Digital Transformation Is Not Enough: Fear, Passion, and the Future of Business 💡 (w/ John Hagel)

What if the real barrier to transformation isn’t technology—but fear? Silicon Valley veteran, strategist, and author John Hagel joins Tom to challenge the myths of digital transformation, argue for the power of scalable learning over efficiency, and explore why unlocking human passion may be the only sustainable way forward.

From leadership mindsets to the future of education, John’s insights reframe the role of institutions in a world of accelerating change.

A real must-listen episode! 

Read John's fantastic blog here (https://www.johnhagel.com/)

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Download part 1, 'Transformation: Driving Adoption, Productivity, and Change in the AI Era',  free of charge right here 

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Episode Transcript

Speaker 1 (00:01):
Welcome it, change Makers to the deck Show with Tim
Flower and Tom McGrath. Let's get into it.

Speaker 2 (00:08):
Hello, change Makers, Welcome back to the Deck Show, flying
solo once again today. Tim Flower will be back with
us shortly, but I'm extremely excited to welcome today's guest.
He's one of my favorite writers in the space. Without exaggeration,
he's John Hegel, well known Silicon Valley legend, entrepreneur, strategist,

(00:29):
former Deloitte partner, and author of the Journey Beyond Fear. John,
it's a pleasure to have you with us.

Speaker 3 (00:36):
Thank you very much. Looking forward to the nonversiation as
as am.

Speaker 2 (00:40):
I particularly, I'm particularly keen to sort of hone in
on what you've written around digital transformation. John. I think
you bring something quite novel to that conversation, and we'll
dig into that in some detail momentarily. But first of all,
if anyone doesn't know your work already listening out there,
give us a quick introduction. Tell the listeners a little
bit about you in your career.

Speaker 3 (01:01):
Wow. Okay, Well, as you mentioned, I've been in Silicon
Valley now for over forty years, so a long journey,
A founder of two tech startups, a senior executive with
Atari for those who can remember that far back, and
a partner with McKenzie and Company. I helped open their

(01:22):
e commerce practice back in the early nineteen nineties, and
then I was a partner with Deloitte, where I founded
and led a global research center called the Center for
the Edge. Retired from that about four years ago and
have been doing consulting to large leaders of large organizations
around the world throughout my career, and my focus has

(01:45):
been looking at emerging opportunities in the future and helping
leaders to see those opportunities and motivating them to address
them and to pursue the transformation that would be required
to address the opportunities. But over time, I've become more
and more focused on emotions because I've found that there's
been a significant barrier to addressing opportunities emerging, and that's

(02:09):
the emotion of fear. As you mentioned, My most recent
book is The Journey Beyond Fear, but I've actually written
eight books now, so it's a long career in terms
of writing books as well.

Speaker 2 (02:23):
Indeed, and looking back across those forty years, Johan, I
mean you tempted sometimes to think it's been forty years
of perpetual digital transformation, perhaps the want of a better
term when we think about those earlier decades somewhat, But yeah.

Speaker 3 (02:39):
The digital transformation has become kind of a buzzword in
the business world. And I say that in my experience.
If I go to any large organization around the world,
they have a digital transformation program. But when I probe
into what do they mean, what is that program? What
is it doing? It's basically applying digital technology to help

(03:02):
everyone doing what they've always done faster and cheaper. And
my pushback on that is when we talk about transformation,
I like to use the metaphor of the caterpillar and
the butterfly. If there's not a fundamental change in everything
we do, it is not transformation. If we're just making

(03:22):
the caterpillar walk faster, that's helpful to the caterpillar, but
please do not call it transformation.

Speaker 2 (03:30):
But across those forty years, we've seen categorical transformation, right,
But I guess you've also seen people outpaced by that
process of transformation.

Speaker 3 (03:39):
Would that be accurate? Yes? I think again it's a
question of large organizations and the degree to which they've changed,
And frankly, I don't think they've changed nearly enough, and
there's a lot more ahead.

