Ep. 5: If Otis can Transform, so can You – Michael Krigsman

Otis elevator company is actually a leader in digital business transformation. Join VANTIQ CMO, Blaine Mathieu, and tech industry guru Michael Krigsman, host of CXOTALK, as they discuss how to effectively transform virtually any company.

Transcript

Blaine: Joining me today is tech industry analyst and host of CXO talk, Michael Krigsman. Michael is recognized internationally as a strategy adviser and industry commentator and also as a columnist for ZDNet. Thanks for taking the time, Michael. We’re gonna have some fun today.

Michael: Hey Blaine! Thank you for inviting me. I’m excited to speak with you!

Blaine: Well great! It’s my honor. So Michael, why don’t you tell us a little bit more about yourself and CXO talk?

Michael: CXO talk is a video series where we speak with the most innovative senior executives in the world. Much of the conversation centers on digital transformation and the response that these folks have in their companies, how they’re managing their business, to various forms of disruption in their environment; whether it’s coming from technology, changing consumer expectations, changing expectations among their employees, it’s all about the management and leadership of their organizations in response to this changing world.

Blaine: Do these tend to be I.T. leaders, business leaders, or a mix of both that you’re interviewing?

Michael: It’s really a mix of both. We’ve had quite a number of CIOs but then we’ve had CMOs, COOs. It’s really a broad range because I’m trying to look at disruption and leadership and management from multiple perspectives. A lot of times, technology, though, is at the root of driving change, but the people I’m speaking with cover a broad range inside companies.

Blaine: Right on. At a high level or even at a detailed level, what particularly excites you these days about what’s going on at the intersection of business and technology? Are there any particular trends? What’s going on that makes you go, “Wow this is amazing!”?

Michael: Well of course, there’s many technologies out there, but the thing that really grabs my attention is how companies are responding. In the past, I technology, IT, was the province. You know, the folks in the white coats who were guarding the server rooms. Today, we’re all technologists and consumers have lots of experience with excellent user experience, with excellent user interfaces. So, the demands that consumers have in their personal life has translated onto what they expect, both from enterprise suppliers, enterprise vendors, and if you’re an employee, it’s translated into what you want from your employer.

So, the transitions or the transformations that this causes can be very deep and very profound and affect things like technology that’s used, adopted, and managed. It can affect your corporate culture, talent pool, or core business model. The changes are very significant. That’s the thing that really grabs my attention today: how companies are dealing with this.

Blaine: I imagine those changes you’re talking about are probably related to your definition of what digital transformation is all about. It’s fundamental to digital transformation. This is a topic you talk a lot about and write about in your interviews diving into this very deeply. As you said at the beginning, many heavy hitters both on the enterprise side and also vendors that are trying to help companies drive digital transformation.

So, what the heck does digital transformation really mean to you? What does it mean, really? It’s an overused term. Everybody uses it: every website everything technology is digital transformation. What does it actually mean to you?

Michael: You know, Blaine, I’m still trying to figure that one out. I ask my guests on CXOTALK the same thing. What does this actually mean? If you summarize it, let’s just take the two words. We have digital and we have transformation.

Digital is, in a way, clear. You have technology changes that have enabled capabilities and changed expectations. Then, you have the transformation itself which means how do we adapt to the changes, to the changing expectations that the world has of us, that our customers have? How do we adapt to changing sets of competitors? Digital transformation is, to me, anything that an organization undertakes to respond to this changing environment or changing landscape. It’s a pretty high-level definition, but it’s flexible as well.

Blaine: Since you’re asking your guests about this topic a lot, do you find that your guests in their organizations are actually, literally using the term digital transformation? Is it something they’re talking about or is this just something they’re doing but they’re not actually referring to it by that term? I wonder how effective, literally, the use of the term is or how widespread it is in the environment we’re in.

Michael: Blaine, it’s an excellent question and I wonder about that myself. I don’t think practitioners use it all that much in their daily activities. Digital transformation is one of these terms that is kind of an aggregating term when you look back and you look over the landscape and you say in a broad brush stroke, “What are we doing?” We can categorize it as digital transformation.

But the work, itself, the work of figuring out how are we going to place the customer in the center of what we do, what does that mean for our processes? What does that mean for the relationship that our people have with technology? That’s not about “digital transformation”. That’s about executing some plan according to some set of goals that we have. .

