Welcome back to The Digital Workplace podcast. Today I’m super excited. We have Ray Wang on the show, and it’s just going to be a fascinating conversation. Ray is the CEO of Silicon Valley based Constellation Research. He cohosts DisrupTV, which is a fantastic show that I enjoy watching a lot, talking about tech and leadership, averages about 50,000 views per episode. Blogs at raywang.org. He’s got a groundbreaking best selling book on digital transformation called “Disrupting Digital Business” that was published by Harvard Business Review in 2015. Also today, we’re actually talking about his new book coming out called “Everybody Wants to Rule the World” released in July of 2021. Wang is well quoted and frequently interviewed in media outlets, like the Wall Street Journal, Fox Business, CNBC, Yahoo Finance, Cheddar, Bloomberg, and of course, The Digital Workplace podcast. Ray, welcome to the show.

Hey, thanks a lot for having me.

Yeah, no, this is fun. You are somebody that we have followed for a long time. We love the research that you put out at Constellation. We love the discussions you’re having there. So it’s just great to have you as a part of this show.

Oh, wow, hey, thanks for having me. I’m looking really forward to getting into this.

But you’re such a good researcher, such a good thought leader in this. So we want to make sure you’re a real human first before we get too far in this. Your CAPTCHA question to prove your humanity is this. What is the coolest thing you could pull out of a crackerjack box today?

You remember those really small comic books? I loved those the best. You never know what you were going to get. But yeah, those were the ones, or the baseball cards.

Whose baseball card would you pull out like, oh, my gosh, I didn’t realize, like somebody from history?

I didn’t care. But I did pull. I didn’t care. But I actually picked one for Reggie Jackson once.

My kids, I have kids in elementary school and their PE teacher, he had all these old baseball cards and just passing them out just for fun. Most of them just worthless things that were there. But then one day, my son came home with like a Randy Johnson card. It was like, whoa, wait a second. Oh, this is cool. And then of course, we have to go on YouTube and find the video of him slamming that dove that he threw the fastball. Very cool. All right, you’re a proven human. So it’s good.

Now it’s just QR codes, so it’s not the same.

Let’s jump into it. Tell us a little bit about, I want to jump into your book, because I think it gives us the best feel of where we’re going in the future. A lot of times we’re talking with CEOs, with leaders, who are leading companies, maybe smaller from 25 to 250, 300 employees. And we don’t get a picture of the big broad market that you have, as you’re looking to things. So tell us a little bit about how this book came into existence and what was the motivation behind it?

Yeah, so a lot of where the book came from, as we started talking about digital transformation in 2010 and really early. Then the earlier book, “Disrupting Digital Business” came out in 2015. And we had captured a whole bunch of concepts around digital transformation, helping people understand these new business models, helping them understand what you needed to understand the workplace that’s in those business models. And we were like, okay, this is great, right? This trend’s taking off, late 2015, 2016, people started looking into it. By 2020, everybody was doing it. About 15 months ago, nobody knew what it was. Now everybody’s in the middle of it.

But there was something unusual. And we realized that even if you did digital transformation, why were you failing. Digital transformation just seemed to be something that you had to do in order just to keep up. And we discovered that there are a set of organizations that were what we call digital giants that had figured out how to build new business models beyond where digital transformation was headed. And they were winning. And it’s not just like, they were winning like 10x. They were winning like 100x. In fact, they were taking markets, and they were taking markets in places where you typically wouldn’t expect them to be in. And I’ll give you an example. You think about the digital ad business, and you’re like, okay, that would be like publications and Google and Facebook and things like that. And you’re like, okay, that’s interesting. Google is dominant in the search business. Facebook is dominant in the social media business. And the next closest competitor is like Microsoft with digital ads and LinkedIn. You’re like, okay, that’s not bad. They do a billion in ads. Google does 140 billion in ads. Facebook does 70 billion in ads.

