Digital Disruption Series at Scheller College of Business at Georgia Tech, FULL PANEL

Digital Disruption Series at Scheller College of Business at Georgia Tech, FULL PANEL

– Good evening, and welcome
to the inaugural presentation of Digital Disruption Speaker Series. We are delighted that
you’re here with us tonight. My name’s Maryam Alavi. I’m the dean of Scheller College of Business at Georgia Tech. Just to give you a framework
for our discussions tonight. It used to be said that
change is the only constant, but being in the field in terms
of research and education, being in the field of digital strategies, I’m beginning to think that
even change is changing now. The primary evidence of
that is really the scope, the scale, and the speed
of digital disruptions, and diffusion of digital technologies. Just to give you an example. It took the internet four years
to reach 50 million users. Four years to reach 50
million users, the internet. You might have heard of the
digital game Pokemon Go. It took Pokemon Go just a few hours to reach 50 million users. So, to help you develop some insights and navigate digital
disruptions and innovations, Scheller College of Business and Accenture partnered and teamed up together to introduce this speaker
series on this important topic. Scheller College is a very innovative and a top-ranked business college at the intersection of
business and technology. Accenture is a world
leader in working with organizations of all size
across different industries to help them leverage technology, to help them grow and
compete in the digital era. I cannot think of any
two other organizations that are better equipped to come together for launching this
wonderful speaker series. This is an important topic,
and it’s a very timely topic. To give you an example,
the panel is tonight, among ourselves, we have
about 100 years of experience and expertise in the digital arena. So we have been in this
area for a long time. So what is digital disruption? We are really talking about exploring, exploring the ways in which
organizations and managers can embrace digital technologies to successfully compete, to create value, and to create the workforce of the future. So, I know you’re here to listen to our, to our panel, wonderful panel discussions, so let me just take a
few minutes to introduce and call our panel’s
speakers to the stage. So let me start with David Godsman. David, please come up. David is the chief digital
officer at the Coca Cola Company. In this role he is responsible for developing the digital
transformation strategy for the Coca Cola Company,
and come up with innovations in their products, and bring
efficiency to their operations. David, thank you so much for being here. – Thank you for having me. (audience applauds) – The next panelist is
our very own Saby Mitra. Saby, please come up. He is the senior associate
dean for programs, and in this role he is responsible for innovations and delivery
of topnotch undergraduate, MBA and non-degree executive
development program. He’s also a professor of
information technology management. Thank you for being here.
– Thank you. (audience applauds) – Last but not least is Michael Sutcliff. Michael, please come up. Mike is the group CEO
of Accenture Digital. He works with clients
to help them to develop strategies and to compete effectively in the area of digital disruptions. Under Mike’s leadership, revenue from digital services at Accenture has grown to $13.5 billion. I also want to thank Mike for partnering with Scheller College and being the champion of this
speaker series at Accenture. So thank you all for being
here, and let’s get started. (audience applauds) I will start by asking
a number of questions. I sometimes ask the same
question from everybody, sometimes I ask different questions from different people
based on their background and the context that you’re familiar with, and we’re gonna stop and
allow 15 to 20 minutes for questions from the audience. So my first question goes to, goes to Mike and Saby. So the question is in the
digital transformations, incumbent companies seem
to be at a disadvantage when it comes to responding to some of the digital innovators such as the Amazons, Ubers, et cetera. So why do you think some
companies are more successful, incumbent companies are more successful in responding to some of these early and digital entrants into their space? – Saby, do you want to start? – You go ahead.
– Okay. I guess what I would start
with is, I think it’s culture. I think it’s the
management team’s appetite and interest in learning,
their willingness to be open to ideas from the ecosystem, and a recognition that
what’s worked in the past might not work in the future. So if they’re open to learning, they’re willing to consider that the business around them is gonna change, that their customers’
expectations are gonna change, that the quality of the
product is going to change, then they start seeking input from others and learning from others, and if they can do that,
they can be successful. The companies that feel
safe, secure and stable, sometimes just don’t have that appetite, and it takes a little bit longer, and usually they wait for
a little bit of a shock to tell them that it’s time to move. – Saby, do you want to add to that? – Sure, and perhaps this
is a little long answer, but I think you’re right
that a lot of times, especially the examples you gave, Uber against the taxicab industry, and Amazon versus retailers, the incumbents seem to
be at a disadvantage in those examples, and
I think there are really fundamentally two reasons for that. One is, it’s really about, not about strategy, but about execution, and execution is hard for large companies. So if you take a really
iconic example such as Kodak, I would say that Kodak probably knew that digital was coming,
and if they didn’t know, then Accenture would have been there and told them that digital was coming. And if you look at what they did, they hired George Fisher
who was CEO of Motorola prior to his joining Kodak in 1993, they set up a digital imaging division. They actually had pretty good success initially with digital. They were the first to come
up with a digital camera way back in 1975, and
then they came up with very viable products and were perhaps number one or number two
in the digital space, but they still couldn’t, so I would say that their strategy was, they realized that digital was coming. They were doing all the things
but they couldn’t execute. And there are a couple of reasons I think that large companies cannot execute on the digital transformation