Blaine: Well that resonates with me a lot. When I put my marketing hat on instead of my interviewer hat on, I work with an outsourced field service firm that makes calls into larger enterprises about this topic. I was quite surprised to discover that about a third of the time the person receives the call, they say something like, “We’re not doing digital transformation. We’re not doing it.” Does that mean you’re not doing any digitization initiatives, anything to improve your growth, alter your business models, respond to the disruptors that are in your space, you’re really doing none of that? They say, “We’re doing that. We’re just not doing digital transformation.” It’s almost scared me off using the term, at least, in that kind of context because I think that, to some degree, I’ve literally seen a bit of a negative reaction to it. So it’s interesting.

Well it makes a lot of sense because, if you think about it, digital transformation is this very broad umbrella. And yet, if you speak with somebody inside a company who’s responsible for some piece of it, it’s sort of down on the ground, getting the work done. It’s maybe that Chief Digital Officer, at that level, who’s got the very high-level overview that might talk about a broad company-wide digital transformation.

But most people in the company are not looking across the whole organization. They’re looking at their job and they have to do their thing, whether it’s looking at competitors, whatever it might be. Now companies have been at technology for decades now obviously, and digitization, in general, bringing processes and systems online literally and figuratively.

Where do you think enterprises are, in general, in the lifecycle toward digital transformation? How mature are we in terms of this transition? Or is that even a way to think about it?

Michael: I think it’s a reasonable way to think about it. I think it’s genuinely a mixed bag. It depends on the company. I’m speaking with really innovative companies. On CXO talk, the goal is to showcase companies who are really doing it, embracing it. So those organizations, and I can give you some examples, but those organizations are on the cutting edge. They really are investing. They recognize that their future is at stake and they have to change.

But then, there are many, and I would say probably most organizations, that are not that far along that know they have to do something. At the most basic level, maybe they need an online store which is not necessarily digital transformation but at least it’s kind of a poke in the right direction. So, they’re taking steps, but any time you’re kind of forced either by choice, because you see what’s going on in the world, or because you have competitors forcing you to look at your business model and rethink the core of what you sell and how you make money and how you relate to your customers, that’s not easy.

We, as people, don’t like to change very easily. Therefore, there’s a constant inertia against driving this type of change.

Blaine: Interesting. There’s so much there in what you just said. I want to react to a comment you made just at the beginning of that which is building an online store might not be digital transformation. Yet, depending on what your business model is, what industry you’re in, or who you’re competing with, that might be radical digital transformation, actually.

I think, sometimes, we get caught up in this notion. I know you’re not, but when people generally think of digital transformation, they think of artificial intelligence and augmented reality and a bunch to these leading edge or bleeding edge technologies. Yeah, those can be part of digital transformation initiatives, but in your industry, putting up an online store might be actual digital transformation; enabling a new business model, enabling you to do things in a way that just hasn’t been done before. It’s a very interesting comment.

Michael: I think that’s right. I think that the term you used earlier, the maturity, is an accurate one because every organization needs to look at where they are. For example, think of retail organizations. Retail has been forced to change.

Why? Well, because of Amazon. Amazon was, initially, a seller of books. Now, it is the most powerful force in retail and online. If you’re a retailer, that is something that you have to deal with. You have no choice.

On the other hand, smaller companies who are less affected by online, for them, they may not need to change as rapidly because their business is not affected in the same way, not disrupted to the same degree. You have to look at the company in the context of its industry, competitors, and market and what the people in the market, the customers, expect and want.

Blaine: Amazon’s a great example with their not quite recent announcement that they’re moving into the home insurance business which caused the insurance company stock to all go down about 10 percent on average. We think of them as an e-commerce store but they’re really a fundamental platform that owns consumers from which they can build many different types of services. So, truly forcing digital transformation industry after industry: groceries, insurance, and who knows what’s next.

That actually brings up a good question, then. Do you see, in your experience, companies are being more proactive these days around their digital transformation or are they being forced to be there by the disruptors like Amazon and others?

Michael: I think a lot of companies are waking up to the reality that if they don’t change, they will lose market share. There are competitors that will arise. I think that that’s happening more and more.

