Conversation with Bill Ruh
Good day everyone, this is Ed Maguire, Insights Partner at Momenta Partners, and welcome to our Digital Leadership Series, in this series of conversations we’re highlighting some of the best and brightest minds and practitioners in the business, as we focus on their journeys into digital transformation, what they learn what their successes were, what the challenges were, along with lessons that are relevant for you today. We hope you enjoy our explorations and get value from it, and always we look for your feedback and suggestions.
Good day everyone, this is Ed Maguire, Insights Partner at Momenta Partners, and today we have a very special guest in our Digital Leadership Series, and our guest today is Bill Ruh, who is currently the CEO of Digital Business at LendLease, which is global developer and construction company for high-rise and real estate development. Bill has a long and prominent career in connected industry and digital transformation, previously he was the Chief Digital Officer for all of GE, as well as the CEO for GE Digital.
We’re thrilled to have you join us today Bill. Bill is speaking to us from Sydney, Australia, but we’d love to get a little bit of a sense about what’s brought you here, and first talk a bit about what’s shaped your view of what we call the Internet of Things.
Thanks Ed, and it’s great to be on. I recently moved from the States from the Bay area here to Sydney, which gives you a totally different view of what’s happening globally in this whole IoT arena, but the main thing I can say is, and I’ve seen this, is it’s a global play, it's not for just mature markets, we see it in developing markets, and in some cases developing markets can be very innovative with technology. But if I just look at my career going back to my days at Cisco where I first saw this from the networking perspective, the early days of people just connecting things. I would say I thought those early days of say 2009 to 2011 it was very much an experimentation, whilst coming to GE from 2011 until 2018 what I saw was the maturing of that market, and people starting to turn it into businesses.
And so we started to see that it became more than a technology and a business model, and a lot of it was I’d just take data off of big complex machines that are needed in our everyday lives, and expect 100 percent guarantees from, whether that’s a utility or an elevator, or a jet aircraft engine, we expect everything to always work, and the ability to change zero unscheduled downtime, nothing breaks in a way that causes problems is probably the cornerstone of what we’re seeing, in terms of where people are getting value. I think now where we’re starting to see the shift is where IoT is now moving from learn to make what we have work better, to let's create new kinds of experiences, and in fact what’s changed the nature of work using this technology.
So, in many respects the role of what we initially thought of as IoT as just connecting devices and using the data, derived from connected assets to improve business processes, is more broadly into this concept of digital transformation, and it's become kind of a popular term. I’d love to get your take on what the term digital transformation, means to you, in context of this evolution of internet of things.
Yes, I view this idea of digital transformation in the following way, and depending on who you talk to, you’re going to get a different answer that’s actually very simpler to everybody else. What I mean by that, it’s like the old story of the three blind men and the elephant, where everyone is touching a different part of the elephant, and when they’re asked to describe it, one has the tail and says, ‘Well it’s a rope’, one has the trunk and he says, ‘Well, it’s a fire-hose’, and one has the leg, ‘Oh, it’s a tree-trunk’, in other words depending on the technology we approach digital transformation from, is how we define it. So, if you’re in the AI game, digital transformation is all about the AI data. If you’re in the IoT game, you’re really talking about connective machines because that’s where a lot of this data is coming from, and so-on.
So, when you think about digital transformation, its being led, it’s technology-led for sure; without the technology we wouldn’t see the disruption occurring. But its more than one technology, so when you start looking for IoT, and connectivity, and data, you want to build an outcome, you want to do something with it, it's not just there to connect. That’s where IoT has always failed is, anybody who just connected has sort of been commoditized, so you really talking about the outcomes you can generate off of that. Well, that then brings in the idea of AI, well its not a data you’re talking about, you suddenly see the cloud as playing an important part of this game. So, when I look at digital transformation, I think there’s sort of a set of table stakes, technologies that are complete let’s say elephants, that you’ve got to be thinking about Big Data, you’ve got to be thinking of cloud, AI machine learning, it's all about global delivery, that’s how people work. You’ve got to think about the open-source capabilities that sit under this, whether its Docker, Kubernetes, or so-on, and the ability to manage this scale and so-on.
