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18.01.2019 15 min Watch Video

Kylie Bonassi: Welcome today, Paul, thanks for joining us. We’re truly excited to be working with you next year to help bring our vision to life. One of the questions I have for you is, having worked in UK and US for so many years, and given Australia is so behind the 8-ball when it comes to digital transformation, why have you made Australia home?

Paul Shetler: Well, I moved here a couple years ago to do a job and I’ve really grown to love the country. I think it’s a great place to live. I mean, I just don’t really think you can beat the quality of life in Australia. Now, everybody says that but, you know, I moved here from London, where I was used to, you know, gray skies, and overcast weather and all this kind of stuff; and to come to the place where, you know, everything is kind of blue and warm and everything is a great thing. Now, that said, I also think there are huge opportunities here in Australia. When I first came here about three years ago, one of the thing that really struck me was that there was a, I’d say, a generalized sort of lack of capability, or generalized lower level of capability when it came to digital. It was very difficult to find product managers. It was very difficult to find really experienced UX designers. People who were coding who knew the latest technologies weren’t that easy to find. And, certainly, almost nobody was used to working in a multifunctional, multidisciplinary team to deliver software. Now, in the space of three years, you can already see an incredible growth of talent. So I think, although, we face a lot of competitive challenges, already there’s been a tremendous upsurge in capability which I’ve seen with my very own eyes having worked in government and and other places like that. I’ve seen the evolution of this. I’m actually really pleased with that. I think if Australia gets it right, in terms of the way it actually structures its companies and unleashes those talents, then we’re in an incredibly good position, and that’s what I want to help do.

So, that’s where you feel you have the biggest impact?

Absolutely, yeah.

And I hear your mom and nephew are flying down tomorrow. Where are you planning on taking them?

Well, my mother’s been here before. So she’s been here once before. When she was here, she went Canberra and she was in Sydney. My nephew has never been here before and he’s been raving about it and been running around like a madman talking about what he wants to do. So, he’s already convinced me that I’m going to go Uluru and we’re going to go there at night and we’re going to look at the Milky Way and take some photos of it. And then, I think after that, what I want to do is go to Cairns. I thought sort of going from Sydney, to the desert, to the rainforest might make a nice triangle.

Nice, help them ease into the easygoing lifestyle here.

Absolutely.

Having said that, you know, does Australia’s easygoing life style condemn us to being complacent?

Well, I do think there’s a, I don’t think we’re condemned to being complacent. But I think if you kind of look at say the last 26 years in Australia, we haven’t really faced any real crises. The management hasn’t really been tested in the same way that it has been in the United States, in the UK, and other countries. As a result of that, you haven’t seen the same upsurge in digital that we saw, say, in London or we’ve seen in the United States; because, to the large extent, digital was a result of upheaval in those economies and then competitive pressures at the same time, and people coming together with very different skillsets and realizing, oh my God, there’s some opportunities here. We can take advantage of them. And they did, massively. And we haven’t really seen that yet. Now, I do think we’re going to be seeing that pretty soon and I think that will be, that could be viewed in two different ways. It can be viewed as a bad thing or that can be viewed as a tremendous opportunity. In my view, it will be a tremendous opportunity for us.

I’ve heard you talk about, as the economy becomes digital, Australia will face greater international competition.

Absolutely. And local companies will be eaten alive by the likes of the Albies and the Amazons of the world if the domestic competition is not encouraged. And, really, at that, we’re committed to helping local executives create real advantage for their company, their customers, for the economy and also their children’s immediate future.

So for you, what is the definition of advantage?

So the definition for me, when I think about advantage, I think about advantage in the competitive economy, because that is what is coming whether we like it or not, right? You know, Leon Trotsky said, you may be interested in war but war is interested in you. And I like to change that to you may not be interested in competition, but competition is very interested in you. In Australia, we have nice, fat margins. We have all the things that people kind of want.

“Competition is coming. As everything becomes more digital, as everything becomes software, as everything becomes a service, as everything becomes delivered over the internet, it’s very hard to keep competitors out.”

