1: Growing through disruption – the transformation journey

Host:
Hello and welcome to Ashurst Business Agenda, a podcast that speaks with leaders in the business world to get their take and insights into how they are navigating the huge forces of change and disruption impacting their industry and how they are embracing opportunities to evolve, grow and create value. In this, our first episode, we speak with Fraser Hill, General Manager of Digital and Process Transformation at Shell, about the extensive transformation program that he is leading, influenced by the energy transition and the company's changing strategy and focus into renewables. Fraser shares with us what that transformation looks like for the business and the efficiencies gained through digitalization, automation, AI and not least the value that these projects bring to Shell's customers and shareholders.

Alongside Fraser, we speak with Ashurst's own Esther Woo, who is leading the legal transformation services program at Ashurst Advanced, Ashurst's new law division. We will compare Shell's transformation journey with the drivers of disruption in the legal industry, including the efficiencies and value creation around the way legal advice is delivered and what that client journey looks like. This is episode one of Ashurst Business Agenda.

Fraser, I want to jump right in. Like many companies across the globe, 2021 is shaping up to be a defining year for Shell, with a huge number of transformation projects at play. I wanted to start by asking you what you think the main drivers for transformation at Shell are. And also, maybe give us an idea of what you're really excited and passionate about at the moment.

Fraser Hill:
Oh, great question and actually very timely. We've just recently completed a strategy day, where the audience were the investors in our group, where we've announced some pretty impressive targets around what we call the energy transition. And our objective as a business, is to be neutral in term of carbon emissions by 2050, not only in our own business but actually the products that we sell to our customers as well. This is a radical step away from traditional oil and gas. In fact, you'll see our business model changing as we invest in renewables increasingly and reconfigure our business towards customers rather than product lines. Coming with that of course, is a change in the economics of our business and therefore an imperative for us to be highly transformative, not just in terms of the offering that we make to our customers but also how we run our business. And so sitting in a central function, which is accountable for managing the spend across the group, which currently is about $40 billion, making sure that we do that as efficiently and effectively as possible, is key.

The whole sourcing process, which includes the legal side of contracting, is going to be a critical enabler for us to digitalize our business and transform the experience of both our suppliers and our customers when they're dealing with Shell. Highly exciting start to this 30 year journey.

Host:
The idea of legal contracting, I think is a good one. And I want to explore that later on in the interview but I wanted to open it up to Esther. As to thinking about the themes and issues that Fraser's raised, do any of those ring true for the transformation work currently underway at Ashurst?

Esther Woo:
Yes, for sure. I think obviously our business product is a little bit different from Fraser's. Whilst we and our clients are absolutely focused on the green agenda, obviously it plays a slightly different part in our business model. I think digitization, for sure. I think all industries, that is a huge push at the moment. And I think particularly COVID has underlined the requirement for us to have stronger digital infrastructure and also working practices. I think the drivers for disruption in the legal industry are probably a bit wider and have been going on for a little while but are ever intensifying. In the legal industry, there's a greater variety of players compared to the old days. We've got alternative legal service providers, we've got legal tech companies, you've got the big four coming in. And then you've got in-house counsel, who have a lot of pressure on them to deliver more for less.

I think for Ashurst, what we're looking at for the few years ahead and we've got our 2023 plan, is a big focus on transformation and changing the way we deliver. We have got an internal legal transformation program, which is about looking at what are different ways we can resource our legal services delivery, process re engineering, absolutely tech but also, we want to look at what we're delivering. Rather than thinking about traditional legal, again, similar to Fraser, we're thinking about the client. What's the client journey? What's the value that we can deliver to clients? And that might be by adding adjacent services to traditionally guide by. We started a risk advisory service. We've been asked to start doing some legal operations consulting but also going downstream as well. We're starting to do some things where we bring together the ability to do volume work.

