Digital transformation: Investment planning and priorities with Oshkosh Corp. CIO - CXOTalk #755
We make sure that we reduce the friction between humans and technology. Investment strategy for digital transformation, that's Anupam Khare, Chief Information Officer of Oshkosh Corporation. We are an $8 billion industrial technology company. We have 10 business units and 14,000 team members in 24 countries globally. We design and manufacture purpose-built vehicles for our firefighters, construction workers at heights, environmental service workers, refuse workers, and soldiers, among others.
We have subscribed to a philosophy of innovate or die. And we constantly innovate to remain number one in the end markets we serve. The second aspect I really want to talk about, I get excited all the time, is about the very unique and inspiring purpose of Oshkosh. We make a difference in the lives of people who serve in our communities. When I'm talking about people
who serve in our communities, I'm talking, again, firefighters, soldiers, and all that. That purpose is so inspiring, it unites us all, and it has digital transformation implications. Tell us about the digital transformation implications that you just mentioned. The way we simply define digital transformation is using technology to reimagine our business for our customers, our employees, and our shareholders. When we are talking about reimagining business, we are talking about reimagining all aspects of our business. We're talking about operations,
supply chains, sales, human resources. We're talking about reimagining, and the second element is on a continuous basis. This continuous basis comes from our culture, which is an innovation culture. It comes from our unified purpose. That's why we feel like we owe it to our customers who do hard work in our communities that we need to do these kinds of things for them, and we continuously need to reimagine business. But when it comes to bringing the digital transformation to the next level, and internally, the way we define it is how do we maximize the potential of the three most important resources in the organization, which is people, asset, and data. In our teams, we simply talk about PAD (people, asset, and data).
We do everything in digital transformation to make our people more productive, whether it's internal people or external customers' assets. We are a manufacturing company, so we want to make sure that every asset we own is basically efficiently utilized using the technology. Finally, it's the data. We want to harness the potential of data, and we are harnessing to create
more value for our shareholders. That's how it is connected with our innovation and our culture. When you look at digital transformation, what is the link between the innovation? You kind of described it almost as the lifeblood of the company, that innovation. What is the link between innovation and digital transformation? The word transformation itself, basically, it embodies the concept of constantly challenging the status quo and being obsessed about our customers. That's where the linkage comes, the innovation of culture, which we have, we call innovation is in our DNA. That leads us to be more customer-obsessed when we are doing our
digital transformation and also helping us to be delivering value for our customers. What is it about digital transformation that enables the innovation? Is it just the fact that you're doing things differently, that you're rethinking, as you said, the people, the assets, the data? Is that the primary linkage? We have been reimagining businesses all the time. What technology does, when we talked about digitally enable, what technology does is two things. Number one, it acts as a catalyst. It speeds up the process of reimagining. It also opens up new opportunity
because we have the ability to do things more in real-time, and also we can collect the patterns. It basically makes the reimagining businesses more intelligent, and it hastens the whole process. The technology then is the enabler. You kind of alluded to data, but also very directly the processes. It's a speed issue as well. It's a speed issue, and it is an intelligence issue. It makes organizations more intelligent and more real-time.
Real-time, can you elaborate on that? That's an interesting point. Humans have a limitation which, augmented with technology, makes them significantly more intelligent and productive. That's how we see there is a symbiotic relationship between humans and the technology. If we establish this, what we do is we significantly propel the power of a human being. That's where it acts as a catalyst. As you're looking across this landscape of potential projects, you're the chief information officer, so I have no doubt that there is an endless stream of projects that you can work on.
How do you decide where to make those investments? We run this prioritization process at two levels. One is at the strategic level and the second at the operational level. At the strategic level, our CEO leadership team, we have an annual planning exercise where each of our businesses and leaders articulate the current state and their strategy in the form of a white paper where the current business is and how it is going. They talk about the market, the customers, their strategies, and all that. What I do is, reading their white papers and
listening to those discussions, I share my technology white paper. The technology white paper basically sets the agenda and establishes the connection between what we are thinking of and what they are trying to do from a business strategy standpoint. I'll give an example. If a business has a strategy to grow in a particular part of region, or they
want to change the channel how they want to work. There are technology implications on this. We basically, at that level, a strategic level, focus on themes from a business standpoint and also themes from a technology standpoint, so I'll give an example. We have three major practice areas in our IT function. One is analytics and AI. The second is intelligent automation. The third is the digital manufacturing.
