September 9, 2019
Interviewed by: David Snow
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So Where Do I Start? CEOs Seek Guidance on Automation

CEOs and their private equity partners are keenly aware that automation technologies can transform their business processes, but they usually don’t know where to begin. Three experts from General Atlantic, Automation Anywhere and RSM talk about the right way to roll out an automation effort at your business.

CEOs and their private equity partners are keenly aware that automation technologies can transform their business processes, but they usually don’t know where to begin. Three experts from General Atlantic, Automation Anywhere and RSM talk about the right way to roll out an automation effort at your business.

PRIVCAP TRANSCRIPT

“So Where Do I Start? CEOs Seek Guidance on Automation”

David Snow, Privcap: Cory, as you look across your portfolio, what have been some of the attitudes of the CEO’s when you’ve approached them with ideas for automation?

Cory Eaves, General Atlantic: In most of our cases, the companies, when presented with the opportunity to automate, the returns are so compelling and so fast, usually in these projects, that there’s really not a question of should they do it. I think a lot of companies just aren’t really aware of the state of the art, they haven’t really thought a lot about where they could start, what opportunities they could automate. I don’t really sense a lot of resistance, it’s more just bringing the awareness to people that this is possible, and sort of helping them build the business case to go do it. I don’t know if Thomas would agree.

Tamas Hevizi, Automation Anywhere: So if we step back and think about digital transformation, most of the CEO’s are thinking about that term and thinking about how do I become more digital? Even if I have a three-, four-, five-year investment cycle. And one of the hard parts at first was a very broad topic. And then how do you identify things that you can actually get done during the holding period, versus things that have amazing potential but will take a long time. And one of the things that we heard from customers is process automation is an easy way, it’s sort of tangible, it’s a short-term kind of return project. It takes the analog out of the processes, because a lot of the manual entry goes away. But also it throws up a lot of data, so if customers are thinking about, or portfolio companies are thinking about analytics projects.

You cannot run a broad analytics project with manual data, if you still are pen and paper. So a lot of times this is a good first step. In fact, I think Forbes called it the gateway drug to digital transformation is getting automation done.

Dave Noonan, RSM:  I think, to Cory’s point, it’s clear and obvious that there’s tangible benefit, measurable and sustainable benefit, to implementing this type of a solution. It really comes down to a question of education, making them understand that it can be done and it can be done in a way that’s not overly intrusive to the firm. And it can be done in a period of time that isn’t going to be overly taxing on the firm from either a resource or a cost perspective. And the return is incredibly straightforward and measurable.

Snow: So when a client or a CEO says to you, why should I do this? What’s the simplest answer you have? What’s the most powerful reason?

Noonan: Well, especially with our private equity clients, it’s a value creation lever that they can pull, that they may not have in their plan today, additional, above and beyond what had been planning on up to this point. And I stress return on investment in every conversation. And if we can’t draw a straight line between a dollar spent on a piece of software or consulting engagement in five to seven dollars in return, then you should probably keep the dollar. And this is a place where it’s evident that the return is there for their taking. Yep.

Hevizi: A lot of times a conversation starts with, automation was not in the thesis, when we decided to go after this investment. And it may not even be in the migration plan, because a lot of these technologies are getting awareness now. And so what do we do? How do we insert this into the thesis? And the great thing about automation, at the end of the day, a lot of these technologies we’ll be talking about, ultimately it’s all about EBITDA gains. It’s going to help with the cost reduction. It’s going to help with some other things like error reduction and compliance. But at the end of the day, it’s about cost reduction. So it’s very easy to insert it into a plan, if there were similar targets and especially in SGNA reduction. But I’m wondering if Corey has had a situation where you had to think about automation post thesis, and how you guys dealt with it.

Eaves: Yeah. Yeah. I would say Tomas, we do a bit of both. So in many cases, the cost reduction opportunity is clear as part of the investment thesis. And in that case, we would build that in right up front. And I can set an example or two here in a second of those. But there are other cases where it’s something we may not discover until we know the company a little better, or get in there a little deeper. And this becomes a little bit of an insurance policy, let’s say, against our investment case. I would echo Dave’s comments, the returns on these projects are usually so clear and so easy to measure that they’re compelling. It’s just sort of hard to look at these projects as an executive and not decide to move forward on one of these things. And I think that really comes down to the ease of implementation. These are projects that don’t take months or years to implement. You can sometimes even have business people who are able to craft very simple pieces of automation that can be strung together. And that’s I think part of why these things are so quick to implement.

Noonan: Yeah, and I think that’s a really important factor. Our process for deploying this kind of technology is really not to get into that firm and stay there forever, delivering professional services. It’s very easy to provide training, direction and access to the tool, and it’s not that hard for functional SMEs to be able to build their own bots, and to run their own automation projects internally, without costing anything from an outside perspective. Those returns are even higher.

Snow: Sort of like teach a man to AI fish. 

Noonan: There you go.

