Host Intro (Gene Kim)

[00:00:07.010] All right. Over the next 30 minutes, we have two talks that serve

[00:00:11.060] a very specific goal. These two people share a common

[00:00:14.660] dissatisfaction of how technology in most organizations

[00:00:18.640] is managed and leveraged in service of what our customers need.

[00:00:22.440] I believe they both can articulate better than almost anyone where the

[00:00:26.260] gaps are and just how harmful these gaps are to their organizations.

[00:00:30.760] John Cutler is, in my opinion, one of the people who is doing the most innovative

[00:00:34.740] work in advancing the field of product and design.

[00:00:38.100] It's been my personal observation that his tweets are among the most widely read

[00:00:41.700] within the DevOps Enterprise community, and I personally benefited from his

[00:00:45.700] amazing advice and observations.

[00:00:48.100] John believes that technology and design are the secret formula for winning

[00:00:52.080] in the marketplace, and helping organizations is part of his role as

[00:00:56.120] head of product research and education at Amplitude.

[00:00:59.340] He will talk on his views of how we should broadly view design and technology,

[00:01:03.900] what we're often so missing when we talk about product and design, and what this

[00:01:07.840] community can do about it to truly build great products that help our

[00:01:11.320] organizations win in the marketplace. Here's John.

John Cutler

[00:01:23.860] Hello, everyone. My name is John Cutler, and I am so excited to be

[00:01:27.560] speaking today, and I'm very grateful to Gene for the invitation.

[00:01:32.200] I've mentioned this in earlier talks, but before attending DevOps Enterprise Summit

[00:01:35.840] in person in Las Vegas, those in-person conferences,

[00:01:39.560] I was absolutely obsessed with the videos.

[00:01:41.800] And Matt Skelton will say I sit there and obsessively tweet out links

[00:01:45.440] to the Team Topologies videos I'd see.

[00:01:47.640] So I'd watch them over and over and over.

[00:01:50.020] So to be able to do a talk on the main stage, the virtual main

[00:01:53.740] stage, so to speak, is a real honor.

[00:01:57.160] So now a bit about me. My background is in product management, UX, a few

[00:02:00.680] startups. I guess I got my start trying to make a video game.

[00:02:04.200] I made a game about bartending called Last Call, unfortunate name

[00:02:08.100] maybe, which ended up getting a mature rating by Walmart.

[00:02:11.900] So it didn't really sell. It was a big commercial flop.

[00:02:14.580] But it was fun to make, and that's how I got started.

[00:02:17.020] So then I wised up and started to get these "real jobs,"

[00:02:20.440] which are kind of surreal, I guess.

[00:02:22.540] So in my current role at Amplitude, I get to talk with lots of teams, from

[00:02:26.400] two-person startups to teams at Fortune 10 companies, frontline

[00:02:30.100] developers to CEOs and CTOs. And it's a lot of fun.

[00:02:33.680] For someone who thinks about this all the time and nerds out about it all the time,

[00:02:37.280] this is sort of the dream job.

[00:02:41.400] I just love this kind of stuff. Now, my goal at Amplitude, and

[00:02:45.300] Amplitude's goal, thankfully, is to help teams have more impact, and we do this

[00:02:49.320] with our product. Think analytics purpose-built for product teams

[00:02:53.440] and with our workshops, coaching, some services, et cetera.

[00:02:56.030] And that's where I spend most of my time.

[00:02:58.340] So that's some quick background about me.

[00:03:01.920] Now, in this talk, we're going to talk about what I see as a

[00:03:05.880] natural evolution for the DevOps community.

[00:03:08.540] We're going to talk about product, design, outcomes, feature

[00:03:11.940] factories, leadership. We're going to talk about the concept of being

[00:03:15.160] product-led and how that applies to companies that aren't digital

[00:03:19.080] product-first companies. And I'm going to leave you with a couple questions that

[00:03:22.980] I'd like to carry with you through the next couple days of the conference.

[00:03:27.100] Now, in my day-to-day work, I'm observing large companies jump on the product

[00:03:31.060] thinking train. They come to me, or they come to my employer, Amplitude, because

[00:03:35.000] they've been told to adopt cross-functional teams, to think in terms of products,

[00:03:38.960] to become more outcome-oriented or data informed, to improve their

[00:03:42.940] customer experience, and in most cases, sort of be like company X, and we could all

[00:03:46.620] insert X there.

[00:03:48.380] And here's what I'm seeing when those organizations put this all in motion.

[00:03:52.100] Suddenly, as expected, everything is a product.

[00:03:55.549] There's products everywhere. There's product owners everywhere.

[00:03:58.100] There's product managers. There's product owner managers.

[00:04:00.360] There's product portfolio managers and product analysts and product project

[00:04:04.140] managers and their managers. You want a budget?

[00:04:07.240] Call it a product. And roadmaps. You have to have roadmaps

[00:04:11.220] when you have products. So what you do is you actually...

[00:04:14.180] It's exactly like a Gantt chart, and you put quarters along the top, and you fill

[00:04:17.421] it up like a horizontal Tetris game.

