Directors on digital

Over just a few short months, Australian businesses saw years’ worth of digital transformation. If digitalisation was gathering pace in the decade leading up to 2020, the global pandemic accelerated it dramatically, unlocking remarkable examples of innovation.

The question is now, how do directors maintain the momentum, build on the digital confidence gained and seize the huge opportunity that digital technology presents? In this episode, we explore the new leadership mindsets driving innovation and balancing performance and wellbeing during digital transformation.

Guest 1:  Dr Peter Fuda, leadership adviser, author and professor of management
Guest 2: John Mullen, chair of Telstra and Brambles
Guest 3: Steven Worrall, managing director Microsoft Australia

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Transcript

Alan Kohler: Hi, and welcome back to the Directors on Digital podcast – brought to you by Microsoft and Company Director magazine – where directors share their insights on how to unlock innovation and growth through digital transformation.

I’m your host, Alan Kohler, and in this episode I sit down with Steven Worrall, managing director Microsoft Australia; Dr Peter Fuda, leadership adviser, author and professor of management; and John Mullen, chair of Telstra and Brambles.

 

We speak about how expectations of leaders have changed with the dramatic adjustments over the past year or so.

 

It probably won’t surprise you, but the work-from-home trends sparked by the lockdowns have stuck. According to the ABS, 41 per cent of people say they’re working from home at least once a week, which is nearly double that since March 2020. And the latest Microsoft Work Trend Index says 73 per cent of workers want flexible remote work options to continue.

 

These remote working situations have raised many opportunities as well as potential issues, and left directors with some big issues to tackle.

 

Such as: how do you lead with empathy when not seeing your staff face to face? Is it possible to balance high performance and wellbeing in this new world of relentless digital transformation? And how do you manage the new dynamic between employees and boards to maintain momentum? 

 

That’s what we’ll answer for you in this episode.

 

We’ll kick off by taking a look at what an extraordinary year 2020 was and what sort of challenges were thrown up by the pandemic. Here’s Dr Peter Fuda.

 

Peter Fuda: Alan, I learned that anxious people became more anxious, controlling people became more controlling, and purposeful people became more purposeful.

 

Alan Kohler: What did you become?

 

Peter Fuda:  More purposeful, I hope. More focused on connection and contribution than fear and anxiety.


Alan Kohler: Steven, one of the things that’s occurred is the acceleration of digitisation across business. In fact, your boss, Satya Nadella – the CEO of Microsoft – says that not only has that occurred, it’s still going and it’s still accelerating. And I just wonder whether in your business you’ve had to refocus your team towards opportunity from defence.

 

Steven Worrall: There’s no question now there’s been this step change in adoption of all things digital, and we don’t see that stopping anytime soon. In fact, I think through the pandemic, what we noticed was the application of technology helped in so many ways to deal with the many challenges that were thrown at organisations in our community. From our point of view, of course, that meant we had a surge in demand. And perhaps the biggest issue we’ve had to manage is how do we meet that demand, because it really has been unprecedented, and then obviously skilling up our teams to ensure that we can continue to provide the support that’s so essential.


Alan Kohler: John, to what extent do you think company directors like yourself have a responsibility to fully inform themselves on the digital world? And how do you think they should do that?


John Mullen: On the positive side, I think most corporations were on a digital pathway already, but what has amazed me is the speed with which corporations have had to react. It’s like Steven was saying. In Telstra’s case, if you’d asked me how long it would have taken to get 15,000 people to work from home, I would have said a year or two, probably. It was actually done in 15 days. A positive out of it is, as society’s expectations get ever higher in the digital world, companies have got to move twice as fast now as they did before. The other side of it, though; things like cybersecurity have accelerated. The challenges of cybersecurity have accelerated with the same speed and it’s now a very serious threat to pretty well every organisation I’m involved in.

 

Alan Kohler: So, how does a director deal with that? I mean, at an individual level, to what extent do you have to inform yourself about what’s going on with cybersecurity and how best to deal with it, or do you just rely on management?