Speaker 2 (03:52):
So yeah, thinking about what's ahead, I mean we're hearing
verse of phrase AI driven transformation in circulation presently. I mean,
do you look at that as a process of it's
potentially qualitatively different in its scale or potential impact of
the previous ways you've already lived through in a seen firsthand.

Speaker 3 (04:14):
Well, I think the challenge and I'm certainly accept that
artificial intelligence is a transformative technology, but I believe what's
happening is a convergence of multiple technologies, not just artificial intelligence.
We've got the Internet of Things, We've got biotechnology, we've

(04:35):
got quantum computing. We've got a whole range of technologies
that are intersecting and amplifying the impact of each of
the individual technologies. So if we just get focused on one,
we're never going to see what the magnitude of the
change is.

Speaker 2 (04:53):
And you've alluded to this distinction already, I think between
digital transformation and what you call business transformation. Maybe flesh
out that distinction a bit more and give some real
world examples of maybe successful business transformation.

Speaker 3 (05:06):
Please, Well, it's fundamentally I've done research on long term
trends that are reshaping our global economy, and I've come
to believe that there is what I call a big
shift in institutional models that are going to drive our
large organizations around the world, not just businesses, but governments, universities, nonprofits.

(05:30):
The institutional model that has driven the large organizations today
is what I call scalable efficiency. It's basically the key
to success is to do things faster and cheaper at scale.
And it's hard to argue with that because I believe
for over a century that has led to the growth
and success of large organizations around the world. But in

(05:54):
a world of rapid change, scalable efficiency is becoming less
and less efficient, and I think the need is to
shift to a different model, which I describe as scalable learning.
And here again I have to be a bit careful
because when I talk about learning, most executives say, oh, yes,

(06:14):
we do learning. We have training programs, we have everybody
learn in training programs. No, I'm talking about a different
form of learning, which is learning in the form of
creating entirely new knowledge that never existed before. Training programs
just have to do with sharing existing knowledge. Great, you

(06:35):
learned a skill that everybody had that other people had already.
Great learning in the form of creating new knowledge does
not occur in a training room. It occurs in the
work environment as you're confronting new situations that have never
been confronted before and finding ways to create value in
those situations. That's a very different form of learning, and

(06:56):
I believe everyone in the organization needs to master that
scalable learning. Not just people in the research departments or
product development, but every part of the organization, janitors in buildings.
Everyone has to be focused on this form of learning.

Speaker 2 (07:14):
How can an organization facilitate that What sounds like a
shift in mentality moving as much as a shift in practice.

Speaker 3 (07:23):
Well, it's challenging. Again, I think it is a fundamental
change and it starts at the top. I mean leaders today,
the mark of a strong leader in organizations is someone
who has an answer to all the questions. No matter
what the question, you can count on the leader to
have an answer. But hey, you know rapidly changing world.

(07:44):
This is why trust is eroding in all large institutions.
If you have a leader who says they have an
answer to all the questions, there are two possibilities. Either
they don't understand how rapidly the world is changing, or
they're lying. In either case, they're not to be trusted.
The mark of a strong leader in the scalable learning

(08:06):
world is a leader who has the most powerful and
inspiring questions and will freely acknowledge they don't have an
answer to the questions and ask for help. And it
sets in motion a totally different culture in organizations, which is,
questions are not only okay, they're absolutely essential, and asking
for help is not only okay, it's absolutely essential. You

(08:28):
need help. You need to come together to address the
questions that are merging on a daily basis.

Speaker 2 (08:35):
I mean, it sounds like what you're discussing has as
much as many implications for the way education should function
in society is for the way businesses should be run.

Speaker 3 (08:45):
And I was.

Speaker 2 (08:45):
Wondering, based on that assumption, how does that break down
in real terms? I mean, how do you think schools
should be addressing this issue? How do you think colleges
and universities should be asking these same questions but their students.

