Articles, Blog

Matt Smith, IFS | IFS World 2019

October 10, 2019

>>Live, from Boston, Massachusetts. It’s the CUBE covering IFS World Conference 2019. Brought to you by IFS.>>We’re back at the Hynes
Convention Center in Boston. This is the CUBE, the leader
in live tech coverage. And this is our coverage
of IFS World 2019. Matt Smith is here. He’s a Global Chief Architect. Paul Gillin and I are
happy to have you on, Matt. Great to see ya.>>Pleasure to be here. Thanks very much for having me.>>You’re welcome. So, business value
engineering is a concept that you’re a fan of and
one that you’ve sort of promoted and evolved. What is business value engineering?>>So, business value engineering
is quite a common term in the industry. But here at IFS, it’s a little different. Fundamentally, it’s a collaborative process that we use working with our
customers and our partners to make sure that what we
do with those customers delivers financial value to their business. So, it’s fundamentally about making sure what we deliver delivers value.>>So, I want to ask you
a question about this because your philosophy as
a company seems to be that let the customer define value, in their terms, not your terms. Not trying to impose a
value equation on them. At the same time, it’s
nice to be able to compare across companies or industries
and firm level, and so forth. So, how do you sort of reconcile that? Is it like balanced score card is sort of, “Hey, you can tailor it to yourself?” Verus some kind of rigid methodology. How do those two worlds meet in BVE?>>Yeah, so, obviously, benchmarking across
industry is really important and there are lots of people
that do that kind of work. And that’s part of
business value engineering. Fundamentally, it’s about
mutual collaboration. So, it’s not just about using the customer’s framework
or their language. It’s about agreeing the language. One of the challenges when you’re trying to build a business relationship
with one or more parties is you have to have a
common shared understanding, a common vision, a common value system. So that when I say something to you, it means the same thing
when you say it to me. So, part of that collaborative process requires that you work together and business value
engineering facilitates that. It’s not just about
producing a business case. It’s really more about
the process and steps that you go through to
get to that business case, that allows you to establish trust and understanding and clarity.>>How does this enter into
the customer discussion?>>So, it enters as early as you can possibly make it enter, right? So, right at the beginning you ask the very first question
which is fundamentally, “What are the business initiatives “that you are trying to achieve “with this potential change program?” And then, you have a deep
discussion about what they mean. So you understand and they understand, and everybody really agrees firmly, what we’re trying to achieve before you get anywhere near solution. And it’s really difficult
as technical people. I’ve got a technical background. To stop yourself from
hearing a problem and going, “I’ve got a solution for that.” And it puts that more disciplined approach to make sure that you don’t
straightaway go to solution. To help you really understand
where you’re going, how you’re going to get there, and, therefore, what the
financial benefits and metrics would be to do it.>>Who are the ideal
stakeholders when you’re doing a collaboration like this in
terms of getting them involved and getting their input?>>So, you might expect the
answer to be C-level executives. And, of course, they’re important from a leadership and a
direction perspective. But as it turns out, from a human cycle that you
call behavior perspective, there are three personality types that are really, really
suitable for this kind of engagement work that’s
focused around change. And if you find those
three personality types, and they’re quite well understood types of people, they’re the ones that tend to cause change to happen more successfully. It doesn’t mean they’re anymore valuable than anybody else inside an organization, but they are the right
kinds of people to establish this sort of work with. And it’s important you have the
right number of those people in a change program.>>So, change agents? Obviously, I would think a
P&L Manager who’s going to… He or she’s controlling a
big portion of the budget, and has thousands of
people working for them. Would be important, maybe
not a C-level executive, but a line of business executive. The sort of the field general. Could that be an example
of a change agent?>>So–
>>But not necessarily, ’cause they’re
trying to protect their turf?>>So, not necessarily, right? When it comes to change, change is always hard in any
company you’ve ever been in. In all of our careers,
change is difficult, right?>>Wake up in the morning, “Let’s change!”>>Yeah, nobody does that, right? (men laugh) So it’s more about who are the people that lay the groundwork for that change? That you follow, you
listen to, the influencers. Now, of course, you’ll have
people that own the budget, the financial controllers. And absolutely they’re
important, of course they are. But they may not be the personality type that causes change to happen. Business value engineering
is about making sure you harness the right
talent, the right skills, the right people, and the right time to help organizations realize
the benefit of change.>>If you’ll excuse me,
this does not seem like a typical role for a
software company to take on. Change management. How do you… Why do you put yourself in that role?>>I think this is something
that all software companies are going to have to do. And you’ll see the subject
of business value engineering in many software vendors now. It’s true it’s a fine line between being a business analyst and being a software vendor. You know, we’re a software provider. I think software providers
that don’t deliver the context and the value that
they are trying to achieve with the software they
buy and the customers, are poorer suppliers. Because they’re just
trying to push technology. And it’s fun. Technologists like myself
enjoy the technology. And I would buy technology all day long. But is it really the right thing to do? So, I think it’s about
being morally right. You have to take a high ground and conduct that
engagement in a way which, in some cases, and this has certainly
been true in my career, you do the business value work. And you realize that you probably
shouldn’t do the project. And you have to have that
fortitude to say to the customer, “This is actually not a great idea. “Because the financial
case doesn’t support this.” And I think it’s taking
that moral highground is a really important start. And software companies that do that generally, those customers
will come back to you in a future time when they’ve
got a different problem that perhaps does fit you. So, I think it’s about recognizing there’s both a short, a medium, and a long-term engagement with the customers
that you have to maintain.>>Well, in 2019, given all of the discussion about data, digital transformation, AI, you know, cloud, I would think that data
plays a crucial role in these discussions. So, what role does data play? Do companies understand
the importance of data as it relates to the
business value discussion?>>Absolutely. I think that data driven decision making is pretty fundamental. You know, a lot of people
say the numbers don’t lie. Maybe some statistics might be bent but numbers don’t really lie. So, you’ve got to be
able to capture numbers and make decisions based on those numbers. So, one of the difficulties though is that for many, many years, in many industries, we’ve been using very simple terminology and simple mathematical calculations to do these value calculations. Everybody’s aware of years ago the software industry was
awash with phrases like, “Return on investment calculators.”>>ROI, NPV, IRR.
