R “Ray” Wang is the Principal Analyst and CEO of Silicon Valley- based Constellation Research. He’s also the author of the popular business strategy and technology blog, “A Software Insider’s Point of View”. The blog provides insight into how disruptive technologies and new business models impact organizations. Wang has held executive roles in product, marketing, and strategy at Forrester Research, Oracle, PeopleSoft, Deloitte, Ernst & Young, and Johns Hopkins Hospital.
His new book Disrupting Digital Business: Create an Authentic Experience in the Peer-to-Peer Economy, published by Harvard Business Review Press and globally available on May 5, 2015, provides insights on why – since 2000 — 52% of the Fortune 500 companies have been merged, acquired, gone bankrupt, or fallen off the list. The impact of digital disruption is very real. However, he points out that it’s not the technologies that drive this change. It’s a shift in how new business models are created.
Ray is a prominent and dynamic keynote speaker and regular contributor to Harvard Business Review. He’s well quoted in The Wall Street Journal, Forbes, Bloomberg Businessweek, CNBC TV, Reuters, and other global media outlets. Wang has thrice won the Institute of Industry Analyst Relations (IIAR) Analyst of the Year Award.
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Morris: Before discussing Disrupting Digital Business, a few general questions. First, who has had the greatest influence on your personal growth? How so?
Wang: I’m the son of immigrants. Watching what my parents have done to make sacrifices for the next generation and watching them grow over the years have had a lasting influence. Their experience shows why it’s important to always invest in the next generation. The tradeoff for short-term gain at the long-term expense is not worth it if you play the long game.
Morris: The greatest impact on your professional development? How so?
Wang: I’ve had the good fortune of being surrounded by brilliant colleagues and visionaries. From the early days of Yahoo to the creation of companies such as Workday, there have always been opportunities to reach out and learn. In the midst of this, I’ve been fortunate to have good mentors. Each of these mentors, Paul Greenberg, Love Goel, John Ragsdale, and others, all bring something different to the table. Paul keeps me grounded. Love helps me think outside of the box and push the limits. John taught me the “ropes” of business.
Morris: Years ago, was there a turning point (if not an epiphany) that set you on the career course you continue to follow? Please explain.
Wang: I think the big revelation five years ago was quite shocking to me. While at Forrester, I was one of the top analysts in research, revenue, and inquiries. I was bringing in 6 to 7M of revenue to the firm, but I was definitely not compensated for that level of revenue production. I went to see the CEO George F. Colony to talk about a possible gain share if I could take my production to 10M. The answer I got was not what I was expecting. Instead of saying they would love to have me stay and grow the business, he told me to just work less hard. I would never have expected that from a founder of a company. Strange given my capitalistic view of the world. [smiles]
Morris: To what extent has your formal education been invaluable to what you have accomplished in life thus far?
Wang: I don’t think the content of what I learned was valuable. However, formal education gave me a discipline and framework to learn how to learn and then pursue my passions around technology and business model shift. What I learned most at Johns Hopkins was in the non-academic areas of leading volunteer organizations, student government, and owning a community newspaper.
Morris: What do you know now about the business world that you wish you knew when you went to work full-time for the first time? Why?
Wang: I really wish I had a much better understanding of how and why companies get funded. The area around investment banking, private equity, and venture capital is an area what would have been valuable to learn.
Morris: Of all the firms that you have seen, which – in your opinion – best dramatizes important business principles? Please explain.
Wang: Personify was a web analytics startup that was set to file a week before the dot.bomb crash. While most folks know what to do during good times, the crash was instrumental in showing what core values were important to a success of a startup amidst a market failure. Customer-centricity was paramount. This meant you had to be ultra responsive or even proactive to customer requests, you also had to go back to focusing on core product as you stripped out all non-essential overhead. The old adage that, “If you are either the product or sales, then everything else is overhead,” rang true.
Morris: From which non-business book have you learned the most valuable lessons about business? Please explain.
Wang: Sun Tzu’s The Art of War still is the best at this.
