Season 2, Episode 6 - "What is my role in the organization?" featuring Rich Penkoski, Principal and Deputy CEO, Markets at Deloitte
Season 2, Episode 6 - "What is my role in the organization?" featuring Rich Penkoski, Principal and Deputy CEO, Markets at Deloitte
On the season finale of Network Disrupted, we’re talking to Rich Penkoski, the Deputy CEO of Markets for Deloitte Consulting. We're going to lean on Rich’s unique role speaking to many different finance and technology leaders to discuss the evolution of the highly important CIO-CFO relationship.
We'll also cover the rapidly changing expectations of technologists, strategies for enabling agile decision making at large organizations, and why intimately trusting your vendors is necessary. Enjoy!
As always, let me know what you thought of today’s discussion! Tweet me at @netwkdisrupted + @awertkin, leave a review on Spotify or Apple Podcasts, or email me at firstname.lastname@example.org.
Read more about Rich on our blog.
With that, I wish you all a happy, safe holiday season. I'll see you in the spring for Season 3.
Andrew: Hey, it's Andrew, and you're listening to the final, yes the final, episode in season two of Network Disrupted. If you haven't heard, this is a show where we help people like you trade notes on navigating disruption in technology. To end off the season, we're talking to Rich Penkoski, the Deputy CEO of Markets for Deloitte Consulting. We're going to lean on Rich's unique role as someone who speaks to a lot of different leaders in technology, as well as finance, to talk about how the highly important, but rarely discussed CIO CFO relationship is evolving; what the new expectations are of technologists; how large organizations are enabling more agile decision- making. If you enjoyed episode three this season, then good, because we're going to touch on why leaning on a broader ecosystem and intimately trusting your vendors is actually necessary. And with that, I wish you all a happy, safe holiday season. I'll see you in the spring for season three. As always, let me know what you thought of today's discussion. You can tweet me @ NetworkDisrupted, leave a review on Spotify or Apple Podcasts. Please, please do. Or email me at andrew @ networkeddisrupted. com.
Speaker 2: Give me a sense of the complexity.
Speaker 3: We love the pilot proof concept approach.
Speaker 4: It influences everything. It influences the human experience.
Speaker 5: There were several failures along the way.
Speaker 6: We want to be an early adopter customers..
Speaker 7: You are handling sensitive information.
Speaker 8: inaudible
Andrew: All right, so let's go. So Rich, how do you work with the traditional view of the CFO and the CIO as around cost and cost containment, as well as around governance and compliance? And we've talked in the past, the industry has talked in the past about that CIO needing to be a better partner with the business in order to deliver the value the business wants. Obviously that's changing today, and so how do you work with your clients and internally as well to help those things align?
Rich Penkoski: There's a number of things we're talking about doing today, Andrew. One of the things we are really focused on, and this is a big role for an IT professional, is talking to CFOs about what it means to be a tech savvy CFO." How do I, as a finance executive, figure out which technologies I need to know the most about? Which ones are most relevant to advancing the strategy of the organization? And which ones, let me be a better finance professional?" Using the CFO as an example. Their IT counterpart is an invaluable resource to that discussion to really help them think about," Hey, here's where you need to focus as our finance chief in order to help me, the CIO, make a better decision and advise this business unit on what they need to be doing for their strategy." And we're seeing a lot more discussions about that. I also think one of the interesting dynamics that we're seeing right now is that, if you take a couple steps back, the finance organization, is oftentimes partnered with IT, and IT has used finance oftentimes as an incubator for new technologies. If you think about the advent of ERP, it started with everybody implementing a finance system, and then they moved to supply chain HR manufacturing. When you think about analytics, the first place that an IT professional usually wanted to pilot something around analytics was in the finance organization because that's where analytic capability sat, and you had the ultimate master ownership of data sitting within that function. You look at robotics, RPA, a lot of the first applications there were in the finance arena. And so watching organizations, IT leaders and finance leaders come together to now help their organizations navigate this new world is becoming even more prominent. And I would also say quite candidly, that the lines between, at the staff level, what an IT professional does and what a finance professional does are starting to blur. And we are seeing a couple of the organizations I'm working with now, and if you particularly look at the consumer industry is a great example where in order for the consumer products company to become more intimate with their customer, the end user of their product, as opposed to the re- saler or the wholesaler of their product, requiring them to have to think very differently. That's changing the mindset of finance when it comes to," How do I think about the money I'm willing to put towards customer engagement? How do I want to think about my supply chain differently?" But it's really the IT professional who is advancing the discussion on," Here's all the things we can do with technology and digital engagement to help build that customer intimacy." Just watching those conversations, it's remarkable. And so the lines are blurring every day.
