Podcast transcript: Does the speed of change blur or sharpen your focus?

17 min approx | 3 Dec 2018

Juliette Foster

“Hello and welcome to The Better Question, the new EY series of podcasts that answer the better questions that will help you lead your business through this transformative age.

I am your host, Juliette Foster, and today, we are looking at growth strategies, asking the better question, “Does the speed of change blur or sharpen your focus?”.

We’ll be hearing insights from someone who is responsible for the growth agenda of one of the largest tech companies in the world, Microsoft. Peggy Johnson is Executive Vice President of Business Development, otherwise known as Microsoft’s “dealmaker-in-chief.”

We’ll also be joined by Annette Kimmitt, who was EY Global Growth Markets Leader until just recently, where she advised companies around the world about their growth strategies. This podcast was recorded just before Annette left the role, at EY annual World Entrepreneur Of the Year Awards™ Forum.

I began by asking Peggy how Microsoft has adjusted its approach to growth in recent years, as the world changes so rapidly around them.

Peggy Johnson

If you look at our success over the last few years, it really comes down to this idea of having a growth mindset. It's something that Satya Nadella, our CEO, introduced when he became CEO of the company and it allows you to think beyond the somewhat calcified fixed mindset ways of the past. You know, “We always did things this way, so we're going to keep doing them that way.” And it basically allows you some freedom to think more broadly, to innovate more quickly, because you are looking beyond a border or a guideline that you thought you had to abide by. And when you just have this growth mindset, you become the learner in the room. You're a listener and a learner, that I think is the core of our success over the last few years.

Juliette Foster

Would you agree, Annette?

Annette 

This idea of a growth mindset has underpinned our own growth journey at EY as well, under Mark Weinberger's leadership. Back in 2014, he set the whole organization this ambitious target that we were going to double our size by 2020, and putting that out there as an ambition unleashed incredible creativity and innovation. Because what it meant was, it just couldn't be business as usual, the teams had to think completely differently about how on earth we were going to double the size of the our business by 2020. So it just unleashes creativity. I agree with you, the growth mindset's pretty key.

Peggy Johnson 

You can get into a slow growth area if you have that fixed mindset. It's just incremental, you don't think of the big ideas, you just think that, “That's not possible.” But with a growth mindset, everything's possible and that is sort of the power of it.

Juliette Foster 

How do you go about embedding that growth mindset throughout the organization and throughout your teams?

Peggy Johnson

When we look at teams, I would say probably our number-one focus is making sure that we have an environment where everyone can be their best selves. So how do you do that? Well, if you look at a group of people, they come from different backgrounds, different ethnic, different gender; you've got your introverts and you've got your extroverts. How do you make an environment where they can all excel? So we have been focused very intensely on that to ensure that everyone can bring what they do best to the table, and that by its very nature means this diversity of thought. So you can have a lot of people who all think the same way and they'll build a product that'll be very good for that group of people. But you're going to build the best products, if you have the most diverse teams. How do you get diverse teams and how to retain diverse teams? By having an inclusive environment.

I think we look at diversity inclusion as things we should be doing and we should, but it actually produces a better business result. And there's study after study that says this, and we still haven't connected all those dots for everybody. There are still people who don't realize the value of having diverse teams, but if you build a product that pleases everybody, you're going to sell more products. It goes back to having diverse development teams, that feed into good environments and then you put products out there that more people will want.

Annette

We run a survey at EY every year; we've just done it for the second year, called the Growth Barometer. And we survey the C-Suite of mid-market companies right around the world; it's the largest survey of its kind, and when we asked them what their number-one priority was on the talent agenda, 41% called out, “improving the diversity of their teams, right across the organization.” Twelve months ago, that was at 12%. So I think business leaders again are starting to wake up to the sorts of things that Peggy's talking about, just the power of diverse teams and creating inclusive environments as a key to really allowing people to bring their best selves to work, and to, again, driving innovation and bringing growth mindset to the business. 

Juliette Foster 

So, Peggy, we’ve talked about the mindsets, but are there also particular skills that are important to have in your teams to ensure that Microsoft can meet its growth objectives at speed? 

Peggy Johnson 

Certainly technical skills, we're still constantly in a shortage state, looking for more engineers, coders and data scientists. 