>>PCI.>>We had breakeven.>>Some of those numbers are valid, right?>>Yeah, for a business case for sure.>>For sure. But just sticking with
simple things like ROIs is not enough.>>Well, it’s valid if
you treat the software as an asset, as an expense essentially.>>Yeah, absolutely. But then, it comes to the engagement’s more than just software. I like to think as a
human being the software is considerably less than half the game. In any change program where
you’re trying to achieve value the people, the human beings,
that are going to do the work are the ones that are going
to generate the value. The software’s a tool that you use. A very important tool, but it’s a tool. So, you have to think about
how do you build teams that can collaborate around value, achieve the value, measure the value, capture that data. But at the same time,
physically collaborate properly to do the work.>>So, how have you
applied this methodology for your customers?>>So, we’ve done a number of things. So, we’ve established
a practicing side IFS. We’ve made sure that every
country has the capability to do business value engineering. We’ve hired some specialists, people who do this for a living. And we are working with lots
and lots of customers now on this as a more methodical,
disciplined approach. But we’ve also recognized
that we needed to measure our existing customers benefits. So, what did our existing
customer base achieve with our software? So we commissioned a pretty
big and important study that was anonymous. We weren’t involved other
than inviting the company to go and do this work. And then, unleashing
them on our customer base for six months across all
industries, all products. And asking them to go
and find out and measure what our customers really
achieve with the software.>>So, how was that anonymous? Anonymous that you
weren’t doing the survey?>>We weren’t doing the survey. And any numbers that came back were anonymized.
>>Anonymous, right, okay.>>So, we couldn’t say,
“Oh, it was this company “that gave this feedback
with these numbers.” So it gave them a sense of freedom to be able to express and share that data.>>And so, you were
specifically asking about the business impact of IFS software throughout
some kind of life cycle? Like a before and an after?>>Yes, exactly.>>As is and the to be, or what have it?>>Yeah.>>Okay, so what’d you find?>>So, as a couple of surprises
in the results, actually. So, firstly–>>Well, can you tell us who did the study or is that (mumbles)?>>Yeah, so, the study. That’s a good question because the choices are many. There’s lots of analyst firms out there that you could use. All do this sort of work
and do it very well. The team that I worked with, we personally had a previous
relationship with IDC. Now, we really liked IDC and I’ve done some of this
work previously with IDC, because they are more… Their analysis has more
statisticians as well as analysts. So, they take a really very methodical, mathematical approach. And as a scientist, I very
much appreciated that. So, we picked them to do this work. And they take it really
very, very, seriously. There were a lot of
strict processes they have for how we are allowed to engage with them and talk to them during this process. And that rigor, I think,
allows us to be comfortable with the numbers and for our
customers to be comfortable with the numbers that they obtain. Because of this anonymity and
the rigor they put behind it. That’s why we picked IDC to do the work. In terms of what we found, and what they found and we
now just see the report. And our customers can
go and see this report. We published it last week. So, just go and free download to look at the material from IDC. The first thing that was
interesting about the study was human productivity focused. So, not things like how much inventory you
hold in supply chain and was it reduced? It was more about how
did the workers get on? What kind of mistakes did they make? Are they faster doing their work? More successful? And they looked at lots
of different categories. And the returns, the improvements, range from just a 10% improvement. So, not a huge improvement. All the way up to 94% improvement in productivity, human productivity. If you averaged it all
out, it works out of just shy of 19%. So, 18 and a bit percent
productivity improvement across all of the different teams. From the finance function,
the supply chain function, human resource function, sales
team productivity function. So, we saw a range. What was good was it
pretty much didn’t matter which category of customer, or size of customer, or industry, they all saw pretty similar
productivity improvements. Which means we can
extrapolate the numbers. The second thing we saw, which was a surprise, a
very pleasant surprise, was that usually when you see these kinds
of benefit studies, most of the value is in cost
saving and only cost saving. That tends to be where asset management, resource planning, service
management, happens. Just under half of the value
that the IDC study showed was net new revenue. So, customers were finding
that nearly half of the benefit was new money coming to the company. Top line benefit. That’s a little unusual.>>So, let me pick… Probe at that. So, productivity. When you’re saying productivity, I think revenue per employee as a simplest measure of productivity.>>Yep.>>But then, you’re saying there was incremental revenue as well. Independent. First of all, is revenue per employee the right measure? Or was it more like doing things faster or sort of more generic measurements and specific to a task? Or was it kind of boiled down
to a revenue per employee? And then, how did that relate
to the incremental revenue? If you follow my question.>>Yeah, I do. So, it was done by function, by team type. So, if you looked at
finance, and auditing, and human resources, and
supply chain, and so on. So, the metrics and you’ll
see in the white paper, are specific to the teams, right?>>Okay, so, specific to that role?>>Specific to that role.>>So, you’re not really big in insurance but a claims adjuster could get more claims done in a day.
