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Episode 5: Inflection Point - Todd Lohr, Head of Ecosystems and National Operations Leader for Advisory Markets, KPMG U.S.
268 Plays2 months ago
In this conversation, Phil Fersht and Todd Lohr discuss the evolving landscape of technology consulting, particularly in the context of AI and ecosystems. Todd shares insights on KPMG's strategic shift towards ecosystem partnerships, the impact of AI on business models, and the importance of addressing workforce concerns amidst technological advancements. They explore the future of services, the trend towards onshoring, and the necessity for enterprises to adopt intentional ecosystem strategies to navigate the complexities of the modern business environment.
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Transcript
Introduction to 'From the Horse's Mouth'
00:00:12
Speaker
You're listening to From the Horse's Mouth, intrepid conversations with Phil First. Ready to meet the disruptors who are guiding us to the new great utopia by reshaping our world and pushing past corporate spin for honest conversations about the future impact of current and emerging technologies?
00:00:30
Speaker
Tune in now.
Introducing Todd Lohr and His Role at KPMG
00:00:36
Speaker
Terrific. Yeah, so it's great to get good time today with somebody I've known in the industry for, oh God, 15 years, some maybe longer, something like that. But a very respected voice in the world of sourcing technology, a i RPA, you name it, he's done it, he's been there.
00:00:59
Speaker
So welcome, Todd Lohr. Maybe you could share with our audience a little bit about your background and a little bit about what you're doing today.
Strategic Importance of Technology Alliances at KPMG
00:01:08
Speaker
Sure. Great. Thanks, Phil. I'm looking forward to the conversation and thanks for having me on.
00:01:12
Speaker
um as as As you said, Todd Lohr, I'm with ah KPMG. I've had various roles over that decade plus of you and I working together. ah More recently, I was the head of our technology business in the US, so focused on technology consulting, all things, you know, strategy through selection, through implementation, scaling of technology, ah getting to play at the forefront of the shiny new objects.
00:01:37
Speaker
as those come came to market. So so working you know closely in the AI automation space together over the last five, 10 years and beyond. up More recently, I'm excited to have taken on a new role with KPMG.
00:01:51
Speaker
ah It is a newly formulated role ah that kind of tilts our hand a little bit at ah our intentions of you know the intersection of partnerships and and our strategy. ah So my new title is Head of Ecosystems, and I'm really focused really on you know taking what has been a a great historic partnership model of technology alliances and other kind of third parties that we to work with, ah but really kind of elevating that to the next level and and looking at the strategic importance of how we work with other providers ah and the impact to our business model.
00:02:25
Speaker
Yeah, I love this head of ecosystems concept.
Ecosystem Approach vs Traditional Alliances
00:02:29
Speaker
It's something I'm starting to hear more and more from various people. And we're actually thinking of getting one ourselves because we work in a crazy ecosystem at HFS. But ah can you talk to us a bit about why this is different from these normative alliances or partnership roles that we hear about?
00:02:46
Speaker
Yeah, I think, you know, and this is a certainly a ah a phrase that is being used more broadly in the in the market. I think historically, to your point, that the term alliances and we still have an alliance portfolio, right? This is not a a out a, you know, we're getting rid of alliances. It's an evolution of our thinking around those alliances. So historically,
00:03:08
Speaker
our focus with third parties, you know, partnerships, as an example, specifically in our advisory business, there's some variation if you think about our audit and tax business. But in our advisory business, it's been historically marked by large technology providers, right? So sometimes we call them platforms, but like the ERPs, the hyperscalers, the data platforms, right? So it's say a list of technology companies where we you know Our clients have a need.
00:03:34
Speaker
ah We work as the professional services around those needs with the technology. So implementing those technologies, doing business transformation with those technologies in the ERP space, et cetera. right So continuing to drive those relationships, but focusing our concept more on this this term of ecosystem, representing a few things that have changed in the market.
Complex Tech Landscape and Ecosystem Benefits
00:03:56
Speaker
One is historically this one to one concept is where we've been focused, meaning it's KPMG plus one of those technology companies. And then we go create value for our clients. Right. We're recognizing that the technology landscape is much more complex than that. And even just the world of professional services is much more complex from that. Right. That the days of solving more simple things ah that our clients were interested in is being you know changed with artificial intelligence. It's being changed with a whole host of.