That’s the sort of the table stakes of technology. Then I just say there’s a whole set of other technology that’s going to continue this, and that’s why this digital transformation’s got a lot of legs, 20 more years, because you’re talking about natural language processing, and where is Siri and Alexa and all those technologies going to fit in? Where is Edge Compute going to come in? Drones, and Bots, and Robotics, ARVR, 3-D manufacturing, blockchain, autonomous systems, all of that technology is over the horizon, and as much as people work in that or think every day about it, it's still not in the mainstream as those other things are. So, when you look at all this technology, that’s the cornerstone of enabling digital transformation, and only companies that can master let’s say a heavy set of that, are going to be able to play in this game.
No doubt, I think we’re very much on the cusp of some exciting… we call it combinatorial innovation, but its enormous potential ahead of us. But if we dial the clock back a bit, I’d love to understand a bit of your experience as being at the Nexus of what a lot of people think about, the industrial IoT. You came into GE as GE was putting together a Predix platform, and started articulating this vision that just resonated hugely across the industry of the power of one percent, and just thematically really helping the market wrap its arms around this massive transformation. Could you talk about what it was like for you to come to a leader in what we’re calling traditional industrial technologies, and look to apply and establish the vision of where you wanted to take the business, and break through some unchartered waters?
I was very fortunate to be able to work at a great company as GE, and I still really love that company. So, when you look at it though GE has always been a leader at driving these kinds of transformations in the market that require innovation. The thing I would say I learned very early on at GE, as opposed to when I was coming from Cisco where I had a very technology-centered view of this IoT space, is that the business needs were pretty profound, and there’s three things that I could boil down to what we say over that period of time at GE, that we were trying to address, and I think GE through Predix, and what’s its done is address a big part of this is, the shocking thing to me was industrial productivity was essentially flat, zero percent for activity gains for something like five or six years. We came out of the recession; we saw activity again and then it just stopped. I think one could look and say that essentially the traditional methods are no longer good enough to drive productivity, and so productivity really needed a reboot, that’s that power of one percent.
It doesn’t matter which industrial sector you’re talking about, you’re just not seeing the game, except in those companies that are really beginning to use digital, data, and analytics to foundationally change their business processes. So, it’s no longer, ‘Hey, I’m just going to apply Six Sigma, and Lean’, and those traditional techniques, they’ve run their course, it doesn’t mean you stop doing those, but if you don’t add digital to that, if you don’t automate and make things more autonomous, you’re never going to get the productivity gains that are necessary, to compete in the next generation. So, the first thing was, productivity, it’s all about productivity.
The second thing is, if you begin to look at tech firms slightly differently, which we did, as to what makes them successful, I don’t think they look at themselves this way. We realized that leaders in digital are tied to asset optimization and better outcomes, and what do I mean by this? Well, essentially Google takes advertising, and if you look at advertising as an asset as much as the jet aircraft engine is an asset, they found a better way to deliver and optimize that asset, and that’s what propelled them. If you think about Apple, I look at them differently, they figured out a better way to deliver and consume applications, and applications being an asset. Uber and taxis, their B&B and hotel rooms, so you begin to realize that the world is moving to asset optimization whether those are hard assets or those are soft assets, virtual assets, but every asset we have in the world is being optimized, and that’s really core to what’s going on.
The third thing we learned is that the future is not just digital, and this is what really, I think opens the door for traditional companies to go in on this, is that it used to be just the digital world, advertising was you could do it all digitally. But when you get the things like airline industry, or you get to the power industry, you get to the construction industry, you get to smart water systems and so-on, all of this things have a physical component. The future is also about those who combine physical and digital, and you look at Tesla is a combination of physical and digital, space-sets is a combination of physical digital, and I’d even say Amazon with retail logistics has mastered physical and digital combined. And so, the world is going to be for those who master physical and digital. So, you’ve got to reboot productivity, you’ve got to be good at optimizing assets and changing your processes, and you’ve got to be good at combining the physical and digital worlds in order to compete going forward, that’s going to be the center of value.
So, when you’re in a company like GE, did you have a process that you applied to assess where change is occurring outside the organization, and how best to map your efforts to improve the impact on your own business, the organization, but also, the rest of the market and your customers?
