Davos 2016 - The Digital Transformation of Industries

Great..
Well, welcome everyone. My name is Rich Lesser. I'm the CEO of the.
Boston Consulting Group. And it's a real pleasure to be with you here this morning. If you saw the.
Crowds outside, you.
Realize that this was quite a hot ticket..
And what I learned yesterday was that this was the second most oversubscribed panel. So now you may be thinking, with this amazing group of panelists up here.
And with a topic.
Like digital transformation, how can it not be number one? And the answer is that just like in his TV show House of Cards, Kevin Spacey is used to finding a way to winning. And Kevin is the most requested session..
Fortunately he didn't have to throw any of us under a train to.
Achieve that status..
In all seriousness,.
Since I was with you, since I was here in Davos a year ago, I've been in 30 countries around the world..
And I've talked to I think a couple hundred CEOs. And the topic we're.
About to talk about now is the most.
Consistent topic that comes up in the conversation, more than the geopolitics we'll hear about, more than any other single topic. And what we see in.
These discussions.
And frankly in the.
Work we're doing.
Is that there's three broad angles on this.
That companies around the world and across industries are wrestling with..
The first is how they rewire themselves,.
How they rewire themselves to be able to take advantage of a digital, cloud-based, mobile-oriented world, and how they leverage advanced technologies, whether it's robotics or AI, inside their operations..
So it's their own.
Internal changes..
The second is how they leverage the massive amounts of data out there and really be able to bring advanced analytics into their business,.
And not just bring it in an algorithmic.
Sense, but bring it.
In a human sense, the people that have the capacity to use it, the.
Processes and the clock speeds that they.
Need to operate at..
And then the third is how they use this digital world as a source of innovation for their customers,.
How they design new.
Products, new services, and in some cases.
Whole new businesses.
That they can generate to drive growth in a world where growth is.
Increasingly hard to find. And so this panel today is a fantastic group.
Of people to give us five windows into how they see the world of digital.
Transformation.
In their environments, and for several of them in how they are interacting with their customers right now. Let me quickly introduce them. I'll just go left to right. Meg Whitman is the.
Chairman and CEO.
Of HP Enterprises, the part of HP that she'll be running. Bernard Tyson is the chairman and CEO of Kaiser Permanente, one of the leading integrated health providers in the US. Klaus Kleinfeld is the chairman and CEO of Alcoa. Jean-Pascal Tricoire.
Is the chairman and CEO of Schneider Electric. And Marc Benioff is the founder and chairman.
And CEO of salesforce.com. So we just have this wonderful group of panelists up here. We thought we would do this conversation in three blocks. I think the first is just to have a conversation about what digital transformation means to these leaders in the context of their businesses, and what are the big bets that they're taking..
Every CEO is trying to incrementally improve their operations in many areas. But what are the.
Really big things.
That they're doing.
To really move.
The needle in the years ahead? The second block.
We'll talk about.
Is how do you make that happen inside the institution? How do you become.
A digital culture?.
And how do you think.
About all the changes that need to happen,.
In some cases even.
In the company.
Structure, but certainly when it comes to organization, leadership, skills, information platforms that.
Need to be created?.
And so what are the enablers to moving to a digital culture? And then the third.
Is we want to leave.
Some time for the questions that are on your mind, the things that you want to.
Raise with the group, so we'll leave a few minutes at the end to do that. This is a live.
Stream discussion,.
So it's being.
Broadcast to others..
I think therefore this is not a world where.
Chatham House rules apply. And at the same time, I want to encourage candor. And also, as I've.
Told our panelists,.
We want to have a.
Conversation, so if people want to jump in,.
Disagree with each other, build on each other, well try to make it free-flowing. Klaus, I thought I would start with you, sitting in the middle there, which is,.
You know, Alcoa is.
A classic industrial.
Leader in the metals world, over a century old..
And yet digital transformation, I imagine three years ago, it would have never been thought that you'd even be sitting here on a digital transformation panel. And I just-- could.
You share how you've.
Thought about digital transformation in the context of Alcoa, and where are the big priorities from your end? Yes..
So it's very relevant for us. I actually think it's very relevant for everybody. And who believes it not relevant hasn't really thought about it. So for us, I mean, to give you a little glimpse into where this place, there's a revolutionary change.
Going on in 3D printing. For us as a metals company, it's all about metal 3D printing. And we are catering to the aerospace industry, the automotive industry. And this changes the.
Way things get done..
We have developed a lot of technology around it and we are investing not just into the manufacturing part, but also into the powder, because the powder is like the ink to metals. And here you're talking about regulated markets, where it's very, very important that you have a quality of powder that a piece that's.
Uniquely made.
Is identical to the other piece that's uniquely made, so it's a challenge.
For the regulators..
We are currently.
Investing in building a powder plant that has three chambers outside of Pittsburgh. So that's one big bet. Another big bet comes with the total revolution on sensing. You know, sensors used to be very expensive, industrial-grade sensors. Today it's cheap, dirt cheap. We carry this around. I mean, optical sensors are in every camera with a resolution that was unthought of. Audiological sensors, microphones, all this is allowing you to do things that were not possible before. So this has relevance in two aspects..
One is we can re-equip our current equipment and get many, many more data. The moment you have the data, you can do diagnostics. And the moment you have diagnostics, you can optimize. So this is relevant.
Throughout the system, whether it's upstream, midstream, or downstream. But it's also relevant for another big bet.
That we've come out in December last year, which is called the Micromill technology. Micromill is a.
Revolutionary process that allows us to roll from the hot phase.
Into a cold roll in 20 minutes, something that today takes 20 days, right? And to have a process like this, as you can easily imagine, requires a precision that was not possible before. With this precision,.
You actually.
Get material out there that nobody could produce before. So in reality, you always were to say you trade off formability to strength. You trade off.
Strength to weight..
Today, we can make.
Material that has.
All of these three.
Dimensions and optimizes these things all together. So this is really.
What's going on there. The biggest challenge-- and I assume.
We're going to have.
