A Director's Guide to Major Technology Investments

Intro: In today's episode, Richard Conway interviews Peter James, chair of MYOB, Droneshield, and Macquarie Technology Group, and former director of iiNet, about how boards should evaluate technology investments.

Richard Conway: Welcome to Minutes by boardcycle. I'm your host Richard Conway, and today my guest on the podcast is Peter James.

Richard Conway: Today, I am going to be quizzing Peter on how boards should approach technology investments, which nowadays are some of the largest investments that companies can make.

Richard Conway: Peter's had a long career in technology, both as an executive and director.

Richard Conway: He's been the chair of Nearmap and Ansarada, a director on iiNet, and he currently chairs Macquarie Technology Group, MYOB, and Droneshield.

Richard Conway: Welcome Peter.

Peter James: Good day, Richard. How are you?

Richard Conway: Good. Thank you Peter. So, to jump right in, Peter, as I said, boards today, across all sectors are required to evaluate significant technology investments.

Richard Conway: Do you have a framework or approach you recommend boards should use to approach those kinds of decisions?

Peter James: Richard, I've been in the tech industry all my working career and all I'll ever admit to is that it's longer than I'll ever admit to, if that makes sense.

Peter James: So, I've seen lots and lots of change in new cycles come through, but one thing that is very clear to me, we talk about technology as if it's separate, as if it's an adjunct, as if it's something discreet in relation to the business.

Peter James: The reality is in most industries, most companies, technology and the business are almost one and the same and technology is usually a core enabler. It underpins or supports and I think we've just gotta get our head around the fact that, you know, technology is just typically core business and therefore everyone has got to understand it. And the good thing is it's part of our daily lives anyway.

Peter James: So, perhaps let's remove that mantle of secrecy or whatever it is, superstition away from technology. So that directors today and businesses are dealing with digital transformation, journey to the cloud, AI, cybersecurity.

Peter James: These are all germane to any business and if most companies have technology interwoven in their business. That's the way that the board should operate.

Peter James: And when we're coming to major projects, the first thing I think it's important to do is look at the company strategy. I mean, that's what boards do, start with the strategy.

Peter James: So why not with the technology? Look at the tech, with technology for boards to look at the connection between strategy and technology and is this particular project, whatever it is.

Peter James: And we talk about a project as if it's discreet, but it's not that project, whatever it is, is gonna have connections, touch points and decisions that will impact probably right through the business.

Peter James: So, firstly, making sure you've got alignment with your strategy and then looking at all the connectors that priorities right throughout the business and making sure that you really understand that and that everyone is signed on.

Peter James: I do think it's important to have a framework and this shouldn't be any different, again, to any major capital project or major capital expenditure. So that's common sense and you know, again, it depends on the company. You can have a tech committee, you can have advisory committees.

Peter James: There are many ways to do it, but I think having a formal structure, again, depending on the size of the company, of the size of the project, but also having stakeholders who are represented from relevant parts of the company.

Peter James: Understanding that it might be a technology project, but it's probably impacting everyone across the company. So having those representatives there.

Peter James: You know, we can look at financials, like ROI, we can look at purely from a financial point of view. But I think it's also important to look at the risks, not just financial. But look at the risks. Risks to the company, risks to the company's reputation, business continuity.

Peter James: Having that framework and having those conversations right up front and going in eyes wide open. Because having been involved, as I said, all my business career, like any project, any complex project, things usually don't go like any business plan exactly as you would think.

Peter James: Really understanding from the people point of view, because one of the things I've learned, Richard, is any problem, involving just technology, can easily be fixed with more technology and money perhaps, if you've got it.

Peter James: But issues around people are far more complex. So making sure that you have the leadership that is experienced in this area.

Peter James: And, you know, having a hard analysis, thought analysis before you start. Is this something that the internal team is really up for? That is, have they done it before? Where have they done it? Or is this the first time for them?

Peter James: Now, I'm not necessarily, if at all, advocating for bringing external teams in often that is appropriate, but the company should keep control. But have a hard look at your own team, making sure they're up for it.

Peter James: What other skills do they need? Can they be brought in from outside? What sort of vendor partner? Again, keep control of yourself. I'm, you know, cautious about projects that are handed offshore or offsite to another third party.

Peter James: But you know, all of these things and then having checks and balances, change control. But again, going in eyes wide open, not being scared of it, but having representatives from all parts of the company so that all those people that are going to be impacted. Are represented, and look just one, we could talk for hours on this, but one of my hot buttons is what I call the "not invented here" syndrome.

Peter James: I always ask the question, is there a software package? Is there something off the shelf that we can buy and tailor that can do this?

Peter James: Because often, technologists, and you know, at heart, I am one myself, we like to build new things. And we'll often say, ah, yes, there's one out there, but it's not really fit for purpose. It doesn't quite do what we need. We're special.

Peter James: That may be the case, but it's quite likely that it's not the case. And you can take something and tailor it.

Richard Conway: Yeah, Peter, so you made a pretty compelling case there around that I guess a board shouldn't really be considering something as just a technology investment. It's a broader business, it's an integrated business investment.

Richard Conway: And so, does it follow from that, that if you received, say, a paper from management that was couched as the acquisition of a new accounting system or something put forward as simple as  buying a new HR system, et cetera, that you would feel that that's a red flag?

Peter James: Not necessarily. Because it may be the right thing to do. But again, you know, what's the context for this? Is it something that we really need? Because again, people like playing with new toys. And that means that there's people, and this can be in technology or anywhere, people working on core legacy businesses day to day.