very effectively. One is, it often requires
different business models. So if you think about Kodak for example, they were a consumer goods company, they sold film and paper, and they had to move away from, to a world where there are no consumables, in the digital space. Their incentives were also not aligned. If you think about a incumbent company, very comfortable as, Mike, you mentioned, in their own space, very
high margins on digital, or I’m sorry, on film and on paper. The joke was at that time
there was nothing legal that had the kind of margins
that film and paper had, and so they wanted to hold on to that for a little longer than
was optimal for them. For those of you with
gray hair in the room, or with no hair like me,
you’ll remember this Photo CD. I don’t know if you remember. That was their attempt
to still capture on film, because, I’m making great margins on film, but let’s hold it longer,
a little bit longer. I’ll give it to you on a CD
and then you can email it and do all those other
things that you want to do. There are current resource bases like their manufacturing facilities, for incumbents, are not relevant anymore. So for Blockbuster, in
a video-on-demand world, their stores don’t have much value. Or for Kodak, their manufacturing base of, for manufacturing film, really doesn’t have
that much value anymore, and so it’s hard for them
to make that transition. Finally, I would also say
that digital transformation is kind of a balancing act if you will, and it’s very hard for 900-pound gorillas to do a balancing act. So if you think about transforming,
digital transformation, do you do it through acquisition or do you do it through internal R & D? Well, the answer is that it’s neither. It’s a balancing act between the two. If you take Google, many of their current products
are through acquisitions. Android, all their targeted advertising. They also spend about 16, 17, or 20%, I don’t exactly remember, of their revenue on internal R & D, because it’s necessary to build
the absorptive capabilities so that you can take those acquisitions and bring it in house,
and if you think about the timing of the transition, do you do it quickly,
or do you do it slowly? Well, Kodak obviously did it slowly, but if you think about
Netflix a few years back, I don’t know if you remember the Quickster debacle that they had, they were trying to move too quickly. So in that case it’s also a balancing act in terms of how fast do you transition so that you bring your customers with you. And because of that,
because it’s very hard to do that balancing act
for large incumbents, I think they’re often at a
disadvantage compared to a large, er, to a incumbent digital player. – Okay, thank you. David, could you in your role as
the chief digital officer at Coca Cola give us a few examples of some of the projects and initiatives that you have launched
in the digital arena? – Yeah, I mean, I thought the opening
comments were wonderful. I think, and I just want to add a couple, and then I’ll jump right into that. I would say, I think that large companies sometimes operate with
a sense of arrogance. They don’t respect the emerging companies to the extent they should,
and they don’t recognize the exponential curve that
can happen in an industry. I think in the Kodak example they missed the macro-level trend of memory, right, and what was happening
with the memory chip, which ultimately enabled the photos. They don’t move with purpose either. When you state that you’re going to enter into a period of digital transformation, too often, that is a
branding campaign of activity that will happen throughout a year that someone is fortunate to own, versus a journey that
you’re going to embark on over a three to five-year period, if not 10-year period of time. So I think those are
some interesting things. We looked at it, at the
highest level in the company, we’ve looked at it across
experience transformation, and that’s how we create value for consumers and our customers. We looked at it across
business opportunity and how we change our own systems and evolve those using
digital as a capability to advance and accelerate
our business model. We look at new business
models in some of the areas where we have an opportunity
not only to disrupt ourselves, but to create new services, new models, for consumers, and lastly is culture. It takes a lot of courage
for companies to realize they don’t know what they don’t know, and for them to embrace
the community and learn. So we’ve just actually
finished up a fairly in-depth exercise where we went and we looked at 15 different capabilities
across our entire ecosystem, so both the company side, the business units that we operate, and also the bottling franchise
partners that we have. So we’ve looked at everything from how we’re marketing in a digital world, and that’s online marketing, that’s use of digitally enabled technology
in the physical world, we looked at E-commerce as one
of the greatest disruptions that are going to face our business. Most of you know that have been, have enjoyed any consumer
packaged good for that matter, or product, know that the
world is changing very quickly, and we won’t be going to the
same shelf in the grocery store for the remainder, so
E-commerce is a big opportunity. And we’ve been spending a
lot of time in supply chain, understanding barriers to entry, understanding what’s happening
in the bio-harvesting field and what that means to
raw material procurement to create beverages, and
how digital is actually influencing that to
change the business model. And so it’s a broad set of
areas that we’re focused on, but we’re very deliberate about it. And to your point, Saby,
which I thought was excellent, this is not something
you achieve in a year. You set horizons. One horizon may be 12 months out, the next one may be 24
months out, and so forth, and so you pick the
projects that can yield, obviously, the fastest return, but you can’t lose sight
of the long-term picture. You have to have a perspective on where you’re trying to go as a company, and what that five-year
view may look like. And as consumers of beverages
or any other product, we live in a world
where there’s more value than what’s inside the bottle. That’s what we expect from that
brands that we interact with and so that’s a major
transformational thought for us to think beyond
the beverage itself, and to create content and other forms of value for
consumers and customers. – So, David, you worked at a big bank before coming here.