Another debate around this for a company that's big and has a strong tradition is how do you make sure that.
Everybody feels that there is a real revolution going on? And the way I'm.
Talking about it,.
Be a little bit more.
Schumpeter, to encourage people to have this gene of constructive destruction. But maybe that's something for the next round..
And can you just-- it feels like between 3D printing on the one hand, Micromills on the other, the whole concept of the supply chain the way you've.
Envisioned, historically it's been envisioned is.
Going out the window. of supply, when.
A business that's.
Built around a supply chain that goes back.
Decades and decades?.
Well, I would say.
Everything is at question. So for instance, I.
Mean, take a jet engine. Obviously, sophisticated part, always.
Was a sophisticated part. The way this worked before, if we were to design a new jet engine, you built a model. We were doing modeling together with the OEMs. So but then, you.
Had to decide when.
You wanted to put.
It into a test bed,.
If you wanted to.
Have a piece made,.
You would have to.
Basically decide.
On one of the alternatives. And then you decide this is the alternative piece. I make it..
Now I order the tooling. The tooling takes.
18 to 24 months.
And costs a lot of money. Then you have this one piece, put it into your test machine, then you test it, right? Today, the process-- and today actually for us was already two.
Years ago, because we had invested in that. We basically are.
Able to indirect,.
To do a 3D printing.
Indirect, you know..
So we did it out of polymer and then cast it from the polymer into the real piece in basically two weeks..
So you now don't have to invest into the tooling and you get it in two weeks..
So now the costs are down. The time is substantially down. So you can say I want to have three of those, and then I can have the three actual pieces in metal, fully functioning pieces that you put into your test bed. And by this, you.
Can now find out,.
Does my test bed.
And the simulation,.
Is that close enough.
To the reality, right? So you're improving.
On two dimensions..
So that's one example. You can also now make pieces with this that technology-wise we would not be able to make before, because there is no casting technology that would, for instance, allow you to have a hollow structure in that particular spot and the hollow structure that you would want to have air flowing through so that you can run this-- I mean, in the jet engine, it's all.
About temperature,.
So you want to run.
It-- it's already.
Running at a temperature that's higher than the melting point. And the only reason.
Why it doesn't melt.
Is because you built in cooling structures with air, compressed air so.
That it can run faster and stand bigger heat. This is stuff that goes straight to the advantage of customers, because you get a.
Higher fuel efficiency and you get a lower emission if you can get things done. So in reality, it puts a lot of things at question. I think you almost have to say you put everything at question, which brings it back.
To the question of,.
How can you get your.
Team thinking about this? I mean, I think the biggest limiting factor today is not technology anymore. It's the humans.
In an organization.
That's not used to question. And Jean-Pascal, while we're in the industrial world, in energy solutions.
And automation.
You've really been an industrial powerhouse for quite a long time. Can you share how you see the digital transformation in your environment and your part of the industrial world? First, I'm very.
Excited that Klaus.
Has a problem of power quality, because I'm.
Sure I can help.
Him, so probably I.
Didn't lose my turn by sitting close to his this time. Oh my god..
Really, I can do.
Many things for you..
This is what.
Friendship looks like. Let's not go into.
Stereotypes, please..
But when-- let's go.
For our world, which.
Is a world of energy.
And automation,.
Digitization carries.
Huge implications..
So we opt for it around the world with many partners, integrators..
And we have used.
From the beginning--.
I would say we've.
Been early adopters.
Of the platform of Marc, of Salesforce to organize that. So I won't speak.
Too much about that,.
Because I think Marc does it much better than I do. But now when you look at energy and you.
Think about it invented more than one century ago, very much siloed generation, transmission and distribution, and consumption,.
Demand as we call it. And all of it's been.
Very discoordinated.
On massive inefficiencies. So 60% of everything we do, buildings, factories, homes, are consuming energy 60%, 50% more than they should. Grid is used at less.
Than 50% of its capacity, an electrical grid, more than 50% of the time. If I would run my.
Factories like this,.
You would really be mad at me. So what is happening.
Today is that we.
Are connecting all of this, from plant to plug, everything connected to the internet so that it generates.
All the adaptation and all the efficiencies around the line. Connectivity is not new for us. We started to connect things to the internet in '98. But the new, new thing is that now we can.
Those microsystems, smart building, smart grid.
Together so that they can add up together..
So in a nutshell, all products will be connected. All the data is.
Getting aggregated..
And analytics, we deploy analytics to automate or to support decisions. So speak about the.
Implications on our company, in 10 years we had to develop to reconvert R&D so that now R&D's 60% software on electronics and that lot of people..
As software, which is the other word of our analytics, our different culture, we set up an autonomous division, business inside Schneider which is serving Schneider itself, but which is serving.
Third-party people..
Second point which changed dramatically for us.
Is the nature of.
The relationship.
With the customers..
We are coming from a.
Relationship which was projects and service on demand. You have a problem.
Of power quality..
I come to help you..
Now it's we stay connected 24/7. So that means we can bring new values, new capabilities, and we can bring a.
Lot of new service..
And I'll come back to that. Third point, where we are working with partners and there are a lot of business and we are still-- and we want to keep working with partners-- a lot of business which are based.
On intermediation,.
So you are kind of a.
Wall between a customer and the supplier..
You bring more value and you make money off that. And those worlds.
Tended to be divided. Now, because it's.
Digital, we share..
And that data is shared. And everybody's bringing the right value to that. So it's opening a new way of working with our partners. And needless to say, when we went into digitization, we knew connectivity. We knew software..
But when you go into the cloud, you can't do everything alone. And the big thing for me is that this world is really prone to a lot of partnerships. So the big bets you.
Have to do is really.
To choose the right partners and really your success is dependant on you, but also on the ecosystem you are choosing. But the biggest.
Change in our industry has been our positioning. So you were coming to see us for safety, reliability, quality. No worries..
You can still come for that. I mean, we still deliver the best reliability, quality, no fires, no repercussion, no harm to people and to goods. But our customers,.
