Episode 61: Ray Wang, CEO and Founder of Constellation Research, On The Business Impact of Technology

Informing your decisions with intelligence analysis and insight Brought to you by the team@ooda.

Loop.Com hello, I'm Bob Gourley, the Chief.

Technology Officer of OODA llc. I'm here with Ray Wang. I think many of you know Ray for his leadership. He's the founder and Chief Analyst at Constellation Research, a very successful author, a continuous publisher and he drives now Disrupt tv. Hello Ray. Good having you here.

Hey Bob, how have you been? What's going on?

Oh man, so much is going on. I'm so glad we finally have this time to sit down because there's some questions I've been dying to ask you.

Oh yeah, well, go ahead.

We're talking about what you're currently doing.

But I want to start at the.

Beginning and ask your foundational story.

Who is Ray Wang and how did you get to this spot?

Well, first, geez. I started out as a high school student. My parents came from Taiwan and they always hoped that both their kids would become physicians. Like all good parents. Physicians, engineers, lawyers, immigrant families, and that was what they were looking towards. I grew up in Allentown, Pennsylvania. It's a, you know, somewhere just a little northwest of Philly, about 40 miles northwest. And you know, I thought I was going to be a physician. I knew something in science, it'd be something fun in that area. You know, as a high school student I was in those like science national science competitions, which is kind of interesting. And so I got into a six year med program. You know, it's a six year commitment. I realized somewhere along the way that I didn't want to be a doctor. It's a little gory. I don't like blood, I don't like strange odors. I like helping people, but I didn't want to help people that way. So yeah, so I ended up going to public health school. So I started a major around public health. Got a master's in public health. Ended up working in hospitals. Healthcare. That was fun. A little bit slow for my pace, so I figured out consulting would be interesting. Ended up doing consulting. Worked in consulting for Deloitte, did healthcare mergers and acquisitions. Didn't really enjoy all the slowness that you could get in healthcare again. So I don't know. Ended up going out doing SAP implementations at Ernst and Young and that was interesting. Understanding finance. Treasury, learned ERP and then wanted to get out of New York and get back to San Francisco. And he a job was open for product management. Had a choice between two companies. Chose Oracle, ended up going there, did product management for about nine Months. And then a friend came up to me and said, I'm going to take over this company. I'm going to become the CEO and I want you to be the CMO of the company. It's a web commerce personalization company. I said, sure, call me when you do that. I was like, whatever. So anyways, nine months later he did. He took over the company. I joined him at a company called Personify and and was the marketing chief. And then we didn't go public. So I went back to Oracle, ended up doing enterprise architecture, product development, and then left that and ended up going to PeopleSoft, only to be acquired by Oracle again, and then got into the analyst business at Forrester.

Cool. Yeah, Forrester. Very widely known name and must have been a great place to learn this craft of analyzing the entire market.

No, I had a great time at Forrester. It was fun. I probably could have stayed there forever. It was just the one comment that I got that really threw me off. And it's when the founder of a company tells you this, this will throw you off completely. So I was home, my dad said, hey, what do you make? What do you work to the company? And he goes to me, that's a really bad ratio, you really should do something about it. And I said, oh, that's kind of bizarre. And so he ended up saying something to me. He's like, you should just go start your own company because these numbers don't make sense. I'm like, well, I'll talk to my boss, see what he knows. So I go to my boss and I say, I drive X million of revenue. I can drive this amount in million revenue, but can you pay me at least 10% of what I'm driving? Because I'm not anywhere close. And my boss goes to me, this is the founder of the company, George Colony Forster. He goes to me and says, ray, you just don't get it. If everybody would just perform to average, we wouldn't be having this conversation. And I'm just like, yeah, I completely get it. No one's performing to average and I'm overperforming. So wouldn't you want to pay me a little more to keep me? And his point was no, I just want to hire people to perform to average. And I'm just like, oh my God, what the heck? That threw me off, right? And I just said, okay, at that point, I'm just going to start something on my own.

See, Ray, I think you have this entrepreneurial spirit or something. There's a certain person that would make that kind of decision you made. And I tell you, for me, no matter where I was in government or in industry, I never wanted to be a commodity. I wanted to deliver unique value and I want to be rewarded for the unique value. That's just something very virtuous about that.

