Brought to you by VANTIQ
Episode 17
Business at the Speed of a 14-Second Pit Stop
Former Penske CIO Steve Pickett discusses how businesses can transform at the speed of a race car team, but only if everyone is working in the same direction. Also, don’t miss his embrace of blockchain and diss on IoT – the first VANTIQ TV guest to go in that direction!
Blaine
Mathieu
Chief Marketing +

Product Officer, VANTIQ
Steve
Pickett
Former CIO of Penske Corporation and Partner at Fortium Partners

Blaine: Joining me today is Steve Pickett. Steve was formerly the CIO of Penske Corporation as well as Executive Director of the Society for Information Management and the Executive Director of IT at Volkswagen, among numerous other stints in a long career. Steve is currently a partner at Fortium Partners, a consulting firm comprised of former C-level technology leaders. Thanks for the time, Steve!

Steve: Well thank you for the interview. This is great. I’m looking forward to it.

Blaine: I agree. We will definitely have some fun. And in fact, our listeners will recall, I recently interviewed Falk Bothe the Head of Digital Transformation at Volkswagen, a bit of a connection to your past life. I know you spent a fair bit of time at Volkswagen.

Let’s dive in. Maybe start by telling us a little bit more about Fortium Partners. What is Fortium Partners? What do they do?

Steve: Fortium Partners is a group of ex CIOs or ex C-level executives that have decided that they want to help other companies out. They offer themselves to companies to do interim CIO work, special projects, look at the due diligence for acquisitions, and basically the whole gamut of things we used to do as CIOs.

The key leverage we have in the market is that we’re one to each in all different industries. We’re not all from the same industry. In fact, most of us are from different industries so we can really lend ourselves to a lot of different organizations in helping those organizations.

Blaine: Interesting. Sometimes it’s sort of a fractional CIO model. Is that right?

Steve: Some of it’s fractional. Interim is probably more of what we do where someone’s lost a CIO or they have a CIO opening and we go in and try to help them out.

Then there is some fractional work. But, the due diligence work is really key because we can get in, find out what the company’s problems are, and then offer our services as interim. So, everything links together.

Blaine: Interesting, interesting. The reason I ask is I before I joined VANTIQ, I was part of another fractional – a CMO firm called Chief Outsiders which is a very similar model, but on the marketing and product side versus on the technology side. I think that model’s becoming very popular these days as companies, especially smaller companies, want the wisdom and experience of guys like you or I, but they maybe can’t afford us or maybe they don’t need all of us. Or as you said, a private equity firm just needs some advice on an acquisition. They can get guys like us a lot more easily than they could in the past.

Steve: Well with respect to the marketing angle, people used to ask me, “How do you get along with your marketing department?” It’s an eight-step process.

Blaine: Okay [laughter].

Steve: And it is. There were eight steps between my office and the CMO’s office. That’s the total process. We got along great.

Blaine: I love it. I love it. I love it.

Well, I’m about maybe 10 steps from the CTOs office here. So, same concept. I’m totally with you.

Let’s back up a bit. Tell us a bit more about yourself and your journey to becoming the CIO of Penske, obviously, a very well-known American brand.

Steve: I kind of surrounded the automobile industry. I started out with two OEMs, one of which American Motors, (which many of your listeners may not even know who they are) and moved to Volkswagen. I got the international experience. I had OEM experience in the U.S., OEM experience in Europe and Asia, and leveraged that into an international company that was a supplier to the automobile industry.

I moved back a tear, but I knew how an OEM thought. I knew how an OEM ran so it gave me the opportunity to use that to the best advantage of a supplier. The only piece missing after that was retail. That’s where I ended up with Penske: the retail automotive. You’ve got dealerships in three different continents. So, it was a great experience. I took my international experience, my OEM experience, and my supplier experience and leveraged it into dealer experience.

It was quite a run. I had a great time doing it, and then got a little dabble into a little bit of the racing on the side. But, that was more of a side job than anything else. I never raced a car, but I got to watch them race and work with the sponsors and things.

Blaine: Penske didn’t let you get behind the wheel and take one around Daytona or something?