Morris: Here are several of my favorite quotations to which I ask you to respond. First, from Lao-tse’s Tao Te Ching:
“Learn from the people
Plan with the peopleBegin with what they have
Build on what they know
Of the best leaders
When the task is accomplished
The people will remark
We have done it ourselves.”
Wang: Success requires ownership of the mission.
Morris: From Michael Porter: “The essence of strategy is choosing what not to do.”
Wang: Trust and transparency are key to working with others.
Morris: From Richard Dawkins: “Yesterday’s dangerous idea is today’s orthodoxy and tomorrow’s cliché.”
Wang: It’s all relative, from geek to chic.
Morris: From Isaac Asimov: “The most exciting phrase to hear in science, the one that heralds the most discoveries, is not “Eureka!” (I found it!) but ‘That’s odd….’”
Wang: Discoveries may not always appear as such upon arrival.
Morris: From Thomas Edison: “Vision without execution is hallucination.”
Wang: Hallucination without perspective is just a bad trip.
Morris: In one of Tom Davenport’s recent books, Judgment Calls, he and co-author Brooke Manville offer “an antidote for the Great Man theory of decision making and organizational performance”: organizational judgment. That is, “the collective capacity to make good calls and wise moves when the need for them exceeds the scope of any single leader’s direct control.” What do you think?
Wang: I agree. What we want to accomplish with digital is to democratize decision-making. Democratization requires empowerment of all the nodes in a P2P model.
Morris: Here’s a brief excerpt from Paul Schoemaker’s latest book, Brilliant Mistakes: “The key question companies need to address is not ‘Should we make mistakes?’ but rather ‘Which mistakes should we make in order to test our deeply held assumptions?'” Your response?
Wang: The goal should not be to fail fast but to learn fast.
Morris: In your opinion, why do so many C-level executives seem to have such a difficult time delegating work to others?
Wang: The challenge is building a team you can trust. It’s often hard given the risk-reward ratio. Most folks have hired individuals going after their job, hence the lack of trust. The folks they hired that were good enough to do the job are not good enough to trust. Unless you have total control of the board vote, you rarely feel that you can delegate work.
Morris: The greatest leaders throughout history (with rare exception) were great storytellers. What do you make of that?
Wang: There is a requirement to tell good stories but more importantly, to evangelize a vision. Today leaders at startups in Silicon Valley are cult-like. You have to have a mission and carry out that mission in an authentic manner in order to attract not only customers, but also employees who will carry out that vision.
Morris: Most change initiatives either fail or fall far short of original (perhaps unrealistic) expectations. More often than not, resistance is cultural in nature, the result of what James O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of custom.”
Here’s my question: How best to avoid or overcome such resistance?
Wang: The answer is in the Lao-tse’s Tao Te Ching quote you mentioned earlier. Unless the employees own the given vision, nothing gets done.
Morris: In recent years, there has been criticism, sometimes severe criticism of M.B.A. programs, even those offered by the most prestigious business schools. In your opinion, in which area is there the greatest need for immediate improvement? Any suggestions?
Wang: Most MBA programs produce folks who know how to run an existing business. Few produce students who know how to create businesses. Even fewer know how to create great leaders. The issue is how do you recruit the top leaders, not the top students. I’d focus on understanding the traits of leaders and bringing those people into the fold.
Morris: Looking ahead (let’s say) 3-5 years, what do you think will be the greatest challenge that CEOs will face? Any advice?
Wang: How to manage success of winners in a digital divide without being dragged down by the losers who wish to encumber them with trivial rules and regulations that impede success. The goal is to fight hard every day to make sure we do not live in the world predicted by Ayn Rand in Atlas Shrugged and that we ensure everyone has the opportunity to pursue happiness while always being empathetic to others.
Morris: Now please shift your attention to Disrupting Digital Business. When and why did you decide to write it?