Yes. What I’ve learned over the last 15 years through my transition Cisco, GE, Lendlease, is what you do on a start-up is going to be very different than what you in a big company, to manage through these transitions. And the way I think about it is, there’s a couple of key things, the first thing is that a start-up gets to act in one speed, start-up speed, and everything is focused on that transformational activity and all the investments, all the people, they see the goal. And so, they act with disruptive speed, which is vast, you don’t worry about the current status, status quo, and then the other thing is you can change the rules. Well, when you’re in a big company it doesn’t work that way, you actually have to have two corresponding processes in order to make it work in a big company, and they operate at different speeds.
So, Speed 1, I view is, look you’ve got to be able to deliver on this productivity gain, near-term, how do you change the processes, how do I take analytics, and its more what I call incremental or evolutionary improvement; thousands of analytics, hundreds of automated processes, take what I do today and in weeks to months to deploy focus on getting these kinds of things done. Now, by the way that is digital transformation, it's just aimed at trying to transition you from the old into the new, it still requires talent and a culture shift, but it enables your existing businesses to be able to get in and see value, and it aligns to that mentality.
Whilst you’re doing that, you also need Speed 2 activities. These are the disruptive platforms that you’re trying to create, the things where you’re trying to get a leading position, and change the nature of the game. You can’t go do thousands of analytics, and hundreds of automated processes to disrupt, you’re going to focus on a platform to get out there and change the world. And in order to get something major like that done, it’s a 12-18 months to deploy and then for a tech firm to win, it takes them 10 years before they get to the kind of scale and momentum that makes them so successful.
So, you’ve got to realize that you’re in it for a longer term, how you judge it is very different. So, in big company the thing that’s important is, you’ve got to realize you’ve got Speed 1 and Speed 2 activities, you’ve got to have a portfolio of both, and one is evolutionary, one is revolutionary, and you’ve got to be able to get the leadership and the people in there to get behind both simultaneously, and make sure that they’re supportive of both in the right way. So, you don’t roll your disruptive thing across your business and disrupt your business, because you’re going to disrupt your quarter to quarter numbers. On the other hand, you don’t say, ‘All those guys lose money, they never do anything’, what you do is, you try to get a few things going, the initial pilot and then embed in the business, make sure you take care of it. I think that’s what I really learned is, you’ve got to have both simultaneously.
The last thing I would say on this is, the real challenge for a big company is, they either want to have all the traditional people in the company become digital, or you say, ‘Okay, we’re going to nurture digital out separately’, and neither of those work very well. You’ve got to lean into the fact that you need new digital natives, the new text back, the new IP, and the new disruptive things, you need digital migrants from the existing phase for delaying knowledge, translation, lay the ground work for adoption, and you need all your ploys to become digitally enabled. So, you’ve got to lean into the organizational structure, which quite honestly of all the things I found that’s really the hardest, is to get the structured talent organization culture changing to a accept Speed 1 and Speed 2, embrace it and make it successful.
That’s a great insight Bill, and with this concept of Speed 1 and Speed 2, how do you appropriately setthe goals for digital transformation initiatives, so that your objectives are aligned but for instance, you don’t overshoot your expectations for the short term, or I would say create unrealistic expectations. But then also have enough stretch goals, and I guess speed too, that you get people inspired and focused on the big picture.
Yes, well every digital initiative has to be tied to a specific matrix in order to succeed in a big company. If you think about the start-up, the moonshots; most moonshots impression, and I think the data that backs it up, fails. And it's okay in Silicon Valley, this is a culture of failure and acceptance of moonshot failures, which doesn’t exist in a big company. So, getting back to that Speed 1 and Speed 2; your Speed 1, you’ve got to establish its evolutionary, so they have to have very specific matrix, but I would say they could be maybe not moonshot matrix, but how about lower orbit around the earth kind of matrix, still big hairy goals, like can I improve my utilization rate, or my reliability rate, or minimize my downtime rate by 10 percent?
Those sound easy, but that’s worth a lot of money in any company, and the question is, okay can I find the analytic or automate the process that are going to get me there? So, you’re picking very specific matrix and are trying to make them achievable, butyou actually want to pick something that’s measurable and hard to do. I think you’ve got to tie it to those kinds of matrix, otherwise it becomes science experiments or technology plays that there’s a disconnect to the end user. The end user cares about minimizing downtime for productivity or energy savings, or something, and you’ve got to connect it to them there, because that focuses your mind on solving the right kind of problems.
