Conversation with Ryan McManus
Good day, and welcome to another edition of our Digital Industry Leadership series, today I’m very pleased to welcome Ryan McManus, the CEO of Tectonic io, the strategic growth options SAAS platform. Ryan is a globally recognized expert speaker, writer, educator, and adviser on digital transformation, emerging technologies, and the future of strategy. Ryan has designed, built, and deployed new digital businesses for over 25-years, including serving as President and head of partnerships and corporate development for EVRYTHNG, the world’s leading IoT Smart products platform company, as well as Accenture’s digital transformation business after roles as the Accenture’s Strategy COO and leader of the firm’s corporate strategy in international expansion practice.
Ryan is a member of the Board of Directors of Nortech Systems, the Advisory Board of CarLabs.ai, the Board of Directors of the New York chapter of the National Association of Corporate Directors, and previously served on two advisory boards with The Aspen Institute. He earned his MBA from the University of Chicago Booth School of Business.
Ryan with that very long and elaborate intro, welcome to our Digital Industry Leadership Podcast.
Thank you, Ken, it’s a delight to be here, thank you.
And it’s a delight to have you, you do have an incredible background, and as we were joking before it’s tough sometimes to fit it into the intro because there are so many different angles, we could take with this. So, as always let’s start with your personal digital industry leadership journey, what is your red thread, and how has it formed your perspective of the digital industry?
Well thank you very much again for having me, and I should say at the beginning that I’m a big fan of Momenta in particular because of the history of everyone who is with Momenta, serving as builders, developers, and innovators, and I think that is hopefully what my own red thread comes down to as well. My career has largely been about developing, designing, and deploying new digital businesses, and in particular, following the thread of emerging technology capabilities and what that changes in markets and in particular in business models. So, over the course of my career, I’ve had the pleasure to work in the early days of digital marketing, through to more analytics kind of focused areas, IoT, artificial intelligence, and of course now the broader market-wide kinds of changes that we’re seeing with digital transformation, and critically digital transformation to the digital economy, which is really this high focus on business models, and it’s been fascinating.
It’s been fascinating because the markets have always changed the evolution of capabilities, the evolution of strategy has become very pronounced and it never really sits still, and so if you’re a fan of learning, if you’re a fan of continuing to develop these new kinds of ideas and these new kinds of capabilities, focusing in on digital and digital industry is really a terrific way to stay primed. Then I’d say it just happens to have resulted in a number of interesting sorts of things I’ve been able to work on along the way, some of which you mentioned, others including a new accelerator named concept that I’m working on, serving on public and non-profit boards, and even having the opportunity to service clinical faculty, places like Duke CE and Columbia University Business School, as we try to help a broader group of executives and companies process, internalize and understand the changes that are coming through the economy.
You are a veritable renaissance man, I love it – all of the things that you are working on, and thank you for the nice plug for Momenta, perhaps we can say Birds of a Feather sticking together here because I do feel like there’s a lot of synergies in the work you’ve done, and we’ve done as well, and certainly common interests. So, let’s rewind a little bit and go back to your pioneering work with Accenture, effectively leading their digital transformation practice through 2015. What did you see as the primary challenges back then, and how has that changed now over those five years?
That was a really exceptional opportunity that I had to work with the Accenture leadership on, developing really from zero their transformation business strategy capability and team. It all came from a single conversation that I had with the Accenture strategy CEO and one of the senior execs at Accenture, and the conversation was an observation that we had in having conversations with a couple of different kinds of leaders at industrial and client organizations. Keep in mind, this was 2012 timing, and was relatively early in this digital transformation market; the observation was that IT leaders were asking us more and more about business strategy, and business strategy leaders were asking us more and more about technology strategy, and so at the intersection of those we conceived of this new business and this new market, which eventually became a digital transformation business model and business strategy focus relatively quickly.
But it was that very simple observation that these things were coming together into the same conversations, and therefore there was an opportunity to help organizations and leaders understand what was changing. And so, some of the observations that came through that work, and the primary challenges that we saw then, and to a degree, we still see now, some of them are pretty foundational, pretty fundamental. First of all, there was a lot of discussion and even disputes in certain cases about what do we mean by digital. For many organizations digital was marketing or digital was eCommerce or digital was IT automation, and of course, those are all parts of the puzzle but the broader impact and the broader market changes that have resulted from all of this digital stuff, this digital transformation goes well beyond a specific functional domain. At the time very many people were anchored in specific domains because that was their familiarity with the applications of digital. That still holds a little bit today, I think it’s evolved rather rapidly.
