Grand Keynote Conversation with Nikesh Arora, CEO of Palo Alto Networks and others I TiEcon 2021

our next grand keynote is nikesh arora ceo and chairman of palo alto networks formerly the chief business officer at google and president and ceo ceo at softbank nikesh has been at the helm of palo alto networks for three years as a leader in network security and now cloud and ai for the session today he chose the topic of scaling and transforming companies as we were discussing who we would like to bring in as a moderator he suggested why not someone i have worked with he picked two employees from palo alto networks nelima brustaghi and ankusha who had both come to palo alto networks from companies that nikesh had acquired please join me in welcoming nikesh arora chairman and ceo of palo alto networks welcome to the grand keynote of tycon 2021 this is ankur and i'm joined by nalima we are fortunate to have with us nikesh aurora the chairman and ceo of palo alto networks prior to joining palo alto networks nikesh was the president and ceo of softbank he also spent a decade at google as the chief business officer hi nikesh thanks for being here hi ankur nice to see you on this platform uh nice to see you in neelam thank you yeah i i gotta be honest as uh as the employees this is like interviewing amitabh bachchan so our apologies if he freeze midway through the interview i just want to know who you are in that movie [Laughter] yeah i know thanks for taking the time i know it's like four days to touch down the end of the quarter uh you're juggling multiple priorities and uh we certainly appreciate your time um look there's a lot to cover today but we'll focus our conversation on your journey at google at palo alto networks uh and most importantly your approach to growing and transforming businesses so kind of to kick things off what's been the biggest surprise for you in the last one year your anchor of the last one year has been eventful at best you know we the world has gone through one of the the worst pandemics we've seen in our lifetime you and i at least in ilima and i think what's been surprising has been the resilience and adaptability of people to be honest like you know we were all in the office and we found out that we'd have to shut the office down i think we all thought oh it was going to be gone for about a week should we say two weeks should we say a month to be conservative and here we are you know 13 months later we're still working from home and you know we all thought the companies are going to go into disarray demand was going to go away the world was going to be in tremendous amounts of chaos in some parts of the world unfortunately still are but to be honest the base of innovation the base of technology adoption the demand for certain goods and services the adaptability of human beings how we've all managed our professional and personal life has been phenomenal and i think in that context what we've tried to do in our company is you're well aware of is you know we had the luck perhaps and some degree of foresight to say at this time the most important thing is to reduce uncertainty and anxiety from our employees and as you know we in the team have been dedicated towards constantly working at eliminating anxiety reducing uncertainty you know allowing people to flourish in this uncertain environment and i think that's been the most humbling and the most interesting thing that's happened in the last one year yeah well said um it's been an interesting year and uh you know companies like palo alto networks has done an incredible job of kind of navigating the employees through this i am so glad you didn't say that uh fake coin like dodge coin reaching 40 billion in market a cap would be the biggest surprise of the year i'm sure i'm sure elon musk is going to do that on saturday night live i think he's hosting it on saturday so exactly pumping down because speaking of something that's grown in market cap significantly you arrived as ceo for the world's largest cyber security company three years ago having no background in either what experiences and core principles got you here well nina it's an interesting question i think i think there's there's kind of two sets of answers to that one is i've always literally finished a podcast on managing careers for employees in our company and i've never tried to manage my career i've always tried to have fun try to enjoy what i do and work around really smart people in a growth environment um i was blessed to do that at google i was blessed to do that at softbank with a whole bunch of startups some of whom were in india and i was really really blessed to be able to work on that kind of growth mindset and actually enjoy what i did so in that context i wanted to work somewhere where i was going to have fun it was a growth business uh people had a growth mindset it was a fun place to be and you know networks is definitely all it doesn't then some i think the the other aspect uh which actually helped me a lot over the last few years ago you know i have a funny story when i was my daughter was 12 she's 23. my father was visiting was since passed away with als and i could overhear a conversation in the back where they were saying she was saying grandpa it's time you learn how to do video chat because if you video chat you can see my face and he's like listen i'm i'm old i don't have any time or desire to go learn something new you're just going to have to call me the old-fashioned way and my daughter insisted that if he was not going to learn video chat you know how she's going to communicate with him and i was overhearing this from the other room and that just that day i sort of raised my hand in exhaustion of the number of apps that were out there and i said you know what i'm not gonna figure out twitter it's gonna it's yet one more