S3: Ep 2: Dr. Rob Austin, Professor Ivey Business School & faculty member, Harvard Medical School

"Digital has outgrown the IT Department."

As a Professor at London Ontario's Ivey School of Business, Rob watches, assesses and teaches trends in technology. His extensive background in both academia and business brings together some fascinating thoughts about the evolution and impact of technology and digital in our world.

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Jann Danyluk, 
Career Resilience.

Transcript

 | 00:12 | I'm so excited to welcome you to season three of Career Resilience. My name is Jann Danyluk. I am senior human resources consultant at Ford Keast, a Progressive accounting firm in London, Ontario, Canada.

 | 00:26 | Each week I get to talk with people about their career path and their career journey, and we can all learn from each other how to be a little bit more resilient in the challenging world of work. Please check out my website, careerresilience.com, where you'll find season one and season two. And now season three. Welcome. Love what you do and do what you love. The best career advice I've received. All the fun.

 | 00:54 | Those opportunities will just organically present themselves, establish those connections and maintain those connections. Acceptance just means accepting what is thinks. We should just put ourselves in a box. At the end of the day, it was always me that I said, I'm not doing good enough right now. I want it to always be movie night on Friday night. My guest today is Dr.

 | 01:20 | Rob Austin, and I just want to introduce you, rob your professor of Information Systems at Ivy School of Business, also affiliated faculty member at Harvard's Medical School. I have that you chaired the executive program for Chief Information Officers at Harvard. And of course, I know that you've got a lot of industry experience as well as academia. So is there anything you'd like to add to that?

 | 01:49 | Because I know your CV is as long as my arm and other people with arms longer than me. Is there anything you want to add? No, I think that's a pretty good summary. I've been involved in one way or another in information technology and digital technology for quite a while. I've worked in big companies in that connection, and I've also worked in startup settings.

 | 02:18 | I did once work for a gentleman named Eric Schmidt who went on to become the he was at the time the CEO of Novell, but he went on to become the CEO and chairman of Alphabet Google. I learned a lot from him. And the program you talked about at Harvard has given me an opportunity to connect with people in a lot of places who are very involved in digital technology and its impacts on business.

 | 02:52 | It's an interesting world these days. It sure is. Okay, so this is actually a hat trick for you because you've been on two other times. And the first one we talked about neurodiversity, which was fascinating and really enjoyed that conversation. And the second one was our age of super transparency and the challenges and positives that brings to us.

 | 03:23 | So I'm interested to now move on to information systems and information technology. Now, is that the same thing? Are those two phrases interchangeable, information systems and information technology? I'd say kind of, not quite. But one of the things that you see happening there is, over time, the sort of in vogue terminology shifts.

 | 03:53 | Technology is an area that is sometimes subject to bandwagons and hype and trends. And so there's a rough equivalence between what we would have called in the 60s, data processing. Maybe a little later, it would have become management information systems or mis. Later information systems. I think people made it information technology to make it seem a little more modern.

 | 04:22 | And now, these days, I think people would use the word digital. They would say it's digital technology. And I think it's a little broader in that formulation. One of the observations that I have heard made is that the world of it, the world of mis, used to be mostly about the it department, the is department in companies. But there's an interesting statistic from MIT, from their center for information systems research.

 | 04:54 | See, they have the name problem, too, but they say that I believe the statistic is only 29% of spending on digital technology is happening now inside the it department. It's happening much more often outside in places like research and development, marketing, and other places within the firm. So digital has kind of outgrown the it department. That's right.

 | 05:23 | When you think of marketing, surely that is all about digital, really, or the biggest slice of it is about digital. Yeah. No, I think what I like to say, we have maybe a small advertisement here, but we have a program at ivy, a masters of science program in what we call digital management, and it's in its third year. And I think it's kind of unlike any other program anywhere else in that we've really embraced the breadth of digital.

 | 05:54 | And what I mean by that, the way I usually say it, and it's related to what you just asked, I like to say digital adds at least another chapter, maybe several new chapters, to pretty much every business discipline. So it's changed strategy. Marketing is now a matter of there's inbound marketing, there's digital marketing there's. All the metrics, all the click through, all the google ads, and all of that has become really an essential part of marketing finance.

 | 06:29 | We've had developments like blockchain, like high frequency trading there's, you know, if you name it. Wherever you see a traditional business discipline, there's new stuff to talk about now that's related to digitalization. Yeah, certainly. I know search engine optimization is huge. SEO, we're constantly talking about that and how we can optimize SEO and so on, which, of course, that's digital.

