ServiceNow CEO On Entrepreneurship, AI, and Automation — With Bill McDermott

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1:25Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Bill McDermott is our guest today. He's the CEO of the$100 billion plus company ServiceNow, and he's a dynamic leader in the tech industry, who's also just a lot of fun to listen to. ServiceNow is deeply involved in the AI discussion we've been having. It's helping automate processes within businesses, along with some other use cases, including a big partnership with NVIDIA. And I invited Bill on the show to talk a bit more about where he sees the technology going, where the market is getting AI right and wrong, and also to tell a few stories from earlier in his career where he saw the importance of reinvention at Xerox and also bought his own deli on Long Island.

2:10It's a really fun one. Major CEO at a major company. This should be fun, dynamic, and I hope to leave you with a few new thoughts about business, leadership, and artificial intelligence. My conversation with Bill McDermott is coming up right after this. Bill, welcome to the show. Thanks for having me, Alex. Great to have you on. I want to get to begin with to have listeners get a sense as to who you are as a person. We go biographical before we get into some of the things that you're doing with AI, partnerships with NVIDIA, all that. So let's start with the deli. At 16 years old, you bought the Amityville Country Delicatessen in Long Island, not far from where I grew up, for$7 ,000.

2:52So I want you to just give the story of like how and why you did that, just so we can learn a little bit more about what makes you tick in the beginning. Well, actually, there was a couple of reasons. One, I was trading in three part time jobs for one full time job, which was a delicatessen. So, you know, bus and tables, stocking shelves, pumping gas, doing all the side jobs that lots of guys like us who came from Long Island did. and I had an opportunity to work in the deli and then ultimately make an offer to buy the deli because the owner was selling it and it was pretty obvious after a year on the market that there were no takers.

3:36And I ended up getting it for$5 ,500, 7 ,000 with interest and the rest is history. I think the big idea behind the deli that I always found inspiring is I had no money. but I did have relationships with the vendors and I asked them to give me the first order on consignment. I told them you might even charge me a little too much but I'll always pay you back. At some point you'll always get that money back on the first consignment order and I had great relationships with the customers and just knew what they liked whether it was their coffee, their brand of cigarettes that was pretty big back then and whatever beer they like to drink or whatever sandwiches they liked, you know, I really could customize it to them.

4:22But the key to the whole thing was really the early days of video games. Because I built a video game room on the delicatessen to draw the young people a block and a half past 7-Eleven to my store. And what was fascinating is I went down to 7-Eleven one day and I realized there was four kids in the store and like 40 online waiting to get in. And I asked them, why are you all waiting online out here when there's a big store in there? And they said, well, they think we're going to take things. I said, don't worry about that. You come down to my store and I let them in 40 at a time, playing video games, hanging out, treated with respect.

5:02And it really underscores what it means to treat people as you wish to be treated. Because at the end of a long day, one of the young people said to me, Bill, when we want to have good food and get treated with respect and play video games, we come to your store. And when we want to steal stuff, we go to 7-Eleven. So Bill, it's interesting because so many kids, by the way, like this is like actually the true Long Island childhood, I can say authentically, that's the case. But like so many kids, when they're younger, they say, okay, I want to start a business. Maybe they do a lemonade stand. And very few actually go out and buy the delicatessen they were working at.

5:41So I'm just kind of curious, like, what do you think made you take that extra step? Was it something about being in control of your future and your destiny? That was something that made you want to go ahead and do it? I mean, you know, it is a very unusual step to do. So what was behind that? Well, I really wanted to make a living. And I felt like, you know, working full time and building up enough cash to at least have a chance at buying it gave me freedom. It gave me the opportunity to build something and it gave me the opportunity to pay for my education. So, you know, I was able to contribute a little bit at home.

6:20I was able to get a car and do the things that young people want to do. and I also put myself through school and really set myself up for what I really wanted, which was to take a shot after I graduated from college and go into the Big Apple and work for a big corporation and start my career. So it was just an evolution of leadership, you know, the desire to lead, the desire to control your own destiny, the desire to make a living, the desire to be a winner. You know, and that's, that's one part of your bio that I don't fully understand. I'll explain why. Okay. Because when you, when you actually set up and are running a successful business, right.

7:04When you're running, it's one of the things that actually it's, it's much easier to set up a business than a lot of people imagine. It's just about putting in the work to sustain that. And then you go ahead and you trade that in for being somebody else's employee. So that's actually a very difficult thing to do. I'm curious why you decided to do that. Because, you know, at the time, my dreams were bigger than being a delicatessen owner. And, you know, I would, there's nothing wrong with it. Obviously, I'm very grateful for the opportunity. But, you know, if you get up at five o 'clock in the morning, enough days to get the coffee ready, get the rolls buttered and get the hot, you know, grill going so you can make egg sandwiches and serve people by the hundreds.