But there's also this understanding now that you need a whole variety of skills as you're building these products. In fact, you see this in hackathons, when you gather the company. We have something that Microsoft called One Week, where we have a hackathon week and people will come together to solve a problem. It could be any world problem or just something on our campus; it goes from one end of the spectrum to the other. But you'll get these teams of people, you think, well, it's probably a bunch of coders. It's not. It's someone from finance, you get someone from HR, you get someone from marketing, you get some technical people, and they come together and it's amazing what they produce. So it again goes to show this diversity of thought, because if you get all those different voices in a room, people challenge each other and say, “Why would we do it that way?” And the person who says, “Well, because we've always done it that way,” they get challenged, and then that opens you up to new thinking. So it's about bringing people from all different disciplines together to solve some of these problems. I don't think we're going to do it just with a room full of coders. You need to have different opinions weigh in on these challenges. 

Juliette Foster 

In the technology sector, in particular — although also in other sectors — innovations, new competitors and even a change to the political or regulatory environment can fundamentally change the playing field. So how do your companies manage these unknown external factors in their business planning? 

Peggy Johnson 

Yeah, one of the things that we have a big focus on is making sure that we have signal coming in from all areas. Obviously, at Microsoft and at EY too, we operate in so many different countries; we actually have the ability to draw in a lot of signal. But that informs us of trends, and it could be new business models we're seeing, it could be interesting technologies and it comes from all over.

We're a productivity-oriented company at Microsoft, productivity in India, for instance, looks very different than productivity in the United States. So how does that inform and what our products are going to be for a market such as India? If we’re not listening to that signal, we are going to miss those trends that are going to be products in 15 years. We have to be listening carefully with our ear to the ground, constantly, or we'll just be left behind. 

Annette 

We're seeing an increasing call coming from EY clients, particularly the very large clients, to help them tap into start-up ecosystems around the world. The question they ask us is, “How can you help us access and get a line of sight on what's happening in the external market, around disruptive innovation?”. 

Juliette Foster 

Mergers and acquisitions have always been one of the options to explore as companies look to grow. Now Peggy, you’re known as Microsoft’s “dealmaker-in-chief,” because you’ve led the US$26b purchase of LinkedIn along with more than 40 other acquisitions for the corporation. So what do you look for when you are evaluating potential acquisition targets? 

Peggy Johnson 

First and foremost, we say, “Does it solve a problem for us?”. Maybe a gap in our technology, it's perhaps something that we have on our road map, but it's out two years, because there are so many other priorities ahead of it. But then, we also ask, “Are we the best owners?”. And, with that comes, “Are the cultures between our company and this company we're looking at similar enough that an integration is possible?”. I think there are a lot of acquisitions out in the business world that we can point to that have not been examples of the best owner buying a company. It's not a metric generally that you see when you're doing an assessment of an acquisition, but it's something you do need to know and understand. Get to know the company very deeply, so you know if this is going to work or not. And it's something that can't be ignored, because it can take all the value out of the purchase price of an acquisition if you don't get that recipe right. 

Annette 

As an organization, we first of all think about, “What problem is this solving for us? Where are the gaps? What are the things that we're not very good at?” But then, we need to plug gaps on, so it's very much aligned with the problem solving for us. But we spend an enormous amount of time on all potential deals, just getting to know the services (not the financial due diligence, the human due diligence). “And is this going to be a great cultural fit for us? Can we make them a better version of themselves by bringing them into EY? Can the teams help the founders of this realize their ambition of globally scaling their business and can they help them accelerate that?” So for the organization, that human element, the cultural alignment element is pretty key. But it always does start with, “What problem is this solving for us and what's the gap in capability that we've got within the organization?”. 

Juliette Foster 

Ok, so apart from acquisitions, innovation through new technologies — such as artificial intelligence (AI) is an area where many CEOs are seeing tremendous growth potential. 

So how are your businesses approaching this opportunity? 

Peggy 

There are probably two memes out there about AI right now. One that it's going to be the magic fairy dust that makes your businesses grow, and just sprinkle a little bit of it on and you're going to be doubling your revenue in just a few years. The other meme is the doomsday device. We are somewhere in between those things. It really just needs to be introduced responsibly. And, you should think about it as a tool that can help augment human intelligence, certainly not replace it, but just to help us do our jobs faster, with more signal and input than ever before. So that's the promise of it, but we're still pretty early days with AI. 