These themes came up as a result of that strategic exercise that this is what is important for the company and this is how technology can support. That's at the strategic level. When I take it to the operational level, which is more from an execution standpoint, or taking the initiative level, we have a framework called VSP. • V is about value, business value. • S is about strategic fit. • P is about passionate sponsor. When we link it with the top strategy, we look at specific initiatives, and we run these three filters. What is the business value proposition here, and is it aligned with the top strategy, which I articulated before? Finally, do we really have a passionate sponsor? This process works at kind of multiple levels. We have four business segments. It happens at that level. But also,
we have a cross-functional team of business sponsors, finance, and IT, together, and we debate on those things. As a result, we prioritize. What has happened as a result, this is working, like, we are very proud of how this whole process runs. We are seeing we are doing less projects but more impactful projects. When I say less, it means compared to the past. But still the need for digitization is increasing, but very meaningful projects are being executed.
And since we get sponsors' alignment, passionate sponsors, we see agility because when IT and business kind of have the same common goal, projects get done faster. That's how we prioritize investments. I think one of the issues that come up for IT, in general, is the selection of projects is driven by so many incoming demands and it's not always anchored in the strategic alignment, as you were just describing with the business goals. And at the same time, the operational aspects may not be entirely clear, so IT ends up doing all these different things. But how much of it really does make an impact?
What you just described is very impressive to me. The credit goes to – for the whole process, which we are running – is our CEO leadership team here because we collectively think that the technology is a big enabler of our value proposition, and we have to prioritize. That's why our strategic planning exercise, which happens every year (and we review it on a quarterly basis), sets the tone, organization-wide. I think you talked about, in the beginning, our unifying purpose, and I'll establish a connection. When I say that cross-functional team working together on this thing, this is where culture comes into.
This is where innovation culture comes in. This is where unifying purpose comes in, too, that finance, business, and IT all come together and saying, "This is where we need to bet on, and these are the places where we need to invest. Let's get it done faster." Now, please subscribe to our newsletter. Just hit the subscribe button at the top of the CXOTalk website. And subscribe to our YouTube channel, and we'll keep you notified of upcoming shows. We have incredible shows coming up.
Anu, can you give us some examples of the kinds of technologies or the types of projects that have passed that scrutiny you were just describing? Where are you focused? Our technology comes into four broader buckets, and then there are some sub-technologies within. Four buckets are: • We're investing in analytics and AI. • We are heavily investing in intelligent automation. • We are investing in a basket of technologies for enabling digital manufacturing. • Finally, it's about cloud. Those are the four major areas where we are investing in. And then, in analytics and AI, for example, we're talking about machine learning and
data quality-related technologies. There are sub-technologies in each of them. These are, I would say, business-enabling technologies, these four baskets. But there are sets of technologies where we are investing to modernize our core. The way we think about it is transforming core requires a set of technology and transforming business requires a different set of technologies. The four baskets, which I mentioned, was about transforming the business. Transforming code, what we're talking about,
that's where the ERP, e-commerce, infrastructure, network, modernization – all those core components, technology comes into play there. We have a really interesting question from Twitter. This is from Arsalan Khan. He always asks the best questions. He says, "Beyond executing the business strategy, does IT get involved in contributing to creating that business strategy along with the other business leaders? We have an element we call expanding digital reach (in the organization). I will explain how we get involved in this.
As I said, we have established the three major practice areas: analytics and AI, intelligent automation, and digital manufacturing. What we do there is we play a pivotal role, and we play a pivotal role because we have two capabilities. If I give you an analogy of a camera, we have a panoramic view and we have a zoom capability. When I do panoramic, we see the business from a very different angle, and we see all four businesses in a very different way. When I say zoom capability,
we have a relationship at the ground level, so we want to zoom anywhere we can. In these practice areas, what we do is we have created a catalog of business opportunities and use cases. We go to businesses and brainstorm with them what is something which will help them. We narrow down those priorities together, and then we go through a process of either piloting, experimenting, and also implementation (where the co-creation comes).