[00:04:20.029] And of course, if many of you are non-customer facing teams, you actually have to

[00:04:23.780] play Tetris based on their Tetris, which is based on the business'

[00:04:27.720] Tetris. So it's Tetris

[00:04:30.860] to the third power. And then you have to have

[00:04:34.840] boards everywhere because they're supposed to visualize the work.

[00:04:37.240] You need a big done column on the right, done and shipped, mission

[00:04:41.060] accomplished, all systems go, and then next feature.

[00:04:44.400] The train has left the station.

[00:04:46.500] I'm still trying to figure out why they're called release trains, but I'm sure

[00:04:49.860] there's a really good reason for that. But anyway, so it's sort of like all aboard.

[00:04:52.820] My son likes Thomas the Train, so I think about trains a lot.

[00:04:56.080] So some of this might sound familiar. You might be supporting this.

[00:04:59.280] You might be operating what's outputted.

[00:05:01.890] You might be developing supporting tools or infrastructure or platforms, or you

[00:05:05.860] might actually be in the thick of it as a so-called customer-facing

[00:05:09.680] team. And this is where lots of companies are at right

[00:05:13.680] now. They've heard that they need to embrace product thinking, and this

[00:05:17.700] is kind of where we've ended up. We've ended up with finely tuned feature

[00:05:21.760] factories. Reasonably usable work,

[00:05:25.000] reasonably fast, stable, observable, shipping

[00:05:28.880] every day, every hour, every minute.

[00:05:32.240] It works. It doesn't really break.

[00:05:34.620] And

[00:05:36.320] don't get me wrong, this is progress for sure, and it's a step up.

[00:05:40.760] But it's not the destination, and that is super important.

[00:05:44.180] And if you've been involved in software for a long time, you know that moment where

[00:05:47.160] you think you've gotten somewhere.

[00:05:49.120] Just when you start to breathe, that's usually a signal that we're seeing a

[00:05:53.080] false peak or a false horizon.

[00:05:55.640] Now, many organizations are missing a central idea, and this makes

[00:05:59.580] sense because many of the popular messages we have about digital products

[00:06:03.160] come exclusively from digital product-first companies that grew

[00:06:06.940] up selling digital products. So more specifically, rapid scale-up

[00:06:10.800] startups like my company, Amplitude, and then 20 or 30-year-old

[00:06:14.660] tech stalwarts on their second, third, fourth, fifth, sixth

[00:06:17.400] act. And these are interesting stories,

[00:06:21.816] but they may be hard to relate to. So companies have trouble

[00:06:25.296] applying the ideas. And I remember this from a

[00:06:29.416] lean coffee activity in Las Vegas, and I was sat in a great group of people, but

[00:06:33.156] the questions seemed simple, but they were intense.

[00:06:36.616] What is a product? But we don't sell that. We sell something else.

[00:06:40.036] Wait, is it a product or a service or an experience or a SKU?

[00:06:44.216] And so what you see is companies copying frameworks, renaming

[00:06:48.196] everything, projects to products, restructure everything, new titles,

[00:06:52.136] new rituals.

[00:06:54.616] They seem to leave out the convenient threats to formal authority.

[00:06:57.656] They don't really take care of that.

[00:06:59.056] But anyway, but

[00:07:01.536] the outcomes in many cases are only marginally

[00:07:05.276] improved.

[00:07:07.156] So why?

[00:07:08.676] What is missing?

[00:07:10.946] So I've been thinking about this a lot lately, and I am

[00:07:14.776] basically obsessed with this question.

[00:07:17.236] And I think about it in my day job and at other times of the day, too.

[00:07:20.536] So in my day job, I end up talking to lots of teams.

[00:07:24.186] And I'll be chatting to someone from a company known

[00:07:29.096] worldwide to be customer-centric,

[00:07:33.116] a great place to work, an innovator in their domain.

[00:07:36.396] They've got world-class leaders. They're thoughtful. They are embracing change.

[00:07:39.656] They're positive. And they're nowhere near that stereotype of the

[00:07:43.356] bureaucratic, slow-moving enterprise.

[00:07:46.596] Yet they are still grappling with some essential truths about this

[00:07:50.536] new reality.

[00:07:52.316] So again, what's missing? What do I see that they don't see?

[00:07:55.856] Or maybe

[00:07:58.356] they see something that I don't see. Who knows?

[00:08:01.036] So in my world, we refer to some companies as being product-led.

[00:08:05.356] And

[00:08:06.956] we have to dig in there because that's a pretty big word.

[00:08:09.156] So what is a product-led company?

[00:08:12.016] So first, it does not mean product manager-led.

[00:08:15.636] We have to really get that out of the way first.

[00:08:18.636] And it doesn't mean that they don't have salespeople or

[00:08:21.976] marketers. It means something different, and it means that

[00:08:25.856] they're using design and technology together to drive

[00:08:29.656] sustainable growth and to meet the needs of the human beings

[00:08:33.656] out in the world who rely on their products and services.

[00:08:37.177] And so when you apply that to non-digital product companies, what this means is

[00:08:40.756] that you're using design and technology across the business

[00:08:44.216] to find sustainable sources of differentiation and growth.