Wang: It was the summer of 2010 and many of my friends and peers could see a shift in the market. We were not sure what was going on but technologies in social, mobile, cloud, big data, and video were making huge strides. Business model disruption had occurred in the first Internet boom, but the second wave was coming. We couldn’t figure out why some companies were not only winning but also dominating categories. Something was different and that was the impetus to see if these were new rules of business or something bigger had shifted. As I looked deeper into this, I could sense a disruption coming but could not quite describe it.
Morris: Were there any head-snapping revelations while writing it? Please explain.
Wang: The big head snapper was that digital Darwinism is unkind to those who wait. Since the tracking of the S&P 500, the average age of a company has declined from 60+ years to about 12 years predicted in 2020. This is 5X compression shows that time is essential to the digital transformation of companies. Those who chose who wait will most likely be acquired or competed out of existence.
Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?
Wang: The book in final form is different. I had envisioned the standard business book with figures, charts, case study call outs, etc. Instead, what my editor, Tim Sullivan, suggested was brilliant. The book became more of a conversation and was written in a way busy executives could quickly consume the insights without the friction of a standard book. Taking that one level deeper, I’d write the book even more succinctly if I could to mirror this example.
Morris: Which business thinkers have had the greatest impact on the development of your ideas about disrupting digital business? Please explain.
Wang: There are a number of folks that have really pushed the envelope on thinking.
Elon Musk on how he manages to create Private Public partnerships (the public ones from the amount of subsidies and grants he can garner) and he showed how you can strip out transaction costs in distribution.
Rich Wong at Accel Partners. This guy has managed to make more successful bets in big themes on digital disruption than most investors.
Marc Andreesen because he’s had the vision of what was coming next and how to guide entrepreneurs.
Alan Mullally at Ford. He figured out how to take a family-run business and move it out of the recession without federal funds but, more importantly, he made the brand mission of Ford a profitable reality.
Love Goel, who I mentioned earlier. He turned around a has-been Brazilian Internet commerce company, B2Win, and set it up for global competition as he built a digital business model that worked. He was also the architect of macys.com.
Roger Ailes. He made Fox News a counter balancing force among the established legacy media.
Ari Zingerman for really understanding customers and empowering workers.
Morris: In your opinion, is there still a substantial need for incremental digital business? Please explain.
Wang: Yes. Incremental should be seen as iterative. But once you go through the interactions, in time the next disruption emerges from an accumulation of collection of iterative success- and-failures.
Morris: What are the defining characteristics of an “authentic customer experience”?
Wang: Be true to your mission or brand potential. This means every touch point, every action, every credo must be in line. You have to deliver what you promise and you have to exceed expectations. Trust and transparency are paramount.
Morris: By which specific process should leaders design the most appropriate disruptive business models for their company?
Wang: The most successful approaches today follow the principles set out in design thinking. This approach helps to ensure that the non-obvious challenges and problems inform the solution design. Along the way ideation enables the ability to freely think and allow for a few disruptive business models and ideas to emerge. The goal here is to unleash the creativity inside organizations instead of applying false constraints.
Morris: There are dozens of passages throughout your narrative that caught my eye. For those who have not as yet read the book, please suggest what you view as the most important point or key take-away in each of these passages.
First, Organizational DNA (Pages 15-22)
Wang: Five generations of people segmented by digital proficiency. The understanding of a technology and the willingness to adopt is digital proficiency.
Morris: Business Model Shifts (23-34)
Wang:Transformational shifts are very different than those that are incremental. While the metrics that matter may be the same, digital transformation is about unleashing transformational innovation.
Morris: Mini-case study: Zingerman’s deli (46-54)
Wang: I love how the Zingerman team has made customer experience the focal point in their training so that employees are empowered to make the call, just as they are at Ritz-Carlton and Nordstrom’s.
Morris: Mini-case study: Marriott (54-66)
Wang: Marriott showed how you can deliver mass personalization at scale and compete against digital disruptors.
Morris: Trust (72-79)
Wang: The seven factors — durability, consistency, competency, timeliness, meritocracy, accountability, and respect — all need to be present to build the trust framework required to succeed in a digital world. As mentioned, every day is a day in The Truman Show and if we think that we can hide anything in a digital world, we are just postponing the inevitable.
