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IT Innovation for Competitive Advantage

  • Topic: Leadership
  • |
  • Partner: SAP Service and Support
Tayfun Yigit, CIO, Index Group
Tayfun Yigit
Chief Information Officer
Index Group
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK

The Index Group, one of the largest distributors of computer products in Turkey, has been in business for 27 years with $1.2 billion in revenue and 40 percent market share. A combination of aggressive competitors combined with changes in consumer buying habits forced Index Group to rethink how it uses IT to gain operating efficiency while supporting new business models and ways of working.

Listen to The Index Group's Chief Information Officer, Tayfun Yigit, explain how the company changed its approach to IT and replaced an in-house system with SAP.

Transcript

Michael Krigsman: I’m Michael Krigsman, industry analyst and host of CXOTalk. And I’m talking with Tayfun Yiğit, who is the Chief Information Officer of the Index Group in Turkey; and the Index Group is a large distributor of computer products in Turkey.

Michael Krigsman: Tayfun, tell us about the Index Group.

Tayfun Yiğit: Okay. The Index Group is a 27-year-old company, and the number one, one-stop IT distributor in our country. We control around 40% of the market, and have been the leader of the market since 2000, which is around 16 years now. And, we work with approximately 4,000 - 4,500 channel partners. Last year’s global revenue was around $1.2 billion annually.

Michael Krigsman: So you have a 40% market share; that’s an extraordinary number!

Tayfun Yiğit: Yes, but there’s not much room for many distributors. So, the market is mainly controlled by the distributors appointed by our vendors ─ the brand owners like Lenovo, Asus, Apple; any brand you can imagine that is currently being distributed here in Turkey. So, that’s the business model for the vendors. So what they do is they appoint several distributors, and namely, we are one of them. And thankfully, we [have been] kind of the greatest for 16 years now.

Michael Krigsman: Now, I am sure that the market and the competitive landscape has changed very significantly over this period of time, and probably especially during the last 2, 3, 4, maybe 5 years. So, tell us about that, please.

Tayfun Yiğit: Yeah, exactly. You are very much right, and the margins are getting narrower every day, and it’s becoming more and more competitive every day. The distributors are seeking ways to do new methods of business in the markets for the larger market share. They compete with each other, and also trying to adapt to the consumer needs as days go by. So naturally, we experience all these issues firsthand and we must develop new methods, and ways to adapt to issues that we come across every day.

Michael Krigsman: So what are these methods and approaches? How are you managing and addressing the changes that have hit your industry?

Tayfun Yiğit: Okay, we have several responses to these issues. The first is we are trying to invest more and more into IT, and increase the efficiency of our resources ─ mainly human resources─ because, also, our cost is human resources. And so, we are trying to do business more efficiently through the facilities of IT operations. And, the second thing is we are trying to expand to new markets in our neighbors, the former Soviet Union markets, [which are the] historically Turkish origin countries like Azerbaijan, Georgia, and Uzbekistan, and similar countries like that. And, another thing we are doing is we are trying to align better with the consumer markets through investing resources into mobile computing - mostly mobile phones, tablets, phablets, and things like that. So, we are kind of trying to diversify and proliferate our services.

Michael Krigsman: It sounds like you’re undertaking business model changes that are pretty significant as well in this mix.

Tayfun Yiğit: That’s right, that’s right. The IT issue is kind of an important and hot issue for us because we migrated to SAP on January 1st of this year, 2016. And that was a big change for us because we used to run our in-house developed ERP system. And now, thanks to the large ecosystem and infrastructure provided by SAP, we are much more agile. So, Goal #1, achieved. We are improving our efficiency through the change in our IT infrastructure this way. And, another thing is we are reorganizing and re-engineering our business processes because things have to change and adapt to all these mentioned new developments. Human resources is kind of a key element in our job. So, what we are trying to do is we are trying to choose the right people for the right job. This is another trick maybe we use to adapt to our newly emerging requirements. So

Michael Krigsman: I’m Michael Krigsman, industry analyst and host of CXOTalk. And I’m talking with Tayfun Yiğit, who is the Chief Information Officer of the Index Group in Turkey; and the Index Group is a large distributor of computer products in Turkey.

Michael Krigsman: Tayfun, tell us about the Index Group.

Tayfun Yiğit: Okay. The Index Group is a 27-year-old company, and the number one, one-stop IT distributor in our country. We control around 40% of the market, and have been the leader of the market since 2000, which is around 16 years now. And, we work with approximately 4,000 - 4,500 channel partners. Last year’s global revenue was around $1.2 billion annually.

Michael Krigsman: So you have a 40% market share; that’s an extraordinary number!

Tayfun Yiğit: Yes, but there’s not much room for many distributors. So, the market is mainly controlled by the distributors appointed by our vendors ─ the brand owners like Lenovo, Asus, Apple; any brand you can imagine that is currently being distributed here in Turkey. So, that’s the business model for the vendors. So what they do is they appoint several distributors, and namely, we are one of them. And thankfully, we [have been] kind of the greatest for 16 years now.

Michael Krigsman: Now, I am sure that the market and the competitive landscape has changed very significantly over this period of time, and probably especially during the last 2, 3, 4, maybe 5 years. So, tell us about that, please.

Tayfun Yiğit: Yeah, exactly. You are very much right, and the margins are getting narrower every day, and it’s becoming more and more competitive every day. The distributors are seeking ways to do new methods of business in the markets for the larger market share. They compete with each other, and also trying to adapt to the consumer needs as days go by. So naturally, we experience all these issues firsthand and we must develop new methods, and ways to adapt to issues that we come across every day.

Michael Krigsman: So what are these methods and approaches? How are you managing and addressing the changes that have hit your industry?

Tayfun Yiğit: Okay, we have several responses to these issues. The first is we are trying to invest more and more into IT, and increase the efficiency of our resources ─ mainly human resources─ because, also, our cost is human resources. And so, we are trying to do business more efficiently through the facilities of IT operations. And, the second thing is we are trying to expand to new markets in our neighbors, the former Soviet Union markets, [which are the] historically Turkish origin countries like Azerbaijan, Georgia, and Uzbekistan, and similar countries like that. And, another thing we are doing is we are trying to align better with the consumer markets through investing resources into mobile computing - mostly mobile phones, tablets, phablets, and things like that. So, we are kind of trying to diversify and proliferate our services.

Michael Krigsman: It sounds like you’re undertaking business model changes that are pretty significant as well in this mix.

Tayfun Yiğit: That’s right, that’s right. The IT issue is kind of an important and hot issue for us because we migrated to SAP on January 1st of this year, 2016. And that was a big change for us because we used to run our in-house developed ERP system. And now, thanks to the large ecosystem and infrastructure provided by SAP, we are much more agile. So, Goal #1, achieved. We are improving our efficiency through the change in our IT infrastructure this way. And, another thing is we are reorganizing and re-engineering our business processes because things have to change and adapt to all these mentioned new developments. Human resources is kind of a key element in our job. So, what we are trying to do is we are trying to choose the right people for the right job. This is another trick maybe we use to adapt to our newly emerging requirements. So, of course, the new landscapes, the new countries, the new markets are natural and it’s standard sales and marketing thing we do like every company.

Michael Krigsman: When you say that you needed to become more agile, and you’re relying on your systems to help with that, can you elaborate on what specifically you mean by that? How does it directly impact the business?

Tayfun Yiğit: Okay, that’s a very nice question. Actually, the IT business requires lots of manpower and development efforts to put a new process into use. Every day, a new requirement comes up from our vendors, from our group of companies, the management teams, the sales force, etc., and our natural business expansion actions, etc. So, we have to develop and tweak our software every day. In the old days, this took a lot of time, and after we received a new requirement, the actual Go-Live, or the actual implementation took around, let’s say, four weeks. But now, thanks to this large infrastructure and ecosystem and plumbing provided by SAP, we kind of reduced this to approximately four days, comparatively. So, it’s a magnitude faster [when we develop] our systems depending on our requirements. So that’s a very large efficiency. With the same team, we output much more productivity, and products and services, to our clients, which is the company personnel and business.

Michael Krigsman: So, your business is based around people, as you said earlier; and so, it sounds like the consolidation of systems is enabling your people to get things done much faster, which of course, that level of efficiency can change your operations.

Tayfun Yiğit: Exactly, exactly. That’s the key issue. The efficiency was the main goal for us, and trying to do much more with the same, or even maybe less resources. Of course, the margin changes ─ the margin decreases ─ kind of forced us to take such similar actions. So, that’s a main issue: If you decrease the costs somehow, or if you increase your throughput, you will adapt to the decreasing margins problem.

Michael Krigsman: And this feeds into your shifting business model as well, I’m assuming?

Tayfun Yiğit: Of course, of course. Absolutely.

Michael Krigsman: I should ask you, are you cloud or on-premise?

Tayfun Yiğit: We are mainly on-premise. We are experimenting on cloud products and services, but we still do not rely on the communications infrastructure. The Internet connectivity here ─ it’s still not fast enough to achieve local access network speeds, and similar speeds. Also, there are some legal actions that need to be taken to make sure that your data is safe; your servers are safe; and your business will not be interrupted in any way through problems of the service provider or through other legal issues, etc. So, I think the cloud still needs some time to mature enough, especially in our environment, to make us feel comfortable enough to migrate entirely to the cloud.

Michael Krigsman: So it sounds like in Turkey, for the moment, on-premise is just a more practical option.

Tayfun Yiğit: Yeah, 90% of similar people like me think this way.

Michael Krigsman: What are the changes, the upcoming changes, that you anticipate in the market that are going to force you to respond?

Tayfun Yiğit: Yeah actually, the same trend that will probably continue. So, our net, our margins are going to get narrower every day, and the mobile rush, and the mobile popularity will increase every day. So, we will have to find ways and adapt to this issue. And we actually set up a company [that groups some of our] subsidiaries {to] concentrate solely on this mobile environment ─ the consumer mobile market. And, another initiative we have taken is we have kind of merged and placed around our contracts to make sure that one of our companies focuses solely on the value-added services like server storage services, database management products like Oracle, HANA, things like that. So naturally, value-added products and services kind of have higher margins. So that helps us to fight with the ever-decreasing profit margins much better.

Michael Krigsman: So your business model continues to evolve, it sounds, quite rapidly in fact.

Tayfun Yiğit: Exactly. Our market is a very interesting market, and let me try to illustrate it with an example: I’m going to mention some names, naturally, but let’s say the brand Apple takes a specific action to increase their sales, or to reach deeper channels, etc. In a week’s time, you will immediately observe that Samsung, or LG, or Huawei kind of take a similar action. So, you have to adapt very fast, because your vendors are acting very fast. So, agility is very, very important for us. That’s why I try to concentrate on that agility issue.

Michael Krigsman: And finally, as you have been through these changes, and these evolutions responding to the market, what are some of the lessons that you have learned? It’s always hard to change, and so, what can you share with us about your experience?

Tayfun Yiğit: Okay. That’s also okay; that’s also a great question, Michael and I will, of course, kind of touch on the issue of migrating to SAP a little bit when giving you these examples, because that’s the most significant change we have performed in the last year. It was a very important step for us also. Choosing the right partners is very important in this SAP ecosystem. So, it’s not easy to come across many qualified consultants every day in every consulting company, so it’s very important to wisely choose the right consultants for the right people.

And also, what we did was we kind of tried to train our troops, our internal team of developers, actually to pull themselves up by their bootstraps. They are trained as strong consultants and business consultants of SAP, and also developers of SAP. So, what we tried to do is to balance our resources to be more efficient this way by relying less on partners. [Or] maybe relying on them [for just] critical issues, and doing most of the legwork ourselves. We are saving lots of resources, actually, the time in terms of time. Because if you go to a developer consultant [for] a development project, it would take two weeks maybe. But if you do it in-house, it will take maybe two days, [which is] much less than two weeks, absolutely. So, it’s important that we kind of trained our team to be experts on this issue. This was an important lesson we learned.

And also, we really took advantage of many great training resources provided by the SAP ecosystem: One of them being the [SAP] Learning Hub ─ the portal of self-based training provided by SAP itself. [Another of them being there are] lots of e-books and books published mainly by SAP Press, actually. We really took great advantage of those resources.

Michael Krigsman: So for you, gaining the self-reliance through education has been extremely important.

Tayfun Yiğit: Yes, that’s right. That’s right, because it’s never enough to learn a lot about the SAP ecosystem. It’s a huge system, it’s a huge universe, actually. So, you have to be training yourself every day, and every day.

Data and Digital Transformation

  • Topic: Digital Business
  • |
  • Partner: SAP Service and Support
Irfan Khan, CTO, SAP
Irfan Khan
Chief Technology Officer
SAP
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK
 

Before embarking on digital transformation, understand the full repertoire of available data tools and be clear on how you will consolidate and manage your data.

