Transcription of Audio Recording
"...top of the line, Apple IIe, one-megahertz processor, one megahertz. I think it was 8 kilobytes of RAM on an 8-bit information system bus and piece de resistance was the dual five and a quarter floppy drive, right? Now, remember, there was no hard drive back then so that was pretty tough, right? So you had to load everything up and I really...it's really sat with me is that my father said to me, "Margaret, this is not gonna get any better than this." And thankfully, my father was wrong, right? Because now we're bringing things together. Our very powerful computers are sitting right in our pockets and really changing, as I mentioned, how we are today. Now, I don't think that anybody could have predicted when we saw the iPod Touch come out and later how this influenced us in the smartphone space, how it would really infiltrate our lives every single day. We think about all the disruption and all the vying for our attention that comes across every single day. Jerry Seinfeld actually said recently - I should have just watched him on YouTube, he was kind of pricey - but Jerry Seinfeld said one time in his stint, he said, "Hey, you know, we've gotten so intimate in our relationship with our phones that I can bet that every one of you out there knows the percentage of battery life that's left on your phone." And I was like, "Oh, it's 17%. Yeah, you're exactly right." So we see a lot of challenges and with that, it's made my job harder and I'm sure it's made your job harder, right, in staying competitive in this space.
So when we're talking about digital capacity, exactly what am I thinking here inside my head? And really it's about the ability for us to be able to align our business to the needs of our customers or our stakeholders or our constituents, right? And we're doing that by injecting and using digital technologies into our business. How fast can we adapt to the space and how quickly can we meet that?
So digital capacity obviously, as Mina mentioned, is at the height, digital transformation, everybody's doing it or everybody's trying. Recently, I think it was last year, Accenture actually did a survey of 2,000 executives that asked how many people want to do digital transformation or digitization, how many people have digital initiatives that are very important to their companies? And the answer was it was about 62% felt that they were really high priority, really high priority for them.
Now, if you take a look at Fortune 500 companies today versus what was the list of Fortune 500 companies in 1955, I believe it's 88% are no longer on the Fortune 500 list, right? And that's changed over quite a bit. If you take a look at some of those companies that we have today, it includes Microsoft, the Oracles, the folks that are really coming across technology and enabling companies that are actually kind of playing both sides of the house, right? They are serving business as well as end consumers and creating a lot of profitability within their own market while empowering us to figure out how to become more digital.
Now, couple more stats just for you to keep in mind. These stats are actually from the midmarket, so folks that are up to a billion dollars. Now we look across industries, every single industry, over 50% of those people say digitization is really a high priority. Now, despite the fact that we're doing a lot of investments in digital, we're still not seeing a lot of satisfaction, right? We're not enjoying, we're not happy with the pace, we're not happy with the quality, we're not happy with some of the results that are coming out. And furthermore, we're realizing that the investment in digital is actually taking quite longer than we thought. Now we can identify points of change and then we talked about the differences between change management and transformation, right? And that change is happening at a single point in time and it probably could be isolated within my own department, right? But transformation really takes a long time and goes across departments and that's one of the things that makes it so hard and so difficult. So then on top of that, we're trying to change in this world and yet it's taking a little of time for us to realize the value, right? So on average, it's about 2.6 years before we actually see a return. Now 44% of the people in the midmarket are saying, "Hey, it's probably going to take us three years or more." Which is actually not an unrealistic thing when you think about the things that are going on within your own company.
So it's no wonder that John Chambers last year, before he stepped down as CEO, at his conference at Cisco he said, "Hey, 40% of you guys sitting in this room are probably gonna be obsolete in 10 years, right, because you can't keep up, and you're gonna try and some of you guys are gonna fail, for that." And it doesn't take that long for us to realize and see exactly some of those results, right? If we take a look at some of the brands today, things that are getting disrupted from the music industry of trying to figure out how to deal with streaming. I think there was an article last year that talked about how consumers are no longer gonna buy songs anymore. They're really just gonna lease them, right? I don't need to listen to Taylor Swift in five years, I just don't care. I need to hear the next thing coming up, right? So why do I need to pay for it and own it, although I'm gonna keep my Michael Jackson album "Thriller." I'm convinced that's gonna be worth a lot of money sometime in the future, right?
So as we start moving into talking a little bit more about the specifics of measuring your digital capacity or thinking about your digital capacity, one of the hardest things that we have to do is of course not only to realize our strengths but take a look at some of our warts, right? So I want you to hold that mirror as we're talking through this and don't worry, we don't have to share, right? So we're just gonna keep it secret within ourselves, but I want you to keep that in mind as we kind of move forward with that.