Steve: We couldn’t do that. A publicly traded company usually doesn’t let their officers get into danger like that.

Blaine: That’s probably a good idea. Actually, it makes me think. Maybe tell the viewers a little bit more about what the scope of Penske’s business is. I think a lot of people knows the name, probably mostly from the racing heritage, but they might not actually realize the scope of business that Penske does.

Steve: Racing is one of the smaller entities. They’ve got a racing and a private equity entity. The next tier up, though, is what people probably know Penske from the most which would be the truck leasing and truck rental business: the yellow trucks with Penske on the side. A large company in Redding, Pennsylvania rents trucks in the U.S. and Canada and also some new business in Australia/New Zealand. It’s a large logistics and truck rental company.

The next tier up is the car business, which is car sales. It’s a publicly traded entity which is kind of interesting. We’ve had privately held entities and publicly traded entities. With those two put together, it was a particular challenge for me because sometimes I had to argue with myself. I wasn’t allowed to disclose certain things to one side of my brain and I had to disclose the other things to the other side of the brain. I had a different type of right brain/left brain analysis there.

The dealership business is in Europe, US, a little bit in Canada now, and Australia/New Zealand, moving into Japan recently. They are all over the place with car dealerships. It makes it interesting because a car dealership in New Zealand runs completely differently than a dealership in the US. You had to learn a lot about how to deal with different cultures. Fortunately, I had that from my previous experience. It was an exciting opportunity in that way.

Blaine: What an opportunity to be involved in so many different elements of a business! Given your background and experience, what most excites you about what’s going on at the intersection of business and technology these days?

Steve: Business and technology… Businesses are more often dealing with the technology through the CIO or through the technology group. It’s important that it’s one team; they’ve got all the oars in the water and they’re all moving in the same direction and you’re not rowing in circles. If one side of the boat’s rolling one way and the other side is rolling the other way, you’re going to go in circles very quickly.

With respect to today’s business, businesses are more and more listening to the technologists, how to go to the next level, and how to make technology productive for them. I think it’s exciting times. It’s moving very, very fast, which every once in a while, you need to tap the brakes because there’s things that can go wrong. But if you’re careful the way you implement things and careful the way you choose your suppliers – I do call them suppliers because they help us. They’re supplying things and they’re partners. They’re not necessarily vendors which sell peanuts on a corner-side stand or something like that.

Blaine: Right, right. Well, speaking riffing off the speed of business you were just talking about, that I think is a good segue into digital transformation as a topic. Everybody’s on that these days. The speed of a business is increasing continuously, and therefore, businesses want to respond to that rapidly. What does digital transformation mean to you?

Steve: Digital transformation has always been there just not just as widely advertised. The taxicab of yesteryear, you had to pay cash for a taxicab. Well now you’ve got Lyft and Uber. Lyft and Uber were huge digital transitions, transformations. They basically took an idea: taxicab collecting cash and turned it into a business where there’s no cash involved. You order it on the Internet. It shows up, a huge digital transformation.

Now, did those two companies transform. No they started there. So, to catch up with them, there’s going to have to be some type of transformation. I was in a taxi yesterday in Chicago and they are transforming. They were there very quickly. They’ve got all the electronics in them now. You can pay with your phone. You can pay with your credit card. They’re learning too. The ones that transform are going to survive. Ones that don’t, won’t.

Everybody’s got to be going in the same direction. The company has to have a strategy that allows them to move quickly, allows them to take advantage of technologies that maybe management was afraid of five years ago. How many executives thought that they’d be doing all their business on a cell phone 10 years ago? In fact, I can remember 10 years ago having to get the CEO to approve a cell phone for a person because it was expensive and he didn’t know what it was.

It went from that to, “Why doesn’t everybody have a cell phone now?” Communicating with customers instantaneously, it’s a big transformation for any company. Even though they didn’t call it the official digital transformation, they did transform. They did transform the way they do business because they’re doing business quicker just by applying simple technologies.

Blaine: Before we started recording, you mentioned that you thought the term “digital transformation” was being overused. Do you have a further thought on that one?