Also, be sure your infrastructure takes future trends in data management into account so you won’t have to do frequent overhauls. The data foundation must stand on its own, without relying on IT to undertake multiple provisioning projects every time you make a change.

Beyond the technology, digital transformation requires all parts of the organization to participate as needed. To break through silos, communicate project goals and results clearly, and seek internal and external feedback from stakeholders.

Transcript

Irfan Khan: As customers embark upon their digital transformation journey, it’s important that they understand the full spectrum of data that they own today, and are likely to be consuming in the future. So the manner in which the digital transformation can take effect is, first and foremost, survey what you own, make sure that you actually have an understanding, a good data governance strategy in place, but then equally so, understand where the new trends in data are taking your business.

So what are the impediments in the place of the workforce right now, or for that matter, even in technology and infrastructure that get in the way? And I’d say that there’s probably two things, that I’d concentrate on: make sure that the skillset of the people is capable of taking you to the next level of growth. The second part is, make sure that the investment in infrastructure and foundations serves not just your businesses for the next twelve months, but for the next five years at a bare minimum, because it’s very disruptive to change your platform. And I firmly do believe that if you want to make sure that the path is clear for you in the future, make those investments up front now.

You’ve got to have a foundation in place that’s actually allowing you to consume all this data, process that data, being able to analyze it in a real, futuristic way. In other words, whatever the users want, they should be able to get without having to go through IT and having to go through multiple provisioning projects to be able to achieve that result for them.

both a significant undertaking from the executive board, but then also from each of the lines of business that have to participate and make sure that the milestones are met. So if you really set the cadence for the next 12-18 months as part of your project cycle, number one: overly communicate what your results are, the success that you’re achieving. Second part is to make sure that as the business users engage, that you get their feedback. Clearly, that is going to be a new horizon for them, a new disruptive horizon maybe, but at the same time a new transformative horizon. We should look to gaining an understanding of exactly what their feedback is. And then thirdly, it is important to benchmark the results. Of course we talk about a 10x or a 100x improvement, but if you have a single part of the process, or part of the data flow, which is forcing things to slow down, then that lowest common denominator in speed will be that part that’s slowing the system down. So make sure that everything is balanced. Understand the whole end-to-end capabilities, and I think that would serve you well for your digital transformation.

Irfan Khan: As customers embark upon their digital transformation journey, it’s important that they understand the full spectrum of data that they own today, and are likely to be consuming in the future. So the manner in which the digital transformation can take effect is, first and foremost, survey what you own, make sure that you actually have an understanding, a good data governance strategy in place, but then equally so, understand where the new trends in data are taking your business.

So what are the impediments in the place of the workforce right now, or for that matter, even in technology and infrastructure that get in the way? And I’d say that there’s probably two things, that I’d concentrate on: make sure that the skillset of the people is capable of taking you to the next level of growth. The second part is, make sure that the investment in infrastructure and foundations serves not just your businesses for the next twelve months, but for the next five years at a bare minimum, because it’s very disruptive to change your platform. And I firmly do believe that if you want to make sure that the path is clear for you in the future, make those investments up front now.

You’ve got to have a foundation in place that’s actually allowing you to consume all this data, process that data, being able to analyze it in a real, futuristic way. In other words, whatever the users want, they should be able to get without having to go through IT and having to go through multiple provisioning projects to be able to achieve that result for them.

both a significant undertaking from the executive board, but then also from each of the lines of business that have to participate and make sure that the milestones are met. So if you really set the cadence for the next 12-18 months as part of your project cycle, number one: overly communicate what your results are, the success that you’re achieving. Second part is to make sure that as the business users engage, that you get their feedback. Clearly, that is going to be a new horizon for them, a new disruptive horizon maybe, but at the same time a new transformative horizon. We should look to gaining an understanding of exactly what their feedback is. And then thirdly, it is important to benchmark the results. Of course we talk about a 10x or a 100x improvement, but if you have a single part of the process, or part of the data flow, which is forcing things to slow down, then that lowest common denominator in speed will be that part that’s slowing the system down. So make sure that everything is balanced. Understand the whole end-to-end capabilities, and I think that would serve you well for your digital transformation.

Building the Business Case for Data

  • Topic: Leadership
  • |
  • Partner: SAP Service and Support
Irfan Khan, CTO, SAP
Irfan Khan
Chief Technology Officer
SAP
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK
 

The case for digital transformation starts with engaging stakeholders around the core business model and outcomes they expect. Of course, IT concerns are important, but transformation must focus on the bottom line, which goes beyond IT alone.

To accomplish, be sure the platform considers future processes as well as current ones. Without the right platform, the business model itself might become unsustainable in the face of change. Therefore, technology foundations must evolve at the same time as business foundations.

To engage stakeholders, create a succinct point-of-view document, limited to a single page, which summarizes likely benefits to the business. Be sure stakeholders understand that digital transformation is a business-wide process intended to achieve very specific outcomes.

Transcript

Irfan Khan: Setting a solid case for your business transformation is imperative. It starts off with engaging the stakeholders, and that’s across the spectrum of both senior leaders in the company, but also the business users of course as well. If we understand that the disruption we are introducing to the business is not just there to provide another iteration of IT to get their work done, it’s really there to provide greater profitability for the business, provide greater shareholder value, and ultimately to product new business options and new business models, that will essentially provide greater monetization in the future.

So the platform needs to be significantly strong enough and foundational to support not the weight of current operations, but future operations. Business processes do evolve, they do change, so you need to be able to create more of a virtual experience, a virtual understanding of where data is today, and how the evolution needs to be understood in the future as well. So this is really a very significant part. As the processes, and of course your branches evolve, your translations into the technology foundations have to also evolve at the same time.

Having met with many customers, who are all trying to embark on their own journeys in terms of digital transformation, the one piece of advice I typically give them is, “Be succinct. Try to define exactly what the outcome should be. And a good approach to doing this is to actually create a point of view document, and I would literally limit this to a single page. If you could write down, in a succinct manner, a very crisp fashion, what exactly the benefits to the business would be, what the outcome [is] that you would be able to achieve, and that could be communicated widely…”

Ultimately, a digital transformation is company-wide, enterprise-wide. It’s not restricted or limited to one particular business user, or one line of business. Let’s get the engagement of all the stakeholders, make sure that the understand the outcome that they’re all trying to drive towards, and ultimately the success that we’re able to drive, overall, n2n, for the corporation.

Irfan Khan: Setting a solid case for your business transformation is imperative. It starts off with engaging the stakeholders, and that’s across the spectrum of both senior leaders in the company, but also the business users of course as well. If we understand that the disruption we are introducing to the business is not just there to provide another iteration of IT to get their work done, it’s really there to provide greater profitability for the business, provide greater shareholder value, and ultimately to product new business options and new business models, that will essentially provide greater monetization in the future.

So the platform needs to be significantly strong enough and foundational to support not the weight of current operations, but future operations. Business processes do evolve, they do change, so you need to be able to create more of a virtual experience, a virtual understanding of where data is today, and how the evolution needs to be understood in the future as well. So this is really a very significant part. As the processes, and of course your branches evolve, your translations into the technology foundations have to also evolve at the same time.

Having met with many customers, who are all trying to embark on their own journeys in terms of digital transformation, the one piece of advice I typically give them is, “Be succinct. Try to define exactly what the outcome should be. And a good approach to doing this is to actually create a point of view document, and I would literally limit this to a single page. If you could write down, in a succinct manner, a very crisp fashion, what exactly the benefits to the business would be, what the outcome [is] that you would be able to achieve, and that could be communicated widely…”

Ultimately, a digital transformation is company-wide, enterprise-wide. It’s not restricted or limited to one particular business user, or one line of business. Let’s get the engagement of all the stakeholders, make sure that the understand the outcome that they’re all trying to drive towards, and ultimately the success that we’re able to drive, overall, n2n, for the corporation.

Role of the Chief Digital Officer

  • Topic: Leadership
  • |
  • Partner: SAP Service and Support
Jonathan Becher, Chief Digital Officer, SAP
Jonathan Becher
Chief Digital Officer
SAP
 

The Chief Digital Officer role is relatively new and still evolving. Because digital business includes a broad scope with implications for business model, marketing, operations, supply chain, and other basic corporate functions, the CDO role itself has a broad mandate. A key part of the Chief Digital Officer role involves managing tensions because the need for organizational stability and predictability relative to the desire for disruption and change.

For this reason, Chief Digital Officers must help drive innovation and disruption, in a manner consistent with the organization's capacity to absorb change and transformation.

Transcript

The role of a Chief Digital Officer is relatively new. And because it’s new, there’s not yet a lot of similarity and the actual definition of what a CDO is, is constantly changing.

When I got the role of Chief Digital Officer of SAP about 18 months ago, there really weren’t very many of us. I found less than 30 around the world. These days, and I keep track regularly, there are at least 150 people that are CDOs around the world. And while their titles are the same, the charters of what they do are very different. In fact, there’s not really that much overlap from all the CDOs that I’ve talked to.

The thing that is similar is they spend a lot of their time on culture. I see it in my own job. I might spend as much as 50% of my time understanding cultural change. And CDOs that I talk to, Chief Digital Officers see the same as well.

Why is that? Well any transformation, particular digital transformation requires change and successful companies naturally resist change. After all, they’re successful and they wonder if they have to change or not.

There’s an interesting quote from the McKinsey report that says something like this. "A CDO is hired because they have a strong bias for action, and because they have a higher tolerance for risk than most executives. Because of that, they are likely to ruffle feathers, to bruise other executive’s egos and even sometimes to cause tempers to flare".

So a good CDO has to balance the need for change, to not alienate him or herself from the rest of the organization. It sets balance. Why some days, I think the acronym CDO doesn’t really stand for Chief Digital Officer, but it might, in fact, stand for Chief Disruption Officer.

Given that disruption, I wonder what the role will look like in the next five to seven years. It’s impossible to predict the future, but we may not need CDOs when we actually have transformed. It’s kind of like the fact that we don’t call it a mobile phone anymore, because everything is mobile. It’s just a phone. Maybe that’ll happen to CDOs as well.

The role of a Chief Digital Officer is relatively new. And because it’s new, there’s not yet a lot of similarity and the actual definition of what a CDO is, is constantly changing.

When I got the role of Chief Digital Officer of SAP about 18 months ago, there really weren’t very many of us. I found less than 30 around the world. These days, and I keep track regularly, there are at least 150 people that are CDOs around the world. And while their titles are the same, the charters of what they do are very different. In fact, there’s not really that much overlap from all the CDOs that I’ve talked to.

The thing that is similar is they spend a lot of their time on culture. I see it in my own job. I might spend as much as 50% of my time understanding cultural change. And CDOs that I talk to, Chief Digital Officers see the same as well.

Why is that? Well any transformation, particular digital transformation requires change and successful companies naturally resist change. After all, they’re successful and they wonder if they have to change or not.

There’s an interesting quote from the McKinsey report that says something like this. "A CDO is hired because they have a strong bias for action, and because they have a higher tolerance for risk than most executives. Because of that, they are likely to ruffle feathers, to bruise other executive’s egos and even sometimes to cause tempers to flare".

So a good CDO has to balance the need for change, to not alienate him or herself from the rest of the organization. It sets balance. Why some days, I think the acronym CDO doesn’t really stand for Chief Digital Officer, but it might, in fact, stand for Chief Disruption Officer.

Given that disruption, I wonder what the role will look like in the next five to seven years. It’s impossible to predict the future, but we may not need CDOs when we actually have transformed. It’s kind of like the fact that we don’t call it a mobile phone anymore, because everything is mobile. It’s just a phone. Maybe that’ll happen to CDOs as well.

Managing Anti-innovation Antibodies

  • Topic: Leadership
  • |
  • Partner: SAP Service and Support
Jonathan Becher, Chief Digital Officer, SAP
Jonathan Becher
Chief Digital Officer
SAP

Established companies value stable processes and predictable business models. Although optimizing operations for continuity brings many benefits, digital transformation requires experimenting and investing in innovation and change. Organizations may struggle with innovations that disrupt existing ways of doing business. 

Jonathan Becher, Chief Digital Officer of SAP, discusses this issue and offers practical solutions to the problem of corporate antibodies that interfere with innovation.

Transcript

When Chief Digital Officers get together they often talk about how to handle corporate antibodies, those things that seemingly resist change and disrupt within a company. When you think about it logically, it makes sense just like the human body works as well.

If a foreign agent is introduced into our bodies, the antibodies come and protect us from that change. The same thing happens in large companies as well. When something seems to disrupt the current business model, the traditionalist will say “Hmm, that jeopardizes our revenue. We should maybe keep it from growing”.

So the way to do it is to actually embrace those that may think this jeopardizes the future and say, “How do we design this for scale. How do we make this so that it’s not so much about innovation, the definition of something new, but scale, the definition of how to make it part of the core.’

