Has your organisation begun it’s digital transformation?
Our guest for this episode shares with us the knowledge and experience from hundreds of technology leaders from his popular show CXOTalk, as we take a look at digital transformation – how it is changing the way we interact with our customers, business partners, and internal stakeholders; some interesting anecdotes on how modern enterprises are dealing with change; and explore what it means to be a “transformational” CIO.
Kevin Montalbo: Welcome to episode 47 of the Coding Over Cocktails podcast. My name is Kevin Montalbo and joining us from Sydney, Australia is Toro Cloud CEO and founder, David Brown. Good morning, David!
David Brown: Good day, Kevin!
KM: All right. Our guest for this episode is the publisher and host of the well-known talk show “CXOTalk” and is one of the most respected executive interviewers in the world. His recent interviews include: CEOs of Zoom, the Philadelphia 76ers, Workday, Members of the UK House of Lords, CMOs of Mastercard, Deloitte, CVS Health, CIO of Adobe, CTO of Accenture, and hundreds more.
His work has been mentioned over a thousand times in the media and in more than 50 books. He has also written over 1,000 columns for the popular tech website, ZDNet, and has served as an advisor to many of the largest enterprise technology companies in the world. Joining us for a round of cocktails is Michael Krigsman. Hi Michael, welcome to the show!
Michael Krigsman: Hey Kevin, how are you? It's great to be here.
KM: All right, great! Sounds good. You often talk and ask your guests on CXOTalk what digital transformation means to them. So, perhaps we can start by asking what digital transformation means to you.
MK: Kevin, it's a great question for me. Digital transformation is thinking about your business or maybe I should say, rethinking your business, placing the customer in the centre as the reference point. So, historically we designed processes in ways that were efficient for us. Right? We have sales and customer service and marketing and all of our interactions were about making our company efficient. Well, today we need to be thinking about what does the customer want? What does the customer care about? Having empathy for that customer.
So for example, a customer really wants expertise if they're calling on for customer support. They want expertise and maybe they want to know their order status, they want to know when the parts will be in stock. And so to accomplish that requires sharing information across a variety of department silos inside the organisation. Sometimes, this is easy for a company to do. But very often it's really hard. We have to rethink our systems, our technology, how we transfer data.
And then there's a whole cultural dimension. So, digital transformation is kind of a window into how we think about our company and how we run our business. It's not just a marketing veneer. “Let's do ecommerce.” That's not digital transformation.
DB: And it's very interesting looking at your guests. I mean that intro that Kevin just went through. It's a credible portfolio of guests and subject matters you've had over the years. And one of the things that struck me was all the varied things that digital transformation means to them and the initiatives that they're going through.
So, you mentioned making it customer-centric. Are there also other stakeholders to digital transformation? I'm thinking of, like, business partners. Business partners who may want to communicate with you directly or even internal stakeholders like your own employees and how they want to interact with the company as well. Is that part of digital transformation?
MK: David, I'm so glad that you raise this point because digital transformation is an ongoing lifestyle choice. We're not going to buy a digital transformation, right? We're not going to buy a widget that's now going to make us change. We're rethinking our business, our relationships, our core business model and in order to accomplish that, yes, we must involve, engage our employees. We need to engage our customers. We need to engage our business partners because otherwise it's not going to work.
I mean look, think about it this way. We're making our business really focused on our customers. We're thinking about our products. How do we define our products, our services so that our customers, it meets their needs? That requires working with our business partners so that they can be responsive to our changing priorities, investment, goals strategies because otherwise there's a discontinuity and it doesn't fit and it won't work.
DB: Yeah, it's interesting. We've had this mentioned in the past. It's how you need to get these other stakeholders and business partners involved in the process and it's almost like you need to have parallel digital transformation and if it is going to truly make this a success. But I guess it's all part of the journey for all of us.
I noticed one of your guests - from memory, I think he was from McKinsey - he differentiated in your talk between “digital transformation” and “business building.” I thought this was interesting because when we talk about digital transformation, we're often talking about creating new digital products and services responding to the market, like identifying what the customer needs.
Like you're just explaining, have you found that somebody could help to differentiate between electronic communication and business process automation and efficiencies with that process of creating new digital products and services?
MK: You know, the question about McKinsey? I asked them the same thing. So, why is it business building? And the reason is the extent to which changes are involved. Now you have to remember, McKinsey is working with very large organisations and the challenge that a large organisation generally often faces is they have existing products, existing services, existing processes and they have to be very careful not to disrupt those customer relationships, not to disrupt their revenue streams. People rely upon them. Their customers rely upon the predictability of those products and the consistency of those products and those services.