 | 07:02 | But I would not have thought of it in the information systems area, because I think that I sort of think of the it area. Right, yeah. No, I agree that's the distinction that we're talking about here, I think, is historically, when people think about it or is or mis, it's mostly been about cost efficiencies, cost savings, automation. Right. But now we live in this world of the internet and the world wide web, and you mentioned search engine optimization.

 | 07:35 | If we think about marketing, historically, marketing was non digital. It was billboards and TV ads and so forth. And it was what people call outbound, meaning you were sending your messages out to people who weren't necessarily asking for it. Right. So they were often you were interrupting people at dinner or interrupting people's TV shows and trying to get a certain amount of attention from them.

 | 08:07 | But one of the things that digital has made possible is now what's called inbound marketing. And inbound marketing describes the idea that we create content and people want the content. So a good example would be what you've seen happening on the web with food sites. So people come to us for recipes, and when we market to them in that context, they're already there looking for things related to what we want to try to convince them to buy.

 | 08:39 | So if you have a website that's an authoritative reviewer of cameras, for example, somebody shows up and you market cameras to them, well, you've got someone there who you're not interrupting, you're not interrupting their dinner, you're not interrupting your TV. They're there specifically for what you want them for. And that's become search engine optimization is very important part of that, because one of the problems you have to solve is how do you get them to your site?

 | 09:09 | So it's all part of the same picture, if you like. I follow various influencers, like many of us do. And of course, I follow a lot of British influencers who have gone completely silent over the last week because of the period of mourning for the passing of Queen Elizabeth. And so it was like losing my fix. Oh, no.

 | 09:35 | And then what I started thinking is, maybe I should unsubscribe because I'm so into going and seeing these influencers and what they have to say. And it's so true, Rob. I go to them. I go to them and I oh, there's more content. Yay. So it's an interesting blank for that week. No, it's true. And one of the biggest companies, biggest new companies in that space is a Canadian company.

 | 10:04 | It's called Viral nation. It was founded by a guy named Joe Gagliaci. And what they figured out, there were lots of companies and agencies that managed the media affairs and the sort of entertainment affairs of pro athletes and kind of other famous people. But what they were quick to realize is that there was kind of a new category of famous people that were famous on YouTube or famous on TikTok or whatever, and they've really made a big business out of that.

 | 10:41 | They manage the influencers. They also help the companies craft campaigns that are based on input from influencers. And they also have software that they sell to help companies manage their influencer based marketing programs. So none of this existed 1015 years ago, right? No. And I think this is sort of going veering into age of super transparency maybe too.

 | 11:08 | I'm not just sure, but I have a friend whose business is being the executive that she represents, is too busy to be on all these social media sites. So she's him on these sites. And I think can you trust anything? No, that is interesting. I haven't heard of that, that people are actually impersonating, famous people impersonating.

 | 11:42 | I don't mean to imply that they're impersonating unwelcomely, but it sounds like this is a way that people are managing their scarcity of time. Interesting. That was very interesting to me. So, for you information systems and so on, where did you come to it and why in your career?

 | 12:07 | So I think we had a conversation, I think, way back where I talked about how a lot of things that I think have happened in my career have been serendipitous, and I think this might be another one. So when I was graduating from undergraduate school, I was an engineer, but I was also an English literature major with a lot of big interest in theater.

 | 12:37 | And so we had to come up with a senior project as we were graduating in the engineering program. And I tried to combine my two interests, and what I decided to try to build was a computer controlled theater lighting system, something that would allow lighting designers to do more complex effects than they could do with the manual sliders and so forth. And so I teamed up with a colleague who was an electrical engineer, and I was a mechanical engineer.

 | 13:08 | It wasn't a very mechanical engineering kind of thing because it was mostly electrical. We were doing a little bit of we did play around with computers and take the backs off of them and build circuit boards to make them work. All stuff that you wouldn't have to do anymore because it's all off the shelf now. But my role was to write the software, and so I wrote a software system to control a theater or a computer controlled theater lighting system and became interested in information technology.

 | 13:46 | I might have mentioned last time, when I left my undergraduate program, I went to study playwriting at the University of Texas. And while I was there, I was a very, very poor graduate student. I mean, poor wealthily. I was good at my grades, but I had zero money. I was eating a 39 cent hamburger, and three nights a week, I was eating English muffins, pizza whiz, and American cheese, because I discovered the scholarship they gave me did not come close to covering what I needed.