Annette 

The EY Growth Barometer survey this year gave some really interesting insight into CEOs of mid-market companies around the world, and we asked them about their growth agenda. And last year, the survey asked the question about the adoption of intelligent automation. And 74% told us, “We have no plans to adopt, not now, not ever.” Fast-forward 12 months, this year, 73% have said, “We're either adopting or plan to adopt within the next two years,” so this massive acceleration in the race to embrace technologies such as AI. But interestingly, through that same time period, what we saw in the survey was that hiring intentions have actually strengthened, so they're intending to put on more full-time folks, but more than half of the people we surveyed said the number-one priority in terms of skill sets is digital. So the approach to AI seems to be about unlocking the creative potential of people, rather than robots replacing humans. But it's been a really interesting shift in the last 12 months. 

Peggy  

Yeah, and I think there have been some good developments in AI that maybe have accelerated that shift that you're talking about. For instance, both voice recognition and image recognition now are better than humans. So the error rate that humans have on both of those ... machines are slightly better than that right now. So those feed into use cases that can happen today and that's part of the excitement, I think, that industries are seeing. There are actually some very useful applications of AI already in the market. I don't want to be left behind, I've got to jump on that bandwagon, so now you get the high numbers of interest in AI from industry. 

Annette 

I think it is about creating seamless experiences for consumers, for workers. How do we make their day-to-day lives, working lives, living lives and the time they spend at home superfluid? You know, certainly the way we're using AI and automation in our own organization , inside EY, is all about taking those friction points out for EY people, allowing them to really then focus on innovating, and thinking about how we do things better, smarter and faster. How do we create new services and offerings for EY clients to solve some of their really complex problems? I know in one of my own teams, we've now got 11 virtual robots and the team has really taken ownership of — they've named them. They're part of the team, but those robots are really doing a lot of the administrative tasks that my team were so bogged down with, and it's freed them up to add incredible value back into the business and to really drive some fantastic innovation. And they're very happy and now, it makes them very creative. So the 11 robots are a great success. 

Juliette Foster 

Do you think that some businesses are just a bit too quick to pursue these disruptive technologies? 

Peggy Johnson 

There certainly are examples of businesses focusing too much on disruption, but there can be unintended consequences when you do that. That's why particularly with technologies such as AI, we need to step into them, with a set of principles. It's not just about barreling ahead and seeing what we can create. It's about as we develop this technology, are there going to be unintended consequences around it? And let's prepare for those ahead of time. We certainly don't want to unleash a technology that takes out tons of jobs, right? That is not a good outcome. But if we think something like that may happen with a technology, let's get ahead of that, let's do some retraining, let's see how we can make a smooth transition there. It really just needs to be introduced responsibly, and you should think about it as a tool that can help augment human intelligence, certainly not replace it, but just to help us do our jobs faster, with more signal and input than ever before.

Because at the end of the day, the technology, if it will be very beneficial to society, you want to ensure that you're not damaging the society as you're unleashing it. So you want to make sure that you have a thoughtful approach to that and not build technology for technology's sake. 

Annette 

That thoughtful approach, we're starting to see that really manifest as a, what I would call, a duality. So you've got businesses that are focused on the business of today. How does new technology help me to improve that business and how do I do that in a thoughtful way? But at the same time, they're actually quite separate from the day to day, starting to set up small groups of people who are thinking about the business of tomorrow and thinking about, “How do we disrupt our own business model and create the business that we’re going to need to be in — in the context of industry convergence, in the context of technology disruption?”. So this duality, continuing to focus on the business of today, and how do we continuously improve that and drive innovation from our people in the way that we do things? But quite separately, thinking about the business of tomorrow and how do we disrupt ourselves? That seems to be emerging as a bit of a trend at the moment.

----

Juliette Foster  

That’s nearly it for today’s episode.

But as ever, answering a better question raises more questions for you to consider for your business.

  •  In the search for growth, is innovation the biggest deal?
  • How do you ensure you are automating intelligently?
  • How can you build trust when emerging technologies bring new risks?
  • When it comes to deals, are values set to become the most valuable asset?

________


I’m Juliette Foster, and thanks for listening to The Better Question podcasts.

To download the research relating to this episode’s better question and search for the answers to many others, go to ey.com. To hear more episodes, subscribe to the full podcast series.

The better the question, the better the answer, the better the world works.

Until next time, goodbye.

 

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.