Coming to the original question, I think, starting from the business strategy, the only purpose is that we do meaningful things. But the approach we adopt is we are building IT teams which are digitally and business savvy, and we are identifying champions who are digital-savvy. And we co-create there. That's how we work. The top level strategy is largely an alignment and fit. But we take the lead here. This is from Mark Thiele, and he says that you should stop focusing on the shareholder and worry about data for better employee experience.
He said employees are customer number one. Followed closely by the external customer, your buyers. The customer is and should be the primary driver for digital transformation. From my perspective, all the stakeholders and shareholders are important, and they contribute to the overall value creation. Yes, we start from – and as I said in the beginning, from the company philosophy standpoint – when we design products, when we design solutions, we keep our customers, firefighters, soldiers, and everybody in mind. That's where basically the whole thinking comes from in the product design and digital solutioning.
But how to make sure the value reaches to them, that's where the employee comes into the picture. I think the point here is all are important elements of value creation. We start with the customers, keep them in mind, but we have to make sure the whole value chain is taken care of. We have another question from Twitter. This is from Chris Peterson. He says, "As a maker of durable goods with long service lives, are there digitalization opportunities for adding capabilities to vehicles that have already been sold?" He wants you to either tell us about products you haven't announced or create some products now. [Laughter] We definitely track the product lifecycle of our products and strategically inject technologies in our new products. We also think about the
future. But I think I will leave it there. One of the issues that always comes up is the adoption of new technologies. You've described, at some length, the process that you go through to ensure that there's alignment between what IT is working on and technology and the underlying business goals. But ultimately, technology needs to be adopted, and so how do
you think about the adoption of technology, which obviously involves process changes, and it can involve culture change? There's more than meets the eye. It can be complicated. Every digital initiative we have, you can see from two perspectives. Is it something we are doing to them or we are doing with them? In our case, we are doing it with them.
That's where our prioritization framework comes into the picture is a passionate sponsor. We, are the root and start point itself, make sure there's a passionate engagement, clarity of business value, and we co-create together. Then what happens is then the old mindset of training team members and aligning with them to use the technology is no longer valid because, from the concept to design to implementation if they are with us, adoption is a natural progression there. At every step, you try to keep very close ties with your stakeholders. I guess this also goes back to what you were saying earlier, which is really trying to understand what those stakeholders, what your customers, for example, actually need. Yes, absolutely. The way we see every technology is we have implemented the last three or four years.
It may sound unrealistic, but I have not seen adoption challenges where we have to tell them what to adopt. It's a natural progression. It happens. What happens, by involving them from the beginning, we create so much excitement about the technology and value in our people, it becomes more of a pull than push. When it becomes a pull, it's again the same answer here is the natural adoption process. When it comes to digital transformation, what kind of metrics or KPIs do you use to evaluate the success and the progress of these initiatives? The way we do it is there are two levels of metrics. The first is strategic metrics that I review with the CEO and the CEO leadership team and, finally, with the board. The second are operational metrics. I'll give you an example.
At the top level, we have simply two metrics coming from digital. One is called operating income impact. We talk about reimagining business using digital technologies. That's the digital transformation definition. Every effort we do,
we have to have an operating income impact whether we do cost reduction, we increase the sales, or whatever we do, it has an impact on operating income. That's the one thing which we work on is the operating income impact. The second is human hours automated. That's the second metric because the digital technologies help organization and people to become more productive. Productivity, the simplest metric is human hours automated. These are the two metrics we focus on at a strategic level, but I will tell you one thing here, as we said our partnership here. None of
these numbers are reported by IT. This is straight from our business sponsors, validated by finance. We only record what they say is the value. We are involved in helping to articulate the value, but finally, the value comes from that. That's the highest level strategic metrics.
