AI Leadership: How CEOs Steer Digital Transformation

Tessa Burg: Hello, and welcome to another episode of Leader Generation, brought to you by Mod Op. I’m your host, Tessa Burg, and today I am joined by Jonathan Murray, Mod Op’s chief strategy Officer. Jonathan, thank you so much for joining us today.

Jonathan Murray: You’re welcome Tessa, nice to be on the show.

Tessa Burg: And it’s nice to have you as a new coworker.

Jonathan Murray: Indeed, that as well.

Tessa Burg: So, you have heard like everyone, all the hubbub around AI and ML, and it’s not really just hubbub, it’s a seismic shift in the way that we are going to do our jobs, bring our products to market, and really think about the role of knowledge work and knowledge employees. But today, and based on your background, we’re going to dive deep into what is the role of the CEO. A lot of our past episodes have focused on how do we as marketers and practitioners and engineers leverage AI and machine learning, but I’m very excited based on your experience to get a framework for our leaders. So, thank you so much for agreeing to come on today. And to kick it off, tell us a little bit about your background and what brought you here to Mod Op.

Jonathan Murray: Well, thank you, Tessa. As I said, delighted to now be a coworker. We’ve been having those conversations for a few months. We recently joined Mod Op, having spent the last seven, eight years or so building a boutiques consulting company called Digital Prism Advisors. And our firm was really focused on strategic advisory work, so advising CEOs, boards, private equity investors, and the stakeholders around that on the impact of technology and organizations and how to essentially help clients modernize their businesses. Our typical clients were very successful businesses in their field, but not companies that grew up digital. And so, a lot of the work that we’ve done for clients over the last eight or nine years as a firm has been helping those senior leaders understand the impact of modern technology practice and capabilities and how to sort of bring that into the firm and how to retool as a business. You know, maybe it’s bringing new digital products to market, maybe it’s building a new platform strategy for the business. Maybe it’s leveraging data to make more effective decisions, but essentially helping senior leaders understand how to move through that journey. How to sort of adopt new technologies and how to transform their businesses to be competitive in a world where lots of their businesses are now impacted by firms that did grow up in a world where they started as digital. So that’s, you know we, I spent, you know, a few years doing that. And then prior to that, I was the chief technology officer at the New York Times for a while. Prior to that, the chief technology officer at Warner Music Group. Two fairly well-known brand name companies where I was responsible for building sort of modern cloud scale platform capabilities for those firms. And doing some fairly deep transformation, certainly at Warner Music Group, modernizing that firm. And then prior to that, I had a 16-year career with Microsoft. So, I ran a number of Microsoft’s global businesses, including managing our top 30 global accounts. So, our most complex commercial enterprise customers. My background’s in software engineering and data architecture so, which I’ve continued over the years to be deeply involved in. So, I’m equally comfortable on the technical engineering side of things as well as, you know, in a, in a boardroom speaking to, you know, board members about the impact of technology on, on their businesses.

Tessa Burg: So, I think it is interesting before we got on the call, you said that, you know, a lot of CEOs may want to hand off the decision making, the leadership, and where the company should go in response to AI, machine learning, to maybe the CTO or practitioners like ourselves, people who kind of understand the tech and have executed it before. But you said it’s really important that the CEO plays a role. Tell us a little bit more about why that’s so important.

Jonathan Murray: I think particularly as you’re thinking about broader transformation, you know, the adoption of becoming digital, which is an expression that we use, which is not the application of digital today. Everybody knows that most of our clients apply digital tools and techniques in their businesses. There’s a difference between applying a tool and a technique in your business and to becoming digital, right? Really embracing digital as a culture and how to operate and how you leverage data and increasing in what we’re going to talk about that now means including AI, right? These, it’s how do you embed that at the very fabric of the way the business operates, how the business model is structured, what the product strategy looks like, et cetera. And so, you know, I think we have a long history, I certainly in my career, a long experience of working with multiple clients where you see a very clear delta between success in these types of initiatives where the CEO is fully vested and fully involved. And those where the CEO basically passes often thinks it’s somebody else’s responsibility. And really in today’s world, we live in an economy that is digital. We live in an economy that is increasingly going to be impacted, already is impacted by, you know, the adoption of AI tools and techniques and certainly data. And so if you are a business and you’re a CEO responsible with a fiduciary responsibility for the success of that business, and the return to your stakeholders, whether you’re privately held or publicly held, you have an individual responsibility to ensure that your business is using the technology, the data, AI, et cetera, most effectively to maintain your competitive advantage, to serve your clients as effectively as you can, and to be as successful a business as you can possibly be. It’s not something that you can pass on to somebody else. Those days of, you know, the CEO saying well, you know, that web thing is something that I’m just going to have the IT team deal with because it was just a bolt onto the business. Those days are long gone. CEOs today, they don’t need to be technical experts, but they do need to understand the strategic impact of technology on their business, on your competitive positioning, your market position, your product strategy, et cetera. That really is a, as I said a fiduciary responsibility of CEOs today.

