Building Your Scaled Digital Organization

hello and welcome everyone my name is janet cahill and i am the executive director of external relations and it is great to welcome you today to the harvard business school alumni program building your scaled digital organization with professor kareem lakani and four distinguished alumni panelists we have um i believe over 1400 alumni representing class years from the 1950s to the 2020s joining us today from many many countries around the globe and 80 percent of you said that your organizations were undergoing digital transformation um so certainly a very relevant topic where you will um i think learn a lot from kareem and also our alumni many of whom have gone through their own um leadership journeys in in managing digital transformation with their companies this program as you know is part of our ongoing collection of ritual programs that we do with faculty please keep in updated with the alumni website so you can learn about more programs that we have coming forward um let me introduce kareem lakhani who is my very dear friend collaborator and partner he is the dorothy and michael hinsey professor of business administration he co-chairs the school's digital initiative he is the founder and co-director of the laboratory for innovation science at harvard he is the co-founder and co-chair of the harvard business analytics program he led the dean's recent task force on digital transformation and is leading right now with srikant the development of a digital data and design institute for the school so needless to say karim is widely renowned for his research and his expertise in technology management innovation ai and digital transformation and he co-authored with marco ann sidi who's the co-chair of the digital initiative um a book called competing in the a competing in the age of ai strategy and leadership when algorithms and networks run the world so kareem i'm going to turn it over to you and i'm going to let you introduce our alumni guest today my zoom game is off janet thanks very much i really appreciate the introduction and i think co-conspirator is more the right term for you and i uh we've been on this journey to sort of uh make hbs more digital and more relevant for the for this for this world and it's been it's been fascinating to have both janet as a partner er as a partner um and we were in the early days of that you know with the announcement of marco marco yanziti as both the chair for technology and transformation of the school but also as our chief acting chief digital officer for the school as well uh so i think i think uh our new dean shrikhand uh and the problem with him being my friend is that he asked me for a lot of lots of crazy things is that he he truly believes in the digitization mission uh and is taking uh hbs on that journey so if i could get the uh the slide up with the with the profiles of our our distinguished alums with me and i'm so delighted uh three i know really well one is new uh so i'm i'm really delighted that they all you know what what's great about hbs alums is that when you ask them for a favor from the faculty they say mostly say yes it's quite nice so i'm delighted uh uh to be here with us so first is jimmy allen mba 1989 senior partner uh baiting company uh uh lives in london uh but has an american accent uh and uh but the the english accent hasn't yet seeped in totally into into jimmy um next is uh bertrand fel uh watson nba 2003 um a member of the executive committee and chief digital officer at novartis uh uh and also an executive fellow at hbs and actually bertrand has been helping tremendously with our uh own work on digital transformation here in many ways uh then meena chang administrator now of us uh digital service uh at the white house uh she is just around the corner in summerville mass uh but also i'm sure commutes to dc quite a bit um and then michelle zatlin nba 2009 uh co-founder president and chief operating officer of cloudflare uh based out of san francisco she's also a fellow canadian uh uh here uh as in terms of disclosures i had both mina and michelle as my students in my tom rc class i tried to convince both of them to stick around and do a phd with me but i think they found better better alternatives elsewhere with greater things and just again in terms of context you know um i feel also think about the organizations that are represented so in terms of context again hbs right we're part of harvard you know we pre-ta we predate the us constitutional republic so you know our traditions are our are our institutions are super old then we have the u.s constitutional republic represented by by mena so vegeta is part of a you know a very old organization also going through some very interesting transformation uh aspects of it um then uh novartis you know comes next probably about 100 years old if you thought thought about all the companies that that that made it work uh jimmy uh bain in the 70s or so right founded in the 70s or so uh and then michelle with the company founded you know on our campus 2009 2010 uh vintage as well so we've got a tremendous set of folks with a tremendous degree of experience on this topic of building uh skilled digital organizations thank you for all the questions you sent us uh they've i've shared with them those questions have informed the conversation we're gonna have and what i'd like to do actually is kick it off with the with jimmy um and get jimmy do uh jimmy wrote a nice piece we'll we'll put on the chat we'll share with you as well about sort of skilled insurgents uh and when i write that i go okay like like he's he's reading my books and i'm reading his books because i think there's there's a lot of concurrency in how we're thinking about the world so jimmy why don't you sort of give us the definition of skill insurgents why this concept came about and what you're seeing from your practice from being from brains view about this great so first thanks very much and uh glad to see how global this uh this uh group is it's amazing watching the chats come through uh which is terrific um i guess i would start by saying as we were looking at the turbulence our clients were facing and what would you say about the future it forced us to look historically at what happens to companies and we basically concluded that roughly every 50 years the nature of how we think about the firm dramatically changes and so i'll give my history a little bit class of 89 here and i'm sorry to date me but um you know when i joined um hbs the way we would have described the history of business was as follows that we that in many ways the first book we read was alfred sloan's autobiography introducing the idea of professional management and professional management let's all remember was a specific reaction to the era that preceded it which was the trust era when you were looking at founder-led organizations that had gotten old and paradoxically anti-innovation so sloan was reacting to henry ford who was so anti-innovation and disruption and what sloan argued is that we need to have institutions be taken over by professional managers and they would have three attributes the first of which is they would be dispassionate custodians of the business meaning we're not going to name the next car after our daughters we are going to be in charge of the institution it was a fungible skill think about how hbs talks about it that by learning the skills of leadership and management you can rotate between functions you could rotate between geographies and even between industries and companies and then the third thing which most of us have discovered in our careers is we're perfectly disposable the idea is that if you have a cadre of professional