00:04:27
Speaker
um you know micro macro economics as well. Right. So there's this pressure of the world of professional services is changing, requiring much more sophisticated solutions that our clients are looking to us to bring.
00:04:40
Speaker
And as such, the one to one relationships really needed to shift to a more of a many to many construct. ah So that that brings the term ecosystem with intent and purpose that we're thinking about how we help our clients with the ecosystem of providers and bringing, we see ourselves as an orchestrator of those ecosystems in our long-term strategy and that we need to be really good at understanding our clients' needs and bringing the complexity of multiple alliances, multiple partnerships, not just technologies, you know,
00:05:09
Speaker
potentially you know data sources or you know other service firms or you know ah industry consortiums, right? right ah Academia, innovation, startup ecosystems, right? There's a whole host of different ways to think about more collectively that ecosystem and how we support our clients.
00:05:27
Speaker
Yeah.
AI as a Catalyst for Ecosystem Models
00:05:28
Speaker
But why is it different now? I mean, we've had a fairly complex technology ecosystem for many, many years. um What is it about this latest wave of AI that's different to what we've seen before?
00:05:41
Speaker
Yeah, I think... um You know, and if you go back historically, I think we're at inflection point, right? where we've And we've, ah you know, you see those pictures, but I, and we've talked about this inflection point for the last decade.
00:05:54
Speaker
um I think we're really at the inflection point. um we We maybe were a little ahead of the inflection point of what artificial intelligence was going to do to not only professional services, but also just businesses and and the world more broadly.
00:06:08
Speaker
So you have the, you know, kind of the industrial revolution that kind of had an inflection point. You have kind of bit the digital revolution that had an inflection point with the Internet, computers, et cetera, right? That the kind of changed things. I think we're at another inflection point um specifically fueled by AI that's going to change business models, operating models, and and our ability to to support clients. Even AI itself is fueling the change.
00:06:32
Speaker
I think if you look at the current wave of AI, also recognizing that AI is not a new concept of the last two years. It's a concept that's been decades in the making. But but again, the advancements and what happened to you about two years ago this time in in the models and the efficacy of the the transformer models that were coming to market, you know, between the earlier versions of those and and the more recent, and even what we've seen since then, um it's changing how organizations are thinking about the adoption of AI.
00:07:01
Speaker
Right. That has changed. You know, we've been talking about ai adoption for at least a decade, but it is changing. And and ecosystems is a really good example of that, because, you know, the first first six months of that kind of new wave, our clients thought that this was more of a traditional technology where, OK, I'm just going to.
00:07:19
Speaker
you know, I'm where do I go build this? Where do I go buy this versus the no, it's not so straightforward because you're seeing compute sitting in a place and you have a partner for that. The large language models themselves sit elsewhere. the data sits elsewhere. you need to embed it in your workflow, right? You need and now agents are actually creating an entirely new layer of complexity on top of that.
00:07:41
Speaker
So I think our clients themselves are starting to recognize that even to solve ai it's an ecosystem construct. of how they need to stitch together, at least now in the market. I think you are going to see conversions over the next several years in the tech stack, but at least today to solve some of these things, clients need to actually start creating their own ecosystems to solve those.
00:08:00
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um And that's where, you know, I think AI is certainly accelerating that. All right.
KPMG's Unique Ecosystem Strategy
00:08:05
Speaker
So what is it that... um you know Why KPMG? What is it that you are bringing to the table here that you think is different, unique from your competitors, other other advisors in the industry?
00:08:18
Speaker
Yeah, look, that's a good it's always a good question. The way we're looking at it is a couple of things. One is taking a very sector based lens, because, again, that the the world that we're seeing is starting to pivot in what you solve and what you need at someone to help you solve is becoming more complex. And it's typically going at the parts of your business model or operating model that are very specialized.
