Box's Aaron Levie: Don’t Rewrite Your Software. Rewrite Your Company

well we're so glad to have a Tim Sloan here on the main stage and I know you've been waiting with bated breath but the other Tim Tim Pawlenty is just joined us so he came in from Las Vegas next up on on the big stage is Aaron Levie he's the chief executive officer co-founder and chairman at box which he launched in 2005 after coming up with the idea while he was in college Aaron leads the company in its mission to transform the way people business and processes work so they can come and achieve their greatest ambitions please join me in welcoming Aaron Levie cool how's everybody doing awesome um so I'm Aaron Levie CEO and co-founder of box very excited to be here today with everyone we you might not be too familiar with us we power secure collaboration for enterprises so we're in over 60% of the fortune 500 many many of you in this room or customers so very very excited to be here so we work in a range of industry including financial services my personal relationship with financial services a little bit limited it comes down to this tie and the fact that I got rejected from an internship at Goldman Sachs in 2004 but I'm not bitter so the because of that rejection fortunately that gave us some time to come up with the idea of box so the summer of 2005 we actually launched the company and what we do is we power how companies work and share with their information and we started box because we saw a handful of major technology trends that we thought were going to change how people would work so at the time while we were mostly on BlackBerry's we did see that there would eventually be ubiquitous mobile access and mobile devices we saw that in the future computing would become very very cheap and infinitely accessible so we could build modern products very easily over the internet and that we would be moving more and more to a networked economy where people would want to be more connected where transactions would happen digitally in a much more secure and seamless way and so all these things were the factors in 2005 but led us to creating box which which now again has 70 thousand customers and people use box to share and collaborate on their information and that was disruptive to a lot of the traditional software and hardware companies in our space but those same technology trends that we used as a disruptive advantage have actually changed every other industry so some things that I think we already know uber was able to leverage those same exact technology trends to be able to disrupt the automotive and transportation industry Airbnb is completely transforming hospitality Netflix is certainly becoming the most important media company on the planet because of these technology trends and of course they're beginning to very significantly impact financial services products and companies like stripe Robin Hood PayPal and so many other companies are reinventing what financial services can mean in the future because of these same technology trends and so I think we all have sort of this insight that software is beginning to eat the world it's going after every single market whether you're in life sciences automotive healthcare and financial services and that means that all of us all of our organizations every company on the planet have to become digital companies so with that insight I just saved you a couple million dollars from BCG and and so this means that every single thing about what we do has to begin to to go digital and so the the thinking goes and when we talk to our customers the thinking is well if we can just build an app like uber if we could only have a real-time digital experience that was data driven maybe had a little flash of artificial intelligence then our consumers would love us and we would have this amazing digital experience and then the sort of problem would be solved but I think what what we all sort of you know recognize and what resonates is that it's not that simple right it's not just about building that digital application or that digital experience in fact if you look at an industry that attempted to do that because of uber you looked at the taxi industry what they tried to do is sort of corral together the the same workflows the same business model the same sort of dispatch organizations that same process and as uber was was coming to attack that mover and lyft and other companies they tried to modernize by just taking software and putting it on top of the existing business model in the business the existing structure and guess what kind of software they ended up with it looks something like this so not really the modern transportation experience that that we're used to and that's because they were still limited by the fundamental dispatch workflow because they didn't have the sensors they didn't have the technology to be able to make it much more on-demand and data-driven and so what you can't just put software on top of a legacy business model or a legacy business process and all of a sudden become digital it's not clearly how it works and the reason for that and the reason why the taxi industry has failed and probably unfortunately now it's a little bit too late is that uber isn't an app it's not just a van app on your phone it's actually an entire company and more important than it being a whole company in the whole operation is that it's a modern company right the way that that people that uber work the way that they collaborate the way they communicate the ideas they share the technology that they use Tim just was talking about cloud computing all of the platforms that uber runs on are fundamentally modern their business processes modern and so when when we're attacking these digital strategies we're looking at the wrong thing in many cases because it's really over the company that delivers uber the experience that we love and so then that shows up as a car on demand that has all digital payments and you don't have to book it in advance and they're no longer limited by the scarce supply of traditional taxis