If you switch the mental frame from innovation to scale, you’re much more likely to be successful.

When Chief Digital Officers get together they often talk about how to handle corporate antibodies, those things that seemingly resist change and disrupt within a company. When you think about it logically, it makes sense just like the human body works as well.

If a foreign agent is introduced into our bodies, the antibodies come and protect us from that change. The same thing happens in large companies as well. When something seems to disrupt the current business model, the traditionalist will say “Hmm, that jeopardizes our revenue. We should maybe keep it from growing”.

So the way to do it is to actually embrace those that may think this jeopardizes the future and say, “How do we design this for scale. How do we make this so that it’s not so much about innovation, the definition of something new, but scale, the definition of how to make it part of the core.’

If you switch the mental frame from innovation to scale, you’re much more likely to be successful.

Organizational Responsibilities for Digital Change

  • Topic: Leadership
  • |
  • Partner: SAP Service and Support
Jonathan Becher, Chief Digital Officer, SAP
Jonathan Becher
Chief Digital Officer
SAP

To bring disruption successfully into an organization, it is important to make innovation and change a core part of the company's culture, operations, and activities. Building links across departments and silos is an essential part of digital transformation.

Transcript

The most common advice I hear about organizational change is to take the people that are going to disrupt and put them off by themselves, off and create an outpost in Silicon Valley because after all that’s where all the change happens.

I find that this is actually not very practical advice in large organizations, because they may come up with creative ideas around change. But when you try to bring them back to the company, the organizational anti-bodies say, "Oh, you forgot to consider this case and that case."

And so therefore my advice is to make the change central for what everything you do. Make it part of what it is, endemic to your company, not a separate standalone division. And even take those that are most resistant to change and ask them to help create it. By centralizing disruption and not putting on the edge, you’re more likely to be successful.

The most common advice I hear about organizational change is to take the people that are going to disrupt and put them off by themselves, off and create an outpost in Silicon Valley because after all that’s where all the change happens.

I find that this is actually not very practical advice in large organizations, because they may come up with creative ideas around change. But when you try to bring them back to the company, the organizational anti-bodies say, "Oh, you forgot to consider this case and that case."

And so therefore my advice is to make the change central for what everything you do. Make it part of what it is, endemic to your company, not a separate standalone division. And even take those that are most resistant to change and ask them to help create it. By centralizing disruption and not putting on the edge, you’re more likely to be successful.

Why Digital Experience Matters

  • Topic: Digital Business
  • |
  • Partner: SAP Service and Support
Jonathan Becher, Chief Digital Officer, SAP
Jonathan Becher
Chief Digital Officer
SAP
 

Customer experience in a key source of competitive differentiation in the digital economy. As new competitors and business models change an industry, established companies can adopt customer experience as a primary source of differentiation in the market. Because digital transformation goes beyond technology and product development into business model change, customer experience must play a central role for every digital business. 

Transcript

In the last five years or so, most companies have realized they can no longer compete on price or functionality, and so experience has become one of the primary ways to differentiate your offering.

The most common example that we know is the Apple iPod. It may not have been the best or even the least expensive mp3 player where it reached the market, but the experience with iTunes made it the most popular.

In fact, it fundamentally changed the music industry from being based on albums to based on a song. Customer experience became a boardroom issue.

I think we’re now entering a second phase, where we’re not just changing the experience, we’re changing the business model.

This is harder because this means it has to change how you make money, and it forces you to change the core of who you are. You have to fundamentally transform in a digital way.

In music, this isn’t about buying songs or buying an album, but rather about paying access to a music catalog. Think for example about Spotify; you’re paying for example $10 a month to get access to music. When you stop paying, you have nothing. That’s a business transformation, and one could argue the reason that the King of Experience, Apple, launched Apple music-- a business transformation.

Now this is a key boardroom topic as well, and everyone is asking themselves, ‘How do I Uber myself?’ That is why digital transformation is such a critical and important topic these days.

In the last five years or so, most companies have realized they can no longer compete on price or functionality, and so experience has become one of the primary ways to differentiate your offering.

The most common example that we know is the Apple iPod. It may not have been the best or even the least expensive mp3 player where it reached the market, but the experience with iTunes made it the most popular.

In fact, it fundamentally changed the music industry from being based on albums to based on a song. Customer experience became a boardroom issue.

I think we’re now entering a second phase, where we’re not just changing the experience, we’re changing the business model.

This is harder because this means it has to change how you make money, and it forces you to change the core of who you are. You have to fundamentally transform in a digital way.

In music, this isn’t about buying songs or buying an album, but rather about paying access to a music catalog. Think for example about Spotify; you’re paying for example $10 a month to get access to music. When you stop paying, you have nothing. That’s a business transformation, and one could argue the reason that the King of Experience, Apple, launched Apple music-- a business transformation.

Now this is a key boardroom topic as well, and everyone is asking themselves, ‘How do I Uber myself?’ That is why digital transformation is such a critical and important topic these days.

Culture Change and Digital Transformation

  • Topic: Digital Business
  • |
  • Partner: SAP Service and Support
Jonathan Becher, Chief Digital Officer, SAP
Jonathan Becher
Chief Digital Officer
SAP

When transitioning to a digital business, culture is at least as important as business processes and technology. For many organization, culture shifts are among the most difficult aspects of undertaking digital transformation. For this reason, we must pay special attention to aligning the organization around key goals and principles associated with the change. Among these goals is the need to embrace experimentation to find better ways to achieve goals more quickly than in the past.

Transcript

Eighteen months into being the Chief Digital Officer at SAP, I’ve learned that culture is at least as important as business transformation and technology in a digital transformation. We’ve identified a lot of cultural issues that have to change, but here are two simple examples.

One is, particularly in large companies you have to move to a model that is much more hands-on. Normally large companies look for experts when they have problems, and those experts often come from the outside of the organization; consultants.

And while there’s nothing wrong with consultants it often means that change doesn’t happen and the people inside the organization don’t change and don’t learn. And so we try first now to do it ourselves, even if that takes longer and we’re less successful.

Which brings me to the second learning, in Silicon Valley we like to talk about a culture of failure, but for many companies, the word failure is a bad word. And so we’ve re-pivoted the culture to talk about running experiments and running many more experiments, small ones. So instead of placing one big bet, we like to place 50 small bets. That’s the culture of experimentation.

Eighteen months into being the Chief Digital Officer at SAP, I’ve learned that culture is at least as important as business transformation and technology in a digital transformation. We’ve identified a lot of cultural issues that have to change, but here are two simple examples.

One is, particularly in large companies you have to move to a model that is much more hands-on. Normally large companies look for experts when they have problems, and those experts often come from the outside of the organization; consultants.

And while there’s nothing wrong with consultants it often means that change doesn’t happen and the people inside the organization don’t change and don’t learn. And so we try first now to do it ourselves, even if that takes longer and we’re less successful.

Which brings me to the second learning, in Silicon Valley we like to talk about a culture of failure, but for many companies, the word failure is a bad word. And so we’ve re-pivoted the culture to talk about running experiments and running many more experiments, small ones. So instead of placing one big bet, we like to place 50 small bets. That’s the culture of experimentation.

Innovating Platforms, Data, and Internet of Things, with Quentin Clark, Chief Business Officer, SAP

  • Episode: 166
  • |
  • Topic: Digital Business
  • |
  • Partner: SAP Service and Support
Quentin Clark, Chief Business Officer, SAP
Quentin Clark
Chief Business Officer
SAP

How do platforms, data, and the internet of things come together create innovation in the enterprise? In this episode, Quentin Clark, Chief Business Officer at SAP shares his view on technologies that can drive transformation and business model innovation.

In addition to being SAP's Chief Business Officer, Quentin Clark is a member of the Global Managing Board of SAP SE. He is responsible for defining the direction for SAP and for advancing the company’s business strategy. In this role, he heads corporate strategy, corporate development, partner strategy and development, and portfolio strategy activities.

Prior to this role, he served as chief technology officer and was responsible for driving SAP's technology vision and leading the company in its efforts to build and innovate world-class products that positively impact people, organizations, and customers. He was also the head of the platform division responsible for the development and product management of the SAP HANA platform, SAP HANA Cloud Platform, as well as the technology and analytics portfolios. With more than 20 years of enterprise experience, Quentin is instrumental in developing and driving product strategy, including the definition, planning, and engineering of software and technology. He also led successful industry-disruptive product launches across organizations. Since joining SAP in November 2014, Clark has contributed extensively to positioning SAP as a cloud platform leader.

Prior to joining SAP, Clark was at Microsoft Corporation where he held various leadership roles. In his last role, he was corporate vice president of data systems and platforms, responsible for design and delivery of all of Microsoft’s data products.

Clark holds a bachelor of science degree in computer science and physics from the University of Massachusetts, Amherst, in the United States.

Transcript

Michael Krigsman:

(00:20) Welcome to episode number 166 of CXOTalk. I’m Michael Krigsman and we’re going to have a great show today. I’m speaking with Quentin Clark, who is the Chief Business Officer of SAP, one of the largest software companies in the world. Quentin, how are you today?

Quentin Clark:

(00:45) Great thanks Michael in speaking with you and your audience.

Michael Krigsman:

(00:44) Well I am thrilled that you’re here and let’s start by just tell us briefly, what does the Chief Business Officer role at SAP mean and do

Quentin Clark:

(01:03) The role I play for the company is effectively overseeing build by partner. So what we mean by that is I manage a team that runs a portfolio process where we look at our internal investment levels. I run a team that does corp dev and M&A. I manage a team that does strategic partnerships and overlaid this of course is strategy function for the whole company. The way to think about this is I was hired to help the company turn course in terms of what’s next and where we’re going and have enough execution muscle to help the company get there.

Michael Krigsman:

(01:39) and previously you were the Chief Technology Officer, so maybe draw the distinction between Chief Technology Officer and Chief Business Officer.

Quentin Clark:

(01:48) Yeah it’s a good question and in fact it turns out that having done that job is super helpful to the current role I’m in. so I was hired by Bill McDermott; recruited by him, hired by him to help SAP like I say turn the course and figure out kind of what’s next for the industry, what’s next for SAP and how we participate in helping drive.

(02:14) What we know talk about is digitization across different industries. And my first role as a CTO was a way for me to get in the company, learn the people and learn the technology. Learn our customer base you know, learn how the company works in a way that I was able to contribute that back as well right. So in that role I was able to contribute to our cloud strategy and our work in analytics and getting certain things off the ground. And then Bill asked me back in the fall to shift focus to the whole companies strategically, and really expand my curve view of really to help drive the whole company.

(02:49) And being CTO for a year, my part in technology inherently really gave me that grounding, but I think having that product bed is really helping in this role because ultimately it’s products where our customers you know adopt and it is innovation that’s ultimately wanted long-term by your industry.

Michael Krigsman:

(03:09) So you mention digitization and the term that comes to mind is digital transformation and I know that is a central part of your strategy and what you’re thinking about. So maybe can you describe for us your perspective what are the components of digital transformation and what are you seeing at your customers.

Quentin Clark:

(03:30) Yeah, that’s a great question and in fact if I can back up a couple a couple of thousand feet and talk a little bit of what we see industry wide in the technology landscape and with our customers would probably be pretty helpful. So let’s just start with the technology landscape that we currently live in.

(03:51) We’re at a moment in time where there has converged together a set of technology shifts that are enabling a whole new era of innovation, unlike anything we’ve really ever seen before. And this is one of these kind of epic kind of generational changes in software. We’re talking about cloud computing, mobility, and mobility is not just smart devices, but it’s also ubiquity of connectivity and the bandwidth that’s available there.

(04:17) We’re talking about the advent of you know machine learning, deep learning, and AI technology coming out of the research labs and now just being part of practical engineering. And we’re talking about big data and the techniques

Michael Krigsman:

(00:20) Welcome to episode number 166 of CXOTalk. I’m Michael Krigsman and we’re going to have a great show today. I’m speaking with Quentin Clark, who is the Chief Business Officer of SAP, one of the largest software companies in the world. Quentin, how are you today?

Quentin Clark:

(00:45) Great thanks Michael in speaking with you and your audience.

Michael Krigsman:

(00:44) Well I am thrilled that you’re here and let’s start by just tell us briefly, what does the Chief Business Officer role at SAP mean and do

Quentin Clark:

(01:03) The role I play for the company is effectively overseeing build by partner. So what we mean by that is I manage a team that runs a portfolio process where we look at our internal investment levels. I run a team that does corp dev and M&A. I manage a team that does strategic partnerships and overlaid this of course is strategy function for the whole company. The way to think about this is I was hired to help the company turn course in terms of what’s next and where we’re going and have enough execution muscle to help the company get there.

Michael Krigsman:

(01:39) and previously you were the Chief Technology Officer, so maybe draw the distinction between Chief Technology Officer and Chief Business Officer.

