We’re joined by John Fallon, former CEO of Pearson PLC, who led its transformation from a 175-year-old publisher to a global digital learning company. Now an author and academic, John shares insights from his new book, “Resurgent,” on how established companies can thrive amidst disruption by leaning into their core strengths while learning to be agile. He argues that a strong, unifying sense of purpose is the most critical factor in navigating the immense challenges of change.
John asserts that the “transformation” aspect of digital change is far harder than the “digital” part itself. He describes the core leadership challenge as bridging the gap between exponential technological progress and the linear way humans adapt. Success requires making change tangible and near-term, and he reframes middle managers not as a “permafrost” layer blocking change, but as the organization’s essential “shock absorbers” who translate strategy and manage the associated anxiety.
Looking ahead, John provides practical advice, from using AI as a tool to create a powerful “first draft” that human creativity can then elevate, to having the patience required for a journey that often takes over a decade. He explains that leaders must protect small, innovative initiatives with non-financial KPIs and foster a culture of continuous change, recognizing that in the modern era, you are either busy being born or busy dying.
→ John’s new book "Resurgent: How Established Organizations Can Fight Back and Thrive in an Age of Digital Transformation"
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(00:07):
Disruption. The digital bit of digital
transformation is hard, but it'snowhere near as difficult as the
transformation bit. And the ultimately, this is a
contact sport. Things get bloody, bruv, beaten,
bent, out of shape. And it's the people side of
(00:28):
this. And my experience is whenever
any group of CEOs gathered to talk about the big bets they
were making on their own digitaltransformation, it very, very
quickly became a conversation about people.
Hey everybody, Pascal here. Time for another episode of
Disrupt Disruption. This episode with a dear friend
of mine. You're in for treat.
(00:50):
John Fallon. John served as the CEO of
Pearson PLC for eight years, leading the digital
transformation of 175 year old British institution from the
world's largest book publisher to the world's lifelong learning
company. He is now Professor of Practice
and Senior Advisor to the President at Northeastern
University, the world's premier experiential learning
(01:12):
university, an Executive Fellow at London Business School and
advises a range of venture capital and private equity
companies on education, technology and digital
transformation. He also chairs War Child UKA,
charity committed to providing asafe future for every child
living through war, and Blackpool Pride of Place, a
(01:33):
public private sector partnership which is leading the
economic and social transformation of the town where
John was born, which now ranks as one of the most deprived
areas in the UK. He is co-author of a new book,
Resurgent, How Established Organizations Can Fight Back and
Thrive in an Age of Digital Transformation, which is being
(01:54):
published by Bloomsbury right now.
We'll put a link in the show note.
Check it out. But now let's dig into our
conversation. John, it's amazing to have you
back. And here's a little bit of
Inside Baseball for everybody who doesn't know the back story,
and you shouldn't. But John, you and I actually
recorded this interview a coupleweeks ago before.
(02:15):
And due to a snafu in the recording software, our amazing
conversation is lost in the ether forever.
So I'm really excited that you agreed to come back on the
podcast and do essentially take two of this conversation.
Yeah. Well, it's, it's not so much
that I was thinking of it. It's just as iterative
development. Pascal, you know, we live in, we
(02:36):
live in a world where, you know,we're always learning and
testing and trying. So we're just sort of a bit of
iterative development between us.
Indeed it is. And I have a, a starting
question for you, given that youhave worked in the learning and
educational space for so long and have done like amazing
things there. Let me just kick off with a
(02:57):
question. I recently spoke to a a young
parent and he asked me what am Isupposed to teach my kids these
days? And I'd be really curious to
hear is like, you know, like in today's world, we are recording
this in the middle of 2025, the World Uncertainty index is at
unprecedented heights. I'd be really curious to hear
what is your advice today. That's why not start with a hard
(03:21):
question. So I mean, the, I read recently
suddenly, suddenly saying the, the answer to every question
about AI, doesn't matter what the specifics of it is, is
either we don't know or it will play out like every major new
technology development has over the last 40 to 50 years and
probably even server. The reason we might not know is
(03:44):
because obviously sort of AI is a technological development with
a different scale and a different power and the
potential that maybe for the first time we have technology
that can think and act like humans and at the pace and power
of a computer. And if so, then that's a very
different world. I think what we actually know so
(04:05):
far is that actually AI is very good at imitating, is not so
good at creating and it's very good at sort of automating
routine, routine and administrative tasks.
And So what I would say that means is that AI and the I think
(04:28):
the other key point to remember is that AI automates tasks.
It doesn't automate jobs. Jobs are bundles of tasks and
the tasks that it's likely to automate are those more sort of
routine and administrative type things.
I would encourage any parent or any of us, whatever state of
life we are to be all over AI, be using plot or ChatGPT or
(04:54):
whatever it is really leading into AI agents.
I would probably be learning to code or at least the basics of
coding because I think, you know, the better you understand
the principles of coding, the more likely you are to be able
to use AI to, to achieve important things.
But I'd also be leaning very heavily into the humanics, into
(05:16):
sort of the humanities as well, because I think sort of
creativity, individualism becomes more important than
ever. And I think deploying it through
a student or a young person using AI, you know, if they've
got some coursework to do, I will basically use all my AI
skills to get the very best first draft I can and then say,
(05:38):
how do I make this better than you could ever imagine it could
possibly be? And that would mean leaning into
our individuality, leaning into our own personality, leading
into our creativity. And I think if we think about it
that way, then it will sort of enhance human agency.
It will give us empowers, not disempowers, and it will enable
(06:00):
us to lead more successful and purposeful lives.
And if you look, if it does playout like previous wages,
technology, that's what's tendedto happen, isn't it?
It opens up new roles, hybrid roles, different lines and
different works, professions andthe like, and enables us to do
more and more creatively. So in very general terms, that's
how I would think about it as a parent.
But what's your, what's your take on that?
(06:22):
Am I? I've been overly optimistic.
I'm actually with you. I'm very curious though to hear
how optimistic you are on the topic of of using AI.
You might have seen that there is a bunch of controversy around
AI turns our brains into mush onthe student side.
So what I'm hearing is you're actually embracing AI and you're
(06:43):
not in the camp of do not use AIas a teacher for example, or as
a student because it will make you lazy.
It is an argument currently being rolled out and debated
about AI effectively making us lazy.
I guess it's probably the easiest summarization.
I think that is a real risk. I genuinely do.
But I can't see how the answer is to deny that it exists.
(07:07):
You know, how how realistic is it to just say, oh, well, we
won't, we'll stop young people from using AII mean it'd be a
bit like back in the early days of the sort of industrial
revolution, the Luddites saying,oh, we just won't use those new
texts. You know, I mean, the world
doesn't sort of work that way. So I think the conundrum of the
challenge that you pose is a very real one, which is in the
(07:29):
world of AI where knowledge is so regular or information rather
is so readily accessible, how dowe learn, how do we still learn
knowledge? Because the, the whole debate
about sort of knowledge versus 21st century skills was always
to me a false dichotomy because you learn those 21st century
skills in the context of learning about a thing, which is
(07:53):
why my argument would be use, you know, use the AI as the
first draft. And how do you then use your
knowledge, your context, your experience to massively enrich
and improve that? I don't see how the answer can
be, well, don't bother with AI at all because the work that you
know, the workplace that people were going to will be right
(08:15):
going AI Because I mean that's how I would think about it.
I like it. Let me bridge something you said
to your upcoming book because weshould be, and I would be remiss
to not mention this on this podcast.
We are recording this July 16th.In a day from now, your book
Resurgent, how established organizations can fight back and
(08:35):
thrive in an age of digital transformation.
We will put a link in the show notes launches tomorrow on the
17th. I'm very curious.
So you talk about how incumbent organizations, very well
established quote UN quote, old companies can actually thrive in
today's environment and do thrive in today's environment.
(08:55):
And that there's somewhat of false narrative in the in the
marketplace about it's only start-ups.