management if things break you simply replace the one you got with another one and then hbs led the era change the era started to change in 1975 when a guy named mike jensen wrote an article and he said why are those gm guys you know the poster children of professional management why are they billing their country club memberships to the firm and his answer was because they had no stake in the value they were creating and the insight was what if we took the skills of the professional manager and reorient them around shareholder value creation boom another massive explosion and what we would consider creativity in business we would talk about jack welsh being one of the ceos that made the transition from professional management to shareholder primacy lbo industry private equity was born but for a hundred years we have depended upon the professional management system the job of which is to systematically bring the customers the benefits of scale it always had an achilles heel and it was the bigger we got the more complex we got and we slowed down to non-competitiveness but that model was okay because the prevailing image was we were just moving up in boxing classes if the featherweights competed against the featherweights the middleweights competed against the motherweights and the heavyweights slugged it out slow and purposeful trying to win on the basis of scale then what emerged using technology was the rise of the scale insurgent companies that were able to compete on the basis of scale and speed and the challenge that it presents to everybody as we move into this new era is not only do we have to learn how to compete on the base of speed but we have to begin to unlearn some of the issues around how to compete on scale and i'll just give examples and then obviously turn over to the panelists that can talk about it in more detail but you know when i started off at bain we would talk about strategy as being one of perfect anticipation you would try to predict the future you would put scenarios and none of you will remember but there was a point at which you'd write a base case and people were fired if the base case didn't happen well we've moved from anticipation to perfect adaptability but the professional management system is not caught up all of finance systems and hr systems are built on anticipation not on adaptability when you go to hbs you learn the predominance of horizontal motions strategy operating model complexity reduction these are motions of the ceo aligning their teams and then hopefully cascading down we learn the motion of horizontal well to compete on speed you have to discover the motion of vertical i don't give a damn about what my strategy is i need to win in china against competitor x tomorrow and then maybe i will learn patterns that i can extrapolate horizontally push we learn at harvard i don't know what you're doing now but but a lot of it is push as a ceo you develop the strategy and then you push it on your people our strategy is to achieve a hundred bob you achieve one x of that mary you achieve point three of x but strategy now is about pull how do you create the poll for change how do you make technology changes meaningful to the front line and get them to pull what you want and we are having to unlearn all this for incumbents the challenge is can they discover speed for a lot of insurgents on this call it is can you create a new way of scaling that doesn't rely on the professional management system because all you're doing is setting yourself up for a complexity trap and the final thing i'll say is when you're in an era change which is obviously the most exciting thing on earth to be part of you've got to get back to first principles and the reason we establish firms is to debate endlessly about the three great conflicts of business on behalf of our customers and sadly we have forgotten what the hell i'm talking about what are the three great conflicts of business well the reason you put an organization together is to fight like hell on behalf of your customers for the benefits of scale versus intimacy if i'm unilever i demand that my head of indonesia fights for her consumers to deliver difference spicy or soup because she knows the indonesian palette but in the same debate on behalf of the same consumer i demand my head a supply chain argues for five kinds of mustard seed not 50 to deliver to that consumer the benefits of scale or sameness routine versus disruption i am flying now i can promise you on my flights to delhi i don't want the pilot to say welcome to the agile flight i have all sorts of new ideas of how i'm going to land in delhi we demand 98.8 of what our customers demand every day is perfect execution of a known routine and yet all of you on this call know that when and how you decide to disrupt yourself will determine the future value of your organization so we set up those delivering routine those delivering disruption in everything we do the third conflict is we've got to run the business and change the business running the business demands the stabilization of the business to start an experience curve changing the business demands that we're constantly experimenting and failing as we try to come up with something new as we talk about digital as we talk about ai what we are talking about is how does that technology enable us in order to compete on the base of scale and speed to resolve those three conflicts faster smarter and better and that's what we're doing in this so let me stop there and get on to the experts on digital great thank you jimmy those that was great it was a great way to sort of give us both the historical perspective as to where how we've gone to where we are but also the current needs that we're faced with so let's start with michelle michelle um you know in many ways uh you are uh building uh you know according to jimmy's definition a scaled insurgent uh so so maybe you want to just reflect on your journey from this origins at hbs to the company you're at and from what i recall our early conversations cloudflare is not what you guys i mean it is in many ways doing what you guys had envisioned for but the details look very different from what you might have even have imagined um and so so maybe you want to give us your perspective michelle on that of course thanks so much for having me jimmy i really enjoyed your remarks because i found myself nodding along a lot now i'm lucky i don't have a hundred year old company that i have to transform i got to start from scratch um however i would say that i started my company at hbs i met with one of my section mates and today we're a publicly traded company a company called cloudflare and we help make the internet faster safer and more reliable for a lot of businesses around the world we have about 2500 people at cloudflare and we are in many ways as you're using your words jimmy we are the definition of scale and speed so let me give you some sense so 2500 people we're only about 11 years old as a company we just celebrate our 11th birthday so for sure successful as a startup but nowhere near a legacy business or iconic company yet that's what we're aiming for we're very ambitious but on the scale side we um uh when we say we make the internet faster safer and more reliable we process about we power about 28 million uh request web requests every second for our customers for a relatively small company if you add up 28 million per second that's 2.4 trillion a day so that's huge scale we stop about 80 billion with a b cyber attacks on behalf of our customers daily that's huge scale but we're supe we're so agile every quarter our team is like shipping new over like 130 new products and features and when i bring in new people into our