On Speed 2, I think you’ve got to have the kinds of goals we’re talking about. But now you’re talking about moonshot kind of goals where you really are trying to change the nature of the business you are in, that you’re talking about a 50 percent productivity, or I think the way the valley really looks at this is that 10x play. If you’re not getting an order magnitude shift in those moonshots, or you’re not targeting your order of magnitude shift, you are not aiming high enough, and I think that is often a struggle for bigger companies to be able to accept that, but then transition that into what you do, execution.
The only other thing I’ll mention is, think about how many moonshots are talked about in the valley, and then think about how many end up actually accomplishing something meaningful, but when you win you win big. So, you’ve got to do that to win in your industry for 10-years, but you’ve still got to have these near-term things. So, Speed 1, Speed 2, you’ve got to keep in mind which one you’re doing, and the matrix shift, and you’ve got to be willing to have the stomach to get behind them in the right way.
If you compare and contrast the Silicon Valley moonshot mindset with the objectives of a big company, how do you measure your success or progress so that you can course correct midstream if necessary, because the expense or the potential cost of something headed down the wrong path for a while can be pretty extensive. Are there any best practices or thoughts that you have on being able to course correct if something’s not going as planned?
Well, I always feel that growth covers a lot of sin. You’ve got to be growing I think is really the medicine for these Speed 2 activities and these moonshots, if you don’t have some way to ensure that you’ve got uptake of what you’re doing, customers are applying it, then it doesn’t mean they’re sort of all in, but they’re beginning to utilize this in a meaningful way, so that you can begin to grow what you’re doing.
I think the second thing is, you’ve always got to keep in mind that in the end you don’t really go against perfection, you’ve got to go against the market, you’ve got to say, ‘Hey, I’m going to be number one or number two in what I’m doing in this moonshot’, and then be able to judge if you’re number one or number two out in the market. Because if you’re number one or number two against your competitors, and you’re growing, you can see a path to where you’ve got to get to.
The last thing is, is it feasible? That to me is for a moonshot you’ve got to be able to put faith on the idea that the technology is feasible, its cost-effective, you can scale the business. And I think a great idea without the right technology that’s too early, is the same as being wrong. So, you’ve got to make sure that the technology is feasible to create your moonshot, you’ve got to make sure you’ve got the talent to get there. But if you can judge that your number one and you’re growing, then I think you can show that you can win this, but that’s why it’s a different process for that as to you’ve got to have the stomach to go 10 years. You’ve got to admire a company like Amazon, where AWS they grew it over time, but they weren’t probably announcing the numbers for a very long time. And I think that’s a smart company, that’s a company committed to building a market, owning something, and being number one, and I think that is a good model for other companies to emulate and look at, and say, ‘Okay they do something we should be able to try to emulate’.
Yeah, that’s not really a trivial undertaking particularly for a public company, if you look at a company like SpaceX for instance which has had many-many years of experimentation, and less than successful moonshots, it really can be a daunting task to pull off these long term goals, right?
If it’s not a daunting task, you’re probably not doing a moonshot!
Yes, exactly. You alluded to the challenges of organizing talent and the organisational structure, have you thought about for one, evaluating the structure of an existing business that’s about to undertake a big transformation, and ensuring that the organization’s appropriately structured for digital change? I would love to get your thoughts on building an organization and some of the considerations there.
It’s the same problem whether it’s a start-up, or it’s a big company. It’s just that the big company has a lot more challenges to accomplish it. These digital businesses are a team sport, meaning if I’m a start-up you’re the people who hire, everybody gets behind what you’re trying to do, and the ones who succeed are the ones where they are maniacally focused on accomplishing their mission. Everybody’s pulling together, and it doesn’t mean you have the normal tension of having groups working together, but when you get groups working together in a start-up, you go fast that you can just outrun others and win. So, that coupled with you’ve got to have the right talent, what makes these small start-ups scary is just the brain power and the capability, so they can go fast, focus, they’ve got great talent, and it’s a team sport; everybody understands what they’re trying to do and is able to play.