And, as those companies come in with very attractive offers, if all you’ve got is something which is kind of clunky and doesn’t really meet users’ needs, you’re going to find out very, very quickly. We’re already starting to see that in certain sectors. This is not something that’s brand new. This is not just the declaration of dire warning. So, I think Australian companies need to start thinking like software companies. They need to start thinking about how they can interact with their customers and respond in real time based on what they learned about their customers, because that is exactly what Amazon is doing. That is exactly what Alibaba is doing. And they are coming here. And that means they need to retool their companies. They need to change their internal processes. They need to change their internal culture. But they do that not through a culture change program, but through changing their own internal incentives. That’s what culture is. It’s the sum total of interactions you have in a company and how people learn to behave. It’s about the whole thing. It’s about changing your entire company so you can actually become a modern, 21st century company that operates with internet speed, with internet quality. You have to be able to, if you are a company and you’re interested in working with, say, startups, and you want to bring in some of this technology, you think it may be able to help you. You’re going to have to be able to procure from them.

You’re going to have to look at how your own internal processes allow you to participate in the modern economy or lock you out from the talent. – And you talk a lot about, you know, you can’t experiment and fail with these huge projects because you’ve got huge budgets. So, make them small and cheap. And, in a world where we’re constantly making things, we should be looking at prototyping, testing, seeing what works and then choosing the better alternative. – Yeah. – Inexpensive, cheap, and doesn’t require a big business case.

If the best thing that a CFO can do is to free up the way that they do their funding and stage release of capital instead of this one big bang, which might go right and might go wrong, how would you recommend shifting to that mindset, that continued delivery, continued evolution?

So, companies talk about failing fast, and companies talk about agility, and they talk about design thinking, and they talk about learning from mistakes and continuous delivery and all these kinds of things. But that requires a shift in thinking from project to products. Projects have a beginning date and have an end date and they’re very well specified and you know exactly what you’re going to be getting. You know, you build a project to put a man on the moon. You’ve done a project to build a nuclear submarine. You do projects to build bridges. They’re all very, very, very well-specified. People know exactly what they want beforehand. And there really is not much room for experimentation because we kind of know how concrete works. We don’t really need to worry about that too much. And we also know how geometry works.

“When we’re dealing with products, however, most of what we consume in our every day life are actually products. Think about pretty much every thing you use, it’s something which was sold as a product. And those things, particularly, when they become translated with software, are totally malleable.”

They can be changed from one minute to the next and it can be very cheap to do that because software is dirt cheap. Software, frankly, is disposable in most cases, particularly if you’re building it yourself. You have complete and total control over it. So, it requires the ability to start thinking in term of what you do. No longer in terms of beginning date and a start date and a very certain set of specifications, but as something which is literally responding in realtime to what you know about your users. You can’t do A/B testing on a road. You can do at with software. And that means you’ve got to change the way you fund these things. You can’t say everything has to be specified upfront. You have to allow for early experimentation to see did this actually meet a user need? Is there a user need this is meeting in the first place? Then, does it actually meet that need? Is there a need? Do we meet it? Those are things which, typically, when you look at IT, people often don’t even ask those questions or have no way of validating those answers before they go into a large project. So, absolutely. You need to start focusing on build early prototypes, early alphas, testing with users in realtime. And then, when you’ve reached a certain point where you say, yep, we do know the answers now. This actually is what we want to do. Then, you can talk about scaling things up. At that point, the more traditional tools in the arsenal of the CFO, and the business case and all that, they have a place there. But then, you also know what you’re building. You’ve got a certain level of certainty you didn’t have before.

Can you talk to the importance of benchmarking and visibly knowing where you are in that digital maturity on your journey?

I think it’s massively important, right? Companies need to understand, you know, if a software company is entering into their market, if an Amazon is entering, or an Alibaba, or an Apple, or somebody like that is entering into your market, they’re going to have a certain set of ways that they operate. They’re going to have a certain set of advantages, frankly, right, in the way that they operate, in the way that they build, and the terms of capabilities they have with their just general approach to the market. And you can quantify those things. You can look at them. You can look at them both qualitatively and quantitatively, you can say, that is what it is. Now, how do you stand relative to that? What is your position relative to that? Do you have the right people? Do they have the right skillsets? Are they working in the right ways? Are they building the right things? Those are all quantifiable things and I think people need to start seriously looking at that because, otherwise, I mean, how are you going to compete?