because any driver can join the network so they fundamentally rethought who can actually be delivering that transportation and the standard thing every time you get out of an uber you rate your driver that so that way you don't have to complain about your experience anymore they're using data signals to be able to actually solve their supply and demand and employment challenges because now they know which drivers are the best on the system so uber the company was able to deliver this modern digital experience now because they have all these capabilities because they have this data because they're built on these modern platforms uber doesn't even care about taxis anymore now they're able to go after anything that needs to move physical assets around so they're going after things like trucking and logistics they're going after food delivery they're going after shipping so they can now go after any industry that is not prepared with the right technology platforms the right data the right intelligence because they are fundamentally a modern company not just an application so how is financial services doing in this respect how are we transforming as financial services institutions well the obvious thing to do to go check on how we're performing is to go talk to Millennials that's the standard approach and many of you have probably seen these statistics this isn't particularly new but 53 percent of Millennials when surveyed said they don't think their bank is offering anything different from other banks so there's limited differentiation between actual products and services that are coming out of the traditional parts of this industry 73 percent said they would be more excited about banking with Amazon Google or Apple so that's obviously an important statistic to pay attention to and most interestingly I was pretty surprised by this one I have to admit 71 percent would rather go to the dentist they said so I don't see how this could be true but I read it on the Internet and so thus it seems reliable so so what's what's going on why is this happening well the issue is that so much of today's quote-unquote modern financial services aren't actually very modern just think about the workflows of your existing products and of the existing business and try and imagine how we've actually taken them digital well here's just one small workflow as an example this is a mortgage process and the mortgage process is obviously very long there's a lot of you know steps and procedures a lot of regulatory compliance issues a lot of people that need to get involved but what's happened is so many of the products in this industry have just been about writing software to try and hide the complexity of this process from customers but then what happens is any part of the process that's not automated that's not data driven that's not digital then shows up as being now taking people offline and off that digital experience so if you have done a mortgage recently or if you've done one of these heavy transactions you still have to collate your documents you have to fax them in or you if that's yeah or you have to FedEx them if you have any issue in the process you still probably have to talk to an operator during hours of operation and business hours and that's just the front end consumer experience now imagine the back end how many of your processes that are delivering that loan or that mortgage are still manual are still paper driven still require all of that extra signal to be done by people as opposed through technology and the reason that I at least think this is happening is I think digital is often seen as a channel to distribute your existing products and this goes all the way back to online banking days right so think about when the first internet banking services came came to be well this was seen as a distribution channel for for our traditional banking products and so when Mobil came out it was yet another distribution channel for the traditional banking products or financial services products and that's a fundamental distinction from how digital companies think about the problem they're not taking that nor do they have two existing products and delivering them through digital experiences they're saying what is the modern experience that should exist because of digital how do we work backwards from that and then what is the process what is the business model what is the architecture what is the technology I need and that's why for instance in financial services but really any industry that's being seeing disruption from technology we're able to see what the process could look like if it were fundamentally rethought because of these digital experiences that's then leading to the reason why digital technology and FinTech is so exciting that's why people have such great experiences that you can't see on this slide right now that were really great experiences where people loved their FinTech companies there's a bunch of tweets all us send it to you offline so digital is not a medium and financial services companies that are that are modern fin tech companies or any disruptor uber or otherwise they don't treat digital as a medium it's not a distribution channel for an existing product it's the foundation of every single touch point that your customer has with your product your service your company every interaction that's the fundamental distinction that we tend to see and this even ripples into the offline world imagine your physical branch the physical bank this is what one of my local banks tends to look like it's no wonder that we think these things are going away nobody wants to go in there it actually is indistinguishable from my local DMV so that is the problem it's not that people don't want to go outside and we just want to we're VR goggles all day long it's that the physical world has never been that great to experience at least in modern times when we know what is possible because of digital experiences now contrast that to what Amazon is doing they've actually said no actually the physical world isn't going away in fact