organization they don't understand how that's possible because when they look at other organizations that's not how it's done and so it's super interesting um to have you know jimmy's kind of framework because i think wow that's how we've built our business it's very agile it's very but at huge scale and so i guess i guess point one is it's possible to do and i do feel like we're winning because of that and a lot of people look at us and say how are you doing it and so when i look back and and again i i know there's a lot of founders on the call or maybe some of you are tasked with starting a new business you know within your organizations you're tasked with some project if i think back to like what's been really critical to our success in quarter success over time it's step one is you gotta solve a meaningful problem that delivers real value to your customers you can't make this up because all of this becomes a lot easier if you're getting pulled versus pushing trying to convince somebody to do something and for us it just happens that every single organization needs to be faster and have better cyber security more reliable and more reliability online because digital is becoming so important so we're getting pulled into organizations and so that that that enforces you to go really quickly it also forces you to solve these problems and i do think there's something very um rewarding for your team when when they're tasked with solving a problem when you solve it and there's actually like adoption by your customers it becomes a very positive feedback loop so step one was solve a meaningful problem like actually solve a problem that your customers have and those customers can be external or internal right it can be an internal team and if you make their lives better by a lot it's very obvious it will pull through it'll make all these digital transformation projects or the start of something a lot easier the second point i'll make um is around people i do think that uh the the what's been really critical to us is having great people be part of this journey and people is not just on the team it means investors like who do you take money from it means who's on your board all those stories that you read in the newspaper about boards being helpful to businesses or or not helpful to businesses are true and so you need to have the you have to assemble the right board the right um investors if you're taking outside funding and then you gotta assemble the right leadership team and people on the team to then go execute on all of these things and i'll just tell one story and then i'll pause and i'll give it over and then once you hire the people internally you've got to empower them to make the decisions and what's really interesting if i look at california this is just how we operate we push decision making very far out we hire very smart people we point them in the same smart direction of course everyone has a boss everyone ladders up to somebody but we empower people to be making decisions on behalf of the business um on a daily basis it's not their boss and i'll just give you an example and then and then i'll pause there and we'll go on i'm sure we'll come back and and dive into this more but where we were working we're working with a very large organization on a very technical project we're co-collaborating bringing something to market and it's so interesting their technical teams were taking notes and giving their feedback to their organization it's a large global company who said claffler brings the product manager to the meeting and the product manager can make the decision they don't have to go back and check they are empowered to make a decision whereas we're bringing five people to the meeting and no one has the authority to decide and i think that if you can be if you go back to jimmy's comment of scale and speed be the organization where the person how many people have to go to the meeting to decide and i think it's you want it to shrink you want fewer people there and you want to give them the responsibility to make a decision they might not always make the right decision but that's okay that's how you gain the the muscle the muscle the muscle memory or the tissue to do it again because business is a series of smart decisions over time not one really brilliant decision that then everyone lines up behind it's how fast can you like constantly be navigating what you're doing so maybe i'll pause there and we can come back but um i i love your remarks jimmy i think we we are we're very lucky we're kind of born on the cloud company helping enable a lot of other organizations through this and excited and happy to answer any questions along the way great thanks michelle that was great and you know i just want to reflect on the point you made which is sort of the decision-making ability in in our in our workers and our employees and our in our in our teams and we all of us spend bazillions of hours of hours hiring people hiring the right people right like just going putting them through massive amounts of work and hiring the right people so we've hire the right people but then we don't give them anything to actually make decisions like we bet we still want to then filter the decisions up into some some bureaucratic mess uh to to to to to do things and i often say you know one of my big realizations when i was working at general electric was nothing i would do would ever bankrupt ge like i was not in a role that would ever bank up and if you think about within your your company as well most of the decisions that are going to be made aren't going to actually bankrupt software if that happens that there's something structurally wrong with your company right and so so then the the the ability to be able to just make the decisions keep you going and learn from the mistakes both for the individual but for the organization is very powerful but most organizations don't live with what you guys are living at this moment all right bertrand your perspective from um from a view of uh you know you've had a you know a very interesting career being at amazon when you when you finished up at at hbs and then going you know starting your own company and then working at novartis tell us what you've learned about this and especially your experience at novartis as your chief digital officer yeah i think it could be picking up on michelle it's probably a very different style point because it's a 200 billion business uh there's a few more years basically in the back in many ways i think we've scaled in many ways but part of the challenge was how do we find the right speed to me a lot of it and i think there are also a lot of incumbents if i can call it some shape or form was how do you first of all pick the right timing as well to get those and mobilize the right i call it political world to really get going on this i think if you don't have that you don't even stand a chance in our case we are fortunate in healthcare that um data technology science have been converging in many ways when you see microsoft when you see amazon when you see google or getting into that space at least it creates some form of tension of how do we bring the best of all those worlds uh to come in there i think there was a joint in 2017-18 there was a massive political will where the board said look it's enough is enough nightstand that we take this on uh it became one of the top five priorities company wide but i generally believe you need that political will uh karim i'll be happy to share an example about estonia as well afterwards if it's of interest but yeah where there was a massive political world to digitalize a country almost 120 million if a country can do it i hope that an organization like ours