Digital transformation: Investment planning and priorities with Oshkosh Corp. CIO - CXOTalk #755

Digital transformation: Investment planning and priorities with Oshkosh Corp. CIO - CXOTalk #755

Show Video

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.

2022-07-03 13:50

Show Video

Other news