You’ve said before that the key to digital transformation is ‘taking out the trash’. What did you mean by that?
Digital Transformation–when I use the term–means changing your products, your markets, your culture, your customer and employee experience. It is not digital optimization, which means doing whatever you do better, faster, cheaper.
Yes, we should do everything we do in a digital fashion. We should get the paper processes out as well as the swivel chair interfaces. But what I find when I work with industrial companies in healthcare, logistics, manufacturing and construction is under-investment and it has led them to the precipice of crippling crushing technical debt.
So I often find that step one of digital transformation is take out the trash and clean up the technical debt. That leads to some interesting philosophical discussions with the board with the CEO and CFO, typically saying ‘what’s wrong with my computer? It boots up every day!’.
The very fact that your computer boots up doesn’t mean a Chinese hacker running the latest and greatest technology has not already penetrated your system. So we have to make executives aware that continual investment in technology is the price one pays for being digital in 2019.
If you think about your product in terms of whether their business or consumer wants to buy, how do you take advantage of digitization to augment that product to create a customer experience better than your competitors?
What would you say is the philosophical problem here? What was the theoretical issue that board members come across?
Well, the issue is if it boots up what’s wrong with it? My general ledger may be 20 years old. The time from ingestion of a document to production of the reports is days, not hours. The reporting is not there. There’s no dashboards and there’s no workflow. So philosophically, the fact that it still does the basic function–it posts transactions, or it boots up–doesn’t mean it’s fit for purpose in today’s world.
Take the example of building a chemical plant and I said to the board ‘I need a billion dollars for a refinery’ and I also said it was going to cost me zero dollars to maintain it. They would throw me out the window. Because they would all know that if you don’t take care of a chemical plant it’s going to explode. The same question asked about a refinery or manufacturing plant must be asked about your technical infrastructure. If you don’t maintain it, it’s going to blow up.
It doesn’t blow up with an explosion that gets on the six o’clock news. But you might wind up on the pages of the Wall Street Journal or Business Week or The Economist saying that the company failed. And that’s what boards have to recognize that you can’t just make an IT investment a one-time shot.
What does innovation look like when you’re working with industrial companies?
The first thing we have to decide is what business are we in if we make a product or deliver a service. The old saying in marketing is nobody wants to buy a drill–they want a hole. But you can’t buy holes. But if somebody could come up with a laser beam that would punch better holes, we’d all stop using drills and get laser beams. So we have to start by understanding what service or product we’re actually selling.
Then there’s the augmented product. That’s the bundle of goods and services that start from the time you start researching the product until you finally stop using it. It may be a warranty, customer service, it may be instruction manuals. So if you think about your product in terms of whether their business or consumer wants to buy, how do you take advantage of digitization to augment that product to create a customer experience better than your competitors?
If I was selling industrial tools, maybe what I’ll sell you is an augmented reality program where you can put in your Google specs and then, as you’re using the tool, I will guide you in using the tool.
There’s all sorts of ways to innovate around the product and deliver an experience of customer experience superior to what we could do in the past. That’s the essence of digital transformation.
20 years from now, what do you imagine digital transformation will look like?
It will still be needed. There are people who say it is dying, it’s going away. Look at the cloud. It is fundamentally transformative. It’s the same transformation going back 150 years when industrial plants generated their own energy.
Go back 120 years or so, companies were embroiled over the question, AC or DC? We’re now talking about hyper scale cloud, hyper converged, hybrid cloud, Google, Amazon and Microsoft. Right now we’re making that fundamental shift in how we build it. How do we provide storage? How do we provide processing? How we provide networking is being taken over by industrial conglomerates, who can do it cheaper, faster, better and more securely.
The nature of IT will change slightly, the tools will change radically.
In 10 years, the idea of putting up a data center will be seen as pointless unless you have a very specialized process. If you’re in the infrastructure business, you’ll go to work for one of the big companies or not at all.
However, the complexity of the problems we’re being asked to solve will keep going up. What we’ll see is an IT workforce that is much more business savvy, that is much more plugged into the processes. We’re still going to need people in it to orchestrate, architect and put this stuff all together. The nature of IT will change slightly, the tools will change radically.