can do that michelle to your point there were also a lot of um big problems to take on when you think about healthcare it's in the u.s it's 15 of gdp in most countries it's between 10 and 15. probably 30 inefficiency in this to get a drug to market think about the context of coverage in normal time to take 12 years and two and a half billion dollars 12 years two and a half million dollars to get that so something is wrong with that equation somewhere and probably worse from a patient point of view you on chronic disease more than eight years to really be diagnosed on the treatment and to be on the treatment on which it should be and even then when they get diagnosed lose another 40 percent of patients will never read the idea to the medication so surely there must be a better way to get to that so there is skill but a lot of what we had was how do we really bring some some speed into that and practically speaking um the first three months we're all about getting things going finding the the traction we launched what we call the 12 light houses so 12 makeup programs to some extent across the organization doesn't mean big as such but 12 was not a magic number but it wasn't three so that it's not not enough to really get going it wasn't 200 so that it's really diluted as and as an executive committee it was really had we all hands together so that and we allocate the right budget so that we can touch enough part of the organizations to get some short-term wins to get some long-term platform girls that needs to be in there and we affect all areas of the organization i think the casting was also equally important to us so how do we put some of the hidden gems how do we put some of the talents behind each of those lighthouses as a way a bit to your opponent earlier carrying a bit as a way to unlock some people who may not get the breathing space otherwise and to say look okay shine show us what you can do get the speed you get the mandate now we've taken the budget issue of the table to some extent uh showcase what you can do and i think that leads us to ultimately uh certainly a big learning for me for the last 10 years has been 50 of those job in digital transformation in broad institutions are cultural shifts so it's really about how do you get 100 000 people on board how do you demystify what the hell this stuff is really about how do you keep it simple enough how do you speak about it in terms of customer terms as opposed to uh to too much lingo and making it more complex and it really should be uh that's probably the hardest part and jimmy to your point is the professional managers uh with a lot of hardcore to make in the top 300 one and a half year down the line uh we probably hit 150 that were really left because it was equally a cultural transformation that really just additional transformation and maybe one piece i would add is also the the capacity in our case to make bold moves fairly early and those are the scariest one carrying your right very few of us can bankrupt an organization uh i think it requires a few more moves to also uh showcase every series about that so in a case we made some fairly meaningful acquisition into new platforms we make we made a 10 billion acquisition into some totally new platforms that we hadn't necessarily considered before uh we looked at bigger partnership with microsoft with amazon uh which made a few of us an easy advance it was like are you sure those are not the competition are we giving all the ip away are you sure they're not the evil tech masters basically that come afterwards i have a strong conviction that you cannot do it alone so how do you really build the right partnerships to be able to do that and then we got a bit of luck to some extent is also to pick to benefit from some of the things that happened in the world when covid happened clearly a hard one for for all of us but it accelerated everything it accelerated the way that telemedicine came up uh it got all the stakeholders regulators fda to come to the party as well doctors could interact with patients in a very different way so how do we get ready and able to really use that as a vehicle for speed in a massive massive way so i'm sure we'll talk more about it but i think it has been fascinating and i'm equally obsessed as dreamy about the notion of scale and how do you really build the speed through partnership throwball moves through programs that are where you hold hands and having the right political goals to go after them great thank you so much bertrand um now on to um mina and you know i was just looking up the budget for the uh u.s uh government

and it's i think it's like 6.6 trillion dollars and much of that is going to flow through whatever mina builds as part of the u.s digital services so vina maybe a slightly bit about your background because you didn't you didn't start off in government you you were in in in many other enterprises and then uh this role that you're taking on and then this notion of sort of scale of digital organizations and how do we get the us government uh to to be that way as well yeah absolutely um so as you noted i mean my background is some uh amalgamation of sort of private sector and public sector i've been interested in government my internship at hbs was actually in government which is sort of a very odd duck thing to do um but you know i spent the first 17 years of my career building in healthcare primarily first building medical devices and then building data systems um as a venture capitalist helping start companies across those sectors and so a lot of what i do now is trying to bring you know exactly what we're talking about here so those best practices from across industry into government and helping us achieve exactly what jimmy um was outlining so you know as you as you are highlighting some of the dichotomies of business that was really resonating with me this whole question of scale versus intimacy right so government processes need to the question of safety versus disruption so we need to be able to deliver services for people at critical times for literally anybody who shows up and everyone in the country and yet we're a critical part of extremely intimate moments right you have a baby and you have to um register for a social security number and that's it and then that social security number has to pull through to your taxes and it has to pull through to many other systems so there's there's like a notion where it fits in with all of our lives at critical moments and at the same time and it has to fit in right as our lives evolve and how we operate in the rest of our lives evolves it still has to fit into that but it has to operate at nationwide highly reliable scale um so to take a step back from sort of the like intimate moments the whole process and infrastructure of government as um as is not surprising is kind of the antithesis of agile right so it's um it's we identify a problem you know michelle commented on how you have to have a significant problem a lot of legislation for example addresses real problems that are understood and we can talk about i'll talk in a minute about some of the things that have recently happened but you you have a bunch of people who sort of take in a lot of information from out in the world but write a prescription for here's what we're going to do to address this problem it gets passed into a bill it gets put into an agency where they then have to run a process to write regulations to determine how we're going to execute against that um and at some point in there you also have to build the systems to operationalize that and the whole process of building and procuring those systems is also governed by a lot of complicated linear waterfall processes so