Andrew: There's obviously been amazing innovation in that space and that's the space that most of us can see the most because we're consumers and so therefore we see it. Nike has been a customer of mine in many different lives and careers and watching what they did, for instance, in digital fitness, where they just, as you said, had no idea who their customers were other than the retailers. And now they know and they can plan product strategies on creating more trail running shoes, for instance, because people are providing them that data and that touch point of data becomes critical. I often think of it as IT needs to shift from project- based go install that ERP system, upgrade that ERP system to more of a focus on creating infrastructure that is designed and architected for change. Because I can't predict what the business is going to need in a year or two, so therefore the more time I spend on long lived projects that screw something in that with some assumptions can be used for five or 10 years is a waste of an investment.
Rich Penkoski: I think that's accurate. And I'd go so far as to say the IT professional also has to begin to shift themselves from thinking about the architecture to enabling that business direction, to actually being with business, creating the business direction, to actually inform that business leader as to," Based on what you want to achieve, here are some great technology tools available and here's some advances that we might want to consider in order to make that happen." It's pretty interesting, Andrew, as I was just reflecting on the whole future of," What does the great IT professional of the future look like?" We did a survey around the future of work in technology, a global survey, and this was fascinating. The three most important rising tech skills we heard from CIOs across the US, and this was late 2019, was actually creativity, cognitive flexibility, and emotional intelligence. It's astonishing, right? And they were double digit gains in how important those three attributes were to the technology professional of the future.
Andrew: What would you expect they would have been in, I don't know, 1990 or something?
Rich Penkoski: Oh my gosh. It would have been deep technology architecture. It would have been high levels of specialization." I need a database administrator, not necessarily a data scientist." So it would have been way over to super specialized skills. And those three attributes by their very definition define a much more of a technology athlete than they do the technology specialists per se. By the way, you need the deep technical expertise, don't get me wrong. But I think there's going to be some very interesting career paths and some very interesting opportunities for technology professionals in the future just based on what the data's telling us. By the way, just interesting sidebar on that, research piece we just did showed that the number of CIOs that are now reporting to CEOs as opposed to CFOs has inverted, that there are now more CIOs reporting to CEOs than they are reporting to CFOs, which I think is, again, a pretty important statement on where the future of IT lands. But it also means that if you're an aspiring technologists trying to get into that seat, what's going to be expected of you in the future might be very different than the experiences you currently have.
Andrew: Oh no, for sure. And look, technology changes rapidly these days, stating something that's more than obvious. And so deep specialty in a single technology is going to be dated regardless. But there's that ability to be able to understand quickly. And let me even separate it a bit more, it's not being so focused on a single vendor's technology stack. You need to understand what your data strategy is, not what your specific strategy around a specific database is. You have to extract away from that tool set.
Rich Penkoski: Yeah, I think that's accurate. And I think it's almost going to be the default position because the stacks themselves are evolving so quickly. We've talked about in the past and we're talking a lot with clients right now is to actually think about," What does my ecosystem of technology providers need to look like in the future to allow me to be best positioned to rapidly adapt the changes and improvements that are coming?" And so we're seeing organizations today where they're developing much stronger and deeper relationships with their two or three chosen cloud providers, because they actually want to rely on that cloud provider to be the one that is their go- to expert on the stack. And they want to use their internal talent on all the things you just described. Now, again, you rewind seven, eight years ago, that would have been heresy, would have never been willing to be that intimate with your vendor when it comes to being a part of the mission- critical architecture that keeps your business running, that's actually becoming the norm and not the exception. And so that's also creating, quite candidly, a little bit of a shift for CIOs and CTOs around how they choose and think about their technical architecture environment. Because it's now not only," What's the strength of the product that I'm looking at?" It's," What's the durability of the product I'm looking at and what are the other offers they wrap around that product to support my core business?" Which we're still in the early stages of that. We're seeing some of the large hyperscalers making some very good plays in that direction. I think it's going to put some pressure on some of the startup software companies who may not necessarily be as complete, but it's going to be an interesting area for all of us to watch and to figure out how to adapt to.
Andrew: Absolutely. And at the same time, I think it's imperative that the IT executive, whether CIO or CTO, whoever, is focused on a strategy that might pivot over time, but is focused on a three- year whatever horizon, so you don't lose track of that. And I see that a lot where there's a strategy that ends up pretty flat, where it's changing too often, where there's not the perseverance necessary to drive through because of what's happening on the short term. And two or three years sounds like the short term in many cases, but things need to change rapidly. And I think it's hard to do given today, these companies that you work with companies I work with have been creating technology for 10, 20, 30, 40 years. They've got this history of technology. Everything is so potentially brittle and inflexible as it is today, so I would imagine it's a bit deer in the headlights of just," Where do I start?"