I'm American, I'm a free market capitalist. I mean it's, you know, you want it to be fair, you want people to play by the rules and you want to get a chance for people who work hard to make lots of money and be successful and do what they want with that money. And it just was strange. I never thought I'd hear that from a founder. I mean, I guess he's been, he'd been doing it for a couple, you know, couple decades and successful at it. But that to me, that wasn't the business model.

Yeah. And then shortly thereafter you became a founder and is that when you created Constellation?

Well, yeah. So a bunch of us got together. Charlene Lee started a company called Altimeter. Three of us jumped over there from Forest, two of us jumped from Forester, another from somewhere else to kind of, you know, build that. And I wanted to build an analyst firm and Charlie wanted to build a consulting agency. And you know, it's, you know, if you start a company, you either follow, you have a really strong mission or you leave or build something else. And at that point I decided to.

Go out and build my own great Constellation Research.

Constellation Research.

And that's when, when, when I learned about you and you guys and just a phenomenal stream of data and information and insights either, you know, written briefings, presentations, you guys do speeches, you're very active on social media. And there's something consistent over all of that, which is when I hear from.

You or one of the other others.

On the analyst team, there's, it's just right off the shoulders. Here's who I am and what I think and what's going on.

Yeah, it is. I mean one of the things we think it's important in the analyst business is for people to trust the source and the analysts. Right. And you have to be authentic. I mean, you don't want to have, you know, like a robot pre prepared script of what's going on. You want people to be succinct, you want people to take strong positions. I mean, so you're 80% right, we're okay. I mean you're going to be 20% wrong. No matter if you try to make a call and own it, you own it, learn why you screwed up. Or learn why the call was wrong and move on. It'll make you stronger. But the last thing we want to do is have people not be able to showcase their brand, showcase their personalities, be who they are. Because we think part of the business is you buy into that authenticity. So for each of our analysts, I mean, they have a lot of freedom here. They have a lot of freedom to choose what they want to write about, what they want to cover. There's no these massive research boards where there's lots of politics before you can get an opinion out. But, you know, it does come with its risks, right? You can make some bad calls.

Yeah, that's a fact. Now, in a way, this is a good segue into your last book because there's a lot of themes in there I want to talk about. But before we leave Constellation Research, I want to ask, what is Constellation Research? How would you define it?

So we've probably best described as a company that sits somewhere between business strategy, a futurist firm, and an analyst firm. And so what we try to do, if we think about our research methodology, we start with big themes like futures themes. Think about what happens in politics, economics, society, environment, technology, legislative. Where do those come into place? That's the Pestle framework we use. And then that comes into these uber themes, next gen customer experience or marketing transformation or data to decisions or digital safety and privacy. These then get distilled into what we call shortlists. The shortlists are basically items in technology and items in business that represent where they are in terms of adoption by organizations and really by their business impact. And when we plot that, we come back later and we start picking coverage areas. And these coverage areas are what the analysts do. And so they put them into shortlists. We have something like 80 of them. And then we go deeper in about 20 of them, where we actually go into market overviews, offering overviews deep into those topics. So every analyst has a major and a minor. They're built on a futurist theme. And clients subscribe to our research. What they really do is they're looking for people to talk to along the way, provide advice, insights, and have conversations you can't really have inside your own company.

Well, Ray, I do want to talk about your past book before we talk about your current book, if that's okay.

Sure, yeah.

Let's jump in 2015, which is not that long ago. We're in the middle of this massive digital transformation. The world's changing around us. All these companies are changing. And you write a book on disrupting Digital Business, how to create a authentic experience in the peer to Peer economy. Would love your thoughts on the overall theme of the book, but let me tell you what I took away from that. Consistently throughout that book, you're hitting on themes of transparency, being authentic, being yourself. As you go through this digital transformation, you hit on a lot of the topics of how to do a good digital transformation, how to use data analytics to drive decisions, a good framework for figuring out how to feed the C suite with data. But throughout it all, I detected this theme of being yourself and being authentic in your communications and your transformation. Get that about right?