the question of how in this current environment where everything else is changing so quickly and no one else operates that way how do you um how do you shift on that when we know that that's not the best way to get the right outcomes right and so in the last so u.s digital service we started about seven years ago and our key task is to um impedance match some of the best capabilities from the private sector in digital primarily in things that are dependent on technology but as everyone here knows that is most services at this point to bring those capabilities and combine them with the critical elements of government and help sort of supercharge and figure out what is our new model for operations moving forward um and a few things have happened in the last couple years that have really supercharged that effort um first you know the world got disrupted so the need for sort of social support structures the need to have um more i won't say government intervention i will say government intervention the the need to for government to play its role in providing sort of a social backstop in a lot of contexts um but also the need to adapt to a lot of disruption across the world right so the world got disrupted there was so many problems to solve and opportunities to engage um the world went online so in a world you know government services aren't typically thought of as like the most uh satisfying digital experiences i would say um and that you know we're working on shifting that but um but as the entire world went online as people needed to get social services in an online context as people who work at government agencies need to do case management and exchanges between one case worker and another and that all needs to happen online and can't happen on paper anymore that's a huge motivating force for change right and then third frankly people across the economy are seeking meaningful work um the world stepped back and sort of said we want to do things that are high impact that feel important to me and so um we know coming i hire a lot of people some people from government and some people from the private sector you know michelle talked about it her company i bet you guys deploy software at least hundreds of times per day i mean there it's a continuous process a lot of places that we go in government have extremely legacy technology supporting critical systems and they deploy say very infrequently like on the order of months or once a year sometimes and it's and it's a huge difference and so i bring together we bring together people who have a background where they understand how you build structures that allow for sort of continuous improvement and um and how do you build sort of the appropriate team dynamics how do you build the appropriate information flows and decision making processes to operate in an extremely dynamic environment and then we also have sort of our teammates who operate in in a more standard bureaucratic government environment and the question is how do you find the appropriate middle path as jimmy said on you know all of these points of tension how do you make sure that you don't lose your ability to deliver key services at the same time implementing new programs using the same processes for example for technology is probably the riskiest path right because we know how that will turn out and so then the question is how do we chart a new path forward on how do we operationalize and build teams in government that do that so we know you know the best strategy is iterative um the best execution is iterative if we're looking to solve problems the best way for us to actually solve those problems is to measure the problems continuously work with users and sort of be evaluating our progress against them um but that isn't how government typically works and so we have to do a lot of work to sort of help teach so the way that we do that is sort of two big buckets um and cream you can tell me whenever whenever you want me to stop talking about one is sort of bringing in a whole bunch of people um who know what this looks like you know and they exist in government too so one of my favorite examples is you know stanley mccrystal's team of teams that's another good instance of how do you build distributed systems distributed teams who can operate very quickly and do decision making making at the edge but also share consciousness right so we bring in folks who understand how to do this we embed them in agencies to sort of show what good looks like and combine the work product together to say how do we together build a system that meets all of our needs um and then the other big piece of work that we're working towards right is institutionalizing making that the standard not making it something where you have to be like a special snowflake with like exceptional executive buy-in but how do we make um high-quality iterative delivery by design as opposed to sort of the exception so how do we make it the rule um and so you know a tremendous amount of opportunity right now in the government a lot of appetite both on the government side and frankly from people who are interested in figuring out how to collaborate and help um and i think there's just um a lot of work to do so i'm excited about the questions and and how we're going to take this discussion great thank you so much i'm going to bring everybody onto spotlight so we have everybody can see everybody together um and i'd love i'd love for us to um first um just just one reflection as i was sort of launching the digital transformation task force work at hbs the thing that sort of hit me you know we were looking across the entire enterprise uh is that nothing we do today at hbs doesn't involve software like everything we do is mediated through technology every single thing but the but the what the interesting thing for hbs is that you know we have this massive investment in our physical infrastructure our physical infrastructure is incredible people come in and you know it's like disneyland right like of like what uh what uh not hogwarts type oxford type but it still is like a modern business school and what it looks like is our infrastructure is the physical infrastructure but the same care attention love on the digital infrastructure has been missing in many ways and like this aha was like everything we do is going to be in software is in software and we need to then sort of make sure that that we are as good at building buildings and maintaining our property as we are in building and maintaining our software infrastructure and digital infrastructure was like there's a big misconnect and with that i think is this question i think that bertrand raised which is like culture right like culture culture is what's gonna make this change and happen but what i'm worried about is so you know i've got you know i see boris gorsberg from our ob unit is an on one of one of the listeners here is like often times like we we we say culture change culture change culture change but like how like what like okay like i can take you to a like a re-education camp right and say you gotta change and you know but like that's not gonna work so what what is the model for culture change that i think is needed in in these complex organizations and so i'd love to start with jimmy get your perspective and then go around and with michelle what i want to ask her is she's growing rapidly the company's going rapidly so ossification and being stuck in the vintage you were founded is super high so how are they working towards making sure that they stay agile and sort of ossifying so jimmy first so so this culture change story what what what do you see so so i think you know the short answer is is of course it is about culture but the