>>Exactly.>>Or something like that would be your example.
>>Yeah, exactly. So, you’d find, for example, one of the statistics was
around field service engineering and how many jobs per day they could do. So, it was reasonably specific.>>And they would attribute that directly to your software, correct?>>Yeah, that’s right.>>So, as a result of installing IFS, how much would you increase
your etc., per day? Your input per day?
>>And that’s why it took them six months to do the study. I mean, this is quite an
in-depth piece of work.>>And how many customers
did they interview?>>So, it was across, and we gave them a challenge to do this. So, it was a set of about
17 fairly large customers. Which sounds like a small number.>>No, no, no, that’s a good number.>>But when you do
these kinds of studies–>>No, no, no, that’s a
totally legitimate number. And then, I mean, these
are in-depth surveys that you’re doing. So it’s not trivial. And then, as well, revenue increases specific to the software. So, that would have been what? Like cohort sales or service? Follow-on sales, things of that nature?>>Yeah, absolutely. And that’s why we were so delighted with the report when it came back because it was a really
nice, pleasant finding. So, most companies that… Well, all the companies
reported the revenue increased. But some were bigger than others. On average, it was a pretty sizable chunk. Nearly half of all of the benefit. And when we asked IDC, “Well, can you give us some
kind of glimpse as to why “we see such a large chunk
of improved revenue?” IDC said, “Well, you’re
improving the productivity “of the sales teams. “So, they can quote faster. “There’s more accuracy in those quotes. “The service quality is improved. “The speed and to get a
product to market is faster. “So, their ability to respond to “bids and tenders is better.” So, it’s actually a
combination of lots of things. Speed, error, quality improvements. That led to their ability to bid and win faster and better
business, net new revenue.>>Did you attempt to factor in less tangible factors such as customer satisfaction, net promoter score, perceived value? Customer perceived value?>>So the… No. The focus of the study
was human productivity and it’s something that
IDC do particularly well. And that’s what we gave them as a target. Obviously, when we we’re doing
business value engineering, you then have to take way more than just things like the benchmark data you’d find from a study
like IDC have conducted. Where you would take into
account those soft factors and other factors outside
of human productivity. So, value engineering is way more than just human productivity. Which is why it’s an engagement model. It’s something you have
to do mutually together. That kind of transparency really is what most
customers are now demanding. You know, I’m not buying
technology unless I know what business outcome I’m
going to obtain from this. It’s just the way of the world these days.>>Good, good takeaway. So, it’s not just your
software’s not just operational impact in nature. It’s more strategic. It has productivity
impact, revenue impacts. And, obviously, cost savings
as well I’m sure was in there.>>Yeah, yeah.>>Well, congratulations. That’s good.>>Appreciate it, yeah.>>How do we get this study? How do people find it?>>Yeah, you said
customers can download it. Can anybody download it?>>Anybody can download this, yeah. So, we’ve published it on our website. It’s very easy to find. And it’s freely available. We, obviously, have to
comply with IDC’s… They own the rights of the report because it was their material. But we’ve, obviously, purchased the rights to be able to distribute that material. We think it’s super
valuable for our customers.>>What a business model (laughs).>>And super important. Yeah, it’s a great business model. Well, and you know? And if I was to write
a business case for it, I would be delighted with
the work that was done and I’d be happy with the outcome. And I’m sure our customers will
make use of the information to be able to benchmark their own work. And also, hold IFS and our partners to account to help build business cases.>>Wow, I know it’s anonymized. And anonymized to protect the customer. But I bet you, some of the
customers would be willing to go public with some of this information. So, hit ’em up, bring ’em on the CUBE. We’ll distribute it for free. (Matt laughs) We won’t even charge
you for reprint rights.>>Very good, right.>>Great to have you on. Thanks very much.
>>Oh, my pleasure. Thanks very much, everyone.
>>Appreciate it. All right, thank you for watching. Paul Gillin and I will be
back with our next guest to wrap up IFS World 2019. You’re watching the CUBE from Boston. (upbeat pop music)

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