A Leadership Perspective: Putting AI to Work for People

Daniel Newman:
What a great lead in, team. I am so excited that we are underway with the 2024 65 summit. It’s AI unleashed. This is one of the most exciting times for me each and every year. This opening keynote session is with someone that I’ve grown to consider a personal friend. He is one of the most inspirational CEOs that I’ve had the chance to get to know and spend time with. And every time I listen to him speak, I find myself fired up. You’ll see him on the big stages. He’s on CNBC, he’s on Bloomberg. He’s been all over the world talking about making work more productive, connecting, automating, driving workflows. It is chairman and CEO of ServiceNow, Bill McDermott. Please join me for this conversation, 65 2024. Here we go.

Bill, thank you so much for doing this this year. It’s great to have you.

Bill McDermott:
Thank you for having me, Daniel. Great to be with you.

Daniel Newman:
It is really wonderful, Bill. I’ve seen you more times than I can count this year on stages. You and I have talks for years now. It goes back a few years when we started talking about the tough macro economy. I remember the early conversations of getting to know you, talking about the conditions of the market, the need for new software to be born, deflationary technology, the ships that are going to happen that are going to basically set up this moment. We were doing it, Bill, before generative AI, before ChatGPT. Before we get started, as the opening speaker of the event, I would love to just get your overall perspective on the tech space, the market and what you’re seeing right now to share it with everybody out there.

Bill McDermott:
Yeah, yeah. Well, we were gen AI before gen AI was cool. So we actually saw this and we have seen this for some time. This is unlike any other revolution that I’ve seen. We’ve been through the internet, the cloud computing, the iPhone moment, but I really believe the AI moment is bigger than all of those combined. And when you ask me what’s going on in the market, my world revolves around my customers and their world. I’ve never seen a moment where every CEO is so personally activated in this massive technology shift. This is a once in a generation move. I think we’ve seen the industrial revolution, we’ve seen the impact of Moore’s Law, but the impact of the AI revolution will be so much greater than all of that.

Daniel Newman:
Yeah, this is the great reset is what I keep referring to it. The winners of past generations of technology, the first, the second, the third industrial revolutions are not guaranteed to be successful in this next generation. In companies that were brand new, that are coming out of nowhere right now, have chance to participate in what might be the most exciting scale growth in the economy in all of our lifetimes. I mean, how are you seeing that? I mean, you talked to hundreds of CEOs every single quarter.

Bill McDermott:
That’s true, but it’s also true that this is all about scale and the effect of scale. And if you’re little, you have to get big fast, because the big companies that are making a move and are successful in AI are going to be even more successful and even stronger. So it’s real important that you recognize, if you’re running the company today, and I do speak with lots of companies in the Valley, here in Silicon Valley, I explained to them it’s not just about the product, it’s also about the impact that the product has on the customer’s business.

I see the world a little bit differently than 1,000 points of dim light with a lot of different products. I actually think we’re at a platform world. I believe the ServiceNow platform is really the ServiceNow AI platform, where we’ve pivoted everything to make AI a reality in every corner of every business in every company in every industry in the global economy. So this is not just a point solution. This is playing for everything.

Daniel Newman:
Yeah, it’s interesting that you say that, because one of the conversations we’ve had along the way is, look, as a CEO that’s building what I would call a smaller company that’s growing, we have made big investments and big bets in software Bill. And I’ve talked to you about it candidly. There’s some really great things in the software ecosystem. There’s also some really frustrating things. I’ve heard you talk about on stage at your recent event, at your recent knowledge event you talked about how some companies have literally thousands of instances of a single software that aren’t all running it in a way that’s compatible or congruent.

Whether you’re small or big, there is a need for this, I mentioned the great reset, for a great reset for how companies implement enterprise software. How fast do you see this happening? And do you think it’s really possible to uproot and change these behaviors that are so deeply entrenched inside of these companies?

Bill McDermott:
You’re on a big point here. These large enterprise systems, the ones that have recognizable brands, have been there over half a century. And that’s what a lot of people are now coming to terms with. Because if something’s been there for half a century, it’s not that easy to pitchfork it out. So what they’re doing is, they’re recognizing that decidable scale brands that are deeply entrenched in the infrastructure are still going to be there. But the customers have learned a lot. 85% of digital transformation projects failed to deliver a positive ROI due to one simple reason, which you and I have talked about many times, integration.

When you did have the iPhone moment 2008, everyone went on the mobile. But when you had the COVID moment in 2020, everybody went home. And then they started to learn how to work on their devices. They expected the same experience on their living room couch from enterprise players as they were getting from Google and they didn’t care very much for a bad experience. So now you’re in a situation where people are being asked, and in most cases have come back to work, only to run into 17 different applications that this swivel chairing between in the office. And I say to people, “Is there any reason… No wonder why they wouldn’t want to come back to work.” Who wants to come back to work when a third of their productivity is getting flushed down the sink just trying to work around these clunky systems?