It’s the same in a big company, but the problem is, that you have to do it at a totally different scale. What makes it hard is that you’ve got to be able to bring the whole company along, you’ve got to get them moving in that direction, or you’ll never see the benefit. So, that’s why I’m saying it’s a different process to what you do than at start-up, in that first you’ve got to be committed to bring in the right talent from the outside, let’s call that the digital natives, with a new text stack, with new business models, the ability to challenge the status quo and have a vision for that big S2 goal that you’re going to try to accomplish.
The second thing though is, it cannot be done in a vacuum. I can’t really point to a company that’s separated it out and it worked well, where the company itself became better as a result, the ones you see is where they’re able to make it work together. So, you need digital migrants for the domain knowledge, the ability to translate, the ability to lay the groundwork for adoption within the existing set of businesses, and if you don’t establish those migrants early-on then you don’t have these two groups able to effectively work together. Over time you’ve really got to think about how 14,000 employees become digitally enabled. Now, I have a theory on this part which is, look everybody, every player I talk to, the have a mobile phone, they have a ton of apps on it, they know how to do all that, and what is amazing to me is big companies often forget, that’s their channel to their employees so embrace it. I don’t care whether its IOS or android, make sure you’re delivering your capability to your end employees so that they are enabled, because they are ready to embrace it. I’ve never seen where they’re not willing to in any environment, everybody has the same technology, and if you give them that capability on their phone, they know how to do something with it.
At the same time, I would say that what a big company has in terms of what I would call digital blockers, are slightly different than what a start-up has. So, one is culture, and every big company suffers from NIH, DIY, and DN… Not Invested Here Syndrome, Do It Yourself, Do Nothing, those three things are the competitors to innovation, and if you can’t get beyond those and make the company embrace this new thing, and decide to participate rather than NIH, DIY, or do nothing, you can’t make the shift. That’s why those digital migrants reported to the translation and the adoption.
The second thing is, leaders at the first level, the second level, the third level, and any company need to message and have actions tied to strategic desires, so they can’t just say, ‘Let them message it’, or, ‘It’s just the CEO’, it’s got to be done at the business leader level and one level down, but they say, ‘Look, we are all in on digital, we’re gonna do this, here’s our play’.
The third blocker I see is business models. Great technology with clarity on the customer, delivery model, and pricing can’t win, and inevitably big companies where they often miss is not the talent and the technology, it’s that the start-ups often are willing to give delivery models, pricing, and a focus on the customer that just is unbeatable, and that’s what big companies should be able to do better because they have better insight in theory.
Lastly it is the funding models. In big companies there’s often a peanut buttering of funding across every initiative, or there’s too many initiatives. Whereas what happens in a start-up is the venture capitalist is a great partner because they come in and say, ‘I’m going to give you this money, I’m all in. But you’re going to focus, you’re going to show me that you’re going to get there’, how you get your own processes aligned to that, has to be done, and I think those four blockers, culture, leadership, business models, funding models, if you can get those blockers out of the way, and then you hit the right talent inside and outside the company working in tandem, and then you think about your end-customer, your employees, or your customers enabled through their mobile devices, this is how a big company can win.
Are there ways that you can effectively bridge the different cultures? You just alluded to a number of these blockers and approaches to essentially dividing the culture I guess into, you have the digital natives who kind of get where you’re going to go, the digital migrants, but when you deal with areas like engineering for instance and industrial technology, are there very different philosophies of product development and go-to market than information technologies of course. And of course, it’s a very different sales philosophy when you’re selling a capital asset, or a product with a maintenance model, versus an X on everything as a service. How do you think about ways that a company can bridge the distinct cultures, whilst preserving what’s best about each one?
You know, every big company was and is an innovator in the spaces they serve. The discomfort comes from additional technology which is a complete foundational change to what they’ve done. So, if you go into traditional material sciences for new construction techniques etc., every one of these existing businesses has been an innovator, that’s what’s made them so successful, that’s what’s made those engineering cultures so successful. So, I think where the challenge comes in my view, going back to the blockers, is that often with digital it’s not just the technology, it’s a business model. I made money a certain way, I’m a big company, I sell this product and I make X margin on this product right, I sell this product and I sell this service, and the service actually may be where the money’s made, but it’s all physical services.
