Brian Kenny: AI. Artificial intelligence. It's the plot line for generations of sci-fi thrillers and blockbuster movies, replete with jaw-dropping special effects and visions of dystopian futures, where things rarely end well for the humans. Then along came the movie, Her, in 2013, a sci-fi romantic comedy, where the lead character falls in love with Samantha, a hyper-intelligent computer operating system with accelerated learning capabilities, personified in a Siri-like female voice. Romance blossoms. Our love of gadgets taken to absurd new heights.
Of course, in reality, our day-to-day encounters with artificial intelligence are far more mundane. In fact, they may even go unnoticed. But many believe that AI holds the promise to improve our lives in ways large and small. Icons of tech and science communities, including Bill Gates, Stephen Hawking, and Elon Musk warn that with that promise comes peril. Seize the promise; avoid the peril: therein lies the challenge for business leaders.
Today we'll hear from Professor William Kerr about his case study entitled Vodafone: Managing Advanced Technologies and Artificial Intelligence. I'm your host, Brian Kenny, and you're listening to Cold Call.
Bill Kerr's research centers on how companies and economies explore new opportunities and generate growth. His forthcoming book, The Gift of Global Talent: How Migration Shapes Business, Economy, and Society, explores the global race for talent, and how countries and businesses compete for high-skilled immigrants. He's also the co-director of Harvard Business School's Managing the Future of Work project, which explores the unprecedented set of challenges and opportunities presented to business leaders today, including aging workforces, growing skills gaps, shifting labor markets, and, of course, rapid technological change, which is exactly what we're going to talk about today. Bill, thanks for joining me.
Bill Kerr: Thank you for having me.
Kenny: Consumers don't realize all the ways that artificial intelligence is already impacting their lives. This case really brought it home for me as I learned about what Vodafone was doing. Maybe you could start just by setting up the case for us. Who's the protagonist? What's on his mind?
Kerr: The case is set in January 2018. It is a gray day in London. The central protagonist is Vittorio Colao, the CEO of Vodafone, but I think of the case more as a conversation with Colao and members of his top management team about advanced technology, and artificial intelligence, and where they are.
Unlike your introduction and the romance that may come with AI, their questions were much more mundane. "Are we going at the right speed? Have we figured out the right strategy for the future? Where is all this taking us, and are we prepared?"
Unlike a number of cases where there is that famous trigger event--the person that walks in the room, or the call from the customer--there's no trigger event in this case. It's really in the midst of this rapid change, as you described, their assessment of, "Are we on the right pace, the right track? And what do we need to do for the future?"
Kenny: They're sort of a proxy of how many other organizations are starting to think about this. I mentioned that you're the co-leader of the Managing the Future of Work project here. I would imagine your motivation for writing this case ties back to that project?
Kerr: Absolutely. Managing the Future of Work has been a project we set up over the last two years at the School to both think about technology and demographic trends, and how they are reshaping the workplace. We see a lot of conversation about the future of work--we all get the emails that come in about the scary or the very promising futures of work that we may hold. What we're trying to do is have a place that deliberately inserts the word "managing" in front of it, so managing the future of work. How are leading companies and leading policymakers thinking about how to shape this future, and the role of their company in that?
So, this case came to us through the HBS European Research Center. We were looking for cases about leading companies, and how they're approaching the technological future. Vodafone came up as an opportunity. We had a one-hour conversation with Vittorio on the phone in the fall of last year, and what came spilling out in that conversation was, in many respects, just the big prelude to the case.Kenny: It sounds like they really opened up too, because the case has a lot of detail in it. So, why don't we dig into it a little bit. There were some things that you, right up front, talk about that were occupying Vittorio's mind. Can you walk through those?
Kerr: Sure. The case throughout has at the core three levels of conversation or thought going on. One of these is just very operational. Like, when we install a chatbot, what is the impact that it's having on our business? How many employees does this sort of replace?
Kenny: What's a chatbot? Just so our listeners know.
Kerr: This would be a customer service request. You come online [and] rather than speaking directly to an employee, you're talking to, first, a machine that's trying to handle some of your questions. And then, if it gets frustrating, we hand you over to a customer service agent. And as we'll describe later on, they have internal operations that they're doing with things like this. So, one level is just very operational. From the HR department over to customer service, to network ops, what are the things we are doing, and how can we make sure that we’re getting the most out of these opportunities?
The next level up is at a leadership-management level. It’s Vittorio and his team thinking about how the way they used to manage this company is different than what's required today. In the past, marketing was a function that was largely driven off of instinct, or people's accumulated experience over time. Now, data plays a much more central role. They have to think about how they change the functions and the operations, and how they adapt to this environment.