It is right. And a lot of it is organizations, enterprises, brands, they don't be the thumbs themselves, right? And so every experience, every interaction that's there has to be reflective of that mission. And if you don't have that mission, that purpose down, it's very hard to be authentic in the communications. I'll give an example. Customer experience is an easy one. If your brand is about no frills, easy access, convenience. I want to be able to walk into the hotel, check in. I don't even need to see anybody, have it on a mobile device, use the mobile device to open my room, order all the things I need and get the bill on my way out without ever having to see someone. If your brand is about massive luxury and you want to be able to have a door person open that door for you, you have someone offer you a beverage on the way in, have someone friendly smiling at you at the counter, then that's your brand and you play it. Marriott does that. You could do it. You could be at the Spring Hill Suites or you could be at the Ritz. It's the whole full service, but it's also personalized, right? It depends what it is. I'm the same person. I haven't changed. My expectation of the brand is X, Y or Z. And I'm paying for a value exchange based on my expectation of what that brand is going to deliver. And so that's one aspect of the book. But the other aspect that's super important is really talking about data, right? Data is the foundation of each one of these digital businesses. And if you're doing digital transformation, you have to realize this is one, a business model shift. Two, you're capturing a lot of data to make that digital transformation successful. And three, if you're just throwing up some digital channels and saying, oh, I've got digital, forget it, you've already lost. I mean, that's not even part of that. And so that business Mindset of putting together a transformation project is not easy. It's not something that's natural for an organization. And that's why we're talking about it. God, in 2015. Because we'd seen clients starting in 2010 when we started the company, go through this process, face a lot of roadblocks. And by the time we got to 2020, almost everybody hadn't figured out what digital transformation was and at least started one or two different types of projects in that area.

Right.

And that leads us up to the current book. It's going to be out this year. The title is Everybody Wants to Rule the World. A great title. It makes a song come to my mind.

I know we're waiting for Curt Smith to call me up and say, hey, can we do something? But we'll figure out if Tears for Fear shows up.

And then the subtitle, Surviving and Thriving in a World of Digital Giants. What's this book about?

So here we are talking about digital transformation. We need to change business models. Everything's going to be okay. And then out in the blue, I'm realizing that there are companies out there that are basically disrupting those companies in the middle of a digital transformation. And you're like, well, what are they doing differently and how are these companies surviving? A great story that we lead with somewhere in the book is really about Domino's Pizza. Think about Domino's Pizza. I mean, up until like this year or last year, it was probably one of the top performing stocks. It beat out all the other big tech names like Facebook, Apple, Netflix, Google. They were doing better than most of them if you look at their stock performance since 2010. And it's pretty impressive how they pulled it off. Now, let's think about this. Domino's Pizza. It's not a tech company, but they're very tech savvy. In fact, at one point, they had the largest e commerce site. At one point, more orders were going through them. You know, they're probably second or third in terms of, like, digital orders and digital sales. So, you know, you think they've won the digital transformation game. They beat out Pizza Hut, right? All across the board. There are more Domino stores. There's more sales nationally. They're beating out Pizza Hut long, you know, overnight. So they're one of the winners. They beat everyone. Digital transformation. Yet they're getting their butts kicked. And you know where they're getting their butts kicked? By companies that don't have stores, that don't sell pizza, that don't have their own Drivers that can deliver the food aggregators like at Postmates or Doordash or Uber Eats or Swiggy out in India or Go Jack in Indonesia. They're crushing Domino's buts because how often do you order pizza, Bob? Is it once a week, twice a week if you're a teen? Well, I have the same issue, but if you're a teen, you're ordering maybe twice a week. That could be the most that you order pizza. Well, you order from food delivery services almost every day. Right. And you actually. And they can sell anything. They don't have to sell just pizza and they don't have to own it. So when food delivery services and food delivery aggregator apps aggregate with ghost kitchens who are actually creating all the menus of everybody else, you won't need a domino's. And that's the battle they're in. And these companies are well funded, built on digital own the customer relationships, you make decisions, happen rapidly, are doing massive automation and have vast networks of users that are on their platform.

Does this apply to other industries or is it just a food industry dynamic?