Tessa Burg: So, I like how you said that CEOs used to hand it off thinking like the website was this tack on to their business or that technology was a tack on. I do feel like it was just yesterday we were presenting to clients like hey, you know, your CRM and website connected together is very, very important and really trying to convince people of that. And now we are at a point where people are asking us hey, how do I harness generative AI? It almost feels like we sort of like skipped a step. Like does that change at all your process or the conversations you have with CEOs on how to both become digital and then move towards embracing and leveraging AI?

Jonathan Murray: I think it does. I think I’ve got a few years on you. I’ve lived through basically every generation of what we would think of as the PC revolution, right? Which is really where the world became digital. I mean, my career started in 1984 and I’ve basically been in the IT industry and played various roles through every step of that transformation. In the original adoption of the PC, the implementation of servers and client server, the adoption of web, you know basically, and the disruption the web brought to business, then the cloud, right? Starting with 2006. So, when Amazon basically put their foot in the water with AWS, the initial services AWS, and now we’re in a world where data, machine learning, and AI are the engine that’s driving the disruption across the business landscape. The cycle time on those transformations is growing shorter. I’m continue to be blown away by how fast the adoption of advanced machine learning and AI is taking place in business today and the cycle time on the new generations of tools and how fast they’re advancing, et cetera. And I think one of the challenges for CEOs is a lot of our CEOs, particularly in our traditional clients, are used to those slower adoption cycles and saying, you know what okay, we don’t want to be an early adopter, we don’t want to be on the bleeding edge. I’ll wait a few years. And basically, we’ll be a late adopter here. We’ll take two or three years to figure it out, then we’ll get on board. And this maturity curve is going to take 10 years to play out, right? You used to have the luxury of doing that. You don’t have that luxury today. There is a huge first mover advantage for firms that adopt advanced machine learning and AI today. That means that the gap between the firms that adopt it and deploy it and make it, take the advantage from it grows ever wider every day to those competitors in their markets who don’t adopt quickly. And so that’s a real challenge for CEOs. I mean, it’s not an easy thing to address, but I think one of the things you need to do as a CEO is to make sure that you’ve built a culture in the organization and the processes in the organization, and you have built a team that is able to continue that transformation to basically adopt new skills and techniques. You know, we’ve called it a learning organization in the past, but an adaptive organization. But organizations need to set themselves up so that as these new waves of technology become available, they can rapidly adopt them, deploy them, make use of them, and extract the value, right? Because there’s going to be another wave, right? We’re just at the beginning of the AI wave, there’ll be another wave beyond that. And so, it’s setting up as a CEO, the capability of your firm to basically take these new technologies in, extract the value from them, make use of them, and then get ready for the next cycle. That constant cycle of change, I think is something that CEOs need to be really focused on.

Tessa Burg: Yeah, no, I couldn’t agree more. I think one of the big challenges I see if I think back to my time on the client side is when you’re in the business, it can be very challenging to assess, do I have a team that’s going to be adaptive, responsive, and always learning. Like what tools or where should CEOs start so they can get their arms around, you know, do they have the right people in the right seats? Are their tools the right tools? Are they collecting the right data? Like where do they begin that journey of understanding their own organization in a way that’s accurate and maybe, maybe kind of helps pull them a little bit away so they can see it clearer?