The highest level goes back to your introduction about dystopian concerns and similar, which is, "Where is all of this going?" and, "What's going to be the impact for society?" If you're a company of Vodafone's size, you're clearly thinking about the broader societal implications, and how you need to be playing an important and active role in shaping that future.
Kenny: How big is Vodafone? They're a European-based company. Where do they sit in the landscape of the telecom space?
Kerr: Vodafone is headquartered in London. They have operations in about 30 countries. It's a little bit less than that, but the exact number, I think, is hard sometimes for me to perfectly pin down. Somewhere between 25 and 30 countries. They have over 100,000 employees across these organizations. They are one of the top five, in terms of size, mobile providers in the world. Many people that listen to this podcast will be a Vodafone customer because there's about 500 million of them in the world. And like all telecom operators, they're not just in the mobile space, but they're moving into converged applications for consumers, internet of things, enterprise operations, and similar.
One of the distinguishing things that quickly bubbles up in the case about Vodafone's operations is that each of these countries has autonomy for the things they're doing. [This is] one of the starting points for Vittorio's management style. He said, "I ban the word 'global' inside Vodafone. Instead ... we are an international company, but we respect how each country has a unique heritage, unique regulations. Don’t think of this as … providing the same service in 28 different countries but instead, ‘We are providing the localized service as appropriate.'"
Kenny: There are some great statistics in the case about the global telecom market, just the appetite for data these days, and the way that the industry has changed. And Vodafone is trying to stay on the leading edge of that.
Kerr: And it's a hard leading-edge to stay on. I actually began my career in the 1990s in the telecom space. Back then, there was often a monopoly or duopoly. Things moved rather slowly. There was some technological change, but it wasn't something that really would necessarily keep a CEO up late at night. Fast forward over the last couple of decades, and there's very rapid technological shifts. You have lots of deregulation, and the market has allowed for more competition. You have people coming in from the side, like a Skype or even a FaceTime. It's a space that you have to be able to move very quickly in order to be a part of it.
Kenny: What are some of the key areas that are affecting the digital transformation…?
Kerr: If you think about this broader digital transformation, there's a bunch of different ways one can slice this. You can think of it in terms of data analysis, moving into automation, or robotic process automation, RPA, the kind of chatbots and things that we talked about before, or go out to that exotic of artificial intelligence.
Another way you can think about the transformation companies have to go through is they, at some level, are thinking about, "How does this affect my just day-to-day operations?" But also, "What new risks am I exposed to?" or, "Who could come in, and just disrupt me from the outside in a digital format?"
Throughout the case you hear this conversation at a number of points, where Vittorio, even though he has 100,000 employees, at one point says, "Gosh. I stay up late at night sometimes, worrying about, 'Could a 100-person startup company with the right software, running it over my lines, and my sort of infrastructure, just displace the things that I'm doing?'"
So, at times, when you think about digital transformation, it's hard to pin down exactly where in this landscape you're talking about. You need to make sure you're covering all of it, and you're being clear what you're pulling up for analysis at a point in time…
Kenny: So, that gets right to the topic that you talk about in the case, how they manage innovation. They've got some pretty interesting ways that they go about managing innovation across this enormous organization.
Kerr: Let me set the case with a little bit of context. Clearly, if you're a telecom provider of Vodafone's size, you have a technology roadmap for a five-year horizon that's going to include a thousand different things, everything from, "What's the next generation of cell phone towers?" over to the types of things that we're talking about, which is how they put some of these new automated and advanced technologies into the organization. But much of the conversation sits around the tools they utilize, especially with their multi-country setting. How can they use themselves as a vehicle for challenging themselves, getting in front of stuff?
One example is that they have a strategy they call crawl-walk-run, where they [start] in one country with a new technology, trying to learn about it. Then, they move to a limited deployment across three or four. And then, they try to take it out to the 25, 28 countries globally. It's a step-by-step process, where they're understanding before they try to take it large-scale.
Likewise, at many points, you see them testing things on themselves. They began their bot development process first with their internal IT help desk. So, a way for them to learn about what's going to frustrate the heck out of people, and "how can we do it on ourselves before we actually put this in front of live customers, and counter them?"
“Amelia” was the internal IT help desk bot that began this process as a way for them to try to handle as many internal requests as they could. Vodafone, like many large multicountry settings, has a shared services division that would be answering a lot of these requests. TOBi is the one that came out that's more of their customer-facing operation. This is when you go online, pull up the, "I need help on this." You start talking with somebody. It's going [to be with] TOBi, and it's not going to be a customer service agent at the front. As of January 2018, about 70 percent of all customer requests were being handled by TOBi.