7:50Do that for a while and then finish the day at midnight where you wax in the floors so everybody the next day can come into an immaculate store. And just the grind of being a sole proprietor and doing that to make a living, it's really no cakewalk. And at the end of the day, I really wanted to be part of a giant corporation. And people would come into the deli in their suits and their ties on their way to the Long Island Railroad. And I would say to myself, I'm going to do that someday. In fact, I even got into conversations with them, asked them about their jobs, what they were doing. And I just found that intellectually so interesting.

8:37So essentially, I did a direct mail campaign to several companies that were highly prestigious at the time. I got a result. Xerox invited me in and so did a few other companies. But I was really excited about Xerox because of the training program, the brand. And at that time, that was one of the most prestigious tech companies in the world. And it was just a thrill to have a shot at the big city in New York. And I went for it. Yeah, it is interesting. I mean, obviously, I think trading in the deli for your career turned out to be a good decision. and you're running a 110 plus billion dollar market cap company today.

9:16And there is something about growing up on Long Island, and I'm not going to spend the whole show talking about this, but I feel like, you know, having you here, this is sort of the environment that I grew up in also that inspires. It's sort of you grow up with maybe you tell me if I'm wrong about this, but you kind of grow up with a chip on your shoulder. You see everybody in the suits going into Manhattan, but you know, somewhat internally, you're not part of it. And there is that bigger show out in the city. And you want to be part of that. And it sort of does. I think maybe that is something that inspires people from Long Island to like maybe put harder work in or just go for it in ways that other folks can't match.

9:54Because I do think there is this ethos from Long Island, not to knock all the other boroughs and everything else, but there's something about that place growing up there. And it gets this reputation as like a rich place, but it's actually quite working class. And it is. I'm curious what you think about that, about that hypothesis. Yeah, well, as you know, Long Island is a pretty diverse place, and socioeconomically, it runs the gamut. And I came from a blue-collar working class family, and I'm really proud of that. And at the time, I loved Long Island because the people with dynamite, I loved the water.

10:31You know, so the Great South Bay or Robert Moses or Jones Beach. You know, I think about those places and literally driving in my car over the bridge, three hours in traffic to get to a beach was like such a privilege. So you do grow up hungry. You do grow up humble. But you also do have a desire to get out of Long Island and be somebody. And so you kind of spend your whole life thinking about how am I going to make it? What am I going to do to get there? And then once you get on your path, you have that built in blueprint of hard work, determination. In fact, I would just say like wanting it more and then ultimately being in a position mentally, physically and emotionally to do whatever it takes to win and be a winner.

11:29And that to me was the gateway to prosperity, just to really want it more than everybody else. I remember my first interview at Xerox and, you know, my dad. Oh, I know the story. I drove to the railroad station that day. As you know, my house flooded, and my brother basically carried me to my dad's car so I wouldn't get my new suit wet. I got a$99 suit at the mall, charged it on my credit card, first credit card. And I get out of the car finally at the railroad station. I tell my dad, I intend to come home tonight with my employee badge in my pocket. And my dad said, Bill, you're a good guy. Just do the best you can.

12:08I said, no, no, no. I guarantee it. I go up the escalator, get on the railroad, and I read the annual report about this guy, David Kearns, who was reinventing this company called Xerox. I started out going to interview for a sales job. By the time I got to Manhattan an hour and a half later, I wanted to be the next David Kearns. That dream inside you is the reason I named my book Winner's Dream, because all the began with a dream, a bold dream. And I get to the interviewing center, top of the sixes in Manhattan, and I'm looking around the room. And, you know, this person graduated from Notre Dame, this one's Yale, this one is, you know, some other prestigious school like Columbia.

12:59And they came from, you know, the pedigree, for the most part, of families that were either wealthy or had white collar workers in their past. Cause I asked them, you know, what'd your dad do? What do you do? And start conversations with everybody. Yeah, exactly. And so as I'm waiting, I'm getting warmed up, just talking to them. And what I realized, Alex, is they would say, well, I'm interviewing here or I'm interviewing there. IBM, Burroughs, Goldman Sachs, Morgan Stanley, you know, and play in the field. And that was the moment that my superpower kicked in and all the nerves went away because I knew I wanted it so much more than they wanted it.

13:44And I'll never forget getting to the last interview that day with the big boss, Emerson Fullwood, in his office in 9 West 57th Street. And I'm on a couch sitting next to this gentleman, David Andermichael. Can you believe this? He was a great friend of mine to this day. And Joanne Siciliano was the receptionist. And I go up to Joanne and I said, Joanne, you know, I've been here for a while. I just want to let you know I'm here to see Mr. Fullwood and I'll wait as long as he needs me to. But I just wanted to make sure he knew I was here. Next thing you know, boom, I get an interview into his office.