[00:08:48.176] In a sense, and this is really important, the whole company

[00:08:52.236] becomes the product.

[00:08:54.756] It's no longer the business and the teams or the

[00:08:58.656] business and IT. Peter was talking about this a lot, or the business and delivery

[00:09:02.536] teams, or my favorite

[00:09:05.696] the business and IT renamed as product development because we've hired

[00:09:09.696] 400 product owners and 400 analysts and 200 Scrum Masters

[00:09:13.796] and,

[00:09:15.496] I don't know, 15 designers. You need 15 designers.

[00:09:18.536] You have a chief experience officer.

[00:09:20.576] They're walking around with mock-ups all over the place and talking about the

[00:09:23.656] end-to-end experience. Sorry, this is a little sour topic for me, but

[00:09:29.156] you're not seeing those divisions.

[00:09:31.516] What you're seeing is that the duality ceases to exist.

[00:09:34.776] It's all the business, or the business is all the

[00:09:38.576] product.

[00:09:40.736] So back to this void in understanding I was talking about earlier.

[00:09:44.896] Why does this idea of being product-led matter?

[00:09:48.316] And certainly your companies believe in your products.

[00:09:50.816] Even if you don't sell digital products, you believe in serving your customers.

[00:09:53.876] That's not new news, but it does matter, and here is

[00:09:56.976] why. One of the key things missing in

[00:10:00.736] these conversations is a belief, a core belief

[00:10:04.976] that design and technology can be the source of step

[00:10:08.696] changes in outcomes, a source of innovation, something that can help the

[00:10:12.676] company do just more than survive or do more than deliver features quickly

[00:10:16.576] or do more than just be responsive or more than just run a feature factory.

[00:10:21.006] And it's a shift from supporting the company's strategic objectives

[00:10:25.496] to actually shaping, guiding, and leading the

[00:10:28.916] company's strategic objectives.

[00:10:31.476] And my joke is it's a shift from sitting at the table to

[00:10:34.636] designing a whole new table.

[00:10:38.775] So there's a fundamental perception issue in terms of the value brought to

[00:10:42.776] the table and maybe even the table itself, but that's not really the whole

[00:10:46.416] picture. So what you often see is, for example, a company is

[00:10:50.496] literally the best in the world in their domain.

[00:10:53.176] Maybe it's banking or automobiles or logistics or travel or

[00:10:56.876] publishing or music or retail or pharmaceuticals or footwear,

[00:11:01.016] and yet they're struggling with creatively applying the kind of design and

[00:11:04.816] technology that we work in to solve problems.

[00:11:07.316] Shoe designer's amazing at design, but this other thing's hard.

[00:11:10.206] It's

[00:11:11.816] curious, right? So the scientists or the designer or the

[00:11:15.376] doctors, they're being bold and creative, and then there's IT.

[00:11:20.096] So what are we grappling with here?

[00:11:22.876] What we do is a different beast, and it can be super hard

[00:11:26.756] to wrap your head around that, and it can be super hard for your companies, too.

[00:11:29.776] So I'm going to propose something.

[00:11:33.256] I'm going to propose that the real differentiator

[00:11:36.856] isn't really what's shipped and delivered, but rather the domain experience

[00:11:40.856] awareness

[00:11:43.116] that teams develop for the customer and the problem,

[00:11:47.796] and they encode that knowledge in the product.

[00:11:50.796] Literally, the code is a representation of that knowledge.

[00:11:54.136] So maybe that's the product, not the code, the pixels, or what gets built

[00:11:58.136] or deployed.

[00:12:00.016] Certainly, we all know that product features, platforms go in and out of style,

[00:12:03.876] but they're differentiated. They serve their

[00:12:07.636] purpose, but they come and go.

[00:12:10.076] And what we're really doing is disrupting ourself, and nothing is truly shipped.

[00:12:14.376] That's been a big

[00:12:18.776] thing that I've realized in these last couple years. Things aren't shipped, they're

[00:12:22.680] only really just offered up. We're offering this to you.

[00:12:25.840] The team is the product. The company is the product.

[00:12:29.880] So I did a recent survey with about

[00:12:32.920] 800 responses, and I asked people whether their organizations

[00:12:36.760] were shipping faster than they learned or learning faster than they

[00:12:40.760] ship.

[00:12:42.020] And 80%, now granted, maybe my Twitter following is

[00:12:46.100] biased, it probably is. And 80% said they were shipping

[00:12:49.700] faster than they learned. Wow, that's incredible if you

[00:12:53.700] think about it. So while important,

[00:12:57.260] shipping alone is not the differentiator.

[00:13:00.320] Now, I can certainly

[00:13:02.820] shoot holes in that. I can see some situations where shipping is the

[00:13:06.520] differentiator.

[00:13:08.480] But that idea itself of the impermanence of what

[00:13:12.500] we build, this lasting value of what we learn, is a

[00:13:16.080] wholesale shift on how most organizations understand software delivery and

[00:13:20.080] operations.

[00:13:23.120] Okay. So here's another mind bender for these organizations,

[00:13:27.159] and it cuts to the central distinction between

[00:13:30.540] what I would call an opportunity seizing team and what we commonly think of as a

[00:13:33.860] delivery team or even an operating team.

