a sudden our CIO tells me IT’s actually starting to become popular because they’re viewed as someone who can help them, and people get their you know device or phone addressed while they’re having lunch.

(25:38) These are practical ways which you change the process to actually make the end-users productivity be significantly better.

Michael Krigsman:

(25:44) So tell us a little bit about the Center of Excellence concept in this case.

Sanjay Poonen:           

(25:50) I think you know it’s always something that I’ve always been, I mean in  BI and analytics and then I worked closely with Gartner as they were rolling out the Analytics Centers of Excellence and both SAP and my prior experience at Informatica and Alphablox, we drove that. Business Object and I stood for that inside SAP. And I think it’s become now very common practice for the way in which you roll out best practice of analytics. Because this notion today of course you have scientists, big data scientists and machine learning kind of centers of excellence.

(26:21) I mean it’s not one of those skills that everybody wants to perfect, but to the extent that you can have a brain trust. Of course all of us should have an analytically you know savvy mindset, but the way in which the best use of tools or the best way to get this done is to share that best practice, having some center of excellence, having some Brain Trust if you would. And the same thing I think I would apply to mobility and to other kind of key disciplines where that center of excellence becomes something that the organization can count on.

(26:52) Listen, all of us want to have experts – I mean, who do we typically go to when we have a legal crisis? The best lawyer in town right. Who do we talk to when we have a medical crisis? The best doctor in town. I think  the same way of there’s some center of excellence or the key things you’re trying to get done that acts as a business partner to you in these areas. I think we see that becomes one of the key success criteria as these projects get rolled out.

Michael Krigsman:

(27:19) So as the company is undertaking this transformation, building the brain trust becomes a way of consolidating as you said the best practices and the strongest expertise and I’m assuming then it serves as a resource for the company and also as a center point to radiate out that expertise and share it with people inside the company.

Sanjay Poonen:

(27:47) I agree and I think that one of the things we find is that that Brain Trust doesn’t need to be big. Often people think we need to hire huge teams. I think quite frankly, lean and mean brain trusts you want to call that or that center of excellence is another synonym for it could become.

(28:02) I mean I usually in any areas I’m usually looking for the smartest people. I spend 30 to 40% of my time if it’s not meeting customers it’s recruiting. And I’m often I’m scouring LinkedIn or whatever sources of place of people either send me names and so on and I want to meet them for coffee.

(28:20) It’s really at the end of the day talent war right. I mean you’re trying to recruit people that maybe three or four or five other companies are trying to recruit. And the more that you can have your arms around that best talent in each area and feel like you’ve got a brain trust that’s the best, or a center of excellence that the best that’s particular, I think you become a much better evolving and high performance organization over time.

Michael Krigsman:

(28:42) So we’ve been talking about leadership Sanjay, and for the many years that I’ve known you, you have been presenting and talking about a concept of leadership that you call servant leadership and so maybe you would share what that is and your thinking about that.

Sanjay Poonen:

(29:03) As you can tell, I’m very passionate about leadership. In fact, on my Twitter handle for those of you who follow me @spoonen on Twitter I talk about loving music, piano, which is I play the piano and leadership. Listen, you know leadership is one of those things which is you know vastly misunderstood and in many cases abused. People think the only way you can be a leader is to be a manager.

(29:24) I think the greatest leaders to me are people like Nelson Mandela you know Mahatma Gandhi, you know I’m using examples from the 20th Century, who were examples of people who created movements.

(29:37) You know leadership to me is being able to get people to do what they don’t want to do and loving it, I think a Peter Drucker line. And if you think about the freedom movement in India or the fight against apartheid in South Africa. I mean many of these things went on whether Nelson Mandela was in jail or not. So I’m very inspired by leaders of inside and outside of technology that can actually create movements, and they can get whole organizations to work and drive a cause whether they work for them or not.

(30:04) And I think the way in which you get that to happen is this notion of servant leadership, which is at the end of the day, you look at yourself – and there is a great line that Nelson Mandela that said listen, lead from the back and make other people feel that they’re leading from the front. It’s almost like you are leading from the back of the room and people aren’t even looking but they hear your voice, they know that your kind of there, you’re helping drive them, you’re their coach. But they in turn are driving. When you get an organization to understand that you know, their greatest power is them and you’re really the facilitator to that.

(30:38) Another good example of that is a conductor of an orchestra. I use this example in a lot of my leadership classes, which I’ll talk about in a second, but the beauty of an orchestra, he’s not the best. He or she is not the best violinist or the lead violinist, the lead trombone player or the one playing the symbols or whatever. They’re just the ones pulling together, but the moment they stop using their arms the orchestra stops. If they do the wrong thing, one side the orchestra the left side might be playing this harmony with the right side.

(31:05) So, I’m a musician, I love music and you know a lot of my great examples about how teams work together are baked in music. So we have to cultivate a group of leaders that are not you know, self-serving, that are thinking of the rest of the team above themselves.

(31:25) I use this poem a lot from a great freedom struggle fighter in India named Rabindranath Tagore, who said something like this; I went to bed and dreamt that life was joy. I woke up and realized that life was service. I acted and behold, service was joy.

(31:46) So I think when you have your life driven by the way in which you serve your teams, clearly all of us are ambitious, we want great thing. But I often find sadly, as people get more and more successful, invariably they get preoccupied with themselves. They’re occupied in their own ego. They kiss up and they kick down so to speak, and those are qualities ultimately I think – I mean there are few people in the world who are extremely arrogant and extremely wealth. But I think if you think about you know the success of a great leader, you know clearly that smart and helpful and I think hard working is very helpful. And when we combine smart with hard work and humility, I think that’s something very special and I will tell you that’s a rare combination; smart, hardworking and humility.

(32:34) So part of what I’ve done over the course of the last seven -10 years as we lead the class for leadership development; the time for leadership now and I’ve done I think probably 1000 or 2000 people through it. Practically every manager that worked for me at SAP and now at VM has been through that curriculum. It’s not something that I developed myself but I was very inspired by people like (Noel Teshi?), who wrote the HR curriculum at GE and that’s really help me inspire people to drive this type of leadership that’s a constant learning and teaching, and hopefully a few people viewing this can see how passionate I’m about it.

Michael Krigsman:

(33:15) So you know I have to say that it’s the first time ever on CXOTalk that anybody has mentioned Rabindranath Tagore, and thank you for that. I’m not an expert on his work but his poetry is simply extraordinary and I tweeted out the Wikipedia page about Tagore so people can go and read it. So this notion of servant leadership how can one cultivate that.

Sanjay Poonen:

(33:53) I think first off I talk this about everything in life being about teaching and learning, but I think first off all of us desire mentors right, I encourage every leader to seek mentors. I’ve been very fortunate to work with some incredible CEOs over the course and others, but I use because many often I was working for them. Whether it was John Thompson or John Schwartz, Shai Agassi, you know Bill McDermott, Vishal and now Pat Gelsinger, Joe Tucci our Chairman.

(34:26) These are incredible men who and in many cases I’ve also learnt from women to who have been folks who I worked for on boards or other, who have been incredible you know inspirations to me and the way in which they lead and in many cases they’re also very down to earth individuals if you get to know them that have humility at the core what they’ve done and what stories and I’ve just been very fortunate to work for them and watch.