And clearly AI plays an interesting role where AI is
shifting that marketplace. Once again, you know, where we
went from the Internet and digitization to now AI.
I'd be curious if you can walk us through a little bit of your
the core argument, the core threat you're you're pulling
(09:17):
through that book. I received overcome the
corporation for eight years. I was at the company for 23
years. Person is a is 175 years old
Pearson was 15 years ago the largest textbook publisher and
paper and pen testing company inthe world and it is now the
world's leading digital lifelonglearning company.
(09:38):
And we went through a massive transformation of our own from
analog to digital. And if you look through that
process and you could apply lookat similar companies in
newspapers and music, in arts, entertainment, television,
creative industries or look at awide range of sort of other
industries. They face major threats from big
(10:01):
tech, obviously the sort of magnificent 7 and you have a
power and a scale that is unthinkable to much everyone
else. And as you say, they also face
huge amount of disruptive threatfrom venture capital backed
startups. We don't have to worry about the
things that a company like Pearson would do, which is these
existing analogue customers making a profit, making short
(10:23):
terms, earnings expectations, dealing with a lot of legacy
infrastructure and technology that goes back 40 to 50 years.
And so the popular mythology is companies like Pearson and Dunes
are all going to go the way of sort of Kodak or Nokia or
BlackBerry or Blockbuster or Toys-R-Us or whatever.
Your favorite example. And the book that I've just
(10:44):
written with Julie Birkenstock, who's the Dean of Ivy Business
School in Canada was previously on the Business School, is that
Kodak are the exception, not therule.
But if you, if you look at it, these large incumbents
organisations, they're not breaking out in the way that the
magnificent seminar, but they are actually surviving and
(11:04):
prospering. And I, if I'm allowed one sort
of cheap jibe at the venture capital industry that more, more
unicorns have gone the way of unicorns than incumbents have
gone the way of Kodak. And how are they doing that?
That they're leaning into the things that made them successful
in the 1st place, Deep relationships with their
(11:25):
customers, industry knowledge and expertise, deep pockets,
great relationships, regulatory,you know, deep, strong
distribution networks in the wide.
But they're also learning, you know, they are elephants that
are learning to dance. If I'm, if I'm allowed to, to
quote from Gerstner from from that, that book way back when,
(11:49):
in that they are sort of learning to be agile.
They're learning to do sort of iterative development of where
we where we started. They're bringing in in new
talent. They're investing massively in
digital transformation. They're learning to move as as
as we did from ownership business models to one that are
(12:09):
much more about access and subscription.
And I think crucially shifting to a focus much more on
outcomes, on inputs and how do they help their customers to
achieve important things. And I think that's probably the
single most important lesson that I think is that incumbents
the race of I do so because theyhave a very strong sense of
(12:31):
purpose and identity. And I think that is absolutely
crucial to their success. You know that my own personal
story at Pearson was, you know, we had number of profit, the
share price collapses really hard, challenging, difficult
times and we had to do some verytough things around the way.
But what got us through it was the belief that applying
(12:54):
technology to education gave us the chance to democratize
opportunity and open up new educational opportunities for
people to personalize learning to make it more effective and
that we grow by doing something important useful in society.
And that I think is fundamental to this wine coming just that's
and the purpose and identity drives you forward.
Interesting. I'm curious to hear a
(13:18):
perspective on from your side. So there is something which has
been debated recently called Martech's Law, and the basic
premise is to say that if you look at technological change, it
moves on this exponentially accelerating curves.
These days, again, AI is a really good example.
Organizations can typically absorb change only
logarithmically, particularly ifyou have an incumbent like large
(13:38):
organization or for all the right reasons, right?
And I'd be curious, have you encountered this?
And probably even more importantly, what Martex law
implies is that you have to pickyour battles, as in, you can
only push so much change throughan organization and you need to
let certain things go. I'd be curious like as ACEO,
(13:58):
former CEO of a very large company which went through a
massive transformation, have youencountered it and how did you,
how did you get through it? Yeah, I think there's two ways
of answering that question. The, the first days, I mean, in
terms of picking your battles, you know, when I, when I started
to see our person, we, we still own Penguin Books and we still
own the Financial Times and The Economist.
(14:21):
And we decided to merge Penguin with Random House to create the
world's leading trade publisher.And subsequent we sold that to
Bertelsmann and we sold the FT to, to, to Nikkei, the Japanese
Business news and Information Group.
And the reason we did that is because we could see that each
of those 3 industries, education, trade, books and
(14:43):
newspapers was each going to go through a very, very challenging
analogue to digital transformation.
And our chances of riding three horses successfully through such
traumatic change was just going to be too hard.
So we had to focus on one. So that's one.
That's one sort of level of answering the question.
The other one is I, I, I wasn't familiar with that specific
concept you're talking about, but I remember about five years
(15:05):
into my tenure at Pearson leading Thank You for Being Late
by Tom Friedman. And in that book he quotes John
Kelly, who's a senior executive at IBM.
And I think this is the same idea.
And John Kelly said what makes digital transformation so hard
is that the technological changeis exponential and humans change
(15:26):
in a linear way. And it's closing the gap between
the linear change way with humans change and the
exponential change of technologythat makes this so hard.
And one of the big themes of thebook is that how the digital bit
of digital transformation is hard, but it's nowhere near as
(15:46):
difficult as the transformation bit.
And that ultimately this is a contact sport.
Things get bloody groove, beaten, bent out of shape and,
and it's the people side of this.
And my experience is whenever any group of CEO's gathered to
talk about the big bets they were making on their own digital
transformation, it very, very quickly became a conversation
(16:10):
about people. Because I think most of us just
both intellectually and in our fibre are being find it very
hard to imagine the future beingdifferent from the world as it
is today, or it was in the in the past.
And I think, you know, I've just, I've just taken on the new
sort of non executive role with the Cabinet Office here in the
(16:33):
UK, which is responsible for running the, the civil service,
the 550,000 civil servants that run the UK government.
And we were talking about, you know, they've got this major AI
transformation of their own plan.
And the biggest challenge is that you just don't, you don't
use AI simply to run your existing systems and processes
(16:54):
and ways of doing things a bit more efficiently than you did
before. You have to be finding new
trails, not paving the existing Calpas for one of the sort of
the better word. And I think that's one of the
hardest things that people do. They apply their prior mental
model to to this. It's a bit like thinking it,
thinking that I'm going to use chat GPC as if it was Google
(17:17):
search. A bit like how in the early days
of digital transformation publishing, the extent of our
aspiration was to create a PDF of the of the of the printed
book as opposed to saying, how does this enable us to sort of
personalize, to interact, to provide an integrated context
that you know, So it's that challenge I think is really
(17:38):
hard. Is that is that the same idea?
Yeah, absolutely. And I'd be curious to hear in
practical terms, how do you get people to change because people
don't want to change on Everett?Yeah, so I, I think it's, you've
got to have the, I, I think it, it helps if you have a, a
burning platform as if, you know, I mean, I, you know, the
(17:59):
truth is change became not easier, but it was more, it was
clearer and Pearson as the analogue sales really starting
to decline and our customers were clearly telling us that
they wanted a different way of engaging with us.
Then, you know, sadly, it's always much better to do this to
fix the roof while the sun is shining.
(18:21):
But you know, I think a burning platform is sort of something
that is drives change. I think combined with that you
do need that that light on the hill.
You know, in our case it was that we can content plus
assessment powered by technologyenables us to personalize
learning and scale and enhance opportunities at lower costs for
more people. So I think we need that light on
(18:42):
the hill, but then you need to, I think to make the change as
small, specific and near term asyou can.
I remember you, I think you, I remember, I think you, you
remember years ago when you weredoing some work with us talking
about, I think it was the, was it the British Olympic rowing
team that had this great success, not because of one
(19:05):
thing, but because they did thousands of iterative things.
And that's together. And and I think the big mistake
that a lot of organ and I and I probably made it myself is the
CEO wants to talk in sort of bigtransformational terms about
change. And if you talk about change, if
you just give the big picture, then change in that sense is
(19:28):
very disempowering people because they feel helpless
because it's in big and amorphous and far away.