Jonathan Murray:  I think they should, I mean most CEOs have a fairly strong network of peers in their industries, right? So, I think tapping into your peer network and basically making sure that there’s a, you’re having those conversations with your peer network and understanding how this is impacting other, you know, peers in your industry or outside your industry. There’s, there are very important sources of information like, you know, the McKinsey Journal and you know, the stuff that comes out of Wharton. So, the business school, the Harvard Business Review, et cetera, which provides sort of that leading edge view and advisory guidance on, you know, the adoption. Those are all critical, important research, you know, techniques. And I think ultimately when you get down to it and saying okay, how do we actually need to go and do this? It is helpful to bring in a third-party advisor. I think one of the things, you know, obviously we’ve spent a lot of time over the last seven, eight years or more of actually being an advisor to senior leadership teams. So, of helping them come in and as an independent third party, helping them assess where the gaps are in capabilities. Because ultimately the adoption of AI as a capability in the business is just one of a portfolio of capabilities that you need as a business, right? The technology is one thing. Do you have your data landscape in a, in a state of readiness that it can serve the AI side of your capabilities? Do you have the people, the skills, the processes, are your business processes streamlined effectively to be able to leverage these types of technologies? Do your client, you know, your relationships with your client and your product portfolio align to where you want to go and how this technology will impact it? Those are all questions that need to be asked at the front end so that you can sort of start to get a picture of where to prioritize. What are the things, you can’t do everything. You can’t make all of that change all at one place. There’s a limited capacity to invest. Where does those scarce dollars for investment that, you know, need to get, need to get placed? And so, having a third party actually come in and do an assessment of your data capabilities, your AI readiness capabilities, right? Your people and skills and your processes, your product portfolio. I think those are helpful things to do for a CEO to give you that perspective on where am I going to place my bets? Where are the gaps that I need to address, and in what priority order should I be tackling things in order to move us forward on the adoption of these new capabilities and delivering the advantage we need for our business.

Tessa Burg: Yeah, I like that approach. It gives them a roadmap and probably makes it a lot easier too, to communicate to boards and across the organization the clear position they’re taking against embracing new technology and how it’s going to propel the business. I am guessing that there’s probably like a lot of stakeholders and a lot of meetings. I mean, what are some of the pitfalls or what are some of the things that CEOs should be aware of could happen or challenges they might face when going through an assessment of their business?

Jonathan Murray: Well look, at the end of the day change is change, right? And some people are more resistant to change than others. And so, I think a critical responsibility of the CEO, there’s some key leadership positions that are required. You need to understand the folks that are responsible for your client side, your sales side of the business, your product portfolio, the data and the technology side of your business. Are the folks in those leadership positions folks that embrace the change, that have the skill sets to basically be able to drive that change in their responsible areas of the business? And importantly, do all of those key stakeholders understand the intimate connection between the area they’re responsible for and the strategic objectives of the business. You know, and we’ve all lived in environments where, for instance, the IT group is not fully aligned with sales and marketing and the alignment of, you know, strategy to execution. And I think one of the CEO’s primary responsibilities is to ensure that there is a well-defined strategic framework for the business, clearly defined outcomes over a defined time horizon that the CEO, the board and the other stakeholders are expecting. And that essentially that framework drives specific action and accountability at the individual group levels that are responsible for bringing that strategy to life. And the CEO’s role in making sure that that is cohesive, is well-formed, and that everybody is held accountable for their role in that piece of, that their piece of the puzzle is super critical, right? And a lot of the clients that we’ve worked with, the early work that we end up doing is actually creating that strategic framework. They understand why they’re in business, they understand, you know, what their financial metrics are over the next two or three years, but when you get into strategically what is your objective as a business, what are your goals? What do you want to be in three years’ time? How do you need to change, how are your markets changing? How are your clients’ needs changing? What’s your product mix going to have to, how’s your product mix going to have to change? A lot of that work has not necessarily been done in an integrated way that comes together as an integrated strategy and I think that’s one of the most important things that a CEO needs to lead in terms of the front end of any sort of transformation or adoption of technology like this.

Tessa Burg: Yeah, and I thought it was funny how you said change is change. I’ve never run into anyone who isn’t just like super excited about change. Everybody’s on board.

Jonathan Murray: Well, no, there’s plenty of organizations where folks are not right? There’s lots of organizations and again, we work with, we work with organizations that as I said are traditionally successful in their industries, right? That are not, didn’t grow up with an organization which was born digital. And is just a group of individuals that come to work every day and understand that the world is going to change, have been in very traditional industries that haven’t changed in quite a long time, and now they’re having to deal with change, right? And so, the CEO’s awareness of the willingness, the ability of key stakeholders and what’s their response to change, right? That and making sure that the right people are in those roles that are critical to successful change is, you know, that’s not rocket science, but it’s, it’s critical. And particularly given the pace of change we’re dealing with right now. It’s you know, having people who are advocates for change in those roles and basically embrace it and understand it and can move the organization forward and are not barriers to change is a critical component.