Steve:It scares executives. You walk in and you say, “We’re going to use AI and IoT to do a digital transformation.” That’s usually the end of the discussion.You’ve got to talk about their business, what their business is doing, and how you can apply digital technologies to that business to make sure that the business runs more efficiently. It is not a single transformation. You know you have to be constantly transforming.

It’s not something you do and then lay it on the shelf and forget about it. It’s something you really need to do everyday in little pieces. The term is overused as this big, massive project. I really think if you transform everyday, you’re going to be a much more productive company.

Blaine: Yeah I think that’s right. I think it should be thought of as continuous digital transformation. When people think of DX, I think too often they think of one big project that’s going to reshape the company. And as we all know, that fails 9/10 and/or least takes far too long.

Given your time at Penske, can you think of any ways that you can discuss where Penske transformed themselves, some particular ways?

Steve: The salesman at the car dealership. You used to have to go to the car dealership, talk to a salesman about a car, walk around and look at the car, and then decide which car you wanted. Now, Penske has a great internet sites. You can find the car that you want on the Internet, dialogue with a sales person with a chat room, figure out that you want to come over on Tuesday and pick up the car, exchange documents, in some cases, with e-mail (the ones the states allow them to do), and you’re in and out of there in no time at all. The old days of having to spend an afternoon at a car dealership to buy a car is gone because they’ve used digital technologies.

They are also using tabletop computers to help with that whole process. Instead of the salesman sitting behind a counter talking to you and typing at a keyboard you can’t see, he’s sitting at a table with you and the digital table happens to have the documents out that you’re supposed to read. They’ve transformed significantly in the car dealership business.

Blaine: That’s absolutely true and thank goodness. I don’t like to go into a car dealership to get my stuff done there. I want to do it all online, all remotely, and literally go in and pick up the car from the dealer. That’s all I want to do in there, which is what happened the last time I was in one. So, that’s a really great transformation, no doubt about it.

Steve: Or if you have a question about a particular vehicle i.e. you’re not sure what kind of performance you’re going to get out of that engine, there’s a chat room and all of these dealerships now have experts. They’re not necessarily salespeople, but they’re in the sales showroom that have special training on the vehicles and know a lot about the vehicle and can help you make your decision like a paint scheme.

Blaine: That’s very interesting. Not everybody’s a sales person in this new model and most of the selling probably happens even before you get anywhere near the dealership.

Steve: And it has to do with the breadth of your web site; how much content you have on there the customer wants to see.

Blaine: You talked a few minutes ago about Uber and Lyft transforming the taxi industry. Part of the way they fundamentally did that is turning that business into a real-time business. We think of using a real-time model as key to digital transformation. Do you agree with that concept? Do you think the world is becoming more real time, the world of business?

Steve: I’m going to transition here once again. What they are doing, really, is a block chain. They have information about the customer. They have information about the driver. They have information about the city. They link all those together in one area so that the customer is communicating with a driver who happens to have a way of getting paid through the company. It’s really an interesting way of doing block chain.

Now, they’re not using public blockchain. They’re using their own. But, they have access to credit cards through a special, digital contract, so to speak. I didn’t have to sign a contract with them. They have a digital contract with the driver and they have significant knowledge about the city so that when the driver has to go from point A to Point B, they know how far it is. The transaction occurs without you having to approve it again.

Blaine: It is amazing: a lot of the core technologies that are underpinning these super easy-to-use services that we don’t even think about.

Flipping to another part of Penske’s business, we were also talking earlier about how executing a race has become very much a data-driven, real-time business. Do you want to touch on that a little bit?

Steve: If you’re watching TV and you’re watching Indy car, F1, or watching NASCAR, particularly F1 and Indy car, the engineers back at the shop know a lot more about what’s going on in the car than they did in the past. The engineer back at the shop is watching monitors and can tell the driver, “It looks like you’ve got a problem with your right front tire. Can you drive it a little easier through the corners so you don’t damage your right front tire?”. Instant communication.

