It’s perhaps not surprising that a commander who conducted cyber missions for the U.S. Air Force sees digital transformation as both an offensive and defensive imperative for virtually all businesses. The good news is that Maj. Gen. (Ret.) Suzanne “Zan” Vautrinot also sees the task as immensely doable.
When C-Suite and board leadership embrace digital as a company’s “imperative future,” even mature businesses with long-established business models can achieve operational transformation, she says, citing CSX as an example. Founded in the 1800s as one of the country’s first rail-transport companies, CSX has been relentlessly seeking ways to bring digital capabilities to every aspect of its legacy business. “Scheduled railroading, digitally based real-time trip status to shippers, alternative communications, automation, control system design as well as leveraging drone, multispectral imaging and data analysis tech for safety and maintenance efficiency are just the initial steps in a journey that is putting a CTO in the C-Suite,” explains Vautrinot, president of Kilovolt Consulting and a board member at Wells Fargo, ECOLAB, CSX and Parsons.
For all but those sectors and entities that are already deeply digital—think fintech or Amazon—the real value comes with the scaling and further expansion of digital into a competitive differentiator. “In every industry, the challenge isn’t to simply leverage digital, although there is great advantage and efficiency in starting there,” says Vautrinot. “It’s to rethink and transform the operation by leveraging the new reality these technologies can facilitate—less an evolution than an emergence perhaps?”
Corporate Board Member recently had the opportunity to talk with Vautrinot about the role boards can play in propelling digital transformation success. Excerpts of that interview, edited for clarity and length, follow.
You serve on the boards of companies in vastly different industries—financial, healthcare, transportation and defense. How do boardroom conversations about digital transformation compare across industries?
The thing that is similar, if not exactly the same for each one of them, is the journey going from technology as a commodity, or as something that was just an underlying thing provided to you, to an alternative way of getting things done. It started as, tell the IT guy to go fix X, or tell the technology guy to go get me Y so that I can do my real job in the company. It wasn’t recognized as foundational to everything you were going to do in your future.
So, when you take this journey, you say, “Technologies can give us an entirely different opportunity or a different alternative for getting something done rather than just being a support structure.” Think about it in terms of the military with space and cyber, two areas where I have experience. When those started, they were nothing more than, “Tell the satellite to provide me communications. Tell the satellite to provide me a picture rather than leveraging space as an alternative to getting missions done.”
It was the same with cyber. It was about IT, getting my email and being able to store information or integrate information. That certainly is important, but the fact that you could actually use cyber as an alternative for warfare, which we have, is a completely different thought process. So, that journey to understanding that it is both foundational and an alternative to getting things done is consistent both in the public sector and private sector. And I’m seeing it as consistent through all of my different industries and boards. They’re just all in different places along that journey.
Regardless of sector, the customer experience is the main reason most directors now give for their companies embarking on this journey. At the same time, board members are expressing frustration about translating data to action. What’s your view of how companies should approach that challenge?
So, if you are a ship at sea, you want wave heights, you want wind speeds. You want the warming of the ocean in certain areas. You want very precise data from the weather channel, completely different than what you and I want, and completely different if you’re surfing and I’m skiing. So, how do you set up an architecture that both brings all of that together and can provide a place to have it curated. And then, what are the technologies and the algorithms that allow it to be curated. And then, what are the elements, the APIs or the apps that allow you then to provide the answer, the information to a customer. That way of thinking is what allows you to go to what we phrase as digital. If you’re just thinking the customer is all one thing and we’re just going to send a barrage of stuff, you’re probably not going be successful. And it’s also too costly because now you’re trying to do everything for everybody. So, how do you curate it?
It reminds me of way back when I was younger, everybody wanted all the data because they thought they would be able to make better decisions. But it’s overwhelming. So, the question isn’t how do you provide data to all your customers, but what information, not data, is relevant and relevant to which customer? IBM did a beautiful job of this when they bought the Weather Channel. They completely reconstructed how they thought about providing information to customers. So, you had an underlying foundation of technology that could bring in lots of different things, then another layer that was the aggregation of information, kind of like we use APIs and apps. Then you had another layer that was almost a machine learning, initial AI. And you were providing, through the app to that user, what had rolled up through that enterprise as relevant to that user.
So the challenge is in identifying which data will enable you to personalize and improve on the experience?
Exactly. Just like in medicine and in cancer research. Of the companies that I work with, Ecolab probably did the biggest digital transformation. They transformed all of their ERM and all of the things that are the business base of the company, which is certainly important, but more importantly in their chemical enterprise. Think of a dairy that has milk moving through all of the automated systems, and you used to have to clean it by putting hot water and chemicals through at a certain temperature for a certain time because all the analysis told you that’s how long you had to do it. They used a technology called 3D Trasar to [adjust that] process so you can actually tell when the lines are clean and that it’s been done properly rather than simply doing it by time. That saves water, it saves chemicals, it saves wear and tear on the systems. It allows you to do it more rapidly.
The same thing can be applied elsewhere, like cleaning cooling towers to make sure that they’re sanitary and you don’t have disease. All of that can now be done in a digital fashion, applied to what the company was providing, which is clean water, food sources, all things for having a pure manufacturing capability. They did it by partnering with Microsoft. But even in that conversation, it wasn’t about saying, “Okay, we’ll give all this stuff to Microsoft and then they’ll help us.” Microsoft came on-prem because a lot of this is intellectual property. How you do it and the information about each one of the companies you’re doing it with can be a competitive [advantage], and it can be knowledge for the company you’re supporting as well. So, you need to do that in a way that enables you to leverage it and make decisions about an industry, but at the same time keep things private.