Quentin Clark:

(01:48) Yeah it’s a good question and in fact it turns out that having done that job is super helpful to the current role I’m in. so I was hired by Bill McDermott; recruited by him, hired by him to help SAP like I say turn the course and figure out kind of what’s next for the industry, what’s next for SAP and how we participate in helping drive.

(02:14) What we know talk about is digitization across different industries. And my first role as a CTO was a way for me to get in the company, learn the people and learn the technology. Learn our customer base you know, learn how the company works in a way that I was able to contribute that back as well right. So in that role I was able to contribute to our cloud strategy and our work in analytics and getting certain things off the ground. And then Bill asked me back in the fall to shift focus to the whole companies strategically, and really expand my curve view of really to help drive the whole company.

(02:49) And being CTO for a year, my part in technology inherently really gave me that grounding, but I think having that product bed is really helping in this role because ultimately it’s products where our customers you know adopt and it is innovation that’s ultimately wanted long-term by your industry.

Michael Krigsman:

(03:09) So you mention digitization and the term that comes to mind is digital transformation and I know that is a central part of your strategy and what you’re thinking about. So maybe can you describe for us your perspective what are the components of digital transformation and what are you seeing at your customers.

Quentin Clark:

(03:30) Yeah, that’s a great question and in fact if I can back up a couple a couple of thousand feet and talk a little bit of what we see industry wide in the technology landscape and with our customers would probably be pretty helpful. So let’s just start with the technology landscape that we currently live in.

(03:51) We’re at a moment in time where there has converged together a set of technology shifts that are enabling a whole new era of innovation, unlike anything we’ve really ever seen before. And this is one of these kind of epic kind of generational changes in software. We’re talking about cloud computing, mobility, and mobility is not just smart devices, but it’s also ubiquity of connectivity and the bandwidth that’s available there.

(04:17) We’re talking about the advent of you know machine learning, deep learning, and AI technology coming out of the research labs and now just being part of practical engineering. And we’re talking about big data and the techniques that have emerged around that. And there’s other pieces of this, but my point is that at this moment where there’s this incredible crucible that’s being created by the technology evolution and landscape.

(04:40) That is now touching into traditional business and creating this tremendous pressure for change and opportunity. If you think about it, the largest transportation company on the planet the transportation company now is Uber; they don’t own any vehicles, right. There’s the largest vacation and car rental company on the planet is Airbnb; they don’t own any vacation properties right. And why is that the case? Well, it’s the case because of everything I was just talking about, the digital transformation and the ability to create and connectivity and direct wiring between the consumers and the producers. And this created a change in those industries and opportunities for a business model change.

(05:21) And that is what this digital transformation ultimately is really all about. But it’s not limited to one industry. It is going to impact every industry that’s out there and create new ones to.

(05:35) One of our favorite examples at SAP is at our company called Kaeser Kompressoren. That’s a German company that makes heavy industry compressor equipment, so like in factories use compressed air to run machinery and tooling etc. and they shifted from an on-prem traditional like selling a compressor time model into basically selling liters of compressed air at some pressure over some landscape inside a factory as a subscription. And so everything they then do on terms of efficiency and everything else and their equipment, they then reap the benefit of and they are no longer having annual quotes on sale cycles on transporting their equipment. They have a much more continuous and predictable business model, and it’s only been possible because of all this stuff we’ve been talking about; IoT, big data, cloud computing, mobility, all of this stuff.

(06:23) And so that is going to impact every industry, and our customers certainly come to us  in how they developed the agility and what they need to start doing technology wise and in their landscapes, they get prepared for that and to start to explore different business models.

Michael Krigsman:

(06:40) Everybody who’s watching be aware that you can join this conversation on Twitter with the hashtag, #cxotalk so please join the conversation and you can even ask questions directly of Quentin as we have this conversation. So Quentin what you’re describing is digital transformation that deeply profoundly effects as you said the business model of the company and that goes far beyond marketing but deep into the operations, the supply chain, the core processes of the company. Maybe you can talk about that dimension of it.

Quentin Clark:

(07:26) Yeah, so one of the ways we think about this in terms of a framework, a taxonomy is digitization across the workplace, across assets, and across customer engagement right. And so if you think about that you know, what we’re talking about is you know at a detailed level, if you look at a logistics management, the ability to basically pretty unique identifiers and everything in building materials and understand everything that’s happened to its entire lifecycle, right.

(07:58) We have companies that we work with in the retail goods space that you know sell a billion products in a year. Those billion products, if you actually traced the manufacturing lineage and trace it through every part of its supply chain all the way to and delivery to a customer and its generating terabytes of data a day potentially right. So how do you go and take advantage of that, not just in terms of maximization and operational efficiency, certainly a worthy pursuit. But also in terms of being able to anticipate changes with suppliers and anticipate trends and these kinds of things to be in front of your business on behalf of doing your best for your customers.

(08:38) If you look at the workplace, the advent of things like employee central and recruiting that’s not happening you know online and understanding in metrics, around interactions between customers and employees. And in between employees and the engineering work that the product they produce, there’s a huge opportunity there to have much more metric based ways of engaging your own workforce right. And making sure you are tuned into the signals to maximize the employee experience, and reduce the kind of work that they do that is not really value producing work and you want to get things focused. And ensure that they are having a really great experience with the company right.

(09:26) And then you know if you think about customers, we’re now in a world where we’re far beyond CRM right. We are now looking at a 306 view of the customer; what are we doing to market to them, what are we doing to sell to them. What if then the comm interacts with them online, retail, physically whatever, and what are we doing to support them right, support and service them.

(09:50) And if you look at all of that together, all of that information, plus the information that’s out there that they’re participating in social data and that kind of stuff, gives you a tremendous opportunity to tune every experience of every customer in a very individualized way. But all of that’s not possible without this notion of digitizing everything that we’re talking about.

Michael Krigsman:

(10:11) And so you’ve mentioned metrics, you mentioned Internet Of Things, all of this has the common thread of data. And so maybe can you now link this concept of data into this and the connection to innovation and the business change that you’ve bee describing.

Quentin Clark:

(10:34) Yeah, so let’s work it backwards and one way to do this that’s interesting is work it backwards. Let’s start with just a very simple scenario. A employee, a retail store manager working at a you know large retail company right, has to open the store that day and to maximize her opportunity for that business to be successful. One of the things that is always done at the beginning of the day is to think about what is at the front of the glass of the store, because that’s going to draw people walking by and into the store naturally. So what do you chose? How does that process work? Well, the very experienced store manager develops a framework and an intuition and picks up on all the little signals, and knows what research to do and social media, and what advertising was done and whatever else to know what to put a the front of the store to maximize the opportunity.

(11:29) Well what if instead of relying in 10 years of experience you could make you know everyone efficient and productive on that topic right. And so you take a very simple thing an analytics model that helps an employee or helps the store manager understand what to bring at the front of the glass. And you trace that piece of analysis all the way back to what’s required and that’s the data story.

(11:54) So for her the experience might be really simple right. Maybe she’s interacting with an intelligence agent that’s helping her understand that. Or maybe she is looking at a report on her mobile device and she sees this analysis and these conclusions and she makes decisions. But underneath is things like an understanding of what kinds of customers will be there that day. And understand of what has potentially caught a social meme, and it’s based on analysis of you know the Facebook, Twitter, or LinkedIn data or whatever is out there that is being analyzed not just in a global way but really in a regional way as well.

(12:33) It also is holding on things like what are the items that need to get through at a certain sales cycle in that week or that month or that quarter and to optimize for that. Who is going to be in the store working and we’re they good at selling, right. So maximizing the opportunity for them.

(12:49) So this actually is a very complex model that we’re talking about. And some of it really is big data. It’s coming out of social data, it’s taking into account the analytics across all of the points of sale, across all the stores. Things work from one place won’t work in another, are they really alike. And all of that data that’s very diverse set and a fairly complex processing that, ultimately has to be made simple.

(13:16) And the data management challenge is how do you make simple, actionable, human understandable artifacts and insights out of this all new information processing. So that is really the opportunity for companies like SAP right, for to come and help engineer those systems and engineer the applications and make it simple for those users.

Michael Krigsman:

(13:38) Now you mentioned the term innovation, and you mentioned the term efficiency. So now can you overlay onto all of this, this notion of going beyond efficiency into the realm of innovation, and how does all of this support innovation that goes beyond ‘merely’ efficiency.

Quentin Clark:

(14:10) That’s a good question. Actually as I approach talking about that let me give an example right. Cloud computing, if you take enterprise cloud computing as a topic you have both of these axis that you speak about. The first initial on ramp of enterprise products and computing generally speaking into the cloud was about operational efficiency. It was about running things more cheaply and being able to scale them more easily etc.

(14:43) But the real opportunity, the disruptive opportunity is about taking them to the cloud to do things that simply weren’t possible before. And leveraging the activity and the scale power of the cloud just to simply approach new challenges, new problems.

(14:58) You know HANA has been a little bit like this for us, where we’ve been retooling with S4 HANA, the ERP suite, we’ve been retooling to take advantage of HANA’s performance and it’s integrated transactional and analytics side, and that’s opened up whole new opportunities. So yes, we’re taking 100 terabyte landscapes and we’re squeezing it down into a terabyte system; incredible efficiency gain. But actually what’s more important and more impactful is the notion of a real-time digital dashboard. Right, a digital boardroom where the access to information, the detail to information, and the real-time nature of information is actually a transformational operational experience that changes what the business was able to do and provides new agility.

(15:39) And so this is true and you can look at these major system architecture changes and it’s no different in this digitization journey right, where the first hacked ROI is going to be, hey, is there something that we can do with it that helps us pay for the investment right, and return something tangibly and neatly back to the business. But the next step would inevitably be is what new is possible?

(16:06) And this is even true for SAP because we have digitized certain things; Digitized travel and entertainment. We’ve digitized procurement management. You know, yes it is a massive operational efficiency opportunity for our customers. But then we look at that and we look at the data inside the system and say, well we know a lot about the world right. We know a lot about how the world gets around. We know a lot about what things cost. We know a lot about procurement, and we can predict what’ going to happen, and that is new value for us to innovate on. So I think for a lot of these major shifts in computing you see this two-step process and I think it’s an insightful observation made.

Michael Krigsman:

(16:45) We have a comment or a question from Arsalan Khan on Twitter who begins to elude to the culture of dimensions. We’ve spoken about the technology underpinnings under all of this but when you’re talking about innovation, you’re talking about change and if you’re doing that pervasively through a company that’s culture. So maybe talk about the people dimension of all of this obviously it’s very important.

Quentin Clark:

(17:13) It is, the cultural journey here I mean you can look at every C change you know that a company across any industry has taken and you see as much of the story is about culture and about people as it is about anything else right. Now the technology tends to more of an enabler. It’s really what people do with it that ultimately matters.

(17:35) And you know I’ve lived through this a couple of times in my career where you know we have undergone you know paradigm changes and focus changes and you need to bring an organization through that. And you can write books, infact books have been written about this very topic. And you have to start with the people understanding where their interests are naturally aligned and really driving towards outcomes that improve that they’re able to do their jobs.

(18:05) Ultimately people want to contribute. And so when this are understood in the context of bettering their experience and bettering their experience to contribute they’ll get it. If it’s only understood in the context of working through change with no better outcome, this is where the resistance happens right.

(18:22) So you can never sort of forget you know, when we work with our customers one of the questions is, is the leadership team championing this? Who is going to be at the forefront every day? Who is the visible leader inside the company that’s helping champion that? Who’s going to be spending their time with the key influencers inside the company that are helping you know, precipitating these kinds of changes?  Because it is as important as a technical journey itself.

Michael Krigsman:

(18:51) So in effect the question becomes how do you overcome the resistance inside your large organizations by their nature are typically focused on the status quo. So is that the question, how do you overcome resistance or are there other core questions around the people transformation aspect of it.

Quentin Clark:

(19:14) Well I think it’s twofold right, there’s both the elimination and the understanding about opportunity and many people will run to opportunity when they see it. And I think that one of the best approaches to this kind of thing is starting small; success begets success. And you know you start something small. You prove its value. You let people see it, and you show you demonstrate that the people involved, that the journey they went through was a viable one, and that tends to build.

(19:48) I’ve been through like I say a couple of cultural transformations in my career and they all almost start like this. They allmost begin with you know, taking on a championship of a small thing and seeing it through, and not worrying as much about you know how are you going to get 1000 people through this knothole or 200 people through this knothole. Let’s start with 10. Let’s start with two groups of 15 right, and let’s build on that because people are inherently social animals and they will start to see where the herd is going so to say. And the wisdom of the crowd is powerful. But that does mean it starts with small groups around the campfire.

Michael Krigsman:

(20:26) This digital transformation involves so many pieces, so what are the implications and you spoke about the technology aspects before. What are the implications for departments such as marketing, so the implications for the CMO or the CEO and even for the CIO, the Chief Information Officer in all of this.

