Disrupt or Be Disrupted: Digital Transformation and the Fourth Industrial Revolution

Welcome to Season 2 of the Taste of Informatics podcast. Digital transformation (DX) is more important than ever now that we're in the Fourth Industrial Revolution, where the lines between the physical, digital, and biological worlds are becoming ever more blurred.

In this episode, author and digital transformation thought-leader Tony Saldanha chats with Mike Nitardy about the revolutionary forces that transform businesses, why digital transformation is fundamentally important, and how leaders should approach the undertaking to avoid the typical 70% failure rate across industries.

Tony Saldanha will be the keynote speaker at the College of Informatics DX22 symposium, held May 17, 2022. For more information, visit https://dx22.informatics.plus.

Tony Saldanha is a globally recognized expert and thought-leader in Global Business Services (GBS) and Digital Technology. He ran Procter & Gamble's famed multi-billion dollar GBS and IT operations in every region across the world during a 27 year career there.  Tony has over three decades of international business expertise in the US, Europe, and Asia. He was named on Computerworld’s Premier 100 IT Professionals list in 2013. Tony's experiences include GBS design and operations, CIO positions, acquisitions and divestitures, outsourcing, disruptive innovation, and creation of new business models.  Tony is currently President of Transformant, a consulting organization that advises over 20 Fortune 100 companies around the world in digital transformation and global business services. He is also a founder of two blockchain and AI companies, and an adviser to venture capital companies. His book titled Why Digital Transformations Fail was released globally in July 2019 and ranked #1 on Amazon’s New Releases for Organizational Change, listed on publisher Berrett-Koehler’s best-sellers for July 2019, and recommended by various publishing forums like CEO-Reads, Book-Pal, CEO Library and others. Forbes contributor Michelle Greenwald called it the “best business book ever that you’re yet to read”.

Transcript

Mike Nitardy: 0:09

Welcome back to the Informatics Cafe. I'm Mike Nitardy, your host and I'm pleased and proud to have with me in the cafe today, Tony Saldanha. He is a former Procter and Gamble executive. He was a vice president there for both IT and shared services. And he is the author of the book, "Why Digital Transformations Fail." And we're so pleased to have Tony with us today to talk about that book, and to talk about digital transformations. And not only that, that we're pleased to announce that Tony is going to be our keynote speaker at the upcoming DX 22 here at Northern Kentucky University's College of Informatics. Tony, welcome to the cafe.

Tony Saldanha: 0:50

Thank you very much. I'm delighted to be here at the cafe Mike. I would love a cup of coffee. Now we're doing this virtually.

Mike Nitardy: 1:00

Yes, no, so we'll have a virtual cup of coffee!

Tony Saldanha: 1:03

There you go.

Mike Nitardy: 1:03

It is great to finally get to meet you and to talk about this. What a fascinating and timely and important topic that is ongoing. And we were just talking, before we started, you said that the the book came out in 2019. But this is something that's going to be going on I know for quite some time. Why don't you start from the very beginning if it's okay, and explain to our listeners, what is a digital transformation?

Tony Saldanha: 1:33

That's always a really good place to start, Mike. Actually, your question is the reason why I wrote the book, what is digital transformation. So through the work that I had done at Procter and Gamble, among the many roles that I had, towards the end of my career, it became very obvious that even though Procter and Gamble shared services was considered to be best in class in the world, that even that needed to evolve. So nothing can be static. You need to disrupt everything. And it's not disrupted necessarily by who you consider to be your competition. So it's not, you know, shared services of, you know, Unilever or Henkel, or, you know, Kimberly-Clark, it's going to be disrupted, potentially, by startups and startup service providers. And so everything gets disrupted, everything needs to be transformed. The question is, what exactly is digital transformation? And you ask a good question, because you know, whenever a topic is timely and relevant, the term gets co-opted by every person that's selling something.

Mike Nitardy: 2:47

No doubt.

Tony Saldanha: 2:48

If you have a software, you know, company that's selling the next version of email, they will say, "Hey, Mike, you have to do digital transformation, and this is exactly what we do." So that is really what creates confusion. And therefore, for my point, I absolutely needed to write about my own experiences there. And so the way I answer that question is to say, you have to step way back from the technology, even from the culture and the organization process. And you have to have a world industry view of what is happening around us.

