ServiceNow CEO Bill McDermott - ‘Linear thinking is crushing companies’

Profile picture for user ddpreez By Derek du Preez March 22, 2021 Audio version
Summary:
Bill McDermott believes that ServiceNow is primed to help buyers rethink their business models in a post-COVID-19 world.

Image of Bill McDermott ServiceNow CEO

It can't be denied that it has been a very strong year for ServiceNow, as its platform approach to rethinking enterprise workflows gained momentum during the COVID-19 pandemic. ServiceNow was already on an upward trajectory, but with organizations needing to quickly adapt to new customer and employee needs in 2020, buyers seemingly looked to the Now platform to redesign services and reduce their complexity. 

I've long argued that ServiceNow has great potential in the enterprise, given it's ‘platform of platforms' approach and the ability for it to be applied to multiple use cases outside of ITSM (which is where the company initially found success). However, I've also stated that ServiceNow needs to do a better job of articulating those use cases to buyers, who sometimes don't quite get the art of the possible when it comes to workflow. 

But following a conversation with ServiceNow CEO Bill McDermott at the end of last week, I'm beginning to get a better understanding of the vendor's approach to driving this message home and executing on what it calls the ‘enterprise workflow revolution'. Simply put, McDermott is determined to centre the Now platform as the answer to organisations' biggest challenges. 

What does this mean? Well, McDermott wants to - by industry - identify where buyers are facing market pressures, across a number of areas, and show why workflow can not only ease some of those pressures, but also help companies ‘reimagine their business models'. He provided detailed examples of how this can be done in a number of industries, which I'll outline shortly. 

This isn't a simple task. But McDermott is adamant that the companies that will fail in the midst of this health and economic crisis are the ones that won't ‘expand their linear thinking'. In other words, those that try to go back to the way things were pre-COVID-19 are setting themselves up for failure. 

And the end goal for ServiceNow is that if it has helped its customers solve these problems and is a useful advisor in the midst of crisis, it will be well positioned for success on the other side of COVID-19. Interestingly, ServiceNow is also now beginning to have a conversation that its platform of platforms approach does enable buyers to retire multiple systems of record over time - something that it's shied away from in the past (but more on that later). 

Central to all of this, for McDermott, is pushing the message that companies need to be actively assessing their business models. He explains: 

We are essentially the glue that puts these disparate systems, silos and processes together in a workflow. And that workflow makes work, work better for people. The thing that is really, really resonating is business model innovation. 

Depending on the industry, 25% to 30% of the business companies get in the next two to three years will be from businesses that they're not in today. So it's really forcing people to rethink the status quo, and go from linear thinking to exponential thinking. And if anything, I think I may have brought a dream big mentality, and an exponential way of thinking to this equation. That's true for ServiceNow as a platform, but also for how ServiceNow serves our customers, so they can better serve their customers, and that is a real exponential headset.

At the centre of the big problems

McDermott is a very charismatic interviewee and it's hard not to get wrapped up by his enthusiasm. But it was important to dive down into the details of what this means in practice for how ServiceNow is thinking about its buyers' needs - and for that we needed examples. What does ‘exponential thinking' and ‘business model innovation' likely mean for industries at the moment? What are these big challenges that ServiceNow wants to be at the centre of? 

McDermott was able to outline conversations he's been having with buyers to give us a better understanding, which was incredibly helpful. 

For instance, when talking about the future of work, McDermott says that for any company that is thinking about how they can get back to the ‘past' (pre-COVID-19), they are "destined to fail". One such example can be found in retail, where McDermott says that he was recently speaking to the CEO of a very large company operating in the sector. 

The retailer is facing challenges across a number of areas. For instance, the move to a $15 minimum wage in the US (which McDermott argues is the right thing to do) is putting enormous margin pressure on the company to the tune of a billion dollars. Equally, customers have changed how they want to shop with the retailer during the course of the pandemic, where they maybe want to browse online and then pick up their products curb-side. These shifts are having huge implications for the business and it is forcing a change in operations, which ServiceNow wants to be at the centre of. McDermott explains: 

The whole business model has completely shifted with COVID. So you're never gonna go all the way back to the way it was. And yet at the same time, you have to change so fast to create the new business model, to catch this new wave. You have enormous pressure on you, on the employee side, and then also on the whole value chain, from how you get the supplies and the products reconfigured to a completely different delivery model. 

