Recently I got a chance to speak to Tony Saldanha, President of Transformant and former VP Global Business Services (GBS) and Next Generation Services, Proctor & Gamble. A widely acclaimed industry leader Tony has held CIO positions, managed acquisitions and divestitures, ran large-scale outsourcing, created industry-wide disruptive innovation structures, and designed new business models.
Tony has also recently published a book “Why Digital Transformations Fail?”
In this exclusive discussion with dynamicCIO.com, Tony tells us what sparked the idea of the book and also how should CIOs be treating Digital Transformation.
Read the excerpts:
DynamicCIO (DCIO): You have set up Transformant. What does the organisation do?
Tony Saldanha (TS): Post my stint with Proctor & Gamble (P&G), I set up Transformant. It we created to dispense two functions:
The first core function is to help companies – large and small – and also individuals digitally transform themselves.
Secondly, we have also created internal shared services, global business services, BPO type transformational services to be offered to companies across the spectrum.
My experience of over 30 years in managing IT and shared services, in almost every nook and corner of the world, comes handy. It is applied here to help organisations and individuals succeed to handle disruption.
DCIO: You’ve spent nearly 27 years with P&G. How have you seen the shift from the traditional era to an era which we know as Industry 4.0 or the era of disruption?
TS: I have been incredibly fortunate to grow with the evolution of Information Technology and shared services industry. I was associated with creating the first ever shared services center in the Philippines as early as in 1993 for P&G. I also managed the largest outsourcing deal ever in year 2003 when we outsourced 2/3rd of IT and shared services to HP (now HPE). This was a mammoth 10-year, $8 billion deal.
I was also the CIO of Gillette and led the successful integration of all of company systems into P&G in a record 18 months to deliver more than US$ 1B of Wall Street value creation. During my last three years at P&G, when Industry 4.0 was just trickling in, I realized we weren’t competing with other large companies. We were competing with the startups. They had half the cost and 10 times the agility of even the best in class companies. That’s when I created a division called Next Generation Services at P&G.
The mandate for that unit was to come out with 10x agility, and productivity for internal business operations: 10 times better travel and expenses solution or supply chain planning solution or accounting/accounts receivable solutions or purchase management solutions etc.
I worked with two different set of entities: The large IT companies like IBM, HPE, TATA etc., and with numerous startups. We opened up P&G to be a playground and used the expertise to ideate and completely disrupt internal operations. For example, why should there be a travel and expense system in today’s world when you have data available through credit cards statement? There were many such really crazy, disruptive ideas that were brought forth. We used our own ecosystem to develop software products/solutions and gave away the intellectual property to the big IT companies. In return, we negotiated not to pay them to develop any of those capabilities for us.
DCIO: Fascinating! You said, and very rightly so, that competition/disruption comes from the startups. To compete with them, you need a very different mindset, which is difficult to come by in a legacy organisation. How did you work it out?
TS: You’ve hit the nail on the head. Generally, people treat digital transformation merely as a technology thing. Whereas it is 90% about organisational changes, and just 10% about technology.
At P&G we did two things which is also the foundation for my book “Why Digital Transformations Fail” published by Penguin Random House recently. I first tried to redefine the word digital transformation as a spectrum, all the way from stage one what people talk about, is it cloud and other automation; and stage five which is essentially about rewiring the culture of the organisation. That gives the framework for not just P&G but any company that wants to embark upon the journey.
We reached out to the best of culture experts in the Silicon Valley and elsewhere and created a methodology for how to involve the entire organisation in coming up with those ‘10x Disruptive Ideas’. But we did it in a very contained manner to avoid anarchy and chaos.
For example, in Next Generation Services group, I handpicked the top 10 or 12 directors from IT and global business services and put them on assignment for a couple of years. Their job was to work with all P&G companies and drive disruption by engaging the organisation. If you convinced them, bring them together, they will follow you. People don’t necessarily back only the innovation gurus, but leaders with credibility because they do the right stuff. Before we attempt to bring change, we have to really study what change is all about.
DCIO: What inspired to write the book? Though I found the title of the book very negative, but it is also true that 70% digital transformations do fail. What’s the premise of the book?
TS: Before I answer the question, I’d like to clarify that the original title of the book was ‘Digital Takeoff’. But when I took the script to the publisher, I was told it was a terrible title. “Nobody will ever pick the book up with such a title.” Following that we market-tested various titles through a survey and came up with this one. In today’s era of ‘clickbait titles’, this was perhaps more appropriate.
Now to your real question of what’s the premise of the book. The premise is actually simple.
