How to apply the thinking techniques of a Chess Master CEO to reinvent your business for continual competitive advantage.
What are the business techniques leaders can learn from a Chess Master CEO and how should they be thinking about the future of AI?
In this episode, Rich sits down with Alan Trefler, a chess master and the Founder and CEO of Pegaystems, the Enterprise Transformation Company that helps organizations Build for Change® with enterprise AI decisioning and workflow automation. Alan has earned multiple patents and overseen the expansion of Pega from start-up to a $1.3+ billion, global, public company with about 6,000 employees.
In this episode, he discusses the lessons he has taken from chess into business, and how he thinks companies should be strategically thinking about AI.
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“The chess master will look and identify a set of candidates. They don't just stare at the position and magically figure out what to do. They say, ‘hey, here are three, four, five things that appear to be credible alternatives’ and then very methodically dig through them to figure out which might be the best one or what the holes are.”
“In the four decades of Pega’s existence, we've done five complete technology shifts….
And every single one of those encompass the risk of doing something that was materially different. And there's always risk when you're doing something the first time, or you're doing something that is hard. Ultimately I think evaluating those risks is key, but you also need to think about the risk of not making a change.”
“If you think of AI as an accelerant, as a way to, for example, tell you something about your business that you should make better and then you have the chance with your team to weigh in and don't necessarily do what the AI is telling you, but use the AI as a stimulus. Boy, you can use the AI as it exists now, and it can profoundly change the way a business works.”
Practice Makes Profit: Increasing productivity and efficiency by scoring and categorizing your interactions.
League of Strategic Minds [listener question]: What are the keys to running a good strategy offsite meeting?
Winsights: Ideas for Advantage: Jack Welch, former CEO of GE, said, “When the rate of change inside a company is slower than the rate of change outside, the end is in sight. The only question is when.” Are you and your team making changes internally in your thinking, processes, resource allocation, and structure each and every quarter?
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(00:44) Deep Dive Interview with Alan Trefler
(43:50 Practice Makes Profit
(45:48) League of Strategic Minds
(48:27) Winsights, Ideas for Advantage
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Links:
Alan Trefler on LinkedIn: https://www.linkedin.com/in/alantrefler/
Pegasystems: https://www.linkedin.com/company/pegasystems/
Rich Horwath on LinkedIn: https://www.linkedin.com/in/richhorwath/
Rich Horwath on YouTube: https://www.youtube.com/@RichHorwath
Rich Horwath on Instagram: https://www.instagram.com/richhorwathceo/
Strategic Thinking Institute Website: https://www.strategyskills.com/
Inc. Magazine’s Top 4 book for 2024: STRATEGIC Book: https://www.amazon.com/Strategic-Direction-Advantage-Executive-Excellence/dp/1394215339
New executive development platform: Strategic Fitness System: http://www.Strategic-Fitness-System.com
Sign up for Rich’s free Strategic Thinker Newsletter: https://www.strategyskills.com/subscribe/
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Mash up: [00:00:00] Are you strategic? The answer can make or break your business. Welcome to strategic minds, the podcast where we'll do a deep dive in conversations with extraordinary leaders to learn how they think, plan, and act strategically. I'm your host, Rich Horwath, founder of the strategic thinking Institute and author of the book strategic.
And my vision is to teach the world to think strategically. Now, let's explore strategic minds. We're stuck. What do we do?
I have no idea. You need a new strategy. We need a more dynamic strategy. The strategy? You have to strategize. But you won't strategize. Let's talk a little strategy.
Rich: Welcome to Strategic Minds. Today on the show, I'm excited to speak with Alan Trefler, founder and CEO of Pegasystems, a company that provides its clients with AI powered decisioning and workflow automation to solve their most pressing business challenges. Alan first gained visibility on the international [00:01:00] stage when he earned a chess master rating at age 19 and, against all odds, tied for first place in the 1975 World Open Chess Championship.
This facilitated his early AI work at Dartmouth College, including working to teach computers to play chess. He's been recognized with numerous awards and accolades, including Public Company CEO of the Year by the Massachusetts Technology Leadership Council, Software CEO of the Year by the American Business Awards, and the Babson College Academy of Distinguished Entrepreneurs.
Alan, thank you for being on the show today.
Alan: Oh, thank you for having me, Rich.
Rich: So if we could, let's begin with your origin story. Please share with us a little bit about where you grew up and how that environment and the people there shaped who you are today.
Alan: Well, I, uh, grew up in Brookline, Massachusetts, actually, which happens to be the town I live in today, as it turns out, they're not the same place.
I went to Brookline High School and my father Was an entrepreneur. He came over from [00:02:00] Europe at the end of World War Two. He survived the war in Europe and he started his grandfather's business, which continues to this day. It's restoration studio. It's a repairs, porcelain and crystal furniture. And it's a very craft like business.
And I would tell you it influenced my life because it really pulled me in to the sort of entrepreneurial setting of having to deal with lots of customers about things they cared about a lot.