Whereas, what we’re often saying is, ‘Hey, the way you’re making money is going to have to change’, and that’s where it gets uncomfortable, because the way we operate engineering is set up to a funding model that’s based on a business model, and once you disrupt the business model funding model that’s when people start to say, ‘This won’t work’, or, ‘You don’t understand how we make money’, because at that point they’re concerned, what if it doesn’t succeed? And I think that’s really the challenge is, the business funding model be very disruptive, and by the way that’s why start-ups love it, because they go, ‘Hey, the business models are very disruptive. Hey, I can undo this’, and that’s what you’ve got to focus on.
I actually found big companies, their people are very bright, as bright as anybody anywhere, they’re innovative as anybody anywhere, but they tend to be very practical around how they make their money, and unless you are able to help to educate and bridge the business model and funding models, and show a transition, even in a disruptive you’ve got to show transition. The transition could be, ‘I will operate these two businesses separately’, but you’ve got to go at that, and you’ve just got to realize that it’s going to be a challenge, because you are disrupting the status quo which has been successful, and you have to respect that success. I think the minute you don’t, you say, ‘Hey, you just don’t understand’, you can’t beat it. But the minute you say, ‘Look, we’re going to have an honest conversation and try to drive this change’, you’ve just got to take on that hard work. Finally, I would just say it’s an education process, and unless you’re up to educating you can’t make your way through it. That’s why a start-up can win, because they don’t have to deal with the transition, and in a big company you have no choice but to deal with the transition.
I’d love to get your thoughts on the transition that you were at the center of at GE, particularly around Predix, the process of building out the platform and mapping it to solutions that complemented the existing businesses. GE digital in a sense had a much broader mission than the specific business lines interests would reach, even though I think you could say it was almost unlimited, the potential there, but I’d love to get your thoughts about the considerations of some of the decisions behind the decision to build a platform, and how you worked with the different business units, and what you learned during that process as you were really defining a brand new market.
You’ve brought up two things, the idea of a platform. I think everyone realizes that in every market there are platforms, and platform can mean a ton of things; to an infrastructure provider the platform is that enabling technology cloud platform, let’s say, like AWS, Google Cloud, or Azure, those are one form of platforms. You just go onto Amazon and another form of a platform, they have a platform for retail. You look at Uber and they have a platform for transportation of taxis, depends on how you want to look at it. So, you’ve got platforms at multiple levels, and I think a couple of things I’ve learned through this is that getting your platform right at the right level for your business is incrediblyimportant, and that you’ve got to make sure you’re at the right level of the stack for your platform.
So, for some people that right level is the infrastructure level of being the cloud provider. For a company like GE or any industrial firm, I think you really are at a higher level, you’ve got to be more at that application layer where its more akin to where the retail is at, where you’re providing outcome-based business services. As I said, the first transition in the market was predictive maintenance is worth a lot of money in the entire industrial world, and that’s an important place to be.
I think the first thing that every company needs to do is make sure they’re really clear on the level of platform they’re at, and at the right level. Then by the way, you build on other people’s platforms to get to your platform, and you’ve just got to be comfortable with that as well, you don’t need to build everything yourself, in fact building everything yourself is the wrong thing to do. So, there are two key lessons, make sure your platforms aligned to your customers on what you’re trying to achieve with those customers, build on everybody else’s platform, and be careful you’re not at the wrong level. And just giving GE a lot of credit, where they’ve taken Predix and APM, and it’s been an incredible journey. And again, I’ve said it before I obviously deeply admire what that company has established here, especially since they were early-on and they created the market. You’ve got to give credit where credit is due.
The second thing around this, it’s not just the platform but it’s what you said, it’s knowing your businesses. So, the diversity of the businesses across GE is an interesting challenge because not every business has the same problem. So, knowing which problems you’re solving is important, and in the end you can’t be a platform that’s everything to everybody, I guess you can if you’re a cloud platform, but as an industrial firm you’ve got to be focused on what you’re trying to do. It goes back to what I said before, you’ve got to have the digital ambassadors, the digital migrants, those folks in businesses who are essentially owning this. The businesses are critical to being first class players and just owning it, your best markers. And I don’t care what company you’re at, if you’re not figuring out how to embed it within your sustained businesses then it slows down. On the other hand, if you try to embed it with your existing businesses, it slows down, because you’ve got a lot of people to convince, cajole and work with. That’s just the nature of it, and if you don’t choose to lean into that, you’ll just find you can’t be as successful.
