Crack the Code of Digital Transformation | Q&A with Brian Gracely

Digital transformation and digitization are huge topics on which Brian Gracely shares his insights in this great interview from the 2019 archives. It is just as relevant now as it was then! Since recording this episode IBM closed a landmark acquisition deal with Red Hat for 34 Billion US Dollars and Brian Gracely at the time was head of strategy for Red Hat

Brian Gracely

Digital transformation is the process of adapting to a digital world, while digitization is the process of turning everything into data. Digital transformation is about creating value in a digital world, while digitization is about understanding and leveraging the power of data.

Digital Transformation and digitization are two huge topics and Brian Gracely shares his insights here in this great interview!

Checkout the episode here.

Brian Gracely (@bgracely) is Director of Product Strategy at Red Hat, the world’s leading open-source software company. He brings 20+ years of experience (Red Hat, Wikibon, EMC, Virtustream, NetApp, Cisco) in Strategy, Product Management, Systems Engineering, Marketing and M&A. He is recognized as an industry thought-leader in Cloud Computing and DevOps, as well as being the co-host of the award-winning podcast, The Cloudcast. He has a BS/MBA from Wake Forest University.

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“Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. … It transcends traditional roles like sales, marketing, and customer service.” Salesforce

As an example: Wimbledon has been successful in their digital transformation by putting it at the core of what they do, even so far as taking over the broadcasting and saying that they’re in control of it now. They changed their supply chain as a result of their digital transformation, and this has reversed the power dynamic between Wimbledon and the BBC.

Digital transformation is a crucial element to business and people’s lives, especially since the pandemic

Digital ethics is important to keep in mind when doing digital transformation in business, because if you lose the consumerization, then your technology will leave you as it did to the Flintstones. Digital transformation is always going to be good for business because it creates win-win situations and opportunities that didn’t exist before.

Transformation can be facilitated through digital ethics and working well with your partners. It is all about adapting to a digital world while digitization is about understanding and leveraging the power of data. Digital transformation is creating value in a digital world while digitization is turning everything into data. Digital ethics must be kept in mind when doing digital transformation because you could lose consumerization, which would take away your technology as it did for the Flintstones. Digital transformation happens by putting it at the core of what you do.

We discuss the difference between digitalization and digital transformation in business. Digitalization is the process of taking something physical, like going to a store and making it into a digital format. Digital transformation is taking that digitalized version and using it to change how a business operates.

“Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” Gartner

If you would like to read the full transcript that is below.

Brian Gracely 1:09

Thanks for having me on Nathaniel really appreciate it this morning.

Nathaniel Schooler 1:29

My pleasure. So I’ve got a couple of topics that I mentioned before, and I’m still confused and I think many people are actually about the difference between digitalization, which is one of the topics and digital transformation. So I think we’ll, we’ll sort of kick-off by talking about digitalization first, if that’s all right, with you?

Brian Gracely 1:52

Yeah, sure. So, the terms can kind of sometimes get interchanged or get “buzzwordy” and they get confusing, but I think in the simplest sense, the way that I think about digitization is essentially the process of taking something that let’s say, it’s in the context of business, something that used to be very physical based, so going to a store or something that was, location based.

Hailing a cab or something like that, and figuring out, okay, how do I, number one, make that a digital experience? Something that I can interact with, say, over the Internet, for example. But more importantly, how do we make it something that can be personalized, and we can learn from that process.

So let’s take it let’s take a simple example. So if I was in London, and I wanted to hail a cab, you know, in the past, the cab sort of had full control over what that experience was, as the end-user, you know, the person writing the car, I didn’t really know when they’re going to show up, I didn’t really know what the fair was going to be. They didn’t know who I was, there was no sort of loyalty to any cab company specifically.

Now what’s happened is, because I have, essentially the internet in my pocket on your smartphone, and I have a service. So something like Lyft, or Uber or any of the other services out there, that process of hailing a cab has now become digitized because I have visibility of where they are. So I have a sense of how long it’s going to take?

Do I stand out in the rain?

Do I not stand in the rain?

They know, I can look at who the driver is, so I can get a sense of how trustworthy they are? Do you know do I want to deal with them? Have other people thought they were good, good drivers?

But all of that has now become a digitized experience. And so you can begin to wrap a bunch of other things around that experience loyalty to a service, an understanding of who the driver is, the location of where the car is. And then that begins the process of:-

“Well, okay, what more could happen beyond that?”

Well, you know, basic things start to happen, you know, it’s raining, or the traffic is bad, and you go, I’d like to build a communication with that person, maybe I moved from where I originally started because it was raining, I moved down the street to the next corner, I want to be able to text that person or call that person.

And so we’ve taken something that was very physical and location-based before we’ve turned it into something that becomes digitized, ie, we put the internet between your business and the person and all these other new interesting services, customizations, kind of spring out of that. So to me, that’s one example of what digitization might need.

Nathaniel Schooler 4:35

Okay, okay. But I mean, on all businesses, to some extent, digitalized these days or most?

Brian Gracely 4:43

Well, there are really two pieces to it. Yes, every business is trying to become digitized. So whether that means, you know, you’re buying experience moves to something online or digital, whether it’s a mobile phone or web application.

That’s part of it. The other part of it really is, what do you do, once you’ve done that digitization?

Because that’s really where things sort of decide whether companies are successful or just kind of beginning to play in the game.

So I’m going to give you an example of that.