world needs another transformation program culture transformation program like a hole in the head meaning the way not to deal with it is we are going to become faster a group of bureaucrats deciding on a cultural program to become faster so the way in which you have to do it is intensely vertical by actually getting stuff done demonstrating use cases making heroes out of the people that execute it make them richer or their lives easier so they then as influencers tell their friends and buddies and pull through the change change management you know just after 30 years of leading hbs change management is what you do when you're wrong and you have to force bad ideas through an organization that knows better that's change management cultural change that is required is we win vertically we figure out what it is we create the use cases and then go from there but but it is also about deep skill change and you said do you have to go to some re-education camp sort of and i'll give you one example from our work with founders but you know if you think about what it means to build businesses the great mythology is business building is about ideation or incubators that's the commodity that when you look at business building there are three communities that get involved if you have the right culture the heroes are always the execution community they keep our customer promises every day they're out there in the field in a world of disruption we'd love to talk about the disruptive community and say how do we do more with them how do we create more disruptors every founder will say every incumbent has more ideas to make a trillion dollars you've got enough what is missing is disruptors live in a world of post-it notes executors live in a world of playbooks you need a bridge and that is a scalar a scalar is a specific skill of how do you take ideas that already exist and test them for transferability figure out how to deploy them how to create the pull in the organization for change so what is it that makes a salesman want to adopt this and a sales person what makes them want to pull it through that is the hardest skill in business that is why amazon their number one business definition is a business builder that is why all of the scale insurgents that are emerging talk about scaling not ideation incubation ideation incubation are the hobbies of incumbents who don't know what they're talking about it is literally common see i you know how many clients have i gone to which is we are now fully adopting agile let me take you to my agile factory which is obviously run by 3m the manufacturer of post-it notes it starts with notice i don't have ceiling panels you can see the pipes above and then watch all my agile teams and then i say how have you scaled agile and they say well we had five teams and now we have a thousand no scaling agile is we have a new business that competes with our declining core that is what we're talking about so yes culture change but it comes vertical but don't underestimate that a change of era requires we will reskill our people and the way we talk about it is the the job of leadership is to hold a grand audition we can promise that we will hold an audition we can coach for everybody to get a role but we can't guarantee it they are going to have to perform in the new roles but we can coach and do it but the idea that it's culture change alone is the great mythology of all the people proposing central driven change management and culture programs yeah the joke that i always say is like change management is change management right change the management you know if so if if you hear management say change management then it should be changed and i'll tell you one great thing then i'll shut up and i'm sorry but you know the whole story of the microsoft turnaround incumbents have seized on it because the ceo says you start with culture but he didn't he started by winning in customer after customer after customer and showing that there was a new way to operate and using those testimonials and then from the pattern recognition of winning in the marketplace he developed the cultural change all the incumbents here is culture change and they launch a culture program oh my god we we don't even learn the lessons that are actually out there yeah all right portrays what are you gonna do about you you're the one that raises the scepter of of culture change what do you think is jimmy onto something or is it gonna like blow up if it shows up in novartis jimmy i like how we got you on fire there i like your energy around this i love it um you're definitely into something and maybe on your own jimmy's like one of the illusions we often create is an industry of pilots and you have plenty of pilots that are sub-scale and actually you get the illusion that you are doing well because you have plenty of innovative agile teams actually going but they are not connected to whatsoever is probably something i've been as much as we're all geared to initial transformations well let's do a pilot um i think that it has a certain limit if not really attached to the core i think maybe gary one thing that i find incredibly helpful over the years look at plenty of scars on my body on on this type of setup and there are plenty of things where i just don't know yet how to best handle it but one thing i found very useful to accelerate um digital transformation and to change to shift the culture is partnerships and what i mean by that is uh and i'm a massive against big vendors relationship at arms lengths that gets messy where you never agree but true true partnerships and we have some for example with stencils in china it was highly controversial at first when we started but where they have effectively boots on the ground they started by giving us almost 50 people in sweat equity with us embedded into a few particular areas we weren't wanted to think about very differently um likewise we've done uh similar like partnership in data science and here with microsoft jimmy point and and with amazon we've done about 30 of those over the last four years research what i love in those partnerships is when you really get some of your team some of their team coming together to the point that you don't even know who is from tencent who is from your artists and they really gel well together when you get the same effect with an amazon style i think you're into something because then you get to learn from them that's natural curiosity you get to learn the amazon culture of how do you do what they call a pr faq so how do you do you write a plan five years not so much a linear or horizontal plane as you were describing earlier but how would they in the shoes of a customer see prime five ten years from now and then you work everything backwards you align your resource you ramp up your teams very differently to be able to get to the goal it's messy you really don't know how to get to that but at least you're drawing the north south of where you want to go for that we all talk about the amazon two pizza team so tencent is incredible the way they set up the different divisions how they bring gamification into healthcare how they make some acquisitions that from the outside don't make much sense but when you look into it it's actually fascinating i love this partnership because we learn from them and it has the hidden agenda that you transform your own culture because our own guys get exposed to that we get to see some of the gaps we have in some of the skills we should really have we see what really good data science and air really looks like in that type of setup we see some of the mistakes they are making as well because maybe they're lacking some of the scientific questions to be grounded in taken