The global technology sector is constantly changing as new players enter the industry and legacy ones adapt. On this episode of Mastering Innovation on Sirius XM Channel 111, Business Radio Powered by The Wharton School, we asked Sid Kumar (WG’09) how CA Technologies, a global enterprise software company, has navigated digital transformation over the past 40 years.
Kumar described one of CA Technologies’ key frameworks for bringing innovation to its customers: the Modern Software Factory. He described the fundamental disciplines, such as agility, automation, insights, and security, which are critical for remaining competitive in any industry. Kumar’s team also works to apply these disciplines within the company itself, often by looking outside the firm for new approaches and perspectives.
A lightly edited transcript follows.
Saikat Chaudhuri: Hello, and welcome. You’re listening to Mastering Innovation, our new show, here on Sirius XM, Business Radio, powered by The Wharton School. I’m your host, Saikat Chaudhuri, Executive Director of the Mack Institute, and a professor of management.
I’m thrilled to be joined in the studio by my colleagues and cohosts for the hour, Nicolaj Siggelkow and Harbir Singh, both professors of management here at The Wharton School, and co-directors of the Mack Institute.
What is Innovation Management?
We often hear about disruption as one of the major challenges that established organizations face. We hear about startups and how they’re trying to get rid of all these legacy players. But, what do the legacy players do about this? That’s really what we focus on here at the Mack Institute, where we think about everything from strategies and organizations to thinking about opportunities for innovation, as well as the different aspects that come along with it.
We will take an interdisciplinary approach on the show, thinking about a variety of situations across the industries. Our guests will include corporate executives, industry leaders, academics, of course, Mack Institute senior fellows, some researchers, alumni, as well as other students. We hope you’ll get a number of not only wide perspectives, but also insights that you can put to use at your own organization.
Tech Growth in China
I’d like to begin today by thinking about something that happened recently, and perhaps resetting some of the impressions that we all have. At the Fortune Global Forum in Guangzhou, China, recently, a number of top executives of global corporations spoke, including Cisco CEO Chuck Robins, and Yahoo’s co-founder, Jerry Yang.
Both observe that Chinese firms in the technology sector have moved from copycats to pioneers since the 2000s. They noted that companies such as Alibaba and 10 Cent are rewriting the rule book for areas such as e-commerce, online gaming, as well as mobile payments.
“Chinese firms in the technology sector have moved from copycats to pioneers since the 2000s.” – Saikat Chaudhuri
This is quite challenging of the current view, where we see these companies as copycats. But, things are probably changing as many of us who visited the [Asian] continent and the region know. I want to ask, and just think about for a few minutes, is this perception reality? What’s happening? What are the changes?
Let me start with you Harbir. Harbir, you are also the Vice Dean for Global Initiatives here at the school. Chinese firms have indeed been viewed as imitators and not innovators for a while. But, with the rise of Alibaba and 10 Cent, that seems to be changing. What is your assessment of these firms? And what impact could they have?
Harbir Singh: As you know, Saikat, in the world of competitive strategy, you should never underestimate competitors. I’m glad that Chuck Robins is seeing that Chinese firms are, in fact, pioneers, and they have been pioneers for a long time, actually. Again, a segment of them. It’s also true that many Chinese firms were replicating technology – particularly a decade or so ago and earlier than that. There are a couple of points I want to make.
The first one is that the story of Alibaba really is about business innovation. They actually were ahead; they defeated eBay in China through business innovation. That was early, Jack Ma, as the founder, working with a team that had global experience.
I did a study with Peter Capelli, one of our colleagues, Mike Useem, and a professor going to business school. We found that the agility of Chinese firms is a lot higher than most others, partly because they have a very clear chain of command.
So, ironically, the chain of command gives them agility. The direction is right. They can go quite far. As a result, Chinese firms are leading, for example, in wind energy, social media… Many Chinese retail firms are ahead in one line because China leapfrogged many other countries. But then again, China does have problems in some other areas.
The idea is, U.S.-centric firms or global firms view Chinese firms as very, very strong competitors. They do have a great deal of ambition, they have agile teams, and they have resources.