But out of nowhere, in the last four or five years, you’ve seen Amazon jump into ads. Now they’re the dominant player in commerce. And suddenly, they became the third player, 14.1 billion in ads and growing. And so you’d say digital ads, you’d say originally, you’d say, hey, look, there’s no competition. In search, Google won the whole business. Who cares? There’s no competition. Facebook, we’re not going to compete. But it turns out that the business model and the monetization models are actually very different. And people with different business models are suddenly competing for the same monetization model. So you got commerce, social networks, and search all competing for the same thing. That completely blows out every single business model. Like, oh, Google’s a monopoly. Well, yes, and no. They’re fighting tooth and nail for ad business from Facebook, and getting slammed from Amazon on the other end. Now, I’d say, oh, wow, that’s actually not something you’d expect. And we see this in 50 markets. We expect 100 companies left in 50 markets by 2050.

So put that in context for us. Because I saw that stat and it was shocking to me, but I didn’t know how shocked I should be. If you look at those 50 markets, maybe 10 years ago, 20 years ago, how many players would we be talking about?

You’re talking about thousands. You’re talking about thousands.

You’re talking about thousands down to 100 dominant players?

Yes. Because they’re collapsing industries along data value chains. They’re changing the way they hire. They’re changing the way they put products out in the market. They’re changing the business models of those products. And in fact, in some cases, they’re doing a few things that you would expect them to do in digital, but not expect them to do in terms of their overall business model strategy. For example, let’s take one of my favorite examples is Domino’s Pizza. When we talk about digital transformation, you’re like, those guys rocked it. I mean, they’ve done a great job. You can order on Alexa. You can order on any device. I mean, they were first every technology. I think that the other day, they talked about robot delivery that they’re going to actually start launching. These guys are up there in tech. And you got to say they’ve done a great job. You order pizza. You know where it is. They give us tracking. We have it in the counter. It’s in the oven. It’s 10 minutes away from your house. It’s five minutes away from house. You can even take a picture of the pizza and send it to the AI bot and it’ll tell you the quality of the picture. So Domino’s, by all accounts, did a really good job. If you think about, since 2010 through 2019, they were probably the top performing stock in the market. So they’ve done a great job. But here’s the problem. How often do you order from Domino’s now?

Yeah, I mean, at most, any pizza would be like once in two weeks, maybe.

Once in two weeks for pizza, and maybe once in a month or once in a quarter with Domino’s. Now, here’s the problem. How often do you order from Postmates or Uber Eats or DoorDash, any of the food delivery apps?

Yeah, again, I don’t do a lot. But I would imagine most people two, three times a week maybe.

I’m with you. I usually cook. But most people would order two to three times a week. So you got two to three times a week versus once maybe every month. They’re getting crushed. Now what did the food delivery app companies do? They got all the restaurants to employ them as the last mile delivery. And what happened? They basically now have all their customers’ data, all their customers’ preferences, and all their payment information. So they’ve disintermediate customer account control. You now go to the food delivery app instead of the restaurant. That’s very natural.

The second thing that occurs is they’re taking that data and they say, hey, you know what? I really like Thai food in this zone. And you see Thai food really popular, but you see Mexican popular somewhere else. You see Indian food more interesting over here. Chinese more interesting in this zip code. And boom. Suddenly, they’ve got better data than everyone else. In fact, they got so much data that they can say, maybe we should build a ghost kitchen here. Ghost kitchens, for those who don’t know what they are, basically, it’s like one big restaurant that has like maybe 10 to 20 different type of restaurant fronts. So it’s a kitchen that basically cooks for like 10 to 15 different types of restaurant genres. It’s really owned by the same person, but it looks like you’ve got 15 different restaurants in their menus. It’s basically a way to actually deliver food and deliver kitchen food much more quickly than others.

So now you’ve got the data, suddenly, you now have the entire network. So you went from like 1000 customers per restaurant to millions of customers that are on the app. And then more importantly, they’re taking that and they’re using that to figure out how to improve search, how to improve placement on the ads, how to create brand new services. So they got the monetization down. And then the last thing that is actually popping up is these folks can lose hundreds of millions. If Domino’s lost hundreds of millions, people would be really upset at them. The shareholders would be mad. Their stock would be down. They’d be in trouble. I mean, Domino’s did a great job. They went from like $3 to like $350 in stock price and you’re like, wow, that’s pretty impressive. Well, these digital giants basically can keep losing money and do really well and even IPO and in fact they can invest for the long term. That’s what makes these digital giants different.

