I will talk more about change and creating an innovation culture at the end of this chapter.
6. Pick your partners carefully.
To fulfill your vision of digital transformation, it’s vital to pick the right partners. This applies to the full ecosystem of partnerships the CDO and CEO need to establish—software partners, cloud partners, and a spectrum of other partnerships and alliances. In a digitally transforming world, partners play a bigger role than in the past. There are four key areas in AI-based transformations where partners can add significant value: strategy, technology, services, and change management.
Strategy
Management consulting partners can help flesh out your AI strategy: Map out your value chain, uncover strategic opportunities and threats, and identify key AI applications and services you will need to develop in order to unlock economic value. They can also assist in setting up your organizational structure for the transformation, including the design of your AI/Digital Center of Excellence, and help establish the appropriate processes and incentive plans for your business.
Technology
Software partners can provide the right technology stack to power your digital transformation. My recommendation is to avoid the “accidental” open source Hadoop architectures, low-level services offered by the large cloud providers, and consulting firm–supported data lake approaches.
These may all seem manageable at first. But as you scale your transformation, the complexity of your system will grow exponentially. Each individual AI application or service will require cobbling together a large number of low-level components, and your engineers will spend a majority of their time working on low-level technical code rather than solving business problems. Your technical agility will also be severely impacted.
My recommendation is to seek out technology providers that can offer a cohesive set of higher-level services for building advanced AI applications with large data volumes. As you evaluate software partners, look for companies with proven track records of enabling AI applications at scale.
Services
Professional services partners can help build your advanced AI applications and/or augment your staff. They can provide teams of developers, data integration specialists, and data scientists if you do not have those talent profiles in house (or are not interested in acquiring some or all of these skilled resources). My recommendation is to look for services partners that have a proven model of agile development that delivers high-value applications in months, not years—partners that can efficiently transfer working solutions and knowledge to your team through well-structured training programs.
Change Management
Once you have developed AI applications and services, a key next step involves all the business transformation and business process change required to capture economic value. You will have to work on integrating AI into your business processes in conjunction with your software solution development.
This will involve understanding how humans and machines can work together—e.g., the machine generating recommendations and augmenting human decision-making. Humans must also be able to give the AI systems feedback so they can learn and evolve.
Human practitioners will often mistrust recommendations from algorithms, and you will have to ensure recommendations are examined objectively and followed to the extent possible.
The incentive structures and organizational structures of human teams may have to be changed to capture value. The organizational issues can be extremely complex in certain situations—e.g., with large labor forces that have historically been trained to operate and contractually rewarded in the same way for a long time.
Personnel will have to be retrained and employment contracts rewritten. New leaders will need to be hired. Compensation and incentive structures will have to be reengineered. Organization structures will require new architectures. Recruiting, training, and management practices will need to be overhauled. The nature of work will change and unless your workforce is trained, incented, organized, and motivated to take advantage of these new technologies, the economic and social benefits will not accrue. This is the hard part. Dealing with this is why you make the big bucks.
7. Focus on economic benefit.
Harold Geneen, the iconic CEO of ITT, is famous for his counsel that management’s job is to manage. From Peter Drucker we learned that if it is important, we measure it. Andy Grove taught us that only the paranoid survive.
As much as you would like to delegate digital transformation to an outside agency, you can’t do it. This is your job. As you approach it, I encourage you to stay focused on economic and social benefit. Benefit for your customers, for your shareholders, and for society at large. If you and your team cannot identify projects for digital transformation that return significant economic value within one year, keep looking. If the solution cannot be delivered within a year, don’t do it. The market is moving too rapidly. Demand near-term results.
In the course of this journey you will be presented with many digital project proposals that just don’t seem to make sense. Many projects will be sufficiently complex that they appear incomprehensible. A rule to live by is that if the project does not seem to make sense, it’s because it doesn’t make sense. If it appears incomprehensible, it is likely impossible. If you do not personally understand it, don’t do it.
I have been actively engaged with the CEOs and management teams of many Fortune 100 companies assessing and selecting such projects for the past decade. We discourage our customers from moving forward on probably 7 out of 10 projects presented. We do that because the project is likely to fail, or in some cases certain to fail. The most important decisions you make in this journey will be the projects you decline to fund.
This is a team sport. Engage with your management team, your business leaders, and your trusted partners. If you make the effort to wrestle with enough ideas—if you throw enough spaghetti at the wall in your conference room enveloped with whiteboards—one project will emerge from the process that is tractable, offers clear and substantial economic benefit, can be completed in six months to a year, and once completed successfully presents the opportunity to be deployed and scaled across the enterprise. Jump on that one and don’t stop until the value is realized. Your digital transformation journey has now begun.