So when talking about our digital capacity, we see a lot of different areas across that are, for us, a way for us to be able to measure how quickly, how diverse, what is the effectiveness of the way your organization is running in order to meet the digital demands of the economy today. Now, some of these are quantitative measures, some of these are qualitative measures, but as you can see, every one of these is dependent on each other from a business and a technology, and a customer/product side, right? They're all dependent on each other. And we know that some of these areas are a little bit more mature. So for instance, Mina mentioned the idea of using Agile. Agile has been around for at least 20 years, I think Scrum in particular, which is what most people are using today when they're going into Agile, started in 1995, right? And it's really taken off today and I would say that one of the reasons is because, when we tried to do it before, we actually failed and learned a lot from it, right? We said, "Hey, we're gonna kinda do Agile." Oh, no. Kinda Agile doesn't really work. We gotta commit to Agile, right? And now we're also seeing some of those folks who made those early investments going into safe Agile, which is the scalable enterprise level of Agile on the program level.
And another place where we're seeing a lot of advancements, of course, is in infrastructure, right? So as you guys know, AWS is one of the big cloud competitors as well as Azure. You'll see that maturity come out because they're putting out new services that complement the scalability of their systems, right? We see that in content management systems. Twenty years ago, content management systems did what? They put up stuff on the web. And nowadays, if you buy a site core, if you buy Adobe Audience AM, you'll find that those content management systems are trying to do more and more leverage data inside that to give you a better customer experience and marketing experience end to end. So we're seeing maturity areas in certain areas but they're not all going at the same time.
Customer experience, for instance, this year, Accenture and CapGemini have identified that customer experience is gonna be the huge thing in 2016. And why is that? Because we found that the consumers are actually willing to pay more for a better experience, right? We are constantly vying for people's attention and that our consumers are empowered to go somewhere else pretty easily. In fact, Tridion did a study that found out that customers were willing to pay up to 24% more in terms of cost to have a better consistent experience. That's a pretty big deal, right? We were thinking that, when we did customer experience and when digital first came around, we gotta throw up that website, we gotta throw up that mobile.
But now, how frustrated do you personally get when you put something in your shopping cart and then you go to your computer and it's not there and then you go to the store and they have no idea what you bought, right? So Best Buy is one of those stores, companies that have actually created that consistency of user experience and have exploited the fact that they have brick-and-mortar stores to their advantage, making sure that the guy who wants the latest gadget can get his hands on it, can order it right there in the store, or order it in a mobile app, and have that continuity from app to desktop to store, all the way through, and that's one of the things that has helped them stay competitive in this race against folks like Amazon, who don't really have that presence in that way, although you'll notice that they're trying to change that, right?
In a couple of other places, when we're talking about up and coming, obviously BI analytics, that's getting really tricky, most companies today are just massively ingesting every bit of data that they can because we can, right? We're gonna figure out what we're gonna do with that later. And now you're hearing a lot more things about automation. So we can measure how well are you doing in the automation space, are you actually getting value out of it, are you actually increasing sales from it, can you actually track and predict exactly what somebody wants before they want it? The interesting thing about that is there's actually a slight pendulum swing going on in the other direction in that we're trying to find out what's the value. Should we be doing automation? Should we be using machine learning? Because we may not get enough value coming out of that. And so some of that analysis, if we're seeing corporations doing that level of analysis, then we're seeing a lot more maturity in that digital capacity realm.
So, obviously, there are obstacles. If it was as easy as kind of going through a digital capacity list and checking things off, we would all be doing it and we will all be high-fiving each other saying, "Hey, we're gonna be around here in 10 years no problem, right?" But let's talk a little bit about what some of those obstacles are. This is very sad, isn't it? I was like, "Oh, I'm so sorry." So this is before child labor laws, I think. So what ends up happening is there are natural points of friction in business all the time, natural points, and so we don't expect not to see that in any company. And a lot of it is no different than what we see today in terms of companies having to reinvent themselves, right? What's old, what's new, should I spend, should I not, should I invest, should I wait, do I realize the gains today or tomorrow, right?
One of the biggest things that we see that is really challenging, of course, is dealing with the cultural shift, that Mina mentioned, that start-up thinking mentality is based back against our traditional and a little bit of that friction between business and technology or business and operations or technology and operations all come into play and have natural points of friction. But even that in itself is really not the challenge here. What the challenge is the fact that we have a lot of businesses right now that are coming and challenging us. And in that, we have a lot of pressure to move fast. These guys are starting up their companies in their garage because AWS, right? Anybody can buy a bunch of servers now for cheap. "And I only have to pay for what I use."
And so that guy and the kid in his garage and the guy who's living with his mother still is now creating conduits to help match people of the inventory to the people who need. And what's interesting about these businesses, they're only about making connections if you think about it, right? None of them are actually producing any sort of inventory in a massive scale way, they're more doing either using crowdsourcing or they're creating opportunities for people to make those connections. And so it's no wonder that, when you take this kind of disruption and the pressure and the pace that they are able to go at, combined with the natural points of friction, it's really the biggest obstacle for our businesses today.