So you've got to have the light on the hill that they need to
make it as a specific and near term as you as you possibly can.
And then I think understanding, and I think what follows from
that is understanding where and how decisions get made in any
(19:51):
large organization. And a lot of CE OS, and I did
this myself probably in the early days, get frustrated with
middle management. It's like, you know, we the
senior leadership get it and therank and file of all likely to
be digital natives and it's middle management of the
permafrost. It's the Throesen middle who are
(20:12):
thwarting and getting in the way.
Over time I realized that was. Absolutely the wrong way to
think about it, because every, you know, we would do these
pulse surveys every quarter of what the mood and what employees
were and how they were feeling and, and, and, and it was more
around organizing. It was organizational health,
not not morale, because I think that's an overly simplistic way
(20:35):
of thinking about it. But time and time again, the
leaders in the organization thatwere most high valued were those
sort of middle managers. And I came to see them as, as
what I would describe as the shock absorbers of the
organization. You know, they were having to,
they were having to take the bigsort of, you know, we've got to,
(20:55):
we're going to make these big changes or we're going to move
to a new ARP system or we're going to move to a new business.
We're going to, you know, we're going to sell, sell as a
service, well as a product and, and make them understandable and
cogent and tangible for their specific part of the business.
And they had to deal with all the anxiety and uncertainty that
that was that was sort of causing.
(21:18):
And so I just learned spend a lot of time with without with
those groups within the organization and this idea that
I don't think you can lead through change unless you're
willing to sort of stand in the shoes of other people and
shuffle rounding them because I think that gives you a much
greater sort of understanding. I think you have to feel change
(21:39):
as well as lead it. That makes sense.
I think it's ultimately a very avery human process.
I'd be curious to get your take on something.
So I've been mulling this over in my head for quite a bit now.
In the world of software development, there is a another
one of these laws. It's called Conway's Law goes
back to 1968, which essentially postulates that your product
(22:02):
will look like your org chart. So in the world of software,
your company is split into threepieces.
Your software will be essentially 3 pieces which will
talk to each other. We are interfaces.
I actually think this is true for every organization and every
product. I'd be curious, you're already
alluded to this in terms of likeorganizational change.
When you do change, how much do you deliberately think about the
(22:24):
organizational structure to reflect that change, to embody
this change in the change you want to see in the marketplace
and the product being reflected in the structure of your
organization? Did you, was that a, was that a
major concern or major thinking?As you were, absolutely.
And I think that what you, what you find is there's a lot of
(22:46):
large incumbent organizations are probably a strong mix of
bureaucracy and meritocracy, andthey don't have a lot of
adocracy because that's not the way that sort of decisions have
got made. And I think this is where and
you, you know, piercing you partof us trying to do this when
(23:09):
you're trying to. And I think when you move from
an analogue to a digital world. So in an analogue world, if you
think, if you're, you're, let's just take college publishing as
an example, you're on a three-year addition cycle for
the new textbook and the new textbook doesn't get released
until every last change in it has been made.
And you can afford to do that because it's a three-year cycle.
(23:31):
And then you're going to do it again.
You move to digital courseware and it's a completely, it's a
completely different model, isn't it?
You know, because you are iterating and you are trying,
you know, and it's learned, don't guess.
And you get a product out, get some feedback.
And so it's a very, very different.
So then you need much greater use of agile, much greater use
(23:53):
of Sprint, all of that sort of stuff.
And that's really hard for established organisations to do.
And that's why I think you, if you're not careful, you get a
lot of innovation theatre in large companies where they feel
like they're prototyping and trialing and piloting.
But actually, you know, 90% of the product development spend is
(24:15):
still going into sort of new additions or revisions of
existing products and there's very little goings.
So I think it's very sort of challenging.
I'd also argue that it depends what it is you're trying to
achieve. So I would argue, I think back
to some of the things we did in Pearson.
When I started, we had, because the business had grown through
(24:35):
sort of acquisition, we had, youknow, 95 data centres around the
world. We have 56 different ERP's, we
have 73 different HR systems. We, you know, we had thousands
of different sort of websites, none of which sort of talked to
each other with the best will inthe world.
You know, by the time I finished, we'd moved to, you
(24:55):
know, 95% of the company was in the cloud and we were all
running off 1 global digital platform and we had reduced time
to market by half and reduced the cost of creating products
and IT and it was virtually digital first company.
You could not have made that change without a strong degree
of sort of hierarchy. And do you know what I mean?
(25:18):
Because there's an extent to which say this is happening and
we're going to do it. Once you've done that, the
products that are built on that digital platform and you want as
little involvement from the CEO and the team as possible and you
want to maximize the degree of adocracy that you have and the
amount that you just let people be our child.
So I think it's this different, isn't it?
(25:38):
What you know, Jeff Bezos talkedabout one way decisions and two
way, you know, there are there adecision where once you've gone
through that door, you're not coming back.
And that degree that requires a sort of degree, a higher degree
of sort of engagement and probably a bit more of the
meritocracy and hierarchy. Whereas most things in life are,
(25:59):
well, if we've got that wrong, we can reverse it tomorrow.
We can tweak it or change it. And then you want to have as
much, you want to be as agile aspossible.
You want to devolve as much as possible.
You want to create sort of horizontal rather than vertical
structures. Does that make sense?
So I'm, I'm also says you can completely get rid of all the
muscle hierarchy of that. I think you need a degree of
(26:22):
that, but I think a much more sophisticated understanding of
the balance of the 2 is really important.
Would you share that view? Am I?
Am I still a bit too traditionalist?
I do share that view. I'd be curious to hear what is
your experience in terms of bringing this change to an
organization. So one of one of the things in
(26:44):
the first season of this podcast, I heard quite a bit
when I talked to people about change who have done large
change initiatives, they all told me one thing, which is it
takes way longer than you even think it takes.
I'd be curious to hear as, as you're thinking about this, you
are, as the CEO of Pearson, you must have been under enormous
pressure to deliver the quarterly results and to like
(27:05):
bring the change about. And at the same time, you, you
clearly know that it'll takes a while.
So how do you reconcile those 2 views as a as a leader?
I think the. I think the, you know, there's
clearly 1 stand out case that sort of you know what the iPhone
was launched in work 2000 and seven 2008 and Nokia and
(27:28):
BlackBerry were essentially bankrupt or out the business
within two years. But that's the exception, not
the rule. You look at the music industry,
music industry revenues declinedevery year for 15 years, then
they bottomed out and then they have grown every year now for
the last decade and they are back to where, you know, the
(27:48):
bigger than they were before that.
That started because that's how long it takes to shift from a
analog ownership business model to a digital subscription
software as a service. And if you look at, if I take
one, one example places, the college publishing business,
that's probably happened in 10 years, but it's 10 years, not in
(28:11):
three years. So hence my point is that, you
know, OK, this might be a code up moment, but it's probably not
going to be. But just because things play out
over time doesn't necessarily make them easier because what we
found is, you know, every, to some extent, if they went
quicker, that would be easier because you would, you know,
(28:32):
what happens is it goes a bit and then it pauses and then it
goes again. And one of the big lessons in
the book is you need to distinguish between the things
you can control and the things you can't.
And one of the things you can't really control is the pace of
consumer adoption. And consumer adoption will play
out over time. And so, you know, I mean, I, one
(28:55):
of the, I the in the book I, I write a little after most of the
book is written as a joint collaboration between Julian and
myself, but I have a little after with some personal
reflections. And one of it is one of them is
learning to sort of pass it on. I mean it became clear to me my
tenure as CEO the the company would only really start to sort
(29:17):
of grow significantly again whenthe profits from the small but
growing digital revenues outstrip the profit decline from
the large annual businesses. And that tipping point was
probably likely to take 10 yearsplus and I wasn't planning to be
(29:37):
CEO for that length of time. So you have to still just say,
I'm going to make the right decisions for the long term
future of the company, recognizing that we may not see
the benefits of this until aftermy tenure.