– I did, many of them. – And so you’ve seen financial services, you’ve seen consumer products in retail, and at big multinational,
big-brand companies. Their management processes
are all set up, right? They’re really good at managing
marketing, and finance, and HR, procurement,
supply chain, et cetera. How do they manage innovation, and how much does that impact
their ability to go through the change curve that
digital throws at ’em? – Yeah, I think they
attempted to manage innovation like they did the other
processes originally, right? So things like a marketing
factory, where you’re looking at creative concepts before
they go to market, gates and milestones, and
things of that nature. It’s not really the way normal incumbents, or actually, it’s the way
normal incumbents operate, it’s not the way that disruptive
companies are operating. I think what you’ve seen,
especially in financial services, which is going through an
amazing fintech revolution, and I also went through
it in the travel industry, is they’re starting to try
to push it out to the edge a little bit more, find partners, where you can develop lab environments and other ways to kinda
scale and accelerate learning without being encumbered
by the legacy systems, and other things that
typically bring people down. And then you have to bring a system to allow it to come back, right? So there’s something about setting free, allowing for divergence to
happen and mass experimentation, and then figuring out
a way to cultivate that and bring it back into
the system with purpose. – I think going back to
your original question of why do some companies struggle or not, I think that last point about having an innovation architecture or process that’s built into the business model that is different than the business model in creating predictable
results, is really a new skill that most companies are
just learning today. – It really has to do with managing risk, learning how to manage risk. And the other thing about
innovation nowadays, is that it’s not a punctuated
one-time thing you do and then say, oh, I have a new product, so I’m good for the next five, 10 years. It’s a continuous process of enhancement and change and transformation, so I think that’s another reason perhaps
some of the established firms have a hard time dealing with it. It’s like going off
balance and learning to remain off balance for indefinitely, so there’s a lot of complex issues. – You know, one really important point is, coming back to your
financial services example, if Google serves me a wrong
ad, big deal, no problem, but if JP Morgan Chase or Bank of America, they don’t process my
transaction correctly, that is a big deal, because they’re moving trillions of dollars, so
you’ve got to be agile, but you also have to have
the processes in place in many of these incumbent organizations to do it reliably and efficiently, and that’s one difference
they have to keep in mind. – Good point. – Risk management. David, my question, what
have you don’t at Coca Cola that you can share with us
in terms of transformations and innovations, digital innovations? – Well, we’ve done a
number of things, right? We’ve started to reimagine
our marketing model. So we had a historical model where we would create big television commercials that we’re probably
all very familiar with, and then we would take that asset and try to morph it into other forms. We’ve flipped that model on its head. We now develop television
for the internet first, and then we bring it back
to broadcast television, so we use the mobile device as
a great mechanism to do that, something we did in the last year, that enables and challenges us, frankly, to get to the core concept
in a six-second opportunity versus a 30-second, or what
may have been 60-second thing. So I think that’s been fairly interesting. We’ve started to use machine learning on how we approach our audiences. So we know we have seven audiences, 15 drinking moments a day,
there are 74 emotional and functional reasons
why you select a beverage, and then you ultimately pick a beverage, and we have that level
of data around consumers, because we have people consuming– – We didn’t know any of that, right? – We have people consuming– – Personalization on steroids. – Yeah, it is, and then
you have volume, right? We have two billion drinks consumed a day, and so you start to apply that model. And it was a great example of, what we historically would have done is, individuals would look at that dataset, write a creative brief, and then ultimately hand
that off to an agency or to someone internally to do it. A machine can do it in
a matter of milliseconds with complete objectivity,
not subjectivity, so there’s no interpretation of the data, the data is what the data is, and so that has radically
changed the way we think about our marketing model,
and how we go to market, and there’ll be future iterations of that. And then we’ve really started to embrace the changes in the physical environment that are coming because of digital. So you’re noticing more and
more when you walk into a store, any store, or to a gas station. You’re being presented
more with digital signage than you are physical signage. Posters are starting to be replaced by screens that have the same image. We spend a lot of time
looking at how we can leverage that at a personalized level for consumers as they come
to those retail environments. There’s a lot of interesting and exciting and kind of creepy voodoo (laughs) targeting type stuff going on. It’s all with good purpose and desire to obviously help the
consumer in their journey to find what they’re looking for, so. – Okay. So my next question has to do with the IT infrastructure of the corporations. Of course, IT infrastructure
plays a key role in digital transformation,
and it used to be that many years ago I remember
in the early days when I was doing my research
on digital strategy, I would go to functional area
executives and I would say, this is important, it can
impact your business model, and their eyes would gloss over and say, go to talk to my CIO,
that’s not what I do. That’s the back office stuff. But now things have changed tremendously. The back office technology
is moving forefront, so my question, and
this is really directed initially to Saby and then to David, is how could corporations position
their IT infrastructure to really enhance and support
the digital transformation? Saby, quick answer and then
I want to move to David. – Sure. At Scheller College
we’ve been pretty lucky in working with one of the
largest banks in the country as they go through a transformation in their IT infrastructure. And basically what they’re
trying to deal with is, because of the disruptions
that he just talked about in the financial services industry, they need to be much more agile to be able to compete with the fintech, emerging fintech players
that are coming on to market, but they also have to do
it, they have to be agile, but they have to do it reliably, they have to comply with all
the rules and regulations because they’re a big bank, and they have to do it
cost efficiently also, because they don’t have
huge margins either. So some of the things that they’re doing in terms of their IT infrastructure, I think there are three
or four key things. One is simplification, which is they’ve gone
through acquisitions, and like many other incumbent companies, they have a very, very
complex infrastructure. If you have complex
infrastructure, it’s not reliable, it’s also very hard to be
agile in that environment, because you can’t make quick changes, and so having consistent platforms, having consistent infrastructure,
simplified systems, that’s one of the bedrocks
of what they’re trying to do, the way they’re trying to
transform their IT infrastructure. The second is around
leveraging the cloud better. I think they’re struggling
through that a little bit, because, like many companies, because if you look at it today, perhaps you do have the scale internally to have the same sort of cost advantages as the public cloud, but that’s probably not going to be so in the future, where the public cloud costs
might go down significantly, so you’ve got to be
prepared, and after all, if you can get something,
software as a service, it’s so much more cost
efficient, so much less headache, but how do you really do it in a way that matches things that
you’ve got to keep internally, especially for this large bank, they’ve got to keep it internally by regulation and other reasons, but they also want to
leverage the public cloud, so how do you marry those two together? And then the third thing
that they’re struggling with is more of a match between a centralized and a decentralized model for IT, where centralization has lots of benefits. More cost efficient, it’s
more perhaps standardized, there’s better security,