(34:49) I’m not perfect, none of them are perfect; they’ve all got their own you know strengths and weaknesses as do all of us. But you know as one learns from inside that environment where you can learn some of that, my obligation now is to teach. People often say well I would love a great friendship, but they don’t spend enough time mentoring others.

(35:07) I find them very selfish, they don’t mentor others, so I tell everybody listen, before you think about what you can get mentored by you know, some bigshot in your company, figure out how you can mentor others. I spend a good part of my life trying to mentor other people who are in the younger generation. Folks in their 20s, 30s, and millennial’s, often people who are in school systems. Coming out of school, just last week we had folks who are from an underprivileged part of the Bay area and who are up and comers, and 17-year-olds all thinking about the future of life, and to me it was an exciting, motivating our that I could spend with 17-year-olds. You know young women and men who were thinking about their future of life and encourage them to work hard, go to college okay, be in a learning more than then teach others.

(35:56) And you know we have to do more as leaders, to ensure that we are distilling these values in the next generation. So part of what I do when I teach these leadership development classes, I teach the class myself Michael. I don’t outsource this to some HR person. I teach this myself because it’s really important that every single manager or a leader in my team see that I want them to be successful.

(36:19) And you know, my job and there’s is kind of like almost a parent figure, you know helping be the coach to make sure that the children in your team which are the people employees are doing. It’s not being pedantic talking that they are children, but it’s almost like a parent. You know an employee management relationship often is like a parent and child relationship, you really have to make sure you’re looking out for the best for them.

(36:40) One other example I share is I often find that employees and managers, managers are threatened by hiring employers better than then. And they feel intimidated by that, or they tell them listen, I don’t want you to go and talk to my boss unless I’m in the room – all of these sort of insecurity complexes that sort of develop around a person, that to me we’ve got to destroy in the way in which we drive our corporate culture.

(37:04) Because ultimately it’s a sign of insecurity. Imagine, I’ve got a nine-year-old girl and twin five-year-old boys and you know I love running in the back garden with my nine-year-old and you can imagine that I could probably beat her in a race, but very soon she will try and beat me. But imagine if I was threatened by that. In fact, every time she greets me I’m more excited than ever. But often I find that same relationship does not exist between an employee and manager. The manager finds that the employee is getting too strong, they want to put them down under their thumb.

(37:31) So these are the types of things that we teach and develop with an obsession on people and talent, and I think it’s made a great difference in creating a corporate culture with the companies that I’ve been involved with whether it SAP or VMWare, that brings the best talent and the best energy out of our people to help them you know to reach the highest potential in their careers.

Michael Krigsman:

(37:54) So Sanjay the notion on being focused on mentoring and teaching others, in general would you say that helps being an antidote towards the kind of arrogance that is epithetical to servant leadership that you’ve been describing.

Sanjay Poonen:

(38:16) I think you know certainly when you teach you have to certainly know what you’re talking about and it allows you to explain and cultivate team work, so it’s certainly one. But there are other things to, I think you really have to surround yourself; I mean you are like the company that you keep. If you surround yourself with arrogant people, you’re probably going to be arrogant.

(38:38) But if you can you know make sure that a key part of your life is also surrounding yourself with folks who are humble and can teach you humility you’re probably going to learn from that and of course teach that to other people.

(38:53) Now listen, want to be very clear, servant leadership doesn’t mean that you’re like a doormat that everybody you know walks all over you. People know that I’m one of the most competitive people, you just have to watch my tweets I’m you know, I want to win against my competition and the score needs to be 100-0.

Michael Krigsman:

(39:09) Yes I know, that is absolutely true about you.

Sanjay Poonen:

(39:12) And I want to negotiate and I want it to be a strong position but it really is like, okay when I was at SAP I competed pretty hard against Oracle. Here I compete with companies like Citrix and MobileIron and Good [Technology] and others. My point there is like listen, when we’re done we’ll get back to the you know into having a drink or a coffee and we’re friends; it’s not personal at all.

(39:35) So you have to be in a place where just because you are a humble person doesn’t mean that you’re not competitive, you’re not ambitious. I mean all those are important but you don’t do it where you’re being a shark. I mean your ambition should not be one where you’re having to eat other people to rise up the corporate ladder. That type of ambition is a selfish ambition, ultimately I think it can work for some in time but is the undoing. When you have a person that rises up because the organization sees in that person, hey listen I want to follow that person not because that person has been a shark. I want to follow that person because there’s leadership attributes that I think I just admire about the way that their unselfish, the way in which they build out of people, that’s the best type of people; that’s a Nelson Mandela, that’s Mahatma Gandhi, that’s a leader that ultimately creates a following wherever they go right.

(40:25) So I think ultimately we look at ways like this where we can continue to cultivate in our best people and this is not just managers. Anybody who has a desire to do more and leadership potential that’s always thinking about other people, I mean there is no "I" in team right, so we’re constantly looking to see how the team wins, and when the team wins it’s clearly going to be often a Michael Jordan or a Scotty Pippin or you know whoever have you that’s going to shine and that’s okay. And we use a lot of sport analogies to map this out but ultimately the team benefitting is what we really really focus and obsess about. 

Michael Krigsman:

(41:06) So this kind of leadership which is flexible and adaptable and strong let’s apply it now to a different context which is IT. this is a big context shift here but IT is undergoing this tremendous change and so from the servant leadership perspective what advice would you have to CIOs who are just faced with this significant change in the technology and their role and technology budgets are shifting outside IT, what should a great CIO leader do?

Sanjay Poonen:

(41:51) You know I think honestly much of what I’ve described it’s awesome Michael that we’ve been speaking the last 15-20 minutes really about the soft topics, right. I mean I went to business school at Harvard and I remember sitting through organization behavior and somewhat was felt like soft topics and thought, man this is boring, get me to corporate finance and you  know technology and operations and things like that kind.

(42:12) I will tell you my experience in life is the hard stuff is the soft stuff, and the soft stuff is the hard stuff. I spend a significant part of my time coaching, grooming, hiring people, that’s all the organizational parts of my life that I feel like often a psychology major.

(42:29) So I think a great CIO first off has to understand that their greatest asset is not just the products or technology that they have, but the people and the process they set up. I think honestly anything in technology you’re focused on three things, product, people and processes, but the people and processes are the soft stuff that often are the reasons IT projects go wrong. And I find the greatest CIOs that I know, that I have gotten to know and inspired by they are just leaders that have a way which they’ve hired the best people, they’re grooming the best people, they’re always looking for process innovations and being innovative about it, and of course they have a discipline to pick the best products in the way in which they roll out technology.

(43:11) But you look at their teams and when they leave and maybe do something else. They’ve got a great team underneath them that step up. They’re very good at communicating their goals crisply. They’re always doing Town Halls and those skills map across any organization where the CIO, the CFO, or me, a General Manager in charge of a business or you know a CEO of a company. Any of those are essential, but beyond that I think an IT leader in their teaching and learning are trying to surround themselves either on their team or in the community of people they learn from, from people who are smarter than them that they’re learning from.

(43:47) And I find often, I find that these CIOs are trying to hang out with other CIOs that are doing best practice, they’re trying to emulate them have them kind of you know, teach their teams what to do and then they learn from those best practices. And I find my greatest learning out with CIOs or CSOs or CTOs, folks who are technology savvy is to constantly ask them, okay, you know you’re spending this much on IT as a percentage revenue, how do you compare that to what other CIOs are spending, is that best practice or is that not. You’re think about these projects now moving to the cloud, you’ve got it, is that best practice or not. You’re thinking about this spend on applications versus infrastructure, how does that compare to others, is that best practice or not. They’re constantly learning and challenging others to you know, with that sort of thinking they’ve got it all figured out.