And so in many cases, what McKinsey has found is that if you're going to make a really significant change to your business model, for example, it's easier, it's more efficient, it's more productive to create a new entity. That entity can be spun off from the mothership. It can be created as a joint venture. It can be created as just a new business altogether. But separating it out means that you can then focus the efforts of the new entity on this changed business model without the baggage or without disrupting the existing business of the organisation. And so that's why they talk about business building.
DB: Yeah, because I imagine that also in a large enterprise like that, there's also the bureaucracy and resistance to change. And so sometimes, spinning it off as a separate unit, it’s more agile, without any of the hang-ups of the existing organisation, if you like. They can innovate quicker, not be hamstrung by existing processes. Is that what you think?
MK: Yes, David, that's exactly right. See, really the goal with this type of business building is to create a clear path to innovation and not be hung up by existing processes, by the existing culture that may be resistant to change as you just described, but at the same time, to take advantage of the size and the capabilities and the reach of the existing company. So, you get the benefits of both. You get the clean slate to design the culture and design the business goals that are in line with what you're trying to achieve, but you also get the benefit of that existing organisation that's behind you.
DB: Yeah, got it. On CXOTalk, you've interviewed C-level executives from companies ranging from Rolls Royce to Best Buy, from Philip Morris to the San Francisco Opera, which I thought was interesting. You discussed all their digital transformation initiatives. Are there any anecdotes or success stories that you can share that your guests have experienced?
MK: I think it's very interesting to talk about success when it comes to digital transformation. Digital transformation is not a kind of point solution. Digital transformation is an ongoing journey. And so if we look at each one of these examples that you just described and we could look at many, many more. If we look at each one of these, they each touch a different part of the organisation. For example, in the case of Rolls Royce, it's a really fascinating story.
So, if you think about the sale of jet engines, which is not something that most of us are thinking about, right? I mean we got on a plane, we don't think about the engines of the plane, we just hope that it works. So historically, jet engines were sold by the manufacturer, like Rolls Royce, to the airlines and it was a transactional sale. Today, these engines are really a partnership between Rolls Royce and the airline. Rolls Royce calls it “serve-it-ization,” meaning they are engaged in a service relationship with that customer where they've outfitted the engines with a tremendous number of sensors. They give off a huge amount of data and Rolls Royce then is collecting that customer data - collecting that data, aggregating it across customers anonymously, of course as you would expect.
But they can then do predictive analytics on those engines to then get back to the customer and say to the customer, “You know, this engine on this particular plane may have some kind of issue. And so bring that in for service and we need to take a look at that.” And obviously that's extremely beneficial for the customer because it can potentially eliminate downtime before it takes place before some type of breakage takes place or damage to the engine. And obviously, they're great safety considerations, which is the primary point when it comes to jet engines.
So, that's an example. It's one example of a particular process that has undergone transformation. If we look completely to a different domain, you mentioned the San Francisco Opera. And the reason I wanted to speak with them is because opera is performance. Performance means in person. And I wanted to learn how one of the world's major opera companies manage when you can no longer do in-person performances. And so, the conversation there was about rethinking the in-person performance, translating it into a digital gathering in a way that keeps the spirit of the opera, makes it interesting and engaging for the audience.
But again, you've got a business model change that's responding to the circumstances and that's keeping the customer in the center in both cases [with] these companies as different as they are. We're thinking about the customer and how they can respond to what their buyers want.
DB: Interesting. So, there are a couple of really good examples there, where organisations have responded to the customer and rethought their distribution of their products and service. But as you said, it's really about the journey, it's not an end goal. So, you don't get there and say, “Okay, we've done it. We've achieved our digital transformation and we're now successful in digital transformation.” It's an ongoing journey. I think it's part of your point as well.
MK: Absolutely, absolutely. There's no fixed endpoint, you know? It's like innovation. Is there a fixed endpoint with innovation? No, it's something that you embody inside your organisation and you want to embed in the DNA of your culture.
DB: Yeah, I guess the other side of it is, I think I kind of liken it to the industrial revolution. And so, you sort of see over history, we went through that period where there was this radical change in process, the way we produced goods. We're now going through this digital revolution and we've tagged it “digital transformation” and I sort of wonder where we are in that journey.