And I think that's what a lot ofcompany and that's what, and
what makes it really hard is when you're in the midst of
that, you've then got a lot of the, you know, VC backed
(29:59):
start-ups who, you know, in my, in my time, we have companies
like Baizou, companies like to you, companies like Cheng that
we're trading on these huge multiples of revenues.
Each of those subsequently have found life very difficult.
And Pearson where people said, oh, well, you know, Pearson has
(30:19):
then is resurgence and has recovered since.
And you can see that playing outagain and again across industry
and industry. How do you protect those those
smaller initiatives which you believe have the potential to
become really big, as you said, like digital revenue, like it
takes 10 years to like outstrip your analog revenue in the
(30:41):
beginning. It's such a delicate flower and
it's so easy to trample over when people say like, oh, look,
we invest all of this time, energy, effort and yet it
doesn't show any results. How do you protect?
It's a great question and it's hard and it gets particularly
hard because there's one of the other thing and this links to
your earlier question about sortof Conway, about Conway's law
(31:05):
and organization structures. Because when an organization is
under extreme financial pressure, like a profit warning,
the temptation is to grip the reins even tighter.
Yeah. And, and actually that's in some
ways absolutely the wrong thing to do because it's the very time
(31:25):
when you need to be given more time and space so that the sort
of the delicate flowers as you, as you say to blue.
I think, I think what you could do is I think you have to have
the systems and structures in place to do that.
You have to understand that any large organization is a
portfolio and that you always need a proportion of your
portfolio that is in that sort of startup phase.
(31:49):
You have to have non financial key performance indicators,
growth in digital registrations,Net Promoter scores, revenue,
you know, revenues, earns and services rather than sort of
ownership model. And actually most, if you're a
public company, most shareholders these days are
sophisticated enough to recognize the value of those
(32:10):
KPIs and we'll support you on them.
You have to be willing. I think you have to have sort of
means of incentivizing rewardingpeople in the company.
Probably an element relates to the overall performance, but
then recognizes that and likewise, you know, you may have
a part of the business where therevenues only declining 5% in
the year is a great, you know, is a great performance.
(32:32):
And that bit there's only declining 5% is generating lots
of cash, which you're then able to redeploy in the bit that's
growing 20%. Do you know what I mean?
And and so having thinking aboutan organization as an ecosystem
and being able to make those sort of trade-offs is really
sort of important and also recognizing that how I mean,
(32:52):
it's a good point, isn't it? Because I think also a lot of
people think that I mean, Clayton Christensen clearly
absolutely brilliant and his insights are incredibly
valuable, but his idea that the only way to do innovation is to
create a completely stand alone separate organization.
It's a way. But in in, for example, in the
(33:15):
book, we essentially say there'sfour different ways of, you
know, because quite often what you do is like what we did in
the early days of digital in thecollege business, you set up a
separate entity, but pretty quickly you then need to migrate
that into the main body because that's actually going to be the
main way that you make money in the future.
You look at an organization likeSandwich, for example, they set
(33:38):
up a digital business within their core business and then
realized it had a wider service outside.
So they then sent me something that was integrated to start.
They then separated off. So I think there's different
ways and different structures and they will vary over time
because I mean, that's how I, I don't know what your experiences
are. That's how I.
I agree. We, we talk a lot about the, the
(34:00):
exact point you just made where we talk, tell people like
there's different ways you can think about what we like to call
the core and the edge, the new and the old.
We highlight those and then always tell people, I can't tell
you which one to choose because it really depends on your
circumstances, who you are culturally, where you are in the
market, what your product is, etcetera.
And you need to find the right, the right mixture for what works
(34:22):
for you. Curious if, if you allow me,
like I would love to double click on one thing because you
talked about this idea that essentially picking the
successor, making sure that yoursuccessor can continue the work
you're doing on these longer journeys where you said, you
know, in your case, you said, like, I know it's a 10 year
journey. I will not be around for the
whole 10 years. So I need to make sure that, you
(34:43):
know, we continue this journey. I actually find this a really
interesting problem, even in theslightly smaller microcosm of
say, for example, high potentials.
So you put a high potential on your project, they're going and,
and hopefully building somethingamazing.
And then because it's a high potential, we love to promote
them away after a year or two ormove them around in the company.
And then you get the next high potential to take over the
(35:05):
project. And then the first thing that
next high potential does is theyleave their mark, meaning they
change everything. And so, you know, like we
somewhat facetiously always tellpeople is like, there's no
wonder that you can't innovate because you, you have no
continuity. How do you build that?
How do you do that? How do you ensure that the
person who's inheriting a project is actually continuing
(35:27):
the work and is incentivized andaligned and doesn't feel the
necessity to leave their mark, change everything, do everything
differently, just because that'swhat is quote UN quote expected
of them? I think that's a very good
question and it's very, it's very difficult and almost like
(35:47):
the way, you know, social media works today and the way the sort
of media narrative works today all leads people towards doing
that way. I mean, interestingly, it was
the opposite challenge in the past, wasn't it?
In a lot of, in a lot of sort oflife, in a lot of life in a lot
of large companies. And actually my, in my last ever
(36:10):
e-mail to Pearson staff, I, I sort of quoted Bob Dylan.
I said, you know, if you're not busy being born, you're a busy
dying and the patient had been busy being born for 175 years
and one made that continue. And, and in that I was basically
saying my successor will want tochange some of the things that I
(36:31):
have done. And that's a good thing, not a
bad thing. So I, I think this idea, because
I think that one of the big challenges we have in person, I
think a lot of large establishedorganizations have this is that,
you know, 2025 minutes into any town hall, physical or virtual,
you could be sure somebody wouldput their hand up and ask a
(36:53):
variation of the question, are we finished changing yet?
Right. And so I think the nuanced
answer to your question is if you've got the strong sense of
purpose, if you've got the vision right, if you've got the
narrative right and the criteriaright, right, of what you're
trying to do, If you've got the culture around sort of iterative
(37:14):
development, right, so that the changes we are making are data,
you know, we are making data-driven changes based on
customer experience to drive towards a clearly defined
object, then that should provideyou some cultural comfort.
The the new person coming in isn't making the changes to
(37:35):
change, say they're making the changes because they are
consistent with what you're trying to.
Does that make sense? I mean, I think that's how I
would. I think that's how I would think
about it. I love that.
Let me bring the conversation back to your book again.
It launches tomorrow. Highly recommended.
I had the great pleasure of reading the pre release version
of it. I love it.
(37:55):
For the benefit of our listeners, how would you
describe the quintessential insight from the book?
You know, if you find yourself in a bar talking to someone and
like, hey, I just wrote this book, here's why you should read
it. That's a good question.
I think if we think about AI andhistory may not repeat itself,
(38:16):
but it certainly rhymes. And I think the best way that
large companies can navigate their way through the challenges
of AI is learning the lessons ofwhat success, how companies have
successfully navigated their waythrough previous waves of
technology. And this gives you the book just
gives you lots of very practicalspecific, it's a sort of guide,
(38:41):
it's a practical handbook how you can lead a large
organization through a time of digital transformation.
And essentially it says, don't forget all the things that made
you such a successful incumbent in the 1st place, but also make
sure that you're learning both from big tech and from all these
(39:02):
startups that are out that are coming after you.
And if you can combine all the things that made you great in
the 1st place with a very strongculture of learning from
everybody around you, then the best days lie ahead.
So I'm I'm I'm not an advertising executive, so I hope
that wasn't too bad a description.
This was amazing. I think again, like having read
(39:23):
the book and having also worked and continued to work with lots
and lots and lots of incumbent organizations all around the
planet, which I love that kind of work because for the exact
right reasons you just described.
I think there is way more interesting things to be had
with these companies than is thegeneral narrative around them.
(39:44):
I think it's a beautiful, it's a, it's a really beautiful
blueprint for people to to really better navigate change.