(44:36) So there’s a lot and we can go on and on and I’m not the best, I mean my job has never to be a CIO, but I’m very fortunate to work with you know Bask Iyer here at VMWare. The former CIO before that was Tony Scott who is now Barak Obama’s federal CIO. So I’ve had the chance to work with some world class CIOs, the CIO at SAP was Oliver Bussman, who I think is now UBS so I any of these CIOs that I’ve had the fortune and privilege of working with I’ve learned a ton from them and then of course their network of many many other CIOs in the industry that I deal with and is part of my rolodex.

Michael Krigsman:

(45:12) Yes Oliver Bussman he is at UBS, he was a guest on CXOTalk and of course he’s amazing. Sanjay, we just have a few minutes left so what advice do you have to organizations that want to roll out this kind of digital workspace that you were describing earlier.

Sanjay Poonen:

(45:33) Hey except number one call us we’ll be happy to help! No I wanted to give the self-selling commercial and get that out of the way.

(45:38) I think you should really look at the way in which mobile and cloud are changing everything. If you’re bound to the old world of looking at things, you’ll probably be stuck at a fat desktop in the past, but mobile and cloud are changing everything. That means that in many cases you can take paper processes and digitize them, manual processes to automate them and then figure a way by which you can abstract a way all of your applications on one side, all of your devices on the other side and say, okay good, how do I bring them together. So make a list of all the applications you have.

(46:10) We have probably 3 or 400 hundred apps at VMWare in IT here and then all of the types of devices that people want. From a Windows laptop, we have a lot of people who know want Macs, some people want Chromebooks, to the tablets people want, to the phones people want. Then ask yourself, how do you map all of the applications to any of those devices in a way that allows end users to use them any place, anywhere in time.

(46:37) Then of course, if you need help with the technology we’d be delighted to help you, we have many customers who are gaining a lot of market share in the space so we have a lot of expertise in this area. I’ve tried to make my dialog here not vendor specific, but one that inspires a little bit of what we’re trying to get done, both in the technology world but also more importantly.

(46:56) And I would say my final piece of advice is say listen, hire smart people. Listen, it’s a talent war, talent game. I spend you know my time divided. I’m probably working 200% of a normal 40 hours, you know 50, 60, 70 hours but if you take 100% and divide it, I probably spend 40% of my time talking to customers and partners, 40% of my time recruiting, and 20 or 30% in probably meaningless meetings that I would like to get out of. But that time where I’m recruiting or retaining, it could be recruiting or retaining talent to get them motivated is just time that’s incredibly precious

Michael Krigsman:

(47:37) Okay, we have been talking with Sanjay Poonen on episode number 145 of CXOTalk. Sanjay, thank you so much for joining us and everybody, we appreciate that you stopped in and we will see you again not next week which is Thanksgiving but the week after. Thanks so much bye bye.

Companies mentioned in today’s show:

Air-Watch:                   www.air-watch.com

Alphablox:       ftp://public.dhe.ibm.com/software/data/bi/alphabloxvideo/alphablox.html

Apple:                          www.apple.com

Box:                             www.box.com

Content Locker:           www.air-watch.com

Dell:                             www.dell.com

Delta Airlines:             www.delta.com

DocuSign:                    www.docusign.com

Dropbox:                     www.dropbox.com

Epic:                            www.epic.com

Facebook:                    www.facebook.com

Gartner:                      www.gartner.com

Getboxer:                    www.getboxer.com

HP:                               www.hp.com

IBM:                            www.ibm.com

Informatica:                www.informatica.com

iTunes:                         www.apple.com/itunes

Netflix:                        www.netflix.com

Salesforce:                  www.salesforce.com

Samsung:                     www.samsung.com

SAP:                             www.sap.com

Symantec:                   www.symantec-norton.com

Twitter:                       www.twitter.com

UBS:                             www.ubs.com

United Airlines:           www.united.com

Veritas:                        www.veritas.com

VMware:                     www.vmware.com

Workday                      www.workday.com

Rabindranath Tagore: https://en.wikipedia.org/wiki/Works_of_Rabindranath_Tagore

Disruptive Innovation and Personal Reinvention with Whitney Johnson, Author

Whitney Johnson, Speaker and Author
Whitney Johnson
Speaker and Author

Disruptive innovation is critical for organizations wanting to maintain a competitive edge in our changing digital world. Author Whitney Johnson, a business partner of innovation guru, Clayton Christensen, applies these concepts to personal disruption.

This episode applies the lessons of corporate innovation to improve individual performance through personal disruption.

Whitney Johnson is an investor, speaker, author and thought leader on driving innovation through personal disruption. Johnson is a Founder and Managing director of Springboard Fund, and co-founder of Rose Park Advisors alongside Clayton Christensen, where they invested in and led the $8 million seed round for Korea’s Coupang, currently valued at $5+ billion. Having served as president from 2007-2012, Johnson was involved in fund formation, capital raising, and the development of the fund’s strategy. During her tenure, the CAGR of the Fund was 11.98% v. 1.22% for the S&P 500.

Previously, Johnson was an Institutional Investor-ranked equity research analyst for eight consecutive years, and was rated by Starmine as a superior stock-picker. As an equity analyst, Ms. Johnson’s stocks under coverage included America Movil (NYSE: AMX), Televisa (NYSE: TV) and Telmex (NYSE: TMX), which accounted for roughly 40% of Mexico's stock exchange.

Johnson is also a frequent contributor to and writer for the Harvard Business Review, and is a LinkedINfluencer. She has authored two books, Dare, Dream, Do (2012), and the forthcoming Disrupt Yourself(TM): Putting the Power of Disruptive Innovation to Work, out October 6, 2015. She is a prolific speaker on innovation initiatives, and has delivered keynote speeches to audiences of more than 25,000 on her ideas and vision.

Transcript

Michael:

(00:02) Innovation and disruption, these are important concepts that we think about in terms of organizations, and organizational change. Now, what happens if we aim the focus of innovation onto ourselves? My guest today on episode number 142 of CXOTalk has written a book exactly about that, and I’m here with Whitney Johnson. Whitney how are you?

Whitney:

(00:40) I am fine and it is a pleasure to be here.

Michael:

(00:43) So Whitney let’s begin by telling us about your background briefly and you’ve had a very interesting and broad career, so give us a sense of your background.

Whitney:

(00:56) My background is I actually studied music in college and ended up surprisingly on Wall street. So when I graduated from college I moved to New York with my husband who was pursuing his Ph.D. and I didn’t really wanted to do music. I was sort of at one of those places where I was just going to work for a little while and then you know have children etcetera and we got to New York and my husband’s Ph.D. was going to take six or seven years, and I realized we needed food on the table and it was my job to make that happen.

(01:26) So I went out and got a job and I found myself completely entranced by Wall Street. It was the late 80s early 90s and you had bonfire insanities poker and working girl and I decided I didn’t just want a job I want to work on Wall Street.

(01:43) So I started out as a secretary because I didn’t have a background in numbers, I had never stepped foot in a business course or accounting class. I had no connections, I had no confidence. So here I was, secretary to a retail sales broker in Midtown Manhattan.