The SECOND POINT which is related and still very much a consideration I think, is mistaking transformation for automation, or mistaking automation for transformation, and they are related but they’re different, and if an organization stops with automation which is a rather traditional application of technology to business processes, and driving cost efficiency, it’s important but it doesn’t necessarily change the game. And if your competition is changing the game, bringing new value propositions and new business models to market, and you’re focused on automation and cost efficiency, you’ll be able to keep up for a while, but eventually, you’re not playing on the same pitch. So that’s still very much a big issue today.
And then THE THIRD BIG CHALLENGE that we saw which I think is very relevant, is the need to translate this technology and digital stuff into really core economic and financial models because that’s what drives the attention of the board, that’s what drives the attention of the C-Suite, that’s how you actually create new strategies and business models, less about eyeballs on the screen, less about some of the more traditional digital KPIs and the rest, but really how is this changing the business, how is this really evolving the organization into the digital economy that we’re all working and competing in.
As I look at your journey, and I like this idea of the intersection between industry or enterprise if you will, and digital, and that’s where we came to see digital transformation as digital is the catalyst for transformation, versus being the purpose for it. So, I think about your work with Everything, a company that we came to know well, and I think where we first met you. If I remember right the New York headquarters is actually sitting in the office suite that one of our former portfolio companies were in, that’s kind of how we met. But they are a leading smart products IoT data management platform, and I’m curious – what was your inspiration to join them at the time, and what did you learn during your tenure there?
Well, you’re right, the office was right there in Flatiron, and I believe that one of your portfolio companies was there for a while with us, it was a terrific place to work, a terrific experience. When I joined EVRYTHNG, I was really intrigued by the scale of the ambition, there are 10-trillion physical products that are produced approximately every year, and we were going after about 10 percent of those, and so it was a mass digitization target. So this enormous scale of really digitizing a vast swath of the economy I found to be super-compelling, I hoped that I could make something of a contribution to that vision and to that ambition, and I was very excited to be part of what could be one of the biggest scale digitization events imaginable, and all of the new capabilities ranging from traceability to supply-chain, to customer experience, to blockchain, to artificial intelligence, and all of these things that we’ve become familiar with in the broader digital economy being accessible and deliverable via physical products at scale. I just felt like a very compelling game-changing journey to be a part of.
Beyond that, I was particularly interested in platform models. Platform models were really merging at the time as the defining competitive model for the digital economy, I think that’s absolutely proven true and continues to prove true, and I wanted to get back to working closely with emerging technologies, hands-on with the data capabilities, the analytics, the AI, the IoT stack, as well as working very closely with engineers and developers again, which I had done earlier in my career. Because in the end I’m just very partial to building new capabilities and building new businesses, and my preference is to work with other folks who are interested in doing the same thing. But that sort of data-focused platform capability was strategically something that I thought was super-relevant.
That’s a critical step in the journey, you run your strategy before and helping other companies, as you say, build their digital presence. It’s helpful to do that many times from the solid platform perspective, truly a SAAS platform in this case, and see how that becomes an enabler for a lot of different business models. As you know we’ve been investors in companies like ThingWorx, Litmus Automation, PLAT.ONE and others, and it’s interesting to see how the platform itself really can be a catalyst for many times that digital transformation – easily connecting things and then being able to look at how business models might evolve around that connectivity.
Moving forward, so starting strategy, working on the technology and I’ll say the operations side, you joined forces with Rita McGrath a renowned professor at Columbia Business School, and somebody we know well based on I think your past introduction, we featured her on our podcast, I think it was number 68 back in August of 2019 at the time discussing her book, ‘Seeing Around Corners.’ Your partnership with Rita interestingly enough has culminated in a recent Harvard Business Review article, called ‘Discovery Driven Digital Transformation’, which I think you guys published back in I think it was the May/June 2020 edition of the Harvard Business Review. Maybe tell us a little bit about your key thesis in this article.
