Why You Need to Become a "Learning Organization" During Digital Transformation: Q&A with Cloud Foundry

Your plan for cloud is a critical part of any digital transformation strategy, and while the cloud computing’s availability as an innovation enabling tool set is still relatively new,  the cloud landscape is maturing quickly. From the “big three” hyperscale service providers of Amazon’s AWS, Microsoft’s Azure and Google’s GCP, to enterprise offerings from IBM, SAP and Cisco, to a whole new ecosystem of enabling and optimization platforms, like Cloudability, cloud solutions for digital transformation strategies are getting more precise, more flexible and cheaper all the time. 

Promoting adoption and development of cloud isn’t just the purview of the firms mentioned. Enter Cloud Foundry, an  open source, multi-cloud application platform as a service  (PaaS) governed by the Cloud Foundry Foundation, an independent non-profit open source organization, formed to sustain the development, promotion and adoption for Cloud Foundry, software originally developed by VMware and then Pivotal, a joint venture of EMC, VMware and GE 

We sat down with the Foundation’s executive director, Abby Kearns, and their CTO, Chip Childers, at their recent users’ summit in Philadelphia – to talk about why ROI isn’t everything, how to leverage your workforce in your transformation journey and what area of the world are leading the digital transformation charge today. 

Let’s start with the basics. What’s the aim of the Cloud Foundry Foundation, and how did you come to join it? 

Abby: The aim of the foundation is really to ensure the long-term sustainability of the technology, the community, and the ecosystem. So, when we think about the work that we do here at the foundation, it’s really fostering all three of those things; drawing in and supporting members, supporting end users, as well as supporting the committers and the contributors that are continuing to make Cloud Foundry the platform that it is today. 

I’ve been with the Foundation for over three years, I joined as VP of Strategy about three years ago, and then about two-and-a-half years ago the Executive Director that was here prior left for a new role, I took over as Executive Director. I’ve been heading up this party ever since! 

Chip: I joined in February of 2015 -- It was about two weeks after it became “a thing.” The software at the time that we were supporting the development of, it had come out of Pivotal Software, which was a spin-out of EMC and VMware.  

So, before Pivotal Software, the Cloud Foundry platform existed at VMware, as an early stage project. I came to join right as they were creating this independent organization to help support the collaboration across the vendors, which was one of the key things -- it’s commercialized by a number of different companies, so I joined up to basically help bootstrap the process. 

Let’s talk about the overarching theme of your summit, and let’s lay out what the key challenges are for today’s cloud-enabled deployments. If you can put your clients’ hats on for a moment, are firms ready for this new cloud world? 

Abby: We’ve talked about data from our last round of research, our Global Perceptions Survey [at the summit], which is a survey both qualitative and quantitative for enterprises around the world, so beyond even our user base.  

What we’ve heard resoundingly is that yes, they are, and more of their critical applications are now running in the cloud, over half of are now running them in the cloud, and more importantly over 75 percent think that digital transformation is important, and that it’s a constant set of changes. We tried to make that clear on the keynote stage as much as possible, that digital transformation is more than just about the “next shiny technology,” but instead it’s a constant state of change and evolution.  

I was really excited to hear stories from Comcast, T-Mobile, and Home Depot about how that is the core of what they’re investing in, and the culture and that change is part of who they are now as enterprises. So, that’s the long way of saying, absolutely, I think that they’re investing in it. 

Chip: Cloud-based computing, it’s there, the transition is just going to take the same amount of time that most transitions take, and it will be additive in terms of the overall [IT] architecture, a lot of these companies. But in that same survey, we focus on a few things, one of them is technology and a meta question of cloud but also some specific technologies underneath it – but we also look at the topic of digital transformation. 

When we think about cloud adoption, I think almost an irrelevant question now. I think the more important one is: are organizations able to make the shift into becoming learning organizations? When asked, “What’s the biggest challenge that you face?” the majority rightfully, I think at this point, are saying it’s not the technology. Yes, maybe we could do with some help with people, but it’s actually the core culture of the organization. 

So, a lot of the end users of the platform that we support have gone through a full organizational transformation, not necessarily the whole company has changed, but they’ve recognized there’s a path to success, where you shift from using technology in a very cost-center based way, to instead thinking of it as it’s either going to be a strategic enabler for your business, or you’re going to go out of business. 