(01:56) Well as I said I was super excited about being on Wall Street, so I started taking business courses at night, I had a boss who sponsored me and that allowed me to move from secretary to investment banking which rarely happens.

(02:09) Then along the way I moved into equity research where I was covering stocks, and then eventually a cofounder in and investment firm with Clayton  Christensen and so today I am now an author, speaker, writer, thinker about how do you drive corporate innovation through personal disruption.           

Michael:

(02:27) Wow, so you started as a musician and you became a secretary, and you became an investment banker from being a secretary, that is such an interesting path. Maybe explain how did you make the leap from being a secretary to being an investment banker.

Whitney:

(02:51) It’s a really good question. The best way to describe is and to go into my own psyche a little bit and I think that perhaps because I’m the oldest child in the family and tend to be pretty ambitious and driven.

(03:07) When I got to Wall Street and I discovered what it was. I didn’t know what it was, I grew up on the West Coast pre-Silicon Valley I realized this was really exciting and as I sat as a secretary, sitting you know sitting in the secretarial pool basically across from a bunch of new recruits, stock brokers who were all men, I realized that this sort of pom-pom, cheerleader person that I had been in high school that it was time for me to throw down my pom-poms and actually get in the game.

(03:36) So it was I think in part an awareness, the situational opportunity of being in a place where there were really interesting exciting things happening and then my own grit if you will and determination to take these classes, and then third I had someone who was willing to sponsor me. So there was a piece of context, so there was an internal piece and then there was an opportunity piece of someone saying in me you know what, I see something in you, I’m going to promote you onto this investment banking track.

Michael:

(04:02) Okay, so you were an investment banker and how did you then make the career transition to becoming an expert on innovation.

Whitney:

(04:18) Very slowly. It’s interesting right when we talked

Michael:

(00:02) Innovation and disruption, these are important concepts that we think about in terms of organizations, and organizational change. Now, what happens if we aim the focus of innovation onto ourselves? My guest today on episode number 142 of CXOTalk has written a book exactly about that, and I’m here with Whitney Johnson. Whitney how are you?

Whitney:

(00:40) I am fine and it is a pleasure to be here.

Michael:

(00:43) So Whitney let’s begin by telling us about your background briefly and you’ve had a very interesting and broad career, so give us a sense of your background.

Whitney:

(00:56) My background is I actually studied music in college and ended up surprisingly on Wall street. So when I graduated from college I moved to New York with my husband who was pursuing his Ph.D. and I didn’t really wanted to do music. I was sort of at one of those places where I was just going to work for a little while and then you know have children etcetera and we got to New York and my husband’s Ph.D. was going to take six or seven years, and I realized we needed food on the table and it was my job to make that happen.

(01:26) So I went out and got a job and I found myself completely entranced by Wall Street. It was the late 80s early 90s and you had bonfire insanities poker and working girl and I decided I didn’t just want a job I want to work on Wall Street.

(01:43) So I started out as a secretary because I didn’t have a background in numbers, I had never stepped foot in a business course or accounting class. I had no connections, I had no confidence. So here I was, secretary to a retail sales broker in Midtown Manhattan.

(01:56) Well as I said I was super excited about being on Wall Street, so I started taking business courses at night, I had a boss who sponsored me and that allowed me to move from secretary to investment banking which rarely happens.

(02:09) Then along the way I moved into equity research where I was covering stocks, and then eventually a cofounder in and investment firm with Clayton  Christensen and so today I am now an author, speaker, writer, thinker about how do you drive corporate innovation through personal disruption.           

Michael:

(02:27) Wow, so you started as a musician and you became a secretary, and you became an investment banker from being a secretary, that is such an interesting path. Maybe explain how did you make the leap from being a secretary to being an investment banker.

Whitney:

(02:51) It’s a really good question. The best way to describe is and to go into my own psyche a little bit and I think that perhaps because I’m the oldest child in the family and tend to be pretty ambitious and driven.

(03:07) When I got to Wall Street and I discovered what it was. I didn’t know what it was, I grew up on the West Coast pre-Silicon Valley I realized this was really exciting and as I sat as a secretary, sitting you know sitting in the secretarial pool basically across from a bunch of new recruits, stock brokers who were all men, I realized that this sort of pom-pom, cheerleader person that I had been in high school that it was time for me to throw down my pom-poms and actually get in the game.

(03:36) So it was I think in part an awareness, the situational opportunity of being in a place where there were really interesting exciting things happening and then my own grit if you will and determination to take these classes, and then third I had someone who was willing to sponsor me. So there was a piece of context, so there was an internal piece and then there was an opportunity piece of someone saying in me you know what, I see something in you, I’m going to promote you onto this investment banking track.

Michael:

(04:02) Okay, so you were an investment banker and how did you then make the career transition to becoming an expert on innovation.

Whitney:

(04:18) Very slowly. It’s interesting right when we talked about the stories because we’re able to craft them into this very neat and tidy narrative. But very quickly, so I was an investment banker, and then after I had my first child 19 years ago I wanted to stay in banking but there wasn’t really an opportunity and so people inside the banks said, why don’t you consider equity research. And so I moved into equity research in part out of necessity because there weren’t opportunities in banking, and that was where I would put a buy or sell recommendation on stocks, particular stocks in Latin America and telecom and media space. And then I did that for 10 years, and that was really a career maker job for me, which was interesting because it wasn’t what I wanted, and yet it’s made my career.

(05:05) After that ten years, we’re now in 2005, I decide that I’m going to take a step back and do now what in my parlance is disrupt myself, walk away from this really prestigious opportunity, become an entrepreneur, connect with Clayton Christensen around this time, and then became immersed and steeped in the frameworks of disruptive innovation and eventually began to think, you know what, these don’t just apply to products and services and companies, people and countries. They actually apply to individuals. And if you really want to drive innovation in organization, individuals also need to disrupt themselves.

Michael:

(05:41) So you ended up working with Clayton Christensen​ who of course is…

Whitney:

The father of disruptive innovation.

Michael:

Yes, so I have to ask what was that like.

Whitney:

(05:57) Well that’s a great question. So I have to say when I first discovered disrupted innovation, I was still a pre-analyst and I heard him give a speech about (innovators weren’t about for probably six or seven years?) and it helped me. I said oh my goodness, it helps me understand why I keep putting out these estimates for wireless in Latin America and they keep on beating their estimates and there are trouncing unclear?) it helped me understand this disruption that was happening.

(06:24) So I was really intrigued by the frameworks, I was really intrigued by him. If you’ve ever met him he’s six foot eight, he’s this very charismatic, smart, warm individual. And so it was a real opportunity to be able to work with him, because again he is so smart, he’s so charismatic, he’s so driven, and he works incredibly incredibly hard. So it was really a really honor to be able to work with him for nearly a decade.

Michael:

(06:53) Okay so now let’s talk about innovation and tell us about disruptive innovation, what is it?

Whitney:

(07:06) Well so you had asked me the initial question in our warm up conversation as sort of what’s innovation because we hear that word like what does that mean. Well innovation is really is basically something that is new, trying a new idea. Well a disrupted innovation is different or it’s a more defined or narrow definition of innovation in that it is an innovation that starts at the low end or in a new place and then eventually ends in industry. So I will give you an example.

(07:35) Think about Amazon in the 90s. When it was first launch it was this silly little thing where everyone thought that we don’t have time for that. They’re just doing this thing online. It’s not going to add much to our bottom line but just let it go.

