Paul M. Bellack
A few great ideas that bring unprecedented value must be celebrated. But what changes in organizational mindset, model, and culture should you enable for such value creation in a sustained manner and at scale?
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Transcript
Sanjog Aul [00:00:24]:
Hello, and welcome to the segment on CTN. To learn more, please visit ciotalknetwork.com. The topic for today is Creating Value At Scale. Our guest for today is Paul M. Bellack, who’s the Vice President and Global CIO with Magna International. Hey, Paul. How are you doing?
Paul M. Bellack [00:00:42]:
I’m doing well. Thank you.
Sanjog Aul [00:00:44]:
Great. Great. So, the topic that we picked today is because we hear a lot of organization dabbling into innovation, and they are doing it incrementally. They are trying to do the big bang innovation, but then for us to be able to move in a sustained manner, especially with digital offering so much opportunity, we have to figure out a way by which we could scale this innovation and not like a flash in the pan. So that’s the whole idea, Adma. How do you do that? How do you change the organizational DNA, the mindset, maybe the model in which you operate, the culture, and many other things? So for that, Paul, the first question is, do you think us doing those three year long innovation big bang approaches or the mantra that we use, fail fast, fail small, quickly do minuscule innovation, is that the recipe which is going to get us there?
Paul M. Bellack [00:01:50]:
Well, I think that by sort of concentrating on the extremes, doing some quick wins and some long term avoids the fat middle, and I think, frankly, that’s where a lot of the value is in transformational projects. So sort of midterm digital initiatives that clearly have some value at scale. The long term transformational efforts are risky to me because they don’t always work out and then you’ve expended a lot of resource and energy and so forth over a long term period, and the quick wins are useful in that they generate momentum and buy in and all that jazz, but they don’t have a lot of absolute value in actual value. So you can point to a win, but you can’t really point to a lot of value. I think the other thing that, really isn’t reflecting your question is a lot of these things depend on the context of the particular organization that you’re talking about. So in our case, in Magna’s case, it’s a very unique structure and organization. I’ve done quite a bit of management consulting in my background, and I’ve been to probably 100 companies, and ours is a very unique one in the sense that it’s an extremely decentralized environment, and that decentralization has been very successful and very helpful in our growth and in our geographic expansion and so forth, but decentralized environments have one unique property and that’s generally the absence of a few centralized solutions, and a lot of these transformational initiatives, at least the ones that we’re working on now, are sort of centralized because transformation in a decentralized environment, while helpful to the business entities being decentralized, adds some value. You don’t get the scale advantages. So to get scale advantages in an organization structured in this way, you need to do something more centralized, and that’s where the focus of our efforts are, and there’s various examples that I can point to about how we’re trying to do that. They’re all digital, certainly. I’m not sure that all of them are actually transformational in the traditional sense. I can tell you that they’re transformational in the cultural sense because, again, this is a decentralized organization that’s not used to dealing with centralized solutions.
Sanjog Aul [00:04:17]:
So the word value, right, it could be interpreted or misinterpreted, and it could also depend on who you talk to. So could there be, to begin with, a common definition or nomenclature that can be established on what is truly seen as valuable and what’s the unit of measure so that whenever an organization looks at value creation, whether episodic or scalable or at scale, we are talking about the same thing. Do you think there is confusion in that regard within the organization, very typically, as I’ve seen at least?
Paul M. Bellack [00:04:58]:
Well, perhaps I’m not sure “confusion” is the right word. There’s certainly opportunity. So value, at least in a company like this, which is a very bottom line driven entrepreneurial manufacturing environment, value is about dollars and cents, period. That’s what people respond to. That’s what we’re obviously a public company. That’s what the stock market responds to. So value in that sense is fairly well understood. There is value in, how should I put this, many, many companies have discovered value in data and analyzing, exploiting transactional data and being more insightful, making faster business decisions, the whole sort of data argument I’m sure you’ve heard dozens of times before. So we’re just working up to that kind of value now and it’s different than a dollars and cents value. Ultimately, hopefully it translates into dollars and cents but a lot of the value from data is more qualitative, the ability to make decisions faster, the ability to get more insight into certain business decisions, and so that’s a little bit of another sort of cultural change that we’re trying to recognize is the changing definition of value.