14:21I walk to the office. Man is beautifully groomed. I'm looking over his shoulder on Central Park from 9 West 57th Street on the 38th floor. and I realized as I went through the hearth of that door to sit down with him that I wasn't going for a job interview at all. I was in a fight for my life because if I could get that job, the destiny of my life was now within my personal control. We sit down, we have an unbelievable meeting at the end. He said to me, Bill, very interesting young man, thank you very much for your time and the HR department is going to get in touch with you within the next couple of weeks.

15:00I guess some of your listeners might have heard the HR department story before. And I said, you know, Mr. Fullard, I don't think you completely understand the situation, sir. And he kind of looks at me, tilts his head. And he's like, what's this kid up to? And I said, I haven't broken a promise to my dad in 21 years. And I guaranteed him I'd have my employee badge in my pocket when I get home tonight. And he kind of tilts his head again, looks at me and he said, Bill McDermott, as long as you haven't committed any crimes, you're hired. And I said, I certainly haven't committed any crimes. So you mean it?

15:35I'm hired? We shake hands. I kind of embrace them, carry them around a little bit, put them down safely, blow past Joanne, Siciliano, get on the elevator, go down 38 floors, go to 6th Avenue and 57th Street to Bunnenberger, throw quarters in the phone, call up my mom and dad. Now this is Long Island style. And I said, mom and dad, I got the job. We're going to celebrate tonight, break out the core bell. And the rest is history. Yeah. And it's interesting when you talk about the vision that you saw at Xerox at the time, it was one of reinvention. And it is sort of the challenge that's facing every company right now.

16:15And it's one that maybe Xerox handled for a while, but ultimately didn't. And you were there for the heyday, and you were also there as the company sort of started what began its decline. I won't say you were there for it, but you definitely saw it in action. What lessons do you think... Now, look, the conventional wisdom is Xerox didn't see the shift to digital coming, and it was so slow that by the time it realized what to do, it was toast. I bet there's a more nuanced story than that. Yeah, there definitely is more nuanced story. First of all, I got there in 1983, and that's the summer of 83 when I got the job.

17:01At that time, Xerox had already been in a situation where it was facing an onslaught of offshore competition. And the competition was building a product, building a product that actually performed better than many of Xerox's products. And they were selling that high quality product for the same price that it was costing Xerox to build a product that perhaps in many cases was inferior in terms of the performance. But the company still had a great brand, and the company had a CEO that wanted to reinvent the company, as you said, based on total quality management and really followed the Deming principles from Japan on quality.

17:51And essentially, the main lesson in quality is do the job right the first time. Because the cost of quality, when you don't build a great product and you don't take care of your customer with a great service, is you're chasing your tail trying to clean up the mess in the market. And even if you sell things, you don't make a lot of money doing it that way. So the whole force field towards quality reinvented the company. so they did see digital but they saw digital through the prism of printing and copying and while I was there one of the real breakthroughs in the company was the division I had the pleasure and the privilege of being responsible for which was called Xerox Business Services and at that time it was very clear that the market was moving away from owning boxes and paying maintenance on boxes, they were really interested in procuring a service, a digital document management service.

18:57And my division went from 700 million to over four and a half billion in just a few years by providing the document, the people that managed the documents and the digital nature of the document as a service. And that was the early days of cloud computing. So what might have been missed is that business came at a lower margin than just hard-selling boxes because it had a labor mix in it, like many of the cloud computing companies do today. And companies have to be willing to change their business model and lean into where the world's going, not where the world has been, if you want to transform yourself and win.

19:42So if there was any lesson to be learned, digitization was one aspect that you had to lean in, but also providing everything as a service was another one. And if you think about cloud computing and distributing things on demand, Xerox had all those ideas, but didn't necessarily lean into them with a single purpose at the time. I think that could have made a really big difference. Now, how much of this is the actual decision making versus the amount of work that it takes to maintain the flagship product? Because I have a book about this, Always Day One, which talks about how the tech giants have sort of reduced some of the, and this is going to be a nice setup for us in a bit, but reduce some of the work they're doing on internal processes.

20:27so they have actually more room to reinvent than the others who like you know they'd like to make these decisions to go towards these future products but they can't because they're just so loaded down on maintaining the flagship and they know that without the flagship they're toast so talk about what you've seen in xerox and elsewhere in terms of like what is the thing holding back most companies is it is it the will and the deter because like you mentioned xerox had the vision they knew digital was coming or is it the fact that they just are so overloaded on maintaining flagship that they can't think about anything else?