Chaudhuri: Thanks, Harbir. You touched upon a very important point, which is leapfrogging. In many ways, that’s related to strategy. Nicolaj, you think a lot about competitive advantage and other related issues. How can these Chinese players really become global giants?
So far, we see them being dominant in their home country and maybe in their region. That’s where they credit their size, but, they haven’t quite reached true global status, in terms of being multinational. What are your thoughts?
Nicolaj Siggelkow: There are at least two big issues. One is the general quality perception of whatever comes out of China. I purposely use the word “perception.” It’s not about the true quality. It is really as perceived by the customer.
I think that it will just take a while for people to really say, “Wow, it’s not made in Switzerland. It’s made in China,” and that actually is, maybe, equivalent to quality. That is something that will just take a long time to overcome – something that they can do, but will take some time before they will really be seen as global competitors on that side.
With that link, of course, quality is also trust. The more we talk about social media and business models that have information exchanging… That may be something that’s also holding Chinese companies back.
“If they’re using the same business models they developed that made them successful in China…they will have exactly the reverse problem other companies had when they tried to enter China.” – Nicolaj Siggelkow
Lastly, maybe it will become somewhat ironic, it’s understanding the customer. They understand the Chinese customer really, really well, and the rest of companies who came to China did not. It’s part of why the Chinese companies were able to – once they got their act together – really blow the Western companies out of the market, because clearly, Chinese customers value certain things quite differently than the Western customers do. But, that exactly, in reverse, will be the problem of the Chinese companies coming to the U.S., or Western Europe, or South America, or wherever they want to go. Those customers will be different. If they’re using the same business models they developed that made them successful in China, in those countries, they will not be as successful. They will have exactly the reverse problem the other companies had when they tried to enter China.
Chaudhuri: Yes, it’s really easy for no one. You have to be strategically smart and organizationally very appropriate in order to make these transitions. I think that’s very apt. It’s really a fascinating scenario.
We live in a world where we have these different competitors coming from different places. You never know who is going to disrupt whom, who is going to capture the market, who is going to create the value and appropriate the value. As a result, it’s actually quite open as to who dominates.
But, what’s clear is that we’re no longer going to see the same line up of companies in the future as we see now. The top 10 innovators in the future might look very different from what we see now – not just in terms of sectors, but also in terms of geographic origin. Any thoughts, Harbir, on that?
Singh: One, the velocity of change today is higher than it was before. In the past, this was debunked as a perception, by the way. But today, the rate of new product introduction has gone up, and many other things. Innovation is being sourced from all over the world.
Also, if you think about human capital, China produces the largest number of engineers in a given year, and so do some other economies. That becomes a trend towards the future as well. And then, supply chains have become global. Firms are, in fact, sourcing technology, putting R&D labs in some of these other economies that were traditionally seen as follower economies on technology.
Finally, I would just say that success is often a consequence, not of invention, but of business model innovation. Business model innovation is happening in many other parts of the world besides the U.S. The U.S. still leads: the human capital here is of high quality, and the ecosystems are wonderful. The U.S., actually, still has U.S.-headquartered companies, and companies of the U.S. operation still have plenty of opportunity to lead.
“Success is often a consequence, not of invention, but of business model innovation.” – Harbir Singh
Siggelkow: Harbir, I think you made some very interesting points. The supply of human capital is partly driven by government policies or stipends we give to certain directions. We have this big STEM initiative in this country.
The other thing, of course, is it’s driven by incentives of, “where is the market?” You said wind power, for instance, or electric vehicles. We clearly see the big impact that government policy has on directing just the incentives for companies to create these innovations.
This will have a big impact when we think about – Saikat, back to your question – in what industries and in what domains will we see new firms popping up? It will probably be from countries where the governments get the incentives right, in a sense, to stimulate innovation in particular areas because some pay off to innovate in those areas.
Chaudhuri: Those are great points, Harbir and Nicolaj. They also point to the fact that it’s not just internal. We can control certain things. We can’t control the market, but it’s beyond that. It’s actually influenced by the environment in which innovation and growth take place, such as regulation, which is clearly an important theme.
Digital Transformation at CA Technologies
Chaudhuri: Now, we’re thrilled to welcome to the show our guest, Sid Kumar, who joins us on the line. Sid is someone who is an alumnus of the Wharton School, having received his MBA in Strategic Management here. Sid is the Global Head of Digital Sales at CA Technologies, where he leads a team of 300 sales and pre-sales professionals to help accelerate growth for the company.