[00:13:37.220] We know how this goes, right? So you business pick the right

[00:13:41.160] thing, and we will build the right thing right.

[00:13:44.170] Or you designer design it, and we will build it.

[00:13:47.200] Or you product manager own the problem and the engineers own the

[00:13:50.460] solution. Your customer-facing teams have a

[00:13:54.170] high-profile roadmap here, and then the non-customer-facing teams have this shadow

[00:13:58.040] roadmap over there. Or think it, build it, run it.

[00:14:01.540] Thinkers over here and the builders over there.

[00:14:05.460] So the idea that these are one and the same is

[00:14:08.600] extremely challenging for the legacy organizations I talk

[00:14:12.360] to. And it got me thinking, what these native

[00:14:16.500] digital product-led companies have figured out is the idea of truly

[00:14:20.360] cross-functional teams,

[00:14:22.180] opportunity discovering teams, problem-solving teams, creative,

[00:14:26.820] close to the edge teams, close to the customer,

[00:14:30.560] aligned with the human beings out in the world, the real customers.

[00:14:33.720] Not the internal customers. Those are partners.

[00:14:36.280] You don't have internal customers unless they're giving you money.

[00:14:38.860] Those are your partners.

[00:14:41.160] But rather I'm talking about the real customers out in the world.

[00:14:44.680] And these digital product first companies have also figured out that supporting

[00:14:48.360] teams are not somehow second-class citizens.

[00:14:50.720] In fact,

[00:14:51.880] the people caring for what I call the value creation system, the ability for the

[00:14:55.540] system to sense and respond, to operate, to adapt, to extend,

[00:14:59.820] to scale up, scale down, insights, recover.

[00:15:03.320] An example I have is onboarding new developers gracefully.

[00:15:07.340] They take that seriously. They take psychological safety seriously

[00:15:11.380] on the part of their teams. So it's as much as the product as

[00:15:15.460] the SKU or the specific service offering that they're giving.

[00:15:19.129] And that is one of the big leaps, and one that

[00:15:22.680] companies with the rock star somewhere else, the rock star scientist or the shoe

[00:15:26.300] designer or the car builder or lawyer or whatever, have a tough time

[00:15:30.020] accepting.

[00:15:31.800] So let's recap for a second. So first we

[00:15:35.300] discussed this big rip and replace that's going on with adopting product

[00:15:39.189] thinking, which I think is going wrong in many cases.

[00:15:42.860] And then we talked about the difficulty translating messaging about product making

[00:15:46.420] from digital product examples to other industries. That's a huge challenge.

[00:15:50.830] And then we translated product-led for non-digital product

[00:15:54.580] examples, and hopefully that resonated.

[00:15:57.080] The company is the product. And then we addressed these three

[00:16:01.200] big leaps, and I'm guessing these are some leaps that you're

[00:16:05.300] struggling with in your particular companies.

[00:16:08.180] So the first leap is design and technology as

[00:16:11.900] a catalyst for sustainable, differentiated growth.

[00:16:16.860] Step changes, not just survival, not just responsiveness,

[00:16:20.800] but step changes. Redesigning and rebuilding the table.

[00:16:24.450] And the importance and the lasting value of domain knowledge.

[00:16:27.240] This idea that products and features, the stack or whatever, is ephemeral

[00:16:31.200] in a sense, and that we have to bring product teams as close to the customer

[00:16:35.010] domain as possible.

[00:16:37.160] And finally, this idea of breaking through this false dichotomy of the thinkers and

[00:16:40.640] the builders. This idea of opportunity seizing teams.

[00:16:45.609] So hopefully some of that resonates

[00:16:49.560] or at least gets you thinking.

[00:16:52.280] As you go about enjoying the conference, I wanted to leave you to

[00:16:55.960] ponder a couple questions. And that's my ask to you.

[00:16:59.240] If anything, you could DM me in the conference Slack channel with the answers to

[00:17:02.760] these questions if you thought about it over the last couple days.

[00:17:05.720] So the first, what beliefs must you

[00:17:10.661] personally let go of

[00:17:13.700] to set about not just sitting at the table, but leading your business using

[00:17:17.580] design and technology to support these step changes

[00:17:21.340] and sustainable growth?

[00:17:23.401] Here, another way to think about it.

[00:17:24.641] What would you do if suddenly I said, "I'm giving you a two-level promotion right

[00:17:28.020] now." How would you navigate that?

[00:17:31.200] Second, what steps do you need to take to be able to connect

[00:17:34.970] the day-to-day work of your teams out to the benefits and outcomes in the world

[00:17:38.940] outside your organization's walls?

[00:17:41.160] Not story points, not cycle time. No, out to at

[00:17:44.980] least be able to trace the line from that passionate engineer who's

[00:17:49.000] working on a data pipeline out to the human beings out in the world

[00:17:53.000] that you're helping. That's something you could do today.

[00:17:57.980] And if you do that, you start thinking about the next part of the question is this,

[00:18:01.400] how can you help your organization learn as fast as you ship?

[00:18:05.080] Maybe you're the other way around at the moment, but maybe ponder the other one.

