Ep. 80: Michael High - Digitalization and Business Transformation
Michael High, CMA, FP&A, currently leads the finance organization for Royal Dutch Shell’s Deep Water Gulf of Mexico business and is based in New Orleans, LA. He is passionate about thought and people leadership, diversity & inclusiveness, digital transformation and personal development. In this episode of Count Me In, Michael talks about finance digitalization, business transformation, and the efforts needed to strategically lead change. He is currently a member of the finance committee on the Board of the Association for Financial Professionals and was recognized by IMA as one of five Young Leaders of the Year in 2011. He is able to share his vast amounts of knowledge stemming from twenty-years of professional experience in roles spanning 4 continents with Shell and the US Army, where he served as an Intelligence Officer. Download and listen now!
FULL EPISODE TRANSCRIPT
Welcome back for episode 80 of Count Me In I'm your host, Adam Larson, and this is IMA's podcast about all things affecting the accounting and finance world. Today's episode features Shell's, Deep Water Gulf of Mexico Business Unit CFO, Michael High. Mike is passionate about thought and people leadership, diversity and inclusiveness, digital transformation and personal development. In his upcoming conversation you have with my cohost Mitch, Mike highlights the different states of going digital, finance's role in business transformation, and what it takes to effectively lead a business transformation. Thanks for joining us, and we hope you enjoy the episode.
For a little background and context and this conversation, can you please tell us what finance digitalization is?
Thanks for the question. So in terms of what the finance digitalization is to me, I like to start a bit with a kind of vocabulary for me, at least a lesson that I learned on this journey, and there are three terms that seem to get thrown out together at the same time, and sometimes try to mean the same thing, but I think they have a bit distinct meaning. So the first one for me is just this idea of digitization, which I think is something we've experienced mostly through our lifetime. This is that switch from analog to digital, where we went from filling out paper forms to doing so electronically. And so for some people, when they hear digitalization or even finance digitization, they're, they're thinking about that element of it. And for me, that's at a minimum step one, and then most places were far beyond it, but there are still pockets where actually this is an important part of digital transformation. The second one is digitalization, which for me is kind of a second phase to that. And this is where we're for me thinking about the current ways that we do work and how can we make those current ways and this current business models more productive or perhaps simpler, or make it a little bit easier to collaborate, but it's, by and large within the paradigm of the existing way that work is done. And the third phase for me is this concept of digital transformation, which is actually where you're opening up entirely new ways of doing business, perhaps even new business models, new ways to even approach the market and fundamentally different ways of working. And so, for me, that's where the most value ultimately lies is in that, and I think it's also where you get beyond things like just looking at the IT cost or even the IT side of the equation to actually looking more fundamentally at a minimum data, but also process and also business models.
So with all those considerations, what is the role of finance in the bigger business transformation for an organization?
I think are some of our foundational skills, even around understanding value management, understanding cost management, these, these core skills actually come to the forefront. And it's really important that we help our business colleagues let's say frame the decision appropriately and evaluate it appropriately. I think it's kind of easy, especially if you're thinking about digital transformation, just simply from that digitization or even digitalization perspective, the kind of first and second steps that are referred to that, you only think about the first order cost effects of this. And I often have found myself in conversations where it's challenged by, well, Excel is free, so why would I possibly spend more money to do something? And of course, when it's framed that way, it is hard to actually talk your way out of that argument. But when you actually step back and say, actually what we're after here is a fundamentally different way of doing business. You start to realize that the cost side of the equation is actually only a very small part of it. The value side of it actually is an enormous part of it, and you have to actually be thinking about things like at a minimum total cost of ownership, of an overall suite of technology, thatpeople productivity in terms of, you know, if you've got the hidden factory of work that is caused by late nights and shuffling between spreadsheets, that ultimately takes a direct toll on people, but also direct toll on your cost, employee engagement, the value of improved decision making these become actually important parts of the frame on this to actually make sure you're making a good long term and sustainable decision for your organization.
Well, that's just it right there. You know, you just said sustainability. Once you have this fundamental difference in the way you look at your business and you've gone through this transformation, you know, what is the impact on your forecasting and your strategic business planning going forward?