Digital transformation is interesting for another reason as well in relation to this. About three years ago, the hype was all around the term digital transformation. That’s all we heard three or four years ago. Now, you don’t hear that term anymore too much, not nearly as much. You hear about AI and digital transformation seems sort of old and boring and not very sexy. But the reality is, if you look at where companies are spending enormous amounts of money and enormous amounts of time, it is in changing their operations because they recognize they have, ultimately, no choice. It would be irresponsible to ignore the need to change, to adapt.

Digital transformation has become a very large industry, so to speak. Even though, it’s not as sexy as it once was. I think the recognition is there that we have to adapt, and if we don’t, we will see an exodus of our customers going to other companies, to competitors, that have made that change.

Blaine: That’s really interesting. I like to think of one of the key elements of digital transformation as being related to the notion of becoming a real time business. You talked about the consumerization of I.T. and people expecting great experiences.

I look at why and how Uber has disrupted the taxi industry by turning the taxi industry into a true, real-time business where they know the location and state of every participant in that ecosystem and can create the optimal outcome because of that. What’s your reaction to this notion of becoming a real-time business or real-time enterprise and its relationship to digital transformation? Does that ring for you?

Michael: It does in many circumstances. I think the issue is ultimately one of data. It depends on the type of business. Let’s say something is happening in your business environment. For example, if you are a retailer, something is going on you know in relation to e-commerce and you need to be able to respond to that. Airlines, or even some sophisticated retailers, are engaged in dynamic pricing which means they are looking, or their systems I should say, are looking across what’s being purchased, the price, who’s buying, and asking if they can adjust the price in a on a real time basis. That’s a fairly obvious example of real time.

Another interesting example is let’s take Otis Elevator Company. We all know Otis elevators. By the way, if you’re nice to me, I’ll tell you the real story of the close button on elevators.

Blaine: OK. Let’s hold that. I definitely want to hear that, but keep going.

Michael: Just this past Friday, I had a CXO talk with a Chief Information Officer, a guy named Marcus Galafassi who’s the CIO of Otis Elevator. They are a 12 billion dollar company. Who would have thought? I guess it makes sense because their brand is everywhere. They are something like 150 years old. I don’t remember the exact date. You can imagine that a 150 year old 12 billion dollar company has had to go through a variety of changes since the time of its founding. He was describing to me what digital transformation means for them.

IT turns out that the elevator business has two parts. One, is installing elevators, but, the really big part is service because elevators can’t go down. What they have been doing is investing very heavily in IoT, Internet of Things, to enable their elevators so that at any moment, a customer can see the real-time status of what’s going on with that heavy capital equipment. Not only that, the elevators themselves can proactively call for maintenance if there’s an issue because there’s service contracts. I forget the number, but I think they employ something like 30,000 elevator field service technicians, a very large number.

In a case like that, the real-time dimension is crucial to what they do and to the service that they’re offering. They’re going to be other kinds of businesses that don’t rely on that, but certainly in this type of situation, it’s central. Real time is central to what they do.

Blaine: Great example. We’ve got one of those internet-connected elevators in the building that I live in and the experience is usually very good. But now, we’ve added on the fact that sometimes the internet connection goes down and then the elevator has to be taken off line. It brings a whole other element of if you’re going to be running a real-time, internet-connected, real-world operation, you better be using edge computing or some of the other technologies that are coming online to really ensure you’ve got high availability, reliability, and everything else. That’s a great example.

Another example that just came to mind when you were talking about that, back to the insurance, maybe because I was thinking of elevators going up and down maybe going down too fast. I’m sure Amazon’s plan is all about turning the insurance business into a real-time business; not setting rates annually based on whether X had a fire or not, but setting rates in near real time, in any case, based on what’s actually happening. What do you own? Did you buy a fire extinguisher on Amazon last week or not? You did! Great. Your insurance rate goes down a tenth of a percentage point. There’s all kinds of ways they can turn the insurance business into a real-time business. I think it’s just an example of how, even companies that you might think are far away from real time, can become real time and that can be central to their digital transformation.

You mentioned examples earlier. Do you have another example of a favorite digital transformation story or an example or use case that sticks in your mind?