[00:18:08.500] So the final question is, what can you do to overcome

[00:18:12.020] the biases, the dichotomies, maybe the stereotypes that

[00:18:15.560] exist about tech in your company to be

[00:18:19.480] more builders and runners, to turn everything you do into the business?

[00:18:22.720] Think about that... scientist, if you're in

[00:18:26.736] life sciences, the scientists in your company are the rock stars.

[00:18:31.996] But what would it take to bring the thinkers and problem-solvers on your

[00:18:35.856] team up to their particular level?

[00:18:38.336] So hopefully, this has been interesting to you.

[00:18:41.776] Huge thanks to Gene and the organizers again, and I

[00:18:45.536] can't wait also to be able to do this in person, as much as I like the

[00:18:49.536] virtual conferences and not traveling with a toddler. So I appreciate it.

[00:18:52.516] Thank you so much.

Host Intro (Gene Kim)

[00:18:54.856] Thank you, John.

[00:18:56.636] All right. If John gave the right brain treatment of this topic, to

[00:19:00.576] present the left brain treatment of this gap between business and technology will

[00:19:04.336] be Peter Moore.

[00:19:06.096] I only met Peter one year ago, but he immediately struck me as someone who the

[00:19:09.716] DevOps Enterprise community needs to know better.

[00:19:12.596] He spent decades in a unique position working with both business leadership and

[00:19:16.456] technology leadership. This started when he worked with the CEO and chairman

[00:19:20.396] at the New York Stock Exchange, where he worked with CEOs of member companies.

[00:19:25.356] Another thing that is remarkable about his work is that it was enabled

[00:19:29.296] by the fact that he is the brother of the famous Dr.

[00:19:31.516] Geoffrey Moore, author of the book "Crossing the Chasm" and "Zone

[00:19:35.536] to Win."

[00:19:36.936] He will talk about the many ways that business leaders put technology in the wrong

[00:19:40.616] frame, or in the wrong zone, and the bad outcomes that

[00:19:44.356] result. And more importantly, what technology leaders can do to

[00:19:48.316] escape the pull of its past of being a cost burden, and instead

[00:19:52.296] be unleashed as a key strategic asset. Here's Peter.

Peter D. Moore

[00:19:56.616] Gene,

[00:20:02.776] thanks very much again for the opportunity to share some ideas

[00:20:07.276] with the DevOps Enterprise Summit, in Las Vegas.

[00:20:10.416] Again, like London, this is virtual.

[00:20:12.716] And one of the things I want to do today is get very

[00:20:16.156] specific about how CIOs and senior IT

[00:20:20.096] leaders can close the gap in the perception of

[00:20:24.076] IT as a cost center and cost burden, rather than a

[00:20:28.116] strategic asset.

[00:20:29.996] If we can't close that gap, I don't think IT can make the contribution

[00:20:33.956] and impact that companies need it to do to

[00:20:37.916] truly compete as digital enterprises.

[00:20:40.776] So what I'm going to do in my talk today is take you through some

[00:20:44.836] very specific steps on how you as a CIO or

[00:20:48.576] another senior leader in IT can actually close that gap

[00:20:52.716] in what I call free IT's future from the pull of its past.

[00:20:57.556] So let's start by what that past legacy mindset might look like in some

[00:21:01.536] companies. A number of studies have documented that

[00:21:05.236] anywhere from 40 to 50% of CEOs and boards

[00:21:09.376] still see IT as a cost center, not a revenue generator.

[00:21:13.336] Less than 25% of companies are using digital

[00:21:16.476] technologies to advance their business strategy.

[00:21:20.476] And finally, and more directly to some of the things we'll talk about today

[00:21:23.956] is IT in general still spends about

[00:21:27.876] 80% of its resources and budget on running the

[00:21:31.116] business and only 20% on changing the business.

[00:21:34.936] And if we can't take meaningful steps to changing that

[00:21:38.756] ratio, getting it closer to 50/50, or maybe even 60/40,

[00:21:42.996] 70/30 change versus run, I think it'll be very

[00:21:46.756] hard to overcome the mindset that IT is just a cost center.

[00:21:51.036] So I want to take you through how I'm going to suggest we go about doing

[00:21:55.056] that.

[00:21:57.216] As Gene mentioned, my brother Geoffrey wrote a book called "Zone to Win,"

[00:22:01.176] and it was designed to create a framework and a set of

[00:22:04.796] discussion tools to enable companies to balance

[00:22:08.636] their resource allocation between the businesses they have

[00:22:12.256] now and new business investments that they'd like to make going forward.

[00:22:17.416] I've adapted that Zone to Win model into a

[00:22:21.336] four-zone business value creation portfolio for

[00:22:25.196] CIOs, and this is designed to make a business

[00:22:28.896] case that IT assets are strategic assets,

[00:22:33.336] and that they enable the CIOs and the

[00:22:37.156] teams to segment the work of IT into four

[00:22:41.176] different what I call themes of impact.

[00:22:44.246] And this framework is designed to represent IT

[00:22:47.996] strategic priorities, business value contributions,

[00:22:51.996] and operational excellence all in one place.