Mike Nitardy: 3:25

Okay.

Tony Saldanha: 3:26

We are in the midst of the Fourth Industrial Revolution. And unlike the first second and third industrial revolutions, where the disruptive technology was steam engines, electricity and internal combustion engines in the second, and then in the third, it was the rise of the Internet. In the fourth industrial revolution, digital technologies is transforming everything. It is transforming every industry including education. It is certainly transforming consumer packaged goods, like Procter and Gamble. And it is transforming all other technologies. Digital technologies is transforming medical technologies. It is transforming physical technologies, IoT, drones, and so on and so forth. It is transforming social technology: Facebook and social media.

Mike Nitardy: 4:14

Right.

Tony Saldanha: 4:14

And so when you talk about what is digital transformation, the only possible answer to that is anything that makes you successful in the third Industrial Revolution era, which is you know, up to now, if you don't transform that to continue to be successful in the fourth industrial revolution. That's the only possible correct answer for digital transformation.

Mike Nitardy: 4:43

Right.

Tony Saldanha: 4:43

You have to be successful in the new industrial revolution.

Mike Nitardy: 4:47

Right.

Tony Saldanha: 4:47

That is digital transformation.

Mike Nitardy: 4:48

Right. No, that makes a lot of sense. And what I like about the title is that it assumes or presumes that people are going to be. and need be, and know they need to be taking part in digital transformation, and that they want it to be successful. So maybe talk a little bit about how you came up with the title because everybody needs to do it and probably knows they need to. Correct?

Tony Saldanha: 5:12

Yes, yes. And that is exactly the right assumption. So it was interesting. Towards my last few years at Procter and Gamble — 2015 or so — I had the opportunity to talk to a hundred different very senior people, you know, corporate executives, CEOs, venture capitalists, startup leaders, you know, consultants, so on and so forth. And actually, with each of them, I did ask the question of, you know, what is digital transformation? And also, where are you in the journey? And, two things stuck out. One is, yes, there was confusion on the definition of digital transformation. But then the second thing that stuck out is your other question now, which is, you know, are you familiar with the need to transform and the issue's very very simple. Everybody knows they have to transform. The question is how, right? What exactly do you want me to do?

Mike Nitardy: 6:08

Right.

Tony Saldanha: 6:08

I'm the CEO of the company. I don't know IT. I don't know programming. What do you want me to do? Right? Are you talking about business models? Are you talking about technology? Are you talking about organization change? Are you talking about digital literacy? What exactly do you want from me? And so I think you're going in assumption that people know they want to transform, but they are frustrated, because they don't know how is exactly right.

Mike Nitardy: 6:32

No, exactly. So, you know, I don't want to give away too much in our conversation here today, obviously, people can buy the book and read it. But I take it that a lot of it has to do with your trial and error, maybe at P&G. Is safe to assume?

Tony Saldanha: 6:51

It does. It is. It is based on my experiences at P&G, and then you know, outside of P&G prior to that as well. But the fact of the matter is that the book is meant to be a checklist of sorts, right? So if you have a spectrum of what people consider to be digital transformation, what I do in the book, is I put that spectrum of the definition of digital transformation into five different stages, where stage one is what most people consider to be digital transformation, which is simply automation. So, you know, I used to do this work manually, let me put it on a computer, let me use SAP, you know, so on and so forth.

Mike Nitardy: 7:34

Right. Right.

Tony Saldanha: 7:34

For me, that is the stage one. That's not going to win you the Fourth Industrial Revolution, right? All the way through stage five, which is where you change not just the technology, but the culture of the organization. For consistent sustained winning, you become like a Netflix with the ability to reinvent yourself. So you change the organization culture along with the technology. So if those are the five stages, what the book is intended to do is to give you a checklist to understand where you are in that spectrum, and a list of things based on real life examples, anecdotes, and a lot of experience on how you could potentially move up that ladder.

Mike Nitardy: 8:14

So there are so many questions that pop into my mind. And I guess... have you been able to in your work, been able to assess where you think most companies are on that scale of one to five?

