0:01 NARRATOR: Luminaries. Talking to the brightest minds in tech.
0:05 MICHAEL DELL: We have always believed that if we built the right technology, we could amplify, and enhance, and enable human progress. And when I look at what lies ahead, I realize that we’ve really just barely begun.
0:22 NARRATOR: Your hosts are Mark Schaefer and Douglas Karr.
0:30 MARK SCHAEFER: Welcome to another episode of Luminaries, where we get a chance to talk to the very brightest minds in technology and technology transformation. This is Mark Schaefer, with my co-host Doug Karr. How are you, Doug?
0:47 DOUGLAS KARR: Hi, I’m doing fantastic. How are you, Mark?
0:49 MARK SCHAEFER: I couldn’t be better. And we are going to dispense with the customary podcast chitchat today, because we truly have a rock star in our presence. We are so honored to talk today to John Roese. John has a lot of different titles, but he is the chief technology officer of Dell EMC. John, welcome to the show.
1:15 JOHN ROESE: Hey, good to be here.
1:17 MARK SCHAEFER: And John, I understand, actually, you and I have something in common. We both have seven patents.
1:25 JOHN ROESE: Actually, I have a lot more than seven.
1:27 MARK SCHAEFER: Oh really!
1:32 JOHN ROESE: I have at least seven.
1:35 MARK SCHAEFER: I was looking at your bio, and it said seven. See, now I’m broken hearted because I will never interview someone again where I will be able to say that, I think.
1:44 JOHN ROESE: Well, you know, you know what’s interesting, the legacy– when Linkedin– I’ve been a Linkedin user for a very long time, as a great social network for business, when I decided to put my patents on there, because I felt like it was kind of a useful thing to articulate, they had no vehicle to do it. So I had to use the generalized notes field, and I actually kind of– it was so irritating to go and grab the patent numbers, copy and paste. But I just kind of gave up. So someday, I’ll go back. I think they’ve added a better way to do it. But I think I just put in a sampling user experience.
2:21 MARK SCHAEFER: Your technologies are certainly helping mankind more than my technologies, which were around holograms.
2:30 JOHN ROESE: OK. Well, it’s funny then.
2:33 MARK SCHAEFER: Let’s get into it. And John, gosh, we just have so much we could talk to you about. But one of the things that I’ve been curious about is, this is all about transformation and change. And one of the things that’s been so fascinating is this idea of disruption. And there are so many models out there that try to assess potential for disruption, or even predict areas, industries, services that might be ripe for disruption. Is something like disruption– is that something that can be predicted, or is the very nature of disruption unpredictable?
3:18 JOHN ROESE: Well, I actually think disruption can be both. So here’s the thing. You have to look at the dependencies of what you’re trying to do. So for instance, if you’re in an industry, being in the industry is the outcome, you know. It’s not the thing that enabled you to do it. The technology, the market conditions, the customer need, all of those things are actually the underlying foundations of your ability to succeed or fail in an industry. And it’s when those change in some way, in a meaningful way, that disruption is likely to happen at the business level. And so I actually think that people who purely look at a market, let’s say health care, and say health care is going to be disrupted, they can’t actually quantify what underneath it is changing.
4:04 It could be a regulatory framework, we’ve seen that happen, but it also can be the advent of technology that has nothing specifically to do with health care, but potentially could change one of those foundational stacks that exist in the health care industry. And so a lot of the time we spend is trying to understand where these foundational changes are coming from. And if you start with that, then you can kind of work backwards towards where are the industries most likely to be disrupted by that technology. So I think you can predict it, but only if you have a very good understanding of the technical evolution going on in the industry, new technologies emerging, and you have to be very open minded, because if you only look for the technologies you are using in that industry, you’re unlikely to see the adjacencies that occur and the disruptions that are happening there.
4:52 MARK SCHAEFER: So interesting. And do you have a formal process for assessing that? Or where do you get those signals?