(07:50) And so what happened then is that Amazon basically had this free pass in this foothold and once it had its own foothold it was motivated by bigger, faster, better just like Barnes and Nobel were, they just wanted to extend their margins and by the time it actually made sense for Barnes and Nobel to mount a counter attack it was too late.

(08:09) And so again low end or playing where no one else is playing and then eventually getting it’s foothold and up ending the industry.

Michael:

(08:18) And how is that different. We hear about disruptive innovation and sustaining innovation, and how are these different?

Whitney:

(08:27) So the best way to differentiate between the two is a disruptive innovation is something that is new, typically playing where no one wants to play or has thought of playing. So it’s new whereas a sustaining innovation is doing more of what you’re already doing.

(08:43) So in this particular example that I just illustrated for Amazon they were a disruptor. If Barnes and Noble or Boarders had added an online commerce an e-commerce platform for them that would have actually been a sustaining innovation, so part of this is really relative.

(09:01) But think about it, the most basic way is a disruptive innovation if you’re at the low end expand your margins, but if you’re an incumbent it decreases your margins, whereas a sustaining innovation actually expand your margins. 

Michael:

(09:16) So what are the conditions that need to be in place for an organization to undertake a program of disruptive innovation.

Whitney:

(09:31) I think that the first thing that there has to be a willingness to do it, and I think that that willingness has to be across the board. So oftentimes you’ll hear these ideas of you know the CEO, we’re going to be the disruptor, were going to innovate. And infact just the other day (unclear 09:52) saying you know disruptive being disrupted, so there’s this sort of drum beat of we need to do this. And you certainly do actually see a lot of disruption happening at the low end of people, low end inside an organization, basically people on the frontiers, people out in the field and they’re coming up with a lot of ideas.

(10:10) So one of the most important things that has to happen inside and organization is for the middle for what’s often called a frozen middle to be an opportunity for people in the middle to still be compensated for trying new ideas and infact incentivized for trying something new, and be given the time and the budget to to that. And infact encouraged to make mistakes. Otherwise they have absolutely no incentive, because if they do do something well maybe they will upside and if they don’t do something well they’ll probably get fired. So they have got to create a situation where the middle layer of management inside an organization has this incentive to drive this silly little thing, products forward.

Michael:

(10:53) So how do you do that, because in many of the large companies that I know middle managers are very focused on their very specific set of activities and their compensation encourages them to be focused there. So how do you drive these kinds of middle management shifts that will open up towards accepting disruptive innovation?

Whitney:

(11:23) Well I think it start with and this goes back and I’m jumping ahead a little bit, but this is one of the reasons why I’m talking so much about the importance of new drive through corporate innovation through personal disruption. Because we can talk about innovation all day long,  but I think if you’re going to have people that actually can disrupt they have to know how to disrupt internally.

(11:48) So for example one of the most important pieces around this is the idea of battling entitlement. So inside of an organization when you start figuring kinds of risk, you’ve figured out what kinds of market you want to go after, and you’ve figured out how to play to your strengths in the organization and it’s really easy to start thinking, well this is the way things are and this is how they’ll always be, our margins are expanding. People like what we’re selling let’s just keep going.

(12:12) So there’s this need to battle entitlement as an individual throughout the organization. And some of the ways that you can do that they are very simple kind of granular things but they start to un-thaw out that middle – apart from the whole idea of incentives. But one way is when I do these facilitations inside organizations I often find that different people in different silos are not actually talking to each other.

(12:39) And so one of the ways you could actually make this happen is to say to people, okay, how many people have you had lunch with inside of your organization over the last three months that are not in your department or who aren’t exactly like you.

(12:53) So if you’re in engineering, have you had lunch with someone in marketing, had you had lunch with someone in accounting? And it’s sort of an informal way of doing this, but as you start to have linkages with people in other departments and start to try to understand and speak and translate those languages you’re able on the middle management perspective to start to tear down these walls and in the words of Mr. Regan or President Regan and unthaw that middle so that this imperatives or (Edith’s) that the CEO has given and the ideas at the bottom are bubbling up and actually start to take root and move throughout the organization.

(13:30) The second thing I would say is watch your pronouns. Watch our pronouns because when you think about innovation it’s so easy to frame it as a battle. You versus me, David versus Goliath, disrupter versus disrupted and yet if you’ve got a brilliant idea and you are saying you and me and us and them, that idea is never going to happen.

(13:53) And so as we’re talking – notice how I switch my pronouns, as we’re talking inside of our company, how are we talking about the people that we work with and are we reframing problems and problems to be solved, and challenges to be wrestled with. Are we framing them as our problem as something we are going to tackle. And those small little shifts with have a surprisingly important and robust impact.

Michael:

(14:26) So one of the thing I’ve observed in companies I work with Whitney is this notion of the anti-innovation antibodies, right. The company want to introduce or people management wants to introduce innovation. And yet the entire organization clusters around those changes to make sure that it never actually sees the light of day.

Whitney:

(15:01) That is great. I have to tell you, when you first said that I thought of this metaphor that’s perhaps going to seem somewhat unseemly on here. But I have had this philosophy that one of the reasons there sort of the reasons that women when their pregnant et morning sickness is that they’re kind of rejecting all of this thing, you know what’s this forgein object doing in my body and then eventually they allow themselves to flood the fetus and then sit and be born. Actually the metaphor is very apt. you know first when somethings new you don’t know what to do with it. I would say that it’s really important when these new ideas come in. it’s start’s – I’ve lost my train of thought. What do I want to say here.

Michael:

(15:48) They reject the new ideas, they circle and bubble up…

Whitney:

(15:52) Yes okay, thank you. So what it means is that the reason that they circle or close ranks is that they don’t feel safe. They don’t feel safe. They afraid that if an innovative idea comes along they will not get credit and therefore not get paid and therefore not get promoted, or they worry that they’re going to lose their job. And what I would say is that whenever there’s a situation where people do feel safe as in they are doing a good job. They do a good job and a new idea comes along and for whatever reason they are doing currently they’ll be reallocated, resituated, then they will buy into it. I think it’s basic human nature, when we don’t feel safe we circle the wagon. So when people do feel safe then professionally they will work on those ideas and I think when you really step back and start to analyze it, it all comes around you, do I feel safe or not

Michael:

(16:53) So fear is the enemy of innovation and disruption.

Whitney:

(16:59) Absolutely 100%.

Michael:

(17:03) Well it makes perfect sense, so that then I’m assuming connects to what you said earlier that corporate innovation rise on personal disruption.

Whitney:

(17:21) Right, because if you’ve got people who – when you think about when you’re disrupting yourself right, theirs is something fundamentally humble about that. when you are on one learning curve think about this you know this wave or an S and at the top of the learning curve and you jump to a new curve, what are you doing?

(17:44) You’re first of all doing something that’s basically a freefall. So there’s a lot of trust in that. it’s a scary thing to do and you’re willingly doing it. Sometime you’re going to get shoved off, but sometimes you’re willingly doing it. and when you do that you are effectively saying, okay, I’m going to try something new. I don’t know how to do this. So there’s a humility in being willing to try something new. There’s a humility in saying you don’t know how to do this.