all of those benefits, but then you lose the agility, you lose the ability to
be closer to the user, so how do you get that balance right between having decentralized groups but also having centralized IT providing the skill that’s necessary? So those are I think the three key things that they’re struggling with in their, in transforming their IT infrastructure. – You’re taking me back to a
world I thought I had escaped, but I know well, and I don’t need to know what the financial institution is. I know they all struggle. – Right, it’s very similar problems. – They all struggle, yeah. – David, how would you like
to add to that in terms of the technology infrastructure
in a corporation? – So, look, I think
part of the re-imagining of the technology stack
is getting it grounded in the use of data, in
effective uses of data. So the ability to ingest
data, standardized data, the ability to then manipulate the data and effectively make decisions off of it. Not everyone built their
technology infrastructure with that level of focus,
and with data being the future currency of the world, I think that’s incredibly important. I think you’re absolutely
right, Saby, about cloud, and the flexibility that
enables you to have, and the scalability, the
infinite scalability. The last thing I would
just say is, we need to, we being large corporations
are guilty of this, need to move away from high
levels of customization. So high levels of
customization of platforms where we think we need something
because we think we need it puts you on a path to being very challenged when you want to unwind, and you need flexibility and
optionality in today’s world, and your ability to be able to plug in and plug out is
incredibly important, so as the architectures
are being designed, I know a lot of time is spent
on thinking through that so that you don’t– – That’s the simplification
I was talking about. – Yeah, that you don’t
put yourself in a scenario where you have to unwind from systems, or in many cases, I think
it’s the demise of some opportunity for companies
where they can’t unwind. And I know the coal-fired
boilers that we have pulled in the financial
services industry behind us, that it’s impossible to get out of, so. – And that is a
particularly important issue in terms of flexibility
and undoing things, because if you want to
change your processes, to respond to your clients
or customers better, or to be more efficient, and if those processes are
encoded in your systems, your technology, and your IT systems, that becomes almost impossible to undo. – Maryam, I would just add that the three things that we talked about in terms of simplifying and
also leveraging the cloud as well as having more agile
decentralized IT organization, is probably not just limited
to financial services. It’s pretty common across large companies and many other industries as well. – Yeah, agreed. – So my question to you,
Mike, is sort of related to technology, but it’s
a little different. Given your experience working with so many companies in different industries, what type of digital technologies your big clients are going after, and how do they go about acquiring it? What are they interested in and how do they go about acquiring it? – Well, I mean, when the
first wave of digital hit and people were trying to find what digital was really about, they were thinking about
engaging the customer. We talked about marketing, moving from mass marketing
to personalized marketing, using the ubiquity of
the screens, the devices, to connect with people and listen to them, and understand their preferences, and then try and provide a more personalized response
to those preferences. That was pretty much wave one of digital. And so that was about
advertising technology and marketing technology, which
had little or nothing to do with the CIO organization,
which was all about systems of records, systems of control, and transaction processing systems. So originally there was a bifurcation between the CIO organization and then what was going with customers
engagement and interaction. Over time, we started to see E-commerce become a big wave of interest for clients, because they started to talk about the movement away from
the physical purchase to something that might be
happening in an online market. And then we started to see
them moving past E-commerce into areas like artificial
intelligence, applied analytics, and we started to see that
the data and the data science were as important as the
technology in actually enabling those interactions
with their customers and providing better
personalized responses. And then we saw a whole new
set of things coming out like blockchain technologies, which enabled trust networks to occur that weren’t able to be stitched together inside the walls of a single company, now we could start to see
members of an ecosystem collaborate together to
take fragments of data and establish a different way to interact with those customers and to serve ’em, and so people got very excited, not about the Bitcoin currency so much as the blockchain underneath it, and then the smart
contracts that those enable. And now we’re starting to see an interest in the concept of
extending your experience, augmented reality, virtual
reality, mixed reality. What’s gonna happen as we start to expand your human capacity to absorb information and to put yourself into
different cognitive situations? And so the nice thing about digital is it’s not one technology,
it’s a wave of them that come wave after
wave, and the question is are you understanding what
each new wave enables, and are you thinking about how to apply it to the business model, the customers, the products and services. Right now, one of the
most interesting things that we’re seeing is the collision, and I think collision
is the right word there, between operational technology
that’s used to manage manufacturing, production,
supply chain, et cetera, with information technology, and that collision is
a very interesting one because it takes a bunch
of really old technology, 20-30-year-old SCADA systems, right, and tries to bring ’em
in into the real world, which is really creating
a massive security issue for a lot of clients, because
those things are not designed to be secure in the way that
we want to use ’em today. So lots of different types of technology to become familiar with,
and the most important point is that none of the technology
by itself is important. The really important question is what are you going to do with it. – Okay, so my next question,
I’m going to direct it to David and Mike, again,
given your background and experience with
different corporations. Traditionally in the US, a
lot of digital innovations and digital disruptors have,
innovations occurred in the US. The US companies were
leading the way, if you will. But then lately, if you look
at companies like Baidu, and Alibaba and Ctrip and WeChat in China, they’re just amazing in terms
of how they’re innovating and how they are moving so fast. Do you think US is losing
its competitive edge when it comes to digital innovations? What’s your opinion about that? Or what do we need to do to keep it? – No, no, no, no, I actually don’t, although I have an
enormous amount of respect for many of the companies
that are starting to emerge, emerge out of Asia, and
India for that matter. I think if you look at the
large-scale tech companies, the Amazons, Apples,
Alphabets, Microsoft, Facebook, you look at the top 10 tech companies, they were all originated and
created in the United States. If you look at the advancement
of a lot of these platforms, they’re mirroring and
mimicking many of the models that were created in the US, right? So Baidu by nature being
76% of the search volume, in China I believe now, and you can see remnants of where that model came from, and frankly, they’re not shy about it. I think if you look at the
advancement in commerce, you had things like Amazon Prime Day three or four years ago, you
now have 11/11 Single’s Day and some of the biggest
commerce events in the world, which by the way, make them
at an exponential rate grow, which makes them
obviously be well deserved of the headline and the scale. I think, what I can see,
and in all these companies, there’s kinda like this coming together, this convergence that’s gonna happen somewhere over the Middle East probably, where the companies from
the West are moving east, and the companies from
the East are moving west, and the companies from the
South are moving vertically up. It’s gonna be really interesting to see who can maintain the
consistency of the brand and the experience and the
consumer value proposition on a global basis, versus
being able to do it really well in a localized fashion, where they’re taking advantage
of some of those trends. – Mike, what are your thoughts on that? – Well, I think I largely– – Completely disagree with me. – Yeah, no.