Host:
Obviously, a great deal of legal transformation work currently being undertaken at Ashurst. I just wanted to get your opinion as to whether you think ... On a broader scale, whether you think that transformation work should actually work hand in glove with the broader organizational transformation or whether you think it should be run more independently.

Esther Woo:
It's a good question. I think it's more important that you look at where your firm is or your company is. In some cases, the organization is ready to start with a bigger organizational change. In which case, of course, that's more holistic. It's going to lead to a more efficient way of doing the transformation because everyone's working together but I think you've just got to start wherever you can. If it is your legal in-house team, there's ready to go, they need to start doing what they can.

Host:
Fraser, I'm going to invite you to comment on this as well. Do you think there's a right way or best practice approach to transformation? And could you also just touch on legal contracting as being part of this transformation process?

Fraser Hill:
Yeah, absolutely. Well, in my opinion, one of the factors that affects our ability to transform is actually the organizational structure itself. Particularly big companies but also with smaller companies, they're quite hierarchical and siloed. And therefore, when you're looking at transforming a process, it's really critical that you look across the end to end. Don't replicate your process analysis around your organizational structure.

Bringing a good example here, on both the buy side and the sell side, the legal function as a function and as a provider of services into the end to end process, needs to be included as much as the customer and the supplier in your analysis of what's actually going on. If you don't do that, you end up solving bite-sized problems and not necessarily in a good way, a solution in one part of the function can actually create a problem elsewhere. I've seen many examples of that. The integration of functions into solutioneering across the process space is critical and you don't get more critical in the commercial contracting space than the legal part of it, which very often, I hear is the point of friction. Everyone talks about the business prevention function. Well, actually bring them into the church and you've got half a chance of addressing those issues. Yeah, absolutely. It's critical to think in that way.

Host:
Fraser, I just want to raise a particular theme and one that you were quoted by the Financial Times recently, in regards to source to pay work. And you're saying that that can be automated with most processes replaced with artificial intelligence. Now, to get to this point, you've said that lawyers and procurement professionals will need to develop coding skills and an understanding of process and data model design. Can you explain your thinking on this a little bit further?

Fraser Hill:
Yeah, entirely. When you're looking at strategy, you obviously need to be big and bold and I'm not saying that this is going to happen tomorrow but ultimately, if you look at the source to pay activities that any company does, they're highly repeatable and therefore, you can build a model around the decision points that you have in the end to end process. It therefore follows, if you can build a decision point based on either some form of data analytics or a heuristic, an informal rule where you move left or right, it follows that you can build an AI engine that can replicate those repeatable activities.

And so ultimately, many of the things that we do day-to-day, whether as a lawyer or a procurement professional or as a salesperson, can be eliminated from our work. Now, that frees us up as human beings to do what we're good at, which is generate ideas and have relationships with other human beings but if you're going to really make it work, you can't rely on your IT organization to turn this stuff on. And in my view, the future is absolutely that in the same way that some of us can run a basic macro in Excel, all of us will have to have some kind of coding skills. My 11 year old daughter at school is currently learning Python. Now, that's quite a relatively advanced piece of technology a few years ago. And an 11 year old child is learning this. The staff of the future will come already equipped with these capabilities. The question for me is, how do we bridge and get there? And we need to up-skill today in order to be able to be prepared for tomorrow.

Esther Woo:
Completely agree with you Fraser about up skilling the new generation. As for coding for lawyers and you talk about procurement specialists as well, we're also looking at that. We're going through the journey with our current generation, where some lawyers are naturally keen to get their hands of the technology and do a bit of coding themselves. They definitely need to understand the way the automations are done, how AI works in the background because the logic is really important and from a technical perspective, you won't get the technical results that you think you're getting if you don't understand how the machine learning drives that result. Just on the coding piece though, I think what I've seen is that there's attempts in different places in the market to actually come up with different kinds of coding. There's actually a group who are looking at building coding for lawyers. It's written in a way that's a little bit more understandable and a bit closer to how lawyers are actually drafting their documents. And I think maybe that's the intersection that's going to come as well.

