Episode 19 Transcript

The Key to Growth, Scale and Success in a Networked Economy w/ Ray Grainger

    Brent Trimble: Welcome again to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. Again, I'm Brent Trimble and I'm really excited for this episode and sequentially a series of episodes. My guest today is a leader who's been on a mission to reinvent the way businesses do work for quite some time. And in particular professional services businesses. He's on the executive board at Fast Company and is the founder of Mavenlink and executive chairman of Kantata, Ray Grainger. Ray, it's great to have you on the show.

    Ray Grainger: Brent, such a pleasure to be here, looking forward to the conversation.

    Brent Trimble: I'm really excited about this series of podcasts and we're gonna kick this one off around this topic of the networked economy and in particular its relevance and the way it’s transforming the way services firms do business and particularly talent-based businesses. And we'll talk about the current state, some evolution and then eventually how more bleeding edge technologies are really pushing the boundaries of connecting talent in services in the space. And as we get into this, we'll think a little bit about the network economy and the progression to this state. I read a great article in the MIT technology review by Vivek Bapat and he noted that we've gone through, of course, stages of economic development, the explosion of the IT economy and then how information turned into the internet economy and much more fluid, adaptable and accessible information. And then how this is now transforming into the network economy. I think for most of us, we live the network economy every day, peer-to-peer, relationships to brands, to payment systems, to customer service. And of course the IT economy sort of fueled that growth, but Vivek noted that this is an emerging type of economic environment arising from the digitization of fast-growing multi-layered highly interactive, real-time connections among people, devices and businesses. And Ray, you've had an extraordinary and fascinating career in leadership, leading firms from this IT revolution to where we are now. I'd love for you to just walk us through that a little bit, just to set the stage.

    Ray Grainger: Sure, happy to. And I really am looking forward to talking about this particular topic. When I look at my own background and what led up to my current participation as a technology leader enabling talent networks within this networked economy. As I look back at the beginning of my career, I have the benefit of having been in business for over 35 years. And when I look back across that time period, it's easy to string together these pearls of this networked economy and how we got to where we are. And then based on that, have some reasonable prediction of where we're going. And when I look back, when I first started in terms of how people communicated with each other in business, at the time, let's call it the late 1980s, people didn't have email yet, broadly. Some companies had it within their companies, but certainly, those systems didn't communicate outwards other than people working in the government sector. So most people communicated either by being in-person together and that was their world and their community and at best they had voicemail systems.

    A popular one back then was the Octel system, it seemed like everybody had Octel and that's the way you would communicate, was through voicemail. It was asynchronous, but there was a lot of latency in the communication. And then several years later when we had the information superhighway, now known as the world wide web and internet vicariously. In 93, people started to have better access to corporate emails that intercommunicated with other email systems broadly. And so you had this continuation of the speed at which people communicate. You couple that with globalization that started way before that, where people were moving operations to different countries and leveraging labor pools and talent all over the world. And then the progression now to the hyper connected world, you can kind of see how it all fits together. I had the benefit when I was managing partner at Accenture to work with a lot of high-tech companies. And what I saw was them taking full advantage of not only in being the technology company laying the infrastructure for all this hyper-connected world in which we live in today, but also participating in globalization, leveraging resources across the globe. And so it's just been a good perspective now to look at how all this has evolved and then start thinking about the implications to the services businesses of which I spent a lot of time either in, or helping. And what it means to the talent networks that they leverage in order to run their businesses.

    Brent Trimble: Having the benefit of that, seeing connectivity in its infancy and then having that really prescient foresight to see where it could go is a really compelling arc. And when I was thinking about this episode, I looked back at a couple different articles and HBJ had one around the Dawn of the E-lance economy. It was written 24 years ago, so it's really interesting. But like you, some of these leaders were saying, there's going to be because of what we're building now, this infrastructure, this backbone, eventually this progression into a networked economy and I'll quote those elastic hubs of talent joining together for compelling projects, then disbanding and reconstituting coming back together for others. The authors said that individual workers will circulate throughout the E-lance economy as independent agents joining together into temporary companies as opportunities arise. And then the MIT journal that we quoted earlier, the network economy will create entirely new ways of working. It'll change the contract between employers and workers that have been in place for decades, if not centuries. The whole idea of employees in the relationship to business will be reimagined. It sounds like as you were leading and observing and really driving change for these talent networks that were large services companies, globalization, the arbitrage of labor markets, that you were really laying the foundation and sort of synthesizing this information that eventually led you to the founding of Mavenlink, now Kantata. Give us some insights there on how you started to see that the need arose.