(18:11) And I think that when people see people that are more senior to them being open to saying I don’t know how to do this, can you show me how to do it. it creates this atmosphere where people do feel safe. But that part of it does absolutely come from the top, and sometimes people would say to me, well I’ll do it if my boss would do it. and my response is you know what? you can’t control what your boss does, you can control what you do and on your watch the people can feel safe. And overtime that’s going to make a difference and if it’s still doesn’t work then you may need to change firms. But for now, start with you, the people on your watch. See what happens, then you can make a decision, stay or go.

Michael:

(18:53) now you mentioned humility, earlier you spoke about entitlement and it seems that these are to opposites of one another, these are in opposition of humility and entitlement.

Whitney:

(19:06) They absolutely are and what’s interesting is that the research shows that the more you have, the more you think that you deserve what you have. So the more entitled you get, the more entitled you become. It’s tough and I think it’s one of the reasons why people need to surround themselves with truth tellers. I think that’s part of the reason why (? 19:35) ones are actually very important because they will tell you the truth in a way that people around you again who are concerned about their jobs just never will.

Michael:

(19:44) So truth tellers, so elaborate a little about that because I think that we all know that especially at the more senior levels of the company the leaders tend to be surrounded by not truth tellers but yes sayers.

Whitney:

(20:01) Yes, there are no name sayers. Again I think that is partly you know we’re in a high pressure position, we want to be around people that can help us get things done and so it’s important that one of the ways you actually balance entitlement and this goes to a senior person especially as you  - I’m going to back up.

(20:26) So I said earlier my husband was doing a Ph.D. in microbiology, so when he was doing his Ph.D. he would grow all of these beautiful cells in colored media and then after a couple of days it would use up all the nutrients. Those nutrients, some of them would be toxic and so they would have to re-plate the cells and into a new petre dish. So if I think about that especially for someone as very senior, women really like the colored petre dish, it made them go and feel comfortable, everybody likes you. But if you’re actually going to drive innovation in your organization and then you have to disrupt yourself. And one of the best ways to do that is occasionally put yourself in new situations. That new situation might be a willingness to listen to people who are junior to you, who you think you have nothing to learn from.

(21:13) Again there is a humility in that but again if you were to listen from whom we have nothing to learn from, and you allow people to tell you things that aren’t necessarily what you want to hear, and there are no adverse consequences for those people, that’s going to be a shock that’s heard around the company and it will make a huge difference.

Michael:

(21:33) So it seems from what you’re saying that corporate disruption is we can boil it down to being a state of mind among the people who are working on them.

Whitney:

(21:48) I like that. Yes I think that’s right. if I had to distil all of my ideas down into sort of 10 words or less it would be companies don’t disrupt, people do, here’s how in seven steps. I mean I really do believe that. I hadn’t thought of it in that way of describing it that way as state of mind but I like that.

Michael:

(22:10) So tell us about you mentioned the S-curve earlier and tell us about the components of that curve and the components of personal disruption that can serve as an enabler to corporate disruption.

Whitney:

(22:29) The S-curve was created in 1962 by E.M. Rogers and the whole purpose of it was to be able to analyze and have basically an algorithm in our equation for understanding ideas or get adopted over time.

(22:45) And so what he figured out is that ideas get adopted in the shape of an S, so think of an S in your mind that I’m drawing on the screen. At the low end or the base, they are going to start out and it’s going to be working really hard and it’s going to look like absolutely nothing is happening and that’s the low end of the curve.

(23:06) And then about 10 or 15% penetration of an opportunity you hit this tipping point, and then you move into hyper growth and you go into that steep back of the curve. And at the top of the curve you’re reaching saturation of 90% and then you may work hard but not a lot’s going to happen because you’re at the top of the curve and you’re not going to work that hard. It’s time to jump to a new curve.

(23:29) Now what I stated to think about is that this also help us to understand this hypnology of disruption. So again, low end of the curve you work really hard, and perhaps you understand I might get discouraged here because it looks like I’m putting in the time and nothing is happening.

(23:46) Then you go into this sweet spot where you start to get competent and very confident, all of your synapse are firing, feeling really really good to you. And then on the upper end of the curve, you can put things on automatic, it’s pretty easy but you’re no longer feeling those feel good effects of learning and so then you actually get kind of bored.

(24:04) And what’s important here is that that what seems like a plateau can actually become a plus. And so as I thought about this whole idea of companies don’t disrupt, people do and let’s think about the S-curve for how you manage the learning curve, how you become to be able to serve the S-curve ways with your own disruption. Then I came up with seven variables that would help you see your progress along the curve.

Michael:

(24:31) And what are the seven variables.

Whitney:

(24:33) Let me take a sip of water and I’ll tell you.

Michael:

(24:39) I was going to say while you’re taking a sip of water you’re obviously in an airport lounge and I should have asked you where are you?

Whitney:

(24:45) I am in Atlanta. I had to seriously run around trying to find a place to sit. So I’m in Atlanta sky lounge B or something and maybe because I gave them that advertisement I maybe should ask for my money back.

(25:01) Okay, so the seven variable. The first variable is taking the right kinds of risks. And that is whenever you’re jumping to a curve, this is the whole notion of you want to play what other people aren’t playing or haven’t thought of playing.

(25:15) And so if you’re playing what other people are playing you’re taking on competitive risk, where people aren’t playing you’re taking on market risk, and what we know from disruption theory is that when you take on competitive risk it may feel like it’s safer because it’s more certain and you know that the competitors can kind of scope it out. Market risk is actually maybe a little less certain, but it’s actually less risky. And again, according to the theory the odds of success from six times higher, revenue opportunity 20 times greater.

(25:46) Second piece of the curve is your strengths. Find an opportunity and then you’ve got to play to what you do well in what other people in your sphere do not. Oftentimes we may be passionate about something that we’re deeply passionate but it’s not necessarily what we’re best at. I know that it’s counter intuitive but some of the things that we do best we completely undervalue because they are so natural for us. It’s like breathings, so climbing that part of the curve is to figure out what your strengths are. Move them into a sort of fish out of water situation and then be willing to play with them.

(26:19) The third piece is that we’ve got to embrace our constraints. Today I’ve got a constraint of being in an airport. I’m embracing it I think, so how, so way. But it’s oftentimes as we look at these constraints and think if only I had. But what I’ve discovered is that those constraints often are very important for giving us a lot of feedback for along the curve and we’ve got all this stuff to bump up against. When you’re bumping up against things it gives you information like a skateboarder. They’re quick learners because they move incredibly fast and use the feedback.

(26:51) And so part of this is figuring out how to embrace this constrain and turn constraints, not into a check on freedom but a tool of creation.

(27:00) Step number four battle and entitlement, and we talked about that already, right at that sweet spot is if we start thinking we deserve it and we can slide back down. Instead figure out ways to battle that and to continue to move up the sweet spot of the curve.

(27:16) Number five, sometimes you have to take a step back in order to grow, that step back could be just pulling back to get a broader perspective. It could be changing ladders that you’re on in your career, like when I left Merrill Lynch I took a step back to try something new. Now the kind of counter intuitive piece of this is – wow I don’t know what we have here a paper shredder. The counter intuitive piece of this is that you’ve got a net pleasant value equation of that step back could have been a sling shot forward.

(27:47) Number six, this failure it’s due. The dirty little secret about failure is we may say we all celebrate it. we celebrate our own failures but we don’t really celebrate others failures. When we fail that is an essential part of this process. That being said we have to allow ourselves to be sad. We must allow ourselves to be sad and then once we allow ourselves to be sad, then we have to ask what important truth did I learn because of this failure. If we don’t it becomes a referendum on us, we wallow, we can’t move forward. So it’s really important to give it it’s due, learn what we need to learn and then move forward.