app social app to go figure out and that was the day after which i've made a promise to myself that i was not going to stop learning and i was never going to have that attitude where i've got it i've known enough and you know i set myself a challenge to get a certain number of followers on twitter because i want to learn it i've always set myself challenges to learn i'm sorry for the along with an answer but i came to biola networks i said i don't know cyber security but i'm sure i can put my head down and learn it and i have to say the first six months and you know ankur is being modest he was part of our business cloud team and you were part of the domestic team and we acquired the companies and you can imagine you already know the number of questions i would ask which i'm sure you sat across the table and said oh my god we're going to have to educate this guy from scratch but i have worked tirelessly for the last few years to learn the industry learn trends learn what the customers want learn how our products work learn how competitors products work and that's been the most rewarding experience for the last few years is the amount of learning i have been able to have and hopefully contribute and return to the growth of our company yeah is that the hunger for continuous learning kind of gave you the confidence that you can actually join a company and disrupt a cyber security space with over like three thousand vendors uh it was an interesting diamond car i was sitting there and saying this is 140 billion dollar industry there is no one company which has more than two and a half percent market share it's one of the few industries in the world which is so fragmented that there is no natural leader and which is counter to the thesis that in enterprise scale is important if you look at the oracle's world in the past ibm or you look at the microsoft's world today and you know google and amazon building large enterprise businesses you realize your sales force you realize enterprise is about scale because eventually you need a lot of people out there working with every customer and they need to back the truck up and lots and lots of products and in cyber security that's not the case in cyber security almost every company when i looked at three years ago was in my mind relative to those giant subscape so i said there's an opportunity to build a leader and the leader is about scaling an organization um and in that you have to have a combination of great products across the customers want you need to large teams out there and you need the ability to build an operating system that allows you to scale and become as large as some of the large enterprise companies out there so that was the opportunity i saw and that's that's the journey we're all along in terms of trying to get to be the natural leader where you become the must-have cyber security partner for every company out there so speaking of scale one of your core beliefs is that building 10x is easier than building 10 can you explain that more well i have to credit uh you know the founder of google larry page for that because that was a belief that that was his belief and if you look at people who achieved great things they've had audacious goals they've tried to pre-invent many things or reinvent many large things in the world and they've applied themselves and tried to get resources and value resources to make that happen you've seen that in pretty much most transformational companies out there whether it's just love that it's over to its credit whether it's google whether it's many of the large companies today we write law formats they've all aspired for audacious outcomes and so when you aspire from audacious outcome when you get to 3x you're not perfectly happy or sweet times better than where you are if you aspire for ten percent you get to three percent you're not happy at all so i think it's a lot easier to aspire for something amazing and great and get halfway there and be happy about it then to aspire for incremental change and then be really unhappy even if you got there to be honest yeah gotcha um speaking of uh building 10x products um you're also known um for your brutal product reviews and i've been actually we've been victims of a few of those so couple questions for you uh is this something you picked up at google very product centric organization obviously and second thing is that sort of you know sometimes to bring the best in people you gotta amp it up you gotta you gotta um you know you know uh set the bar really high for your employees how do you get the best out of your teams and maintain that level of intensity well there's a lot of questions that are occurring sure you and lillian are speaking from personal experience and thanks so thanks for watching our our laundry in but uh we love it if you think about it it was very funny i had the privilege of running into peter drucker once at a conference by many many many years ago and he had those 4p principles right product promotion pricing and position position and i sat and i talked to him and i said hey peter what do you think about google he's like what do you mean i said at google there's only one p he's like what do you mean i said it's only product there's no pricing the products for everyone and there's no promotion the product sells itself because people use it and they want to use it forever he said yeah and he kind of like ignored the fact that i set three variables three of his p's to zero and focused on one p which is product and it's a very fundamental principle if you believe you can build the best product in the world then all the other things matter less and you can play that game whichever way you want you know you buy iphones i don't you know if you had sat down and built a plan to go sell tens of millions of iphones every quarter you say well