So, if it's going to be a 50-year journey or whatever it’s going to be, yes, there's these ongoing processes. We’re modifying, responding to the market with new digital products and services, but this is a huge step change in the way we're doing everything right now. Where are we? Are we right at the beginning of that process? [For] most organisations, are they well into the process? You've interviewed thousands. Where are we?
MK: You know, I think for many organisations, they're very well along on that journey and I think the pandemic was a forcing function that gave organisations no choice. The option of conducting business in the old way evaporated for many organisations. And so, they had to embrace new tools, new technologies that enabled their workforce to be distributed and enabled and force these organisations to adopt mechanisms for different types of communication, for providing customer support and customer service.
And all of these are attributes or symptoms of digital transformation, meaning we're changing the way that we conduct our business. To be more digital and to be more “agile” - you use that term David - to respond to our customers, to respond to the changing environment and to do it faster. In many cases, faster than we ever thought we could. But we've done it. Many businesses have done it successfully.
DB: Have you identified any common challenges that these organisations are facing along the way?
MK: I think, the bottom-line common challenge is culture/people issue. Think about it this way. We sell existing products and services. We have a sales organisation, for example, and we compensate our sales people on the basis of historically what's worked, the products and services that we used to sell. Now we are changing, and Rolls Royce is a great example, right?
So, historically they sold jet engines and I'm sure I'm making an assumption here because I didn't speak with them about this. But historically, I assume the sales people were compensated based on the number and the type of jet engines that they sold.
Well, what happens when the relationship is no longer an outright sale but starts to look or approximate a subscription relationship? The software industry has faced this from going from on premise to software as a service. How do you rethink, change your sales compensation? And how do you get your salespeople to get on board with this, because in the old days, if I'm a salesperson and I sold a big ticket item? Man, I was getting a big check.
Well now, I'm not selling big ticket items. I’m getting subscribers, which is really, really good from a customer relationship standpoint because it forces us, as the seller, on an ongoing basis [to] provide that customer with what they need, because otherwise they're going to unsubscribe and we won't get that revenue. But from a salesperson standpoint, you know, David, I'm not sure I like that so much. Give me that big check. I don't want to get it over the course of the next three years. I want it now.
DB: Yeah, fair enough. And you get this resistance to change. And of course the touch points with digital transformation across the organisation is so broad and you're affecting so many business processes in introducing new ones. Then we're finding the common challenge is this cultural challenge of deploying change down.
So, digital transformation initiatives often come from the top down. There will be a board level or the CEOs, they take these initiatives, driving it down through the organisation. Yes, there are technology considerations. But the people challenge, cultural challenge seems to be a recurring theme. Interesting.
MK: Yeah, I think that it's easy on the one hand for senior leadership of a business to issue an edict. It's very easy just to say, “We're going to do things differently now.” But that gets lost in translation and it gets lost in the practicality of execution as you start speaking to the people who are having to act to do the work on the ground and when you start to then think about the compensation of the incentive models. Just in general, the cultural resistance part is the big challenge, I think
DB: Interesting. And of course you have noticed, even in your own interviews, there's lots of different roles involved in these initiatives. I've seen titles like CEO, CMO, CXO, CIO, CFO all involved in various initiatives. Does this involve the entire C-suite of an organisation?
MK: Boy, I sure hope it does. Because if it doesn't, [like] if it only involves the CMO, then it's not really digital transformation if you're making your marketing department more efficient, for example. So, digital transformation is a strategy. Again, it's a corporate lifestyle, meaning it's not limited to one little sector. And that means, by definition, you are involving people across the leadership of the company. At least you should be.
If you're not, then it's just you and you’re lonesome and you're digitally transforming the company. You know what? You ain't digitally transforming the company. Maybe you’re doing something great, but you're not doing a complete digital transformation.
DB: And of course, the CIOs are often mentioned in these initiatives because it often involves technology. And there's one article you have there which I found interesting where you talked about the “transformational CIO.” So, the CIO has been traditionally focused on infrastructure. You talk about this concept where they need to start to focus on growth and innovation. What's the expectations of a transformational CIO?
MK: I spoke with one CIO or a Chief Digital Officer or a Chief Technology Officer. This person is at a large insurance company, a very large insurance company and he kind of crosses all these roles. That's why I hesitated there and he made the point that the Chief Digital Officer for example, or the CIOs, when you start to talk about digital transformation and you’re isolated to one position, you know that there's something wrong.
And the idea of the transformational CIO is that she or he is embracing this kind of change. It's really a business focused role. It's not so much a technology-focused role. The technology is table stakes. And we assume that if you're the CIO at a large enough organisation [is] that you've got operational excellence, you have your systems in place. You have people that can run those systems, that can run the traditional projects that need to be run because projects are not going away. You still have to get stuff done and stuff is done through projects.