Rich Penkoski: Without question. This whole notion of," How do I deal with my technical debt?" Is front and center for every established mainline organization. And brittle is actually a really good adjective, Andrew. I think that many organizations today may not have appreciated just how fragile their architecture is until they've had to deal with, for example, a remote workforce, or they've had to deal with fundamentally interacting with their customer in a highly digital environment, which relatively straightforward to put a front end on that, but when you then need it to ingest all of that information and do something with it on the backend was virtually impossible or required heavy levels of manual intervention. And so a lot of what the pandemic I think has revealed is absolutely changing the fundamental strategic direction for a lot of organizations where they're having to really say," Look, we have put certain technology investments on the back burner because they were considered infrastructure. They were considered back office." I mean pick your favorite term. When in reality that now limits their ability to achieve their digital agenda and their digital aspiration. And so, yeah, I think you've got a lot of organizations figuring out," How do we deploy capital to go address that?" And that's further complicated, by many organizations continuing to feel strain because of the current business environment that they might be operating in. So it's a vexing problem, but I would say it is also a big driver to a trend we've also been seeing, which is how much more the CIO has a seat at the table when it comes to strategy. We do CIO surveys every year, we do a lot of trends in technology every year, and as recently as three or four years ago, there was a big push that we were talking to CIOs about, which was how to get a seat when you're formulating the technology direction of a company. What we're seeing today, in a recent study that we just did, again, kind of a global study, shows that most CEOs actually see their CIO as one of the most mission critical members of their team when it comes to formulating strategy, more than the CFO, more than the COO, it's actually the CIO. Which is a profound change over such a short period of time. But it tells you that the pivots we're talking about are not academic, they're happening in the real world and they're being shaped by IT professionals. Now, the question that everybody's got to grapple with is," Do I have the right IT professional in the seat? And is it somebody who is rooted in the past, as you described, or who's more forward- looking?" And I think that's the next wave of the role of the CIO in the future is the CIO as a true business catalyst.
Andrew: Are there case studies or anonymized customer stories you can talk about with some specific examples?
Rich Penkoski: Yeah. I can give you a couple of different examples. I'm familiar with one client that's in the financial services industry today. That organization, pretty meaningful size organization, did a CIO search, I think, two, three years ago now. And actually was really focused on a non IT professional and actually brought on somebody that was a business unit head from another company in an adjacent industry. Now it was a tech heavy business that this individual was running, but they were brought in to actually transform the role of IT in the organization to be a business partner, as opposed to being a excellent IT provider. That was an isolated case a couple of years ago. I can tell you just off the top of my head, I can think of two or three clients that I've personally been engaged with who've actually chosen a non traditional IT professional to head up IT. That's one big step we've been seeing and I don't know that I would call it a trend yet, but I would certainly believe it's commercially appropriate in certain industries in certain organizations. I think the other thing that we're seeing, that I think is a pretty good harbinger of the future, is that we are seeing the role of IT in the boardroom starting to become much more prominent. So I had a conversation with a CIO just two weeks ago who this year their organization installed a new board chair. And the board chair has carved out equal time on the board agenda for the audit committee and for IT. And now this individual has got a standing board agenda topic around talking about IT strategy, talking about IT execution. And she and I were actually thinking about," How do you create an agenda that is relevant for the board?" And that's everything from bringing along the less tech savvy board members to become more tech savvy, all the way through laying the groundwork for how the technology function becomes a key enabler to strategy. So again, pretty interesting case study. This is a good size organization, multi- billion dollar company. And again, I think that this is becoming more prominent, not less prominent.
Andrew: I've seen no specific data about it, but certainly a trend in some of our customers where the new CIO now has the title of CTO. I think that's part of just the rebranding of what this role should be doing focused on a technology strategy to help drive the business as opposed to an information strategy to help support the business.
Rich Penkoski: Yeah, because the fact of the matter is information is well beyond the purview of any one function. That wasn't the case when the CIO role was first developed, it's absolutely the case now. And I would argue in many cases, chief data officer role has kind of filled in much of what that quote information role was, but information is ubiquitous; controlling it from a central function like a CIO I think is sort of yesterday's approach. The CTO dimensions of the role are now becoming much more important.