Quentin Clark:

(20:53) So I think if you look at the business unit right, the functional units like marketing or you know the (signal dropped 21:04) or the executive bet, joining HR right and you really separate that from the conversation with IT for a moment right.

(21:13) The opportunities for the lines of business I mean they are really there. Products and procurement for finance, the success factors for finance and HR, we’ve seen this pattern play out where the people who are responsible for these businesses see these units within the business. They see the opportunity to improve their entire remit right, by embracing these changes.

(21:44) And they’ll drive that right. Infact a lot of the adoption that we see in things like travel and expense or in HR management start departmentally. Even outside of those departments, even start with smaller groups, and then we see that the sort of functional leaders see that opportunity and get after it.

(22:03) IT, there’s a tremendous opportunity for IT to reassert its role in the business and in the enterprise. I think there’s been a period of time where IT got very focused or got their reputation basically for operating the systems; keeping things running as opposed to innovating, and I think those days have to be over. I think you know there was a point in time for IT, everything they did was like magic right. I mean the first time email showed up. The first time file sharing showed up, these are magical productivity transformations in the enterprise and for businesses and for how people work.

(22:42) And then we made it a big exercise to run these systems right, and in part of what HANA has been about, and part of what SAP is really driving towards is this notion of run simple. We’re trying to make it so that IT can focus back on innovation. Whether that innovation is at an auto maker that’s having to go through transitions, it’s driverless cars and different business models with you know ride sharing and these kinds of things. Or that digitization at this compressor company that has to change its own business model.

(23:15) IT is going to be at the heart of this because every company is going to end up being a software company. Any company that believes that it is not at the forefront of leading it’s industry through this transformation and embracing new model and leveraging software to get there needs to rethink its strategy.

Michael Krigsman:

(23:37) What about the role of platforms in all of this.

Quentin Clark:

(23:43) Platforms, well Michael, that is a big word right. I mean in some ways if you think about Ariba, it’s a platform for procurement management because there are suppliers who plug into that platform and because that platform is open it opens up an ecosystem for them to participate in.

(24:05) So a platform really lives at many layers of the stack, and in terms of digitization there are parts of the platform that I think are very well understood in industry-wide as being a critical component. The cloud and its scale as a whole, the ability to deal with big data and SAP of course has made investments in HANA and VORA to get after that big data equation. Analytics is an important part of this. We’re talking more and more about intelligence and the need for platforms around machine learning and deep learning and naturally there are interactions.

(24:43) So it is just as I started with, because of the technology landscape, opening up the crucible for innovation and  change, the platforms for that are of course incredibly important, and I think you’re going to find that everyone who is serious about helping enterprises work through these transitions is making investments in the platform in pretty substantial way.

Michael Krigsman:

(25:05) And maybe again, I keep asking you to overlay these various new pieces, but you mentioned earlier IOT; Internet Of Things and that’s another very very important part of this landscape of transformation. So please, share your thoughts on that

Quentin Clark:

(25:28) So IOT is one of the components if you will of a new equation around information that feeds in a lot of these transformations. And so you know, people don’t think about the analytics behind for example social data as an IOT problem because it’s not. It’s characterized as a big data problem. But just as much as that information is critical for customers and sentiments and understands how you parked your fairing, IOT is just as instrumental in things such as supply management, manufacturing, and retail, and retail management etc. So these are all just facets of the same generalized challenge around information.

(26:14) Remember when I talked about you know the end user experience of that store manager, well the example I gave was actually fed by IoT data, by social data, by the systems of record information, like the point of sale and the history and all that. So IoT fits in that way and IoT and my belief is IoT is going to end up being a mesh of information. So the creators of IoT information, a piece of machinery on a factory floor, a sensor at a warehouse right, these sorts of pieces, that information is going to flow. They’ll be certain services that those product suppliers, system suppliers offer around that information and creating a flow into other systems, and they’re all creating a flow into these systems and applications and end users are seeing and using. And they’re changing the information they have access to and how they understand that information.

(27:09) And so IoT is really going to fit in with this mesh f many different sources and many different uses of that information. And it’s an important part of this digitization as any other piece.

Michael Krigsman:

(27:21) And so again that leads us back to this platform question because in order to do this we need both the technology foundation as well as the business model foundation as well as all the other tentacles, implications of where the business changes go, ripple through the company that’s undertaking this digital transformation.

Quentin Clark:

(27:49) Yeah absolutely. I mean at SAP this is one of the things that of course we’re quite focused on is as we’ve been retooling around SAP HANA, and as we’ve been taking HANA and leveraging in our cloud line of business applications, the question is how is it that the overall data flow supports the end user insights and experiences that are going to help the business differentiate and really sort of run in this digital journey. So there’s a core piece of data infrastructure that needs to be worked through and evolved over time as these apps mature and these systems mature. But there also is other elements of platform right.

(28:33) And if you think about things like what we’ve done with Hybrid Yaz or tax capitalization as a service, or the APIs into something like Ariba. It’s this new opportunity to more rapidly build new value on top of these other systems that kind of never really existed before. So there’s a thing that’s emerging which is a little bit of this cloud/API economy, where the ability to interface this system, automate things, build new value rapidly is also something that’s emerging and it’s going to be part of this digital transformation.

Michael Krigsman:

(29:07) As you observe your customers, are there specific industry segments or types of customers that are undertaking or embracing these transformations particularly.

Quentin Clark:

(29:23) Well I would say nothing by industry really stands out in terms of one industry versus another you know where we’re seeing more interests in the kinds of transformation and into the kinds of business model disruption that we know there is potential for.

(29:41) What’s more true is at an individual customer by customer basis, right. How far along are they in terms of intellectually understanding that? And they go through this interesting cycle of exploring and learning right. Where you know, first they’re curious and in the end they get a little wide eyed around cloud, ‘This could potentially and hugely impactful, how do we begin?’ And then they start to get their sleeves rolled up and dig into it and realize that there is an approach they can make. Again culturally you build, you start small, you build, you explore, you create agility. So there’s all these different aspects of this, but they can breakdown the problem.

(30:23) And so I’ve had experiences where you know customers come in to our conference here in Palo Alto and you know immediately open with, our industry is changing and we think it’s changing because of the following reasons. And you know we’re here to talk about how we can work together to help us right, this enterprise, being prepared for exploring how to take advantages of those changes.

(30:47) An example that is I had one of the German automobile makers come into our conference room just a few weeks ago and said look, between ridesharing and driverless automobiles, we know our business model’s going to change. We want to have a conversation around what does that mean in terms of IoT, coming on and off the vehicles, that kind of flexibility you need to have in our customer engagement systems. The kinds of flexibility you need to have in terms of the back end, in terms of manufacturing and even supply management. How are we going to embrace creating agility for ourselves so we can go explore all these potential business models? And it’s just this incredible conversation to be part of and really a humbling experience to be involved in us to help a company go through that.

Michael Krigsman:

(31:35) So is the common thread that’s driving these companies to undertake transformation, is it seeing the competitive environment or can you draw a common thread among these various companies?

Quentin Clark:

(31:50) Well I think the common thread tends to be you see a combination of two things that are taking effect at the same time. One is there’s someone who gets it. Very often you end up meeting the person who’s championing that things are going to change, right. And so you see that and you see that mixed in with enough insight into something in their industry which is an opportunity by comparing to something that’s happened in a parallel industry, or something they’re seeing the beginnings of their own industry. And so you couple something specific with someone who has the vision of where to champion that change could provide great opportunity, and this is typically when these conversations really begin.

Michael Krigsman:

(32:39) And when a  company is in this position, so there’s somebody who gets it and there’s some type of change that’s going on in the market how do they begin. So if there are business executives out there or technology executives who are watching this, and they’re seeing this, it seems like a daunting task, how do they begin?

Quentin Clark:

(33:07) Yeah, again as we’ve watched and participated and been part with customers who have you know began to be on this journey, we do see that moment right, where their eyes get wide and realize wow, the scale of impact could be tremendous and how is it we get through this journey.

(33:27) And here you know, the thing that we tent to counsel our customers on is let’s start with a specific project. Let’s go identify you know, one or two opportunities where there’s a part of the organization that’s ready. Whether it’s a change in how to engage our workforce and part of HR on that, or whether it’s to start looking at we know we’re going to need instrument these products, whether it’s manufacturing thing or a consumer goods thing or whatever else between where they are in that chain. We know we’re going to instrument it differently because we know we’re going to need these insights. Great, let’s go and get a project going just to build and in architecture that gets you that instrumentation and starts to get the data signals you know flowing and all that stuff right.

(34:14) So it’s really getting down to these individual projects so that often we end up co-innovating on with them to help them explore that. But the point really being start small and build up. It’s like every other major project. You don’t approach building a house by standing there in front of a forest with an axe and saying by the end of the day I’m going to have a full house built with plumbing. You start small; okay here are the steps we’re going to go through and we need to build a plan. We need to you know get the lumber, or we need to you know validate  that the wall we’re going to build are going to be robust enough. We need to do these different step in order to construct and erect the house and it’s going to take time, right.

(34:58) And you can start small and you can work your way through it. And by working with customers and identifying those small pieces that start to come together, you’re effecting the culture change right, so we’re back to that. And you’re starting to learn and make progress.

(35:13) But the number one thing that we can tell people is just maintain the curiosity right. Start to be curious, start to ask the questions and one of the things that I’ve often suggested to people is, go show up in a different conference right. Go outside your industry. Go and learn things that may be related, but very much parallel with a difference. And go learn how this is impacting other industries and other organizations. And it won’t be exactly how you’re going to apply it but it might catalyze some thinking about how it will affect you.

Michael Krigsman:

(35:51) We have only a few minutes left, as a company is looking at the problem and starting small and trying to get quick wins and break it down as they would in any other project. In this case with digital transformation it involves both technology pieces as well as business pieces. And that by its nature involves information and collaboration cross siloes, so who is the right people to get involved and what advice or recommendations do you have for making this initial process of coming together as seamless and as easy as possible.

Quentin Clark:

(36:34) Well I think a lot depends on the business right, and certainly if you do not have a conversation at the senior leadership level with the CEO, the CIO, and the heads of finance and HR and the business lines, and the sales fields and core organization. If you do not have a conversation at that level, these things tend not to go very far right. And it won’t be these people who necessarily roll up their sleeves and implementing the new code, the new product line, or the new business approach but they have to be intellectually curious about the journey, and they have to help and support and setup teams to go after these things.

(37:18) One of the most valuable things that these people can do is walk back from those discussions and identify someone to help be that change agent for them in their departments, and set up a small effort right, that’s going on exploring. With exploration is what is the value of kind of a thing, like what is the value of adopting a cloud base solution for this or that other functionality. Or that exploration of we need to understand IoT better. Let’s just set up a small project that we can work with a partner, instrument this product, or instrument this factory, or instrument this warehouse or instrument whatever it is. So to get some information back and start to understand what the value might be and gain some experience. These are the things that have to happen.

(38:03) So it starts with a recognition that the world around you is changing and an open and honest conversation about that like you know every great company story, it starts with the leadership team who understands that they have to put one foot in front of another in terms of a journey. And you know this digital transformation it is a journey. It is not something that happens overnight. It doesn’t happen in industry overnight, it doesn’t happen in every single company overnight. But it starts with those small steps, and it starts with being curious. And you know, the more they can bring in outside people that are again from different industries, or come from a technology space that can help aluminate the potential changes and value, and how the business process might work or how the business model might work the better off they are right, and that curiosity is going to lead into opening up avenues to exploration.

Michael Krigsman:

(38:55) Again, we have only five minutes, and these are such huge topics and we could go on and on. But you mentioned earlier that this is a time of tremendous opportunity for IT and Chief Information Officers. Can you elaborate on that and also share your advice as you work with many different customers of SAP. How can CIOs take best advantage of this great opportunity that they have today.

Quentin Clark:

(39:33) I think a lot of it’s really about leadership right, and I’ve met so many CIOs over the years that have really wanted to lead a phase change in the business and to contribute to how the business operates and looks for opportunities to seek and capitalize on. And I think the environment that we live in from a technology landscape standpoint gives them a platform so to say to do that unlike in any other time in history.

(40:05) It is yes, it’s about adopting you know cloud software and determine to put that in the cloud, that we need to take HR management and move that into the cloud and focus on the things that are going to move the needle and provide agility in the business. You know, when we talk to customers about p-process and leveraging something like SAP HANA and what we talk about is the agility they gained back out of it, which they then reapply back in the business.

(40:30) We have a great story for example with a major retail company – a luxury goods company, where they were able to digitize their entire supply management, able to digitize the customer experience in the retail stores, and have a major change to the end-to-end; manufacturing, demand signals, supply management, all the way to the retail experience into the digital you know marketing experiences that those customers also have.

