The Industrial Revolution of software: Alan Trefler, CEO, Pegasystems

Alan Trefler, CEO of enterprise vendor, Pegasystems, discusses digital business and the relationship between IT and business functions.

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                        (27:24) However, what you’re seeing are customers really falling into the sort of traps that are ultimately not going to let them put together a coherent experience. Now, this isn’t true for systems that for example, help things like internal administration and other bits that aren’t fundamental to the strategies of the business. But, if you are dealing with things that are strategic to the business, just being able to get a quick fix in the cloud, isn’t going to get you all the way there. So I think what customers need to do is step back and ask themselves, how am I going to make sure that what I’m going to do to try and improve service is going to work across all my channels?

(28:01) And if that doesn’t happen, how am I going to make it so it will scale up to be able to deal with the actual complexities of my business, so that I’m not just tracking stuff – remember that workflow that I talked about. Lots of these systems just flow things around and track them. I’m actually able to get the intelligence in.

(20:20)So the point of contact with the client is far at the stream as possible because it’s something that actually understands rules and processes, and the things that my business needs to control. And those are the types of things that I think that the implication of business buyers today in the enterprise is first, they need to take a breath and asked themselves of what’s going to really make them have strategic outcomes.

(28:45) The second big deal has to do with changing the business IT relationship, where it can’t be business just running off and buying stuff because they are frustrated with IT. It can’t be IT continuing to have the lists of you know, yes you can have this in 2021. It’s got to be the business needs to be able to take more sort of active roles, more empowered roles in being able to actually help construct the real software. And what that does, it actually puts the business and IT folks on the same page, and puts all the smart minds to work.

(29:22) So I think the business and IT relationship changing that has got to be a first principle to making this all work properly.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vala:               (29:29) So do you think companies were panicking when they hired chief digital officers a couple of years ago? On LinkedIn there was probably less than 100 and now we are approaching about 2,000 CEOs, and is it because – as you just mentioned (almost like Gartner, that I think refers to this by mobile IT) where you maintain operational excellence but you also could adapt to the line of business needs. All of this is kind of disruption around us with consumerization of IT, mobile, social, cloud, big data, Internet of Things how are we going to help IT and CIOs to meet the demand of their internal customers and then start with their paying in extra old customers.

Alan:               (30:15) Well I think that’s central to what you’re talking about, whether companies actually think hire a chief digital officer and have the appropriate pedestal there and not have to worry about that and the rest of the business. That’s just crazy.

                        (30:34) Digital is going to sort of underlie the entire future of these businesses. It’s going to be absolutely central to how these businesses work. So you can hire a chief digital officer to sort of be the tip of the spear, to sort of help everybody understand where they are going. But if those business operations of the existing IT operations, is not completely committed to working together hand in hand on that digital agenda, then frankly those people are not going to be part of a successful business.

                        (31:05) Because, digital is like electricity. It’s kind of like you had to rewire the buildings and factories, and you couldn’t just have light in one room. It’s got to be throughout and it’s got to touch everything.

Michael:         (31:21) Basically, hiring a chief digital officer without undertaking the broader transformation across the company, is the thing that you’re saying isn’t going to work.

Alan:               (31:31) That’s correct, it’s going to be like, frankly I’m making up the analogies on the fly here. But it’s kind of like the days of mainframe computing. You had a computer in a big single room. Blocked out from the rest of the company stuff came in and out of a little window it was really important. I mean, look at Medbit. The computer sits right there in the middle of the floor.

                        (31:54) But, let’s face it, what really made it what made business at work today is this proliferation of digital power. That’s going to happen end to end in companies. And you know, the worst part of not having the business understand the technology better, is they don’t know what to ask for.

                        (32:14) You know, in my book I draw an analogy of what would it be like if you wanted to either build a house to make a massive addition, and you had never been to Home Depot. You just sort of had to imagine how the off the shelf parts work. You are going to have to imagine what would be easy and what would be hard, and you would end up asking for lots of things that were really complicated and expensive. That’s the way it works today.

                        (32:39) On the other hand, if you have walked through Home Depot you’ve seen things like French doors, and you’ve seen things like bay windows, you could have a really intelligent conversation with your architect, and they may push back and say no, you really don’t want that. But suddenly, you’re talking about things being sort of off-the-shelf in places where that’s adequate or actually even better.

                        (33:03) That’s what has to happen for organizations to get digital. The business people need to understand what’s possible, what’s easy, what’s expensive – what’s not. And like any other good business person that will influence in how they engage with the rest of the organization.

                        (33:21) If the chief digital officers out there are just sort of driving on their own responding to requests from the business, they will get smart requests unless digital has percolated through the company.

Vala                (33:33) Sure, well Pegasystems, certainly over the last 30 years has evolved and changed significantly and it’s an incredible success, but can you identify and is the CEO where the company needs to evolve and change. Is it just you know being at the ground level and being engaged with your direct reports and un-direct reports, engaging with customers, you know how do you stay ahead of digital disruption?

Alan:               (34:01) Well as Mike will appreciate, the first thing that you do is that you listen to this series.

Michael:         (34:09) This is where it begins, thank you for that.

Alan:               (34:14) I mean that’s central. Now, once you’ve done that then I think the most important thing…

Michael:         (34:21) By the way the (unclear) is going up this week, so thank you for that.