Rich: Excellent. Yeah, that that makes a lot of sense. And I'd be interested. You talked about the craftsmanship aspect to combine with the entrepreneurship.
If you would, I'll tell me a little bit about how that influenced your approach as a leader, as a thought leader, as somebody who's built the business, the craftsmanship piece. What did that play into as far as your values were concerned as you started to grow your business?
Alan: Attention to detail was always terrifically important to my father.
When you're restoring a piece of artwork or looking to fix something that, you know, [00:03:00] is something memorable to our customer, they really care that it's done well and it can meet their expectations and being able to pay attention to that level of detail. I think was something that was driven into me from a very early age as I worked as a child in that business, helping out sometimes, sadly, I did not have the artistic skill to really make that my life's work.
So I, I had to branch out into other things.
Rich: Excellent. Excellent. And I'd be interested when you think back, what were some of your earliest memories you talked about helping out in the business as a child, any early memories on some of the challenges or the excitement of being in a, in an entrepreneurial setting?
Alan: Well, you know, I think one of the things that would happen routinely is that somebody would come in extremely upset because something that they viewed as precious, the commemorative plate from their, their great aunt had been shattered. and it looked like it was hopeless. And then [00:04:00] to see them come back a couple weeks later and see something that had been magnificently restored really gave me the personal sense you know, you're doing this for people and it's an important thing to do well and in a way that they will appreciate.
So, you know, I think there were a lot of experiences like that really helped form my early identity, I would say.
Rich: And it sounds like there's a lot of foundational values that you learned in that setting of a family run business. I'd be interested to Allen. You, we talked a little bit at the top about your chess background and as well as, you know, you're being a CEO today.
Typically, in those types of environments, uh, being able to manage your resources, your time and your energy are important for the long run. Uh, maybe share with us any tips or techniques that you found helpful in managing time and energy to be as effective and successful as you've been.
Alan: Well, I think you need to be relentless about prioritizing and evaluating what you're [00:05:00] doing.
You know, there's a concept from chess. That I found as very valuable, and it's interesting because there's actually a book called Think Like a Grandmaster that years after I was already doing it talked about how strong chess players think, and I find that it's really useful both in terms of helping me prioritize what I do, but also helping make decisions.
And it's this concept I described as Candidate moves. So the idea of candidate moves is that when a chess master looks at a position, um, this is immortalized in the book, actually, and could be you can look up in Wikipedia. The chess master will look and identify a set of candidates. They don't just stare at the position and magically figure out what to do.
They say, Hey, here are 345 things that appear to be credible alternatives. And then very methodically, Dig through them [00:06:00] to figure out Which might be the best one or what the holes are you might come up with a sixth candidate while you went through that But the idea of structuring the thinking into the sort of, Hey, I'm going to plan to look at a set of things and then I'm really going to see it through, I think, keeps people from jumping to the wrong early conclusion based on a predilection or or based on seeing something they like without really thinking about what the choices are.
Rich: Yeah, that's a great point. We see a lot of cases in business, especially where people haven't done the scenario planning the, you know, the options as you talk about those candidate moves and they become a confined into a corner. And because they didn't explore those things early on, they find themselves stuck in a position that is almost unwinnable at some points.
I'm wondering, Alan, if you could share with us maybe an example of how you've used that candidate moves framework in your business, either, you know, a while back or more recently, any examples that you think you could share [00:07:00] with us on how that might apply actually?
Alan: Sure. You know, we knew Actually, a long time ago that a I was going to be terrifically important to our business.
Our company for our clients really does two things. One, it helps them drive the work flows that make their businesses effective and make them better at dealing with clients. But it also helps them make great decisions. And when It's doing that. It obviously can help turn those decisions of the workflows and the workflows need decisions.
There's a natural synergy between those two things. About 12, 14 years ago, we realized that I was hitting a real tipping point as it related to what was called machine learning and being able to do statistical AI, which is based on math basically to figure out what the next best action is, what the right thing to do is.
And we had to choose the candidates. We had to decide what types of AI we wanted to [00:08:00] incorporate. Do we build it or buy it? And we actually went out and we found a terrific company that we merged into Vega that brought that deep skill set and knowledge in, and those key people persist to this day, helping us drive that use of AI.
And that's candidly a use of AI. that now has been supplemented by a whole new form of AI that's come out called generative AI, which we've been tracking for a long time. My head of AI in 2019 got up at our customer conference, put up a four Rembrandts on the big screen and said, Hey, three of these pictures are actual Rembrandts.
One was done by a computer. And of course, no one could tell the difference. He pointed out one or two of the really minor things. And he said, this isn't ready yet. But it will be. And then two years ago, when it really broke on the scene. We needed to decide what we were going to do with and about generative AI.