Because it's digital, call us to energy optimization, process optimization, predictive maintenance, asset management,.
Which are coming natively as a byproduct of those systems. Now when you are companies that were selling products with the first.
Characteristics and that you have to go into that.
Form of consulting,.
Think about the.
Whole reconversion.
That you have to do.
With your sales force. You don't speak to the same people in the company. So that's very exciting. We've been 20 years.
In the journey,.
But it's been really creating new value to our company. Can I ask you one follow-up? I spent a lot of time personally working.
With R&D organizations over the years..
And transforming R&D is actually quite a challenge, because people are very committed and very smart, but they get very.
Deep skill sets..
They're technically deep. And it's hard to.
Get them sometimes.
To see the world from a different angle..
You mean they are conservative. Conservative, well,.
Innovative, but in the way they know how to do it. You know what I mean? Like, they have a.
Way of doing it..
And so you talked.
About now moving to I think you said 60% R&D is sort of software-related. Probably very different skills than the way you traditionally recruited for R&D. How have you made that transition really happen in R&D?.
And how do you see.
Making that work?.
Well, some people make happily the journey..
And actually, they.
Find it very exciting. Second, we have acquired. Third, we have created a venture capital fund that affiliates us with a number of.
Start-ups and things.
So that they inspire us and we create things together. And the other.
Conclusion, when you.
Have to do big.
Conversions like this, you have to take people from the outside..
But just it changes.
Fundamentally.
Your way to develop products. I mean, in the world of before, you make a spec. Your spend two or three years in the tunnel of development. Now you go fast on the market with a minimum viable product. And then you can upload, download software.
To bring more functionalities so that you are much faster testing the functionality with the customer,.
And much faster adapting the product to your customer needs. So it's not only.
Changing what you do, but it's a lot about.
Changing the way you do it. Bernard, I've been.
Hearing for years.
About how Kaiser had been such a leader in integrating IT and bringing different parts of the value chain together in health.
Care provision..
But of course, digital transformation's.
Hitting this world.
In a big way too..
How do you see your digital transformation priorities now in the context of the enormous leadership role that Kaiser's historically had in sort of the IT environment in health care?.
Thanks..
And it's really great to be here with this esteemed panel. It's a great question. And of course, when you talked to me about this I said, yeah, I would love.
To talk about it,.
Because we're knee-deep in our transformation within Kaiser Permanente..
Fortunately, we've.
Embraced technology.
As part of the history of our organization, which has been somewhat unique in the health care industry. And so there's almost a natural-- but I will tell you, the change now with.
Digital transformation is dramatic, even inside of our organization..
So right quick, if you think about the health care industry, we pretty much have.
Enjoyed the luxury.
Of forcing everybody to come to us for everything that you need..
We built the health.
Care industry.
On two legs, one, a "fix me" system, pretty much. People get sick and.
Then you come see us. And number two, we.
Designed it around how we wanted to do everything, so it was provider-built, and to our convenience in many cases..
We're deploying a strategy in Kaiser Permanente.
Of what I call "care anywhere," that we're challenging that whole notion that people have to come in for everything that they need. And the digital.
Platform has allowed.
Us to both prove.
That theory as true.
And to enhance the value that our members see.
In Kaiser Permanente. Case in point, we.
Introduced e-visits..
And we started with.
The mobile phone.
And with the.
Computer, your ability to have a secure office visit with your doctor, with your provider directly. Last year we did something like 26 million e-visits. Members love it..
On a scale of 1 to.
10, it's something.
Like 9-point-something. Satisfaction extremely high. Additional access.
Into the organization. Never have to leave your home. Never have to leave your office. Never have to leave wherever you are for something that is appropriate.
That could be taken.
Care of with a virtual visit. We're now building.
On that telehealth,.
Where now the visual.
Becomes important,.
In particular between the interaction between the patient and the physician..
And so I expect that that's going to take off just like the first generation of what we were doing as well. Inside of the.
Organization, it has.
Created both incredible possibilities as well as incredible fears.
And challenges,.
All the way from the.
Life of a physician.
Has changed dramatically inside of our organization, because now like some of us in the other side of the world, we've been doing this for a long time, always-on. And this has been a.
Cultural challenge.
For some of our providers. The second one is,.
It is true I've.
Come to learn that actually people do pay attention to what the CEO is saying. And what I have discovered-- Big shock..
And what I have.
Discovered is-- what.
I have learned in.
Terms of feedback.
From the organization is that I'm heavy on the technology. I fully embrace it..
I'm building a whole.
Digital platform..
I have strategic partners. I'm into it..
What I'm hearing back from the organization is, what you've excluded.
From your communication is our role in that and our role in the future of this organization. And it was an aha moment for me, because I just assumed everybody would know that we still need people to take care of people. And I've discovered that people have started to look at, is this replacing.
All of us in theory,.
Or is in fact this.
Is helping to enable.
Us to be more.
Effective in taking.
Care of millions of people? Wonderful..
Meg, HPE is at the forefront of many of the technologies we're talking about around the cloud, predictive algorithms, big data and analytics. And how do you see these technologies changing and what it means for companies to really go digital right now? Well, first of all,.
Thank you for having me. This is a great.
Privilege to be here. We do have a unique.
Position, because we.
Have had to digitally transform a 75-year-old company, just like the organizations many of you run, while at the same time we are one of the partners that people choose to help them digitally transform. And what's driving this really is two things, in my view. It is every one of you is trying to figure out how do you take your organization and make it even more competitive so that you win in.
The marketplace,.
Whether you're Kaiser or anyone else, over the next five years? The other thing.
That has changed,.
Which I bet everyone.
Can relate to, is speed. My view is, the future belongs to the fast..
If you can't get.
Your organization.
To accelerate at dramatic speed their ability.
To develop the technology that will allow you to win, almost by definition you.
Are falling behind..
The other big change is that business strategy is now completely one and the same with IT strategy. And I thought Bernard, you said it very well. There is no business strategy without the IT underpinnings that is going to allow you to win in the marketplace. And virtually every major company has a problem. They have an existing quite rigid, not very cost-effective, slow, legacy IT.