 | 14:20 | So I went looking for a job and settled onto a computer administrator for a regional headquarters of a sort of a medium sized nonprofit organization. And so, once again, I had a job in the computer industry. They couldn't or computer related they couldn't afford a real computer person. I was kind of in between, you know, like, I thought what they would pay me was great, and I knew enough about computers, I guess, to satisfy them.

 | 14:55 | And of course, it was an opportunity to learn some more. And then eventually, I went to work for Ford, and the computer was the information technology part of Ford that hired me. And at that point, I was pretty committed to that career path. Yeah. I have friends who started out serendipitously into Is and so on, and they have said to me, it was a question of fake it till you make it.

 | 15:27 | It wasn't school book learning. It was simply there was an interest there. There was an ability there. And so it just, you know what? I can do this. So what does a professor of information systems teach, and who do you teach it to? So at a business school? We teach it at a business school like Ivy. We teach it to everybody. So it is part of our core curriculum.

 | 15:52 | At Ivy, there are certain required courses that all of our students take, and that would include things like financial fundamentals and strategy and marketing and all the sort of classic business disciplines. But we also have a core course called Leveraging Information Technology. And the logic is, digitalization is all woven through the fabric of today's organizations.

 | 16:20 | And our general management students, even if they don't aspire to move into a technical career path most of them don't, some of them do. But even if they don't, they need to know about this stuff. Yeah. Okay. I wanted to switch gears for a second and talk about companies in general and overall and gather your opinion from education and just from the various roles that you've held and all your knowledge.

 | 16:52 | What do you think Rob makes a company successful? That's a really big question, but I would say what really differentiates successful companies over the long haul is sort of a devotion to a core set of values and the sort of strength of the culture.

 | 17:22 | And the reason I say that is because I think a lot of the capabilities that really differentiate companies are not visible, say, on the balance sheet. Right. They're not visible in the financial statements. I do think that companies some companies underestimate the degree to which their success depends in the long term on less visible assets, if you like.

 | 17:50 | And I'm talking about things like knowhow that resides within companies. It's gotten kind of fashionable to try to manage everything by the numbers and so forth. But I think one of the problems with that is that it does not take sufficient account of these. I don't think they're invisible assets, but they're less visible assets. So when you talk about invisible assets, you're talking about know, how you're talking about what collegiality all these the people part of things.

 | 18:25 | The people part of things is a huge part of it. And the way you see some executives squander that is, when they think of people as just another fungible resource, and they may be tempted to outsource, to realize a short term and fairly ephemeral cost reduction, but they may liquidate in the process. A lot of employee know how, but it's not just that.

 | 18:55 | There are other things like reputation, like resilience. One of the things that makes me think about this these days is I'm sure you've read and everyone who might listen to this has read and experienced we're having a lot of failures of operational processes since the Pandemic, right? Yeah. So the airports don't work very well, the airlines don't work very well, supply chains are not working well.

 | 19:24 | We can't get baby formula, those kinds of things. And I would argue that that is the result of leadership that has squandered resilience. Right. So they've tightened things down so tight that they cannot absorb shocks anymore. And it was good for the short term when there were no shocks underway, and it made their financial ratios look really good.

 | 19:52 | But now that we've had a jolt from the Pandemic, from the war in Ukraine, and we're realizing that they've actually paid something for those improvements right. They've paid something in the form of their company's capabilities. And the other thing is the people dimension is, you know, this is kind of your area. They can't get people back. Right. They're saying, Please, please come back.

 | 20:21 | We have jobs for you now. And people are saying, no thanks. Right. So certainly not on the old terms am I going to come back to you? Right. Yeah. Which is why compensation and salaries are escalating like mad, because people are being bought back. Not brought back, but bought back. Yeah. And I think coming back, too, when you're bought back, not brought back, you come back quite a bit more transactional. Right.

 | 20:52 | This is what they talk what they talk about. I think when people say talk about quiet quitting, and that somehow in the process of leading based mostly on numbers, we've gotten transactional in a way that costs us things like the capabilities that we had from employees really identifying with what the company was doing. There's some spectacular examples of it.

 | 21:21 | I would say Boeing has a very serious problem this way now General Electric, we're seeing them fall apart after two or three decades of treating employees like rank them and yank them. I sometimes wonder, do you think that businesses look at the long game, or is it mostly, let's just get through this year. That's at the heart of the problem, I think, is that there's too many, you know, there's too much emphasis on the short game.

 | 21:54 | And I think it manifests in a lot of ways. There are speculative investors that mostly care about the short game. I worry sometimes that some bonuses, some executives that are bonus on financial metrics are, you know, slide. I don't think they necessarily start out obsessed with the short gain, but they end up obsessed with the short gain.