So, you're doing all of that. But the focus of your efforts should be understanding what the different parts of your organisation do, what their concerns are and then supporting them in the use of technology to help become better and efficient. Then you notice I said “better” first, which means innovation and I said “efficient” second because it's about innovation. And if you do innovation well and you couple that with efficiency, that term, doing more with less starts to emerge. And I know your organisation, Toro Cloud does things with low code, and so low code is a great tool to help do more with less. I think all of that's part of it.
DB: Yeah, thank you for mentioning Toro Cloud. Talking about technology, you're finding AI is becoming a large part of AI/ML. Is it becoming a large part of digital transformation initiatives?
MK: It's such an interesting question. So, if we ask software vendors, then you would say, “Absolutely.” AI is everything because every software vendor you know now says, “Well we do AI.” But in practice, if we break this down, what are we trying to achieve with our digital transformation, right? We're trying to achieve better moving information across silos, operating together as a team to fulfill our customer's expectations on our brand promise in a better way. And we should bring to bear any tool, any method, any process that's going to help us do that.
Now in some cases, using an abacus may be the best way to do it. And if the abacus is the right tool, we should use the abacus in other cases. AI is going to help us if we have the right kind of data and we have the right methods and processes and tools in place. AI can help us as, in the case of jet engines, for example, and predictive maintenance. We can use analytics and the data to do a better job, to do a more efficient job. And in those cases, AI and machine learning are excellent tools and can change processes and change portions of our business in significant ways and can bring us capabilities that we did not have before. So in those instances, yeah of course, we should be using AI because shouldn't we bring every tool to bear that's going to help us?
DB: Despite being a tools vendor ourselves, I like this concept of saying, “Yes if you want to speak to the tools vendors, machine learning is where it's at.” All that data analytics, that sort of stuff. But I like your abacus analogy there, because it is about bringing the right tool to the job and finding the right tool for the solution for your particular initiative because everyone's initiative is different and your business is different. So, I like that analogy. I mean obviously, technology in some form or another is often involved in a digital transformation initiative. Are you finding any trends besides machine learning occurring in the space? Is there anything you're witnessing with technology trends?
MK: You know, I don't focus too much on the technology trends because my focus is for businesses. What do they need to do in the near term? I think that we can't escape machine learning. And if you talk about machine learning, you better be talking about the data that is going to stand behind your models, that you're basing your models on.
So, I think that there is a growing sophistication in the recognition that it's not just the algorithms that are important, but for many companies, it's the data. So, my focus would be more on things like the data. How do we get the data? What's the problem? What's the business problem that we're trying to solve that we think this data can help us with? Can we use agile methods more effectively than we're using today?
We can talk about quantum computing, we could talk about streaming video, there's all kinds of technologies that are out there. We can talk about real time databases and all of that's fine. But the people that I'm talking to are the business folks who really wanted to come down to, “How is this going to help my business in the next few years as opposed to where this is all going in the next 5 to 10 years?”
DB: You seem to really enjoy what you do, Michael. You've been doing it for a number of years now and you've interviewed thousands of people, but you still seem to have a great deal of energy and excitement about it. You are still finding your learning and enjoying the process of interviewing all these industry leaders.
MK: I love it. I mean, I feel so fortunate, so grateful to do what I do. I mean, I have a really good job.
DM: Can you tell our listeners where they can listen to your talks?
MK: Just go to CXOTalk.com. Check it out. And there's lots of videos. I mean there's hundreds and hundreds and hundreds of huge numbers of videos on all these topics: digital transformation, AI, machine learning with some of the best, most innovative experts in the world and the top business leaders in the world. I mean, of course I'm biased, but it's pretty amazing. And David, as a matter of fact, I had your former Prime Minister Malcolm Turnbull and his wife, Lucy Turnbull, who is the former Lord Mayor of Sydney, as guests on CXOTalk.
DB: It's funny, you should mention them. They were my first investors in my first software company. Malcolm Turnbull was at Goldman Sachs before he became Prime Minister and he and these other investors were seed investors in my first technology company. And Lucy was on our Board of Directors. So, there you go. It's a small world,
MK: They're both amazing people.
DM: They are. Very intelligent, amazing people. I agree. Well, Michael, it has been a pleasure to have you on our program.
MK: Thank you again, David. Thank you. It's really my honor to be here. Thank you.
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