 

John Mullen: Well, it’s got to be a combination of both. You can’t ever have the depth of knowledge that management has. But you really have to understand the magnitude of the problem, the urgency of the problem, and satisfy yourself that management are really embracing it with all the expertise and resources needed to deal with it. The other way of addressing that is to ensure you’ve got diversity on a board, where you’ve got people who are naturally attuned to some of those different influences. You do need some gray hair as well. On the Telstra board, when I became chairman, we didn’t have anybody with deep industry knowledge, which was a real challenge. So you need some people on the board who really can go head to head with management on that and understand every detail. Similarly, we gave it a leap of faith and we appointed a millennial to our board. And why? Because our digital world is being shaped by that generation. 

 

Alan Kohler: I just wanted to bring Peter in. You deal with a lot of companies at the highest level – chairman and CEO. What’s your observation about how they’re dealing with digitisation and the acceleration of it in the past 12 months?

 

Peter Fuda: The bit that’s really fascinating to me is the human dimension of it  because, whatever the end goal of the transformation, it’s people who need to articulate it, accept it, implement it. And when people get to an acceptance of it, there’s a deep commitment. And then you find that action is actually the easy part. And then, of course, smart people figure out what they need to do pretty quickly after that.


Alan Kohler: John, you mentioned 15,000 people working from home and you said that you’ve kind of dealt with that, you’ve got it happening. But to what extent has that been a challenge for the culture of the organisation?

 

John Mullen: Firstly, the majority of employees out there didn’t have the option of working from home. If you’re driving a truck or you’re fixing a phone, your life has become higher risk, more challenging. The other fantastic benefit is that because of that acceleration, we’re embracing things that we always intended to do but never really had a sense of urgency about. For instance, previously a Telstra call centre worker was someone who worked in a 10,000-seat or 5000-seat huge call centre, usually overseas. Now the technology development, with the assistance of people like Microsoft and others, has led to: you can be a young mum living in a country town, and you have limited time because you’ve got young kids, but you can actually now log on as a Telstra call centre worker, do a few hours’ work from home in a country town and be a participating member of the workforce. That would never have been open to you before.

 

Alan Kohler: I imagine that presents opportunities and challenges.

 

John Mullen: Yes. The opportunity is that, all of a sudden, you’ve got a much bigger potential workforce. You’ve got motivated, committed people who didn’t want to have to come and live in the city or work in a call centre, but can live outside. The challenge is – I don’t want to be a broken record, but the whole cybersecurity thing becomes a lot more difficult. When employees are working in the workplace and you’ve got all your firewalls and protections, it’s a lot easier than when people are working from a laptop in their house out in the country. That’s one of the big problems.

 

Alan: We also explored the opportunities a hybrid workforce offers business, and found that balance and connection can actually be easier to achieve.

 

Steven Worrall: We’ve seen this across the world. In fact, we’ve just completed a survey of 30,000 employees from 31 countries in terms of what their experience has been like working through this period. One of the conclusions that we’ve drawn is that talent is now everywhere. And the idea that in future, as we think about our businesses, that we’ll need to hire in the cities – I think we’ve dispelled that notion. And technology is making it possible for us to connect with people wherever they may be, which I think opens up all sorts of opportunities with the appropriate protections in place. One of the other reflections out of our own usage of our platforms through this time, Alan – and, of course, the experience working with clients – is this idea of digital exhaustion. We’ve seen two-and-a-half times’ increase in the number of meetings that are being held. We’ve seen a 45 per cent increase in the number of Teams chats. We’ve seen productivity increase, in many cases, as a result. But we also know that there are some unintended consequences related to digital exhaustion and how organisations think about ensuring that what we set ourselves up for is sustainable in future.

 

Alan Kohler: What’s your view of working from home and how that’s changed things, Peter?

 

Peter Fuda: It tends to exacerbate the habits that you already have. So, for those who have both the privilege of choice, and have discipline, it can work extremely well. For those who are perhaps less disciplined, perhaps not as clear on the purpose of what they're doing, it obviously has all sorts of potentially negative consequences.

 

Alan Kohler: And have you seen your clients being required to prioritise leadership in general and also rethink the way they consider innovation and change and culture and so on?