Kenny: TOBi is not a person on the other end who's responding…
Kerr: TOBi is not. That was an important question that they had to think through: Do we want it to be obvious to the customer that you're talking to a computer, or do we want it to be kind of a little fuzzy, or a little vague? Companies have taken different routes here. In this case it's very clear that TOBi is a computer you're talking with. As they get a sense that you are frustrated, it kicks you over…
Kenny: If people swear at TOBi, you know it's time to move 'em along.
Kerr: Exactly. And throughout, they keep a constant stream of the conversation and what has happened both for continuity at the handover, but also because that's how they learn. It's how they can train TOBi to do better next time with this type of request.
The heart of it is you have to train these programs. It's not that there is a single list of actions. In some settings you're interacting with customers, there's a whole range of things…
Kenny: And sentiment, all those other things.
Kerr: Right, exactly. So, when you go to the question of, "How do I attract young digital talent when I'm automating?" This is something that young digital talent are looking for. They want to have the ability to work with very advanced technologies, and just because you're automating something doesn't mean there's not an important role for a person to play in this process.
In fact, we often think that you have to move your game to a higher level. So, you used to be crunching some data. Now, it's likely that the machine's going to crunch that data better than you. You're going to have to understand which data you should be putting into the machine and understand the overall risk patterns that that data is producing. Those are tasks that young digital people are going to find exciting and want to be a part of.
Now, [Vodafone] has to make sure that they can compete against the Apples and the Googles of the world for talent … This is the age-old question for companies all around the world bringing in digital talent: How do you do that effectively? Of course, a lot of that is the workplace environment, making it an exciting place to operate, power and autonomy that people feel in their work, being able to see the impact on the results of the products they're creating. A lot of these things are common to many companies as they compete for this workforce.
Kenny: You mentioned early on the three levels, and we've talked about the first two as they thought about moving down this path. How have they thought about that third level of society and the implications for what they're doing?
Kerr: I believe that they were remarkably open and helpful in this case-development process to describe it. They did not shy away from talking, at times, about the economics of some of the stuff they're doing. They're very clear that with a number of the bots they roll out, it usually takes the place of three employees, and they can provide the cost structure of say, 6,000 Euros a year to run the bot effectively. And there is some question about, "What if it's not three jobs anymore? What if it's 3,000 jobs?"
But they then packaged this up, and, "What are the many things we need to consider? First off, we have to move extremely fast, and be competitive in this market because what matters in the end for customers are prices. And this is a way for us to be ever more productive with our workforce, and the overall size of Vodafone may grow to the degree that we can do this." So, to date, even though there's places where they have shed some employment around some of these advanced technologies, the company hasn't shrunk in its overall size; its employment base has grown.
But then, you come to some of the more difficult questions of, "Well, we look out, and that's going to have some important implications for our operations in various countries. Even if Vodafone’s employment as a whole is increasing, it could be that we're reducing employment in some markets, or in some operations. And that could have an important local effect, destabilized local effect." They want to make sure they're thoughtful and respectful as they roll out these types of improvements and technologies, that they don't disrupt the landscape in the countries that they operate.
At some level that is just being a good citizen. It's also ... when you are a company of Vodafone's size, you're directly interacting with the president of most countries that they are working in. And there's going to be expectations about, you know, "What are you doing around these operations?" or, "What's going to be the road map of the future for Vodafone in this place?" That's a conversation that they need to manage.
Kenny: It reminds me a little bit of the change that we had to go through when assembly lines became a very common thing, and automation happening in assembly lines that was changing the nature of jobs that people had, but the industry adjusts over time.
Kerr: Yes. And much of the case is about how the leadership team is trying to educate themselves, and also the workforce, to make these adjustments happen. And then in places where they know that it's going to be different, how should they prepare for that opportunity, an example of where they know it's going to be different?
Kenny: So, you've had the opportunity to discuss this in the MBA class. How do they respond? The emerging leaders of the future?
Kerr: For them the case really resonates, in part, because this is what a lot of them are going to face. Organizations like Vodafone have built up [with] 40, 50 years of history. Legacy systems. Customer bases, and their expectations, and so forth. You can't just jump to whatever the latest technology is overnight. You have to build the workforce that can handle that. You have to manage your existing IT spend in order to get there. You have to manage capital markets. They need to understand and walk through, "How does this process unfold?" and, "If you're put in a leadership position like Vittorio what's the step that you need to go through to make this happen?"
Kenny: Great insights, and great things for our students to be thinking about, and managers everywhere. Bill, thanks so much for joining us today.
Kerr: Thank you.
Kenny: If you enjoyed this episode of Cold Call, you should check out our other podcasts. After Hours features Harvard Business School faculty dishing on the latest happenings at the crossroads of business and culture. Managing the Future of Work features experts discussing how to survive and thrive in the age of artificial intelligence and learning machines. Subscribe to these and others on Apple podcasts or wherever you listen. I'm your host Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School.