We’re going to come back to that issue, but tell us more about the survey again? 

Abby: The Global Perception Survey, it’s not that catchy of a name! It’s our ninth survey, we’ve been doing these for four years, and the importance of that is that we have time-series data now too. So, we can go back to 2016 and say, “How has this changed over the last four years?” and that often is as telling as the answer to the question around how companies have evolved.  

In fact, we had a long conversation and we looked at the data, and we were doing a “compare and contrast,” and four years ago when we talked about cloud adoption and digital transformation, we found that most enterprises around the world felt like they were in the fog of war. There was a lot coming at them, and they were like, “I don’t know how to filter through all of this.” 

Now, they’re self-assessing themselves as competent, capable, understanding, and mature in this process. So, when you think about how far these companies have come, in such a short amount of time for large enterprises, three-plus years is a really short cycle to make that large of a leap. So, I’m really bullish on what the next three years are going to look like, as these companies take the progress they’ve made thus far and go exponentially broader with that. 

Let’s revisit the questions of the survey a little later, too, but let’s pull back for a moment. Given that you obviously have some big partners here -- Google, SAP, IBM; when we think about “who’s who” in cloud, they’re here -- and given what you’ve seen from that survey, if you’re thinking of, say, a Fortune 500 … 

Chip: Sure, we could probably tell a story about half of them! 

Right! In this broad digital transformational learning curve, is there something they could learn from nimbler or smaller firms in doing this, or is the technology agnostic to that? 

Abby: I feel like technology is agnostic. What we hear over and over again [at the summit] is the importance of the culture part of it, and that’s hard. It’s hard to do in a small company of 100 people, but it’s super-hard to do that, in a company that’s, say, 100 years old with 150,000 people.  

Just think of the sheer pure communication patterns that exist in that organization, particularly if you’ve had people that have worked there 15, 20, 30 years. And so, the amount of lift you have to do in that organization is way more significant than an 8-year-old company with 100 people. So, I think there’s a lot of fundamentals that look the same, and the technology looks the same, but the approach on the adoption, and enablement around that is very different. 

Chip: I’d add  that – and this is an interesting statistic, although maybe a bit dated in this fast moving world – would be that if you looked at the Fortune 500 that existed in the year 2000, and then compared that to the year 2015, more than 50 percent were out of business.  

There’s been a lot of work that’s gone into studying why that is, and it’s interesting because you’ve kind of referred to some of the world’s largest companies by market cap, as these smaller, nimble organizations; that’s one of the keys, we hear terms like “Become a learning organization,” but it’s also about breaking things down, having a product-centered mindset. 

There’s another component to it which does relate to the way some of these really big organizations have become big, they’re building platforms, and they’re thinking about how do these platforms enable commerce between their customers, how they enable their partnership, and even the insurance companies are starting to think along those same lines, because it’s a natural conclusion.  

Once you start iterating quickly, you start fixing some of the processes: how you write software to be more in tune with the customer demand, or you start to realize there’s more market opportunity for you if you can just be better.. 

Abby: Allianz had a similar progression story with the way they were moving their business model to a mobile-first application and engagement with their customers, and it changed the way that they interacted, and it allowed them to expand beyond the markets they were into. 

You’ve touched on culture, and that varies from sector to sector as much as from company to company. Are there verticals that get this faster than others? What’s that “crux of innovation” inside a vertical that you may not normally see – for example, if I thought of financial services, does everyone think they move – and have to move – faster versus, say, transportation, manufacturing, logistics?’ 

Chip: Yes, [financial services] are first movers, they’re consistently first movers. 

Abby: Yes, financial services have throughout history been a first mover. They were for a long time our biggest vertical of users, and our earliest users. Most of the banks around the world run Cloud Foundry, and one of our earlier users – you’ve mentioned IoT, was GE’s Predix platform. Predix works on Cloud Foundry and has for five years. They were one of our early users, industrial IoT, Siemens MindSphere runs on it, Bosch, most of the automotives, so when you’re thinking about industrial IoT, you often don’t think of that as super-leading-edge or agile, but yet there are a lot of these firms recognizing the need to change, and the need to change their model.  