Peter James: Something new comes in and you'll find most people want to flock to it because it often involves new people, new things, perhaps some travel, et cetera. But if someone we're talking about the software package, Accounting, HR, whatever in isolation, yes that would be a big red flag.

Peter James: How does this fit in with our strategy? Whether that be at a company level, at a business unit level. What are the priorities?

Peter James: I always talk about the F word, Focus. Making sure that this fits in with the business priorities. It could be that the board and executives have said, "Look, we've got enough change happening in the company. We're just going to stick to our knitting for the next 12 months. You know, if it's not broken, don't fix it."

Peter James: So, I think it's just, you know, if it's technology, that's one thing. But you know what, A lot of this comes back to common sense.

Richard Conway: And so Peter, I think it follows from what you've said that implementation is a critical aspect for any of these projects.

Richard Conway: How do you, as a board, effectively monitor that? I guess it's notoriously difficult to understand how well these things are being embedded after a board's approved them?

Peter James: Look, I think that's, that's really fundamental because, typically we spend a lot of money, you know, millions, hundreds of millions, whatever it is on these projects.

Peter James: And I think too often, people are busy. And, you know, also there's often no one finish point. So, I think there's gotta be board oversight. As I said, it could be a tech committee, advisory committee.

Peter James: You can bring external people in all the way through building the project. But then often there's no one finish line. And I do think it's important to have an honest, I mean, it's fundamental to have an honest review at the end.

Peter James: And that's not about a witch hunt or anything like that. If there's any issues, it's about understanding and what are the learnings? So, the company can learn from it.

Peter James: And also, you know, typically we're spending shareholders dollars. To whom we're accountable. And I think it's just sensible governance to do that review. And to do it without fear of favour.

Peter James: But without any undue tension. What are the learnings, and how can we do better next time? 'Cause you can always do better. Would we have brought external consultants in? Would we have done it ourselves? Would we have used a particular software? Would we have done it at that time?

Peter James: You know, sometimes legislation is changing, you've got no choice but to make these changes. But, you know, businesses these days are complex and moving quickly. I don't think the post implementation review needs to be overly complex or overly long.

Peter James: In this case, I'm a big believer of the Pareto Principle — the 80/20 rule. Come in, do the review. 'Cause you don't wanna get in the way of those people running the business and trying to get on with doing good things.

Richard Conway: Absolutely. And Peter, I just wanted to change tack a little bit now and ask you about emerging technologies. Obviously that's very topical at the moment.

Richard Conway: But how should boards think about investment in those emerging technologies, whether it's AI or anything else emerging, and decide whether a company should be on sort of the bleeding edge, versus the leading edge, versus being a follower.

Peter James: Look, it's a really, really good point. And you know, I've got a few sort of experiences, touch points myself.

Peter James: My first reaction is you don't wanna be at the bleeding edge, not any established business would be, you know, perhaps a black and white answer.

Peter James: Having said that, as you alluded to, tech is moving very quickly and AI is one that, in the last 12 months, two years, has just taken off.

Peter James: The first thing I'd say is that boards, executives need to, educated sounds a formal word, but need to understand what these things, what this new technology's about.

Peter James: For example, with AI, my view is, and there's white papers written there's all sorts of experts, consulting firms, tech firms giving their view.

Peter James: The best way to learn about AI for any company, any board is to start doing what software, start using some software using real life examples.

Peter James: But at the end of the day, technological change is about cultural change in an organisation. And if I go back to that wonderful company, iiNet, which we ultimately sold.

Peter James: In the early days, we were innovative. And, and that was our mantra, was innovation and customer care, net promoter score. As we got bigger, it became harder to be an innovator.

Peter James: Because the core company, its systems became quite large and almost had a mind of its own. So, Michael Malone set up iiLabs, which was, this is where, yes, we did do bleeding edge.

Peter James: And yes, we did leading edge, but it was a wholly owned. Almost a separate business. Running with its own culture where we could trial things, and then if they worked, potentially bring them back into the company.

Peter James: But, and I've had a reasonable amount of experience at this. If you try and do too much leading edge from within an existing company, often it doesn't get enough oxygen. Because the existing business will stifle it people, and again, I said before, people run to the new toys, everyone will want to be part of it, but the juggernaut of the bigger company will actually stifle it of oxygen.

Peter James: The challenge, however, is if you set it up as arm's length, at what point are you able to bring it back into the main corporation as an incubator?

Peter James: The challenge, however, in all of this is, you can't stand still.

Peter James: And one of my mantras, if you stand still in the middle of the road, you get run over by a truck. And that's in the case of technology. Never, never more so, you know, we've seen, all the various iterations of it, ideations of it.

Peter James: Now AI is, is a real one. You know, you've gotta be really careful that you're not disintermediated. And I think, and Macquarie Technology does this really well, we have study trips. Every year a group of executives, sometimes the board, head overseas to see trends. Particularly as they apply to a company such as us. What's working, what's not, then bring it back.

Peter James: So again, another, and at iiNet I led a team to the US where we just went and looked at all the new technologies, then bring it back.

Peter James: So, one lesson I've learned is you can't do it from a desk. For example, with AI, get started, understand, have pods of people within the company trialling things. That's not bleeding edge, that's people, actually looking at how they can create efficiencies and/or how they can create new business models.

Peter James: But also, be prepared to get out of the boardroom, get out of the office, go offshore and just look at what's happening. Because often if you're a challenger brand like Macquarie is, and look, most of the companies I've been with are challengers, Aussies. You'll usually find someone offshore who'll talk to you about this.