Chapter 1: What are the key insights from Andy Penn's leadership journey?
Call them changemakers.
Call them rule breakers.
We call them redefiners. Hi, everyone, and welcome back to another episode of Redefiners. I'm Marla Oates, a leadership advisor at Russell Reynolds. I'm thrilled to be joined today by my fabulous co-host, Russell Reynolds Associates' one and only chief science officer, Tomas Chamorro-Promuzic.
Hey, Marla. It's great to be here. How are you?
I'm good. It's so nice to see you.
Thank you. Thank you. I'm excited to be here.
Are you ready for your first Redefiners episode?
I prepared a lot. I have to say I've been a fan of the podcast for some time, so I'm a little nervous, but I'll do my best. And I know that you'll guide me through this and you're an experienced host, so I'll try my best to keep up with you.
You're going to do great. Well, look, before we get started, just a quick reminder to our listeners that you can find all episodes of Redefiners and Leadership Lounge on YouTube. If you're currently watching on YouTube, don't forget to hit that subscribe button so you don't miss an episode. And for our audio listeners, don't forget to rate Redefiners. We love to see your feedback.
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Chapter 2: How did Andy Penn lead Telstra through its transformation?
I assume the fact that you worked in different industries informed how you approach your role as a CEO. Are there any commonalities, any things that basically influence your style or your approach?
Firstly, I've always been very curious and inquisitive. And so I've always been inspired to learn new things and learning new industries has been one aspect. But also, I think that even when you transition into a new industry, there's a lot of patterns and a lot of experiences that you can take from one to the other.
So, for example, I moved from financial services into telecommunications, a very different product proposition for customers. But, you know, the concept of the regulatory environment in which you're operating, the responsibilities that that brings about, the governance aspects that you need to deal with, just basic people understanding
leadership and leading large teams through complex situations, the technology environments, the core fundamental base of it may be different, but some of the principles, some of the things you learn. And so I've always found that super interesting. How do you take what I know and what I've learned and then apply it in a new sector? But then how do I take the time to actually learn the new sector?
And that is super important as well, because a lot of industries, and I don't know if this is becoming more the case than in the past, probably it is. But the degree of specialization and, I guess, uniqueness within industries, whether it's telecommunications or financial services, whatever it may be, I think is pretty important as well.
Let's talk about your CEO role at Telstra. So you stepped into the role in 2015, pretty turbulent time for the company. And shortly after taking the helm, you had to deal with a number of network outages, angry customers, analysts questioning the company's response, the strategy. How did you react to that so early in your CEO tenure? And what did you do to start turning things around?
Whilst they were very different sort of issues, customer complaints, regulatory issues, network outages, those types of things, It became apparent pretty quickly that they were all rooted in the same problem, which was that fundamentally the organization had not really tackled a upgrading and transformation of its core business.
And there was a major structural change that was happening in the industry, which was effectively being implemented by the government, which had profound impact on the organization. I won't necessarily go into the detail of it. And I think what the company had done in response to that was to look for new avenues of growth, new avenues of investment, but that were not part of the core business.
And ultimately, we all know what sort of happens when companies go into adjacencies in new areas. That's not always successful. And that was partly the case in Telstra's case. But the bigger point was it was also distracting attention from dealing what we fundamentally had to deal with was a major transformation.
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Chapter 3: What lessons can CEOs learn from Telstra's digital transformation?
When I took over, we had 80,000 people in the organization, so staff. And I always used to sort of joke that I could be the last person left in the office at the end of the day and make a decision as the CEO after everybody else has gone home and somehow the company would still reject it.
And I sort of started to ponder this concept around resistance to change because a lot of people sort of talk about resistance
resistance to change or the frozen middle or whatever it may be and i used to say well show it to me where is it how does it manifest itself how do i change it and what i came to conclude was that it is actually the withholding of resources it is the withholding of resources somewhere in the organization so that as a senior team or as a chief executive or whoever it is
You make a decision that you're going to do something and you promulgate that decision in the organization, but somehow the resources that are required to support it are not forthcoming. By resources, I mean money, so the capital. I mean the people, so people resources, or I mean the emotional energy.
You think you've announced this thing you're going to implement, but actually when it dissipates into the organisation and it becomes the organisation's responsibility to implement it, actually what really happens is it doesn't get supported in one way, shape or another.
So the key to me was how do I therefore tackle this issue of allocation of resources and this issue around resistance to change? And one of the things that we did do, which was incredibly powerful in this regard, was we implemented... Typically, an organization is functionally orientated. However, most of the things as an organization you're trying to deliver are actually horizontal.
You're trying to deliver new solutions to customers or deliver new systems. And so they're cross-functional in nature. And so typically what tends to happen in the planning sense is you identify your strategy, you plan the things you want to implement, which are cross-functional. And then you hope that the functional teams are actually going to apply their resources to their bit of implementing.