Chip: We had a specialized machine part manufacturing company that’s based out of Germany, SECOM, here presenting from a broader perspective, and they feel the exact same pressures, they need to figure out how to respond.  

I was contemplating this a couple of weeks ago, I was trying to think is there any vertical, any market that isn’t being impacted; it doesn’t mean that the large organizations have done any transformation, but I cannot think of a single vertical that hasn’t been impacted. I think the legal industry is evolving as an industry very slowly, but it is assuredly being impacted because you have services like LegalZoom, all of a sudden, we get legal advice… 

Abby:…All the AI stuff...

Chip: Absolutely. 

Abby: Which is on target to roll out in a lot of that business. 

Chip: So, I think there are stages of realization, and we’re well past the majority of industries having realized there’s a need to shift your thinking, and become more strategic about tech. There are stages to it, I think there’s some that are lagging in terms of the stages, but there’s no industry that’s not being impacted. 

Abby: Yes, I don’t think you’re going to go to any board of any major corporation to say, “Hey, there’s this one thing called digital transformation,” because I’m sure they’re all thinking about it at this point. 

Chip: Even nation states at this point are trying to become better at citizen engagement, because frankly the citizens are demanding it. 

So there’s a challenge. Smart city technologies, for me, these sometimes are seen as “public” distributed networks, meaning that it only “works” if it’s a city deploys it. But if it’s a city deploying smart parking meters, or if it’s a private parking garage owner doing it, the “end node” is a car and its driver, and the interaction is how you pay for it; it’s competition for revenue and optimization of resources. But where “smart cities” get more challenging is everything around engagement, being a citizen, voting – goals that go beyond just asking “what’s the cheapest possible price for this service?” Governments in different degrees and different places embrace transparency differently, radically or not. There is a market there that could be challenging. 

Abby: There’s a broad continuum. 

But [from a public sector perspective] it’s interesting and it’s on-going. From your survey, I think it was about three quarters of the respondents said they saw digital transformation as an ongoing thing, versus a one-time project. Tell me about that -- how big of a change is that, in terms of a mindset? 

Abby: Well, it’s a huge change. We also in that same survey asked the question: “Do you think it’s hyperreality?” We didn’t ask that exact question, so we don’t have a ton of time to advertise that precise question, but anecdotally people thought, “I’m going to go and disappear for a couple of years, and then I’ll emerge. Ta-da! Done!”  

I think it’s important to reiterate that this is a continuous process, and this is not a journey you’re ever going to get to the destination. You’re fundamentally changing the way you work, and the way you think about your work, that’s why I was really excited to put Home Depot on the stage to talk about their “Orange Method,” because that is very emblematic of the story I was trying to tell: How do you invest in your people so that there is an opportunity for continuous learning, because unless you are doing that you’re never going to reach the point where you think you can absorb all of these things, and continue to evolve past it. 

Then there’s what companies are actually trying to adopt in the name of innovation. In the IoT world, everybody drags out that McKinsey survey that says 7 out of 10 of those projects fail, or 8 out of 10, or whatever number we’re at right now, and that issue of… 

Chip: The rise of ARPs (address resolution protocols) back in the early 2000s… 

Abby: I love it when you can read my mind, because I was just thinking I remember this survey on ARP systems and how long and expensive the average one was -- what, three years? -- and $100 million… for failure!  

It’s an expensive way to learn. There’s a lot of crows with shiny bits of metal thinking, “Oh! Let’s take down some innovation!” and “IoT’s here, so we need to have an IoT project, so let’s get at it!” There’s a lot of “innovation tourism” that happens out by me in San Francisco, and I may be as guilty as anyone in terms of hyping the opportunity, but I watch what people do with that… 

Abby: I love that phrase by the way, “innovation tourism.” 

Right! And it seems to be the same use cases dressed up in the same technology everywhere I go. And maybe that’s great, but the reality is ROI is still king -- and not just because it spells that in French -- ROI is something that everyone wants and it turns out when I’m spending money on this, I have to find a way to make it pay for itself. 

Abby: I would argue with that though; I don’t think there’s an ROI on digital transformation that you can pinpoint at a time. 

Chip: I wouldn’t have even started with that, you just phrased that like somebody thinking about IT as a cost center, where cost has to be managed, as opposed to a strategic enabler. 