    Ray Grainger: Sure. Well one of the things that were very clear and that led to not only my own, I think, personal success, but what I observed in other people having success within the large consulting firms is they are really a network of talent pools around the world. So you might have 100 or 200 or 300 people in a particular office in a particular location and your clients' demands were unending in terms of what they needed and the talent required to deliver on those outcomes. Especially back in the day when you had limited internet and used voicemail, you had to really build a network. And it was really a lot of your own effort in building that network where you knew the talent was so that you can effectively deliver on what your clients were asking. Over time, of course with email, that got a bit easier to do, but these firms did and still operate because of their scale as a network of talent across the globe. I had some consulting engagements, I had one in particular where I had a wonderful client that had about 8,000 people spread around the country in 10 different offices. And they were all masters or Ph.Ds, about two-thirds of their talent was very skilled and educated. And yet they struggled to identify where the talent was in order to deploy them on the right projects to get the best outcomes for their clients. And so I was engaged to help reinvent that, this was actually in 1993. And so similar to the E-lance economy, recognizing, okay, what is their network?

    And looking at talent based on a network concept and thinking about a supply chain kind of orientation was where I had my thinking or my head in the middle to the end of the nineties. So similar to the article on the E-lance economy, HBR, I recognized that being networked was everything in this business. And knowing who was where and if they're available and how I can get them. Most of the large firms still operate principally in a tribal knowledge or manual way in terms of identifying talent and it’s really a series of people to go through to get there. And based on my client’s work and my own experience, recognizing that the technology boom was precipitating a real diverse set of skill requirements that you needed to assemble this whole move to the digitization of everything, the range of skills required and the high demand. I mean, a need to deliver it now required a new way of thinking around how to enable the services industry. And that really led to the establishment of Mavenlink, which in its name “Maven” these experts being linked together, really was the fundamental concept. And doing that required a very data-driven process, right? Again, I use the term supply chain orientation in the thinking, which is a very heavily data-driven exercise across clients, your firm, suppliers and how to think about this whole delivery in terms of a network and supply chain orientation.

    So that was really the Genesis of just a lot of experience in living in it day to day and then seeing where a connected world was gonna allow us to end up. And of course, I think most people now can identify with that, having gone through the pandemic, the entire world, all at once, experiencing a work from anywhere approach and having survived it and some actually having thrived more productively through this period. And I think that this idea now that people can be more independent, they can perhaps be multi-affiliated with different companies and have a demand source that's global and they can provide their services anywhere in the world. So it accelerated it, both technology as well as the pandemic that we all went through the change at once. And so this was the lead-up to building Mavenlink as what I see being able to do in the future in terms of enabling this new economy.

    Brent Trimble: The big five and Accenture in particular really make the market. I mean they're market leaders and in many ways defined service delivery. Whether it's managed service delivery, consulting strategy, implementation transformation and I'd love to dig in a little bit on those experiences because these firms, the Accentures, the Deloittes and so forth, really define and drive or drove that notion of talent networks. And you've got a new joiner, a recent grad going back to Arthur Anderson and even Accenture, I think Lake Charles and they start their career and their orientation around this notion that as they progress in the firm, they take on more responsibility, build expertise, build career tracks. But this notion of the network is key, now the network of course is contained within the firm, but it's drilled in that ultimately building that network results in the notion of the network being their net worth. But ultimately even today a bit, these are still very closed systems. They're massive, I mean I don't have the latest Accenture valuation or employee count, but it's something like half a billion colleagues worldwide.