 

Peter Fuda: One of the interesting things that’s happened as a consequence of COVID and remote work is that leaders have had to extend more trust to their workforce than ever before, simply because it’s much harder to control what people are doing every day. The paradox of that has been the more trust we extend, the more contribution people have made, which then encourages us to extend more trust to them. And it becomes a virtuous cycle. 

 

Alan Kohler: Do you find that burnout is sometimes a challenge at the board level and, in particular, at the executive level?

 

Peter Fuda: What we know in hardcore research is that the people who don’t experience burnout the way we’re talking about it now, it has very little to do with hours of work, for example. It has much more to do with how much meaning and purpose they find in their work, the degree of agency that they feel – and by agency I mean the belief that “my effort makes a difference” – the degree of autonomy they have over their work and the degree of stretch and growth that they get from their work. So, there’s a really interesting thing that I’ve observed, which is that the most engaged people, those who are often described as being “in flow”, are the people who are doing work which is within their capability but outside of their comfort zone. And so those factors, in my experience and that research tells us – data tell us the same thing – are far more engaged, far more committed, far more sustainable, even if they’re working 60 or 70 hours a week, than the people who don’t have meaning and purpose, don’t feel a sense of agency. A bit like a leaf blowing around in the wind.

 

Alan Kohler: What do you do for the people who are leaves blowing around in the wind? How do you deal with that?

 

Peter Fuda: Your job [as a leader] is to instil a sense of agency in those people; to inspire hope, not fear. When we talk about hope as a critical ingredient, particularly at a time like this, we think about it as some esoteric concept. It’s not. Hope is just clear goals, pathways to achieve those goals and a sense of agency – the belief that “my effort makes a difference”. And often what we will find in someone who’s struggling – if I’m counselling a leader who’s got team members who are struggling – typically, the struggle will be the people who are working for that leader have lost their sense of agency, the belief that their effort makes a difference. And then I’ll talk to that leader and say, “Think about the person who’s had the greatest positive impact on your career.” And they get that person in their mind and I say, “My guess is, they saw something in you that you didn’t see in yourself.” And they nod knowingly. And I say, “Well, that’s your job as leader to see something in these people that they can’t yet see in themselves. That’s where their sense of agency and hope comes from.”

 

Alan Kohler: And does that turn around pretty quickly when that happens?

 

Peter Fuda: It absolutely can – again, if you’re very intentional about it, if you give people meaning and purpose. Of course, if you’re slogging people to death 80 hours a week, they’re not sleeping, they have a poor home environment – all of those things play a factor. But my perception is that we exaggerate that stuff in order to avoid the real conversation, which is: do people actually have meaningful work to do? Do they get a sense of purpose from what they do every day? Can they see how their effort contributes to the outcomes of the company? If that’s true, then chances are they will be highly engaged, highly committed and sustainably so.

 

Alan: Microsoft recently released its 2021 Work Trend Index, which provided some fascinating insights into the future workplace; namely, the future of work is here and it’s hybrid. 


Steven Worrall: One of the other interesting outcomes of this research that we’ve conducted asked the simple question: thriving or surviving through this period? And there was a very interesting dynamic. Those in leadership roles represented “thriving” at low 60 per cent; that was sort of the average. Those at the other end of the scale – they’d just joined the firm or had been with the firm for a couple of years – were in the low thirties in terms of “thriving”. More surviving than thriving. It’s really interesting that we’re seeing a very different experience across our workforce in regards to this time. And it reminds me of something that Professor Genevieve Bell from the Australian National University said early on in the pandemic, when she observed that we have to be very, very careful not to totalise experience. Because the experience that I have; or Peter, you have; or John, you have is very different. In fact, for as many people as we have in our organisations, that’s as many experiences as we’re seeing in our workforce. And it’s so important to acknowledge that and then work through “How do I then best prepare this organisation to come through this period?”


Alan Kohler: Peter, how do you think you can balance the need for high performance and employee wellbeing?

 

Peter Fuda: The thought on that, Alan, is that you don’t actually balance them. One is a factor; a consequence of the other. The way you get high performance is to deliver employee wellbeing, to make sure your employees are healthy, happy, motivated, focused, committed – and the consequence of that will be high performance. The concern would be if we think that we are trading one for the other; in my experience, that’s not real.