And we evaluated it using the candidate moves [00:09:00] framework. Do we want to create our own language model? Do we want to use a conventional, a foundational one? How do we want to handle our knowledge? How do we want to handle our customers knowledge? How do we address the issues of security and privacy? All of which are absolutely critical.
in evaluating that. And I think we did a great job of identifying the candidate alternatives and then going through them and making choices that have turned out tremendously for how peg is operating today.
Rich: Excellent. That's a great example. That'd be interesting. You taught, you talked about the candidate moves and then coming up with those alternatives.
I know some folks are able to come up with the alternatives, but then tend to falter when it comes to the assessment of the alternatives. Um, Obviously, with your background, your ability to look forward, how do you take a look at the alternatives? And are you using primarily data to assess those or using some intuition?
Is it a combination of both? How do you [00:10:00] successfully evaluate alternatives once you have those 3 to 5 in front of you?
Alan: Well, the first thing, and it's amazingly hard to do this, is to actually have the discipline to be able to go through the full list. It's very normal for people, you know, particularly if the needs are pressing or a little bit tired to gravitate to the first good idea that they have.
And boy, it still might be a good idea, but that's not typically the best idea. You need to really put yourself through that rigorous process. But I believe that evaluation in business is really almost always a combination of. The facts and intuition and trying to turn those intuitions into factual things that you can validate or you can test.
But I believe ultimately what makes business interesting and fun is you do have to use judgment and depending too much on the facts candidly causes you to miss things.
Rich: Yes. Yes. Yeah. Thank you for that. I think you're right. The discipline is something that is [00:11:00] important. And as somebody who facilitates strategic planning workshops, I would concur.
I see a lot of times people coming up with that first solution, wanting to go with that. And like you said, not necessarily Wanting to push through and discover some of the other options, which could be better. So appreciate you sharing that is far is assessing those alternatives. Then one of the things that you have to consider both in chess and business is the idea of risk.
You know, do I risk this piece on the chess board in order to put myself in a better position in business? Do I risk this direction, even though we've been successful in this area? Are we going to try something new and innovate? And in fact, a lot of the research shows that successful companies also. wind up faltering because they rely continually on what's got them there, but instead didn't look forward to what was next.
So when you think about risk as somebody who's been, you know, at the top of the chess field as well as a business leader, how do you assess risk and what are some of the factors that you consider?
Alan: Well, you know, I think there's [00:12:00] always risk if you're doing something that's innovative and ultimately the reasons business falter is that they become overly dependent.
On the things that got them there and inevitably in a technology business, especially there's always a time when a critical pivot is required. We have to make hard decisions about change. You know, in the four decades of existence, we've done five complete technology shifts, deciding to change the architecture, change the technology in some ways, Go in well, similar ways to our original ideas, but doing it in a radically different fashion.
And every single one of those encompass the risk of doing something that was materially different. And there's always risk. When you're doing something the first time or you're doing something that is, you know, frankly, sometimes hard and ultimately, I think evaluating those risks is key, but you also need to think about the risk of not making a change of, you know, [00:13:00] continuing as was a year or two or four longer than you might have pivoted.
And there's a huge risk to that as well. And I think the key in business, and it's much harder in business than it is in chess, is to figure out how to decide when you need to change your position, as it were, in a place that's radical, in a way that's radical. That can be extremely difficult. And, you know, the analogies between chess and business, I think there are some.
But I think it's often overblown because one of the big things in chess is it's a game of perfect information. Both players see the world completely as it exists and the pieces of the pieces and candidly, there are only 64 squares. So it's a pretty limited sort of advantage that you need to have to see what's going on.
The real business world. Not just with the complexity of what you choose to do, but the challenges of people and community and customers and all the different [00:14:00] stakeholders in a business, they all add just realms of complexity, which are not always visible, but still need to be considered. And, you know, that's part of, I tell you what makes it fun at the same time that it makes it a little nerve wracking sometimes.
Rich: Right, right. I'm wondering, Alan, if there's any questions or techniques you use to take all of that complexity that you just described in the business arena and discern what's noise, what's the uncontrollables, the things that Aren't we aren't going to focus on? And then what are the things that actually do matter?
Are there any techniques or questions that you and your team use to really help focus on turning that complexity into clarity for your business and making some of those big tipping point changes that you described a few minutes ago?
Alan: Well, this may sound a little trivial, but I'll tell you something I like and something I hate.
So what I like is actually just writing the stuff down, you know, bringing [00:15:00] up a word document and beginning to in a structured fashion. Typically, I tend to use outline view a lot, even though Microsoft doesn't even like it very much. It's really not very well supported, but I tend to try to organize the thoughts.
So that as you go through and and consider the candidates you got them reasonably well laid out And the best way to do that is in a way where everybody can sort of Share the same documents see what's going on You know be in a position to think about things from a common vantage point What I hate is uh powerpoint presentations, which as far as i'm concerned are not the way You organize thinking PowerPoint is about perhaps at best conveying something, but it's not about conceptualizing.