Fraser Hill:
I don't envy your task. I remember someone telling me once about walking into an office and seeing one of the senior partners in front of their PC with a calculator and Excel open and trying to figure out what the sum of all of the build hours will look like. Good luck with that.

Esther Woo:
Yes, definitely but we do have all sorts giving it a go. Some of the partners that you don't expect to get involved, if you sit down with them, it is logic, a lot of it. And so once you explain the logic to them, they can start to understand but it is taking that time. And it's whether or not it's the right investment because they are right. Things will change a lot in the next few years. How much will they change, such that they actually impact that level of advisor?

Fraser Hill:
I actually think a really interesting application of technology is ... And just bear with me a little bit, is actually one that you can learn from Garry Kasparov. For many years, IBM were coding an artificial intelligence machine. I think they call it Deep Blue or Big Blue, I can't quite remember. And it was trying to beat Garry Kasparov at chess and it was failing frequently. And then one year it started beating him and it started beating him quite regularly. And Garry Kasparov's response was really interesting. Instead of disengaging and being uninterested, he started saying, "Well, this is quite fascinating. How has it this machine's beating me?"

And the most powerful chess player is not Garry Kasparov and it's not the machine, it's actually Garry Kasparov and the machine. And I think if I look at some of the work they've done in procurement and in legal, it involves quite a lot of trawling through data and using your experience to then figure out the most likely solution. Well, wouldn't it be great if on your desktop, if you were a solicitor or barrister or whatever it was, instead of having to do your traditional research through these legal precedents, you could very quickly be given the answer by someone that's watching what you're doing or a machine that's watching what you're doing and instantaneously give you the advice that you need to make the next choice? That's quite some cool stuff that I think is here today actually.

Esther Woo:
That is absolutely the really exciting stuff that gets people I think, inspired and with a vision. I think the question about coding is again, probably a little bit too narrow in that it's about learning new skills, isn't it? Fraser, what you're talking about there is actually learning a different way to absorb information. Whereas previously, in the traditional ... Let's talk about the traditional legal model. You actually went to the source data. You trawl through the regulations. You trawl through case study, you trawl through 300 documents, to understand what the legal lay of the land is. You've now got machines that you should be able to start to rely on. And like you say, you have to work in a team with them but actually trusting that machine to do the thinking, it's a skill that needs to be learned.

Fraser Hill:
And for us here at Shell, actually the use of technology across the entire contracting and commercial space, is going to be critical because if we can increase our time ... Or rather shorten our time to market, by making it easier for us to trade with our suppliers and as we create new business models and new customers as we transition into this new energy world, making sure that it's easier for us to have retail like experiences for our B2B customers and really speeding up commercial relationship is going to be critical for us to be successful in delivering our ambition for both society but also for our shareholders.

Host:
It's a really interesting discussion in regards to maybe a different and bigger topic in terms of the generalization of the global workforce and whether we can actually afford to be specialists in a day and age where we really have to be experts across a number of different areas.

Esther Woo:
Yes, we were talking just now ... Going back to coding for lawyers. The other thing I was thinking about, is we have proliferated the number of roles that we have at Ashurst. we've got legal technologists, we've got legal analysts, who none of them are lawyers. At the moment, we have brought people in who have law degrees so that they can understand the legal technical aspects but actually, they really truly are specialists in their field. I think there is going to be a change in what roles are necessary and also how those roles work together. I think about our lawyers, they're actually going to have to learn how to manage several different skillsets, to bring together a solution that clients need, right. They need to know how to use a project manager. They need to know how to use a legal technologist. They need to learn how to use various other skills that we may bring in from time to time.

Host:
With the introduction of AI into more and more of these transformation projects, we're really looking at the theme of efficiency as being one of the main drivers and results of those transformations. Fraser, what should business leaders be doing to also ensure that they're creating value, particularly with that end customer in mind?