(28:24) And the seventh and final step is to be driven by discovery. Because you’re a disrupter you are looking for a market that has not been created and so you have got to and be willing to take a step forward to gather feedback and adapt it accordingly. And one of the things that I think is so interesting is that 70% of all successful businesses have ended up with strategies different to the one that they initially pursued. So it gives me great confidence to say I just look forward because and trust that I’ll eventually be able to see the top of the curve, but I can’t see it from above of the curve.

Michael:

(29:00) So we’ve been talking about both corporate innovation and disruption on the one hand and personal innovation and disruption on the other hand, but now let’s try to link them together. So if I am a senior manager inside a company and I’m interested in disruption and I hear these terms and hear about innovation, but I’m struggle I’m sure you have, we’ve all seen many senior executives and companies struggle. They try to put forward innovation, but it just doesn’t work. Why doesn’t it work and what’s your advice.

Whitney:

(29:49) So the first thing I would say is to think about this idea that companies don’t disrupt, people do because I think that most people don’t think of it that way.

(29:58) The second thing I would say is that in order for a person to disrupt because it is – disruption is actually again, you’re jumping to a new curve. You’re jumping from one curve to the next. There is an element of this that is very scary, and so it’s important to allow people to bring their dreams to work. They have to believe that those dreams that they have count at work and because it’s those dreams is what makes them problem solvers. It’s what makes them say nothing is going to stand in my way. It’s makes them hungry for a better life, so I really believe that dreaming is the engine of disruption.

(30:36) And so one of the things as a CEO or a leader is to say to them okay, am I allowing for people to bring their dreams to work? Do I know what their aspirations are sort of in this more holistic fashion?

(30:47) I know this sounds pie in the sky, but I do think that we are moving in that direction and infact we’ll get there and I do believe that millennials and thanks to millennials they are pushing us in that direction.

(31:00) The second thing that I would say is that when you’re disrupting and be aware that if you are scary and lonely you’re probably on the right track, and because it doesn’t involve a step back, you’re going to have some periods where Wall Street is going to go I don’t like what you’re doing.

(31:17) I remember when I was a Wall Street analyst and I was covering America Noble, and they introduced you know the straight talk, pre-paid wireless here in the United States and we just pummeled them, like what are you doing. The margins are terrible, (unclear 31:29) knew something that we didn’t know which is this was eventually going to be a really big business, and the margins just needed to be bad for a while. So it takes some real gumption to say, okay, you know I’m going to do this because it’s important to do it, so there has to be this time.

(31:37) So again, recapping really quickly, companies don’t disrupt people do and in order for your people to disrupt and including you, you have got to be able to bring your dreams to work because the dreaming is the engine to disruption. Understand that it’s going to be scary and lonely and innovation is an inside game. It starts with the inside, so you’ll start with your people and figure out are they playing to their strengths. Figure out are their some people that you need to allow to jump to a new curve. Sacrifice in short term productivity, but knowing that you will build loyalty and engagement. And that even although you feel that you’re on the sweet spot and don’t want to change anything, that’s precisely the time when you need to do it.  

Michael:

(32:24) So let me just push back on you on a point. I do understand what you were saying to allow people to bring their dreams to work and create the conditions of safety where they feel secure enough that they can do things differently, but there’s a lot of stupid ideas out there, and so how do you know that the ideas and that the disruption you’re pushing forward is actually a good idea as opposed to just, you know a fight of fantasy. 

Whitney:

(33:01) That’s a completely and totally fair question. I think that’s where this idea of you know, lean startup really comes in and I think is really really important and relevant and the whole notion of constraint, right. You can embrace constrain but you can impose constraints.

(33:16) So yes, there can be a lot of ideas that aren’t great, but if you say to people, all right, you’ve got a day, you’ve got a budget of $200, I mean like  I ‘m being really bootstrapping here. But a day, $200 and you can reach out to three people. Tell me what you come up with, and tell me the three questions, the three things that you need to know in order that need to prove true in order for us to pursue.

(33:45) So that’s where the whole discovery thing comes in and it’s what needs to prove true in order for us to be willing to pursue around this and it imposes really strict constraints. And one of the things you’ll find oftentimes a lot of people talk, talk, talk, talk. But when you say all right, you’ve got a day, go and do something, they won’t do anything. So that right there gives you a tone of information and win those ideas out that were never there.

(34:13) And I think that’s another place where the battle of entitlement comes in and sometimes we just want our brilliant ideas to be done because we want them done. But if we say to someone, okay, you’ve persuaded me that we should try this, so that takes some element of tenacity and now I’m going to give you some very strict constraints in which to try this. Tell me the three things you need to answer a senior board and you’re able to do that, then you are able to start to see ideas that are interesting and we can move forward from there. So it’s a very you know small process but I think that’s a way to really lead through.

Michael:

(34:48) You know it’s interesting you mentioned lean startup because we’ve had a couple of times on CXOTalk both Alex Osterwalder and Steve Blank, and Steve Blank is very focused these days on the application of lean startups to corporate management.

Whitney:

(35:09) Yeah, I think it’s absolutely such a sound idea and for me it dovetails beautifully with this whole notion of disruptive innovation, because you’re talking about low end, where no one else is playing and so lean startup is a great way to really iterate at the curve. So I think they are really powerful ideas and dovetails very nicely.

Michael:

(35:35) Okay, so we’ve got about 10 minutes left, so we don’t have that much time. So let’s dig into advice, first for corporations and then let’s talk about advice for individuals who want to take the lessons from your research. So let’s dig into corporations a little bit more.

Whitney:

(36:00) Okay, so let’s take each of these steps in turn and think about how we would apply them at the corporate level. So let’s start with the whole idea of taking on the right kinds of risks.

(36:14) So the first thing I would say around that is if someone comes to you and says, I’ve got this that there’s a need that’s not met, a job that needs to be done. No one’s doing it. I don’t have projections but I think we should design and test to find out. Be open to that, and that’s one of the ways to figure out if you’ve got a market opportunity.

(36:34) The tendency is to say well you do have projections, we don’t have projections, we’re not going to look at it. Well in which case that’s sustaining innovation, that’s not the kind of innovation that we’re talking about here, the disruption that it builds new businesses and creates something new.

(36:49) Number two, just stick to strengths, let’s talk about it on a corporate level. Are your people inside your organization playing to their strengths? And are you as a company playing to your strengths. One of the things that is interesting is that you will find that you’re getting a lot of feedback all the time, all the time from the customers. And yet if you really look at that feedback of what they like is that what they like? What you’re known for the jobs that they actually hired you to do? Is that what’s reflected on your website? Is it reflected in your marketing literature? Is it reflected in the conversations that your salespeople have? And so make sure you know what your company does uniquely well and identify that and play to that strength.

(37:34) The third is the whole notion of constraints, and depending on your company, if you’re really small company then it’s really about placing the constraints, whether it’s lack of time, money, buying or expertise.

(37:46) If you’re a larger company you may need to impose constraints. You may need to say, all right, we do have a lot of money but we’re going to take- and this is what (into? 37:57) it did with a thing called (Fossel 37:59) they wanted to improve the lives of Indias 1.2 million people but they didn’t throw a lot of money at it. They sent three engineers to India for three weeks, figure something out.