00:08:42
Speaker
um in in the sector that you are in and you need that level of expertise so so we're really thinking about the ecosystem construct or even our capabilities in a very sector lens right so sector by sector understanding the complexities of those industries understanding the different providers and you're seeing you know whether it's within the startup ecosystem or within the ai ecosystem or within established technology players you're seeing specialization by sector So our focus really in the last year has been understanding the nuances of each sector and then creating that ecosystem of you know partnerships that we can start orchestrating in advance of our clients to be able to help them bridge the gap ah in those areas.
00:09:24
Speaker
um And another thing that we're focused on, given our legacy brand of kind of trust and really helping our clients through all things in their risk agenda, is an ecosystem strategy actually creates differentiated third-party risk, other kinds of risks in your enterprise.
00:09:40
Speaker
And so we're seeing it both as a strategic enabler, but also something that can introduce new risk and bringing them together in a way to be able to help our clients navigate that. Right, right.
Client Concerns and AI Adoption
00:09:50
Speaker
So in terms of the types of engagements you're having right now, one of my observations has been um heightened awareness to the point of frustration and a certain degree of paranoia amongst a broad set of clients that we engage with. um I think we got some new data that shows 45% of
00:10:13
Speaker
enterprises are nervous, negative about, you know, people within those enterprises are negative about ai nervous about their jobs, et cetera, and only 15% are really positive about them.
00:10:27
Speaker
Is this something that, one, you're seeing, and two, what types of approaches are you adopting to get more positivity and and bravery and excitement from your from your enterprises that you work with?
00:10:39
Speaker
You know, I think... um If you look back, maybe six to 12 months, you didn't see necessarily the negativity. I think anyone who's been in the technology automation space, like you and I have been for years, understand that at some point the paranoia will set in when people start looking at job impact.
00:10:58
Speaker
I don't think in the wave that we're currently on with AI that you've seen a lot of job impact. I think you've seen a lot of you know, productivity of very specific tasks, meaning, you know, you go to your LLM, ask a question, it creates a better email, it it synthesizes data, it's kind of, you know, swivel chair infusion of insight into work, especially for knowledge workers.
00:11:20
Speaker
But you haven't seen kind of the scale impact to the workforce. So I don't think that there's there's always... like The other thing that I would always say, media gets excited about about job loss and paranoia because that that is more interesting than this is a you know less the transformative technology at at any point in time.
00:11:38
Speaker
so So there's always that part of it. But I do think you're going to start seeing... more of that kind of rhetoric in the next year. And the reason being is the adoption of agents and agents are going to accelerate the the value delivered, the use cases that can be addressed, the actual Right.
00:11:55
Speaker
AI in the last two years has been really good at providing insight. We're moving from taking that insight into action and action is where you start getting more wide productivity gains. Right. And and specifically the the types of agents that we can build with the LLMs today are different than any type of automation that we could build in the past.
00:12:13
Speaker
And so instead of like automating tasks, you're really going to be orchestrating entire of value chains that is going to have massive productivity improvement. So, so, so that's, I do think the paranoia, although, you know, depending on who you ask is probably unfounded based upon looking backwards, but looking forward and the speed, I think, don't know that I would use the word paranoia, but I do think organizations need to start thinking about the workforce implications.
00:12:39
Speaker
And what theyre this is, again, no different from conversations you and I've had for over a decade. What what is your obligation to your workforce? How do you make sure that you're providing transparency? How do you actually bring them along for, you know, the the ride to to incentivize them to use AI? Because we're still in this. you ah precarious state that that a lot of the productivity and a lot of the value of AI is really based upon people using it. If they start getting concerned that there's you know concern in how they're using it or why they're using it, then that's going to slow down the progress. it And the way we're approaching it as a firm is really we want to drive adoption. We want what my folks and and other leaders, you know the quote I am heard saying a lot is everyone every day.
00:13:20
Speaker
I want everyone in the firm every day using AI because I don't think that you can understand the disruption that's coming at the pace that it's coming if you're not actually exploring and using it day to day um in your job to understand you know where and how your job is going
AI's Impact on Outsourcing
00:13:35
Speaker
to pivot. And some of the best ideas are actually coming from our people using it. It's not something top down is really easy for leaders to say, this is where I'm going to go address it.
00:13:43
Speaker
Brian So when we look at the current environment we're in, um yeah without I don't want to get into a political political conversation, but there's a lot of talk about um pulling more work onshore, especially with tariffs and protectionism happening.