– Make it controversial. – I largely agree with the point that the US remains an
incredibly competitive place if you want to be an
innovator around technology, because we have a massive
amount of capital available with a community that knows how to invest. So they’re comfortable
being angel investors, or Series A or Series B, they
understand the risk profiles, and there’s a lot of capital
flowing into innovation, and the ecosystem is there to support it, the educational system to generate the people who can do the work as well as companies who are used to
working with those startups to test and pilot and do proof
of concepts and prototypes. So if you had to choose
a place to try something, this is a great place
to try it, in the US. Now, having said that, not all the best ideas
came from the US, right? A lot of the companies in Silicon Valley originated in Israel or London, or Frankfurt or somewhere
else, and the problem was, the regulatory environment
there stopped them, right? It didn’t give them the freedom, because data privacy or regulatory, or capital restrictions or whatever, said if you want to do this, you’re gonna have to go try
it somewhere in North America. Now, North America’s
got this massive market, behind China, it’s probably the most attractive market to try and do this in. The problem with the Chinese
market is you can only do it if you’re Chinese, right,
so if you’re Google, you can’t go there, but they
can certainly come here. And so what we’re seeing
with the large competitors in China is, they never did
lack the ability to innovate, they’ve always been able to innovate, but they had a different
regulatory environment. And what we’ve seen over
the last 10 years is, the regulators in China are
letting them experiment, and therefore, they’re developing really competitive capabilities. Now they’re starting to export those from China into other markets. Note, they’re not really coming here. They’re going to Eastern Europe
or Africa or other places, but they will come here
eventually, as we will go there. So I think we will meet
somewhere in the middle. The most interesting part is
I think the European Union has just completely shot
themselves in the foot. There won’t be another innovative company coming out of there for about a decade. So, you know, don’t try and innovate if– – You can quote him. (laughing) – They just have put too
many regulatory constraints on the ability to innovate
as a startup, right? And so the people who’ve
got those ideas in Europe have to choose: are they gonna
go try and do it in China, or are they gonna come
try and do it in here, or maybe they’ll go to India, but they’re certainly not gonna try it in one of the European countries. – One really quick point. University systems play a real
important part in innovation and I would say that 20 years back, if you looked at the
university system in the US, it was really unparalleled, I mean, there’s no other country
in the world that has the scale and scope of
universities that exist here, but in the last five years
I’m seeing a little bit of a transition in terms
of scientific papers that are submitted to journals. I used to edit a pretty prominent journal, and 10 years back, I would say 100% of the articles in that
journal were all from folks who were in the US universities. Now I see much more, or many more, it’s still dominated by US universities, but much more from, Europe being one, but also China, India, Singapore, Hong Kong, et cetera, as well. – Yeah, good point. – Saby, I want to ask you, we talk about incumbent corporations, we talk about the fast digital movers, everyone says companies like
Amazon, Facebook, Google, Uber, these are the winners
in the digital economy. Do they have anything to worry about, or they are just so far
ahead and they can just, what do they have to
worry about, if anything? – That’s an interesting question. We just came back from
our Silicon Valley trip, as you know, with the MBA students. I think a couple of things. One is, a lot of the tech companies rely on this notion of network effects, which is they pay a lot
of emphasis on usage, traffic, on eyeballs, rather
than on revenue, profit, the traditional metrics,
with the idea that as you grow larger, you
get sort of to scale and no one else can compete,
and that’s actually, if you look at Facebook and
Google, that’s probably true, but I think there is a
danger in that thinking, because if you rely on
those kind of metrics, on network effect metrics, without switching costs,
those are meaningless. In other words, when you try to monetize, consumers can really quickly
switch to another platform, so Uber spending a lot
of money to get drivers and riders to be on their platform, if there’s an alternative
platform available that can provide the same benefits, and there’s really no
viable switching costs to prevent me from switching, all that investment is not of much value. So that’s one thing that
they have to be careful of. The other thing I feel is,
they have very high margins and very high valuations right now, and if you have those high
margins and high valuations, it leads to a little bit of
inefficiency and complacency. So you build these fancy campuses, you have, you’re not as efficient,
you’re not as hungry as you can be if you
had those high margins, and that’s something that
they have to be careful about during downturns, and during, when they don’t have
those high valuations, can they really maintain those, the infrastructure that
they’re setting up? And then the last thing is incumbents. I think if you look at Amazon
and you look at Walmart, Amazon has probably 44% of online revenue, and Walmart has a much smaller share, but, Amazon has 75 or 80 fulfillment
centers around the country. Look at Walmart, they
have maybe 4,500 stores. So they have so many more locations to be closer to the customer. If they can get their act
together on the digital space, they have about $480 billion in revenue compared to Amazon, which has 130 billion, so they have bigger scale,
better supplier relationships, more economies of scale, if they can get their act together, they can be a very viable competitor against the digital players. Of course, they haven’t
been able to do that. Walmart is still, in terms of digital revenue, is pretty small, but I think there’s a risk there as well. – And can I add another risk? One of the things that you’ll
learn in the program here, I still remember this
discussion we had in class years ago about what stakeholders matter, and right now there’s a
massive discussion going on about whether or not
society is going to continue to give them the license to operate the way they’ve been
operating today, right? And trust is a major, major factor, and if you lose the trust of
the people or the government, and they revoke your license to operate, or significantly change it, that can damage your business model whether you want it to or not, right? Uber in London right now is
in a bit of a pinch, right, because they’re about
to lose their license, and that’s because the regulators just don’t trust the fact
that they caught them using some software they
shouldn’t have been using to try and avoid the regulation, and the regulators said, okay, fine, if you don’t want to play by the rules, we’ll just pull your
license to play at all. – Yeah, I think it’s a very valid point. – There was an article yesterday or today in the Wall Street Journal