But when we go to the next level, initiative by initiative, we have a different set of metrics. For example, if there is customer-facing work, we have time to code, net promoter score. Every initiative has a different set of metrics but, ultimately, they all need to point to the top two metrics: Is the digital technology helping the business from an operating income perspective? Is it making our people more productive? Do those metrics also cover the innovation you were talking about? Yeah, so it covers innovation because, again, the point here is innovation with intent and innovation with purpose. In an innovation cycle, when we are sourcing ideas, when we are experimenting, at that stage, we have a set of value propositions and we have an objective either to learn about technology or learn about the business value proposition. But when it goes to implementation, before we
implement, we go through the same process. Innovation has to lead to a certain value proposition for the company. It takes time for business, finance, and us to come together to articulate in a case-by-case basis, but every technology has a purpose. It creates value for our internal and external customers. That's the science and art of doing it.
At each step of the way, you're forced, in a sense, to ensure that there's that alignment of the activities, the operations against corporate objectives, which includes both finance as well as customer satisfaction because, ultimately, that's going to lead back into the finance. That's correct. The piece which we had made is our digital transformation. We have attempted to make it more quantifiable. That's why our top two metrics come into the OI (operating income) impact and automation because it is very clear.
This becoming unifying metrics – every business leader, every group, general manager, and board. It's a common language. Everybody understands it, so that's what we focus on. We have another question from Arsalan Khan. He's shifting gears here to talk about data and analytics. I'll say thank you, Arsalan, for doing that because great minds think alike, I suppose, because that's where I was just going as well. He says, "When it comes to using data for decision making, how do you make sure that an executive or a business leader's experience – which is to say their bias – doesn't overshadow what the data is saying?" What I saw in 2018 when I joined this organization, this company is generally data-driven. It's a manufacturing organization, a data-driven organization, but our key need here was data-rich decision making, so driven to rich decision making. That's the one observation.
The second observation was we wanted to make sure that analytics and AI models, which basically gives the results from data, they become a toolset in the basket of our business. Those were the two things which we kept in mind. How we started our data and analytics journey that will give insight is we started with, at the leadership level, first we did an industrial company benchmark and looking at that if it is an $8 billion company, and if we have to use – and I'm talking about 2018, 2019 when our program started – is we make sure that if we assess that how much is the financial benefit of using data in a sound manner. What it did, it told us the size of the opportunity. Then it also told us the areas to focus on. We said, okay, supply chain and manufacturing are the two key areas we need to
focus on in our data and analytics journey. Then we said, okay, within supply chain, these are the areas. Logistics optimization, supplier visibility, those are the areas. We came down to that level. What it did, it created a value proposition in the mindset that data and analytics, this is real. And when it was created, then we created our team,
and the same things, which I mentioned before. In these areas, we come up with the use cases, we co-create a solution with our business partners, and they use it. We monitor. We monitor the usage of our analytics model. I think, through this approach, from a value-based approach and co-creation approach, what we have done is we have created a symbiotic relationship between this toolset and human being. Nobody is competing. I think this is an augmentation. This is our framing. I'll tell you; our CEO has definitely significantly helped us making sure the data, as well as automations, seen as additional toolsets to make better decisions. That has set the tone. Very quickly, Mark Thiele comes back and makes
a comment. He wants you to know, "In his opinion, the shareholder is a recipient, a benefactor of corporate performance and, therefore, the best way," he says, "to create excellent corporate performance is by giving your employees all that they need: leadership, culture, the tools to be successful. Everything comes from that." Any very quick reaction to that? I 100% agree that employee experience is a very, very important aspect. That's the aspect I'll pick up from that question. What we do here is we make sure we reduce the friction between human and technology. Whether you are using your
simple device, whether you're using a smartphone, or you are using the service desk, you're using a laptop, whether you're using an analytical model, or you are using any system, we make sure that an employee's experience is in our thought process before implementing those systems. That's why this is definitely very important. I'll tell you. When we see automation and the employee experience, somehow, indirectly, we connect with the well-being. One thing you might have read about Oshkosh, we are a people-first culture company, and so people's wellbeing becomes very, very important. That's where we connect. What we are doing
in technology, we make sure that we take care of that experience. This is from Carmen Hill. "Do you approach core modernization projects differently from business transformation enablement? Is the process similar for strategic alignment, prioritization, co-creation?" I guess the question is, do you approach these different types of projects in the same way or differently? We look at core modernization. In core modernization, also there are two components. One is infrastructure in the cybersecurity side, and another is more on the business application, whether it's the CRM and ERP side.