So highly recommend if you're inan incumbent organization,
highly recommend the book. If you are in a start up still
highly recommend the book because you will at one point
become an incumbent organizationand you might need the advice,
John, you have in your book. John, this was an absolutely
(40:06):
phenomenal conversation. Thank you so much for agreeing
to do the redo for those of you.Who might ask yourself is was
this the better conversation than the one we have lost into
the ethers of the digital world?Yes, it was.
It was an E better conversation.So, and thank you so much.
Wish you all the best. We will put the link to the book
(40:27):
into the show notes. Go on to Amazon or whatever is
your preferred bookseller and get a copy.
Thanks, John.
Disruption. The digital bit of digital
transformation is hard, but it'snowhere near as difficult as the
transformation bit. And the ultimately, this is a
contact sport. Things get bloody, bruv, beaten,
bent, out of shape. And it's the people side of
(00:28):
this. And my experience is whenever
any group of CEOs gathered to talk about the big bets they
were making on their own digitaltransformation, it very, very
quickly became a conversation about people.
Hey everybody, Pascal here. Time for another episode of
Disrupt Disruption. This episode with a dear friend
of mine. You're in for treat.
(00:50):
John Fallon. John served as the CEO of
Pearson PLC for eight years, leading the digital
transformation of 175 year old British institution from the
world's largest book publisher to the world's lifelong learning
company. He is now Professor of Practice
and Senior Advisor to the President at Northeastern
University, the world's premier experiential learning
(01:12):
university, an Executive Fellow at London Business School and
advises a range of venture capital and private equity
companies on education, technology and digital
transformation. He also chairs War Child UKA,
charity committed to providing asafe future for every child
living through war, and Blackpool Pride of Place, a
(01:33):
public private sector partnership which is leading the
economic and social transformation of the town where
John was born, which now ranks as one of the most deprived
areas in the UK. He is co-author of a new book,
Resurgent, How Established Organizations Can Fight Back and
Thrive in an Age of Digital Transformation, which is being
(01:54):
published by Bloomsbury right now.
We'll put a link in the show note.
Check it out. But now let's dig into our
conversation. John, it's amazing to have you
back. And here's a little bit of
Inside Baseball for everybody who doesn't know the back story,
and you shouldn't. But John, you and I actually
recorded this interview a coupleweeks ago before.
(02:15):
And due to a snafu in the recording software, our amazing
conversation is lost in the ether forever.
So I'm really excited that you agreed to come back on the
podcast and do essentially take two of this conversation.
Yeah. Well, it's, it's not so much
that I was thinking of it. It's just as iterative
development. Pascal, you know, we live in, we
(02:36):
live in a world where, you know,we're always learning and
testing and trying. So we're just sort of a bit of
iterative development between us.
Indeed it is. And I have a, a starting
question for you, given that youhave worked in the learning and
educational space for so long and have done like amazing
things there. Let me just kick off with a
(02:57):
question. I recently spoke to a a young
parent and he asked me what am Isupposed to teach my kids these
days? And I'd be really curious to
hear is like, you know, like in today's world, we are recording
this in the middle of 2025, the World Uncertainty index is at
unprecedented heights. I'd be really curious to hear
what is your advice today. That's why not start with a hard
(03:21):
question. So I mean, the, I read recently
suddenly, suddenly saying the, the answer to every question
about AI, doesn't matter what the specifics of it is, is
either we don't know or it will play out like every major new
technology development has over the last 40 to 50 years and
probably even server. The reason we might not know is
(03:44):
because obviously sort of AI is a technological development with
a different scale and a different power and the
potential that maybe for the first time we have technology
that can think and act like humans and at the pace and power
of a computer. And if so, then that's a very
different world. I think what we actually know so
(04:05):
far is that actually AI is very good at imitating, is not so
good at creating and it's very good at sort of automating
routine, routine and administrative tasks.
And So what I would say that means is that AI and the I think
(04:28):
the other key point to remember is that AI automates tasks.
It doesn't automate jobs. Jobs are bundles of tasks and
the tasks that it's likely to automate are those more sort of
routine and administrative type things.
I would encourage any parent or any of us, whatever state of
life we are to be all over AI, be using plot or ChatGPT or
(04:54):
whatever it is really leading into AI agents.
I would probably be learning to code or at least the basics of
coding because I think, you know, the better you understand
the principles of coding, the more likely you are to be able
to use AI to, to achieve important things.
But I'd also be leaning very heavily into the humanics, into
(05:16):
sort of the humanities as well, because I think sort of
creativity, individualism becomes more important than
ever. And I think deploying it through
a student or a young person using AI, you know, if they've
got some coursework to do, I will basically use all my AI
skills to get the very best first draft I can and then say,
(05:38):
how do I make this better than you could ever imagine it could
possibly be? And that would mean leaning into
our individuality, leaning into our own personality, leading
into our creativity. And I think if we think about it
that way, then it will sort of enhance human agency.
It will give us empowers, not disempowers, and it will enable
(06:00):
us to lead more successful and purposeful lives.
And if you look, if it does playout like previous wages,
technology, that's what's tendedto happen, isn't it?
It opens up new roles, hybrid roles, different lines and
different works, professions andthe like, and enables us to do
more and more creatively. So in very general terms, that's
how I would think about it as a parent.
But what's your, what's your take on that?
(06:22):
Am I? I've been overly optimistic.
I'm actually with you. I'm very curious though to hear
how optimistic you are on the topic of of using AI.
You might have seen that there is a bunch of controversy around
AI turns our brains into mush onthe student side.
So what I'm hearing is you're actually embracing AI and you're
(06:43):
not in the camp of do not use AIas a teacher for example, or as
a student because it will make you lazy.
It is an argument currently being rolled out and debated
about AI effectively making us lazy.
I guess it's probably the easiest summarization.
I think that is a real risk. I genuinely do.
But I can't see how the answer is to deny that it exists.
(07:07):
You know, how how realistic is it to just say, oh, well, we
won't, we'll stop young people from using AII mean it'd be a
bit like back in the early days of the sort of industrial
revolution, the Luddites saying,oh, we just won't use those new
texts. You know, I mean, the world
doesn't sort of work that way. So I think the conundrum of the
challenge that you pose is a very real one, which is in the
(07:29):
world of AI where knowledge is so regular or information rather
is so readily accessible, how dowe learn, how do we still learn
knowledge? Because the, the whole debate
about sort of knowledge versus 21st century skills was always
to me a false dichotomy because you learn those 21st century
skills in the context of learning about a thing, which is
(07:53):
why my argument would be use, you know, use the AI as the
first draft. And how do you then use your
knowledge, your context, your experience to massively enrich
and improve that? I don't see how the answer can
be, well, don't bother with AI at all because the work that you
know, the workplace that people were going to will be right
(08:15):
going AI Because I mean that's how I would think about it.
I like it. Let me bridge something you said
to your upcoming book because weshould be, and I would be remiss
to not mention this on this podcast.
We are recording this July 16th.In a day from now, your book
Resurgent, how established organizations can fight back and
(08:35):
thrive in an age of digital transformation.
We will put a link in the show notes launches tomorrow on the
17th. I'm very curious.
So you talk about how incumbent organizations, very well
established quote UN quote, old companies can actually thrive in
today's environment and do thrive in today's environment.
(08:55):
And that there's somewhat of false narrative in the in the
marketplace about it's only start-ups.
And clearly AI plays an interesting role where AI is
shifting that marketplace. Once again, you know, where we
went from the Internet and digitization to now AI.
I'd be curious if you can walk us through a little bit of your
the core argument, the core threat you're you're pulling
(09:17):
through that book. I received overcome the
corporation for eight years. I was at the company for 23
years. Person is a is 175 years old
Pearson was 15 years ago the largest textbook publisher and
paper and pen testing company inthe world and it is now the
world's leading digital lifelonglearning company.