which was basically discussing whether it’s time to break up the Facebooks and Googles of the world, because Google has 89% share of search, and Facebook has some 95% share of, 95% of the people use
some sort of Google app, WhatsApp or Facebook, et cetera, and so is it time to break them up, and that sort of scrutiny will
come as they become larger. – I also think the very asset that they’ve built their business on is a risk, right? The asset of data that they’ve
built their business on, accumulated on every, virtually every individual in the world
has to be protected. And as you saw with the likes of the, kind of the ending chapter
of Yahoo as an example, right, with the mass compromising email accounts that wasn’t disclosed. You saw the impact that that had ultimately on the transaction value of it. I do think someday we will face some form of data apocalyptic event, where one of these companies will be, and they haven’t to date, but, will face some serious pressure and potential vulnerabilities that will ultimately lead to a backlash, and people will now start to take back ownership of their data as their currency. For the last five years
we’ve all been kinda, it’s like the ’70s again, right? We’ve been all out on the wild web, and living our lives
with no real recourse, and the reality is everything
has been permanent, and is out there, as you can see from the photo that’s in the pamphlet that someone found for me five years ago. It’s out there and
sometimes it’s not pretty, (people laughing)
and, right? When you can dig up stuff like that, there’s a lot of risk associated with it. – Yeah, and I think– – It’s a personal example, sorry. – You had hair in the photograph, right? – I had some, I had some. (laughs) – Yeah, and things never
go away on the web. You know that, so.
– Yeah, I know. – Yeah, I think one of
the issues around these security breaches which
is really interesting is right now people tend
to be tolerant of that, not even, they don’t have any alternative. All you get is a letter that comes in. Oh, right away, your data was compromised. And? Oh, you can get a couple credit reports. So there are not really
severe consequences to that, but eventually when
something terrible happens, there are gonna be consequences, so I agree with you on that. So I think, again, this is a question for David and Mike to begin with. Since the year 2000, about
50% of Fortune 500 companies have been replaced on that list, so things are really in a state of flux, and you started to talk
a little bit about that, but what should the leadership,
what should, can, could, leadership do in organizations
to get them to be agile and to get them to innovate,
to get them to move faster, to come up with a balancing act? What is a leader to do? What are some of the attributes, some of the things they can
possibly do to make things, to guard against this being
left behind or being disrupted? How can one become the disruptor rather than disrupted, right? – Yeah, and I think you’ve got
different situations, right? You’ve got companies with
long-established market shares, global portfolios of products that are stable and working well, and even in that situation, I think, you know, you’ve got a new CEO in place, you recognize that that’s
not really gonna be what the world looks
like five years from now, so even with the best advantages of a blue chip brand name like Coca Cola, the CEO, I think day one
in the company, said, “I’m telling you all, the future
won’t look like the past.” And I think that is step
one, is the leadership team having a culture inside
the company that recognizes that the world will change
whether you want it to or not. And the very first thing that
we would recommend to CEOs is to make sure that
they really understand where value is being
created for their customer, and whether that’s gonna be persistent, and if not, what they’re gonna have to do to capture new sources
of value in the future. And so we think if you start with that, and if you start with really understanding where the value is coming from and what it’s gonna
look like in the future, then everything else has
to be up for grabs, right? You’ve got to be willing to say, the operating models, the
markets, the products, all of the things that we used to do, might have to change based on that value. And we take an example of Amazon coming in and disrupting the retail industry, now Walmart’s responding, right? Walmart has recognized that
they actually have an advantage on the physical-digital
blur, but only if they act. If we look at what, the transaction going on now
with CVS and Aetna, right? Why is CVS buying Aetna? Because they know that Amazon’s coming in to the pharmaceuticals market, and they want the ability to react. And so the willingness to
look at value proposition from the end customers’ viewpoint, and make everything else up for grabs, I think has got to be the mindset that the leadership team starts with, and I think that’s what’s
going on now, right? – Yeah, no, no, I agree 100%. I think there’s some
characteristics, right? I do think we all have to
operate with a sense of humility, even though we’re massive,
in our particular case, one of the most recognizable
iconic brands in the world. We don’t know what we don’t know, and we know that others are
moving quickly into the space. I think a healthy sense of
paranoia is a good thing, so I think all leaders
should carry a little bit of a looking-over-their-shoulder
type mentality, because there are proof
points that you can find in generally every subject
where that’s happening. I think they need to
test the immune system. I joined Coca Cola a year ago,
I was a complete outsider. I had never been in CPG before, I didn’t know a single
person in the company, I came from the banking industry, which obviously is going
through lots of transformation, and to bring in individuals
to also start to shape and change the thought process and the way to do that’s
incredibly important, and you can’t do that– – There were no antibodies in the company. – I don’t want to be on record, but I am here, and it’s a year in, so, no, but it’s really important
to test, and I could also say, you change over a lot of
the leadership individuals. Right, if you can’t change fast enough, you’ve got to be courageous enough to make bigger changes there. But I do think it’s straining
yourself a little bit to see if you have that
characteristic there. And the last thing I think we’ve talked about a couple times tonight. Introduce a sense of risk tolerance, responsible risk tolerance. So there are very few people
in the company who are like, I’m gonna bet it all
on my job today, right? Because that’s not the
way large companies work. But showing where fast-fail
mentality is actually not, is rewarded, not necessarily scolded, I think is interesting, and
there are many companies today who have introduced things
in their innovation processes where they do failure rewards. People get bonuses for knowing
that they killed a project that was never gonna
be commercially viable at a scale that would’ve mattered, but they’re rewarded for it,
and they celebrate it in a way, and I think that’s some
of the cultural dynamics, you started off by talking
about culture earlier, I think those are some of the things that you have to do to really test the courage of the organization, especially as a top-down
leadership structure. – The only thing I would
add is being comfortable at the intersection of
business and technology, which is where the
Scheller College operates. (panel and audience laughs) – Good plug. – Good commercial.