Yeah. So I think maybe to take, take forecasting as a first part, and then I'll talk maybe wider around. business transformation. On the forecasting front, I think there, there's a recognition that, of course there's no crystal ball that'll tell you a precise answer about the future, and unfortunately, when many of us are trained to try to get as precise of an answer as possible about the past, and there probably are facts that we can ultimately uncover if we just dig deeper and deeper and deeper. Applying that mindset to a forward looking forecast, actually I think undermines the general quality of it, and, you know, there's a, there's an adage around, you're better to be approximately right than precisely wrong. And I think that is a, that is a transition that those of us who've been on this kind of a journey in accounting and finance have to ultimately make as recognizing, letting go of some of that precision might be the key to finding that approximately right view of the future. And I think one of the things that digital transformation enables related to that is, is the way I'd almost describe it as it's so much effort to just find one number. So if that's one business plan CFO number at the end of the day. When our company, at least the process of getting to that can take months, if not an entire year to just get the one number., Whereas, you know, digital transformation potentially you to find three or four approximately right numbers across a range and across a set of scenarios that in sensitivities that allows you to actually recognize, okay, the outcome could be this, this or this,this and if I want to use a number four, for example, performance management and target setting, I may choose one, which is a bit more aggressive in the range to be able to drive performance. And at the same time, if I'm going to use a number to try to take the best guess of what I think is going to happen, I'm going to take something that's probably in the middle of the range. And if actually I'm going to give a commitment to the external market, something that the market is going to hold me against to see whether I deliver, I may actually take a more conservative number in the range. And I think digital transformation allows us to with the same amount of effort, or even less be able to generate three or four numbers in the time that it actually take us to generate one. In terms of wider business transformation, you know, one of the phrases I've kind of find myself referring back to is this idea of putting the business back in business planning. And one of the things I think that's happened with having this process, which is so arduous, and so difficult is that basically it ends up being a finance and an IT process mainly because finance kind of knows that knows the numbers and knows the details. IT knows how to use the technology and the systems that are very complex and difficult. And it leaves very little room actually for the business itself, ultimately should be the end owner of the numbers and the forecast to be able to spend a lot of time just soaking and thinking and reflecting on it. You know, if 99% of your process is just getting to that one number, you leave 1% for the business to actually sit and reflect upon it. You got to guess that's not leading to great business outcomes. So I think part of this transformation will be changing the portion of time between call it the IT and the finance part of it, actually allowing much more of the process to be driven and owned by our business counterparts as well.
So there are certainly a number of considerations and, you know, you've mentioned quite a few different benefits, great value to be realized through this process, but I'm sure it's not just a matter of saying, okay, we're going to do this right. So, can you name a few, maybe some of the common challenges that you have come across or are aware of and, you know, things for our listeners to consider as far as, potential pitfalls as they look for this transformation?
Indeed, quite a bit, and I would actually say a good sign of that you're going about this in the right way, is that you're hopefully coming across pitfalls quite frequently. And what I mean by that, it's a little bit, this fail fast adage, but you know, traditionally our approach around technology implementation has followed a very waterfall like project management approach, which is, you know, you spend quite a bit of time defining requirements and then in a sequence set of steps, perhaps lasting over a course of years, you hand off from one team to the next, until an end product is produced that the original customer may still not even be around, gets the output. And it's a comparison against those original requirements from years before. And it hasn't been a lot of customer involvement on the way, and so I think, so one of the outages would be if you're finding pitfalls, it means you're probably failing fast enough to actually go about this in the right way. So a couple of those things that we learned as we kind of shifted from a waterfall mindset to an agile mindset around project management of digital projects. One is that is, your ecosystem in and around the project has to also be agile or it actually can undermine the overall agile effort. And what I'm meaning by that is if, for example, you have