(38:07) That’s a pretty small budget so they imposed those constraints. The engineers embraced the restraints and they eventually came up with this algorithm that would allow farmers to get access to commodity prices at really significantly reduced their cost of doing business.

(38:24) The forth I would say is battle the entitlement is a very practical thing that I eluded to a moment ago is for people to talk to other people inside of your organization, and also do some of the hard work of translating the ideas. Can I explain what it is that I do or need to someone in marketing? Can I explain what it is that I do or need to someone in engineering and vice versa? So you’re starting to translate and have a sort of a UN if you will a sort of a lean work bond for innovation.

(38:57) Number five is the fact of growth, say that goes very much in this idea of allowing your people to bring drinks to work. I would say nearly every leader that’s looking into this can think of someone inside or reporting to them who they have moved to the top of the curve, it’s time for them o move, and you don’t want them to move because you need them, but you’ve got to let them move, because if you do let them move over time they are going to be even more productive for your organization.

(39:28) Sixth, is on a failure piece I would say do you ever allow yourself to fail, and when you failed and you talk about it in such a way that you explained to the team what you’re running. And if you have people on your team that you are not allowing to fail, then you may not have the right people on the team. Because if you think about it, with a small child that’s learning how to walk, if they fall down when their learning how to walk what do you do. Do you slap their hand? No, you just say come on, get back up. You can do it. And if you have the right people then you’re willing to do that, but if you’re not willing to do that, you may have the wrong people on your team.

(40:05) And then seven, I would say driven by discovery, that’s something I mentioned just a moment ago with these ideas is to say to yourself, what has to prove true for us to continue with this idea.

(40:15) So those are seven very concrete things that you can do inside of your company that can start to move the gears, they’re practical, they’re simple and they start to create this shift where that first disruption is happening and that will start to move into corporate innovation.

Michael:

(40:37) This notion of failure, and you know we hear a lot of fail fast and sort of glorifying failure. I really mean that very, very, very few people who say, I love to fail and that I’m glad to fail. So how do you reconcile. So when you talk about failure what does that mean exactly in practical terms

Whitney:

(41:00) I think that people are talking about the kind of failure when they’re testing something. They’re kind of you know doing it simply and there are no sort of ego attached to that. So that is important and we need to be able to do that.

(41:16) When I’m thinking about failure, is the kind of failure where you really care deeply about something. You really want to get it to work, and certainly in our society, we have this ethos, this is from Derren Brown you know, kill or be killed, control or be controlled, so if you fail it’s like you’ve been killed.

(41:36) So we have to acknowledge that when we fail we’re probably going to feel pretty bad. If you’re however aware of that, if we’re aware that our identity was attached to succeeding a fail and start gradually, gradually separating our identity around whether or not we’ve succeeded or failed and do that with the people around us. Then overtime if we can disconnect those two, then the failure does not become a referendum on us and we can celebrate it more. But I think this is one of these things that’s a task of a lifetime. The question is do I feel less ashamed of my failures today that I did two years ago. That’s the best I think we can do, because I think we’re always going to struggle with that because obviously the society in what we live in and how we’re wired.

Michael:

(42:30) Okay, really we have just a few minutes left, I wish we had more time. But now can you offer advice to individuals who want to be the face of disruption and innovation inside their organization. And also when an individual inside a company is facing those corporate anti-bodies – anti-innovation antibodies that we spoke about earlier, what should they do? So now this is advice to the individuals.

Whitney:

(43:04) Inside of a corporation. All right, so first of all market risk, competitive risk. Sometimes we go after opportunities inside a corporation. They can either be job opportunities or just ideas that everybody else is looking at. And so the advice would be is look where people aren’t working. Take on those projects that people don’t want to take on. The jobs that you think that need to be done, but aren’t that so exciting, that playing where no one else is playing or thought of playing. Because you will have a lot easier time getting buy-in because people just dismiss it. It’s not a big deal. It’s a silly little thing. So that would be number one.

(43:41) Number two is play to your strengths an again what I mean by that is  think about the things that you do well that you don’t necessarily often want to own. For me as an example, as a stock analyst, I was so proud that I built a really good financial model, and I wanted everybody to just say, wow you’re the best financial model builder ever.

(44:02) And I was good at it, but I wasn’t great. What made me a good analyst was my ability to read stocks, understand the psychology of a stock. To be able to make connections across lots of different silos, something that was a softer skill. And when people said I was good at this I was like, what are you dissing me, like the fact that I didn’t want to own the fact that I was  really good at this. So I would say to you that if you really want to soar inside of your company, get your pain of place skills, the thing that you have to do well. But then play to your constraints and strengths and it’s that is what’s going to allow you to be really successful. Compare that strength with an opportunity.

(44:39) Embrace constraints. I would say  - let’s use it basically, if you’re not getting a buy-in as an idea, then use that as an opportunity – which is a constraint. Us it as an opportunity to figure out how do I need to explain this in such a way that people will understand what it is that I’m trying to get done and use that fact that people don’t understand it as an opportunity to be much clearer on the value proposition if you’re talking to accounting, much clearer on how that plays and why the engineers need to do it etcetera.

(45:13) So embrace that constraint because it will become a tool of you being able to speak the language of innovation.

(45:20) The fourth would be buy-in time, which I kind of just eluded to is doing the hard work of getting buy-in’s and for your ideas that’s speaking in ’we’ and find ways to frame things as ‘we’.

(45:29) Fifth, taking a step back to grow. Sometimes you may need to take a role that’s a lateral move in order to move up. Sometimes you may need to take a step back in the sense that you sort of take one for the team to move things forward. You can’t do that all the time, but sometimes you just need to do that and this is one of the ones that I think that people, that when they realize that they may need to do that it’s a really important a-ha , because again there is a lack of selfish around that.

(45:59) Failures to, I would say that the best thing that you can do there is when you fail and when something doesn’t work, make sure you allow yourself to use that. Because if you allow yourself to be sad then the energy that you need in order to get back on the horse, get back on the saddle will be there. If you try to sublimate that sadness it sort of all your energy in general implodes and you need the energy that comes from having something you care very deeply about, so that you’ll go on to care deeply about something else.

(46:32) And then the seventh and final one to be willing to not know where this is all going to take you. I think most people would say if they think about their career path and inside of a company, is if I’m willing to just work really hard and take two or three steps forward I’ll figure it out as I go. And just to see far enough to that if this door can open more doors then that’s a good path to go down. You don’t have to know everything from day one.

Michael:

(47:05) Okay, well what an action packed 45 minutes this has been

Whitney:

(47:12) Good I’m glad.

Michael:

(47:14) So thank you so much. We have been talking with Whitney Johnson, who is the author of the book Disrupt Yourself and who I think personifies the notion of shattering, breaking, destroying the glass ceiling. Whitney, thank you so much this has been a lot of fun.

Whitney:

(47:38) Thank you for having me.

Michael:

(47:38) You have been watching episode number 142 of CXOTalk thank you so much, and next week we’ll be speaking with Elisa Steel, who is the CEO of Jive software. And Whitney thanks again for joining us.

Whitney:

(47:55) Thank you.

Michael:

(47:56) Everybody have a great week. Bye bye.

Companies mentioned in today’s show

Amazon:                                                                    www.amazon.com

Barns & Noble:                                                         www.barnesandnoble.com

Book: Disrupt Yourself by Whitney Johnson:      www.whitneyjohnson.com