He’s an accomplished operating executive in the technology sector with a lot of general management and profit/loss experience across business units, ranging from $100 million to $2.5 billion. Prior to CA Technologies, he spent time in Venture Capital and Private Equity. He also provided strategic mergers and acquisitions, and financing advice to companies across the technology sector.
Sid, welcome to the show. Thank you so much for taking the time.
Sid Kumar: Thank you very much. Good to be here.
Chaudhuri: It’s wonderful to have you. The first thing we should do for our listeners is ask you a very basic question, which is, what is it that CA Technologies does, and what is your role in the company?
Kumar: Great question. CA Technologies is a 40-year old company in the enterprise software space. We’re really in the business of helping organizations globally, across industries, thrive in their own digital transformation.
It’s from the point of, when a company has an idea about a product or a concept, bringing that idea to fruition, and getting it into production to drive a greater customer experience from a software standpoint. It’s enabling customers to drive that digital transformation.
My specific role here is that I lead our Digital Sales Organization. This is really CA applying digital transformation to itself. I lead the organization that is engaging with organizations around the world, our customers, our partners from a digital engagement standpoint.
It’s a team of, as you said before, about 300 professionals around the globe that are leveraging digital engagement technologies to virtually engage with customers in a non-face-to-face manner by leveraging different types of vehicles and methodologies.
This is CA on CA, if you want to think of it that way, from a go-to-market transformation. It’s an organization we’ve been building up and investing in over the past couple of years.
The Modern Software Factory
Chaudhuri: Thanks for that background. We hear the word “digital” quite often. In fact, you must have mentioned it five times in what you said. We hear “digital transformation,” we hear “digital disruption,” we hear “digital sales.” What, for you, are the key digital technologies that are going to have an impact? Could you define them for us?
Kumar: When we think about digital disruption, we really think about software. How does any organization across any industry become software-enabled and software-powered? That’s how we think about digital in the context of businesses. I like to think of it as the software supply chain.
What would it take for an organization that’s brick and mortar today to become much more digitally enabled and respond to the changes and market dynamics that are taking place? The way we define it at CA is this framework called the Modern Software Factory, which is actually a blueprint that we think about. It has multiple different pillars to it.
The four pillars are agility, automation, greater insights, and security. We believe these are the four fundamental disciplines that an organization that wants to be digitally-oriented and drive its own transformation needs to adopt. I’m happy to go into those in more detail, but that’s how we define it here.
“What would it take for an organization that’s brick and mortar today to become much more digitally enabled?” – Sid Kumar
Chaudhuri: Please give us an example of how you would work with a company in actually realizing this. Pick any industry and any client that you like.
Kumar: I’ll give you an example around agility. Let’s take Cisco. I think everybody knows Cisco. Cisco was continually, as it was driving its own transformation, entering new lines of business and continuing to drive innovation. They were faced with how to deliver that innovation faster and more quickly with more capability in response to what the market was demanding.
You were discussing it earlier. The market is moving faster than we thought it would be. Things are coming at us left, right, and center. We need to be able to pivot and adapt to these changes quickly.
They leveraged one of our solutions called “Agile Central,” which we acquired through a company called Rally Software several years ago. It’s effectively a platform that allows them to develop and deliver applications much faster by leveraging an agile methodology.
What they’ve seen is 25% faster delivery time, much greater innovation, and higher employee satisfaction, as a result of being able to generate these innovations and deliver them to market quicker. That’s one example.
Siggelkow: I was fascinated when you were saying, “We’re trying to apply the tools that we’re selling to our clients to ourselves.” I want to push that a little bit more, and ask you: how has the interaction that you have had with your own customers changed over time?
Cisco comes to you with a problem. The process of how you deal with that customer seems to have also changed, using the new technologies that you are trying to help your customers with as well. I’d be fascinated to hear a little bit more about how the relationship between how you deal with your own customers has changed.