 

John Mullen: And I think this has been a two-speed COVID for so many organisations and people in that if you’re fortunate, like many of us who’ve got a little bit of room at home, you can sit in the study and you’ve got some peace and quiet attending a conference – that’s one thing. If you’re a young person sharing a flat or you’ve maybe got two young children and you’re trying to juggle school and then you’ve got to go and stand in the bathroom to make the call, the pressure on those people is very, very real and we have to understand that. Alan Kohler: And Steven, you talked about how much of a priority for Microsoft the health and wellbeing of your staff has been. To what extent does that ever conflict with your targets? 

 

Steven Worrall: I don’t think they’re in conflict, Alan. It’s about us as a community and I think there’s a lot of work to be done taking a more holistic view of psychological safety, in particular. Because I think, as a country, we’ve done a wonderful job with physical safety, when we think about our miners and our construction firms. I think there’s a lot of work to be done in regards to psychological safety in Australian workplaces and I can see that that’s had a very positive impact. 

 

Alan Kohler: Peter, how can boards and non-executive directors, in particular, build on the progress – the digital progress – that’s been made over the past 18 months or so?


Peter Fuda: For me, it’s a focus on the key management levers that reinforce that stuff. So, for example, we can have an aspiration to continue innovating, but if the performance systems reward short-term behaviour – if managers are incentivised in that way – then we will get short-term behaviour. If we want creativity and openness to continue, then we need to facilitate a culture where that’s possible. So having less hierarchy, for example, in an organisation is one way to get that. Fewer signs of executive privilege, where it’s safe for people to speak up and contribute their ideas, where you have a 32-year-old on the board who is there to contribute and bring all of that energy, they’re the kinds of things that will embed this – not just saying, “We want more innovation and creativity”. It’s manifesting it in practical ways inside the organisation.

 

Alan Kohler: And John, does this to some extent come down to the way you structure remuneration practices – and is that changing?


John Mullen: That is definitely changing and yes, it does. I think at the different levels, the answer is different. By the time you get to being CEO of a large corporation, obviously, you want a good salary and everything, but money is no longer anywhere near the main motivator. It’s pride in the work you do that counts as success, and all of those things are really, really important. As you go down the organisation, direct incentives to executives, as Peter says, become more meaningful – and particularly at the sales level. Is it sales at all costs or do you have to take into account a much broader stakeholder involvement? It’s an embracing of all of the components that go into a corporation being successful. And it’s not just demanded by society – whether it’s the environment, ESG issues and the like – but it’s also increasingly demanded of your employees. Is this the sort of place I want to work? Do I respect what my employer is doing in the workplace and for society? Those things are more and more important. I think this whole pandemic is accelerating that even further.


Steven Worrall: It’s definitely made that idea of connecting purpose with the role of the firm at the uppermost of people’s thinking – I couldn’t agree more there, John. But I was also thinking, Alan, about your question: the responsibility that we have as a business to help our employees, our teams, pick up the skills that are necessary for them to continue to play the role that they play inside our organisations or, indeed, to play roles in other parts of the economy. Telstra do a fantastic job of helping to find pathways to skill their teams as they redeploy inside the business or, indeed, find other roles in other parts of our economy, as one example. And I think that that type of responsibility is fair for business to take on board. Business has to work side by side with government and the community to make that possible.

 

Alan Kohler: Let’s talk about Bridget Loudon, who you hired as a director of Telstra last year. Take us through the process of recruiting her. 

 

John Mullen: That was a bit of a personal crusade and I had to take some of my board colleagues along on the journey. I was really keen to get somebody who was thoroughly versed in technology and social media and the whole impact on our lives. Now, the problem, of course, is that there are lots of millennials who’d like to be a director of Telstra and quite a few suggested they were ideal candidates. 

 

Alan Kohler: How did they suggest it? Did you advertise? 