It’s very exciting and extremely scary, too, to realize what’s going on. Where do you land on that, just personally as you look at all this, because you’re seeing, I think, with so much more clarity than most of us what’s going on. What’s your threat level right now as you look at everything?

Look, I’m an unabashed free market capitalist. I know it’s dangerous to say that. But I’m unabashed. I’m a free market capitalist. Capitalism is the greatest force for good and you can’t deny that. But you have to have free and fair markets for capitalism to work. And so when you look at anti trust, when you look at competition, when you look at where we are, if the benefits to the consumer do not outweigh the costs, then we have an issue. So right now we’re taking advantage of all the innovations. We’re taking advantage of all what’s going on. The cost structures are coming down. Prices are coming down. People have more access to things than they ever had before. So when that stops, yes, we now have a problem. It doesn’t mean you don’t put together rules and regulations for when that stops. But you don’t prematurely put together rules and regulations just because companies are getting bigger. The question is, what are the benefits to the consumer? And you’ve got to take a look into that. And right now, it’s actually pretty good. You can’t complain.

Let’s transition a little bit, because a lot of people listening in are thinking, okay, very interesting that they’re following news, they like these trends going on. But if they got a company that’s maybe smaller, again, we always fall into that trap of being like, that’s somebody else’s problem. That’s not going to really affect me down the road. So if we’re talking to a company that is in that growth stage, but they’re definitely not a digital giant, how do they navigate these waters? Should they just keep on with what’s going on? Or how much awareness and change in their strategy should they have?

For example, and the short answer is, this is very important if you’re a small business, because the really, really large players, where you think aren’t competing with you, are starting to build partnerships and aggregate, basically, ecosystems and channels that are competing with you. So if you see the battle that’s going on for small business between Amazon and Google, it’s happening right now. Google’s going after small businesses. They’re signing up small businesses to help them with search, help them with retail, help them compete against Amazon head on. And that’s why it’s important, right? You’re starting to have to pick ecosystems to compete in. You’re starting to have to think about, what types of business models are going to work, and which partners are going to be important to you. And so we’re starting to see what we call joint venture startups and coalitions of folks starting to compete against digital giants by aggregating their capabilities. So you’ll see more and more of that over time. Like the way when taxi companies were being disrupted by Uber and Lyft, they finally got together and banned and put together their own delivery app. Those independent taxi companies all got together to do that, because they were getting crushed. And so the earlier companies start to do that, you’ll start to see those advantages. Independent bookstores, for example, have been a place where they band together to actually get to some cost savings, and to be able to actually work together and share more information and data, and we’re going to see more of that.

So I’m hearing you say, if you’re leading these growing organizations today, you need to start looking at alliances that you can start to build to mitigate these threats and to be prepared for these things as they come through.

You definitely have to. When you think about the investment in talent, the investment in technology, these digital giants are doing it at a scale that you can’t possibly fathom. So most companies aren’t going to put 5% to 10% of their profits, or even the revenues in some cases towards innovation, technology and future investment. I mean, most companies are sitting in a 3% to 5% profit margin, and they’re like, oh, okay, we’re barely making it. What’s going on? So let’s just get bigger and get to scale. Okay, that’s one way to do it. Or the other places, maybe we band together and coinvest in these technologies, coinvest in the talent so that we can get to be successful.

Like you said, with the DoorDash, Postmates example, what if it was a local conglomerate of restaurants that had actually put that data together on their own, as opposed to somebody else from the outside coming in. That’s really interesting.