Michael: There is a company called Uniqa insurance. They are a very large insurer in Switzerland. I had on my show Dr. Alexander Bockelmann who was their CIO and now is their Chief Digital Officer and a member of their board of directors. He is running a relatively small group inside Uniqa looking at their business model. The business model of insurance has not changed in a long, long time. They’re looking at what kinds of products are they selling, information they can gather about their customers, such as you were describing.

Again, it’s a proactive thinking about the underlying business model. How are we making money? What do consumers expect from us? How can we manage risk? How are we pricing? All of these things come into it. So it’s another example. In that case, like I said, he’s a member of their board of directors. That demonstrates the level of senior executive commitment that they have.

Blaine: That’s actually a really good example as a lead into my next question. So this person, I think you said, was a CIO then became a CDO. In your experience, and maybe it’s trending in different ways over the last few years, who owns digital transformation in most enterprises? Is it somebody who comes from the IT side or is it somebody who comes from the business side? It’s the old IT versus OT debate that goes on. What’s your take on where we sit these days? IT or OT in digital transformation?

Michael: Well, I’ve seen both and it’s another interesting question. If digital goes under the – I’m grimacing because it’s like a no win situation in a way – If digital goes under the CIO, then does that imply that digital is primarily a technology initiative which it should not be? At the same time, the CIO really is the person with the broadest view, end-to-end, across the company because she or he sits at the intersection of every process that goes on.

On the other hand, you can make the argument (and a lot of companies do, probably more companies do) that say the Chief Digital Officer should report directly to the CEO because digital is not a departmental function. It is a core business model shift of the company as a whole.

Blaine: I fundamentally agree. I think real digital transformation involves, as you said at the beginning, digital technologies, but it’s as much if not more about a business model shift or doing something differently in the business enabled by technology. I think you’re right. There’s a breed of CIOs becoming CDOs and others these days who literally do have that mandate from the CEO or from the board.

I will say, though, when I attend events and speak on this topic as you do, I hear a lot of pushback from the business side saying IT still just doesn’t get it. They’re involved in a two year project to upgrade SAP and they’re the last ones I would talk to digitally transform my company. There’s just a lot of resistance pushback from the operations side of the business I still feel. It’ll be interesting to see how this continues to play itself out over time. Can IT make itself the strategic leader in the organization that I think it could be?

Michael: It gets back to the maturity issue that you raised earlier in this conversation because if you have a CIO in an IT department that’s just focused on their latest enterprise software upgrade, then clearly, it’s not the appropriate place to oversee your overall business model. On the other hand, there are some great CIOs out there who really do get it. Then again, I’m talking to the ones who are the most innovative who really are the leaders. The folks that I’m interviewing, many of them do run this, and if they don’t have digital transformation under them, they’re very deep partners. I don’t think you can make a generalization about it.

Blaine: I see you’ve got a selection bias. Your guests are the ones that are the ones on the leading edge. They’re doing it right or they’re trying to figure out how to do it. And then you’ve got the mainstream market further behind wondering how they are going to do it. How are they not going to get steamrolled if they’re in the elevator business by Otis transforming themselves or by Uniqa transforming themselves or Amazon or whoever it is? Those are the ones that I think really need to ask this question and find some answers sooner rather than later.

Michael: And then I have to get people on my show who are trying to do this and really get it and are great and they may not have the organizational support that they need. This is the exception, but every now and then it happens. For example, there was a person on my show that worked for a retail brand that you would know. This person was struggling because management viewed transformation as online sales. Therefore, if a metric for transformation is, “how is our online store doing?”, then that cuts out any other type of innovation that’s not directly and functionally related to beefing up the store.

That’s not a business model change. That’s not innovation necessarily. That’s going after a particular channel. So, you’ve got to have alignment across the organization or it simply doesn’t work. If there are weak links, it’s going to break down someplace.

Blaine: Yeah, absolutely. Let me shift gears on you a little bit. I know a few years ago, every tech company, every startup in particular, had to be an AI company. I saw so many companies were just putting AI or machine learning on their website even if they didn’t really have much there. Are you seeing or sensing any shift in the impact or the real-world impact of AI on digital transformation initiatives or is it too early yet?