Tessa Burg: Yeah, I do think it’s one of the hardest decisions CEOs have to make is sometimes you do have to make a leadership change if someone is a barrier to change in those traditionally successful businesses, because it could be someone who’s been doing that job for so long. But I know I’ve seen with clients like sometimes the resistors, the blockers, the people who are preventing you from moving forward, are kind of passive aggressive about, really coming up with all the reasons why something should not happen when the focus should really be, if we have this framework, if we know our goals, if we’re being held accountable for this, how are we going to do it? Not what are we not going to do? And that is so challenging. I think something about bringing an outside advisor, something I used to say a lot when I was on the client side is now I can blame the process. You know, it’s like, it’s not, it’s doesn’t have to be me personally saying this isn’t the right position for you. It’s, we’ve measured, I know that you use advanced analytics in doing this, so you’re looking at your data and you’re not just saying like, oh, we’ll do an inventory of what you have. You’re diving in deep and saying, we can actually show you what’s likely to happen and how we’re going to get there. When you have that solid foundation, you know, that really empowers CEOs to say, this isn’t personal, this isn’t like, you know, you’re awesome and great, but this is where we have to go. I feel like those are some of hardest conversations to have.

Jonathan Murray: And that piece of, and again, none of this is sort of rocket science, this has been part of management practice for decades, right? But having, having clarity on objectives and measures and key performance indicators that you need out of the business that you expect this change to drive are critical, right? You can’t, you know, you have to be able to measure the results and you have to be able to measure the return on investment against those results. It’s not always a straight path. I mean, that’s clear. But at the end of the day, you’re going to invest in the adoption. You’re going to invest, particularly as we talk about the adoption of AI and advanced machine learning, et cetera, those are very disruptive changes to a business, right? They aren’t just a, like I said, it’s not like the web 20 years ago where it was just a bolt-on, it was a nice to have. These are things that are going to fundamentally change how we operate as businesses, right? How we interact with our clients and our customers, right? How we make decisions, right? And how we actually run the fundamental processes of the business. That’s, that’s structural change. And so being very clear on what the measure of success looks like is, is a very important aspect of the CEO and the other stakeholders setting that up front so that you have targets to measure against as you go through the individual investments. The other thing I would say is, you know, more complex organizations, you know, not all pieces of the organization either need to move as quickly or can move as quickly, right? There are, there are structural, you know, rigidity in some businesses that makes it difficult to move some parts, other parts can move more fluidly. I think it’s important for the CEO and the other stakeholders to figure out, you know, let’s pick the bit of the business where we can see the bang for the buck, where we can see where this technology is basically going to have an impact. Maybe it’s a single product line, maybe it’s a particular customer set, right? Maybe it’s a particular business process out of many. Go do that test, figure it out. And that’s another thing where sort of an advisory partner can really be helpful is helping you sort amongst the many opportunities to invest. So, to figure out which are the ones that are going to give you that biggest bang for the buck, that are going to become the showcases. And, you know, organizational behavior tells you that nothing incense behavior like internal competition right? Once senior leaders see another department getting advantage from an investment and being first to market with the adoption of a new technique, a new process, new technology, that has a, you know, effect within the rest of the business. It spurs other people to action. So, getting those early successes and wins is a key part of the strategy here for any transformation like this.

Tessa Burg: Yeah, so you’ve seen probably a lot of successes and wins and how this process helps businesses scale, but have you noticed any patterns or either certain behaviors from the CEO or team members where like, oh, this is doomed? Like it’s like not going to work if these types of activities are, you know, these types of people are involved.

Jonathan Murray: I, as I said before, the places where it doesn’t work is where you don’t have clarity from the senior leadership team, right? So, a lot of change has to happen bottoms up. People have to, you know, the organization needs to essentially be ready to adopt and embrace change as a broad organization. But the framework has to come from the top. And in the, in the situations where I’ve seen it not work so effectively, leadership has not been clear about what the objective of change is, how they’re going to measure it, the expectations they’re setting, and the accountability that they are going to expect from the folks who are responsible for driving the change. That, and it isn’t just you do that at the front end of a six or a nine-month program. You have to be involved. And again, that’s pretty consistent in our experience. We’ve worked with clients who’ve embraced different levels of transformation and the CEO in some clients, fewer than which is a good thing. Some clients, the CEO is all in on the front end, very engaged, sets the tone and the agenda, and then you get rolling on a transformation program and you never see the CEO again except for, I don’t know, a six monthly or a quarterly review. Because they’ve got lots of other things they’re dealing with, right? That, that is not sufficient right? CEOs, if they’re leading, you need to be visible. You need to be seen to be leading constantly through this process. That doesn’t mean you need to be in every daily standup, but you probably do need to be doing an update to the organization, to be having those conversations, to be reinforcing that change language in all of your communications that go out no matter what you’re talking about, right? You’re always talking about change is always in there and that basically you’re engaged with the team on, you know, at least once every, you know, month at minimum, right? If not every couple of weeks as you go through a transformation program like that. That visibility from the CEO and that constant reinforcement of the, the rationale, the mission, the vision, that’s critically important. That to me is the biggest difference between success and failure.