Well, in the US, you’re going to see something. The first food delivery app that built a ghost kitchen will have declared war on the restaurants. And when they do that, then one of the other food delivery apps will say we’re only representing the small businesses and then you have that little war going on. I mean, this happened in India. A company called Swiggy basically built those kitchens. And the ghost kitchens now are providing like 20, 30 different genres of food with separately branded and labeled. But they’ve got this whole network competing, and you’re seeing a little backlash occur, and the backlash will then actually create an opportunity for someone to say, well, we’re never going to do that to our restaurant partners.

Yeah, there’s always an opportunity for an angle. Let’s jump into how we can prepare for this new digital world that we’re entering into. We’re already a part of, so it’s more about how we catch up to where we are now. One of the terms you introduced is the idea of dynamic skills. So let’s talk about what kind of dynamic skills, both leaders and their teams, need to be building as they enter into this world.

It’s a great point. We are moving to hybrid and return to work environments. Where you work, how you work, when you work, why you work completely changed. And that’s one of the trends driving it. The second piece is digital transformation requires new types of skill sets. Building a new digital channel or figuring out data, trying to figure out new monetization models, that’s not something that’s taught in school, it’s not anything that’s even taught at work. But you’ve got to figure out data proficiency, machine learning, design thinking, new coding languages, and how you lead, how you communicate, how do you even attract, retain, and retrain the step events, talent that’s out there. And the third thing is massive automation is coming to the workplace. We’ve got a talent shortage, you see that in terms of some markets, especially heavy front office, service based types of industries, can’t find enough people. We’ve got massive regulatory issues coming in place. Labor costs are going up.

And so we’ve got to figure out what’s going on. We’ve got to figure out how to augment capabilities in concert with automation. And then, of course, at this point where you are competing for certain, probably about 40% of jobs, which are office work type of jobs, you’re competing for global competition on talent. And so that means that’s going to be a factor in terms of that recruiting, then, of course, faster cycles of rescaling and retraining are popping up everywhere. So we’ve got to figure out how to do that. And so this means that your organization in order to be agile and resilient, we’ve got to have a continuous learning type of mindset. That continuous learning means we’ve got to develop skills around technology expertise, data literacy. We’ve got to figure out problem solving and critical thinking of creativity and innovation. How do you get there? Multimedia communication becomes important. I mean, you’re doing this podcast, it’s in video, it’s going to be other areas.

Commercial awareness, how you think about business? How do you think about business models inside organizations? How do you drive revenue, build new products? Collaboration and teamwork is super important, especially when we are in decentralized work environments. And of course, dynamic leadership styles are going to pop into play. One type of leadership style isn’t good enough. Things are changing between what we call responsible and responsive leadership. And then, of course, the last piece is career management, you’ve got to prioritize decisions in your own career, as well as your employees careers, and thinking about what those career plans look like.

So as you say all this, I’m overwhelmed thinking about like, okay, what are all the skills that I need to build into people on my team, to other people I work with. I’m sure other people are feeling that same thing. And I think the first thought that a lot of us feel is like, I don’t know if the people that I have right now are ready for that, versus can I hire someone in like that or do I need to train the people that are here? And how can I, instead of, you can’t make somebody learn something and force them into that. So recognizing the importance of what you’re saying, of these new skills and seeing it ourselves about what’s going on, it’s that tension between how do you put that fire under somebody else to say like, yeah, we all need to learn this. If we don’t all pursue these new things and this continuous learning, it’s going to be tough for everybody. What’s been your experience with that?

Yeah, I think it starts with a continuous learning culture. You have to reward folks for thinking about, why it’s important to upskill themselves along the way. But I think it’s really important. I mean, we’ve got 10 steps that we tell people to think about. You want every organization, every employee in their organization to start with a life plan, like what’s important to you? Maybe you’re doing more work life balance. Maybe you’ve got three more years with your children before they go to school. Maybe you’re at a point in your career where you’re ready to go for it. But that life plan is important. And that conversation is really important with your spouse along with everyone else in the organization. Then what you really want to do is make sure employees make time for themselves, set aside 30 minutes or two hours a week for employees to go focus on what their career is going to look like, how they want to organize their life. And then of course, you want a spirit of folks where people are okay to ask why. Stay curious. Curiosity is so important. And then, of course, there’s right brain and left brain things. We spent a lot of time talking about tech and engineering and data. Well, we also need to talk about creativity, art, philosophy. I mean, ethnography is very important. Thinking about dynamics of how these all come together. Then, of course, leaders have to lead by example. I mean, you really do lead by example to get them there.