The engineer is not sitting there watching the race. He’s back in his home in North Carolina just watching monitors. It happens quite often. They’re communicating with the driver. If the driver doesn’t like the way the car is running, they can tell him different things to dial, different things to try to make the car run better.

Now leveraging that knowledge and leveraging that way of doing business into the regular business – we’ve always said doing business at the speed of a 14-second pit stop, that’s the mantra of the Penske organization: with absolute quality but the speed of a pit stop. That really did occur.

Blaine: That’s a great concept and you’ve given me the title for this episode of VANTIQ TV. That’s definitely a great idea. Shifting gears a little bit, although it relates to the example you just gave, we talk a lot about humans, human-machine collaboration: people and increasingly intelligent systems working together collaboratively. There’s obviously a lot of discussion about AI these days. What’s your thought on the future of artificial intelligence and how that might affect business and the role of people in business?

Steve: Today, artificial intelligence is obviously in its embryonic stage. What people don’t realize is that there’s a learning process involved with it. You can write an AI program. You’ve got to teach it or it’s not going to be intelligent and it’s certainly not going to be artificial. The teaching process, the amount of data that you have to give to the engine, is significant. I think they created a new term, zettabytes, or something like that. I have no idea how much that is.

Taking just an example, if you want to teach an AI program what a crack is, you have to show it terabytes and terabytes of data that looks like a crack and then you have to look at what it did with it and a human being has to decide whether it figured it out correctly or not. Maybe it figured something else out that you didn’t know about. That’s the key: the human to say, “No. You got it wrong.” while the AI program might have gotten it right and the human knowledge about what it was looking at/how it was looking at it might be the incorrect thing.

It takes some time to understand this, but there are great AI applications that I’ve heard about. For example, pricing of rental cars. It’s an instantaneous thing. If you take customers walking up to a rent a car counter, the logic behind the price they’re going to offer them might have occurred 10 minutes before based on inventories that they see in the parking lots, the number of people flying in that day.

You can change your prices pretty quickly if you’ve got an AI program that has all that data and can properly analyze. If you do not properly analyze it and offer the customer a price they don’t like, they can walk next door. There are real, live applications doing that today.

There are AI applications, particularly in quality control, where a particular AI application is looking at a camera. A tray of items are going or flying below it and it’s finding defects in those, maybe. But, again the human is going to look at something and say, “I don’t know what’s wrong with it, but it just doesn’t look right.” where an AI program has to know exactly what’s wrong with it. That’s where I think the AI is going to take a while to figure out how to do things.

When AI programs are telling us things that we don’t know, that’s when artificial intelligence is going to kick in properly. Then, we have to listen to it. It’s like anything else. They can tell us that there’s a paint defect and we look at it and say, “It looks fine to me.” Well, you have to believe the AI program found a paint defect.

I think there’s a lot of applications in quality control initially. I don’t think it’s going to be able to chat with customers for a while. I think that the people who have experimented with that are indicating that they’re 95 percent there, but that another 5 percent is what customers hang out for. It’s going to take some time to get there.

Blaine: Yeah, I fundamentally agree. I think AI or machine learning being applied to very particular use cases and scenarios makes a lot of sense and can and is absolutely adding value even today. But, this notion of a generalized AI system which is going to do everything or be as intelligent as people in every way in every circumstance is a long, long way off, if ever.

Maybe that’s a good segue into the next section. I always ask my guests if there’s a part of technology or business conventional wisdom that you think you’d like to call BS on; where most of the people are thinking X and you think Y.What would that be in your case?

Steve: I’m going to take the Internet of Things.

Blaine: [Gasp] You’re the first one to use IoT as an example. All right, let’s hear it. What’s your thought?

Steve: I’m going to take a hospital example. Let’s pretend that I have a heart issue and I go and have a heart monitor put in. The doctor does a really good job of putting it in. It’s an Internet of Things device. It’s programmable with Bluetooth and I’m doing fine. Then, I have an ear issue so I go to a different doctor and have a similar thing put it in for my ear. Then, I go to a third doctor and have a similar thing put in to correct some vision. All three of them are operating correctly together.