So just being able to put something online, it’s been around for more than a decade, everybody’s had a website, everybody’s got a mobile app these days, the question becomes two things. Number one, what do you do when you’ve created that new interaction model with your customers or with your business partners?

Is it just a one-time interaction, right?

I just went to the website and I bought something?

Or have you begun to understand how do I learn more about that experience?

When did they come?

What types of things did they search around for?

What did I recommend to them?

What do I know about that person that I can enhance about trying to continue to make them a customer?

What happens today have, all those things started to become two-way interactions are multi-way interactions, you’re wrapping a lot of information around the experience, you’re using that experience to make the interaction better, that becomes the digitization. Now, so that’s one part of it. Have we made that digitization rich? And able to drive more interactions or drive better experiences? That’s one part.

The second part that’s probably much more complicated, is the part where you say, Okay, I’m the business that’s offering that. So let’s say I’m a bank, or I’m retail, or I’m something else.

When you’re having to make that interaction with your customer, or with your business partner, more two way more, based on the data that happens, the interactions that happen, now you start to have to say, okay, our internal business processes, and potentially, the way we organize our business is probably going to have to change, because we’re no longer just saying, we’re taking an action, we planned for it for nine months, we took an action, and then we’re all done, we’re essentially saying, the business and the way that we interact with our marketplace or with our partners, or with other things that will influence our market is going to be a constantly evolving thing, a constantly changing thing.

And because it’s software that’s now interacting with your customer, as opposed to a person or a physical store, we have the ability to update that software, change that experience, use the data from that experience, to continue to improve it and change it. So if your business is internally very static, your organizational charts are very, very static, the way that you communicate changes within your businesses is very static, you’re going to struggle with the digital transformation part of that, right. So, you may have digitized the front end of your store, for example, but the sort of digital transformation of what do I do beyond that within my company? Is usually the bigger challenge for a lot of companies.

Nathaniel Schooler 8:05

Right, right. I mean, so digitalization is the buying kit topic, which should include digital transformation, ideally, everything needs to be as streamlined as possible.

Brian Gracely 8:18


Nathaniel Schooler 8:18

And it needs to be as easy as possible for the teams to work within that business. So digital, realizing it is just, you know, using the data, whether it’s coming in from you know, your old customer records, which you have, and new data that you are assimilating from all over the place, it could be from your Google Analytics, it could be from your social media, listening tools, it could be from, you know, anything else that you’re sort of plugged in, it could be weather data, right, right now about IBM and the weather channel, or whatever, they bought a few years, right? Billions of dollars.

So then that actually opens up the conversation around, you know, let’s look at this data, let’s actually analyze it, let’s kick it around. And then let’s create some, let’s create some new business models, let’s create some better processes, smoother processes, and actually just see if we’re missing any opportunities, right. I mean, that’s, that’s in essence, what we’re looking to do, isn’t it?

Brian Gracely 9:32

Yeah, absolutely. I mean, we’re really what happens when you get to a point where what you’ve done is digitized, right? So your experiences is now digital, if you will, it begins to sort of open up a whole lot of possibilities about how you can start to say:- “Okay, how do I not just give a better experience or be more efficient?”

But because the cost of making changes is so low, right? So let’s take a simple physical versus virtual example. So let’s say I want to run a retail store, I run a clothing store, for example, if I’m not sure, if red sweaters are going to be a more popular season or blue sweaters gonna be more popular?

Well, the cost of figuring that out means I’d have to order a whole lot of inventory, I’d have to go to the store, I’d have to put out red ones for a few days, I’d have to figure out, did those sell really well, then maybe the next few days, I put out blue ones. And I figure out if those sell well, but I had to buy the blue inventory.

Like all that can be very expensive. It can be time-consuming. And you know, for all, you know, that day was just, you know, rainy and miserable weather and nobody was going out to buy anyways. Right? So you did a bunch of work, maybe you got useful information, maybe you did online, you can simply say, Well, what I’m going to do is I’m going to build some pictures of people with red sweaters. I’m going to build some pictures of people with blue sweaters. And for some percent of the people that come to my website, I’m going to put the blue sweater out as the first thing they see. And I can figure out very quickly, is that drawing attention?

Are people buying that? Okay, so for the next day, week, whatever I put the red sweater out there, the cost of doing that of putting out those experiments digitally, is infinitely less, right. It basically cost me nothing to do those experiments, and I can start figuring out okay, are there correlations between days of the week? and colours?

Are there correlations between what was on TV last night for the most popular TV show that people watched that people were watching and the person wore red sweater?

Should I put that red sweater out there?

What’s happening on Pinterest or any of the other like you said social media sites to figure out how can I start to correlate things or associate things that maybe will help me as well. And so doing it, when you start with did as your as your footprint, the ability to then experiment with the business, start to figure out what people would like, becomes much easier, number one, but also becomes incredibly less expensive to do. And so your ability to tweak things for 1% 5%, here and there becomes much more manageable than what you ever did in a physical world.

Nathaniel Schooler 12:25

Right. So so it enables you to also come up with all sorts of new possibilities in all areas of the business, doesn’t it?

Brian Gracely 12:32


Nathaniel Schooler 12:33

So for example, you might say, Well, you know, you might be a clothing store. And you might think well, okay, so we’ve got a great website. So how are we going to take this to the next level? I mean, I’ve been I’ve been looking at getting some glasses. Yeah, so I’m in the process of getting glasses, and I had a look at some of the glasses, you know, in a shop. And then I had a look online, and I went to a site, which is you know, you could you can order your glasses on online. Okay, so they send you your glasses, and I was looking on my mobile and it says, Please install flash. Right?