Abby: Think strategic investment. What is ROI -- if we’re thinking about this -- what is the number people come up with? “Okay, how many headcounts can I cut?”—essentially, that’s the ROI, that’s the number. You’re looking for “How many people can I cut from my workforce, and that’s going to be my ROI.” I don’t think that’s the appropriate way to think about it.  

I punched back against ROI on digital transformation for years, and one of the analogies I used to give was this: “Alright, let’s talk about Blockbuster…” and everyone’s laughing, and I say, “No, imagine this. Imagine when Netflix started pivoting into the streaming model, and I am positive there was a conversation at Blockbuster where someone said, ‘I’ve got this idea, let’s switch to streaming’. And I’m sure someone said, ‘Hey, okay great. What’s the cost going to be, and what’s the ROI?’ ‘You know, I don’t know what the ROI is, but I feel this would be an interesting way for us to go and move into this new field’.  And someone said ‘Yeah, it’s going to cost $10 million, but I don’t know’, and someone else is like, ‘You know, we’re doing just fine right now, let’s put a pin in that and come back to it in a few years.’” 

Yes, and no doubt, somebody somewhere said, ‘Meh…I don’t see how that fits with the model…” 

Abby: “We’re doing fine right now. We’ve got revenue, we’re good, we’ve got stores everywhere, foot traffic is fine.” That’s the story that comes to mind, because it’s like, ok, how do you articulate the value of your being able to stay in the industry you’re in? Stay competitive, retain your customers, and that’s just the table stakes, not even how do I expand to new markets and grow my position, and compete in new ways? 

Chip: And the other piece of this is, the big fallacy that we have that keeps happening in the industry, is that there’s this attempt to just copy-cat. If Blockbuster had just copied Netflix, I’m not that would have worked either, so they had to respond, but you have to respond intelligently, you have to respond on fast feedback loops with your customers, that’s what gets you a result. Once you start seeing these faster feedback loops, you start getting positive customer reactions, you start improving things, you start getting more customers.  

The whole notion of “we’re going to save money” goes out of the window because of Jevons Paradox. It turns out that in most of these organizations there’s this Jevons Paradox of “I can do more with less developers, but actually now I want to hire ten times the number of developers, because I’ve figured out how to have developers and product teams be much more effective.” 

And going back to the Orange Method at Home Depot, with a thousand people over the last year, a decent percentage of them brought up from a store associate level, because they’re trying to find different ways to funnel people with the raw potential to get them into those teams. So, I do think there’s a real human capital-related Jevons Paradox, that kicks in when you’re being successful. 

Abby: And on that note, because this is why I get so upset about rescaling and upscaling, because what I heard over the last couple of years from a lot of executives at these enterprise companies, “Okay, I’m going to hire a thousand people this year,” and I’m like “Okay, I’m going to hire a thousand of the right people.” 

Chip: [Laughs] Where are you going to find those Abby? Tell me more! 

Abby: And that was always my question! You start multiplying that out, a hundred different companies told me that, I’m like, “Oh? There are a million unemployed cloud enabler developers sitting around waiting for a job?” 

Chip: Pull up the Bureau of Labor and Statistics data, just to crosscheck! 

Abby: And you start thinking about that, and then you start hearing these companies say “I’m going to fire 10,000 of these people that aren’t that great, I’m going to hire 10,000 new ones,” which used to be the model. Fifteen years ago, that’s how you did it, when you’re trying to make that significant of a change in your organization, but that model doesn’t work anymore. “By the way, this isn’t a one-time change, I’m going to hire the right people and they’re going be just fine.” No, you’re going have to put in a model that allows for that continuous learning, and allows for that active evolution, because if you don’t find the “right people” that you just hired, the right people five years from now are going to be the wrong people, and then what are you going to do?  

I think a lot of companies are missing what this conversation around digital transformation and digitization really mean. It’s really fundamentally rethinking the way you hire, maintain and manage talent, but also a different way of looking at the way your business operates. 

Our conversation was so interesting we’ve split it into two parts – Part One is above, and we’ll link to part two when we publish next week. 

If you want to learn more about how to kick off your digital transformation journey, save your seat for our webinar “What’s Your Digital Game Plan? A Playbook for Success” and learn key challenges, issues and use cases from practitioners who have been through the process.