00:14:01
Speaker
Are you getting any vibes from industry folks that you talk to that clients are wanting to see more capabilities built onshore? And is this driving more interest in maybe...
00:14:13
Speaker
you know, AI driven services that are U.S. based that can help deal with the current predicament of globalization and everything going on.
00:14:24
Speaker
Yeah. You know, I think. um The trend that had already started, regardless of of tariffs and whether we're going to tax offshore, you know, kind of other other labor outside the U.S., etc., right?
00:14:37
Speaker
um Those conversations have already started, but but not based upon the the economic constructs of tariffs and and the pricing of of where labor sits physically. it It was actually started with AI, right? And if you look at a lot of the work that has historically been, you know, offshore or outsourced, coming in some of the more technology, AI was already kind of addressing that. And and I think there's been, that's where if you look at productivity gains in in the last year, that is where you've seen a lot of like it in especially in software modernization, coding, engineering, a lot you know quality testing, a lot of think about the the software development lifecycle.
00:15:15
Speaker
That's already been pretty well disrupted in terms of what AI can do.
Shifting to 'Services as Software'
00:15:20
Speaker
So I think the two of those kind of coming together, um i don't know that necessarily will drive people faster you um ah onshore engineering, but it might drive them faster to um taking some of that tech work that has been done and and accelerating the adoption of AI, especially in ah an environment where there's a tariff kind of overlay against the workforce.
00:15:44
Speaker
Right. So how do you see the future of services in general, so every lookout, you know, took five years even I mean, you're getting to science fiction this point, but what he where do you think this is heading? You've been as close as I have to this industry for a couple of decades now. Do you see us taking a really significant shift?
00:16:06
Speaker
and I do. sort of Yeah. Yeah, i look, I think a lot of our, again, you know looking at more of a pure professional services consulting type model, a lot of the work of the last decade has been in helping clients sort through and implement SaaS, especially from a technology perspective. There's obviously a whole breadth of technology.
00:16:31
Speaker
you know services out there But when I talk about where kind of a lot of value creation has happened in in in enterprises, it's you know adopting enterprise SaaS and kind of bringing that into standardized streamline.
00:16:46
Speaker
automate their their work. I see the next wave for the next 10 years as inverted SAS, meaning it's no longer software as a service, but services as a software, right? Very similar to how you guys are, are positioning it that in the future as, as such is it's less about me helping my clients implement sa SAS and get the transformative business value from doing that.
00:17:07
Speaker
It's more about me creating services that actually let them like leverage my insight, my 130 years of experience as a professional services firm through something that looks closer to a managed service, ultimately something that looks even closer to ah sort services and software, right? So things that start looking more like a product. So that's really where we're spending a lot of our time is really understanding that market and where ah we see our our business and where can we start taking the things that we've done traditionally today and start disrupting our own delivery and business model
00:17:39
Speaker
ah to be able to accommodate what we think are going to be the buying preferences from our clients in the next 10 years.
Readiness for AI-Driven Services
00:17:46
Speaker
Right. So are we ready for this change? Is KPMG generally ready to build the talent up to deliver this? And they are your clients ready to really go through this type of change? I mean, we all get the concept. It all sounds very good.
00:18:03
Speaker
It's lovely talk about outcomes. But then when we get down to the brass tacks, um it's a lot. I mean, we're we're talking about moving work from maybe people to people offshore, now to people to computers. It's a very different concept.
00:18:20
Speaker
So how ready are we for this change? you know i think
00:18:26
Speaker
it i I think, and I'll start maybe with the ah how how ready are clients. I do think our clients have started to think about this already, right? you know And obviously BPO, right? The whole outsourcing, you know the the wave that your organization and you've been very much a part of has differentiated how our clients think about you know where work and how work gets done and thinking of it outside of their own four walls, right? So so to your point, this is...