So, get your platform right at the right level, all the problems you’re trying to solve, make sure you know who your customers, and that customer that’s a problem they want solved, that’s a valued proposition they need. Realize you can’t do it all yourself and align yourself into your existing businesses as effectively as you can, realizing that the nature of human beings, the nature of organizations, is one of very difficult to embrace and adopt, that’s why big companies often aren’t able, that’s the innovators dilemma. But at the same time, those who conquer the innovators dilemma, the scale of a big company allows them to win in a way that a start-up can’t. So, I’d say that’s the downside is trying to do that. The upside is once you’ve done it, it’s an unbeatable combination.
No doubt, and when you look at the initial expectations around Connected Industry, and the industrial Internet of Things, say we go back to say 2013 or 2014 I’d love to get a higher level view of the industry where there were some fairly I would say optimistic expectations that we’d see a big ramp, a lot of this was embedded into Wall Street expectations, and the industrial IoT would see this massive inflection point, and I think what happened is it became a lot more deliberate. I’d love to get your perspective on what became a disconnect between I would say more aggressive adoption expectations, and the down on the ground realities of really transformation across sophisticated industries.
Well for big companies, their customers are often existing big companies to do their start-ups. So, my perception of AWS first set of customers were start-ups, not big existing firms. But as they developed their business then they moved into the big existing firms, who found it easier to embrace the technology, and nobody says cloud is too risky. But when you’re talking about your customer base being large companies, they’re no different than you, they’re innovators within it, there’s the desire to make that shift, they know they’ve got to deal with what I talked about before, the productivity etc. But the hard part is that you’ve got to be able to talk to those customers, unleash your customers. And it doesn’t matter what company I’ve been at in my 35-year career, what I’ve always found is the people who are selling to the customers are deeply afraid of the new technology. This goes back to everything I have ever done, because they know how they’re going to sell the existing technology, they know what the risks are, they know how to make their way through it so that its successful.
New technologies if it doesn’t go well, has the opportunity to disrupt their relationship with their customers. So, when you talk about not just the internally inside, but the sales to the outside, you’ve just got to realize that your customers aren’t the same as you, there’s innovators in there, there’s desires. On the other hand, there’s the core existing, ‘Let’s not mess this up’, the sales team make you the sales what not to mess it up in their relationship. So, you’ve got to again lean into the fact that you’ve got to go with these customers, show value, you’ve got to make sure the first ones go well, and then you’ve got to be able to scale. I think what we’re in is the period, if you look at it, all of these things take a 10-year journey, and that journey to get through that is that the first few years you’ve got to get your first customers right, and then you start to build. And by the way, I would say the industrial internet, the IoT market is entering its maturity phase. We’re seeing predictive maintenance and the ability to use data as part of everybody’s strategy, nobody’s questioning it.
I can tell you, I saw the customers shift from, ‘Why are you doing this?’ to, ‘How are you doing this?’, to, ‘How am I doing it?’ over the last five years, and so my belief is we’ve crossed the chasm if you will on IoT, and now we’re into the phase of adoption. So, I think it’s just the natural phasing of things that we’re seeing.
It’s really interesting as you point out, that certain industries do need to move in a more deliberate pace. I’d love to hear a bit more about the work you’re doing at your current company, could you talk about some of the potential that you see for the construction and real estate industry, and what you’re looking at?
Again, it’s an industry that’s undergoing transformation, and if you think about how we construct, and it goes beyond buildings, how we construct buildings, or how we construct a precinct, how we do urbanization. The world is going through a real shift, transportation, mass transit, urban living, people moving into the cities, expecting greater sets of services. We see a movement from the retiring communities and how that’s changing. What we’re seeing is a sense of urbanization and community that is very different than what we thought about building things in the past, so you’ve got that one trend going on.