Alan:               (34:24) You’re welcome, but the reality is you have got to be open to input from all different sources. So you know, if the world is so wonderfully connected, it’s easier to see what competitors are doing, and what potential new entrants are doing. It’s easy to see what your clients are doing using a technology, if it’s like ours it’s something that becomes visible, and what their competitors are doing too, so you can get a real sense as to how your customers are going to fare as competitors as they always do change and evolve in what they do.

                        (34:57) So, I think you have to have a culture which is first activity, and then you need to explicitly go out there, seeking opportunities to try new stuff. You know, part of us tries to have a culture of innovation that is central to the company is we actually for example do a hacka-thoughts, and we will go and challenge our engineers and project management teams to come up with stuff that we may not normally fund. And then out of those we do lots of tremendous and excellent ideas.

                        (35:24) We try to work with academic communities. Now, we’re here at Cambridge, which is near MIT for example, which is right next door, that’s always a great place to get ideas. And just being receptive is important, because that’s where things start, and then challenging your assumptions. What if the things we are thinking turn out to be wrong? That’s part of what I was talking about in the chess example. That’s that third part where you say, oh my God what have I missed. You know, what patterns was I following when one of my presumptions was that I wasn’t going to get mated in three.

Michael:         (35:58) You’ve made some acquisitions and on the subject of innovation, to what extent do you view acquisitions as an adjunct for innovation in addition to your own internal innovation efforts.

Alan:               (36:16) Well I think being open to looking at companies and acquiring them, it means you’re going to be seeing lots of stuff. So I view that as being a very important part of our intellectual curiosity, and when we see things that make sense we buy them. So that in my mind is a pretty important part of knowing what else is going out there, meeting some of the right people to help you think fresh.

                        (36:46) And so that’s important for innovation, but unlike a lot of other companies that do acquisitions, when we acquire a firm they are sort of technology adjuncts, and really helping our technology do better in terms of sentiment analysis or mobility or predictive and adaptive analytics.

                        (37:06) When we do an acquisition, we are committed to building that technology into a unified platform with the rest of our architecture. One of the problems with a lot of acquisitions is people end up with all these sort of multiple lumps of stuff that get glued together in the PowerPoint’s, but it’s very very hard for customers and I sometimes refer to those as the Frankenstack.

                        (37:33) You have got offerings that are like Frankenstein, who was lots of dead people sewed together. So you have offerings like lots of dead software companies – by the way, we compete with a lot of those. But typically those really meet the cost and agility needs of the customers that are out there.

 

 

 

 

 

 

 

Vala:               (37:53) We have a lot of start-up CEOs as our guests from Brian Halligan of Hubspot to Aaron Levi of Box, and then some smaller startups who are waiting to become billion-dollar companies. But what advice do you have for entrepreneurs and startup founders, if they were going to come and pitch to you, what do you look for or how should they prepare? Please guide some of our audience members who are running businesses today or looking to achieve the success that you and Pegasystems have achieved.

Alan:               (38:32) Well I would welcome them to achieve much more success, to tell you the truth what I’ve done I’ve done by a longshot. We’re actually pretty excited and amp up our ground, so we become more meaningful to more customers.

                        (38:45) But in terms of lessons that might not be obvious, and I think an obvious lesson is be prepared for it to be harder than you think it’s going to be. You know, I think folks who come in and do pitches with all these crazy numbers in Excel which are driven by formulas is just silly. And if they are going to have numbers and projections you need to think about what are some of the things that can go wrong, and how you’re going to make sure that the business is going to be able to accommodate them. That shouldn’t scare you, but it should well, make you a little bit sober because it’s a difficult experience.

                        (39:23) You know, the other thing I’ll say in that is perhaps a bit of unusual advice, is I would say to be very cautious about putting academics on your board of directors. Yeah, which is interesting because we use them as consultants. We love them, but at the end of the day what I found is some, I wouldn’t say all, but some of the academics that I’ve had the opportunity to work have sometimes proven to be sort of an academic exercise in the boardroom. As opposed to really digging in and making a hard decision and not arguing things to death.

                        (40:04) So I’ll just say that in terms of it being something that I’ve learned along the way.

Michael:         (40:09) Alan, talk to us about venture capital and starting a company with VC money investment vs. bootstrapping, which is what you do.

Alan:               (40:21) Well I’ll tell you now I think there is a role for venture capital, but software is not a very capital intensive business. And the problem with venture capital, which is a very very serious problem, is that it typically puts a five or seven year sort of view on a business, at which point the venture fund typically either needs to sell to liquidate the company so it can pay the investors, or the company is ready to go public, which a lot of companies won’t be at that stage.

                        (40:52) So, I’m a fan of actually making sure that CEOs and companies have enough time to get it right. I mean look at Apple, you have the most successful company in the world arguably, and it took them a long time to get it right. I can remember the first time I held a nudent you know it took them a couple of slots to get it to this (unclear 41:17) generation.

                        (41:18) So, part of what I think is important is that this is going to be a significant part of your life, and I believe that for anybody who’s a founder in an early startup it’s going to be a pretty part of your life. Make sure the funding and the partnership with the people you work with is going to let you sustain your dream to a reasonable fruition level.

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