– There we go. – Good commercial. Let me now open it to the audience, and we have mikes that
are gonna be taken around. (people whispering faintly) – Hi, Saby. Hi, Saby.
– We can hear you. – I’m Larry Baskowitz, I work
in the Scheller career center. Going back to the Kodak example, you did a very good job articulating some of the legacy
issues they were facing, and given their attempts
at going into digital, based on what we know today,
what would be the best-practice digital transformation
strategies that Kodak should have adopted that
they failed to adopt? I know it’s a multimillion
dollar question, but I just, just a brief overview. – I’ll be very quick in the answer. Hindsight is always 20/20, right? I mean, we can always say
what they could’ve done. So if you look really quickly, they had a lot of acquisitions, they were in multiple
different businesses, and they actually shed those
businesses at one point because they wanted to focus
on their core film business. Now, on hindsight, if they
had kept those businesses, maybe those businesses would
have had much more value than their core film
business, so that was one. Of course, I think they were
too slow in the transition. They could have been much
more faster in the transition, and with good reason they were slow, because they had a very
profitable film business, which they didn’t want the
business to go away fast, so they wanted to slow that down, and in hindsight that was
probably not a good thing to do. – Okay, next. – Hi, my name is Anid Kyon. I used to work at Accenture
and now I run a fintech. So my question is, so to
kinda transform companies, you need a lot of capability,
not only in the perspective, but in the talent, and
a lot of the new talent that’s required takes
an extremely long time, data analytics, machine learning, how do you develop that in a company that has a lot of legacy employees? Do you replace them? Do you spend a lot of
money on training them? What’s the strategy here? – Yeah, I would just say,
and I’m gonna give you a plug as well in this sense, right? To your comment on
universities earlier, I think, you look at universities
as a feeder system. A lot of the studies obviously
focus on those areas, and you have to be willing
to take somebody who, frankly, hasn’t been in tainted by kind of the large business environment, right, and relish that opportunity to
have some different thinking. You definitely can up-skill, but you either have the
capability or you don’t, right? It’s hard to change kind
of the cognitive processing of an individual who just
isn’t going to be great at data science or
analytics at some point. And then I think you have
to look for partners, right? You have no choice but
to look for partners and where you can augment those, you know? It’s interesting, we spend
a lot of time talking about artificial intelligence, machine learning. You can also look to governments. We spend a lot of time with
the government in Singapore. They will attempt to build, based off the way that
they’re investing there, they’ll attempt to build probably the largest concentration
of artificial intelligence or data scientists to fuel that industry. So there’s opportunities to look at that. But I think it’s a combination, right? You can’t try to move everybody in the direction that you already have unfortunately in the
organization, because they either not have the ability
or it takes too long. You have to find ways
to inject and augment. – If I may add to that. Developing the workforce of future, it’s a critical issue
for all corporations. Unfortunately, I mean, there’s no way that universities can
graduate as many students as is needed for economy and
many organizations in the US. So it’s really important that the company, the organizations, come up with a strategy for human resource development to really address some of these issues. One of the companies that has done a good job at that is AT&T. AT&T embark on this human
resource development a number of years ago, and
they did it in multiple ways. It’s not a single way of doing that. Of course, they want to
recruit great graduates from great institutes like Georgia Tech, but in addition to that,
they started partnering with universities including Georgia Tech to develop online kind
of programs for them, curriculum and program for them, that they make it available
in the organization. But it’s just not enough to say, here’s the online thing
in your spare time, go ahead and re-skill and develop data science capabilities
or artificial intelligence. They really sit down
and create opportunities for their employees, it’s a program. What kind of jobs you want
to get into the future, this is the progression you can have, and they incentivize,
they provide incentive for their workforce to
up-skill themselves, and they give them promotion,
they give them opportunities. So it truly has to be a very significant aspect of strategy of a
lot of big corporations. Unfortunately, many of them are not paying a whole lot of attention
to that, unfortunately. It’s not gonna happen over night. People need to time to
develop the new skills, and you cannot fire your entire workforce, and hire all these bright students that are gonna be graduating and having the right set of skills. Beside, their set of skills gets outdated in a matter of a couple years anyway, so that’s a fundamental issue that corporations have to rethink. – Yeah, and I think a couple of things that you’ll remember from
you Accenture days then is we have something called
learning boards, right, where we let our employees who feel like they’re experts at something create their own videos,
like a YouTube video, and post it, and then people consume it, and they up-vote it and down-vote it, and say this one’s really good, and this one’s not that great, and there are thousands of them. So if you want to learn
a particular technology, or you wanna learn about a
particular topic in an industry, there’s probably a
learning board out there that somebody who thinks that
they’re an expert already has made on their behalf for
you, and you can take it. If you think about what the Khan Academy has done for education, it’s provided a model, and
right now, if you had to name, what’s the place where the
most people go to learn things? YouTube, right? How many YouTube videos are out there on really interesting topics
that people can learn from? So I think this concept
of bite-sized learning, of pieces of learning, can work for lots of different things. Now, something like learning
to be a data scientist, probably creates a more
structured set of interactions, but as you said,
governments and incubators are doing really interesting work there. The other thing that we see in terms of identifying talent is hackathons. We run hackathons with the express intent of figuring out who we’re gonna hire. They come and they do an
awesome job at the hackathon, you’re like, probably have
the skills we’re looking for. – And I also think that existing employees bring a lot to the table. If you look at data analytics, the real gap is not in the
production of analytics, but in the consumption of analytics, that is using analytics to
make actual business decisions, and for that you need that
understanding of the business, which is what a fresh graduate,
however well we train them, will really not have when
they enter the workforce. – Okay, next?