Fraser Hill:
That's a really, really good question. And the solution I'm going to give is quite simple but actually hard to execute. And this is to do with human nature. We tend to be quite myopic and focused on what we are doing and it becomes very central in our activities. Whereas actually, one of the things that I advocate very strongly, both in terms of legal design but also process design in general, is that you have to start back from the user and I'll give you a good example. And this is not a dig at lawyers. This is a general observation around contracts. A contract is designed for a use case that rarely occurs. A contract is designed so that you can resolve a dispute in a court of law. If you look at the total number of contracts that are executed and create a simple percentage model, I suspect that less than 0.1%, even 0.01% of all contracts ever end up in a court of law. Yet, this is the purpose of the design. It's for that 0.01% use case.

Actually, if you think about process design or in this case contract design, you should be starting with what is the purpose? And for me, the purpose of a contract is to create a common language between buyer and seller and to enable trade, to make trade as frictionless as possible. It is not about going to court. And therefore, the design principle that I always take, whether it's with building a pricing system or doing some continuous improvement, is start with the user in mind and understand what it is that they need and design around their needs, not your own. And so that's probably quite a long answer to your question but that's fundamentally where it starts for me.

Host:
Esther, I want to go back to an earlier answer where you spoke about the increasing pressure that in-house counsel feel about delivering more for less, due to regulatory demands and the globalization and just the world we live in at the moment. Ashurst Advanced research from a couple of years ago, found that 83% of in-house lawyers felt pressure to increase the efficiency of their function. What's your take on the efficiency versus the value dilemma?

Esther Woo:
They want both efficiency and value. I think those two things are not separated. Efficiency is not an end game in itself. There needs to be something that comes with that. I think when we are talking with our in house clients, we're absolutely understanding the pressure that they are under. And I think what we're trying to look at, is how do we bring solutions that can help them? And sometimes, it means that in order for them to deliver something more efficiently, they outsource more. It may be sometimes for them to deliver things more efficiently, they in source more. We constantly have to have that info with our clients to understand what solutions are most going to help them but I think going back to the value point, at the end of the day, that is actually what they ask us for. Yes, they do come with efficiency but they do ask us when we're pitching, when we're talking to them, about partnership. They say, "Actually, we need to demonstrate value. It's not just about cost."

And so the industry has very much moved to more of a client focused, solution focused outlook. I don't think about when we're delivering legal services, it's just A to B. We've got to think of the client is trying to answer a business problem from X to Y. A to B absolutely as a small part of that and an essential part of that but let's look at the X to Y. Actually, how can we get them that quicker and more efficiently? Say for example, one of the projects that we're working on is a high volume trade flow work. The client doesn't want to just get the drafting done on the trades quickly. Absolutely, they want that. They actually want to go from negotiation of the trade to execution of the trade quickly. And the legal piece is one step of that but actually, if we look at the integrated whole of work with them as to how they can get from that negotiation to execution, that is actually a better solution for them.

Host:
With that in mind, Fraser and presumably as a law firm customer, what would you like to see from law firms and the legal profession as a whole, in regards to the transformation journey that Shell is on at the moment?

Fraser Hill:
I'll broaden it out to not necessarily just from legal partners but anyone that is a supplier or even a customer of ours. What we're really interested in, is the enablement of the strategy. And as I mentioned before, we've got a societal part to play in the energy industry, for sure but also, we have a part to play in terms of quality of returns for our investors. And I think that particularly if you're dealing with an organization and you are a supplier to that organization, you need to bring ideas and solutions that enable their business strategy.

It comes back to what I was talking to in an earlier question about process. You need to start with the objective, the end game, the user in mind and then apply what it is that they need, rather than pushing your own agenda. Intimacy and understanding and being very clear about how you play in the value chain is critical I think, if you want to be a successful supplier. And it then also follows that if you are working with customers, that you do the same to them. We have customers, we have suppliers and that mental model needs to be applied universally on both the buy and sell side of things.