Absolutely, and I’ve had the great pleasure of considering Rita a colleague for several years, and along the way we have explored a number of different ideas; one is an idea that I’ve been working on for a few years which is that this broader digital shift is really creating fundamental changes to the field of strategy because there are so many things moving around, there are so many different competitive norms that are really challenging the established way of considering strategy, developing strategy, executing strategy, and so that was one of the inputs into the thinking for HBR.
Beyond that, it was a relatively simple observation. We saw the significant percentage of global economic activity that is focused on digital, something like 25 percent of global GDP, we looked at the massive amount of investment going into all things digital, several trillion dollars over the period of a few years. Then we looked at the incredibly poor delivery numbers and delivery metrics for companies, and it sort of makes you ask the question – how it is possible that this massive part of the economy complemented by these incredible capital flows and investment flows are resulting in really very poor performance by the companies that are going after this sort of transformation because it just doesn’t line-up with all of that capability and investment and the rest. So, we wanted to explore what was really happening, and then critically what companies are getting right when they get it right.
So, the main idea is that for incumbents, success in digital is not a big-bang proposition, big-bang investments. Big-bang bets when you’re taking a very firm multi-year position are a little bit backwards when we start thinking about the speed and complexity, and rate of change in the digital economy, that is however a normal way to think about strategy. So, we basically look at a number of different strategic vectors, we choose one or two, and then we go full force into those, and we expect that we’re going to be right, even if the journey is several years away. That kind of perspective worked in the analog economy because the analog economy was much less complex, the competitive set was much more stable, and critically the speed of that economy was much slower than what we see in the digital economy. And so, there’s some nuance and some shift that we were observing with organizations that are actually getting this right.
It may seem a little bit contradictory what I’m about to say in terms of the pattern, but basically what we explored in the HBR article is that on the one hand we always need this bigger vision; what is the ambition in terms of how we’re going to change the business model, what is the ambition in terms of where markets are going, what our customers want the jobs to be done. We should be looking at that and holding that at the level that it needs to be, which is the same for many organizations representing some pretty fundamental changes. We discussed Kloeckner and the HBR article, Kloeckner went from being basically a steel middleman distributor to being the leading platform company and marketplace in the steel industry, that’s a huge shift for a company in a sector which is traditionally quite slow, and quite transactional, but that’s the kind of ambition that we’re really interested in exploring.
Now holding that ambition in mind doesn’t mean that we know exactly what it’s going to take to get there, and this is where the discovery-driven planning work that Rita has pioneered for so many years really came into play because it really becomes this learning journey where we tee up a number of experiments, we learn, we pivot, we shift, we double-down, we accelerate and we look at the KPIs that we’re trying to get, maybe we start slowly, we bring the entire organization along with us, and we understand that it’s going to take a little bit of time and that there’s going to be changed along the way. But the critical thing is to encourage that learning journey, bring the entire organization with you, as opposed to just a very small SWAT team if you will of digital innovators, or an accelerator sort of focus, that doesn’t actually change the mothership as directly as looking at this as a full transformation across the business. So, keeping that vision in mind, but then understanding that it’s going to take a little bit of time to change the organization, change the processes, change the culture, but bring in the entire group along with you and learning along the way as to what works, and what the new digital capabilities can deliver, is really what’s core to getting this right.
You know, I tend to think of things many times from a startup perspective because we’re active investors, and in some sense, it feels like this model is a little bit like the build, measure, learn loop that Eric Reis taught in a seminal book, ‘The Lean Startup’, is there similarities in terms of that level of discovery you do early on, and as you say pivoting, or the equivalent of an NVP product if you will?
I think that there are absolutely similarities there, and in fact, one of the great things that Eric Reis did with his book basically clarifies this model for startups. That being said, the underlying theory had been around for a few years, in particular discovery different planning had been observed as part of an innovation capability for some time, but Eric really clarified it for the startup community and market which was becoming more and more important, and of course, it’s really stood the test of time. So the underlying theory there and model, I think absolutely there’s a relationship, what we were observing with our article, and what we observe when we’re teaching when we’re working with companies when we’re working with executives, is that this is now basically core to strategy, and so how do you apply that build – measure – learn loop to an incumbent, but not only in the traditional context of innovation or new product development, but at a business model level.
There’s a lot more complexity, there’s a lot more risk to doing that when you’re talking about a mid-cap, or a large public company for example with all of the resources, the capital under management, the scale of the talent base, and the rest, it’s much trickier, it’s much more difficult, its slower in most cases than applying it to a 5-to-10-person startup, it’s just not at all the same level of complexity. But the underlying ideas, they’re very much related.