Brian Gracely 13:09


Nathaniel Schooler 13:10

Look at yourself and see these glasses on. Right? How am I going to install flash from my iPhone?

Brian Gracely 13:15

Yeah, right!

Nathaniel Schooler 13:16

Right. So immediately, that company has basically just lost themselves money. Right?

Brian Gracely 13:22


Nathaniel Schooler 13:23

What I did do is I went over, I was looking at designer frames, I decided I was going to save money and just buy cheap pair of reading glasses instead from the shop, right? Because I got my prescription and everything else. And I didn’t want the hassle of it all. Okay, but, then I sort of just started thinking, and I was just like. Okay, so how am I’m going to look at some manufacturers designer frames for when I do have some money to buy some designer frames when I budget for those.

So I think I took a look at I think it was Police glasses or you know, it’s one of these time-honoured brands, it could have been Carrera or it wasn’t on my I think it was Police or some someone like that. And I and I looked on the site, and it said to try on the glasses.

So I was like, okay, so I picked some frames, I stick my head in front of the camera, wiggled my head around from left to right. And I got a fitting for my head so that they could put the glasses on. And I tell you what, Brian, it was pretty good. I’m not gonna lie.

Brian Gracely 14:21


Nathaniel Schooler 14:22

But the thing is, is that surely you as a retailer, one would want to be there ahead of your manufacturer, or at least the manufacturer would direct the business into your store, once you’ve decided what you know, I mean, it’s just a bit of a no brainer, really. And, and these models can be in all areas can’t they own all parts of retail, I mean, the future of retail, I personally think is very exciting.

But I think that square footage is going to reduce, and I think it’s going to become a lot more interesting. I mean, what’s your sort of view on that?

Brian Gracely 15:01

Well, I think, you highlight two really important things, right? The first one is, so take your example of glasses. You know, as things become digital, as you no longer really care for, let’s say experience worked out great. Well, you no longer really care:- “Did I buy them from the retailer?”

Or:- “Did I buy them directly from the glasses manufacturer?”

Right? As far as you’re concerned. That was a great experience, whoever did that. So this digital, this digitization model, this digitization experience is really sort of disrupting business in that people who used to be manufacturers and their business used to go to market through retail stores through sort of secondary people, well, they may no longer need those, right, the value chain may radically change because they can directly go after you they can advertise on Google, they can you punch glasses into your search, and they may show up as opposed to the retail.

So there’s going to create some tension in the value chain and the supply chain between the creators and the people who do retail. And what that’s doing is ultimately for people that are in the retail space, meaning things like they own real estate, they have stores and so forth, they’re really having to rethink “Okay, number one, do I want to maintain the real estate? Is that providing any value?” And in some cases, the answer is yes. And in other cases, it may not be they may be shrinking retail.

But, you know, it comes and goes right, there’s usually some sort of, you know, the disruption that happens in the market. So maybe they don’t need as much retail space. But then we do begin to see, you know, things come back into retail.

So, we see things like the Apple Store, who said, you know, we’re going to spend less time having lots of shelves stocked, and we’re going to spend more time allowing you to be in the store, they’ll be geniuses there, you can learn things in the store. So there’s a reason to physically come there. Because there are people that still want to shop that way. And automobiles are bought that way. And other things are about that way.

But yeah, it’s really forcing companies to say, okay, you know, number one, can I create great experiences?

But number two, is my value chain, my supply chain going to potentially change here or get disrupted here?

Where am I in that value chain?

And then, given certain scenarios that could play out?

What do we want to do with the assets that we have, you know, is real estate and storefront?

Is that still an asset?

Do we want to rethink what that looks like?

Maybe we want to do other things in that real estate, but also move more stuff into a digital experience. So it really, there’s no one right answer to it. That’s the interesting part of this. But it is making people really have to rethink those things about, you know, what is our current business look like?

What could our other business look like?

Our partners, our competitors? are our partners, our partners?

It really changed a lot of things in an interesting way.

Nathaniel Schooler 18:00

Yeah, I mean, it’s going to be a bit like the Dollar Shave Club, isn’t it? At the end of the day, I mean, that came from nowhere. The branding was amazing. They then they got sold for like, it was a ridiculous amount of money for a billion.

Brian Gracely 18:14

Billion dollars. To Gillette.

Nathaniel Schooler 18:17

Yeah, for businesses just came from nowhere, right? Like, thanks, I have a billion dollars, but the thing is that all it’s going to take is an application on an iPhone or an Android phone, which means you can do your own I test at home. Yeah, you do your own I test. Okay, you sit there. And literally, you’re going to be able to create images of what you look like in different clothes with different haircuts with different glass frames.

Yeah. Or contact lenses? Oh, what do I look like a blue contacts, you know, and it’s going to I think that that is ripe for disruption. That particular I don’t like the word disruption. But that’s in essence, what’s happening. It’s what’s been happening for. I mean, what I like about IBM is that they are quite a very old company, actually, in the scheme of things I was talking to Winston Churchill’s grandson the other day.