[00:22:56.236] So this is a complete picture of the potential business

[00:23:00.076] value that IT can deliver to any organization.

[00:23:03.596] And as I'm sure you can imagine, to successfully make

[00:23:07.436] this kind of shift will require a fundamental change

[00:23:11.636] to how IT is organized, staffed, and operates,

[00:23:16.156] along with new ways to measure both TCO and

[00:23:20.096] ROI. So let's take a brief look at each of these four zones

[00:23:24.396] and I'll give you the way that IT can impact each one

[00:23:28.436] of them.

[00:23:29.836] The performance zone is where the organization has all

[00:23:33.816] of its businesses, and this is where your products are made and the

[00:23:37.556] products that are made are sold. So this is everybody in the

[00:23:41.016] organization who has a revenue bogey.

[00:23:44.356] IT's biggest contribution here to enable the performance of

[00:23:48.176] those businesses is to develop and deploy systems of

[00:23:51.836] engagement that increase customer experience value,

[00:23:56.376] and also develop and deploy systems of intelligence

[00:24:00.416] to better understand and deliver new customer value.

[00:24:04.336] And the key here is that IT works in collaboration

[00:24:08.656] with their internal business partners so that all IT investments in this

[00:24:12.776] zone are aligned with the critical business outcomes that the

[00:24:16.756] business is on the hook for that particular year.

[00:24:21.476] The productivity zone is where all the systems of record reside in any

[00:24:25.136] organization. They could be ERP, CRM,

[00:24:28.776] finance, HR, et cetera. You have to have them.

[00:24:32.116] They have to be stable, secure, and compliant with the

[00:24:35.776] industry that you're in. But one of the things that we've noticed over

[00:24:39.736] a period of time is there's an enormous amount of trapped

[00:24:42.996] value in a number of these systems of record, particularly

[00:24:46.706] legacy systems that have been around for 10, 15, 20

[00:24:50.046] years, that if you can recover that trapped value and

[00:24:53.726] redeploy it against systems of engagement and systems of

[00:24:56.986] intelligence, you can significantly increase

[00:25:00.896] the business value creation that IT brings to the organization.

[00:25:05.246] And we'll talk more about that as I go through my talk.

[00:25:08.906] The incubation zone is where IT is exploring,

[00:25:12.926] identifying, validating, testing next-generation products and

[00:25:16.746] technologies that can improve the competitive performance of

[00:25:20.706] the organization and enable it to transform

[00:25:24.466] into a digital enterprise. One of the things that I was

[00:25:28.446] really happy to hear was Doug Parker, the CEO of

[00:25:32.126] American Airlines, was asked the question, "Who is

[00:25:36.046] responsible for business organization at his company?" And he said,

[00:25:39.796] "Everyone, especially the executives." And the key point

[00:25:43.806] to closing this gap is you can't

[00:25:47.946] transform your business using digital technology without

[00:25:51.766] having IT playing a central role, not only in

[00:25:55.686] implementation, but in the strategic design of what

[00:25:59.546] that new business looks like and how that technology will be deployed.

[00:26:04.286] And the final zone is the transformation zone, and this is where, as I

[00:26:08.306] said before, the original intent of my brother's book was,

[00:26:12.186] if a company wants to launch a net new business

[00:26:16.246] that represents a minimum of 10% or greater of your overall

[00:26:19.536] revenues, this is a major transformation effort, and

[00:26:23.406] everybody in the organization has to align behind it, but particularly

[00:26:27.166] IT, because in many cases, it will be

[00:26:30.246] technology that is helping drive and scale this new business.

[00:26:34.966] And so, again, what this framework is designed to

[00:26:38.286] do is to present a much more robust and complete

[00:26:42.106] picture

[00:26:43.466] of the total business value that IT can bring to an

[00:26:47.126] organization, not just maintaining systems of record.

[00:26:51.266] But again, as I said earlier, when we looked at that resource

[00:26:54.826] allocation, we have to address changing that ratio

[00:26:58.886] of where you spend your time and your money, and we'll get into that in just a

[00:27:02.786] minute.

[00:27:04.506] So there's some very good early use cases of companies

[00:27:08.486] that have actually deployed this framework, and in one of them,

[00:27:12.266] Monsanto developed and launched a data analytics platform

[00:27:16.166] called Science at Scale

[00:27:18.386] to run simulations against millions of data points on seed

[00:27:22.226] genetics, climate, water, soil, and nutrients.

[00:27:26.606] The platform leverages Amazon Web Services and Google's TensorFlow

[00:27:30.286] machine learning application to reduce the time

[00:27:34.246] to run simulations from months to minutes, thereby

[00:27:37.986] increasing revenue by $17 million.

[00:27:41.146] So it's an example of a direct contribution from IT

[00:27:45.066] to the performance zone in generating revenues for the

[00:27:48.766] organization.

[00:27:50.746] Another example, which I think is really relevant to this community is in the work

[00:27:54.626] I did with Splunk.

[00:27:56.846] The group I worked with was the business applications team,

[00:28:00.746] and when we came into the work, the

[00:28:04.486] development teams were organized around different software stacks.