4:59 JOHN ROESE: We do. I mean, we do a tremendous amount of work. I mean, there’s a number of things that, obviously it’s pretty complex at our scale. Data is your friend. And so when we look at innovation in general, we– one thing that we don’t do is, we don’t do foundational research over like 10 year time horizons as a commercial company. Generally that’s best left to academia and research. What we do do is we fund that work, so we have access to it. In fact, actually, next week or actually, yeah, next week, I’ll be over at MIT for their member days, because we’ve been a big participant in MIT for a long time as one of the universities that we work deeply with. And once a year, they hold this big kind of, here’s everything we’re working on for a couple of days. And obviously we spend time with them tactically, but we also want to have access to those ecosystems so we can see what potentially is coming at us. In fact, this is where we saw things like DNA synthesis start to materialize, which you kind of go, what does that have to do with the IT infrastructure.
6:00 But fast forward 10 years into the future, there is a reasonable hypothesis that says you may be able to store data in a DNA structure. You know, it is a data store, just have the genetic imprint of a human being or a living organism. But the contingent to do that is not that the DNA exists. It’s the ability to synthesize it. Now I’m not predicting that we’re going to have DNA storage tomorrow, but on the other hand, having a relationship with things like, universities like MIT research institutions, gives us early warning. Then we move in a little bit further, and we start to look at the commercial ecosystem. You know, what’s coming out of Intel, what’s coming out of the semiconductor world. What new geometries around silicon develop and are materializing. What big inflections are happening in adjacencies. You know, we’ve seen some of those happen. For instance, this year and next year, we will see large scale persistent memory materialize.
6:48 3D XPoint from Intel is an example of that. But there’s many others that we’ve been tracking for probably five years. Those have profound impacts on how IT systems are going to be built, and they’re going to be very horizontal across the entire industry. And then you get in further, and you start to look at your individual technology swim lanes, and you start asking questions of, is there an adjacent architecture materializing? Have we seen something happen in the consumer world that might get better over time and influence the enterprise world? A good example of that would be solid state disks. You know, early days of flash memory and solid state disks, the enterprise use cases, because discs were very small, and they had a lot of activity on them, required what was known as high endurance. So they could handle lots of writes per day. You know, that’s how we measure the endurance of a drive. How many times a day you rewrite the entire drive. And eventually, it wears out if you exceed that.
7:39 But what was interesting is the consumer side compromised on that, and drove cost down. Because you don’t write that much to a consumer product. But there’s a correlation that said, when you actually start to build bigger drives, even if they have a lower endurance because they’re intrinsically bigger, the amount of data written to them actually requires fewer writes per day. And it was actually the adoption of both larger capacity drives and novel innovative technologies to drive costs down on endurance that came out of the consumer world, which actually is the baseline of enterprise products today. But three years ago, four years ago, nobody would have considered a consumer drive because they weren’t big enough, and they didn’t have enough endurance.
8:20 But over time, those two things worked against each other to create an ability to use lower cost kind of consumer technology in the enterprise. And that was actually incredibly important, moving to this kind of all flash era that we’re in now. And so you wouldn’t have seen that if you only looked at the enterprise swim lane, but you have to look outside of it in that substrate and then try to apply it. So you know, any reputable technology company better be doing a lot of this over long term, medium term, and short term, and in adjacencies. For us, we tend to aggregate it. We analyze it, we use a lot of tools to try to figure out what customers are talking about. In fact, we have a vehicle where we use that data mining technology that every EBC or customer briefing, we take notes. And then we basically take that information and we dump it into basically a big data engine.
9:08 And we try to analyze, are there patterns materializing globally. Are there more customers kind of bringing up a particular technology. And sometimes, that early warning can give us a hint about what we might be missing, or where something might be materializing. Blockchain was a very good example of something that we knew what it was, we couldn’t quite relate it. It’s kind of above the layers we play at, but the level of interest went up precipitously over the last couple of years, and we were able to see that by the kind of comments from customers, and that allowed us to kind of create things like blockchain as a service, and cloud foundry, and look at how we optimize our infrastructure. So there is no one answer other than keep your eyes open, and cast a very wide net, and try to understand that unexpected things happen to your industry from places that you didn’t expect them to come from.