He’s the founder of American Angels, which is an angel investment firm they have, he’s worked with over 1000 startups. And, you know, I was quite impressed, actually. And we were sort of talking a bit about that. And it’s just, it’s just so interesting how these businesses can just come from nowhere. And I think IBM is the only one really, that I know of, that’s actually still around from that era. I mean, it’s pretty old compared to, if you look at all the top companies, most of them are new, right? Like not even 20 years old.

Brian Gracely 19:50

Right yeah, there’s always, you know, as we move from every generation of computing, there’s always going to be maybe a few that survive into the next generation and then alive, don’t make it.

So yeah, IBM has survived through the mainframe era, they essentially created the computing market, you know, they survived through the PC era, you know, they’re, they’re now trying to reinvent themselves through the cloud computing era. And, you know, as we get into things like Artificial Intelligence, and the Internet of Things, and all things that are going to become super data-intensive, you know, it makes sense as to why they would go out and acquire, you know, companies like the weather channel, who have number one massive amounts of data, but you think about things like weather, weather impact, so many things that aren’t just:- “Hey, do I take an umbrella to work?”

It impacts, supply chains and impacts, you know, all sorts of stuff that companies have to plan for. So having that information and being able to say, Hey, could we monetize it in ways that don’t just look like you turn on your weather for the day and see what the forecast look like? Can I help somebody, you know, forecast what they should buy?

If I’m the home supply store or something else, you get yourself into lots of different businesses and again, it’s really about the importance of thinking, not just about your business, but like your supply chains, your value chains, your partners, how can you help them or potentially monetize those interactions?

Nathaniel Schooler 21:16

Yeah, very much so very much. So it’s quite an exciting prospect. Really, I mean, I, I’ve been a sort of been involved with the CDO Summits for the past few years, I helped with some social marketing there, right, in 2014, in London, and David Matheson is a lovely gentleman. And, you know, back then, in 2014, I listened to what the New York government was doing. And let’s just give you a scenario. Okay. You go to the New York government, and you say to them, I want to open a store in New York. Okay. And this is this, this blew my mind, actually, it still blows my mind. If you think it’s five years ago, nearly now that this happened, and the government then say to you, right, so what business are you in? So you tell them? “Okay, I’m going to open a coffee shop.”

Okay. So what they do is they actually analyze all of the footfall in the entire New York metropolitan area, the demographics of the people that are going to be passing past the front of your store, the empty shops, yeah, the proximity to public transport links, bars, are the coffee shops, etc, etc, right? And then they say:- “This is the best location for you. And it’s up for rent, it’s how much money per month?”

Brian Gracely 22:40

Right? Yeah, no, it’s, it’s one of these things, where, again, I think it’s great, that’s a great example of saying, you know, thinking of yourself as a, as a one function organization, so, you know, the government maybe is in the business of, you know, making laws and maybe trying to, you know, maintain a certain order in society, they’re saying:- “Look, you know, we also have a responsibility to, you know, to collect taxes to help build schools!” And one of the ways they’re going to do that is to make a business thrive.

And to do that, it’s like you said. You’ve got to not just, give somebody a license to put up a coffee shop, but there’s a lot of value that you know, about your city that you ought to be able to provide, help that business, find the best place to be, hopefully, that’s going to help their businesses succeed, that’s going to drive tax revenue, it’s going to help the city I mean, that it’s like, it’s a huge cycle that you want to be part of, and figure out where you can provide value and the value a lot of times always centres around the data that you have, and the ability to collect data and analyze data.

Nathaniel Schooler 23:42

Yeah, that’s the core of digitalization, isn’t it?

Brian Gracely 23:46

It really is. Yeah, absolutely.

Nathaniel Schooler 23:47

Yeah. So. So in terms of digital transformation? Yeah. Right. There are a number of different businesses in the world. There are small businesses, there are medium size, there are large, large businesses. Each one of those, is that a different step at a different stage of digitalization?

Okay. So where do you start with digital transformation?

Brian Gracely 24:16

Well, I think the key when you think about digital transformation, you know, start with one assumption, which is, like you said, we’re going to focus on digitizing the business.

But the second thing typically is, you have to realize that the transformation part of it, while there’s a technology aspect, and there are lots of people who can help you with the technology, the bigger part of it typically is the people that are involved. And this is typically the hardest part.

So essentially, what you have to come to realize there’s probably a part of your business, that their job is to say:- “Hey, we’re going to come up with new innovative things!”

Well, their job is to go fast, create new things, you know, have innovative ideas. Well, there’s also going to be other parts of your current business whose job is to create stability, the group that manages security for your business, or, you know, they make sure that the website is always running 24 by 7, and so forth.

It could be, you know, business development, or sales, or whatever that function is:- “We’re going to come up with new do innovative things!”

And what happens there is, as you’re trying to digitize things, as you’re trying to move faster in the markets, you’re trying to react to the markets differently, you create this inherent internal tension between the people that want to go fast and change things. And the people who are incentivized to not change things to keep things stable to keep things secure. And so the first thing to really realize is that you’re going to have to figure out a way to overcome that tension, because you want the benefits of moving faster of collecting more data, making decisions on that data. And doing it in a way that that doesn’t, you know, create undue risk on your business or create so much change, that nobody can understand it. So that’s always the first thing that people kind of have to mentally grasp.

And it’s really important that gets looked at, from the executive level, because the executives have to be supportive of the idea that, hey, this digitization, digital transformation is important for our business, it’s going to make us survive in the long run, you know, sort of top-down, encouraging, encouraging of that.