When you have identified one or more such projects, bring in experts to provide the software technology. Personally sponsor the project. Review progress weekly. Set clear and objectively quantifiable milestones, and mandate that they be met. When a milestone slips, require a mitigation plan to get it back on schedule. Walk around daily to talk to the people doing the work so you can feel the progress, or lack thereof—don’t just read a weekly executive report. And most importantly, assume that unless you do all of the above, the project will fail.
8. Create a transformative culture of innovation.
A CEO may have a clear vision of what needs to happen to transform the organization. But senior management, middle management, and rank and file employees must also fully understand that vision and operate in an environment conducive to success. A 2018 Forrester Consulting thought leadership paper on digital transformation noted that nearly half of lower-level decision makers struggle to meet digital transformation objectives.14 It’s easy to say that all good plans die outside senior leadership. But without understanding how the organizational culture needs to shift, that axiom could be all too true.
In order to effectively drive digital transformation, CEOs need to understand what the world of digital transformation and disruption looks like, and what digital products can do. As part of this effort to gather information and inform their own visualizations of their company’s future, CEOs should conduct corporate executive visits at the sources of disruption. As a February 2017 McKinsey article pointed out, “Companies must be open to radical reinvention to find new, significant, and sustainable sources of revenue.”15 Where better to find inspiration for such radical reinvention than t
he source of disruption itself?
At C3.ai, I personally host many CXOs, as well as delegations from governments around the world, who are trying to understand the agile, nimble culture of Silicon Valley. Most often, these visitors spend a work week meeting with leaders and smaller organizations in the Bay Area across a wide swath of industries and use cases.
Think of Uber, Airbnb, Amazon, Apple, Tesla, Netflix. These companies outcompete traditional players, disrupt entire industries, and create new business models. They’ve created entirely new ways of approaching their business, entirely new business models and new services. Through corporate executive visits, the C-suite can see what a disruptive organization looks like, how it goes about setting the course for disruption, and how to emulate this for their own enterprises.
Most importantly, corporate leaders can learn from these companies what it means to have an innovation culture. This does not simply mean superficial traits such as offices arrayed with beanbag hangouts, sushi for lunch, and daily massages. Rather, it means cultivating a culture of core values—one that rewards collaboration, hard work, and continuous learning.
Executive visitors to our C3.ai headquarters in Silicon Valley, for example, frequently comment on the energy and focus they see exhibited by our team members, who work in an open office environment and often self-aggregate in small groups to solve problems together. Visitors ask about our four core values—innovation, curiosity, integrity, and collective intelligence—that are posted in our open dining area. And they see our “Wall of Fame,” where we display certificates of every employee who has completed outside course work to advance their careers, for which they are financially rewarded with cash bonuses—an effective way to reinforce a learning culture.
The way you attract, the way you retain, and most importantly, the way you motivate and organize people today has changed dramatically from what we experienced in recent decades. With the baby boomers, we could focus primarily on compensation plans to motivate individuals. Today, we oversee multi-generational workforces comprised of a complex tapestry of baby boomers, Gen Xers, and millennials—a very rich and complex group. Individuals in today’s workforce have divergent value systems and diverse motivations and skill sets. You need to figure out how to take that powerful mix of diverse attitudes, goals, and motivations and turn it into something cohesive, focused, and productive, with a shared mission and common purpose.
Study after study tells us the companies able to innovate effectively are those that share certain characteristics: a high tolerance for risk, agile project management, empowered and trained employees, collaborative cultures, lack of silos, and an effective decision-making structure. As a 2016 MIT Sloan study on digital transformation found: “So for companies that want to start down the road to digital maturity, the ‘one weird trick’ that will help is developing an effective digital culture. The cultural characteristics we identified—appetite for risk, leadership structure, work style, agility, and decision-making style—are by no means all your company needs to successfully compete in a digital world, but you cannot compete without them.”16
Without a culture that encourages innovation and risk-taking, even the best thought-out digital transformation strategy will fail.
9. Reeducate your leadership team.
Face the facts. Your organization does not have the skills today to succeed at this effort. You can’t just hire consultants to change the DNA of your company. You can’t simply hire a systems integration firm, write it a check for $100 million to $500 million, and make this problem go away. You need to infuse your executive team and your employees with new skills and a new mindset to succeed at digital transformation. And then you and your team need to manage the projects in a hands-on manner.