9:52 DOUGLAS KARR: Wow. I was reading, obviously doing some prep for the podcast, and there was a couple of things that stood out to me in the reading. And that was, one is in the IBC IT organization imperatives report, one of the key behaviors that they talked about was being future focused. And it sounds to me like, obviously, Dell has to be way out in the forefront of being future focused, future aware, future focused. And then actually creating for that future. But what was surprising was that one in three IT organizations are only current focused. So can you talk a little bit about, OK, how does Dell, who’s taking and looking at these things way in the future, and then obviously working with academia to go even further. How are you bringing these ideas to industries that they’re just not there? They’re just not even looking where they need to be?
10:47 JOHN ROESE: Yeah I know, it’s a great point. I mean, you know, first of all, we have a kind of core responsibility to be extremely broad and extremely long term and extremely tactical at the same time, because we’re the biggest player in the industry. And so, we have customers that range the continuum. We have ecosystems that are in different stages of their journeys, and so their expectation is that we’re going to catch it before they do. We’re going to understand what’s happening. So part of our responsibility comes with scale. If you’re a small start up, and you’re in a niche, by all means, you should know that niche, but nobody expects you to know the breadth of IT. Well, we’re not a niche. We’re kind of the entire infrastructure business of the world in one place.
11:25 So we definitely have to be future focused, but to your point, you know, your customers range from the bleeding edge, actively being disrupted, or doing the disrupting. And we’re definitely seeing that in places like industrial, and to some extent health care, but definitely the banking sector is going through a transformation. You know, and even within those sectors there’s people at the forefront, and there’s people that are kind of waiting to see. So we acknowledge that there’s that spectrum of the most bleeding edge customers that want to disrupt their industry, or an active disruption from someone who may be a cloud-scale provider. And then at the other end of the spectrum, you have people that are basically happy to just keep the lights on. What’s important is that these innovations that are materializing, these disruptions that are coming at you, end up benefiting all of those customers. So in the case of the early adopters, a lot of the time it’s very explicit interaction. For instance, I have a team that works for me called our open innovation lab, which works with the kind of bleeding edge, large scale customers that have an unsolvable problem.
12:25 And if we find one of those that nobody has a good answer, we’ll actually engage with them and technically try to solve the problem together. It’s based on principles of open innovation and a guy named Henry Chesbrough, who’s a professor at Berkeley, kind of coined about 15 years ago. You know, deeply collaborate with your customers to solve a problem together. Now that wouldn’t make a lot of sense for people in the rest of the spectrum. On the other hand, the people who are actually just consuming product, they actually have an expectation that even if you don’t know why or how the price points come down, the performance goes up, they’re intrinsically stable, and so a lot of the innovation that occurs within our company and our ecosystem makes its way very quickly into the componentry and the architectures of mainstream products that most people don’t even know that technology is in there.
13:10 You know, again, not to dwell on solid state memory, but solid state memory, or flash technology still is early. I mean, it’s kind of become the dominant media type for persisting data, but the reality of it is, is that’s only in the last several years. There are customers that haven’t really adjusted their IT architecture for a decade. And they’re not going to because they’re in a very stable industry, or maybe there isn’t a disruption. The fact that those customers, when they buy a storage system, for instance, that is just going to serve their legacy applications that might have been written 15 years ago, to take a product that is using the most state of the art media in the world, state of the art computing in the world, plug it in and it speaks the old languages, it speaks to that system that’s been around for a decade, and the only thing that happened is their prices came down and the performance went up. That’s a way for them to consume innovation, and to be “future focused” without knowing you are. And that’s because our responsibility is to not just innovate for the bleeding edge and innovate for the first movers.