Environment that's.
Been built up over anywhere from 10 to 50 years..
And every organization knows they.
Have to move from where they are to where they must be. And so how do you balance the needs of your existing IT infrastructure that.
Runs your business,.
Runs your supply chain, while at the same time you move to a new environment? And so what I think.
This is driving.
Is organizational change, but perhaps more than that, every CIO, every CEO.
Has to have a plan..
And where are you today and in three or four years, where are you going to be? What are the milestones? And what's the business case for getting it done? Because what I also know is there's not usually big incremental.
Budgets for IT spend. In fact, I bet most.
Of you are trying.
To figure out how to.
Spend less on IT while you move to the new world order. So it's investing in some very basic things like automation and orchestration..
You would be surprised how many organizations are not fully automated, not.
Fully orchestrated..
And there's a 20% or 30% savings off the top right there. Virtualization, many companies are not fully virtualized. Movement to the.
Cloud, some folks.
Have started with very small applications in the cloud. How you get to the cloud as fast as humanly possible, whether on premise or someone else's cloud, and how you pick the SaaS applications that you are going to drive for your organization, the key to this whole thing is workloads..
So you've got maybe 2,700 workloads or applications in your organization. What do you want.
To keep locked down.
In your data center,.
Untouched by anyone else except for your employees? What do you want to move to a private cloud on premise? What would you be.
Willing to move.
To a managed cloud or a virtual private cloud or a public cloud?.
And then what.
Applications do you never want to see anything.
In your environment..
You just want to buy that application that lives in the cloud, like Salesforce. And that is the whole key to transforming.
Your digital.
Environment is where are the applications going to live? And then lastly, and I'm sure we'll talk about this, is there is also a big business model change happening. IT used to be bought.
On a CapEx basis..
Today, increasingly the world is moving to a consumption model. And so you can.
Move CapEx to OpEx..
And then you partner.
With companies.
Who can actually.
Help you do that..
If you're Salesforce, that's an OpEx model from the beginning. But your traditional.
Environment can.
Be bought on a.
Consumption-based model, which for many, many companies makes the ability.
To finance this digital transformation incredibly important and doable. And then, of course,.
There's the thing.
I think we'll talk about last, which is culture. In many ways-- and this will be interesting to you-- running a technology company, the technology.
Is actually the easy part. Getting the.
Organization to move, to adopt the new technology and the new way of doing business and the new business.
Models is really.
In many ways the.
Toughest component..
And we have had experience internally at HP.
When we don't manage.
The process of change as effectively as we manage the technology change, actually the projects are not as successful as they otherwise might be. And for those of you.
Who are technologists, like Bernard, you.
Know everyone wants.
To blame the technologists. Often it is the.
Culture change that.
Hasn't had the right.
Attention paid to it. Excellent..
So I want to come.
Back exactly to that. But I want to first,.
Marc, just ask you,.
You've been working essentially with many hundreds of companies now around their digital transformation journeys, and just to show.
Your perspective.
On where do you see the world moving in terms of the priorities and where companies need to be taking the big bets right now? Well, I think-- thanks, Rich, and thanks.
For putting together this panel. Number one, I think.
Everybody got this great book from Klaus Schwab, The Fourth Industrial Revolution. And if you haven't had a chance to read that book, I mean, that's I think a great place to start and kind of map your current company.
Against that..
And I think what.
You'll find when.
You do that is the fourth industrial revolution starts with one very important point, which is trust. That is, you're about to define a new level of trust between yourself and your employees, between yourself and your customers,.
Between yourself.
And your key stakeholders, shareholders,.
As Jean-Pascal said, between yourself and your partners. And this is a.
Cultural revolution.
For organizations that are not built on trust, because when we talk about trust, when we talk about growth, when we talk about.
Innovation, we have.
To talk about it in that order. That's number one..
You know, I kind of was thinking about, how do I explain it? And then this morning, of course, I woke up at 5 AM, because I never sleep in Davos. And I went down to the gym. And of course, what do I find? Of course, my friend Nerio-- I see him sitting the back row, would you just.
Wave to us Nerio--.
Is the CEO of Technogym. And he has all this.
Amazing new equipment. And it's all connected now and I have to put in my information. And you know, it's a.
Big internet of things. And his bikes are connected and the elliptical trainers are connected and the treadmills are connected. And he knows who I am. And he knows how.
Much I'm working out. He's got all my biometrics. And it's not just about a B2C situation, because he's also a B2B company..
That is, he's selling to the hotels..
He's selling to the.
Fitness centers..
And he's building this kind of collaborative social network. So it's about mobility. It's about collaboration. It's about, of course, the cloud, because now he has a big Technogym cloud. But at the end of the day, I'm only going to use those bikes and I'm only going to register with that network get involved with Nerio if I trust him..
And of course, I trust him, because I met him here many years ago..
But as a customer.
Of his, I better.
Be ready to a new.
Level of trust,.
Because the types of access, the types of information, the types of data,.
The level of privacy.
That we are talking.
About, it doesn't.
Matter if you're HP or Kaiser or Alcoa or Schneider Electric, all of these companies are going online..
All of these companies are connected in a whole new way. And they're connected to their customers in a whole new way. They all have incredible stories about how.
This fourth industrial revolution has transformed them, not only now, but where they see where they want to be 10 years from now. But I guarantee you that in each and every one of these stories, it begins with the.
Transformation of trust in their enterprise..
And that's the hard part. Employees better.
Realize customers.
Aren't going to.
Use your products.
In the fourth.
Unless they trust you. This is a big change. It's very interesting you said that, because this morning, I was at a breakfast that Richard Edelman hosts every year on trust..
And the thing that their Trust Barometer shows this year is that the gap between trust of the-- I.
Forget what the phrase is, but the more elites and sort of the mass of the.
Population has never been wider than it is right now. And I think some of this is the stories Bernard that you were telling or Meg you were describing about how engaging the broader.