Hevizi: AI fish, well said. It’s interesting what’s happening. We noticed a trend. I don’t think it was designed that way, but one of the things that happen is some business functions felt neglected by the transformation agenda, or maybe the value creation agenda. Typically finance felt that we have all these backlog of projects we always wanted to do, but it never gets on the IT project list because they have bigger issues to deal with. And they started automating. So they started using tools that allowed them to get into automation and say when they started using analytical tools without the supervision of an IT organization. And now we’re seeing a synergy between IT and the businesses. Basically saying let us get this, this far, and then you guys, IT brings in the governance. And that’s a very interesting trend because most technology projects struggle with IT buy-in or business buy-in. In this case, they naturally happen. So I thought that was very interesting.

Snow: So let’s say a CEO or a private equity firm is really excited, let’s get started. Where do they get started? I’m sure there’s so many different things that could have automation applied to them. So how do you start?

Hevizi: I see two ends of the spectrum. Sometimes we have a private equity firm got excited and they talked to the management team. The CEO gets excited, this is great. And they have a brainstorm and they come up with 200 different use cases as they call them for automation. And that is just too much. You sort of want to start somewhere because every organization needs to get comfortable with how to integrate robots into the workforce. But then we see the other end of the spectrum where the concept makes sense, but the question, where do we start? Where does it make more sense? As a rule of thumb, because of everything I said about finance, if all else fails, starts with finance. Finance is a great function because a lot of manual activities still get done, whether it’s a monthly closing, daily mark to market in some financial service industries, claims management as we talked about in healthcare, you always have manual processes.

The second reason finance is great because it’s a very structured organization. So they actually understand what their processes are, versus many times you deal with different functions, they’re not self-aware. So finance is good place to start. Like Dave’s mentioned, payables, receivables, journal entry. They can all be automated.

Noonan: We can ask that, I mean it’s almost the first question is where do we start? I have very few clients that come to me with the 200 use cases right out of the gate. They’re saying how do I get there and where do I invest my time? And we’ve actually gone so far as to create a self assessment survey. We did this actually with Tomas’ help, to allow a CEO or even a line of business manager to very quickly assess a process from a quantitative and qualitative perspective, to determine is it worth spending the time to automate? Is it going to save enough money? And is it strategically important enough to business where we ought to spend time on it? And we found that that takes a lot of the guesswork out of it. Doesn’t take a whole lot of time, doesn’t cost them really any money to go through it, and they can come out with a roadmap on, at least a place to start so they can start kind of taken advantage of the platform.

Eaves: Dave, we probably need to get a little bit of that structure for some of our portfolio companies. I find this question of where to start is the key question, for most of our companies is. They’re generally aware of the technology. They know their business well obviously, but trying to manage and marry those two things together is really a challenge. And I think it’s even the basics, like how do you get a baseline in place to measure improvement from? How do you pick a process? How do you build a business case? Just the basic setups of trying to figure out where we’re going to start and getting organized, I think in many cases the hardest part.

Snow: And who should own these initiatives? Should it be the IT department? Is it biz dev? Is it strategy?

Noonan: Yeah, it varies depending on what you’re trying to do. From my personal perspective I believe that executive sponsorship is really important, so we have the CEO or the CFO. The reason being, that if you go to a functional line leader, let’s use accounts payable again as an example, the person who’s running accounts payable may have 45 people in that department that he’s wanting to protect, right? And he sees this as a big threat to those folks’ livelihood and he may not be as apt to adopt, if we didn’t have executive sponsorship. It ultimately gets runs at the functional level, but I think having that executive, or even the private equity sponsorship to deploy is really important.

Hevizi: It’s interesting to build on that. We’re seeing a slight difference in our commercial clients versus our private equity portfolio clients. A lot of times B portfolio companies have CFOs owning these projects because they own the  targets. And traditionally a lot of the large public customers tend to have the CIOs own these projects, so it varies. I tend to see a lot more CFO involvement in private equity customers. Eaves: It’s probably a generalization, but I think PE typically brings an urgency of execution that may not always exist in certain other companies. And so I think typically we’re one of the parties as a shareholder in the business that’s encouraging them to evaluate these projects and sort of get started. So I think that it starts there. But it ultimately has to get owned by the executives and the companies to really own the outcome, I think.

Hevizi: There is an interesting concept that’s emerging, which is to Dave’s earlier point of creating self-sufficiency in the business. So automation should be as easy as you using a spreadsheet, it’s going to take a while, but the idea is that if it’s a very hard complex idea project with data scientists, it’s going to be really hard to take off. So a lot of the technology providers out there are trying to find ways to make this as easy. And there’s even visions out there saying, you know what, if I can click and ask for an Uber in five minutes, I should be able to click and ask for a bot in five minutes. So we’re not there yet as an industry, but it’s an interesting concept.

Snow: Alexa, make me a bot. Right?

Hevizi: Make me a bot. Right.

Eaves: Yeah, I think in some of our more advanced companies who are pushing the envelope, I think we’ve been pleased, maybe not quite to get to that spot, but at least to get the culture to change enough that people ask the question. So that they look at a part of the business, they look at a process and they think, can this be automated? And that’s a big step forward. As opposed to, can I hire someone to do this job? If you can get people in the mindset of like, this could potentially be automated, let’s investigate that. That’s a good place to at least start.

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