Start with an executive reading list. I recommend that you and your executive team consider the following list to become familiar with how the historical context of this market has developed; how the technology is changing today; the underlying theory of AI and IoT; and how to succeed at applying these technologies.
• The Information: A History, a Theory, a Flood, James Gleick. This book takes you back to the beginnings of information theory, putting today’s innovations into historical context.
• The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution, Walter Isaacson. Isaacson’s history of information technology, from Ada Lovelace and Charles Babbage in the 19th century to the iPhone and the internet, enables you to consider your digital transformation as a natural evolution of a process that has been accelerating for the past 70 years.
• The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World, Pedro Domingos. If you want to demystify AI, read this book. Domingos provides you an evolution of the underlying theory and promise of AI in the context of the statistics, math, and logic courses that you took in college and high school. Really enlightening.
• Big Data: A Revolution That Will Transform How We Live, Work, and Think, Viktor Mayer-Schönberger and Kenneth Cukier. A most pragmatic discussion of a highly misunderstood topic. This book allows you to think about big data in a practical manner devoid of spectacle, extravaganza, and hype.
• Prediction Machines: The Simple Economics of Artificial Intelligence, Ajay Agrawal, Joshua Gans, and Avi Goldfarb. A down-to-earth discussion of AI and the problems it can really address.
• The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, Erik Brynjolfsson and Andrew McAfee. This is a visionary work that addresses the art of the possible. Motivating and inspiring.
This may seem a bit daunting, but all of these are highly approachable, good to great books. If you want to play this game, you need to invest some time and energy to acquire domain expertise. It’s not magic and it’s not mysterious. But you need to learn the language to engage thoughtfully, manage the process, make good decisions, and lead change management. A majority of what you will be told about AI and digital transformation is sheer poppycock delivered by self-proclaimed experts who have accomplished little to nothing in the field. You need to be able to distinguish signal from noise. You should travel with a book in your hand, and you should encourage your management team and key employees to do the same.
10. Continually reeducate your workforce—invest in self-learning.
Again, face the facts—your technical and management personnel currently do not have the skills to succeed at this. Augmenting them with advice from highly paid consultants is not sufficient. It is impractical to think about replacing your workforce with a new qualified team. But you can train them.
At C3.ai, we recruit and hire some of the most highly skilled data scientists and software engineers on the planet. In the past year we had 26,000 applicants for 100 open data science and software engineering positions. We interviewed 1,700 people and hired 120. We will interview as many as 100 candidates to hire one data scientist. And these candidates are trained with PhDs from the world’s leading universities. Many have 5 to 10 years of highly relevant work experience. We have an exceptionally talented and well-trained workforce.
But we recognize that even we don’t have the skills necessary to excel in this highly dynamic milieu. The field of data science is in an embryonic state—the cell might have divided eight times. The rate of innovation across all these domains—cloud computing, deep learning, neural networks, machine learning, natural language processing, data visualization, the ethics of AI, and related fields—is blistering.
In an effort to keep our employees current at the leading edge of these rapidly changing technologies, we have formalized a program to encourage our workforce to continually refresh and improve their skill sets. I encourage you to consider the same type of program.
The educational resources available today from learning portals like Coursera are simply amazing. Think of the entire curricula of MIT, Stanford, Carnegie Mellon, Harvard, etc. online and immediately available to your workforce. If you a
re not taking advantage of this 21st century continuing education development, you are missing a big opportunity.
At C3.ai, we incent our employees with both recognition and cash bonuses for successfully completing a curated curriculum to develop additional expertise in the skills necessary for digital transformation.
This has proven an incredibly successful program for skills development. Everyone from the receptionist to our lead data scientist has taken these courses. Each gets a letter of recognition signed by the CEO; his or her name is featured in our headquarters on a Self-Learning Hall of Fame wall; and each gets a bonus check of $1,000 to $1,500 for receiving a certificate of completion.17
The courses are listed below:
• Deep Learning:
https://www.coursera.org/specializations/deep-learning
• Machine Learning:
https://www.coursera.org/learn/machine-learning
• Programming Foundations with JavaScript, HTML and CSS:
https://www.coursera.org/learn/duke-programming-web
• Text Mining and Analytics:
https://www.coursera.org/learn/text-mining
• Secure Software Design:
https://www.coursera.org/specializations/secure-software-design
• Introduction to Cyber Security:
https://www.coursera.org/specializations/intro-cyber-security
• Python:
https://www.coursera.org/specializations/python
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