It's just not the right way to do it now with A. I. These days. In terms of organizing what you do and considering what a business should do and [00:16:00] how a business can improve, AI now brings a whole new set of ways to bring new thinking, new imagination. into how you want to revise a business and candidly, that's a big part of what we've been doing with our product as we've gone forward in the last two years incorporating a I
Rich: and to build on that.
You've talked about, you know, building the products. You've talked about some of the inflection points that you've been through as a company. How does the competitive landscape influence that thinking? You know, are these inflection changes things that you all say, look, based on where customers are going, where the market's going, we're gonna make these changes or do you weigh in more heavily the competitive elements and say, look, if we're gonna position ourselves to have some advantage, we need to differentiate and think about X, Y and Z.
How do you think about competition relative to what your team's doing?
Alan: I think that you always assume that [00:17:00] there will be competition that that's simply inevitable, and it's actually in many ways a great thing for customers. But the way we start is by looking at the technology itself. By the time a competitor has done something, the signals have typically been out there for a long time that there's something that should be done.
And it's not like you can rely on your competitors to do the right things. You got to look at the technology yourself and decide what you're going to do when it came to the application of a I two years ago, we ended up looking at the technology itself coming up with some pretty Uh, definitive approaches to how we wanted to incorporate it, and it turned out, you know, years later, when you can now look at the competitive space and see what different competitors are doing, we've taken our own approach, and that's great.
And that's been, I think, true throughout our history to look at the technology and look at the opportunity itself, anticipate what customers are going to need [00:18:00] and ask how, based on what we know and what we can imagine, could this new set of technologies drive what will eventually become a competitive advantage.
Rich: Yeah, and I want to build on what you just said there, you know, anticipating what customers need as I talked to different business leaders in different industries. There seems to be a couple different camps as far as customers go. Some say, look, we observe and we listen to them. And, you know, we build things that you know that they They we see they need and then others say, Look, we really think about the technology and we're going to dictate where things go.
You know, kind of that apple approach with Steve Jobs. We don't do market research. We kind of dictate where things are going to go. How do you balance that? That line between listening to customers and really determining what should be next in the market?
Alan: Well, listening to customers is of critical importance.
You need to hear what they're telling you, but those candidly are not going to be leading indicators [00:19:00] for technologies that have not yet been deployed. So if you want to be a real innovator, if you want to look at what the technology is about and where it's going, you listen to the customers. You try to understand what are they really saying, which I think by the way, Steve Jobs was great at.
And then you try to predict. Hey, if I can apply the technology differently in a way that, that maybe couldn't even be envisioned, would that actually meet the needs of the customer, both the needs they've articulated, but also perhaps the needs they'll have in 234 years? I mean, nobody knew they needed a computer in their pocket.
Before, you know, the iPhone came out and people got one, right? Boy, we are now so dependent. It's impossible to imagine life without them. And that's true of so many things. That have really shifted the landscape and we try to pay a lot of attention to those the things that shift the landscape are The most exciting and the most fun [00:20:00] to work on
Rich: Yeah, I want I want to get dive into a little deeper the the big changes you've talked about and it you know, we It's remarkable because a lot of companies fail when they try to do those types of changes.
You know, again, the classic example is Kodak. And, you know, a lot of people say, well, Kodak, they didn't have the technology to keep up. And as you know, they did have the technology, but what they weren't able to do is they weren't able to convince the organization and the different fiefdoms within the organization that digital was really going to be the place to be.
I'd be interested, Alan, as a leader who successfully navigated some of those big changes in direction. Internally, uh, how have you brought people along to buy into, yes, this is, even though this is a new, new waters that we're charting here, this is the right way to go. Any things that you could share that would help other leaders out there bring their people along to places that maybe they haven't been before?
Alan: So I think articulating and getting buy-in [00:21:00] on a company's true mission is super important. So our mission. When we started, which is in fundamental ways, exactly what we do today is we wanted to make it so the workflows that drive our customers, businesses could be executed more effectively and efficiency with efficiency, and we wanted to make their customers more satisfied.
And we also wanted to make it so that the fiefdoms in our clients. Which typically have a business fiefdom, you know, the folks who are working with their customers and an it fiefdom the people who work the technology We wanted to make it so that those two You know often feuding factions could work together could collaborate and to have a technology that would bring those folks together for the benefit of the organization's customers.
And that value was more important. That value set than any particular technology we chose, um, or any particular path we took. And because that was at the heart [00:22:00] of what was driving our decisions, I think we made a lot of the right decisions, even as we moved from technology that was You know, radically centralized and mainframe oriented to worlds of, you know, distributed processing to worlds of the Internet to now the worlds of a I that set of mission statements still applies as it relates to doing great work for our customers to serve their customers and to make their I.
T. And business departments work together. We've been able to launch onto those latch onto those and it's helped. You know, I think Kodak Forgot that it's business was preserving customer memories. They thought it's business with cameras and film and by getting distracted with the mechanism and not sticking to their values.