We just featured Guido Jouret the recent Chief Digital Officer at ABB on one of our podcasts, I think three podcasts ago, of course discussing his experience helping that giant company make its digital leap. How do you think the sector and geography affect either the principles or approach of discovery-driven digital transformation? i.e., If I’m AB would I do it differently than Proctor & Gamble as an example?
Yes, I think that this really gets into some of the fascinating geopolitical aspects of this broader shift to the digital economy, because there are clearly differences in market structures, differences in incentive opportunities, differences in governance, regulatory requirements, access to either government grants or capital, or to sudden wealth, and all these kinds of things. All of this plays into the broader global competitive set that organizations are dealing with, and so a couple of observations here.
When we’re dealing with industry, capital-intensive, asset-intensive businesses, it is by definition harder and slower to drive the nature of transformation and new capability development, than in a purely digital call its software or platform kind of business. When you’re only dealing with ones and zeros you can be as fast as you can possibly be, when you’re dealing with physical product and manufacturing lines, and large architectural design, building new factories, and all these things, it is just by definition harder and slower, and I think we’ve seen that in the overall pace of the development of the IoT industry for example.
We’ve definitely crossed the threshold in terms of the inflection point where the majority of physically focused or manufacturing, or industrial-focused companies are now actively pursuing IoT, we are well beyond that, and I think we’re going to see an acceleration of some of the newer value proposition focused kinds of strategies and investments as the foundations of IoT and automation around IoT become commonplace and core. But it has been a little bit slower than some of the other sectors that people would be familiar with, like media, entertainment, pure data kinds of players. It’s going to be driving a lot more interesting things I would argue, as we move forward especially at the intersection of IoT, AI, blockchain, and some of these other emerging capabilities. So, there are some core things to be aware of just in terms of the sector complexity, that this kind of thing represents.
From a geographical perspective, again, regulatory, data privacy, different access to capital, those sorts of things are very important, but overall, where I see the biggest difference is in the national culture around growth and innovation. We all know very well that there are some places in the world that really drive ahead of other places, particularly on a country or a regional level, that has been consistent over time. Really there are a couple of reasons why they can do that, first of all, there’s a community of people who are focused on creating the new, who are focused on paying it forward and all that kind of stuff, but then there’s also the market capability to provide incentives for entrepreneurs and innovation. If that is not there and it’s not there in a number of countries around the world, if that incentive structure is not there it’s very tricky to expect people to take risks in terms of building new businesses, trying to bring new capabilities and value propositions to market. Whereas there, people are incentivized to take that risk and to go build, and I think that’s really the bare bones in terms of which geographical areas really lead the way.
Another angle on this is certainly the people who are leadership angle, so our exec search practice focuses on Chief Digital Officer roles like Guido’s as an example. What do you see as the key characteristics of effective digital leaders?
I think it’s important to understand that effective digital leaders have a new complement of skills to traditional management, even traditional leadership skills. The number one question that I encourage executives to ask when they’re either looking to hire a Chief Digital Officer, or onboard a new director to their board who should be the leading digital voice on the board, or even working with consultants and advisers or partners, the number one question that I encourage people to ask individuals and the teams is, ‘What have you built?’ Because in my view digital transformation and digital leadership really require having gotten your hands dirty building out new businesses, building out new capabilities. This is different from building a team, this is different than automating a process, this is different than reading the literature and doing PowerPoint decks if that’s all that one has ever done. You can’t really understand what it takes to transform and create new value propositions and create new business models if you haven’t done it. It’s a very black and white consideration in my experience. So, ‘What have you built?’ I think is a very interesting, salient, sort of surgical question to ask, and it’s fascinating to understand how people respond to that, but I think that’s really the key.
In my view there are four areas that effective digital leaders should have experience with, which go beyond traditional management and operational roles; clearly building, and it doesn’t mean that you’ve built startups, but it does mean that you’ve maybe built new products, new business units, and undertaken that journey from ideation, incubation, development, deployment, and you understand what those phases are, having that hands-on experience, critically of course with data-driven businesses.