Speaker 3 (08:57):
Now that's a great, great observation I've done, and a
lot of study, at least in the US of the
emergence of the public school system, and the public school
system was designed to prepare students for the work environment
of scalable efficiency. Just listen to the teacher, memorize what
the teacher has to say, and show you that you

(09:17):
memorize it in the exams. I believe education is going
to have to fundamentally transform if we're really focused on
this new form of learning. And in this case, again
I go back to emotions. I've come to believe that
one of the keys to success in a rapidly changing
world is a specific form of passion. I call it

(09:38):
the passion of the explorer. And I believe that all
schools are going to have to be redesigned to fo
help students discover their passion. What is the passion that
really excites them to have more and more impact in
a specific domain, and help them then to pursue it
and cultivate that passion earn faster in whatever domain is

(10:02):
most exciting for them. So it's a very different form
of education, very different.

Speaker 2 (10:10):
And you know, is it is it realizable? Like do
you think it's it's an achievable aim? Perhaps when you
think about an organization, right you have a relatively small scale,
it might be thousands of people, but still compared to
the millions of people the past. For education, the kind
of you know, centralized way that an education system has
to inevitably be run. How realistic is this? Is this

(10:32):
aspiration towards something It sounds so novel.

Speaker 3 (10:35):
Well, I actually don't believe that education has to be centralized.
It is centralized today, It can be highly decentralized.

Speaker 2 (10:43):
It could.

Speaker 3 (10:44):
In fact, what we're seeing today is the emergence of homeschooling,
unschooling schools of all kinds because parents are increasingly realizing
that these centralized schools are not really helping their children.
So I think it's going to be something that well
merge over time.

Speaker 2 (11:01):
Because did you say, did you say, John, did you
say unschooling?

Speaker 3 (11:05):
Yes?

Speaker 2 (11:05):
I never heard of it. Literally when they try and
deschool you what is it?

Speaker 3 (11:11):
Well, it's this notion that schools are as they're currently
designed or focused on just getting students to be, you know,
following instructions, and unschooling is the notion. No, let's let's
free our students from our children from these schools and
let's just let them explore the world.

Speaker 2 (11:32):
I was going to say, unschooling sounds precisely what you're
advocating for in a sort of societal level, I would argue,
but I mean, let's think specifically about the workplace context,
and let's think about the employee, the ideal employee with
in a little bit more detail. What kind of attributes
would you be looking for. I mean, you've described it

(11:53):
to some degree, but I is it so open ended?
Is it so much about that openness to learn, that
open in this to experiment that you can't even put
a fine point on it, or of a certain attributes
and outlooks which can be inculcated and encouraged and to
a degree nurtured.

Speaker 3 (12:12):
No. Well, again, I think the key to success in
the future for large organizations and for the employees is
to focus on the passion of the explorer. One of
the interesting things that I've discovered in my research is
I've yet to find a single large organization which measures
or seeks to identify the passion of their employees. Nobody

(12:36):
is looking at passion. In fact, passion is viewed as
deeply suspect. Passionate people ask too many questions, they take
too many risks, They deviate from the script. You don't
want passionate workers. You want workers who will follow their instructions.
So they focus on engaged workers. What's worker engagement. That's
what they measure. And again I don't want to be

(13:00):
too contrarian, but broadly, engaged workers means do you like
the work you do, do you like the people you
work with, you respect the company you work for. That's
an engaged worker. Okay, let's imagine one of those engaged
workers and go to them and tell them that their
work is going to have to fundamentally change. WHOA wait

(13:20):
a minute. I like the work that I do. I
don't want to change. I want to keep doing what
I'm doing. I love it, I like it. So I
think engagement is a challenge in a rapidly changing world,
and passion is somebody who's excited about change. They want
more change, They're seeking change all the time. So that's

(13:41):
the key is how do we cultivate that passion? And
I could go on a long time, but one of
the shifts that I see is again when we talk
about learning, it's about learning new skills, and again, semantics matter.
Skills in my view are things that are valuable in

(14:03):
a specific context. So a skill on how to operate
a machine that's very valuable when you're in front of
that machine. Skill to do a certain kind of calculation
in a process that's valuable in that process, but they're
not valuable anywhere else. To me, the key is to
shift our focus from skills to what I call capabilities,

(14:26):
things like curiosity, imagination, creativity, collaboration, reflection. Those are capabilities
that are valuable in every context and essential if you're
really focused on learning in the form of creating new knowledge.
So how do we cultivate those capabilities and draw those
out in people?