14:10 We have to innovate for the whole industry, and as that innovation is going to be consumed, what you have to recognize is a lot of the customers that need to consume it, do not want to understand it. It’s not in their interest, nor do they have the capability or the desire to understand it, but they should absolutely benefit from it. So we find this too often, when companies that say, I have this great innovation, and in order for you to use it, you must change. Now change is hard, and it takes time for a lot of people. The better answer is, I have this great innovation that makes what you’re doing today better if you’re mainstream, or even a legacy environment.
14:47 But it also potentially could be exploited in novel ways for bleeding edge early adopter. But candidly, you ought to be able to pick how you absorb that innovation. And it really has to be the spectrum from explicit dynamism, where you’re changing your architecture and adapting your business, all the way to, you don’t know you’re using it, but you get the benefits of it. And that’s kind of the holistic approach of how you deal with that. I don’t think that statistic you described is wrong at all. I think, probably a third of the customers in the world, honestly don’t have a lot of time to think about the future and think about what’s coming next. They’re kind of trying to keep the lights on and run their businesses, and IT is very secondary to them. There’s no reason on Earth why they should not benefit from the innovations that are coming at them. But the best way to do that is to hide that innovation and make it manifest by just simply improving their existing operating model.
15:37 MARK SCHAEFER: John, I wanted to build on that. And certainly there is this continuum of businesses that are disrupting, or being disrupted. Or some that may be in a certain steady state. So how do you be intellectually honest about your business? How do you know if it’s OK to bolt on, or say hey, we really need to transform? What are the signals that a company will look for to know to say hey, we’ve really got to go through a transformation here. Or are they just kidding themselves by thinking things are stable?
16:20 JOHN ROESE: Well the first thing is, that everything– laws of entropy tell you that everything is constantly in motion and changing, it’s just the speed in which it changes varies. But the bottom line is, the biggest signal you can have that you better get on the bandwagon and transform yourself is when a digital disruptor shows up. And we like to talk about the Amazons and the Ubers and the Teslas of the world. Those are very good examples of technology companies that use technology to disrupt industries. They’re very visible, they’re very obvious. So, you know, candidly, if you’re an automobile manufacturer, you just have to look at Tesla and say, hey, I’m being disrupted, I’d better move. And the good news is, they all have. And we’re working with most of them because they realize that it’s a digital game. It’s not a mechanical game, necessarily, to win in the automobile transportation industry. You know, that’s almost too simple. Sit back and wait for the Uber of your industry to show up, and then it’s time to go.
17:15 The good news, by the way, is you may actually use that as your strategy if you in a relatively staid kind of classic industry. Because interestingly enough, when you look at the time line, as long as you knew that Uber existed, if you were completely blind to them even emerging at all, you might have been too late. But from the time that they were founded to the time they really started to force change in the industry, it was measured in years. There’s plenty of time for you to then begin your transformation, as long as you don’t just stand there and deny their existence. I guarantee you, the difference between a successful and unsuccessful automobile or transportation company right now is the ones that, when they saw this materialize, began to move, are likely to have a chance of success. Anyone that is in denial about a very obvious digital disruptor is very likely to fail. They’re too late now, because the disruptions are already under way. The lead horse is out of the gate, and you know this is not going to slow down. And that one’s completely obvious. The other way to kind of understand when you should move is looking at your customer’s experience.
18:19 You know, far too often we accept mediocrity. We accept the bureaucracy. We expect that, you know, it’s OK to have a bad user experience. And what you’ll see with every digital disruption that’s occurred, is it wasn’t really about the technology. It was technology that enabled a more natural, seamless experience to the service that was being provided by that industry. An intelligent car that can be updated over the air is about a user experience, not necessarily about the underlying technology. And so if you’re in an industry where your employee satisfaction and your customer satisfaction are just intrinsically bad, then it is very likely that there will be a disruptor coming, and it’s very likely you could be that disruptor if you chose to improve the user experience. I think the airline industry, specifically airports, went through that exercise. If anybody remembers, I travel a lot, but go back 10, 15 years ago and, you know, when your flight got canceled or was delayed, you had no idea until some voice in the sky came on the PA and told you, hey, the pilots aren’t here, or the plane is broken.