What evidence should we be collecting, though, to show that it’s money well-spent and the project’s on track?

I think you need to be looking at a few things, right? So, first off, I mean, when I look at like, if I’m looking at digital maturity, then I’d be looking at, obviously, how do they actually deliver their product? I’d be looking at what kind of skillsets do they have? What kind of roles do they have? What kind of capabilities do they bring to bear? What’s they general approach? And then, I’d be looking at, okay, so how fast are they actually delivering stuff? How easy is it for them to actually change product? And things along those lines. Now, ultimately, you should be able to say, how are they, how well do they track user satisfaction? How quickly can they respond to changes to that? How quickly can they respond to competitive pressures?

So when you look at change and transformation, how would you recommend measuring progress in incremental value?

So I think there’s two things you’ve got to look at here. So when we’re talking about incrementalism, incrementalism has to do with the way you’re actually doing your products. When you’re doing your products in an incremental way, you are shifting, you are funding things in an incremental way. But, actually, in my view, there’s also some big changes you have to make that are not incremental, right? You’re going to have to make some fundamental decisions in terms of how you do your funding. You’re going to have to make some fundamental decisions in terms of how you do your governance, in terms of how you procure, in terms of how your IT works and all those kinds of things. Those aren’t necessarily incremental changes. You may be able to sort of put them in the sandbox area or do a kind of lab type of thing. But, at some point, you’re going to have to make them real. You’re going to have apply them across the board. And that’s a big change. So incrementalism is how you deliver a particular product. But to be able to even do that, sometimes, paradoxically, you’re have to make big changes inside your company.

So you need to map out that roadmap?

Absolutely.

And how do you even get there?

How do you even get there? Well, I think, what you first do is you look at, again, what kind of company do you want to be, right? How would a software company be operating in the market that you’re operating in? What would be the characteristics of that? What kind of skills do your people have? How would you be organized internally? How would things work? You need to actually sit down and think about these things and not just respond sort of in a knee-jerk fashion; immediately copying this or copying that, but actually considering what it is in your industry. Because that’s the essence of competition, right? If everybody could just sort of copy each other, then there would be no competition, right? It would just, literally, be copying and then, immediately, there’d be a winner. But there is an element of strategy. There is an element of knowing what is right for your market, and what do your customers need, and how can you best do that? So I think that’s the essence of it and that’s the secret of it.

Next year, one of the conversations or the topics that you’re really discussing at our Edge events is how to fix the Square of Despair. For those out there who don’t really understand what that means, can you share the idea behind the Square of Despair?

Yeah, the Square of Despair. So when I first joined the British government, I mean, I had worked in banks, I’d working in financial messaging companies, I’d working in software companies like Microsoft and Oracle for years. I’d seen all these kinds of things. So when I moved to government in Britain, it was in administrative justice. So, you know, we did very non-digital things, as well. We managed prisons and courts and things like that. And we were tasked with delivering software really, really quickly. We had a very accelerated program and I put everything on a 20-week time-box so that, if you couldn’t get things done within 20 weeks. There were four stage gates of evaluations. Then, sorry, I wasn’t going to accept that. And so, we were the only department which got things through, got four exemplars through, and all this all to live, all at lowest cost, in the entire government. So we were kind of becoming very well-known for what we did. Now, after I’d been there for a few, after I’d been there for about a couple of months, I met with some people and they were saying, you know, Paul, it’s really interesting. We brought you guys in because we wanted you to help us solve these problems.