Community, having people deeper in the organization-- Rich, this is the.
Opportunity for all of us. The opportunity for.
All of us is to do.
What Meg said, to get there first, get to the future first. But when you get there, make sure that you show up with the right values, because the values.
Of the fourth.
Are different than the values of the third revolution. And we all know that. And that's the.
Transformation that we're all going to make together. And it's very exciting. I mean, there's never been a more exciting time in the history of industry. I want to come back to this. I just want to.
Pick up on one more.
Point around this digital transformation journey broadly, which is-- and for all of you, so you don't all have to jump in, but.
Whoever-- how do you know if you're going fast enough? And how do you know.
How much investment.
Is enough investment? I think everyone would say we need to go fast and we need to invest a lot. I think that's pretty-- But you know, you're the CEOs. You're getting things brought to you all the time. At least my experience is most are impatient. They wish things were happening faster than they were. How do you judge for yourself, like what's the pace and are you satisfied to drive in this direction right now? Well, I'll start on that, because not only, as I said, have we transformed.
Hewlett Packard,.
But we do this with hundreds of companies every day. And the key factor I think to these successful journeys is having a multi-year plan, that you've.
Got to understand where you are today, what the cost structure is today, and what the limits to your infrastructure are in terms of your.
Business strategy..
And then you've got to have a multi-year plan, just like every other project is managed, milestones, cost reductions,.
People in charge..
And there has to be.
An inspection process. And you have to build a multi-year plan.
Based on what you can afford, because you.
Have to save to invest. And then you have to.
Hold your organization accountable for delivering against those milestones. And it's tricky..
Every organization is different. If you're in the.
Health care business, there's a whole set of regulatory and HIPAA.
Regulations that you.
Have to be mindful of. financial services area, the regulatory overhead there is just enormous. But if you do not.
Have a plan, you.
Won't get there incrementally. And my advice to CEOs is hold your IT accountable, your organization, your business accountable for a plan and then execute the plan. And you can change.
It as you go along,.
If new technologies.
Arrive, things like that. But if you do not have a plan, it's that old saying, if you do not have a plan, any road will take you there. If you don't have a destination, And this is where I.
See huge cost overruns and disappointment in the delivery for the businesses. I would just build on that. I know we're not.
Going fast enough..
At least I believe that. And I want to hold.
That to be the truth. You know, I'm working on what I call inside the organization that we're increasing what I call the BPMs, the Beat Per Minute..
And we're getting better at it. But we're still not.
At the ideal pace..
Secondly, our challenge that I think about all the time is I have 50-- 70-plus years of legacy systems..
And so I'm flying.
The plane today.
And I can't just turn stuff off. And so how do I.
Balance what goes away because of all this technology? and what in fact.
Is still connected.
And must be connected to it? I think the second piece is working very hard.
On what should I not.
Be doing and turning.
To competent organizations to do that on my behalf as part of the.
Integrated strategy?.
And so that's a big.
Piece of the work.
That we have going on that is aimed at moving faster. But I don't feel that we're moving fast enough. I think a lot.
Depends also on how.
You judge the old.
Environment, you know, because obviously, I mean having a long-term vision always wins, absolutely always wins. And I think that.
Andy Grove's old.
Saying "only the paranoid survive" is probably more true today than it ever was. I mean, in an organization-- we are 127 years old, you know? So in that organization, I think the push cannot be strong enough..
And the only thing that you have to judge as a CEO, when are you.
Over-stretching the system, because then you're losing it and cracks appear, you know. But basically you have to try to move them as fast as possible. And it's the fine-tuning when you see-- do you see cracks? Do you have to slow down? But I think that pace is absolutely essential, absolutely essential. Your question is a lot of headache, right?.
Because on one side, you know you have to invest, because you figure out that the world will be digital. And how much money?.
First, it's expensive. It's really expensive. It asks for an investment, and that's an investment that you don't do in.
Places that you used to do. So you have really to arbitrate, the first thing. And my conclusion.
After many years.
Of spending too.
Much money on things.
That were phantasm rather than reality is really to every time they come with-- we come with an elephant project is to slice it in the minimum tranches and go to the market.
As fast as possible..
Entice the customer and bring the customer from day one into thinking..
And frankly, I struggle to do differently..
We are becoming very.
Empirical in the way of doing. I would rebound on.
What Meg was saying..
It's people spend a lot of time on technology, business model..
And that changes all layout of the business model. And we never spend enough time on the business model. Especially in.
Engineering companies, it's a lot of religious fights about what technology we choose, which don't make sense. I'd make one last.
Observation here,.
Which is you can always go faster than you think you can. When I came to HP, HP was in a fairly challenging situation. I was the third CEO.
In as many years..
And yet this was an entirely new environment for me. And I was very worried about breaking the company. You know, would I be the one who would actually run the car off the cliff? Looking backward, I could-- and we moved very fast. But we could have.
Moved even faster..
So I would just encourage everyone to think,.
Let's push the edge.
Of the envelope..
Klaus said it well..
Let's push until you actually start to see a few things crack at the edge..
And frankly, I think.
You underestimate--.
I underestimated the.
Organization's capability to move fast..
Is probably almost.
True for everyone in this room. So I want to shift a little bit to the culture stuff before we open it up for the room for questions, because it's such a.
Fundamental question. And how do you bring.
The organization along? I thought the comment that a number of you made in different forms were the technology is tough, but the technology.
Isn't the toughest part. The toughest part is how do you win trust in the organization and with your customers and how do you.
Bring along your organization? I guess I'd like to start, Marc and Jean-Pascal, you guys are generating so much data now.
That your customers can use. You're changing the way people think about data and how you wire the.
Organizations together and leverage that both inside the organization and with your customers. And I think Marc you made a comment in another setting that the data was.
Almost dark matter.
Inside the organizations. What are the unintended consequences?.
And I don't mean that just in a cyber-security sense, but the challenges of living in this world of big data and bringing the cultures along to be able to use it in the right ways..