Michael: I think it’s too early yet. However, there are many, many companies that are involved with proofs of concept around AI. For example, with customer service using cognitive agents – I’m not even going to use the term chat bots because that’s sort of more primitive than real, AI-backed cognitive agents – but there are very large organizations who have proofs of concepts going on to try this out. Sometimes what they do is they’ll use it first on say, internal help desks, and then they’ll try it out externally. So AI will happen. It is happening, but it’s very early days still as well.

Blaine: One theory I have, there’s a lot of talk obviously about the singularity in tech circles and Elon Musk saying the machines will take over. I think the real promise in a foreseeable future is enabling better human-machine collaboration; actually having machine systems, could be physical robots, but even just software systems and machines being able to work more effectively with people to utilize the wisdom, strength, and intelligence of people along with the machines and systems. What’s your opinion on the question of the future of AI and impact on humanity, the workforce, etc.?

Michael: One of my guests was Paul Daugherty who’s the Chief Innovation and Technology Officer at Accenture, huge company. He just wrote a book called “Human Plus Machine”. The thesis of the book is precisely as you just described: the AI foreseeable future is not going to be about robots replacing people so that we can all spend our days on the beach being overlords of this vast cyber army of servants, cyber servants. Maybe in the future, but for now, that’s kind of science fiction.

On the other hand, on a helpdesk just as an example, if you have a cognitive agent that is smart enough that can interact appropriately with people that are calling in or typing on a site, that frees up the agent to handle the more complex issues. If the road issues can be handled by machines, it frees up people to do the more interesting stuff, higher value, more difficult.

The other thing is judgment. Judgment is an interesting question because the greater the degree of judgment, the more you start to approximate human intelligence because human intelligence, in a sense, is a function of judgment. In our practical, present reality, it’s going to be a combination of AI supporting human activities.

Blaine: I couldn’t agree more. Maybe, to take us to the end here, I’d like you to reflect on any sort of key takeaways or tips for a business leader who’s trying to drive real-time transformation into their business. After all the interviews you’ve done with thought leaders and gurus in this space, what are some key takeaways or tips you’d have?

Michael: I think at one level, it’s pretty simple and that is just listen. Listen to your customers. Listen to what they have to say. Watch what they’re doing. Watch their buying habits. Listen to the things that they care about. Listen to your employees. Listen to what they want. What does it take to make your employees actually happy so that they want to go the extra mile? What does it take to make your customers actually happy so that they will make a referral to their friends or their colleagues online and say, “Oh yeah you should shop here because these guys are great.”.

How do you break down silos inside your organization so that you can deliver back to the customer the information that they care about? So if the customer is calling about an order it can just be all done simply and easily from the customer point of view. And to do this and to make this kind of change, what kind of innovation is needed and what’s the mindset? Do you have people inside your company who are willing to experiment, who are willing to try new things? Are they willing to do that?

Or do you push them down if they make the smallest mistake? Are they ground down into the ground so that they feel that they can never do that again? This will stifle innovation. All of this reveals many, many layers of the onion but it begins with actually really caring about these constituencies.

Blaine: Great advice. I think often, we don’t think of that kind of advice as being in the context of digital transformation. And yet, I agree it’s fundamental to the concept of digital transformation. So, thank you for that. That’s very well said.

Before I let you go, I do need to hear the real story of the button on the elevator!

Michael: Of course, when I was speaking with the CIO of Otis Elevator Corporation, that’s the first thing that I asked. Does it really close? He said that when an elevator door shuts, you have a great deal of force. When and where does the most stress and strain happen on an elevator? It’s when the doors are closing and try to force the doors open. Now you have one force going against the other force and that’s what causes the most problems on elevators.

So, the button, unless the customer doesn’t want or if the customer requests the button is –

Blaine: A placebo? [laughter].

Michael: Not Fully functional. He wouldn’t say that it was fake, but you can draw your own conclusions.

Blaine: There you go. So, all you rapid button pressers who are listening to this, and I know that’s probably most of you, take heed. Well, that wraps it. Thank you so much, Michael. It’s really fun having you join us today and a really insightful conversation.

Michael: Thank you so much, Blaine. It’s a pleasure and honor to be here.

Blaine: You bet. Those interested in hearing more of Michael’s thoughts can follow him on Twitter @ mkrigsman and at CXOTALK. Also, check out cxotalk.com. Thanks again, Michael, Bye bye.

Michael: Thank you.

 

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