Host:
Esther, from your point of view, do you think that Fraser's wishlist there can be met?

Esther Woo:
I think it needs to be. The world we live in today is global and complex and it is impossible to solve and deliver just in silos. We have to work as partners and collaborators. And I think that's the way we all need to move towards. And I think personally, for me, I worked in the charity sector for a couple of years and that is actually how the nonprofit sector is set up. They don't look at other organizations as competitors. Where someone is a potential competitor, they're actually a potential partner and collaborator. And again, that's the view we need to have. What is the bigger impact that we're trying to achieve together? Let's work on it and find the best solution rather than thinking, what do I need? And our clients are coming to us with that view as well. They say, "We know you need to be profitable after this. We also want to do while after this. How can we find a solution together that helps us both do well out of this?"

And that's actually just really helpful.

Fraser Hill:
Interestingly, sometimes doing nothing is actually the best thing that you can do for a client. There's a great book by a neurosurgeon, called Henry Marsh, called Do No Harm. And over the course of his professional life as a neurosurgeon, he learned that sometimes the right thing to do was not to operate, even though his entire training was about brain surgery. And one of the things that I find frustrating, both having been a salesperson and also now, transforming the procurement side of things is, that very often we get into a negotiation. Both parties want to do business, they want to trade. And then we stumble on red lining of a document and sometimes if ... And I'm not saying that it's the other person's fault, it's a mental model in the legal industry that sometimes because you're being paid, you have to say something or do something. And it then just creates this cycle of red lining. And I just wonder sometimes if coming up with a business model where you get paid not to do something, actually might be quite interesting.

Esther Woo:
We will definitely have to look at that as part of our pricing strategy Fraser. We'll charge you for doing nothing.

Host:
There's no doubting the challenges ahead of us. And it's fascinating to see some of these exciting transformation projects being executed and realized over the coming months and years ahead. I wanted to open it up to both of you finally, to give some insight and maybe some actions and key takeaways that you think are really top of mind for you as you go on this transformation journey through this year and beyond.

Fraser Hill:
It's a really good question and one that I get asked quite a lot, I must admit. And it doesn't matter whether you're transforming your legal function, your procurement function, your customer relationships. For me, the guiding principle is, you should never ever automate a bad business process. Where I would always advocate that anybody starts, is with a pen and paper or whiteboard and really understand not what you think is happening in your business but what is actually happening. And really get into the nitty gritty of that. And before you even start buying any technology, some contract lifecycle management technology or data mining or whatever it is, understand what is actually happening in your business because 60, 70% of all transformation projects really are about basic process re-engineering. And if you start there, you don't even need to spend any money. Once you've got your process working perfectly in an analog world, then you're really set up for transformation and digitizing it.

Esther Woo:
I will probably focus more on the change side of transformation. I think we've done well to not really mention our favorite friend COVID during this chat but I think there's positives that we should look at that have come from this time, that people have been forced to make changes that they would not have otherwise have made. For instance, the remote working disruption, that's huge but actually we should use that as a positive as businesses and build on that change, build on the fact that people have made changes and been successful within those changes.

Host:
Absolutely. Esther, Fraser, thank you very much for being on the Ashurst Business Agenda podcast. Thank you for your time and valued contributions.

Fraser Hill:
Thank you.

Esther Woo:
Thank you.

Host:
Thank you for listening to Ashurst Business Agenda. We hope you found this episode both worthwhile and insightful. To learn more about this podcast and our suite of podcast channels, visit ashurst.com/podcasts. And to ensure you don't miss future episodes, subscribe now on Apple podcasts, Spotify or your favorite podcast platform. While there, please feel free to keep the conversation going and leave us a rating or review. Thanks again for listening and goodbye for now.