John Mullen: I actually made a mistake, or what I was saying at the AGM, that we were going to do something like this. So then I got a lot of helpful suggestions from around the world as to who could do it. So we then went through a professional firm and I was actually amazed at the quality of some of the young people out there. And we narrowed it down; we ended up with two or three very talented potential board members. What was really important to me, though, and to us, was not just that they were smart and successful at whatever they’re doing. There were a lot of people like that, but they also had to understand the complexities of a large corporation, where you spend an awful lot of time on the stuff that young entrepreneurs find very boring – all the governance and ASIC and shareholder meetings and AGMs and all of these things. So, you had to get the right cultural fit as well and Bridget came out. She’d worked for Bain consulting, she’d worked in big corporations. So, she had a bit of a foot in both camps, which was the magic sauce for me.

Alan Kohler: Is one enough, Peter? Do you think one millennial on a board like Telstra’s or Brambles’ – or some of these things that have got only retired CEOs on them – is enough?

 

Peter Fuda: I think it depends on what you’re trying to accomplish. So, if the idea is to spark new ideas and provoke people, then one’s probably enough. If you’re looking to actually make substantial lasting change, then you probably need more. And so, for me, it’s always about the gap. What is this board trying to be? What future are they trying to create? Is that the group of people that’s going to get us there? In a sports world, we never think twice about players coming in and out on a regular basis in order to accomplish the ambitions of the club. But we get quite delicate and sensitive about that stuff in a corporate environment – to our detriment, I think. I would always start with: what’s the ambition this board has for its company? Because then you actually have something to hold them accountable to. It’s their vision that you can create a gap on. If it’s not, then it’s outside people agitating and it seems a bit arbitrary. 

 

John Mullen: Could I just say something a little bit left field? In my spare time, I’m a bit of a maritime history tragic and it’s really been fascinating to look at the cycles in life, in society. If you go back a couple of hundred years, when Europeans were exploring the world, the people captaining those ships were in their early twenties and some of the officers were teenagers – and, yet, they had to lead a group of 150, 200 unruly sailors, half-drunk, press-ganged. They had to maintain discipline. They had to understand how to navigate before GPS and everything else, bring people home safe. We entrusted serious management to youngsters in those years.Then we sort of moved into a cycle where, unless you have gray hair and you’ve been a CEO and all the stuffy sort of pompous attitude to the world, then you don’t really have value to add. And that’s what I find fascinating about the digital generation. That we’re almost going full circle and coming back to now, where we’re seeing 20-year-old billionaires being created – which, to me, is just history always repeats itself. And I think it’s doing so now in a different way.

 

Alan Kohler: Do you think it’s important for a big company to try to get a startup entrepreneur on their board? Do you think that’s a mindset that is really useful?

 

John Mullen: Well, yes, in a nutshell. But as you grow, you start to get structure that people find frustrating. And you can’t just say, “Well, we have an unlimited capex budget and everybody can spend whatever they want.” You have to have a capex committee. And then, if you have a capex committee, then you have to start, well, there’s a routine. So, you’ve got to put the thing in a month ahead and then it needs three different departments to sign off. And all of a sudden, what you started yourself as a really innovative, vigorous organisation, where you made all the decisions on the run, it gets slower and slower and slower. And when you get to a company that’s been around for 100 years or more, it’s imbued with all of that. And trying to fight it is really, really hard. You have to remind yourself every five minutes how many people can say yes and how many people can say no to a decision. And I used to do that and make a list for myself, and it was really scary. There were about 10 or 12 people who could block the idea. There was only one, usually, who would actually say, “Do it.” And so bringing on a youngster who keeps reminding you of that, I think, is really important.

 

Steven Worrall: John, what you're talking about there is related to the culture of the firm in terms of how it approaches those sorts of challenges. What’s the board perspective on helping to shape the culture in the organisation given that clearly is the purview of the CEO and his or her team?