Tessa Burg: Yeah, I agree with all those points. And something I saw when I was on the execution side of digital transformation projects is when the CEO isn’t there at those moments of accountability, people start to assume that it’s not important to them. Even though, you know the CEO said this is number one priority, it’s very important. If they don’t come to the review of the business where they’re going over how we’re going to measure, people just start checking out. They miss a date, they give it, it’s funny or it’s not funny but it’s, it’s very frustrating being where I was like, just to start to slowly unravel and I’m like, ugh.

Jonathan Murray: That’s, that’s a typical pathology of change programs that run out of steam, right? That basically don’t, we’ve done some fairly deep transformation with clients where the CEO, the senior leadership team were in basically every business review of a project that went over a couple of years, right? And it makes a material difference. It keeps the team energized, it keeps ‘me focused, it reinforces the importance, et cetera. And the other thing I would say, and sort of, we sort of passed on this, but I’m a huge believer in the importance of the mission and the vision, right? Which is ultimately folks that work for an organization attach, they want to attach to an exciting view of the future and an exciting mission for the business you know? We all get, come to work, we get paid, you know, we do our jobs, et cetera. But ultimately what creates a sustainable organization, one that attracts and retains talent, et cetera, is that those people come to work for more than just the money and, you know, getting a paycheck at the end of the month. They come to work because they think their, their business is having an impact, right? That they’re being led by a leadership team that has an exciting vision of what the future of the business is going to be. And I think, making sure you capture that right up front and that you remain consistent to that mission and vision throughout a change process is a critical success factor, right? And having a, having a mission and a vision that everybody can get excited about and attaches to and wants to be part of, you can’t under, you can’t underestimate the power of that just in the simple use of language and getting people excited about being part of something new and a change that is going to help them with their colleagues, have real impact for their clients or their customers or their mission as a business if they’re a not-for-profit, et cetera. I think that’s super critical. And the CEO leading that and being the voice of that, constantly every day in every communication and reinforcing it, is a critical success factor.

Tessa Burg: Yes, I agree. Well, Jonathan, we’re at time, but I have a kind of personal question for you. Have you ever seen the show on AMC, Halt and Catch Fire?

Jonathan Murray: No, I have not.

Tessa Burg: Oh my gosh. You really, you have to watch it. And if anyone else listening hasn’t seen it. When you were referencing, when you started your career, that’s where the show starts. It’s in the early 1980s and it goes through all of those transformations in technology, and it takes it from the perspective of the hardware and the software folks. But it’s also an intense drama, so you get a little bit.

Jonathan Murray: Very cool, thanks for the reference. I will recognize lots of things in there.

Tessa Burg: Yes, yeah. Sometimes I would just like bust out laughing because, I can remember those moments in my life and my husband’s like what’s so funny? I’m like, yeah, you just never like dove into the door train, did you? It’s always, my uncle had a hardware re-manufacturing company and so from a very young age, fascinated by tech. But you’ll love it and anyone else, just watch it.

Jonathan Murray: Thank you.

Tessa Burg: So, we’re at time but thank you so much for joining us on this episode. And at Mod Op. And for anyone who’s interested in learning more about, you know, what your role, or what’s most critical in your role as CEO in the age of AI, feel free to reach out to us at M-O-D-O-P dot com. You can also find all the Leader Generation episodes up now on ModOp.com. And if you have any questions for Jonathan, Jonathan, how can they reach you directly?

Jonathan Murray: Jonathan. Murray, M-U-R-R-A-Y at ModOp.com.

Tessa Burg: Perfect. Alright, well we will talk to you again soon. And until then, have an awesome day. It was a pleasure. Thanks Tessa. Have a good day.

Jonathan Murray: You too.