Chairman and CEO Pierre Nanterme tells Forbes how his global consulting firm discovered that being a “fast follower” suddenly became fatally slow in the age of A.I. and cloud.
Q: Describe your 35 years at Accenture, because I think talking about that will be an interesting way of describing what’s happened to the global economy and the Information Technology backbone of the global economy during that time.
Nanterme: Accenture has changed a lot during that time, probably undergoing a new wave that drove significant changes to the business every ten years. We evolved from management consulting to systems integration and technology. Ten years after that came a new wave--outsourcing. Now we’re facing the next wave, which I’ll call global security and the digital revolution. Indeed, each reinvention of Accenture was based on the new technology waves that occurred.
Q: Why are you convinced that the digital revolution that is happening now is different from the waves of digital transformation that have gone before? Because, certainly, in 1983 we had personal computers; then in the late 1980s and early 1990s there was a migration to network computers, minicomputers and network PCs. Then came the Internet and the web. We’ve had many generations of IT. But I sense from you--and from other CEOs to whom I’ve talked--that things are suddenly moving quite a bit faster. Is that a fair description of the digital transformation period we’re going through?
Nanterme: That’s completely right. The IT revolution, technically speaking, was a different revolution from the digital revolution. And I think you can find many things different about this current digital revolution. This revolution is a technology disruption, with many more tech disruptions ahead and coming at an accelerating pace. First, there’s the digital marketing revolution, then mobile apps, then analytics and the A.I. revolution, then there’s the cloud revolution, and then the cybersecurity and the encryption revolution.
We know there’s more to come: the blockchain revolution, the immersive-reality revolution and, around the corner, there’s quantum-computing. So different from the IT revolution in the rapid pace of technological change. Tech trends in the client-server/IT revolution took 30 to 40 years to mature. The tech trends related to this digital revolution change every second, and the way companies work and operate are changing, too. Digital is changing the products companies provide to their customers and the way those products are delivered; it is impacting how businesses operate and is having a profound impact on society at large, creating a debate around security and privacy.
Q: It used to be that all of this was happening at once and having such widespread impact throughout business and society. But it seems to me, as I’ve watched the many decades of digital technology changing the way businesses are run, that until recently it was really the responsibility of the chief information officer to get this right. Yet over the last three or four years CEOs, COOs and CFOs have become involved, because IT has gone from being a technical advantage to a tactical advantage. Is that a view shared by Accenture?
Nanterme: Absolutely. These new digital technologies are being applied and are penetrating across multiple parts of companies more than any other technology previously has. Prior to this, technology was the domain of the CIOs, used in managing the company’s back office, its processes and its infrastructure. We know that digital technologies are now impacting the front line--marketing and sales--in a very profound way. And they continue to impact enterprise management, which we call ERP, through the reinvention of enterprise resource planning. That, in turn, impacts “field operations,” operations that happen at the plant level. In short, digital is impacting organizations from top to bottom.
Second, the previous technology revolution created an impact around the productivity of the company. So, it was more convenient to operate differently and make productivity gains. But we all know now that the latest digital technologies, on the one hand, can improve the way companies operate, but, on the other, can create new and disruptive business models. This is the big difference and why this revolution is getting much more attention from CFOs, CEOs and executive committees.
Q: Well, let’s talk about that. What I’ve observed from serving on boards of directors is that IT, until very recently--and maybe it still does--used to exist within the audit committee. And the way it would work was that the CEO would summon the CIO into the Board meeting--because the CIO was never on the Board--and the CIO would give a 30-minute presentation. Two questions would generally be asked of the CIO: (1) Are we compliant in terms of our financial accounting and the regulations we must observe? and (2) Are we protected against security and data breaches? The CIO would answer the two questions, the Board would check the boxes, and the CIO wouldn’t be seen for another quarter.
If technology and digital transformation is really an existential issue, and the survival of companies depends on how well they transform, then shouldn’t technology exist in its own executive committee, rather than being blocked in the audit committee?
Nanterme: That’s a good question. Historically, technology has been viewed as a compliance issue, which is under the purview of the audit committee. Chief information officers and security officers also report to audit committees. But company Boards are increasingly concerned with cybercrime and cybersecurity--two of the top risks facing a company--and audit committees still oversee these issues as well.