(09:38):
And we went through a massive transformation of our own from
analog to digital. And if you look through that
process and you could apply lookat similar companies in
newspapers and music, in arts, entertainment, television,
creative industries or look at awide range of sort of other
industries. They face major threats from big
(10:01):
tech, obviously the sort of magnificent 7 and you have a
power and a scale that is unthinkable to much everyone
else. And as you say, they also face
huge amount of disruptive threatfrom venture capital backed
startups. We don't have to worry about the
things that a company like Pearson would do, which is these
existing analogue customers making a profit, making short
(10:23):
terms, earnings expectations, dealing with a lot of legacy
infrastructure and technology that goes back 40 to 50 years.
And so the popular mythology is companies like Pearson and Dunes
are all going to go the way of sort of Kodak or Nokia or
BlackBerry or Blockbuster or Toys-R-Us or whatever.
Your favorite example. And the book that I've just
(10:44):
written with Julie Birkenstock, who's the Dean of Ivy Business
School in Canada was previously on the Business School, is that
Kodak are the exception, not therule.
But if you, if you look at it, these large incumbents
organisations, they're not breaking out in the way that the
magnificent seminar, but they are actually surviving and
(11:04):
prospering. And I, if I'm allowed one sort
of cheap jibe at the venture capital industry that more, more
unicorns have gone the way of unicorns than incumbents have
gone the way of Kodak. And how are they doing that?
That they're leaning into the things that made them successful
in the 1st place, Deep relationships with their
(11:25):
customers, industry knowledge and expertise, deep pockets,
great relationships, regulatory,you know, deep, strong
distribution networks in the wide.
But they're also learning, you know, they are elephants that
are learning to dance. If I'm, if I'm allowed to, to
quote from Gerstner from from that, that book way back when,
(11:49):
in that they are sort of learning to be agile.
They're learning to do sort of iterative development of where
we where we started. They're bringing in in new
talent. They're investing massively in
digital transformation. They're learning to move as as
as we did from ownership business models to one that are
(12:09):
much more about access and subscription.
And I think crucially shifting to a focus much more on
outcomes, on inputs and how do they help their customers to
achieve important things. And I think that's probably the
single most important lesson that I think is that incumbents
the race of I do so because theyhave a very strong sense of
(12:31):
purpose and identity. And I think that is absolutely
crucial to their success. You know that my own personal
story at Pearson was, you know, we had number of profit, the
share price collapses really hard, challenging, difficult
times and we had to do some verytough things around the way.
But what got us through it was the belief that applying
(12:54):
technology to education gave us the chance to democratize
opportunity and open up new educational opportunities for
people to personalize learning to make it more effective and
that we grow by doing something important useful in society.
And that I think is fundamental to this wine coming just that's
and the purpose and identity drives you forward.
Interesting. I'm curious to hear a
(13:18):
perspective on from your side. So there is something which has
been debated recently called Martech's Law, and the basic
premise is to say that if you look at technological change, it
moves on this exponentially accelerating curves.
These days, again, AI is a really good example.
Organizations can typically absorb change only
logarithmically, particularly ifyou have an incumbent like large
(13:38):
organization or for all the right reasons, right?
And I'd be curious, have you encountered this?
And probably even more importantly, what Martex law
implies is that you have to pickyour battles, as in, you can
only push so much change throughan organization and you need to
let certain things go. I'd be curious like as ACEO,
(13:58):
former CEO of a very large company which went through a
massive transformation, have youencountered it and how did you,
how did you get through it? Yeah, I think there's two ways
of answering that question. The, the first days, I mean, in
terms of picking your battles, you know, when I, when I started
to see our person, we, we still own Penguin Books and we still
own the Financial Times and The Economist.
(14:21):
And we decided to merge Penguin with Random House to create the
world's leading trade publisher.And subsequent we sold that to
Bertelsmann and we sold the FT to, to, to Nikkei, the Japanese
Business news and Information Group.
And the reason we did that is because we could see that each
of those 3 industries, education, trade, books and
(14:43):
newspapers was each going to go through a very, very challenging
analogue to digital transformation.
And our chances of riding three horses successfully through such
traumatic change was just going to be too hard.
So we had to focus on one. So that's one.
That's one sort of level of answering the question.
The other one is I, I, I wasn't familiar with that specific
concept you're talking about, but I remember about five years
(15:05):
into my tenure at Pearson leading Thank You for Being Late
by Tom Friedman. And in that book he quotes John
Kelly, who's a senior executive at IBM.
And I think this is the same idea.
And John Kelly said what makes digital transformation so hard
is that the technological changeis exponential and humans change
(15:26):
in a linear way. And it's closing the gap between
the linear change way with humans change and the
exponential change of technologythat makes this so hard.
And one of the big themes of thebook is that how the digital bit
of digital transformation is hard, but it's nowhere near as
(15:46):
difficult as the transformation bit.
And that ultimately this is a contact sport.
Things get bloody groove, beaten, bent out of shape and,
and it's the people side of this.
And my experience is whenever any group of CEO's gathered to
talk about the big bets they were making on their own digital
transformation, it very, very quickly became a conversation
(16:10):
about people. Because I think most of us just
both intellectually and in our fibre are being find it very
hard to imagine the future beingdifferent from the world as it
is today, or it was in the in the past.
And I think, you know, I've just, I've just taken on the new
sort of non executive role with the Cabinet Office here in the
(16:33):
UK, which is responsible for running the, the civil service,
the 550,000 civil servants that run the UK government.
And we were talking about, you know, they've got this major AI
transformation of their own plan.
And the biggest challenge is that you just don't, you don't
use AI simply to run your existing systems and processes
(16:54):
and ways of doing things a bit more efficiently than you did
before. You have to be finding new
trails, not paving the existing Calpas for one of the sort of
the better word. And I think that's one of the
hardest things that people do. They apply their prior mental
model to to this. It's a bit like thinking it,
thinking that I'm going to use chat GPC as if it was Google
(17:17):
search. A bit like how in the early days
of digital transformation publishing, the extent of our
aspiration was to create a PDF of the of the of the printed
book as opposed to saying, how does this enable us to sort of
personalize, to interact, to provide an integrated context
that you know, So it's that challenge I think is really
(17:38):
hard. Is that is that the same idea?
Yeah, absolutely. And I'd be curious to hear in
practical terms, how do you get people to change because people
don't want to change on Everett?Yeah, so I, I think it's, you've
got to have the, I, I think it, it helps if you have a, a
burning platform as if, you know, I mean, I, you know, the
(17:59):
truth is change became not easier, but it was more, it was
clearer and Pearson as the analogue sales really starting
to decline and our customers were clearly telling us that
they wanted a different way of engaging with us.
Then, you know, sadly, it's always much better to do this to
fix the roof while the sun is shining.
(18:21):
But you know, I think a burning platform is sort of something
that is drives change. I think combined with that you
do need that that light on the hill.
You know, in our case it was that we can content plus
assessment powered by technologyenables us to personalize
learning and scale and enhance opportunities at lower costs for
more people. So I think we need that light on
(18:42):
the hill, but then you need to, I think to make the change as
small, specific and near term asyou can.
I remember you, I think you, I remember, I think you, you
remember years ago when you weredoing some work with us talking
about, I think it was the, was it the British Olympic rowing
team that had this great success, not because of one
(19:05):
thing, but because they did thousands of iterative things.
And that's together. And and I think the big mistake
that a lot of organ and I and I probably made it myself is the
CEO wants to talk in sort of bigtransformational terms about
change. And if you talk about change, if
you just give the big picture, then change in that sense is
(19:28):
very disempowering people because they feel helpless
because it's in big and amorphous and far away.
So you've got to have the light on the hill that they need to
make it as a specific and near term as you as you possibly can.
And then I think understanding, and I think what follows from
that is understanding where and how decisions get made in any
(19:51):
large organization. And a lot of CE OS, and I did
this myself probably in the early days, get frustrated with
middle management. It's like, you know, we the
senior leadership get it and therank and file of all likely to
be digital natives and it's middle management of the
permafrost. It's the Throesen middle who are
(20:12):
thwarting and getting in the way.