    Ray Grainger: Yeah, they're closing in on 600,000 people right now.

    Brent Trimble: It's massive, yet that's still a contained network. So with your experience being on the inside, then the notion of forming and building Mavenlink with an eye toward the future, what are some of the pressures you see on the current staffing, services, expertise model and how do you think it needs to evolve?

    Ray Grainger: Sure. To illustrate, I think what's going on now and where I think it needs to go talking a little bit more about what the big five in particularly Accenture in my experience there and what I've observed since, the big firms principally throughout most of their history and again, the big firms that are consulting today, the PWCs, the Deloittes, Accentures, KPMGs et cetera, most of them grew on what I refer to as an academy model. You alluded to it a little bit where the growth was done principally by local offices, hiring locally, typically from local universities, bringing in high potential candidates, taking them through very rigorous training. Many including Accenture had their own academy training centers. In Accenture's case in St. Charles, Illinois, where they were able to build uniformly around the world methods, techniques, tools and general education around how to be a good consultant. And they did that through, again, this academy model where people progressed throughout their career and then began to learn from others through their deployments on projects and clients.

    That worked pretty well up to a point, when I joined the firm, we were somewhere between 10 and 20,000 people. So large by any standards, but far smaller relative to the 600,000 that the firm has today. And so you could grow a firm and keep a pace with marketed 15, 20% growth rates by using that academy model. But the minute that the world got sped up through the internet, through this hyper connectivity, through an explosion of technology and every company having an imperative to digitize all of their experiences, the range of skills required and the speed at which I was required to deliver to our clients changed. And that's for everybody, that's for the large firms, as well as the niche firms that specialize in a particular area, those pressures are still there and it's very competitive. Clients have a much better understanding of what they should pay for services. Services providers, or services cost make up perhaps 30, 40, even 50% of their payroll costs to deliver to external providers and so the whole landscape has changed.

    In Accenture, as many may know their response: one, to grow the firm and two, enter new markets was to do numerous acquisitions of talent. Accenture has become one of the most acquisitive companies in the world. I think last year they did something like 110 acquisitions alone in a single year and I think they're on a similar pace for this year. So they've responded through the acquisition of talents. Now most people, it would be difficult to do that much acquisition. Accenture feels compelled to do that, in order to grow because they're gonna turn over another a hundred thousand people a year who will leave the firm and so how do you make that up and still grow the firm, it's through acquisition. It’s their model as it is for many others too, that are on the larger end of the spectrum. It's also one of the only ways they can meet the demand for diverse talent. So this idea of cycling through your workforce is considerable. Now they can do it, as you mentioned, it's this large self-contained network and they're growing it through acquisition and bringing in new people. But in order to feel confident that they can control the supply that they acquire, I think the new model moves beyond that for most people.

    Most people can think about what might, again, I bring up this term supply chain orientation. People are often reluctant to use that term when it relates to people, but it's the thinking that goes behind it. Around how to think about your workforce that goes beyond your full-time employees and really think about the network of partners that you can bring to bear at any given time to leverage the demand in the marketplace and the skills requirements. So this idea of an asset-light services firm, asset meaning permanent full-time employees, allows you to be more nimble and respond to markets much more quickly. I think to manage a higher profitability and make good on the promises to your clients that you will deliver the best talent to help them achieve their outcomes. And so I think this idea of talent networks that go beyond the firm that is a really ecosystem of people. And the changes are pretty dramatic when you look at how people need to manage their businesses based on that and having people be these really talented orchestrators that go beyond their own business boundaries is, I think, where we're headed pretty quickly.

    Brent Trimble: I wanna follow up on that notion of orchestration, but before that, there are two barriers we see in the market. One is this notion of software or technology as an enabler in the space of professional services automation hasn't really been keeping pace or hasn't been adopted. And what's really remarkable is you look at an Accenture all the way down to a niche consultancy who are deploying talented people with great insight and expertise to transform their business. Yet those firms have been slower to adopt maybe transformative software in kind of that cobbler's children's shoes phenomenon. So with those two tensions, one, the PSA arena needs to transform. And then conversely the behavior on behalf of the services forum, where do you see that going?