Kumar: If you just expand that example on Agile, we’ve really transformed our own development shop to be much more agile – and, frankly, all parts of the organization. But you could see it most readily in the development side of the house. It’s leveraging an agile methodology to go develop our product. We’re not building products that our customers don’t want or don’t see value from.
We’re engaging [customers] at all phases of the development cycle, from the idea all the way to when we have our initial code draft. It’s being shaped and developed in conjunction with our customers who can validate that this is going to solve a business outcome of theirs if they have this product. It creates a much greater partnership with our customers.
The Security Market
Singh: Sid, this question of security that you talked about is one of the elements, one of the features, you pursue. Can you elaborate on that a bit? How you are seeing that, and how does one maximize the attributes that might give security?
Kumar: Security is super important, right? When you think of all of the aspects of software, if it’s not secure, then you’ve eroded a lot of the values. Trust is really important.
When you think about how organizations are trying to engage with their customers, it’s through the application. If they’re not getting a secure experience, it’s going to erode trust. It’s going to damage the brand perception that one has about that organization.
We come at security from an angle of identity. We come at it from an angle of application security. Security market is a large market, and there’s many different angles you could think about security from, whether it’s at the firewalls or at the endpoint.
We’ve taken the point of view that identity is really the new perimeter for security. Whether that identity is a human accessing a corporate asset inside or outside the firewall, or it’s a device – when you think about internet things, it’s really devices accessing content and data. The identity of who gets to do what under what situations and circumstances is how we think about it.
“If customers are not getting a secure experience, it’s going to erode trust. It’s going to damage the brand perception that one has about that organization. We come at security from an angle of identity.” – Sid Kumar
Kumar: The other side of it is: when I talked about application security, we bought a company early this year called Vericode. The premise here is thinking about security from the outset, building security into your code and making it rock solid before it even goes into production. You’re not trying to solve a problem later, you’re looking for vulnerabilities and leakage early on.
One example is, we worked with a government entity. Part of the solution is that it scans for flaws and helps you remediate the vulnerabilities. We found 18,000 flaws that we were able to help them remediate by identifying them earlier on.
Singh: Clearly, a client will pay for security as part of the value proposition. That would really raise the willingness to pay, I would think. But then, we see so many elements of hacks in companies. I’m sure the vendors were providing security.
On one hand, it gives you the opportunity, but then, the demonstration is often by having a trouble-free record. Is the experience good, in other words? Just a quick part B of the question.
Kumar: You’re right. Security is one of those things. As organizations get smarter with the technologies, you end up with the bad guys getting smarter too and thinking of new ways to come at it. This is always going to be a market that’s a multi-layered approach.
In some sense, you’re going to have to assume that the hackers or the bad guys get in. How are you preventing them from doing things they are not supposed to be doing? This is where we come at it, from an identity standpoint. We’re working in conjunction with your network firewalls and working in conjunction with an endpoint protection, etc.
External Sources of Innovation
Chaudhuri: You know you’re bringing to our listeners the perspective of what happens on the backend. We’re often confronted by the frontend, the interaction with the end consumer. How it all works, especially in a world of IoT connected devices with the security and all the layers, is fascinating.
The theme of, “You have to be on top of everything,” is coming up over and over again. As you work with your clients, you’re learning for yourself inside the firm as well. You mentioned already, two acquisitions that you made.
Clearly, to be on the cutting edge, in terms of technology or even business model or services that you offer, you not only look internally, but you look outside as well. How do you see acquisitions and their role in, perhaps, complementing your organic growth strategy?
Kumar: As I mentioned before, we’re a company that’s been around for 40 years, and we’ve had a history of building and acquiring where needed. It really is that: bringing the best of both worlds together.
How do we preserve the heritage, the relationships, the trust that we have with the largest enterprises around the world, with the solutions they’ve been running, and constantly bring them the best we can bring them? It ultimately boils down to the choice of: should we build or should we buy? There are a lot of factors that go into that.
But Harbir, you mentioned this earlier. The markets are moving much faster than we ever thought before. It’s a matter of looking at where we are in a particular market cycle and looking at, does it make more sense to go down this path or go down the other path?
But the other important part about this is, outside of the IT and the actual technology, bringing new talent, new perspective, new ways of doing things into the organization. That can’t be overlooked. That’s what’s really given us our staying power and credibility for as long as we have.