[00:28:07.686] So Salesforce, NetSuite,

[00:28:10.646] Workday, et cetera. And they didn't have any direct interaction with their

[00:28:14.546] internal business partners. So we dismantled

[00:28:18.515] that structure and created six

[00:28:21.806] cross-functional teams and assigned each team to one of

[00:28:25.766] the internal business partners. So it was the cloud business, it was the product

[00:28:29.446] teams, it was the revenue and marketing teams, et cetera.

[00:28:33.166] And just to give you an example of the immediacy of the impact,

[00:28:37.706] when we sat down with the chief revenue officer and the chief marketing

[00:28:41.366] officer, instead of bringing in an Excel spreadsheet of all the projects and

[00:28:45.686] where are they on the roadmap and who needs to move it around, we

[00:28:49.606] just asked a fundamental question:

[00:28:52.046] What is currently making it difficult for you and your

[00:28:55.046] team to achieve the desired business

[00:28:58.826] outcomes that you're accountable for in this year's plan?

[00:29:03.346] Totally open-ended.

[00:29:05.266] Not

[00:29:06.306] where we are with projects. So the answer was, we found

[00:29:10.266] out, that if you were a salesperson at Splunk, you had to open up five

[00:29:14.286] separate applications to get the total customer

[00:29:17.986] relationship that one customer had with all the different products and

[00:29:21.906] services. And so we created something called One Click One

[00:29:25.586] View and compressed those from five down to one in a period of

[00:29:29.426] about six months, and turned an adversarial relationship with a

[00:29:33.306] partner into a true collaboration, and actually

[00:29:37.086] one who advocated for us.

[00:29:39.716] So two good performance zone use case examples with

[00:29:43.746] Monsanto and Splunk.

[00:29:46.066] In terms of productivity use case examples, AIG

[00:29:49.886] is really, I think, a very good one on recovering trapped

[00:29:53.906] value and redeploying it. They deployed five virtual

[00:29:57.466] engineers inside their infrastructure to collect and analyze

[00:30:01.266] system performance data.

[00:30:03.726] A typical network outage would go into the queue and take

[00:30:07.726] engineers three and a half hours to address.

[00:30:11.146] Using virtual assistants, most outages were fixed in 10 minutes,

[00:30:15.566] and over the first year, returned 23,000

[00:30:19.306] hours of trapped value back to the company.

[00:30:23.206] And another good example is Edmunds, and this is one of

[00:30:27.146] my favorite stories because it speaks to a lot of what "The Unicorn

[00:30:31.006] Project" really was talking about and how the red shirts finally said enough is

[00:30:34.906] enough.

[00:30:36.146] When the CIO of Edmunds came in about six years ago,

[00:30:40.426] he had inherited an Oracle ERP license

[00:30:44.946] and maintenance contract that was costing the company $2 million

[00:30:48.866] a year.He and his team went in and looked at that contract

[00:30:52.914] and assessed the fact that they were getting about $500,000 worth of

[00:30:56.714] value out of it. So they went back to Oracle and said, "We need to

[00:31:00.414] renegotiate the contract, we're not

[00:31:04.414] using all of it." And Oracle basically said, "Go pound sand." So

[00:31:08.374] instead of saying, "Well, there's nothing we can do," what the CIO did

[00:31:12.374] is he went to the CEO and said, "I need half a million

[00:31:16.034] dollars."

[00:31:17.514] And the CEO said, "What for?" And he says, "I want to take my best developers,

[00:31:21.934] and I want to pay them on their own time, over and above their day

[00:31:25.534] job, to develop our own ERP system."

[00:31:29.774] The CEO said, "How long is this going to take?" "Well, I don't know.

[00:31:32.514] It could take 12 months, nine, we don't really know." Four months

[00:31:36.394] later,

[00:31:38.834] they released their own ERP system, which had

[00:31:42.734] 80% of what they needed, and they went back to Oracle and told them to take a

[00:31:46.554] hike. So I think it's a great example that when you

[00:31:50.594] understand the value that IT brings, you don't have to

[00:31:54.554] be held hostage by vendors and onerous

[00:31:58.334] contracts that deliver more than you need or want,

[00:32:02.454] and I think this, again, as I said, is a terrific example of that.

[00:32:06.474] So if we look at

[00:32:09.254] the

[00:32:10.294] incubation zone use cases, Union Pacific, this was a

[00:32:14.314] real surprise for me because I wouldn't

[00:32:17.934] see them normally as somebody who was

[00:32:20.934] particularly innovative.

[00:32:23.774] But they created and launched something called PS

[00:32:27.074] Technology, a separate commercial technology business

[00:32:31.394] to sell the digital technology apps the company had

[00:32:34.914] originally developed for its own use.

[00:32:38.434] And they sold them to partners and even competitors.

[00:32:41.814] As a result, they are now one of the largest providers of locomotive

[00:32:45.394] simulation systems, which has generated $50

[00:32:48.654] million in new revenue for the company.

[00:32:53.634] And finally,

[00:32:55.394] Raytheon is another really interesting example.

[00:32:59.053] They moved from using software as a business enabler to

[00:33:02.664] treating it as a new business growth opportunity.