00:18:52
Speaker
similar to that, but at the same time different because it's it's not recoding your workforce or even getting, you know, a different workforce in a different location to drive the value. It's kind of shifting that to again to, ah you know,
00:19:07
Speaker
an agent that books like, you know, a monthly subscription fee, right? Which is where if you start looking at like some of the roadmaps of both the large technology providers, as well as the labs and the LLMs, that is where they're going is the ability to, you know, your monthly subscription for, you know, access to to AI is actually going to be access to an agent. That agent is going to be, you know,
00:19:32
Speaker
ah pretty sophisticated what it could do so So I think it's, it's, it's, that is going to be a shift. I think getting comfortable with that shift there's, you know, and again, the technology is going to take time to develop and especially bringing this really awesome technology and then budding it into a lot of organizations that still have mainframe and a lot of legacy applications.
00:19:53
Speaker
um is is something that how do you meld the old with the new and continue to run the company? I think that's where organizations are going to have the biggest lift. Like, where does the data sit? Who owns the data? Where's the IP? Right. there There's still a whole host of things that need to get sorted out ah that that organization is going to have to work through. But i but I do think that this isn't a.
00:20:13
Speaker
you know, 2026, we have to figure out how we actually push work outside of our own organization because organizations have been doing that. It's just, it's different in how you're integrating with your existing technology and your existing workforce.
00:20:26
Speaker
How do you get them working side by side? I do think, you know, from you your guys' perspective, there's probably a lot of parallels in the waves that you helped organizations through for, you know, 15 years ago, right? There's a lot of parallels in how you thought about it then and how you need to think about it now and kind of taking the same playbooks out and revisiting
Enterprises and Ecosystem Strategies
00:20:45
Speaker
those.
00:20:45
Speaker
ah To answer this, KPMG ready for it? Absolutely. we We need to be ready for it. I think we have made leadership investments across the board, understanding that this is kind of the future of our business. We're investing in it, too as you know.
00:20:58
Speaker
we We took a very senior partner and made him the head of overall our innovation and AI program, ah the gentleman that ran our consulting business. ah So from where I sit, I'm excited for the future. It's not without a lot of work and a lot of change in taking an organization that's been predicated off 130 years of rate times hour.
00:21:18
Speaker
we We provide you an expert and you pay us hourly for that expert. Like that model we know is going to pivot, but but we know that it's coming and we're investing into that future. Okay, good answer.
00:21:29
Speaker
So final question, what's your one top recommendation for enterprises trying to make the most effective use of their ecosystems? You know, I i think it's um one of the words that I've used is intentional, right? I think a lot of organizations, not not a lot, every organization has an ecosystem strategy. They're they're probably just not intentional, meaning they have third parties across the organization that they're using to help drive value. They just haven't been intentional and they haven't elevated it to the leadership level, likely the C-suite, and they haven't baked it into part of their strategy, right? So, so
00:22:08
Speaker
Go to your chief strategy officer, go to the C-suite and make sure that you're being intentional about how you think about the disruption of your business model. Obviously, you should be doing the what is my strategy, what is my business model in the world of AI, right? Like that's the other, I guess, other helpful hint, not directly to your question, but you you don't need an AI strategy. You need to rethink your business strategy in the world of AI and where we're going.
00:22:30
Speaker
And you need to know, you know, as part of that, you don't need to go it and actually you don't, you can't go it alone, you're going to need an ecosystem to be able to navigate the complexity of that answer.
00:22:42
Speaker
Right. So it's it's bringing both AI and ecosystem thinking into the boardroom to have a strategic conversation to guide the strategy of your enterprise for the next 10 years. Right.
Conclusion and Engagement Encouragement
00:22:53
Speaker
Well, I wish you the best of luck crafting these ecosystems for all these complex enterprises that you work with. And it's always a pleasure talking with you and meeting up with you over the years and seeing how the world's evolving. So I look forward to sharing this with our network. And thank you very much for your time to today, Tom. Absolutely. Thank you, Phil. Appreciate the time.
00:23:18
Speaker
Thanks for tuning in to From the Horse's Mouth, intrepid conversations with Phil First. Remember to follow Phil on LinkedIn and subscribe and like on YouTube, Apple Podcasts, Spotify, or your favorite platform for no-nonsense takes on the intricate dance between technology, business, and ideological systems.
00:23:38
Speaker
Got something to add to the discussion? Let's have it. Drop us a line at fromthehorsesmouth at hfsresearch.com or connect with Phil on LinkedIn.