When we do business application side CRM and ERP and other implementations, we follow the same thing as business enablement. We see them as a business enablement, but it is still their core modernization. When we think about infrastructure and cyber modernization, that's the area that's hard to quantify the value. We still look for strategic alignment, but the place there, our view there, is we look at the risk, which is creating in the company. This is less quantifiable, but it's still
articulated in alignment with our business that we are reducing the operational risk or cyber risk. You can see I really prioritize the questions from the audience over my own. The audience, you guys are great and such a smart, intelligent audience. This one is coming on LinkedIn from Sai Penumuru. He says, "The technology part of digital transformation is easy. But the process,
people, or cultural adjustments are difficult. How do you manage this?" Again, the process, people, cultural adjustments. And he wants some examples of tips and tricks. First of all, I agree with him. The technology side is easy and the business part. That's where I think my whole approach here is not a technology-led digital transformation. It is a technology-enabled digital transformation. That's where I think co-creation becomes very, very important. I give an example that we brought a number of technologies in our manufacturing from augmented reality to virtual reality, digital simulation, wearable technology, computer vision. These are the set of technology we brought to our
manufacturing. The idea here was to co-create, co-experiment, and, together, define. I think my simplest tip at the highest level is alignment to the strategic priorities or pain points of the business at a multiple level and in doing it together. This notion of co-creation is really foundational to your entire approach, it sounds like. The way we see it, and another dimension I'll say, is trust is a very important factor in digital transformation, speed, and outcome. The trust is built on a daily basis, and that trust is built if we are closer to the business in terms of strategy, and if we are cocreating things together. How are you competing for technical talent in this
very difficult job market, difficult from the point of view of hiring technology folks? I don't believe in talent competition. My underlying philosophy is talent nurturing. I'll give you an example. Talent nurturing, what we are talking about is we hire people. Just to be clear, we hire people nationally for key skillsets. We bring in interns with a purpose. I think that's traditional hiring sources. But our majority of the focus in talent is nurturing. How we do it is we give them the skills aligned with their transferable skills and their passion, and we give them opportunities, experiential opportunities.
That's what makes the difference. I'll give an example. We have created a robotic process automation. It is a technology which we implement for automation. This is a very high demand skillset in the market. What we have done is we have
taken our internal resources who had software capability, retrained them (who had passion), and they are now one of the best RPA programmers. They're developers there. I'll give another example in the data science field is we had a data analyst in our legal group passionate about data and wanted to be in this career. We gave her an opportunity in our data and analytics team. In two years, she is a phenomenal data scientist because what she did is she had a passion for it. We had provided the opportunity and training. We combined that. That leads to the maximum
emphasis I am playing is on talent nurturing. This is from Jasna Kovcin. She says, "How do digital technologies support your sustainability efforts?" As a company, we have made a pledge to have science-based targets, and we are defining science-based targets. That's the highest level, so that shows our commitment around sustainability. We have a sustainability group, and we work,
from an IT standpoint, the data centers, and cloud. We are constantly looking at ways for making sure that we use the right level, the right type, of energy sources to help sustainability. We are also helping, from an analytics standpoint, on the energy consumption in our manufacturing, so there are multiple initiatives in this space. Where is digital transformation at Oshkosh going? As I had articulated, our definition is using digital technology to reimagine business. We will continue to reimagine our business every day for our end customers. To us, it is a continuously happening exercise. But if you talk about specific areas, we
think that the data will continue to play a major, major role, and we are working towards that. The second is automation. My personal ambition is any and every task in this company should be automated, and our teams (business and IT) are working together. Automation and data will be the two directions where we are going to spend a lot of energy.
With that, we are out of time. I want to say a huge thank you to Anupam Khare. He is the chief information officer at Oshkosh Corporation. Anu, thank you so much for being here with us today. Thank you. Everybody,
thank you for watching, especially those folks who asked such excellent questions. You are such a smart audience, and I love your questions. Now, before you go, please subscribe to our newsletter. Just hit the subscribe button at the top of the CXOTalk website. And subscribe to our YouTube channel, and we'll keep you notified of upcoming shows. We have incredible shows coming up. Everybody, thank you again for watching. Thank you to Anu, and I hope, everybody, you have a great day.