What actually you do in Agile is the Agile system effectively controls that process. It controls the allocation of resources. So when you make a decision at a cross-functional level, the actual system ensures that the resources are allocated to it and the functional teams
leads if you like can't resist that and so the mechanism actually makes that happen and we implemented agile because philosophically we thought it was the right thing to my point is just to understand what's going on if you can better align the allocation of resources people money and emotion to the cross-functional initiatives the more you can do to mechanistically make that happen the easier you will find the transformation
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Chapter 4: How does organizational culture impact transformation success?
And of course, it's an incredibly powerful tool
tool but I do think therefore you know there needs to be a big capability investment it's a new way of thinking about things a new way of developing products and solutions and ideas and I think traditional companies that think that they're going to lead in AI as a strategic differentiator are probably deluding themselves if they think they're going to get there organically they're going to need some outside help one way shape form or another because that's just not
you know, historically how they've grown up. And then, of course, there's a big governance and ethical piece to it as well. And, you know, I really bring it back to two simple points, which is firstly, AI is literal. In other words, the answer that an AI engine will come up with will be a function of the algorithms that you're using.
It won't then go back and double check it and say, oh yeah, but is that a good answer or is that an ethical answer or is that the right answer? So you need to cater for that. And then secondly, AI can be a black box or rather you cannot afford to let it be a black box. So I think if you've got the principle in an organization that says that we need to be able to
understand and rationalize why the answers that are coming out of AI are what they are, and we can reverse engineer that, and then we can test those answers to make sure that they're not causing us to do inappropriate or unethical things, then I think that's the philosophical approach that we need from a governance perspective.
As Tomas hinted at, I mean, you know a lot about cybersecurity. You're currently on the board of the Office of National Intelligence, and you're part of Australia's top secret cloud program. You've also previously served as chair of the expert advisory boards for Australia's 2022 and 2023 national cybersecurity strategies.
You know, with technology permeating every facet of an organization and organizations thinking about, hey, how do I leverage AI to While still balancing the cybersecurity risk, any advice on how they balance and navigate?
At a practical level, there is no internet without a telecommunications network. All of the traffic across the internet goes across the telecommunications network. So when you're the CEO of the biggest telecommunication network and the national network in the country, you basically are responsible for the network where most malicious cyber activity is actually going.
And so as a consequence of that, I needed to be very thoughtful about it because I became the CEO in 2015. And from that period of time, cyber malicious activity really increased quite dramatically sort of internationally.
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Chapter 5: What strategies can leaders use to build effective teams?
And so once you've got your inventory of digital assets, you can actually start to adopt a differentiated approach to having a different security posture on each asset, define what you want that to be and make sure that you've got those protections in place. The third thing I would say is that the worst possible time to develop a crisis response plan is in the middle of a crisis.
Somebody once sort of said to me that you need to touch the Bunsen burner to know that it's hot. In other words, As a kid doing chemistry, you can be told that the Bunsen burner is hot, but of course you still touch it and then you realize it's hot. And it's that experience, that visceral experience that is the learning.
And so actually when companies do scenario testing and they sort of role play, if you like, a cybersecurity incident, the more visceral you can make that, the more the learnings from it will stick. And then the last thing I would say is that What is safe today may not be safe tomorrow. You may have put in place a comprehensive cybersecurity risk management plan, and it's pretty robust.
Can't guarantee nothing bad is going to happen, but you can put your hand on your heart and say, I've taken reasonable steps. But actually the world's changing. And so we talked about AI, malicious cyber acts as more tools with which to do as harm. Another great example would be quantum computing.
The risk of quantum computing through the security of encryption keys that we have distributed in systems is quite significant. It's something that's getting a lot of attention today. at the moment. So we think that our data is safe because it's encrypted today. What if somebody using a quantum computer could crack that encryption code and suddenly release all that information?
And quantum computers are not that far away. And so that's the fourth point. Really, you just need to keep an eye on new technologies and developments that are happening to keep on top of the whole cybersecurity risk management plan.
We've covered a lot of topics, but I want to take it back to the top now. Looking back, was there a redefiner moment that really shaped your journey and how you think about leadership and the world in general?
My transition from financial services to telecommunications was pretty profound in the sense that I suddenly moved from a world where we were a financial services business and technology was important, but it wasn't the foundation of the business to a world where actually technology was rapidly becoming the foundation of the business. And if I reflect back on my career
40 plus years from the day I started as a humble sort of shipping clerk when actually at that time companies were still using punch card and paper tape to input data into computers. The fact that that's had the biggest single impact I think on business and the way in which business is done and in fact our world over the last 40 years has been technology and
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