They didn't, I think, ask the question if digital. Exists. Will some or all clients find that [00:23:00] better? Find that better for preserving their histories, for preserving their sense of longevity and family. And if they had asked that right question, which I think was tied to their original mission, they would have made some of the pivots, even if they had been difficult.
But, you know, it's very easy, particularly for successful businesses. to lose mission in favor of what they've been executing on.
Rich: Yeah, I love what you said there about mission and value set. You know, it reminds me, uh, Jeff Bezos was asked, he said, he said he often got the question, what's going to change in the next 10 years.
And he said, The more important question is what's not going to change in the next 10 years. And that's how you build, you know, your business. And I think what you just articulated there is a great reminder for all of our leaders out there listening that you do need to use purpose, mission, vision, values.
As that anchor. And it's amazing is you, you've described how long your company has really thrived on, you know, that [00:24:00] same value set, that same mission. It's obviously probably evolving a little bit, but that, that core is still the same. Um, do you, do you as a leadership team intentionally look at and, and craft or hone that mission and values year in and year out?
Or is that something that, you know, is there, but now that it's built, it just be kind of has become embedded in what you all do.
Alan: I think it, of course, becomes embedded in what we do, and what we do is way more important than anything you say, of course, I mean, that's what really proves what you're up to, but I think it needs to be rearticulated on an ongoing basis, and the language can be updated, the way you think about it can evolve, but it's not something that you can just put up on a wall and say, yeah, we're going to stick with it.
You need to really both live it, And we go through values, exercises, even though I think what we have is great. We go back and, you know, repolish it typically every year.
Rich: [00:25:00] Excellent. And in, in, in that same vein, then when you think about strategy and you've described some of the different directions that your team has set strategically, you know, you talked about looking at mission and vision and values on a yearly basis, you know, is, is strategy something that once you've set this and you've got the directions, again, something that.
something that, you know, is there, but not necessarily a focus and a talking point or do you and your team intentionally talk about and revisit the strategy on a regular basis? What does that typically look like for you?
Alan: Well, we do, I think a pretty good job of trying to talk about the strategy because to be honest, in any company of more than a couple of people, there's typically a lot of opportunity for the strategy to become misunderstood or for non alignment or lack of alignment.
to settle in. So we find that, you know, things that perhaps I think are strategically obvious and aligned. Well, boy, I've got to repeat them quite a bit [00:26:00] to actually make sure that people have heard him. And I've got to listen to make sure that they're repeating it in a way in their own words that actually echoes What we want to be doing.
So we've made as a software company, the business that we're in has moved from the mechanics of selling. If I go back decades, we sold perpetual transactions to our customers. We would sell them a block of software that they would install on a machine that they had. And it was really very much a. A transactional sale, we said we don't want it to be transactional.
So we built a relationship with these customers that I pointed out has persisted and made sure we were listening. But the underlying mechanics were still very much. Hey, you're going to buy something, you're going to use it. Maybe some number of years later, you'll buy a replacement that, that hopefully we've continued to innovate.
So you'll want ours as opposed to somebody else's. Now, [00:27:00] how has that business evolved? Well, we've moved into a subscription business, a business that is actually offering software as a service now to our clients where, you know, not only are we providing software that they use, But we're providing it in a facility that means they don't have to worry about installing it.
They don't have to take care of it. We take care of it for them. We are now are responsible for delivering things that are much closer to the outcomes they're trying to achieve. And that moves a lot of responsibility onto us that we need to be very sensitive to the fact that our customers depend on the software.
And it's important to them both that it run reliably and that it continue to evolve. And so we've actually been able to shift our business. To be this sort of recurring engagement business from what was a transactional business. But happily we were able, I think, to do that pretty well because the value system of the company always was, [00:28:00] we want a longterm relationship with the client.
So we now we're able to get that more aligned with the way that the business model works, the weather selling model works now reinforces that as opposed to the older model, which was. You know, kind of sell something and then provide maintenance and support it. It's now completely, completely as a service, which by the way, I think more and more businesses are trying to find ways to build as a service relationships, longterm recurring relationships with clients, because I'll be honest, it's much more rewarding.
Rich: And in what you describe, they're a great example for all the leaders out there. You know, Alan just talked about the way that his organization evolved to capture that third element to the business model. So they moving to subscription, that's one of the things I see a lot of companies struggle with is, you know, they, they've either been a product company, a service company, and they're really in that mental rut.
So I love what Alan just shared with us all about, you know, thinking [00:29:00] outside the box, you know, being able to capture revenue and build relationships in different. Away. So I think that's gonna be really important, uh, for all of us to think about it as we enter the new year. And I wanna be interested too, with your expertise in ai and, and I'm thinking about a lot of the leaders I work with right now are trying to get their footing around that, and I specifically around, you know, the capabilities that they're gonna need to have internally or, or the support they're gonna need to have externally.