Andrew: Part of it is, and certainly some of our customers have this core strategy, the traditional IT strategy, also their goal is to create a platform from which the business can innovate on and ensure that that platform provides the reliability, provides the security, provides the ability to scale appropriately. But they're not necessarily ones creating the actual applications and services that are going to flex this because the business is hiring and investing in people in its own set of technologists. So I guess the other trend being IT isn't... Obviously in a traditional technology company, there's lots of technologists outside of IT. But in a lot of businesses, that's where the technology professionals were. Now they're everywhere. So how do we support them in a centralized way and let them fly? Because if we don't, they're going to go somewhere else.
Rich Penkoski: If you think back, when you were a technology professional, in most organizations nobody really understood what you did and they didn't necessarily understand how technology could help. Now people come to work and they expect the technology they use in their day- to- day job to be just as easy and just intuitive as all of the technology they use in their personal lives. I had a client, I did a large finance transformation program, completely reinvented finance, all the IT, all the business for a large insurance company. And CFO sat across from me and he said," Look, I want a system that's Apple easy and Google fast." That was the construct that he had put around it. And this is actually a really interesting time to be in technology because it used to be you were trying to kind of drive all the promise that technology could offer to help a business process be more streamlined or help a customer engagement be more compelling. Now you're on the other side of the equation where you've got your business users saying," Well, why can't this be as easy as the way I order it from Amazon or the interface I have on my Apple watch?" And you're having to go the other way to be able to explain what's required for something to be cyber secure and to be scalable in the organization and to be maintainable that may not be quite as easy as the interaction you have with one of your consumer electronic products. So we've almost flip- flopped and gone completely the other direction. But in other ways, I think if you're an IT professional today, the opportunity that offers you to be equally business and technical literate, I actually think is really exciting from a career perspective. And what we see some clients today, Andrew, that are actually being very deliberate about in their high potential resource programming, their management development programming, they are making those individuals take a rotation through the IT function. And we are seeing more IT professionals chosen for those management development programs to be future enterprise leaders because they know those enterprise leaders have to be highly tech savvy.
Andrew: It's going to be fascinating. I, like many people, lived through the transition from everybody having a Blackberry to everybody having whatever they wanted, first iPhones and then everything else. But given how much I'm on airplanes, it was remarkable how quickly that shift happened. Plane would land, everybody would pull out a Blackberry, then it was you saw a few iPhones, then go forward a year and the Blackberry was the minority of devices that got pulled out. And that's just an example of the consumerization of IT, or basically what individuals wanting being more important than what corporate policies were historically. That sort of shift is visible to somebody who travels as much, but these other shifts are happening just as quickly. Which always gets to, just going back to something I said before, certainly in the industry I'm in today, five or 10 years ago you can present a deployment architecture to a prospect and you can get some level of agreement that," Yeah, that's probably what we're going to need for the next five or 10 years. And so let's get started on that." And for all the reasons we've been discussing, harder and harder and harder to predict out that far. As a business how do you, somebody in the finance side, invest in that? Invest in things that where I can't go measure a 10 year TCO or a five year TCO or understand exactly how many internal or external resources I'll need over part of that TCO for the next three to five years? Instead, we just want to start experimenting or start trying to do this, or potentially using this vendor. All of that sounds like a high potential of waste from a cost perspective. And normally that's the sort of thing that keeps CFO up at night." We're wasting money." Or," I don't know why this money is being spent." Or," I'm not certain of the results of this investment."
Rich Penkoski: Yeah this is actually top of mind for many of the CFOs that I'm talking with today. And it's this whole notion that the annual planning process and the corporate budgeting process was really designed, and particularly when it comes to IT, to support, reward, evaluate, analyze a traditional waterfall methodology. So," Here's my project. Here's the scope of my project. Here's how long it's going to take. Here are the key milestones. Here's when I can start depreciating various pieces and parts of it." And the machinery of finance is geared to do that. As we know, agile development's been around for awhile, that that's nothing new. How widespread, however, agile methods have permeated other parts of the organization are now forcing this issue to the forefront. So a couple of things that we're seeing on this horizon; the first one is we are starting to see the proliferation of more, what I'll coin as, VMOs or value management offices, as opposed to PMOs that oversee IT investment. And these VMOs are convening stakeholders to think about where to put, what I'll call, the next dollar of investment across the IT development stack. So as more organizations get comfortable with the fact that," Okay, I'm going to launch on this solution. I know directionally where it's going to go. I know the problem it's going to try to solve. I know the technology I want to use. And I'm going to get it to a certain point, get it into production and then improve, improve, improve." These VMOs are emerging to actually convene IT to CFO, business unit leaders, functional leaders, et cetera to look at the portfolio holistically and to begin to allocate capital dynamically across the portfolio of projects, no matter where they sit in their development life cycle. Now, academically, that sounds great. That doesn't eliminate the," Well, my need's more important than your need." But by bringing the cross- functional teams together, what we're starting to see is a more vibrant dialogue that says," We're not after this scarce pool of dollars, because we're not asking for a huge chunk of it. We're asking for the next tranche of manageable dollars to get the next two pieces of functionality into something that's in production." And people aren't as nervous because they don't have to wait for the next annual planning cycle to do the next major project. They can come back to the VMO and get the next slug of money. And so, because it's dynamic, you're actually seeing capital deployment become more efficient and you're seeing that capital deployment begin to support the corporate strategy in a more direct way. Will CFO still pull his or her hair hair out when it come time to look at the annual process and say,'How much do I put against this unit?" Of course you will. But I think that if you begin to lower the blood pressure of all of the stakeholders around fighting for limited funds, and they begin to get comfortable with the funds move as demand moves, and I can get pieces and parts, even though I can't get the whole thing, I think you start to break the log jam. We did a piece in our last year's tech trends on this exact topic and we actually highlighted a couple of case studies in there of organizations that are doing it. That's becoming more and more prevalent. And again, for the organizations that have a business- minded CIO or CTO, we're seeing success, and we're seeing better products coming to market or deporting the organization sooner and with more durability.