Speaker 2 (14:47):
Yeah, as I said, oh sorry, Junker.

Speaker 3 (14:49):
I'm sorry. I just wanted to add one other thing.
I get a lot of pushback from people saying, oh,
come on, John, some of us are capable of passion,
but most of us just want to be told what
to do and have this curity of an income. And
you know, my response to that is, Okay, let's go
to a playground and let's look at children five or
six years old. Show me one that isn't really excited

(15:12):
about exploring new areas and coming together with others to
explore those areas. What happened? They went to school and
they were taught to just listen to the teacher, and
they lost that passion. But it's in there. It's still there.
I believe in all humans waiting to be found and
drawn out. So that's the opportunity that I see.

Speaker 2 (15:35):
It's interesting because you're a dendum there. It touched upon
precisely what I was going to ask you about, which is,
you know, as I say, I genuinely enjoy your writing
and your ideas, and but one of the things I
often find myself quite forcefully thinking is a kind of
counterpoint of them. Is like you're kind of describing in
your ideal employee depiction or your depiction of employee of

(15:58):
the future, you're just describing what I would think of
as an ideal founder, as an ideal entrepreneur. And I
think that there's a lot of logic to the idea
that we all need to become entrepreneurs, you know, to
some degree in the modern economy. But this is what
you've just touched upon, right, that dynamic between people who

(16:19):
who do see more passivity more regularity. You know, we've
always defined the entrepreneur as the person within capitalism willing
to take for risk, right, And it's that willingness which
we acknowledge societally is a kind of is a rarity,
you know, and is the thing that, in its rarity
is becomes well rewarded because it has a general utility,

(16:43):
a general broader utility. And I guess you've already touched
upon it by sort of you know, unearthing that passion
that everybody has, maybe in many cases more smothered in
the kind of concept of unschooling. But yeah, I wonder
if you you know, is there is not everybody's going
to be able to achieve this And what is the

(17:05):
place for people who don't have that autonomy within themselves
in the future economy?

Speaker 3 (17:13):
Well, again, I would push back and say, we are
all capable of it. We all have an aspiration and
need for it. It's within us waiting to be discovered,
waiting to be cultivated and pursued. And we need to
create environments that will encourage people to find their passion,
what really excites them, what is it that really drives

(17:33):
their desire to have more change and more impact in
the world, and help them to pursue it. So I
believe that we all have it. Just again, where an
environments that crush that passion, that are hostile to it,
and it's not surprising. I did as survey of the
US workforce, and in the US workforce, the survey indicated

(17:57):
that at most fourteen percent of US workers have passion
about the work they're doing. Fourteen percent. And I'm actually
surprised it's as much as fourteen percent, because in environments
that are hostile to this passion, they've somehow found ways
to pursue it and you know, maintain it. And so

(18:19):
I'm I believe again we're going to need to find
ways to make it one hundred percent of people who
have passion and are pursuing their passion.

Speaker 2 (18:28):
It's a it's a compelling proposition. John, can't deny it.
Let's look at sort of macro trends a little bit.
You know, the specter of global competition is presumably driving
the urgency around this need for kind of you know,
leaching the workforce effectively. I think as you describe it,

(18:49):
and what would you say about that backdrop and about
the exigency of tapping this passion in terms of the
future for global economy and the future of since America
of the West.

Speaker 3 (19:02):
Yeah, no, it's essential, and I think again, I've done
a lot of research on what I call the Big Shift,
the forces that are changing the global economy and society.
And on one side, the Big Shift is creating mounting
performance pressure. It is intensifying competition on a global scale,
it's accelerating the pace of change. Those things we thought

(19:25):
we could count on are no longer there. And then
because of all the connectivity we've created around the world,
we have extreme disruptive events that come in out of
nowhere and disrupt our best laid plans and actions. So
there's a lot of pressure. Any one of those things
would be pressure, but threed together. And I think it's
the reason why we're seeing around the world the increasing

(19:46):
emotion of fear, because it's a response to that pressure.
But here's an interesting paradox, and I love paradox. The
same forces in this big shift on the global economy
that creating mounting performance pressure are also creating exponentially expanding opportunity.