(40:58) An end-to-end view driven by the CIO, because it wasn’t just one department at a time. It wasn’t just about the manufacturing. It wasn’t just about supply management. It wasn’t just about retail, and it wasn’t just about marketing. It was about driving and helping the company understand the end-to-end flow that this digital transformation was going to result in and the impact it would have across that entire lifecycle which ultimately is about the customer, right. And it took the IT remit, it took an IT visionary to help the company see the opportunity, embrace it, and it had tremendous impact on their business. And that’s the kind of thing that is the power now that a CIO has and the potential impact on the business.

Michael Krigsman:

(41:46) It’s really a challenge though in some companies because you’re describing a way of thinking that makes so much sense and especially the reference point back to what’s best for the customer, but it may not be in the DNA of the company.

Quentin Clark:

(42:02) It may not and the reality is Michael if you look at the you know the logos at the top of any industry right over you know 10 year, 20 year spans, they change right. And a lot of that has to do with whether or not companies saw where the current C change in the industry was and was able to embrace that C change and take advantage of it. And it’s not true for new companies to arise and to take their place in the world. But it’s also as much of an opportunity for an incumbent organizations not to survive but to really thrive in the new era.

(42:46) We have worked with companies who were concerned about how they were going to navigate through this change. But got on the forefront of it and have been able to find a way to thrive. And yeah, it’s the mentality, it’s a culture, it’s a recognition of opportunity. It’s people with all of the vision. But the message is it can be done, and infact I don’t think it even takes necessarily rocket science. It takes recognition, and it takes conviction. And if you have those things, you can stand up, you can lead, and you can drive that change.

Michael Krigsman:

(43:23) So at the end of the day, recognition and conviction are the bottom line attributes.

Quentin Clark:

(43:31) I would say so. I mean so much of and even as a parent right, I have a couple of boys that are 12 and 14 and you know helping them is about helping them recognize the opportunities for them and have the conviction that is the right thing to pursue. And I’m not comparing our engagements to customers having kids, but it is the human journey. Generally speaking, when we recognize, when we have this awareness to know what is going on around us and to develop a conviction for what we want our role to be in that. That’s true at a company level. It’s true in a company’s leadership and the boardroom right, with the CXOs, and it’s true at the individual level down at the CIO.

(44:18) So at all of those different points you know we need to develop that situation whereas that recognition of what’s going on and the conviction, and the conviction about where we want to be in that evolving world.

Michael Krigsman:

(44:30) I love that; digital transformation as the human journey. Thank you so much. We have been talking with Quentin Clark, who is the Chief Business Officer of SAP about digital transformation. Quentin, thank you so much for taking the time out of your really busy day and joining us today I really appreciate it.

Quentin Clark:

(44:57) Thank you so much Michael. Great conversation and I really appreciate the opportunity to talk to you and your audience.

Michael Krigsman:

(45:03) And everybody thank you for taking time out of your day for watching to join us. This has been episode number 166 of CXOTalk with again my guest today was Quentin Clark the Chief Business Officer of SAP. Everybody, have a great week and we’ll see you next time bye bye.

 

Companies mentioned on today’s show

Airbnb                                     www.airbnb.com

Facebook                                 www.facebook.com

Kaeser Kompressoren             www.kaeser.com

LinkedIn                                   www.linkedin.com

SAP                                          www.sap.com

Twitter                                    www.twitter.com

Uber                                        www.uber.com

 

Quentin Clark

LinkedIn                                   www.linkedin.com/in/quentin-clark-2ba5764

Twitter                                    https://twitter.com/quentinclark

Digital Transformation and Leading Digital

  • Topic: Digital Business
  • |
  • Partner: SAP Service and Support
George Westerman, Principal Research Scientist, MIT Center for Digital Business
George Westerman
Principal Research Scientist
MIT Center for Digital Business

MIT researcher, George Westerman, discusses digital transformation and the lessons described the book he co-authored, called Leading Digital. From the Leading Digital website

Digital mastery is a combination of two separate but related dimensions .The first, digital capabilities, is investment in technology-enabled initiatives to change how the company operates. Firms maturing in the second dimension, leadership capabilities, are creating the right conditions to drive digital transformation throughout the organization. Leadership capabilities include the vision to shape a new future, governance and engagement to steer the course, and IT/business relationships to implement technology based change.

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Digital Masters represent excellence on both digital and leadership dimensions. Beginners are just at the start of the digital journey. As a result, Beginners have only basic digital capabilities. And they lag behind their competitors on multiple measure of financial performance. Fashionistas are not waiting to act. They buy every new digital bauble. However, because they lack strong digital leadership and governance, they waste much of what they spend. Or they find that they need to reverse what they've done so that they can integrate and scale their capabilities. Although Conservatives have useful digital leadership capabilities, excess prudence prevents these firms from building strong digital capabilities. This caution can be useful, but it can also create a governance trap that focuses more on controls and rules than making progress. By focusing on control and certainty, Conservatives find it hard to mobilize top management – and the rest of the organization – to see the bigger prize that digital transformation can bring. Digital Masters have overcome the difficulties that challenge their competitors. They know how and where to invest, and their leaders are committed to guiding the company powerfully into the digital future. They are already exploiting their digital advantage to build superior competitive positions in their industries.

Transcript

Michael:

(00:05) The subject of digital transformation is one of the most important and profound in business today.

I’m Michael Krigsman with CXOTalk, and in this special edition of CXOTalk, which is sponsored by SAP I’m talking with George Westerman who is a research scientist at MIT studying digital transformation and related issues.

(04:41) Tell us about your role at MIT, I know you’re affiliated with a couple of organizations at MIT.

George:

(00:49) I’ve got this wonderful job where we can really focus on doing relevant research for companies. We’re with the MIT Center for Digital Business and what we do is we tend to do sponsored research, where we get together with a company to find a really good problem and then execute that project. And what’s nice about it is that it allows me to do research and work with my colleague. The research and work in the academic context, but we also tends to stay and keeps us very relevant. And so we tend to do not only the academic papers but also books.

(01:19) One of the things we’re going to talk about today is a new book we have coming out on some of the work on digital transformation. I’m also with a group that we’re just starting called the initiative on the digital economy, and we’re attacking problems there that are bigger than we can do with just one company sponsorship. Problems like what is happening what is technology doing to the work situation? What skills are going to be important going forward? As computers advance their skills, what skills for humans are still going to be going forward?

(01:49) These kind of big challenges are just giant problems that we’re able to go through the initial and the digital economy. So I’m with both of those groups and it’s just a really great place to be.

Michael:

(01:59) So you’re studying the effect then of digital transformation both on companies as well as on the broader economy as a whole.

George:

(02:08) Absolutely.    

Michael:

(02:11) When we talk about digital transformation, it seems like it’s become this great buzzword that everybody talks about and the meaning is quite unclear and it seems as if many people define the meaning based on their particular needs at that moment. So maybe tell us from your perspective what does digital transformation actually mean? What does it encompass?

George:

(02:36) So for us we define it as using technology to radically change the way you do business, and especially the performance and the reach of the company. The way we would look at it there is three kind of elements to this transformation.

(02:49) One is transforming the way that you deal with your customers, your customer engagement. Another is transforming your operations, and the last is transforming your business models. And companies we have studied have done one of those or all three of those because they can kind of fit together.

Michael:

(03:05) So why is digital transformation so profound?

George:          

(03:11) What’s happening is you know, we’ve got 50 years of IT that’s been happening where computers have been able to get very good at automating things, and that has great effects for companies, not always the best effects the workers but we’re all productive than we’ve ever been before.

(03:28) And what’s happened in the last 10 years or so is that technology now has improved its capabilities. Not only is it primarily about automating and putting efficiency in, we’re collaborating better than we ever could before, and we also now computers are able to do things with big data and almost cognitive work that was never there before.

(03:47) These things are completely changing the way companies can take that next step and move from automation into completely transforming the way they think. So for example, if you think about what a good data driven approach to customer engagement means, what Caesars does, what many other retailers

Michael:

(00:05) The subject of digital transformation is one of the most important and profound in business today.

I’m Michael Krigsman with CXOTalk, and in this special edition of CXOTalk, which is sponsored by SAP I’m talking with George Westerman who is a research scientist at MIT studying digital transformation and related issues.

(04:41) Tell us about your role at MIT, I know you’re affiliated with a couple of organizations at MIT.

George:

(00:49) I’ve got this wonderful job where we can really focus on doing relevant research for companies. We’re with the MIT Center for Digital Business and what we do is we tend to do sponsored research, where we get together with a company to find a really good problem and then execute that project. And what’s nice about it is that it allows me to do research and work with my colleague. The research and work in the academic context, but we also tends to stay and keeps us very relevant. And so we tend to do not only the academic papers but also books.

(01:19) One of the things we’re going to talk about today is a new book we have coming out on some of the work on digital transformation. I’m also with a group that we’re just starting called the initiative on the digital economy, and we’re attacking problems there that are bigger than we can do with just one company sponsorship. Problems like what is happening what is technology doing to the work situation? What skills are going to be important going forward? As computers advance their skills, what skills for humans are still going to be going forward?

(01:49) These kind of big challenges are just giant problems that we’re able to go through the initial and the digital economy. So I’m with both of those groups and it’s just a really great place to be.

Michael:

(01:59) So you’re studying the effect then of digital transformation both on companies as well as on the broader economy as a whole.

George:

(02:08) Absolutely.    

Michael:

(02:11) When we talk about digital transformation, it seems like it’s become this great buzzword that everybody talks about and the meaning is quite unclear and it seems as if many people define the meaning based on their particular needs at that moment. So maybe tell us from your perspective what does digital transformation actually mean? What does it encompass?

George:

(02:36) So for us we define it as using technology to radically change the way you do business, and especially the performance and the reach of the company. The way we would look at it there is three kind of elements to this transformation.

(02:49) One is transforming the way that you deal with your customers, your customer engagement. Another is transforming your operations, and the last is transforming your business models. And companies we have studied have done one of those or all three of those because they can kind of fit together.

Michael:

(03:05) So why is digital transformation so profound?

George:          

(03:11) What’s happening is you know, we’ve got 50 years of IT that’s been happening where computers have been able to get very good at automating things, and that has great effects for companies, not always the best effects the workers but we’re all productive than we’ve ever been before.

(03:28) And what’s happened in the last 10 years or so is that technology now has improved its capabilities. Not only is it primarily about automating and putting efficiency in, we’re collaborating better than we ever could before, and we also now computers are able to do things with big data and almost cognitive work that was never there before.

(03:47) These things are completely changing the way companies can take that next step and move from automation into completely transforming the way they think. So for example, if you think about what a good data driven approach to customer engagement means, what Caesars does, what many other retailers are doing, what many banks are doing, they’re just smarter about what individuals want as opposed to classes of customers.

(04:12) As a result they’re able to give us a personalized experience that was just never even possible before. And that’s become possible because of big data, because of analytics and because of some other technologies that are out there that have only been in the last 10 years. It’s a qualitative change in the way that companies are working.

Michael:

(04:30) So the implication then is this is important for some of the organizations because it’s ultimately going to drive very significant changes as you said to business models, to relationships. We have customers potentially in relationships with employees. So it’s getting at the fabric of many of the activities in which a company engages.

George:

(04:53) Yeah, we studied 400 companies over the last three or four years. These companies aren’t the Googles and Amazons of the world. They are big billion-dollar companies. They’re large banks, it’s Nike, it’s Caesars gaming, it’s Burberry in retail. And what we’re finding is these companies, the companies you don’t think as tech companies are radically changing the way they are operating.

(05:23) In addition the way consumer technology has advanced, we’re seeing a radical change in the way consumers want to deal with companies. So, if you haven’t started this change already, the expectations of your customers are changing and you need to catch up

Michael:

(05:38) But let’s play devil’s advocate for a moment, you know you’re mentioning brands like Burberry and I know that you’ve written about Nike but these are really large companies and some of the most progressive and innovative in the world. So this notion of digital transformation, is it just for the shall we say corporate elite or are there broader implications beyond that.

George:

(06:04) Well the first thing we said when starting this research is all of these stories that we’ve been hearing about social media, about analytics, and even these embedded devices, the Internet of everything, tend to all talk about the same firms, and often they were start-ups where they were technology firms.

(06:20) And that’s all great, but at best we can find it may be is 10% of the economy. So what we wanted to do was study the other 90%, the companies really are not noticed as technology companies and we’re wanting to see what they are doing.

(06:32) And I think the interesting thing is that we’ve found with these companies what you know, basically boring companies from a technology standpoint are all doing interesting things with technology. But what we also found is some companies are doing better than others, where a lot of companies are 70% of the companies we studied are investing in these new technologies, and only 25% are getting the real benefit from it.