 

John Mullen: I think the management – the CEO, in particular – have to drive the culture. You can’t do it entirely from the board, where you’re meeting every couple of months. And no matter how diligent you are, it's a living, breathing thing that has to be worked on every single day.  I’ve learned the hard way on a number of things. And you’ve seen from banking royal commissions and other things, if you get things 98, 99 per cent right, traditionally, historically, I would have said, “Well, that’s pretty good then. We’re doing okay there. I won’t worry about that problem.” Actually, the stuff that makes the news headlines and creates a royal commission is the one per cent that we never really looked at. And now, trying to change the culture of the organisation to say, “We need to hear about the one per cent. We’ll take it the 98’s going okay, but I want to hear the one or two per cent, because that’s where our exposure lies.”

 

Alan Kohler: What about the balance between defending against disruption and aggressively disrupting yourself? What are the challenges internally with that?

 

John Mullen: It’s a fascinating challenge now for Australia, for regulators, for governments and all around the world. You’re no longer just facing the quality of your product and service, you’re also facing a business model change. Where Telstra’s still got to pay out 70, 80 per cent of earnings as a dividend or we’ll get absolutely caned – we’re a taxpayer, big taxpayer. If you’ve got a model where, say, you’ve got a really good product and all the profit you make from that you reinvest in marketing and be more competitive and lower in prices, you get even more market share, your company succeeds, your share price rockets, government doesn’t get any tax and your competitors find it harder and harder to compete on a business model level long before you even get to “Is my product as good as theirs?” That’s, I think, going to be a real conundrum for industry.

 

Alan Kohler: Peter, what have you learnt in talking to companies like Telstra, dealing with disruption in this way? Because so many legacy companies are having to deal with technological disruption. 

 

Peter Fuda: Two things, mainly. One is that it forces questions about identity. And Telstra’s a good example of this. There’s a doubling down on: who are we really trying to be here? What are we trying to accomplish? What does success look like for us? And how are we all going to be together on this journey? What are the expected standards of behaviour? The second question becomes a pragmatic one about cadence and sequencing, which is: maybe there’s a horizon over the next year where we need to manage the benefits of these strategic priorities. As a leader, if you can’t do both, you struggle to succeed in any company.

 

Alan Kohler: John, is one of your challenges to try to turn Telstra from being a hardware company into a software company?

 

John Mullen: Yes, absolutely. So Telstra, its assets, also some of its liabilities in that we build a physical network of exchanges and ducts and copper and fibre and switches and all these other things – which, at the time, were absolutely leading, state-of-the-art equipment and created big telecommunications networks. Now, all of a sudden, we’re moving into a software-defined networking world where you don’t need half those assets anymore. That’s a real challenge for a legacy company that is super-rich in all those assets; you can’t just make them disappear. You’ve got them, you’ve invested billions of dollars in them over the years, but you’ve got to compete with a disruptive modern world, where a lot of 19-year-olds in an attic somewhere can provide a very competitive product against you.

 

Steven Worrall: I might just add to that, Alan. I think when you say, “going from being a hardware company to a software company”, that’s one descriptor that is used regularly. The way I talk to our clients about this conversation is more in terms of how they use data and how they meet their customers’ requirement. And as simple as this will sound, what we learned from startups and organisations that are digital natives is that there is a myopic focus on customers’ usage of my service or my product, and that there is a very, very short cycle time between my customer using that product or service and then their satisfaction with that product or service. If they aren’t delighted, then I’m going to speed up the process by which I will iterate to ensure that tomorrow I’m going to address that concern. That defines that we need to be thinking about how we use the data, the information inside our organisations, in a fundamentally different way so that product releases aren’t made on a monthly or yearly basis. So that our customers know that “We are focused today, right now, on how satisfied you are. And if you aren’t where we’d love you to be, we’re going to make a change this afternoon.”

 

Alan Kohler: Peter, I was looking at the list of Australia’s biggest companies in 1980 that someone sent me the other day. And the top company was Broken Hill Proprietary Limited, BHP. Second one was MIM Holdings, Mount Isa Mines. Third one was Western Mining Corporation. But what struck me is that mining companies have become technology companies as well. Peter, how does Australia sit in terms of its dealing with technology?

 

Peter Fuda: To me it goes back to leadership. You know, when Steven talks about this idea of shifting from know-it-alls to learn-it-alls. How else do you cope with an environment that is changing at such speed and scale, where you’ve got to manage the present and create the future all at the same time? If you have blinkers on, you do it the way you did it yesterday. And my experience is – at least in dealing with the companies that we deal with in Europe, North America and Asia – Australia is right up there in terms of a creativity, desire kind of mindset for innovation.