So, some of it was done hybrid cloud on-prem so that the data is still the company’s, and the algorithms are still the company’s, but the resource for providing that foundation was a partnership with Microsoft. And now, they are a completely digital company in terms of what they do as a product and as a service provider, not just in their business operation.
Companies sometimes seek to acquire the technology or technical talent they need through M&A, partnerships and affiliations. What should directors be asking to ensure that those actions will bring the company where it needs to go?
Before a transaction, my question as a board member would be, “Is this going to be one of our core competencies? Is this integral to what we’re gonna have to do in the future? Do we need to understand so much about it as a core competency that then we can innovate and expand it on our own?” That means that we have to have that organic resource, that organic talent. And it also means that we have to keep that organic talent on the leading edge of leveraging that technology. They need to know which friends to phone, what things to leverage, because if we brought them in and just kept them in a box for 10 years and told them, “Keep working on this,” they would do what they knew to do 10 years ago.
This area is constantly evolving, so if you’re going to have it organically in your company—to put the resources in to continue that level of development and research and capability and growing that capability—then two things happen: One, the people you’ve brought in want to stay because that’s why they do this business. Two, they are still on the leading edge because you continue to grow and to move that forward. If you are not willing to do that, if it’s not core to your company, then that’s when you should be partnering. But you have to be partnering with full knowledge of what you’re trying to gain, because your partner doesn’t do your business. Your partner is not going to facilitate your business. So, you have to have real expertise on your side to look at where you want to go from a strategy and from an execution standpoint, and leverage only those things from the partner or those things that the partner best provides toward that end.
So, you have to be all over it in strategy and the method by which you want to execute. You can’t just hit the easy button. It’s similar to what people were thinking about the cloud: I’m just gonna put it in the cloud, and I’ll hit the easy button, and it will be easy. They didn’t understand that what you use in the cloud, how you use it, what has to be protected and secured, which different ways you segment, even how you intersect into the cloud has to be protected. So, you had all kinds of very large, brilliant companies that got eaten alive because they didn’t understand how to establish the interface and best use what their partner was providing. And that’s not what the partner does. The partner doesn’t say, what’s the best possible way I can make your business move forward?’ That’s not their job.
Do boards today need to think about having members who have a background in digital or cyber, or maybe just a younger generation, to be able to offer insight like that in the boardroom?
I would start with, how do we make sure that management has looked every which way? If management doesn’t have the expertise and the wherewithal to have this discussion with the board, that’s your first problem. Because the board can’t do management’s job. So, you can have brilliant people that [surface] the problem for management and no one within the management structure who understands what they’re talking about or understands what they’re asking. Then you have kind of the frustration I call the Velcro effect. When you have Velcro, you have that scratchy side and you have that fuzzy side that it clings to. If you don’t build the fuzzy stuff first, then all you do is annoy folks with the scratchy stuff.
The fuzzy stuff is getting management to recognize that they need to leverage expertise, have this conversation and bring it into the strategy and into their operational sessions. When they’re ready to do that, then you need board members or advisors to the board members to help them on that journey. That lets you ask better questions so that you don’t go down Alice’s rabbit hole and distract but rather move with the company on this journey. Both of those things have to happen. To your point, yes, if the company is serious about doing it and is now creating the capability to do it, that’s a good time to have the board either have education and advisory that allows them to move in that direction or a board refresh that brings in the expertise to ask the right questions.
You mentioned having an innovation committee. How does that work with the full board?
It’s not a standing committee on any of my boards. It was something we established on one of my boards in order to get a portion of the board a really deep understanding of what technologies were available to help with that strategy discussion. We created it as we were moving the company forward.
Technology is a standing subcommittee of risk at Wells Fargo because digital is changing all of the foundational capability in banking, what you would call the enterprise capability, right down to where we have data centers, how they interact and their business continuity and the resiliency. Then, how do things run on top of that; how do you secure that? How do you work the APIs and the data to the customers; that is so central to moving forward. That’s the technology committee at the bank.
Then, within the bank, there are folks who do digital. They aren’t part of the CIO’s office. They’re looking at all the digital and fintech type of capability. But those elements come back in because you’re looking at it from a risk and a facilitation standpoint. And that’s what the committee does. It says, “Okay, as we’re looking at these things, what are the risks across the company and how do we implement it? And how do we make sure that we do governance that facilitates it but also puts in the appropriate controls?”
At the same time, you’re making sure that it moves through the entire company because you’ve got different pockets of expertise, let’s call them cylinders of excellence, and you have to make sure that it moves across them because the whole company has to move forward securely in a controlled fashion. Particularly with Wells Fargo, that has to be done exactly right. You can’t afford a misstep, especially after you have had unintended consequences sometimes of things you’re trying to achieve. This is not an area where you’d want an unintended consequence.
So, the technology committee brings all that together right down to the business continuity. And resilience is part of that committee’s responsibility because so much of the underlying technology directly relates to that. These things belong together.
The pandemic accelerated digital transformation, and now everybody’s jumping on the latest technologies, trying to adapt. Amid that sense of urgency, do you feel enough attention is being given to contingency plans?
On every single one of my boards, one of the entities on the C-Suite owns that. For example, at Wells Fargo, the COO owns business continuity and resiliency because there are so many elements across the entire company, but it reports in to technology when we’re looking at it as a board agenda item, because so much of the underpinning that allows the right things to happen are technology-based. So, you’ve got that continuity where it belongs to the COO, but we talk about it in the technology committee, and then it will go to other places based on whether it’s a personnel issue or a legal issue with checking privacy, checking methodology or checking laws of a given state. And then somebody who is senior enough has the gravitas to take it across the company and to the folks who have the knowledge base to leverage technology to facilitate it. CBM