Over time I realized that was. Absolutely the wrong way to
think about it, because every, you know, we would do these
pulse surveys every quarter of what the mood and what employees
were and how they were feeling and, and, and, and it was more
around organizing. It was organizational health,
not not morale, because I think that's an overly simplistic way
(20:35):
of thinking about it. But time and time again, the
leaders in the organization thatwere most high valued were those
sort of middle managers. And I came to see them as, as
what I would describe as the shock absorbers of the
organization. You know, they were having to,
they were having to take the bigsort of, you know, we've got to,
(20:55):
we're going to make these big changes or we're going to move
to a new ARP system or we're going to move to a new business.
We're going to, you know, we're going to sell, sell as a
service, well as a product and, and make them understandable and
cogent and tangible for their specific part of the business.
And they had to deal with all the anxiety and uncertainty that
that was that was sort of causing.
(21:18):
And so I just learned spend a lot of time with without with
those groups within the organization and this idea that
I don't think you can lead through change unless you're
willing to sort of stand in the shoes of other people and
shuffle rounding them because I think that gives you a much
greater sort of understanding. I think you have to feel change
(21:39):
as well as lead it. That makes sense.
I think it's ultimately a very avery human process.
I'd be curious to get your take on something.
So I've been mulling this over in my head for quite a bit now.
In the world of software development, there is a another
one of these laws. It's called Conway's Law goes
back to 1968, which essentially postulates that your product
(22:02):
will look like your org chart. So in the world of software,
your company is split into threepieces.
Your software will be essentially 3 pieces which will
talk to each other. We are interfaces.
I actually think this is true for every organization and every
product. I'd be curious, you're already
alluded to this in terms of likeorganizational change.
When you do change, how much do you deliberately think about the
(22:24):
organizational structure to reflect that change, to embody
this change in the change you want to see in the marketplace
and the product being reflected in the structure of your
organization? Did you, was that a, was that a
major concern or major thinking?As you were, absolutely.
And I think that what you, what you find is there's a lot of
(22:46):
large incumbent organizations are probably a strong mix of
bureaucracy and meritocracy, andthey don't have a lot of
adocracy because that's not the way that sort of decisions have
got made. And I think this is where and
you, you know, piercing you partof us trying to do this when
(23:09):
you're trying to. And I think when you move from
an analogue to a digital world. So in an analogue world, if you
think, if you're, you're, let's just take college publishing as
an example, you're on a three-year addition cycle for
the new textbook and the new textbook doesn't get released
until every last change in it has been made.
And you can afford to do that because it's a three-year cycle.
(23:31):
And then you're going to do it again.
You move to digital courseware and it's a completely, it's a
completely different model, isn't it?
You know, because you are iterating and you are trying,
you know, and it's learned, don't guess.
And you get a product out, get some feedback.
And so it's a very, very different.
So then you need much greater use of agile, much greater use
(23:53):
of Sprint, all of that sort of stuff.
And that's really hard for established organisations to do.
And that's why I think you, if you're not careful, you get a
lot of innovation theatre in large companies where they feel
like they're prototyping and trialing and piloting.
But actually, you know, 90% of the product development spend is
(24:15):
still going into sort of new additions or revisions of
existing products and there's very little goings.
So I think it's very sort of challenging.
I'd also argue that it depends what it is you're trying to
achieve. So I would argue, I think back
to some of the things we did in Pearson.
When I started, we had, because the business had grown through
(24:35):
sort of acquisition, we had, youknow, 95 data centres around the
world. We have 56 different ERP's, we
have 73 different HR systems. We, you know, we had thousands
of different sort of websites, none of which sort of talked to
each other with the best will inthe world.
You know, by the time I finished, we'd moved to, you
(24:55):
know, 95% of the company was in the cloud and we were all
running off 1 global digital platform and we had reduced time
to market by half and reduced the cost of creating products
and IT and it was virtually digital first company.
You could not have made that change without a strong degree
of sort of hierarchy. And do you know what I mean?
(25:18):
Because there's an extent to which say this is happening and
we're going to do it. Once you've done that, the
products that are built on that digital platform and you want as
little involvement from the CEO and the team as possible and you
want to maximize the degree of adocracy that you have and the
amount that you just let people be our child.
So I think it's this different, isn't it?
(25:38):
What you know, Jeff Bezos talkedabout one way decisions and two
way, you know, there are there adecision where once you've gone
through that door, you're not coming back.
And that degree that requires a sort of degree, a higher degree
of sort of engagement and probably a bit more of the
meritocracy and hierarchy. Whereas most things in life are,
(25:59):
well, if we've got that wrong, we can reverse it tomorrow.
We can tweak it or change it. And then you want to have as
much, you want to be as agile aspossible.
You want to devolve as much as possible.
You want to create sort of horizontal rather than vertical
structures. Does that make sense?
So I'm, I'm also says you can completely get rid of all the
muscle hierarchy of that. I think you need a degree of
(26:22):
that, but I think a much more sophisticated understanding of
the balance of the 2 is really important.
Would you share that view? Am I?
Am I still a bit too traditionalist?
I do share that view. I'd be curious to hear what is
your experience in terms of bringing this change to an
organization. So one of one of the things in
(26:44):
the first season of this podcast, I heard quite a bit
when I talked to people about change who have done large
change initiatives, they all told me one thing, which is it
takes way longer than you even think it takes.
I'd be curious to hear as, as you're thinking about this, you
are, as the CEO of Pearson, you must have been under enormous
pressure to deliver the quarterly results and to like
(27:05):
bring the change about. And at the same time, you, you
clearly know that it'll takes a while.
So how do you reconcile those 2 views as a as a leader?
I think the. I think the, you know, there's
clearly 1 stand out case that sort of you know what the iPhone
was launched in work 2000 and seven 2008 and Nokia and
(27:28):
BlackBerry were essentially bankrupt or out the business
within two years. But that's the exception, not
the rule. You look at the music industry,
music industry revenues declinedevery year for 15 years, then
they bottomed out and then they have grown every year now for
the last decade and they are back to where, you know, the
(27:48):
bigger than they were before that.
That started because that's how long it takes to shift from a
analog ownership business model to a digital subscription
software as a service. And if you look at, if I take
one, one example places, the college publishing business,
that's probably happened in 10 years, but it's 10 years, not in
(28:11):
three years. So hence my point is that, you
know, OK, this might be a code up moment, but it's probably not
going to be. But just because things play out
over time doesn't necessarily make them easier because what we
found is, you know, every, to some extent, if they went
quicker, that would be easier because you would, you know,
(28:32):
what happens is it goes a bit and then it pauses and then it
goes again. And one of the big lessons in
the book is you need to distinguish between the things
you can control and the things you can't.
And one of the things you can't really control is the pace of
consumer adoption. And consumer adoption will play
out over time. And so, you know, I mean, I, one
(28:55):
of the, I the in the book I, I write a little after most of the
book is written as a joint collaboration between Julian and
myself, but I have a little after with some personal
reflections. And one of it is one of them is
learning to sort of pass it on. I mean it became clear to me my
tenure as CEO the the company would only really start to sort
(29:17):
of grow significantly again whenthe profits from the small but
growing digital revenues outstrip the profit decline from
the large annual businesses. And that tipping point was
probably likely to take 10 yearsplus and I wasn't planning to be
(29:37):
CEO for that length of time. So you have to still just say,
I'm going to make the right decisions for the long term
future of the company, recognizing that we may not see
the benefits of this until aftermy tenure.
And I think that's what a lot ofcompany and that's what, and
what makes it really hard is when you're in the midst of
that, you've then got a lot of the, you know, VC backed
(29:59):
start-ups who, you know, in my, in my time, we have companies
like Baizou, companies like to you, companies like Cheng that
we're trading on these huge multiples of revenues.
Each of those subsequently have found life very difficult.
And Pearson where people said, oh, well, you know, Pearson has
(30:19):
then is resurgence and has recovered since.