But also, there’s gotta be some retraining and some educating at the ground level of the business, the people doing the work, to say:- “Hey, look, we’re going to change some things, and we’re going to support you in how this change is going to happen. It’s going to feel different, we’re going to measure things different in the business!”

But kind of understanding that inherent tension of some things have to go faster, and some things still want to remain the same. That’s always the biggest challenge. And typically, the best starting point in terms of how we’re going gonna make this happen.

Nathaniel Schooler 27:02

Yeah, that makes a lot of sense. I mean, I think there’s a lot of people who are very scared about losing their jobs. I think a lot of people have become complacent as well in their jobs, sure, careers and their businesses as well. And that complacency.

Unfortunately, guys, anyone listening to this, that is going to cause either, you know, mass loss of jobs. Or it means you need to take action and learn something new. And you know, what I would prefer to take action and learn something new. And that’s my personal attitude about it. But over and above, above, above this year, businesses have their own pressures from shareholders and everything else.

However, there needs to have some sort of corporate social responsibility, which ensures that there is no mass panic, within that business that says will look:- “We just want to help you make your job easier, we want to make your job better for you, and we’re going to help you to make that job better. And, yes, we’re going to streamline as best as we can, but we will ensure that there are plenty of jobs!”

Because I mean, that’s the other fear, there aren’t going to be any people working. And it’s just going to be robots, like with the Hitachi warehouse manager that they recruited in 2015, to manage your warehouse of humans, which was quite an interesting one. Right?

Brian Gracely 28:32

Yeah. I mean, they’re, you know, they’re obviously some examples that are starting to come up where we see, you know, automation, take the place of what we’re human jobs at some point, you know, what we find more and more in the sort of computer side of technology is that, number one, I always tell people, if you’ve been in the technology industry, the sort of the computer side of the technology industry, for any period of time, the only constant that’s existed is changing, right, you’re used to change, you’re used to having to learn something new, on a fairly regular basis, it may be once every year or once every couple of years.

But, you know, fearing change, and being on the computer side of technology, or you know, kind of oil and water, you sort of come to accept it. And the reality is, in most cases, the business isn’t saying, we would benefit from losing all of your experience, or losing having people to do these things, what they’re really saying is, we just want to do things in different ways. And we’re looking for, you know, the ability to be to be adaptable.

And so it, it asks, it says, number one, I’m not really asking you to do anything, radically different than you’ve done before, I’m asking you to continue to learn and continue to change and so that’s, you know, that should help part of them, hey, you know, we’re going to evolve. And the second part of it is, you know, you’re kind of asking your your workers to make some commitment to the business, because the business is essentially saying, we would like to continue to survive, we’d like to continue to be successful. And we want you to be part of doing that.

And, you know, if you’ve built a culture in the company, where people enjoy working there, they want to see the company be successful, they become successful as the company becomes successful. You know, this is really doubling down on on a commitment between, you know, the company itself and the workers themselves to say:- “Hey, you know, we want to be successful, we want you to be part of that.”

And, you know, in most cases, when when you present it that way, you find there’s there’s a lot of buy-in from people, there’s less push back then there is buy into want to make things successful, want to learn new things and be part of the part of the change.

Nathaniel Schooler 30:41

I mean, I think the people who, in essence, will, will lose their jobs or their jobs will change dramatically are the ones that need to be looking anyway, really, because that experience, I mean, that experience is is valuable, and you know, all these people sort of getting causing a mass panic and everything else. And actually, you know, I was talking to talking to Dr. Churchill the other day, like I said, and he sort of said, you know, we’re not going to be living in the in the age of the Jetsons anytime soon.

And that did make me smile, actually. Because that’s what people in technology, you know, would like everyone to believe that actually are we’re we’re going to just use AI and there’s this mass overhyping of AI and technology and what it can actually do, and I think that someone needs to put their hand up and say:- “You know what, okay, so we can do these things with AI. But AI is not connected. Yeah. That AI is used in very specific ways. And it is not going to create some kind of, you know, Ganja fueled hallucinations of grandeur” like Elon Musk is saying that it’s gonna kill everyone, and you know, everything else. I mean, that’s, that’s my attitude around it.

What’s your view on that one? Brian?

Brian Gracely 32:04

Yeah, I think the thing with with AI and machine learning, your people have to remember that this isn’t a new phenomenon. This is, you know, science and mathematics. It’s existed for, you know, 20-30 years. And so, you know, there’s always a certain amount of science fiction that goes on to Hey, if it’s something gets taken to its furthest reaches, you know, here’s what it could look like. And we’ve seen science fiction movies about that, and books have been written and so forth.

But the real reality is that with AI, with machine learning, it’s now such a, an everyday part of our lives, that we sort of forget that the small progresses that it makes, you know, sort of unlock some things. So for example, if you’ve ever gone to Google, you know, way back in the day, if you went back 10 years in Google, Google didn’t do things like complete your search, right, you start typing in a couple of words, and it feels it a bunch of stuff for you. You know, that didn’t used to happen. Right now, those things start to happen. Well, nobody says, Oh, my gosh, my searches using AI and ML, it’s like people go:- “Oh, that’s a nice convenience.”

Right. You know, the Jetsons 30-40 years ago, used to talk about flying cars. Well, you know, now we have vehicles, you know, most modern vehicles these days have a bunch of things built into them, that do pretty interesting stuff, that are helping you drive better, they let you know, when you’ve gone outside the lanes, they’ll do some things to sense the car in front of you and potentially stop if you’re not stopping in time.