Tony Saldanha: 8:31

I have. That's a fascinating question, too. So when companies tell me, "Oh, we have a digital transformation program," and I have had the opportunity with your permission to assess them, the average of all of those assessments that I have done, ends up being somewhere at between stage one and two. It's about one stage 1.4.

Mike Nitardy: 9:00

[laughter]

Tony Saldanha: 9:00

So stage one is it is actually not transformation, it is automation.

Mike Nitardy: 9:04

Right.

Tony Saldanha: 9:05

And stage two, is is basically siloed automation, or a siloed transformation, where you know, they have some wins, they have one or two success stories where they've used artificial intelligence to maybe change the way they do accounting or whatever it is, right? That's stage two. So they're somewhere in there. yeah they're still streamlining their automation, and they've got some wins on their success stories for stage two.

Mike Nitardy: 9:33

So it seems to me that you know, in any type of change coming across an organization that you have to get a lot of buy-in within the organization because people are spending their days doing what they do, doing what they do already. And all their activity and focus is on that. And that can be a very, you know, check the box kind of ordeal. How do you get organizations to buy in to the you know, the changing of the focus in the atmosphere in the culture, kind of like you were talking about earlier.

Tony Saldanha: 10:05

And so it has to be a two part movement within the organization. One is the top down and then the other is that the bottom up cultural change. Ninety percent of all failed digital transformations fail because of organization change reasons, not for technology or not for leadership direction reasons, right. So, that's really important to have pull for the change as much as there is a need for leadership, air cover and support for this change, right? So how do you create that change within the organization? As leaders, we have to recognize that our organizations are delivering against what we reward them for. And in most cases, you know, typical MBA theory, until relatively recently, has basically said, there has to be two parts to the organization's strategy. One is run the business brilliantly and keep cutting costs and all that kind of stuff, growing the revenue. And then the second is continuous improvement, don't stand still keep improving 10 20% every year, right. The additional insight that I would like to provide is that that strategy works brilliantly in normal stable times. But at inflection points of industrial revolutions, you need a third part to the business strategy, which is in addition to running the business and improving it, you also have to have a third leg, which is you have to try to disrupt yourself, right? So the example I would give you, is, if you kind of throw your mind back to the second industrial revolution, let's say the evolution of the horse carriage into the car...

Mike Nitardy: 12:07

Right.

Tony Saldanha: 12:08

...no amount of operational excellence and continuous improvement of the horse carriage would have given you the internal combustion engine. Right?.

Mike Nitardy: 12:18

Right. Right.

Tony Saldanha: 12:19

So and that's why they're called industrial revolutions, there is something disrupting the entire industry. So the reality is that that framework is necessary for leaders to understand which is their strategy has to have three different reward systems, for running the business for continuous improvement and for disruptive innovation. And then part of their job is to implement the reward system, so that the bottom up feed of ideas.. You know, the accountant will know best, what can disrupt the accounting processes or procedures within their company, right. So those ideas have to come bottom up. And when you do that, you have brought the organization along with you.

Mike Nitardy: 13:05

That is that is fantastic and profound and certainly, obviously, it takes as you just said, it's going to take both top down and bottom up in order for that to happen. The the top of the organization has to be okay with that disruptive aspect being one of the top three ways of, of charting success. And then they have to instill that in give the people below them the ability to be disruptors, I guess...

Tony Saldanha: 13:29

Indeed.

Mike Nitardy: 13:30

.. and and promote it and and...

Tony Saldanha: 13:32

Exactly.

Mike Nitardy: 13:32

... reward it.

Tony Saldanha: 13:34

Exactly, exactly. Yes.

Mike Nitardy: 13:35

So having that in mind, I've got two questions to follow up on that. If that's all right. Having that in mind, do you think one must precede the other? I mean, I would think logically that if the if the if there's not buy-in at the top, there can't be the work from the bottom? Is that correct?

Tony Saldanha: 13:55

Absolutely. You are absolutely spot on. Yes. Unless the leadership initiates and understands the change. The bottom up thing is is dead on arrival.

Mike Nitardy: 14:09

So then, so then it kind of leading to the next question, and hopefully I'm not, you know, leading like a lawyer to the get the answer that I want. But ...

Tony Saldanha: 14:17

Hey, as long as you're leading in the right direction I'm perfectly fine.