No, it applies to lots of other industries and we see it in travel, potentially we see it in manufacturing. And so you're going to see a lot of these interesting opportunities out there. I'll give you another one which I'll be using a lot when we get to book launch, since you're probably the earliest interview about this book. But let's say I wanted to take out LG and Samsung for fun. How would you do that? Well, I'd make a very interesting offer, Bob. I've got a 65 inch, we'll make it a 75 inch TV for you. I'm going to give it to you for $15 a month for the next five years. Are you in on that deal? It's about 900 bucks. Yeah, I'm. And on top of it, guess what? I'm going to include the warranty plan now. Are you in? Oh yeah. What have I done by doing that? What happens to the market? I have locked out LG and Samsung from the market for five years because I now own that relationship. I'm going to even top this one off. I'm going to give you one upgrade, one upgrade during that period that you can evoke at any point through that period for $25 a month instead of 15. Will you take that deal? Okay. And when you take that deal, I mean I lock you in for the next five years on the upgrade. Okay, but just so you know, that's kind of the process. So I potentially could lock you out for seven years from LG and Samsung. And if I funded that application, that app and that business, I could raise the money to do it. It's easy to raise a couple hundred million in this market. And if my goal was to go take out and win consumer electronics, I could just focus on that and warranty. That business is built on data. That data that's around is really the feedback loops. I want to know what you watched. I want to know which component breaked, why did it break. I want to know when you watch things that is being aggregated into a bunch of signal Intellig that's going to be brokered in this network that's trying to understand where we procure, how do we supply. Right. I might even get down to the point where I can take that network and use it to actually get into other devices and appliances. Pretty soon I'm going to go to you, Bob. How many do you hold your kitchen? Let's do your whole kitchen. GE Whirlpool. We'll do it for $120 a month, everything. If it breaks, we'll come send someone over. Includes home warranty again, Right. If you want to go high end Bosch mealy, fine. We'll do it for $350 a month, but you get the idea. So pretty soon you could take out the entire electronics industry, the kitchen industry, and I might even do your h vac for $200 a month for a three ton unit.

Fascinating. Yeah.

I do want to read this and start thinking through how it applies to other sectors and the dynamics when it hits the aerospace industry, the defense industry, the space systems industry. Because I think it's going to be a very interesting time.

Right. And the main thing here is we're seeing a collapse in convergence of industries around value chains. Those value chains are being commoditized comms, media, entertainment and telco. Same industry. Same industry in the digital distribution world. So we're going to see more and more of that. There's probably going to be 100 companies and 50 value chains by the end of 2050. Awesome.

This is great. That's why I love talking to you.

Ray.

Can I transition in our last few minutes here and I want to ask you about a couple tech topics, is that all right?

Yeah, let's do it. Let's jump in.

You know, so just kind of lightning round. I'm going to say a word and I want your view of the future and its relevance to us. Starting with the quantum computing.

Oh, amazing. This is the future. First word is really about juxtaposition. So can you handle the ability and the relativity of is it here or is it really not here? Right. But I think where quantum is going to play a role is especially in simulation and modeling and helping us break new rules and find new rules. Great.

And then related but totally different.

Quantum security, quantum key distribution.

It's like pulling a bulldozer to a thatch hut. We're going to have to have quantum security. So if you're not ready. Yeah, I think we're going to be looking at how everything is vulnerable, yet everything isn't. Back in the quantum theme. But no. Quantum security I think is going to be one of the linchpins for not only national security, but also the ability to protect IP and IP theft. Great.

Bitcoin.

We are going to see cryptocurrencies evolve. I think Bitcoin has a good shot at it with 21 billion coins that are available. So I think it's the next stored asset or reserve asset value.

Good. Then a 2003 quote from William Gibson. The future is here. It's just not evenly distributed.

I think that will continue to happen and that will continue to worsen. With governments printing trillions of dollars, the reflation is actually showing how that gap is widening. While people may still be in the same distribution, the widening rungs of that ladder are increasing. And the future being distributed is uneven because not all the players can actually receive it and not all the players actually have accessibility to those capabilities. And most people can't understand it.

Awesome, Ray. It's good getting your thoughts on all this stuff. A question I forgot to ask you, is your book, when will the book be out?

It's coming out July 13th. That's what they say. But it's available on Amazon for pre order if people are looking. And it's published by HarperCollins.

Okay, I'm going to grab that and put it in our show notes and make sure everybody has an easy way to get to that through this video.

Yeah. And if you need to find anything else, just hop onto the personal website, www.reywong.org or you can hop on to constellationr.com right.

And you're also on Twitter.

Yeah. Can be found on Twitter, they tell me. Just kidding. You can find me Wang0 hey, thanks.

For the time today, Ray. I really, really appreciate it.

Hey, thanks Bob. Happy to be on.

Thanks for listening to this Ooda Loop production. For the latest analysis on cybersecurity technology and global risks, please visit www.oodaloop.com.