Well, that’s essentially a variation of what Machine Learning and AI is. But they’ve just become a part of your everyday thing. And you look at them, and you go, Wow, those are great. They get they kept me safe, they helped me avoid an accident. And so I think there are there are always going to be scary scenarios that people will apply to science, if it if it goes radically wrong. You know, every superhero movie is ever is always based on that the Hulk or Spider Man or something. But I think what we’re seeing more and more is that the the small advances, the day to day advances that happen, people tend to like the benefits that come out of those, and the ones that are, you know, strange and weird and radical kind of get kicked out by the market rejected by the market, but the things that are, that are useful and helpful and become part of our day to day lives. People appreciate that it ends up unlocking some time that they can do with other things. So I’m less fearful about it, I understand the concern and the fear and ensure you know, things can go wrong. But, you know, I think the market has a way of sort of accepting the things that are useful for for, you know, the broad pieces of society and, and rejecting the ones that that seemed to cause a lot of harm. Yeah,

Nathaniel Schooler 34:52

I agree. I agree. So what exciting digital transformation projects have you been involved with Brian, you know,

Brian Gracely 35:01

The good thing about it is there’s, there’s so many of them. And, it’s a little bit like the AI example, I have, you know, things happen. And they may seem small at the time, but they begin to sort of blossom. So I give you a couple of simple examples. You know, I grew up in, in Detroit, which for your listeners, they may or may not know, Detroit was sort of the, the capital where automobiles were originally, you know, kind of became mass-produced, you know, Ford and the assembly line, and so forth. So, you know, I grew up in Detroit, and the thing that you always focused on with automobiles was, was horsepower and, and styling of the outside of the car, and all those types of you knows, it was very, you know, machine-centric. And nowadays, when you think about automobiles, all of the automakers are really focused on, you know, what’s the inside experience?

Like, can I deliver software to the vehicle so that it gets new features, it doesn’t just stop when it rolls off the off the lot where you bought the vehicle? It’s now thinking about, you know, can I update maps in the car? Can I update, you know, better driving things? And so, you know, we’ve worked with some companies, some of the automotive companies that are really focused on how do we deliver software to those to those automobiles, on a consistent basis?

You know, how do we focus people’s experience so that the kids in the backseat can get WiFi or you can personalize your music experience, like, that’s a huge transformation for the automotive industry, less about the the engine itself and more about the experience in the car. We work with a company who is one of the major hotel companies.

And one of their focuses was they said:- “You know, everybody comes through our front door, everybody deals with the front desk, but everybody gets the exact same experience.”

And the reality is, somebody coming in with kids on a vacation is totally different than the person who’s a business traveler, a road warrior and rolls in at 11 o’clock at night. And so they said, you know, the first thing that we could do, the simplest thing we could do is give them a key, let them get the key without having to check-in at the front desk at 11 o’clock at night, when they’re tired. They just want to show up. And so we help them with a digital key program.

And as simple as that sounds, you go :- “Wow, that really starts to, you know unlock a lot of things.” Number one, it maybe helps the hotel itself rethink the front desk experience that rethinks that whole real estate that they have of the front desk:- “What else could we do to that?”

But number two, it personalizes the experience for that person, it could be, you know, I rolled in late at night, and I want to let them know:- “Hey, please put some water in my room, or please put warm cookie in my room.”

I don’t have to deal with the front desk person if I’m tired if I’m grumpy. So sometimes they’re big things like the automotive example. Other times, they’re what seemed like little small things. But they have sort of nice benefits. Because as that road warrior, you go, I’m going to go back to that hotel, if I get a chance, I’m always going to pick that one because they make my chicken experience better. And so you’re always thinking about how, you know:- “What can we do to make the customer experience better to make the loyalty experience better? And then what can we learn from that?”

And obviously, there’s a bunch of technology that makes all that happen. But again, there’s so many examples out there, you know, it’s really sort of fascinating.

Nathaniel Schooler 38:18

That’s, really interesting about the front desk check. And I like that a lot, actually. Because it’s, it’s just, it’s so necessary to reinvent everything, because people are different. Like you say, having a family versus a business traveler is completely different or newlyweds- totally different.

So, right, what’s the most exciting for you out of all the projects that you’ve been involved with?

Brian Gracely 38:49

Oh, wow. You know, I think the thing that you love the most is, when you get a chance to work with some companies, and, and they start to realize, like:- “Oh okay, number one, we conquered some new technologies!”

Like, that’s always, that’s always fun, it gives them a lot of satisfaction that, you know, something they were maybe we’re afraid of our didn’t know anything about where they were excited about. But more importantly, it is pretty crazy, after working with somebody for six months, or a year or something, they go:- “This is going to totally change our business, this totally unlocks our ability to do to get into new markets and new new things.”

You know, like I treat it a little bit like my kids, like you don’t, you don’t love one kid more than the other. And you don’t want to say that one’s more than the other. But it’s amazing. To me, what’s really interesting, is to watch these companies kind of start to get creative, right? It’s, for me, I work with a lot of technologists, to computer people. And you think, well, they’re only focused on the computers and the blinky lights and kind of a low level stuff. And what happens is, when you unlock, and you start to talk to them, and you go:- “Hey, you have the ability, you know, you’ve never really been the front of the business, but you have the ability to impact the future of the business.”