19:26 A few airlines figured out, you know, hey wait a minute, we ought to invent in this space. Actually, Continental was a good example of this, where they started putting monitors up, and they started to basically share information. They invested very heavily on digital to create a better user experience, apps that could tell you what the waitlist is, and who’s on the upgrade list, and what’s the status of the plane. Today, we take that for granted. The user experience changed, but you’ll notice something about the airline industry. There’s a lot less airlines. And if you look, generally a lot of the characteristics, or the ones that kind of prevailed with their architectures was, they probably had a better digital strategy. They used it primarily to create a better user experience. And I’m not claiming that airlines are perfect yet, but we saw that pattern where there wasn’t a new airline a la Tesla that materialized to catalyze this.
20:11 There was a unsolved user experience problem that was so obvious to every consumer of that product, that as soon as one of the incumbents started to invest more heavily and try to look and take it seriously, they got an unfair advantage and it began an industry transformation. And then again, the underlying technology is what enabled it to happen, but the problem wasn’t the technology. The problem was, people didn’t like a product because there was something wrong with the experience. I think health care is ripe for this. We’re seeing some improvements, but we’re very early. And you know, clearly the banking sector in emerging markets has moved to that model with mobile banking. And that’s creating a huge amount of disruption. But it’s very much likely to be, either there’s a digital disruptor already present, or if you’re intellectually honest, and you look at the scores of your customer satisfaction and user experience, there’s just something intrinsically wrong with the friction in the experience, and the outcome of how people consume your product. If either of those conditions are true, you are probably, if not certainly, going to be disrupted by either somebody from the outside that’s obvious, or somebody from the inside that takes advantage of technology.
21:17 DOUGLAS KARR: One of the things that you touched on, John, that I think is an intriguing one is regulation. Like with health care. From a regulatory standpoint, and from a privacy standpoint, security standpoint, I’m interested in your perspective on when we’re moving at the speed of light, how do we get regulatory engines up to speed as well?
21:43 JOHN ROESE: Yeah, obviously the regulated industry intrinsically has a drag chute deployed. That’s a good way to describe it. It is very difficult to move fast if you have an archaic regulatory framework. Let me give you a funny story. In a previous life, I used to be the chief technology officer of a company called Nortel. I ran worldwide R&D there. And one of the things that we were doing in the mid 2000s is, we were creating a technology that ultimately would be known as LTE, or long term evolution, or 4G. And I remember we had a very good relationship with the various FCC commissioners, and one day I invited a couple of them up to Ottawa, Canada to just– we do this periodically just to educate them. You know, we weren’t selling– we weren’t the end user. We weren’t really regulated, our customers were, but we felt it was incumbent on us to help the regulator understand what’s going on.
22:32 I remember bringing one of these commissioners up, and we had a– this is, boy, 2007. We had a lot of early work around broadband over the air. This idea of cellular broadband, not voice over the air, but real broadband. You know, it eventually became LTE. And what was interesting behind it is we– I remember showing this test bed, and it was big circuit boards, and it didn’t look like a cell phone. But we showed them the bandwidth. And I remember showing this commissioner that there was over the air, streaming in at like 30 milliseconds latency, which is just like broadband in your house, you know, 45 megabits per second of bandwidth. And at the time, with 3G, you might get a megabit if you’re lucky.