“It ultimately boils down to the choice of: should we build or should we buy?” – Sid Kumar
Siggelkow: That’s fascinating, because what we’re seeing at Wharton, on the academic research side, is that people are finding ways to de-risk acquisitions, particularly if it’s knowledge-based. Because in the past, as in 15 years ago, knowledge-based acquisitions were considered a no-no. You lose the human capital.
But Oracle did a lot of acquisitions, and the service societies started seeing companies doing that. What are some of your due diligence points to get you through a good decision? To avoid the pitfalls?
Kumar: Certainly. [We ask ourselves:] How does this fit into the broader strategy? How does this fit into our portfolio? Looking at overlap, and looking at areas where it’s going to strengthen any gaps we’re trying to fill – that’s from a technical side. From a people side, it’s very, very important when we look at culture and look at the cultural fit of the organization, across the organization, from the go-to-market side to the development side. Because at the end of the day, when you are talking about a software company, you are talking about people, and you are talking about IP. If you want to continue to invest and create that sustained value out of the investment case, you’re going to need those people to stay on board and help shape the direction of that company. That’s very important for us, culture.
Then, the other side of it is really looking at what the value proposition is and how it’s been resonating with the customers that they have been selling to. The question there is, could we help expand that by leveraging our distribution and get it to a broader side of our customers?
Chaudhuri: You make it sound so easy, Sid. I’m sure it’s not that easy. What are the principal one or two challenges you run into when leveraging acquisitions, in order to keep your innovation engine running and tapping into the IP, but also the people, to change the perspectives?
Kumar: There’s no one-size-fits-all on this, right? It depends on the size of the acquisition. It depends on the role that that technology is playing in the broader portfolio and story. In some cases, we will integrate the acquisition right away, after it’s closed. We will functionally align each piece of the organization, especially if it’s more of a technology type of purchase.
On the other hand, if it’s an organization with more critical mass and a distinct value proposition that we want to learn from and almost observe for a period of time, we’ll let it continue to run separately, but look at what the integration points need to be, and make sure that we are aligning that organization with CA, with a broader CA, but keep it a bit at arm’s length so that it doesn’t happen too fast.
Chaudhuri: Clearly, not a one-size-fits-all strategy. That’s one of the things that’s key to managing acquisitions because as we know, the track record is not necessarily so good in the market.
Sid, we were talking about reinventing the company and how you are using acquisitions. You were telling us about how you used differentiated approaches when it comes to different integration strategies for different kinds of acquisitions.
Now, do you also use other external sourcing of innovation such as alliances, minority investments, or ecosystems in order to stay on the cutting edge? If so, what are those, and how do you decide amongst them?
Kumar: The other angle here is really what we are doing around our go-to-market site. When I talked about how we are digitally transforming ourselves, we’ve been transforming our go-to-market model over the past couple of years to leverage the intellect, the knowledge, of partners.
There would be systems integrators, or system outsourcers, reseller partners – a number of different channels that we work with and leverage. These are partners that have specific industry expertise in a specific geography that are sometimes closer to the ground about what’s happening in the locale and what the end users need, which would be the customers.
We work very closely, and that’s an increasingly important part of our strategy as we look at this opportunity to drive digital transformation. There’s no way we can get at it alone purely through a direct sales type of model. And, that’s been a large part of the impetus over the past couple of years.
We’ve been heavily investing in our indirect strategy to go tap into this broader network. When I look at the indirect strategy that has these different routes to market which I just talked about, that’s where my organization fits in from a digital sales standpoint. It’s, “How do we scale and reach and touch more end users using these different ways of engaging, and collect that data and insight so we can make that experience richer along our buyer’s journey?”
“How do we scale, reach, and touch more end users using these different ways of engaging? How do we collect that data and insight so we can make that experience richer along our buyer’s journey?” – Sid Kumar
Singh: Returning to the question of M&A, you tell a very important observation around culture. The question is, how do you assess cultural differences? How have you assessed cultural differences?
Because we hear this a lot. Some companies are able to do this, but many end up exposed to some cultural incompatibilities that they just were not able to see. Do you want to elaborate on that a bit? I’m very curious as to how you have been able to do that.