They just their creative juices get going and and they get so excited about it. And, you know, I will give you one more example again, in the sort of in the travel space, but you know, not coincidentally, you know, we work with one of the airports in Europe, and they, you know, they set this really big goal, they said:- “We want to be the best airport in Europe. And you said, Okay, that’s great. And they said, We want to do that by, you know, 2021!”

So a super short timeframe. And they really started thinking about, you know, everything about the experience of going to the airport, everything from, you know:-

How do I get my tickets?

Do I make that simple for people?

How do we notify them about things that are going on?

You know, like, has the weather changed other delays in traffic?

Has the flight been delayed?

Everything about every bit of the experience? How they can digitize it? How do they put signage in the the airport, so that, it’s in multiple languages, or, you know, they figure out the flow of traffic.

You start to think about all that, and you’re like, this is this is really amazing. This is sort of watching businesses reinvent themselves, somewhat in real time. And the fact that they don’t longer have to think about just the resources that they have. But they think about :-“How do I interact with weather?

Oh, I’m going to go to the Weather Channel.

Oh, how do I interact with social media?”

Oh, there’s there’s a whole bunch of tweets about some, you know, traffic thing, or there’s tweets about, you know, some crazy incident, like, how how do we collect all that and then make better experiences? That part is, is really fun, because you’re no longer talking about technology anymore. You’re talking about, you know, really reshaping these companies, businesses, and they want to think about the next 20 years for themselves. That’s, that’s very cool.

Nathaniel Schooler 41:42

Yeah, I share your excitement. I think seeing other people get excited about what they’re doing. Yeah, sort of share the excitement. I mean, you’re already excited, because you’re already involved with this, you know, but for them discovering it, and then actually, you know, having that sort of helping them hand must just be very, very rewarding. There’s no doubt about that at all.

Brian 42:04

Yeah, absolutely.

Nathaniel Schooler 42:06

Yeah. So on digital transformation, do you start sort of just by like an audit, like, say, say, I had a business that, you know, and I came to you and I said, Hey, hey, Brian, can you can you help me? I need to, you know, really transform digitally? I want to I want to become, you know, the most digitalized business in my space? Yeah, where where do you start? You start with an audit, and then and then list opportunities from there or?

Brian Gracely 42:35

So I think the reality is there’s there’s usually two places people start and one I found works pretty well, and one tends to lag. So usually, the companies or the businesses that start with a problem. So they have an urgency in the business somewhere, you know, maybe it’s as simple as, hey, you know, the business has been slow, we have to increase profitability. Okay, that’s fine. That’s typically kind of a normal thing in the business. But usually, when there’s something that’s a little more critical in the business. Maybe they had a major outage, that impacted their business, they ended up on the front page of the newspaper, or, you know, they lost something.

Usually, when there’s when there’s a criticality that starts the process, that tends to work itself better. And the reason for that is, number one, urgency sort of focuses people, but number two, it gives them a distinct area to work on, and it really forces them to say:- “Okay, how did we get ourselves in this situation? And, you know, do we do we just want to get ourselves back to sort of normalcy? Or do we use this as an excuse to really rethink what we did?”

And, the reason I use that example is, you know, you can apply this to sort of your regular life. You know, if if you wake up on January 1, and you say:-

“Well, my new year’s resolution is I’d like to lose 10 pounds.”

Okay, you could do that any year of your life for any reason, and you just sort of said you want to do that. But if you went to the doctor, and the doctor said:- “Well, your cholesterol level is is over 300.”

Well, now you’ve got a critical reason to go, I better lose those 10 pounds, I better figure out the best way to change my diet, I better figure out because now I’ve got an urgency. And so that the urgency driven starting point tends to work better. It’s it’s easier to drive funding around those projects, it’s easier to drive people being concerned about it, the ones where you just start with an audit and say:- “Hey, you know, all my other competitors say they’re doing digital transformation.” Those work, there is success that happens with them, they don’t tend to change nearly as fast because there isn’t an urgency. It’s harder to get funding because people think you’re just doing the day in and day out work. So I always typically ask people, you know, what’s the most critical thing happening right now? Or what’s the thing that worries you the most, as opposed to just saying:- “We’re changing for normal 10% efficiency improvements.”

Nathaniel Schooler 45:04

Pain is it is a great motivator.

Brian Gracely 45:06

Yeah, a normal human function that we all understand. Yeah. I mean, it pain and urgency.

Nathaniel Schooler 45:14

Yeah. And then from there, they’ve said:- “Well, we’ve got this massive problem, we’ve had a data breach!” Let’s use that as an example.

“We’ve had a data breach. And, we’ve really got a serious problem here. How do we manage our data? And how do we take this so that no one can get into our systems again?”

Brian Gracely 45:35


Nathaniel Schooler 45:36

Then you then you put together a plan, and then ask them what else they may need? And then sort of get with the urgent stuff first, and then and then progress to the more nice to have items at the end? Right?

Brian Gracely 45:49

Yeah, and I think there’s really, you have to think in terms of to sort of immediate paths, the first one is going to be, and again, think of these in parallel. The first one is, so you had this breach, you want to go to to the executive level of the company, and make sure they understand the criticality of it. But also make sure that they’re going to get behind, the things that the project needs to be successful.

So are they going to help get it funded?