 | 22:24 | So I don't actually think it's something we can solve completely with incentives. One of the things people will argue is if we could stretch out the incentives over time so that if we could claw back some of the gains if things go badly after they leave. But I honestly don't think it's about incentives. It's about core values. It's about intrinsic motivation, not extrinsic motivation.

 | 22:50 | Let's move back to information system. Can you just speak to that in terms of where we are and where you think we're going? Sure. So I think we're in a place where we've been integrating our business processes into technologically automated systems for decades now. Right.

 | 23:17 | And consequently, it's really not very easy anymore to separate business operations from the technology. And that has a lot of consequences that we see happening in the news sometimes, where a computer system will knock out an airline for a day and a half, or there's a lot of versions of this.

 | 23:43 | One of the things it means is that a lot of the business logic in our companies is now kind of hard coded, or it's not necessarily hard coded because it could be in software, but it's less visible than it used to be. There's a lot of know how, knowledge, process and so forth from our companies. It's embedded in technological systems now. And, you know, there's benefits, huge benefits from that.

 | 24:11 | But there's also some risk that we see when we see major failures. But I would say that's old school. That's old schooled. It we automated stuff to make it more efficient, to maybe make it more reliable and so forth. I think new school, which you tend to use digital technology for, is about expanded possibilities on the top line. Right.

 | 24:40 | So it's about reaching customers in new ways or delivering new services to customers. It's also about new business models. And I'd say that's why I said there was a new chapter in every business discipline. The new chapter in strategy is that we have new business models now that have not been very common in the past, but are extremely common and getting more common, and we don't know how to think about them.

 | 25:09 | And what I'm talking about specifically is the business models of companies we call tech platforms. So Google, Amazon, Apple, they are making money and operating in ways that most companies have not. Historically, they're platform companies, not what I call pipeline companies. Pipeline companies take in raw materials, add value, and then sell them on into a market. Platform companies sometimes just connect people who want to transact.

 | 25:39 | Uber is a platform company. It doesn't actually make anything. It just connects drivers and riders. But these platform companies are incredibly valuable and some of them are incredibly profitable. Doesn't information systems therefore have the keys to the kingdom? Yeah, they should. Well, I used to give a talk to It professors or not It. Professors. It professionals called.

 | 26:10 | Why? It leaders need a new trick. Right? It was sort of a riff on the it was something like that. This old dog needs a new trick, right? Yes. And the thrust of the talk was to say, everything's about digital now. Everything's about digital now, but our It managers are focused like this and on a narrow piece of that picture.

 | 26:37 | And most of it was about cost reduction. And it was understandable in a way, the way I used to put it. As we were saying, vision, vision, strategy, strategy, vision. And they were looking at us and going, Hunt, kill, eat. Right? They were saying, don't talk to me about vision. I got a reduced cost or I'm out of a job. Right. The history of hype around technology, and it's important to business, kind of goes up and then crashes, and then goes up and then crashes and then goes up and then crashes.

 | 27:10 | And so I think it's led people who are in the profession to have sort of a batten down the hatches kind of a mindset. They're reluctant to get too far up the up slope because they know that, like a roller coaster, the down slope is coming. But I think that's unfortunate because it causes them to miss some of the really transformational things that may be happening.

 | 27:41 | Don't you think, Rob, that a lot of budgets for information systems are just so big and have to be so big that CEOs look at It and just rear back in fear of spending that kind of money for progress? That might be a little bit intangible, yeah, and I think you're right about that.

 | 28:09 | I also think that if you look at the amount that we spend maintaining that infrastructure, that's also worrisome. One of the kinds of analysis that I've proposed to companies and led them through from time to time is what we call compete versus qualifier analysis.

 | 28:33 | And what we do is we go through their portfolio of It projects, and we say, how many of these are just what we call qualifiers, meaning they're required to stay in business, but they don't really give us any edge over our competitors. A compete is something that does give us an edge of our competitors. And so we go through the portfolio and we categorize, and we classify they categorize and they classify this as a compete, this is a qualifier, and so forth.

 | 29:02 | And then we add up the amount of cost that's being absorbed by computes and qualifiers, and we compare them, and we decide whether that's reasonable. And in most companies that have been around for a while, the amount going into qualifiers is much, much bigger than the amount going into competes. And some of that is just a signal of the age of the It infrastructure. Right. But it's not ideal.