(20:07):
We can be a far more value with far less resource,
far more quickly than would have been imaginable a few
decades ago. But if we're driven by fear, we can't
even see those opportunities, much less be motivated to pursue them.
So it's one of the reasons I've become more and
more focused on how do we acknowledge and address the

(20:27):
emotion of fear and help people to move beyond the
fear and find their passion and pursue it.

Speaker 2 (20:34):
I mean, it's particularly pointed at the moment with the
fear of AI replacement effectively right of jobs. And I
suppose I mean, when you look at coverage of it,
when you look at the way it's communicated and discussed,
do you see just the proliferation of fear as a
post of a proliferation of opportunity? And how much opportunity

(20:55):
do you see at this present moment for people who
are willing to push past that kind of nervousness and hesitation.

Speaker 3 (21:03):
No, I believe it's huge opportunity for people. But again,
I understand the fear. When I talk to executives about
artificial intelligence, they only have two questions, how quickly can
I automate and how many jobs can I eliminate? I'll there,
you go here, that's scalable efficiency and employees, even if

(21:23):
the leaders don't say those out loud in their speeches,
they know that's what's driving Most of the leaders of
large organizations around the world. So again, the fear is
very understandable, but I think again it just drives the
notion of Okay, what can I do to continue to
work and create value in a rapidly changing world. And

(21:46):
that's about finding passion and pursuing it.

Speaker 2 (21:49):
Any thoughts on the sort of paradox which that mentality
that you just described among executives presents for the economic
system potentially, right, I mean putting aside you are you
are offering solutions, you know, potential solutions. I see that.
But when you think about this notion of okay, you
can replace the workers with technology, you can have more

(22:11):
scalable efficiency in organizations, but guess what, you're also going
to be collectively damaging your own customer base as an economy,
right there as an irony ore as you say, paradox
to that, And I was wondering what your reflections are
on the realness of that, of that threat to the waive.
The system functions, as you know, having having consumers and

(22:33):
workers and and and a circularity in the economy itself.

Speaker 3 (22:38):
Yeah, Again, the challenge is scalable efficiency is becoming less
and less efficient over time because in a rapidly changing world.
You can't just focus on doing the tasks you've always
done faster and cheaper. You have to fundamentally change those
tasks and address the opportunities that are emerging. So I
think it's it's something that is going to have to happen,

(23:00):
and I'm an optimist and I believe it will happen
as more and more people realize that what's required in
this world is not efficiency, scalable efficiency in the traditional model,
but this notion of learning in the form of creating
new knowledge and pursuing it.

Speaker 2 (23:16):
So I think.

Speaker 3 (23:19):
We're going to see it happen, but it's not going
to be easy.

Speaker 2 (23:24):
Are you familiar with something we discussed a lot of
the show over the last few months, the theme of
digital adoption, you know, of facilitating the adoption of new
technologies among employees. Kind Of you could say it's a
form of training, which is, you know, one of those
things that you kind of, you know, scour out a

(23:44):
little bit in your work. But you could also say that, look, Visa,
the tools that currently we're trying to encourage adoption too
are very open ended tools, right, They're tools that can
expand or contract. According to your imagination. That's the nature
of these AI tools, argue, and I was wondering what
your thoughts are on digital adoption per se and on

(24:04):
adapting to these tools specifically.