ibm has made a lot of big promises as well um on watson that haven't fully realized and i've learned a lot from that i think it's a combination of those two things that really span very very well together so i'm a massive fan of those and i think it works in any industry surprisingly we always think that we are the only one way it wouldn't because our questions are so unique healthcare would be a good defender of that and it's really not the case i think technology data science are really coming together i think i have a good friend who might be on the call called who's a family business super impressive has been running for six generations and he's running a group called cgc cgc so on the control dom grains and at the same time while they have poultry businesses food businesses they have at the same time investment into the likes of impossible food and the obsessed his mindset is how do i get impossible food to disrupt my my my business and not so much on the outside but really bring them in together and collapse those two things how can i create a bug investment in burger king how do i create the impossible whooper for example so the best of those two communication i think it shifts the way that people think it gets into what customers really want at the end of the day in many ways so again big fan of those partnerships so what would be in each of our industries partnerships that can really move the dial and change the culture from from outside in basically you know you know your perspective i mean should we put an asterisk against you know more than 100 organizations uh you know trying to do this change like and you put that on hbs as well but like what's your sense like of of of both the partnership story which i think is true in terms of usds set up to bring in people from the outside but this this broader change about i don't even know if the sloanian bureau sort of professional management applies even to hbs or to or to the u.s government like i didn't do like a university old university or to government so like what's your sense in now that you're in sort of the front lines because you have a digital mandate but part of that is going to be the culture change that needs to happen yeah i mean i completely agree with jimmy's notion we say all the time you have to show don't tell like you can tell people how to think about things um but at the end of the day you get down in the trenches together you execute on a project you have to create the space so there's a little bit of building sufficient trust so that people are willing to travel the the new path together um but you know you execute the project together you take on some of the risks that people are concerned about and you show don't tell and then you say these are the metrics that we need to be looking at we are all going to look at them together every monday wednesday and friday and evaluate how our consumers are doing at getting you know uh first call resolution on customer service metrics um and and once you do that for long enough together and that you can start moving the needle that's that breeds culture i think the other really critical piece of this is understanding the old culture right deeply like you have to understand what motivates people you have to really be a good listener you know i had one of my transformational hbs moments sitting in two of karim's different classes one around innovation and one um where we were talking about the toyota system so i have an engineering background engineering parents engineering grandparents and so i came to hbs and we're talking about how innovation and sort of iterative development happens and the whole class was very intuitive to me on the subject matter and i turned around and learned from my classmates how everyone else thought it happened and that was like the aha moment for me that was like oh everyone else doesn't know this isn't like water for them and i think that's critical also in these transformational situations you have to deeply understand what the motivations of the incumbent individuals are and what they care about so that you can actually help shape the transformation to really be moving for them and the culture to sort of meet their inherent needs while also showing them how they can be met by a new system of operations great right yeah i was just going to say that and this conversation is super interesting so i you know we're not a hundred year old organization yet but we work with all these things that's your ambition though right you've been around for a long time yeah of course yes we're very long-term focused that's what we're 11 years into our journey but when we but we work with all these large organizations um you know 20 almost 20 of the fortune 1000 our cloud for customers so i actually kind of see a breadth of customers of how organizations react and again if they're using our service they have something online which every single company does so there's something internet connected and so it's interesting there's a lot of things that that i would just maybe punch up in what has been said so we're trying to spoke about partnerships what's interesting is you know here's like something very practical a lot of a lot of your organizations send out rfps and they're asking for very specific information and that's fine but actually what the best organizations do here is the problem and they find a vendor to collaborate with on the with on the problem and they don't have to commit to buying from that vendor until they're like actually now i'm convinced that you can solve it then i'll commit to buy from you so it's almost like a variation it's the broadest definition of patrons partnership you don't even have to go do a formal partnership you can just say here is my business problem put put it out to some organize external parties that you might want to work with and find the team that you collaborate with because that we see organizations doing that all the time and our teams almost end up becoming extensions of each other and the biggest compliment i get from customers is when they say hey your team is like extensions of our team and i love that because they rely on us to bring the innovation and the the technical expertise but we partner with our organization and it's not a formal partnership it's a vendor relationship but it's different than an rfp where it's mask and i don't want to know who it's blind i so there's there is something about i think not all large organizations are figuring out how to partner externally with vendors and i think some of the best are the ones who are saying here's my business problem i got to solve and i need to go look externally to see if there's someone who can help me with it and then go talk to them like people and it's like if if problems are just people collaborating both internally externally to solve the problem i think that's super interesting so that's something that i just see the second thing i would say is this idea of finding a problem to solve is so hard it's really searching for problems is never good it's much better when you have a problem even if it's small or big being very specific is much easier to find a path forward because what jimmy said what mina said it's and bertrand it's like it's all about showing not telling and so you want to build if you have a real pain point then you can show solutions then it just makes the next one easier versus some big thing where we're gonna do all this thing it's gonna take five years way too slow you gotta find something kind of smaller make progress against it and then people's appetite is to go to the next thing and then just the third point i will say which which hasn't been brought up which i think is not obvious