Sanjog Aul [00:06:25]:
So how about looking at value in terms of what you offer to the people who pay your bills or they pay you money to be with you or to create, and that’s how a customer comes into play. So when we talk about value creation, it could be to your internal customer or to your partners or to your external customers, and when you talk about dollars and cents, that’s more like an outcome as a result of the value creation. While the way I define this all seems to be not fuzzy, it is not directly measurable. It is experienced by someone, and as a result, we grow as a company. So if I’m creating value for my customer in the whole experience using digital or even in non digital fashion, that’s when they stay with us, and that’s what increases the lifetime value of a customer. If we take care of our partners, they work with us to give us a good supply chain, if you will, or work well with us to, again, create value for whosoever is involved. So is the word value to be defined in terms of the outcome or the activities which, when done in a cohesive and a thought out manner, will create the experience? Can I equate value to experience?
Paul M. Bellack [00:08:02]:
I personally believe that value is about outcomes, right? That people value outcomes. Outcomes drive P&Ls and outcomes drive stock market price and outcomes drive customer satisfaction, and it’s an interesting conversation, but at some point you have to kind of draw a line in the sand and declare where value is and my line would be on outcomes. So then the next question is, so what drives outcomes and of course it’s beyond just dollars and cents, and in our industry, dollars and cents happens to be a pretty important issue. We are essentially a B2B business. We are what’s called a tier one supplier. So we make parts that are sold to original equipment manufacturers: Daimler, BMW, Volkswagen, Ford, GM and so forth. So maybe we have several dozen customers. That’s a B2B business and those customers behave in a fairly homogeneous manner. It’s about cost for them, but it’s also about quality, warranty experience, time to market, supply chain, etcetera.
Sanjog Aul [00:09:31]:
So let’s talk about the value creation by the people who are in the frontline. So you may be a manufacturing organization and the person who’s working on the shop floor is not truly being exposed to the dollars and cents equation, but he or she still has to be led by showing them a vision of how their contribution helps create value.
Paul M. Bellack [00:09:57]:
Well, let me challenge your premise. The premise of the question is that, here, and again, it’s a very unusual conversation. Here, the people on the shop floor are probably the biggest custodian and champion of value, dollars and cents, and profitability. It’s a decentralized entrepreneurial bottom-up company and while if you added up all our sales that adds up to something like $40,000,000,000, it’s really a collection of something like 350 to 400 manufacturing facilities around the world, and each of those manufacturing facilities—quite literally 350 to 400 of them around the world in something like 30 countries—each of those manufacturing facilities are stand-alone entities, have a P&L on their own, reach customers on their own and they’re really independent businesses. So all the innovation, certainly industrial innovation and again there’s two kinds of innovation we can talk about. We can talk about industrial innovation on the factory floor and we can talk about business process innovation at the corporate level, which is something that I’m responsible for, but it’s completely two different categories, but in fact, the factory floor innovation, all of it takes place on the factory floor, and our challenge is to contain it, to try and standardize it so that it can be scaled and to share the experiences with everybody around the world. So if we have a manufacturing facility in Germany who dreams up some new analytics approach at the plant level for preventative maintenance or IoT or any of those sort of technologies, what we try and do is to capture that experience in a sort of a repository: how they did it, what vendor they used, their business case, that sort of thing, and share it with the other 349 plants around the world because for us it’s all about sharing the experiences because that’s the only way we’re going to get scale because the company, again, is this collection of hundreds of independently managed plants. So the secret at scale is to find some way to standardize and share the experiences so that others can duplicate the innovations that are done on the factory floor.
Sanjog Aul [00:12:31]:
So building upon your example, so you had this one unit which gets that spark, that idea, and you would like to harness the most value of it and that’s where your group comes in, but what does an organization do to foster an environment where more of such sparks happen? And yes, to harness value and to standardize, there will be an ongoing engine which you will be running, but you would like to have many, many more such sparks happening and it happens at scale. So when you increase the quantity, you don’t want to create chaos, but at the same time, you want more ideas to create value. Who is in charge of that? Who owns that part?
Paul M. Bellack [00:13:16]:
Well, who owns it? That’s always a difficult question to answer in this company because of the decentralized nature, but one of the mechanisms that we’ve introduced recently and had actually quite a bit of success with is we call it the Shark Tank, and we’re trying to mimic a television show. Do you know the television show, The Shark Tank?
Sanjog Aul [00:13:38]:
Yes. I do.