Speaker 3 (24:07):
Again, I'm a bit of a contrarian. When I hear
digital adoption, it's the message from the leaders is adopt
these tools. Use these tools to do what you've always
done faster and cheaper. Actually it's not. Adopt the tools
so you can fundamentally reimagine what the work is and
what value you can create and deliver to the stakeholders

(24:29):
that you have. I have to tell you one little
example or story that gives me some inspiration is there's
a clinical laboratory company that was experiencing increasing customer churn
rates in their marketplace and finding that the frustration of

(24:50):
customers was with their call center operations, and the call
center operators were resigning at an accelerating rate because they
were frustrated. The leader of the call center went to
the department, called all the people together and said, here's
one thing I'm promising. None of you are going to
lose your jobs. You will all continue to work, but

(25:13):
your first assignment is go work with the IT department.
To find out how you can take it and automate
the most routine calls that you get that are consuming
all your time and attention. And then once you freed
up that time that's been consumed with the routine calls,
focus on the calls that you've never had before and

(25:36):
that you have no answers for, and come together in
small groups he called them pods, to problem solve and
figure out how you could address those problems and come
up with creative answers. Customer churn rates went way down.
The call center operators became much more passionate and excited

(25:57):
because they were making a difference that nobody else could
have made, because they're coming up with solutions and answers
that nobody had ever had before. So I think it's
an interesting example of a way to adopt the technology
but in the process of fundamentally changing how you operate
and preserving work, not just firing people, but keeping the

(26:19):
people focused on more and more change around you and
the problems and opportunities that need to be addressed.

Speaker 2 (26:28):
Fascinating, and it anticipates the next question as well, which is,
you know, the traditional silos for modern corporation, the traditional
departments the phenomenon of departments per se, presumably in one
of the ones we discussed, for instance, the old silo
between IT and HR. You know, as the workplace becomes

(26:50):
increasingly digitized, who owns what? I mean, that's a very
real question at the moment when you look at the
structure of the future organized what structure if any to anticipate.

Speaker 3 (27:05):
Well, I believe the silos are going to have to
be blown up and disappear. So the key to me again,
I've done a lot of research and work on if
you really believe in the need for learning in the
form of creating new knowledge, how do you organize to
pursue that? And in my experience, the most effective way

(27:25):
of learning for those people is coming together into small
groups and it's typically anywhere between three to fifteen people
who share a real passion for an excitement about having
more and more impact in a certain area. I call
them impact groups. And they're diverse people within the group.

(27:46):
It's not just people all from one department or one
you know, educational system, whatever. They're very diverse people because
they realize that they're going to learn faster if they
are diverse perspectives that are being brought together into the
small group, and on the one side, they're constantly supporting
each other in a challenging time. But on the other side,

(28:07):
they're constantly challenging each other, say why can't we have
even more impact? What would we need to do? How
would we learn to have more impact? And because they're
driven by this passion, this excitement about having more impact,
and so the core unit I believe of large organizations
in the future will be a small group of three
to fifteen people, and they'll be connected into networks that

(28:31):
will connect them with other small groups, both within the
organization and outside the organization. I think increasingly this notion
of silo organization silos is going to have to be dismantled,
and we focus on networks that bring people together across
organizations so they can learn faster.

Speaker 2 (28:53):
Brilliantly said John, and a fantastic note to conclude on it,
I think. But it's been a real pleasure to get
to talk to you for the first time. As I said,
I've been reading you for a long time. Really enjoy
your work, and we'll continue to keep a close eye
on it. Anything you would like to tell the listeners
about where they can find you read you connect with you.

Speaker 3 (29:16):
Yeah, no, well it's I have a website, Johnhagel dot
com and would welcome any feedback on what I've said.
And I do a lot of activity on social media.
I'm active on LinkedIn, on Facebook, on Twitter x now,
and as I mentioned, I've written quite a few books,

(29:36):
and again I would encourage people, particularly today in a
world of increasing fear, to look at my most recent book,
The Journey Beyond Fear, and I would welcome feedback on that.
Does it really address the need and what can I
do to make the concepts even more effective and compelling
to people?

Speaker 2 (29:58):
John Hagel, thank you so much. We will have co
for those links in the show notes. Hope to have
you on the show again in the future.

Speaker 3 (30:04):
Lovely to me. Thank you very much.

Speaker 1 (30:08):
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next think dot com. Thank you so much for listening.

(30:30):
Until next time,