Kumar: It’s two ways. One is at the outside. Is there a common vision and understanding of where the market’s going, and how the organization sees itself being part of CA, and that they are going to get synergy and lift?
Not every company wants to be acquired, but, if the organization, from top to bottom, can see that there is going to be value brought to the company by getting their value proposition more broadly diffused into the market, that’s really important. It’s a problem from the top. It’s the cultural alignment at the leadership level.
The second piece is when you go through diligence. It’s typically done at a functional level outside the executives. That’s where there’s an opportunity to spend time, function by function, and understand: are there common views and shared values in terms of approach? Or, are they diametrically opposed? What does that gap look like that they overcome?
Singh: In a way, what you’re saying, and what I find fascinating about this point, is that you’re looking for whether the target or the partner firm wants to embrace your culture or at least be open to your culture. And then, also, the compatibility of values.
The motivation on their part is to adapt to what might be a new regime. Of course, it’s not that you’re imposing anything. I think that’s very interesting.
Siggelkow: I want to shift the discussion back to the customer. When you started out telling us about CA at the beginning, you said you will try to help your customers implement new digital strategies for them.
When we teach executives and we ask them about big failures in their organizations, unfortunately, software implementations are quite often coming up. That seems to be a really hard thing for enterprises: to integrate new software into their businesses.
Can you tell us a little bit about what customers can do to increase the likelihood of a big software digital transformation being successful in their organizations?
Kumar: The market has shifted to more of a, “Let’s start somewhere and prove value from a software,” or whatever the use case is, and then, “Let’s expand to another one.” I think the huge monolithic projects of the past are not the way people want to consume their technology.
If you look at subscription models and the shift to try-and-buy, it’s, “Let me experience it. Let me get value from it. And then, let’s look at expanding that particular use case. Let me expand to another division.” The approach we take is making sure that when you think about the software factory and the blueprints, it’s, “Let’s figure out where to start on that journey which makes sense for that organization.”
If automation is the biggest pain point, let’s start there. If it’s security, let’s start there. It’s really starting where it makes sense, where the biggest pain point is for that customer, and making sure that we’re showing incremental returns and ROI to that customers quickly, so that they want to continue a broader rollout of that particular software or move it to another division, for example. It’s not trying to boil the ocean right away.
Siggelkow: Start small, and then run fast, hopefully.
Singh: Speaking to this point, we come to market segmentation. You’re already being selective. Which are the markets that you feel are the most productive? Or, what are the dimensions of the market? It’s the global markets for software services, particularly security, and many of the attributes you’re talking about. I’m really talking about the corporate strategy of CA.
Kumar: You can look at segmentation in a number of different ways. The way we segment our customer-based opportunity is when we look at the broader market for digital transformation and the markets that we’re in. It’s somewhere in the $30 billion type of range.
How do we go after that? We have two segments. We have an enterprise segment, and we have what we call a commercial segment. Our enterprise segment is our top customers that we have account coverage on, and we have a disciplined account-based strategy and approach for these customers.
When you look at our commercial segment, this is about 60,000 customers globally that, primarily, we are trying to engage with through partners. Like I mentioned before, it could be reseller partners, it could be managed service providers, it could be a systems integrater.
These are customers that we believe have a real ability to consume and adopt our software in the context of digital transformation or a part of it, that we would access through a broader network of channel partners.
Singh: Very interesting. Then again, you have the issue of compatibility and partnering, right?
“You’re looking for whether the target or the partner firm wants to embrace your culture or at least be open to your culture.” – Harbir Singh
Singh: These are non-equity relationships. There’ll be really a question of compatibility. You’re back to the cultural issues again, right? Culture and process issues again.
Kumar: It’s also a partnership. It has to be mutual gain for both sides, and the economics have to be compelling on both sides. But, clearly, from a strategic cultural standpoint, there has to be a line in order to go to marketing. Absolutely.
Singh: Makes a lot of sense.
Siggelkow: Continuing with segmentation and bringing it back to “global,” where we started out the show today, tell us a little bit about where you see a lot of demand around the globe. You’re part of the Global Head of Digital Sales. We talked about China early in the session, but I’m interested to hear from you, where do you see the growth markets for CA?