Well, I think Jean-Pascal is a great example, as well as the other panelists as well. But I think you look at the incredible transformation that has happened with.
Schneider Electric..
First, you have a.
Company that has.
Acquired all these amazing companies around the world. For any CEO, that's going to be scary right there that you have to create a culture, a common culture, a collaborative culture. And then number two, a transformational vision, that he's going to be able to go to any government agency, to any business,.
To any consumer,.
And ultimately get their residence, their office building, their.
Corporate facilities.
Online, manage them,.
Monitor them, do things with sensors that have never been done before. That was aggressive, you know? And then you look at.
The market share gains that he's achieved.
Against his competitors, it's just relentless execution on a compelling vision. I mean, I look at my.
Own company today..
We're the fastest growing software company in the top 10. And I'm fortunate that all of these panelists are also our customers and that we get to work with them. That's our joy every day is the opportunity to partner with these customers. That's what makes it fun. But when you look at.
Somebody who pushes.
You-- and Jean-Pascal pushes. And even somebody like me, it does become scary. And--.
That's the first time I hear you saying that. [LAUGHTER].
I'm trying to be nice. And I'll tell you that speed is the new currency of business. I have a good.
Friend of mine who's.
Just saying that all the time. You know, the most.
Dangerous place.
To make a decision.
Is in the office..
We have these incredible devices that all of us have here now. And this makes.
Everything go faster. This is what is making everything go faster, because communication is just happening faster and faster. When I first started coming to World Economic Forum in 2002, we used to get these.
Proprietary devices..
They didn't work..
You know, nothing worked. The network didn't.
Work, whatever--.
I don't know if it was Joe Schoendorf was running it, but something was deeply wrong. And now, you just come in here. And it's just--.
I know..
Everything is like lightning how fast it's going, you know? They put Salesforce in and took all the old crap out. Well, there is some of that. We did put Salesforce into the World Economic Forum. That helps..
But I think that.
That's what's going on. The reality is it's the technology also enables speedier execution..
And so in that way, it's kind of a little bit of the medium is the message..
That is, we know we have to get more connected. We all-- look, I used to come to the World Economic Forum and talk about,.
Well, we're the cloud and we're RAID-able.
Technology, and we're a multitenant architecture and we're a subscription service and, you know, we're.
Not a capital expense, we're an operating expense. That's all of these companies. What company does not want to be a cloud company today? What company does not have a multitenant architecture? What company doesn't want to move to that same business model that we have?.
And that's kind of.
What's cool for us..
And that's also what's fun. But how we grew our.
Business was speed..
You just cannot go fast enough, because if you're not going fast enough, somebody else is. And that's why we all have to be a little bit scared and we all have to go a little bit faster..
Jean-Pascal, did you.
Want to add anything? I can give the other pitch on the other side of the mirror. But we were facing the issues that Marc described very well, a lot of acquisitions. We're operating as a federation of separate companies. And customers were.
Harshly complaining..
We want one solution. We want one Schneider. And any kind of traditional IT program in this dimension was incredible cost,.
Long time of deployment. Time was actually.
More important..
Anyway, met them..
This was pretty much.
At the beginning..
Great solution..
First reaction, what, put our customer data on the cloud in San Francisco?.
Over my dead body, OK? So but then we went into it, deployed it in one area. So suddenly, you've got one repository for the customers, those 360 degrees.
On your customers,.
Your call centers, your people on the ground.
Equipped with mobility and able to do that..
It's been great for us. And it's been a part of the evolution of the culture. Next day, everybody.
Has the same visibility on the same customer. And the trust issue.
Is behind us now,.
So now it's about.
Building together.
New functionalities which we did one year ago,.
Went to the next level. Meg, we were talking before this, you're also seeing this. How do you help bring different parts of the organization together and sometimes take them apart and sort of build the organization through the IT end, but also bringing the people along? I don't know how.
You would see this.
In the context of culture and strengthening organizations. Well, as I said.
Before, and I think.
It's been echoed by the panel, speed is so important. I really do believe that the future belongs to the fast. And so how you transform your organization,.
I have a couple.
Of thoughts on it..
One is, and this will sound like motherhood and apple pie, but you would be.
Surprised how often people don't do this, the right people in the right job at the right time with the right attitude..
And depending-- you know, turnarounds, transformations are not for everybody. And so you've got to look all the way down your organization. Do you actually have the people in the organization in the right job who can help you accomplish this? No amount of pressure from the top with the wrong people will bring you home..
And so we've done a huge change out of people, because we had to.
Have the right skill.
Set, the right attitudes, frankly the right constitution to do this..
The second thing I would say is communications, communications, communications. I feel like--.
Probably some of you.
Know I ran for.
Governor of California. Often I feel like I'm giving a stump speech at HP, because we say the same thing over and over and over again. And you would be surprised after you've said it 57 times, people say, I never.
Knew you thought that. I mean, it's amazing. And when you are communicating with large groups of people, it is actually not the facts and the figures. It is the stories that you tell. No one remembers the.
They remember the.
Stories that you tell. And that's part of the way we're driving culture change. And then the last.
Element of this.
Is I fully believe.
That you do not.
Get what you do not inspect. You do not get what.
You do not inspect..
And so you've got to set your organization up in a way that the results and the processes and the milestones get inspected and.
Then corrective action is taken early,.
Because I totally.
Agree with you Jean-Pascal. You can find yourself a year into something and if you haven't.
Been inspecting it.
On a weekly basis, the thing is wholly off track and you have lost a.
Massive amount of time, and frankly a fair.
Amount of credibility with your organization. So it's not-- people.
Say, you don't.
Get what you don't expect. It doesn't sound uplifting. But it is, because.
You're making progress that then you can tell the organization about. And it shows the organization what you care about too. Exactly..
Just the act of tracking things is a signal..
This one matters to me. So I fully agree..
And then last but.
Not least, of course, is a set of shared.
Values and beliefs..
And I think most great historic companies have real DNA that they can build from. I'm very fond of saying that actually founder DNA-- Marc will be happy to hear this. Founder DNA is.