 

Peter Fuda: Most of the Australians that I know doing business on an international stage are very confident in their ability to create and add value. And Australians are in demand all around the world. If I think about all the multinational companies that we work with, the Australian subsidiaries – always an exporter of talent as opposed to an importer. 

 

Alan Kohler: And John, how’s Brambles going in terms of its technological advancement and innovation in the context of its global peers?

 

John Mullen: Being disrupted, or subject to digital disruption, like everybody else. A very simple product – just a wooden pallet flying around the supply chain – but with more than 300 million of them out at any one time, cycling it, the possibility and the opportunity is huge to further digitise all of that and gain not just internal efficiencies, but extraordinary visibility over the world’s supply chain. So, that’s the main focus there.

 

Alan Kohler: Yeah, but I’m wondering whether you’re satisfied with how Brambles has done that. Do you think they’ve moved fast enough?

 

John Mullen: I don’t. Not for want of trying, but there are some simple laws.

 

Alan Kohler: What’s been in the way?

 

John Mullen: The laws of economics and technology in that you can’t track a pallet in a global supply chain unless it can identify where it sees itself. It’s fine in a closed loop. So if you can put RFID scanners in it or whatever, you can move it through agreed checkpoints, then you can track anything. But if you supply the pallet to your manufacturer, who in turn supplies it to one of their retailers, and then some of them end up in the local garden centre, none of those have got RFID scanners. So they vanish. You can buy a scanner, you can buy a chip rather, to put on a pallet, but it costs about 70, 80 bucks and the pallet costs 18 to 20. And if you’ve got 300 million of them, it’s quite a big capex bill. But technology is proceeding at such speed that it’s not far away, and it’s very exciting. I think that the technology-focused innovation in Australia is great. I do have a concern, though, that our manufacturing capability in some of these areas. So, while you say the mining industry is more and more digital, most of that equipment is imported from overseas. And the pandemic really brought it home to me that the short-term stockholdings of major corporations – whether it’s in telecommunications, whether it’s in energy – during the pandemic, fortunately, we were able to source a huge amount of air uplift and bring in technology. But if it was in a time of war or something – God forbid – where we didn’t have that access, a number of our major industries would be in deep trouble very quickly.

 

Alan Kohler: Steven, what’s your sense of how Australia sits? You probably have a pretty good sense through your clients.


Steven Worrall: If I go back over 30 years in the industry, most of it here in the country at IBM and then at Microsoft, there’s no question we have been early adopters of new waves of technology. And Australian industry, broadly speaking, has adopted a range of technologies that have obviously helped us to develop and to deal with many of the challenges we saw last year. Also fair to say there are some settings in our industry that need to continue to be tweaked for us to be even more successful in creating the startups that drive economic growth, that create jobs in our economy. And so, I think there’s much more that needs to be done there. The more important question, Alan, from my point of view is not “Are we a good adopter or user of technology or not?” It’s more the realisation that we have to be, because how does a country of 28 million people in Asia, in the current geopolitical environment we find ourselves in – and we think about the challenges over the next several decades – how do we see our place in Asia and in the world? And how do we feel we are going to be able to set ourselves up? I’ve enjoyed 30 years of unbroken economic growth, up until the pandemic last year, in my working career. How do we make sure we set up our kids so that they enjoy that sort of prosperity? And I think technology is at the intersection of most of the solutions to the big problems that we have, whether that’s related to creating new jobs, sustainability or the many other issues that we know we are going to need to deal with. 

 

Alan Kohler: And I’m wondering, when you compare notes with other country heads at Microsoft, whether you find it harder or easier than your colleagues to sell advanced technology in your patch here?


Steven Worrall: We’re an early adopter of cloud technology. So one measure, one answer to that question, very obviously, is: how fast is the cloud being adopted in Australia versus other countries? And we are at the leading edge. So that would be one answer. Per capita, we spend more on technology than any other market on the planet in terms of the use of both consumer and corporate technology. So that’s another measure. But I think, Alan, to your question and the provocation here, it’s not a matter of: absolutely are we using more technology than other countries? It’s: how are we going to use that technology to reshape our economy? Because that is exactly what needs to happen over the next several decades. 