(06:54) What they are doing is there not only investing in technologies, they’re also investing in leadership capabilities to really drive change. So, you can invest in technology and get some benefit. You can invest in the leadership capabilities and get some benefit. These digital masters they’re putting things into it, and that’s really where it comes from.

(07:13) So what is it about these elite firms? Yeah, those elite firms are digital masters. But we’ve seen at Asian Paints, they make a white paint. Not a company you think of as an elite digital firm, they are doing amazing things. We’ve studied Kideco in Chile, a government owned mining company doing amazing things with technology. So you don’t need to beat one of the digital elite, we’re seeing companies in all industries doing amazing things.

Michael:

(07:40) Now, in your research, the framework you’ve developed talks about digital capability and leadership capability as to important dimensions against which you examined these companies, maybe tell us about that.

George:

(07:57) So the digital capability is that just investing in new digital, and we talk about that in three areas right. You’re changing your customer experience, you’re changing your operational processes and you’re changing the business models.

(08:09) And that’s all fine and good, but you can do that well and you can do that poorly. It’s the other dimensions that’s the important part also which is this leadership capability. We find the digital masters are very good at identifying the vision and for where they’re going, and driving the organisation in the direction of that vision. And if you can put these two-dimensional is together, the digital stuff and the leadership stuff then you’ve got this kind of Magic quadrant, that’s the digital masters we call it.

(08:38) The companies that are investing without the leadership, they tend to invest two or three times in the same problem and they tend to waste a lot of money because they can’t integrate later. The companies that invest with the leadership capabilities are the ones that are able to push forward and really transform the companies.

(08:54) We also see that when we look at the financial position it’s an interesting relationship to, that the digital masters are 26% more profitable than other large companies in their industries. So it seems that these are really good lessons is this idea of being the best run firms manage digital this way, it’s a good practice to use.

Michael:

(09:16) So you mentioned 26 more profitable, why? What’s the driver behind that?

George:

(09:23) Well so we don’t know actually it’s poor relation and we don’t know whether doing digital in this way makes you more profitable, or whether the most profitable companies in the world do it digitally this way.

(09:35) And from an academic standpoint that can be bothersome. From the standpoint of management, it’s actually not , because what we are seeing is the best-known companies in the world seem to manage digitally this way. They put the digital capabilities and the leadership capabilities that seems to be a good practice that you want to follow.

(09:50) So I think what’s happening is these companies are very very good at moving the organisation in a common direction, and they are doing this in the digital world and that’s where they get the payoff. So just for example, at Kideco, it’s a mining company and they’ve put in some basic information so they can do a better job at understanding what’s happening in the mines in real time, and that’s great. But what they also did is they said let’s do more. So now, they have automated machinery, large trucks driving round the mines without people in them, because they know where those trucks should be and the nice thing if you take a person out of the truck, it doesn’t have accidents anymore. So it gets on time with a better safety than the past.

(10:34) And that was the next step and it was kind of neat, but now there extending it and they’re actually thinking of a world where it may be you never need to send a miner underground anymore, because if the vehicles drive themselves you don’t need people down there. Suddenly, that’s a complete change in the way you do mining and you know nobody will ever have to die underground either, which is just a wonderful wonderful thing.

(10:55) So what they’re doing is there saying, what’s our vision and how do we actually get towards there. That’s amazing. That’s what these digital masters can do. Other companies will just invest in these two things and they wouldn’t tie them together, they would lose out on that advantage of continuingly driving for more and more change.

Michael:

(11:11) So George, what is the defining characteristics because let’s play devil’s advocate for a moment that couldn’t you say  that companies that have good leadership are going to succeed, whether it’s the digital domain or any other area. So what is it about these companies and maybe drill into the characteristics of leadership that makes them particularly make the conditions particularly right for them to succeed with digital transformation.

George:

(11:48) So as I said it’s putting the two together, we didn’t find companies that have better leadership capabilities, but not the digital side. They are more profitable, but they’re not driving as much revenue. It’s when you put this together with the good solid digital investment that you get the value where the improvement seems to happen.

(12:08) As we define in digital leadership there are four elements. Number one, it’s having a very strong vision of how you’re going to be different. So in Kideco it’s the idea of being as information and as digital as they can be throughout all their processes, and now the vision has evolved to being a world where you don’t have to have people in dangerous environments anymore. That’s a large vision. It’s going to take them time to get there.

(12:32) You start with this vision, and then you need to make that vision a reality, where you add engagement and governance. Engagement is the idea of helping your employees buy into the vision, and when they buy into division it’s easier to change the organization, and it’s also easier to come up with new ideas. But then you need governance.

(12:52) And governance is the set of rules that keeps you going in one direction. Because once people are energized, they’re going to go all over the place and you need to have a larger steering wheel to keep them going the right way.

(13:03) So leadership is these three things, it’s a vision, it’s the engagement, it’s the governance. And the last that’s really critical is that these digital masters they have got a great relationship with her IT and business people. As an IT researcher, that was very comforting. We didn’t set out to do this stuff this idea about IT, but it turned out that having a great relationships driving that great platform, being able to be very strong at building your new capabilities was critical for these digital masters.

(13:34) So that’s how we define digital leadership. It’s the vision, the engagement, the governance, and the strong IT business relationships. If you’ve got those in place you can really drive change.

Michael:

(13:44) So then if you bring together this leadership with vision engagement governance, good relationships between IT and the business, combine that with the right type of digital platform and digital capability, and then mix it all together under the umbrella of a strong and visionary leadership, then in effect that’s your recipe for success based on your research.

George:

(14:19) Well I think it’s a little simpler than what you said, because you’ve added a lot of whole things in their about you know just having vision. I think it’s more clear. What we see is that whether it be the most visionary company in the world, or the most boring company in the world, these four elements are things that you can build and you can really move it forwards.

(14:39) So we studied the Yellow Pages, one of the Yellow Page companies in France you know, that’s an industry that is in real trouble and get one of these yellow Page companies said, as we become digital we are going to lose vision of what we’re doing. And what they’re doing is they’re basically saying digital and books, it’s still the same business. We’re connecting small businesses to local customers. We’ve always done that.

(15:03) But because they set the vision in place, the employees can buy into it that digital is just a new technology to do what they always did before. Other yellow page companies are having a little bit more trouble in getting there.

(15:12) So any industry these four elements, set up a vision, putting the engagement and governance, and build your IT relationships. I think it’s a little simpler than the way you laid it out in the question there, now it still really hard to do. There’s nothing simple about it, but it’s something that any company can do because we’ve seen it happen in many many companies.

Michael:

(15:31) Okay, so we’ve laid the foundation which then it brings us to the next point that you’ve just raised, how do we do it? You’re talking about really significant change that in some cases runs through the company, and as we said at the beginning has a profound impact on their relationship with their customers as well. So what are the elements of successful transformation?

George:

(15:59) It’s the same elements, right. You have to define that vision and push it through your organization and that’s critical, so how do you define the vision? Well, one way we’ve seen is for companies to go out there and just start to prospect. We’ve seen senior team is doing these kinds of learnings towards Silicon Valley, Boston and in other areas to understand what technology firms are doing, just to kind of get smarter on what technology is capable of doing.

(16:23) That can be a tremendous opportunity to get your senior team to think about what the threats and opportunities are that they face. And then you’ve got to drive this change forward. Now, if you’re in a company that’s a burning platform, so like the Yellow Pages, right, your industry is just dying. People are ready to pay attention.

(16:43) If you’re in industry that’s a little less fast-moving, whether it be farmers or others you need to give a little bit more push, but you have got to set up this vision for where you’re going, how you’re going to be a different company, and you’ve got to drive it through. And those are the elements and you’ve got these four things in place that’s what makes these transformations happen.

Michael:

(17:01) But as you said it’s very difficult to do this and there are not that many companies who are doing it well enough to be what you refer to as a digital master. So what are the kind of obstacles that tend to us or the academies.

George:

(17:17) Absolutely, if everyone was doing it, it wouldn’t be that interesting. So a way in effect that only a quarter of the firms are digital masters is a good opportunity for research of course, but for other companies.

(17:30) Obstacles one was just the idea of just inertia, you know why should we do this. This is hard stuff quite should we do this and that’s a big issue. Another issue tends to be a disconnect between leadership and the rest of the organisation, where this is just you know a kind of interesting opportunity is do as you are and if they wait long enough it will just go away. So that’s a different kind of inertia.

(17:56) And one other one that really is getting in the way is IT issues. So if you’re going to have this single view of you know personalized, customized, intimate relationship with your customers, intimate in a good way that’s hard to do if you don’t have a really strong platform that lets you know what you’re doing with customers at all times. If you don’t have the integrated view of customers it’s just really hard.

(18:20) So you’ve got the inertia things, you’ve got the inability to drive your company once you’ve got the idea, you have the platform thing and one more is just skills. Some of the skills are hard to come by, and so a lot of companies are working with consulting companies to build those skills to get moving.

(18:36) The obstacles are they are, but people are able to drive through these obstacles. Some companies are, and the other companies are struggling and they’re going to have to learn how to do it.

Michael:

(18:47) So is this a top down push or a bottom up push, or both or how does that work?

George:

(18:33) We were looking for – you hear the stories  for innovation about letting 1000 flowers bloom and doing everything from the bottom up, we didn’t see it. But these transformations are every time we saw them we were like very very strongly top-down. It took senior leadership to sate this is the change we are going to do, this is the vision help we’re going to be different and then driving that through the firm. You know, sometimes they will take one unit to be the pioneer to move forward, but it has been very top-down and this is eventually going to effect the whole company.

Michael:

(19:23) But you also need the participation and collaboration of the people down on the ground, right simply giving the edict out, hey guys, we’re going to change our business model. That’s not going to work.

George:

(19:35) That’s why the engagement is so important because there are a lot of companies where the employees will just say, okay, you know I can ignore that, because next week it will be something different.

(19:44) Or one of the employees inside organizations which we seen and said you know, that CEO is only going to be with us for three years. I can wait until he gets fired, and you don’t want to do that.

(19:52) So this engagement things is incredibly important, so help the employees to understand what this means for them. How can employees understand why the future is going to be better in the current world, and if you can do that you can create energy around it. If you can’t do that, you’re just going to get resistance at every turn.

Michael:

(20:14) So the vision and the direction comes from the top, but the engagement and therefore the energy comes from the grass roots, would that be a correct way of saying it.

George:

(20:29) The engagement comes top down, but if you don’t have your employees energized around the problem it’s going to be very hard to make it happen. Because leaders can’t force employees to do things. They can get employees to see that it is in their interest to do things, and that’s what the engagement is all about. He want to top-down energize your company around the problem.

Michael:

(20:49) So you need both sides, you need the top-down engagement as you say, but you also need the participation and the sense of purpose that comes through the grassroots.

George:

(21:03) If you’re leading this the right way, the organization will be energized and. Moving in the right direction with you, and that’s what you want to get.  

Michael:

(21:12) Now what about the role of the Chief Digital Officer, that’s a title or a role that is relatively new and growing. What did you find about that in your research?

George:

(21:24) So this is that governance angle and also some other pieces. You know anything that you’re doing needs somebody in charge of it. And it can often be difficult in an organisation to figure out who will own digital. Do we put it with marketing? Well, maybe that means operations is going to get short shrift. Do we put it with IT? Well maybe that means that some of the more in the other organizations like marketing and others that don’t deal as much with IT are going to get short shrift.

(21:52) So many companies are setting up in essence role of the Chief Digital Officer, and their job is to drive the transformation, to be the kind of a point person to make these things happen. So Starbucks have done it. they done it at Asian Paints, at Kideco the CIO is doing it. Having somebody who can drive it is the answer.

(22:14) Now there’s a question about that role of who it should be. That really depends on what your company is, who has the right talent and the right context to make it happen. There is also a question about whether it’s a permanent role. The jury is still out on that.

(22:27) You know, you’re driving the transformation, does that role need to stay there after the transformation has started really getting momentum. That also is going to be by your company, but the role itself, the Chief Digital Officer it’s an important one and we are seeing more and more companies figuring out how to make that happen.

Michael:

(22:43) It’s an interesting question because if a company puts a Chief Digital Officer in place, is that simultaneously a statement about the CIO and the CMO, the Chief Marketing Officer.

George:

(23:02) Well you need the role. You don’t necessarily need the title. So it can be driven out of marketing, that’s great, if it can be driven out of IT it’s great, and we’ve seen that in different organizations.

(23:14) But in general what you’re trying to do is you’re trying to cross silos. So whoever’s running it, it’s not really about this person lacking or this person lacking. It’s about the ability to cross and coordinated between them and that’s the importance of having a role like this in place.

Michael:

(23:29) So going across silos seems a foundational capability in trying to accomplish what your describing.