 | 29:29 | A good thing to do would be as if we could figure out how to reduce the cost basis for that commodity stuff and then use the windfall to actually invest in some more competitive systems. I wanted to ask you, what do you think is sort of the biggest learning or that our viewers or listeners should take away from our kind of wideranging discussion.

 | 29:57 | So I think one of the big things that people should take away and we didn't go really deep into it, but I did mention these new business models that digitalization is creating or making possible.

 | 30:12 | And one of the things that I've been doing quite a lot lately, and I've been doing it with executives from big banks and various other kinds of companies, but also my 22 year olds, right, my master of science and digital management students, is talking to them about what we call colloquially, we call it the superpowers of these platform business models, and especially the big broad ones.

 | 30:45 | And you see this concern in the news, right, that the Justice Department in the US. Is suing Google. Elizabeth Warren, when she ran for president last time, big part of her platform was taking the technology companies apart, right? Facebook, Google, Amazon, and so forth.

 | 31:05 | But what we do when we dig into this is, I believe what I say to the folks that we're talking about this with is, if you look at the news, you might think that people think these companies have superpowers, but what I say is, well, they kind of do, right? And then we dig into why.

 | 31:28 | And it has to do with what are called network effects, that their value increases when they can increase the size of their network, and it increases faster than they add to their network, which means that the bigger they get, the harder it is to catch them for any competitor to catch up with them. So they're not monopolists in the strict sense, because monopolies are companies that abuse their dominance of a market to increase prices unfairly on customers.

 | 31:59 | But what Google would point out, if you call the monopoly, is that they don't charge consumers anything for their services. The Maps search, Google Docs, Google Drive, it's all free to consumers. And it's because they're trying to build their network as big as possible because they can monetize the data. And this monetize the data thing, just to say it kind of diplomatically, it's a much bigger deal than most managers think it is.

 | 32:31 | And, you know, one of the things I see when we do executive education is there's a layer of executives not at the top of the company, but a bit below. And they see it. They see the threat, but their bosses don't see the threat and don't even believe in it. So we just had a program not, well, exactly a week ago, because today's Wednesday.

 | 33:02 | So a little over a week ago is Monday and Tuesday with the top three executives, top four executives of a European bank, and they won't hear it that the tech platforms are coming in, the financial services. And I think they're wrong. Isn't it pretty obvious they are? Well, you would think so, but what they keep saying is things like, well, they can't make money. They can't make money in that.

 | 33:32 | And what they're looking at is Google. Or, I mean, they're looking at companies doing things like what Google is doing, offering services for free, and they're saying, how do you make money off of offering services for free? And what they're forgetting is that they're not making money over here, but they're making a ton of money over there, right, from having the network of free services over here. And, you know, I mean, all you got to do is look at Google's financials profit.

 | 34:02 | Their return on sales are in the vicinity of 30%. They are immensely profitable. And that's after they put away more for research and development than any traditional firm can afford to. So what I guess I would say is, if you haven't figured this out, if you're a manager today and you still think the game is the same, you should figure out this platform thing. There's some good books.

 | 34:30 | There's a book called The Business of Platforms that I recommend. It's by Cousin Mono. Yafi. And I think gauer. I can't remember the last author, but they're an MIT professor, a Harvard professor, and I'm not sure of the affiliation of the third author, but very good book. And it's kind of your head should explode stuff. Yes. Some people are just like, nah, it's the same old stuff.

 | 35:00 | Business never changes. But business has changed because of digitalization, and people who don't get on board with that, I think are going to have problems. Yeah, maybe be left behind. But I'll tell you, Rob, it is fascinating to see where it's all going. It really is fascinating, frightening, exciting.

 | 35:25 | Yeah, it'd be fun to be one of my 22 year olds in my digital management program these days, cause the world is just going to be amazing during your career. Well, and amazing during your career, and amazing during the Industrial Revolutions career and so on and so forth. That is how we're blessed. Rob, thank you so much for chatting with me today.

 | 35:53 | I love chatting with you and learning from you. So thank you very much. Sure thing. Well, thank you for having me. It's always a lot of fun. I enjoy it. So, to our viewers and listeners, thank you for joining Rob and me, and I hope you will go back and listen to the other two episodes that we did together in season two. One about, as we said at the beginning, neurodiversity, which is really fascinating.

 | 36:22 | And one about the age of super transparency, which is self explanatory when you hear that phrase. If you're a listener, catch me on my podcast, wherever you get your podcast. If you're a viewer, catch us on YouTube. And thank you so much and until we meet again.