Then there are three other areas, I call them explorer, catalyst, and connector. And so very briefly, to be an explorer means to be continuously learning, continuously experimenting with new capabilities, new value propositions, new teams, and really understanding that the world is changing so quickly that things that we used to have confidence in, in terms of our knowledgebase maybe have a significantly reduced shelf-life. So, a big part of what digital leaders do is not assume that because something worked a couple of years ago, that it’s going to continue to work, they’re always exploring for the new capabilities in what’s changed.
Next, being a catalyst. This means being able to drive the change throughout the organization, being able to bring people together, being able to set new KPIs, demystify all of this digital and technology stuff, in order to bring a broader organization, in particular leadership teams and the board, down through management, and eventually cascading it, but being that catalyst for change is a critical responsibility.
And finally, the idea of being a connector. Eventually, this will go away but right now there’s still a little bit of reticence I think, in terms of mid-management all the way up through senior leadership kinds of roles, because one of the things that have happened over the last several years is that digital has gone from being a back-office/IT/digital marketing kind of focus in many organizations, and particularly industry, to being the most important driver of strategy and business models, and many people are not digital natives. So, if we engage in technology first terms, if we use some of the jargon of technology and neural networks, blockchain nodes, and these kinds of things which are basic ideas if you’re fluent in those topics, but can be really off-putting if you’re not, if that’s the first engagement with executives then we risk really shutting them down.
So being a connector means also understanding what it takes to demystify all of this technology stuff, put it into accessible terms, put it into actionable strategic and business-driven outcomes, and that really opens the door to a broader set of leaders being able to engage. Even if they don’t know all of the ones and zeros that drive the underpinning technology capabilities.
Builder, explore, catalyst, connector, it probably explains why it’s not so easy to find the truth, as we like to say, catalytic Chief Digital Officers, especially for larger industrial corporations.
I take it you guys wrote the HBR article or started writing it before the true impact of COVID. In some sense, COVID-19, we’ve observed or kind of tongue in cheek we’ve called it ‘digital accelerator’ because we’ve seen the impact of it on digitization in many different forms, at the very least of which of course if remote working which we’re all doing now. If you had to go back with Rita and rewrite the HBR article again now with the last 9 months in mind, how would that article change?
Well, there are a few things, and obviously, COVID-19 has changed so many aspects of our lives, and of the economy, that it’s hard to ignore how important digital has been to the overall sustainability of business around the world. And as you say, remote work is the most visible and probably the most democratized aspect of that. In my view there are some risks there, there are some great things that have happened; on the one hand, companies have learned how quickly they can adapt, how quickly they can access and deploy at scale these new digital capabilities, and that is not a small realization. One of the things that we really try to focus on in some of them, for example, workshops and executive development courses that we do, is to give people hands-on experience that allows them to have confidence that they can engage and do things differently. That’s really-really critical to enabling an organization. And so COVID-19 with remote work has delivered that at scale.
There’s a risk there though. The risk is that people think that that is what digital transformation is when basically what we’ve done is automated and virtualized meetings, in general, that’s kind of where a lot of this focus has been. So, if we equate digital transformation with the COVID-19 context, I think we risk missing the forest through the trees sort of thing and hope that we’re going to go back to things before COVID-19 which is absolutely not the case. Now, as this crisis has continued, you’re seeing a lot more focus on digital twins, a lot more focus on different SAS capabilities to drive remote non-traditional ways of working, a lot more focus in terms of automation, even of large industrial capabilities, and services, and deployments. So, it’s absolutely driving more there, and I think we would have explored that.
But overall, I think what we would have looked at for a rewrite is really one more stage of an exploration which is around what wins, because what wins in the digital economy is the combination of speed and scale; startups are super-fast, they don’t have scale. Incumbents have scale but traditionally they’re not super-fast. So, that intersection of speed and scale in my view its really what changes the game and creates significant competitive pressures on players who don’t have one or the other. So, how do you affect that, how do you target that, how do you develop that capability in line with the broader discovery-driven approach? I think that would have been really the remaining piece to explore, and then COVID-19 contextually basically represents the intersection of speed and scale. So, I think that’s how everything would link together.
So, summarizing all of this together, what would you say are the new capabilities organizations need to really be good at to be successful in the digital economy?