George:

(23:40) Yeah, that’s where the top down push is so important, because you know within a silo, you’re just going to change product development. You can do that with your product development chief. If you’re going to change your supply chain, you can do that with your supply chain, and Nike did both of those, like figuring to do social marketing, Nike did that out of marketing. Where they got the real benefit is when they started tying this together and created a digital unit called Nike Digital Sport , and the job in that unit was to start making sure that everything was coordinated together, so that they could link across these many different silos that they had and it’s been a tremendously valuable opportunity for them. It’s really worked.

Michael:

(24:13) When you start crossing silos you’re applying different types of relationships among people in the organisation. Is there a cultural shift that’s required as well?

George:

(24:26) Yeah, and you know ideally you get the cultural shift where people want to work across silos, but then that can be really hard like anybody who works in a big company knows, so you drive it. You put the leadership into really kind of force it to happen, and in a good world the kind of collaboration across silos you want will become more natural over time.

(24:47) There are some some companies that have said we’re going to do the cultural change and skill building first and then will get on with the transformation, that often can delay their effort by a couple of years, where you could just drive it and let the culture catch up, that may be a better way to go.

Michael:

(25:04) So basically what you’re saying take the forward momentum, push it, get some results and the culture will go through what upheavals it does, but eventually is going to fall in place.

George:

(25:19) Yeah, well so there is getting the change done and there’s making the change permanent, and so there’s an awful lot you need to do on building skills, on changing incentives, on making it easier for people to collaborate. So you build the momentum with some quick wins, and then you add these things on as you’re moving forward.        

Michael:

(25:41) What about metrics? How do you measure the success of this type of digital transformation that we’ve been discussing?

George:

(25:48) So a lot of companies go out and you know, especially the more consumer focused companies tend to talk about their percentage on digital to physical sales, and that’s a good measure. And a lot of companies are doing that whether you know in the Yellow Pages they wanted it to be just 75% digital within five years. You can do that.

(26:13) There are other measures though that I think are the same measures that you’ve always had. You know, we measure this process by a lot of days in inventory that if you transform it you still measure along that way. We measure this process by customer satisfaction. If you digitally transform it you’re still measuring customer satisfaction.

(26:31) So you have some digital measures, but I would also argue that the measures you’ve always been using to talk about process performance are still useful. You just want to raise your sights on how good those things can get, because they are digital is there.     

Michael:

(26:45) So the result of your business in terms of profitability, in terms of customer satisfaction, these kinds of traditional measures don’t go away but hopefully they’re actually improving and the way that you are delivering on these things underneath maybe changing significantly.

George:

(27:08) Yeah, so you know if you’re only measuring yourself by how digital you are, and your customers are less happy with you, then you’re actually not doing such a great job. So you want to keep those traditional measures and raise your thresholds. You know, you want to bump up the customer satisfaction by a large number and the digital it will help you get there.

Michael:

(27:28) Now, we’ve spoken about technology and it’s interesting to me because on the one hand technology plays a key role in all of this, and yet it’s not about the technology. So what is this relationship or the intersection between the technology and the leadership, and the business outcomes and so forth, how do these connect?

George:

(27:54) So the big thing is that you know you can look at it in two ways. You can look at technology as a technology adoption problem, or you can look at technology as an opportunity to transform. And the digital masters are the ones that look at it as technology is an opportunity to transform the rest of the business.

(28:09) And then the next thing is whatever  links to the rest of it, the rest of it is involved in making that transformation happen which is why the leadership capability is so important. So, how do you look at this first and then driving the changes is the second piece.

Michael:

(28:25) So, you’ve mentioned a few times about the relationship between IT or the CIO and other parts of the business. It seems like this interconnection now becomes extremely important. So maybe talk about that.

George:

(28:42) You know it’s interesting, when we did our first round of interviews we interviewed 150 people in 50 companies around the world. A lot of them were saying you know, our IT is a mess. We’re going to try and do this as kind of go around our CIO. The digital masters didn’t talk about way. They talked about how their relationship was so good that IT was allowing them to do things that they never drained as possible.

(29:05) And some of them actually said our IT relationship wasn’t good before but we fixed it, and that is help we’re in this situation. Digital masters have strong relationships between their IT and their businesses, colleagues, it’s at the CIO level and it’s at levels down below that. And it’s essential because for all of the great ideas on organisation change, you still need technology to make this happen, and the technology specialists in the organisation, you’re better off working with them than without them.

(29:35) Now having said that, sometimes IT is just not ready for whatever reason. And so we’ve seen organizations setting up a kind of a dual speed idea approach, where they have created a digital IT group within the IT unit. It’s going to work at a faster, more innovative approach, and then they have to coordinate between what the innovative people need and what the more traditional IT needs and that can also be a very useful way to work. But yeah, you’re not going to do it without strong IT and it’s just a matter of figuring out how to get there.

Michael:

(30:08) What about in many companies other functions outside of IT are taking greater and greater control of the technology budget, so before that marketing. The relationship between marketing and IT is often fraught with difficulties, because marketing wants things done very quickly, and yet IT has a set of constraints like security for example, like authentication, again another aspect of security that it has to address. And so marketing then sets up shop and says okay, you know we’re going to just do it ourselves and leave IT out of it. What’s the implication for those kind of relationships in this digital transformation that we’ve been discussing.

George:

(31:01) So great IT leaders are able to make the link between their rapid innovative activity, fast-moving and experimental, and a longer term really resilient things that you need to keep this stuff running. The great IT leaders can do it.

(31:15) When you see these shadow IT things popping up, often it’s because the IT people have not been able to deliver what they need, and as a result other people are doing it and at leads to problems that we all know about.

(31:27) So what you want to get is have the situation where you’ve got dual speed IT, or you just have a great IT shop where you can meet both needs. Because if you are putting pieces of IT around the organization and they are not coordinated, you’ve got trouble. If those pieces around the organization are coordinated you’re in much better shape.

(31:51) Now, does that mean you’ll never want to put an IT shop into your marketing organisation? No, you’ll have them there but you want to make sure that coordination is there with enterprise IT to make it happen. So you know, for years in IT we’ve had this idea that you’ve got your CIO and you’ve got business unit CIOs. And business unit CIOs is a very very hard job, because you live with the business units but you also have to to coordinate with enterprise IT. But that role is essential to make sure that you’re not doing things that are dangerous in these business units even if the business units have their own IT. When the role is done right it also introduces innovations from one unit and brings them across to the others. So you want to make that happen.

Michael:

(32:33) In many companies it seems that the goal of IT is to reduce cost, and so from that standpoint is it accurate to say that technology budgets are zero sum gain, so that if money is flowing away from IT into other parts of the business, it represents a challenge for IT. And when that happens it seems that you’re driving greater schisms across these different groups rather than bridging the silos and bringing them together the way it needs to happen in order to accomplish the kind of changes that we’ve been talking about.

George:

(33:21) Michael, I have got this great to book for you. We have got a new book, on leading digitally that’s coming out in October. But the previous book was called the real distance between IT, how CIOs can create and communicate value. And you set up the question by saying if IT is a cost center, does that create problems. Well the fact that IT is a cost center is already the problem. And so this book and what we studied is how do you turn IT from a cost center to a true strategic partner. We studied dozens of IT turnarounds and what we found is that if you can communicate in three levels of communication, you walk a path where you change the way you think about IT. You change their perceptions about how you’re doing at IT, and you change the way that they work with you, you become their strategic partner.

(34:08) So, taking the fact that IT as a cost center is a given is actually the wrong way to think. What you want to do is, you want to say how can we get IT out of that cost mindset and then the rest can happen. So it can be helpful.

 

 

Michael:

(34: 27) I’ll have to take a look., But how can CIOs who are in this situation get out of it, I mean I know a number of CIOs where really, their mandate is reduced their percentage of IT as relevant to the overall budget of the company.

George:

(34:46) I think you know, what’s interesting about companies that use IT well, they actually spend more money on IT. And so if the conversation is about how to reduce IT as a percentage of revenue, you want to change the compensation and this book can give you some examples on how to do that.

(35:04) If the conversations are all focused on the cost, you have already lost. So what you need to focus them on investment. You want to focus on performance per cost. There is some other things that we talk about in this book to change that conversation. If you take the cost mentality as a given, it’s hard to do anything else. You’ve got to break out of that.

Michael:

(35:26) So give us some advice for CIOs who might be watching this conversation. How can they break out of the cost mentality into the investment and value mentality?

George:          

(35:39) So in the book we talk about three steps to value. Number one, rethink what you do and what you think about IT and how you talk about IT. Because if you’re talking about IT as a technology thing, then you are actually asking people that only talk about you when they want a technology conversation. If you’re talking about IT as a cost of doing business, you’re actually asking people just to cut your costs. You got to change that first of all.

(36:05) Next, you got to show that you’re a very strong leader in the IT organisation by showing that you deliver great value for money, and then you want to change the way investments are made, so that every project investment is tied to performance and you can measure when that performance hits.

(36:18) You go through the idea of rethinking of what you’re about, showing value for money as a leader in IT, helping the other leaders of the company work with you better. And you almost automatically become their strategic partner, but it has to happen in that order. It’s really hard to have a strategic conversation if they don’t think your costs are right. You have to drive it. You have to take control of that conversation as a driver. And like I said this book has some really great ideas on how to do that.

Michael:

(36:44) I think many IT organizations from what you are saying really makes perfect sense, for many IT organizations either the CIO and the IT organization as a whole don’t seem ready. They don’t seem to have the skills, the communication skills, they don’t understand the business. Even if they do, they don’t have relationships with the business and the business is not willing to except them in this different higher value role.

George:

(37:21) That’s the leadership problem. Great IT leaders are able to turn the situation around. We’ve seen it dozens of times. That you take it on yourself to change the perception of IT, and you can make that perception happen.

(37:34) If you’re going to sit around and wait for the business units to start thinking about you differently, and you haven’t done anything else, you’re going to be waiting a long time. But what we are seeing and CIOs say we’re going to change this, they go through this set of three steps and they are able to change it. It takes the leadership on the IT side to be willing to go off and try to make those changes happen.   

Michael:

(37:51) So the CIO is the person where the buck starts in effect for driving this type of change your relationship between IT and other parts of the company.

George:

(38:02) I mean that should be the CIOs role right, the CIO should be about to lower the strategic value, and part of the role for the CIO may be to change the conversations so that the organizations are ready to have those conversations. But the organizations are not likely to have the conversations unless the CIO can help them start changing the nature of the game.

Michael:

(38:23) So George, as we draw to a close maybe give us a kind of summary or read First off of what we should want and expect from IT, what the IT opportunity is within the context of digital transformation.

George:          

(38:43) One of the things that we have learnt from this research and this leading digital book is that companies aren’t paying attention. Senior executives made time to talk to a bunch of academic researchers about this, because they care about what’s happening in the digital world. They want to have conversations and they’re looking for guidance. And as IT leaders you have a lot of the skills that they need and you’ve just got to step up and try to enter that conversation.

(39:09) So technology driven vision, that’s something that IT people want to be able to do and many IT organizations have it and there are ways to insert yourself in the conversation. Governance, IT has got a very strong governance in organizations, and that same governance is useful for the digital world. Engagement and getting people to go along with these technology changes, IT people have been fighting that battle out for years. And of course the platforms, that’s all about IT.

(39:37) So basically what organizations need from the leadership side, IT organizations actually already have the skills and the vision and the capabilities to make that happen, and you have got to find a way to put yourself in that conversation because they are waiting for it. They would love to have the great guidance if you can get yourself in this situation where they will be able to listen to you.

Michael:

(40:00) George, this has been an interesting conversation on digital transformation. Any final thoughts that you would like to leave with the people listening who might want to embark on this journey. What words of advice and wisdom can you offer them as somebody who has been studying this with hundreds of different companies?

George:

(40:21) So, it’s easy to think that you have time to wait. It’s easy to think that these technologies, digital transformation are happening in somebody else’s industry. We found digital masters in every industry that we studied. And we found the digital masters are not only doing better than their competitors, they’re actually able to accelerate ahead. So whatever your industry is in, start paying attention to what the digital opportunities and threats that you’re facing, and start the conversation now because it’s time to get moving.

Michael:

(40:52) So the summary is you have to do this, there’s no alternative and they need to start right away.

George:          

(40:59) Rethink what your company can be with all these technologies and make them start to happen.

Michael:

(41:06) Great, well this has been a fascinating conversation. We’ve been talking with George Westerman, who is a research scientist at MIT studying digital transformation. I’m Michael Krigsman and this show has been sponsored by SAP and we’re grateful for SAP to give us their support. George, thank you so much for taking the time today.

George:

(41:33) Thanks for having me here.  

Michael:

(41:35) Have a great day, bye bye.

 

Companies mentioned in the show

Caesars           www.caesarscorporate.com 

Kideco             www.kideco.com

MIT                 http://www.mit.edu

Nike                 www.nike.com

SAP                  www.sap.com