Andrew: That's one of the basic promises of or one tenet of agile, the smaller the units of work, and the more often they're inspected, then you can pivot, you can make changes based on a number of factors, which is critical in being a more agile organization. Measuring value's always very difficult in a way that is comparable across different projects or different products, I would imagine, because at some point you get down to squeaky wheels, loud voices and promises. But also if you can measure those things more effectively, then you also have the data necessary to understand if an investment makes sense. And so that sort of agile everything or agile from a business plan process, I think is a critical part of it. I think that organizations though sometimes struggle in some of the same way as that similar struggles from the software days, from an agile perspective, which is you've got these different teams rapidly innovating in different ways and nobody's necessarily looking across the horizontal aspects to make sure that we don't have 23 different strategies for data analytics or different cloud strategies forming or different networking or security strategies. We want to take these horizontal architecture and platform pieces and make them available so that people can invest on top. I know there's a case study of a bank that I read recently where they were designing, I think it was, the next mortgage processing product. And traditionally this bank was still at the point where there was, you can fill out an application online, but that ended up literally as paper in somebody's bin. And for the 60 days it took to get from one bin to another, nobody knew the status until you got to the top. And they designed something via a new agile process that consumers loved, everybody else using it loved. And they're like," Yeah, let's go live." But it didn't scale at all. But they built something that was good for testing in one small market and had no view on how they were going to scale this thing or how they were going to secure this thing. They've proved something, but didn't do the underlying work to make sure that this was scalable and reliable and secure and everything else they needed. I've seen that more than once. And so I think you need that horizontal investment as well. And I think that's probably a real challenge for CIOs to look at.
Rich Penkoski: It is. And look, it's becoming apparent to the non IT executives that investing in core architecture for purposes of flexibility is critical. You're still fighting for those dollars, but the resistance is lower and lower for all the reasons that you just described. I think that's point one. The second point around that is I also think that as certain elements of core infrastructure have begun to standardize around smaller numbers of larger players, that's taken some pressure out of the system. At this point I think most organizations realize they're probably not going to necessarily have a single cloud strategy, not with a single cloud provider for sure. So now, as each marketplace begins to shake out that also simplifies things to some degree. And look, it kind of goes back to my earlier point around being very thoughtful and strategic about what your ecosystems of product providers and service providers is, is really essential. Because it is a fool's errand to believe that you'll be able to have enough talent in- house with a broad enough perspective, to be able to avoid all the problems you just described. You're going to have to mobilize some kind of an ecosystem. Now by the way, I use that term very, very broadly. Because ecosystem can be everything from your relationship with academic institutions to doing incredible R& D, all the way through your relationship with the right gig working platform for purposes of tapping into spot expertise just when you need it. You've got to really look at the definition of that, of your corporate ecosystem in a very wide way. But I think that's going to be something we're seeing a lot... We're seeing a lot more of it today. We're still in the maturing stages of that. And I think that the most forward- thinking IT leaders are going to be the ones that get their organizations there the quickest.
Andrew: No, without a doubt. We both keep saying this, but I think it's the most critical part, which is understanding both the technology and the business and what impact the technology can have on the business and doing both of that is critical.
Rich Penkoski: Yeah.
Andrew: Well, super. It was fantastic talking to you. I really enjoyed it.
Rich Penkoski: Andrew, likewise. A great conversation and some very exciting times ahead.