people can't afford it and how can a person who's got a low disposable income go spend a thousand dollars by a phone guess what i think the the amount of iphones out there in the world will disprove the theory that there is a buying threshold for iphones from a price perspective so i think superior products trumped every other p over time on the contrary crap products eventually are the downfall of companies so if you believe that i think having a great product is fundamental to the existence of a business enterprise um so from that perspective if we don't strive for excellence in our products we don't strive for a product which the customer wants that allows the customer that the customer consumes and wants more of we're in the risk of we're at the risk of you know destroying the business so i think the product manager is the most important people in any company because they are responsible for the entire value chain of the business and uh unfortunately they have to be held to even higher bar than everybody else because if one sales guys you know misses one sale if we've got other sales people selling to other places if you miss a product even destroyed the entire possibility for that company to excel in their certain space so i think you've got to hold all the product people a high bar and uh you got to push them as much as you can within reason to make sure they're doing their best because they are effectively the the backbone of any company that's out there trying to wire the customers so going back to building great products okay uh for building great products you often have to disrupt yourself or you will get disrupted and disruption is often very uncomfortable for organizations what is your advice on striking a balance between staying the course ramping up or charting a new one you know as you've experienced at our company we were a phenomenal network security company when i started and today we have the privilege of being a player in cloud security and autonomous stocks and data oriented or machine learning oriented security which is more behaviorally oriented now you have a choice i think i think disruption uh if you don't if you don't play the destruction card you have an existential crisis you run the risk of obsolescence so it's no it's not it's not like disruption is a choice i think disruption is a necessity especially in an industry where the bad guys are constantly innovating the bad guy is not sitting down let me try the same security hack i tried 15 years ago because by now ankur and nelim i would have built that solution so let me go try it again they're working on stuff you're not working on they're trying to figure out how to go build a new attack vector or new supply chain attack as we've seen recently which nobody's ever thought of because i'm going to go out fox and outwit the product manager in the cyber security industry so these guys are innovating and they only have to be right once we have to write 100 of the time so we have to constantly disrespect disrupt ourselves because they're looking to disrupt us so i think the challenge of the bar in cyber security is so much higher in than any other industry that i think for us it's an existential threat that if you don't disrupt you die so i think from that perspective we've got to accept the challenge that we work in an innovative industry whether it's ours or many other industries out there where com competitive forces are constantly innovating you've got to believe that if you're not going to be constantly thinking about how to disrupt yourself and i think disrupting yourself means doing better every other day in reinventing it so that the customers have a better outcome reinventing it so that the you know you're solving a bigger and better problem constantly you're on the risk that somebody's going to come out of that field and disrupt you totally and sometimes you can try your best and you're doing evolutionary disruption and then you get revolutionary disruption that comes from the other side you know which is what apple did to the entire mobile phone industry they said we're not going to parlay to every mobile company out there and try and get input from them how to build an explorer it's going to build it ourselves and we'll tell the world this is the best thing they need sometimes that happens too right so the entire mobile phone industry was evolving to a better state over time and they came in from left field and disrupted an industry where they had no experience in it so you've got to constantly look at those examples and see for tesla right they've forced the entire auto industry to start focusing on evs and making ev their target number one because they've proven that they can be extremely successful by disrupting what is a traditional industry okay uh so that actually is a nice segue into the transformation thing uh so in the three years we've become leaders in multiple spaces cloud security network security in the sock in hindsight this now all makes sense but what were the chess moves along the way you know it's actually interesting emma uh what happens is typically uh what is that phrase that says you know you underestimate the long term and overestimate the short term yeah yeah this is the short term and you you don't pay attention to the long term so one of the things which we did early when i sat down with the founder near and with lee our chief product officer and i said listen let's worry about where the world will be five years from now so there's some very interesting principles we came back with we said the biggest change in our lifetimes that'll happen to computing as a cloud which means we think most companies of small to medium size will actually stop building data centers and start relying primarily in the public cloud and start building the infrastructure there and if you look