I think the second trend is certainly people more cognizant of the idea of the meaning of how we construct, sustainability, you have that going on. I think the other thing is, we also are starting to see a world where the way we generate energy is changing, and building are becoming more the center point of where a lot of the generation is, how to use roof-top space for solar and so-on. So, what we’re seeing is a change in all of these kinds of things happening simultaneously, which changes the way you design your environments. Nobody’s making more land, the best constructive pieces of land you need to come in and find the optimal use of that, the optimal use of making it a great place for people to live, work, play and so-on.
As you think about it, everything from how design the space and think about how people move through it, how people live in it, how we’re sustainable, to how we construct the kind of material. For example, at Lendlease they’re building high-rise buildings now, not in concrete but in wood because wood technology is changing, it allows you to do great structures out of wood components at levels you didn’t do before, and I’m just watching a high-rise building go up in wood outside my office, and it’s incredible to see it in wood which provides a lot of benefit as well. You’re seeing these kinds of shifts occur, and the kinds of demands people are putting on these buildings, so that’s going to have a digitization effort, a manufacturing effort.
We’ll see the shift over time on construction to where the design will move from being a 3D design to a digital twin, and that digital twin will not just be a drawing, but it will be a living, breathing model that goes from the designer to the construction manager, into the building operator. That model will continue to grow to where it’s an accurate representation, which allows you to do predictive analytics on how to get better energy, how to operate the building better, how to provide better services to your people who are living and working there. So, one is I think digital twins are going to play a big role here.
I think the second thing that we’re going to see in this, is that we’re going to see a movement from full bespoke construction, into manufacturing-based construction. We’re already seeing start-ups in this area that are trying to do… you construct the skeleton at least, if not most of the building off-site, and then you put together, the way as kids we always imagined Lego blocks, which is really hard. So, I think we’re at the early stages of the manufacturing in buildings and construction.
The last thing is, IoT, I already see that in some buildings in Singapore that it’s amazing the use of IoT with cameras, smart trash cans, and everything else which allows us to live cleaner, better, more interesting lives. So, we’re going to see more IoT technology for sure as table stakes in every design, and then all of the thing coming in is going to change again how we operate those buildings. So, we’re at the early stages of what is a 20-year transformation of this industry. What Lendlease is doing in some of these building, and they’re really innovative buildings, it’s quite fascinating, but I think it’s going to be enabled through those technologies I said. Cornerstone a building, IoT will be in there, digital twins will be in there, Big Data, machine learning, we’re going to see a lot more Edge compute, everything connected. But the way we’re going to judge the success of that is, is that building cleaner? Is it more sustainable? Is it cheaper to operate? Is it more efficient? Does it always work and never go down? Those kinds of things are going to be the outcomes we get, and people willing to pay for those things, but the technology is just now coming to the forefront, and the industry is just now starting to engage, and that’s why I kind of like this industry, it’s really in the early innings of getting started.
You’ve just alluded the breadth of outcomes that can be accomplished with advanced technologies, and an industry that where a lot of processes and techniques really haven’t changed much in decades, so I really appreciate your insights there.
One final question Bill which I always like to ask our guests is, whether there’s a resource or a book recommendation you might be able to share for our listeners?
There’s a ton of them. One, I saw the author speak, then I read the book and it made me really think differently about this idea of scaling. The author took the perspective of start-ups, what he calls up-starts, I look at it today of how do I apply it to a big company, and I think there’s a lot of good lessons, and it’s called ‘Unscaled’ by Hemant Taneja. It really talks about how AI can disrupt every industry. So, that would be the one that had a lot of impact on my thinking.
That’s a great recommendation, I’m not familiar with it and I’m absolutely going to put it into my reading list. Bill it’s been a pleasure talking to you, your insights and experience are invaluable, and we really appreciate the time you’ve taken to share.
Again, this is Ed Maguire Insights Partner at Moment Partners, and we have been speaking with Bill Ruh, CEO of Digital Business at Lendlease. Bill, I want to thank you once again for taking the time to share your insights and experience once again.
Thanks Ed, it’s been a real pleasure.
This is Ed Maguire Insights Partner at Momenta Partners, with an episode of our Digital Leaders Series. Please check our website a Momenta.partners for archive versions of prior podcasts, webinars, as well as resources to help with your digitization journey.