23:13 And he’s looking at me, he’s trying to process this. And I said, understand what you’re looking at. You’re looking at the future of your industry that you have to regulate. And the industry that you’re in thinks of cell phones as a thing to make a phone call that might do some data. And what I’m showing you is something that doesn’t do phone calls in the traditional sense, but looks like the broadband industry that you’re regulating on the wireline side. And you can see his kind of brain click in and he said, you know, this is bad, this means my entire regulatory framework has to change. Now, in order to work through the regulator, the first thing that we have to do is recognize the regulators are mostly lawyers and governmental agencies.
23:52 They’re not the technology industry, so we have a responsibility to educate them, to keep them informed about what’s coming next. The last thing you want to do is invent a great new technology that’s going to go into a regulated market that you didn’t have the courtesy to try to educate the regulator about what the changes were going to be. That doesn’t guarantee success, but I guarantee it will guarantee failure. A wonderful innovation that the regulator has no idea is coming, and takes five years to adapt to. So first principle is, big technology companies have to recognize that part of their delivery of technology in regulated industries, is that they have to actually work with the regulator early, and they have to try to educate them about significant changes so that we can adapt to regulation, because that moves very slowly. That is not done well today. We need a much better framework for that, and companies need to take it much more seriously. And to be perfectly honest, if you’re a startup and you come up with a great idea, it’s going to be applied in the regulated industry, and you’re not capable of changing the regulations, you’re likely to fail. So that’s number one.
24:50 Number two is, remember, not all problems have to be solved within the regulated framework. A good example would be in the health care industry. It takes time to get FDA approved medical devices even if they’re digital. You know, it takes– Withings just released a FDA-approved WiFi-connected thermometer. It’s really cool, actually. Does remote sensing, logs everything going out. Took them a long time to build it because of the regulations. But they eventually delivered it, they got the compliances. Quite a impressive piece of technology. But the bottom line though, is if you’re going to try to apply new technology in the regulated industry, you might have options.
25:32 For instance, a lot of the health care innovators actually innovated in wellness before they innovated in health care. They said, maybe it will take time to put this into core regulated functions, like medical procedures and medical instruments, so maybe I’ll invent the new technology initially in basically just care and feeding of people outside of the regulated side. Companies like Humana did a lot of great work with the early Apple Watch, an app called Q, which was one of the first nagware– it functions, it kind of looked at what you were doing. It would tell you to stand up, or breathe more. And it was totally targeted at wellness, but what it allowed them to do is become relevant in the digital transformation of the overall health care market without necessarily having to deliver a medical instrument.
26:14 And so regulation is not your friend if you’re trying to move fast for innovation. So either you have to move the regulation significantly as you invent the technology, or if you’re doing invention, you may actually find there’s an adjacency that allows you to provide almost the same amount of value to the end customer without necessarily having to get directly into the regulated environment. And by the time you work that out, maybe the regulation will start to catch up, because they now have something to look at. But the bottom line is, there is no magic bullet. There is no way to snap your fingers and change regulation quickly. It’s there, you have to acknowledge it, it has to be part of your overall innovation framework. It doesn’t mean it is an impediment for you innovating. There are ways to get around it, there are ways to innovate behind it, above it, beside it. But ignoring it is usually a recipe for disaster.
27:02 DOUGLAS KARR: Sure.
27:05 MARK SCHAEFER: Well John, I’m looking through my questions here, and we’ve got through about one third of them. And I just feel like we could go on– oh my, you just got my head spinning here, and maybe we could convince you to come back on the show another time, because there’s just so much– oh my gosh, I just got so much here. And so really, just thank you so much for sharing your vision, your wisdom, and your insight today. And unfortunately, we’ll have to draw this to a close.
27:39 And we hope you’ve enjoyed this episode of Luminaries. We hope that you’ll think about subscribing to the show on iTunes, or another social media channel. We hope to hear from you. Leave a comment, leave a review on iTunes, and we’ll see you next time.
27:59 This is Mark Schaefer, and Doug Karr, signing off for Luminaries. Luminaries, talking to the brightest minds in tech. A podcast series from Dell Technologies.