Very hard to kill..
And in most cases,.
And in Marc's case,.
That's a really good thing. They're trying..
Don't worry..
You're so right..
You know, BCG's founder left the firm in 1980. It's 35, now 36 years later. It is still so much ingrained in the way we think and talk. It's a very good point. Listen, Bill Hewlett.
And Dave Packard.
Have been gone from the company for 30 years. And when I came to the company, I could feel the DNA. I could see it..
I could smell it..
And I said, let's do more of what we do well and then make the to-do list, as.
Opposed to let's find all the things that are wrong. And that was a winning formula. I'm conscious I want.
To get to questions,.
But I'm just really.
Interested, Bernard and Klaus, you have front-line.
Employees that.
Are in businesses that are very traditional ways of operating over many years..
And if you could.
Just both quickly.
Talk about the cultural aspects of making these changes happen and really getting it to seep into the organization, I think it'd be really valuable. Just two quick comments. The first one is.
One of the things.
That certainly I'm.
Learning in my role.
As CEO of a great organization is the cultural change is about me also..
I remember a long time ago someone told me.
A leader without a follower is just a person taking a walk. And so I want to make sure that there are.
People with me on this journey. And so that means that I have to figure out.
Tapping into their value system how to engage them in the change process as well. The second thing is.
To Marc's point--.
And I haven't read the book yet, but I will. In our industry and.
In our organization,.
Our physicians and.
Nurses is for me.
A great example of.
What happens when you have a trusting relationship. And at the center of that trust is the physician culture, the nursing culture.
Is that I'm here.
To take care of the patient. I'm the advocate of the patient. I have the best interest of the patient at heart. And it's very important to me that as we.
Make the cultural and technology changes that we keep that centerpiece there. And so their voice is very important to the credibility of what we come up.
With that's going.
To maintain if not enhance the trusting relationship that we want to have with now almost 11 million people. And our business is not a transactional business. It's a business of relationships and building on trust. I think that what.
Makes the founder's.
Spirit for a company that's old, I mean, it's also an advantage. What I've done is-- I mean, we have a great history. I mean, we have a rabble-rouser who founded Alcoa..
It was this young.
Kid in his early 20s.
Going against the.
Steel robber barons,.
Basically, with a.
Material that nobody.
Knew how to make it, right? So to connect it and say, wow, this is our history. We've got this disruptive gene. We've got to live up to this. If this kid wouldn't.
Have done this,.
We would all not have a job. We wouldn't have [INAUDIBLE]. So it's very strong,.
That's the first thing. The second thing, I mean, it's all about people. I totally agree..
So tone from the top.
Still is very important, still is very important. I mean, we've used this thing, I mean, be more Schumpeter, or I've coined this thing, think louder, act faster, right? But then the third.
Thing, which is something that only dawned on me by having seen this,.
I think there is an advantage of bringing established knowledge. You can constantly refresh it with no established knowledge together, right?.
And if you can master this-- and this is not something the organization.
Can do by design..
I'll give you the example. We have a very good.
Internship program..
We're currently.
Making it better..
But if you were to.
Say, hey, you now.
Define exactly who we are recruiting as an intern, some good things that we've seen in the last years would have never happened. So I run into--.
Going into a plant,.
I run into a kid who.
Does an internship there. And they gave him a little space and trying out stuff. He's working with.
Microphones, with microphones and listening to a pouring process, a pouring process. And I'm thinking, what on earth is this kid doing? And I'm stopping, you know. And I asked him..
He's African-American. In fact, he's.
African originally,.
You know, Michigan University. And he says, well, I worked in the automotive-- I worked in Michigan University a little bit on the automotive. And for automotive,.
Acoustics are very important. And every material talks to you. I said, wow, every.
Material talks..
We never thought.
About this, you know. So what does this.
Material tell you?.
And he says, well,.
We have this problem. I don't want to go.
In too much depth,.
But it's a very.
Expensive problem.
Because we never diagnose it. It happens at the early part of the process.
And we only find it in the later part of the process. So in the meantime, a lot of value-add gets lost. And he says, well, I think it happens because something cracks in this, right? And I can listen to.
The material and I.
Can hear whether it cracks. So I said, oh, wow..
Let me see this..
And he shows me this. He has an oscillogram. I mean, he probably had spent no more than $200 on this. So he listens to it and you can hear [CLICK]. Suddenly the.
Oscillogram goes up..
Now he knows it's cracked. And I said, now what? He says, now I know it cracked. Now I can take this and now we go into a digital radiography, which has moved on..
And I can do a 3D digital radiography on this piece. Now I can install.
That in the line.
As constant quality inspection. That's an idea that nobody would have come up with. So that's why I think you have to allow.
To get some fresh.
Talent in that has.
This naivete or some totally different backgrounds. And if this comes together with established know-how something really cool can evolve from this. Thank you..
And thanks for the.
University of Michigan plug. We have time for a.
Couple of questions..
Joe?.
So many challenges--.
I think the microphone. And we'll need to.
Keep our answers quick so we can get a.
Couple in before--.
Joe Schoendorf, venture capital, 50 years in Silicon Valley, started working for.
HP 50 years ago..
Computers in those days were IBM, Snow White.
And the seven dwarfs. The seven dwarfs are all gone. IBM is in pretty.
Different business..
This is my 20th Davos. I looked last night, top 10 most valuable companies in the world..
Five of them were in high tech. Let's take them, Apple, Alphabet, Facebook, Microsoft, Amazon..
When I came here 20 years ago, I looked it up,.
Jeff Bezos was one year into having Amazon online. Gil Amelio was.
Still running Apple.
And they were close.
To bankruptcy..
Mark Zuckerberg.
Was 10 years old..
Larry Page was.
Still at Stanford..
And Microsoft had just had its first $2 billion quarter and he was still working at Oracle two years away from starting Salesforce. And the transformation of the cloud, Larry Ellison is still trying.
To figure it out..
And you've got one of the world leaders sitting right over here..