So let's talk about how companies are dealing with that and how they can accelerate, what we've seen, how people can accelerate that timeline. One of the biggest things that people often do is, of course, the and tried true "Let's acquire those gaps. Let's fill it in, right?" So we see that in our services industry, like the Accentures, the Deloitte Digitals, who acquire the small digital agencies, pull them in, get a lesson learned, keep going, "We can win more work by expanding our capabilities." We definitely see some interesting things that are happening in the hospitality industry. Up here, you see Capital One. Capital One was really one of the larger brand companies that had bought a digital agency and had brought it in-house. And on top of that, you'll see some folks that are actually just trying to enhance their business. So McKinsey bought an analytics firm because they believe of a pertinent development in their management consulting firm is to be able to do data-driven business decisions. And the company that they bought, that was their expertise. So it made sense. It felt complimentary.
What's interesting about Comcast here is that you know, Comcast is a cable company. They're a telecommunications company and yet they're buying a content company, right? Something to enhance and provide new revenue streams and ways to influence folks in the marketplace today. Of course, another way for folks to be able to do this is to separate, to keep what's good, invent, experiment and isolate it out. So we see folks like AARP is a huge nonprofit in DC. I think they're a near-billion-dollar nonprofit, which sounds like an oxymoron, doesn't it? But when you think about that, they've created...about five years ago, they actually created an internal media, a new media center. Now, they were having a lot of problems with this internal media center because it wasn't jiving with their culture. If you think about AARP, they were a lot of people who've been there for a long time, 20 to 25 years, 30 years, they retire out of AARP. And so they took that innovation center actually last year and they spun it out into its own entity. So you'll see them putting out a lot of digital products on their own. One of the recently was an iPad app specifically targeted for the 50 plus, actually, I would say 65 plus, for the way that they marketed that particular application.
We also see folks like Major League Baseball. They have a platform that they're leveraging and they've spun off a group called MLB Advanced Media, and that today, is the same platform that is being used by several sports channels and several sports groups, including ice skating, etc., to help forward their business in a very different way. We have, of course, Amazon and Amazon web services in certain ways. We have Gannett and TEGNA. That was the huge one in our local area that happened also last year because they were trying to isolate themselves from publishing and trying to protect that digital business. So, separating is another way that folks have been able to do this to incubate and hopefully evolve.
So diversification is another tactic that is really quite interesting and I'll point out...you can see all these folks that are on the page, they're doing a lot of really interesting things, but I'm gonna highlight, Marriott. Marriott is also a large local company in the DC metro area, and as you can imagine, Airbnb is quite causing a little bit of that disruption there in the hospitality industry. What's interesting about Marriott, though, is that they've decided that their advantage and their differentiator is the fact that they are in the hospitality business, they are not just a bed, they are not just a restaurant, they are in the business of hospitality. So I wanna give you the best experience from the time you start engaging with Marriott all the way until the end. Now, does that mean a mobile app? Maybe, right? Everybody seems to have one, we might as well have that.
But what they have started to do is last year is last year they started hiring a bunch of entertainment folks, folks from the entertainment industry, like ex-Disney, to come in and actually produce their own television shows. They're not only producing their own television shows that are going out to the Travel Channel and channels that make sense for them, they're also producing their own publications. Now, the idea, of course, is to extend that experience, right? Make it more consistent. Make sure that when you're meeting with me at Marriott and I have control over the message of who I am, that you feel good and you feel like you can relate and I've already kind of cut that perception off at the past. I can help influence that. So that's an example of how Marriott is somewhat turning their business a little bit or diversifying their business in order to help compliment and speed some of the disruptions that are actually happening with them or counter that disruption.
The biggest influence that we see when we're looking at organizations going through digital change, of course - Mina alluded to this - which is defining or having a strong definition of what that means for the company to be digital. And it is okay for that to evolve over time, but having that strong alignment is really huge because, at the end of the day, we're finding that more successful companies are more tightly coupled together. They're becoming less siloed and more collaborative in order to get that enterprise vision. Now, with that enterprise vision, there's a need as we talked about those natural points of friction, right? We gotta get rid of that, so we need to, of course, have that C-level sponsorship. And with that C-Level sponsorship, it really helps reduce some of that friction and helps empower down, all the way down to the folks that are running on the ground, trying to execute that digital vision. And everybody's marching closer to the single beat. Now, that's not to say there aren't pain points and that's not gonna happen, but it is a huge step in being able to align the company.
Now, I will also highlight the fact that part of the challenge is being able to understand the risks that are going in as we're making the concessions to go faster, to go better, to change our business models. Overall, it becomes a huge cultural shift, and as Mina mentioned, digital really is a mindset to change exactly how we want to do what we want to do and how we want to achieve it."