So what we believe is, we believe this is a once in a generation moment, a ServiceNow, because we are that clean pane of glass that resides above the chaos where you can put AI to work, but do it in a way that’s friendly to people. So if you’re solving an IT challenge or managing assets or operations, or your employees need a better experience or your customers want to deal with you at any channel on their terms, or you’re augmenting the way field service personnel can actually serve the customer better at higher margins, or you’ve got innovators that want to go multimodal and now they want to text a code or actually take a picture and turn that into software code and improve their productivity by 50%, all this is being done on the ServiceNow AI platform. And that to me is such a clean story. I think that there’s the big ones and then there’s the emerging big one that I think can really help customers run their business a lot better. And that’s why I truly believe that the world works with ServiceNow.

Daniel Newman:
Yeah, it’s hard not to be compelled by this. Listen, there might be a few people in your beautiful new innovation center here that saw me snapping pictures, maybe rubbing my head like a genie and sending notes back to some people on my team going, “Why? Why can’t we do this?” And the point is that what I’m so fascinated by is that we can, it is achievable. But it does take grit. It takes some guts to literally say, look, the software your enterprise… I mean, it’s great when you have a clean slate and you’re going to do property, Bill, and you can do it from zero. You have 17 applications that have people that have been aged and trained and invested and embedded and almost built careers to have to now go back and say, look, this has been great until now. Great reset. AI fresh start.

I want to ask you a question. You answered something at Dell Technologies World and I heard you on stage, great presentation alongside Jensen Long and Michael Dell, three people I admire together up there on stage. One of the things that everybody’s saying, Bill, is “Well, you’re going to solve this problem?” I just mentioned, for instance, all those jobs, all those people that have careers that have been built on this. You’re removing swivels. All those swivels mean busyness. Busyness means having to hire lots of people. So Wall Street might love big deep cuts of personnel pruning to grow. The world though wants to see how do we grow? I think you told a story that talked a little bit about how productivity and job gains… Generative AI does not mean the end of productivity and does not mean the need for immediate UBI. You see a world that’s a little bit more optimistic. Can you share a little bit about it?

Bill McDermott:
Absolutely, Daniel. I see a beautiful opportunity here to create jobs, to create prosperity, to go for success and go for growth. Let me explain. In 1966, Time Magazine ran a huge feature and it was based on the computer and what the personalization of computing would do to jobs. The position that was featured in the article is that 90% of the operational jobs would disappear and only 10% would be leftover, and that would be mostly executives, and the states and federal would have to subsidize jobs because nobody was going to be able to work. The computers are going to do everything.

In the United States alone, since that article was published, 90 million net new jobs have been created and most of them by technology. So my creed is really simple. You can’t create jobs unless you’re growing. There’s no jobs without growth. And you’re not going to grow unless you intelligently use technology to create great products, build great teams, tell great stories, isolate your brand in a unique and differentiated manner, and expand an ecosystem so other people think you’re great, too, not just yourself. That’s the case for growth. All of that will be enabled by gen AI in the enterprise. We today are operating a million business processes, 40 billion workflows and 4 trillion machine-led transactions in the enterprise today. That is going to go up 10X in the next few years because that is the power of AI saw in more generative for growth and success and prosperity than Moore’s law was. So we’re in a new ballgame.

Now, here’s what, practically speaking, smart customers are doing. Do you really need hundreds of duplicative systems? And even if you did, shouldn’t they integrate? So we’ve gone to another extreme of integration with 650 of the world’s largest platforms seamlessly integrate into ServiceNow. You can take the data from those systems and run it in a real time engagement layer. So now you can have one engagement layer for your company. Why is that a big deal? Because process optimization is the number one use case in the enterprise for AI, and that’s our core competency.

Daniel Newman:
Yeah, our data came up with the exact same finding, by the way. We released our intelligence on AI and process optimization is what we found. So you are spot on. The single pane of glass, spot on. The opportunity to interface. We can debate the height.

Bill McDermott:
Right.

Daniel Newman:
It’s hard to debate four plus trillion dollars of expected economic growth, but you can debate how much LLMs have been hyped up versus what they’re going to be able to deliver. But what I think we’ve all learned, even from search, people want a simplified UX. They want to be able to go to one place. They want to be able to ask all the questions, and you’re there. Another thing I just want to reiterate about what you said about the growth and the prosperity and the jobs is, I think part of what happens in these mega transition moments, Bill, is that people become a bit uncomfortable with the change so they go to the panic mode. Meaning, “We’re going to lose all the jobs.” It’s a great headline story for Time. It sold a lot of magazines for them. But they couldn’t have been further from the truth. They couldn’t have been further from right.