we can deliver better experiences in the physical world in some cases that we can the online world but through digital technologies and so now if you are familiar with Amazon go it's their modern grocery store you go in you take anything you want you leave they automatically charge you because of sensors artificial intelligence computer vision and the fact that they have all of your data on file all of your credit card information on file so they can do that because they're a modern company that's approaching the retail experience in a very digital way so alright fairly straightforward so why is it that delivering these digital experiences is so difficult well this is the part where obviously it's it's not so simple it's because if you're big and successful and you were founded before the year 2000 or 155 years ago it's that you've optimized your business model that incumbents have had to optimize everything about their organization their people their processes their talent who the leaders are in the organization about those that could succeed in the industrial economy against their industrial competitors so that meant you got really good at deploying physical branches we got really good at distribution so it was better to bundle products together so we could sell more and more products to customers we got really good at regulation and compliance that was built for an industrial era and as you saw from that millennial survey there's little distinction between banks from Wales so that means the only way that you compete is by generating more margin the way you generate more margin is through process efficiency well the fastest way to deplete innovation is by just focusing on the process and focusing on optimizing the process so what do we do about this well the first thing is it's useful to then learn from the digital companies that that are actually leading this charge and that's because the rules have fundamentally changed and so those things that you got really really really good at are now actually anchors on your strategy and on your business model and on your operating model so what can we learn from Silicon Valley what can we learn from modern digital companies well here's the first thing in Silicon Valley we don't think of the app as our product it's an artifact of the overall summer experience and of the overall product so we need to stop just focusing on the app and that digital that digital interface but think fundamentally about what is the product that we're delivering that's different because of the the new era that we're in how is it fundamentally different than the product that would have come before if we didn't have digital the only way that we can deliver new products though is because in the valley and software companies we have new business models and I'll get in that in just a second but the only way you can deliver that new business model is if fundamentally you have a new operating model and so the the the challenge is that it's actually the things that we don't see in the digital world the operating model and the business model that enable the digital experience that is so disruptive and so we have to actually look behind the scenes to understand what we can do to begin to modernize so let's start with a digital operating model for one second the first is if you're in a space like what we're in it box there's so much competition there's so much change happening in our industry every single week there's a new event that occurs that we have to respond to so we fundamentally have to be focused on agility and how quickly can we respond to these trends that that are going on constantly in our space the only way we can do that is if we have a flat organization that's able to share information as quickly as possible through all nodes of that organization we can't have information be delivered through a traditional hierarchy of the corporate structure we would not be able to respond quickly enough to what's going on in the business if we had that traditional approach to how information flows and that's then because we can be more decentralized and thus flatter because of that this is not possible with most of the traditional IT systems that traditional incumbent organizations are running on top of you just can't do this with legacy technology in most cases and so if you actually look under the hood of how most startups work and operate collaborate how we share information how we work together we're using a completely different technology stack than what incumbents are using that shows up by then enabling that flatter organization to be able to share ideas to be able to work more effectively make better decisions and only when you start to treat IT as a growth driver as opposed to a cost reducer that's how you actually then get to become data-driven then you can invest in artificial intelligence to be able to remove people out of the process when that's not enabling the customer experience so once you have the digital operating model now let's look at the digital business model what we do at boxes we sell an ongoing service we don't sell hardware we don't sell software that you control that you own and that's basically the biggest trend with cloud computing is you don't need to buy assets you rent either experiences or outcomes so you fundamentally only pay for what you're getting and instead of us bundling all of our technology and all of our products together we deliver them as individual services so we are modularizing our technology and our products so customers can pick and choose any part that they want without being a customer without using any of the others we're already familiar with things like renting assets and network effects that's what Airbnb uber lyft and others are driven by but this is another disruption is is it's not about generating as much economies of scale in your assets as much as how much can you leverage from the other technologies the other products and services that are out on the market only then once your operating model is is modern once your business model