Could you talk a little bit about what your perspective is on how generative AI and just the ability to automate. Which obviously your organization specializes in. How is that going to change a leader's responsibilities or what they need to look for internally and externally as they're trying to grow their business?
Alan: Well, you know, it's interesting. There's so much hype around A. I. And the last thing I want to do is contribute to that hype, but it is truly amazing what is possible. And you know, what we [00:30:00] think is that it's important to look at A. I. for the different types of A. I. that exist. And the ways that it works, you know, the first type of I is that statistical I that machine learning that ability to find patterns in data.
That's hugely important, but it's quite a bit different from generative I and generative I actually can work in concert with the statistical I but offers different and new features. And you need to understand which I is appropriate for which use cases. We've actually found that there are two profound Classes of generative AI.
That we've really been careful to tease apart. But a lot of other people, I think, along together in a way that doesn't work well. One is AI productivity tools. I mean, there are great AI productivity tools to summarize things or to provide advice or to make it easy to look things up. Those are fabulous.
But the second approach to applying generative AI, [00:31:00] which I think we've done pretty uniquely, is to apply the generative AI to rethink the fundamentals of the business itself. You were talking about strategic questions. How does somebody use AI to redesign their workflows, redesign their business objectives so that it helps actually define.
The business. And then, of course, you want to use it from a productivity point of view to execute. And then you want to be able to use AI to optimize. Typically, it would be statistical AI that you would use to optimize to see if the results you're getting mathematically are panning out the way you want.
Being able to think of those three types, the Hey, let's design it. Let's execute it. And then let's optimize it. I think if people don't discriminate in their mind or distinguish in their mind between those different types of AI, I think it's really easy for them to fall into the hype wave. [00:32:00]
Rich: Yeah. In addition to the hype wave, are there any other pitfalls or things that you think leaders need to be aware of or looking for as they start to do more with a I to support and drive their businesses?
Any other things that in addition to just the hype and as you talked about discerning which types of a I are going to be appropriate in different places. Any other things to be aware of?
Alan: Well, you know, I think that you hear lots of things often promoted by vendors who have an interest In one particular angle or another.
So you'll hear the people who would you profit based on folks doing stuff with data saying, Oh, you need to get your data right before your AI can work. Right? And I look, don't get me wrong. Getting your data right makes perfect sense. But even with mediocre or broken data, there's a lot that the AI can be doing for you.
So I think what leaders need to say is, Hey, What are the things that I'm hearing that are really impediments? And that's true for data. That's true for security [00:33:00] questions. You know, that's true for all the different aspects that are viewed as controversial. Which of these are real impediments? And which are things that we can find clever ways to work around?
I mean, you need to understand that we're a long way from saying that application of AI is producing perfectly finished work. If you think about that way, then you're gonna hold yourself to a standard that's going to really limit your use of it. But if you think of AI as an accelerant as a way to, for example, tell you something about your business that you should make better.
And then you have the chance with your team to weigh in and don't necessarily do what the A. I. Is telling you, but use the A. I. Is a stimulus. Boy, you can use the A. I. As it exists now, and it can profoundly change the way a business works.
Rich: Love those examples in those analogies with the accelerant and the catalyst.
I think that makes a lot of sense. Um, one of the things I found in leaders I work with that really excel is their ability to [00:34:00] assess their situation clearly and concisely. Um, as a CEO, Alan, I'm wondering How are you integrating a I in your ability to look forward to assess the situation? Are there tips or techniques that you could share with other leaders that that you've used to help be, you know, to help with that situational awareness?
Alan: Well, I think I can help you really distill data down and distill in particular documents down. So they become much, much more Accessible and not just accessible to you as a CEO, but make them more accessible to your staff. You know, you can take the, you know, Google has a product called notebook LM, which is really cool, which allows you to upload documents that Might relate to marketing questions, might relate to, to, to individual problems that you're facing, manufacturing issues, anything you want to build a notebook around, you can then [00:35:00] ask your questions and it will dissect it and bring together the data from all the different parts of the information that you've uploaded.
And you can also hit a button and it will give you a 10 minute podcast. With two artificial people that sound amazing. It sounds wildly good. That would then allow you to give that little podcast to your staff. And suddenly this hundred pages of documentation that's hard to absorb becomes magically, you know, eight or nine minutes.
Of really engaging voice, and it's really quite amazing what it can do, and there are dozens of things like that, you know, and for our customers, our own product helps them rethink their workflows in ways that, you know, they tell us they think that it's remarkable how it helps them rethink the way they want to provide service, how it rethink the way they want to process transactions because [00:36:00] the AI can say, Hey, it's What's the absolute best practice for this on the internet?
Let me pull this in, marry it up with the customer's specific processes and data, and then challenge the customer to do things differently.
Rich: Yeah, I was just making a note. I love your use of the word rethink there. Uh, I, I, I believe that a lot of folks today react and they don't think. But the idea of rethinking, I think, is a really powerful concept for a lot of folks out there to keep in mind as they're exploring new ways to grow the business in the new year is just this idea of rethink.