in my world it's so obvious but in it's it's not obvious um to the the industry yet but i think it becomes a superpower you don't have to solve the problem for everyone on day one you can start a beta or a like booster starter pack or some other thing that with some cover call it something different so it's not has to be for every single person it's people opting into something smaller and if that becomes people will opt into it consumers customers internal employees and if that's successful then you can roll it out more broadly and i think that in entrepreneurship you know you do these crowdsource fundings or or um product hunt where you get initial early beta users like betas are like an entrepreneur's best friend because you can try something get early feedback and then you can launch it for everybody else and i think a lot of large organizations are starting to do the same thing where they cleave it off and they start just to try it and restaurants have been doing this for a long time they start in a couple stores they make sure it works before they scale it everywhere and i think this idea of you don't have to make it work for everyone on day one if you like a lot of large organizations start with like a beta or a booster they call it something different and it's people opt into it and if it's successful then they scale it up or more broadly and then it just it's a lot easier of a problem to solve and again it's back to you solve the problem you make momentum great you have momentum and momentum is a very powerful force for for moving things forward moving the ball down the court i used to play basketball so anyhow that's those are just some comments that i would see working with these large organizations of the ones who are able to make progress move things along feel like they're in good place versus the ones who just talk and actually don't show anything because they can't get things done that i think is interesting and also kind of goes back if you're talking about how you repurpose hbs for a moment which is that there's a fundamental tension that that i don't think we've explored enough between what makes great cultures and what makes great partners because currently they are completely incompatible i think if michelle were honest here and i think patron would agree with this as with mina when you join a very very powerful culture that creates a cultural identity of the organization makes you feel proud to be part of it there is an unintended consequence that it often makes you a the worst partner to your ecosystem not the best because there's a natural arrogance that builds in that says we are always going to do it slightly better so the reason that michelle gets rfps is not stating the fact that no one who's writing the rsp has a clue what they need or what they want they are convinced they do and that michelle's job is to align in and to admit as a 100-year organization or a 40-year organization that you can learn from outside partners almost challenges the the nature of what a culture is and if i you know it's often asked you what would i want to relearn at hbs i would want a course that says how do you create a culture that makes you a partner of choice for the ecosystem not the partner of last resort and it's not easy because the natural what what we learn as culture builders is effectively to create almost enough versus them mentality we can see that our customers are always right but to then concede that partners peers of ours in our ecosystem that we can learn from them is very different very difficult culturally for a lot of organizations michelle i would just say for you as you're scaling notwithstanding the fact that you see this problem with your customers i can almost guarantee you'll fall into the trap that your company will be so confident of its own success that it won't partner with it don't it's just the trap we go in and how do you prevent that so that you can do what patron said which i think is 100 right your best cultural change will come by your openness up to the ecosystem and people coming in and jimmy we see this movie repeat every time over like microsoft won the pc wars lost the internet lost mobile right because they didn't know how to partner they actually weren't a great partner because it took all the profits in the industry for themselves right and weren't going to share the value that was being created and then the and something that sort of sort of unlearn all that and then and then you know do the play in the cloud that they've done so so on this point of unlearning so you know one of the great things uh i have a privilege of being a professor at hbs especially when you're tenured is you can ask controversial questions that go against the dogma so i'm always one of the things i learned at graduate school was this this great article about drop your tools and it's really based on this notion of the mann gulch fire in which firefighters in the middle of a pretty bad inferno could see a safety spot and their leaders said drop your tools and run because you're going to lose weight and get the speed you need to get there and none of them drop their tools because the tools was what made them identi made their identity made them the firefighters that they were and dropping your tools was very difficult and in many ways i think we're at the stage of dropping tools for lots of our organizations lots of ourselves as well so so uh what tools from hbs um we'll just keep it among us and the 400 people that are here uh would you drop now uh jimmy uh i'll start i've given a lot of thought about this and i apologize for everybody on the call because um i don't know what hbs has taught after 1989. so i think this is an old

opinion we need you to come back and take some exec ad with us yes exactly the whole problem of the case system teaches the exact opposite behavior of what's needed in the future which is we learn to read a case in 12 to 14 minutes and then pontificate and we learn two skills which are bureaucratic skills and you only realize when you see the opposite bureaucrats make problems bigger insurgents make problems smaller we have a pricing issue in china a bureaucrat would say we don't have a pricing issue in china it's a problem of how the product organization a matrix organization are working together requiring a thorough review of the operating model in an 18-month organization redesign an insurgent would say we don't have a problem with china pricing it's four products three stores everybody get on the call and solve it and the case method too often trains you in the act of finding we all knew how to do it the chip shot that rose and elevated the issue so that it scored a lot of blackboard points but actually it teaches you a skill that you're taking the problems out of the room of the decision making second in bureaucratic organizations the opposite of simple is advanced in insurgent organizations the opposite of simple is complex and there is a world of difference if the opposite of simple is advanced anybody with a new idea advances the thinking i have a new idea for a budget tim for a slide in a budget template it's more advanced i have to say yes i have a new idea for a new step in our innovation process more advanced i have a new i want to form a committee to study the role of committees more advanced but if the opposite of simple is complex somebody is screaming all of these advanced ideas are adding cost to our consumer will someone call her and see if she wants to pay for them and the issue that we're not teaching is how do we rid the organization of clever people that in the words of cal newport are creating shallow

2021-11-19 23:18

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