is modern does it really make sense for you to be able to deliver great digital experiences that customers are going to love because in the digital world you can't just take that complex bag of services and products and deliver it through a digital medium we have too much choice now there's too much information for consumers so products have to be so much simpler to be able to actually get adoption and to be able to get consumption and when you have that fundamentally different operating model then you can deliver rapid innovation to customers the reason why traditional car companies are in such a difficult position now it's because the speed that uber innovates the speed that Tesla innovates they can do software updates in a couple of days that ripple through every car of technology they wrote a couple days prior so that speed of innovation is unstoppable if your organization your business model is used to three year or even 12 month long cycles to be able to get those products in the market so now you take those three areas you put them together and they continue to reinforce each other over time and this is what is so precious about digital is the companies that get this right really there's a compounding advantage that you just can't catch up with by investing the dollars or hiring the people to try and match this because the companies that have more data that have more customers that changes their operating model the operating model then influences updates business model which then reinforcing the product and that cycle continues over and over and over again to the point where it's a really unstoppable position and so even if today it doesn't look like your business is under attack or it's under duress in any particular area it's probably not that hard to imagine a future where oh god okay there's a Google logo before insurance so it's probably not that hard to imagine a world where Google could use all of its data and all of its customer experiences and deliver an insurance product or we're Facebook by connecting two billion people around the world could actually just do payments on their own rails or Amazon because of all the e-commerce information all the credit information could deliver a loan product and now it wouldn't be about the small fin tech startup that that is at your heels it's actually about the world's best enabled technology companies with modern business models model modern operating models now coming after this industry would your business be prepared would this industry be prepared for that kind of shift that would be nonlinear and and really out of nowhere so here are a couple things that I would think about and that what we talked to customers that we try and pay attention to it's just a couple quick questions to be asking yourself the first is just that basic one is digital a distribution channel for your existing products or have you really rethought the product from the ground up in what the digital world can enable this is the car issue right ooh BRR doesn't distribute taxis via or cars via a digital interface it's transportation on demand and so when car companies are stuck with their legacy business model of selling the vehicle digital interface on top of that's not going to help them the product has been rethought for the digital era the second is is your operating model compensating for a lack of data or signal are you having to put too many people against the problem too many manual processes against the problem because you just don't have the data you don't have the signal that can help automate that process that can make it more seamless for the customer and make it better for your business model this one is is one that we pay a lot of attention to is your IT strategy focused on making today's business more efficient or is it really actually setting up for future growth the easiest way to solve this one is look at where your CIO is time is being spent where what technology vendors are they working with what organizations are you partnering with what types of technology is being deployed if it's the same technology from the same brands or the past multiple decades you're probably not getting all the right innovation you need to be able to marry the the legacy technologies with modern technology stacks as well and is IT fundamentally enabling employees to to move faster move more quickly or as security and compliance or risk sort of preventing that and slowing you down and are all of your digital partners speeding you up or are you slowing them down this one we see a lot you have a big institution a big company and once it partners with the digital company the the big company doesn't get any faster it's just the slow company gets crushed the smaller company gets crushed really be thoughtful of all of your labs divisions that are out in the valley all of your investments are you using that speed to go into the core of your business to help you speed up or is that off to the side and are you really just destroying that that technology partner and then finally is your organization designed to compete with just your peers so the companies that you've always competed with for 20 30 50 years or is it ready to respond to digital disruptors which would include technology incumbents do you have an organization model do you have an operating model that can adapt that the pace that Amazon Google Facebook and others are able to move so those are some of the things that I would be paying attention to as you think about your digital strategy so in closing it's really not about just writing a better application it's not about using data to change the user interface just a little bit it's about fundamentally rewriting your company to deliver digital products in the modern era thank you very much and have a good day [Music] [Music]

Channel: Bank Policy Institute

Views: 8,912

Rating: 4.8461537 out of 5

Keywords: bank, banking, finance, tech, technology, box, aaron levie, fintech, fintech ideas festival

Id: xl92uM_EP1I

Length: 21min 50sec (1310 seconds)

Published: Thu Jan 12 2017