To that point, Alan, you've done a great job throughout your career, whether it was on the chessboard or in business, of looking forward. One of the questions I get from a lot of leaders I work with is how, how long. How should we be creating our strategic plan for it? Is it a one year plan? Is it a five year plan?
Is it a 10 year plan? A lot of people today say, well, it should be shorter because things are less [00:37:00] predictable. As somebody who's been able to look forward successfully, when you think about your plan, your business, how far out are you planning typically?
Alan: Well, you know, the plan at one level, we typically think about three years.
In the tech business. Even three years is unrealistic in terms of predicting what's really going to happen. So, you know, I try to operate on a three year cycle with, uh, with a six month sort of execution Window, you know, how do we take anything we want to do and figure out how to deliver? Pieces of it in six months or less if you can't get the whole thing done, and that I think allows you to learn by doing, which is a really just important concept in this day and age.
Rich: Yeah, I really like that six month, six month execution window. I think that's enough time to give resources and people in tools the chance to. Gain traction, but then it's also enough time [00:38:00] to say, look, do we need to make course corrections here? So I think that's really wise advice. Three year plan could be, you know, could be a little less, but then think about that six month window.
So love that. Love those techniques there.
Alan: Yeah. I mean, look, we have a, we have an annual budget cycle, like any company does. So we get to calibrate the six months. against how it's fitting into the year. But in terms of how I really try to make sure we're conceptualizing it, it's really, you know, three years.
Let's you pick a direction for the technology, decide if there are winners or losers that you want to be able to bet on, but then looking at it every six months or even less. lets you validate that and make changes, you know, as needed because they're needed often.
Rich: Yeah, you know, Alan, I'm fascinated as we've talked about your journey, you know, starting as a child growing up in a family run business that involved craftsmanship and entrepreneurial willpower to where you are to chest to where you are today.
[00:39:00] One of the things I'm struck by is, you know, you've used some principles to that that have seemed to be kind of a straight line through through that journey. How would you articulate the factors or principles that have really guided your success throughout your life?
Alan: Well, you know, I think that one of the things that has been key is not expecting everything to work all at once.
I think one of the principles, you know, you don't become a good chess player without losing a lot of games. And so you need to be able to understand. How to deal with things that, you know, obviously I love it when it goes well, but how to deal with things that don't go well and how to take learnings from situations that might be difficult or discouraging.
And I think that was something that really was. One of the really great things I got out of learning to play chess. You know, I haven't played much chess is [00:40:00] seriously for decades now, but it still influences my thinking all the time. And that's one of the key things it's how do I learn from what I see happening here?
And it's, I think, something that makes your businesses terrific. I was reading about Jensen from NVIDIA, and one of the things that he was writing about is how do you learn from weak signals? How do you look at your business and find the things that aren't obvious that haven't been polished, that haven't come up through the full management racks that that give you a signal that there might be something that Hey, you need to look at and you need to be able to consider and contemplate.
And I think being trying to be aware is I think the most important thing that a CEO or any leader needs to do.
Rich: Yeah. I think that awareness is a key piece. And then as you talked about that ability to not only think, but to rethink a really powerful concept. Alan, I'd be grateful if we can close our conversation today with your response to six [00:41:00] questions that we call the strategic six.
Are you up for that? I'll
Alan: give it a shot. All
Rich: right. So number one, what was
Alan: your
Rich: first
Alan: job? Well, when I was talking to you about working in the studio, you know, actually working to try to live up to my dad's expectations and make some customers happy. So that was it.
Rich: Excellent. Number two, what's your favorite vacation spot?
Alan: So I'd say it would have to be split between London and Paris. And wherever my wife wants to go, that's my favorite.
Rich: Number three. What's the one word that best describes you? Persistent. Excellent. Yeah. It sounds, it sounds like it based on what we've talked about today. For sure. Number four, what's the one book that's had significant impact on your development?
Alan: So I really liked. The five dysfunctions of a team, which was interesting. It gave me some insight into the personal dynamics and some of the struggles we were having at that time in terms of getting the leadership team to really be a team and be [00:42:00] plugged in and work together. I just I think it's a, it's a parable, so it's not to everybody's taste, but it's, I thought a terrific book.
Rich: Okay. Excellent. Number five. What's the one piece of advice you'd like to share with other people that would fit on a bumper sticker?
Alan: I would say, hang in there. Nothing is accomplished. Overnight successes usually have very long gestation periods, and so you, you need to, you need to be, you need to come up with the right ideas.
But then you need to be ready to stick to them, uh, even when it doesn't always look like they're going perfectly.
Rich: Yes. And number six, what's the most exhilarating moment you've experienced in your professional life?
Alan: Well, in my professional life, I, I have burnt into my consciousness, um, a day, a winter day that I was on the 21st floor of 111 Wall Street before I started PEGA.