Paul M. Bellack [00:13:40]:
So we form a panel of judges who are equipped with a lump of seed money, and then we ask people from various plants around the world to present innovation ideas in 10 minutes. It’s just like the show. They come in front of the panel. They present their idea. The panel decides on whether it’s a good idea and whether we should fund it. So maybe out of 10 ideas that we see, we fund maybe 3 of them, so 30% of them, but what it does is number one, it provides a mechanism to introduce capital to some of these innovation attempts, and number two, it introduces an element of competition that the teams really find a lot of fun. It’s a fun exercise to go through. So we find that it’s a good way to engage people on the front lines to introduce innovation in their production facilities and find ways to create value.
Sanjog Aul [00:15:00]:
So when we are looking at the approach that you are taking in this race to innovate and you mentioned that you want to maximize, you are trying to build consistency in there. Does that not cannibalize on each organization? So you’ve got a federated model, it looks like, separate identities, but they would not want to be contained if one organization or one unit is more progressive in their innovation cycle. They don’t want to be contained because you are trying to standardize. So how do you allow them what I call is a box, but a very wide and very loosely attached box so that they still are within the structure, so it doesn’t go very chaotic, but nobody is held back?
Paul M. Bellack [00:15:53]:
Well, it’s a fine balance. We do try and standardize things, but the reality is that surprisingly few of our standards are actually mandated, and the standards that we do mandate are those standards that have something to do with cybersecurity or some obvious cases where it’s inarguable that everybody ought to be doing the same thing, but for the vast majority of services that we do and functions that we support, we encourage people. We always try and have a standard. We always try to encourage best practice, but we can’t insist on it because as soon as we insist on a particular standard, then basically we’re compromising the decentralized operating model, and that defeats the whole purpose of the company. So it’s this fine balance that we’re always trying to keep, and even in the case of industrial innovation on the factory floor, there’s very few things that we insist on, but security has to be one of them and architecture has to be another one, because if you don’t have some commonality in security, there’s an obvious implication of that. If you don’t have any commonality on architecture, then we can turn around five years from now and have a mass proliferation of every solution under the book and that’s not in anybody’s best interest, but short of security and architecture, we don’t enforce order. We try and get the teams to talk to each other to share experiences. One of the biggest levers that we found around innovation, particularly on the factory floor, is exploiting our global vendors. As the guy who runs global IT, I’ve got relationships with all the usual suspects, Microsoft, SAP, Accenture, Siemens, Amazon, you know, big vendors who we spend millions and millions of dollars with every year. So those are checks that I ultimately get to sign. That gives me a lot of leverage to send Microsoft or Amazon or Siemens to a plant and say, why don’t you help those guys out? Why don’t you find $10,000 to do a little bit of seed money for them? And the vendors are happy to do it. Because we’re such a large company, my procurement strategy is such that I don’t have a single vendor for anything. In the process that I’ve just described, exposing some of my global vendors to factory floor innovation, I can get Amazon to play with one factory and Microsoft to play with another factory, and Amazon and Microsoft are obviously natural competitors, and so that sets up a sort of a competitive landscape on the vendor dimension, and that gives us a little bit more clout too. So we’re trying to be quite thoughtful about it, but we’re always walking a line. The decentralized model is very important to this company and it’s central to success, but it’s kind of the antithesis of scale and standards. So we’re always trying to balance it, and we think that we found a reasonable way to balance it. We’re not perfect, but we think we found a good way to balance.
Sanjog Aul [00:19:17]:
Let’s take a quick break, listeners. We’ll be right back, and let’s talk about the adoption of anything that is created. So yes, the whole approach that Paul you use to standardize across the board but then even when you’re looking at things like digital, it is best harnessed when you do it in a holistic manner versus as siloed. So if you’ve got a bunch of manual operations and then you’ve got just one or two isolated digital, that really doesn’t take you to where you want to. What do we need to do so that even when we are introducing such innovations, wherever this triggered from, they are approached holistically versus point solution only because and opportunistic only. What parameters govern it, and how can we get to this ideal state where all innovation is always looked at holistically. Please stay tuned listeners. We’ll be right back.
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You are listening to CTN, CIO Talk Network with Sanjog Aul. To learn more about our program, please visit ciotalknetwork.com. Now back to the show.