 

Alan Kohler: I think the conventional wisdom is that Australia doesn’t spend as much as other countries on R&D because they’re too busy paying dividends to shareholders. And Telstra is one of those companies that is seen as a dividend ATM for shareholders. How much of a challenge is it, in running Telstra, to maintain that flow of dividends to people while also investing in technology?

 

John Mullen: I think it comes back to what we were talking about earlier. A lot of investors in high-dividend companies are there because of the dividend. Particularly, like in Telstra’s case, more than 50 per cent of the share registry are private retail mums and dads, super funds, private super funds, et cetera, who need a dividend. As a board, Telstra has got to keep firmly in mind that shareholders’ interests may not be saying, “We’re not going to pay a dividend anymore. We’re going to go for growth.”

 

Alan Kohler: You cannot do that, right?

 

John Mullen: Well, you’ve got to try and balance it all. If you pay everything out in a dividend, you’re never going to grow, either. So, we have cut back the dividend for exactly that reason, to make sure that we maintain a balance sheet and the ability to make acquisitions to invest in technology, et cetera. It’s always a fraught balance getting that one right.

 

Alan Kohler: Peter, do you notice that there’s a tension on some of these matters between the board and the executive; that the executive wants to spend capex, wants to grow, and the board’s pulling on the reins?

 

Peter Fuda: There’s always a natural tension between boards and executives, and that’s perfectly normal and useful. But, ultimately, they have similar ambitions for their company. It’s less about what we want to accomplish and more debates about: how are we going to get there together? How are we going to sequence things? That tends to be the discussion in a high-functioning board-executive relationship.

 

Alan Kohler: So, do you find yourself pushing the executive team or pulling them back, John?

 

John Mullen: A bit of both, a bit of both. It’s a fantastic time to be alive. It’s a fantastic era in society’s development, industry development. I’m not quite as cutting edge in technologies as Steven, but I mean telcos are pretty up there in terms of having to adopt new technologies at a frantic pace. I find that absolutely fascinating. And we’ve got, hopefully, some pretty smart minds around the board table and in the management, and it’s a constant debate as to you can’t do everything. We don’t have an unlimited capacity, either financially or time-wise. So you’ve got to try and pick the trends, pick the investments that you think will set us up for the next decade or however long it is. And you don’t get them all right, but you’ve got to try and get more right than you get wrong.

  

Some food for thought and solid advice on getting the best out of a digitally enabled workforce, where you can access talent pretty much anywhere. 

 

Directors need to put employee wellbeing front and centre. It’s more than yoga and a fruit bowl; you need to give people clarity of purpose and an understanding that their effort makes a difference. 

 

The leadership style that sparks creativity and innovation fosters a sense of personal agency and inspires collective hope. It’s also about making it safe to speak up.

 

For directors, the key to adapting is to cultivate a “growth mindset” – think of being learn-it-alls rather than know-it-alls.

 

That’s it for this episode of Directors on Digital. Thanks again to Steven Worrall, Dr Peter Fuda and John Mullen for sharing their insights.

 

Please join me in the next episode, when I sit down with Deanne Stewart, CEO of Aware Super; and Josephine Sukkar, founder and principal of Buildcorp, director of Washington H. Soul Pattinson and chairman of the Australian Sports Commission.

 

Deanne – “When you’re embarking on transformation, I think being really clear about what you’re really good at, and actually where other partners really can help you, is really important. And so, looking for a real partnership in collaboration with different technology players has certainly been a huge part of the transformation.”

 

And how they transform engagements among internal and external stakeholders to drive innovation.

 

Josephine – “So, there’ll be 10 of us in the room – head of HR, all the different general managers from the different states – and we sit and listen to these young people tell us one of the things that we ought to be doing better. Because, let’s face it, the innovation is going to come from that generation.”

I’m Alan Kohler. I’ll see you again in the next episode of Directors on Digital.