that's kind of true for all the new startups you see in the world they're pretty much there's nobody's out there buying servers hiring devops people building their you know multi uh sort of vendor instances everything out there in aws gcp azure now when people go to the cloud it fundamentally changes the network architecture of enterprises it changes the security paradigm you no longer have to worry about infrastructure secure you have to worry about application security and what you're developing you've got to secure your data from other people who's going to want to come to have access to it and so that was one principle he said if that's true what also happens if public cloud has to succeed over time the cost of compute and the cost of storage is going to go down it's not like moore's law will constantly keep going down which means to be cheaper and cheaper to store data and cheaper and cheaper to compute and to analyze data if that's true then you don't have to push signatures to the edge devices in security because you can actually start focusing on behavior analytics which is actually truly the right way to do security because you got to watch anomalous behavior and say this is bad behavior let me shut it down as opposed to say oh you know this is the idea this is the signature so with those two insights we said we're going to go big in cloud we're going to go big in data ingestion analytics and behavior analytics and what is the impact the cloud is going to have to our network security capabilities so if you look back in three years it's kind of hindsight is a wonderful thing everything looks you know like a plan if you look back what we did the first acquisition we did actually was redlock which was where we said that's a cloud security platform we had evidence we didn't have enough cloud security and redlock became the backbone of our cloud platform strategies uncle is there as he's aware painful he was part of the redlock team he said what's next they said container security and uncurrent team said we'll build it outside in the market there's two people who are two years ahead of you let's go ingest that because it's gonna take us two years to catch up to where they are today and they'll be two years ahead again so we went and ingested and effectively paid for our lack of innovation over many years in the past by getting up to snuff with innovation today what the innovations we do on the cloud platform are stuff that nobody else is doing out there the last two years we had to ingest and pay for technical debt and buy back into our company all the things that people are working on from innovation perspective so in hindsight it looks like you know this was all all working but the second acquisition as you know the illumina we made was to mr which was the solar platform we said when you collect a lot of data and alerts you got to do automation and soar is going to become the underpinning of our ai platform because we're effectively training our data by automation so you know those are the bets we made and once you make those long-term bets and you start adapting your business towards long-term bets many customers out there understand that that's the right strategic direction to go to and then they become your partners if you're tactically solving short-term problems they don't understand where you're going and that scares them and hence they go look for they take the onus of strategy themselves so if you want to be somebody's true partner in the enterprise world you've got to make sure that they see your vision and you've got to make sure that your vision aligns with their view of the world and there will always be some people who will not align your door and that's fine you only need a market share to win yeah it's interesting you should say that uh you know originally we we said hey we can build uh container security and build that and a lot of companies actually think like that right like we can build our way out of transformation as a matter of fact like before you joined palo alto obviously the acquired companies but in a very cautious manner uh what's the what's the thinking behind build versus buy well you know i think there are multiple uh considerations right obviously the number one consideration is is is what your customers need something you can provide today yeah is there somebody else providing it better than you can will you be able to catch up and be able to do a better job than them if not you're better off acquiring them if it fits in your portfolio right so take cloud security for example we saw it was early days we didn't have as good of a security platform as obviously redlock did we acquired it and we ingested it and integrated it now so you do that by making sure that's that's a strategy that you believe is right for the long term so we acquired that we acquired redlock we acquired first law we acquired a series of companies in the cloud ecosystem but once you get to a certain point realize integration costs a lot more than build and at that point at that inflection point is where we reached on christmas cloud is you know we started innovating faster internally and built an x4 module ourselves because we said the cost of integrate is too high is better off to build and we have enough best of breed first products in the platform that our customers will will wait for us to do that integrated innovation which they were not going to wait in the first instance so i think you've got to strike the balance and it's category dependent there are some areas where we decided not to play as a company because we didn't believe that we could add any more incremental value to what the best player in industry out there was providing and it was a price we couldn't afford so it's really topic specific but there are some fundamental principles i think uh first in