a scrum team who’s come together, they're meeting daily, they're, we have a product owner, they're finding requirements, they're testing things with their customer on and on and on, but things like either IT security, especially if you're moving into the cloud or contracting and procurement in terms of making a contract with the IT service provider, a SAS provider that you want, if they are not thinking agile, you can still have a very, very long process and series of steps there that actually slows down the overall effort of the project and makes the whole thing effectively not be agile. I think the second one in that is time. One of the learnings there is, you know, taking again, this waterfall, agile comparison is like to think of an agile project is takes one third of the time of a waterfall project, but fit, into, half of the effort or half of the effort fitting into that one third of the time. So when I'm going out there is the intensity of the effort actually is higher. It just happens to calendar day, days wise, last a lot less. And so, if you're used to the idea of, I'm just going to define my requirements hand ut off to it and the consultants in two years come back and I don't have to do a lot between now and then, you're not going to have a great project. You have to recognize that as the stakeholder of the project, you actually have to invest more time than you did before you just get the benefit of getting the output a lot faster. With that, of course, as a commitment around resources. So the first agile project I did, I said, okay, I've got somebody on my team. I'm going to dedicate them half of their time they're going to focus on this project. And very quickly I realized actually half was not enough. I needed to actually put three people into the project and most of them full time, and we did get the output and a third of the time, but it took investing two to three times the, the resources to do it. Maybe two others I'll just leave you with. I think another one is that, you know, not everyone has your interest at heart ,and of course there's internal politics that may have that and the case. And you can run into that. And I'm thinking a little more externally in this case. So obviously a technology provider or salesperson has in their own interest, the idea of selling their product. Now, some companies are better at partnering with you to really try to understand what your needs are and really try to solve your problem as opposed to just selling you something that doesn't work. But there is that risk. The one that surprised me a little bit was the kind of consulting ecosystem in and around these projects that, you know, these companies make money a certain, in some cases it's been by implementing certain technologies and working with certain technology providers and they know that they make more money off of that than other technologies that may not be familiar with. And that you can run into a little bit of a fiduciary issue, I think around that. And you have to recognize that you can't just rely even on third party advisors who in theory are supposed to be agnostic, to be truly agnostic and have your interest at heart. And so, you know, being a bit open-minded to the fact that you're going to have to do your own research and advocate for yourself, and can't just trust every little bit of advice that you get from folks, because again, there may be driven by different interests. And then the last piece I think, is a debate around what it really means to move to a market standard or off the shelf technology. And being in the energy industry, you know, we like probably many industries, we love to think of ourselves as different than other industries. And therefore, sometimes when we think about what's the standard technology to choose off the shelf, we already narrowed the frame on it by looking at technologies that are available to our competitors and they're using. So if it's, you know, what another major oil and gas company would be using, we would say, aha, that must be the market standard. Well, the reality is things like planning and forecasting are quite industry agnostic. And so I think a better way to frame that question is to say, you know, given the 80% of our process is industry agnostic, what is the multi-industry market standard? So I'd rather look at things that 40 or 50 industries are using, because the other reality is even in a company like ours is an integrated energy company. We have multiple industries represented in our own company, and we've sometimes found ourselves by choosing just oil and gas market standard technologies that are not even usable and other parts of our own company. And so I think reframing that is one of the learnings that we have on the journey as well.
Your experiences are really interesting and the examples you've been able to share have been great. So, I mean, it's, it's obvious you have a great leadership in moving these transformations, and you know, leadership is certainly an area of interest of mine. So when it comes to you know, pointing out a leader if you're looking to identify somebody who would be good at leading a business transformation, who does that look like to you and what kind of skills or attributes do you think a one individual needs if they want to bring this to their organization?