And you can see that playing outagain and again across industry
and industry. How do you protect those those
smaller initiatives which you believe have the potential to
become really big, as you said, like digital revenue, like it
takes 10 years to like outstrip your analog revenue in the
(30:41):
beginning. It's such a delicate flower and
it's so easy to trample over when people say like, oh, look,
we invest all of this time, energy, effort and yet it
doesn't show any results. How do you protect?
It's a great question and it's hard and it gets particularly
hard because there's one of the other thing and this links to
your earlier question about sortof Conway, about Conway's law
(31:05):
and organization structures. Because when an organization is
under extreme financial pressure, like a profit warning,
the temptation is to grip the reins even tighter.
Yeah. And, and actually that's in some
ways absolutely the wrong thing to do because it's the very time
(31:25):
when you need to be given more time and space so that the sort
of the delicate flowers as you, as you say to blue.
I think, I think what you could do is I think you have to have
the systems and structures in place to do that.
You have to understand that any large organization is a
portfolio and that you always need a proportion of your
portfolio that is in that sort of startup phase.
(31:49):
You have to have non financial key performance indicators,
growth in digital registrations,Net Promoter scores, revenue,
you know, revenues, earns and services rather than sort of
ownership model. And actually most, if you're a
public company, most shareholders these days are
sophisticated enough to recognize the value of those
(32:10):
KPIs and we'll support you on them.
You have to be willing. I think you have to have sort of
means of incentivizing rewardingpeople in the company.
Probably an element relates to the overall performance, but
then recognizes that and likewise, you know, you may have
a part of the business where therevenues only declining 5% in
the year is a great, you know, is a great performance.
(32:32):
And that bit there's only declining 5% is generating lots
of cash, which you're then able to redeploy in the bit that's
growing 20%. Do you know what I mean?
And and so having thinking aboutan organization as an ecosystem
and being able to make those sort of trade-offs is really
sort of important and also recognizing that how I mean,
(32:52):
it's a good point, isn't it? Because I think also a lot of
people think that I mean, Clayton Christensen clearly
absolutely brilliant and his insights are incredibly
valuable, but his idea that the only way to do innovation is to
create a completely stand alone separate organization.
It's a way. But in in, for example, in the
(33:15):
book, we essentially say there'sfour different ways of, you
know, because quite often what you do is like what we did in
the early days of digital in thecollege business, you set up a
separate entity, but pretty quickly you then need to migrate
that into the main body because that's actually going to be the
main way that you make money in the future.
You look at an organization likeSandwich, for example, they set
(33:38):
up a digital business within their core business and then
realized it had a wider service outside.
So they then sent me something that was integrated to start.
They then separated off. So I think there's different
ways and different structures and they will vary over time
because I mean, that's how I, I don't know what your experiences
are. That's how I.
I agree. We, we talk a lot about the, the
(34:00):
exact point you just made where we talk, tell people like
there's different ways you can think about what we like to call
the core and the edge, the new and the old.
We highlight those and then always tell people, I can't tell
you which one to choose because it really depends on your
circumstances, who you are culturally, where you are in the
market, what your product is, etcetera.
And you need to find the right, the right mixture for what works
(34:22):
for you. Curious if, if you allow me,
like I would love to double click on one thing because you
talked about this idea that essentially picking the
successor, making sure that yoursuccessor can continue the work
you're doing on these longer journeys where you said, you
know, in your case, you said, like, I know it's a 10 year
journey. I will not be around for the
whole 10 years. So I need to make sure that, you
(34:43):
know, we continue this journey. I actually find this a really
interesting problem, even in theslightly smaller microcosm of
say, for example, high potentials.
So you put a high potential on your project, they're going and,
and hopefully building somethingamazing.
And then because it's a high potential, we love to promote
them away after a year or two ormove them around in the company.
And then you get the next high potential to take over the
(35:05):
project. And then the first thing that
next high potential does is theyleave their mark, meaning they
change everything. And so, you know, like we
somewhat facetiously always tellpeople is like, there's no
wonder that you can't innovate because you, you have no
continuity. How do you build that?
How do you do that? How do you ensure that the
person who's inheriting a project is actually continuing
(35:27):
the work and is incentivized andaligned and doesn't feel the
necessity to leave their mark, change everything, do everything
differently, just because that'swhat is quote UN quote expected
of them? I think that's a very good
question and it's very, it's very difficult and almost like
(35:47):
the way, you know, social media works today and the way the sort
of media narrative works today all leads people towards doing
that way. I mean, interestingly, it was
the opposite challenge in the past, wasn't it?
In a lot of, in a lot of sort oflife, in a lot of life in a lot
of large companies. And actually my, in my last ever
(36:10):
e-mail to Pearson staff, I, I sort of quoted Bob Dylan.
I said, you know, if you're not busy being born, you're a busy
dying and the patient had been busy being born for 175 years
and one made that continue. And, and in that I was basically
saying my successor will want tochange some of the things that I
(36:31):
have done. And that's a good thing, not a
bad thing. So I, I think this idea, because
I think that one of the big challenges we have in person, I
think a lot of large establishedorganizations have this is that,
you know, 2025 minutes into any town hall, physical or virtual,
you could be sure somebody wouldput their hand up and ask a
(36:53):
variation of the question, are we finished changing yet?
Right. And so I think the nuanced
answer to your question is if you've got the strong sense of
purpose, if you've got the vision right, if you've got the
narrative right and the criteriaright, right, of what you're
trying to do, If you've got the culture around sort of iterative
(37:14):
development, right, so that the changes we are making are data,
you know, we are making data-driven changes based on
customer experience to drive towards a clearly defined
object, then that should provideyou some cultural comfort.
The the new person coming in isn't making the changes to
(37:35):
change, say they're making the changes because they are
consistent with what you're trying to.
Does that make sense? I mean, I think that's how I
would. I think that's how I would think
about it. I love that.
Let me bring the conversation back to your book again.
It launches tomorrow. Highly recommended.
I had the great pleasure of reading the pre release version
of it. I love it.
(37:55):
For the benefit of our listeners, how would you
describe the quintessential insight from the book?
You know, if you find yourself in a bar talking to someone and
like, hey, I just wrote this book, here's why you should read
it. That's a good question.
I think if we think about AI andhistory may not repeat itself,
(38:16):
but it certainly rhymes. And I think the best way that
large companies can navigate their way through the challenges
of AI is learning the lessons ofwhat success, how companies have
successfully navigated their waythrough previous waves of
technology. And this gives you the book just
gives you lots of very practicalspecific, it's a sort of guide,
(38:41):
it's a practical handbook how you can lead a large
organization through a time of digital transformation.
And essentially it says, don't forget all the things that made
you such a successful incumbent in the 1st place, but also make
sure that you're learning both from big tech and from all these
(39:02):
startups that are out that are coming after you.
And if you can combine all the things that made you great in
the 1st place with a very strongculture of learning from
everybody around you, then the best days lie ahead.
So I'm I'm I'm not an advertising executive, so I hope
that wasn't too bad a description.
This was amazing. I think again, like having read
(39:23):
the book and having also worked and continued to work with lots
and lots and lots of incumbent organizations all around the
planet, which I love that kind of work because for the exact
right reasons you just described.
I think there is way more interesting things to be had
with these companies than is thegeneral narrative around them.
(39:44):
I think it's a beautiful, it's a, it's a really beautiful
blueprint for people to to really better navigate change.
So highly recommend if you're inan incumbent organization,
highly recommend the book. If you are in a start up still
highly recommend the book because you will at one point
become an incumbent organizationand you might need the advice,
John, you have in your book. John, this was an absolutely
(40:06):
phenomenal conversation. Thank you so much for agreeing
to do the redo for those of you.Who might ask yourself is was
this the better conversation than the one we have lost into
the ethers of the digital world?Yes, it was.
It was an E better conversation.So, and thank you so much.
Wish you all the best. We will put the link to the book
(40:27):
into the show notes. Go on to Amazon or whatever is
your preferred bookseller and get a copy.
Thanks, John.
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