the market trade at a premium to second for a reason because they're first and if you buy second then you end up being second and the probability that you screwed up is higher and you give you the wide even you know the gap widens between the first and second because they're busy integrating with you while the first one gets a clear run so i think your your best opportunities in life are to go buy the best product out there in the market and find a way to scale it um not try and cost optimize to number two and number three which usually means you don't have strong enough belief in that segment because if you believe in something it should be a 10x as we said earlier if it's not if you have to pay 2x or 10x doesn't matter i've also heard through the great point that you negotiate a lot of deals yourself don't hire a lot of bankers um for the entrepreneurs listening out there can you share some of your secrets if you want to get acquired for top dollar well um i'll tell you what it sounds more dire than it is the reason i prefer to have the conversation myself is you are not making an acquisition if you do it right you're welcome welcoming somebody to your team and your family and you don't need interlopers to act on your behalf who are transactional in nature sometimes to try and create the right bond and the right understanding i think a lot of the early discussions we have with companies set the bar in terms of what our expectations are and what their expectations are so i have the conversation directly with founding teams or many of us have the conversations directly with aunties but we want to make sure they understand who we are we want them to come in with their eyes wide open this is the beginning of a journey for the team and the end of the journey for the investors very often what bankers do is they maximize the outcome for the investors and perhaps they're not as invested in the outcome for the team so all i will say is that for the most part for the 11 companies required my focus is to make sure we pay investors fairly for their investment in the company and we incentivize the teams to work at palo alto networks for the next two to three years with giving them the right environment the right strategy the right partnership and creating the right incentive structure so a lot of those negotiations are to try and balance the investor interest of the team interest and it's very hard to do that if you have a third party negotiating on your behalf and yes those in those discussions do get interesting if that's what you're implying so uh nikkei last question last year has been very sobering for all of us having said that hope is eternal what is the single most thing you are most excited about the future look neil uh professionally i'm excited about the fact that the rate of adoption of technology the rate of disruption has actually gone up and not down in the last one year because every company has to has had to stand on its head every other thing has shut down the focus and technology has been tremendous which has forced management teams ceos leaders people to go deploy technology faster because that's become the underpinning that's how we get groceries that's how we get food delivered that's how my kids school communicates that's how their calendar is set up that's how we do vaccinations so literally anybody who needed to deploy technology has been forced to deploy touch less technology and faster technology in the last 20 years so i think professionally it's very exciting because the the the adaptation which could have taken three to five years has happened in span of two months so that's exciting because it's going to mean lots of fun for all of us in the technology world i think on a professional basis uh as i said it has made my relationships more meaningful i cherish the time with my family a lot more where i'd be traveling at a drop of a hat now you know when my son says to me are you going to the office and then you're not coming back you're going to dinner oh my god no you know two years ago that would have been a different conversation today i feel his pain because i spent the last year over here and he's six years old so you know as i said if i want to go meet a customer i actually want to have a meaningful conversation um all the frivolous interactions have vanished from my life right i'm not going to arbitrary places and you know i was joking with somebody the other day like it'll be a long time before i go to a 10 000 people user conference in vegas because that's just does not make it to my top 10 human interaction desires for the next year so i think relationships become more meaningful interactions become more meaningful uh and professionally it's a phenomenal time to be in technology so i think that's the part i'm most hopeful and i hope that you know since we're at icon i hope that uh the current crisis that is going on in india go away soon my entire family has been uh you know has had oh wait my mother was in the hospital uh two days ago so i know i many of our fellow uh daikon members are experiencing similar situations either if they're here or in india and i wish them and their families the best my hope that we can get out of this crisis soon i hope that we all do our part in trying to trying to support various efforts in the country thank you nikesh it was a real pleasure to have this conversation with you thank you for taking your time and we look forward to speaking with you again for our next product review thank you nikesh really appreciate the time thank you nikes and team for such a wonderful conversation

Channel: TiE Silicon Valley

Views: 993

Rating: 5 out of 5

Keywords: conference, Entrepreneur Conference, Business Event, Emerging Tech, AI, Machine Learning, ML

Id: MCFhyfoHfS4

Length: 28min 12sec (1692 seconds)

Published: Fri May 14 2021