I do think some bold CEOs over the last few years have come out and said, “There might be some short-term efficiencies identified.” Because of course you’re not going to foolishly spend money on things that you could do easily with automation. But as you start to see those dollars come back through, they get invested in growth because your job is to grow.

Bill McDermott:
100%. If you always do or you always do it, you’ll always get what you always got. My feeling, and I’ll use ServiceNow as a case study, we have 20 generative AI initiatives at the company. We’re delivering productivity breakthroughs that are measurable. If you look at the gross margins, the operating performance of the growth of the company, it’s unmatched. And there’s a reason for that. If you walk into ServiceNow as an employee, and we’ve been hiring thousands of them right through COVID, no layoffs, we’re all about our people pact. I do believe that the true measure of a leader is not what they take from this world, but it’s what they give this world.

And in time to controversy, we have hired and built a great company. They don’t come in here worrying about what my financial system is or what my HR system is or what my desktop system is. We have greater companies that do that, but they don’t have to see that. We have one engagement layer, a fully autonomous company, a company that actually can run without anyone in the buildings, because it’s using the ServiceNow platform powered by AI. We’re getting 50% improvements on our innovators building net new software. Our HR department is winning all the awards because from the time you recruit somebody, hire them, onboard them, give them all their services on the mobile and make sure that they’re trained up to pursue their interests in this brave new world, well, that’s on one system. So if there’s no swivel chairing back and forth, they know what to do, and they’re doing it in a way that’s enjoyable. We’re bringing the consumer grade user experience to the enterprise and the enterprise needs that.

I have one great CIO in a financial services company post up a beautiful slide to their financial shareholders saying how many millions she saved by consolidating hundreds of applications onto ServiceNow. The big ones are still there, but the dim points of light are fading away when they should. If you don’t make the best product and you don’t deliver value, you’re not going to be around long.

Daniel Newman:
Yeah. You hit a lot of important topics there, Bill. We have a few minutes left. One of the things I think is really interesting is going to be how this trend line, AI, single panes of glass, new systems, risks and explosive growth are going to change enterprises. I’m always curious about how does buying change? How does decision making change? For instance, LLMs are going to give way to smaller language models that are going to be industry specific, something you’ve already aggressively gone down the path of. I genuinely believe the big models are table stakes. The small model is proprietary high value data. CIOs, you mentioned. But I also think that there’s going to be new buyers. I think CFOs are going to become more important in the era of AI. I think CEOs are going to become more demanding to have meaningful data, like that beautiful dashboard I was taking pictures of earlier.

Bill McDermott:
Thank you.

Daniel Newman:
Yeah, you’re welcome. You’ve earned it. I went in there. I was foaming a little bit. [inaudible 00:17:11]. That was exciting.

Bill McDermott:
That’s awesome.

Daniel Newman:
But having said all this, what do you give to the audience? Talk to the audience a little bit here. What should these other leaders, the CEOs you talk to, the ones that maybe don’t have a chance to talk to you, the CFOs, CIOs, what should they be thinking about to build high impact, sustainable, world changing companies in this era? What advice could you give to them?

Bill McDermott:
Well, new business model in innovation is the name of the game, and I can give you a few examples. One example would be, as you saw in a COVID world, lots of companies got excited around direct to consumer business mods because that’s how people were buying things. And then they got disillusioned because the buyers didn’t just do direct to consumer. Even if that’s a choice, they’re not just doing that. So you have to think about the world from the customer in, not your company out, and meet the customer where they’re at no matter the channel they want to participate in.

One company in particular that I’m working with is an international company. They want to go direct to consumer in the US. That’s their only way to get to the market, and the margins are very thin on what they manufacture. But they also learned through research that the customer’s willing to pay double for same day service. With generative AI, they can arbitrage the workflow for all the field service personnel in such a precise manner mathematically that they can charge double and make huge margins on the service contract still giving the customer what the customer wants. Then you do all the preventative things within the hardware that GenAI enables on the ServiceNow platform, and you’re playing a different game. You’re playing chess, not checkers.

I’ll give you another one. An unbelievable retailer in Europe, the biggest there is, the Schwartz group, they’re building the whole company on the customer experience. They want to understand in the supply chain how they can automate everything from a replenishment perspective based on what the customer’s buying and what they’re not buying so they know what trade promotions to do and what not to do. Also how to give you a mobile experience that’s uncommonly good, because they know that if they can deal with the full life cycle of that customer relationship before you get there, while you’re in store, when you leave, you’ll come back. They also know that one bad experience… For example, it’s summer and you want an ice cream and the refrigerator’s down, the customer that didn’t get that ice cream on that day is one third, take that population, one third are not coming back ever again. So the stakes are super high.