Working as a consultant for a large New York bank. And we [00:43:00] had just been up literally all night bringing a major system alive. And the users came in at about 7 a. m. and turned on, started turning on their screens. Our system was actually running, and the dawn was breaking over the river. And it was like a scene from a movie, you know, if you ever saw Working Girl, where the sun rises.
And it was just, just spectacular. And they were happy. And suddenly months of work got turned into a really moment of exhilaration and then exhaustion.
Rich: Beautiful. Love it. Well, I really appreciate the wonderful tools, tips and techniques that you've shared with us to help us all become better strategically.
Thank you very much for being the guest on the show today.
Alan: Thank you. This was a lot of fun, Rich.
What are we talking about? Practice. Practice makes perfect. Practice makes profit. [00:44:00] Think of your favorite teams and favorite sports. Football, basketball, baseball, soccer, tennis. Do
Rich: you think you would care as much if they decided to not keep score in the games?
No, probably not, right? Because you would tune out. We want to know what's happening. We want to know the score. The score matters to people and in business, it should matter to you as well. And I'm not just talking about revenue or sales or operating margin. I'm talking about the internal score and my strategic coaching engagements with executive leaders.
I recommend they score their interactions. Internally during their day for one week each quarter. So for the next week, I would ask you to try scoring your interactions. So your one on one meetings, your team meetings, uh, customer meetings, and what I want you to use as a scale from zero to three, zero is low value [00:45:00] and three is high value.
So after each interaction, jot down what the interaction was and then your score from 0 to 3. 0 is low, 3 is high value. Then at the end of the week, I'd like you to categorize, so one on one meetings, team meetings, customer meetings, and then average out the score for each of those interactions. If you've got internal meetings, especially that are zero or one average, you need to think about how can we eliminate those meetings or consolidate those meetings or make those more productive.
So if you take the approach of scoring your interactions throughout the day, you're going to make yourself and your team a lot more productive and a lot more efficient through the use of scoring. I
Alan: appreciate your strategic mind.
Rich: Must have a strategic brain. Great strategic minds of tomorrow, right here.
In this [00:46:00] segment, the League of Strategic Minds, I answer questions submitted by listeners. Today's question, what are the keys to running a good strategy off site meeting? In my experience facilitating strategy offsite meetings for executive leadership teams over the past 25 years, I found three keys.
Number one, comprehensive pre work. It's really important to have people do thinking and work prior to the strategy offsite meeting. I typically recommend a diagnostic survey, which asks people to think about The last three years or so, what were the projects, initiatives, strategies, what worked, what didn't work and why.
Then I like to have them think about the next couple of years. What do you think the areas of focus should be? What should the team stop doing? So after the diagnostic survey, I'd recommend doing a strategy survey. The strategy survey asks people to think about their business in four areas. Market, customers, competitors, and company.
So typically you're [00:47:00] finding out about what are the patterns and trends they're seeing in the market. What's happening with the thinking and actions of their customers. Who are their most dangerous competitors and why? And then what are the strengths, weaknesses, opportunities and threats with their business?
So number one, comprehensive pre work number to have a facilitator that's willing to challenge thinking. Typically, you can have somebody outside of your team, so it could be someone else in the organization. It could be a board director. It could be an outside facilitator. But you need to have somebody who doesn't have any skin in the game so they can effectively challenge people and their thinking so that we can avoid groupthink and we can get people to explore new ideas and paths that haven't been taken before.
And then the third way to improve strategy offsite meetings is have a concise. But effective process. I've heard of teams that have three or four months strategic planning process. That's way too long. We've got to shorten that down. Typically, I leave [00:48:00] processes that take about 2 to 4 weeks, so we can certainly accelerate that, but still do a good job thinking about each area of the business coming up with new insights and then channeling those insights into a plan.
If you have a question you'd like answered, visit the Strategic Minds page on the website StrategySkills. com and complete the brief submission form. If your question is selected, you'll receive some strategic swag for your contribution. Any insights? You play to win the
Alan: game. Any further insights? You don't play to just play it.
Insightful.
I want winners. I played the game to win.
I want people
that
Rich: want
Alan: to win. It's very insightful
Rich: to close today's show. Our wind site or idea for advantage comes from Jack Welch, former CEO of GE. He said, when the rate of change inside a company is slower than the rate of change outside, the end is in sight. The only question is when. [00:49:00] Ask yourself this. Are you and your team making changes internally in your thinking processes?
Resource allocation and structure each and every quarter. Your future depends on it. If your team needs a new process and tools for strategic thinking lacks a common language for strategy is too reactive and tactical, or would like to increase innovation to grow profits and create competitive advantage.
Visit StrategySkills. com where you can learn more about strategy workshops, online certificate courses, the Strategic Thinker newsletter, and hundreds of other resources. Pick up a copy of my newly released book, Strategic, and take your leadership development to the next level by subscribing to the Strategic Fitness System, an innovative, state of the art fitness system.
Executive development platform. Remember be strategic to be your [00:50:00] best.