20:59Culture is the number one thing. You have to have a great company culture that's built on simplifying everything so you can do anything. You have to distribute net new innovation to the marketplace. You have to build products the world doesn't know it yet needs. but once it gets them, it doesn't even realize how it ever lived without them. So this whole bias has to be net new innovation led, where you're building things that are really changing the game and the marketplace. That's where the leverage is. To pull that off, you have to have a company culture that's not looking internally, but it's seeing the world through the eyes of the customer and understanding everything from the external viewpoint.

21:53And it sounds simple. It sounds basic, and it is. But basic things done extraordinarily well have proven hard to do for a lot of folks. So my feeling on it is you have to have an uncommonly great vision because people have to see themselves in a beautiful picture. The culture has to be radically simplified. And ultimately, it has to be innovation-driven and customer-led. And if you could pull all that off, you've got a good chance of doing some big things. But you can't always listen to the customers. So here's one example that I learned in researching my book, that in Microsoft, there was chief information officers who were responsible, and chief technology officers, responsible for maintaining the on-premises servers.

22:42And when Microsoft brought this idea of cloud up to them, they laughed it off. And they said, no, we're not moving to the cloud. We like the setup. And the reason was because they would lose their power if they moved to the cloud. And then Microsoft looked a level deeper and said, hey, wait a second. You know, after really going through the economic analysis, they realized that these people would either be A, on board with cloud in a few years, or B, fired. And so they said, okay, we're actually going to put, and this was under SIA. And that's how Azure was really turned into what it is, is they didn't listen to the customers and went ahead and moved forward.

23:18I'm curious what you think about that. Well, I'm really fortunate with ServiceNow because we're natively built in the cloud architecture and company. So we were in the cloud in the 21st century as opposed to taking a 20th century architecture and trying to reinvent it from on-premise to cloud. So this has been refreshing for me because I've been in both worlds. And it is true that you have to see past the corners that your existing customer base might be caught in. But it's also true that it's not only about technology and the technologists that use your product. It is also about the business people.

24:03And this is why I believe IT and business have to be co-joined in a shared vision for the future. So you have to spend a lot of time not just with the technical people, but also the business people on what their dreams and goals are. And how I think IT has really transitioned is the IT strategy, because of digitization, has become the business strategy. So now the business people are going to IT saying, take me someplace new because these are the goals that I have to hit. These are the things I have to do, whether it's taking costs out, improving productivity or putting growth into the business.

24:44And IT now has become the catalyst in helping business do that. So we're in a new era now. And you're right. You can't just simply serve what got you from there to here. What got you from there to here will not get you from here to there. And it is the here to there that you have to spend your critical thinking and your resources on to create that net new innovation. So I'm going to hand you a challenge and I think you can pull it off. So I'm going to ask you to describe, because this is kind of my level of understanding, sometimes your business describes what what service now does to the level of, let's say, a later in their career high schooler and maybe within under two minutes.

25:29just so people who haven't really been introduced to the company can get a sense of it because it goes down to it really goes to this idea of reducing some of the processes that yeah these are working to you know well anyway i'll get i'll lend it to you but i do think there's something to be said about the let's tell that later stage high school individual what's going on companies have spent billions and billions of dollars trying to digitally transform their companies so they become a digital company. So the experience you have with your digital phone on your living room couch and that great user experience you get from Google and many other wonderful companies needs to come into the enterprise.

26:18And the reason that the enterprise has not provided that great consumer-grade user experience is because there's 50 years of sludge and mess in these enterprises. And 80 % of those billions of dollars that got invested by these companies in digital transformation has failed to deliver a positive ROI, return on investment. And so then the question becomes, why? And the answer is one word, integration. The IT system doesn't talk to the employee system. That doesn't talk to the customer system. And the smart people like yourself, a young person coming out of school that just wants to build an app and do something different and innovate can't do it because the platform doesn't allow for easy low code or no code development.

27:18What if we had one platform that could lift up an entire company and integrate that mess so you never had to see it again. And your user experience in a corporation could be as simple as using that smartphone on your living room couch on the weekend. And the consumer grade experience could be just as good. What if we could do that for you? Would you be interested in that? Okay. And so that's service now. That's it. So it's great because it sounds like we talked about it in the beginning, but just like the amount of processes and the amount of work companies have to maintain their flagship product, right?

28:03They're in all these point solutions and they just can't handle it. And, you know, by the time they are able to get a task done, they don't have time to think about what's coming around the corner, which is why I think that your company is very interesting. And it also gives you an unbelievable perspective into what all these debates about automation, like what they're actually going to amount to, because that's something that you are working or hoping to work with clients on is to automate a lot of these processes that they end up spending time on, giving them more time to invent and create that next reinvention.