My real theory is-- and it's what venture capital is all about--.
Big transformation.
Happens because the big companies don't get it right and a start-up comes in and runs faster than anybody can and builds a new industry. End of story..
Any reactions, particularly from the very strong legacy companies that are.
Sitting up here..
Absolutely..
Yeah..
I mean, I agree, right? It's Darwinism..
And so we all have.
A responsibility.
To continue to make.
Our companies relevant and reinvent, because, you know, listen,.
The whole world has changed. And if you do not reinvent, you'll be eclipsed..
And it's a challenge for the big companies and the older companies..
The other challenge, at least in my situation, is a lot of people.
Inside of my company, and me included, would consider us very successful. And so the question is always this tension of how much change are we trying to produce when we're getting all these positive results already? So that becomes an.
Ongoing challenge.
For how you keep the.
Organization fresh and moving forward..
The innovative.
Companies that right now are coming into the.
Health care arena.
I view as a breath of fresh air, because they are forcing us to.
Think very differently and to see on the.
Horizon what's possible. Others..
Toshi, maybe one last question? I have a question about what is critically.
Different from third.
To fourth industrial revolution. We heard about speed.
And also communication and culture and value. It all seems to be the same. But Marc, you mentioned about there is a value, it will be totally different from the fourth and third. I have to ask you, what is critically different? What do you think we should do totally differently from the past?.
Well, I think that-- you know, I mentioned trust. I mean, I think.
That's the big one,.
Because when everything is connected,.
Things are going.
To go badly wrong..
And there's a lot of.
Good examples of that. I don't know many.
People in this room.
Have read the book.
Ghost Fleet yet,.
But it's one that I.
Would highly recommend. And it's about.
Everything getting.
Connected for the.
Militaries of the world. And you're about to enter an environment, which is what this book so.
Beautifully lays out, that's kind of unprecedented, that you have lots of really powerful technology,.
Some information.
Technologies, some.
Biotechnologies, manufacturing technologies..
And all these things are kind of coming together at once, which is really unusual. And it's going to transform all of our industries. And I think that looking back at our earliest days, I was coming out of the third industrial revolution. I was coming out of a third industrial revolution company, Oracle, looking into the fourth industrial revolution..
And when we first had a reliability crisis.
At Salesforce, I.
Didn't know what to do. I was kind of acting how I was acting at Oracle, which is, well, you just.
Don't say anything..
Just hold on and we'll get through this..
Instead we had to move to a transparency-based organization, a.
Transparency culture. We built trust.
Through transparency. We had to put up a web page, trust.salesforce.com. We had to disclose everything. We had to see that our customers and our partners were rooting for us to be successful partner and they were part of our team. That was very different. So I think that we'll be guided by a different set of values. And I think the faster that we move on to those values, the more successful we'll be, the faster we will get there. And this is going to be an amazing new world. I did want to mention that just before I walked in I got a note from.
Klaus Schwab on this. And he asked for Bernard to stand up during this, so Bernard, would.
You just stand up..
And evidently, it's.
Bernard's birthday today. And Klaus asked us to sing "Happy Birthday" to Bernard, so (SINGING) happy birthday to you, happy birthday to you, happy birthday dear Bernard, happy birthday to you. [APPLAUSE].
OK..
So let me-- time is.
Short and we want.
To keep everyone on schedule. I'm going to ask the.
Panelists one quick question, but it's an important one, which is, the world is changing quite fast..
Could you give an.
Example of what.
You think is the big bet that stands out for you that you think three years.
Ago had you been.
Sitting on this stage you wouldn't have even been thinking about..
It wouldn't have been on your radar screen. And now it's pretty.
Fundamental to the way you think about your future. Marc?.
Well, I think the.
Big bet that we.
Had to go through that's really transformed us as an organization is to be much more focused on industries. You know, when we're partnering with high technology, with health care,.
With manufacturing,.
With electronics, or.
Everyone in this room, we had to make a pretty big shift internally. And once we made that decision, we had to go all in. Jean-Pascal..
Probably two things..
First, we have several ports of digitization, customer relationship, connectivity of products, supply chain, the way we work together, the need to integrate them, because it's rotating fast and you need to connect everything together with the rest, so just like a need for consistency which is--.
And really, you were speaking about the new values of this, I don't know if we call it the fourth and things, but being really sharp on where you want to make a difference. And really be very.
Sharp on the partners you want to associate with. That's--.
Importance of speed..
I mean, not that it wasn't on my radar, but as we are now-- we've decided to separate the company so that both entities have their unique profile. And the speed in which we have to do this.
And we have to continue to-- speed is everything. Bernard..
I think our big bet.
Was a great fear.
That we would open up all this new opportunity for access on demand and that it will get used unnecessarily. And what we've discovered is people are smart.
And they don't want to spend all their time with us. But for the right things, they want to come to us. And we have figured out how to manage all this new demand. Meg..
Like Klaus, separation. We had to get smaller to get faster and smarter. And so separating a $110 billion company with 300,000 employees would not have crossed my mind three years ago. And the other one is lean in to completely disruptive innovation..
We're trying to reinvent compute with the machine. So I'd like to close by thanking this outstanding panel. I'd like to just highlight, we heard so many great things. We don't have time to recap. But this point that technology is not the hardest part. It's how you think about all the things around the technology, the human beings,.
The organization,.
The way you make it work, the repeated emphasis of speed and.
Adaptiveness and agility, but particularly speed, to move at a pace that is beyond the.
Normal comfort zone,.
To drive things forward, that a strong business model, a robust plan is really the foundation for pushing forward, the essential elements of trust,.
And how much earning.
Trust with your customers and deep in your organization is key to drive this. And lastly, one of my favorites was a point that Bernard had made a few minutes ago, which is complacency is the enemy here. These are all leaders of very successful companies that come in at.
Different points in time. Some were different challenges. But a lot of what's.
Required here.
Requires cutting against the grain and the mindset of highly successful.
Organizations and really resisting the natural temptations to complacency. Thank you all so.
Much for joining us..