– Thank you. – Hi, my name is Sara Cross,
I work for UHY Advisors on their management and
technology consulting team. My question revolves around
how would you reconcile two different trains of thought as far as software selections
for different companies who are wanting to move forward. You talked about not
getting into a situation where you’re too customized
and backing yourself into not being able to get out
of a certain software, or getting behind on a trend, maybe you have high switching
costs for your own company. My team, on the other
hand, is seeing a lot of this situation where our
clients are wanting to select new software to move forward and create more efficiency
for their business, and there is a situation where instead of software companies saying,
this is what you get from us, they’re more now saying,
what would you like to see, and you’re seeing that kind
of trend in customization, and the clients, quite frankly, like that, because it’s protecting
their value proposition by supporting their unique workflows. How would you reconcile
those two thoughts? – Yeah, my observation was, so it wasn’t, it was too general of a statement, right? I think there are certain platforms, certain software capabilities that you do have to leverage at the core, and I think that’s incredibly important. And we get asked that
question a lot, frankly, from a lot of the vendors
that we work with: what would you like to
see in the capability? But that’s not unique to us, right? I think what’s brilliant
about how the software model is evolving is people are
taking the opportunity to ask all of their clients, what
are the features, functions, elements of a potential solution that would help make it better,
but then that’s being applied to everyone as
a common benefit, right? What I was referring to is
you take a piece of software, I won’t name one, because
I’ll probably get in trouble, but you take a piece of software, and then you go really
deep on this has to be the ultimate Coca Cola version
of that software instance, that’s where I think
you can’t get out of it. But we do spend a lot of time, and I think you’re right
in acknowledging it. We spend a lot of time
with software providers and vendors talking about
how does the platform, how should it evolve,
where are we thinking of going with our models
that they may be able to build a feature and
functionality out of it. So it’s almost like we’re kind of helping to shape the product over time, and I think that’s more
where the world’s leaning. That was my point about customization. I think that’s more of
influenced software development versus proprietary customization models. I don’t know if you guys… – One of the things
that we see in terms of how people are architecting
their IT within the company, is they are picking some
platforms, and they’ll say, these are gonna be the building
blocks of my architecture, and they’re separating the platforms from the user interface,
and then the user interface becomes what you customize, right? That approach seems to be
one that gives a lot of flexibility while not
getting into the quicksand of going into deep, deep changes to the underlying transaction
process and capabilities or control systems in the platforms that you’ve chosen for the architecture. So there’s a balance there,
there always will be. The big, big, big question, which is usually not answered
well within the company, is what really matters, right? Which ones do you really
need to customize, and which ones just make you feel good? And focusing on the
ones that really matter, really requires some discipline that most companies find hard to execute. – One other question. – She’s got one right in the middle. – Right in the middle. – So I’m actually Accenture alum as well, and I now work at Aetna, so
it’s funny to hear you say that. My question kinda goes back to when you guys were discussing
the low-hanging fruit versus kind of the long-term
goals that you have. I struggle with this internally. I do a lot of the type of work where we have to pick projects, and just curious how you
guys pick your projects. Is it ROI based or is it value prop based, is it we need to pay to play kinda? Just curious when you’re going from the digital disruption perspective, how you kind of scope and
then kinda pick your roadmap. – Yeah, I think we’ve tried to, we’ve tried to have a balance of kind of highly innovative project work that may be short term or long term
in terms of benefit, stuff we have clear line of sight on that we can invest in in
just the core business, and we’ve kinda tried
to apply a funding model and an evaluation approach to that. ROI applied to everything
is very difficult to enable and foster innovation, right, ’cause you don’t know what you don’t know, and when you’re in a
business where you’re removed two and three times from a consumer, it’s also challenging to get to a moment where you can with absolute
clarity attach ROI to that. So I think we use a balanced model. We used to break it up kinda
70-20-10 type of thing. I think we’re adjusting that slightly, but you have to have a healthy balance. You have to know where
you’re going to explore, where you think there’s meaningful value that you’re going to challenge, and then ultimately where you develop a core leadership position that you need to extract value from it. Those are usually where you
can see a very clear ROI, the rest of it, you’ve got
to apply multiple lens. And as I said before,
in our world I do think ROI can in value creation beyond just a core product that someone has purchased. That is where we’re seeing greater upside and potential loyalty, deeper
penetration from household, all those types of things, versus something that we would have tied back to the purchase of a beverage directly, so. – I think also that a lot of the metrics which are there to measure,
especially technology IT, are very backend focused,
so it’s around cost, it’s around ROI, it’s
around on-time delivery. It doesn’t really get to the value of IT and agility, innovation, and there’s a whole,
that’s a whole other area, of coming up with the right
metrics to measure technology. – And they change. Metrics are different
from project to project. It’s not the same metrics. Okay, well, this was a
wonderful discussion. Thank you very much. Let’s give a hand to our panel. (audience applauds)

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