Sanjog Aul [00:22:48]:
Welcome back. So, Paul, let’s talk about the siloed or opportunistic approach that people have typically used for innovation. In digital, we see more often than not that they would pick up the one which looks the lowest hanging fruit, just work on it without thinking the implications on the rest of the organization. What do you think would be a good way to prevent this and not just because it’s dependent on Paul or some other leader who’s going to drive this, but make it more like a process or part of the DNA that anytime when any innovation or value creation is approached, it is done so in a holistic manner?
Paul M. Bellack [00:23:29]:
Well, again, it comes back to organizational context, and most of our conversation is focused on factory floor innovation. At that level of the organization, the notion of siloing doesn’t really apply. Down there, the entity is the entity. Innovation takes place there, and they’re free to do whatever they want as long as they meet the standards and guidelines that we discussed a couple of minutes ago. The other dimension of innovation, digital innovation that we’re undertaking, is what I’d call the corporate or group level. So I should explain that, for argument’s sake, we make 10 different kinds of auto parts. So we make seats, and we make mirrors and so forth. Of the 350 plants that we have, those plants are organized into product groups. So there’s an organizational entity that we call the Seating Group that is comprised of the 60 or 70 plants that actually make seats, and that’s an organizational entity that exists. There’s a president of Seating and a whole organization around Seating that is responsible for the operation of the plants that make seating around the world, and then there’s a corporate layer that sits on top of the groups that provides services, HR, legal, marketing such that it is in a B2C business or B2B business, IT and so forth on top of all of that. So the other dimension of innovation that we talk about and we action here is innovation at the corporate and group level that innovates around business processes that apply to all the groups. So from the mundane, travel and expense reporting, capital planning. This is a business that’s all based on quotations that are sent to our customers. So there’s a quotation tracking process. There’s all kinds of business processes that take place at the group or corporate level and that’s another element of innovation, and so we very much try to avoid the silos because history has shown that these groups who are very large entities in and of themselves—Magna, as a total, is $40,000,000,000 in revenue. One of the largest groups is actually $12,000,000,000 or $13,000,000,000. So that’s a large company in and of itself, and without proper governance, that group could go and do whatever they choose to in terms of digital innovation. So what we try and do is to introduce cross-functional steering committees across all the groups to encourage them to commonly identify transformational digital opportunities, commonly prioritize them, figure out how we’re going to fund them, and then throw it over to the fence to the IT organization that we actually implement. So the short answer is the way that we try and prevent silos is through cross-functional steering committees with governance responsibilities, and it’s a classic response to a federated kind of company, and I’ve made the point a number of times that all of these issues depend on the structure of the company. We happen to be what in management literature would be described as a federated company. I’m quite familiar with one of our competitors, a little smaller than us, based in France called Faurecia. They’re maybe two thirds of our size. They have several hundred plants around the world in the exact same industry and a direct competitor, and interestingly enough, I’ve had a beer or two with the CIO there, and they’re 100% centralized. So they are the antithesis of the way that we run things, the way that we run IT. So they’re a pretty successful business. We’re a pretty successful business. The moral of the story is that you can have different, radically different organizational structures and be successful, and it all depends on cultural adaptation and how the company chooses to leverage the organizational model that’s in place.
Sanjog Aul [00:28:00]:
And, see, the traditional manufacturing, of course, had its own fundamentals, but then with the advent of something especially like IoT, where your OEM is no longer just going to build a widget and sell it and be done. Now you’ll be joined at the hip with the product itself depending on what you’re producing.
Paul M. Bellack [00:28:24]:
Well, depending on what we’re producing.
Sanjog Aul [00:28:27]:
Yes. Exactly. So I’m not sure of course, we do not have clarity yet on this conversation at least on what your organization may be producing, but if an organization is in manufacturing and is producing something which has got the tentacles, the IoT centric tentacles connected to their products, then your value creation doesn’t stop at creating a widget on the factory floor. There’s a lot more that’ll get attached to it and in digital age it will have a potential for ongoing innovation beyond just on the factory floor. So if you were to take that as the context and as a context where there is a lot of shift possible, even traditional manufacturing companies are also going in this direction, what does that do to your approach to creating value at scale?