Kumar: Well, given our history, we do operate in almost every part of the world. From a digital sales standpoint, we operate hubs in every region. For North America, we have several hubs. We operate our Europe hub out of Prague. We cover all of Europe out of that location. In Asia, Sydney and Singapore are our major sites, and in Latin America, São Paulo and Bogotá.
It’s very interesting when I look at these different areas and markets. When you think of the product lifecycle curve, what you realize is that there is not one product lifecycle curve. Products that may be very mature in one market are just getting started in another market.
I see that in pockets where we’re getting growth from areas in one region, like Latin America, or in parts of M&A, where it’s a very saturated market in North America or Western Europe, for example. It really depends on the nature of the solution and what we’re talking about.
When you think about digital transformation, you think about adoption of APIs and virtualization of services. It tends to be driven out of where there are larger organizations, and there is more of a drive toward digital transformation. It tends to be some of the more mature markets to start with.
“There is not one product lifecycle curve. Products that may be very mature in one market are just getting started in another.” – Sid Kumar
Chaudhuri: Sid, a follow up on that. It sounds to me like the way your company globalizes is, you take some of these technologies, assess where in the world what states firms are in, and then you apply that approach.
Correct me if that impression is incorrect. Do you also use these different parts of the world – for example, Prague, Sydney, Singapore – as sources of innovation of things which are different and export to other more established markets?
Kumar: Absolutely, and it’s interesting. I’ll take Prague as an example, when we were thinking about, “Where do we build our digital sales hub?” It was in large part due to the fact that we have an innovation center in Prague, from a research and development standpoint. We deliver remote services out of there, so we have a pretty big investment in Prague.
We found that we could get very talented engineers, very talented sales professionals, and from a cultural standpoint, a very nice blend of different cultures from across Europe that we were able to find in one place. It’s a beautiful city. It just has a real appeal to it that brings and attracts folks and brings a very nice demographic to it.
Part of our solution is, we have a big development center there that is really hooked into the broader development organization. It will either contribute to core elements of products built in other parts of the world or build entire products in and out of themselves out there.
Chaudhuri: Glad to see you’re using the world as an oyster to source innovation.
Sid, I wanted to ask you if you see any major change that’s going to be coming up on the user side or on the company side. What’s the biggest impact and change that you think we’ll see in companies or end users, as these digital revolutions and transformations become a reality?
Kumar: That’s a great question. That really ties into why, when we’ve been thinking about our go-to-market strategy over the past couple of years, we’ve been digitally transforming that experience. Not because of any other reason, but because that’s how customers want to engage with us, and that’s how they want to buy.
If you think about the millennial population, it is now bigger than the baby boomer population. In the next couple years, they’ll be half of the U.S. workforce. What that means is the purchasing decisions in B2B are largely going to be impacted and driven by millennials as time goes on.
There is an expectation around how they engage with enterprises. It’s very similar to how they operate in their personal lives. It’s engaging through social. It’s engaging through digital mechanisms. It’s doing, frankly, a lot of the research on their own, in their own time, through digital content delivery. Depending on what statistics you look at, about two-thirds of the buyer’s journey is done without talking to a salesperson.
All of this change in expectation around what the engagement model needs to be, as a result of digital transformation, has really changed how we’ve thought about it and has been impacting the investments we’ve put in place both on the marketing and sales side: a differentiated customer experience model.
Siggelkow: Does that mean that you’ll become redundant if millennials don’t really interact with sales in the same way?
Kumar: I don’t know if that was a joke or not. No, no. If you look at any technology everywhere, it’s never all-or-nothing, right? It’s similar here. You’re still going to have your direct engagement.
But, when you look at your digital sales organization, you travel less often. You’re not face-to-face as often, but you’re still engaging as you would in a normal scenario. It’s just what that mix looks like and how that shifts over time.
“When you look at your digital sales organization, you travel less often. You’re not face-to-face as often, but you’re still engaging as you would in a normal scenario.” – Sid Kumar
Chaudhuri: That makes a lot of sense. Change is really the key point that you’re talking about throughout this entire endeavor. That’s really, really important.