But, actually, we’ve never done these things before. And we don’t really know where the problems are. We just know it’s a minefield and we want you to run through it. And so, we started talking and we came up with a, we kind of realized that there were a few areas where we sort of seeing consistent patterns across all government agencies, across all government departments, of things that were holding us back. And somebody said, oh, yeah, that’s the Square of Despair. That immediately resonated with all of us. And starting the first part of the Square of Despair, sort of the original sin, and I guess I should probably preface this by saying, it assumes a generalized lack of capability, alright? Not a huge amount of digital capability. And the original sin on top of that is the business case, the insane business case, the one that takes 500 pages, the one that costs a million dollars to do, the one that everybody kind of rubber-stamps and pretends that they understand, and nobody really knows how the benefits are going to be realized, right? But it’s there and it specifies everything without every having done any prototyping or ever tested anything with the user. It’s also done on a day you know the least about the project, which is the day before you start it. That’s the original thing. From that, we get to really crazy governance. The ones where you have the risk management set, you have the risk management register which is sent out. And again, it’s 300 pages. It goes out an hour before the meeting and everybody pretends to have read it. They said, yeah, I’m cool with that. They send it on. And so, on the one hand, it’s all very, very heavy. Come on, let’s face it. 300 pages is really, really heavy. On the other hand, it’s remarkably lightweight because no one’s taking it seriously. Very, very strange, right? From that, you know, you’ve specified everything. You said it’s all going to be this way. But you don’t have the capability. So what do you try to do? Well, gosh, I guess, we’re going to have to send it up to, I know, an integrator. Great. So procurement, right? So you wind up having either everything sort of rolled up into these gigantic contracts which are very opaque, which have the things which change all the time, like the end-user interface and stuff which you really don’t know much about. And then, the stuff which doesn’t change at all, which you typically look at when you’re looking at the pricing and you say, wow, they have a great deal.

Well, the problem with that is whenever you have found things that you didn’t account for in your business case, which you probably shouldn’t have written in the first place, it’s a change control request. It’s called ka-ching, ka-ching, ka-ching, ka-ching. And because your procurement isn’t set up in any other way, you can only do it that way. You’re not actually able to bring in small chunks of capability, or small pieces of software so you can actually act as the integrator. And that foresight is an inappropriate IT. Because, at the end of the day, all this relates to, then you wind up having a very expensive program that took a very long time to deliver, which actually had relatively shoddy, although very heavy governance, and which didn’t deliver what you wanted it to do. And we call it the Square of Despair and it’s at the heart of pretty much every government organization. But, surprisingly enough, I don’t think it’s only government. So whenever I’ve spoken to audiences in Australia and I’ve mentioned the Square of Despair, and I talk about this, regardless of industry, there is always like, oh my God, he’s described exactly what I’m dealing with. It is precisely that. And then, you know, everybody tweets about it and it goes all over LinkedIn and everything else. Because everybody recognizes it. And everybody knows it’s a problem. And it’s got to be solved for Australian business to move forward. Because, ultimately, it signals a lack of seriousness. But what we’re dealing with in Australia right now is very serious, right? It’s the future of our economy. You mentioned this at the very beginning of the interview. It’s the future of our economy. It’s people’s children’s future. You’ve got to get this right. You can no longer, you know, have this kind of pantomime with the Square of Despair anymore.

Se want to inspire the new generation. Who do you believe responsibility is this?

Well, look, it’s, I think, to a very large extent, I think who are sort of coming up in the digital sphere already are already, to a very large extent, inspired to do the right thing. They are. That’s why they’re in the job. You know, particularly, I think, if you’re looking in government and areas like that, that is definitely the case. What they need is to be able to be, they need enabling, right? One of the reasons my team was successful in administrative justice was that my boss, who was its chief operating officer removed a lot of the impediments, removed those four sides of the Square of Despair. We were no longer boxed into it, and we could deliver, and we could do stuff.

“Now, that is the most important thing that a senior executive could do today. They need to understand where their organization stands relative to a software company… They need to actually remove the impediments and make it possible for people to do what they want to do.”

Can you share so new ways of doing things in 2019, or recommend some new ways of doing things?

We’re going to be working with companies in 2019 on precisely this focus on the Square of Despair. For us, that’s the single most important thing we can do. Like I said earlier, we’ve seen a lot of new talent starting to come into Australia. I’ve noticed this over the last few years. People now need to be unleashed. They should no longer be spending their time batting their heads against this, trying to get things done. They just need to be allowed to get on and do it. And that’s our job.

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