Paul M. Bellack [00:29:24]:
So that’s a very good question. Up to now, this conversation has talked about process innovation on the factory floor largely. What you’re talking about is product innovation, and it’s an interesting topic because more and more of the products in this sphere and more and more of our products are subjected to product innovation, and these products are largely electronic in nature. If one segments the sort of the stuff that Magna produces, and this is how we organize the company, we have a particular supergroup of our company called Power and Vision that manufactures the video cameras, the lidar sensors, all of the components that go into autonomous driving or driverless cars or what we call ADAS, which stands for Advanced Driver Assist System. So all the disruptive technology that your readers are reading about. We’re major players in that world, and then a portion of our company makes the traditional frames and pumps and that sort of thing that automotive parts makers have been making for years, and then there are some surprising products that we make that have a surprising amount of technology value add, if you think about a seat. In a half-decent car, a seat has an eight-direction power seat. It’s heated. It’s cooled. It’s an extremely complicated piece to manufacture. It’s often manufactured to spec on the fly, on a just-in-time basis. There’s all kinds of electronics involved in that world. So the point is that a portion of our products have this sort of electronic component to them, and we’re just a supplier to the industry. There are emerging standards on how all of these products can communicate with each other because in a car there’s a standard bus that all these products sit on. So how are we going to protect all these products from cybersecurity hacking? How are we going to do integration? There are emerging standards around all of that, and I think quite frankly the industry is a work in progress. Nobody’s actually prepared a definitive standard for any of that. All the OEMs and all of the big tier one parts suppliers have a lot of options to scale, and because we’re a tier one supplier as opposed to the ultimate customer who’s the OEM, we don’t control the supply chain. We just participate in the supply chain.
Sanjog Aul [00:32:33]:
And especially when you’re in this connected or smart manufacturing type of era and your products may end up connecting, then it is no longer even just centered around product. Because once it’s sold, there’s a lot of data coming, and then you’re supposed to create value adds using that data and create value for the right. So this creates a totally different or rather spawns an ecosystem which transcends the product itself.
Paul M. Bellack [00:33:02]:
I agree. It’s a different value chain entirely that can arise from that. It’s still sort of a little hypothetical, but it can arise from that. If you take a look at the automotive industry in general, it’s probably one of the most disrupted or soon-to-be disrupted industries available on Earth. The basic automotive manufacturing industry has been around for something like 120 years, and in the last 5 and in the next 5 years there’s just so many things that are going to disrupt electrification, driverless cars, mobility as a service, all that jazz. It’s going to profoundly disrupt the automotive business and thereby its suppliers and we obviously have to learn to adapt to that. So one of the value chains that I think you’re referring to is the value of the data once a car is in flight or once the car has been sold. So do we put sensors in the frame to detect stress, for example, in the frame and thereby predict the failure of the frame? Do we take all the data from a driverless car that, by the way, we don’t control and somehow use big data or AI techniques to take a look at the driverless car behavior and what led to an accident or a stressful trip and try and develop some sort of relationship with that? There’s a huge potential value from all of that. It’s difficult as a supplier in this industry to lead it. Maybe there are some competitive advantages for us, but we’re a B2B company, and we kind of sell what our OEM customers ask us to build. So in a way, we’re sort of at the behest of them, and a potential source of competitive advantage for us is to figure out what these additional value chains are and how it might appeal to them.
Sanjog Aul [00:35:14]:
So are you or your people on the floor or in your corporate all waiting for the innovation to be triggered by your OEMs for you to start thinking, or are you taking ideas to them to say, hey, this is how we can disrupt, and does Magna lead the change?
Paul M. Bellack [00:35:35]:
Well, a hybrid. We’re certainly not waiting for anybody. It’s difficult for us to be the 100% or the exclusive leader of change because we’re a supplier to an industry that manufactures vehicles from our parts, but we can’t be an aggressive contributor to defining the future. For example, one of the things that a lot of people don’t know about is that Magna has a fairly substantial investment in Lyft. That was a strategic investment. It’s a meaningful investment. I think it’s public knowledge that we made a $200,000,000 investment in Lyft, and so that’s something that we took on ourselves to partner with them to understand all the implications of driverless cars and how that technology could perhaps impact our technology in simple ways. For example, Magna is the world’s biggest manufacturer of automotive video cameras—the little camera that sits on your bumper and shows you what’s behind you. So we’re the guys who make all those cameras. We must make millions of them. We have a capability in electronics, and we apply that capability beyond the trivial. We’re also a fairly large supplier of lidar, which uses laser beams instead of radio beams. Lidar senses in all these driverless cars and figures out what’s in front of the car. We are the manufacturer of the bits and pieces that define the future of driverless cars and where we try to package them up. We’ve got a number of innovations around packaging them up, making a starter kit for OEMs who are behind that they can use our technology. So I guess your question was, are we waiting or following? We’re pretty aggressive to the extent that we can, and again, we can’t be the absolute leader in this because we’re part of a global, very tightly integrated and complicated supply chain to which we’re not the end. We make parts for the OEMs. That’s our mission.