    Ray Grainger: Sure. Well I think contextually and historically the large services firms were kind of bifurcated, meaning that there's the corporate dimension of the firm, which is where they handle I'll call it a shared set of services for the rest of the firm, which is deployed to clients and to projects. And they're sort of outside that part of the business, meaning they're effectively in the field delivering. And so they're somewhat autonomous or have been, historically, somewhat autonomous to go use their skills and expertise to deliver in any way they see fit for those clients. While there may be some dimensions of common delivery methods and those kinds of things, it was really kind of an autonomous group out there. As long as they're delivering to the profit targets of the corporation, they were pretty free to do what they needed to do in order to make that client successful. And so from a systems perspective, most of what was required is what I'll call managing the financial capture of what was going on out in the field. And so the tools, at least from a corporate standpoint, were somewhat limited to I’ll call it time tracking. And some level of margin project accounting, both at an engagement portfolio, you know, region, et cetera. So this roll- up across firms became much more paramount to do much better financial capture as these firms began to go public, right?

    One notable one that I think probably did a poor job of that was BearingPoint, which ended up going bankrupt after a hundred years of being a private company because of their lack of, I think, effective financial capture across the whole dimension. So I think this bifurcation of the field can kind of be autonomous and do what they want as long as the corporate needs are being met. Which were principally financial capture is the history of most of PSA, at least in the large firms. And a lot of that was actually custom built and then added onto from SAP, Oracle, those types of ERP systems. What is, I think, driving a lot of change today is that it's insufficient anymore to rely solely on these big engagements running over a long period of time where you could flub up in the beginning and make up the margin at the end. And so just trust me, everything's gonna be okay, stay off my back, I think that's becoming less of a viable path. Engagements are shorter, many of these companies are public companies and they're held to a different standard in terms of the market. And so I think that there is this notion of thinking about supply chain orientation across the entire spectrum. And this would include having a consistent method of engagement, planning and estimating, for example.

    So to have some predictable codified way of this is this type of an engagement, this is the level of its complexity and these are the types of resources that were historically deployed to high success in these types of engagements. It moves it out of the tribal knowledge state. And as these firms are hiring more and more people that don't have the benefit of that tribal knowledge or history to engage in a system that's much more uniform and predictable. So you're seeing the emergence of engagement planning capability that gives you very high demand signals that are fairly accurate. That can then move through the planning and execution cycle, in which you see a lot of adoption out there for the collaborative work management tools. Now our products also embed those types of technologies, but you also see people buying them independently out in the field because to some degree, they're still thinking they can operate autonomously away from what I’ll call the financial capture dimension.

    When you think about coupling all of the engagement planning so you have very good demand signals with the planning and execution and then you tie in optimizing resources. So again, supply chain orientation of optimizing across then a talent network, everything changes. Smaller firms can now really effectively participate with large firms because they've got an unlimited demand or supply. If they are good network people, they've got potentially an unlimited supply so they can operate with infinite scale. And so they can compete and grow faster if they adopt one technology more broadly. Now I'm seeing some of this emerge in the large firms. Most of that is being developed by themselves, it's quite costly. And I think the independent software market is emerging so fast and it's much easier to build and deploy technology that I don't think they'll keep pace, but that's what I see going on in the market.

    Brent Trimble: So what you started to describe, I think ties into this concept of orchestration. And we've just gone through a new branding and positioning and centered on a new brand to the market called Kantata, which just by friendly coincidence has a musical connotation and orchestration. So in a perfect world where maybe technology weren't the barrier, what would you see as an orchestration model where talent, client demand, fit, maybe propensity of success and sophistication come together? What would that look like?