We’re really big on what we are doing, but I do want to give a call out to a great Nvidia company and what Jensen has done. We’ve been building large language models with Jensen for more than five years now. Nvidia is a sensation and we’re very proud to team up. You’ve seen the conversation how Jensen’s actually running ServiceNow and believe ServiceNow is the AI operating system for the enterprise, which is pretty big from the godfather of AI.

Daniel Newman:
By the way, he came out on stage and I think he said something like, “What do I want?” And he said, “ServiceNow.” I mean, he got the whole crowd going. Amazing.

Bill McDermott:
And that’s amazing. We saw each other at Dell Technologies and the great partnership that we have with Michael and his amazing company. He’s taking Nvidia stack and putting that Blackwell stack into his offerings to make everything simple and more consumable for the customer.I also talked openly about our great partnership with Microsoft, because I do believe that Copilot will revolutionize the desktop practices of the knowledge worker in the enterprise. And we’re proud that Now Assist can run side by side and we can take tasks from Teams of O365, activate it in ServiceNow and the user never has to swivel chair anything, the engineers took care of that. What you’re going to see is great partnerships, big bets on big partners really take hold. And that’s the way we’re looking at it. What partners can we team up with to use GenAI for the customer and what they’re trying to achieve? So thank new business model innovation.

One thing, too, I’m so worn out with this, “Probably it’s going to take all these jobs away.” And they always pick on the call center agent. “Oh, the call center agents, we won’t need them anymore.” In case you have a noticed, folks, they turn over at about 35% and 40% a year, so they’re leaving anyway. The real question is, how do we have them stay? Because they love their job, and they can deflect all these nonsense cases that wear them out and crush their soul. How can we make their day better so they stay and they love their job? So yes, jobs are going to change, some will go away and others will be invented. This is part of the innovation cycle. It’s never been any different. But let’s get a hold of this thing.

My feeling is this; if you are playing the second mover advantage with AI, you’re playing with fire. Because you can’t catch up easily. This is not a game you could play let me look at the tape on Monday, Tuesday, and Wednesday and maybe we’ll get ready for Sunday. This is the thing; the game is right now. I got to start planting the flags right now. What are the platforms I’m going to bet on? Which ones really understand me and care about me and know my industry and can make a difference? Don’t go for the 1,000 points that dim light. Focus your energy and execute your plan.

Daniel Newman:
So much passion, and it comes across every time you present. You are bold, Bill, in your ambitions. You are taking on the challenges that an industry has used to create deep moats. And you’re basically trying to create a new way for companies to go to market. I’ve consistently been impressed.

Bill McDermott:
Thank you.

Daniel Newman:
Now taking that idea and bringing it to life is something that I think the culture of your company has deeply entrenched in their belief systems. I’ll give a lot of credit. I walked away from your knowledge of ads and I said, “I can’t find a person here that doesn’t seem like they really love to be part of ServiceNow.” And that’s a big credit, because they always talk people process technology. You can have all the tech and all the process in the world, but people don’t love it. So what you’re building, very special, deserves a lot of credit. Of course, I wish you well in tackling this challenge, creating new jobs, building economies, Bill, and continue to inspire-

Bill McDermott:
Thank you.

Daniel Newman:
… the world with your leadership.

Bill McDermott:
Thank you, Daniel. I’m grateful that you’ve seen that and we’re very proud of that. I do want to give credit where it’s due. If you think about Fred Luddy, the original founder of the company, he was hungry, he was humble, and he was always customer centric. It’s built into our board of directors. It’s built into our management team. And it’s built into the hearts, not just the minds, but the hearts of nearly 25,000 women and men.

What’s even more impressive is we now have partners all over the world that are creating thousands and thousands of jobs on the ServiceNow platform to expand their interests and our mutual interests to change the global economy. And that’s really what it’s all about. I came here with a dream, to help build a defining enterprise software company in the 21st century. I have listened to you, I have learned from you, I have debriefed with you, and I have seen you on many different circuits. You totally get it. So for you to say that you think we’re going in the right direction is a huge compliment to our company. And on behalf of the women and men in ServiceNow, thank you very much.

Daniel Newman:
Thank you. Ladies and gentlemen, Bill McDermott, chairman, CEO of ServiceNow joined us here for our 2024 65 Summit. Bill, thank you so much.

Bill McDermott:
Thank you so much, Daniel. Great to be a part of it. Thanks for having me.