Mike Nitardy: 14:21

But but so the inability then or to have a lot of organizations, let's say then at 1.4 whatever it is, is it because of that failure from the top part of the organization, would you say, to buy in to that disruptive aspect? Or, you know, or is it... because it seems to me that it would be a lot more companies that once they get that top buy in, they'll get the bottom to move, but you can't get the bottom to move unless you've got the top?

Tony Saldanha: 14:49

Yes. So I think actually it is a combination of different factors. But if I were to kind of summarize, you know, why is it that you're on an average, we're still at 1.4 and not three, or four, or whatever it is, is for two reasons. One, is because of the confusion around the term "digital transformation." Our CEOs our government leaders, our leaders aren't necessarily, you know, hardcore tech people. So when their CIOs or when their people say "we are doing digital transformation," they trust them. Right? And so I think that's part of the issue, which is that language. Now, if I go to a business leader and say,"you will 1.4 on a scale of five" that shakes them up.

Mike Nitardy: 15:42

Right.

Tony Saldanha: 15:42

That hardly ever happens, right? Because that scale is not widely in use. So that's one reason, which is the terminology itself, right? So we give ourselves a false sense of security. We dabble in and do successful pilots of artificial intelligence, and blockchain and stuff like that. But very few of those get scaled across the enterprise. So so so all of that is the first reason. The second reason is that even when the goals are set correctly, the execution methodology — the implementation — fails.

Mike Nitardy: 16:18

Right. Right.

Tony Saldanha: 16:18

The implementation fails, because

Mike Nitardy: 16:18

Mmm hmm.

Tony Saldanha: 16:19

Which is to say, take a solution, and implement the, the discipline methodology that's being used to implement That makes a lot of sense. It seems to me that it would almost digital transformation is the same methodology as any other it and make sure the project does not fail. Unfortunately, normal, PMI, Project Management Institute certified methodology. digital transformation doesn't work that way. The reality is, you're disrupting something. And so the only methodology that works in that case, is a combination of portfolio management, venture capitalist-based, hey, you know, work with 50 different ideas and kill 40 of those and let 10 be successful, you know, a combination of that for portfolio management. And for the ones that eventually get selected, then you use, you know, project management be — and please jump all over me and correct me if I'm wrong, but just listening to this — that an organization would be or should methodology. And the third part of that methodology is be willing to bring in a consultant to help them with something like this, with moving in this direction, because organizational change management. So, it's really the you're going to have to fight a lot of the same old cultural urges that the company already has, that the organization already has, what do you think about that? combination of those methodologies that is necessary. I do think that's accurate. And you know, whether it's one consultant for bringing the outside in, I think the best thing that a leader that wants to drive transformation can do That discipline does not exist sufficiently in most is to start by, you know, looking at the outside, and organizations, which is why the second point of failure is execution. trying to bring all of that inside the company. So one of the things that I do in the work that I've done since Procter and Gamble, I have a couple of businesses. One is I do advise about 20 of the Fortune 100 companies at the board and CXO level on digital transformation. And then the other thing that I have done is, I actually have along with my previous boss from P&G, set up the global standards and certification body for shared services across the world. So, but in the work that I do for my former role that I was describing, what I do is I start with what I call shock and awe, which is, you know, let the leaders of these companies, you know, experience what is currently happening in the world that could disrupt their ending without having gone through the measurement process that, you know, we are at, you know, let's say 1.4. Right. And that's always the best starting point. And then of course, the second part of that is then the execution methodology.

Mike Nitardy: 19:36

That is, that is amazing. Thank you for that insight. Well, Tony, I want to thank you so much for joining us in the cafe today. Talk about digital transformation — we're joining each other in our digital cafe today! And for talking with us today about your book "Why Digital Transformations Fail." Absolutely fascinating. And I highly recommend that people run out and get it and apply it to their organizations. Thank you so much for joining us.

Tony Saldanha: 20:05

Mike. It's been a pleasure. Thank you for having me.

Mike Nitardy: 20:07

Thank you. Informatics Café is a production of Informatics+, the outreach arm of Northern Kentucky University's College of Informatics. Hosted by Mike Nitardy, produced by Chris Brewer, music and engineering by Aaron Zlatkin, recorded at the Informatics Audio Studio in Griffin Hall.