Sanjog Aul [00:38:04]:
Yeah. Let’s take a quick break, listeners. We’ll be right back, and let’s talk about the uncertainty, the volatility, the ambiguity, if possible, and see what are those doing to impact our ability to create value at scale, and is there something we can do as an organization in terms of its design or whatever other things we could change so that the uncertainty and the volatility don’t cripple us, but instead we are able to manage them effectively and move ahead and charge ahead and create value at scale. Please stay tuned listeners. We’ll be right back and explore.
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You are listening to CTN, CIO Talk Network with Sanjog Aul. To learn more about our program, please visit ciotalknetwork.com. Now back to the show.
Sanjog Aul [00:41:17]:
Welcome back. So, Paul, when we are looking at value creation, that’s all good, and we have to move forward, but there is also a sentiment that things are moving way too fast. There is a dynamically shifting marketplace. Disruption is happening, which is fundamentally creating uncertainty on how we will be positioned in the new environment where the market players, the market dynamic will be changing and continually changing. So do you think there is a way for us to insulate ourselves from the uncertainty and the volatility while we are creating value or while we are attempting to create value at scale?
Paul M. Bellack [00:42:01]:
Well, I think there’s things that we can do organizationally to insulate us, not 100%, because it’s a new reality out there. There’s more disruption expected in the automotive industry in the next 5 years than probably what occurred in the last half a century. It is certainly a different environment. I think what we can do organizationally is find a way to be, number one, much more agile, be much more nimble. This is a big place. We have something like 175,000 employees around the world, and we have to find ways to identify opportunities very quickly, to respond to them very quickly, to fail fast if they don’t look like they’re going to be good ideas, to get funding much faster than the traditional way because this is an old style manufacturing business and capital has to be approved and all that jazz. So I think there are ways to organize to be much nimbler and much swifter. There are cultural changes that have to be introduced that say it’s okay to fail. Take two or three months, see if there’s something there. If there’s nothing there, it doesn’t matter that you’ve spent $1,000,000—let’s move on to the next one. That’s a very different mentality than conventional manufacturing, which is very much margin and profitability oriented down to the last penny. So there are organizational and cultural things we can do to change our behaviors to insulate us in the way that you’ve described. Is it going to be 100% insulation? Obviously not, but the risk-return profile in this business has changed substantially. We need to get on board with that or else it’s almost an existential kind of question. This is the way that the industry is moving and we have to modify and adapt to behave in a manner that keeps us agile and ahead of the competition. A lot of it has to do with data. All of these fields are extremely data intensive. IoT, analytics, AI—almost all the things that we’ve talked about, even conventional innovation around corporate business processes, they’re all about data. That’s a challenge that we have here to deal with. We understand what they are and we’re working hard to put the appropriate foundational investments in place to manage data and hire the right people.
Sanjog Aul [00:44:52]:
So any specific tactic has been bearing the most fruits for you in this area where you kind of create a good insulation against the volatility and get your people to stay motivated and the resources to keep coming so your value creation doesn’t stall?
Paul M. Bellack [00:45:11]:
Well, we’ve come a long way in forming little sort of research and development SWAT teams to take a premise, find the data, identify the data that’s necessary to validate the premise, even if it’s sending people to a plant, do the tooling in a very quick and dirty manner that we would never have done before. Many of these ideas deal with terabytes or petabytes worth of data. In the old days, it would be unthinkable to deal with data like that. Now we can call up Amazon and within 15 minutes we’ve got a drive in the sky ready to do it. We’ve got several examples of innovative approaches to solving data-oriented problems or addressing data-oriented opportunities. That’s been quite fruitful for us and is quite different than the status quo, the way that the company usually works.
Sanjog Aul [00:46:18]:
Let’s talk briefly about the people because they are the ones who are essentially going to be leading the charge or supporting the innovation and value creation. Now not everyone signed up for this when they joined. They are also not ready to move wherever the company wants to move. So you cannot just keep firing people either. How do you balance all of this?