There are two reasons why digital transformations (DT) fail:
- One, because leaders, board members, CEOs, CIOs, and even the junior-level people are simply unclear about what DT means. Is it about AI? Is it about cloud? It may sound trivial but that’s true. I spoke to several hundred executives and asked them what they thought of digital transformation. I didn’t get a very convincing answer. One of them even said this has been going on for many years. We had digital watches in the 70s and what not. Weird, isn’t it?
- The second issue, where all of my research and experience went, is in realising that the execution methodology used for DT is absolutely insufficient and incorrect. The reason: It uses IT Project Management capabilities, Agile, Scrum and what not. That’s wrong. DT is not IT project management. The flawed methodology does not account for the fact that 90% of the change is cultural, and only 10% is technology.
When you’re aiming for a real 10x disruption, you have to be like a venture capitalist. You have to have 10 ideas and you should be willing to very quickly fail on nine of them, to get to the 10th big one and succeed. That’s really what the premise of the book is.
DCIO: True! People generally confuse DT with technology transformation. We can, at best, place technology as an enabler. The bigger constraint is mindset change/transformation, which may be augmented by use of technology but cannot be technology-led. How do you think this mindset will change or should change?
TS: That’s a really critical issue. I recommend the following two things:
- One, which many CIOs are going to view as a threat, but it is really not, is that the role of the CIO has to change from a person that drives scale and governance to become a resource provider. For example: Human Resources (HR), doesn’t try and control every person in an organisation. They enable them. Actually, in the book, I have a chapter on how I think the CIO community needs to evolve. Forward-thinking CIOs are already doing this.
- Secondly, CIOs need to play the role of an educator. They should educate CEOs and the Board of Directors that we are in the midst of the fourth industrial revolution. Asking CIO to own DT is unfair. It has to be owned by the CEO and the board. And there’s enough empirical evidence from Harvard and other similar institutions to support that. CIOs need to invest time and energy on this education.
DCIO: When we talk of DT, even the most acclaimed leaders take a siloed approach. They would like to ignite transformation in a particular function and let that live in a silo. How can this jinx be broken? How can DT be looked at as one overarching mission for an organisation?
TS: Once again, a really good question, and that’s exactly what ties into the point I made around the different definitions of DT. The five-stage model that I described, where stage one is the foundation, it’s automation and not transformation, and stage five is culture change comes into play to bring about a wholesome transformation. Just to fill the gaps in-between, the stage two is what you’re describing as a ‘silo’. A CFO may say he’d like to digitally transform his function because that’s within his control and he won’t bother about anybody else. That’s a flaw. Stage three is what I call ‘partially synchronised’. A classic example is GE (General Electric) where there is a big bang announcement of being a digital company at the start of the journey, but for various reasons, nothing is complete. Stage four is ‘fully synchronised’ – the whole company technically transforms, but they have not changed the culture, and end up with something like a Yahoo or a Nokia. It may do well for a while but eventually fail.
I work with the CEOs and boards of nearly 20 of the Fortune 100 companies. My endeavour is to educate people bottom-up and top-down to not confuse DT with IT strategy.
Organisations have to rethink three things:
- What is the new business model they need to survive in the fourth industrial revolution even though they survived the third? It’s a little bit like don’t go after faster horse carriages, do something different.
- What’s their disruptive internal business operation strategy? How do they go about running the internal operations at half the cost and 10 times the agility, the way startups do?
- How do they create smart products?
The company’s strategy group needs to make those decisions. I think the role of a CIO is to not only educate the company but also to lead the charge on how to make these ideas achievable.
DCIO: You work with a lot of Fortune 100 companies and consult them on their DT initiatives. Can you provide some examples of industries that you think are doing pretty well? What is their approach and why are they successful?
TS: I will talk of the industry that I think is doing the best and also the one doing the worst. The industry that’s doing the best, based on my experience, is the financial sector – more specifically the investment banking and not necessarily the consumer/retail banking or some of the insurance companies. The industry that’s doing terribly is pharmaceutical and medicine.
The finance industry, especially after the 2008 economic crisis, has put its act together. For example: Fidelity, in the US, decided to use DT as their tool for driving competitive advantage. They even invested in conferences on blockchain, which is crazy if you think about it. But blockchain is a promising tech that has the potential to disrupt financial sector. They went after it, because they wanted to disrupt themselves. Now you start creating completely new business models and get into the blockchain platform for moving money around, whether its intra-company transfers or whether it is completely trust-based money moving. We should give due credit to them. That’s how digital transformation is made successful.