Sid, thanks so much for joining us on this show tonight. We know that you have a very active Twitter handle, @SidKumar. I hope you don’t mind us promoting it so that you get even more visibility and can interact with even more of your customers throughout that medium – especially that millennial generation, which, of course, will engage with you in that way. Thanks a lot.
Kumar: Thank you very much.
Chaudhuri: Fascinating. I thought that was a very interesting discussion. We talked about so many different things. The premise of what Sid does is so interesting. He helps organizations transform even as CA Technologies’ own organization has to keep changing as well.
He talked to us about the basics of organizational change. He talked to us about leveraging external sources such as acquisitions, but also ecosystems in order to orchestrate changes for himself, but ultimately, for his customers as well.
That was very, very insightful. That’s really an experience and a perspective on the backend of the organization, what companies do in the background, and what’s important in making that goal. Any thoughts, any reflections, any insights that you gained, Harbir and Nicolaj?
Singh: It was very, very informative. For me, I think it’s a high-velocity environment where they are strategizing. The customer preferences are changing, technology is changing, his organization is changing. I felt that there is a lot more detail that Sid did not have a chance to get to, but that’s going to be really important.
The fact that it’s global is not surprising. Digital applications are often global. Sourcing externally is a hedge against not being current. The risk of not sourcing is higher than the risk of sourcing, and then, de-risking where there is acquisition or partnership. The internet access is clearly there because he says the customer acquisition technology is changing.
To me, one of the interesting broader questions is, the buyers will also have millennials who might do more digital engagement. CA have many more millennials who would do different forms of engagement. The interesting question is, what will be the best business model in the future for this different way of accessing customers, providing information, and delivering value?
Siggelkow: Well, I found fascinating the idea about how to engage with the customers in smaller projects, and then slowly building up. Clearly, those tend to be risky projects to invest in. Again, the hit rate has not been very great. There have been a lot of horror stories around this. But, of course, that then raises the question: so why haven’t we done that before?
From the firm strategy point of view, it’s asking yourself, “How can we modularize our product? How can we make it into smaller modules that we can sell our product rather than selling a big product? How can we create a product architecture that allows us to start small and then build on that to show value to the customer as we go along?”
That sounds so easy, but probably isn’t at all. Otherwise, we would have done this. How do we do this in the economically efficient way? This raised, to me, some interesting strategy issues, which partly will help us with Harbir’s question around “which marketplaces do we play?” Because again, there are modules or systems or products we can custom-tailor more easily to different segments. That was an interesting aspect.
Chaudhuri: Related to what both of you are saying, it’s very hard for software companies because you can be a platform company and essentially provide the platform, you can be a company that has the applications, or you can simply provide services.
There are a lot of choices. It’s not clear which one dominates, if any, but different players in that ecosystem that he was talking about also have different roles. It’s no longer one company going out and selling to any of these customers. It’s a set of companies, and he brought that out very vividly.
Singh: For me, that’s exactly right. I agree with the direction of our discussion here, but for me, the biggest issue is selectivity because of all the things we have said: which of the small projects, which are the customers, are we platform, are we a deliverer of the end product? We can dissipate the effort very easily in this kind of business because everything is moving.
Whoever can come with a discrete and identifiable value proposition, in a particular application domain and geographic domain, can probably then have a chance at being world-class at it. That’s the other part that I was thinking. How do you become world-class at everything? How do you select? Then there’s market segmented activity, performance, and continuous improvement.
Siggelkow: The fascinating thing is this is all happening in a B2B world, and not just in a B2C world. It was also nice to have Sid on the program today because, quite often, we are just thinking about this as the end customer, but now it’s the same issues happening in a B2B world as well.
Chaudhuri: Absolutely fascinating. I think different business models will survive and do well in different parts of the world. It may not be the same solution. Of course, the sign of a good conversation is when we run out of time, and that’s all we have time for tonight.
About Our Guest
Sid Kumar is the Global Head of Digital Sales at CA Technologies, where he leads a team of 300 sales and pre-sales professionals to help accelerate growth for the company. He is an accomplished operating executive in the technology sector with general management and profit/loss experience across business units, ranging from $100 million to $2.5 billion. Prior to CA Technologies, he spent time in Venture Capital and Private Equity. He also provided strategic mergers and acquisitions, and financing advice to companies across the technology sector.
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