Thank you. Thank you for the question. I think, for me it first and foremost starts with a learning mindset and there's a lot of discussion around this new kind of idea between fixed and learning mindsets that even underpins our current discussion, our company around safety performance, and you've got to switch to a world where you recognize you don't know everything and that's okay. And you gotta be willing to admit mistakes and learn from them and go on and recognize that, when someone else knows something, that's an opportunity to learn from them, not something that is competition. And so I think it starts there. And, you know, if I even think about my own journey on this, you know, two, three years ago, I honestly did not know all that much about digital transformation. It was a bit of a joke in my family, which was, you know, when you come to the dinner table, I was the least competent from a technology perspective. You know, I had a brother who worked in IT, a dad who worked in IT and so I was a bit of the black sheep when it came to technology and adoption. And so, you know, some of this is the humility of recognizing you don't know it, but then a curiosity and going after and learning as that's probably the second piece. I think the third one then would be persistence. you know, this is not an easy thing to advocate for, again, back to this idea of first order effects on cost versus second and third order effects. You know, when you're, especially in an economic environment like this advocating for spending money on something, especially from the lens of finance, that's a difficult sale and especially where most of the value is in things it's a little bit harder to measure, everything from, again, the user experience and employee engagement through to total cost to ownership. You know, these aren't as easy to measure as just looking up the contract price of a piece of software. And so, you know, kind of staying with the struggle and going after it and persisting and staying on message, sometimes in the case for a year or so. I kind of find this as an exponential journey, not a linear one. And so, the payoff has been massive, but it only came in the last 10% of the timeline, not in the first 90%. And then I think two other things that come to mind is, having a strategic view. And what I mean by that is, again, back to this idea, if I'm just trying to solve a problem for my immediate business line, I'm not necessarily solving it in a way that will help my overall company. and again, if I'm only looking at my industry and not looking at other industries, I'm potentially, you know, sub-optimizing on an industry specific solution versus a bigger one. And so I think having that bigger picture in mind, the other part of bigger picture in mind could even be cross-functional. Because I tend to believe that most of the value in companies is actually lost between interfaces, whether it's interfaces between departments or interfaces between businesses. I've seen it a lot in the space between functions and in the flip side of it is I think back all by proudest achievements, and you know, since I've been working in my company for almost 15 years now, they've almost all come when I partnered with another function. So whether that's what HR or it or legal, or, or many other functions that that combination of functions and the different perspectives can be very valuable. And so, that also is part of the strategic view of recognizing this is a cross functional thing to go after. And then maybe the last one is, you know, putting your skin in the game. And so that ultimately comes down to this willingness to commit resources and time. And so if I'm not willing to have my team reprioritize what it's working on and go from half a person to those three people working on a project to make sure the right knowledge was in the project to get it delivered on time, that I'm not drinking my own Kool-Aid right.
So I'm actually going to take a step back, to the beginning of the conversation you even said, you know, nobody has a crystal ball, nobody can really predict the future, but you've seen your organization change. You realized you yourself needed to change and all that goes back to learning. So with this ongoing,need to learn and the new skills that are needed in today's business environment, what do you think individuals or organizations, you know, what should they be working on to best prepare themselves for the future here?
I think, you know, one of the things that will prepare us best for the future, and I know I have said it a few times, but probably good to continue to emphasize it is, you know, we have to pivot as individuals from being the knowers and the people with the answers to the people with the best questions. And that for me, again, is underpinned by this idea of a learner mindset. You know, the reality is whatever skills are going to be needed to navigate us through the future. We probably don't have all of them right now and may not have any of them in some, in some cases. And I think just what we've all experienced in the last six months should show us that. You know, maybe, just an interesting anecdote, I'll share as well. Cause I think the second one we need to do is we clearly need to have a more diverse and more inclusive function as finance. And I think it doesn't even just take the external events that have been occurring with George Floyd and others too, to acknowledge that. But I even reflect on something very close to home. Which is just strictly about our capability as finance and around risk management. I attended a finance conference back in October and, and in that I attended a workshop that was on scenario planning and risk management. And there were 140 people in the audience representing perhaps 30 to 40 different industries. And so as part of the talk, the speaker had us list the top five risks that our business we thought was going to encounter in the coming years. And so if you take an audience of 140 and multiply that times, the five risks you come up with 700 potential risks that could be identified again across 30 or 40 industries. And what was fascinating was, you know, this was an October and out of 700 potential risks identified cutting across these industries. There was not a single person who identified a pandemic as one of the primary risks that their business was going to be exposed to. And one of my reflections and the linkage to diversity and inclusiveness and the ability to forecast as a function and why we need to change is, you know, there were clearly people on this planet at that time who knew that a pandemic was a significant risk that we needed to be thinking and planning for. And so what is it about our function that, you know, in that cross section of 140 people, we did not manage to have anyone who was thinking in that way. And if there's anything that kind of sells the point me on the value of diversity, it's this ability to recognize risk and understand from different life experiences and perspectives and education and training and all these things that there are many different outcomes that the world could be experiencing and things that we're exposed to and being able to then link it to inclusion, which has maybe there are people who do see it, but they don't feel like they can speak up about it. You know, creating an environment where they can is going to be a really important part of our function as we go forward.
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