Morris: Mini-case study: Fox News (79-84)
Wang: You have to enable the balance between growing a personal brand and growing the corporate brand in a digital world. Both are interrelated.
Morris: Mini-case study: Bitcoin (84-88)
Wang: Trust and transparency drive how a currency or stored value system works. Bitcoin illustrates and dramatizes what a crypto currency needs to garner trust through transparency and what happens when that trust is broken.
Morris: Intention-Driven (93-97)
Wang: We are moving to systems that take our patterns and test us to see what new patterns emerge. So these systems may know you get coffee every day at 7:30 am and you order a tall black at Starbucks. What they then do is test to see in what context this pattern can be changed. So, if you are ordering at 2:00 pm, will you order something else? If you are on the road, do you change when you order? If you are with a friend, do you order food as well? This machine learning — documenting patterns and habits of behavior — is a key aspect of where digital is heading.
Morris: Self-Learning: (100-103)
Wang: The machines are far from making all of our decisions but in fact they can help to strengthen our ability to make better decisions. We see this as augmented humanity.
Morris: Force Multipliers (118-124)
Wang: The power of digital is its ability to create massive scale, not only in creation but also distribution. This enables an individual or node to accomplish multiple times more than what one could accomplish alone. This power rests in the people-to-people networks.
Morris: Freemium (135-143)
Wang: Given that we no longer sell products or services but keep brand promises and deliver on outcomes and experiences, without a value change, digital fails. Freemium gives customers the ability to gauge what level of value exchanged is worth a purchase.
Morris: Co-Innovation and Co-Creation (143-144)
Wang: Digital scale requires a community to build on top of an organization’s platform. GE’s done a great job creating a consortium to build on top of its software in the emerging field of Internet of Things.
Morris: Designing New Customer Experiences (148-152)
Wang: Start with the brand mission and begin to identify how to reimagine the customer journey. Form follows function so the brand mission is the prime directive or indicator.
Morris: Developing a Culture of Digital DNA (152-157)
Wang: We need to balance right-brain and left-brain capabilities in teams. If you have many STEM type folks, you want storytellers, visual designers, and anthropologists to balance out the equation. This is what we call “digital artisans.”
Morris: Applying New Technologies to Existing Infrastructure (157-163)
Wang: Once you have the business model down, the goal is to create force multipliers with disruptive technology. In many cases, organizations must balance between the new and the old to succeed.
Morris: Moving from Gut-Driven to Data-Driven Decisions (163-166)
Wang: Instrumenting for digital means that every touch point, every click, every swipe, and every scan drives more data. When that context is applied to the data, we discover patterns of insight that we can use to move from gut-driven decisions to data-driven decisions.
Morris: Co-Creating and Co-Innovating with New Partners (166-170)
Wang: This is the scale part. Without co-creation and co-innovation, you can’t scale up a digital business and you won’t with the advocates needed to further mission.
Morris: Of all the great innovators throughout history, with which one would you most want to share an evening of conversation if it were possible? Why?
Wang: Ben Franklin. He was the colonial Renaissance Man, prankster, and statesman all into one.
Morris: Let’s say that a CEO has read and then (hopefully) re-read Disrupting Digital Business and is now determined to establish or strengthen a workplace culture within which personal growth and professional development are most likely to thrive. In your opinion, where to begin?
Wang: Start by challenging the existing brand mission. See if the company’s strategies and initiatives will survive a challenge from a non-traditional competitor. Identify the highest margin areas and prepare to be disrupted because, trust me, it’s going to happen and probably sooner than later.
Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Disrupting Digital Business, which do you think will be of greatest value to leaders in small companies? Please explain.
Wang: Disrupting digital was meant for companies of all sizes but understand that it’s the small businesses that are in the best position to disrupt existing businesses through digital.
Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?
Wang: After this lengthy interview, I think you covered it all except the question of whether or not I’ll write another book. The answer – when I’m ready to disrupt myself again.
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Ray cordially invites you to check out the resources at these websites:
Constellation Research link
Software Insider link