I think this question really brings together a lot of what we talked about so far. Again, in my view strategy itself is changing, the models, the frameworks, the approaches that people are familiar with in terms of leading strategic practices, almost 100 percent of them were conceived of and for an analog economy, and again the analog economy was slower, was easier to understand, was much more clarified, and much less uncertainty, that was just the nature of it compared to the digital economy. So, when we’re competing in the digital economy, which we all are, we need to understand how all of these things have changed. Critically, capital flows and investment flows are very-very different in the digital economy than they were in the analog economy. Just very briefly, the analog economy is pretty linear, investors put money into corporations, corporations built new products, and services, and businesses, and basically deployed them, and the competitive set was relatively static.
In the digital economy, investors of which there are now many more, by the way, are putting money into startups, incubators, accelerators, corporations, and other kinds of vehicles, and the end result is hundreds if not thousands of new competitors, hundreds if not thousands of new products and services that an incumbent need to be aware of. That scale is not normal, that scale is not what was anticipated in the traditional analog-strategic sort of world, and so, what does that mean? Again, we come back to this idea of speed and scale.
I should say, with all of the conversations I’ve had with the executives, I’ve never heard an executive say that they don’t want to do this, that they don’t want to transform, that they don’t want to be a digital leader. Everybody wants to do this, but they don’t necessarily have the tools and capabilities to do so because they’re not digital native organizations, and so understanding that there are some new capabilities to bring in is actually what we’re trying to provide with the tectonic SAAS platform. Basically, this idea of driving many experiments at speed, the smaller financial investment beds that we described in the HBR article. But then critically understanding what are we getting for that investment, what is the performance? Not only once it’s in the market, but what are we learning along the way, how do we become much more dynamic, how do we re-allocate resources, both financial and talent much more quickly, and how do we create a new strategic capability that is focused on growth investments, and basically treating growth investments as financial options – modeling them similarly to financial options because that’s where the speed comes from.
So, whether it’s innovation domains, or accelerators, or corporate venture capital, or M&A, or new product development, all of these areas become very important when you’re transforming into a digital business model, and there’s really no capability to instrument those across that entire growth portfolio in a way where the people controlling the budgets can understand what we’re getting for the investment, what are the patterns, what works, and how do we do this very-very quickly to keep up with the pace of our new competitive market.
At the very end of Guido Jouret’s interview, I was fascinated, we asked the question, what would you do differently if you were going back in to start the role again, and he mentioned venture studio-ing and they should have done that earlier. It’s interesting because we’ve worked with a number of large industrials on venture studios, it seems to me it’s coalescing in the same model you’re talking about as well, and interesting to see the move toward more… you could say outside-in or inside-out innovation in that sense.
In closing, can you provide recommendations of people, books, and/or resources that inspire you?
Sure, absolutely. First of all, I’d give a definite recommendation to Momenta’s podcasts and newsletters, I think in particular at the intersection of industry, IoT, and AI they are really terrific, and I look forward to reading them every time they come out. From an academic perspective, I think it’s McAfee and Ben Olson from MIT have really written the most important books on the broader machine-age topics. For people who are interested in understanding more of how to think like a startup, which is not necessary for all incumbents, but it can be very instructive in terms of the different intellectual models and frameworks that people apply, the Y Combinator videos and articles are super-helpful. You mentioned Venture Studios, again Momenta mach49, different groups of resources there. And then for the broader digital transformation and new strategy capabilities, we’ve actually created a couple of webinars with Duke CE, as well as masterclasses on those topics, and so Duke CE would be an interesting resource for executives as well.
Great, and we’ll include links on those when we publish this podcast, we always transcribe it and then include links for all of these references, so thank you so much. Ryan, thank you for this insightful interview.
My pleasure and thank you Ken very much for having me. As I say, I’m just a huge fan of Momenta’s business model, and you’ve created a terrific team of people who have actually done the work of building and bringing these new value propositions to market, and so that I think is really the key to getting this right, is having people on your team or in your ecosystem who can help you along the way, who have actually done it, so a real pleasure and privilege to be with you, thank you.
Well thank you so much for that kind plug, we like to consider ourselves practitioners first, and so it definitely speaks to the rolling up the sleeve’s element.
This has been Ryan McManus, CEO of Techtonic.io and the co-author of the Discovery has driven digital transformation article in HBR. Thank you for listening and please join us next week for the next episode of our digital industry leadership series. Thank you and have a great day.