Paul M. Bellack [00:46:48]:
Well, first of all, not everybody’s wired for the transformation that you described. To lead transformational efforts or even to participate, you have to be brave, you have to be able to challenge the status quo, think about new solutions, say things that others might not want to say. Not everybody is wired for transformation, and I think we need to recognize that because it takes a pragmatic mix of people. Not everybody’s wired to do business as usual, and the reality is notwithstanding all of the exciting and interesting things we’ve talked about on this call, a large percentage of our business is still business as usual—crank out the parts and make some money. So there has to be a balance in that approach because you risk sacrificing the current state of affairs to seize a future state of affairs that as we’ve acknowledged in this call is undefined and uncertain. There has to be a balance in the way you deal with people, in the way that you train people, in the way that you recruit people. It’s clear that our recruitment approaches have changed in the last 5 or 10 years. It’s clear that the set of competencies and skills we need to effectively compete in the future are completely different. Three years ago, I had only been here four years. Three years ago, if I said we ought to hire a data scientist, people would look at me like I have horns. Well, guess what? We have more than a few data scientists now, and all they do is deal with the data. So there are many solutions to it, but it begins with a recognition of pragmatism that you have to have a balance in anything that you do.
Sanjog Aul [00:48:47]:
So when you are looking at such people who are coming up with these ideas, and the ones who are being hired, are you going to base that style of hiring and style of motivating based on what you do today or are you going to look 5 years ahead while you do not have a crystal ball, but then you will end up have to phase out people who want to do the same old, same old?
Paul M. Bellack [00:49:22]:
I think that the latter part is probably a little premature. Things in this industry take some time to change. There is no doubt that new skill sets are required and therefore new recruiting techniques are necessary. The engineer that we would have hired 5 years ago, the specs on that engineer, like the personality specs on the engineer, would be quite different. We have several thousand software developers working for us, writing code behind our electronic products. That’s a growing area and in that area, we’re competing with the Googles and the Amazons and everybody else looking for coders. So there are certain skill sets that we’re missing and recruitment techniques are absolutely going to have to change and be different than what they were, but there is a meaningful portion of this business that we think is going to be around for quite some time because if you think there are going to be vehicles on the road, then we’ve got a lot of content in just about every vehicle on the road anywhere in the world. You have to take a balanced approach and take this innovation in stride. It’s not going to represent the lion’s share of what we’re going to be doing, at least in the next decade or so. I think all bets are off in the distant future.
Sanjog Aul [00:50:48]:
A question regarding compassion and care. You mentioned your organization is going to measure everything based on dollars and cents but the ones who are going to help make you or keep you relevant as an organization are the people who should feel that the organization cares for them. How do you prevent this mindless chase of something new—keeping the lights on or keeping our shareholders happy—from cannibalizing and destroying the people-centric culture?
Paul M. Bellack [00:51:39]:
The company has a fairly long history of a very paternalistic, people-oriented environment. We’ve got, I think I mentioned earlier, 175,000 employees around the world. A shockingly small percentage of them are unionized. We spend a lot of time and energy concentrating on taking care of our teams. We have a charter of rights that has been in existence since the company’s formation 60 years ago. So we think that we’re much better than average in terms of establishing a caring, compassionate culture, taking care of our people, and trying to behave in ways that are not ruthless. In my operation, as disruption takes place in IT, we use fewer and fewer on-premises services and more and more servers at Amazon, Google, and Microsoft. That results in change of many people’s jobs. We don’t need as many people to run servers. We need more people to manage vendors and cloud services. That doesn’t necessarily result in job losses. It results in job repurposing. The company takes the responsibility to repurpose people very seriously. In any of the examples we’ve talked about, there are opportunities to repurpose people, to get them retrained. Once we have an employee who’s part of the family, that has value to us, and we’d rather repurpose and retrain them than to discard them on the heap of disruptive changes.
Sanjog Aul [00:53:32]:
On behalf of the show and our listeners, thanks so much, Paul, for sharing your thoughts, and insights regarding how organizations can take very specific concrete steps towards the creation of value at scale. Thanks so much.
Paul M. Bellack [00:53:48]:
My pleasure. Thanks for having me.
Sanjog Aul [00:53:50]:
Thank you, and listeners, please like us on Facebook. Search for CTN, CIO Talk Network, and be sure to follow us on Twitter and join our LinkedIn group. Thanks again for listening to the segment on CTN. This is Sanjog Aul, your talk show host. Till next week. Take care and God bless.