Are they going to help make sure that they’re providing air cover in terms of schedules and making sure that people realize how important this is to fix?

So there’s a top-down aspect of it. But typically, what ends up happening is in parallel, you can go to the teams that are responsible for things and be like- “Hey, you know, not just, you know, do you know why this happened?” But in a lot of cases, they’ve already been researching, you know, what other technologies because we use to make this better? What best practices do we wish we could have been using, but, you know, we just didn’t have time to do it. So in parallel, you’re kind of going to, from the bottom up and saying:- “What do you guys think would help make this better?” Because they live with it every day, they typically know what would have been better. And it also allows them to say, hey, what restrictions? Or what changes can we make at the, you know, at the work level, really finding that balance between sort of executive top-down buy-in, air cover support, and then encouragement and the knowledge from the base in terms of bottom-up, you got to find a way to work both of those in parallel, yes, a plan falls out of it, and so forth. But those two things are really, really important. If you just do one versus the other. You either get lots of ideas with no support or lots of expectations with no ability to execute.

Nathaniel Schooler 47:35

Yeah, I can see that because it can be really de motivational when someone at the top of a business turns around and says we’re doing this, and then they come to your department and say we’re doing this, and you’re like, well, I don’t want that. We don’t need that.

Brian Gracely 47:47

Right. You don’t you don’t understand it.

Nathaniel Schooler 47:50

Yeah, or, you know, we know that that’s not the right solution, and ran and picking the right solution is certainly it’s got to be key, isn’t it? Really.

But I think I think the future is bright. I think that I think that a lot of companies are going through this right now. I mean, I was sort of looking at some stats the other day, and I think it was like 34% of businesses are like well into digitalization. Completely transforming using using data. But I mean, I think there are a lot of sort of outside factors that are coming in, you know, like GDPR, for example, over here. And then you guys have got, like, the California thing that happened over there, that was pretty serious in terms of like, government legislation and that sort of stuff. But I think I think, you know, starting off with a kind of, I hate to say it, but like the old school methods, like SWOT analysis and stuff, like still have value today, you know.

Brian Gracely 48:50

They do, I think what you end up finding is that the the long term planning processes that a lot of companies used to do, they’d have a 5 year and 10 year forecast or roadmap or plan, that model is really getting broken down. So you still, you still want to understand the SWOT analysis and the four box quadrants, and all those sort of things that you might learn in business school. But you very much have to be able to say, we’re going to do iterative planning, we’re not doing sort of waterfall planning, where we start, and we plan and plan and plan and plan and then we get to the end date to 18 months later, and we’re like:- “Oh, wait, all of our assumptions are no longer valid, because the market changed, right?”

You’ve got to, you’ve got to have things in place that say, our planning is going to be iterative, we’re going to collect feedback as we go along, we’re going to course-correct as we go along. You know, there’s a there’s a model out there people that that’s called, OODA it’s like, observe, they call it OODA loops. And there are things that the military use all the time. Because in military environments, you know, you have a plan, you have a battle plan, you know where your enemy is, but the enemy moves around, the inherent, it’s changed, the weather changes, the, you know, munitions change, how much food you have changes? And so there are things that we’re learning from other ecosystems that become applicable to business, you know, in environments that are going to change more frequently.

Nathaniel Schooler 50:14

Yeah, I mean, I think coming up with, you know, where you want to be having that big goal, you know, of like people like Wimbledon did, like, they said, Well, we want to be the best, the best tennis tournament in the world. And right, they’ve done it, you know, and, and they are doing it, they’ve, they’ve put digital transformation at the absolute core of what they do, even so far as, you know, taking over the broadcasting and saying, well, we’re in control of this now. And if you weren’t with us, then you need to pay us. And that’s what they did with the BBC, you know.

Brian Gracely 50:43

Right. Now, they changed their supply chain.

Nathaniel Schooler 50:45

Exactly. And then, they reverse the power. And, and I think that there’s a lot to be said for that. But, you know, keeping ethics at the core is, is is so, so important. And that’s what I like about when we’re doing I mean, they’ve, they’ve kept their relationship with the BBC, they’ve designed the way that they release updates, so that it actually benefits the BBC instead of hurting them, which I think goes to, you know, core ethics of a business and, and I like that, I think that there are so many interesting, exciting things going on right now. But we all need to remember that if we if we lose the consumerization right, then all of this technology and everything is going to leave us like the Flintstones anyway.

Brian Gracely 51:31

Oh, yeah. Ethics and working well with your partners and creating, you know, like Stephen Covey says, you know:- “Win Win” situations is always going to be good for your business, there’s going to be some change along the way, and you want to educate them. But yeah, it if you’re creating situations that are that are win wins that you that you want to create bigger opportunities that exist today. Those are always great starting points for, you know, working with people and trying to make things better.

Nathaniel Schooler 51:54

Yeah, well, thanks, Brian. You’ve been you’ve been really generous with your time and we’ve got 30 seconds. So it’s the best place for people to find you on LinkedIn. Do you think?

Brian Gracely 52:04

Yeah, LinkedIn is great. You know, Brian Gracely on LinkedIn, @BGracely on Twitter. I’m online a lot and any of those places would love to talk to folks and you know, my, my direct messages are always open. So love to talk to people about this stuff.

Nathaniel Schooler 52:18

Very cool. Very cool. Well, thank you so much, and I look forward to speaking to you soon buddy. They can attend to really appreciate the time.

nat 52:28

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