However, digital strategy (revenue growth and future investment) has become part of the mandate of a Board’s strategy committee, so companies have seen the rise of the chief digital officer (CDO). Some companies divide the CIO into two positions: one, the CIO, who oversees core applications and infrastructure; the other serves as the CDO, who manages digital strategy and assets.
Q: Since you work with so many large organizations around the world, do you have any opinion as to whom the CIO and the CDO should report?
Nanterme: We see multiple approaches. In the past it was common for the CIO to report to the COO. But in today’s global companies you see more CIOs reporting to an executive committee that includes the heads of all operations. The CDO, as the company’s manager of all digital strategy, should be on the executive committee.
Q: How has Accenture changed over the last five years to map itself to this rapidly oncoming digital transformation period and to better serve its clients? How are you different today than you were five years ago?
Nanterme: We are totally different. We saw that the professional services industry would be commoditized. We had to become leaders in innovation and scale. In 2011 we realized that all the classic outsourcing businesses were facing commoditization. There were a lot of good players, resulting in a lot of capacity in the marketplace, and we knew it was going to become more difficult to differentiate and create value in the classic legacy outsourcing model of labor arbitrage. So we invested in higher-value services. In 2011–12 we identified five digital capabilities with the opportunity of delivering high-growth, higher-value services and decided to pivot to those five capabilities--vowing to become a leader in each. We called the five capabilities IMACS: interactive, mobile, analytics, cloud and security.
We created Interactive, which is a leading digital marketing agency. We are also a leader in creating mobile apps and mobile solutions. Similarly, with analytics we built it to scale on data, data science and algorithms, evolving that capability to include new capabilities around machine learning and deep learning, helping our clients to transform their business models with artificial intelligence, our next logical extension. We have a cloud-first approach and build the most effective cloud solutions to mine and store data, while creating cyber trust through Accenture Security.
We focused first on these five capabilities, scaling each and every one, one after the other. And by the end of FY17, more than 50% of our revenues were in the five areas: interactive, mobile, analytics, cloud and security. By the end of FY18, we expect that 60% of our revenues will be in digital services. We are investing a lot to drive what is the most significant pivot of our industry.
Q: When it comes to cloud, do you work with the major cloud vendors, such as AWS, Microsoft, Google, etc.?
Nanterme: Yes, at Accenture we are a true player in services. We’re not in the support or the infrastructure business. Part of our success, now and before, has always been to leverage what is the ecosystem of partners. In addition to being the number one partner of many of the platform and infrastructure providers you mentioned, we are the number one partner of SAP, Oracle, Microsoft and Salesforce. Our positioning has always been to provide these services to integrate the best-existing technologies--and to integrate them, of course, in an industry context: banking, insurance, retail, consumer goods, life sciences, high tech, telecom, etc. We are the bridge between the technology and our clients, and we are totally agnostic about the different platforms, as we’re working with the best, and we have the industry expertise to make these technologies relevant and effective for our clients.
Q: Several weeks ago in Los Angeles I interviewed Julie Sweet, your North American CEO, and she said something very interesting about Accenture. She said that for years and years the company prided itself on being a “fast follower.” “But,” she said, “we can no longer afford to be a fast follower because of the acceleration of digital transformation.” How does a company as large and as globally widespread as Accenture--with its legacy of being a fast follower--position itself to become a leader, and what does that mean, in your words?
Nanterme: Julie said it very well. We had to make a pivot from the services we were delivering to cultivate relevance. If you’re going to pivot from a services standpoint or, as I just described, react to make the pivot from a positioning standpoint to continue being differentiated, relevant and competitive, it is difficult. Historically, Accenture was viewed as a big delivery organization. Though we were pleased with that positioning, it wasn’t enough at a time when innovation was/is fundamental. So, our first pivot was from large-scaling, mission-critical delivery positioning to a high-speed, highly-innovative organization. I’m very pleased with our results, based on surveys and feedback from our clients, analysts and investors. We made significant investments in R&D and in Accenture labs. We have more work to do, but I am pleased because the image and the positioning of Accenture has changed.
The second is exactly the one Julie mentioned. In the past, if you weren’t out in front of the emerging technology waves and weren’t the leader, you could still grab some of the market--and be taking less risk. That’s not possible today.
The waves are coming so fast that if you wait, you’ll be left behind. We needed people inside Accenture to change our approach and position us as a leader in this new digital revolution. It required changing our company culture. It’s a different game, being a first mover, but the benefits are enormous. You’re creating a “Go to” company.