Let’s dive into the leadership point a little bit more, because there’s one point in your book that I really wanted to dive into a little bit more. A lot of times on this podcast, we bring people on talking about self management, talking about distributed decision making, which is, we feel like, a very human centered focus towards leadership, spreading it out, recognizing that everyone has something to contribute, but it is a slower mode of work, and a lot of times, if you’re going to be that digital giant, if you’re going to move fast, you’re going to move faster if you have just one person calling all the shots. And so you say in a lot of these big, large digital giants, the leadership model that works best in those tends to be that benevolent dictator, the one that says, I’m going to consider the humanity of everyone I’m working with, but I’m going to make the decision and make it fast. And we’re going to go there, and everyone’s going to go with me. So talk about that tension between this need that a lot of people are seeing for, hey, let’s spread out that decision making. We see what happens sometimes when you put all that power into one person’s hand, and what they can do with that, and some bad decisions they can make out of that, versus the need of the hour of this quick decisions and quick change that we’re seeing.

I’m going to say something that’s going to get me in a little trouble, but hey, that’s what podcasts are for. So, the benevolent dictatorship model is basically what call the cult. Startups are all cults. The reason I say they’re cults are because you really have to believe that these things are happening. And when I talk about the benevolent dictatorship model, what I’m really talking about is the fact that if you’re going to create a digital giant, you have to think like a cult, you have to act in very, very different ways. And there is no time for trying to get to consensus. You’re either on board or you’re not. And that’s how these organizations move that quickly.

Now, not everybody can do that successfully. This is why we have democracy. This is why we have different approaches. And in fact, we actually recommend something a little bit different. We recommend a benevolent dictatorship model if you’re doing joint ventures and consortiums and alliances and coalitions because it’s very hard and you see how hard it is for bodies, like the UN to get, and you make a decision or even what country you’re in, like your own legislative body can never make a decision. It’s a pain in the butt. That’s why companies have dictators, or what we call CEOs. No, I’m just kidding. They have leaders that have to make the tough decisions, and there’s a different level of engagement in each place. And so this is really why we came up with a dynamic leadership model, which really says core traits are the same, integrity, inspiration, inclusiveness, authentic, transparency, that’s what people want in leaders.

However, there are a couple things where you can balance between things like decision making. Is it decisive, like you make quick decisions? Or is it pensive, you take your time, and you think about what’s going on? Do you make decisions based on policy and actions? Are you a principle leader or are you adaptive and you say, hey, look, we got to figure this out on the fly? And so these things that balance, like decision making, demeanor, goals and objectives, policy and actions, motivational approach, for example, are you demanding or are you compassionate? Performance expectations, or execution style, some people are super focused in execution, other people are like, hey, this is an opportunity you can’t miss, we’ll take advantage of that. We’ll regear for opportunistic approach. This responsible versus responsive leadership is really important, because these 14 foundational attributes change the way you behave. And people can say, hey, that leader is not being consistent. But the reality is that leader’s being adaptive or dynamic. And so this is why dynamic leadership’s really important in a world of digital transformation.

Back to your point on benevolent dictatorships. However, if you’re trying to put together a coalition or an alliance of folks together, it’s got to be a benevolent dictatorship. There isn’t time to waste so you better lay out your plan, fully think through it, have people on board, have them understand that this is the direction you’re headed, and have them committed. Otherwise, you’re going to fall behind. You’re going to spend more time arguing about how you’re going to change out the curtains instead of actually figure out how to resell a house and get it out the door. That’s how people are looking at it.

So I’m hearing you’re an advocate for almost a situational leadership, like whatever the situation demands, leader needs to be able to adapt to that situation. Would you say that?