The ear guy realizes that he’s made a programming error and wants to download code to reprogram the ear device that screws up my heart device and turns me blind, which is a real-life scenario. No one is looking at these things from an interoperability standpoint. Where did you install the device? Who’s keeping track of them? What’s the serialization of them? How are you going to keep track of the software levels and then do the software levels operating with the software levels of another?

I’m really concerned that we’re talking internet of things, but we haven’t learned how to manage the things yet. If you have 5000 devices in a building and somebody comes along and says you have to update software on one of them or one set of them, how does that affect the other set of them and how is it going to impact it.

We didn’t figure that out when we first put PCs in. They all conflicted with each other. I’m really afraid with IoT, we’ve got the same issue because we don’t have the management software to manage the volumes of things and push software updates to these things. I don’t think anybody’s figured it out.

Blaine: That’s definitely a key challenge out there. I agree. It’s about managing and orchestrating the connections between these different devices and different systems of devices, in fact. I think that that is definitely a key challenge that has to be overcome for IoT to really achieve its potential, either in the consumer side or on the industrial IoT side.

Steve: What’s the impact of a hacker coming in deciding that he wants to shut the building down and all he’s got to do is prove, as we proved with Target, he just needs to get into one device, find a vulnerability in one device and these are all manufactured by all kinds of different people. The one device that is manufactured by a substandard programming house that the hacker’s going to get into, we’re going to have a situation where he’s going to shut a building down or shut a company down. Relatively anything.

Blaine: The next decade is going to have a lot of interesting experiences, I think, as we begin to see that boom in connected devices and IoT devices. No doubt, we’re going to see some examples exactly like that. Leaving the next decade out, how about 2019. Any specific predictions for 2019 either on the business or technology side?

Most CIOs haven’t been stressed a lot since 2009. It’s been grow, grow, grow, more, more, and more. I think that we’re likely to see a little bit of a stressed period in 2019 and we’ll see how they perform.

Blaine: By stress period, you mean a downturn in the economy?

Steve: Some type of downturn in the economy. Maybe not all segments of the economy, but many of them. When that downturn occurs, the good CIOs are going to figure out how to continue to do their projects, save money in other areas, and continue to encourage management to continue. The CIOs that that have been loving this grow, grow, grow period that have never been through a downturn, recession, a scenario where you’ve got to say goodbye to people, we’re going to see who the good guys are.

Those are the lessons you have to learn throughout your career. If you’ve never experienced them, they’re tough times. The tough times are going to happen. If you’re not ready for it, then you’ve got to step up to it. Either figure it out quickly or they’re going to have to go get somebody else that has figured it out before.

Blaine: Well, of course, I think on the one hand, we all hope that kind of downturn isn’t going to happen in 2019, but we know business cycles are business cycles. Economic cycles happen. It’s inevitable. So, you’re right. We have to be ready. I think the smart and the agile will actually take advantage of that as a time to leapfrog ahead of competitors that aren’t able to deal with it as quickly.

Steve: They should have a plan in the back of their head already. It’s going to happen. If you are ignoring it, ignorance is bliss, but it’s not if you’re in an environment where your people are counting on you to do your job. If you do you have a strategy, if you have a plan, then you can take advantage of that knowledge and operate a lot better without getting into panic mode.

Blaine: That sounds like a good way of summing up some advice for business or technology leaders that want to drive that kind of transformation.

Steve: In any scenario, have energy and show it. Show people that you’re excited about things. Even in a downturn, you can be excited about getting things done properly. If you show that and if your outer face is, “I’m going to get the job done.” then you’re going to be a lot more successful than if you say, “Oh no. We’ve got to have another headcount reduction.” It’s figure it out and we’re going to figure out how to do your projects at the same time.

Blaine: I think that makes perfect sense. I think that actually wraps it for us! Steve, thanks so much for joining us today. I really enjoyed the conversation.

Steve: It was great. Appreciate it. Thank you.

Blaine: Those interested in hearing more of Steve’s thoughts can visit his profile on LinkedIn and also check out FortiumPartners.com. You can reach out to me anytime at [email protected]

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