Q: One of the fast-moving waves--and one of the enabling technologies of the larger revolution--the one that everyone’s been talking about and that causes a lot of worry in society is A.I. Not long ago, Diane Greene, who runs Google Cloud, spoke at a Forbes conference. She said something to the effect that the underlying pace of evolution in A.I. had undergone a step-function change and was moving at a rate that was two to three times faster than it had previously been moving. She speculated that the rate of improvement is around 50% to 60% per year. And it doesn’t take long to compound that 50% to 60% a year into seeing extraordinary effects--from driverless vehicles to amazing breakthroughs in medicine and healthcare. But it also leaves us with some deep questions about the future of employment--and even of humanity.
Should CEOs be thinking about this? Or is that, as we like to say in the U.S., “above their pay grade”? What is the Accenture view on A.I., as it rolls out in society?
Nanterme: The current evolution in A.I. is absolutely incredible. But the question for every business is “How do you apply A.I. in the context of your business?” At Accenture we work with an ecosystem of partners around these A.I. revolutions, and we’re trying to figure out with each business how to apply A.I. For instance, it could be used to invent the best technologies. You need to understand how you’re going to use it to create value in the context of your business, because you have one chance to deliver value to the business and to society.
Yes, A.I. is going to be a great, but where can it really deliver productivity and value? I think those will develop at different paces. We are starting to see a lot of A.I. used in the process of automation. The second wave will be more abrupt and will be more about using the science of A.I. Then you’ll need to understand which business areas you’ll want to address through A.I. It could be floor management, healthcare or deep research. Industry by industry you’ll have to figure out how you’ll use A.I. Our job at Accenture is to work with all the A.I. providers--SAP, Google, Microsoft, Amazon, to mention a few--to understand how the technology is going to be used in the context of the business. It will take time for businesses to figure out their use case and to ultimately deploy, at scale, these solutions in the U.S., in Europe and in the rest of the world.
Q: One of the areas that will be profoundly transformed over the next five years is global supply chains. The technology behind the Internet of Things will collect massive amounts of data, with new algorithms that can analyze the data faster without first having to reduce the data to sample sets, and with the enormous power of cloud computing will crunch through these complex algorithms. Given today’s geopolitical environment, which, on the one hand, has given us a higher rate of economic growth--at least this year--and, on the other hand, has given us more trade risk, how should CEOs be thinking about investing in their global supply chains, with all that’s happening in the world?
Nanterme: We are just at the beginning of this impactful digital revolution. The first wave we saw in Europe was the business to consumer businesses: banking, insurance, retail, teleco, and so forth. The technology used has been mostly around digital marketing through commerce analytics and the communications and digital experience. The second wave will be in manufacturing, and the magnitude of its impact on business will be huge. It will affect oil and gas, utilities, industrial companies, the automotive industry and everything related to manufacturing. And, as you mentioned, with the rise of the cloud, 3D platforms, immersive realities, VRs and augmented realities, there will probably be the added impact of blockchain in many of these applications.
So this is going to be a very big wave, one that should create jobs. The prior revolution was disappointing in the job-creation arena, but this second revolution, when it hits manufacturing, will create many products and services--and jobs.
We at Accenture feel the digital manufacturing wave has started in a very significant way over the last 12 to 18 months, which is why we are launching what we call Accenture Industry X.O.
Q: I have a last question for you. Earlier this year on our Forbes Cruise for Investors, a participant asked a question of one of the speakers, James Stack, who is one of the most accurate long-term stock market forecasters: “What would be a stock that I could buy and put away for five years, feeling comfortable that it would do well over the five-year period?” Stack answered without hesitation, “Accenture.” Now, I know that as a CEO you can’t talk about your company’s stock price. But I ask you, why would Stack feel comfortable saying that Accenture has a good five years ahead of it?
Nanterme: Because Accenture is highly differentiated, highly resolute and highly agile. We have achieved differentiation through innovation; we are resolute through having a manageable portfolio of diversified businesses; and we are agile in how we manage our business in a confidence-based approach. That is my formula for creating value, value for our investors and shareholders, for our people and for communities. We have worked hard to create a very innovative company--in the services we provide and in our digital focus. At the same time, we’ve been extremely durable in sustaining strong performance because of our strong rigor and discipline in the way we anchor the business, and in the way we are resolute and agile. It is how we work every day, and so far we are striking a balance among innovation, resolution and agility that drives value for our different stakeholders.