This is a digital transformation example where you have to use exponential thinking to completely revamp the business model. Do what's right for the people and digitise processes in ways that have never been encountered before, and get the numbers to tie so these companies are sustainably and financially viable on the capital markets. We're at the heart of that conversation. And that's exactly where I wanted us to be.

McDermott provides call centres as another example of change being forced, where companies facing up to 35% turnover of employees each year because of their "soul crushing jobs". Companies can't afford to maintain a churn rate this high on a per annum basis, McDermott argues, and so need to "completely rethink the model". This should be achieved by enabling customers to solve most of their issues on their own, digitally, so that call centre agents can spend their time on high value problems. McDermott adds: 

Deep machine learning, virtual agents and AI can eliminate 90% of the common issues. There will still be 10% where humans have to get involved. So we're not talking about replacing jobs here. We're talking about the 10% of the jobs that are here not churning every year, they're happy, because the technology's taken away the soul crushing stuff. They get involved when there's human interaction, where their insight and their counsel is highly appreciated. 

That all requires the technology to issue a workflow order to the right person with the right empowerment, the right skill set and training to remediate the customer issue. All of this has to be highly automated on a workflow level.

McDermott says that whilst these problems and the solutions will vary by industry, ServiceNow is identifying common blueprints by sector. Or as McDermott says, "birds of a feather fly flock together". But the common denominator across all of this, he reiterates, is workflow. 

And that's why I've always said the workflow revolution has only just begun. I mean, we might be a global corporation on the move, but we're a startup compared to the opportunity.

Finally, one of the biggest challenges facing governments and organisations at this time, which ServiceNow is positioning itself as a key stakeholder, is vaccine management. The vendor has won a number of contracts with governments, including at a state level in the US, and nationally in places such as Scotland. But this problem is now also filtering down to the enterprise. McDermott says: 

I realised in the last week that CEOs from major companies are in many cases building their own vaccine management process, because they have to have real accounting for who's been vaccinated, and who hasn't. What I've learned also is when companies build their own solution, and software is not their core business, they're generally quite disillusioned by the negative result. 

So we're going to step in. This is not just about commerce. This is about our standing in the world as a major player on the global stage.

Reducing complexity, but what about legacy? 

Central to the ServiceNow story over the past few years has been that it doesn't publicly talk about competing with the other main cloud vendors, which McDermott would describe as systems of record. ServiceNow wants to act as the integration layer between an organization's existing systems, reducing complexity for a buyer, enabling them to build reimagined workflows on top. 

McDermott gives an example of a bank he spoke to recently, which he says has 5,000 mission critical applications across their infrastructure, which are at least 25 years old. This bank can rewrite 10% of them per year, McDermott says, which means they will find it very hard to ever keep up with the ever changing employee and customer demands. He adds: 

So as you're rewriting the past, the future is being reinvented in front of you, which means you can hardly ever catch up. What is the way out? The way out is to standardise on modern platforms like ServiceNow, whilst at the same time enabling the developer community within your company to essentially write these new workflows on the Now platform - new applications that you could put out into the enterprise. And do this at record pace. 

However, ServiceNow is finally acknowledging that this approach also gives companies the headroom to retire ageing systems. This is a conversation in the past I have felt like it wanted to avoid - for whatever reason - but I think it's a key selling point that should be highlighted. McDermott says: 

In many cases, we can hide the complexity within our platform. But what will happen is [our customers] will retire those systems, and they'll do it at their leisure. For example, I have one public sector example, where they had 75 of those systems, and then they chose ServiceNow. 

Now only one exists with ServiceNow - so they have one system of record and ServiceNow. They retired 74. My point is, I think the customer is in a situation where once they understand what's possible with ServiceNow, they'll come to their own terms with retiring the legacy systems. 

My take

As always, it's great to catch up with McDermott. It's impressive that after so many years in this industry, he clearly still has the enthusiasm and excitement for change that we don't always see from other CEOs. In many ways, this is the conversation I've been hoping to have with ServiceNow for some time. Whilst I've always pointed to the potential of the platform, I've also always felt that the use case conversation was lacking somewhat. McDermott is now going after this all guns blazing - not only having that use case conversation, but positioning ServiceNow at the centre of some of the digital enterprise's biggest challenges. A conversation about customers' problems and the possible solutions is always going to land better than a 45 minute conversation about the latest AI or technology innovation. McDermott had at least a dozen examples to provide. As ever, we will be asking to speak to those customers to get the details of how the platform is supporting their changing business models as we enter the second year of this pandemic. And we will be watching closely.