    Ray Grainger: Sure. So imagine a world where technology wasn't a constraint in your business, that you really had access to the right information, the right data at the right points in each part of the value chain in order to make really effective decisions. So technology enabled you to operate in that way, which would take much more of the whipsaw out of your entire supply chain. What that allows you to do then is focus on demand generation, branding, marketing, growing your firm, taking on potentially new business that you might not have anticipated previously. Because there's a higher likelihood that you will be able to get the supply of talent that you need to deliver on that. So you're now able to move beyond just being a niche provider, you've got these great client relationships. They trust you, they rely on you, they'd like for you to be able to do more for them and historically you would've been supply constrained and stayed in your niche. Now with this infinite data being able to operate at infinite scale because you've got access, you've curated, nurtured and have access to new partners. Everybody is sharing availability, skills, talent all over the globe and allows everybody to participate equally in this market, given that the demand is still so high for services. Most services firms are really supply constrained today. In fact, they're probably growing at half the rate that they could if they had better access to a talent network. Then being able to operate with this idea of unlimited capacity or unlimited scale. So that's what could and would happen in a world where we operated with supply chain orientation, orchestration as a mindset and all the data in order to operate like that.

    Brent Trimble: That’s great. And I think many services leaders would be thrilled to be growing at 2X the rate that you highlighted there rather than being constrained by their supply. Before we wrap, I'm just curious to know, you have an opportunity now in your chairman role and your leadership role, both helping cultivate and form and guide the trajectory of Mavenlink now Kantata. And then conversely, talking to clients in the big five at individual corporations. Do you have any examples of either niche technologies, of course our own product roadmaps, are very exciting, but firms that are putting some of this into practice that might be of interest where you see good examples of at least the beginning of an orchestration being manifested.

    Ray Grainger: Sure. Well I think one, services firms are recognizing this need for managing their workforce more holistically and thinking beyond just the employee base. I did a webinar the other day, hosted by a consulting magazine where we had the chief people officer of Deloitte, as well as the CEO of MBO partners, for managing partner at PWC and we all agreed and concluded around this talent network concept. So I think that's a direction that companies are going to be going. So the supply chain orientation, broad workforce, work from anywhere, access to talent around the world is a theme that we're going to see more and more of. So our aim at Kantata is to be able to be the choice technology provider for the services industry and to enable that entire value chain from demand planning all the way through billing and financial capture, resource optimization, et cetera and everything in between. So we want to be that place that people go to for that.

    When you look at where the emerging technologies and I'm really excited about some startups, some firms have been a bit more mature with this idea that I mentioned earlier of engagement planning. I think it's really important. It's sort of starts the process of people doing things right to begin with; this is typically today done on spreadsheets. And again, just based on the experience of whatever engagement manager I've assigned to the role. And so being able to orchestrate data across your sales systems and then into your execution systems much more uniformly, I think is a really good area. Another area that I really like is, there are some firms that are developing technology around what I'll call defining the skill sets of the industry. One of the things in order to be good at resource optimization is you have to describe what you need in clear terms. And so firms are using AI to synthesize what would be the defacto skill set based on the way people expressed it. So building this ontology of skills for the entire industry that I think will be a big enabler of the talent ecosystem. So those are two in particular that I see firms developing and the ones that we’re very excited in.

    Brent Trimble: Oh that's great and fascinating. Well we're gonna go into a few of those in our follow up sessions. And as part of this series, it's been a really great kickoff to ground us and our listeners in the notion of the talent networked economy. In the next series we're going to talk to some firms that are going through that evolution, leaders and you'll coordinate those conversations. We're going to talk a little bit about firms that are going outside the walls and how does that relationship with more fluid talent networks evolve. And I think you reference kind of AI as a supply chain enabler and a predictive platform for services firms, really building out those taxonomies and skills and ontology for the future. So I look forward to those sessions and going in detail. But first of all, thank you and I know our listeners will really appreciate the insights. I mean hearing the progression from very closed analog systems from the IT age, all the way up through where we're going with Kantata has been really fascinating.

    Ray Grainger: My pleasure Brent, really enjoyed the topic, looking forward to the follow on.

    Brent Trimble: That'd be great. And then as always, feel free to reach out to me or us with any follow-up questions on the topics we've described, ideas for the future episodes and any general feedback at podcast@kantata.com.