Actually, I would take it one level down and say, look, leaders are good at different attributes on that scale. And when you realize that time has changed, boards have to actually bring in the right leader that can do that. Not every leader can handle and be able to make those types of decisions and what you’re really looking for are people’s ability to transition to some of those areas. It’s not situational, right? It’s not situational in the sense that each decision is that way. It’s situational at the time and place for that organization.

Do you see an era in the future when you don’t just look for a leader, but someone’s almost prequalified themselves. This is the exact situation where I succeed in the best and where my natural gifting and my natural talents I’ve built up succeed here. When you have this situation, call me. And when we’ve hit this level, then I’ll find some other position. Do you think that’s a maturity that will reach or we should?

That’s already happening. I think boards recognize that. So you always see that, for example, when in these digital giants and startups. Not all startup founders end up being CEO as they go from the beginning of the company to pitching the idea to getting the first product out the door to getting the markets behind them to getting to technology or business model transition to recapitalizing the company or turning it around. Some CEOs are great at turnarounds. Some CEOs are great at starting company. Some CEOs are great actually 10xing or growing a company post IPO. And I think people are starting to realize that.

Yeah, and it’ll be great, I think, to even move away from just seeing leadership as this monolith thing as like, oh, you’re the person in charge, I think looking at authority is good to think about those ways. But saying, like, you’re not just leader, you’re a specific type of leader and being able to embrace that.

In the small business market, we see this all the time, family businesses, as you go from each dynasty or each set of each generation. It’s really how do you lay the grounds? Right now we’re in a very interesting transition point. We’ve got probably about, I want to say like 61% or 63% of small businesses are about to transition to the next generation. That’s going to be interesting. It’s going to be a massive technology adoption. There’s going to be different types of technology adoption. There’s going to be different ways of looking at where finance comes into play. People are going to have different leadership styles, of course, that are generational based. And that’s going to completely transform how small businesses operate.

Ray, I’m so excited about this conversation we’ve had. We’ve covered so much ground. There’s a lot of things to look at and everything to bring in. What would you like to close out with? What’s the thought that, especially these people who are leading these midsize growing organizations, if there’s one thing they need to focus on today, of all the things we’ve talked about or something else, what would you want to leave them with?

I’m going to leave you with the five points on what digital giants are doing so you understand what’s happening. One, they’re disintermeding your customer count control. Two, they’re competing for concept we call data supremacy. Three, they’re actually using that data to actually monetize in ways that you might not have thought of before. So taking your information for where do I put a new restaurant, or where do I put a new factory, or what do I do with search? Or how do I create advertising in places where you didn’t think you could actually even get ads for? And then, of course, what they’re doing is they’re able to build large networks. We think 1000 customers, or 10,000 customers are big. They think millions. That skill is important. They’re thinking really big. Now, that’s something that you can’t do on your own. So that’s why it’s so important to do partnerships to help you get there because they can lose hundreds of millions. You can’t. So this is where partnerships and alliances become very important.

Yeah, this is great. Because I think, again, like I said at the start, a lot of us don’t have the view that you do. And you’re not only in that position, but you’re super smart, you have a lot of frameworks to be able to bring it around and you got a lot of people around you that are helping you out, too. So let us know if people want to stay in touch with you, we’ll put all the links in the show notes, but where would you want to direct them?

The best places to check me out is at Constellation Research, which is constellationr.com. Personal blog is www.raywang.org. And more importantly, if you preorder the book right now, I think they’re giving the first three chapters to you earlier before the launch. We launch July 13.

Yeah, so definitely check out the book. I saw that the preview of it. It looks great, so much good information. And again, it’s important to be able to step out and into those worlds to really recognize what’s going on in the product place. And I think you’re very important leader in that world.

Yeah, and definitely reach out. I actually do respond to all my emails. I don’t know how. Yeah, I get about like 600, 700 emails a day. But I do respond to all of them or LinkedIn.

That’s amazing. Cool. Ray, thanks for being on the show. We look forward to checking in with you again soon just to hear what’s coming up next.

Thanks for having me. Really appreciate it.