[00:33:05.934] Starting back in 2007, they began partnering

[00:33:09.494] with and acquiring cybersecurity software

[00:33:12.794] companies. This created a new business unit with its

[00:33:16.794] own P&L called Forcepoint in service to CEO

[00:33:20.654] Tom Kenney's vision that, quote, "With the Internet of Things,

[00:33:24.834] cyber is pervasive in everything we do.

[00:33:27.694] The entire globe has become essentially a cyber

[00:33:31.334] economy." And this has driven a lot of the new

[00:33:34.494] revenue opportunities for that company.

[00:33:38.214] And let me finish finally in the transformation zone with the

[00:33:41.834] Microsoft example, and

[00:33:44.434] this makes two points. It makes the point of how hard it is to free a

[00:33:48.114] company's future from the pull of its past, and how significant

[00:33:53.114] of a change you can make if you're successful in doing it.

[00:33:57.154] When Steve Ballmer succeeded Bill Gates in 2000 as the CEO of

[00:34:01.114] Microsoft, the company's stock was trading

[00:34:04.254] at $40 a share.

[00:34:08.714] Fourteen years later, when Steve Ballmer stepped down as

[00:34:12.274] CEO, the company's stock was trading at $40 a share.

[00:34:17.015] Now, you may be thinking to yourself, "How is that possible?" This is a company

[00:34:20.694] that was generating free cash flow like there was no tomorrow.

[00:34:24.374] Well, the problem was, when they did their annual planning and resource allocation

[00:34:28.334] work,

[00:34:29.455] they went through the discussions, and before they got very far along,

[00:34:33.214] 95% of all resources and budget were either

[00:34:36.354] allocated to Windows or Office. So they didn't have

[00:34:40.354] the discipline to be able to privilege a new

[00:34:44.274] investment opportunity over the existing businesses of

[00:34:48.254] Windows and Office. When Satya Nadella came in

[00:34:52.814] in 2014, the first thing he did was he said,

[00:34:56.634] "Microsoft is now going to pivot from an on-premise,

[00:35:00.214] on-desktop business model to a cloud first, mobile first

[00:35:03.914] business model."

[00:35:05.694] And in doing that, he looked at the three core businesses in the performance

[00:35:09.754] zone, of which Office and Windows were two, and said, "They're

[00:35:13.634] under existential threat from the Amazon, Facebooks, Googles, and

[00:35:18.234] Apples of the world. We need to reboot them."

[00:35:21.994] And so he took them one at a time from the performance zone into the

[00:35:25.534] transformation zone, shifted them from on-premise,

[00:35:29.034] on-desktop to cloud first, mobile first,

[00:35:32.354] and the stock now is trading north of $220 a share.

[00:35:37.274] The point being is that, and that's an extreme example, but

[00:35:41.274] it's a very clear example, and he used the four zone

[00:35:45.214] model framework as his foundational

[00:35:48.354] framework to manage that whole evolutionary or

[00:35:52.014] transformational process. So again, it's an

[00:35:55.774] example of how the sort of vibrancy and the

[00:35:59.154] viability of this framework and the

[00:36:02.374] practical way that you can apply it and get very significant

[00:36:06.374] results. My final slide now will give you a look

[00:36:10.274] at what those metrics might include.

[00:36:12.594] And what we did in this case was each one of these zones has its

[00:36:16.514] own charter, its own operating culture, and its own metrics.

[00:36:21.114] So the performance zone really has what we call investor metrics.

[00:36:25.334] It's all about generating revenues, margins, and profits, and if

[00:36:29.254] you're a publicly traded company, it's what the market looks at quarter after

[00:36:33.214] quarter to see how well you're doing.

[00:36:35.544] The productivity zone is really measured by process metrics.

[00:36:39.554] How well can we optimize the cost of maintaining systems of record?

[00:36:43.514] How compliant are we? Have we been able to reduce our technical debt?

[00:36:48.114] What's our net promoter score? All those kinds of things there.

[00:36:52.154] And then the incubation zone is

[00:36:55.954] where we really think about these as what we call venture metrics.

[00:36:59.274] So think about what a startup does when it begins to

[00:37:03.114] look at how it develops and deploys and drives adoption and

[00:37:06.774] utilization. And then finally, the transformation zone is,

[00:37:10.994] these are what we call hyper-growth metrics.

[00:37:13.264] And here, the key is, as I said, because for a transformation

[00:37:17.314] initiative

[00:37:18.854] project to work, okay, it takes a lot of sacrifice from the

[00:37:22.774] rest of the organization. So it has to be something that has a significant

[00:37:26.514] return, and our threshold is 10% or greater of overall revenues.

[00:37:30.834] And the key takeaway here is that the mistake that most companies make

[00:37:35.234] and why most innovation initiatives fail

[00:37:38.914] is because they'll use performance zone metrics to measure

[00:37:42.494] incubation zone initiatives. That is a mistake you do not want to

[00:37:46.514] make, and if you can segment your metrics the way

[00:37:50.334] you segment your investments and your operating thing, you will get

[00:37:54.374] much better results.

[00:37:56.634] Thank you very much, and I look forward to the Q&A.